MERRILL LYNCH
MULTI-STATE
LIMITED MATURITY
MUNICIPAL
SERIES TRUST
FUND LOGO
Quarterly Report
October 31, 1998
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Trust unless
accompanied or preceded by the Trust'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 Multi-State
Limited Maturity
Municipal Series Trust
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
Merrill Lynch Multi-State Limited Maturity Municipal Series Trust
Officers and
Trustees
Arthur Zeikel, President and Trustee
James H. Bodurtha, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Terry K. Glenn, Executive Vice President
Vincent R. Giordano, Senior Vice President
Edward J. Andrews, Vice President
Donald C. Burke, Vice President
Gerald M. Richard, Treasurer
Alice A. Pellegrino, Secretary
Custodian
The Bank of New York
90 Washington Street, 12th Floor
New York, NY 10005
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
Merrill Lynch Multi-State Limited Maturity Municipal Series Trust,
October 31, 1998
TO OUR SHAREHOLDERS
During the six months ended October 31, 1998, long-term bond yields
declined significantly. The near absence of any inflationary
pressures in the United States continued to support historic low
interest rates. Additionally, foreign economic factors have
continued to outweigh US domestic fundamentals, as they have for
much of 1998. The economic crisis that began in Asia over a year ago
has spread both to Russia and South America. However, economic
factors in these countries have begun to negatively impact US
growth. For example, employment in the US manufacturing sector
declined in recent months as a result of reduced demand for export
goods. Concern that the modest decline in US economic growth seen
thus far would spread and intensify led the Federal Reserve Board to
lower short-term interest rates in late September, in mid-October
and in mid-November. These actions were taken to offset the drag of
foreign economies on future US growth.
US Treasury bond yields continued to benefit from a strong "flight
to quality" as foreign investors were drawn to the relative safe
haven of US Government securities. Additionally, the sharp equity
market correction, which began at the end of August, triggered a
further flight into US Treasury securities. Long-term US Treasury
bond yields fell over 90 basis points (0.90%) to approximately 5% by
the end of September. This is the lowest level since the US Treasury
re-introduced 30-year maturity bond auctions in 1977.
By early October, worldwide investor confidence began to rise,
reducing the demand for the safety and liquidity of US Treasury
securities. Investor confidence was restored by the belief that
major world governments, as well as the International Monetary Fund,
would take the necessary action to support weak domestic economies
in Asia and Latin America. Additionally, rapid recovery in US and
world equity markets caused some investors to reallocate funds from
US debt instruments back to various world equity markets. US
Treasury security yields rose for the remainder of the month to end
October at 5.15%. During the six-month period ended October 31,
1998, long-term Treasury security yields declined approximately 80
basis points.
During the past 12 months, the tax-exempt bond market has contended
with significant new-issue supply pressures. Over the past year,
more than $277 billion in new long-term tax-exempt bonds were
underwritten, an increase of almost 30% compared to the same period
a year ago. During the most recent six-month period, approximately
$140 billion in new long-term municipal bonds were underwritten,
representing an increase of more than 15% over the same six-month
period last year. This increased supply, coupled with the high
returns the US equity market generated for much of 1998, was one of
the major reasons municipal bond yields declined less than their
taxable counterparts during the period.
The continued increase in new bond issuance has required ever-lower
tax-exempt bond yields to generate the economic savings necessary
for additional municipal bond financings. Consequently, the pace of
new bond issuance has slowed in recent months. In fact, the trend
may be reversing. During the three months ended October 31, 1998,
just over $60 billion in new long-term municipal bonds were
underwritten, a decline of 4% compared to the same quarter a year
ago. During the month of October, there were less than $20 billion
in new municipal bond securities issued, a decline of over 10%
compared to October 1997. We will monitor this trend closely in the
coming months to determine if the supply pressures exerted thus far
in 1998 are abating and fostering a more balanced supply/demand
environment.
Throughout the six-month period ended October 31, 1998, municipal
bond yields followed a pattern that was similar to US Treasury
securities, although the yield declines were more muted. As measured
by the unmanaged Bond Buyer Revenue Bond Index, long-term, uninsured
tax-exempt revenue bond yields declined over 40 basis points to
5.09% by the end of September, their lowest level since the early
1970s. Municipal bond yields rose during October to end the period
at 5.24%. Over the past six months, long-term tax-exempt bond yields
declined almost 30 basis points.
Although municipal bond yields declined during the six-month period,
recent supply pressures and the absence of the safe haven status
enjoyed by US securities caused municipal bond yields to rise
relative to US Treasury bond yields. At October 31, 1998, long-term
tax-exempt bond yield spreads were attractive relative to US
Treasury securities of comparable maturities (over 100%), well in
excess of their historic range of 85% - 88%. Tax-exempt bond yield
ratios have rarely exceeded 90% in the 1980s and 1990s.
Historically, yield spreads have been wider than these levels when
there have been potential changes in Federal tax codes that would
have adversely affected the tax-favored status of municipal bonds.
Currently, municipal bond investors find themselves in a unique
investment environment. Previous opportunities to purchase tax-
exempt bonds with yields exceeding that of comparable US Treasury
issues have been limited to relatively brief episodes and then
further limited to a few municipal credits undergoing specific
financial pressures. At present, almost the entire municipal bond
universe, across nearly all maturity and credit sectors, can be
purchased at yields greater than their taxable counterparts.
However, the current opportunity may quickly disappear should tax-
exempt bond supply pressures diminish or the safe-haven status of US
Treasury securities become less desirable. Under these conditions,
municipal bond ratios should quickly revert to more normal historic
percentages, certainly well below their presently attractive levels.
Portfolio Strategy
Merrill Lynch California Limited
Maturity Municipal Bond Fund
During the quarter ended October 31, 1998, Standard & Poor's Rating
Service affirmed its A+ rating on the state of California's $18.5
billion of outstanding general obligation bonds. The rating reflects
the strength of the state's economy, which continues to show broad
improvement and diversification, an achievement that has carried the
state's employment levels to above pre-recessionary levels. In
addition to the favorable economic conditions, the state's improving
financial position is also the result of more conservative budgeting
practices, both of which have allowed mostly positive operating
results since 1995. This has gradually moved the state's budgetary
basis unreserved general fund balance to a positive accumulated
surplus of $521 million at fiscal year-end 1998 compared to a $2.6
billion deficit at fiscal year-end 1995. Original estimates of a
small deficit in fiscal year 1998 turned into an operating surplus
of $2.2 billion because of strong tax revenue growth. The fiscal
1999 budget projects a slight operating deficit of approximately
$277 million, which will bring the unreserved fund balance to $495
million, 0.9% of expenditures. The 1999 budget reflects conservative
economic and expenditure assumptions and includes tax cuts and
increased spending. However, the state's unemployment rate remains
above that of the nation, and concern remains about how the state
will fare in a slowing economic environment. The continuing Asian
economic and financial crisis will be felt more emphatically in the
months ahead as the state's export business feels the brunt of the
downturn.
At October 31, 1998, the net assets of Merrill Lynch California
Limited Maturity Municipal Bond Fund stood at approximately $10.7
million, an increase of approximately 18% from the July quarter.
During the October quarter, we adopted an aggressive investment
strategy under the expectation that inflation would remain subdued
and economic growth would slow because of external pressure from
Asia and Latin America. This position enhanced the Fund's
performance as the Federal Reserve Board lowered the Federal Funds
rate three times in recent months from 5.50% to 4.75% because of
concern for a slowing manufacturing sector, decreasing exports and
the threat of imported deflation. Looking ahead, we will continue to
maintain our aggressive duration position since we expect the
Federal Reserve Board to maintain an easing bias as the US economy
continues to moderate and as world financial markets remain
tumultuous.
Merrill Lynch Multi-State Limited Maturity Municipal Series Trust,
October 31, 1998
Merrill Lynch Florida Limited
Maturity Municipal Bond Fund
During the quarter ended October 31, 1998, Standard & Poor's Ratings
Service affirmed its AA+ rating on the state's outstanding general
obligation bonds. This confirmation reflects Florida's healthy
financial position, continued sound financial management and the
steady funding of the state's budget stabilization fund. The state
ended fiscal year 1998 with a combined reserve of more than $1.4
billion, representing 8.2% of general revenue fund expenditures.
This is the highest reserve level the state has maintained in more
than a decade.
Florida's 1999 budget includes reasonable revenue estimates, and
spending growth is expected to be 4.7% over 1998 appropriations. The
state must continue to maintain strong budget control since it is
faced with increased debt issuance in upcoming years in order to
maintain and expand a very rapidly growing educational system. The
state relies on sales tax for 71% of its general funds operations.
Florida's general and working capital funds are estimated to have a
combined balance of $756 million, lower than the opening balance of
$882 million. State tax support debt has remained moderate over a
long period and is equal to $851 per capita and 3.3% of personal
income. The state's diversified service-based economy continues to
experience strong growth relative to the region and the nation.
At October 31, 1998, the net assets of Merrill Lynch Florida Limited
Maturity Municipal Bond Fund stood at approximately $19.4 million,
an increase of approximately 3.7% from the July quarter. During the
October quarter, we adopted an aggressive investment position under
the expectation that inflation would remain subdued and economic
growth would slow because of external pressure from Asia and Latin
America. This position enhanced the Fund's performance as the
Federal Reserve Board lowered the Federal Funds rate three times in
recent months from 5.50% to 4.75% because of concern for a slowing
manufacturing sector, decreasing exports and the threat of imported
deflation. Looking ahead, we will continue to maintain our
aggressive duration position since we expect the Federal Reserve
Board to maintain an easing bias as the US economy continues to
moderate and as world financial markets remain tumultuous.
In Conclusion
We thank you for your support of Merrill Lynch Multi-State Limited
Maturity Municipal Series Trust, 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
Senior Vice President
(Edward J. Andrews)
Edward J. Andrews
Vice President and Portfolio Manager
December 9, 1998
Merrill Lynch Multi-State Limited Maturity Municipal Series Trust,
October 31, 1998
PERFORMANCE DATA
About Fund
Performance
Investors are able to purchase shares of the Trust 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 1% 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 1% if redeemed during the first year, decreasing 1% the
next year to 0%. In addition, Class B Shares are subject to a
distribution fee of 0.20% and an account maintenance fee of 0.15%.
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 0.20% and an
account maintenance fee of 0.15%. 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 1% 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>
Since Standardized
12 Month 3 Month Inception 30-day Yield
Total Total Total As of
Return Return Return 10/31/98
<S> <C> <C> <C> <C>
California Limited Maturity Fund Class A Shares +4.82% +2.11% +24.06% 2.14%
California Limited Maturity Fund Class B Shares +4.44 +2.12 +21.91 1.81
California Limited Maturity Fund Class C Shares +4.64 +2.17 +21.84 2.00
California Limited Maturity Fund Class D Shares +4.81 +2.18 +22.57 2.04
Florida Limited Maturity Fund Class A Shares +4.66 +1.98 +22.80 2.59
Florida Limited Maturity Fund Class B Shares +4.29 +1.89 +20.67 2.26
Florida Limited Maturity Fund Class C Shares +4.04 +1.85 +18.77 2.07
Florida Limited Maturity Fund Class D Shares +4.55 +1.95 +21.19 2.49
<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 inception
periods for each of the Funds within Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust are Class A & Class B
Shares, from 11/26/93 to 10/31/98 and Class C & Class D Shares, from
10/21/94 to 10/31/98.
</TABLE>
Merrill Lynch Multi-State Limited Maturity Municipal Series Trust,
October 31, 1998
PERFORMANCE DATA (concluded)
Average Annual
Total Returns
California Limited Maturity
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
Year Ended 9/30/98 +4.88% +3.83%
Inception (11/26/93) through 9/30/98 +4.55 +4.34
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
% Return % Return
Class B Shares* Without CDSC With CDSC**
Year Ended 9/30/98 +4.40% +3.40%
Inception (11/26/93) through 9/30/98 +4.16 +4.16
[FN]
*Maximum contingent deferred sales charge is 1% and reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Class C Shares* Without CDSC With CDSC**
Year Ended 9/30/98 +4.60% +3.60%
Inception (10/21/94) through 9/30/98 +5.12 +5.12
[FN]
*Maximum contingent deferred sales charge is 1% and reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Class D Shares* Sales Charge Sales Charge**
Year Ended 9/30/98 +4.77% +3.73%
Inception (10/21/94) through 9/30/98 +5.28 +5.01
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
Florida Limited Maturity
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
Year Ended 9/30/98 +4.71% +3.66%
Inception (11/26/93) through 9/30/98 +4.29 +4.07
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
% Return % Return
Class B Shares* Without CDSC With CDSC**
Year Ended 9/30/98 +4.34% +3.34%
Inception (11/26/93) through 9/30/98 +3.92 +3.92
[FN]
*Maximum contingent deferred sales charge is 1% and reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Class C Shares* Without CDSC With CDSC**
Year Ended 9/30/98 +4.13% +3.13%
Inception (10/21/94) through 9/30/98 +4.42 +4.42
[FN]
*Maximum contingent deferred sales charge is 1% and reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Class D Shares* Sales Charge Sales Charge**
Year Ended 9/30/98 +4.61% +3.56%
Inception (10/21/94) through 9/30/98 +4.92 +4.65
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
PORTFOLIO COMPOSITION
For the Quarter Ended October 31, 1998
California
Limited Maturity
Municipal
Bond Fund
Distribution by Market Sector*
General Obligations & Tax Revenue Bonds 20.9%
Prerefunded Bonds** 13.9
Other Revenue Bonds 65.2
------
Total 100.0%
======
Net assets as of October 31, 1998 were $10,740,002.
Quality Ratings*
(Based on Nationally Recognized Rating Services)
AAA/Aaa 56%
AA/Aa 35%
A/A 3%
Other++ 6%
[FN]
*Based on total market value of the portfolio as of October 31,
1998.
**Backed by a fund holding US Treasury or other high-quality
securities.
++Temporary investments in short-term municipal securities.
Florida
Limited Maturity
Municipal
Bond Fund
Distribution by Market Sector*
Prerefunded Bonds** 22.2%
General Obligations & Tax Revenue Bonds 18.2
Utility Revenue Bonds 10.8
Other Revenue Bonds 48.8
------
Total 100.0%
======
Net assets as of October 31, 1998 were $19,407,269.
Quality Ratings*
(Based on Nationally Recognized Rating Services)
AAA/AAA 70%
AA/AA 24%
A/A 6%
[FN]
*Based on total market value of the portfolio as of October 31,
1998.
**Backed by a fund holding US Treasury or other high-quality
securities.
