MERRILL LYNCH
OREGON
MUNICIPAL
BOND FUND
FUND LOGO
Annual Report
July 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
July 31, 1999
TO OUR SHAREHOLDERS
During the six months ended July 31, 1999, long-term bond yields
rose significantly. Steady US economic growth combined with
improvement in foreign economies, most notably Japan and Brazil, as
well as an inflation scare in early May put upward pressure on bond
yields throughout the period. Continued strong US employment growth,
particularly the decline in the US unemployment rate to 4.2% in
early June, was among the reasons the Federal Reserve Board cited
for raising short-term interest rates in late June. US Treasury bond
yields reacted by climbing above 6.15% by late June before improving
somewhat to 6.10% by July 31, 1999. During the last six months,
yields on long-term US Treasury securities increased approximately
100 basis points (1.00%).
Long-term tax-exempt bond yields also rose during the last six
months. Until early May, the municipal bond market had been able to
withstand much of the upward pressure on bond yields. However,
investor concerns regarding ongoing US economic strength and the
fear of additional moves by the Federal Reserve Board eventually
pushed municipal bond yields higher throughout June and July. During
the period, yields on long-term tax-exempt revenue bonds rose just
under 50 basis points to 5.65%, as measured by the Bond Buyer
Revenue Bond Index.
The ability of the tax-exempt bond market to withstand much of the
recent upward pressure on long-term fixed-income bond yields
reflects the continued strong technical position the municipal bond
market has enjoyed in recent quarters. During the last six months,
more than $120 billion in long-term municipal bonds was
underwritten, a decrease of more than 20% compared to the same
period a year ago. During the past three months, more than $60
billion in municipal bonds was underwritten. This quarterly issuance
represents a decline of nearly 25% compared to the same three-month
period in 1998.
Recently, the municipal supply position deteriorated even further.
Total issuance in July 1999 of $16.5 billion was more than 30% lower
than July 1998 levels. Additionally, this past June and July,
investors received more than $40 billion in coupon income and
proceeds from bond maturities and early bond redemptions. These
proceeds have generated significant retail investor interest, easily
absorbing the recent diminished supply. This very favorable
supply/demand position has allowed the tax-exempt bond market to
outperform its taxable counterpart in recent months.
However, the recent relative outperformance of the municipal bond
market has somewhat reduced the very attractive tax-exempt bond
yield ratios that were available at the end of 1998. In December
1998, long-term, uninsured municipal bond yields were higher than
those of their taxable counterparts. Historically, long-term tax-
exempt bond yields have been approximately 82%-85% of long-term US
Treasury bond yields. Municipal bond yields rose at a lower rate in
recent months than US Treasury bond yields, causing the yield ratio
to decline. At July 31, 1999, long-term municipal bond yields were
approximately 92% of their taxable counterparts. Current ratios,
while lower than those available at the end of 1998, still represent
historically attractive levels. We expect the strong technical
position the municipal bond market enjoyed thus far in 1999 to
continue for the remainder of 1999. Consequently, there appears to
be little reason for the tax-exempt bond market to underperform the
taxable US Treasury bond market. This suggests that the present bond
yield ratio is likely to be stable in the coming months and a return
to a ratio in excess of 100% of taxable Treasury securities is
improbable.
Looking ahead, it appears to us that long-term municipal bond yields
will trade in a relatively tight range near current levels. Strong
US economic performance is being balanced by nearly negligible
inflation readings, as well as improvements in productivity in both
manufacturing and service industries. Future moves by the Federal
Reserve Board have largely been discounted by bond markets and are
to a great extent reflected in present bond yields.
Any improvement in bond prices is likely to be contingent upon
weakening in both US employment growth and consumer spending. The
100 basis point rise in US Treasury bond yields seen thus far this
year is likely to negatively affect US economic growth. The US
housing market will be among the first sectors likely to be
affected, as some declines already have been evidenced because of
higher mortgage rates. We believe it is also unrealistic to expect
double-digit returns in US equity markets to continue indefinitely.
Much of the US consumer's wealth is tied to recent stock market
appreciation. Any slowing in these incredible growth rates is likely
to reduce consumer spending. We believe that these factors suggest
that the worst of the recent increase in bond yields has passed and
stable, if not slightly improving, bond prices may be expected.
Merrill Lynch Oregon Municipal Bond Fund
July 31, 1999
Fiscal Year in Review
Given the considerable volatility exhibited by long-term interest
rates during the past year, we made several changes in portfolio
strategy in order to guide the Fund through a difficult investment
environment. Initially, the worldwide economic and financial market
turbulence prompted a more constructive outlook on our part as
expectations of sharp declines in long-term interest rates were soon
fulfilled. As a result, the Fund benefited from our efforts to
position the portfolio more aggressively during this period.
However, soon thereafter, interest rates began to rise as evidence
of renewed financial market stability slowly mounted. Signs of
continued strength in the domestic economy added to investor
concerns, signaling a shift in investor psychology. Our efforts
turned to repositioning the portfolio more defensively as a means to
preserve net asset values. We increased cash reserves temporarily
while we accomplished modest restructuring of the Fund's holdings.
While these efforts helped to insulate the Fund to some degree, the
full impact of the bond market's decline was unavoidable.
Technical limitations inherent within the municipal market and the
Oregon market in particular further hindered our efforts to insulate
the portfolio. New-issue tax-exempt volume in Oregon for the year
increased 40%, far more than the 10% decline in national volume.
This increase in issuance allowed for some opportunities to
restructure the portfolio in a manner consistent with our changing
investment outlook.
Finally, two other investment themes affected the portfolio during
the year. First, quality spreads (that is, yield spreads between
higher-rated and lower-rated credits) remained very narrow for most
of the year. In our opinion, investors were not being adequately
compensated for the assumption of added credit risk. Consequently,
we sought to upgrade the average quality of the portfolio. Second,
with many of the Fund's holdings facing early redemption during the
next few years, the current rise in long-term interest rates, in our
opinion, presented an excellent opportunity to sell these holdings
and reinvest the proceeds in securities possessing more attractive
redemption features. We sought to extend the portfolio's average
call protection at an opportune time. Furthermore, we believe that
our proactive approach toward managing call protection should help
to insulate the Fund from any untimely redemptions, which we believe
will help sustain shareholder income for the near term.
As a result of our efforts this year, the Fund generated total
returns for the 12-month period ended July 31, 1999 that modestly
underperformed the average return for all Oregon tax-exempt funds,
as measured by Lipper Analytical Services, Inc. However, the Fund
did produce 12-month yields that exceeded the industry average.
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,
(Terry K. Glenn)
Terry K. Glenn
President
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(Theodore R. Jaeckel Jr.)
Theodore R. Jaeckel Jr.
Vice President and Portfolio Manager
September 9, 1999
Merrill Lynch Oregon Municipal Bond Fund
July 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 7/31/99
<S> <C> <C> <C> <C>
ML Oregon Municipal Bond Fund Class A Shares +1.33% -2.42% +31.57% 3.76%
ML Oregon Municipal Bond Fund Class B Shares +0.82 -2.55 +27.67 3.41
ML Oregon Municipal Bond Fund Class C Shares +0.63 -2.66 +33.13 3.31
ML Oregon Municipal Bond Fund Class D Shares +1.23 -2.45 +36.47 3.66
<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 dates are from 8/27/93 for Class A & Class B Shares
and from 10/21/94 for Class C & Class D Shares.
</TABLE>
Merrill Lynch Oregon Municipal Bond Fund
July 31, 1999
PERFORMANCE DATA (continued)
Total Return Based on a $10,000 Investment--
Class A Shares and Class B Shares
A line graph depicting the growth of an investment in the Fund's
Class A Shares and Class B Shares compared to growth of an
investment in the Lehman Brothers Municipal Bond Index. Beginning
and ending values are:
8/27/93** 7/99
ML Oregon Municipal Bond Fund++--
Class A Shares* $ 9,600 $12,630
ML Oregon Municipal Bond Fund++--
Class B Shares* $10,000 $12,767
Lehman Brothers Municipal Bond
Index++++ $10,000 $13,796
Total Return Based on a $10,000 Investment--
Class C Shares and Class D Shares
A line graph depicting the growth of an investment in the Fund's
Class C Shares and Class D Shares compared to growth of an
investment in the Lehman Brothers Municipal Bond Index. Beginning
and ending values are:
10/21/94** 7/99
ML Oregon Municipal Bond Fund++--
Class C Shares* $10,000 $13,313
ML Oregon Municipal Bond Fund++--
Class D Shares* $ 9,600 $13,100
Lehman Brothers Municipal Bond
Index++++ $10,000 $14,235
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of operations.
++ML Oregon Municipal Bond Fund invests primarily in long-term
investment-grade obligations issued by or on behalf of the state of
Oregon, its political subdivisions, agencies and instrumentalities
and obligations of other qualifying issuers.
++++This unmanaged Index consists of long-term revenue bonds,
prerefunded bonds, general obligation bonds and insured bonds. The
starting date for the Index in the Class A & Class B Shares' graph
is from 8/31/93 and in the Class C & Class D Shares' graph is
from 10/31/94.
Past performance is not predictive of future performance.
Merrill Lynch Oregon Municipal Bond Fund
July 31, 1999
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/99 +1.18% -2.87%
Five Years Ended 6/30/99 +6.28 +5.42
Inception (8/27/93)
through 6/30/99 +4.73 +4.00
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/99 +0.67% -3.21%
Five Years Ended 6/30/99 +5.74 +5.74
Inception (8/27/93)
through 6/30/99 +4.20 +4.20
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 6/30/99 +0.57% -0.40%
Inception (10/21/94)
through 6/30/99 +6.22 +6.22
[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 6/30/99 +1.08% -2.97%
Inception (10/21/94)
through 6/30/99 +6.75 +5.82
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Merrill Lynch Oregon Municipal Bond Fund
July 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 many 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
RIB Residual Interest Bonds
S/F Single-Family
STRIPES Short-Term Inverse Payment Exempt Securities
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--81.0%
<S> <S> <C> <S> <C>
AAA Aaa $ 500 Columbia County, Oregon, School District No. 502, GO, 5.05%** due 6/01/2018 (e) $ 183
BBB+ NR* 900 Klamath Falls, Oregon, Intercommunity Hospital Authority Revenue Bonds
(Gross-Merle West Medical Center Project), 7.10% due 9/01/2024 978
NR* Aa2 500 Lane and Douglas Counties, Oregon, School District No. 97-J, GO, 5.40% due 6/15/2019 499
AAA Aaa 500 Lincoln County, Oregon, School District, GO, 5.25% due 6/15/2012 (e) 508
AAA Aaa 870 Marion County, Oregon, Union High School District No. 007J (Silverton), GO, 7% due
6/01/2004 (c)(g) 976
AAA Aaa 850 Morrow County, Oregon, School District No. 001, GO, 6% due 6/01/2007 (b) 922
NR* Aa3 500 Multnomah County, Oregon, COP, Series A, 4.75% due 8/01/2017 460
AAA Aaa 1,000 Northwest Regional Education Service District, Oregon, GO, 5% due 6/15/2019 (b) 961
AAA Aaa 3,220 Oregon Health Sciences University, Revenue Refunding Bonds, Capital Appreciation,
Series A, 5.79%** due 7/01/2021 (b) 986
AAA Aaa 500 Oregon State Department of Administrative Services, COP, Refunding, Series A,
4.75% due 5/01/2015 (d) 468
NR* Baa2 500 Oregon State Economic Development Revenue Refunding Bonds (Georgia Pacific Corp.
Project), AMT, Series 183, 5.70% due 12/01/2025 487
NR* VMIG1++ 200 Oregon State Health, Housing, Educational and Cultural Facilities Authority
Revenue Bonds (Guide Dogs for the Blind), VRDN, Series A, 3.15% due 7/01/2025 (a) 200
A+ NR* 500 Oregon State Health, Housing, Educational and Cultural Facilities Authority, Revenue
Refunding Bonds (Reed College Project), Series A, 5.375% due 7/01/2025 491
Oregon State Housing and Community Services Department, Mortgage Revenue Refunding
Bonds (S/F Mortgage Program), Series A:
NR* Aa2 440 6.40% due 7/01/2018 461
NR* Aa2 1,000 AMT, 6.20% due 7/01/2027 1,045
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) 1,116
Port Umpqua, Oregon, PCR, Refunding (International Paper Co. Projects):
BBB+ A3 500 Series A, 5.05% due 6/01/2009 (h) 499
BBB+ A3 500 Series B, 5.20% due 6/01/2011 496
NR* NR* 1,500 Portland, Oregon, Sewer System Revenue Refunding Bonds, RIB, Series 134,
6.462% due 6/01/2014 (f) 1,438
</TABLE>
Merrill Lynch Oregon Municipal Bond Fund
July 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>
AA- NR* $1,000 Salem, Oregon, Hospital Facility Authority Revenue Bonds (Salem Hospital),
5.25% due 8/15/2014 $ 991
AAA Aaa 900 Tillamook County, Oregon, GO, 6.25% due 1/01/2005 (e)(g) 986
AA+ Aa2 500 Tri-County Metropolitan Transportation District, Oregon, GO, Refunding
(Light Rail Extension), Series A, 5.25% due 7/01/2012 504
AA+ NR* 500 Tri-County Metropolitan Transportation District, Oregon, Revenue Bonds,
Series One, 5.65% due 6/01/2029 494
Puerto Rico--18.4%
AAA Aaa 2,720 Puerto Rico Commonwealth, GO, Refunding, 7% due 7/01/2010 (d) 3,206
AAA Aaa 400 Puerto Rico Electric Power Authority, Power Revenue Bonds, STRIPES,
Series T, 7.742% due 7/01/2005 (c)(f) 453
Total Investments (Cost--$18,989)--99.4% 19,808
Variation Margin on Financial Futures Contracts***--0.0% 9
Other Assets Less Liabilities--0.6% 110
-------
Net Assets--100.0% $19,927
=======
<FN>
(a)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at July 31, 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 July 31, 1999.
(g)Prerefunded.
(h)All or a portion of security held as collateral in connection
with open financial futures contracts.
*Not Rated.
**Represents a zero coupon bond; the interest rate shown is the
effective yield at the time of the purchase by the Fund.
***Financial futures contracts sold as of July 31, 1999 were as
follows:
(in Thousands)
Value
Number of Expiration (Notes
Contracts Issue Date 1a & 1b)
26 U S Treasury Bonds September 1999 $2,989
------
Total Financial Futures Contracts Sold
(Total Contract Price--$3,036) $2,989
======
++Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Oregon Municipal Bond Fund
July 31, 1999
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of July 31, 1999
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$18,988,911) (Note 1a) $ 19,807,678
Receivables:
Interest $ 173,866
Securities sold 95,834
Variation margin (Note 1b) 8,938 278,638
------------
Prepaid registration fees and other assets (Note 1e) 2,910
------------
Total assets 20,089,226
------------
Liabilities: Payables:
Beneficial interest redeemed 23,989
Dividends to shareholders (Note 1f) 12,365
Distributor (Note 2) 7,190
Investment adviser (Note 2) 3,560 47,104
------------
Accrued expenses and other liabilities 115,498
------------
Total liabilities 162,602
------------
Net Assets: Net assets $ 19,926,624
============
Net Assets Class A Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized $ 30,882
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 126,528
Class C Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 27,530
Class D Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 18,028
Paid-in capital in excess of par 20,948,888
Accumulated realized capital losses on investments--net (Note 5) (2,091,124)
Unrealized appreciation on investments--net 865,892
------------
Net assets $ 19,926,624
============
Net Asset Value: Class A--Based on net assets of $3,031,310 and 308,822 shares of
beneficial interest outstanding $ 9.82
============
Class B--Based on net assets of $12,421,130 and 1,265,278 shares of
beneficial interest outstanding $ 9.82
============
Class C--Based on net assets of $2,704,504 and 275,298 shares of
beneficial interest outstanding $ 9.82
============
Class D--Based on net assets of $1,769,680 and 180,279 shares of
beneficial interest outstanding $ 9.82
============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Oregon Municipal Bond Fund
July 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Year Ended
July 31, 1999
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 1,199,353
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 121,874
Professional fees 73,753
Printing and shareholder reports 72,933
Account maintenance and distribution fees--Class B (Note 2) 71,727
Accounting services (Note 2) 45,520
Account maintenance and distribution fees--Class C (Note 2) 18,156
Transfer agent fees--Class B (Note 2) 6,390
Pricing fees 3,997
Registration fees (Note 1e) 2,378
Custodian fees 2,372
Account maintenance fees--Class D (Note 2) 1,704
Trustees' fees and expenses 1,296
Transfer agent fees--Class C (Note 2) 1,286
Transfer agent fees--Class A (Note 2) 1,094
Transfer agent fees--Class D (Note 2) 607
Amortization of organization expenses (Note 1e) 553
Other 1,909
Total expenses before reimbursement 427,549
Reimbursement of expenses (Note 2) (77,556)
------------
Total expenses after reimbursement 349,993
------------
Investment income--net 849,360
------------
Realized & Realized gain on investments--net 442,353
Unrealized Change in unrealized appreciation on investments--net (1,085,454)
Gain (Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 206,259
(Notes 1b, 1d & 3): ============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Oregon Municipal Bond Fund
July 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended July 31,
Increase (Decrease) in Net Assets: 1999 1998
<S> <S> <C> <C>
Operations: Investment income--net $ 849,360 $ 930,982
Realized gain on investments--net 442,353 156,351
Change in unrealized appreciation on investments--net (1,085,454) 108,099
------------ ------------
Net increase in net assets resulting from operations 206,259 1,195,432
------------ ------------
Dividends & Investment income--net:
Distributions to Class A (131,116) (149,827)
Shareholders Class B (537,290) (666,069)
(Note 1f): Class C (110,267) (86,976)
Class D (70,687) (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 (849,360) (937,528)
------------ ------------
Beneficial Net decrease in net assets derived from beneficial
Interest interest transactions (853,320) (2,416,519)
Transactions ------------ ------------
(Note 4):
Net Assets: Total decrease in net assets (1,496,421) (2,158,615)
Beginning of year 21,423,045 23,581,660
------------ ------------
End of year $ 19,926,624 $ 21,423,045
============ =============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Oregon Municipal Bond Fund
July 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. Class A
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 year $ 10.11 $ 10.00 $ 9.52 $ 9.40 $ 9.41
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .43 .47 .47 .48 .50
Realized and unrealized gain (loss) on
investments--net (.29) .11 .48 .12 (.01)
-------- -------- -------- -------- --------
Total from investment operations .14 .58 .95 .60 .49
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.43) (.47) (.47) (.48) (.50)
In excess of realized gain on
investments--net -- --++ -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.43) (.47) (.47) (.48) (.50)
-------- -------- -------- -------- --------
Net asset value, end of year $ 9.82 $ 10.11 $ 10.00 $ 9.52 $ 9.40
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 1.33% 5.93% 10.27% 6.52% 5.54%
Return:* ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.16% .89% .78% .53% .31%
Net Assets: ======== ======== ======== ======== ========
Expenses 1.51% 1.24% 1.22% 1.17% 1.23%
======== ======== ======== ======== ========
Investment income--net 4.25% 4.62% 4.88% 5.06% 5.51%
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands) $ 3,031 $ 3,103 $ 3,232 $ 3,904 $ 4,332
Data: ======== ======== ======== ======== ========
Portfolio turnover 60.26% 36.31% 40.62% 103.61% 142.77%
======== ======== ======== ======== ========
<FN>
*Total investment returns exclude the effects of sales charges.
++Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Oregon Municipal Bond Fund
July 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. Class B
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 year $ 10.11 $ 10.00 $ 9.52 $ 9.40 $ 9.41
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .38 .42 .42 .44 .45
Realized and unrealized gain (loss) on
investments--net (.29) .11 .48 .12 (.01)
-------- -------- -------- -------- --------
Total from investment operations .09 .53 .90 .56 .44
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.38) (.42) (.42) (.44) (.45)
In excess of realized gain on
investments--net -- --++ -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.38) (.42) (.42) (.44) (.45)
-------- -------- -------- -------- --------
Net asset value, end of year $ 9.82 $ 10.11 $ 10.00 $ 9.52 $ 9.40
======== ======== ======== ======== ========
Total Investment Based on net asset value per share .82% 5.39% 9.72% 5.97% 5.00%
Return:* ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.67% 1.40% 1.29% 1.04% .84%
Net Assets: ======== ======== ======== ======== ========
Expenses 2.02% 1.75% 1.73% 1.68% 1.75%
======== ======== ======== ======== ========
Investment income--net 3.75% 4.11% 4.37% 4.55% 4.99%
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands) $ 12,421 $ 14,965 $ 17,888 $ 21,542 $ 25,861
Data: ======== ======== ======== ======== ========
Portfolio turnover 60.26% 36.31% 40.62% 103.61% 142.77%
======== ======== ======== ======== ========
<FN>
*Total investment returns exclude the effects of sales charges.
++Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Oregon Municipal Bond Fund
July 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class C
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. Oct. 21, 1994++
For the Year Ended July 31, to 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 .37 .41 .41 .43 .34
Realized and unrealized gain (loss) on
investments--net (.30) .12 .47 .13 .38
-------- -------- -------- -------- --------
Total from investment operations .07 .53 .88 .56 .72
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.37) (.41) (.41) (.43) (.34)
In excess of realized gain on
investments--net -- --++++ -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.37) (.41) (.41) (.43) (.34)
-------- -------- -------- -------- --------
Net asset value, end of period $ 9.82 $ 10.12 $ 10.00 $ 9.53 $ 9.40
======== ======== ======== ======== ========
Total Investment Based on net asset value per share .63% 5.39% 9.50% 5.97% 8.19%+++
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.77% 1.50% 1.39% 1.16% 1.00%*
Net Assets: ======== ======== ======== ======== ========
Expenses 2.12% 1.85% 1.83% 1.79% 1.88%*
======== ======== ======== ======== ========
Investment income--net 3.64% 4.01% 4.28% 4.45% 4.68%*
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 2,705 $ 2,549 $ 2,063 $ 1,555 $ 853
Data: ======== ======== ======== ======== ========
Portfolio turnover 60.26% 36.31% 40.62% 103.61% 142.77%
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Commencement of operations.
++++Amount is less than $.01 per share.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class D
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. Oct. 21, 1994++
For the Year Ended July 31, to 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 .42 .46 .46 .47 .38
Realized and unrealized gain (loss) on
investments--net (.29) .11 .48 .13 .37
-------- -------- -------- -------- --------
Total from investment operations .13 .57 .94 .60 .75
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.42) (.46) (.46) (.47) (.38)
In excess of realized gain on
investments--net -- --++++ -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.42) (.46) (.46) (.47) (.38)
-------- -------- -------- -------- --------
Net asset value, end of period $ 9.82 $ 10.11 $ 10.00 $ 9.52 $ 9.39
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 1.23% 5.82% 10.17% 6.52% 8.55%+++
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.27% .99% .90% .63% .51%*
Net Assets: ======== ======== ======== ======== ========
Expenses 1.62% 1.34% 1.32% 1.28% 1.39%*
======== ======== ======== ======== ========
Investment income--net 4.15% 4.52% 4.76% 4.97% 5.12%*
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 1,770 $ 806 $ 399 $ 173 $ 188
Data: ======== ======== ======== ======== ========
Portfolio turnover 60.26% 36.31% 40.62% 103.61% 142.77%
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Commencement of operations.
++++Amount is less than $.01 per share.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Oregon Municipal Bond Fund
July 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. 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.
(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.
Merrill Lynch Oregon Municipal Bond Fund
July 31, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
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 the "Distributor"), a division 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: .55%
of the Fund's average daily net assets not exceeding $500 million;
.525% of average daily net assets in excess of $500 million but not
exceeding $1 billion; and .50% of average daily net assets in excess
of $1 billion. For the year ended July 31, 1999, FAM earned fees of
$121,874, of which $77,556 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 Distribution
Maintenance Fee Fee
Class B .25% .25%
Class C .25% .35%
Class D .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 year ended July 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 $ 725 $3,783
Class D $1,455 $2,125
For the year ended July 31, 1999, MLPF&S received contingent
deferred sales charges of $32,920 and $2,969 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.
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 year ended July 31, 1999 were $12,793,599 and $13,040,453,
respectively.
Net realized gains for the year ended July 31, 1999 and net
unrealized gains as of July 31, 1999 were as follows:
Realized Unrealized
Gains Gains
Long-term investments $ 442,353 $ 818,767
Financial futures contracts -- 47,125
---------- ----------
Total $ 442,353 $ 865,892
========== ==========
As of July 31, 1999, net unrealized appreciation for Federal income
tax purposes aggregated $818,767, of which $1,070,471 related to
appreciated securities and $251,704 related to depreciated
securities. The aggregate cost of investments at July 31, 1999 for
Federal income tax purposes was $18,988,911.
Merrill Lynch Oregon Municipal Bond Fund
July 31, 1999
Interest Transactions:
Net decrease in net assets derived from beneficial interest
transactions was $853,320 and $2,416,519 for the years ended July
31, 1999 and July 31, 1998, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Year Dollar
Ended July 31, 1999 Shares Amount
Shares sold 48,530 $ 498,190
Shares issued to shareholders
in reinvestment of dividends 8,458 85,918
---------- -----------
Total issued 56,988 584,108
Shares redeemed (54,976) (557,027)
---------- -----------
Net increase 2,012 $ 27,081
========== ===========
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 Year Dollar
Ended July 31, 1999 Shares Amount
Shares sold 247,050 $ 2,528,521
Shares issued to shareholders
in reinvestment of dividends 20,295 206,486
---------- -----------
Total issued 267,345 2,735,007
Automatic conversion of shares (2,706) (27,775)
Shares redeemed (479,089) (4,873,473)
---------- -----------
Net decrease (214,450) $(2,166,241)
========== ===========
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 Year Dollar
Ended July 31, 1999 Shares Amount
Shares sold 115,073 $ 1,177,617
Shares issued to shareholders
in reinvestment of dividends 6,629 67,435
---------- -----------
Total issued 121,702 1,245,052
Shares redeemed (98,227) (987,740)
---------- -----------
Net increase 23,475 $ 257,312
========== ===========
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 Year Dollar
Ended July 31, 1999 Shares Amount
Shares sold 108,087 $ 1,105,169
Automatic conversion of shares 2,706 27,775
Shares issued to shareholders
in reinvestment of dividends 2,096 21,304
---------- -----------
Total issued 112,889 1,154,248
Shares redeemed (12,343) (125,720)
---------- -----------
Net increase 100,546 $ 1,028,528
========== ===========
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, 1999, the Fund had a net capital loss carryforward of
approximately $1,912,000, of which $679,000 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
July 31, 1999
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
Merrill Lynch Oregon Municipal Bond Fund of
Merrill Lynch Multi-State Municipal Series Trust:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of Merrill Lynch
Oregon Municipal Bond Fund of Merrill Lynch Multi-State Municipal
Series Trust as of July 31, 1999, the related statements of
operations for the year then ended and changes in net assets for
each of the years in the two-year period then ended, and the
financial highlights for each of the years in the five-year period
then ended. These financial statements and the financial highlights
are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at July 31,
1999 by correspondence with the custodian and broker. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Merrill Lynch Oregon Municipal Bond Fund of Merrill Lynch Multi-
State Municipal Series Trust as of July 31, 1999, the results of its
operations, the changes in its net assets, and the financial
highlights for the respective stated periods in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
September 10, 1999
</AUDIT-REPORT>
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid monthly by
Merrill Lynch Oregon Municipal Bond Fund during its taxable year
ended July 31, 1999 qualify as tax-exempt interest dividends for
Federal income tax purposes.
Additionally, there were no capital gains distributions paid by the
Fund during the year.
Please retain this information for your records.
Merrill Lynch Oregon Municipal Bond Fund
July 31, 1999
OFFICERS AND TRUSTEES
Terry K. Glenn, President and Trustee
James H. Bodurtha, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Arthur Zeikel, Trustee
Vincent R. Giordano, Senior Vice President
Kenneth A. Jacob, Vice President
Theodore R. Jaeckel Jr., Vice President
Donald C. Burke, Vice President and Treasurer
Alice A. Pellegrino, Secretary
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
