MERRILL LYNCH
OREGON
MUNICIPAL
BOND FUND
[FUND LOGO]
STRATEGIC
Performance
Semi-Annual Report
January 31, 1998
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 -- 1/98
[RECYCLE LOGO]
Printed on post-consumer recycled paper
Merrill Lynch Oregon Municipal Bond Fund January 31, 1998
TO OUR SHAREHOLDERS
The Municipal Market Environment
During the six months ended January 31, 1998, long-term bond yields
declined to recent historic lows. Prior to late October, the ongoing
positive combination of moderate economic growth and low inflation had
allowed interest rates to gradually move lower. During the last three
months, however, the decline in interest rates was driven more by the
continued turmoil in Asian equity markets than by fundamental
concerns. A significant "flight to quality" has benefited the US
Treasury bond market, particularly longer-maturity US Treasury bonds,
as foreign investors have sought safe haven in the relative stability
of US financial markets. Over the six months ended January 31, 1998,
US Treasury bond yields declined approximately 50 basis points (0.50%)
to 5.81%.
Without the ability to benefit from the tax advantage inherent in
municipal bonds, foreign investors have not participated in the tax-
exempt market. Consequently, municipal bond yields have not declined
dramatically as have taxable US Treasury securities. Long-term
municipal revenue bond yields, as measured by the Bond Buyer Revenue
Index, declined only 15 basis points to end the six-month period ended
January 31, 1998 at 5.33%. Nevertheless, tax-exempt bond yields have
not reached these levels since the mid-1970s.
The increase in new municipal bond issuance over the past six months
has also prevented the tax-exempt bond market from more closely
mirroring the yield declines exhibited by its taxable counterpart.
During the last six months, over $120 billion in new long-term
municipal bonds were underwritten, an increase of over 30% compared to
the same six-month period one year ago. As interest rates have
continued to decline in recent months, new tax-exempt bond issuance
has remained strong. Over $60 million in new long-term municipal
securities were issued during the last three months, an increase of
over 20% compared to the same three-month period ended January 31,
1997. During the past month, over $16 billion in new long-term
municipal securities were underwritten, representing an increase of
over 40% compared to the January 1997 level.
In our opinion, the recent correction in world equity markets has
enhanced the near-term prospects for continued low, if not declining,
interest rates in the United States. It is likely that the recent
correction will result in slower US domestic growth in the coming
months. This decline should be generated in part by reduced US export
growth. Additionally, some decline in consumer spending can also be
expected because of reduced consumer confidence. Perhaps more
importantly, it is likely that, barring a dramatic and unexpected
resurgence in domestic growth, the Federal Reserve Board will be
unwilling to raise interest rates until the full impact of the equity
market's corrections can be established.
All of these factors suggest that over the near term, interest rates,
including tax-exempt bond yields, are unlikely to rise by any
appreciable amount. It is probable that municipal bond yields will
remain under some relative pressure because of continued strong new-
issue supply. However, the recent pace of municipal bond issuance is
likely to be unsustainable. Continued increases in bond issuance will
require lower and lower tax-exempt bond yields to generate the
economic savings necessary for additional municipal bond refinancings.
Preliminary estimates of 1998 total municipal bond issuance are
presently in the $195 billion -- $220 billion range. These estimates
suggest that recent supply pressures are likely to abate somewhat next
year, or at least exert only minimal technical pressure during 1998.
Additionally, municipal bond investors received approximately $23
billion in January coupon payments, bond maturities and proceeds from
early redemptions, which should serve to intensify investor demand in
the near future. With tax-exempt bond yields at already attractive
yield ratios relative to US Treasury bonds (approximately 90% at the
end of December 1997), any further pressure on the municipal market
may well represent an attractive investment opportunity.
Portfolio Strategy
Going into the second half of 1997, we maintained a slightly defensive
posture for the Fund. During the six months ended January 31, 1998,
several changes took place in the US economy which eased our concerns
for a higher interest rate environment. In November 1997, we adopted a
less defensive strategy in response to the Asian economic crisis and
the continued domestic low inflation environment. This change in
structure was obtained by maintaining a fully invested position and
seeking out interest rate- sensitive issues when available.
While total municipal bond issuance increased by over 30% for the six
months ended January 31, 1998 compared to the same six-month period
last year, total Oregon municipal bond issuance decreased by almost
18% during 1997. Most issues were brought in the form of current-
coupon bonds without attractive call protection. We did not
participate in these issues since they did not benefit the Fund's
overall portfolio structure. We expect issuance in Oregon to be strong
going into 1998.
In the months ahead, we expect to maintain the Fund's fully invested
position. We believe that interest rates will stay within their
current trading range. We will look for periods of higher interest
rates before adopting a more aggressive investment strategy.
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,
/S/ARTHUR ZEIKEL
Arthur Zeikel
President
/S/VINCENT R. GIORDANO
Vincent R. Giordano
Senior Vice President
/S/THEODORE R. JAECKEL JR.
Theodore R. Jaeckel Jr.
Vice President and Portfolio Manager
March 9, 1998
We are pleased to announce that Theodore R. Jaeckel Jr. is responsible
for the day-to-day management of Merrill Lynch Oregon Municipal Bond
Fund. Mr. Jaeckel has been employed by Merrill Lynch Asset Management,
L.P. (an affiliate of the Fund's investment adviser) since 1991 as
Vice President and Portfolio Manager.
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
1/31/98 10/31/97 1/31/97 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $10.20 $9.98 $9.67 + 5.48% +2.20%
Class B Shares* 10.20 9.98 9.67 + 5.48 +2.20
Class C Shares* 10.21 9.99 9.68 + 5.48 +2.20
Class D Shares* 10.20 9.98 9.67 + 5.48 +2.20
Class A Shares -- Total Return* +10.59(1) +3.42(2)
Class B Shares -- Total Return* +10.03(3) +3.29(4)
Class C Shares -- Total Return* + 9.92(5) +3.26(6)
Class D Shares -- Total Return* +10.48(7) +3.39(8)
Class A Shares -- Standardized 30-day Yield 3.78%
Class B Shares -- Standardized 30-day Yield 3.44%
Class C Shares -- Standardized 30-day Yield 3.34%
Class D Shares -- Standardized 30-day Yield 3.69%
* 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 $0.469 per share ordinary income dividends.
(2) Percent change includes reinvestment of $0.120 per share ordinary income dividends.
(3) Percent change includes reinvestment of $0.419 per share ordinary income dividends.
(4) Percent change includes reinvestment of $0.107 per share ordinary income dividends.
(5) Percent change includes reinvestment of $0.409 per share ordinary income dividends.
(6) Percent change includes reinvestment of $0.104 per share ordinary income dividends.
(7) Percent change includes reinvestment of $0.459 per share ordinary income dividends.
(8) Percent change includes reinvestment of $0.117 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
1997 9.70 10.12 -- 0.471 + 9.44
1/1/98 -- 1/31/98 10.12 10.20 -- 0.032 + 1.19
Total $2.172
Cumulative total return as of 1/31/98: +28.02%**
* Figures may include short-term capital gains distributions.
** Figures 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
1997 9.70 10.12 -- 0.421 + 8.88
1/1/98 -- 1/31/98 10.12 10.20 -- 0.029 + 1.14
Total $1.957
Cumulative total return as of 1/31/98: +25.17%**
* Figures may include short-term capital gains distributions.
** Figures 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
1997 9.71 10.13 -- 0.412 + 8.78
1/1/98 -- 1/31/98 10.13 10.21 -- 0.028 + 1.14
Total $1.381
Cumulative total return as of 1/31/98: +30.85%**
* Figures may include short-term capital gains distributions.
** Figures 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
1997 9.70 10.12 -- 0.461 + 9.33
1/1/98 -- 1/31/98 10.12 10.20 -- 0.032 + 1.18
Total $1.543
Cumulative total return as of 1/31/98: +32.99%**
* Figures may include short-term capital gains distributions.
** Figures do not include sales charge; results would be lower if sales charge was included.
</TABLE>
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/97 +9.44% +5.06%
Inception (8/27/93)
through 12/31/97 +5.56 +4.58
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/97 +8.88% +4.88%
Inception (8/27/93)
through 12/31/97 +5.03 +5.03
* 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 12/31/97 +8.78% +7.78%
Inception (10/21/94)
through 12/31/97 +8.40 +8.40
* 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 12/31/97 +9.33% +4.96%
Inception (10/21/94)
through 12/31/97 +8.93 +7.55
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
<TABLE>
<CAPTION>
Merrill Lynch Oregon Municipal Bond Fund January 31, 1998
SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<S> <C> <C> <C> <C>
Oregon -- 78.2%
AAA Aaa $1,000 Chemeketa, Oregon, Community College District, UT, 5.95% due 6/01/2016
(e) $1,087
AAA Aaa 500 Columbia River, Oregon, Peoples Utility District, Refunding, UT, 5% due
6/01/2006 (d) 526
BBB+ NR* 900 Klamath Falls, Oregon, Intercommunity Hospital Authority Revenue Bonds
(Gross-Merle West Medical Center Project), Series A, 7.10% due 9/01/2024 1,010
AAA Aaa 500 Lincoln County, Oregon, School District, UT, 5.25% due 6/15/2012 (e) 526
AAA Aaa 970 Marion County, Oregon, Union High School District No. 007J (Silverton), UT,
7% due 6/01/2010 (c) 1,119
AAA Aaa 850 Morrow County, Oregon, School District No. 001, UT, 6% due 6/01/2007 (b) 960
AAA Aaa 2,650 Oregon Health Sciences University Revenue Bonds, Insured Series A, 5.75%**
due 7/01/2021 (b) 813
NR* Baa2 500 Oregon State Economic Development Revenue Refunding Bonds (Georgia Pacific
Corp. Project), Series 183, 5.70% due 12/01/2025 518
Oregon State Health, Housing, Educational and Cultural Facilities Authority
Revenue Bonds, Series A:
NR* VMIG1+ 200 (Guide Dogs for the Blind), VRDN, 3.60% due 7/01/2025 (a) 200
A+ NR* 500 Refunding (Reed College Project), 5.375% due 7/01/2025 511
AA Aaa 850 Oregon State Higher Education Building Improvement Bonds, UT, Series A,
6.45% due 8/01/2004 (g) 965
NR* Aa2 1,000 Oregon State Housing and Community Services Department, Mortgage Revenue
Bonds AMT, Series A, 6.20% due 7/01/2027 1,061
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 1,071
NR* Aa2 475 Refunding, Series A, 6.40% due 7/01/2018 506
NR* Aa2 1,050 Series B, 6.875% due 7/01/2028 1,126
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) 1,172
AAA Aaa 50 7.10% due 7/01/2021 55
A1+ A3 500 Port Saint Helens, Oregon, PCR (Portland General Electric Company Project),
VRDN, AMT, Series A, 3.70% due 8/01/2014 (a) 500
Port Umpqua, Oregon, PCR, Refunding (International Paper Co. Projects):
A- A3 500 Series A, 5.05% due 6/01/2009 514
A- A3 500 Series B, 5.20% due 6/01/2011 516
A+ A1 1,500 Portland, Oregon, Sewer System Revenue Bonds, Series A, 6.25% due 6/01/2004
(g) 1,679
AAA Aaa 1,000 Tillamook County, Oregon, GO, UT, 6.25% due 1/01/2014 (e) 1,114
Puerto Rico -- 17.2%
AAA Aaa 2,720 Puerto Rico Commonwealth, GO, UT, 7% due 7/01/2010 (d) 3,376
AAA Aaa 400 Puerto Rico Electric Power Authority, Power Revenue Bonds, STRIPES,
Series T, 7.772% due 7/01/2005 (c)(f) 484
---------
Total Investments (Cost -- $19,249) -- 95.4% 21,409
Other Assets Less Liabilities -- 4.6% 1,036
---------
Net Assets -- 100.0% $22,445
=========
(a) The interest rate is subject to change periodically based upon prevailing market rates.
The interest rate shown is the rate in effect at January 31, 1998.
(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, 1998.
(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 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 January 31, 1998
<S> <C> <C> <C>
Assets: Investments, at value (identified cost -- $19,249,441) (Note 1a) $21,408,640
Cash 155,387
Receivables:
Securities sold $816,667
Interest 184,950
Beneficial interest sold 32,161 1,033,778
-----------
Deferred organization expenses (Note 1e) 8,323
Prepaid registration fees and other assets (Note 1e) 3,559
-----------
Total assets 22,609,687
-----------
Liabilities: Payables:
Beneficial interest redeemed 53,017
Dividends to shareholders (Note 1f) 15,454
Distributor (Note 2) 8,099
Investment adviser (Note 2) 3,822 80,392
-----------
Accrued expenses and other liabilities 84,773
-----------
Total liabilities 165,165
-----------
Net Assets: Net assets $22,444,522
===========
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited number of
Consist of: shares authorized $32,823
Class B Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 160,275
Class C Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 20,770
Class D Shares of beneficial interest, $.10 par value, unlimited number of
shares authorized 6,140
Paid-in capital in excess of par 22,619,412
Accumulated realized capital losses on investments -- net (Note 5) (2,554,097)
Unrealized appreciation on investments -- net 2,159,199
-----------
Net assets $22,444,522
===========
Net Asset Value: Class A -- Based on net assets of $3,348,033 and 328,233 shares of
beneficial interest outstanding $10.20
===========
Class B -- Based on net assets of $16,349,994 and 1,602,749 shares of
beneficial interest outstanding $10.20
===========
Class C -- Based on net assets of $2,120,258 and 207,697 shares of
beneficial interest outstanding $10.21
===========
Class D -- Based on net assets of $626,237 and 61,396 shares of
beneficial interest outstanding $10.20
===========
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
For the Six Months Ended
January 31, 1998
<S> <C> <C> <C>
Investment Income Interest and amortization of premium and discount earned $631,232
(Note 1d):
Expenses: Investment advisory fees (Note 2) $63,315
Account maintenance and distribution fees -- Class B (Note 2) 42,587
Professional fees 28,528
Accounting services (Note 2) 19,758
Printing and shareholder reports 8,375
Account maintenance and distribution fees -- Class C (Note 2) 6,312
Transfer agent fees -- Class B (Note 2) 4,523
Registration fees (Note 1e) 4,038
Amortization of organization expenses (Note 1e) 3,841
Pricing fees 1,749
Custodian fees 1,190
Transfer agent fees -- Class A (Note 2) 720
Trustees' fees and expenses 650
Transfer agent fees -- Class C (Note 2) 536
Account maintenance fees -- Class D (Note 2) 288
Transfer agent fees -- Class D (Note 2) 125
Other 1,259
----------
Total expenses before reimbursement 187,794
Reimbursement of expenses (Note 2) (40,291)
----------
Total expenses after reimbursement 147,503
----------
Investment income -- net 483,729
----------
Realized & Realized gain on investments -- net 135,731
Unrealized Gain on Change in unrealized appreciation on investments -- net 315,952
Investments -- Net ----------
(Notes 1b, 1d & 3): Net Increase in Net Assets Resulting from Operations $935,412
==========
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: 1998 1997
<S> <C> <C> <C>
Operations: Investment income -- net $483,729 $1,128,807
Realized gain on investments -- net 135,731 504,081
Change in unrealized appreciation/depreciation on investments -- net 315,952 688,160
------------ ------------
Net increase in net assets resulting from operations 935,412 2,321,048
------------ ------------
Dividends & Investment income -- net:
Distributions to Class A (76,747) (170,118)
Shareholders Class B (351,534) (860,053)
(Note 1f): Class C (42,394) (86,440)
Class D (13,054) (12,196)
Realized gain on investments -- net:
Class A (966) --
Class B (4,806) --
Class C (593) --
Class D (181) --
------------ ------------
Net decrease in net assets resulting from dividends and distributions
to shareholders (490,275) (1,128,807)
------------ ------------
Beneficial Interest Net decrease in net assets derived from beneficial interest transactions (1,582,275) (4,784,283)
Transactions ------------ ------------
(Note 4):
Net Assets: Total decrease in net assets (1,137,138) (3,592,042)
Beginning of period 23,581,660 27,173,702
------------ ------------
End of period $22,444,522 $23,581,660
============ ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
Class A
For the For the
Six Period
Months Aug. 27,
The following per share data and ratios have been derived Ended 1993+ to
from information provided in the financial statements. Jan. 31, For the Year Ended July 31, July 31,
1998 1997 1996 1995 1994
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $10.00 $9.52 $9.40 $9.41 $10.00
Operating --------- --------- --------- --------- ---------
Performance: Investment income -- net .24 .47 .48 .50 .48
Realized and unrealized gain (loss) on
investments -- net .20 .48 .12 (.01) (.58)
--------- --------- --------- --------- ---------
Total from investment operations .44 .95 .60 .49 (.10)
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income -- net (.24) (.47) (.48) (.50) (.48)
In excess of realized gain on
investments -- net -- -- -- -- (.01)
Realized gain on investments -- net --+++++ -- -- -- --
--------- --------- --------- --------- ---------
Total dividends and distributions (.24) (.47) (.48) (.50) (.49)
--------- --------- --------- --------- ---------
Net asset value, end of period $10.20 $10.00 $9.52 $9.40 $9.41
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 4.45%++++ 10.27% 6.52% 5.54% (1.13%)++++
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses, net of reimbursement .85%* .78% .53% .31% .08%*
Net Assets: ========= ========= ========= ========= =========
Expenses 1.20%* 1.22% 1.17% 1.23% 1.30%*
========= ========= ========= ========= =========
Investment income -- net 4.64%* 4.88% 5.06% 5.51% 5.26%*
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $3,348 $3,232 $3,904 $4,332 $6,712
Data: ========= ========= ========= ========= =========
Portfolio turnover 25.30% 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.
+++++ Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Class B
For the For the
Six Period
Months Aug. 27,
The following per share data and ratios have been derived Ended 1993+ to
from information provided in the financial statements. Jan. 31, For the Year Ended July 31, July 31,
1998 1997 1996 1995 1994
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $10.00 $9.52 $9.40 $9.41 $10.00
Operating --------- --------- --------- --------- ---------
Performance: Investment income -- net .21 .42 .44 .45 .43
Realized and unrealized gain (loss) on
investments -- net .20 .48 .12 (.01) (.58)
--------- --------- --------- --------- ---------
Total from investment operations .41 .90 .56 .44 (.15)
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income -- net (.21) (.42) (.44) (.45) (.43)
In excess of realized gain on
investments -- net -- -- -- -- (.01)
Realized gain on investments -- net --+++++ -- -- -- --
--------- --------- --------- --------- ---------
Total dividends and distributions (.21) (.42) (.44) (.45) (.44)
--------- --------- --------- --------- ---------
Net asset value, end of period $10.20 $10.00 $9.52 $9.40 $9.41
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 4.18%++++ 9.72% 5.97% 5.00% (1.59%)++++
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses, net of reimbursement 1.36%* 1.29% 1.04% .84% .58%*
Net Assets: ========= ========= ========= ========= =========
Expenses 1.71%* 1.73% 1.68% 1.75% 1.80%*
========= ========= ========= ========= =========
Investment income -- net 4.13%* 4.37% 4.55% 4.99% 4.75%*
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $16,350 $17,888 $21,542 $25,861 $25,493
Data: ========= ========= ========= ========= =========
Portfolio turnover 25.30% 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.
+++++ Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Class C
For the For the
Six Period
Months Oct. 21,
The following per share data and ratios have been derived Ended For the Year 1994+ to
from information provided in the financial statements. Jan. 31, Ended July 31, July 31,
1998 1997 1996 1995
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $10.00 $9.53 $9.40 $9.02
Operating --------- --------- --------- ---------
Performance: Investment income -- net .20 .41 .43 .34
Realized and unrealized gain on investments
-- net .21 .47 .13 .38
--------- --------- --------- ---------
Total from investment operations .41 .88 .56 .72
--------- --------- --------- ---------
Less dividends and distributions:
Investment income -- net (.20) (.41) (.43) (.34)
Realized gain on investments -- net --+++++ -- -- --
--------- --------- --------- ---------
Total dividends and distributions (.20) (.41) (.43) (.34)
--------- --------- --------- ---------
Net asset value, end of period $10.21 $10.00 $9.53 $9.40
========= ========= ========= =========
Total Investment Based on net asset value per share 4.23%++++ 9.50% 5.97% 8.19%++++
Return:** ========= ========= ========= =========
Ratios to Average Expenses, net of reimbursement 1.45%* 1.39% 1.16% 1.00%*
Net Assets: ========= ========= ========= =========
Expenses 1.80%* 1.83% 1.79% 1.88%*
========= ========= ========= =========
Investment income -- net 4.03%* 4.28% 4.45% 4.68%*
========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $2,121 $2,063 $1,555 $853
Data: ========= ========= ========= =========
Portfolio turnover 25.30% 40.62% 103.61% 142.77%
========= ========= ========= =========
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of operations.
++++ Aggregate total investment return.
+++++ Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Class D
For the For the
Six Period
Months Oct. 21,
The following per share data and ratios have been derived Ended For the Year 1994+ to
from information provided in the financial statements. Jan. 31, Ended July 31, July 31,
1998 1997 1996 1995
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $10.00 $9.52 $9.39 $9.02
Operating --------- --------- --------- ---------
Performance: Investment income -- net .23 .46 .47 .38
Realized and unrealized gain on investments
-- net .20 .48 .13 .37
--------- --------- --------- ---------
Total from investment operations .43 .94 .60 .75
--------- --------- --------- ---------
Less dividends and distributions:
Investment income -- net (.23) (.46) (.47) (.38)
Realized gain on investments -- net --+++++ -- -- --
--------- --------- --------- ---------
Total dividends and distributions (.23) (.46) (.47) (.38)
--------- --------- --------- ---------
Net asset value, end of period $10.20 $10.00 $9.52 $9.39
========= ========= ========= =========
Total Investment Based on net asset value per share 4.40%++++ 10.17% 6.52% 8.55%++++
Return:** ========= ========= ========= =========
Ratios to Average Expenses, net of reimbursement .95%* .90% .63% .51%*
Net Assets: ========= ========= ========= =========
Expenses 1.30%* 1.32% 1.28% 1.39%*
========= ========= ========= =========
Investment income -- net 4.54%* 4.76% 4.97% 5.12%*
========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $626 $399 $173 $188
Data: ========= ========= ========= =========
Portfolio turnover 25.30% 40.62% 103.61% 142.77%
========= ========= ========= =========
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of operations.
++++ Aggregate total investment return.
+++++ Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Oregon Municipal Bond Fund January 31, 1998
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, 1998, FAM earned fees of
$63,315, of which $40,291 was voluntarily waived.
Pursuant to 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, 1998, MLFD earned underwriting
discounts and MLPF&S earned dealer concessions on sales of the Fund's
Class D Shares as follows:
MLFD MLPF&S
Class D $203 $2,250
For the six months ended January 31, 1998, MLPF&S received contingent
deferred sales charges of $13,691 and $182 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, 1998 were $5,997,693 and
$5,336,506, respectively.
Net realized and unrealized gains as of January 31, 1998 were as
follows:
Realized Unrealized
Gains Gains
Long-term investments $135,731 $2,159,199
------------ ------------
Total $135,731 $2,159,199
============ ============
As of January 31, 1998, net unrealized appreciation for Federal income
tax purposes aggregated $2,159,199, all of which related to appreciated
securities. The aggregate cost of investments at January 31, 1998 for
Federal income tax purposes was $19,249,441.
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest transactions
was $1,582,275 and $4,784,283 for the six months ended January 31, 1998
and for the year ended July 31, 1997, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Six Dollar
Months Ended January 31, 1998 Shares Amount
Shares sold 12,367 $123,585
Shares issued to shareholders
in reinvestment of dividends
and distributions 5,593 55,991
------------ ------------
Total issued 17,960 179,576
Shares redeemed (13,004) (129,998)
------------ ------------
Net increase 4,956 $49,578
============ ============
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 B Shares for the Six Dollar
Months Ended January 31, 1998 Shares Amount
Shares sold 124,436 $1,247,237
Shares issued to shareholders
in reinvestment of dividends
and distributions 16,093 161,068
------------ ------------
Total issued 140,529 1,408,305
Automatic conversion of shares (7,561) (75,441)
Shares redeemed (319,557) (3,195,964)
------------ ------------
Net decrease (186,589) $(1,863,100)
============ ============
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 C Shares for the Six Dollar
Months Ended January 31, 1998 Shares Amount
Shares sold 31,883 $319,127
Shares issued to shareholders
in reinvestment of dividends
and distributions 3,219 32,252
------------ ------------
Total issued 35,102 351,379
Shares redeemed (33,588) (333,487)
------------ ------------
Net increase 1,514 $17,892
============ ============
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 D Shares for the Six Dollar
Months Ended January 31, 1998 Shares Amount
Shares sold 16,268 $162,040
Automatic conversion of shares 7,562 75,441
Shares issued to shareholders
in reinvestment of dividends
and distributions 576 5,775
------------ ------------
Total issued 24,406 243,256
Shares redeemed (2,967) (29,901)
------------ ------------
Net increase 21,439 $213,355
============ ============
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
============ ============
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.
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
Theodore R. Jaeckel Jr., 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
