MERRILL LYNCH
OREGON
MUNICIPAL
BOND FUND
[FUND LOGO]
STRATEGIC
Performance
Semi-Annual Report
January 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
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, 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 -- 1/97
Merrill Lynch Oregon Municipal Bond Fund January 31, 1997
TO OUR SHAREHOLDERS
The Municipal Market Environment
Long-term fixed-income bond yields generally declined over the six
months ended January 31, 1997. Initially, US Treasury bond yields
declined over 45 basis points (0.45%) to 6.45% by late November as low
employment growth and continued low inflation combined to support lower
bond yields. Concurrently, long-term municipal revenue bond yields, as
measured by the Bond Buyer Revenue Bond Index, declined over 20 basis
points to approximately 5.80%. However, signs of increased economic
activity and renewed inflation fears pushed bond yields up for
the remainder of the period. By the end of January 1997, US Treasury
bond yields rose 35 basis points to end the period at approximately
6.80%. Similarly, long-term municipal revenue bond yields rose
approximately 20 basis points from their lows in late November to
approximately 6.00%. During the six months ended January 31, 1997, US
Treasury bond yields declined approximately 10 basis points, while tax-
exempt bond yields were essentially unchanged.
Recently, tax-exempt bond yields underperformed their taxable
counterparts despite a continued strong supply position. During the six-
month period ended January 31, 1997, over $88 billion in long-term tax-
exempt bonds was underwritten, essentially unchanged from issuance a
year ago. Approximately $50 billion in new municipal bonds was issued
during the three-month period ended January 31, 1997, representing a
decline of over 5% compared to the same period in 1996. This declining
trend in bond issuance was even more apparent recently. Slightly more
than $10 billion in long-term bonds was issued in January 1997, a
decrease of over 15% compared to January 1996 issuance.
The municipal bond market's recent underperformance relative to Treasury
issues was the result of a number of other factors. The historic
strength of the US equity market has attracted significant investor
interest. Additionally, as tax-exempt bond yields declined again below
6%, some investors temporarily lost interest in the municipal bond
market. If interest rates continue to decline as they did
at the end of 1994 and throughout 1995, investors, in general, will
quickly adjust to the new levels. The tax advantages generated by
municipal bonds quickly outweigh low nominal yields, and investor demand
increases.
The Presidential and Congressional elections this past November
resurrected some investor concerns regarding continued Federal deficit
reduction and potential legislative restrictions upon the municipal bond
market. This situation was similar to that at the beginning of 1996 when
tax-exempt bond yields were negatively impacted by fears that
legislation reducing the tax advantage of municipal bonds would be
introduced to aid further deficit reductions.
However, the US Treasury bond market's recent relatively strong
performance resulted in municipal bonds becoming a particularly
attractive investment alternative. At current levels, long-term tax-
exempt revenue bonds yield over 88% of comparable US Treasury bond
yields. Current levels make tax-advantaged products more attractive than
they were at mid-year when yield ratios declined to approximately 85%.
For example, to an investor in the 36% Federal income tax bracket, a
current tax-exempt bond yield of 6% represents a taxable equivalent
yield of approximately 9.37%.
Looking forward, the supply of new bond issuance for 1997 is expected to
be very similar to that of 1996, with most annual estimates falling in
the $170 billion -- $175 billion range. Investor demand is also expected
to regain its former strength, with 1997 total municipal redemptions
(refundings, maturities and coupon payments) in the $175 billion -- $185
billion range. This overall balance suggests that the positive technical
backdrop the municipal bond market enjoyed in 1996 could continue in
1997. However, it is likely that seasonal factors may temporarily
distort this overall balanced technical scenario. During periods of
reduced bond issuance, the ease and ability to purchase tax-advantaged
products at their current attractive levels may be greatly restricted.
Portfolio Strategy
During the six-month period ended January 31, 1997, our strategy was to
remain flexible given the increased volatility in the bond market. The
everchanging perception on the state of the economy, and the need for
monetary tightening by the Federal Reserve Board, caused large swings in
interest rates over this time period. Flexibility enabled us to take
advantage of market fluctuations to seek to enhance the Fund's total
returns. The Fund's defensive posture at the beginning of the six-month
period provided protection from the increase in bond yields through early
September. At this time, we began purchasing interest rate-sensitive bonds
which helped the Fund perform well in the bond market rally through the end
of November.
During the six months ended January 31, 1997, long-term Oregon issuance
decreased by nearly 7% compared to the same period a year earlier. In
addition to the decrease in supply, investor interest in tax-exempt bonds
helped push yields on Oregon tax-exempt bonds to high levels. We maintained
low cash reserves in the Fund in order to benefit from such a strong
technical market.
Looking forward, we expect to maintain a constructive posture for the
Fund until the economy shows signs of accelerating. We believe the
economy will moderate in the first half of 1997, with the possibility to
reaccelerate at the end of the year, at which time the Federal Reserve
Board may be forced to raise short-term interest rates in an effort to
control inflation.
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 ahead.
Sincerely,
/S/ARTHUR ZEIKEL
Arthur Zeikel
President
/S/VINCENT R. GIORDANO
Vincent R. Giordano
Senior Vice President
/S/ROBERT A. DIMELLA
Robert A. DiMella
Vice President and Portfolio Manager
March 5, 1997
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. 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
1/31/97 10/31/96 1/31/96 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $9.67 $9.65 $9.80 -1.33% +0.21%
Class B Shares* 9.67 9.65 9.80 -1.33 +0.21
Class C Shares* 9.68 9.66 9.81 -1.33 +0.21
Class D Shares* 9.67 9.65 9.80 -1.33 +0.21
Class A Shares -- Total Return* +3.76(1) +1.49(2)
Class B Shares -- Total Return* +3.23(3) +1.36(4)
Class C Shares -- Total Return* +3.13(5) +1.33(6)
Class D Shares -- Total Return* +3.66(7) +1.46(8)
Class A Shares -- Standardized 30-day Yield 4.50%
Class B Shares -- Standardized 30-day Yield 4.18%
Class C Shares -- Standardized 30-day Yield 4.08%
Class D Shares -- Standardized 30-day Yield 4.41%
* 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 $0.486 per share ordinary income dividends.
(2) Percent change includes reinvestment of $0.128 per share ordinary income dividends.
(3) Percent change includes reinvestment of $0.436 per share ordinary income dividends.
(4) Percent change includes reinvestment of $0.115 per share ordinary income dividends.
(5) Percent change includes reinvestment of $0.427 per share ordinary income dividends.
(6) Percent change includes reinvestment of $0.113 per share ordinary income dividends.
(7) Percent change includes reinvestment of $0.476 per share ordinary income dividends.
(8) Percent change includes reinvestment of $0.126 per share ordinary income dividends.
</TABLE>
<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 -- 1/31/97 9.70 9.67 -- 0.035 + 0.13
Total $1.704
Cumulative total return as of 1/31/97: +15.76%**
* 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>
<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 -- 1/31/97 9.70 9.67 -- 0.031 + 0.09
Total $1.538
Cumulative total return as of 1/31/97: +13.76%**
* 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>
<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 -- 1/31/97 9.71 9.68 -- 0.031 + 0.08
Total $0.972
Cumulative total return as of 1/31/97: +19.04%**
* 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>
<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 -- 1/31/97 9.70 9.67 -- 0.034 + 0.12
Total $1.084
Cumulative total return as of 1/31/97: +20.37%**
* 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.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/96 +4.06% -0.10%
Inception (8/27/93)
through 12/31/96 +4.43 +3.16
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/96 +3.54% -0.43%
Inception (8/27/93)
through 12/31/96 +3.90 +3.63
* 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 12/31/96 +3.43% +2.44%
Inception (10/21/94)
through 12/31/96 +8.23 +8.23
* 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 12/31/96 +3.96% -0.20%
Inception (10/21/94)
through 12/31/96 +8.75 +6.75
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
Merrill Lynch Oregon Municipal Bond Fund January 31, 1997
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<S> <C> <C> <C> <C>
Oregon -- 84.9%
AAA Aaa $1,000 Chemeketa, Oregon, Community College District, UT, 5.95% due 6/01/2016 (e) $1,029
AAA Aaa 1,000 Eugene, Oregon, Public Safety Facilities, UT, 5.70% due 6/01/2016 (e) 1,006
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 1,060
AAA Aaa 1,165 Lincoln County, Oregon, School District, UT, 5.25% due 6/15/2012 (e) 1,154
AAA Aaa 2,000 Marion County, Oregon, School District No. 103C (Woodburn), Series B, 5.35%**
due 11/01/2008 (e) 1,102
AAA Aaa 2,280 Marion County, Oregon, Union High School District No. 007J (Silverton), UT, 7%
due 6/01/2010 (c) 2,567
AAA Aaa 1,215 Morrow County, Oregon, School District No. 001, UT, 6% due 6/01/2007 (b) 1,321
Oregon Health Sciences University Revenue Bonds, Insured Series A (b):
AAA Aaa 2,650 5.75%** due 7/01/2021 655
AAA Aaa 1,500 5.25% due 7/01/2025 1,422
NR* VMIG1+ 500 Oregon State Health, Housing, Educational, and Cultural Facilities Authority Revenue
Bonds (Guide Dogs for the Blind), VRDN, Series A, 3.60% due 7/01/2025 (a) 500
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 1,046
NR* Aa 490 Refunding, Series A, 6.40% due 7/01/2018 506
NR* Aa 1,050 Series B, 6.875% due 7/01/2028 1,115
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) 1,102
AAA Aaa 50 7.10% due 7/01/2021 54
A1+ A3 100 Port Saint Helens, Oregon, PCR (Portland General Electric Company Project), VRDN,
AMT, Series A, 3.70% due 8/01/2014 (a) 100
A NR* 1,000 Portland, Oregon, Housing Authority, M/F Housing Revenue Bonds (Riverwood Project),
6% due 1/01/2019 1,001
A+ A1 1,500 Portland, Oregon, Sewer System Revenue Bonds, Series A, 6.25% due 6/01/2015 1,576
AAA Aaa 1,000 Tillamook County, Oregon, GO, UT, 6.25% due 1/01/2014 (e) 1,064
AAA Aaa 1,130 Yamhill County, Oregon, School District No. 029J (Newberg), UT, 6.875% due 6/01/2007 (c) 1,266
Puerto Rico -- 14.2%
AAA Aaa 2,720 Puerto Rico Commonwealth, GO, UT, 7% due 7/01/2010 (d) 3,191
AAA Aaa 400 Puerto Rico Electric Power Authority, Power Revenue Bonds, STRIPES, Series T, 7.512%
due 7/01/2005 (c)(f) 449
Total Investments (Cost -- $24,035) -- 99.1% 25,349
Other Assets Less Liabilities -- 0.9% 222
--------
Net Assets -- 100.0% $25,571
========
(a) The interest rate is subject to change periodically based upon prevailing market rates.
The interest rate shown are those in effect at January 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 January 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.
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)
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
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL INFORMATION
Statement of Assets and Liabilities as of January 31, 1997
<S> <C> <C> <C>
Assets: Investments, at value (identified cost -- $24,034,620)(Note 1a) $25,349,106
Cash 143,400
Receivables:
Interest $225,567
Beneficial interest sold 43,309 268,876
------------
Deferred organization expenses (Note 1e) 16,093
Prepaid registration fees and other assets (Note 1e) 6,983
------------
Total assets 25,784,458
------------
Liabilities: Payables:
Beneficial interest redeemed 118,557
Dividends to shareholders (Note 1f) 18,942
Distributor (Note 2) 9,769
Investment adviser (Note 2) 1,857 149,125
------------
Accrued expenses and other liabilities 64,764
------------
Total liabilities 213,889
------------
Net Assets: Net assets $25,570,569
============
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited number of
Consist of: shares authorized $34,936
Class B Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 201,752
Class C Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 25,646
Class D Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 2,042
Paid-in capital in excess of par 26,906,024
Accumulated realized capital losses on investments -- net (Note 5) (2,914,317)
Unrealized appreciation on investments -- net 1,314,486
------------
Net assets $25,570,569
============
Net Asset Value: Class A -- Based on net assets of $3,378,519 and 349,355 shares of
beneficial interest outstanding $9.67
============
Class B -- Based on net assets of $19,512,585 and 2,017,522 shares of
beneficial interest outstanding $9.67
============
Class C -- Based on net assets of $2,482,033 and 256,456 shares of
beneficial interest outstanding $9.68
============
Class D -- Based on net assets of $197,432 and 20,419 shares of
beneficial interest outstanding $9.67
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
For the Six Months Ended
January 31, 1997
<S> <C> <C> <C>
Investment Income Interest and amortization of premium and discount earned $770,551
(Note 1d):
Expenses: Investment advisory fees (Note 2) $74,948
Account maintenance and distribution fees -- Class B (Note 2) 53,315
Professional fees 28,098
Accounting services (Note 2) 24,351
Printing and shareholder reports 18,109
Transfer agent fees -- Class B (Note 2) 7,321
Account maintenance and distribution fees -- Class C (Note 2) 6,107
Amortization of organization expenses (Note 1e) 3,997
Registration fees (Note 1e) 3,179
Pricing fees 1,918
Custodian fees 1,722
Transfer agent fees -- Class A (Note 2) 1,085
Trustees' fees and expenses 694
Transfer agent fees -- Class C (Note 2) 654
Account maintenance fees -- Class D (Note 2) 95
Transfer agent fees -- Class D (Note 2) 55
Other 2,248
------------
Total expenses before reimbursement 227,896
Reimbursement of expenses (Note 2) (67,400)
------------
Total expenses after reimbursement 160,496
------------
Investment income -- net 610,055
------------
Realized & Realized gain on investments -- net 273,046
Unrealized Gain on Change in unrealized appreciation on investments -- net 159,399
Investments -- Net ------------
(Notes 1b, 1d & 3): Net Increase in Net Assets Resulting from Operations $1,042,500
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
January 31, July 31,
Increase (Decrease) in Net Assets: 1997 1996
<S> <C> <C> <C>
Operations: Investment income -- net $610,055 $1,390,594
Realized gain on investments -- net 273,046 259,122
Change in unrealized appreciation on investments -- net 159,399 158,225
------------ ------------
Net increase in net assets resulting from operations 1,042,500 1,807,941
------------ ------------
Dividends to Investment income -- net:
Shareholders Class A (91,098) (214,883)
(Note 1f): Class B (470,397) (1,107,194)
Class C (44,001) (59,087)
Class D (4,559) (9,430)
------------ ------------
Net decrease in net assets resulting from dividends to shareholders (610,055) (1,390,594)
------------ ------------
Beneficial Interest Net decrease in net assets derived from beneficial interest transactions (2,035,578) (4,478,110)
Transactions ------------ ------------
(Note 4):
Net Assets: Total decrease in net assets (1,603,133) (4,060,763)
Beginning of period 27,173,702 31,234,465
------------ ------------
End of period $25,570,569 $27,173,702
============ ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
Class A
For the For the Period
Six Months Aug. 27,
The following per share data and ratios have been derived Ended For the Year 1993+ to
from information provided in the financial statements. Jan. 31, 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 .24 .48 .50 .48
Realized and unrealized gain (loss) on investments -- net .15 .12 (.01) (.58)
------- ------- ------- -------
Total from investment operations .39 .60 .49 (.10)
------- ------- ------- -------
Less dividends and distributions:
Investment income -- net (.24) (.48) (.50) (.48)
In excess of realized gain on investments -- net -- -- -- (.01)
------- ------- ------- -------
Total dividends and distributions (.24) (.48) (.50) (.49)
------- ------- ------- -------
Net asset value, end of period $9.67 $9.52 $9.40 $9.41
======== ======== ======== ========
Total Investment Based on net asset value per share 4.15%++ 6.52% 5.54% (1.13%)++
Return:** ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement .74%* .53% .31% .08%*
Net Assets: ======== ======== ======== ========
Expenses 1.23%* 1.17% 1.23% 1.30%*
======== ======== ======== ========
Investment income -- net 4.95%* 5.06% 5.51% 5.26%*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $3,379 $3,904 $4,332 $6,712
Data: ======== ======== ======== ========
Portfolio turnover 25.23% 103.61% 142.77% 52.88%
======== ======== ======== ========
<CAPTION>
Class B
For the For the Period
Six Months Aug. 27,
The following per share data and ratios have been derived Ended For the Year 1993+ to
from information provided in the financial statements. Jan. 31, 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 .22 .44 .45 .43
Realized and unrealized gain (loss) on investments -- net .15 .12 (.01) (.58)
------- ------- ------- -------
Total from investment operations .37 .56 .44 (.15)
------- ------- ------- -------
Less dividends and distributions:
Investment income -- net (.22) (.44) (.45) (.43)
In excess of realized gain on investments -- net -- -- -- (.01)
------- ------- ------- -------
Total dividends and distributions (.22) (.44) (.45) (.44)
------- ------- ------- -------
Net asset value, end of period $9.67 $9.52 $9.40 $9.41
======== ======== ======== ========
Total Investment Based on net asset value per share 3.88%++ 5.97% 5.00% (1.59%)++
Return:** ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.25%* 1.04% .84% .58%*
Net Assets: ======== ======== ======== ========
Expenses 1.75%* 1.68% 1.75% 1.80%*
======== ======== ======== ========
Investment income -- net 4.44%* 4.55% 4.99% 4.75%*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $19,513 $21,542 $25,861 $25,943
Data: ======== ======== ======== ========
Portfolio turnover 25.23% 103.61% 142.77% 52.88%
======== ======== ======== ========
* Annualized.
** Total investment returns exclude the effect of sales loads.
+ Commencement of Operations.
++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (concluded)
Class C
For the For the
Six For the Period
The following per share data and ratios have been derived Months Year Oct. 21,
from information provided in the financial statements. Ended Ended 1994+ to
Jan. 31, July 31, July 31,
1997 1996 1995
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $9.53 $9.40 $9.02
Operating ------- ------- -------
Performance: Investment income-- net .21 .43 .34
Realized and unrealized gain on investments -- net .15 .13 .38
------- ------- -------
Total from investment operations .36 .56 .72
------- ------- -------
Less dividends from investment income -- net (.21) (.43) (.34)
------- ------- -------
Net asset value, end of period $9.68 $9.53 $9.40
======== ======== ========
Total Investment Based on net asset value per share 3.83%++ 5.97% 8.19%++
Return:** ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.35%* 1.16% 1.00%*
Net Assets: ======== ======== ========
Expenses 1.84%* 1.79% 1.88%*
======== ======== ========
Investment income -- net 4.35%* 4.45% 4.68%*
======== ======== ========
Supplemental Net assets, end of period (in thousands) $2,482 $1,555 $853
Data: ======== ======== ========
Portfolio turnover 25.23% 103.61% 142.77%
======== ======== ========
<CAPTION>
Class D
For the For the
Six For the Period
The following per share data and ratios have been derived Months Year Oct. 21,
from information provided in the financial statements. Ended Ended 1994+ to
Jan. 31, July 31, July 31,
1997 1996 1995
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $9.52 $9.39 $9.02
Operating ------- ------- -------
Performance: Investment income-- net .24 .47 .38
Realized and unrealized gain on investments -- net .15 .13 .37
------- ------- -------
Total from investment operations .39 .60 .75
------- ------- -------
Less dividends from investment income -- net (.24) (.47) (.38)
------- ------- -------
Net asset value, end of period $9.67 $9.52 $9.39
======== ======== ========
Total Investment Based on net asset value per share 4.10%++ 6.52% 8.55%++
Return:** ======== ======== ========
Ratios to Average Expenses, net of reimbursement .84%* .63% .51%*
Net Assets: ======== ======== ========
Expenses 1.33%* 1.28% 1.39%*
======== ======== ========
Investment income -- net 4.85%* 4.97% 5.12%*
======== ======== ========
Supplemental Net assets, end of period (in thousands) $197 $173 $188
Data: ======== ======== ========
Portfolio turnover 25.23% 103.61% 142.77%
======== ======== ========
* Annualized.
** Total investment returns exclude the effect of sales loads.
+ Commencement of Operations.
++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Oregon Municipal Bond Fund January 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. These unaudited
financial statements reflect all adjustments which are, in the opinion
of management, necessary to a fair statement of the results for the
interim period presented. All such adjustments are of a normal recurring
nature. The Fund offers four classes of shares under the Merrill Lynch
Select PricingSM 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
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.
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 six months ended January 31, 1997, FAM earned fees of $74,948,
of which $67,400 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
Maintenance Distribution
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 six months ended January 31, 1997, MLFD earned underwriting
discounts and MLPF&S earned dealer concessions on sales of the Fund's
Class A Shares as follows:
MLFD MLPF&S
Class A -- $4
For the six months ended January 31, 1997, MLPF&S received contingent
deferred sales charges of $34,450 and $199 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 six months ended January 31, 1997 were $6,598,201 and $6,331,059,
respectively.
Net realized and unrealized gains as of January 31, 1997 were as
follows:
Realized Unrealized
Gains Gains
Long-term investments $ 229,561 $ 1,314,486
Financial futures contracts 43,485 --
--------- -----------
Total $ 273,046 $ 1,314,486
========= ===========
As of January 31, 1997, net unrealized appreciation for Federal income
tax purposes aggregated $1,314,486, all of which related to appreciated
securities. The aggregate cost of investments at January 31, 1997 for
Federal income tax purposes was $24,034,620.
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest transactions
was $2,035,578 and $4,478,110 for the six months ended January 31, 1997
and for the year ended July 31, 1996, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the
Six Months Ended Dollar
January 31, 1997 Shares Amount
Shares sold 8,460 $ 81,768
Shares issued to shareholders
in reinvestment of dividends 6,279 60,388
----------- -----------
Total issued 14,739 142,156
Shares redeemed (75,545) (728,211)
----------- -----------
Net decrease (60,806) $ (586,055)
=========== ===========
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
Six Months Ended Dollar
January 31, 1997 Shares Amount
Shares sold 115,340 $ 1,110,540
Shares issued to shareholders
in reinvestment of dividends 24,646 237,084
----------- -----------
Total issued 139,986 1,347,624
Automatic conversion
of shares (1,796) (17,204)
Shares redeemed (383,702) (3,694,407)
----------- -----------
Net decrease (245,512) $(2,363,987)
=========== ===========
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
Six Months Ended Dollar
January 31, 1997 Shares Amount
Shares sold 103,518 $991,473
Shares issued to shareholders
in reinvestment of dividends 3,592 34,601
----------- -----------
Total issued 107,110 1,026,074
Shares redeemed (13,821) (132,869)
----------- -----------
Net increase 93,289 $893,205
=========== ===========
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
Six Months Ended Dollar
January 31, 1997 Shares Amount
Shares sold 82 $787
Automatic conversion
of shares 1,796 17,204
Shares issued to shareholders
in reinvestment of dividends 340 3,268
----------- -----------
Net increase 2,218 $21,259
=========== ===========
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, 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.
