Exhibit 17l
March 21, 2001
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Merrill Lynch Oregon Municipal Bond Fund
Gentlemen:
Enclosed herewith pursuant of Rule 30b2-1 of the Investment Company Act of
1940 the Report to the Shareholder for the period ended January 31, 2001,
submitted on behalf of the above-noted Fund.
Sincerely,
(Carol Singer)
Carol Singer
Pellegrini and Associates
Third Party Filer
Filing on behalf of Merrill Lynch Asset Management
(BULL LOGO)
Merrill Lynch Investment Managers
Semi-Annual Report
January 31, 2001
Merrill Lynch
Oregon Municipal
Bond Fund
www.mlim.ml.com
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, 2001
TO OUR SHAREHOLDERS
During the six months ended January 31, 2001, long-term fixed-income
bond yields generally declined. The strength seen in the US economy
in 1999 and early 2000 clearly has moderated in recent months. After
growing at approximately 5% in the first half of 2000, US gross
domestic product (GDP) declined to 2.2% during the third quarter of
2000. An initial estimate of fourth quarter 2000 GDP growth was
recently released at 1.4%. Additionally, over the past six months,
inflationary pressures have remained well contained, largely in the
2%--3% range. By early September, US Treasury bond yields had
declined more than 20 basis points (0.20%) to 5.65% as a result of
moderating economic growth and low inflation.
However, rising oil and natural gas prices, rekindled investors'
inflationary fears, and US Treasury bond yields quickly rose to
nearly 6% at the end of September 2000. During October and into mid-
November, long-term bond yields fluctuated in response to declining
commodity prices and the considerable uncertainty surrounding the
presidential election. In December 2000, significant declines in US
equity markets, especially the NASDAQ, as well as another series of
weak economic indicators combined to reestablish the decline in long-
term US Treasury bond yields. By mid-December, the Federal Reserve
Board announced that current economic conditions warranted the
cessation of the series of short-term interest rate increases they
had initiated in February 2000. Given the favorable economic
environment and, at least, a neutral Federal Reserve Board,
investors were free again to focus upon the ongoing US Treasury debt
reduction program and forecasts of sizeable Federal budgetary
surpluses going forward. Many analysts and investors concluded that
there would be a significant future shortage of longer maturing US
Treasury securities. These factors helped push US Treasury bond
yields lower. By the end of December, US Treasury bond yields
declined to 5.45%, their lowest monthly closing level in almost two
years.
Citing declining consumer confidence and weakening industrial
production and retail sales growth, the Federal Reserve Board
lowered short-term interest rates by 50 basis points twice during
January 2001. This action triggered a significant rebound in many US
equity indexes, reducing the appeal of many US fixed-income
securities. Additionally, many investors sold US Treasury bonds to
realize recent profits believing that the Federal Reserve Board's
actions in January 2001, as well as those anticipated in the near
future, would quickly restore US economic growth to earlier levels.
By the end of the six-month period ended January 31, 2001, US
Treasury bond yields declined overall by nearly 30 basis points to
close the period at 5.50%.
Long-term tax-exempt bonds also responded well to the positive
economic environment that developed during the last six months.
While municipal bond yields followed a downward pattern similar to
that of US Treasury bonds, tax-exempt bond price volatility was
significantly reduced. Municipal bond yields traded in a relatively
narrow range, generally declining steadily throughout the last six
months. Overall investor demand for municipal bonds has remained
very positive, allowing tax-exempt bond yields, as measured by the
Bond Buyer Revenue Bond Index, to decline more than 40 basis points
to end the period at 5.43%, their lowest monthly closing level in
over 18 months.
New long-term tax-exempt issuance has continued to decline on an
annual basis, although declines in bond yields have triggered a
recent increase in municipal underwritings. Most of this recent
increase in tax-exempt issuance was underwritten in January 2001.
Lower bond yields were responsible for the significant increase in
refunding activity. Local and state issuers used the recent period
of lower bond yields as an opportunity to refinance outstanding,
higher-couponed debt issues at lower rates. Historically, January
monthly underwritings are among the lowest monthly issuance of the
year. Despite the surge in January issuance, long-term tax-exempt
bond yields were still able to decline, underscoring the ongoing
positive technical position the municipal market has enjoyed in
recent quarters.
The reduction in annual issuance has helped provide much of the
technical support within the tax-exempt bond market. The demand for
municipal bonds came from a number of non-traditional and
conventional sources. Fortunately, the combination of reduced annual
bond issuance and ongoing demand from non-traditional sources has
been able to more than offset the decline in demand from tax-exempt
mutual funds. This favorable balance has fostered the significant
decline in municipal bond yields seen in recent months.
Merrill Lynch Oregon Municipal Bond Fund
January 31, 2001
The outlook for the tax-exempt bond market in 2001 appears quite
favorable. The steeply positive yield curve and relatively high
credit quality that the municipal bond market offers should continue
to attract retail and institutional investors seeking both tax-
exempt income and a ready substitute for relatively scarce US
Government securities. Strong state and local governmental financial
conditions also suggest that issuance should remain manageable in
the coming months. Additionally, while it appears likely that
President Bush will keep his campaign promise to lower Federal
income tax rates in 2001, any legislation is unlikely to be enacted
before late summer. These factors suggest that the strong technical
position the municipal market has enjoyed is likely to continue.
Given the recent market performance by tax-exempt bonds over the
past year, the strong returns illustrate the excellent investment
diversification municipal bonds can provide to investors.
Portfolio Strategy
During the six months ended January 31, 2001, the market for bonds
issued by the state of Oregon, its various municipalities and
political subdivisions did not appreciably diverge from the general
market at large. This occurred despite a 33% decline in new-issue
volume for the period in comparison to last year, which contrasts
with a modest increase industrywide. Despite a generally favorable
investment climate as a result of steadily declining interest rates,
institutional investor demand remained fairly tepid. However,
individual investors continued to demonstrate a healthy appetite for
tax-exempt securities and the attractive taxable equivalent yields
they generate.
In terms of portfolio strategy, we consistently sought to provide
shareholders with a competitive dividend within the context of
reduced net asset value volatility. Accordingly, the Fund's cash
reserves were kept to minimal levels for the bulk of the period. The
Fund's performance benefited from this decision as long-term
interest rates have generally declined. More recently, as the bond
market rally accelerated late last year, we took steps to reduce the
Fund's average portfolio maturity. We were able to capture 90%--95%
of the yield available on the longest-dated securities by investing
in bonds that possessed maturities of no more than 15 years--20
years. This strategy enabled us to reduce interest rate volatility
without sacrificing a material amount of income. The Fund's current
structure and composition reflect a relatively neutral investment
outlook going into the months ahead. We will maintain this stance
until the outcome of the Federal Reserve Board's recent shift toward
an accommodative monetary policy is clear and the new Presidential
Administration's tax-cut proposal, in its entirety or of some
proportion, is enacted.
Oregon's financial management and performance remains favorable,
aided by a moderate and well-managed debt position, and an economy
that continues to diversify and modestly strengthen. While the tax-
cutting initiatives on last November's ballot failed to pass, the
state's finances bear watching as potential future voter
initiatives, if implemented, could substantially impact financial
operations.
In Conclusion
We appreciate your ongoing interest in Merrill Lynch Oregon
Municipal Bond Fund, and we look forward to assisting you with your
financial needs in the months and years ahead.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Trustee
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(Theodore R. Jaeckel Jr.)
Theodore R. Jaeckel Jr.
Vice President and Portfolio Manager
March 12, 2001
Merrill Lynch Oregon Municipal Bond Fund
January 31, 2001
PROXY RESULTS
During the six-month period ended January 31, 2001, Merrill Lynch
Oregon Municipal Bond Fund's shareholders voted on the following
proposals. The proposals were approved at a shareholders' meeting on
December 21, 2000. The description of each proposal and number of
shares voted are as follows:
Shares Voted Shares Withheld
For From Voting
1. To elect the Fund's Board of Trustees: Terry K. Glenn 1,313,680 0
James H. Bodurtha 1,313,680 0
Herbert I. London 1,313,680 0
Joseph L. May 1,313,680 0
Andre F. Perold 1,313,680 0
Roberta Cooper Ramo 1,313,680 0
Shares Voted Shares Voted Shares Voted
For Against Abstain
2. To ratify the selection of Deloitte & Touche LLP as the Fund's
independent auditors for the current fiscal year. 1,252,235 1,982 59,463
3. To approve an amendment to the Fund's charter permitting
the Board to convert the Fund to "master/feeder" structure. 1,229,776 32,570 51,334
Merrill Lynch Oregon Municipal Bond Fund
January 31, 2001
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. The Fund's Investment Adviser voluntarily waived a
portion of its management fee. Without such waiver, the Fund's
performance would have been lower.
Recent Performance Results*
6 Month 12 Month Since Inception Standardized
As of January 31, 2001 Total Return Total Return Total Return 30-Day Yield
ML Oregon Municipal Bond Fund Class A Shares +4.43% +11.29% +40.23% 3.57%
ML Oregon Municipal Bond Fund Class B Shares +4.27 +10.84 +35.18 3.21
ML Oregon Municipal Bond Fund Class C Shares +4.11 +10.61 +40.75 3.11
ML Oregon Municipal Bond Fund Class D Shares +4.48 +11.17 +45.38 3.47
*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 from 8/27/93 for Class A & Class B
Shares and from 10/21/94 for Class C & Class D Shares.
Merrill Lynch Oregon Municipal Bond Fund
January 31, 2001
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
One Year Ended 12/31/00 +9.04% +4.68%
Five Years Ended 12/31/00 +4.61 +3.75
Inception (8/27/93)
through 12/31/00 +4.60 +4.02
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
One Year Ended 12/31/00 +8.49% +4.49%
Five Years Ended 12/31/00 +4.08 +4.08
Inception (8/27/93)
through 12/31/00 +4.07 +4.07
*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*
One Year Ended 12/31/00 +8.37% +7.37%
Five Years Ended 12/31/00 +3.97 +3.97
Inception (10/21/94)
through 12/31/00 +5.55 +5.55
*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*
One Year Ended 12/31/00 +8.93% +4.57%
Five Years Ended 12/31/00 +4.50 +3.65
Inception (10/21/94)
through 12/31/00 +6.08 +5.38
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Merrill Lynch Oregon Municipal Bond Fund
January 31, 2001
SCHEDULE OF INVESTMENTS
(in Thousands)
S&P Moody's Face
Ratings Ratings Amount Issue Value
Oregon--75.0%
Forest Grove, Oregon, Campus Improvement Revenue Refunding
Bonds (Pacific University):
AA NR* $ 250 6% due 5/01/2015 $ 271
AA NR* 250 6.20% due 5/01/2020 270
NR* NR* 600 Marion County, Oregon, Union High School District No.007J (Silverton),
GO, 7% due 6/01/2004 (b)(f) 666
AAA Aaa 500 Morrow County, Oregon, School District No. 001, GO, 6% due 6/01/2007 (a) 555
NR* NR* 450 Multnomah County, Oregon, Educational Facilities Revenue Bonds (University
of Portland Project), 6% due 4/01/2020 461
AA Aa2 500 Multnomah County, Oregon, Reynolds School District Number 007, GO, 5.625% due
6/15/2017 530
AAA Aaa 1,920 Oregon Health Sciences University, Revenue Refunding Bonds, Series A,
5.70%** due 7/01/2021 (a) 655
AAA Aaa 500 Oregon State Department of Administrative Services, COP, Series A,
6.25% due 5/01/2017 (c) 560
NR* VMIG1++ 100 Oregon State Health, Housing, Educational and Cultural Facilities Authority
Revenue Bonds (Guide Dogs for the Blind), VRDN, Series A, 4.55% due
7/01/2025 (g) 100
Oregon State Housing and Community Services Department, Mortgage
Revenue Refunding Bonds (S/F Mortgage Program), Series A:
NR* Aa2 335 6.40% due 7/01/2018 353
NR* Aa2 150 AMT, 6.20% due 7/01/2027 157
BBB Ba2 750 Oregon State Solid Waste Disposal Facilities, Economic Development Revenue
Bonds (USG Corporation Project), AMT, Series 192, 6.40% due 12/01/2029 528
AAA Aaa 950 Port of Portland, Oregon, Airport Revenue Refunding Bonds (Portland
International Airport), AMT, Series 7-B, 7.10% due 1/01/2012 (a)(f) 1,149
NR* Aaa 500 Portland, Oregon, M/F Housing Authority Revenue Bonds (Lovejoy Station
Apartments Project), AMT, 5.90% due 7/01/2023 (a) 515
NR* Aaa 500 Portland, Oregon, Sewer System Revenue Bonds, RIB, Series 386, 6.64% due
8/01/2020 (d)(e) 599
AAA Aaa 500 Tillamook County, Oregon, GO, 6.25% due 1/01/2005 (d)(f) 549
AAA Aaa 500 Washington County, Oregon, Unified Sewer Agency, Sewer Revenue Refunding
Bonds, Senior Lien, Series A, 5.75% due 10/01/2012 (d) 560
B NR* 500 Yamhill County, Oregon, PCR, Refunding (Smurfit Newsprint Corporation
Project), 8% due 12/01/2003 509
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
M/F Multi-Family
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
Merrill Lynch Oregon Municipal Bond Fund
January 31, 2001
SCHEDULE OF INVESTMENTS (concluded)
(in Thousands)
S&P Moody's Face
Ratings Ratings Amount Issue Value
Puerto Rico--24.3%
AAA Aaa $2,000 Puerto Rico Commonwealth, GO, Refunding, 7% due 7/01/2010 (c) $ 2,447
AAA Aaa 400 Puerto Rico Electric Power Authority, Power Revenue Bonds, STRIPES,
Series T, 8.574% due 7/01/2005 (b)(e) 461
Total Investments (Cost--$11,014)--99.3% 11,895
Other Assets Less Liabilities--0.7% 78
-------
Net Assets--100.0% $11,973
=======
(a)MBIA Insured.
(b)FSA Insured.
(c)AMBAC Insured.
(d)FGIC Insured.
(e)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, 2001.
(f)Prerefunded.
(g)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, 2001.
*Not Rated.
**Represents a zero coupon bond; the interest rate shown reflects
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.
Merrill Lynch Oregon Municipal Bond Fund
January 31, 2001
FINANCIAL INFORMATION
Statement of Assets and Liabilities as of January 31, 2001
Assets: Investments, at value (identified cost--$11,014,429) $ 11,895,153
Cash 81,863
Interest receivable 107,414
Prepaid registration fees and other assets 1,285
-------------
Total assets 12,085,715
-------------
Liabilities: Payables:
Beneficial interest redeemed $ 39,647
Dividends to shareholders 12,093
Distributor 4,394
Investment adviser 2,004 58,138
-------------
Accrued expenses and other liabilities 54,702
-------------
Total liabilities 112,840
-------------
Net Assets: Net assets $ 11,972,875
=============
Net Assets Class A Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized $ 12,771
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 88,704
Class C Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 14,071
Class D Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 6,663
Paid-in capital in excess of par 13,361,268
Accumulated realized capital losses on investments--net (2,384,168)
Accumulated distributions in excess of realized capital gains
on investments--net (7,158)
Unrealized appreciation on investments--net 880,724
-------------
Net assets $ 11,972,875
=============
Net Asset Value: Class A--Based on net assets of $1,250,649 and 127,705 shares of
beneficial interest outstanding $ 9.79
=============
Class B--Based on net assets of $8,689,947 and 887,035 shares of
beneficial interest outstanding $ 9.80
=============
Class C--Based on net assets of $1,379,430 and 140,709 shares of
beneficial interest outstanding $ 9.80
=============
Class D--Based on net assets of $652,849 and 66,631 shares of
beneficial interest outstanding $ 9.80
=============
See Notes to Financial Statements.
Merrill Lynch Oregon Municipal Bond Fund
January 31, 2001
FINANCIAL INFORMATION (continued)
Statement of Operations
For the Six Months Ended
January 31, 2001
Investment Income: Interest and amortization of premium and discount earned $ 377,060
Expenses: Investment advisory fees $ 35,812
Professional fees 30,431
Account maintenance and distribution fees--Class B 22,835
Printing and shareholder reports 16,276
Accounting services 12,059
Account maintenance and distribution fees--Class C 4,509
Trustees' fees and expenses 3,024
Transfer agent fees--Class B 2,780
Pricing fees 1,633
Registration fees 1,008
Custodian fees 914
Transfer agent fees--Class C 461
Transfer agent fees--Class A 428
Account maintenance fees--Class D 354
Transfer agent fees--Class D 182
Other 1,455
-------------
Total expenses before reimbursement 134,161
Reimbursement of expenses (22,789)
-------------
Total expenses after reimbursement 111,372
-------------
Investment income--net 265,688
-------------
Realized & Realized gain on investments--net 152,055
Unrealized Change in unrealized appreciation on investments--net 126,184
Gain on -------------
Investments--Net: Net Increase in Net Assets Resulting from Operations $ 543,927
=============
See Notes to Financial Statements.
Merrill Lynch Oregon Municipal Bond Fund
January 31, 2001
FINANCIAL INFORMATION (continued)
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
January 31, July 31,
Increase (Decrease) in Net Assets: 2001 2000
Operations: Investment income--net $ 265,688 $ 642,611
Realized gain (loss) on investments--net 152,055 (445,099)
Change in unrealized appreciation on investments--net 126,184 (111,352)
------------ ------------
Net increase in net assets resulting from operations 543,927 86,160
------------ ------------
Dividends & Investment income--net:
Distributions to Class A (37,875) (105,200)
Shareholders: Class B (182,864) (410,494)
Class C (29,334) (78,272)
Class D (15,615) (48,645)
In excess of realized gain on investments--net:
Class A -- (1,173)
Class B -- (4,537)
Class C -- (915)
Class D -- (533)
------------ ------------
Net decrease in net assets resulting from dividends
and distributions to shareholders (265,688) (649,769)
------------ ------------
Beneficial Net decrease in net assets derived from beneficial
Interest interest transactions (2,141,779) (5,526,600)
Transactions: ------------ ------------
Net Assets: Total decrease in net assets (1,863,540) (6,090,209)
Beginning of period 13,836,415 19,926,624
------------ ------------
End of period $ 11,972,875 $ 13,836,415
============ ============
See Notes to Financial Statements.
Merrill Lynch Oregon Municipal Bond Fund
January 31, 2001
FINANCIAL INFORMATION (continued)
Financial Highlights
Class A
For the
Six
Months
The following per share data and ratios have been derived Ended
from information provided in the financial statements. Jan. 31, For the Year Ended July 31,
Increase (Decrease) in Net Asset Value: 2001 2000 1999 1998 1997
Per Share Net asset value,
Operating beginning of period $ 9.59 $ 9.82 $ 10.11 $ 10.00 $ 9.52
Performance: -------- -------- -------- -------- --------
Investment income--net .22 .41 .43 .47 .47
Realized and unrealized gain (loss) on
investments--net .20 (.23) (.29) .11 .48
-------- -------- -------- -------- --------
Total from investment operations .42 .18 .14 .58 .95
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.22) (.41) (.43) (.47) (.47)
In excess of realized gain on
investments--net -- --++ -- --++ --
-------- -------- -------- -------- --------
Total dividends and distributions (.22) (.41) (.43) (.47) (.47)
-------- -------- -------- -------- --------
Net asset value, end of period $ 9.79 $ 9.59 $ 9.82 $ 10.11 $ 10.00
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 4.43%+++ 2.07% 1.33% 5.93% 10.27%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.27%* 1.41% 1.16% .89% .78%
Net Assets: ======== ======== ======== ======== ========
Expenses 1.62%* 1.76% 1.51% 1.24% 1.22%
======== ======== ======== ======== ========
Investment income--net 4.51%* 4.36% 4.25% 4.62% 4.88%
======== ======== ======== ======== ========
Supplemental Net assets, end of period
Data: (in thousands) $ 1,251 $ 1,791 $ 3,031 $ 3,103 $ 3,232
======== ======== ======== ======== ========
Portfolio turnover 19.73% 64.56% 60.26% 36.31% 40.62%
======== ======== ======== ======== ========
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Amount is less than $.01 per share.
+++Aggregate total investment return.
See Notes to Financial Statements.
Merrill Lynch Oregon Municipal Bond Fund
January 31, 2001
FINANCIAL INFORMATION (continued)
Financial Highlights (continued)
Class B
For the
Six
Months
The following per share data and ratios have been derived Ended
from information provided in the financial statements. Jan. 31, For the Year Ended July 31,
Increase (Decrease) in Net Asset Value: 2001 2000 1999 1998 1997
Per Share Net asset value,
Operating beginning of period $ 9.59 $ 9.82 $ 10.11 $ 10.00 $ 9.52
Performance: -------- -------- -------- -------- --------
Investment income--net .20 .36 .38 .42 .42
Realized and unrealized gain
(loss) on investments--net .21 (.23) (.29) .11 .48
-------- -------- -------- -------- --------
Total from investment operations .41 .13 .09 .53 .90
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.20) (.36) (.38) (.42) (.42)
In excess of realized gain on
investments--net -- --++ -- --++ --
-------- -------- -------- -------- --------
Total dividends and distributions (.20) (.36) (.38) (.42) (.42)
-------- -------- -------- -------- --------
Net asset value, end of period $ 9.80 $ 9.59 $ 9.82 $ 10.11 $ 10.00
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 4.27%+++ 1.55% .82% 5.39% 9.72%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.79%* 1.93% 1.67% 1.40% 1.29%
Net Assets: ======== ======== ======== ======== ========
Expenses 2.14%* 2.27% 2.02% 1.75% 1.73%
======== ======== ======== ======== ========
Investment income--net 4.00%* 3.86% 3.75% 4.11% 4.37%
======== ======== ======== ======== ========
Supplemental Net assets, end of period
Data: (in thousands) $ 8,690 $ 9,608 $ 12,421 $ 14,965 $ 17,888
======== ======== ======== ======== ========
Portfolio turnover 19.73% 64.56% 60.26% 36.31% 40.62%
======== ======== ======== ======== ========
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Amount is less than $.01 per share.
+++Aggregate total investment return.
See Notes to Financial Statements.
Merrill Lynch Oregon Municipal Bond Fund
January 31, 2001
FINANCIAL INFORMATION (continued)
Financial Highlights (continued)
Class C
For the
Six
Months
The following per share data and ratios have been derived Ended
from information provided in the financial statements. Jan. 31, For the Year Ended July 31,
Increase (Decrease) in Net Asset Value: 2001 2000 1999 1998 1997
Per Share Net asset value,
Operating beginning of period $ 9.60 $ 9.82 $ 10.12 $ 10.00 $ 9.53
Performance: -------- -------- -------- -------- --------
Investment income--net .19 .36 .37 .41 .41
Realized and unrealized gain
(loss) on investments--net .20 (.22) (.30) .12 .47
-------- -------- -------- -------- --------
Total from investment operations .39 .14 .07 .53 .88
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.19) (.36) (.37) (.41) (.41)
In excess of realized gain on
investments--net -- --++ -- --++ --
-------- -------- -------- -------- --------
Total dividends and distributions (.19) (.36) (.37) (.41) (.41)
-------- -------- -------- -------- --------
Net asset value, end of period $ 9.80 $ 9.60 $ 9.82 $ 10.12 $ 10.00
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 4.11%+++ 1.55% .63% 5.39% 9.50%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.89%* 2.02% 1.77% 1.50% 1.39%
Net Assets: ======== ======== ======== ======== ========
Expenses 2.24%* 2.37% 2.12% 1.85% 1.83%
======== ======== ======== ======== ========
Investment income--net 3.90%* 3.75% 3.64% 4.01% 4.28%
======== ======== ======== ======== ========
Supplemental Net assets, end of period
Data: (in thousands) $ 1,379 $ 1,583 $ 2,705 $ 2,549 $ 2,063
======== ======== ======== ======== ========
Portfolio turnover 19.73% 64.56% 60.26% 36.31% 40.62%
======== ======== ======== ======== ========
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Amount is less than $.01 per share.
+++Aggregate total investment return.
See Notes to Financial Statements.
Merrill Lynch Oregon Municipal Bond Fund
January 31, 2001
FINANCIAL INFORMATION (concluded)
Financial Highlights(concluded)
Class D
For the
Six
Months
The following per share data and ratios have been derived Ended
from information provided in the financial statements. Jan. 31, For the Year Ended July 31,
Increase (Decrease) in Net Asset Value: 2001 2000 1999 1998 1997
Per Share Net asset value,
Operating beginning of period $ 9.59 $ 9.82 $ 10.11 $ 10.00 $ 9.52
Performance: -------- -------- -------- -------- --------
Investment income--net .22 .40 .42 .46 .46
Realized and unrealized gain (loss) on
investments--net .21 (.23) (.29) .11 .48
-------- -------- -------- -------- --------
Total from investment operations .43 .17 .13 .57 .94
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.22) (.40) (.42) (.46) (.46)
In excess of realized gain on
investments--net -- --++ -- --++ --
-------- -------- -------- -------- --------
Total dividends and distributions (.22) (.40) (.42) (.46) (.46)
-------- -------- -------- -------- --------
Net asset value, end of period $ 9.80 $ 9.59 $ 9.82 $ 10.11 $ 10.00
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 4.48%+++ 1.96% 1.23% 5.82% 10.17%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.38%* 1.51% 1.27% .99% .90%
Net Assets: ======== ======== ======== ======== ========
Expenses 1.73%* 1.86% 1.62% 1.34% 1.32%
======== ======== ======== ======== ========
Investment income--net 4.41%* 4.25% 4.15% 4.52% 4.76%
======== ======== ======== ======== ========
Supplemental Net assets, end of period
Data: (in thousands) $ 653 $ 854 $ 1,770 $ 806 $ 399
======== ======== ======== ======== ========
Portfolio turnover 19.73% 64.56% 60.26% 36.31% 40.62%
======== ======== ======== ======== ========
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Amount is less than $.01 per share.
+++Aggregate total investment return.
See Notes to Financial Statements.
Merrill Lynch Oregon Municipal Bond Fund
January 31, 2001
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 conformity with accounting
principles generally accepted in the United States of America, 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 investment strategies to increase or decrease the level of
risk to which the Fund is exposed more quickly and efficiently than
transactions in other types of instruments. 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, 2001
NOTES TO FINANCIAL STATEMENTS (continued)
(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. The Fund will adopt the
provisions of the AICPA Audit and Accounting Guide for Investment
Companies, as revised, effective for fiscal years beginning after
December 15, 2000. As required, the Fund will amortize premiums and
discounts on debt securities under a different method effective
August 1, 2001. The cumulative effect of this accounting change will
have no impact on the total net assets of the Fund. The impact of
this accounting change has not been determined, but will result in
an adjustment to cost of securities and a corresponding adjustment
in net unrealized appreciation/depreciation, based on securities
held as of July 31, 2001.
(e) Prepaid registration fees--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 the
treatment for futures transactions and post-October losses.
(g) Expenses--Certain expenses have been allocated to the individual
Funds in the Trust on a pro rata basis based upon the respective
aggregate net asset value of each Fund included in the Trust.
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 FAM Distributors, Inc. ("FAMD"
or the "Distributor"), 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 six months ended January 31, 2001, FAM earned
fees of $35,812, of which $22,789 was 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 .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 six months ended January 31, 2001, FAMD earned underwriting
discounts and MLPF&S earned dealer concessions on sales of the
Fund's Class A Shares as follows:
FAMD MLPF&S
Class A $11 $187
For the six months ended January 31, 2001, MLPF&S received
contingent deferred sales charges of $3,504 relating to transactions
in Class B Shares.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Accounting services were provided to the Fund by FAM through
December 31, 2000. Up to this date, the Fund reimbursed FAM $10,186
for these services. As of January 1, 2001, accounting services are
provided for the Fund by State Street Bank and Trust Company ("State
Street") pursuant to an agreement between State Street and the Fund.
The Fund will pay the cost of these services. In addition, the Fund
will reimburse FAM for the cost of certain additional accounting
services.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, PSI, FDS, FAMD, and/or ML & Co.
Merrill Lynch Oregon Municipal Bond Fund
January 31, 2001
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended January 31, 2001 were $2,426,265 and
$4,055,746, respectively.
Net realized gains for the six months ended January 31, 2001 and net
unrealized gains as of January 31, 2001 were as follows:
Realized Unrealized
Gains Gains
Long-term investments $ 152,055 $ 880,724
---------- ---------
Total $ 152,055 $ 880,724
========== =========
As of January 31, 2001, net unrealized appreciation for Federal
income tax purposes aggregated $880,724, of which $1,111,622 related
to appreciated securities and $230,898 related to depreciated
securities. The aggregate cost of investments at January 31, 2001
for Federal income tax purposes was $11,014,429.
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest
transactions was $2,141,779 and $5,526,600 for the six months ended
January 31, 2001 and for the year ended July 31, 2000, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Six Dollar
Months Ended January 31, 2001 Shares Amount
Shares sold 16,183 $ 155,703
Shares issued to shareholders
in reinvestment of dividends 2,426 23,417
---------- -----------
Total issued 18,609 179,120
Shares redeemed (77,701) (755,103)
---------- -----------
Net decrease (59,092) $ (575,983)
========== ===========
Class A Shares for the Year Dollar
Ended July 31, 2000 Shares Amount
Shares sold 21,449 $ 202,474
Shares issued to shareholders
in reinvestment of dividends
and distributions 7,254 68,376
---------- -----------
Total issued 28,703 270,850
Shares redeemed (150,728) (1,407,319)
---------- -----------
Net decrease (122,025) $(1,136,469)
========== ===========
Class B Shares for the Six Dollar
Months Ended January 31, 2001 Shares Amount
Shares sold 24,744 $ 241,146
Shares issued to shareholders
in reinvestment of dividends 6,439 62,262
---------- -----------
Total issued 31,183 303,408
Automatic conversion of shares (1,552) (14,953)
Shares redeemed (144,512) (1,402,589)
---------- -----------
Net decrease (114,881) $(1,114,134)
========== ===========
Class B Shares for the Year Dollar
Ended July 31, 2000 Shares Amount
Shares sold 69,165 $ 650,319
Shares issued to shareholders
in reinvestment of dividends
and distributions 15,618 147,204
---------- -----------
Total issued 84,783 797,523
Automatic conversion of shares (3,392) (32,156)
Shares redeemed (344,753) (3,251,686)
---------- -----------
Net decrease (263,362) $(2,486,319)
========== ===========
Class C Shares for the Six Dollar
Months Ended January 31, 2001 Shares Amount
Shares sold 760 $ 7,318
Shares issued to shareholders
in reinvestment of dividends 1,510 14,604
---------- -----------
Total issued 2,270 21,922
Shares redeemed (26,465) (256,566)
---------- -----------
Net decrease (24,195) $ (234,644)
========== ===========
Merrill Lynch Oregon Municipal Bond Fund
January 31, 2001
NOTES TO FINANCIAL STATEMENTS (concluded)
Class C Shares for the Year Dollar
Ended July 31, 2000 Shares Amount
Shares sold 8,109 $ 76,536
Shares issued to shareholders
in reinvestment of dividends
and distributions 4,561 43,070
---------- -----------
Total issued 12,670 119,606
Shares redeemed (123,064) (1,162,380)
---------- -----------
Net decrease (110,394) $(1,042,774)
========== ============
Class D Shares for the Six Dollar
Months Ended January 31, 2001 Shares Amount
Automatic conversion of shares 1,551 $ 14,953
Shares issued to shareholders
in reinvestment of dividends 437 4,220
---------- -----------
Total issued 1,988 19,173
Shares redeemed (24,426) (236,191)
---------- -----------
Net decrease (22,438) $ (217,018)
========== ===========
Class D Shares for the Year Dollar
Ended July 31, 2000 Shares Amount
Shares sold 8,652 $ 82,867
Automatic conversion of shares 3,392 32,156
Shares issued to shareholders
in reinvestment of dividends
and distributions 1,245 11,763
---------- -----------
Total issued 13,289 126,786
Shares redeemed (104,499) (987,824)
---------- -----------
Net decrease (91,210) $ (861,038)
========== ===========
5. Short-Term Borrowings:
On December 1, 2000, the Fund, along with certain other funds
managed by FAM and its affiliates, renewed and amended a
$1,000,000,000 credit agreement with Bank One, N.A. and certain
other lenders. The Fund may borrow under the credit agreement to
fund shareholder redemptions and for other lawful purposes other
than for leverage. The Fund may borrow up to the maximum amount
allowable under the Fund's current prospectus and statement of
additional information, subject to various other legal, regulatory
or contractual limits. The Fund pays a commitment fee of .09% per
annum based on the Fund's pro rata share of the unused portion of
the facility. Amounts borrowed under the facility bear interest at a
rate equal to, at each fund's election, the Federal Funds rate plus
.50% or a base rate as determined by Bank One, N.A. The Fund did not
borrow under the facility during the six months ended January 31,
2001.
6. Capital Loss Carryforward:
At July 31, 2000, the Fund had a net capital loss carryforward of
approximately $1,983,000, of which $679,000 expires in 2003,
$1,233,000 expires in 2004 and $71,000 expires in 2008. This amount
will be available to offset like amounts of any future taxable
gains.
Merrill Lynch Oregon Municipal Bond Fund
January 31, 2001
OFFICERS AND TRUSTEES
Terry K. Glenn, President and Trustee
James H. Bodurtha, Trustee
Herbert I. London, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Roberta Cooper Ramo, 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
Arthur Zeikel, Trustee of Merrill Lynch
Oregon Municipal Bond Fund, has recently
retired. The Fund's Board of Trustees
wishes Mr. Zeikel 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