MERRILL LYNCH
OREGON
MUNICIPAL
BOND FUND
FUND LOGO
Annual Report
July 31, 1996
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Statements and other information herein are as dated and are subject
to change.
<PAGE>
Merrill Lynch Oregon
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011
TO OUR SHAREHOLDERS
The Municipal Market Environment
Municipal bond yields rose dramatically during the six-month period
ended July 31, 1996. Investors became increasingly alarmed that
earlier forecasts of continued moderate growth were overly
optimistic. As indications of stronger growth were released,
particularly the strong employment reports released beginning in
March, fears of associated inflationary pressures mounted and yields
rose in response. By May and June, long-term municipal bond yields
rose into the 6.25%--6.30% range.
However, in early July the combination of the Federal Reserve Board
suggesting that growth was expected to slow later in 1996 and a
temporary stock market correction allowed municipal bond yields to
fall as investors scrambled to purchase relatively scarce
securities. As measured by the Bond Buyer Revenue Bond Index, long-
term, A-rated uninsured tax-exempt bonds yielded 6.02% at July 31,
1996, an increase of over 30 basis points (0.30%) in the last six
months. Long-term US Treasury bond yields rose significantly over
the same period. By July 31, 1996, yields on US Treasury bonds
increased almost 100 basis points to end the six-month period at
6.97%.
<PAGE>
The municipal bond market's recent outperformance as compared to its
taxable counterpart was largely the result of two principal factors.
First, much of the concern in the tax-exempt market regarding the
potential loss of the inherent tax-advantage of the municipal bonds
dissipated. For much of 1995, various tax proposals, such as the
flat tax or national sales tax, were put forward either to reduce
the national debt or reform the current tax system. Most of these
proposals would have severely limited the tax advantages enjoyed by
the municipal bond market. However, in February 1996, the Kemp
Commission released its findings regarding various tax reform
proposals. While noting that numerous changes should be made, no
mention of curtailing or stopping municipal bonds' current favored
tax status was made.
The second major factor leading to the municipal bond market's
recent outperformance was the return of a more favorable technical
environment. The rate of increase in new bond issuance recently
slowed. Over the last 12 months, approximately $175 billion in long-
term municipal securities were issued, an increase of over 27% as
compared to the same period a year earlier. Much of this increase
was the result of issuers seeking to refinance their existing higher-
couponed debt as interest rates declined in 1995 and early 1996. As
interest rates rose, these financings became increasingly
economically impractical and issuance declined. Over the last six
months, less than $70 billion in long-term tax-exempt securities
were underwritten, an increase of 20% versus the comparable period a
year earlier. Only $43 billion in tax-exempt securities were issued
in the last three months, a total essentially unchanged from the
comparable quarter in 1995. In July 1996, less than $10 billion in
long-term municipal bonds were issued, representing the lowest
issuance for the month of July since 1990.
At the same time investor demand remained consistently strong. With
nominal new-issue yields above 6%, retail investor interest was
steady. Additionally, investors received over $50 billion this June
and July in assets derived from coupon income, bond maturities and
proceeds from early redemptions. Annual new bond issuance has
declined in recent years and is expected to remain below levels seen
in the early 1990s. Consequently, as the higher-coupon bonds issued
in the early-to-mid 1980s were redeemed at their first optional call
dates, the total number of outstanding tax-exempt bonds has
declined. This combination of a declining net supply and significant
amounts of assets helped maintain investor demand in recent months.
It is unlikely that the municipal bond market will continue to
significantly outperform US Treasury securities in the near future.
The tax-exempt bond market's recent performance led to the yield
ratio between long-term taxable and tax-exempt securities falling
from in excess of 90% to approximately 85%. While historically still
very attractive, some institutional investors, particularly short-
term traders, began to view the tax-exempt bond market's recent
outperformance as an opportunity to sell a relatively expensive
asset. However, to the long-term investor, such a sale would
represent the loss of an attractively priced asset which may not be
easily replaced given the relative scarcity of municipal bonds under
present supply conditions.
<PAGE>
Looking ahead, no clear consensus for the direction of interest
rates currently exists. Perhaps, the primary focus going forward
will be the extent to which the increase in interest rates seen thus
far in 1996 will negatively impact future economic growth. Should
growth slow in the interest rate-sensitive sectors of the economy,
like housing, auto, and consumer spending, as many economists assert
is likely, then bond yields are likely to decline. Under such a
scenario, the municipal bond market's performance is likely to
closely mirror that of the US Treasury bond market.
Fiscal Year in Review
Merrill Lynch Oregon Municipal Bond Fund began its fiscal year ended
July 31, 1996, with a neutral stance toward interest rates. The
economy seemed to be turning around, the housing market began
showing strength, retail sales exhibited strong momentum, and the
Federal Reserve Board began easing monetary policy to spur the
economy. We focused on generating as high a level of tax-exempt
income as possible while limiting interest rate risk exposure. This
strategy helped protect the Fund from increased volatility while
maintaining competitive yields.
At September 30, 1995, our interest rate outlook became more
constructive because of indications that the resurgent economy was
weakening and inflationary pressures were subsiding. The strength in
housing and retail sales proved to be temporary and began slipping
at the beginning of fourth-quarter 1995. Perception at this time was
that the easing of short-term interest rates by the Federal Reserve
Board was not aggressive enough to stimulate the economy, and
further easing would allow for significant price appreciation. We
began extending the Fund's duration by purchasing bonds with greater
price sensitivity to declining interest rates in order to seek to
enhance total return to shareholders.
Our investment strategy remained constructive, and the Fund
participated in the bond rally through January 1996. The
surprisingly strong economy and impressive job growth during the
first two quarters of 1996 caused interest rates to increase
dramatically, forcing us to shift to a defensive position to seek to
protect the Fund's net asset values. This strategy helped protect
the Fund from the increase in interest rate volatility year-to-date.
Looking ahead, we will maintain the Fund's defensive posture until
there is a clear sign of which direction interest rates will follow.
This strategy, although limiting significant price appreciation from
a bond market rally, is expected to better protect much of the
Fund's principal while seeking to provide attractive yields to its
shareholders.
<PAGE>
In Conclusion
We appreciate your ongoing interest in Merrill Lynch Oregon
Municipal Bond Fund, and we look forward to serving your investment
needs in the months and years to come.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(Robert A. DiMella)
Robert A. DiMella
Vice President and Portfolio Manager
September 6, 1996
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
<PAGE>
*Class A Shares incur a maximum initial sales charge (front-end
load) of 4% and bear no ongoing distribution or account maintenance
fees. Class A Shares are available only to eligible investors.
*Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.25% and an account
maintenance fee of 0.25%. These shares automatically convert to
Class D Shares after approximately 10 years. (There is no initial
sales charge for automatic share conversions.)
*Class C Shares are subject to a distribution fee of 0.35% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
*Class D Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.10% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. 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
7/31/96 4/30/96 7/31/95 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $9.52 $9.42 $9.40 +1.28% +1.06%
Class B Shares* 9.52 9.42 9.40 +1.28 +1.06
Class C Shares* 9.53 9.43 9.40 +1.38 +1.06
Class D Shares* 9.52 9.42 9.39 +1.38 +1.06
Class A Shares--Total Return* +6.52(1) +2.34(2)
Class B Shares--Total Return* +5.97(3) +2.21(4)
Class C Shares--Total Return* +5.97(5) +2.18(6)
Class D Shares--Total Return* +6.52(7) +2.31(8)
Class A Shares--Standardized 30-day Yield 4.69%
Class B Shares--Standardized 30-day Yield 4.38%
Class C Shares--Standardized 30-day Yield 4.28%
Class D Shares--Standardized 30-day Yield 4.59%
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
(1)Percent change includes reinvestment of $0.481 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.118 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.433 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.106 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.424 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.104 per share ordinary
income dividends.
(7)Percent change includes reinvestment of $0.472 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.115 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** 7/96
ML Oregon Municipal Bond Fund++--
Class A Shares* $ 9,600 $10,670
ML Oregon Municipal Bond Fund++--
Class B Shares* $10,000 $10,760
Lehman Brothers Municipal Bond
Index++++ $10,000 $11,475
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** 7/96
ML Oregon Municipal Bond Fund++--
Class C Shares* $10,000 $11,465
ML Oregon Municipal Bond Fund++--
Class D Shares* $9,600 $11,101
Lehman Brothers Municipal Bond
Index++++ $10,000 $11,840
[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.
<PAGE>
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/96 +6.05% +1.80%
Inception (8/27/93)
through 6/30/96 +3.29 +1.82
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/96 +5.50% +1.50%
Inception (8/27/93)
through 6/30/96 +2.77 +2.13
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced
to 0% after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 6/30/96 +5.39% +4.39%
Inception (10/21/94)
through 6/30/96 +7.57 +7.57
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced
to 0% after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 6/30/96 +5.94% +1.70%
Inception (10/21/94)
through 6/30/96 +8.09 +5.51
[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
1995 8.77 9.80 -- 0.489 +17.69
1/1/96--7/31/96 9.80 9.52 -- 0.270 + 0.05
------
Total $1.459
Cumulative total return as of 7/31/96: +11.15%**
</TABLE>
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change***
<S> <C> <C> <C> <C> <C>
8/27/93--12/31/93 $10.00 $10.30 -- $0.167 + 4.70%
1994 10.30 8.77 -- 0.468 -10.46
1995 8.77 9.80 -- 0.441 +17.10
1/1/96--7/31/96 9.80 9.52 -- 0.243 - 0.24
------
Total $1.319
Cumulative total return as of 7/31/96: +9.51%***
</TABLE>
<PAGE>
<TABLE>
Performance Summary--Class C Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change***
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $9.02 $8.78 -- $0.087 - 1.68%
1995 8.78 9.81 -- 0.432 +16.96
1/1/96--7/31/96 9.81 9.53 -- 0.238 - 0.30
------
Total $0.757
Cumulative total return as of 7/31/96:+14.65%***
</TABLE>
<TABLE>
Performance Summary--Class D Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $9.02 $8.77 -- $0.100 - 1.65%
1995 8.77 9.80 -- 0.480 +17.58
1/1/96--7/31/96 9.80 9.52 -- 0.265 - 0.01
------
Total $0.845
Cumulative total return as of 7/31/96: +15.63%**
<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.
***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 the right.
<PAGE>
AMT Alternative Minimum Tax (subject to)
GO General Obligation Bonds
M/F Multi-Family
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--86.2%
<S> <S> <C> <S> <C>
AAA Aaa $ 1,000 Chemeketa, Oregon, Community College District, UT, 5.95% due 6/01/2016 (e) $ 1,014
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 1,051
AAA Aaa 1,165 Lincoln County, Oregon, School District, UT, 5.25% due 6/15/2012 (e) 1,138
AAA Aaa 2,280 Marion County, Oregon, Union High School District No. 007J (Silverton), UT,
7% due 6/01/2010 (c) 2,556
AAA Aaa 1,500 McMinnville, Oregon, Sewer System Revenue Bonds, Series A, 5% due 2/01/2014 (e) 1,404
A1 VMIG1++ 1,300 Medford, Oregon, Hospital Facilities Authority Revenue Bonds (Gross-Rogue
Valley Health Services), VRDN, 3.70% due 10/01/2016 (a) 1,300
AAA Aaa 1,215 Morrow County, Oregon, School District No. 001, UT, 6% due 6/01/2007 (b) 1,305
Oregon State Health, Housing, Educational, and Cultural Facilities Authority
Revenue Bonds, Series A:
NR* VMIG1++ 900 (Guide Dogs for the Blind), VRDN, 3.50% due 7/01/2025 (a) 900
A+ NR* 1,240 Refunding (Reed College Project), 5.375% due 7/01/2025 1,150
AA- Aa 1,000 Oregon State Higher Education Building Improvement Bonds, UT, Series A,
6.45% due 8/01/2024 1,063
Oregon State Housing and Community Services Department, Mortgage Revenue
Bonds (S/F Mortgage Program):
NR* Aa 1,000 AMT, Series E, 7.10% due 7/01/2014 1,040
NR* Aa 500 Refunding, Series A, 6.40% due 7/01/2018 509
NR* Aa 1,050 Series B, 6.875% due 7/01/2028 1,111
</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>
AAA Aaa $ 1,000 Port of Portland, Oregon, International Airport Revenue Bonds (Portland
International Airport), AMT, Series 7B, 7.10% due 7/01/2021 (b) $ 1,086
Port Saint Helens, Oregon, PCR (Portland General Electric Company Project),
A1+ A3 500 VRDN (a):AMT, Series A, 3.80% due 8/01/2014 500
A1+ VMIG1++ 200 Series B, 3.55% due 6/01/2010 200
A NR* 1,000 Portland, Oregon, Housing Authority, M/F Housing Revenue Bonds (Riverwood
Project), 6% due 1/01/2019 996
A+ A1 1,500 Portland, Oregon, Sewer System Revenue Bonds, Series A, 6.25% due 6/01/2015 1,557
AAA Aaa 1,250 Salem, Oregon, Water and Sewer Revenue Bonds, 5.50% due 6/01/2014 (b) 1,230
AAA Aaa 1,000 Tillamook County, Oregon, GO, UT, 6.25% due 1/01/2014 (e)(g) 1,046
AAA Aaa 1,130 Yamhill County, Oregon, School District No. 029J (Newberg), UT, 6.875%
due 6/01/2007 (c)(h) 1,258
Puerto Rico--13.2%
AAA Aaa 2,720 Puerto Rico Commonwealth, GO, UT, 7% due 7/01/2010 (d) 3,165
AAA Aaa 400 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series T,
STRIPES, 7.924% due 7/01/2005 (c)(f) 432
Total Investments (Cost--$25,851)--99.4% 27,011
Variation Margin on Financial Futures Contracts--(0.1%)** (18)
Other Assets Less Liabilities--0.7% 181
-------
Net Assets--100.0% $27,174
=======
<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, 1996.
(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, 1996.
(g)Bank qualified.
(h)Security held as collateral in connection with open financial
futures contracts.
*Not Rated.
**Financial futures contracts sold as of July 31, 1996 (in
thousands) were as follows:
<PAGE>
Value
Number of Expiration (Notes
Contracts Issue Date 1a & 1b)
85 US Treasury Bonds September 1996 $9,276
Total Financial Futures Contracts Sold
(Total Contract Price--$9,103) $9,276
======
++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, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$25,851,496) (Note 1a) $ 27,010,645
Cash 44,482
Receivables:
Interest $ 268,817
Beneficial interest sold 30,004 298,821
------------
Deferred organization expenses (Note 1e) 16,093
Prepaid registration fees and other assets (Note 1e) 6,983
------------
Total assets 27,377,024
------------
Liabilities: Payables:
Beneficial interest redeemed 66,193
Dividends to shareholders (Note 1f) 29,941
Variation margin (Note 1b) 17,875
Distributor (Note 2) 9,734
Investment adviser (Note 2) 1,141 124,884
------------
Accrued expenses and other liabilities 78,438
------------
Total liabilities 203,322
------------
Net Assets: Net assets $ 27,173,702
============
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited
Consist of: number of shares authorized $ 41,016
Class B Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 226,303
Class C Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 16,317
Class D Shares of beneficial interest, $.10 par value, unlimited
number of shares authorized 1,820
Paid-in capital in excess of par 28,920,522
Accumulated realized capital losses on investments--net (Note 5) (3,187,363)
Unrealized appreciation on investments--net 1,155,087
------------
Net assets $ 27,173,702
============
Net Asset Value: Class A--Based on net assets of $3,904,036 and 410,161 shares
of beneficial interest outstanding $ 9.52
============
Class B--Based on net assets of $21,542,214 and 2,263,034 shares
of beneficial interest outstanding $ 9.52
============
Class C--Based on net assets of $1,554,235 and 163,167 shares
of beneficial interest outstanding $ 9.53
============
Class D--Based on net assets of $173,217 and 18,201 shares
of beneficial interest outstanding $ 9.52
============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<PAGE>
<TABLE>
Statement of Operations
<CAPTION>
For the Year Ended
July 31, 1996
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 1,682,294
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 165,072
Account maintenance and distribution fees--Class B (Note 2) 121,328
Accounting services (Note 2) 62,342
Professional fees 52,701
Printing and shareholder reports 29,143
Registration fees (Note 1e) 13,251
Transfer agent fees--Class B (Note 2) 13,160
Account maintenance and distribution fees--Class C (Note 2) 7,937
Amortization of organization expenses (Note 1e) 7,791
Custodian fees 3,939
Pricing fees 3,841
Transfer agent fees--Class A (Note 2) 1,880
Trustees' fees and expenses 1,603
Transfer agent fees--Class C (Note 2) 722
Account maintenance fees--Class D (Note 2) 189
Transfer agent fees--Class D (Note 2) 84
Other 286
------------
Total expenses before reimbursement 485,269
Reimbursement of expenses (Note 2) (193,569)
------------
Total expenses after reimbursement 291,700
------------
Investment income--net 1,390,594
------------
Realized & Realized gain on investments--net 259,122
Unrealized Change in unrealized appreciation on investments--net 158,225
Gain on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 1,807,941
(Notes 1b, 1d & 3): ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended July 31,
Increase (Decrease) in Net Assets: 1996 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 1,390,594 $ 1,546,572
Realized gain (loss) on investments--net 259,122 (2,378,778)
Change in unrealized appreciation on investments--net 158,225 2,151,374
------------ ------------
Net increase in net assets resulting from operations 1,807,941 1,319,168
------------ ------------
Dividends to Investment income--net:
Shareholders Class A (214,883) (270,715)
(Note 1f): Class B (1,107,194) (1,258,134)
Class C (59,087) (14,460)
Class D (9,430) (3,263)
------------ ------------
Net decrease in net assets resulting from dividends to
shareholders (1,390,594) (1,546,572)
------------ ------------
Beneficial Interest Net decrease in net assets derived from beneficial interest
Transactions transactions (4,478,110) (1,192,644)
(Note 4): ------------ ------------
Net Assets: Total decrease in net assets (4,060,763) (1,420,048)
Beginning of year 31,234,465 32,654,513
------------ ------------
End of year $ 27,173,702 $ 31,234,465
============ ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<PAGE>
<TABLE>
Financial Highlights
<CAPTION>
Class A
For the
Period
The following per share data and ratios have been derived Aug. 27,
from information provided in the financial statements. For the Year Ended 1993++ to
July 31, July 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.40 $ 9.41 $ 10.00
Operating -------- -------- --------
Performance: Investment income--net .48 .50 .48
Realized and unrealized gain (loss) on investments--net .12 (.01) (.58)
-------- -------- --------
Total from investment operations .60 .49 (.10)
-------- -------- --------
Less dividends and distributions:
Investment income--net (.48) (.50) (.48)
In excess of realized gain on investments--net -- -- (.01)
-------- -------- --------
Total dividends and distributions (.48) (.50) (.49)
-------- -------- --------
Net asset value, end of period $ 9.52 $ 9.40 $ 9.41
======== ======== ========
Total Investment Based on net asset value per share 6.52% 5.54% (1.13%)+++
Return:** ======== ======== ========
Ratios to Expenses, net of reimbursement .53% .31% .08%*
Average ======== ======== ========
Net Assets: Expenses 1.17% 1.23% 1.30%*
======== ======== ========
Investment income--net 5.06% 5.51% 5.26%*
======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 3,904 $ 4,332 $ 6,712
Data: ======== ======== ========
Portfolio turnover 103.61% 142.77% 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>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class B
For the
Period
The following per share data and ratios have been derived Aug. 27,
from information provided in the financial statements. For the Year Ended 1993++ to
July 31, July 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.40 $ 9.41 $ 10.00
Operating -------- -------- --------
Performance: Investment income--net .44 .45 .43
Realized and unrealized gain (loss) on investments--net .12 (.01) (.58)
-------- -------- --------
Total from investment operations .56 .44 (.15)
-------- -------- --------
Less dividends and distributions:
Investment income--net (.44) (.45) (.43)
In excess of realized gain on investments--net -- -- (.01)
-------- -------- --------
Total dividends and distributions (.44) (.45) (.44)
-------- -------- --------
Net asset value, end of period $ 9.52 $ 9.40 $ 9.41
======== ======== ========
Total Investment Based on net asset value per share 5.97% 5.00% (1.59%)+++
Return:** ======== ======== ========
Ratios to Expenses, net of reimbursement 1.04% .84% .58%*
Average ======== ======== ========
Net Assets: Expenses 1.68% 1.75% 1.80%*
======== ======== ========
Investment income--net 4.55% 4.99% 4.75%*
======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 21,542 $ 25,861 $ 25,943
Data: ======== ======== ========
Portfolio turnover 103.61% 142.77% 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>
<PAGE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class C Class D
For the For the
For the Period For the Period
The following per share data and ratios have been derived Year Oct. 21, Year Oct. 21,
from information provided in the financial statements. Ended 1994++ to Ended 1994++ to
July 31, July 31, July 31, July 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1996 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.40 $ 9.02 $ 9.39 $ 9.02
Operating -------- -------- -------- --------
Performance: Investment income--net .43 .34 .47 .38
Realized and unrealized gain on investments--net .13 .38 .13 .37
-------- -------- -------- --------
Total from investment operations .56 .72 .60 .75
-------- -------- -------- --------
Less dividends from investment income--net (.43) (.34) (.47) (.38)
-------- -------- -------- --------
Net asset value, end of period $ 9.53 $ 9.40 $ 9.52 $ 9.39
======== ======== ======== ========
Total Investment Based on net asset value per share 5.97% 8.19%+++ 6.52% 8.55%+++
Return:** ======== ======== ======== ========
Ratios to Expenses, net of reimbursement 1.16% 1.00%* .63% .51%*
Average ======== ======== ======== ========
Net Assets: Expenses 1.79% 1.88%* 1.28% 1.39%*
======== ======== ======== ========
Investment income--net 4.45% 4.68%* 4.97% 5.12%*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 1,555 $ 853 $ 173 $ 188
Data: ======== ======== ======== ========
Portfolio turnover 103.61% 142.77% 103.61% 142.77%
======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects
of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch 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.
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 had 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 FAM during any fiscal year which will cause such expenses
to exceed expense limitations at the time of payment. For the year
ended July 31, 1996, FAM earned fees of $165,072 , of which $163,931
was voluntarily waived. FAM also reimbursed the Fund additional
expenses of $29,638.
Pursuant to the distribution plans (the "Distribution Plans")
adopted by the Fund in accordance with Rule 12b-1 under the
Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are
accrued daily and paid monthly at annual rates based upon the
average daily net assets of the shares as follows:
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.25%
Class C 0.25% 0.35%
Class D 0.10% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the year ended July 31, 1996, MLFD earned underwriting discounts
and MLPF&S earned dealer concessions on sales of the Fund's Class A
and Class D Shares as follows:
<PAGE>
MLFD MLPF&S
Class A $202 $1,550
Class D $126 $1,406
For the year ended July 31, 1996, MLPF&S received contingent
deferred sales charges of $131,678 and $483 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.
NOTES TO FINANCIAL STATEMENTS (concluded)
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, 1996 were $29,250,589 and $32,030,001,
respectively.
Net realized and unrealized gains (losses) as of July 31, 1996 were
as follows:
Unrealized
Realized Gains
Gains (Losses)
Long-term investments $ 105,672 $ 1,159,149
Financial futures contracts 153,450 (4,062)
----------- -----------
Total $ 259,122 $ 1,155,087
=========== ===========
As of July 31, 1996, net unrealized appreciation for Federal income
tax purposes aggregated $1,159,149, all of which related to
appreciated securities. The aggregate cost of investments at July
31, 1996 for Federal income tax purposes was $25,851,496.
<PAGE>
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest
transactions was $4,478,110 and $1,192,644 for the years ended July
31, 1996 and July 31, 1995, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Year Dollar
Ended July 31, 1996 Shares Amount
Shares sold 22,470 $ 214,498
Shares issued to share-
holders in reinvestment
of dividends 14,697 140,289
----------- -----------
Total issued 37,167 354,787
Shares redeemed (88,017) (840,104)
----------- -----------
Net decrease (50,850) $ (485,317)
=========== ===========
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 B Shares for the Year Dollar
Ended July 31, 1996 Shares Amount
Shares sold 372,008 $ 3,544,465
Shares issued to share-
holders in reinvestment
of dividends 57,440 548,361
----------- -----------
Total issued 429,448 4,092,826
Automatic conversion
of shares (1,050) (10,019)
Shares redeemed (917,652) (8,750,805)
----------- -----------
Net decrease (489,254) $(4,667,998)
=========== ===========
<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 C Shares for the Year Dollar
Ended July 31, 1996 Shares Amount
Shares sold 92,438 $ 880,499
Shares issued to share-
holders in reinvestment
of dividends 4,225 40,343
----------- -----------
Total issued 96,663 920,842
Shares redeemed (24,236) (230,561)
----------- -----------
Net increase 72,427 $ 690,281
=========== ===========
Class C Shares for the Period
October 21, 1994++ to Dollar
July 31, 1995 Shares Amount
Shares sold 94,204 $ 863,629
Shares issued to share-
holders 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
Year Ended Dollar
July 31, 1996 Shares Amount
Shares sold 11,567 $ 111,225
Automatic conversion
of shares 1,050 10,019
Shares issued to share-
holders in reinvestment
of dividends 405 3,857
----------- -----------
Total issued 13,022 125,101
Shares redeemed (14,853) (140,177)
----------- -----------
Net decrease (1,831) $ (15,076)
=========== ===========
Class D Shares for the Period
October 21, 1994++ to Dollar
July 31, 1995 Shares Amount
Shares sold 23,942 $ 223,020
Shares issued to share-
holders 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, 1996, the Fund had a net capital loss
carryforward of approximately $2,924,000, of which $1,691,000
expires in 2003 and $1,233,000 expires in 2004. This amount
will be available to offset like amounts of any future taxable
gains.
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
<PAGE>
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, 1996, 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 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.
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,
1996 by correspondence with the custodian and broker. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Merrill Lynch Oregon Municipal Bond Fund of Merrill Lynch Multi-
State Municipal Series Trust as of July 31, 1996, the results of its
operations, the changes in its net assets, and the financial
highlights for the respective stated periods in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
September 6, 1996
</AUDIT-REPORT>
<PAGE>
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, 1996 qualify as tax-exempt interest dividends for
Federal income tax purposes.
Additionally, there were no capital gains distributed by the Fund
during the year.
Please retain this information for your records.
OFFICERS AND TRUSTEES
Arthur Zeikel, President and Trustee
James H. Bodurtha, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Terry K. Glenn, Executive Vice President
Vincent R. Giordano, Senior Vice President
Donald C. Burke, Vice President
Robert A. DiMella, 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, Massachusetts 02101
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
