Merrill Lynch Maryland 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 April quarter, our strategy was to maintain a competitive
yield during a volatile interest rate environment. This goal was
achieved by purchasing bonds with maturities exceeding 15 years
because of the positively sloped yield curve and by purchasing bonds
which are investment grade.
The market in Maryland municipal bonds saw little activity in the
April quarter because of small amounts of new issuance in the State
and strong demand for Maryland tax-exempt bonds. As the Fund
receives new subscriptions, we plan to purchase bonds with yields
matching or exceeding those currently owned to keep its current
yield from declining. Because of the forecasted slowdown in the US
economy in the second half of 1994, we have purchased discount bonds
that should perform well as interest rates decline.
We appreciate your ongoing interest in Merrill Lynch Maryland
Municipal Bond Fund, and we look forward to serving your investment
needs and objectives in the months and years to come.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President and Portfolio Manager
May 25, 1994
<PAGE>
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.
<TABLE>
Recent Performance Results*
<CAPTION>
Since Inception 3 Month
4/30/94 1/31/94 10/29/93** % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares $9.12 $10.18 $10.00 -8.80% -10.41%
Class B Shares 9.11 10.18 10.00 -8.90 -10.51
Class A Shares--Total Return -6.48(1) -9.19(2)
Class B Shares--Total Return -6.81(3) -9.41(4)
Class A Shares--Standardized 30-day Yield 5.52%
Class B Shares--Standardized 30-day Yield 5.25%
<FN>
*Investment results shown for the 3-month and since inception periods are before the deduction of any sales charges.
**Commencement of Operations.
(1)Percent change includes reinvestment of $0.234 per share ordinary income dividends.
(2)Percent change includes reinvestment of $0.128 per share ordinary income dividends.
(3)Percent change includes reinvestment of $0.210 per share ordinary income dividends.
(4)Percent change includes reinvestment of $0.115 per share ordinary income dividends.
</TABLE>
<PAGE>
Aggregate Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Inception (10/29/93)
through 3/31/94 -7.08% -10.80%
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Inception (10/29/93)
through 3/31/94 -7.27% -11.27%
[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.
