MERRILL LYNCH
OREGON
MUNICIPAL
BOND FUND
FUND LOGO
Annual Report
July 31, 1995
<PAGE>
Officers and Trustees
Arthur Zeikel, President and Trustee
James H. Bodurtha, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Terry K. Glenn, Executive Vice President
Donald C. Burke, Vice President
Vincent R. Giordano, Vice President
Kenneth A. Jacob, Vice President
Gerald M. Richard, Treasurer
Jerry Weiss, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
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, NJ
08543-9011
<PAGE>
TO OUR SHAREHOLDERS
In the July quarter, economic data generally showed evidence of
slowing activity. Gross domestic product growth for the first three
months of 1995 was reported at 2.7%, the weakest showing in the past
18 months. Other signs of a sluggish economy included lackluster
durable goods orders, slowing growth in the manufacturing sector and
three consecutive months of declines in the Index of Leading
Economic Indicators, an occurrence which has often (but not always)
forecast recessions. As a result, concerns arose that the economic
"soft landing" could turn into an actual recession. However, at the
same time there were also expectations that a few months of very
slow or zero growth would be followed by a pickup in economic
activity later in the year. This view was supported by the stronger-
than-expected employment data for June and an upward revision in
May's employment figures, as well as improving housing activity
measures and consumer confidence surveys.
Thus far in 1995, economic developments have been very positive for
the US stock and bond markets, and most US stock market averages
recently have attained record levels. In contrast, the US dollar has
been persistently weak, especially relative to the yen. Following
the Federal Reserve Board's cut in short-term interest rates in
early July, continued signs of a moderating expansion and well-
contained inflationary pressures could provide further assurance
that the peak in US interest rates is behind us, creating a stronger
foundation for higher stock and bond prices. On the other hand,
indications of reaccelerating growth and increasing inflationary
pressures would likely suggest that higher interest rates are on the
horizon, a negative development for the US financial markets. The
outcome of the current deliberations on reducing the Federal budget
deficit will also play a role in the investment outlook for the US
capital markets.
<PAGE>
The Municipal Market
Tax-exempt bond yields exhibited considerable volatility during the
three months ended July 31, 1995. Municipal bond yields initially
fell throughout May into early June as evidence of a slowing
domestic economy and moderate inflationary pressures accumulated. As
measured by the Bond Buyer Revenue Bond Index, yields of A-rated,
uninsured tax-exempt revenue bonds declined 35 basis points (0.35%)
to 5.94%. By late June, however, amid signs of a potentially
resurgent economy, particularly in the rebounding housing sector,
bond yields returned to their April quarter's levels of
approximately 6.30%. The lowering of short-term interest rates by
the Federal Reserve Board in early July temporarily restored
investor confidence and tax-exempt bond yields fell to 6.05%. As
additional economic indicators were released during July, investors
again saw signs that the economy was regaining momentum and that the
Federal Reserve Board action had been premature. Fears that an
expanding economy would have negative inflationary consequences
pushed municipal bond yields higher, ending the July 31, 1995
quarter essentially unchanged at 6.27%. US Treasury bond yields
exhibited a similar pattern of volatility during the July quarter.
However, US Treasury bond yields continued to decline, falling
approximately 50 basis points to 6.85%.
Municipal bonds have underperformed US Treasury securities for a
number of reasons. The record highs of the US equity market have
continued to attract retail investors seeking further capital gains.
Investor demand has also been diminished in recent months by the
"sticker shock" effect that periodically affects the municipal bond
market. Investors who had become accustomed to purchasing tax-exempt
securities in the 6.50%-7.00% range six to seven months ago have
demonstrated understandable reluctance to purchase similar
securities at current levels. The strong fundamental structure of
the municipal bond market, however, suggests that such hesitancy may
prove costly.
<PAGE>
However, the major reason by far for the tax-exempt market's recent
underperformance has been concerns regarding the implication for
municipal bonds' tax advantage resulting from various proposed tax
law changes (for example, flat tax, value-added tax or national
sales tax) that have reduced investor demand for tax-exempt
products. Such concerns are likely to quickly recede as investors
realize that such, if any, changes are unlikely to be enacted before
late 1996 at the earliest. Long-term investors will also recall 1986
when similar tax proposals were made, municipal bond yields
initially rose, in some instances, to over 100% of taxable yields.
Tax-exempt bond yields quickly declined as investors' fears proved
to be unfounded.
The municipal bond market's strong technical position has diminished
somewhat in recent months. New-issue supply over the last six months
has totaled approximately $71 billion, or a decline of over 20%
compared to the corresponding period in 1994. In recent months,
however, municipalities issued approximately $41 billion in new
securities, which represents only a 6% decline versus the same
period a year earlier. Investor demand has remained muted in recent
months despite significant funds available to investors. By the end
of July investors, both individual and institutional, are expected
to have received as much as $80 billion from tax-exempt bond
maturities, coupon payments and the proceeds of early bond
redemptions. Little new money has entered the municipal market in
recent months, largely in response to the factors mentioned above.
Consequently, much of the technical support the municipal market
enjoyed earlier this year has evaporated, causing municipal bond
yields to decline at a slower rate than their taxable counterparts.
However, the recent relative underperformance of municipal bonds has
made them particularly attractive to long-term investors. Tax-exempt
bonds currently yield well over 90% of US Treasury securities. In
some instances, A-rated, long-term revenue bonds have yielded almost
95% of US Treasury bonds. Analysts usually consider municipal bonds
yielding over 82% of US Treasury securities to be historically
attractive. With inflation-adjusted, "real" after-tax equivalent tax-
exempt yields of over 6.50%, municipal securities appear to
represent considerable value.
Current tax-exempt yield levels appear to be overcompensating for
any proposed changes in tax law that can reasonably be expected to
be enacted. As Congressional hearings on this matter would continue
into 1996, and the revenue losses resultant from such changes become
more apparent, the likelihood of any significant changes to tax
codes and the resultant decline of municipal bonds' inherent tax
advantage should decline. Under such a scenario, tax-exempt bond
yields would quickly decline and currently available municipal bond
yields would return to their normal historic relationship.
<PAGE>
Fiscal Year in Review
Merrill Lynch Oregon Municipal Bond Fund began the fiscal year ended
July 31, 1995 neutral on the interest rate outlook. The economy had
shown significant strength in the fourth quarter of 1994 but seemed
to be slowing in response to the monetary tightening orchestrated by
the Federal Reserve Board. By mid-November 1994, the Federal Reserve
Board had raised short-term interest rates by 250 basis points. In
actuality, the economy did not weaken until the end of 1994. Tax-
exempt interest rates were peaking, and we started selling the
Fund's then current holdings and purchasing new bonds to seek higher
yields. This strategy, along with the market performance as a whole
in 1994, enabled the Fund to maintain a competitive yield, while
achieving a positive total return for the fiscal year.
The Fund remained fully invested for the bond market rally that
started in November 1994 and continued through May 1995. This rally
was brought on by signs of a weakening economy along with moderate
inflation. By early June, we had become more neutral on the market
and raised cash reserves to seek to protect the Fund from any
downside risk. Tax-exempt interest rates increased, enabling us to
put some cash to work at attractive levels. This strategy enabled
the Fund to realize an attractive total return. Currently, we are
again neutral on the market in response to an economy that seems to
be gaining strength. The housing market appears to have bottomed and
is making a turnaround, and reported retail sales have started to
rise. The Federal Reserve Board cut the discount rate in July by 25
basis points to spur what seemed to be a weak economy, thus adding
to the economy's momentum. Looking ahead, our strategy will consist
of seeking to enhance the total return of the Fund and to enhance
the level of tax-exempt income for shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President and Portfolio Manager
August 31, 1995
<PAGE>
PERFORMANCE DATA
About Fund Performance
Since October 21, 1994, investors have been able to purchase shares
of the Fund through the Merrill Lynch Select Pricing SM System,
which offers four pricing alternatives:
* Class A Shares incur a maximum initial sales charge (front-end load)
of 4% and bear no ongoing distribution or account maintenance fees.
Class A Shares are available only to eligible investors.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.25% and an account
maintenance fee of 0.25%. These shares automatically convert to
Class D Shares after approximately 10 years.
* Class C Shares are subject to a distribution fee of 0.35% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.10% (but no distribution fee).
Performance data for all of the Fund's shares are presented in the
"Total Return Based on a $10,000 Investment" graphs on page 4 and
the "Recent Performance Results" table below. Data for the Fund's
Class A and Class B Shares are presented in the "Performance
Summary" and "Average Annual Total Return" tables on pages 4 and 5.
Data for Class C and Class D Shares are also presented in the
"Aggregate Total Return" tables on page 4.
The "Recent Performance Results" table shows investment results
before the deduction of any sales charges for Class A and Class B
Shares for the 12-month and 3-month periods ended July 31, 1995 and
for Class C and Class D Shares for the since inception and 3-month
periods ended July 31, 1995. All data in this table assume
imposition of the actual total expenses incurred by each class of
shares during the relevant period.
<PAGE>
None of the past results shown should be considered a representation
of future performance. Investment return and principal value of
shares will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. Dividends paid to each class
of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
<TABLE>
Recent Performance Results
<CAPTION>
12 Month 3 Month
7/31/95 4/30/95 7/31/94++ % Change++ % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $9.40 $9.27 $9.41 - 0.11% + 1.40%
Class B Shares* 9.40 9.27 9.41 - 0.11 + 1.40
Class C Shares* 9.40 9.27 9.02 + 4.21 + 1.40
Class D Shares* 9.39 9.26 9.02 + 4.10 + 1.40
Class A Shares--Total Return* + 5.54(1) + 2.70(2)
Class B Shares--Total Return* + 5.00(3) + 2.57(4)
Class C Shares--Total Return* + 8.19(5) + 2.55(6)
Class D Shares--Total Return* + 8.55(7) + 2.68(8)
Class A Shares--Standardized 30-day Yield 4.83%
Class B Shares--Standardized 30-day Yield 4.51%
Class C Shares--Standardized 30-day Yield 4.42%
Class D Shares--Standardized 30-day Yield 4.73%
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
++Investment results shown for Class C and Class D Shares are since
inception (10/21/94).
(1)Percent change includes reinvestment of $0.503 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.120 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.456 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.108 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.333 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.106 per share ordinary
income dividends.
(7)Percent change includes reinvestment of $0.373 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.118 per share ordinary
income dividends.
</TABLE>
<PAGE>
PERFORMANCE DATA (continued)
Total Return Based on a $10,000 Investment--Class A Shares and Class B Shares
A line graph depicting the growth of an investment in the Fund's
Class A Shares and Class B Shares compared to growth of an
investment in the Lehman Brothers Municipal Bond Index. Beginning
and ending values are:
8/27/93** 7/95
ML Oregon Municipal
Bond Fund++--Class A Shares* $ 9,600 $10,017
ML Oregon Municipal
Bond Fund++--Class B Shares $10,000 $10,052
Lehman Brothers Municipal
Bond Index++++ $10,000 $10,764
Total Return Based on a $10,000 Investment--Class C Shares and Class D Shares
A line graph depicting the growth of an investment in the Fund's
Class C Shares and Class D Shares compared to growth of an
investment in the Lehman Brothers Municipal Bond Index. Beginning
and ending values are:
10/21/94** 7/95
ML Oregon Municipal
Bond Fund++--Class C Shares* $10,000 $10,719
ML Oregon Municipal
Bond Fund++--Class D Shares* $ 9,600 $10,421
Lehman Brothers Municipal
Bond Index++++ $10,000 $11,107
<PAGE>
[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.
Past performance is not predictive of future performance.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/95 +7.05% +2.77%
Inception (8/27/93)
through 6/30/95 +1.83 -0.41
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/95 +6.50% +2.50%
Inception (8/27/93)
through 6/30/95 +1.31 -0.31
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
Aggregate Total Return
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Inception (10/21/94)
through 6/30/95 +7.36% +6.36%
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Inception (10/21/94)
through 6/30/95 +7.68% +3.37%
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
PERFORMANCE DATA (concluded)
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
8/27/93-12/31/93 $10.00 $10.30 -- $0.185 + 4.89%
1994 10.30 8.77 -- 0.515 -10.01
1/1/95-7/31/95 8.77 9.40 -- 0.278 +10.54
------
Total $0.978
Cumulative total return as of 7/31/95: + 4.35%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
include sales charge; results would be lower if sales charge was
included.
</TABLE>
<PAGE>
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
8/27/93-12/31/93 $10.00 $10.30 -- $0.167 + 4.70%
1994 10.30 8.77 -- 0.468 -10.46
1/1/95-7/31/95 8.77 9.40 -- 0.251 +10.23
------
Total $0.886
Cumulative total return as of 7/31/95: + 3.34%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
reflect deduction of any sales charge; results would be lower if
sales charge was deducted.
</TABLE>
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 many of the securities according to the
list at right.
AMT Alternative Minimum Tax (subject to)
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
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Oregon--80.8%
<S> <S> <C> <S> <C>
AAA Aaa $ 2,125 Jackson County, Oregon, School District No. 549C, UT, 6% due 6/01/2005 (c) $ 2,305
AAA Aaa 1,320 Josephine County, Oregon, School District No. 007, UT, 5.75% due
6/01/2006 (e) 1,390
BBB+ NR* 1,000 Klamath Falls, Oregon, Intercommunity Hospital Authority Revenue Bonds
(Gross-Merle West Medical Center Project), Series A, 7.10% due 9/01/2024 1,034
A+ Aa 1,140 Lane County, Oregon, Area Education District, Lane Community College,
UT, 5.50% due 6/01/2006 1,176
AAA Aaa 1,000 Lincoln County, Oregon, School District, UT, 6% due 6/15/2009 1,045
AAA Aaa 2,280 Marion County, Oregon, Union High School District No. 007J Revenue Bonds,
UT, 7% due 6/01/2010 (c) 2,572
AAA Aaa 1,000 McMinnville, Oregon, Sewer System Revenue Bonds, Series A, 5% due
2/01/2014 (e) 912
A1 VMIG1++ 700 Medford, Oregon, Hospital Facilities Authority Revenue Bonds (Gross
Rogue Valley Health Services), VRDN, 4% due 10/01/2016 (a) 700
AAA Aaa 2,250 Metropolitan Service District, Oregon, Convention Center, UT, 7.65%
due 12/01/1997 (g) 2,433
AAA Aaa 1,215 Morrow County, Oregon, School District No. 001, UT, 6% due 6/01/2007 (b) 1,302
A- NR* 1,250 Multnomah County, Oregon, Education Facilities Revenue Bonds (University
of Portland Project), 6% due 4/01/2014 1,262
AA- Aa 1,000 Oregon State Higher Education Building Improvement Bonds, Series A,
UT, 6.45% due 8/01/2024 1,054
</TABLE>
<PAGE>
<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 $ 509
NR* Aa 2,050 Series B, 6.875% due 7/01/2028 2,131
AAA Aaa 1,000 Port Portland International Airport Revenue Bonds (Portland International
Airport), AMT, Series 7-B, 7.10% due 7/01/2021 (b) 1,083
Port Saint Helens, Oregon, PCR (Portland General Electric Company
Project), VRDN (a):
A1+ A3 1,200 Series A, AMT, 4% due 8/01/2014 1,200
A1+ VMIG1++ 300 Series B, 3.90% due 6/01/2010 300
A+ A1 1,500 Portland, Oregon, Sewer System Revenue Bonds, Series A, 6.25% due
6/01/2015 1,547
AAA Aaa 1,130 Yamhill County, Oregon, Newberg School District No. 029J, UT, 6.875%
due 6/01/2007 (c) 1,271
Puerto Rico--11.4%
AAA Aaa 2,720 Puerto Rico Commonwealth, UT, 7% due 7/01/2010 (d) 3,131
AAA Aaa 400 Puerto Rico Electric Power Authority, Power Revenue Bonds, STRIPES,
Series T, 7.538% due 7/01/2005 (c)(f) 441
Total Investments (Cost--$27,801)--92.2% 28,798
Other Assets Less Liabilities--7.8% 2,436
-------
Net Assets--100.0% $31,234
=======
<PAGE>
<FN>
(a)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at July 31, 1995.
(b)MBIA Insured.
(c)FSA Insured.
(d)AMBAC Insured.
(e)FGIC Insured.
(f)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, 1995.
(g)Prerefunded.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
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, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$27,801,138) (Note 1a) $ 28,798,000
Cash 92,316
Receivables:
Securities sold $ 1,981,988
Interest 336,173
Beneficial interest sold 55,000
Investment adviser (Note 2) 34,271 2,407,432
------------
Deferred organization expenses (Note 1e) 23,884
Prepaid registration fees and other assets (Note 1e) 40,639
------------
Total assets 31,362,271
------------
Liabilities: Payables:
Dividends to shareholders (Note 1f) 27,290
Beneficial interest redeemed 11,671
Distributor (Note 2) 10,727 49,688
------------
Accrued expenses and other liabilities 78,118
------------
Total liabilities 127,806
------------
<PAGE>
Net Assets: Net assets $ 31,234,465
============
Net Assets Class A Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized $ 46,101
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 275,229
Class C Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 9,074
Class D Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 2,003
Paid-in capital in excess of par 33,351,681
Accumulated realized capital losses on investments--net
(Note 5) (3,428,053)
Accumulated distributions in excess of realized capital
gains--net (18,432)
Unrealized appreciation on investments--net 996,862
------------
Net assets $ 31,234,465
============
Net Asset Value: Class A--Based on net assets of $4,331,575 and 461,011
shares of beneficial interest outstanding $ 9.40
============
Class B--Based on net assets of $25,861,524 and 2,752,288
shares of beneficial interest outstanding $ 9.40
============
Class C--Based on net assets of $853,250 and 90,740 shares
of beneficial interest outstanding $ 9.40
============
Class D--Based on net assets of $188,116 and 20,032 shares
of beneficial interest outstanding $ 9.39
============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Year Ended
July 31, 1995
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 1,776,780
(Note 1d):
<PAGE>
Expenses: Investment advisory fees (Note 2) $ 167,827
Account maintenance and distribution fees--Class B (Note 2) 126,160
Printing and shareholder reports 65,714
Professional fees 61,686
Accounting services (Note 2) 31,099
Transfer agent fees--Class B (Note 2) 17,987
Registration fees (Note 1e) 11,157
Amortization of organization expenses (Note 1e) 7,770
Pricing fees 4,340
Custodian fees 4,050
Transfer agent fees--Class A (Note 2) 2,951
Account maintenance and distribution fees--Class C (Note 2) 1,854
Trustees' fees and expenses 1,593
Transfer agent fees--Class C (Note 2) 232
Account maintenance fees--Class D (Note 2) 64
Transfer agent fees--Class D (Note 2) 42
Other 3,168
------------
Total expenses before reimbursement 507,694
Reimbursement of expenses (Note 2) (277,486)
------------
Total expenses after reimbursement 230,208
------------
Investment income--net 1,546,572
------------
Realized & Realized loss on investments--net (2,378,778)
Unrealized Change in unrealized appreciation/depreciation on investments--net 2,151,374
Gain (Loss) ------------
on Investments Net Increase in Net Assets Resulting from Operations $ 1,319,168
--Net (Notes 1b, ============
1d & 3):
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year For the Period
Ended Aug. 27, 1993++
July 31, to July 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 1,546,572 $ 1,271,483
Realized loss on investments--net (2,378,778) (1,049,275)
Change in unrealized appreciation/depreciation on
investments--net 2,151,374 (1,154,512)
------------ ------------
Net increase (decrease) in net assets resulting from
operations 1,319,168 (932,304)
------------ ------------
<PAGE>
Dividends & Investment income--net:
Distributions to Class A (270,715) (295,489)
Shareholders Class B (1,258,134) (975,994)
(Note 1f): Class C (14,460) --
Class D (3,263) --
In excess of realized gain on investments--net:
Class A -- (3,927)
Class B -- (14,505)
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (1,546,572) (1,289,915)
------------ ------------
Beneficial Net increase (decrease) in net assets derived from beneficial
Interest interest transactions (1,192,644) 34,776,732
Transactions ------------ ------------
(Note 4):
Net Assets: Total increase (decrease) in net assets (1,420,048) 32,554,513
Beginning of period 32,654,513 100,000
------------ ------------
End of period $ 31,234,465 $ 32,654,513
============ ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<PAGE>
<TABLE>
Financial Highlights
<CAPTION>
Class A Class B
For the For the
For the Period For the Period
The following per share data and ratios have been derived Year Aug. 27, Year Aug. 27,
from information provided in the financial statements. Ended 1993++ to Ended 1993++ to
July 31, July 31, July 31, July 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1995 1994
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.41 $ 10.00 $ 9.41 $ 10.00
Operating -------- -------- -------- --------
Performance: Investment income--net .50 .48 .45 .43
Realized and unrealized loss on investments--net (.01) (.58) (.01) (.58)
-------- -------- -------- --------
Total from investment operations .49 (.10) .44 (.15)
-------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.50) (.48) (.45) (.43)
In excess of realized gain on investments--net -- (.01) -- (.01)
-------- -------- -------- --------
Total dividends and distributions (.50) (.49) (.45) (.44)
-------- -------- -------- --------
Net asset value, end of period $ 9.40 $ 9.41 $ 9.40 $ 9.41
======== ======== ======== ========
Total Investment Based on net asset value per share 5.54% (1.13%)+++ 5.00% (1.59%)+++
Return:** ======== ======== ======== ========
Ratios to Expenses, excluding account maintenance and
Average distribution fees and net of reimbursement .31% .08%* .34% .08%*
Net Assets: ======== ======== ======== ========
Expenses, net of reimbursement .31% .08%* .84% .58%*
======== ======== ======== ========
Expenses 1.23% 1.30%* 1.75% 1.80%*
======== ======== ======== ========
Investment income--net 5.51% 5.26%* 4.99% 4.75%*
======== ======== ======== ========
<PAGE>
Supplemental Net assets, end of period (in thousands) $ 4,332 $ 6,712 $ 25,861 $ 25,943
Data: ======== ======== ======== ========
Portfolio turnover 142.77% 52.88% 142.77% 52.88%
======== ======== ======== ========
<CAPTION>
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. October 21, 1994++
to July 31, 1995
Increase (Decrease) in Net Asset Value: Class C Class D
<S> <S> <C> <C>
Per Share Net asset value, beginning of period $ 9.02 $ 9.02
Operating -------- --------
Performance: Investment income--net .34 .38
Realized and unrealized gain on investments--net .38 .37
-------- --------
Total from investment operations .72 .75
-------- --------
Less dividends from investment income--net (.34) (.38)
-------- --------
Net asset value, end of period $ 9.40 $ 9.39
======== ========
Total Based on net asset value per share 8.19%+++ 8.55%+++
Investment ======== ========
Return:**
Ratios to Expenses, excluding account maintenance and distribution fees
Average and net of reimbursement .40%* .41%*
Net Assets: ======== ========
Expenses, net of reimbursement 1.00%* .51%*
======== ========
Expenses 1.88%* 1.39%*
======== ========
Investment income--net 4.68%* 5.12%*
======== ========
Supplemental Net assets, end of period (in thousands) $ 853 $ 188
Data: ======== ========
Portfolio turnover 142.77% 142.77%
======== ========
<FN>
*Annualized.
++Commencement of Operations.
**Total investment returns exclude the effects of sales loads.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
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. The Fund offers
four classes of shares under the Merrill Lynch Select Pricing SM
System. Shares of Class A and Class D are sold with a front-end
sales charge. Shares of Class B and Class C may be subject to a
contingent deferred sales charge. All classes of shares have
identical voting, dividend, liquidation and other rights and the
same terms and conditions, except that Class B, Class C and Class D
Shares bear certain expenses related to the account maintenance of
such shares, and Class B and Class C Shares also bear certain
expenses related to the distribution of such shares. Each class has
exclusive voting rights with respect to matters relating to its
account maintenance and distribution expenditures. The following is
a summary of significant accounting policies followed by the Fund.
(a) Valuation of investments--Municipal bonds and other portfolio
securities in which the Fund invests are traded primarily in the
over-the-counter municipal bond and money markets and are valued at
the last available bid price in the over-the-counter market or on
the basis of yield equivalents as obtained from one or more dealers
that make markets in the securities. Financial futures contracts and
options thereon, which are traded on exchanges, are valued at their
settlement prices as of the close of such exchanges. Short-term
investments with remaining maturities of sixty days or less are
valued at amortized cost, which approximates market value.
Securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or
under the direction of the Board of Trustees of the Trust, including
valuations furnished by a pricing service retained by the Trust,
which may utilize a matrix system for valuations. The procedures of
the pricing service and its valuations are reviewed by the officers
of the Trust under the general supervision of the Trustees.
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses may
arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
<PAGE>
* Financial futures contracts--The Fund may purchase or sell interest
rate futures contracts and options on such futures contracts for the
purpose of hedging the market risk on existing securities or the
intended purchase of securities. Futures contracts are contracts for
delayed delivery of securities at a specific future date and at a
specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to
the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as variation margin
and are recorded by the Fund as unrealized gains or losses. When the
contract is closed, the Fund records a realized gain or loss equal
to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Deferred organization expenses and prepaid registration fees--
Deferred organization expenses are charged to expense on a straight-
line basis over a five-year period. Prepaid registration fees are
charged to expense as the related shares are issued.
(f) Dividends and distributions--Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates. 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 Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner. The Fund has also entered into a Distribution
Agreement and Distribution Plans with Merrill Lynch Funds
Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc.
<PAGE>
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee based upon the average daily
value of the Fund's net assets at the following annual rates: 0.55%
of the Fund's average daily net assets not exceeding $500 million;
0.525% of average daily net assets in excess of $500 million but not
exceeding $1 billion; and 0.50% of average daily net assets in
excess of $1 billion. The Investment Advisory Agreement obligates
FAM to reimburse the Fund to the extent the Fund's expenses
(excluding interest, taxes, distribution fees, brokerage fees and
commissions, and extraordinary items) exceed 2.5% of the Fund's
first $30 million of average daily net assets, 2.0% of the next $70
million of average daily net assets, and 1.5% of the average daily
net assets in excess thereof. FAM's obligation to reimburse the Fund
is limited to the amount of the management fee. No fee payment will
be made to the Investment Adviser during any fiscal year which will
cause such expenses to exceed expense limitations at the time of
payment. For the year ended July 31, 1995, FAM earned fees of
$167,827, all of which was voluntarily waived. FAM also reimbursed
the Fund additional expenses of $109,659.
Pursuant to the distribution plans ("the Distribution Plans")
adopted by the Fund in accordance with Rule 12b-1 under the
Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are
accrued daily and paid monthly at annual rates based upon the
average daily net assets of the shares as follows:
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.25%
Class C 0.25% 0.35%
Class D 0.10% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
<PAGE>
For the year ended July 31, 1995, MLFD earned underwriting discounts
and MLPF&S earned dealer concessions on sales of the Fund's Class A
and Class D Shares as follows:
MLFD MLPF&S
Class A $ 838 $6,599
Class D $ 76 $ 885
For the year ended July 31, 1995, MLPF&S received contingent
deferred sales charges of $96,587 and $30 relating to transactions
in Class B and Class C Shares, respectively.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-
owned subsidiary of ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, PSI, MLPF&S, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended July 31, 1995 were $39,985,101 and $42,616,703,
respectively.
NOTES TO FINANCIAL STATEMENTS (concluded)
Net realized and unrealized gains (losses) as of July 31, 1995 were
as follows:
Realized Unrealized
Losses Gains
Long-term investments $(2,083,953) $ 996,862
Financial futures contracts (294,825) --
----------- -----------
Total $(2,378,778) $ 996,862
=========== ===========
As of July 31, 1995, net unrealized appreciation for Federal income
tax purposes aggregated $996,862 of which $1,008,358 related to
appreciated securities and $11,496 related to depreciated
securities. The aggregate cost of investments at July 31, 1995 for
Federal income tax purposes was $27,801,138.
<PAGE>
4. Beneficial Interest Transactions:
Net increase (decrease) in net assets derived from beneficial
interest transactions was $(1,192,644) and $34,776,732 for the year
ended July 31, 1995 and the period ended July 31, 1994,
respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Year Dollar
Ended July 31, 1995 Shares Amount
Shares sold 65,606 $ 590,520
Shares issued to share-
holders in reinvestment
of dividends 18,358 167,505
----------- -----------
Total issued 83,964 758,025
Shares redeemed (336,462) (2,993,389)
----------- -----------
Net decrease (252,498) $(2,235,364)
=========== ===========
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 share-
holders in reinvestment
of dividends & 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.
<PAGE>
Class B Shares for the Year Dollar
Ended July 31, 1995 Shares Amount
Shares sold 579,985 $ 5,316,243
Shares issued to share-
holders in reinvestment
of dividends 73,142 667,752
----------- -----------
Total issued 653,127 5,983,995
Shares redeemed (658,507) (5,958,286)
----------- -----------
Net increase (decrease) (5,380) $ 25,709
=========== ===========
Class B Shares for the Period Dollar
Aug. 27, 1993++ to 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.
Class C Shares for the Period Dollar
Oct. 21, 1994++ to July 31, 1995 Shares Amount
Shares sold 94,204 $ 863,629
Shares issued to shareholders
in reinvestment of dividends 883 8,240
----------- -----------
Total issued 95,087 871,869
Shares redeemed (4,347) (41,198)
----------- -----------
Net increase 90,740 $ 830,671
=========== ===========
[FN]
++Commencement of Operations.
<PAGE>
Class D Shares for the Period Dollar
Oct. 21, 1994++ to July 31, 1995 Shares Amount
Shares sold 23,942 $ 223,020
Shares issued to shareholders
in reinvestment of dividends 129 1,210
----------- -----------
Total issued 24,071 224,230
Shares redeemed (4,039) (37,890)
----------- -----------
Net increase 20,032 $ 186,340
=========== ===========
[FN]
++Commencement of Operations.
5. Capital Loss Carryforward:
At July 31, 1995, the Fund had a net capital loss carryforward of
approximately $1,691,000, all of which expires in 2003. This amount
will be available to offset like amounts of any future taxable
gains.
<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, 1995, the related statements of
operations for the year then ended and changes in net assets for the
year then ended and the period August 27, 1993 (commencement of
operations) to July 31, 1994, and the financial highlights for the
year then ended and 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
audits.
<PAGE>
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at July 31,
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
Merrill Lynch Oregon Municipal Bond Fund of Merrill Lynch Multi-
State Municipal Series Trust as of July 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
August 31, 1995
</AUDIT-REPORT>
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid monthly by
Merrill Lynch Oregon Municipal Bond Fund during its taxable year
ended July 31, 1995 qualify as tax-exempt interest dividends for
Federal income tax purposes.
Additionally, there were no capital gains distributions by the Fund
during the year.
Please retain this information for your records.
