MERRILL
LYNCH
OREGON
MUNICIPAL
BOND FUND
Annual Report July 31, 1994
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Merrill Lynch Oregon
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, New Jersey
08543-9011
TO OUR SHAREHOLDERS
The expectation of increasing inflationary pressures and higher
interest rates initially heightened investor concerns and increased
financial market volatility during the July quarter. However, as the
quarter progressed, it was the weakness of the US dollar in foreign
exchange markets that dominated the financial news and prolonged
stock and bond market declines. Although the US dollar had
strengthened slightly by July quarter-end, which may have improved
investor confidence in the stock and bond markets, the possibility
of continued tightening by the Federal Reserve Board resurfaced
following Chairman Alan Greenspan's recent congressional testimony.
Nevertheless, as the quarter drew to a close, a lower-than-expected
rate of growth reported for the US economy during the second
calendar quarter allayed investor concerns and led to stock and bond
market rallies.
During the July quarter, the US dollar's weakness relative to other
major currencies reflected the deteriorating US trade deficit and
widening net long-term capital outflows. In 1993, an expanding US
economy and recession in other industrial countries led to a higher
level of imports and weaker export growth, widening the US trade
deficit further. In addition, global investors favored non-US dollar
denominated assets throughout 1993, which has further depressed the
dollar's value. This trend is not improving significantly thus far
in 1994 since foreign inflows into US capital markets continue to
decline, although US investors are investing outside of the United
States to a lesser degree.
Over the longer term, if the economies of the United States' major
trading partners expand (improving the prospects for US export
growth), the outlook for the US dollar is likely to improve. In the
near term, central banks have attempted to reverse the dollar's
decline through currency market intervention. These efforts have met
with limited success thus far, giving rise to the concern that the
Federal Reserve Board will be forced to continue to raise short-term
interest rates to attract investment capital back to the United
States and bolster the dollar's value. However, further interest
rate increases may jeopardize the US economic expansion. Despite
evidence of a moderating trend in the US economy, Federal Reserve
Board Chairman Alan Greenspan indicated in his July Humphrey-Hawkins
testimony that the central bank would prefer to err on the side of
too much monetary tightening rather than too little. In the weeks
ahead, investors will continue to assess economic data and
inflationary trends as they focus on the US dollar in order to gauge
whether further increases in short-term interest rates are imminent.
Continued indications of moderate and sustainable levels of economic
growth would be positive for the US capital markets.
The Municipal Market
Long-term tax-exempt bond yields ended the July quarter essentially
unchanged. The Bond Buyer Revenue Bond Index rose five basis points
(0.05%) to 6.47%. The Index, however, failed to capture the dramatic
bond rally on July 29, 1994, when municipal bond yields had their
largest one-day decline thus far this year. Responding to reports of
a continued mild inflationary outlook and a potentially weakening
economy, municipal bond yields declined by approximately 10 basis
points. US Treasury bonds displayed a similar pattern over the last
three months, ending with an equally dramatic rally on July 29,
1994. Long-term US Treasury bonds ended the quarter yielding
approximately 7.40%.
The tax-exempt bond market has continued to be very volatile with
yields fluctuating by as much as 15 basis points from week to week.
This continued volatility is largely a reflection of the same lack
of conviction regarding the near-term direction of interest rates
that has prevailed for much of 1994. Throughout this past quarter,
the municipal bond market had been unable to maintain a consensus
regarding either the potential strength of the current economic
recovery or the resultant response by the Federal Reserve Board.
However, a number of economic indicators released in late July began
to suggest that the robust pace of recent economic growth was
slowing. This promoted a more positive market environment,
culminating in the market rally on July 29.
The municipal bond market's technical position has remained
supportive. Approximately $40 billion in long-term securities were
issued during the three months ended July 31, 1994. This represents
a decline of over 50% versus the July quarter from the previous
year. As discussed in earlier reports, this reduction in new-issue
supply has minimized the selling pressure by larger institutional
investors who fear being unable to purchase sizable amounts of
securities in the future. Such a significant decline in issuance
would normally be expected to trigger a decline in yields as
investors chase a commodity in scarce supply. Investor demand,
however, has also diminished somewhat in recent months as net flows
into long-term municipal bond funds have dramatically slowed or, in
some instances, reversed. Consequently, the supply/demand
relationship within the municipal bond market has remained in
balance, promoting the overall stability in yield levels seen in the
past months.
With after-tax equivalents in excess of 10%, long-term tax-exempt
bonds continue to represent considerable value relative to other
investment alternatives. We continue to anticipate that municipal
bond yields will decline further in late 1994 and into 1995. The
economic impact of the significant interest rate increases
experienced since early February have yet to be totally realized.
The resultant drag on the economy should provide the foundation for
further interest rate declines. Under such a scenario, current tax-
exempt bond yields may prove to represent considerable value.
Fiscal Year in Review
Merrill Lynch Oregon Municipal Bond Fund commenced operations on
August 27, 1993. Since that time, the Fund has grown from $17.8
million to $32.7 million at July 31,1994, representing an 83.7%
growth rate. The municipal bond market rallied since the Fund's
inception until the middle of October 1993, but has been on a
downward trend since. The yield on the Bond Buyer Revenue Bond Index
has increased over 90 basis points since the Fund's inception.
Our initial strategy was to invest in long-term municipal bonds. At
the time, the interest rate outlook was constructive for the bond
market. Therefore, we invested in discount bonds which perform well
in an up market. However, strong fourth quarter 1993 economic growth
data forced the Federal Reserve Board to implement a more
restrictive monetary policy beginning in February of this year,
causing taxable long-term interest rates to increase by more than
100 basis points. As a result, the Fund's Class A and Class B Shares
underperformed relative to the municipal market as a whole.
Recently, we reduced the Fund's exposure to discount bonds and
purchased higher coupon bonds in an effort to increase the Fund's
total returns. Looking ahead, we are constructive on municipal bonds
because of the predicted slowdown of the US economy during the
second half of 1994 and the reduction of new-issue supply of
municipal bonds in 1994 compared to 1993.
We appreciate your ongoing interest in Merrill Lynch Oregon
Municipal Bond Fund, and we look forward to serving your investment
needs and objectives in the months and years to come.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President and Portfolio Manager
August 25, 1994
PERFORMANCE DATA
None of the past results shown should be considered a representation
of future performance. Investment return and principal value of
Class A and Class B Shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Aggregate Total Return--Class A Shares*
% Return Without % Return With
Sales Charge Sales Charge**
Inception (8/27/93)
through 6/30/94 -3.42% -7.29%
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
GRAPHIC MATERIAL APPEARS HERE. SEE APPENDIX,
GRAPHIC AND IMAGE MATERIAL: Item 1.
Aggregate Total Return--Class B Shares*
% Return % Return
Without CDSC With CDSC**
Inception (8/27/93)
through 6/30/94 -3.82% -7.82%
[FN]
*Maximum contingent sales charge is 4% and is reduced
to 0% after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
GRAPHIC MATERIAL APPEARS HERE. SEE APPENDIX,
GRAPHIC AND IMAGE MATERIAL: Item 2.
PERFORMANCE DATA (concluded)
<TABLE>
Recent Performance Results*
<CAPTION>
Since Inception 3 Month
7/31/94 4/30/94 8/27/93** % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares $9.41 $9.28 $10.00 -5.90% +1.40%
Class B Shares 9.41 9.28 10.00 -5.90 +1.40
Class A Shares--Total Return -1.13(1) +2.80(2)
Class B Shares--Total Return -1.59(3) +2.67(4)
Class A Shares--Standardized 30-day Yield 5.29%
Class B Shares--Standardized 30-day Yield 5.01%
<FN>
*Investment results shown for the 3-month and since inception
periods are before the deduction of any sales charges.
**Commencement of Operations.
(1)Percent change includes reinvestment of $0.476 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.128 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.430 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.116 per share ordinary
income dividends.
</TABLE>
PORTFOLIO ABBREVIATIONS
To simplify the listings of Merrill Lynch Oregon Municipal Bond
Fund's portfolio holdings in the Schedule of Investments, we have
abbreviated the names of some of the securities according to the
list at right.
AMT Alternative Minimum Tax (subject to)
GO General Obligation Bonds
PCR Pollution Control Revenue Bonds
S/F Single-Family
STRIPES Short-Term Rate Inverse Payment
Exempt Securities
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Oregon--98.1%
<S> <S> <C> <S> <C>
A+ A $1,140 Central Lincoln, Oregon, People's Utility District, Electric Revenue Refunding
Bonds, 5.10% due 1/01/2011 $ 1,038
NR Baa1 1,385 Clackamas County, Oregon, Hospital Facilities Authority, Revenue Refunding
Bonds (Gross Willamette Falls), 5.75% due 4/01/2015 1,275
AA A1 500 Eugene, Oregon, Electric Utility Revenue Bonds, Series C, 5.80% due 8/01/2019 486
A+ A 800 Gresham, Oregon, Water Revenue Refunding Bonds, Series B, 5.30% due 11/01/2015 729
BBB+ NR 1,000 Hillsboro, Oregon, Hospital Facilities Authority, Revenue Refunding Bonds
(Quality Healthcare), 5.75% due 10/01/2012 936
AAA Aaa 800 Jefferson County, Oregon, School District No. 509J Revenue Bonds, UT, 5.50%
due 6/15/2013 (c) 760
A- NR 800 Keizer, Oregon, Urban Renewal Agency, Tax Increment Revenue Bonds (North River
Road Economic Development Area), 5.60% due 7/01/2013 755
AA Aa1 500 Lake Oswego, Oregon, Oregon Park & Open Space, GO, Revenue Refunding Bonds, UT,
Series 1993, 5.125% due 2/01/2014 454
NR A 500 Lane and Douglas Counties, Oregon, School District No. 97 Refunding Bonds, Series
J, UT, 5.20% due 2/01/2011 461
NR Aa 2,000 Lane County, Oregon, School District No. 4J Refunding Bonds (Eugene), Series A,
UT, 5.375% due 7/01/2013 1,868
A1 VMIG1 1,600 Medford, Oregon, Hospital Facilities Authority Revenue Bonds (Rogue Valley Health
Services), VRDN, 2.85% due 10/01/2016 (a) 1,600
A- NR 500 Medford, Oregon, Urban Renewal Agency, Tax Revenue Refunding Bonds, Series A,
5.30% due 9/01/2011 462
A A 1,000 Metro, Oregon, General Revenue Refunding Bonds (Metro Regional Center Project),
Series A, 5.25% due 8/01/2022 890
A- NR 1,250 Multnomah County, Oregon, Educational Facilities Revenue Bonds (University of
Portland Project), 6% due 4/01/2014 1,248
AA- NR 800 Multnomah County, Oregon, School District No. 040, GO, UT, 5.625% due 6/01/2012 784
A- NR 1,000 North Clackamas, Oregon, Parks and Recreation District, Recreational Facilities
Revenue Bonds, 5.70% due 4/01/2013 980
NR A 500 Oregon State Board, Bank Revenue Refunding Bonds (Oregon Economic Developing
Department), Series A, 5.50% due 1/01/2012 472
AAA Aaa 500 Oregon State Department of Transportation Revenue Bonds (Regulation Light Rail
Fund--Westside Project), 6.25% due 6/01/2009 (b) 516
Oregon State Elderly and Disabled Housing Revenue Bonds, Series C:
AA- Aa 1,250 AMT, 5.65% due 8/01/2026 1,185
AA- Aa 1,000 UT, 6.25% due 8/01/2013 1,028
Oregon State Health, Housing, Educational and Cultural Facilities Authority
Revenue Bonds, Series A:
NR A1 900 (Oregon Coast Aquarium Project), 5.25% due 10/01/2013 818
AAA Aaa 500 Refunding (Lewis & Clark College Project), 6.125% due 10/01/2024 (b) 504
A+ A1 2,000 Oregon State Housing and Community Services Department, Housing Finance Revenue
Refunding Bonds (Assisted or Insured Multi-Unit), Series A, 5.75% due 7/01/2012 1,909
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Oregon (concluded)
<S> <S> <C> <S> <C>
Oregon State Housing and Community Services Department, Mortgage Revenue Bonds
(S/F Mortgage Program):
NR Aa $ 500 Refunding, Series A, 6.40% due 7/01/2018 $ 504
NR Aa 2,050 Series B, 6.875% due 7/01/2028 2,114
AA- Aa 475 Oregon State PCR, Series C, UT, 5.625% due 6/01/2013 460
AAA Aaa 900 Port Portland International Airport Revenue Bonds (Portland International
Airport), Series Seven-A, 6.75% due 7/01/2009 (b) 959
A1+ VMIG1 1,600 Port Saint Helens, Oregon, PCR (Portland General Electric Company Project),
Series B, VRDN, 2.70% due 6/01/2010 (a) 1,600
A+ A1 1,400 Portland, Oregon, Sewer System Revenue Bonds, Series A, 6.20% due 6/01/2012 1,414
NR Aa 300 Portland, Oregon, Water System Revenue Bonds, 5.25% due 8/01/2013 276
A1 VMIG1 300 Salem, Oregon, Hospital Facilities Authority Revenue Bonds (Capital Manor),
VRDN, 2.80% due 10/01/2017 (a) 300
AAA Aaa 500 Umatilla County, Oregon, Pendleton School District No. 016R, 6% due 7/01/2014 (d) 503
NR A1 800 Washington and Clackamas Counties, Oregon, Tigard School District No. 23J,
Refunding Bonds, UT, 5.40% due 1/01/2010 767
AAA Aaa 1,000 Washington County, Oregon, Sherwood School District No. 088J, UT, 6.10%
due 6/01/2012 (c) 1,018
AAA Aaa 1,000 Western Lane Hospital District, Oregon, Hospital Facility Authority Revenue
Refunding Bonds (Sisters of Saint Joseph's Peace), 5.75% due 8/01/2019 (b) 969
Puerto Rico--2.1%
Puerto Rico Electric Power Authority, Power Revenue Bonds:
A- Baa1 250 Refunding, Series U, 6% due 7/01/2014 245
AAA Aaa 400 Series T, STRIPES, 8.219% due 7/01/2005 (c)(e) 416
Total Investments (Cost--$33,858)--100.2% 32,703
Liabilities in Excess of Other Assets--(0.2%) (48)
-------
Net Assets--100.0% $32,655
=======
<FN>
(a)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rates shown are the rates in
effect at July 31, 1994.
(b)MBIA Insured.
(c)FSA Insured.
(d)AMBAC Insured.
(e)The interest rate is subject to change periodically and inversely
based upon prevailing market rates. The interest rate shown is the
rate in effect at July 31, 1994.
NR--Not Rated.
Ratings of issues shown have not been audited by Deloitte & Touche
LLP.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of July 31, 1994
<CAPTION>
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$33,857,668) (Note 1a) $32,703,156
Cash 466,404
Receivables:
Securities sold $ 2,403,288
Interest 415,492
Investment adviser (Note 2) 175,242
Beneficial interest sold 135,642 3,129,664
-----------
Deferred organization expenses (Note 1e) 38,763
Prepaid registration fees and other assets (Note 1e) 29,981
-----------
Total assets 36,367,968
-----------
Liabilities: Payables:
Securities purchased 3,533,690
Dividends to shareholders (Note 1f) 26,146
Distributor (Note 2) 10,782
Beneficial interest redeemed 151 3,570,769
-----------
Accrued expenses and other liabilities 142,686
-----------
Total liabilities 3,713,455
-----------
Net Assets: Net assets $32,654,513
===========
Net Assets Class A Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized $ 71,351
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 275,767
Paid-in capital in excess of par 34,529,614
Accumulated realized capital losses--net (1,049,275)
Accumulated distributions in excess of realized capital gains--net (18,432)
Unrealized depreciation on investments--net (1,154,512)
-----------
Net assets $32,654,513
===========
Net Asset Class A--Based on net assets of $6,711,876 and 713,509 shares
Value: of beneficial interest outstanding $ 9.41
===========
Class B--Based on net assets of $25,942,637 and 2,757,668 shares
of beneficial interest outstanding $ 9.41
===========
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Period
August 27, 1993++ to
July 31, 1994
<S> <S> <C>
Investment Interest and amortization of premium and discount earned $ 1,395,671
Income
(Note 1d):
Expenses: Investment advisory fees (Note 2) 143,923
Distribution fees--Class B (Note 2) 102,731
Printing and shareholder reports 70,928
Accounting services (Note 2) 34,684
Professional fees 27,771
Registration fees (Note 1e) 27,436
Transfer agent fees--Class B (Note 2) 10,035
Amortization of organization expenses (Note 1e) 8,837
Custodian fees 8,008
Pricing fees 4,001
Transfer agent fees--Class A (Note 2) 2,355
Trustees' fees and expenses 1,051
Other 1,593
-----------
Total expenses before reimbursement 443,353
Reimbursement of expenses (Note 2) (319,165)
-----------
Total expenses after reimbursement 124,188
-----------
Investment income--net 1,271,483
-----------
Realized & Realized loss on investments--net (1,049,275)
Unrealized Unrealized depreciation on investments--net (1,154,512)
Loss on -----------
Investments-- Net Decrease in Net Assets Resulting from Operations $ (932,304)
Net (Notes ===========
1d & 3):
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Changes in Net Assets
<CAPTION>
For the Period
August 27, 1993++ to
Increase (Decrease) in Net Assets: July 31, 1994
<S> <S> <C>
Operations: Investment income--net $ 1,271,483
Realized loss on investments--net (1,049,275)
Unrealized depreciation on investments--net (1,154,512)
-----------
Net decrease in net assets resulting from operations (932,304)
-----------
Dividends & Investment income--net:
Distribu- Class A (295,489)
tions to Class B (975,994)
Shareholders In excess of realized gain on investments--net:
(Note 1f): Class A (3,927)
Class B (14,505)
-----------
Net decrease in net assets resulting from dividends and distributions to shareholders (1,289,915)
-----------
Beneficial Net increase in net assets derived from beneficial interest transactions 34,776,732
Interest -----------
Transactions
(Note 4):
Net Assets: Total increase in net assets 32,554,513
Beginning of period 100,000
-----------
End of period $32,654,513
===========
<FN>
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. For the Period Aug. 27, 1993++
to July 31, 1994
Increase (Decrease) in Net Asset Value: Class A Class B
<S> <S> <C> <C>
Per Share Net asset value, beginning of period $ 10.00 $ 10.00
Operating ----------- -----------
Performance: Investment income--net .48 .43
Realized and unrealized loss on investments--net (.58) (.58)
----------- -----------
Total from investment operations (.10) (.15)
----------- -----------
Less dividends and distributions:
Investment income--net (.48) (.43)
In excess of realized gain on investments--net (.01) (.01)
----------- -----------
Total dividends and distributions (.49) (.44)
----------- -----------
Net asset value, end of period $ 9.41 $ 9.41
=========== ===========
Total Based on net asset value per share (1.13%)+++ (1.59%)+++
Investment =========== ===========
Return:**
Ratios to Expenses, net of reimbursement and excluding distribution fees .08%* .08%*
Average =========== ===========
Net Assets: Expenses, net of reimbursement .08%* .58%*
=========== ===========
Expenses 1.30%* 1.80%*
=========== ===========
Investment income--net 5.26%* 4.75%*
=========== ===========
Supplemental Net assets, end of period (in thousands) $ 6,712 $ 25,943
Data: =========== ===========
Portfolio turnover 52.88% 52.88%
=========== ===========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Oregon Municipal Bond Fund (the "Fund") is part of
Merrill Lynch Multi-State Municipal Series Trust (the "Trust"). The
Fund is registered under the Investment Company Act of 1940 as a non-
diversified, open-end management investment company. Prior to
commencement of operations on August 27, 1993, the Fund had no
operations other than those relating to organizational matters and
the issuance of 5,000 Class A Shares of beneficial interest and
5,000 Class B Shares of beneficial interest of the Fund to Fund
Asset Management, L.P. ("FAM") for $100,000. The Fund offers both
Class A and Class B Shares. Class A Shares are sold with a front-end
sales charge. Class B Shares may be subject to a contingent deferred
sales charge. Both classes of shares have identical voting,
dividend, liquidation and other rights and the same terms and
conditions, except that Class B Shares bear certain expenses related
to the distribution of such shares and have exclusive voting rights
with respect to matters relating to such distribution expenditures.
The following is a summary of significant accounting policies
followed by the Fund.
(a) Valuation of investments--Municipal bonds and other portfolio
securities in which the Fund invests are traded primarily in the
over-the-counter municipal bond and money markets and are valued at
the last available bid price in the over-the-counter market or on
the basis of yield equivalents as obtained from one or more dealers
that make markets in the securities. Financial futures contracts and
options thereon, which are traded on exchanges, are valued at their
settlement prices as of the close of such exchanges. Securities with
remaining maturities of sixty days or less are valued at amortized
cost which approximates market value. Options, which are traded on
exchanges, are valued at their last sale price as of the close of
such exchanges or, lacking any sales, at the last available bid
price. Securities and assets for which market quotations are not
readily available are valued at fair value as determined in good
faith by or under the direction of the Board of Trustees of the
Trust, including valuations furnished by a pricing service retained
by the Trust, which may utilize a matrix system for valuations. The
procedures of the pricing service and its valuations are reviewed by
the officers of the Trust under the general supervision of the
Trustees.
(b) Financial futures contracts--The Fund may purchase or sell
interest rate futures contracts and options on such futures
contracts for the purpose of hedging the market risk on existing
securities or the intended purchase of securities. Futures contracts
are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a
contract, the Fund deposits and maintains as collateral such initial
margin as required by the exchange on which the transaction is
effected. Pursuant to the contract, the Fund agrees to receive from
or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are
known as variation margin and are recorded by the Fund as unrealized
gains or losses. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
NOTES TO FINANCIAL STATEMENTS (concluded)
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Deferred organization expenses and prepaid registration fees--
Deferred organization expenses are charged to expense on a straight-
line basis over a five-year period beginning with commencement of
operations. Prepaid registration fees are charged to expense as the
related shares are issued.
(f) Dividends and distributions--Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates. Distributions in excess
of realized capital gains are due primarily to differing tax
treatments for futures transactions and post October losses.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with FAM.
Effective January 1, 1994, the investment advisory business of FAM
was reorganized from a corporation to a limited partnership. Both
prior to and after the reorganization, ultimate control of FAM was
vested with Merrill Lynch & Co., Inc. ("ML & Co."). The general
partner of FAM is Princeton Services, Inc. ("PSI"), an indirect
wholly-owned subsidiary of ML & Co. The limited partners are ML &
Co. and Fund Asset Management, Inc. ("FAMI"), which is also an
indirect wholly-owned subsidiary of ML & Co. The Fund has also
entered into Distribution Agreements and a Distribution Plan with
Merrill Lynch Funds Distributor, Inc. ("MLFD" or "Distributor"), a
wholly-owned subsidiary of Merrill Lynch Investment Management, Inc.
("MLIM"), which is also an indirect wholly-owned subsidiary of ML &
Co.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee based upon the average daily
value of the Fund's net assets at the following annual rates: 0.55%
of the Fund's average daily net assets not exceeding $500 million;
0.525% of average daily net assets in excess of $500 million but not
exceeding $1 billion; and 0.50% of average daily net assets in
excess of $1 billion. The Investment Advisory Agreement obligates
FAM to reimburse the Fund to the extent the Fund's expenses
(excluding interest, taxes, distribution fees, brokerage fees and
commissions, and extraordinary items) exceed 2.5% of the Fund's
first $30 million of the average daily net assets, 2.0% of the next
$70 million of average daily net assets, and 1.5% of the average
daily net assets in excess thereof. FAM's obligation to reimburse
the Fund is limited to the amount of the management fee. No fee
payment will be made to the Investment Adviser during any fiscal
year which will cause such expenses to exceed such expense
limitation at the time of such payment. For the period ended July
31, 1994, FAM earned fees of $143,923, all of which was voluntarily
waived. FAM also voluntarily reimbursed the Fund additional expenses
of $175,242.
The Fund has adopted a Plan of Distribution (the "Plan") in
accordance with Rule 12b-1 under the Investment Company Act of 1940,
pursuant to which the Fund pays the Distributor ongoing account
maintenance and distribution fees relating to Class B Shares, which
are accrued daily and paid monthly at the annual rates of 0.25% and
0.25%, respectively, of the average daily net assets of the Class B
Shares of the Fund. Pursuant to a sub-agreement with the
Distributor, Merrill Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S"),
an affiliate of ML & Co., also provides account maintenance and
distribution services to the Fund. The ongoing distribution and
account maintenance fees compensates the Distributor and MLPF&S for
providing distribution and account maintenance services to Class B
Shareholders. As authorized by the Plan, the Distributor has entered
into an agreement with MLPF&S which provides for the compensation of
MLPF&S for providing distribution-related services to the Fund. For
the period ended July 31, 1994, MLFD earned underwriting discounts
of $4,869, and MLPF&S earned dealer concessions of $40,649, on sales
of the Fund's Class A Shares.
MLPF&S also received contingent deferred sales charges of $18,277
relating to Class B Share transactions during the period.
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, FAMI, PSI, MLIM, MLFD, FDS, MLPF&S, and/or ML &
Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the period ended July 31, 1994 were $44,881,898 and $13,629,312,
respectively.
Net realized and unrealized gains (losses) as of July 31, 1994 were
as follows:
Realized
Gains Unrealized
(Losses) Losses
Long-term investments $(1,286,647) $(1,154,512)
Short-term investments 32 --
Financial futures contracts 237,340 --
----------- -----------
Total $(1,049,275) $(1,154,512)
=========== ===========
As of July 31, 1994, net unrealized depreciation for Federal income
tax purposes aggregated $1,154,512, of which $127,776 related to
appreciated securities and $1,282,288 related to depreciated
securities. The aggregate cost of investments at July 31, 1994 for
Federal income tax purposes was $33,857,668.
4. Beneficial Interest Transactions:
Net increase in net assets derived from beneficial interest
transactions was $34,776,732 for the period ended July 31, 1994.
Transactions in shares of beneficial interest for Class A and Class
B Shares were as follows:
Class A Shares for the Period
August 27, 1993++ to Dollar
July 31, 1994 Shares Amount
Shares sold 798,207 $ 8,031,308
Shares issued to shareholders
in reinvestment of dividends
and distributions 18,709 182,974
----------- -----------
Total issued 816,916 8,214,282
Shares redeemed (108,407) (1,045,172)
----------- -----------
Net increase 708,509 $ 7,169,110
=========== ===========
[FN]
++Prior to August 27, 1993 (commencement of operations), the Fund
issued 5,000 shares to FAM for $50,000.
Class B Shares for the Period
August 27, 1993++ to Dollar
July 31, 1994 Shares Amount
Shares sold 2,895,412 $28,978,505
Shares issued to shareholders
in reinvestment of dividends
and distributions 54,074 528,427
----------- -----------
Total issued 2,949,486 29,506,932
Shares redeemed (196,818) (1,899,310)
----------- -----------
Net increase 2,752,668 $27,607,622
=========== ===========
[FN]
++Prior to August 27, 1993 (commencement of operations), the Fund
issued 5,000 shares to FAM for $50,000.
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
Merrill Lynch Oregon Municipal Bond Fund of Merrill Lynch Multi-
State Municipal Series Trust:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of Merrill Lynch
Oregon Municipal Bond Fund of Merrill Lynch Multi-State Municipal
Series Trust as of July 31, 1994, the related statements of
operations and changes in net assets, and the financial highlights
for the period August 27, 1993 (commencement of operations) to July
31, 1994. 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 audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at July 31,
1994 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 audit provides
a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Merrill Lynch Oregon Municipal Bond Fund of Merrill Lynch Multi-
State Municipal Series Trust as of July 31, 1994, the results of its
operations, the changes in its net assets, and the financial
highlights for the period August 27, 1993 to July 31, 1994 in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
August 29, 1994
</AUDIT-REPORT>
IMPORTANT TAX INFORMATION
All of the net investment income distributions paid monthly by
Merrill Lynch Oregon Municipal Bond Fund during its taxable period
ended July 31, 1994 qualify as tax-exempt interest dividends for
Federal income tax purposes.
Additionally, the Fund distributed short-term capital gains of
$.006854 per share to shareholders of record on December 22, 1993.
There were no long-term capital gains distributed during the period.
Please retain this information for your records.
OFFICERS AND TRUSTEES
Arthur Zeikel, President and Trustee
Kenneth S. Axelson, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Terry K. Glenn, Executive Vice President
Donald C. Burke, Vice President
Vincent R. Giordano, Vice President
Kenneth A. Jacob, Vice President
Gerald M. Richard, Treasurer
Jerry Weiss, Secretary
Custodian
National Westminster Bank NJ
10 Exchange Place
Jersey City, New Jersey 07302
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
APPENDIX GRAPHIC AND IMAGE MATERIAL.
ITEM 1:
APPENDIX: GRAPHIC AND IMAGE MATERIAL.
Item 1:
Total Return Based on a $10,000 Investment--Class A Shares*
A line graph depicting the growth of an investment in the Fund's
Class A Shares compared to growth of an investment in the Lehman
Brothers Municipal Bond Index. Beginning and ending values are:
<PAGE>
8/27/93** 7/94
ML Oregon Municipal
Bond Fund++ $ 9,600 $ 9,492
Lehman Brothers Municipal
Bond Index++++ $10,000 $ 9,979
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses including advisory fees.
**Commencement of Operations.
++ML Oregon Municipal Bond Fund invests primarily in
long-term investment-grade obligations issued by or on behalf of
the State of Oregon, its political subdivisions,
agencies and instrumentalities and obligations of other
qualifying issuers.
++++This unmanaged Index consists of long-term revenue bonds,
prerefunded bonds, general obligation bonds and insured bonds.
<PAGE>
Item 2:
Total Return Based on a $10,000 Investment--Class B Shares*
A line graph depicting the growth of an investment in the Fund's
Class B Shares compared to growth of an investment in the Lehman
Brothers Municipal Bond Index. Beginning and ending values are:
8/27/93** 7/94
ML Oregon Municipal
Bond Fund++ $10,000 $ 9,465
Lehman Brothers Municipal
Bond Index++++ $10,000 $ 9,979
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses including advisory fees.
**Commencement of Operations.
++ML Oregon Municipal Bond Fund invests primarily in
long-term investment-grade obligations issued by or on behalf of
the State of Oregon, its political subdivisions,
agencies and instrumentalities and obligations of other
qualifying issuers.
++++This unmanaged Index consists of long-term revenue bonds,
prerefunded bonds, general obligation bonds and insured bonds.
