MERRILL LYNCH
OREGON
MUNICIPAL
BOND FUND
[FUND LOGO]
STRATEGIC
Performance
Annual Report
July 31, 1997
Officers and Trustees
Arthur Zeikel, President and Trustee
James H. Bodurtha, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Terry K. Glenn, Executive Vice President
Vincent R. Giordano, Senior Vice President
Donald C. Burke, Vice President
Kenneth A. Jacob, Vice President
Fred K. Stuebe, Vice President
Gerald M. Richard, Treasurer
Robert E. Putney III, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
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.
Merrill Lynch Oregon
Municipal Bond Fund
Merrill Lynch Multi-State
Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011 #16761 -- 7/97
[RECYCLE LOGO] Printed on post-consumer recycled paper
Merrill Lynch Oregon Municipal Bond Fund July 31, 1997
TO OUR SHAREHOLDERS
The Municipal Market Environment
During the six months ended July 31, 1997, a number of very favorable
factors combined to push both tax-exempt and taxable bond yields to
recent historic lows. A slowing domestic economy, a continued benign, if
not improving, inflationary environment, a declining Federal budget
deficit with resultant reduced Treasury borrowing needs, and a
successful Congressional budget accord all resulted in significant
declines in fixed-income yields. By the end of July, 30-year US Treasury
bond yields had declined approximately 50 basis points (0.50%) to 6.30%,
their lowest level in over a year. Similarly, as measured by the Bond
Buyer Revenue Bond Index, long-term municipal revenue bond yields fell
over 50 basis points to end the July 31, 1997 quarter at 5.49%,
their lowest level since early 1994.
The decline in tax-exempt yields in recent months has been even more
impressive given that the municipal market has lost much of the
technical support it had enjoyed for over a year. In previous quarters,
new tax-exempt bond issuance declined or remained stable. During the six
months ended July 31, 1997, approximately $100 billion in new long-term
municipal securities was underwritten, an increase of over 7.5% versus
the comparable period in 1996. As tax-exempt bond yields declined, many
municipal bond issuers have taken this opportunity to both issue new
debt and refinance older, higher-couponed debt with new, lower-yielding
issues. This refinancing has led to a surge in tax-exempt issuance in
recent months. Over the three months ended July 31, 1997, new long-term
tax-exempt bond issuance totaled approximately $55 billion, an increase
of over 15% versus the July 31, 1996 quarter.
The decline in municipal bond yields has also resulted in some reduction
in retail investor demand. In earlier episodes of rapidly declining
interest rates, individual investor demand initially fell until
investors became more acclimated to the current levels. Should interest
rates stabilize, we expect investor demand to return to earlier levels.
Also, this past June and July, municipal bond investors received over
$50 billion in assets from coupon income payments, bond maturities, and
the proceeds from early bond redemptions. Despite the continued allure
of the US equity market, it is likely that much of these assets will be
reallocated to the municipal bond market as investors adjust to the new
investment environment.
Looking forward, given the extent of the recent bond market rally, some
retrenchment or at least a period of consolidation is likely. However,
the positive backdrop of modest economic growth and low inflation
suggests that any such adjustment is not likely to be excessive. Despite
recent increases in new bond issuance, supply for all of 1997 is not
expected to be materially different than earlier estimates of
approximately $175 billion. It is likely that the recent increase in
issuance has largely borrowed from that originally scheduled for later
this year. Additionally, any significant increase in tax-exempt bond
yields will prevent any further bond refinancings, reducing future
supply. Unless the current positive economic fundamentals undergo
immediate and significant deterioration, any increase in municipal bond
yields is likely to be viewed as an opportunity to purchase more
attractively priced tax-exempt securities.
Fiscal Year in Review
During the past 12 months, the municipal bond market was characterized
by tremendous price volatility within a narrow trading range. We focused
on purchasing long-term insured bonds as yields approached 6.00% and
selling these securities as yields rallied to 5.50%. The Fund was fully
invested in long-term securities during most of the fiscal year to seek
to achieve a yield greater than that of similar Oregon municipal bond
funds. The Fund's cash equivalent reserves fluctuated between 5% -- 10%
of total assets, and a large position of assets committed to longer-term
maturities currently have coupons structured for income rather than
price appreciation. This strategy served the Fund well during this
particularly volatile period for the fixed-income markets in general,
generating total return performance comparable to the industry average
as well as an above-average yield.
Portfolio Matters
During the six months ended July 31, 1997, we maintained the slightly
defensive posture we had adopted in late 1996. Our principal concern was
that the strong economic growth seen in the fourth quarter of 1996 would
continue into 1997, causing the Federal Reserve Board to raise interest
rates so that growth would not result in a significant increase in inflation.
However, US economic growth slowed in the second quarter of 1997 and
inflation remained subdued, allowing interest rates to decline. We believed
the Fund's structure would allow it to perform well during periods of market
improvement.
We generally maintained the Fund's cash reserves below 5% of net assets
in order to seek to enhance the Fund's dividend stream and in response
to the continued scarcity of attractively priced tax-exempt Oregon
issues. During the last six months, approximately $615 million in Oregon
municipal securities was underwritten, an increase of more than 15% as
compared to the same period a year ago.
Looking forward, we expect to maintain our current strategy of waiting
for an environment characterized by higher interest rates before
adopting a more aggressive portfolio structure. In such an environment,
we expect to emphasize higher-couponed issues over more interest rate-
sensitive securities. The generation of an optimal amount of tax-exempt
income will remain the primary investment strategy of the Fund. As new
bond issuance is expected to be approximately $175 billion on an annual
basis for all of 1997, we expect to maintain the Fund's fully invested
position.
In Conclusion
We appreciate your ongoing interest in Merrill Lynch Oregon Municipal
Bond Fund, and we look forward to assisting you with your financial
needs in the months and years to come.
Sincerely,
/S/ARTHUR ZEIKEL
Arthur Zeikel
President
/S/VINCENT R. GIORDANO
Vincent R. Giordano
Senior Vice President
/S/FRED K. STUEBE
Fred K. Stuebe
Vice President and Portfolio Manager
September 3, 1997
We are pleased to announce that Fred K. Stuebe is responsible for the
day-to-day management of Merrill Lynch Oregon Municipal Bond Fund. Mr.
Stuebe has been employed by Merrill Lynch Asset Management, L.P. (an
affiliate of the Fund's investment adviser) since 1989 as Vice President
in the Tax-Exempt Bond Department.
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the Merrill
Lynch Select PricingSM System, which offers four pricing alternatives:
[bullet] 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.
[bullet] 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.)
[bullet] 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.
[bullet] Class D Shares incur a maximum initial sales charge
of 4% and an account maintenance fee of 0.10% (but no distribution fee).
None of the past results shown should be considered a representation of
future performance. Figures shown in the "Average Annual Total Return"
tables as well as the total returns and cumulative total returns in the
"Performance Summary" tables assume reinvestment of all dividends and
capital gains distributions at net asset value on the payable date.
Investment return and principal value of shares will fluctuate so that
shares, when redeemed, may be worth more or less than their original
cost. Dividends paid to each class of shares will vary because of the
different levels of account maintenance, distribution and transfer
agency fees applicable to each class, which are deducted from the income
available to be paid to shareholders.
<TABLE>
<CAPTION>
Recent Performance Results
12 Month 3 Month
7/31/97 4/30/97 7/31/96 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $10.00 $9.61 $9.52 + 5.04% +4.06%
Class B Shares* 10.00 9.61 9.52 + 5.04 +4.06
Class C Shares* 10.00 9.61 9.53 + 4.93 +4.06
Class D Shares* 10.00 9.61 9.52 + 5.04 +4.06
Class A Shares -- Total Return* +10.27(1) +5.31(2)
Class B Shares -- Total Return* + 9.72(3) +5.18(4)
Class C Shares -- Total Return* + 9.50(5) +5.15(6)
Class D Shares -- Total Return* +10.17(7) +5.29(8)
Class A Shares -- Standardized 30-day Yield 4.31%
Class B Shares -- Standardized 30-day Yield 3.99%
Class C Shares -- Standardized 30-day Yield 3.90%
Class D Shares -- Standardized 30-day Yield 4.22%
* 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 $0.470 per share ordinary income dividends.
(2) Percent change includes reinvestment of $0.117 per share ordinary income dividends.
(3) Percent change includes reinvestment of $0.421 per share ordinary income dividends.
(4) Percent change includes reinvestment of $0.104 per share ordinary income dividends.
(5) Percent change includes reinvestment of $0.412 per share ordinary income dividends.
(6) Percent change includes reinvestment of $0.102 per share ordinary income dividends.
(7) Percent change includes reinvestment of $0.460 per share ordinary income dividends.
(8) Percent change includes reinvestment of $0.114 per share ordinary income dividends.
</TABLE>
Merrill Lynch Oregon Municipal Bond Fund
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** 7/97
ML Oregon Municipal Bond Fund+--
Class A Shares* $9,600 $11,766
ML Oregon Municipal Bond Fund+--
Class B Shares* $10,000 $11,915
Lehman Brothers Municipal Bond
Index++ $10,000 $12,651
Total Return Based on a $10,000 Investment--Class C Shares and Class D
Shares
A line graph depicting the growth of an investment in the Fund's Class C
Shares and Class D Shares compared to growth of an investment in the
Lehman Brothers Municipal Bond Index. Beginning and ending values are:
10/21/94** 7/97
ML Oregon Municipal Bond Fund+--
Class C Shares* $10,000 $12,554
ML Oregon Municipal Bond Fund+--
Class D Shares* $9,600 $12,229
Lehman Brothers Municipal Bond
Index++ $10,000 $13,054
* 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 6/30/97 +8.57% +4.22%
Inception (8/27/93)
through 6/30/97 +4.64 +3.53
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/97 +8.13% +4.13%
Inception (8/27/93)
through 6/30/97 +4.14 +3.91
* Maximum contingent deferred sales charge is 4% and
is reduced to 0% after 4 years.
** Assuming payment of applicable contingent deferred
sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 6/30/97 +7.91% +6.91%
Inception (10/21/94)
through 6/30/97 +7.71 +7.71
* Maximum contingent deferred sales charge is 1% and
is reduced to 0% after 1 year.
** Assuming payment of applicable contingent deferred
sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 6/30/97 +8.57% +4.23%
Inception (10/21/94)
through 6/30/97 +8.27 +6.64
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
<TABLE>
<CAPTION>
Performance Summary -- Class A Shares
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
1996 9.80 9.70 -- 0.480 + 4.06
1/1/97 -- 7/31/97 9.70 10.00 -- 0.260 + 6.02
Total $1.929
Cumulative total return as of 7/31/97: +22.57%**
</TABLE>
<TABLE>
<CAPTION>
Performance Summary -- Class B Shares
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
1996 9.80 9.70 -- 0.431 + 3.54
1/1/97 -- 7/31/97 9.70 10.00 -- 0.233 + 5.71
Total $1.740
Cumulative total return as of 7/31/97: +20.15%***
</TABLE>
<TABLE>
<CAPTION>
Performance Summary -- Class C Shares
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
1996 9.81 9.71 -- 0.422 + 3.43
1/1/97 -- 7/31/97 9.71 10.00 -- 0.228 + 5.54
Total $1.169
Cumulative total return as of 7/31/97: +25.54%***
</TABLE>
<TABLE>
<CAPTION>
Performance Summary -- Class D Shares
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
1996 9.80 9.70 -- 0.470 + 3.96
1/1/97 -- 7/31/97 9.70 10.00 -- 0.255 + 5.96
Total $1.305
Cumulative total return as of 7/31/97: +27.39%**
* Figures may include short-term capital gains distributions.
** Figures do not include sales charge; results would be lower if sales charge was
included.
*** Figures do not reflect deduction of any sales charge; results would be lower if
sales charge was deducted.
</TABLE>
<TABLE>
<CAPTION>
Merrill Lynch Oregon Municipal Bond Fund July 31, 1997
SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<S> <C> <C> <C> <C>
Oregon -- 75.9%
AAA Aaa $1,000 Chemeketa, Oregon, Community College District, UT, 5.95% due 6/01/2016 (e) $1,066
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 1,095
AAA Aaa 500 Lincoln County, Oregon, School District, UT, 5.25% due 6/15/2012 (e) 517
AAA Aaa 1,280 Marion County, Oregon, Union High School District No. 007J (Silverton), UT,
7% due 6/01/2010 (c) 1,473
A1 VMIG1+ 900 Medford, Oregon, Hospital Facilities Authority Revenue Bonds (Gross - Rogue Valley
Health Services), VRDN, 3.75% due 10/01/2016 (a) 900
AAA Aaa 1,000 Morrow County, Oregon, School District No. 001, UT, 6% due 6/01/2007 (b) 1,119
AAA Aaa 2,650 Oregon Health Sciences University Revenue Bonds, Insured Series A, 5.75%** due
7/01/2021 (b) 741
Oregon State Health, Housing, Educational and Cultural Facilities Authority Revenue
Bonds, Series A:
NR* VMIG1+ 200 (Guide Dogs for the Blind), VRDN, 3.70% due 7/01/2025 (a) 200
A+ NR* 1,000 Refunding (Reed College Project), 5.375% due 7/01/2025 1,007
AA Aa2 1,000 Oregon State Higher Education Building Improvement Bonds, UT, Series A,
6.45% due 8/01/2024 1,104
NR* Aa2 1,000 Oregon State Housing and Community Services Department, Mortgage Revenue Bonds,
AMT, Series A, 6.20% due 7/01/2027 1,047
Oregon State Housing and Community Services Department, Mortgage Revenue Bonds
(S/F Mortgage Program):
NR* Aa2 1,000 AMT, Series E, 7.10% due 7/01/2014 1,067
NR* Aa2 490 Refunding, Series A, 6.40% due 7/01/2018 518
NR* Aa2 1,050 Series B, 6.875% due 7/01/2028 1,123
Port of Portland, Oregon, International Airport Revenue Bonds (Portland International
Airport), AMT, Series 7B (b):
AAA Aaa 950 7.10% due 1/01/2012 (g) 1,143
AAA Aaa 50 7.10% due 7/01/2021 55
A1+ A3 1,000 Port Saint Helens, Oregon, PCR (Portland General Electric Company Project),
VRDN, AMT, Series A, 3.65% due 8/01/2014 (a) 1,000
A+ A1 1,500 Portland, Oregon, Sewer System Revenue Bonds, Series A, 6.25% due 6/01/2015 1,627
AAA Aaa 1,000 Tillamook County, Oregon, GO, UT, 6.25% due 1/01/2014 (e) 1,099
Puerto Rico -- 16.1%
AAA Aaa 2,720 Puerto Rico Commonwealth, GO, UT, 7% due 7/01/2010 (d) 3,320
AAA Aaa 400 Puerto Rico Electric Power Authority, Power Revenue Bonds, STRIPES, Series T, 8.069%
due 7/01/2005 (c)(f) 470
--------
Total Investments (Cost -- $19,847) -- 92.0% 21,691
Other Assets Less Liabilities -- 8.0% 1,891
--------
Net Assets -- 100.0% $23,582
========
(a) The interest rate is subject to change periodically based upon prevailing market rates.
The interest rate shown is the rate in effect at July 31, 1997.
(b) 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, 1997.
(g) Prerefunded.
* Not Rated.
** Represents a zero coupon bond; the interest rate shown is the effective yield at the time
of purchase by the Fund.
+ Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
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
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL INFORMATION
Statement of Assets and Liabilities as of July 31, 1997
<S> <C> <C> <C>
Assets: Investments, at value (identified cost -- $19,847,401) (Note 1a) $21,690,648
Cash 28,416
Receivables:
Securities sold $1,858,138
Interest 172,608 2,030,746
------------
Deferred organization expenses (Note 1e) 8,323
Prepaid registration fees and other assets (Note 1e) 3,559
------------
Total assets 23,761,692
------------
Liabilities: Payables:
Beneficial interest redeemed 62,891
Dividends to shareholders (Note 1f) 27,638
Distributor (Note 2) 8,606
Investment adviser (Note 2) 3,977 103,112
------------
Accrued expenses and other liabilities 76,920
------------
Total liabilities 180,032
------------
Net Assets: Net assets $23,581,660
============
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited number of
Consist of: shares authorized $32,328
Class B Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 178,934
Class C Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 20,618
Class D Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 3,996
Paid-in capital in excess of par 24,185,819
Accumulated realized capital losses on investments -- net (Note 5) (2,683,282)
Unrealized appreciation on investments -- net 1,843,247
------------
Net assets $23,581,660
============
Net Asset Value: Class A -- Based on net assets of $3,231,460 and 323,277 shares of
beneficial interest outstanding $10.00
=======
Class B -- Based on net assets of $17,888,143 and 1,789,338 shares of
beneficial interest outstanding $10.00
=======
Class C -- Based on net assets of $2,062,611 and 206,183 shares of
beneficial interest outstanding $10.00
=======
Class D -- Based on net assets of $399,446 and 39,957 shares of
beneficial interest outstanding $10.00
=======
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
For the Year Ended July 31, 1997
<S> <C> <C> <C>
Investment Income Interest and amortization of premium and discount earned $1,440,632
(Note 1d):
Expenses: Investment advisory fees (Note 2) $139,867
Account maintenance and distribution fees -- Class B (Note 2) 98,340
Professional fees 53,583
Accounting services (Note 2) 47,011
Printing and shareholder reports 28,407
Account maintenance and distribution fees -- Class C (Note 2) 12,127
Transfer agent fees -- Class B (Note 2) 12,012
Registration fees (Note 1e) 10,221
Amortization of organization expenses (Note 1e) 7,770
Pricing fees 3,276
Custodian fees 2,235
Transfer agent fees -- Class A (Note 2) 1,777
Trustees' fees and expenses 1,293
Transfer agent fees -- Class C (Note 2) 1,158
Account maintenance fees -- Class D (Note 2) 256
Transfer agent fees -- Class D (Note 2) 130
Other 4,118
------------
Total expenses before reimbursement 423,581
Reimbursement of expenses (Note 2) (111,756)
------------
Total expenses after reimbursement 311,825
------------
Investment income -- net 1,128,807
------------
Realized & Realized gain on investments -- net 504,081
Unrealized Gain on Change in unrealized appreciation/depreciation on investments -- net 688,160
Investments -- Net ------------
(Notes 1b, 1d & 3): Net Increase in Net Assets Resulting from Operations $2,321,048
============
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
For the Year Ended July 31,
-------------------------
Increase (Decrease) in Net Assets: 1997 1996
------------ ------------
<S> <C> <C> <C>
Operations: Investment income -- net $1,128,807 $1,390,594
Realized gain on investments -- net 504,081 259,122
Change in unrealized appreciation/depreciation on investments -- net 688,160 158,225
------------ ------------
Net increase in net assets resulting from operations 2,321,048 1,807,941
------------ ------------
Dividends to Investment income -- net:
Shareholders Class A (170,118) (214,883)
(Note 1f): Class B (860,053) (1,107,194)
Class C (86,440) (59,087)
Class D (12,196) (9,430)
------------ ------------
Net decrease in net assets resulting from dividends to shareholders (1,128,807) (1,390,594)
------------ ------------
Beneficial Interest Net decrease in net assets derived from beneficial
Transactions interest transactions (4,784,283) (4,478,110)
(Note 4): ------------ ------------
Net Assets: Total decrease in net assets (3,592,042) (4,060,763)
Beginning of year 27,173,702 31,234,465
------------ ------------
End of year $23,581,660 $27,173,702
============ ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTIION>
Financial Highlights
Class A
For the Period
Aug. 27,
The following per share data and ratios have been derived 1993+ to
from information provided in the financial statements. For the Year Ended July 31, July 31,
1997 1996 1995 1994
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $9.52 $9.40 $9.41 $10.00
Operating ------- ------- ------- -------
Performance: Investment income -- net .47 .48 .50 .48
Realized and unrealized gain (loss) on investments -- net .48 .12 (.01) (.58)
------- ------- ------- -------
Total from investment operations .95 .60 .49 (.10)
------- ------- ------- -------
Less dividends and distributions:
Investment income -- net (.47) (.48) (.50) (.48)
In excess of realized gain on investments -- net -- -- -- (.01)
------- ------- ------- -------
Total dividends and distributions (.47) (.48) (.50) (.49)
------- ------- ------- -------
Net asset value, end of period $10.00 $9.52 $9.40 $9.41
======= ======= ======= =======
Total Investment Based on net asset value per share 10.27% 6.52% 5.54% (1.13%)++++
Return:** ======= ======= ======= =======
Ratios to Average Expenses, net of reimbursement .78% .53% .31% .08%*
Net Assets: ======= ======= ======= =======
Expenses 1.22% 1.17% 1.23% 1.30%*
======= ======= ======= =======
Investment income -- net 4.88% 5.06% 5.51% 5.26%*
======= ======= ======= =======
Supplemental Net assets, end of period (in thousands) $3,232 $3,904 $4,332 $6,712
Data: ======= ======= ======= =======
Portfolio turnover 40.62% 103.61% 142.77% 52.88%
======= ======= ======= =======
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of Operations.
++++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Class B
For the Period
Aug. 27,
The following per share data and ratios have been derived 1993+ to
from information provided in the financial statements. For the Year Ended July 31, July 31,
1997 1996 1995 1994
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $9.52 $9.40 $9.41 $10.00
Operating ------- ------- ------- -------
Performance: Investment income -- net .42 .44 .45 .43
Realized and unrealized gain (loss) on investments -- net .48 .12 (.01) (.58)
------- ------- ------- -------
Total from investment operations .90 .56 .44 (.15)
------- ------- ------- -------
Less dividends and distributions:
Investment income -- net (.42) (.44) (.45) (.43)
In excess of realized gain on investments -- net -- -- -- (.01)
------- ------- ------- -------
Total dividends and distributions (.42) (.44) (.45) (.44)
------- ------- ------- -------
Net asset value, end of period $10.00 $9.52 $9.40 $9.41
======= ======= ======= =======
Total Investment Based on net asset value per share 9.72% 5.97% 5.00% (1.59%)++++
Return:** ======= ======= ======= =======
Ratios to Average Expenses, net of reimbursement 1.29% 1.04% .84% .58%*
Net Assets: ======= ======= ======= =======
Expenses 1.73% 1.68% 1.75% 1.80%*
======= ======= ======= =======
Investment income -- net 4.37% 4.55% 4.99% 4.75%*
======= ======= ======= =======
Supplemental Net assets, end of period (in thousands) $17,888 $21,542 $25,861 $25,943
Data: ======= ======= ======= =======
Portfolio turnover 40.62% 103.61% 142.77% 52.88%
======= ======= ======= =======
* Annualized.
** Total investment returns exclude the effects of sales loads
+ Commencement of Operations.
++++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (concluded)
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,
1997 1996 1995 1997 1996 1995
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $9.53 $9.40 $9.02 $9.52 $9.39 $9.02
Operating ------- ------- ------- ------- ------- -------
Performance: Investment income -- net .41 .43 .34 .46 .47 .38
Realized and unrealized gain on
investments -- net .47 .13 .38 .48 .13 .37
------- ------- ------- ------- ------- -------
Total from investment operations .88 .56 .72 .94 .60 .75
------- ------- ------- ------- ------- -------
Less dividends from investment
income -- net (.41) (.43) (.34) (.46) (.47) (.38)
------- ------- ------- ------- ------- -------
Net asset value, end of period $10.00 $9.53 $9.40 $10.00 $9.52 $9.39
======= ======= ======= ======= ======= =======
Total Investment Based on net asset value per share 9.50% 5.97% 8.19%++ 10.17% 6.52% 8.55%++++
Return:** ======= ======= ======= ======= ======= =======
Ratios to Average Expenses, net of reimbursement 1.39% 1.16% 1.00%* .90% .63% .51%*
Net Assets: ======= ======= ======= ======= ======= =======
Expenses 1.83% 1.79% 1.88%* 1.32% 1.28% 1.39%*
======= ======= ======= ======= ======= =======
Investment income -- net 4.28% 4.45% 4.68%* 4.76% 4.97% 5.12%*
======= ======= ======= ======= ======= =======
Supplemental Net assets, end of period (in thousands) $2,063 $1,555 $853 $399 $173 $188
Data: ======= ======= ======= ======= ======= =======
Portfolio turnover 40.62% 103.61% 142.77% 40.62% 103.61% 142.77%
======= ======= ======= ======= ======= =======
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of Operations.
++++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Oregon Municipal Bond Fund July 31, 1997
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.
[bullet] 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.
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.
For the year ended July 31, 1997, FAM earned fees of $139,867, of which
$111,756 was voluntarily waived.
Pursuant to the distribution plans (the "Distribution Plans") adopted by
the Fund in accordance with Rule 12b-1 under the Investment Company Act
of 1940, the Fund pays the Distributor ongoing account maintenance and
distribution fees. The fees are accrued daily and paid monthly at annual
rates based upon the average daily net assets of the shares as follows:
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.25%
Class C 0.25% 0.35%
Class D 0.10% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce,
Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co., also provides
account maintenance and distribution services to the Fund. The ongoing
account maintenance fee compensates the Distributor and MLPF&S for
providing account maintenance services to Class B, Class C and Class D
shareholders. The ongoing distribution fee compensates the Distributor
and MLPF&S for providing shareholder and distribution-related services
to Class B and Class C shareholders.
For the year ended July 31, 1997, MLFD earned underwriting discounts and
MLPF&S earned dealer concessions on sales of the Fund's Class A and
Class D Shares as follows:
MLFD MLPF&S
Class A $1 $18
Class D $261 $1,250
For the year ended July 31, 1997, MLPF&S received contingent deferred
sales charges of $71,008 and $3,156 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, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for
the year ended July 31, 1997 were $9,514,971 and $15,174,846,
respectively.
Net realized and unrealized gains as of July 31, 1997 were as follows:
Realized Unrealized
Gains Gains
Long-term investments $460,596 $1,843,247
Financial futures contracts 43,485 --
----------- ------------
Total $504,081 $1,843,247
=========== ============
As of July 31, 1997, net unrealized appreciation
for Federal income tax purposes aggregated $1,843,247, all of which
related to appreciated securities. The aggregate cost of investments at
July 31, 1997 for Federal income tax purposes was $19,847,401.
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest transactions
was $4,784,283 and $4,478,110 for the years ended July 31, 1997 and July
31, 1996, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Year Dollar
Ended July 31, 1997 Shares Amount
Shares sold 37,316 $360,520
Shares issued to shareholders
in reinvestment of dividends 11,762 113,681
----------- -----------
Total issued 49,078 474,201
Shares redeemed (135,962) (1,313,376)
----------- -----------
Net decrease (86,884) $(839,175)
=========== ===========
Class A Shares for the Year Dollar
Ended July 31, 1996 Shares Amount
Shares sold 22,470 $214,498
Shares issued to shareholders
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 B Shares for the Year Dollar
Ended July 31, 1997 Shares Amount
Shares sold 209,679 $2,026,849
Shares issued to shareholders
in reinvestment of dividends 42,397 409,629
----------- -----------
Total issued 252,076 2,436,478
Automatic conversion
of shares (10,731) (103,105)
Shares redeemed (715,041) (6,901,484)
----------- -----------
Net decrease (473,696) $(4,568,111)
=========== ===========
Class B Shares for the Year Dollar
Ended July 31, 1996 Shares Amount
Shares sold 372,008 $3,544,465
Shares issued to shareholders
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)
=========== ===========
Class C Shares for the Year Dollar
Ended July 31, 1997 Shares Amount
Shares sold 160,039 $1,543,944
Shares issued to shareholders
in reinvestment of dividends 6,578 63,646
----------- -----------
Total issued 166,617 1,607,590
Shares redeemed (123,601) (1,195,407)
----------- -----------
Net increase 43,016 $412,183
=========== ===========
Class C Shares for the Year Dollar
Ended July 31, 1996 Shares Amount
Shares sold 92,438 $880,499
Shares issued to shareholders
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 D Shares for the Year Dollar
Ended July 31, 1997 Shares Amount
Shares sold 10,153 $99,282
Automatic conversion of shares 10,732 103,105
Shares issued to shareholders
in reinvestment of dividends 872 8,438
----------- -----------
Total issued 21,757 210,825
Shares redeemed (1) (5)
----------- -----------
Net increase 21,756 $210,820
=========== ===========
Class D Shares for the Year Dollar
Ended July 31, 1996 Shares Amount
Shares sold 11,567 $111,225
Automatic conversion of shares 1,050 10,019
Shares issued to shareholders
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)
=========== ===========
5. Capital Loss Carryforward:
At July 31, 1997, the Fund had a net capital loss carryforward of
approximately $2,478,000, of which $1,245,000 expires in 2003 and
$1,233,000 expires in 2004. This amount will be available to
offset like amounts of any future taxable gains.
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, 1997, the related state-ments of operations for the year then ended
and changes in net assets for each of the years in the two-year period
then ended, and the financial highlights for each of the years in the
three-year period then ended and for the period August 27, 1993 (com-
mencement 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, 1997 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, 1997, the results of its
operations, the changes in its net assets, and the financial highlights
for the respective stated periods in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
September 5, 1997
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,
1997 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.