Merrill Lynch Massachusetts Municipal Bond Fund
Quarterly Report -- April 30, 1994
To Our Shareholders:
The magnitude of the rise in tax-exempt bond yields experienced this
past quarter has not been seen since 1987 when municipal bond rates
rose 250 basis points (2.50%) from March to October of that year. It
is very important to note that the municipal bond price declines of
the April quarter, while certainly damaging, were essentially much
different than those in 1987. Recent price declines were largely the
result of consistent and insistent selling pressures over the last
two months. In 1987, the tax-exempt bond market was much more volatile
and, at times, chaotic as investors sought to liquidate positions without
concern for fundamental value. For the most part, the recent price
deterioration has been orderly, and the municipal bond market's
liquidity and integrity have not been challenged or jeopardized.
Despite recent price declines, tax-exempt securities remain among
the most attractive investment alternatives available. After the
yield increases experienced in the April quarter, longer-term
municipal securities yielded approximately 90% of comparable US
Treasury yields. Purchasers of these municipal bonds also accrue
substantial after-tax yield advantages. To investors in the 39%
marginal Federal income tax bracket, the purchase of a municipal
bond yielding 6.50% represents an after-tax equivalent of 10.65%.
With prevailing estimates of 1994 inflation at no more than 3%--4%,
real after-tax rates in excess of 6.50% easily compensate longer-
term investors for much of the price volatility recently
experienced.
<PAGE>
Portfolio Strategy
During the quarter ended April 30, 1994, our portfolio strategy
consisted of selling discounted bonds and replacing them with higher-
yielding current coupon bonds. Furthermore, we raised the Fund's cash
reserves to 10% of net assets, and premium coupon bonds were purchased
when available. Our strategy's net effect generated an increased yield
for shareholders, while modestly restructuring the Fund to exhibit a
more defensive posture. Municipal issuance of Massachusetts bonds decreased
79% for the April quarter versus the same quarter last year, which is
magnified compared to a 40% decrease for national issuance. This decrease
made it difficult to purchase bonds which would have fulfilled our
investment strategy, although it also set the stage for a strong technical
market for Massachusetts municipal bonds. In addition, the lack of supply
should help Massachusetts issues perform attractively relative to
national issues. Looking ahead, we will seek to increase the Fund's
holdings of tax-exempt income-producing bonds, while decreasing cash
reserves as opportunities to purchase current coupon bonds surface.
We appreciate your ongoing interest in Merrill Lynch Massachusetts
Municipal Bond Fund, and we look forward to assisting you with your
financial needs in the months and years ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President and Portfolio Manager
May 25, 1994
Performance Data
None of the past results shown should be considered a representation
of future performance. Investment return and principal value of
Class A and Class B Shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
<PAGE>
<TABLE>
Recent Performance Results*
<CAPTION>
12 Month 3 Month
4/30/94 1/31/94 4/30/93 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares $10.34 $11.35 $10.91 -4.36%(1) -8.90%
Class B Shares 10.34 11.35 10.91 -4.36(1) -8.90
Class A Shares--Total Return +1.34(2) -7.64(3)
Class B Shares--Total Return +0.83(4) -7.76(5)
Class A Shares--Standardized 30-day Yield 5.39%
Class B Shares--Standardized 30-day Yield 5.11%
<FN>
*Investment results shown for the 3-month and 12-month periods are before the deduction
of any sales charges.
(1)Percent change includes reinvestment of $0.103 per share capital gains distributions.
(2)Percent change includes reinvestment of $0.643 per share ordinary income dividends
and $0.103 per share capital gains distributions.
(3)Percent change includes reinvestment of $0.146 per share ordinary income dividends.
(4)Percent change includes reinvestment of $0.587 per share ordinary income dividends
and $0.103 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.133 per share ordinary income dividends.
</TABLE>
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 3/31/94 +2.35% -1.74%
Inception (2/28/92)
through 3/31/94 +8.03 +5.94
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<PAGE>
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 3/31/94 +1.93% -1.88%
Inception (2/28/92)
through 3/31/94 +7.49 +6.61
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced
to 0% after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
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.
