MERRILL LYNCH
OREGON
MUNICIPAL
BOND FUND
FUND LOGO
Semi-Annual Report
January 31, 1999
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
Printed on post-consumer recycled paper
Merrill Lynch Oregon Municipal Bond Fund
January 31, 1999
TO OUR SHAREHOLDERS
The Municipal Market Environment
During the six months ended January 31, 1999, long-term bond yields
moved significantly lower. US domestic economic growth remained
moderate, with losses in the manufacturing sector offset by strong
growth in service-oriented industries. Industrial commodity prices
recently fell to their lowest level in over a decade. This suggests
that the current positive inflationary environment is unlikely to be
challenged in the near term. Additionally, the Federal Reserve Board
lowered short-term interest rates in September, October and
November, in part to ensure that US domestic economic growth would
not be negatively impacted by ongoing weak economic growth overseas.
However, various external factors, as well as increased volatility,
contributed to the decline in bond yields as they have for much of
the past year. Episodes of foreign economic instability generated a
significant "flight to quality" rally in US Treasury securities, as
well as fostering lower tax-exempt bond yields as a result. Periods
of strong foreign equity market appreciation, particularly in Asia,
have at times resulted in higher US bond yields as foreign investors
have sold US fixed-income instruments to reinvest the proceeds in
their own domestic equity markets. Additionally, the continued
distraction of President Clinton's impeachment trial added to recent
interest rate volatility. However, on balance, the favorable
fundamental economic scenario supported lower bond yields. During
the six-month period ended January 31, 1999, the yield on the US
Treasury 30-year bond fell over 60 basis points (0.60%) to 5.09%,
and long-term municipal revenue bond yields declined almost 20 basis
points to 5.17%, as measured by the Bond Buyer Revenue Bond Index.
Throughout most of 1998, the municipal bond market's performance was
impeded by a significant increase in new-issue supply. However, in
recent months, the technical position of the tax-exempt market
improved. Over the last 12 months, almost $285 billion in new long-
term tax-exempt bonds was underwritten, an increase of almost 30%
compared to the same period a year ago. As municipal bond yields
declined in recent years, it has taken increasingly lower bond
yields to generate the cost savings necessary to refinance remaining
higher-couponed debt. Consequently, the rate of increases in
municipal bond issuance slowed in recent quarters. During the last
six months, more than $125 billion in new tax-exempt bonds was
issued, an increase of approximately 5% compared to the same period
a year ago. During the January 31, 1999 quarter, $63 billion in new
long-term municipal bonds was underwritten, representing an increase
of 5% compared to the January 31, 1998 quarter.
The pace of tax-exempt issuance continued to slow in 1999. January's
monthly issuance was less than $15 billion, representing a decline
of almost 25% compared to January 1998's volume. Additionally,
investors received more than $22 billion in coupon payments,
maturities and proceeds from early redemptions in January. Investors
can also expect to receive an additional $15 billion--$18 billion in
February for reinvestment. Consequently, investor demand has been
strong in recent months, easily matching, if not at times exceeding,
available supply. We will monitor this trend closely in the coming
months to determine if the supply pressures exerted in 1998 are
abating and fostering a more balanced supply/demand environment for
1999. Such an environment should allow the tax-exempt market's
performance to more closely mirror that of its taxable counterpart.
Foreign investors have rarely been active investors in the tax-
exempt bond market since they are unable to benefit from the
inherent tax advantage of municipal securities. Consequently, the
municipal bond market has not been able to benefit from the strong
flight to quality demand enjoyed by US Treasury securities since
late 1997. This inability has in large part resulted in
significantly smaller declines in municipal bond yields compared to
US Treasury securities. However, this has resulted in the
opportunity to purchase tax-exempt securities with yields very close
to or, in some instances, exceeding those of comparable US Treasury
bonds. By January 31, 1999, long-term tax-exempt bond yields were at
102% of US Treasury securities of comparable maturities, nearly
matching the least expensive level of the past year. Municipal bond
yield ratios have averaged approximately 95% for the last six months
and 92% for all of 1998. During 1997, tax-exempt bond yield ratios
averaged 84%. It is likely that the combination of the increase in
new-issue volume and the "safe-haven" status of US Treasury
securities drove municipal bond yield ratios to their present
attractive levels. Should new volume decline and/or foreign
financial markets regain stability in 1999, tax-exempt bond yield
ratios could quickly return to their more historic levels (85%--
88%).
Merrill Lynch Oregon Municipal Bond Fund
January 31, 1999
Looking ahead, the expected combination of moderate economic growth
in the United States and continued negligible inflation suggests a
relatively stable interest rate environment into early 1999.
However, it is likely that foreign financial markets will again be a
critical factor in determining US bond yields. Economic problems in
Russia and Brazil remain unresolved, suggesting that additional
shocks to the world's financial system are possible. On the other
hand, the continued robustness of the US economy has led to some
backup in interest rates. However, at present these factors indicate
that there is little immediate risk of sustained significant
increases in long-term bond yields.
Portfolio Strategy
During the six months ended January 31, 1999, our portfolio strategy
was driven mainly by our constructive investment outlook. A number
of factors contributed to this optimistic assessment, not the least
of which was the steady decline in the rate of inflation. While the
economy proved to be surprisingly resilient despite the economic and
financial turbulence faced by much of the world during the period,
the absence of emergent price pressures suggested that the
environment for long-term interest rates would remain favorable.
Consequently, we sought to build and maintain a maximum exposure to
tax-exempt securities that possessed strong performance
characteristics. In the absence of any material growth in the Fund's
assets by way of new subscriptions, funding for these purchases
originated from the sale of more seasoned holdings that we believed
faced a high probability of being redeemed on their first call date
within the next few years. During the period, we preferred to
redeploy the Fund's assets at a time of our own choosing rather than
face the uncertain reinvestment risk at some point in the future.
During the six months ended January 31, 1999, new long-term issuance
of tax-exempt debt in Oregon substantially exceeded the pace of
volume at the national level. Despite this increase in supply,
healthy demand both from retail and institutional investors created
an environment in which Oregon issues outperformed the broader
market. However, expected issuance during the months ahead should
alleviate matters somewhat since the extraordinary relative value
inherent in current market levels will likely sustain demand for the
foreseeable future.
Looking ahead, we expect to maintain our current strategy in an
effort to capitalize on the fundamentally positive environment for
fixed-income markets. In addition, we will continue to seek out
opportunities to upgrade the average quality of the portfolio.
Quality spreads remain historically narrow in the municipal
marketplace, and we believe there is insufficient compensation for
the increased risk of holding lower-rated credits longer term.
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,
(Terry K. Glenn)
Terry K. Glenn
Executive Vice President
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(Theodore R. Jaeckel Jr.)
Theodore R. Jaeckel Jr.
Vice President and Portfolio Manager
March 5, 1999
Merrill Lynch Oregon Municipal Bond Fund
January 31, 1999
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 4% and bear no ongoing distribution or account maintenance
fees. Class A Shares are available only to eligible investors.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.25% and an account
maintenance fee of 0.25%. These shares automatically convert to
Class D Shares after approximately 10 years. (There is no initial
sales charge for automatic share conversions.)
* Class C Shares are subject to a distribution fee of 0.35% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.10% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. Figures shown in the "Recent Performance
Results" and "Average Annual Total Return" 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>
Recent Performance Results*
<CAPTION>
Standardized
12 Month 3 Month Since Inception 30-Day Yield
Total Return Total Return Total Return As of 1/31/99
<S> <C> <C> <C> <C>
ML Oregon Municipal Bond Fund Class A Shares +5.85% +1.66% +35.51% 3.34%
ML Oregon Municipal Bond Fund Class B Shares +5.31 +1.53 +31.82 2.98
ML Oregon Municipal Bond Fund Class C Shares +5.11 +1.41 +37.54 2.88
ML Oregon Municipal Bond Fund Class D Shares +5.74 +1.63 +40.62 3.25
<FN>
*Investment results shown do not reflect sales charges; results
would be lower if a sales charge was included. Total investment
returns are based on changes in net asset values for the periods
shown, and assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date. The Fund's
since inception periods are Class A & Class B Shares, from 8/27/93
to 1/31/99 and Class C & Class D Shares, from 10/21/94 to 1/31/99.
</TABLE>
Merrill Lynch Oregon Municipal Bond Fund
January 31, 1999
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/98 +5.93% +1.69%
Five Years Ended 12/31/98 +5.02 +4.17
Inception (8/27/93)
through 12/31/98 +5.63 +4.83
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/98 +5.39% +1.39%
Five Years Ended 12/31/98 +4.49 +4.49
Inception (8/27/93)
through 12/31/98 +5.10 +5.10
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 12/31/98 +5.29% +4.29%
Inception (10/21/94)
through 12/31/98 +7.65 +7.65
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 12/31/98 +5.83% +1.59%
Inception (10/21/94)
through 12/31/98 +8.18 +7.14
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Merrill Lynch Oregon Municipal Bond Fund
January 31, 1999
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)
COP Certificates of Participation
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
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Oregon--80.5%
<S> <S> <C> <S> <C>
AAA Aaa $ 500 Columbia County, Oregon, School District No. 502, Deferred Interest, GO,
5.05%** due 6/01/2018 (c) $ 193
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 1,002
AAA Aaa 500 Lincoln County, Oregon, School District, GO, 5.25% due 6/15/2012 (e) 542
AAA Aaa 1,000 Marion County, Oregon, COP (Courthouse Square Project), Series A, 5%
due 6/01/2023 (b) 1,002
AAA Aaa 870 Marion County, Oregon, Union High School District No. 007J (Silverton), UT, 7%
due 6/01/2004 (c)(g) 1,017
AAA Aaa 850 Morrow County, Oregon, School District No. 001, GO, 6% due 6/01/2007 (b) 975
AAA Aaa 3,220 Oregon Health Sciences University, Revenue Refunding Bonds (Capital Appreciation),
Series A, 5.79%** due 7/01/2021 (b) 1,048
NR* Baa2 500 Oregon State Economic Development, Revenue Refunding Bonds (Georgia-Pacific Corp.
Project), AMT, Series 183, 5.70% due 12/01/2025 512
Oregon State Health, Housing, Educational and Cultural Facilities Authority Revenue
Bonds, Series A:
NR* VMIG1++ 500 (Guide Dogs for the Blind), VRDN, 2.70% due 7/01/2025 (a) 500
NR* Baa1 1,000 (Linfield College Project), 5.25% due 10/01/2023 997
A+ NR* 500 Refunding (Reed College Project), 5.375% due 7/01/2025 518
Oregon State Housing and Community Services Department, Mortgage Revenue Bonds
(S/F Mortgage Program):
NR* Aa2 820 AMT, Series E, 7.10% due 7/01/2014 881
NR* Aa2 1,000 Refunding, AMT, Series A, 6.20% due 7/01/2027 1,074
NR* Aa2 450 Refunding, Series A, 6.40% due 7/01/2018 482
NR* Aa2 1,050 Refunding, Series B, 6.875% due 7/01/2028 1,122
AAA Aaa 1,000 Port of Portland, Oregon, Airport Revenue Bonds, Portland International
Airport, AMT, Series 12-C, 5% due 7/01/2028 (e) 994
Port of Portland, Oregon, Airport Revenue Refunding Bonds, AMT, Series 7-B (b):
AAA NR* 15 7.10% due 7/01/2001 (g) 16
AAA Aaa 35 7.10% due 7/01/2021 38
</TABLE>
Merrill Lynch Oregon Municipal Bond Fund
January 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Oregon (concluded)
<S> <S> <C> <S> <C>
AAA Aaa $ 950 Port of Portland, Oregon, Airport Revenue Refunding Bonds (Portland International
Airport), AMT, Series 7-B, 7.10% due 1/01/2012 (b)(g) $ 1,192
Port Umpqua, Oregon, PCR, Refunding (International Paper Co. Projects):
BBB+ A3 500 Series A, 5.05% due 6/01/2009 531
BBB+ A3 500 Series B, 5.20% due 6/01/2011 531
A+ A1 1,500 Portland, Oregon, Sewer System Revenue Bonds, Series A, 6.25% due 6/01/2004 (g) 1,693
AA- NR* 1,000 Salem, Oregon, Hospital Facility Authority Revenue Bonds (Salem Hospital),
5.25% due 8/15/2014 1,044
AAA Aaa 900 Tillamook County, Oregon, GO, 6.25% due 1/01/2014 (e) 1,006
Puerto Rico--18.8%
AAA Aaa 2,720 Puerto Rico Commonwealth, GO, Refunding, 7% due 7/01/2010 (d) 3,439
A1+ VMIG1++ 500 Puerto Rico Commonwealth, Highway and Transportation Authority, Highway Revenue
Refunding Bonds, VRDN, Series X, 2.35% due 7/01/1999 (a) 500
AAA Aaa 400 Puerto Rico Electric Power Authority, Power Revenue Bonds, STRIPES, Series T,
8.371% due 7/01/2005 (c)(f) 485
Total Investments (Cost--$21,132)--99.3% 23,334
Other Assets Less Liabilities--0.7% 170
-------
Net Assets--100.0% $23,504
=======
<FN>
(a)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at January 31, 1999.
(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, 1999.
(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.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Oregon Municipal Bond Fund
January 31, 1999
<TABLE>
FINANCIAL INFORMATION
<CAPTION>
Statement of Assets and Liabilities as of January 31, 1999
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$21,131,916) (Note 1a) $ 23,333,989
Cash 273,442
Receivables:
Interest $ 181,913
Beneficial interest sold 7,005 188,918
------------
Deferred organization expenses (Note 1e) 553
Prepaid registration fees and other assets (Note 1e) 2,069
------------
Total assets 23,798,971
------------
Liabilities: Payables:
Securities purchased 190,850
Dividends to shareholders (Note 1f) 14,543
Distributor (Note 2) 7,401
Beneficial interest redeemed 7,256
Investment adviser (Note 2) 3,549 223,599
------------
Accrued expenses and other liabilities 71,823
------------
Total liabilities 295,422
------------
Net Assets: Net assets $ 23,503,549
============
Net Assets Class A Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized $ 31,008
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 146,986
Class C Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 31,722
Class D Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 17,863
Paid-in capital in excess of par 23,399,760
Accumulated realized capital losses on investments--net (Note 5) (2,319,317)
Accumulated distributions in excess of realized capital gains on
investments--net (Note 1f) (6,546)
Unrealized appreciation on investments--net 2,202,073
------------
Net assets $ 23,503,549
============
Net Asset Value: Class A--Based on net assets of $3,201,698 and 310,075 shares of
beneficial interest outstanding $ 10.33
============
Class B--Based on net assets of $15,178,908 and 1,469,858 shares of
beneficial interest outstanding $ 10.33
============
Class C--Based on net assets of $3,278,336 and 317,217 shares of
beneficial interest outstanding $ 10.33
============
Class D--Based on net assets of $1,844,607 and 178,631 shares of
beneficial interest outstanding $ 10.33
============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Oregon Municipal Bond Fund
January 31, 1999
<TABLE>
FINANCIAL INFORMATION (continued)
<CAPTION>
Statement of Operations
For the Six Months Ended
January 31, 1999
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 602,806
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 61,770
Account maintenance and distribution fees--Class B (Note 2) 37,333
Accounting services (Note 2) 33,553
Professional fees 31,592
Printing and shareholder reports 22,552
Account maintenance and distribution fees--Class C (Note 2) 8,804
Registration fees (Note 1e) 3,728
Transfer agent fees--Class B (Note 2) 3,577
Pricing fees 1,925
Custodian fees 908
Account maintenance fees--Class D (Note 2) 798
Transfer agent fees--Class C (Note 2) 669
Trustees' fees and expenses 634
Transfer agent fees--Class A (Note 2) 580
Transfer agent fees--Class D (Note 2) 309
Amortization of organization expenses (Note 1e) 268
Other 1,310
------------
Total expenses before reimbursement 210,310
Reimbursement of expenses (Note 2) (39,308)
------------
Total expenses after reimbursement 171,002
------------
Investment income--net 431,804
------------
Realized & Realized gain on investments--net 207,614
Unrealized Gain on Change in unrealized appreciation on investments--net 250,727
Investments--Net ------------
(Notes 1b, 1d & 3): Net Increase in Net Assets Resulting from Operations $ 890,145
============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Oregon Municipal Bond Fund
January 31, 1999
<TABLE>
FINANCIAL INFORMATION (continued)
<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: 1999 1998
<S> <S> <C> <C>
Operations: Investment income--net $ 431,804 $ 930,982
Realized gain on investments--net 207,614 156,351
Change in unrealized appreciation on investments--net 250,727 108,099
------------ ------------
Net increase in net assets resulting from operations 890,145 1,195,432
------------ ------------
Dividends & Investment income--net:
Distributions to Class A (64,033) (149,827)
Shareholders Class B (280,870) (666,069)
(Note 1f): Class C (53,713) (86,976)
Class D (33,188) (28,110)
In excess of 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 (431,804) (937,528)
------------ ------------
Beneficial Interest Net increase (decrease) in net assets derived from beneficial
Transactions interest transactions 1,622,163 (2,416,519)
(Note 4): ------------ ------------
Net Assets: Total increase (decrease) in net assets 2,080,504 (2,158,615)
Beginning of period 21,423,045 23,581,660
------------ ------------
End of period $ 23,503,549 $ 21,423,045
============ ============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Oregon Municipal Bond Fund
January 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
Class A
For the
Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended
Jan. 31, For the Year Ended July 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.11 $ 10.00 $ 9.52 $ 9.40 $ 9.41
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .22 .47 .47 .48 .50
Realized and unrealized gain (loss) on
investments--net .22 .11 .48 .12 (.01)
-------- -------- -------- -------- --------
Total from investment operations .44 .58 .95 .60 .49
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.22) (.47) (.47) (.48) (.50)
In excess of realized gain on
investments--net -- --++ -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.22) (.47) (.47) (.48) (.50)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.33 $ 10.11 $ 10.00 $ 9.52 $ 9.40
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 4.37%+++ 5.93% 10.27% 6.52% 5.54%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.10%* .89% .78% .53% .31%
Net Assets: ======== ======== ======== ======== ========
Expenses 1.45%* 1.24% 1.22% 1.17% 1.23%
======== ======== ======== ======== ========
Investment income--net 4.27%* 4.62% 4.88% 5.06% 5.51%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 3,202 $ 3,103 $ 3,232 $ 3,904 $ 4,332
Data: ======== ======== ======== ======== ========
Portfolio turnover 25.08% 36.31% 40.62% 103.61% 142.77%
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Amount is less than $.01 per share.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Oregon Municipal Bond Fund
January 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class B
For the
Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended
Jan. 31, For the Year Ended July 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.11 $ 10.00 $ 9.52 $ 9.40 $ 9.41
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .19 .42 .42 .44 .45
Realized and unrealized gain (loss) on
investments--net .22 .11 .48 .12 (.01)
-------- -------- -------- -------- --------
Total from investment operations .41 .53 .90 .56 .44
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.19) (.42) (.42) (.44) (.45)
In excess of realized gain on
investments--net -- --++ -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.19) (.42) (.42) (.44) (.45)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.33 $ 10.11 $ 10.00 $ 9.52 $ 9.40
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 4.11%+++ 5.39% 9.72% 5.97% 5.00%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.61%* 1.40% 1.29% 1.04% .84%
Net Assets: ======== ======== ======== ======== ========
Expenses 1.96%* 1.75% 1.73% 1.68% 1.75%
======== ======== ======== ======== ========
Investment income--net 3.76%* 4.11% 4.37% 4.55% 4.99%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 15,179 $ 14,965 $ 17,888 $ 21,542 $ 25,861
Data: ======== ======== ======== ======== ========
Portfolio turnover 25.08% 36.31% 40.62% 103.61% 142.77%
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Amount is less than $.01 per share.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Oregon Municipal Bond Fund
January 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class C
For the For the
Six Period
The following per share data and ratios have been derived Months Oct. 21,
from information provided in the financial statements. Ended 1994++ to
Jan. 31, For the Year Ended July 31, July 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.12 $ 10.00 $ 9.53 $ 9.40 $ 9.02
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .19 .41 .41 .43 .34
Realized and unrealized gain on
investments--net .21 .12 .47 .13 .38
-------- -------- -------- -------- --------
Total from investment operations .40 .53 .88 .56 .72
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.19) (.41) (.41) (.43) (.34)
In excess of realized gain on
investments--net -- --+++++ -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.19) (.41) (.41) (.43) (.34)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.33 $ 10.12 $ 10.00 $ 9.53 $ 9.40
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 3.95%+++ 5.39% 9.50% 5.97% 8.19%+++
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.71%* 1.50% 1.39% 1.16% 1.00%*
Net Assets: ======== ======== ======== ======== ========
Expenses 2.06%* 1.85% 1.83% 1.79% 1.88%*
======== ======== ======== ======== ========
Investment income--net 3.66%* 4.01% 4.28% 4.45% 4.68%*
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 3,278 $ 2,549 $ 2,063 $ 1,555 $ 853
Data: ======== ======== ======== ======== ========
Portfolio turnover 25.08% 36.31% 40.62% 103.61% 142.77%
======== ======== ======== ======== ========
<FN>
*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, 1999
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class D
For the For the
Six Period
The following per share data and ratios have been derived Months Oct. 21,
from information provided in the financial statements. Ended 1994++ to
Jan. 31, For the Year Ended July 31, July 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.11 $ 10.00 $ 9.52 $ 9.39 $ 9.02
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .21 .46 .46 .47 .38
Realized and unrealized gain on
investments--net .22 .11 .48 .13 .37
-------- -------- -------- -------- --------
Total from investment operations .43 .57 .94 .60 .75
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.21) (.46) (.46) (.47) (.38)
In excess of realized gain on
investments--net -- --+++++ -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.21) (.46) (.46) (.47) (.38)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.33 $ 10.11 $ 10.00 $ 9.52 $ 9.39
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 4.32%+++ 5.82% 10.17% 6.52% 8.55%+++
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.20%* .99% .90% .63% .51%*
Net Assets: ======== ======== ======== ======== ========
Expenses 1.55%* 1.34% 1.32% 1.28% 1.39%*
======== ======== ======== ======== ========
Investment income--net 4.16%* 4.52% 4.76% 4.97% 5.12%*
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 1,845 $ 806 $ 399 $ 173 $ 188
Data: ======== ======== ======== ======== ========
Portfolio turnover 25.08% 36.31% 40.62% 103.61% 142.77%
======== ======== ======== ======== ========
<FN>
*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, 1999
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's
financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of
management accruals and estimates. 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 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.
* Financial futures contracts--The Fund may purchase or sell
financial 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.
Merrill Lynch Oregon Municipal Bond Fund
January 31, 1999
(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 period not exceeding five years. Prepaid
registration fees are charged to expense as the related shares are
issued.
(f) Dividends and distributions--Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates. Distributions in excess
of realized capital gains are due primarily to differing tax
treatments for market discount.
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 ("MLFD" or "Distributor"), a divison of Princeton Funds
Distributor, Inc. ("PFD") which is 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, 1999, FAM
earned fees of $61,770, of which $39,308 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 Incorporated ("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, 1999, MLFD earned underwriting
discounts and direct commissions 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 $ 726 $3,783
Class D $1,341 $2,125
For the six months ended January 31, 1999, MLPF&S received
contingent deferred sales charges of $7,377 and $1,493 relating to
transactions in Class B and Class C Shares, respectively.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Merrill Lynch Oregon Municipal Bond Fund
January 31, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, PSI, FDS, PFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended January 31, 1999 were $6,813,284 and
$5,461,422, respectively.
Net realized gains for the six months ended January 31, 1999 and net
unrealized gains as of January 31, 1999 were as follows:
Realized Unrealized
Gains Gains
Long-term investments $207,614 $ 2,202,073
-------- -----------
Total $207,614 $ 2,202,073
======== ===========
As of January 31, 1999, net unrealized appreciation for Federal
income tax purposes aggregated $2,202,073, all of which related to
appreciated securities. The aggregate cost of investments at January
31, 1999 for Federal income tax purposes was $21,131,916.
4. Beneficial Interest Transactions:
Net increase (decrease) in net assets derived from beneficial
interest transactions was $1,622,163 and $(2,416,519) for the six
months ended January 31, 1999 and for the year ended July 31, 1998,
respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Six Dollar
Months Ended January 31, 1999 Shares Amount
Shares sold 31,625 $ 325,924
Shares issued to shareholders
in reinvestment of dividends 4,045 41,467
---------- -----------
Total issued 35,670 367,391
Shares redeemed (32,405) (330,582)
---------- -----------
Net increase 3,265 $ 36,809
========== ===========
Class A Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
Shares sold 21,542 $ 216,132
Shares issued to shareholders
in reinvestment of dividends
and distributions 10,465 105,275
---------- -----------
Total issued 32,007 321,407
Shares redeemed (48,474) (489,222)
---------- -----------
Net decrease (16,467) $ (167,815)
========== ===========
Class B Shares for the Six Dollar
Months Ended January 31, 1999 Shares Amount
Shares sold 176,538 $ 1,811,156
Shares issued to shareholders
in reinvestment of dividends 11,012 112,896
---------- -----------
Total issued 187,550 1,924,052
Automatic conversion of shares (74) (759)
Shares redeemed (197,346) (2,022,723)
---------- -----------
Net decrease (9,870) $ (99,430)
========== ===========
Class B Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
Shares sold 243,304 $ 2,448,833
Shares issued to shareholders
in reinvestment of dividends
and distributions 29,269 294,348
---------- -----------
Total issued 272,573 2,743,181
Automatic conversion of shares (9,123) (91,207)
Shares redeemed (573,060) (5,762,259)
---------- -----------
Net decrease (309,610) $(3,110,285)
========== ===========
Class C Shares for the Six Dollar
Months Ended January 31, 1999 Shares Amount
Shares sold 90,277 $ 928,176
Shares issued to shareholders
in reinvestment of dividends 3,322 34,096
---------- -----------
Total issued 93,599 962,272
Shares redeemed (28,205) (288,808)
---------- -----------
Net increase 65,394 $ 673,464
========== ===========
Merrill Lynch Oregon Municipal Bond Fund
January 31, 1999
Class C Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
Shares sold 84,837 $ 854,906
Shares issued to shareholders
in reinvestment of dividends
and distributions 6,430 64,766
---------- -----------
Total issued 91,267 919,672
Shares redeemed (45,627) (455,409)
---------- -----------
Net increase 45,640 $ 464,263
========== ===========
Class D Shares for the Six Dollar
Months Ended January 31, 1999 Shares Amount
Shares sold 107,767 $ 1,101,915
Automatic conversion of shares 74 759
Shares issued to shareholders
in reinvestment of dividends 1,003 10,294
---------- -----------
Total issued 108,844 1,112,968
Shares redeemed (9,946) (101,648)
---------- -----------
Net increase 98,898 $ 1,011,320
========== ===========
Class D Shares for the Year Dollar
Ended July 31, 1998 Shares Amount
Shares sold 34,763 $ 347,728
Automatic conversion of shares 9,124 91,207
Shares issued to shareholders
in reinvestment of dividends
and distributions 1,199 12,078
---------- -----------
Total issued 45,086 451,013
Shares redeemed (5,310) (53,695)
---------- -----------
Net increase 39,776 $ 397,318
========== ===========
5. Capital Loss Carryforward:
At July 31, 1998, the Fund had a net capital loss
carryforward of approximately $2,321,000, of which
$1,088,000 expires in 2003 and $1,233,000 expires
in 2004. This amount will be available to offset
like amounts of any future taxable gains.
Merrill Lynch Oregon Municipal Bond Fund
January 31, 1999
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
Kenneth A. Jacob, Vice President
Theodore R. Jaeckel Jr., Vice President
Donald C. Burke, Vice President and Treasurer
Robert E. Putney, III, Secretary
Gerald M. Richard, Treasurer of Merrill Lynch Oregon Municipal Bond
Fund has recently retired. His colleagues at Merrill Lynch Asset
Management, L.P. join the Fund's Board of Trustees in wishing Mr.
Richard well in his retirement.
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
