As filed with the Securities and Exchange Commission on October 18, 1994
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Post-Effective Amendment No. 19 /X/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 18 /X/
(Check appropriate box or boxes)
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Merrill Lynch Municipal Bond Fund, Inc.
(Exact name of registrant as specified in charter)
P.O. Box 9011
Princeton, New Jersey 08543-9011
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (609) 282-2000
ARTHUR ZEIKEL
Merrill Lynch Municipal Bond Fund, Inc.
P.O. Box 9011, Princeton, New Jersey 08543-9011
(Name and address of agent for service)
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PHILIP L. KIRSTEIN, Esq. LEONARD B. MACKEY, Jr., Esq.
Fund Asset Management Rogers & Wells
P.O. Box 9011, Princeton, New Jersey 08543-9011 200 Park Avenue,
New York, N.Y. 10166
It is proposed that this filing will become effective
(check appropriate box)
/ / immediately upon filing pursuant If appropriate, check the following
to paragraph (b) box:
/X/ on October 21, 1994 pursuant to / / this post-effective amendment
paragraph (b) designates a new effective date
/ / 60 days after filing pursuant to for a previously filed
paragraph (a) post-effective amendment.
/ / on (date) pursuant to paragraph
(a) of Rule 485.
/ / 75 days after filing pursuant to
paragraph (a)(ii)
/ / on (date) pursuant to paragraph
(a)(ii) of Rule 485.
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CALCULATION OF REGISTRATION FEE
Proposed Maximum
Amount of Proposed Maximum Aggregate Amount of
Title of Securities Shares Being Offering Price Offering Registration
Being Registered Registered Per Share Price Fee
- -----------------------------------------------------------------------------------------------------------------
Shares of Insured Portfolio Common
Stock, par value $0.10 per share 20,585,132 $8.06 165,916,164* $100
Shares of Limited Maturity Common
Stock, par value $0.10 per share.... 1,588,778 $9.91 15,744,789**
*The calculation of the maximum aggregate offering price is made as of October 14, 1994 pursuant to Rule 24e-2 under
the Investment Company Act of 1940. The total amount of Insured Portfolio Common Stock redeemed or repurchased during
the Registrant's previous fiscal year was 75,370,568. Of this amount 54,803,426 have been used for reductions pursuant to
Rule 24e-2(a) or Rule 24f-2(c) under the Investment Company Act of 1940 in previous filings during the Registrant's current
fiscal year. 20,567,142 shares of Insured Portfolio Common Stock redeemed during Registrant's previous fiscal year are
being used for the reduction of the registration fee in this post-effective amendment to the Registration Statement.
**The calculation of the maximum aggregate offering price is made as of October 14, 1994 pursuant to Rule 24e-2 under the
Investment Company Act of 1940. The total amount of shares of Limited Maturity Portfolio Common Stock redeemed or
repurchased during Registrant's previous fiscal year was 49,816,037. Of such amount 48,241,891 shares have been used
for reductions pursuant to Rule 24e-2(a) or Rule 24f-2(c) under the Investment Company Act of 1940 in previous filings
during Registrant's current fiscal year. 1,574,146 shares of Limited Maturity Common Stock redeemed during
Registrant's previous fiscal year are being used for the reduction of the registration fee in this post-effective
amendment to the Registration Statement.
The Registrant has registered an indefinite number of Class A and Class B Shares of the Insured Portfolio Series,
the Limited Maturity Portfolio Series, and the High Yield Portfolio Series Common Stock. The notice required by such rule
for the Registrant's most recent fiscal year was filed on August 23, 1994.
=============================================================================================================================
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MERRILL LYNCH MUNICIPAL BOND FUND
Cross Reference Sheet
Form
N-1A Item No. Location
---- --------------------------------------------------- --------
Part A
1. Cover Page........................................ Cover Page
2. Synopsis.......................................... Fee Table
3. Financial Highlights.............................. Financial Highlights; Additional
Information-Performance Data
4. General Description of Registrant................. Investment Objective and Policies;
Investment Policies of the Portfolios
5. Management of the Fund ........................... Fee Table; Investment Adviser;
Directors; Portfolio Transactions;
Additional Information
6. Capital Stock and Other Securities................ Cover Page; Dividends, Distributions and
Taxes; Additional Information
7. Purchase of Securities Being Offered.............. Cover Page; Merrill Lynch Select Pricing SM
System; Fee Table; Purchase of Shares;
Net Asset Value
8. Redemption or Repurchase.......................... Merrill Lynch Select Pricing SM System; Fee Table;
Redemption of Shares; Shareholder Services
9. Pending Legal Proceedings......................... *
Location
--------
Part B
10. Cover Page........................................ Cover Page
11. Table of Contents................................. Table of Contents
12. General Information and History................... *
13. Investment Objectives and Policies................ Investment Objective and Policies;
Investment Restrictions
14. Management of the Fund............................ Management of the Fund
15. Control Persons and Principal Holders of
Securities....................................... Management of the Fund
16. Investment Advisory and Other Services............ Management of the Fund; Purchase of Shares
17. Brokerage Allocation and Other Practices.......... Portfolio Transactions and Brokerage;
Financial Statements
18. Capital Stock and Other Securities................ Additional Information
19. Purchase, Redemption and Pricing of
Securities Being Offered......................... Purchase of Shares; Net Asset Value,
Redemption of Shares;
Systematic Withdrawal Plans;
Exchange Privilege; Additional Information
20. Tax Status........................................ Dividends, Distribution and Taxes
21. Underwriters...................................... Distributor
22. Calculations of Performance Data.................. Performance Data
23. Financial Statements.............................. Financial Statements
Part C
Information required to be included in Part C is set forth under the appropriate Item, so numbered, in
Part C to this Registration Statement.
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* Item inapplicable or answer negative.
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PROSPECTUS
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October 21, 1994
Merrill Lynch Municipal Bond Fund, Inc.
P.O. Box 9011, Princeton, New Jersey 08543-9011 - Phone No. (609) 282-2800
Merrill Lynch Municipal Bond Fund, Inc. (the "Fund") is a
professionally managed, diversified, open-end investment company which
seeks to provide shareholders with as high a level of income exempt from
Federal income taxes as is consistent with the investment policies of each
of its Portfolios and prudent investment management. The Fund is a series
fund and is comprised of three separate Portfolios, each of which invests
primarily in a diversified portfolio of tax-exempt Municipal Bonds,
principally consisting of state, municipal and public authority
securities. Each of the Portfolios pursues its investment objective
through the separate investment policies described below:
Insured Portfolio invests primarily in long-term, investment grade
Municipal Bonds, each of which is covered by portfolio insurance
guaranteeing the timely payment of principal at maturity and interest.
National Portfolio invests primarily in long-term medium to lower
grade Municipal Bonds offering higher yields than the Insured Portfolio
but also subject to greater risks than investment grade Municipal Bonds.
Limited Maturity Portfolio invests in a portfolio primarily of
investment grade Municipal Bonds with a maximum maturity not to exceed
four years and, depending on market conditions, an average maturity of
less than two years is anticipated. The Limited Maturity Portfolio can be
expected to offer the lowest yield of the three Portfolios, but it will be
subject to less market risk than the longer-term Portfolios.
Each Portfolio is, in effect, a separate fund issuing its own shares.
Pursuant to the Merrill Lynch Select Pricing SM System, each Portfolio of
the Fund offers four classes of shares, each with a different combination
of sales charges, ongoing fees and other features. Class C shares of the
Limited Maturity Portfolio are available only through the Exchange
Privilege. The Merrill Lynch Select Pricing System permits an investor to
choose the method of purchasing shares that the investor believes is most
beneficial given the amount of the purchase, the length of time the
investor expects to hold the shares and other relevant circumstances. See
"Merrill Lynch Select Pricing SM System" on page 8.
Class A and Class D shares of the Fund's Portfolios may be purchased
directly from Merrill Lynch Funds Distributor, Inc. ("the Distributor"),
P.O. Box 9011, Princeton, New Jersey 08543-9011 (609 282-2800), or from
securities dealers which have entered into selected dealer agreements with
the Distributor, including Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch"). Class B and Class C shares of the Fund's
Portfolios may only be purchased either directly from the Distributor or
Merrill Lynch. See "Purchase of Shares" below. The minimum initial
purchase for shares of each Portfolio is $1,000, and the minimum
subsequent purchase in each Portfolio is $50. Merrill Lynch may charge its
customers a processing fee (presently $4.85) for confirming purchases and
repurchases. Purchases and redemptions directly through the Fund's
transfer agent are not subject to the processing fee. See "Purchase of
Shares" and "Redemption of Shares." The net investment income of each
Portfolio is declared daily and paid monthly.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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This Prospectus sets forth in concise form the information about the
Fund that a prospective investor should know before investing in the Fund.
Investors should read and retain this Prospectus for future reference.
Additional information about the Fund has been filed with the Securities
and Exchange Commission in a Statement of Additional Information, dated
October 21, 1994, and is available upon request and without charge, by
calling or writing the Fund at the address and telephone number set forth
above. The Statement of Additional Information is hereby incorporated by
reference into this Prospectus.
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Fund Asset Management - Investment Adviser
Merrill Lynch Funds Distributor, Inc. - Distributor
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Insured Portfolio
FEE TABLE
A general comparison of the sales arrangements and other nonrecurring
and recurring expenses applicable to shares of the Fund follows:
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Class A(a) Class B(b) Class C(c) Class D(c)
------------ ---------- ---------- ----------
Shareholder Transaction Expenses:
Maximum Sales Charge Imposed on
Purchases (as a percentage of offering
price)................................ 4.00%(d) None None 4.00%(d)
Sales Charge Imposed on Dividend
Reinvestments......................... None None None None
Deferred Sales Charge (as a percentage
of original purchase price or redemption
proceeds, whichever is lower).......... None(e) 4.0% during 1% for one None(e)
the first year, year
decreasing 1.0%
annually thereafter
to 0.0% after
the fourth year
Exchange Fee............................ None None None None
Annual Fund Operating Expenses (as a
percentage of average net assets)(f)....
Management Fees(g)....................... 0.36% 0.36% 0.36% 0.36%
12b-1 Fees(h):
Account Maintenance Fees............... None 0.25% 0.25% 0.25%
Distribution Fees...................... None 0.50% 0.55% None
(Class B shares
convert to Class D
shares automatically
after approximately
ten years and
cease being subject
to distribution fees)
Other Expenses
Custodial Fees.......................... 0.01% 0.01% 0.01% 0.01%
Shareholder Servicing Costs(i).......... 0.03% 0.03% 0.03% 0.03%
Other................................... 0.02% 0.02% 0.02% 0.02%
----- ----- ----- -----
Total Other Expenses.................. 0.06% 0.06% 0.06% 0.06%
----- ----- ----- -----
Total Fund Operating Expenses............. 0.42% 1.17% 1.22% 0.67%
===== ===== ===== =====
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EXAMPLE:
Cumulative Expenses Paid for the Period of:
------------------------------------------------
1 Year 3 Years 5 Years 10 Years
--------- --------- --------- ---------
An investor would pay the following expenses on a $1,000
investment including the maximum $40 initial sales charge
(Class A and Class D shares only) and assuming (1) the
Total Fund Operating Expenses for each class set forth
above; (2) a 5% annual return throughout the periods and
(3) redemption at the end of the period:
Class A................................................... $44 $53 $63 $ 91
Class B................................................... $52 $57 $64 $142
Class C................................................... $22 $39 $67 $148
Class D................................................... $47 $61 $76 $120
An investor would pay the following expenses on the same
$1,000 investment assuming no redemption at the end of the
period:
Class A................................................... $44 $53 $63 $ 91
Class B................................................... $12 $37 $64 $142
Class C................................................... $12 $39 $67 $148
Class D................................................... $47 $61 $76 $120
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The foregoing Fee Table is intended to assist investors in understanding the costs and expenses that a shareholder in the Fund will bear directly or indirectly. The Example set forth above assumes reinvestment of all dividends and distributions and utilizes a 5% annual rate of return as mandated by Securities and Exchange Commission regulations. The Example should not be considered a representation of past or future expenses or annual rates of return, and actual expenses or annual rates of return may be more or less than those assumed for purposes of the Example. Class B and Class C shareholders who hold their shares for an extended period of time may pay more in Rule 12b-1 distribution fees than the economic equivalent of the maximum front-end sales charges permitted under the Rules of Fair Practice of the National Association of Securities Dealers, Inc. ("NASD"). Merrill Lynch may charge its customers a processing fee (presently $4.85) for confirming purchases and redemptions. Purchases and redemptions directly through the Fund's transfer agent are not subject to the processing fee. See "Purchase of Shares" and "Redemption of Shares."
National Portfolio
FEE TABLE
A general comparison of the sales arrangements and other nonrecurring and recurring expenses applicable to shares of the Fund follows:
Class A(a) Class B(b) Class C(c) Class D(c)
---------- ---------- ---------- ----------
Shareholder Transaction Expenses:
Maximum Sales Charge Imposed on
Purchases (as a percentage of offering
price)................................ 4.00%(d) None None 4.00%(d)
Sales Charge Imposed on Dividend
Reinvestments......................... None None None None
Deferred Sales Charge (as a percentage
of original purchase price or
redemption proceeds, whichever is
lower)................................ None(e) 4.0% during 1% for one None(e)
the first year, year
decreasing 1.0%
annually thereafter
to 0.0% after
the fourth year
Exchange Fee............................ None None None None
Annual Fund Operating Expenses (as a
percentage of average net assets)(f)....
Investment Advisory Fees(g).............. 0.48% 0.48% 0.48% 0.48%
12b-1 Fees(h):
Account Maintenance Fees............... None 0.25% 0.25% 0.25%
Distribution Fees...................... None 0.50% 0.55% None
(Class B shares
convert to Class D
shares automatically
after approximately
ten years and
cease being subject
to distribution fees)
Other Expenses
Custodial Fees.......................... 0.01% 0.01% 0.01% 0.01%
Shareholder Servicing Costs(i).......... 0.04% 0.04% 0.04% 0.04%
Other................................... 0.02% 0.02% 0.02% 0.02%
----- ------ ----- -----
Total Other Expenses.................. 0.07% 0.07% 0.07% 0.07%
----- ------ ----- -----
Total Fund Operating Expenses............. 0.55% 1.30% 1.35% 0.80%
===== ===== ===== =====
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EXAMPLE:
Cumulative Expenses Paid for the Period of:
---------------------------------------------
1 Year 3 Years 5 Years 10 Years
-------- --------- --------- ----------
An investor would pay the following expenses on a $1,000
investment including the maximum $40 initial sales charge
(Class A and Class D shares only) and assuming (1) the
Total Fund Operating Expenses for each class set forth
above; (2) a 5% annual return throughout the periods and
(3) redemption at the end of the period:
Class A................................................... $45 $57 $70 $106
Class B................................................... $53 $61 $71 $157
Class C................................................... $24 $43 $74 $162
Class D................................................... $48 $65 $83 $135
An investor would pay the following expenses on the same
$1,000 investment assuming no redemption at the end of the
period:
Class A................................................... $45 $57 $70 $106
Class B................................................... $13 $41 $71 $157
Class C................................................... $14 $43 $74 $162
Class D................................................... $48 $65 $83 $135
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The foregoing Fee Table is intended to assist investors in understanding the costs and expenses that a shareholder in the Fund will bear directly or indirectly. The Example set forth above assumes reinvestment of all dividends and distributions and utilizes a 5% annual rate of return as mandated by Securities and Exchange Commission regulations. The Example should not be considered a representation of past or future expenses or annual rates of return, and actual expenses or annual rates of return may be more or less than those assumed for purposes of the Example. Class B and Class C shareholders who hold their shares for an extended period of time may pay more in Rule 12b-1 distribution fees than the economic equivalent of the maximum front-end sales charges permitted under the Rules of Fair Practice of the National Association of Securities Dealers, Inc. ("NASD"). Merrill Lynch may charge its customers a processing fee (presently $4.85) for confirming purchases and redemptions. Purchases and redemptions directly through the Fund's transfer agent are not subject to the processing fee. See "Purchase of Shares" and "Redemption of Shares."
Limited Maturity
FEE TABLE
A general comparison of the sales arrangements and other nonrecurring and recurring expenses applicable to shares of the Fund follows:
Class A(a) Class B(b) Class C(c)* Class D(c)
---------- ---------- ------------ ----------
Shareholder Transaction Expenses:
Maximum Sales Charge Imposed on
Purchases (as a percentage of offering
price)................................ 1.00%(d) None None 1.00%(d)
Sales Charge Imposed on Dividend
Reinvestments......................... None None None None
Deferred Sales Charge (as a percentage
of original purchase price or
redemption
proceeds, whichever is lower).......... None(e) 1.0% during 1% for one None(e)
the first year, year
decreasing to 0.0% after
the first year
Exchange Fee............................ None None None None
Annual Fund Operating Expenses (as a
percentage of average net assets)(f)....
Investment Advisory Fee(g)............... 0.33% 0.33% 0.33% 0.33%
12b-1 Fees(h):
Account Maintenance Fees.............. None 0.15% 0.15% 0.10%
Distribution Fees..................... None 0.20% 0.20% None
(Class B shares
convert to Class D
shares automatically
after approximately
ten years and
cease being subject
to distribution fees)
Other Expenses
Custodial Fees.......................... 0.01% 0.01% 0.01% 0.01%
Shareholder Servicing Costs(i).......... 0.02% 0.03% 0.03% 0.02%
Other................................... 0.04% 0.04% 0.04% 0.04%
----- ----- ----- -----
Total Other Expenses.................. 0.07% 0.08% 0.08% 0.07%
----- ----- ----- -----
Total Fund Operating Expenses............. 0.40% 0.76% 0.76% 0.50%
===== ===== ===== =====
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EXAMPLE:
Cumulative Expenses Paid for the Period of:
--------------------------------------------
1 Year 3 Years 5 Years 10 Years
-------- --------- --------- ----------
An investor would pay the following expenses on a $1,000
investment including the maximum $10 initial sales charge
(Class A and Class D shares only) and assuming (1) the
Total Fund Operating Expenses for each class set forth
above; (2) a 5% annual return throughout the periods and
(3) redemption at the end of the period:
Class A................................................... $14 $23 $32 $60
Class B................................................... $18 $24 $42 $94
Class C*.................................................. $18 $24 $42 $94
Class D................................................... $15 $26 $38 $72
An investor would pay the following expenses on the same
$1,000 investment assuming no redemption at the end of the
period:
Class A................................................... $14 $23 $32 $60
Class B................................................... $ 8 $24 $42 $94
Class C*.................................................. $ 8 $24 $42 $94
Class D................................................... $15 $26 $38 $72
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The foregoing Fee Table is intended to assist investors in understanding the costs and expenses that a shareholder in the Fund will bear directly or indirectly. The Example set forth above assumes reinvestment of all dividends and distributions and utilizes a 5% annual rate of return as mandated by Securities and Exchange Commission regulations. The Example should not be considered a representation of past or future expenses or annual rates of return, and actual expenses or annual rates of return may be more or less than those assumed for purposes of the Example. Class B and Class C shareholders who hold their shares for an extended period of time may pay more in Rule 12b-1 distribution fees than the economic equivalent of the maximum front-end sales charges permitted under the Rules of Fair Practice of the National Association of Securities Dealers, Inc. ("NASD"). Merrill Lynch may charge its customers a processing fee (presently $4.85) for confirming purchases and redemptions. Purchases and redemptions directly through the Fund's transfer agent are not subject to the processing fee. See "Purchase of Shares" and "Redemption of Shares."
MERRILL LYNCH SELECT PRICING SM SYSTEM
Each Portfolio of the Fund offers four classes of shares under the Merrill Lynch Select Pricing SM System. The shares of each class may be purchased at a price equal to the next determined net asset value per share subject to the sales charges and ongoing fee arrangements described below. Shares of Class A and Class D are sold to investors choosing the initial sales charge alternatives, and shares of Class B and for the Insured and National Portfolios only Class C are sold to investors choosing the deferred sales charge alternatives. Class C shares of the Limited Maturity Portfolio are offered only through the exchange privlege and may not be purchased except through exchange of Class C shares of another Portfolio or another Fund. The Merrill Lynch Select Pricing SM System is used by more than 50 mutual funds advised by Merrill Lynch Asset Management, L.P. ("MLAM") or its affiliate, Fund Asset Management, L.P. ("FAM" or the "Investment Adviser"). Funds advised by MLAM or FAM are referred to herein as "MLAM-advised mutual funds."
Each Class A, Class B, Class C or Class D share of one of the Fund's Portfolios represents an identical interest in the investment portfolio of the applicable Portfolio and has the same rights, except that Class B, Class C and Class D shares bear the expenses of the ongoing account maintenance fees and Class B and Class C shares bear the expenses of the ongoing distribution fees and the additional incremental transfer agency costs resulting from the deferred sales charge arrangements. The deferred sales charges and account maintenance fees that are imposed on Class B and Class C shares of a Portfolio, as well as the account maintenance fees that are imposed on the Class D shares, will be imposed directly against those classes and not against all assets of the relevant Portfolio and, accordingly, such charges will not affect the net asset value of any other class or have any impact on investors choosing another sales charge option. Dividends paid by a Portfolio for each class of shares will be calculated in the same manner at the same time and will differ only to the extent that account maintenance and distribution fees and any incremental transfer agency costs relating to a particular class are borne exclusively by that class. Each class has different exchange privileges. See "Shareholder Services-Exchange Privilege."
Investors should understand that the purpose and function of the initial sales charges with respect to the Class A and Class D shares are the same as those of the deferred sales charges with respect to the Class B and Class C shares in that the sales charges applicable to each class provide for the financing of the distribution of the shares of the Fund. The distribution-related revenues paid with respect to a class will not be used to finance the distribution expenditures of another class. Sales personnel may receive different compensation for selling different classes of shares.
The following table sets forth a summary of the distribution arrangements for each class of shares under the Merrill Lynch Select Pricing SM System, followed by a more detailed description of each class and a discussion of the factors that investors should consider in determining the method of purchasing shares under the Merrill Lynch Select Pricing SM System that the investor believes is most beneficial under his particular circumstances. More detailed information as to each class of shares is set forth under "Purchase Shares."
Insured and National Portfolios
- -----------------------------------------------------------------------------------------------------------------
Account
Maintenance Distribution Conversion
Class Sales Charge (1) Fee Fee Feature
- -----------------------------------------------------------------------------------------------------------------
Maximum 4.00% initial sales
A charge (2),(3) No No No
- -----------------------------------------------------------------------------------------------------------------
B CDSC for a period of 4 0.25% 0.50% B shares convert to D
years, at a rate of 4.0% during shares automatically
the first year, decreasing after approximately
1.0% annually to 0.0% ten years (4)
- -----------------------------------------------------------------------------------------------------------------
C 1.0% CDSC for one year 0.25% 0.55% No
decreasing to 0.0% after
the first year
- -----------------------------------------------------------------------------------------------------------------
D Maximum 4.00% initial sales 0.25% No No
charge (3)
- -----------------------------------------------------------------------------------------------------------------
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Limited Maturity Portfolio
- -----------------------------------------------------------------------------------------------------------------
Account
Maintenance Distribution Conversion
Class Sales Charge (1) Fee Fee Feature
- -----------------------------------------------------------------------------------------------------------------
Maximum 1.00% initial sales
A charge (2),(3) No No No
- -----------------------------------------------------------------------------------------------------------------
B CDSC at a rate of 1.00% 0.15% 0.20% B shares convert to D
during the first year, shares automatically
decreasing to 0.0% after the first year after approximately
ten years (4)
- -----------------------------------------------------------------------------------------------------------------
C (5) 1.0% CDSC for one year 0.15% 0.20% No
decreasing to 0.00% after the first year
- -----------------------------------------------------------------------------------------------------------------
D Maximum 1.00% initial sales 0.10% No No
charge (3)
- -----------------------------------------------------------------------------------------------------------------
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(2) Offered only to eligible investors. See "Purchase of Shares-Initial Sales Charge Alternatives-Class A and Class D Shares-Eligible Class A Investors."
(3) Reduced for purchases of $25,000 or more for the Insured and National Portfolios and $100,000 or more for the Limited Maturity Portfolio. Class A and Class D share purchases of $1,000,000 or more will not be subject to an initial sales charge but instead will be subject to a 1.0% CDSC for the Insured and National Portfolios and a .20% CDSC for the Limited Maturity Portfiolio, for one year. See "Class A" and "Class D" below.
(4) The conversion period for dividend reinvestment shares is modified. Also, Class B shares of certain other MLAM-advised mutual funds into which exchanges may be made have a eight year conversion period. If Class B shares of the Fund are exchanged for Class B shares of another MLAM-advised mutual fund, the conversion period applicable to the Class B shares acquired in the exchange will apply, and the holding period for the shares exchanged will be tacked onto the holding period for the shares acquired.
(5) Class C shares of the Limited Maturity Portfolio are available only through the Exchange Privilege. See p. 42.
Class A: Class A shares incur an initial sales charge when they are
purchased and bear no ongoing distribution or account maintenance
fees. Class A shares are offered to a limited group of investors and
also will be issued upon reinvestment of dividends on outstanding
Class A shares. Investors that currently own Class A shares in a
shareholder account are entitled to purchase additional Class A
shares in that account. Other eligible investors include
participants in certain investment programs. In addition, Class A
shares will be offered to Merrill Lynch & Co., Inc. and its
subsidiaries (including MLAM) (the term "subsidiaries," when used
herein with respect to Merrill Lynch & Co., Inc., includes MLAM, FAM
and certain other entities indirectly by wholly-owned and controlled
by Merrill Lynch & Co., Inc.) and their directors and employees and
to members of the Boards of MLAM-advised mutual funds. The maximum
initial sales charge is 4.00% for the Insured and National
Portfolios and 1.00% for the Limited Maturity Portfolio and is
reduced for purchases of $25,000 and over for the Insured and
National Portfolios and for purchases of $100,000 or over for the
Limited Maturity Portfolio. Purchases of $1,000,000 or more will not
be subject to an initial sales charge but such purchases will be
subject to a CDSC of 1.0% if the shares are redeemed within one
year after purchase. Sales charges also are reduced under a right
of accumulation which takes into account the investors's holdings
of all classes of all MLAM-advised mutual funds. See "Purchase of
Shares-Initial Sales Charge Alternatives-Class A and Class
D Shares."
Class B: Class B shares do not incur a sales charge when they are
purchased, but they are subject to an ongoing account maintenance
fee of 0.25% (in the case of the Insured Portfolio and the National
Portfolio) and 0.15% (in the case of the Limited Maturity Portfolio)
of the Portfolio's average net assets attributable to the Class B
shares, an ongoing distribution fee of 0.50% (in the case of the
Insured Portfolio and the National Portfolio) and 0.20% (in the case
of the Limited Maturity Portfolio) of the Portfolio's average net
assets attributable to Class B shares and a CDSC if they are
redeemed within four years of purchase (in the case of the Insured
Portfolio and National Portfolio) and within one year of purchase
(in the case of the Limited Maturity Portfolio). Approximately ten
years after issuance, Class B shares of the Portfolio will convert
automatically into Class D shares of the Portfolio, which are
subject to an account maintenance fee but no distribution fee; Class
B shares of certain other MLAM-advised mutual funds into which
exchanges may be made convert into Class D shares automatically
after approximately eight years. If Class B shares of a Portfolio
are exchanged for Class B shares of another MLAM-advised mutual
fund, the conversion period applicable to the Class B shares
acquired in the exchange will apply, and the holding period for the
shares exchanged will be tacked onto the holding period for the
shares acquired. Automatic conversion of Class B shares into Class D
shares will occur at least once a month on the basis of the relative
net asset values of the shares of the two classes on the conversion
date, without the imposition of any sales load, fee or other charge.
Conversion of Class B shares to Class D shares will not be deemed a
purchase or sale of the shares for
|
Federal income tax purposes. Shares purchased through reinvestment of dividends on Class B shares also will convert automatically to Class D shares. The conversion period for dividend reinvestment shares is modified as described under "Purchase of Shares-Deferred Sales Charge Alternatives-Class B and Class C Shares-Conversion of Class B Shares to Class D Shares."
Class C: Class C shares do not incur a sales charge when they are purchased, but they are subject to an ongoing account maintenance fee of 0.25% (in the case of the Insured Portfolio and the National Portfolio) and 0.15% (in the case of the Limited Maturity Portfolio) of average net assets and an ongoing distribution fee of 0.55% (in the case of the Insured Portfolio and the National Portfolio) and 0.20% (in the case of the Limited Maturity Portfolio) of average net assets. Class C shares are also subject to a CDSC if they are redeemed within one year of purchase. Although Class C shares are subject to a 1.0% CDSC for only one year (as compared to four years for Class B of the Insured Portfolio and National Portfolio), Class C shares have no conversion feature and, accordingly, an investor that purchases Class C shares will be subject to distribution fees that will be imposed on Class C shares for an indefinite period subject to annual approval by the Fund's Board of Directors and regulatory limitations. Class C shares of the Limited Maturity Portfolio are available only through the Exchange Privilege. See p. 42.
Class D: Class D shares incur an initial sales charge when they are purchased and are subject to an ongoing account maintenance fee of 0.25% (in the case of the Insured Portfolio and the National Portfolio) and 0.10% (in the case of the Limited Maturity Portfolio) of average net assets. Class D shares are not subject to an ongoing distribution fee or any CDSC when they are redeemed. Purchases of $1,000,000 or more will not be subject to an initial sales charge but such purchase will be subject to a CDSC of 1% if the shares are redeemed within one year after purchase. The schedule of initial sales charges and reductions for Class D shares is the same as the schedule for Class A shares. Class D shares also will be issued upon conversion of Class B shares as described above under "Class B." See "Purchase of Shares-Initial Sales Charge Alternatives-Class A and Class D Shares."
The following is a discussion of the factors that investors should consider in determining the method of purchasing shares under the Merrill Lynch Select Pricing SM System that the investor believes is most beneficial under his particular circumstances.
Initial Sales Charge Alternatives. Investors who prefer an initial sales charge alternative may elect to purchase Class D shares or, if an eligible investor, Class A shares. Investors choosing the initial sales charge alternative who are eligible to purchase Class A shares should purchase Class A shares rather than Class D shares because of the account maintenance fee imposed on Class D shares. Investors qualifying for significantly reduced initial sales charges may find the initial sales charge alternative particularly attractive because similar sales charge reductions are not available with respect to the deferred sales charges imposed in connection with purchases of Class B or Class C shares. Investors not qualifying for reduced initial sales charges who expect to maintain their investment for an extended period of time also may elect to purchase Class A or Class D shares, because over time the accumulated ongoing account maintenance and distribution fees on Class B or Class C shares may exceed the initial sales charge and, in the case of Class D shares, the account maintenance fee. Although some investors that previously purchased Class A shares may no longer be eligible to purchase Class A shares of other MLAM-advised mutual funds, those previously purchased Class A shares, together with Class B, Class C and Class D share holdings, will count toward a right of accumulation which may qualify the investor for reduced initial sales charges on new initial sales charge purchases. In addition, the ongoing Class B
and Class C account maintenance and distribution fees will cause Class B and Class C shares to have higher expense ratios, pay lower dividends and have lower total returns than the initial sales charge shares. The ongoing Class D account maintenance fees will cause Class D shares to have a higher expense ratio, pay lower dividends and have a lower total return than Class A shares.
Deferred Sales Charge Alternatives. Because no initial sales charges are deducted at the time of purchase, Class B and Class C shares provide the benefit of putting all of the investor's dollars to work from the time the investment is made. The deferred sales charge alternatives may be particularly appealing to investors who do not qualify for a reduction in initial sales charges. Both Class B and Class C shares are subject to ongoing account maintenance fees and distribution fees; however, the ongoing account maintenance and distribution fees potentially may be offset to the extent any return is realized on the additional funds initially invested in Class B or Class C shares. In addition, Class B shares of a Portfolio will be converted into Class D shares of that Portfolio after a conversion period of approximately ten years, and thereafter investors will be subject to lower ongoing fees.
Certain investors may elect to purchase Class B shares if they determine it to be most advantageous to have all their funds invested initially and intend to hold their shares for an extended period of time. Investors in Class B shares should take into account whether they intend to redeem their shares within the CDSC period and, if not, whether they intend to remain invested until the end of the conversion period and thereby take advantage of the reduction in ongoing fees resulting from the conversion into Class D shares. Other investors, however, may elect to purchase Class C shares if they determine that it is advantageous to have all their assets invested initially and they are uncertain as to the length of time they intend to hold their assets in MLAM-advised mutual funds. Although Class C shareholders are subject to a shorter CDSC period at a lower rate, they forgo the Class B conversion feature, making their investment subject to account maintenance and distribution fees for an indefinite period of time. In addition, while both Class B and Class C distribution fees are subject to the limitations on asset-based sales charges imposed by the NASD, the Class B distribution fees are further limited under a voluntary waiver of asset-based sales charges. See "Purchase of Shares-Limitations on the Payment of Deferred Sales Charges."
FINANCIAL HIGHLIGHTS
The financial information in the table below in connection with shares of the Insured Portfolio, National Portfolio and the Limited Maturity Portfolio has been audited in conjunction with the audits of the financial statements of the Portfolios by Deloitte & Touche LLP, independent auditors. Financial statements for the year ended June 30, 1994 and the independent auditors' report thereon are included in the Statement of Additional Information. Financial information is not presented for Class C or Class D shares, since no shares of those classes are publicly issued as of the date of this Prospectus. Further information about the performance of the Fund is contained in the Fund's most recent annual report to shareholders which may be obtained, without charge, by calling or by writing the Fund at the telephone number or address on the front cover of this Prospectus.
Insured Portfolio
---------------------------------------------------------------------------------------------------
Class A
---------------------------------------------------------------------------------------------------
THE FOLLOWING PER SHARE
DATA AND RATIOS HAVE
BEEN DERIVED FROM
INFORMATION PROVIDED
IN THE FINANCIAL
STATEMENTS:
INCREASE (DECREASE) IN NET For the Year Ended June 30,
----------------------------------------------------------------------------------------------
ASSET VALUE: 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ----
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period.... $ 8.64 $ 8.26 $ 7.92 $ 7.86 $ 7.97 $ 7.69 $ 7.79 $ 7.84
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Investment income-net... .47 .50 .52 .54 .55 .58 .57 .60
Realized and unrealized
gain (loss) on
investments-net....... (.53) .49 .41 .12 (.11) .28 .00 (.04)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total from investment
operations............ (.06) .99 .93 .66 .44 .86 .57 .56
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Less dividends and
distributions:
Investment income-net. (.47) (.50) (.52) (.54) (.55) (.58) (.57) (.60)
Realized gains on
investments-net...... (.23) (.11) (.07) (.06) - - (.10) (.01)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total dividends and
distributions........ (.70) (.61) (.59) (.60) (.55) (.58) (.67) (.61)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value,
end of period......... $ 7.88 $ 8.64 $ 8.26 $ 7.92 $ 7.86 $ 7.97 $ 7.69 $ 7.79
========== ========== ========== ========== ========== ========== ========== ==========
TOTAL INVESTMENT RETURN:**
Based on net asset
value per share...... (1.08%) 12.43% 12.11% 8.84% 5.76% 11.62% 7.75% 6.94%
========== ========== ========== ========== ========== ========== ========== ==========
RATIOS TO AVERAGE NET
ASSETS:
Expenses, excluding
distribution fees... .42% .42% .44% .45% .46% .49% .52% .57%
========== ========== ========== ========== ========== ========== ========== ==========
Expenses................ .42% .42% .44% .45% .46% .49% .52% .57%
========== ========== ========== ========== ========== ========== ========== ==========
Investment income-net... 5.53% 5.94% 6.44% 6.90% 7.03% 7.46% 7.55% 7.21%
========== ========== ========== ========== ========== ========== ========== ==========
SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands)......... $1,941,741 $2,225,188 $2,062,591 $1,984,307 $2,019,166 $2,013,219 $1,982,997 $2,238,480
========== ========== ========== ========== ========== ========== ========== ==========
Portfolio turnover...... 28.34% 43.86% 22.50% 33.12% 23.20% 45.49% 33.98% 63.55%
========== ========== ========== ========== ========== ========== ========== ==========
|
Insured Portfolio
------------------------------------------------------------------------------------------------
Class A Class B
------------------------- ------------------------------------------------------------------
THE FOLLOWING PER SHARE
DATA AND RATIOS HAVE
BEEN DERIVED FROM
INFORMATION PROVIDED For the
IN THE FINANCIAL Period
STATEMENTS: Oct. 21
INCREASE (DECREASE) IN NET For the Year 1988+ to
Ended June 30, For the Year Ended June 30, June 30,
------------------------ -------------------------------------------------------
ASSET VALUE: 1986 1985 1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ---- ----
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period.... $ 7.36 $ 6.61 $ 8.63 $ 8.26 $ 7.92 $ 7.86 $ 7.97 $ 7.81
---------- -------- -------- -------- -------- -------- -------- --------
Investment income-net... .63 .65 .40 .44 .46 .48 .49 .36
Realized and unrealized
gain (loss) on
investments-net....... .48 .75 (.53) .48 .41 .12 (.11) .16
---------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations............ 1.11 1.40 (.13) .92 .87 .60 .38 .52
---------- -------- -------- -------- -------- -------- -------- --------
Less dividends and
distributions:
Investment income-net. (.63) (.65) (.40) (.44) (.46) (.48) (.49) (.36)
Realized gains on
investments-net...... - - (.23) (.11) (.07) (.06) - -
---------- -------- -------- -------- -------- -------- -------- --------
Total dividends and
distributions........ (.63) (.65) (.63) (.55) (.53) (.54) (.49) (.36)
---------- -------- -------- -------- -------- -------- -------- --------
Net asset value,
end of period......... $ 7.84 $ 7.36 $ 7.87 $ 8.63 $ 8.26 $ 7.92 $ 7.86 $ 7.97
========== ========= ========== ========= ========= ========= ======== ========
TOTAL INVESTMENT RETURN:**
Based on net asset
value per share...... 15.62% 22.21% (1.81)% 11.45% 11.27% 8.02% 4.98% 6.88%#
========== ========= ========== ========= ========= ========= ======== ========
RATIOS TO AVERAGE NET
ASSETS:
Expenses, excluding
distribution fees... .60% .71% .42% .43% .44% .45% .47% .48%*
========== ========= ========== ========= ========= ========= ======== ========
Expenses................ .60% .71% 1.17% 1.18% 1.19% 1.20% 1.22% 1.23%*
========== ========= ========== ========= ========= ========= ======== ========
Investment income-net... 8.13% 9.30% 4.78% 5.17% 5.69% 6.13% 6.27% 6.58%*
========== ========= ========== ========= ========= ========= ======== ========
SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands)......... $1,741,727 $921,803 $866,193 $911,307 $706,016 $537,755 $408,641 $175,707
========== ========= ========== ========= ========= ========= ======== ========
Portfolio turnover...... 43.70% 47.28% 28.34% 43.86% 22.50% 33.12% 23.20% 45.49%
========== ========= ========== ========= ========= ========= ======== ========
|
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of Operations.
# Aggregate total investment return.
FINANCIAL HIGHLIGHTS - (Continued)
National Portfolio
--------------------------------------------------------------------------------------------------
Class A
--------------------------------------------------------------------------------------------------
THE FOLLOWING PER SHARE
DATA AND RATIOS HAVE
BEEN DERIVED FROM
INFORMATION PROVIDED
IN THE FINANCIAL
STATEMENTS:
INCREASE (DECREASE) IN NET For the Year Ended June 30,
----------------------------------------------------------------------------------------------------
ASSET VALUE: 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ----
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period... $ 11.02 $ 10.64 $ 10.17 $ 10.12 $ 10.31 $ 9.94 $ 10.12 $ 10.28
---------- ---------- ---------- ---------- ---------- --------- ---------- ----------
Investment income-net. .62 .67 .71 .73 .74 .77 .76 .80
Realized and unrealized
gain(loss) on
investments-net...... (.64) .57 .58 .05 (.19) .37 (.11) .02
---------- ---------- ---------- ---------- ---------- --------- ---------- ----------
Total from investment
operations........ (.02) 1.24 1.29 .78 .55 1.14 .65 .82
---------- ---------- ---------- ---------- ---------- --------- ---------- ----------
Less dividends and
distributions:
Investment income-net. (.62) (.67) (.71) (.73) (.74) (.77) (.76) (.80)
Realized gains on
investments-net...... (.30) (.19) (.11) - - - (.07) (.18)
---------- ---------- ---------- ---------- ---------- --------- ---------- ----------
Total dividends and
distributions....... (.92) (.86) (.82) (.73) (.74) (.77) (.83) (.98)
---------- ---------- ---------- ---------- ---------- --------- ---------- ----------
Net asset value,
end of period....... $ 10.08 $ 11.02 $ 10.64 $ 10.17 $ 10.12 $ 10.31 $ 9.94 $ 10.12
========== ========== ========== ========== ========== ========== ========== ==========
TOTAL INVESTMENT
RETURN:**
Based on net asset
value per share...... (0.47%) 12.21% 13.09% 7.94% 5.53% 11.89% 6.89% 8.00%
========== ========== ========== ========== ========== ========== ========== ==========
RATIOS TO AVERAGE NET
ASSETS:
Expenses, excluding
distribution fees... .55% .55% .55% .55% .55% .55% .55% .55%
========== ========== ========== ========== ========== ========== ========== ==========
Expenses.............. .55% .55% .55% .55% .55% .55% .55% .55%
========== ========== ========== ========== ========== ========== ========== ==========
Investment income-net. 5.72% 6.23% 6.80% 7.20% 7.27% 7.63% 7.79% 7.56%
========== ========== ========== ========== ========== ========== ========== ==========
SUPPLEMENTAL DATA:
Net assets, end of
period (in thousands) $1,203,181 $1,353,805 $1,278,055 $1,255,820 $1,365,541 $1,445,116 $1,467,982 $1,506,369
========== ========== ========== ========== ========== ========== ========== ==========
Portfolio turnover.... 73.33% 65.43% 50.94% 75.25% 48.80% 76.73% 72.77% 72.44%
========== ========== ========== ========== ========== ========== ========== ==========
|
FINANCIAL HIGHLIGHTS - (Continued)
National Portfolio
---------------------- --------------------------------------------------------------------------
Class A Class B
---------------------- --------------------------------------------------------------------------
THE FOLLOWING PER SHARE
DATA AND RATIOS HAVE
BEEN DERIVED FROM For the
INFORMATION PROVIDED Period
IN THE FINANCIAL Oct. 21,
STATEMENTS: For the Year 1988+ to
INCREASE (DECREASE) IN NET Ended June 30, For the Year Ended June 30, June 30,
------------------------ ------------------------------------------------------------- -----------
ASSET VALUE: 1986 1985 1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ---- ----
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period $ 9.57 $ 8.63 $ 11.02 $ 10.63 $ 10.16 $ 10.11 $ 10.30 $ 10.14
----------- ---------- ---------- ---------- ---------- --------- ---------- ----------
Investment income-net. .86 .90 .54 .59 .63 .65 .66 .48
Realized and unrealized
gain(loss) on
investments-net...... .71 .94 (.65) .58 .58 .05 (.19) .16
----------- ---------- ---------- ---------- ---------- --------- ---------- ----------
Total from investment
operations........ 1.57 1.84 (.11) 1.17 1.21 .70 .47 .64
----------- ---------- ---------- ---------- ---------- --------- ---------- ----------
Less dividends and
distributions:
Investment income-net. (.86) (.90) (.54) (.59) (.63) (.65) (.66) (.48)
Realized gains on
investments-net...... - - (.30) (.19) (.11) - - -
----------- ---------- ---------- ---------- ---------- --------- ---------- ----------
Total dividends and
distributions....... (.86) (.90) (.84) (.78) (.74) (.65) (.66) (.48)
----------- ---------- ---------- ---------- ---------- --------- ---------- ----------
Net asset value,
end of period....... $ 10.28 $ 9.57 $ 10.07 $ 11.02 $ 10.63 $ 10.16 $ 10.11 $ 10.30
========== ========== ========== ========== ========== ========== ========== ==========
TOTAL INVESTMENT
RETURN:**
Based on net asset
value per share...... 17.09% 22.36% (1.39)% 11.47% 12.25% 7.14% 4.74% 6.48%#
========== ========== ========== ========== ========== ========== ========== ==========
RATIOS TO AVERAGE NET
ASSETS:
Expenses, excluding
distribution fees... .56% .59% .55% .56% .56% .56% .56% .56%*
========== ========== ========== ========== ========== ========== ========== ==========
Expenses.............. .56% .59% 1.30% 1.31% 1.31% 1.31% 1.31% 1.31%*
========== ========== ========== ========== ========== ========== ========== ==========
Investment income-net. 8.41% 9.79% 4.97% 5.46% 6.03% 6.43% 6.52% 6.74%*
========== ========== ========== ========== ========== ========== ========== ==========
SUPPLEMENTAL DATA:
Net assets, end of
period (in thousands) $1,297,305 $617,764 $459,169 $424,071 $286,375 $213,581 $179,362 $97,196
========== ========== ========== ========== ========== ========== ========== ==========
Portfolio turnover.... 120.80% 85.18% 73.33% 65.43% 50.94% 75.25% 48.80% 76.73%
========== ========== ========== ========== ========== ========== ========== ==========
|
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of Operations.
# Aggregate total investment return.
FINANCIAL HIGHLIGHTS - (Concluded)
Limited Maturity Portfolio
--------------------------------------------------------------------
Class A
---------------------------------------------------------------------
THE FOLLOWING PER SHARE
DATA AND RATIOS HAVE
BEEN DERIVED FROM
INFORMATION PROVIDED
IN THE FINANCIAL
STATEMENTS:
INCREASE (DECREASE) IN NET For the Year Ended June 30,
--------------------------------------------------------------------
ASSET VALUE: 1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ----
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.... $ 10.01 $ 9.91 $ 9.75 $ 9.71 $ 9.73 $ 9.75
-------- -------- -------- -------- -------- --------
Investment income-net................... .37 .41 .50 .57 .60 .58
Realized and unrealized gain (loss) on
investments-net....................... (.14) .10 .16 .04 (.02) (.02)
-------- -------- -------- -------- -------- --------
Total from investment operations........ .23 .51 .66 .61 .58 .56
-------- -------- -------- -------- -------- --------
Less dividends and distributions:
Investment income-net.................. (.37) (.41) (.50) (.57) (.60) (.58)
Realized gain on investments-net....... - - - - - -
-------- -------- -------- -------- -------- --------
Total dividends and distributions....... (.37) (.41) (.50) (.57) (.60) (.58)
-------- -------- -------- -------- -------- --------
Net asset value, end of period.......... $ 9.87 $ 10.01 $ 9.91 $ 9.75 $ 9.71 $ 9.73
======== ======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN:**
Based on net asset value per share...... 2.30% 5.28% 6.93% 6.45% 6.16% 5.96%
======== ======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS:
Expenses, excluding distribution fees... .40% .41% .40% .40% .40% .41%
======== ======== ======== ======== ======== ========
Expenses................................ .40% .41% .40% .40% .40% .41%
======== ======== ======== ======== ======== ========
Investment income-net................... 3.68% 4.13% 5.02% 5.88% 6.21% 6.00%
======== ======== ======== ======== ======== ========
SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)............................ $790,142 $846,736 $613,407 $350,549 $352,005 $385,794
======== ======== ======== ======== ======== ========
Portfolio turnover...................... 45.67% 65.43% 96.32% 93.06% 106.44% 228.78%
======== ======== ======== ======== ======== ========
|
FINANCIAL HIGHLIGHTS - (Concluded)
Limited Maturity Portfolio
--------------------------------------------------------------------
Class A Class B
-------------------------------------------- ----------------------
THE FOLLOWING PER SHARE
DATA AND RATIOS HAVE
BEEN DERIVED FROM For the
INFORMATION PROVIDED For the Period
IN THE FINANCIAL Year Nov. 2,
STATEMENTS: Ended 1992+ to
INCREASE (DECREASE) IN NET For the Year Ended June 30, June 30, June 30,
--------------------------------------------
ASSET VALUE: 1988 1987 1986 1985 1994 1993
---- ---- ---- ---- ---- ----
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.... $ 9.83 $ 9.87 $ 9.85 $ 9.70 $ 10.01 $ 9.93
-------- -------- -------- -------- -------- --------
Investment income-net................... .53 .52 .60 .67 .33 .24
Realized and unrealized gain (loss) on
investments-net....................... (.07) (.04) .02 .15 (.14) .08
-------- -------- -------- -------- -------- --------
Total from investment operations........ .46 .48 .62 .82 .19 .32
-------- -------- -------- -------- -------- --------
Less dividends and distributions:
Investment income-net.................. (.53) (.52) (.60) (.67) (.33) (.24)
Realized gain on investments-net....... (.01) - - - - -
-------- -------- -------- -------- -------- --------
Total dividends and distributions....... (.54) (.52) (.60) (.67) (.33) (.24)
-------- -------- -------- -------- -------- --------
Net asset value, end of period.......... $ 9.75 $ 9.83 $ 9.87 $ 9.85 $ 9.87 $ 10.01
======== ======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN:**
Based on net asset value per share...... 4.83% 4.99% 6.50% 8.72% 1.98% 3.26%#
======== ======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS:
Expenses, excluding distribution fees... .40% .40% .42% .43% .41% .41%*
======== ======== ======== ======== ======== ========
Expenses................................ .40% .40% .42% .43% .76% .76%*
======== ======== ======== ======== ======== ========
Investment income-net................... 5.42% 5.27% 6.04% 6.83% 3.33% 3.60%*
======== ======== ======== ======== ======== ========
SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)............................ $567,158 $792,229 $623,902 $428,662 $145,534 $95,179
======== ======== ======== ======== ======== ========
Portfolio turnover...................... 146.01% 19.55% 7.94% 81.06% 45.67% 65.43%
======== ======== ======== ======== ======== ========
|
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of Operations.
# Aggregate total investment return.
Further information about the Fund's performance is contained in the Fund's Annual Report which may be obtained, without charge, upon request.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to provide shareholders with as high a level of income exempt from federal income taxes as is consistent with the investment policies of each Portfolio and prudent investment management. The Fund is comprised of three separate portfolios, Insured Portfolio, National Portfolio and Limited Maturity Portfolio, each of which is, in effect, a separate fund issuing its own shares. Each Portfolio seeks to achieve its objective by investing in a diversified portfolio of obligations issued by or on behalf of states, territories and possessions of the United States and the District of Columbia and their political subdivisions, agencies and instrumentalities, the interest from which is exempt from federal income tax (such obligations are herein referred to as "Municipal Bonds"). Municipal Bonds include general obligations bonds; revenue or special obligation bonds, industrial development bonds, variable rate demand notes, and short-term tax-exempt municipal obligations such as tax anticipation notes. Each Portfolio at all times, except during temporary defensive periods, maintains at least 80% of its net assets invested in Municipal Bonds. In addition, each Portfolio may not purchase securities other than Municipal Bonds and Temporary Investments described below. These are fundamental policies of each Portfolio and may not be changed without a vote of the majority of the outstanding shares of the Portfolio. Each Portfolio currently contemplates that it will not invest more than 25% of its total assets (taken at market value) in Municipal Bonds whose issuers are located in the same state. There can be no assurance that the objective of any Portfolio can be attained.
While the Fund does not intend to realize taxable investment income, each Portfolio has the authority to invest as much as 20% of its net assets on a temporary basis in taxable money market securities with a remaining maturity not in excess of one year from the date of purchase ("Temporary Investments") for liquidity purposes or as a temporary investment of cash pending investment of such cash in Municipal Bonds. In addition, the Fund reserves the right to invest temporarily a greater portion of its assets in Temporary Investments for defensive purposes, when, in the judgment of the Investment Adviser, market conditions warrant. Temporary Investments consist of U.S. Government securities, U.S. Government agency securities, domestic bank certificates of deposit and bankers' acceptances, short-term corporate debt securities such as commercial paper, and repurchase agreements. From time to time, the Fund may realize capital gains, which will constitute taxable income. In addition, the Fund may invest in certain tax-exempt securities which are classified as "private activity bonds," which may subject certain investors to an alternative minimum tax. At June 30, 1994, the Fund's Insured Portfolio, National Portfolio and Limited Maturity Portfolio did not hold any "private activity bonds." These figures should not be considered representative of the respective Portfolio's private activity bond positions for any future period. See "Dividends, Distributions and Taxes."
Certain instruments in which the Fund may invest may be characterized as derivative instruments. The National Portfolio and the Limited Maturity Portfolio are authorized to engage in transactions in financial futures contracts for hedging purposes. For a more complete description of futures transactions, see "Financial Futures Contracts and Derivatives" below and the Statement of Additional Information.
Investment in the Fund offers several benefits. The Fund offers investors the opportunity to receive income exempt from federal income taxes from a diversified, professionally managed portfolio of Municipal Bonds. The Fund also provides liquidity because of its redemption features and relieves the investor of the burdensome administrative details involved in managing a portfolio of tax-exempt securities. The benefits are at least partially offset by the fact that there are expenses in operating an investment company. Such expenses consist primarily of the investment advisory fee and operational expenses, including, in the case of the Insured Portfolio, premiums for insurance on portfolio securities.
INVESTMENT POLICIES OF THE PORTFOLIOS
Each Portfolio pursues its investment objective through the separate investment policies described below. These policies differ with respect to the maturity and quality of portfolio securities in which a Portfolio may invest, and these policies can be expected to affect the yield on each Portfolio and the degree of market and financial risk to which the Portfolio is subject. Generally, Municipal Bonds with longer maturities tend to produce higher yield and are subject to greater market fluctuations as a result of changes in interest rates ("market risk") than are Municipal Bonds with shorter maturities. Generally, lower rated Municipal Bonds will provide a higher yield than higher rated Municipal Bonds of similar maturity but are subject to greater market risk and are also subject to a greater degree of risk with respect to the ability of the issuer to meet its principal and interest obligations ("financial risk"). See "Additional Information - Rating Information" for information with respect to ratings assigned to Municipal Bonds and Temporary Investments by rating agencies.
INSURED PORTFOLIO
The Insured Portfolio may invest in investment grade Municipal Bonds covered by portfolio insurance guaranteeing the timely payment of principal at maturity and interest. Investment grade Municipal Bonds are those rated at the date of purchase in the four highest rating categories of Standard & Poor's Corporation (AAA, AA, A and BBB) or Moody's Investors Service, Inc. (Aaa, Aa, A and Baa) in the case of long-term debt, rated MIG 1 through MIG 4 by Moody's Investors Service or in the four highest bond ratings of, or rated SP-1+ through SP-2 by, Standard & Poor's Corporation in the case of short-term notes, and rated P-1 or P-2 in the case of Moody's Investors Service or A-1+ through A-2 by Standard & Poor's Corporation in the case of tax-exempt commercial paper. Depending on market conditions, it is expected that long-term Municipal Bonds will comprise a major portion of this Portfolio.
The Insured Portfolio may invest only in Municipal Bonds that, at the time of purchase, either (1) are insured under an insurance policy purchased by the Fund or (2) are insured under an insurance policy obtained by the issuer thereof or any other party from an insurance carrier meeting the criteria of the Fund set forth below. The Fund has purchased from AMBAC Indemnity Corporation ("AMBAC"), Municipal Bond Investors Assurance Corporation ("MBIA") and Financial Security Assurance Inc. ("FSA"), separate Mutual Fund Insurance Policies (the "Policies"), each of which guarantees the payment of principal and interest on specified eligible Municipal Bonds purchased by the Insured Portfolio ("Insured Municipal Bonds"). Consequently, some of the Insured Municipal Bonds in the Insured Portfolio may be insured by AMBAC, while others may be insured by MBIA or FSA. The Policies generally have the same characteristics and features. A Municipal Bond is eligible for coverage if it meets certain requirements of the insurance company set forth in a Policy. Additional information regarding these eligibility requirements is set forth in the Statement of Additional Information. In the event interest or principal on an Insured Municipal Bond is not paid when due, AMBAC or MBIA or FSA (depending on which Policy covers the bond) is obligated under its Policy to make payment not later than 30 days after it has been notified by, and provided with documentation from, the Fund that such nonpayment has occurred. The insurance feature reduces financial risk, but the cost thereof and the restrictions on investments imposed by the guidelines in the insurance policy reduce the yield to shareholders.
The Policies will be effective only as to Insured Municipal Bonds beneficially owned by the Insured Portfolio. In the event of a sale of any Municipal Bonds held by the Insured Portfolio, the issuer of the relevant Policy is liable only for those payments of interest and principal which are then due and owing. The Policies do not guarantee the market value of the Insured Municipal Bonds or the value of the shares of the Insured
Portfolio. It is the intention of the Insured Portfolio, however, to retain any insured securities which are in default or in significant risk of default and to place a value on the insurance, which ordinarily will be the difference between the market value of the defaulted security and the market value of similar securities which are not in default. In certain circumstances, however, the Fund's management may determine that an alternative value for the insurance, such as the difference between the market value of the defaulted security and its par value, is more appropriate. As the result of the value placed on the insurance with respect to securities held in the Insured Portfolio which were in default at the end of the Fund's last fiscal year, such securities were effectively valued at par. The Insured Portfolio will be unable to manage the portfolio to the extent it holds defaulted securities, which may limit its ability in certain circumstances to purchase other Municipal Bonds. See "Net Asset Value" in the Statement of Additional Information for a more complete description of the Insured Portfolios method of valuing defaulted securities and securities which have a significant risk of default. Further information with respect to the portfolio insurance is also set forth in the Statement of Additional Information.
AMBAC, MBIA and FSA may not withdraw coverage on securities insured by their Policies and held by the Insured Portfolio so long as they remain in the Portfolio. AMBAC, MBIA and FSA may not cancel their Policies for any reason except failure to pay premiums when due. AMBAC and FSA have reserved the right at any time upon written notice to the Fund to refuse to insure any additional municipal securities purchased by the Insured Portfolio after the effective date of such notice. The Board of Directors of the Fund has reserved the right to terminate any of the Policies if it determines that the benefits to the Insured Portfolio of having its portfolio insured are not justified by the expense involved.
The premiums for the Policies are paid by the Insured Portfolio and the yield on the Portfolio is reduced thereby. The Investment Adviser estimates that the current cost of the annual premiums will range from approximately .08% to .20% of the average net assets of the Insured Portfolio. The estimate is based on the expected composition of the Portfolio.
NATIONAL PORTFOLIO
The National Portfolio invests in a portfolio primarily of long-term medium to lower grade Municipal Bonds. This Portfolio normally can be expected to offer the highest yields of the three Portfolios, but it will also be subject to the highest market and financial risks. Because an investment in the National Portfolio entails relatively greater risks, it may not be an appropriate investment for all investors.
The investment policies of the National Portfolio are not governed by specific rating categories. Management of the Fund will seek primarily medium and lower grade Municipal Bonds, including short-term tax-exempt notes, tax-exempt commercial paper and variable rate tax-exempt demand notes. Medium grade long-term debt obligations are those rated A and BBB by Standard & Poor's or A and Baa by Moody's and unrated obligations of comparable quality. Lower grade obligations (commonly known as "junk bonds") are those rated below BBB or Baa and unrated obligations of comparable quality. Lower grade obligations will generally be more speculative with respect to the capacity of the issuer to make interest and principal payments. Because issuers of Municipal Bonds having these characteristics may choose not to have their obligations rated, it is possible that a substantial portion of the National Portfolio's portfolio may consist of obligations which are not rated. Unrated bonds are not necessarily of lower quality than rated bonds, but the market for rated bonds is often broader. It is not the present intention of the Portfolio to invest over 35% of its assets in securities rated below Baa by Moody's or in securities rated below BBB by Standard & Poor's.
Junk bonds are considered by Standard & Poor's and Moody's to have varying degrees of speculative characteristics. Consequently, although junk bonds can be expected to provide higher yields, such securities may be subject to greater market price fluctuations and risk of loss of principal than lower yielding, higher rated debt securities. Investments in junk bonds will be made only when, in the judgment of the Fund's management, such securities provide attractive total return potential relative to the risk of such securities, as compared to higher quality debt securities. The National Portfolio will not invest in debt securities in the lowest rating categories (those rated CC or lower by Standard & Poor's or Ca or lower by Moody's) unless the Fund's management believes that the financial condition of the issuer or the protection afforded the particular securities is stronger than would otherwise be indicated by such low ratings. The National Portfolio does not intend to purchase debt securities that are in default or which the Fund's management believes will be in default. The Statement of Additional Information contains a more detailed description of the risks involved in purchasing junk bonds.
The table below shows the average monthly dollar-weighted market value, by Standard & Poor's rating category, of the securities held by the National Portfolio during the year ended June 30, 1994:
% Market
Value
% Net Municipal
Rating Assets Bonds
------ ------ ----------
AAA.............................. 11.26% 12.43%
AA............................... 21.13 23.34
A................................ 28.96 31.99
BBB.............................. 17.41 19.22
BB............................... 3.31 3.66
NR................................ 8.47 9.36
----- -----
90.55% 100%
====== =====
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It is expected that the National Portfolio will consist primarily of revenue bonds emphasizing hospital, health care, public utility and housing issues.
LIMITED MATURITY PORTFOLIO
The Limited Maturity Portfolio invests in a portfolio primarily of short-term investment grade Municipal Bonds. Municipal Bonds in the Limited Maturity Portfolio will be either Municipal Bonds with a remaining maturity of less than four years or short-term municipal notes, which typically are issued with a maturity of not more than one year. The Limited Maturity Portfolio will treat Municipal Bonds which it has the option to require the issuer to redeem within four years as having a remaining maturity of less than four years, even if the period to the stated maturity date of such Bonds is greater than four years. Municipal notes include tax anticipation notes, bond anticipation notes and revenue anticipation notes. The Limited Maturity Portfolio can be expected to offer a lower yield than the longer-term Portfolios. Interest rates on short-term Municipal Bonds may fluctuate more widely from time to time than interest rates on long-term Municipal Bonds. However, because of the shorter maturities, the market value of the Municipal Bonds held by the Limited Maturity Portfolio can be expected to fluctuate less in value as a result of changes in interest rates.
The Limited Maturity Portfolio will invest only in Municipal Bonds rated at the date of purchase in the four highest ratings of Standard & Poor's (AAA, AA, A and BBB) or Moody's (Aaa, Aa, A and Baa) in the case of long-term debt, rated by Moody's as MIG 1 through MIG 4 or in the four highest bond ratings of, or rated
SP-1+ through SP-2 by, Standard & Poor's in the case of short-term tax-exempt notes, and rated by Moody's P-1 through P-2 or rated A-1+ through A-2 by Standard & Poor's in the case of tax-exempt commercial paper. The Limited Maturity Portfolio will also invest in other Municipal Bonds deemed to qualify for such ratings and in variable rate tax-exempt demand notes. Securities rated in the lowest of these categories are considered to have some speculative characteristics. The Limited Maturity Portfolio may continue to hold securities which, after being purchased by the Portfolio, are downgraded to a rating lower than those set forth above.
Forward Commitments
Each Portfolio may purchase Municipal Bonds on a forward commitment basis at fixed purchase terms. The purchase will be recorded on the date the Portfolio enters into the commitment and the value of the security will thereafter be reflected in the calculation of the Portfolio's net asset value. The value of the security on the delivery date may be more or less than its purchase price. A separate account of the Portfolio will be established with its custodian consisting of cash or liquid Municipal Bonds having a market value at all times at least equal to the amount of the forward commitment.
Financial Futures Contracts and Derivatives
The National Portfolio and the Limited Maturity Portfolio (collectively, the "Portfolios") are authorized to purchase and sell certain financial futures contracts ("futures contracts") and options on such futures contracts solely for the purpose of hedging their investments in Municipal Bonds against declines in value and to hedge against increases in the cost of securities the Portfolios intend to purchase. A financial futures contract obligates the seller of a contract to deliver and the purchaser of a contract to take delivery of the type of financial instrument covered by the contract or, in the case of index-based futures contracts, to make and accept a cash settlement, at a specific future time for a specified price. A sale of financial futures contracts may provide a hedge against a decline in the value of portfolio securities because such depreciation may be offset, in whole or in part, by an increase in the value of the position in the futures contracts. A purchase of financial futures contracts may provide a hedge against an increase in the cost of securities intended to be purchased, because such appreciation may be offset, in whole or in part, by an increase in the value of the position in the futures contracts.
The Portfolios intend to trade in futures contracts based upon The Bond Buyer Municipal Bond Index, a price-weighted measure of the market value of 40 large, recently issued tax-exempt bonds, and to engage in transactions in exchange-traded futures contracts on U.S. Treasury securities and options on such futures. If making or accepting delivery of the underlying commodity is not desired, a position in a futures contract or an option on a futures contract may be terminated only by entering into an offsetting transaction on the exchange on which the position was established and only if there is a liquid market for such contract. If it is not economically practicable, or otherwise possible to close a futures position or certain option positions entered into by a Portfolio, the Portfolio could be required to make continuing daily cash payments of variation margin in the event of adverse price movements. In such situations, if the Portfolio has insufficient cash, it may have to sell portfolio securities to meet daily variation margin requirements at a time when it may be disadvantageous to do so. In addition, the Portfolio may be required to perform under the terms of its contracts. The inability to close futures or options positions could also have an adverse impact on the Portfolio's ability to hedge effectively. There is also risk of loss by a Portfolio of margin deposits in the event of bankruptcy, of a broker with whom the
Portfolio has an open position in a futures contract, or the exchange or clearing organization on which that contract is traded. The Portfolios may also engage in transactions in other futures contracts, such as futures contracts on other municipal bond indexes which may become available, if the Investment Adviser believes such contracts would be appropriate for hedging the Portfolios' investments in Municipal Bonds.
Utilization of futures or option contracts involves the risk of imperfect correlation in movements in the price of such contracts and movements in the price of the security or securities which are the subject of the hedge. If the price of the futures or option contract moves more or less than the price of the security or securities that are the subject of the hedge, a Portfolio will experience a gain or loss which will not be completely offset by movements in the price of such security, which could occur as a result of many factors, including where the securities underlying futures or option contracts have different maturities, ratings, or geographic mixes than the security being hedged. In addition, the correlation may be affected by additions to or deletions from the index which serves as a basis for an index futures contract. The trading of futures contracts or options on futures contracts based on indexes of securities also involves a risk of imperfect correlation between the value of the futures contracts and the value of the underlying index. The anticipated spread between such values or in the correlation between the futures contract and the underlying security may be affected by differences in markets, such as margin requirements, market liquidity and the participation of speculators in the futures markets. Moreover, when a Portfolio enters into transactions in futures contracts on U.S. Treasury securities, or options on such contracts, the underlying securities will not correspond to securities held by the Portfolio. Finally, in the case of futures contracts on U.S. Treasury securities and options on such futures contracts, the anticipated correlation of price movements between U.S. Treasury securities underlying the futures or options and Municipal Bonds may be adversely affected by economic, political, legislative or other developments which have a disparate impact on the respective markets for such securities.
Under regulations of the Commodity Futures Trading Commission ("CFTC"), the futures trading activities described herein will not result in the Portfolios' being deemed to be "commodity pools," as defined under such regulations, provided that certain restrictions are adhered to. In particular, among other requirements, the Portfolios may either (a) purchase and sell futures contracts only for bona fide hedging purposes, as defined under CFTC regulations, or (b) limit any transaction not qualifying as bona fide hedging so that the sum of the amount of initial margin deposits and premiums paid on such positions would not exceed 5% of the market value of the Portfolio's net assets. Margin deposits may consist of cash or securities acceptable to the broker and the relevant contract market.
When either Portfolio purchases a futures contract, it will maintain an amount of cash, cash equivalents or commercial paper or other short-term high grade fixed income securities in a segregated account with the Fund's custodian, so that the amount so segregated plus the amount of initial margin and option premiums held in the account of its broker equals the value represented by the futures contract, as reflected by its daily settlement price, thereby ensuring that the use of such futures contract is unleveraged. It is not anticipated that transactions in futures contracts will have the effect of increasing portfolio turnover.
Reference is made to the Statement of Additional Information for further information on financial futures contracts.
The Fund may invest in a variety of instruments which may be characterized as "Derivative Securities." The Fund may invest in Municipal Bonds the return on which is based on a particular index of value or interest rates. For example, the Fund may invest in Municipal Bonds that pay interest based on an index of Municipal Bond interest rates or based on the value of gold or some other commodity. The principal amount payable upon
maturity of certain Municipal Bonds also may be based on the value of an index. Also, the Fund may invest in so-called "inverse floating obligations" or "residual interest bonds" on which the interest rates typically decline as market rates increase and increase as market rates decline. To the extent the Fund invests in these types of Municipal Bonds, the Fund's return on such Municipal Bonds will be subject to risk with respect to the value of the particular index. Such securities have the effect of providing a degree of investment leverage, since they may increase or decrease in value in response to changes, as an illustration, in market interest rates at a rate which is a multiple (typically two) of the rate at which fixed-rate long-term exempt securities increase or decrease in response to such changes. As a result, the market values of such securities will generally be more volatile than the market values of fixed-rate tax exempt securities. To seek to limit the volatility of these securities, the Fund may purchase inverse floating obligations with shorter term maturities or which contain limitations on the extent to which the interest rate may vary. The Manager believes that indexed and inverse floating obligations represent a flexible portfolio management instrument for the Fund which allows the Manager to vary the degree of investment leverage relatively efficiently under different market conditions. Certain investments in such obligations may be illiquid. The Fund may not invest in such illiquid obligations if such investments, together with other illiquid investments, would exceed 10% of the Fund's net assets.
Investment Restrictions
The Fund has adopted a number of restrictions and policies relating to the investment of its assets and its activities, which are fundamental policies of the Fund and may not be changed without the approval of the holders of a majority of the Fund's outstanding voting securities (including a majority of the shares of each Portfolio). One such restriction prohibits the Fund from entering into a repurchase agreement if, as a result thereof, more than 10% of the total assets of any Portfolio (taken at market value at the time of each investment) would be subject to repurchase agreements maturing in more than seven days. Investors are referred to the Statement of Additional Information for a complete description of such restrictions and policies.
The Board of Directors of the Fund, at a meeting held on August 4, 1994, approved certain changes to the fundamental and non-fundamental investment restrictions of the Fund. These changes were proposed in connection with the creation of a set of standard fundamental and non-fundamental investment restrictions that would be adopted, subject to shareholder approval, by all of the non-money market mutual funds advised by MLAM or FAM. The proposed uniform investment restrictions are designed to provide each of these funds, including the Fund, with as much investment flexibility as possible under the Investment Company Act and applicable state securities regulations, help promote operational efficiencies and facilitate monitoring of compliance. The investment objectives and policies of the Fund will be unaffected by the adoption of the proposed investment restrictions.
The full text of the proposed investment restrictions is set forth under "Investment Objective and Policies-Proposed Uniform Investment Restrictions" in the Statement of Additional Information. Shareholders of the Fund are currently considering whether to approve the proposed revised investment restrictions. If such shareholder approval is obtained, the Fund's current investment restrictions will be replaced by the proposed restrictions, and the Fund's Prospectus and Statement of Additional Information will be supplemented to reflect such change.
INVESTMENT ADVISER
The investment adviser to the Fund is Fund Asset Management, L.P. ("FAM"), an affiliate of Merrill Lynch Asset Management L.P. ("MLAM"), an indirect subsidiary of Merrill Lynch & Co., Inc., a financial services holding company and the parent of Merrill Lynch. The address of FAM is P.O. Box 9011, Princeton,
New Jersey 08543-9011. FAM or MLAM acts as the Investment Adviser for over 100 other investment companies. As of August 31, 1994, the Investment Adviser and MLAM had a total of approximately $165.7 billion in investment company and other portfolio assets under management, including accounts of certain affiliates of the investment adviser.
FAM, subject to the general supervision of the Fund's Board of Directors, renders investment advice to the Fund and is responsible for the overall management of the Fund's business affairs. The responsibility for making decisions to buy, sell or hold a particular security rests with FAM. For the year ended June 30, 1994, FAM received in fees from the Fund $22,860,647, of which $11,040,540 was received with respect to the Insured Portfolio (representing 0.36% of its average net assets), $8,514,268 was received with respect to the National Portfolio (representing 0.48% of its average net assets) and $3,305,839 was received with respect to the Limited Maturity Portfolio (representing 0.33% of its average net assets).
The Investment Advisory Agreement obligates each Portfolio to pay certain expenses incurred in its operation and a portion of the Fund's general administrative expenses allocated on the basis of the asset size of the respective Portfolios. The Fund's total expenses for the year ended June 30, 1994 were $37,728,533, of which $19,914,627 was attributable to the Insured Portfolio (representing .42% of average net assets for Class A shares and 1.17% of average net assets for Class B shares), $13,322,352 was attributable to the National Portfolio (representing .55% of average net assets for Class A shares and 1.30% of average net assets for Class B shares) and $4,491,554 was attributable to the Limited Maturity Portfolio (representing 0.40% of average net assets for Class A shares and 0.76% of average net assets for Class B shares); no Class C shares or Class D shares had been issued that year. FAM was not required to reduce its fee or reimburse any of the Fund's expenses for the 1994 fiscal year.
Vincent Giordano has served as the Fund's Portfolio Manager since 1977, and is primarily responsible for the Fund's day-to-day management. He has served as a Senior Vice President of the Investment Adviser and MLAM since 1984, and as Vice President from 1980 to 1984.
DIRECTORS
The Directors of the Fund consist of six individuals, five of whom are not "interested persons" of the Fund as defined in the Investment Company Act of 1940. The Directors of the Fund are responsible for the overall supervision of the operations of the Fund and perform the various duties imposed on the directors of investment companies by the Investment Company Act of 1940.
The Directors of the Fund are:
ARTHUR ZEIKEL*-President and Chief Investment Officer of MLAM and FAM, Executive Vice President of Merrill Lynch & Co, Inc. ("ML & Co.") Director of the Distributor; President and Director of Princeton Services, Inc. ("Princeton Services").
RONALD W. FORBES-Associate Professor of Finance, School of Business, State University of New York at Albany.
CYNTHIA A. MONTGOMERY-Professor, Harvard Business School since 1989.
CHARLES C. REILLY-Adjunct Professor, Columbia University Graduate School of Business.
KEVIN A. RYAN-Professor of Education at Boston University since 1982. Founder and current Director of the Boston University Center for Advancement of Ethics and Character.
RICHARD R. WEST-Professor of Finance at New York University School of Business Administration.
PURCHASE OF SHARES
Each Portfolio offers its shares in four classes at a public offering price equal to the net asset value plus varying sales charges as set forth below. Merrill Lynch Funds Distributor, Inc. (the "Distributor"), an affiliate of both the Investment Adviser and Merrill Lynch, acts as the Distributor of the shares. Class C shares of the Limited Maturity Portfolio are offered only through the Exchange Privilege. See p. 42.
Shares may be purchased directly from the Distributor or from other securities dealers, including Merrill Lynch, with whom the Distributor has entered into selected dealer agreements; however, only Class A and Class D shares may be available for purchase through securities dealers, other than Merrill Lynch, which are eligible to sell shares. The Fund is offering shares in four classes of its Portfolios at a public offering price equal to the next determined net asset value per share plus sales charges imposed either at the time of purchase (the "initial sales charge alternative") or on a deferred basis depending upon the class of shares selected by the investor under the Merrill Lynch Select Pricing SM System, as described below. Net asset value per share will be determined in the manner set forth under "Net Asset Value." The minimum initial purchase in each Portfolio is $1,000 and the minimum subsequent purchase in each Portfolio is $50. Merrill Lynch may charge its customers an administrative fee (currently $4.85) to confirm a sale of shares.
Because retirement plans qualified under Section 401 of the Internal Revenue Code will be unable to benefit from the tax-exempt dividends of the Fund, the shares of the Fund may not be suitable investments for such retirement plans.
Each of the Portfolios issues four classes of shares under the Merrill Lynch Select Pricing SM System, which permits each investor to choose the method of purchasing shares that he believes is most beneficial given the amount of the purchase, the length of time the investor expects to hold the shares and other relevant circumstances. Shares of Class A and Class D shares are sold to investors choosing the initial sales charge alternative and shares of Class B and Class C shares are sold to investors choosing the deferred sales charge alternatives. Class C shares of the Limited Maturity Portfolio are available only through the Exchange Privilege and may not be purchased except through exchange of Class C shares of another Portfolio or another Fund.
Investors should determine whether under their particular circumstances it is more advantageous to incur the initial sales charge or to have the initial purchase price invested with the Portfolio with the investment thereafter being subject to a contingent deferred sales charge and ongoing distribution fees. A discussion of the factors that investors should consider in determining the method of purchasing shares under the Merrill Lynch Select Pricing SM System is set forth under the Merrill Lynch Select Pricing SM System on page 8. Each Class A, Class B, Class C and Class D share of a Portfolio represents identical interests in the Portfolio and has the same rights, except that Class B, Class C and Class D shares bear the expenses of the ongoing account maintenance fees, and Class B and Class C shares bear the expenses of the ongoing distribution fees and the additional incremental transfer agency costs resulting from the deferred sales charge arrangements. The deferred sales charges and account maintenance fees that are imposed on Class B and Class C shares, as well as the account maintenance fees that are imposed on Class D shares, will be imposed directly against those classes and not against all assets of the Fund and, accordingly, such charges will not affect the net asset value of any other class
or have any impact on investors choosing another sales charge option. Dividends paid by a Portfolio for each class of shares will be calculated in the same manner at the same time and will differ only to the extent that account maintenance and distribution fees and any incremental transfer agency costs relating to a particular class are borne exclusively by that class. Class B, Class C and Class D shares each have exclusive voting rights with respect to the Rule 12b-1 distribution plan adopted with respect to such class pursuant to which account maintenance and/or distribution fees are paid. See "Distribution Plans" below. Each class has different exchange privileges. See "Shareholder Services-Exchange Privilege".
Investors should understand that the purpose and function of the initial sales charges with respect to Class A and Class D shares are the same as those of the deferred sales charges with respect to Class B and Class C shares in that the sales charges applicable to each class provide for the financing of the distribution of the shares of the Fund. The distribution-related revenues paid with respect to a class will not be used to finance the distribution expenditures of another class. Sales personnel may receive different compensation for selling different classes of shares. Investors are advised that only Class A and Class D shares may be available for purchase through securities dealers, other than Merrill Lynch, which are eligible to sell shares.
The following tables set forth a summary of the distribution arrangements for each class of shares under the Merrill Lynch Select Pricing(SM) System.
Insured and National Portfolios
- ------------------------------------------------------------------------------------------------------------------------------
Account
Maintenance Distribution Conversion
Class Sales Charge (1) Fee Fee Feature
- ------------------------------------------------------------------------------------------------------------------------------
A Maximum 4.00% initial sales No No No
charge (2)(3)
- ------------------------------------------------------------------------------------------------------------------------------
B CDSC for a period of 4 years, at a 0.25% 0.50% B shares convert to D shares
rate of 4.0% during the first year, automatically after approximately
decreasing 1.0% annually to 0.0% ten years(4)
- -------------------------------------------------------------------------------------------------------------------------------
C 1.0% CDSC for one year decreasing to 0.25% 0.55% No
0.00% after the first year
- -------------------------------------------------------------------------------------------------------------------------------
D Maximum 4.00% initial sales charge (3) 0.25% No No
- -------------------------------------------------------------------------------------------------------------------------------
[/TABLE]
25
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Limited Maturity Portfolio
|
- ------------------------------------------------------------------------------------------------------------------------------
Account
Maintenance Distribution Conversion
Class Sales Charge (1) Fee Fee Feature
- ------------------------------------------------------------------------------------------------------------------------------
A Maximum 1.00% initial sales
charge (2)(3) No No No
- ------------------------------------------------------------------------------------------------------------------------------
B CDSC at a rate of 1.00% 0.15% 0.20% B shares convert to D
during the first year, shares automatically
decreasing to 0.0% after the first year after approximately
ten years (4)
- ------------------------------------------------------------------------------------------------------------------------------
C(5) 1.0% CDSC for one year 0.15% 0.20% No
decreasing to 0.00% after the first year
- ------------------------------------------------------------------------------------------------------------------------------
D Maximum 1.00% initial sales 0.10% No No
charge (3)
- ------------------------------------------------------------------------------------------------------------------------------
|
(1) Initial sales charges are imposed at the time of purchase as a
percentage of the offering price. CDSCs may be imposed if the
redemption occurs within the applicable CDSC time period. The charge
will be assessed on an amount equal to the lesser of the proceeds of
redemption or the cost of the shares being redeemed.
(2) Offered only to eligible investors. See "Initial Sales Charge
Alternatives-Class A and Class D Shares-Eligible Class A Investors."
(3) Reduced for purchases of $25,000 or more for the Insured and National
Portfolios. Reduced for purchases of $100,000 or more for Limited
Maturity Portfolio. Class A and Class D share purchases of $1,000,000
or more will not be subject to an initial sales charge but instead will
be subject to a 1.0% CDSC for one year.
(4) The conversion period for dividend reinvestment shares is modified.
Also, Class B shares of certain other MLAM-advised mutual funds into
which exchanges may be made have a eight-year conversion period. If
Class B shares of a Portfolio are exchanged for Class B shares of
another MLAM-advised mutual fund, the conversion period applicable to
the Class B shares acquired in the exchange will apply, and the
holding period for the shares exchanged will be tacked onto the
holding period for the shares acquired.
(5) Class C shares of the Limited Maturity Portfolio are offered only
through the Exchange Privilege. See p. 42.
Initial Sales Charge Alternatives - Class A and Class D Shares
Investors choosing the initial sales charge alternatives who are eligible to purchase Class A shares should purchase Class A shares rather than Class D shares because there is an account maintenance fee imposed on Class D shares.
The initial sales charges, computed as indicated below, are reduced on larger purchases. The Distributor may reallow discounts to securities dealers with whom it has agreements and retain the balance over such discount. At times the Distributor may reallow the entire sales charge to selected dealers, in which case such dealers may be deemed to be underwriters within the meaning of the Securities Act of 1933 and subject to liability as such. The Distributor will retain the entire sales charge on orders placed directly with it.
The public offering price of Class A and Class D shares of the Portfolios, for purchasers choosing the initial sales charge alternative, is the next determined net asset value plus varying sales charges (i.e., sales loads), as set forth below:
Class A and Class D shares of Insured and National Portfolios
Sales Charge
-------------------------------------------------------------
Discount to
Sales Load as Sales Load as Select Dealers as a
a Percentage of a Percentage of Percentage of
Amount of Purchase Offering Price Net Amount Invested Offering Price
------------------ -------------- ------------------- --------------
Less than $25,000 ...................... 4.00% 4.17% 3.75 %
$25,000 but less than $50,000 .......... 3.75 3.90 3.50
$50,000 but less than $100,000 ......... 3.25 3.36 3.00
$100,000 but less than $250,000 ........ 2.50 2.56 2.25
$250,000 but less than $1,000,000 ...... 1.50 1.52 1.25
$1,000,000 and over** .................. 0.00 .00 .00
|
Class A and Class D shares of Limited Maturity Portfolio
Sales Charge
-------------------------------------------------------------
Discount to
Sales Load as Sales Load as Select Dealers as a
a Percentage of a Percentage of Percentage of
Amount of Purchase Offering Price Net Amount Invested Offering Price
------------------ -------------- ------------------- --------------
Less than $100,000...................... 1.00% 1.01% .95 %
$100,000 but less than $250,000 ........ .75 .75 .70
$250,000 but less than $500,000 ........ .50 .50 .45
$500,000 but less than $1,000,000 ...... .30 .30 .27
$1,000,000 and over** .................. .00 .00 .00
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The Distributor may reallow discounts to selected dealers and retain the balance over such discounts. At times the Distributor may reallow the entire sales charge to such dealers. Since securities dealers selling Class A shares of the Fund will receive a concession equal to most of the sales charge, they may be deemed to be underwriters under the Securities Act of 1933, as amended (the "Securities Act"). During the fiscal year ended June 30, 1994, the Insured Portfolio, the National Portfolio and the Limited Maturity Portfolio sold 33,131,876, 8,490,063 and 37,619,639, Class A shares respectively, for aggregate net proceeds of $280,935,110, $92,184,282 and $375,440,124, respectively. The gross sales charges for the sale of Class A shares of the Insured Portfolio, the National Portfolio and the Limited Maturity Portfolio for that year were $3,435,864, of which $343,837 and $3,092,027 were received by the Distributor and Merrill Lynch, respectively. For the fiscal year ended June 30, 1994, the Distributor received CDSCs of $36,923 (in the case of the National Portfolio), $45,329 (in the case of the Insured Portfolio) and $93,556 (in the case of Limited Maturity Portfolio), all of which were paid to Merrill Lynch, with respect to redemption within one year of purchase of Class A shares purchased subject to front-end sales charge waivers.
Eligible Class A Investors. Class A shares are offered to a limited group of investors and also will be issued upon reinvestment of dividends from outstanding Class A shares. Investors that currently own Class A shares in a shareholder account, including participants in the Merrill Lynch Blueprint SM program, are entitled to purchase additional Class A shares in that account. Class A shares are available at net asset value to corporate warranty insurance reserve fund programs provided that the program has $3 million or more initially invested in MLAM-advised mutual funds. Also eligible to purchase Class A shares at net asset value are participants in certain investment programs, including TMA SM Managed Trusts to which Merrill Lynch Trust Company provides discretionary trustee services and certain purchases made in connection with the Merrill Lynch Mutual Fund Adviser program. In addition, Class A shares will be offered at net asset value to Merrill Lynch & Co., Inc. and its subsidiaries and their directors and employees and to members of the Boards of MLAM-advised investment companies, including the Fund. Certain persons who acquired shares of certain MLAM-advised
closed-end funds who wish to reinvest the net proceeds from a sale of their closed-end fund shares of common stock in shares of the Fund also may purchase Class A shares of the Fund if certain conditions set forth in the Statement of Additional Information are met. For example, Class A shares of the Fund and certain other MLAM-advised mutual funds are offered at net asset value to shareholders of Merrill Lynch Senior Floating Rate Fund, Inc. who wish to reinvest the net proceeds from a sale of certain of their shares of common stock of Merrill Lynch Senior Floating Rate Fund, Inc. in shares of such funds.
As to purchase orders received by selected dealers prior to the close of the New York Stock Exchange, which includes orders received after the close on the previous day, the applicable offering price will be based on the net asset value determined on the day the order is placed with the Distributor, provided the order is received by the Distributor prior to 4:30 P.M., New York City time, on that day. Any order may be rejected by the Distributor or the Fund. Neither the Distributor nor the dealers are permitted to withhold placing orders to benefit themselves by a price change. The Fund reserves the right to suspend the sale of its shares to the public in response to conditions in the Municipal Bond markets, or otherwise.
Payment by Wire. To purchase shares by wiring Federal Funds, payment should be wired to The Bank of New York, New York City. Shareholders should give their financial institutions the following wiring instructions, ABA #021000018, DDA #902233, Financial Data Services, Inc. For all communications regarding existing accounts, please indicate the name of the Portfolio, the shareholder's account number, and the shareholder's name. Instructions for new accounts should specify name, address and social security number of each person in whose name the shares are to be registered and the name of the Portfolio. Failure to submit the required information may delay investment.
If Federal Funds are received by the Transfer Agent by 11:00 A.M., shares of the Portfolio will be issued that day based upon the net asset value of the Portfolio determined as of the close of regular trading on the New York Stock Exchange that day. Shares begin accruing dividends so long as they are issued and outstanding. Shares are issued and outstanding as of the settlement date of a purchase order to the settlement date of a redemption order. Since purchases of shares of the Fund are normally effected on the basis of a five-business-day settlement procedure, this method of payment provides an expeditious method of investing in the Portfolios of the Fund. Many of the Municipal Bonds in which a Portfolio invests do not trade on the basis of one-day settlements, and, since the only municipal securities that a Portfolio may acquire on a one-day settlement offer lower yields, if a substantial amount is invested by wire transfer this may have the effect of decreasing the yield in that Portfolio. The Fund is not responsible for delays in the wiring system.
The minimum purchase for payment by wire is $1,000, except that the minimum purchase for payment by wire for new accounts is $5,000.
Reduced Initial Sales Charges. No initial sales charges are imposed upon Class A and Class D shares issued as a result of the automatic reinvestment of dividends or capital gains distributions. Class A and Class D sales charges also may be reduced under a Right of Accumulation and a Letter of Intention.
Class A shares are offered at net asset value to certain eligible Class A investors as set forth above under "Eligible Class A Investors."
Class D shares are also offered at net asset value without sales charge to an investor who has a business relationship with a financial consultant if certain conditions set forth in the Statement of Additional Information are met. Class D shares may be offered at net asset value in connection with the acquisition of assets of other investment companies.
Class D shares are offered with reduced sales charges and, in certain circumstances, at net asset value, to participants in the Merrill Lynch Blueprint SM Program.
Additional information concerning these reduced initial sales charges is set forth in the Statement of Additional Information.
Deferred Sales Charge Alternatives - Class B and Class C Shares
Investors choosing the deferred sales charge alternatives should consider Class B shares if they intend to hold their shares for an extended period of time and Class C shares if they are uncertain as to the length of time they intend to hold their assets in MLAM-advised mutual funds.
The public offering price of Class B and Class C shares for investors choosing the deferred sales charge alternatives is the next determined net asset value per share without the imposition of a sales charge at the time of purchase. As discussed below, Class B shares of the Insured and National Portfolios are subject to a four year CDSC and Class B shares of the Limited Maturity Portfolio are subject to a one year CDSC, while Class C shares are subject only to a one year 1.0% CDSC. On the other hand, approximately ten years after Class B shares are issued, such Class B shares, together with shares issued upon dividend reinvestment with respect to those shares, are automatically converted into Class D shares of the relevant Portfolio and thereafter will be be subject to lower continuing fees. Class C shares of the Limited Maturity Portfolio are available only through the Exchange Privilege. See "Conversion of Class B Shares to Class D Shares" below. Both Class B and Class C shares of each Portfolio are subject to an account maintenance fee of 0.25% (in the case of the National and Insured Portfolios) and 0.15% (in the case of the Limited Maturity Portfolio) of net assets. Class B and Class C shares of the Insured and National Portfolios are subject to distribution fees 0.50% and 0.55%, respectively of the net assets. Class B and Class C shares of the Limited Maturity portfolio are subject to a distribution fee of 0.20%. See "Distribution Plans." The proceeds from account maintenance fees are used to compensate Merrill Lynch for providing continuing account maintenance activities.
Class B and Class C shares are sold without an initial sales charge so that the Fund will receive the full amount of the investor's purchase payment. Merrill Lynch compensates its financial consultants for selling Class B and Class C shares at the time of purchase from its own funds. See "Distribution Plans" below.
Proceeds from the CDSC and the distribution fee are paid to the Distributor and are used in whole or in part by the Distributor to defray the expenses of dealers (including Merrill Lynch) related to providing distribution-related services to the Fund in connection with the sale of the Class B and Class C shares, such as the payment of compensation to financial consultants for selling Class B and Class C shares, from its own funds. The combination of the CDSC and the ongoing distribution fee facilitates the ability of the Fund to sell the Class B and Class C shares without a sales charge being deducted at the time of purchase. Approximately ten years after issuance, Class B of a Portfolio shares will convert automatically into Class D shares of that Portfolio, which are subject to an account maintenance fee but no distribution fee; Class B shares of certain other MLAM-advised mutual funds into which exchanges may be made convert into Class D shares automatically after approximately eight years. If Class B shares of the Fund are exchanged for Class B shares of another MLAM-advised mutual fund, the conversion period applicable to the Class B shares acquired in the exchange will apply, and the holding period for the shares exchanged will be tacked onto the holding period for the shares acquired.
Imposition of the CDSC and the distribution fee on Class B and Class C shares is limited by the NASD asset-based sales charge rule. See "Limitations on the Payment of Deferred Sales Charges" below. The proceeds from the ongoing account maintenance fee are used to compensate Merrill Lynch for providing continuing
account maintenance activities. Class B shareholders on the Fund exercising the exchange privilege described under "Shareholder Services-Exchange Privilege" will continue to be subject to the Fund's CDSC schedule if such schedule is higher than the CDSC schedule relating to the Class B shares acquired as a result of the exchange.
Contingent Deferred Sales Charge-Class B Shares. Class B shares of the Insured and National Portfolios redeemed within four years of purchase for the National and Insured Portfolios and Class B shares of the Limited Maturity Portfolio redeemed within one year of purchase, may be subject to a CDSC at the rates set forth below charged as a percentage of the dollar amount subject thereto. The charge will be assessed on an amount equal to the lesser of the proceeds of redemption or the cost of the shares being redeemed. Accordingly, no CDSC will be imposed on increases in net asset value above the initial purchase price. In addition, no CDSC will be assessed on the redemption of shares received upon the reinvestment of dividends or capital gains distributions.
The following table sets forth the rates of the contingent deferred sales charge on Class B shares applicable for the period starting October 21, 1994:
Contingent Deferred
Insured or Sales Charge as a
National Portfolio: Percentage of
Year Since Purchase Dollar Amount
Payment Made Subject to Charge
------------ -----------------
0-1 .................................................................... 4.0%
1-2 .................................................................... 3.0%
2-3 .................................................................... 2.0%
3-4 .................................................................... 1.0%
4 and thereafter ....................................................... 0.0%
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Limited Maturity Contingent Deferred
Portfolio: Sales Charge as a
Year Since Purchase Percentage of
Payment Made Dollar Amount
------------ -------------
0-1 .................................................................... 1.0%
1 and thereafter ....................................................... 0.0%
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In determining whether a contingent deferred sales charge is applicable to a redemption, the calculation will be made in a manner that results in the lowest possible applicable rate being charged. Therefore, with respect to the Insured and National Portfolios, it will be assumed that the redemption is first of shares held for over four years or shares acquired pursuant to reinvestment of dividends or distributions and then of shares held longest during the applicable four-year period. It will be assumed, with respect to the Limited Maturity Portfolio, that the redemption is of shares held for over one year or shares acquired pursuant to reinvestment of dividends or distributions. The charge will not be applied to dollar amounts representing an increase in the net asset value since the time of purchase. A transfer of shares from a shareholder's account to another account will be assumed to be made in the same order as a redemption.
To provide an example, assume an investor purchased 100 Class B shares of the Insured Portfolio at $10 per share (at a cost of $1,000) and in the third year after purchase, the net asset value per share is $12 and, during such time, the investor has acquired 10 additional shares upon dividend reinvestment. If at such time the
investor makes his or her first redemption of 50 shares (proceeds of $600), 10 shares will not be subject to charge because of dividend reinvestment. With respect to the remaining 40 shares, the CDSC is applied only to the original cost of $10 per share and not the increase in net asset value of $2 per share. Therefore, $400 of the $600 redemption proceeds will be charged at a rate of 2.0% (the applicable rate in the third year after purchase). The Class B CDSC is waived on redemptions of shares following the death or disability (as defined in the Internal Revenue Code) of a shareholder.
The Class B CDSC also is waived on redemptions of shares placing purchase orders through Merrill Lynch Blueprint SM Program. See "Shareholder Services-Merrill Lynch Blueprint Program." Additional information concerning the waiver of the Class B CDSC is set forth in the Statement of Additional Information.
For the fiscal year ended June 30, 1994, the Distributor received $2,378,916 in contingent deferred sales charges, amounting to $1,469,123, $718,890 and $190,903 in the Insured, National and Limited Maturity Portfolios, respectively.
Contingent Deferred Sales Charges-Class C Shares. Class C shares which are redeemed within one year of purchase may be subject to a 1.0% CDSC charged as a percentage of the dollar amount subject thereto. The charge will be assessed on an amount equal to the lesser of the proceeds of redemption or the cost of the shares being redeemed. Accordingly, no Class C CDSC will be imposed on increases in net asset value above the initial purchase price. In addition, no Class C CDSC will be assessed on shares derived from reinvestment of dividends or capital gains distributions.
The following table sets forth the rates of the contingent deferred sales charge on the Class C shares of the Insured, National and Limited Maturity Portfolios:
Contingent Deferred
Sales Charge as a
Percentage of
Year Since Purchase Dollar Amount
Payment Made Subject to Charge
0-1 .................................................................... 1.0%
thereafter ............................................................. 0.0%
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In determining whether a Class C CDSC is applicable to a redemption, the calculation will be determined in the manner that results in the lowest possible rate being charged. Therefore, it will be assumed that the redemption is first of shares held for over one year or shares acquired pursuant to reinvestment of dividends or distributions and then of shares held longest during the one-year period. The charge will not be applied to dollar amounts representing an increase in the net asset value since the time of purchase. A transfer of shares from a shareholder's account to another account will be assumed to be made in the same order as a redemption.
Conversion of Class B Shares to Class D Shares. After approximately ten years (the "Conversion Period"), Class B shares of a Portfolio will be converted automatically into Class D shares of the relevant Portfolio. Class D shares are subject to an ongoing account maintenance fee of 0.25% (in the case of Insured Portfolio and National Portfolio) and 0.10% (in the case of the Limited Maturity Portfolio) of net assets but are not subject to the distribution fee that is borne by Class B shares. Automatic conversion of Class B shares into Class D shares will occur at least once each month (on the "Conversion Date") on the basis of the relative net asset values of the shares of the two classes on the Conversion Date, without the imposition of any sales load, fee or other charge. Conversion of Class B shares to Class D shares will not be deemed a purchase or sale of the shares for Federal income tax purposes.
In addition, shares purchased through reinvestment of dividends on Class B shares also will convert automatically to Class D shares. The Conversion Date for dividend reinvestment shares will be calculated taking into account the length of time the shares underlying such dividend reinvestment shares were outstanding. If at a Conversion Date the conversion of Class B shares to Class D shares of the Fund in a single account will result in less than $50 worth of Class B shares being left in the account, all of the Class B shares of the Fund held in the account on the Conversion Date will be converted to Class D shares of the Fund.
Share certificates for Class B shares of the Fund to be converted must be delivered to the Transfer Agent at least one week prior to the Conversion Date applicable to those shares. In the event such certificates are not received by the Transfer Agent at least one week prior to the Conversion Date, the related Class B shares will convert to Class D shares on the next scheduled Conversion Date after such certificates are delivered.
In general, Class B shares of equity MLAM-advised mutual funds will convert approximately eight years after initial purchase, and Class B shares of taxable and tax-exempt fixed income MLAM-advised mutual funds will convert approximately ten years after initial purchase. If, during the Conversion Period, a shareholder exchanges Class B shares with an eight-year Conversion Period for Class B shares with a ten-year Conversion Period, or vice versa, the Conversion Period applicable to the Class B shares acquired in the exchange will apply, and the holding period for the shares exchanged will be tacked onto the holding period for the shares acquired.
Distribution Plans
The Fund has adopted separate distribution plans for Class B, Class C and Class D shares pursuant to Rule 12b-1 under the Investment Company Act (each a "Distribution Plan") with respect to the account maintenance and/or distribution fees paid by the Fund to the Distributor with respect to such classes. The Class B and Class C Distribution Plans provide for the payment of account maintenance fees and distribution fees, and the Class D Distribution Plan provides for the payment of account maintenance fees.
The Distribution Plans for Class B, Class C and Class D shares each provide that the Fund pays the Distributor an account maintenance fee relating to the shares of the relevant class of a Portfolio, accrued daily and paid monthly, at the annual rate of 0.25% (in the case of the Class B, Class C and Class D shares of the Insured Portfolio and the National Portfolio) and 0.15% (in the case of Class B and Class C shares of the Limited Maturity) and 0.10% (in the case of the Class D shares of the Limited Maturity Portfolio) of the average daily net assets of the Portfolio attributable to shares of the relevant class in order to compensate the Distributor and Merrill Lynch (pursuant to a sub-agreement) in connection with account maintenance activities.
The Distribution Plans for Class B and Class C shares each provide that the Fund also pays the Distributor a distribution fee relating to the shares of the relevant class of a Portfolio, accrued daily and paid monthly, at the annual rate of 0.50% and 0.55% for the Class B and Class C shares, respectively, of the the Insured and National Portfolios and 0.20% for the Class B and Class C shares of the Limited Maturity Portfolio of the average daily net assets of the Portfolio attributable to the shares of the relevant class in order to compensate the Distributor and Merrill Lynch (pursuant to a sub-agreement) for providing shareholder and distribution services, and bearing certain distribution-related expenses of the Fund, including payments to financial consultants for selling Class B and Class C shares of the Portfolio. The Distribution Plans relating to Class B and Class C shares are designed to permit an investor to purchase Class B and Class C shares through dealers without the assessment of an initial sales charge and at the same time permit the dealer to compensate its financial consultants in connection with the sale of the Class B and Class C shares. In this regard, the purpose and function of the
ongoing distribution fees and the CDSC are the same as those of the initial sales charge with respect to the Class A and Class D shares of the Fund in that the deferred sales charges provide for the financing of the distribution of the Fund's Class B and Class C shares.
Prior to July 6, 1993, the Fund paid the Distributor an ongoing distribution fee, accrued daily and paid monthly, at the annual rate of 0.75% (in the case of the Insured Portfolio and National Portfolio) and 0.35% (in the case of the Limited Maturity Portfolio) of the average daily net assets of the Class B shares of the respective Portfolio's (the "Prior Plan") to compensate the Distributor and Merrill Lynch for providing account maintenance and distribution-related activities and services to Class B shareholders. The fee rate payable and the services provided under the Prior Plan are identical to the aggregate fee rate payable and the services provided under the Distribution Plan, the difference being that the account maintenance and distribution services have been unbundled. For the fiscal year ended June 30, 1994, the Fund paid account maintenance and distribution fees of $6,980,635 with respect to the Class B shares of the Insured Portfolio, account maintenance and distribution fees of $3,496,610 with respect to the Class B shares of the National Portfolio, and account maintenance and distribution fees of $466,701 with respect to Class B shares of the Limited Maturity Portfolio. Substantially all of the payments received by the Distributor under the Distribution Plan was paid to Merrill Lynch for providing distribution-related services in connection with the Class B shares. The Distribution Plan is designed to permit an investor to purchase Class B shares through dealers without assessment of a front-end sales load and at the same time permit the dealer to compensate its financial consultants in connection with the sale of the Class B shares. In this regard, the purpose and function of the distribution fee and the CDSC are the same as those of the initial sales charge with respect to the Class A share of the Portfolio in that the deferred sales charges provide for the financing of the distribution of such Portfolio's Class B shares.
For the year ended June 30, 1994, the Fund paid the Distributor account maintenance fees of $3,625,758 and distribution fees of $7,318,188 under the Class B Distribution Plan. The Fund did not begin to offer shares of Class C or Class D publicly until the date of this Prospectus. Accordingly, no payments have been made pursuant to the Class C or Class D Distribution Plans prior to the date of this Prospectus.
The payments under the Distribution Plans are based on a percentage of average daily net assets attributable to the relevant shares regardless of the amount of expenses incurred and, accordingly, distribution-related revenues from Distribution Plans may be more or less than distribution-related expenses. Information with respect to the distribution-related revenues and expenses incurred by the Distributor and Merrill Lynch with respect to the Class B shares is presented to the directors for their consideration in connection with their deliberations as to the continuance of the Class B and Class C Distribution Plans. This information is presented annually as of December 31, of each year on a "fully allocated accrual" basis and quarterly on a "direct expense and revenue/cash" basis. On the fully allocated accrual basis, revenues consist of account maintenance fees, the distribution fees, the contingent deferred sales charges and certain other related revenues, and expenses consist of financial consultant compensation, branch office and regional operation center selling and transaction procession expenses, advertising, sales promotion and marketing expenses, corporate overhead and interest expense. On the direct expense and revenue/cash basis, revenues consist of the account maintenance fees, distribution fees, the contingent deferred sales charges and expenses consist of financial consultant compensation. As of December 31, 1993, the last date for which fully allocated accrual data is available, the fully allocated accrual expenses incurred by the Distributor and Merrill Lynch since October 24, 1988 with respect to Class B shares of the Insured Portfolio exceeded revenues for that period by $6,929,000 (0.71% of the Insured Portfolio's net assets at that date), and the fully allocated accrual expenses incurred by the Distributor and Merrill Lynch during
that period with respect to Class B shares of the National Portfolio exceeded revenues for that period by $4,235,000 (0.85% of the National Portfolio's net assets at that date). The fully allocated accrual expenses incurred by the Distributor and Merrill Lynch during the period from November 2, 1992 to December 31, 1993 with respect to Class B shares of the Limited Maturity Portfolio exceeded revenues by $527,000 (0.37% of the Limited Maturity Portfolio's net assets at that date). As of December 31, 1993, direct cash revenues received with respect to the Insured Portfolio for the period since October 24, 1988 exceeded direct cash expenses incurred with respect to the Insured Portfolio by $10,889,786 (1.17%) of the Insured Portfolio's net assets at that date), and direct cash revenues incurred with respect to the National Portfolio for that period exceeded direct cash expenses received with respect to the National Portfolio by $4,229,610 (0.85% of the National Portfolio's net assets at that date). The direct cash expenses incurred with respect to the Limited Maturity Portfolio for the period from November 2, 1992 to December 31, 1993 exceeded direct cash revenues received with respect to the Limited Maturity Portfolio by $1,669 (.001% of the Limited Maturity Portfolio's net asset value at December 31, 1993). As of June 30, 1994, direct cash revenues received with respect to the Insured Portfolio for the period since October 24, 1988 exceeded direct cash expenses incurred with respect to the Insured Portfolio by $13,801,624 (1.50% of the Insured Portfolio's net assets at that date), and direct cash revenues received with respect to the National Portfolio for the period exceeded direct cash expenses incurred with respect to the National Portfolio by $5,502,600 (1.20% of the National Portfolio's net assets at that date). As of June 30, 1994, direct cash revenues received with respect to the Limited Maturity Portfolio for the period since November 2, 1992 exceeded direct cash expenses incurred with respect to the Limited Maturity Portfolio by $259,536 (.17% of the Limited Maturity Portfolio's net assets at that date).
The Fund has no obligation with respect to distribution and/or account maintenance related expenses incurred by the Distributor and Merrill Lynch in connection with the Class B, Class C and Class D shares, and there is no assurance that the Board of Directors of the Fund will approve the continuation of the Distribution Plans from year to year. However, the Distributor intends to seek annual continuation of the Distribution Plans. In their review of the Distribution Plans, the Directors will be asked to take into consideration expenses incurred in connection with the account maintenance and/or distribution of each Class of a Portfolio separately. The initial sales charges, the account maintenance fee, the distribution fee and/or the CDSCs received with respect to the one class of a Portfolio will not be used to subsidize the sale of shares of another class of the same Portfolio or of any class of another Portfolio. Payments of the distribution fee on Class B shares will terminate upon conversion of those Class B shares into Class D shares as set forth under "Deferred Sales Charge Alternatives-Class B and Class C Shares-Conversion of Class B to Class D Shares."
Limitations on the Payment of Deferred Sales Charges
The maximum sales charge rule in the Rules of Fair Practice of the National Association of Securities Dealers, Inc. ("NASD") imposes a limitation on certain asset-based sales charges such as the Fund's distribution fee and the CDSC borne by the Class B and Class C but not the account maintenance fees. The maximum sales charge rule is applied separately to each class and Portfolio. As applicable to a Portfolio, the maximum sales charge rule limits the aggregate of distribution fee payments and CDSCs payable by the Fund to (1) 6.25% of eligible gross sales of Class B shares and Class C shares of that Portfolio , computed separately (defined to exclude shares issued pursuant to dividend reinvestments and exchanges), plus (2) interest on the unpaid balance for the respective classes, computed separately at the prime rate plus 1% (the unpaid balance being the maximum amount payable minus amounts received from the payment of the distribution fee and the CDSC). In
connection with the Class B shares the Distributor has voluntarily agreed to waive interest charges on the unpaid balance in excess of 0.50% of eligible gross sales. Consequently, the maximum amount payable to the Distributor (referred to as the "voluntary maximum") in connection with the Class B shares is 6.75% of eligible gross sales. The Distributor retains the right to stop waiving the interest charge at any time. To the extent payments would exceed the voluntary maximum, the Fund will not make further payments of the distribution fee with respect to Class B shares and any CDSCs will be paid to the Fund rather than to the Distributor; however, the Fund will continue to make payments of the account maintenance fees. In certain circumstances the amount payable pursuant to the voluntary maximum may exceed the amount payable under the NASD formula. In such circumstances payment in excess of the amount payable under the NASD formula will not be made.
REDEMPTION OF SHARES
The Fund is required to redeem for cash all shares of each Portfolio upon receipt of a written request in proper form. The redemption price is the net asset value per share of the Portfolio next determined after the initial receipt of proper notice of redemption. Except for any contingent deferred sales load which may be applicable, there will be no charge for redemption if the redemption request is sent directly to the Transfer Agent. Shareholders liquidating their holdings will receive upon redemption all dividends declared through the date of redemption. The value of shares at the time of redemption may be more or less than the shareholder's cost, depending on the market value of the securities held by the relevant Portfolio at such time. If a shareholder redeems all of the shares in his account, he will receive, in addition to the net asset value of the shares redeemed, a separate check representing all dividends declared but unpaid. If a shareholder redeems a portion of the shares in his account, the dividends declared but unpaid on the shares redeemed will be distributed on the next dividend payment date. As set forth below, special procedures are available pursuant to which shareholders may redeem by check.
Redemption
A shareholder wishing to redeem shares may do so by tendering the shares directly to the Transfer Agent, Financial Data Services, Inc., Transfer Agency Mutual Fund Operations, P.O. Box 45289, Jacksonville, Florida 32232-5289. Redemption requests delivered other than by mail should be delivered to Financial Data Services, Inc., Transfer Agency Mutual Fund Operations, 4800 Deer Lake Drive East, Jacksonville, Florida 32246-6484. Proper notice of redemption in the case of shares deposited with the Transfer Agent may be accomplished by a letter requesting redemption. Proper notice of redemption in the case of shares for which certificates have been issued may be accomplished by a written letter as noted above accompanied by the certificate(s) for the shares to be redeemed. The notice in either event requires the signature(s) of all persons in whose name(s) the shares are registered, signed exactly as their name(s) appear on the Transfer Agent's register or on the certificate(s), as the case may be. The signature(s) on the redemption request must be guaranteed by an "eligible guarantor institution" as such is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, the existence and validity of which may be verified by the Transfer Agent through the use of industry publications. Notarized signatures are not sufficient. Examples of eligible guarantor institutions include most commercial banks and other broker dealers (including for example, Merrill Lynch branch offices). Information regarding other financial institutions which qualify as "eligible guarantor institutions" may be obtained from the Transfer Agent. In certain instances, the Transfer Agent may require additional documents such as, but not limited to, trust instruments, death certifica tes, appointments as executor or administrator, or certificates of corporate authority. For shareholders redeeming directly with the Transfer Agent, payment will be mailed within seven days of receipt of a proper notice of redemption.
At various times the Fund may be requested to redeem shares of a Portfolio for which it has not yet received good payment. The Fund may delay or cause to be delayed the mailing of a redemption check until such time, not exceeding ten days, as it has assured itself that good payment (e.g., cash or certified check drawn on a United States bank) has been collected for the purchase of such shares. Normally this delay will not exceed 10 days.
Repurchase
The Fund will also repurchase shares of each Portfolio through a shareholder's listed securities dealer. The Fund will normally accept orders to repurchase shares by wire or telephone from dealers for their customers at the net asset value next computed after receipt of the order by the dealer, provided that the request for repurchase is received by the dealer prior to the close of business on the New York Stock Exchange on the day received and is received by the Fund from the dealer not later than 4:30 P.M., New York City time, on the same day. Dealers have the responsibility of submitting such repurchase requests to the Fund not later than 4:30 P.M., New York City time, in order to obtain that day's closing price. These repurchase arrangements are for the convenience of shareholders and do not involve a charge by the Fund (other than any applicable CDSC); however, securities dealers may impose a charge on the shareholder for transmitting the notice of repurchase to the Fund. Merrill Lynch may charge its customers a processing fee (currently $4.85) to confirm a repurchase of shares. Redemptions directly through the Fund's Transfer Agent are not subject to the processing fee. The Fund reserves the right to reject any order for repurchase. The exercise of this right of rejection might adversely affect shareholders seeking redemption through the repurchase procedure.
For shareholders redeeming through their listed securities dealer, payment for full and fractional shares will be made by the securities dealer within seven days of the proper tender of the certificates, if any, and stock power or letter requesting redemption, in each instance with signatures guaranteed as noted above.
Reinstatement Privilege-Class A and Class D Shares
As described in further detail in the Statement of Additional Information, holders of Class A or Class D shares of any of the three Portfolios who have redeemed their shares have a one-time privilege to reinstate their accounts by purchasing Class A or Class D shares of the same Portfolio, and class, as the case may be, in which they had invested at net asset value without a sales charge up to the dollar amount redeemed.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends and Distributions
The net investment income of each Portfolio is declared as dividends daily as of the regular close of trading on the New York Stock Exchange (currently 4:00 P.M.) immediately prior to the determination of the net asset value of each Portfolio on that day. The net investment income of each Portfolio for dividend purposes consists of interest earned on portfolio securities, less expenses, in each case computed since the most recent determination of net asset value. Expenses of each Portfolio, including the advisory fee and Class B account maintenance and distribution fees (if applicable), are accrued daily. Dividends of net investment income are declared daily and reinvested monthly in the form of additional full and fractional shares of each Portfolio at net asset value unless the shareholder elects to receive such dividends in cash. The per share dividend distributions on each class of shares of each of the three Portfolios will be reduced as a result of any account maintenance,
distribution and transfer agency fees applicable to that class. Shares will accrue dividends as long as they are issued and outstanding. Shares are issued and outstanding as of the settlement date of a purchase order to the settlement date of a redemption order.
Net realized capital gains, if any, are declared and distributed to
the Fund's shareholders at least annually. Capital gains distributions
will be automatically reinvested in shares unless the shareholder elects
to receive such distributions in cash.
See "Shareholder Services-Automatic Reinvestment of Dividends and
Capital Gains Distributions" for information as to how to elect either
dividend reinvestment or cash payments. Any portions of dividends and
distributions which are taxable to shareholders as described below are
subject to income tax whether they are reinvested in shares of any
Portfolio or received in cash.
Federal Income Taxes
Each Portfolio of the Fund generally will be treated as a separate corporation for federal income tax purposes. Each Portfolio has qualified and expects to continue to qualify for the special tax treatment afforded regulated investment companies under the Internal Revenue Code of 1986, as amended (the "Code"). If each Portfolio qualifies for that tax treatment, it will not be subject to federal income tax on that part of its net ordinary income and net realized long-term capital gains which it distributes to its shareholders.
Each Portfolio has qualified and expects to continue to qualify to pay "exempt-interest" dividends as defined in the Code. If it so qualifies, dividends or any part thereof (other than any capital gain distributions) paid by the Portfolio which are attributable to interest on tax-exempt obligations and designated by the Portfolio as exempt-interest dividends in a written notice mailed to the Portfolio's shareholders within sixty days after the close of its taxable year may be treated by shareholders for all purposes as items of interest excludable from their gross income under Section 103(a) of the Code. The recipient of tax-exempt income is required to report such income on his federal income tax return. However, a shareholder is advised to consult his tax adviser with respect to whether exempt-interest dividends retain the exclusion under Section 103(a) if such shareholder would be treated as a "substantial user" under Section 147(a)(1) with respect to some or all of the tax-exempt obligations held by the Portfolio. The Code provides that interest on indebtedness incurred or continued to purchase or carry shares of the Portfolio is not deductible to the extent attributable to exempt-interest dividends. Also, any losses realized by individuals who dispose of shares of the Fund within six months of their purchase are disallowed to the extent of any exempt-interest dividends received with respect to such shares.
Each Portfolio may realize capital gains, which will constitute
taxable income. Any distributions designated as capital gain dividends,
i.e., as being made from the Portfolio's net long-term capital gains
(whether from tax-exempt or taxable obligations) in a written notice
furnished annually to shareholders are taxable to shareholders as
long-term capital gains, regardless of a shareholder's holding period for
shares of the Portfolio. In addition, if, after April 30, 1993, a
Portfolio acquires tax-exempt obligations having market discount
(generally, obligations acquired for a price less than their principal
amount), any gain on the disposition or retirement of such obligations
will be treated as ordinary income to the extent of accrued market
discount.
Dividends paid by each Portfolio from its taxable income (i.e., interest on money market securities) and distributions of net realized short-term capital gains (whether from tax-exempt or taxable obligations) are taxable to shareholders as ordinary income.
Some shareholders may be subject to a 31% withholding tax ("backup withholding") on reportable dividends, capital gains distributions and redemption payments. Backup withholding is not required with respect to dividends representing "exempt-interest." Generally, shareholders subject to backup withholding will be those
for whom no certified taxpayer identification number is on file with the Fund or who, to the Fund's knowledge, have furnished an incorrect number. When establishing an account, an investor must certify under penalties of perjury that such number is correct and that he is not otherwise subject to backup withholding.
No gain or loss will be recognized by Class B shareholders on the conversion of their Class B shares into Class D shares. A shareholder's basis in the Class D shares acquired will be the same as such shareholder's basis in the Class B shares converted, and the holding period of the acquired Class D shares will include the holding period for the converted Class B shares.
A loss realized on a sale or exchange of shares of the Fund will be disallowed if other Fund shares are acquired (whether through the automatic reinvestment of dividends or otherwise) within a 61-day period beginning 30 days before and ending 30 days after the date that the shares are disposed of. In such a case, the basis of the shares acquired will be adjusted to reflect the disallowed loss.
Individual shareholders of the Fund may be subject to alternative minimum tax to the extent the Fund holds "private activity" bonds. The Fund expects that it will hold private activity bonds; however, in general, an individual shareholder filing a joint return who does not have any tax preference items subject to the alternative minimum tax other than income received from the Fund derived from private activity bonds would have to receive more than $45,000 of such income from the Fund before becoming subject to the alternative minimum tax.
Exempt-interest dividends paid by the Fund, whether or not attributable to private activity bonds, may increase a corporate shareholder's alternative minimum taxable income. In addition, the payment of exempt- interest dividends may increase a corporate shareholder's liability for the environmental tax imposed on a corporation's alternative minimum taxable income (computed without regard to either the alternative tax net operating loss deduction or the environmental tax deduction) at a rate of $12 per $10,000 (0.12%) of alternative minimum taxable income in excess of $2,000,000. The tax will be imposed even if the corporation is not required to pay an alternative minimum tax.
The foregoing is a general and abbreviated summary of the applicable provisions of the Code and Treasury Regulations currently in effect. For the complete provisions, reference should be made to the pertinent Code sections and the Treasury Regulations promulgated thereunder. The Code and these Regulations are subject to change by legislative or administrative action either prospectively or retroactively. The Statement of Additional Information sets forth additional information regarding other tax aspects of investment in the Fund.
Ordinary income and capital gains dividends may also be subject to State and local taxes.
State and Local Taxes
Depending upon the extent of the Fund's activities in those states and localities in which its offices are maintained or in which its agents or independent contractors are located, the Fund may be subject to the tax laws of such states or localities. In addition, the exemption of interest income for federal income tax purposes does not necessarily result in exemption under the income or other tax laws of any state or local taxing authority. The laws of the several states and local taxing authorities vary with respect to the taxation of such interest income, and each holder of shares of the Fund is advised to consult his own tax adviser in that regard. The Fund will report annually the percentage of interest income received by each Portfolio during the preceding year on tax-exempt obligations, indicating, on a state-by-state basis, the source of such income.
PORTFOLIO TRANSACTIONS
No Portfolio has any obligation to deal with any dealer or group of dealers in the execution of transactions in portfolio securities. Municipal Bonds and money market securities in which each Portfolio invests are traded primarily in the over-the-counter market. Where possible, each Portfolio deals directly with the dealers who make a market in the securities involved except in those circumstances where better prices and execution are available elsewhere. It is the policy of the Fund to obtain the best net results taking into account such factors as price (including the applicable dealer spread), the size, type and difficulty of the transaction involved, the firm's general execution and operational facilities, and the firm's risk in positioning the securities involved and the provision of supplemental investment research by the firm. While the Fund generally seeks reasonably competitive spreads or commissions, the Fund will not necessarily be paying the lowest spread or commission available. Municipal Bonds and money market securities are generally traded on a net basis and do not normally involve either brokerage commissions or transfer taxes. The cost of portfolio securities transactions of each Portfolio consists primarily of dealer or underwriter spreads. Under the 1940 Act, persons affiliated with the Fund, including Merrill Lynch, are prohibited from dealing with the Fund as a principal in the purchase and sale of securities. The Fund has obtained an exemptive order permitting it to engage in certain principal transactions involving high-quality short-term Municipal Bonds. In addition, the Fund may not purchase Municipal Bonds from any underwriting syndicate of which Merrill Lynch is a member except pursuant to procedures approved by the Board of Directors which comply with rules adopted by the Securities and Exchange Commission. Affiliated persons of the Fund may serve as its broker in over-the-counter transactions conducted on an agency basis.
SHAREHOLDER SERVICES
Each Portfolio offers a number of shareholder services designed to facilitate investment in its shares at no extra cost to the investor. Below is a description of these services. Full details as to each of these services and copies of the various plans described below can be obtained from the Fund.
Investment Account
Each shareholder whose account is maintained with the Transfer Agent has an Investment Account and will receive a statement, at least quarterly, from the Transfer Agent. These statements will serve as transaction confirmations for automatic investment purchase and the reinvestment of ordinary income and long-term capital gains distributions. These statements will also show any other activity in the account since the preceding statement. After the end of each year, shareholders will receive federal income tax information regarding dividends and capital gain distributions. A shareholder may make additions to his Investment Account at any time by purchasing shares at the applicable public offering price either through a securities dealer which has entered into a selected dealers agreement with the Distributor or by mail directly to the Transfer Agent, acting as agent for the Distributor.
Shareholders also may maintain their accounts through Merrill Lynch. Upon the transfer of shares out of a Merrill Lynch brokerage account, an Investment Account in the transferring shareholder's name will be opened automatically, without charge, at the Transfer Agent. Shareholders considering transferring their Class A or Class D shares from Merrill Lynch to another brokerage firm or financial institution should be aware that, if the firm to which the Class A or Class D shares are to be transferred will not take delivery of shares of the Fund, a shareholder either must redeem the Class A or Class D shares (paying any applicable CDSC) so that the cash proceeds can be transferred to the account at the new firm or such shareholder must continue to maintain an
Investment Account at the Transfer Agent for those Class A or Class D shares. Shareholders interested in transferring their Class B or Class C shares from Merrill Lynch and who do not wish to have an Investment Account maintained for such shares at the Transfer Agent may request their new brokerage firm to maintain such shares in an account registered in the name of the brokerage firm for the benefit of the shareholder at the Transfer Agent.
Share certificates are issued only for full shares and only upon the specific request of the shareholder. Certificates representing all or only part of the full shares in an Investment Account may be requested by a shareholder directly from the Transfer Agent.
Automatic Investment Plan
An Automatic Investment Plan is available whereby the Transfer Agent is authorized through pre-authorized checks of $50 or more to charge the regular bank account of the shareholder on a monthly basis to provide systematic additions of shares of the Fund to the shareholder's Investment Account. Shareholders whose positions in any Portfolio of the Fund are maintained in a CMA (R) account may participate in the CMA Automated Investment Program, through which investments in any Portfolio of the Fund may be made on a regularly scheduled basis ranging from weekly to semiannually in amounts of $100 or more.
Automatic Reinvestment of Dividends and Capital Gains Distributions
Unless specified instructions are given as to the method of payment of monthly dividends and annual capital gains distributions, they will automatically be reinvested in additional shares of the respective Portfolio. Such reinvestment will be at the net asset value of the shares of the respective Portfolio, without sales charge, as of the close of business on the payable date of the dividend or distribution. Shareholders may elect in writing to receive either their income dividends or capital gains distributions, or both, in cash, in which event payment will be mailed by the Transfer Agent as soon as practicable after the payment date, which is the last day of each month.
A shareholder may at any time, by written notification to Merrill Lynch if the shareholder's account is maintained with Merrill Lynch or by written notification or by telephone (1-800-MER-FUND) to the Transfer Agent if the shareholder's account is maintained with the Transfer Agent, elect to have subsequent dividends or capital gains distributions, or both, paid in cash, rather than reinvested, in which event payment will be mailed on or about the payment date. Cash payments can also be directed to the shareholder's bank account. No CDSC will be imposed upon redemption of shares issued as a result of the automatic reinvestment of dividends or capital gains distributions.
Systematic Withdrawal Plans
As described in further detail in the Statement of Additional Information, a holder of Class A or Class D shares of any of the three Portfolios may elect to make systematic withdrawals from his or her Investment Account on either a monthly or calendar quarterly basis.
Exchange Privileges
Shareholders of each class of shares of a Portfolio who have held all or part of their shares in the Portfolio for at least 15 days may exchange their shares for shares of certain other Portfolios of the Fund, or with certain other MLAM-advised mutual funds.
Under the Merrill Lynch Select Pricing SM System, Class A shareholders may exchange Class A shares of a Portfolio for Class A shares of another Portfolio or a second MLAM-advised mutual fund if the shareholder holds any Class A shares of the other Portfolio or second fund in his account in which the exchange is made at the time of the exchange or is otherwise eligible to purchase Class A shares of the other Portfolio or second fund. If the Class A shareholder wants to exchange Class A shares for shares of other Portfolio or a second MLAM-advised mutual fund, and the shareholder does not hold Class A shares of the other Portfolio or second fund in his account at that time of the exchange and is not otherwise eligible to acquire Class A shares of the other Portfolio or second fund, the shareholder will receive Class D shares of the other Portfolio or second fund as a result of the exchange. Class D shares also may be exchanged for Class A shares of another Portfolio or a second MLAM-advised mutual fund at any time as long as, at the time of the exchange, the shareholder holds Class A shares of the second fund in the account in which the exchange is made or is otherwise eligible to purchase Class A shares of the other Portfolio or second fund.
Exchanges of Class A and Class D shares are made on the basis of the relative net asset values per Class A or Class D share, respectively, plus an amount equal to the difference, if any, between the sales charge previously paid on the Class A or Class D shares being exchanged and the sales charge payable at the time of the exchange on the shares being acquired.
Class B, Class C and Class D shares of a Portfolio will be exchangeable with shares of the same class of another Portfolio or other MLAM-advised mutual funds. Class C shares of the Limited Maturity Portfolio are available only through the Exchange Privilege.
Shares of a Portfolio which are subject to a CDSC will be exchangeable on the basis of relative net asset value per share without the payment of any CDSC that might otherwise be due upon redemption of the shares of the Portfolio. For purposes of computing the CDSC that may be payable upon a disposition of the shares acquired in the exchange, the holding period for the previously owned shares of the Portfolio is "tacked" to the holding period of the newly acquired shares of the other fund or Portfolio.
Class A, Class B, Class C and Class D shares also will be exchangeable for shares of certain MLAM-advised money market funds specifically designated as available for exchange by holders of Class A, Class B, Class C or Class D shares. The period of time that Class A, Class B, Class C or Class D shares are held in a money market fund, however, will not count toward satisfaction of the holding period requirement for reduction of any CDSC imposed on such shares, if any, and, with respect to Class B shares, toward satisfaction of the Conversion Period.
Class B shareholders of a Portfolio exercising the exchange privilege will continue to be subject to the CDSC schedule applicable to that Portfolio if such schedule is higher than the CDSC schedule relating to the new Class B shares. In addition, Class B shares of a Portfolio acquired through use of the exchange privilege will be subject to the CDSC schedule applicable to that Portfolio if such schedule is higher than the CDSC schedule relating to the Class B shares of the MLAM-advised mutual fund from which the exchange has been made.
Exercise of the exchange privilege is treated as a sale for Federal income tax purposes. For further information, see "Shareholder Services- Exchange Privilege" in the Statement of Additional Information.
Each Portfolio's exchange privilege is modified with respect to purchases of Class A and Class D shares under the Merrill Lynch Mutual Fund Adviser ("MFA") program. First, the initial allocation of assets is made under the MFA program. Then, any subsequent exchange under the MFA program of Class A or Class D shares of an MLAM-advised mutual fund for Class A or Class D shares of a Portfolio of the Fund will be made solely on the basis of the relative net asset values of the shares being exchanged. Therefore, there will not be a charge for any difference between the sales charge previously paid on the shares of the other MLAM-advised mutual fund and the sales charge payable on the shares of the Fund being acquired in the exchange under the MFA program.
ADDITIONAL INFORMATION
Determination of Net Asset Value
The net asset value of the shares of all classes of each Portfolio is determined by FAM once daily as of 4:15 P.M., New York City time, on each day that the New York Stock Exchange is open for trading immediately after the declaration of dividends. The net asset value per share is computed by dividing the sum of the value of the portfolio securities held by each Portfolio plus any cash or other assets minus all liabilities by the total number of shares outstanding at such time, rounded to the nearest cent. Expenses, including the investment advisory fees payable to FAM, account maintenance and/or distribution fees payable to the distributor are accrued daily.
The per share net asset value of Class A shares of a Portfolio generally will be higher than the per share net asset value of shares of the other classes of that Portfolio, reflecting the daily expense accruals of the account maintenance, distribution and higher transfer agency fees applicable with respect to Class B and Class C shares and the daily expense accruals of the account maintenance and higher transfer agency fees applicable with respect to Class D shares. Moreover, the per share net asset value of Class D shares generally will be higher than the per share net asset value of Class B and Class C shares, reflecting the daily expense accruals of distribution and higher transfer agency fees applicable with respect to Class B and Class C shares. It is expected, however, that the per share net asset value of the four classes of a Portfolio will tend to converge immediately after the payment of dividends or distributions, which will differ by approximately the amount of expense accrual differentials among the classes.
Performance Data
From time to time the Fund may include its average annual total return, yield and tax equivalent yield for various specified time periods in advertisements or information furnished to present or prospective shareholders. Average annual total return, yield and tax equivalent yield are computed separately for the Class A, Class B, Class C and Class D shares of the Portfolios in accordance with formulas specified by the Securities and Exchange Commission.
Average annual total return quotations for the specified periods will be computed by finding the average annual compounded rates of return (based on net investment income and any realized and unrealized capital gains or losses on portfolio investments over such periods) that would equate the initial amount invested to the
redeemable value of such investment at the end of each period. Average annual total return will be computed assuming all dividends and distributions are reinvested and taking into account all applicable recurring and nonrecurring expenses, including any CDSC that would be applicable to a complete redemption of the investment at the end of the specified period, such as in the case of Class B and Class C shares and the maximum sales charge in the case of Class A and Class D shares. Dividends paid with respect to all shares of a Portfolio, to the extent any dividends are paid, will be calculated in the same manner at the same time on the same day and will be in the same amount, except that distribution fees, account maintenance fees and any incremental transfer agency costs relating to a class of shares will be borne exclusively by that class. The Fund will include performance data for all classes of shares of the Portfolios in any advertisement or information including performance data for such Portfolios.
The Fund also may quote total return and aggregate total return performance data for various specified time periods. Such data will be calculated substantially as described above, except that (1) the rates of return calculated will not be average annual rates, but rather, actual annual, annualized or aggregate rates of return and (2) the maximum applicable sales charge will not be included. Actual annual or annualized total return data generally will be lower than average annual total return data since the average annual rates of return reflect compounding; aggregate total return data generally will be higher than average annual total return data since the aggregate rates of return reflect compounding over a longer period of time. See "Purchase of Shares." The Fund's total return may be expressed either as a percentage or as a dollar amount in order to illustrate such total return on a hypothetical investment in the Fund at the beginning of each specified period.
Yield quotations will be computed based on a 30-day period by dividing
(a) the net income based on the yield of each security earned during the
period by (b) the average daily number of shares outstanding during the
period that were entitled to receive dividends multiplied by the maximum
offering price per share on the last day of the period. Tax equivalent
yield quotations will be computed by dividing (a) the part of the Fund's
yield that is tax-exempt by (b) one minus a stated tax rate and adding the
result to that part, if any, of the Fund's yield that is not tax-exempt.
The yield for the 30-day period ending June 30, 1994 for National
Portfolio Class A shares was 5.59% and 5.05% for Class B shares, for
Insured Portfolio Class A shares was 5.20% and 4.65% for Class B shares,
and for Limited Maturity Portfolio Class A shares was 3.89% and 3.56% for
Class B shares. The tax-equivalent yield for the same period (based on a
tax rate of 28%) for National Portfolio Class A shares was 7.76% and 7.01%
for the Class B shares, for Insured Portfolio Class A shares was 7.22% and
6.46% for the Class B shares and for Limited Maturity Portfolio Class A
shares was 5.40% and 4.94% for Class B shares.
Total return, yield and tax equivalent yield figures are based on the Fund's historical performance and are not intended to indicate future performance. The Fund's total return, yield and tax equivalent yield will vary depending on market conditions, the securities comprising the Fund's portfolio, the Fund's operating expenses and the amount of realized and unrealized net capital gains or losses during the period. The value of an investment in the Fund will fluctuate and an investor's shares, when redeemed, may be worth more or less than their original cost.
On occasion, the Fund may compare its performance to that of the Standard & Poor's 500 Composite Stock Price Index, the Value Line Composite Index, the Dow Jones Industrial Average, or performance data contained in publications such as Lipper Analytical Services, Inc., Morningstar Publications, Inc., Money Magazine, U.S. News & World Report, Business Week, CDA Investment Technology, Inc., Forbes Magazine or Fortune Magazine. As with other performance data, performance comparisons should not be considered representative of the Fund's relative performance for any future period.
Rating Information
DESCRIPTIONS OF MOODY'S INVESTORS SERVICE, INC.'S MUNICIPAL BOND RATINGS
Aaa-Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues.
Aa-Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in Aaa securities.
A-Bonds which are rated A possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.
Baa-Bonds which are rated Baa are considered medium grade obligations;
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present, but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba-Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class.
B-Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small.
Caa-Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest.
Ca-Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings.
C-Bonds which are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.
Conditional Rating: Bonds for which the security depends upon the
completion of some act or the fulfillment of some condition are rated
conditionally. These are bonds secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operation experience,
(c) rentals which begin when facilities are completed, or (d) payments to
which some other limiting condition attaches. Parenthetical rating denotes
probable credit stature upon completion of construction or elimination of
basis of condition.
Rating Refinements: Moody's may apply numerical modifiers, 1, 2 and 3 in each generic rating classification from Aa through B in its municipal bond rating system. The modifier 1 indicates that the security ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and a modifier 3 indicates that the issue ranks in the lower end of its generic rating category.
Short-term Notes: The four ratings of Moody's for short-term notes are MIG 1, MIG 2, MIG 3 and MIG 4. MIG 1 denotes best quality. There is present strong protection by established cash flows, superior liquidity support or demonstrated broad-based access to the market for refinancing; MIG 2 denotes high quality. Margins of protection are ample although not so large as in the preceding group; MIG 3 denotes favorable quality. All security elements are accounted for but there is lacking the undeniable strength of the preceding grades. Liquidity and cash flow protection may be narrow and market access for refinancing is likely to be less well established; MIG 4 denotes adequate quality. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk.
DESCRIPTIONS OF MOODY'S COMMERCIAL PAPER RATINGS
Moody's Commercial Paper ratings are opinions of the ability to repay punctually promissory obligations having an original maturity not in excess of nine months. Moody's employs the following three designations, all judged to be investment grade, to indicate the relative repayment capacity of rated issuers:
Issuers rated Prime-1 (or related supporting institutions) have a superior capacity for repayment of short-term promissory obligations.
Issuers rated Prime-2 (or related supporting institutions) have a strong capacity for repayment of short-term promissory obligations.
Issuers rated Prime-3 (or related supporting institutions) have an acceptable capacity for repayment of short-term promissory obligations.
Issuers rated Not Prime do not fall within any of the Prime rating categories.
DESCRIPTIONS OF STANDARD & POOR'S CORPORATION'S MUNICIPAL DEBT RATINGS
A Standard & Poor's municipal debt rating is a current assessment of the creditworthiness of an obligor with respect to a specific obligation. This assessment may take into consideration obligors such as guarantors, insurers, or lessees.
The debt rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment as to market price or suitability for a particular investor.
The ratings are based on current information furnished by the issuer or obtained by Standard & Poor's from other sources Standard & Poor's considers reliable. Standard & Poor's does not perform an audit in connection with any rating and may, on occasion, rely on unaudited financial information. The rating may be changed, suspended or withdrawn as a result of changes in, or unavailability of, such information, or for other circumstances.
The ratings are based, in varying degrees, on the following considerations:
I. Likelihood of default-capacity and willingness of the obligor as to the timely payment of interest and repayment of principal in accordance with the terms of the obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization or other arrangement under the laws of bankruptcy and other laws affecting creditor's rights.
AAA Debt rated "AAA" have the highest rating assigned by Standard
& Poor's to a debt obligation. Capacity to pay interest and
repay principal is extremely strong.
AA Debt rated "AA" have a very strong capacity to pay interest
and repay principal and differs from the higher rated issues
only in small degree.
A Debt rated "A" have a strong capacity to pay interest and
repay principal although they are somewhat more susceptible
to the adverse effects of changes in circumstances and
economic conditions than debts in higher rated categories.
BBB Debt rated "BBB" are regarded as having an adequate capacity
to pay interest and repay principal. Whereas they normally
exhibit adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt
in this category than in higher rated categories.
BB Debt rated "BB," "B," "CCC" and "CC" are regarded, on
B balance, as predominantly speculative with respect to capacity
CCC to pay interest and repay principal in accordance with the terms
CC of the obligation. "BB" indicates the lowest degree of
speculation and "CC" the highest of speculation. While such
debts will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.
C The rating "C" is reserved for income bonds on which no
interest is being paid.
D Debt rated "D" is in default, and payment of interest and/or
repayment of principal is in arrears.
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Plus (+) or Minus (-): The ratings from "AA" to "B" may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.
Provisional Ratings: The letter "p" indicates that the rating is provisional. A provisional rating assumes the successful completion of the project being financed by the debt being rated and indicates that payment of debt service requirements is largely or entirely dependent upon the successful and timely completion of the project. This rating, however, while addressing credit quality subsequent to completion of the project, makes no comment on the likelihood of, or the risk of default upon failure of, such completion. The investor should exercise his own judgment with respect to such likelihood and risk.
NR Indicates that no rating has been requested, that there is
insufficient information on which to base a rating or that
Standard & Poor's does not rate a particular type of
obligation as a matter of policy.
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Descriptions of Standard & Poor's Corporation's Commercial Paper Ratings
A Standard & Poor's commercial paper rating is a current assessment of
the likelihood of timely payment of debt having an original maturity of no
more than 365 days. Ratings are graded into four categories, ranging from
"A" for the highest quality obligations to "D" for the lowest. The
four categories are as follows:
A Issues assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category
are delineated with the numbers 1, 2 and 3 to indicate the
relative degree of safety.
A-1 This designation indicates that the degree of safety regarding
timely payment is very strong.
A-2 Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as high as
for issues designated "A-1."
A-3 Issues carrying this designation have a satisfactory capacity
for timely payment. They are, however, somewhat more vulnerable
to the adverse effects of changes in circumstances than
obligations carrying the higher designations.
B Issues rated "B" are regarded as having only an adequate
capacity for timely payment. However, such capacity may be
damaged by changing conditions or short-term adversities.
C This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.
D This rating indicates that the issue is either in default or is
expected to be in default upon maturity.
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The commercial paper rating is not a recommendation to purchase or sell a security. The ratings are based on current information furnished to Standard & Poor's by the issuer or obtained by Standard & Poor's from other sources it considers reliable. The ratings may be changed, suspended, or withdrawn as a result of changes in or unavailability of, such information.
Descriptions of Standard & Poor's Corporation's Note Ratings
A Standard & Poor's note rating reflects the liquidity concerns and market access risks unique to notes. Notes due in 3 years or less will likely receive a note rating. Notes maturing beyond 3 years will most likely receive a long-term debt rating. The following criteria will be used in making that assessment.
- Amortization schedule (the larger the final maturity relative to other maturities, the more likely it will be treated as a note).
- Source of Payment (the more dependent the issue is on the market for its refinancing, the more likely it will be treated as a note).
Note rating symbols are as follows:
SP-1 Very strong, or strong, capacity to pay principal and interest.
Those issues determined to possess overwhelming safety
characteristics will be given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
SP-3 Speculative capacity to pay principal and interest.
Organization of the Fund
The Fund, a Maryland corporation, is a diversified, open-end management investment company that commenced operations on October 21, 1977. Prior to September 21, 1979, the Fund consisted solely of the Insured Portfolio. Currently, the Fund is comprised of three separate Portfolios: Insured Portfolio, National Portfolio and Limited Maturity Portfolio.
The authorized capital stock of the Fund consists of 3,850,000,000 shares of Common Stock, divided into three series, each of which is divided into four classes, having a par value of $0.10 per share. The shares of Insured Portfolio Series Common Stock (500,000,000 Class A, 375,000,000 Class B shares, 375,000,000 Class C shares, 500,000,000 Class D shares authorized), High Yield Portfolio Series Common Stock (375,000,000 Class A, 375,000,000 Class B shares, 375,000,000 Class C shares, 375,000,000 Class D shares authorized), which does business under the name "National Portfolio," and Limited Maturity Portfolio Series Common Stock (150,000,000 Class A, 150,000,000 Class B shares, 150,000,000 Class C shares, 150,000,000 Class D shares authorized) are divided into four classes, designated Class A, Class B, Class C and Class D Common Stock. Each Class A, Class B, Class C and Class D share of common stock of each of the Portfolios represents an interest in the same assets of such Portfolio and are identical in all respects to the shares of the other classes except that the Class B, Class C and Class D shares bear certain expenses related to the account maintenance associated with such shares, and Class B and Class C shares bear certain expenses related to the distribution of such shares. Each Class of shares of a Portfolio has exclusive voting rights with respect to matters relating to account maintenance services and distribution expenditures relative to that Portfolio, as applicable. Only shares of each respective Portfolio are entitled to vote on matters concerning only that Portfolio. The Fund has received an order from the Securities and Exchange Commission permitting the issuance and sale of multiple classes of shares of the Portfolios. The Directors of the Fund may classify and reclassify the shares of the Fund into additional series or classes of Common Stock at a future date. The creation of additional classes would require an additional order from the Securities and Exchange Commission. There is no assurance that such an additional order will be issued.
Each issued and outstanding share is entitled to one vote and to participate equally in dividends and distributions declared by the respective Portfolios and in net assets of the respective Portfolios upon liquidation or dissolution remaining after satisfaction of outstanding liabilities, except, as noted above, the Class B, Class C and Class D shares of the Portfolios bear certain expenses related to the distribution of such shares. The shares of each Portfolio, when issued, will be fully paid and nonassessable, have no preference, pre-emptive, conversion, exchange or similar rights. Shares have the conversion rights described in this Prospectus. Holders of shares of any Portfolio are entitled to redeem their shares as set forth under "Redemption of Shares." Shares do not have cumulative voting rights, and the holders of more than 50% of the shares of the Fund voting for the election of Directors can elect all of the Directors of the Fund if they choose to do so and in such event the holders of the remaining shares would not be able to elect any Directors. Stock certificates will be issued by the Transfer Agent only on specific request. Certificates for fractional shares are not issued in any case. Shareholders are entitled to redeem their shares as set forth under "Redemption of Shares."
Custodian
The Bank of New York, 90 Washington Street, 12th Floor, New York, New York 10286, is the Fund's custodian.
Transfer Agent
Financial Data Services, Inc. ("FDS"), which is a wholly owned subsidiary of Merrill Lynch & Co., Inc., acts as the Fund's Transfer Agent pursuant to a Transfer Agency, Dividend Disbursing Agency and Shareholder Servicing Agency Agreement (the "Transfer Agency Agreement"). Pursuant to the Transfer Agency Agreement, FDS is responsible for the issuance, transfer and redemption of shares and the opening and maintenance of shareholder accounts. Pursuant to the Transfer Agency Agreement, FDS receives an annual fee of $11.00 per shareholder account for Class A or Class D shares of the Portfolios and $14.00 per shareholder account for Class B or Class C shares of the Portfolios, and is entitled to reimbursement for out-of-pocket expenses incurred by it under the Transfer Agency Agreement. For the year ended June 30, 1994, the Insured, National and Limited Maturity Portfolios of the Fund incurred fees of $989,990, $692,712 and $195,214, respectively, pursuant to the Transfer Agency Agreement.
Counsel and Auditor
Rogers & Wells, Counsel to the Fund, passes upon legal matters for the Fund in connection with the shares offered by this Prospectus. Deloitte & Touche LLP, independent auditors, are auditors of the Fund.
Shareholder Reports
The Fund issues to its shareholders quarterly reports containing unaudited financial statements and annual reports containing financial statements examined by auditors approved annually by the Directors. Only one copy of each shareholder report and certain shareholder communications will be mailed to each identified shareholder regardless of the number of accounts such shareholder has. If a shareholder wishes to receive separate copies of each report and communication for each of the shareholder's related accounts the shareholder should notify in writing:
Financial Data Services, Inc.
Attn: TAMFO
P.O. Box 45289
Jacksonville, Florida 32232-5289
The written notification should include the shareholder's name, address, tax identification number and Merrill Lynch, Pierce, Fenner & Smith Incorporated and/or mutual fund account numbers. If you have any questions regarding this please call your Merrill Lynch financial consultant or Financial Data Services, Inc. at 800-637-3863.
Additional Information
This Prospectus does not contain all the information included in the Registration Statement filed with the Securities and Exchange Commission under the Securities Act of 1933 with respect to the securities offered hereby, certain portions of which have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The Statement of Additional Information, dated October 21, 1994, which forms a part of the Registration Statement, is incorporated by reference into this Prospectus. The Statement of Additional Information may be obtained without charge as provided on the cover page of this Prospectus. The Registration Statement, including the exhibits filed therewith, may be examined at the office of the Securities and Exchange Commission in Washington, D.C.
MERRILL LYNCH MUNICIPAL BOND FUND-AUTHORIZATION FORM (PART 1)
1. Share Purchase Application
I, being of legal age, wish to purchase: (choose one)
Insured Portfolio / / Class A shares / / Class B shares / / Class C shares
/ / Class D shares
National Portfolio / / Class A shares / / Class B shares / / Class C shares
/ / Class D shares
Limited Maturity Portfolio / / Class A shares / / Class B shares
/ / Class C shares / / Class D shares
of Merrill Lynch Municipal Bond Fund and establish an Investment Account as described in the Prospectus. In the event that I am not eligible to purchase Class A shares, I understand that Class D shares will be purchased.
Basis for establishing an Investment Account:
A. I enclose a check for $............ payable to Financial Data
Services, Inc. as an initial investment (minimum $1,000). I understand
that this purchase will be executed at the applicable offering price
next to be determined after this Application is received by you.
B. I already own shares of the following Merrill Lynch mutual funds
that would qualify for the right of accumulation as outlined in the
Statement of Additional Information: (Please list all funds. Use a
separate sheet of paper if necessary.)
1. ............................. 4. .......................................
2. ............................. 5. .......................................
3. ............................. 6. .......................................
Name......................................................................
First Name Initial Last Name
Name of Co-Owner (if any).................................................
First Name Initial Last Name
Address..................................................... Date...........
............................................................
(Zip Code)
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Occupation.................... Name and Address of Employer..............
..........................................
..........................................
............................................................................
Signature of Owner Signature of Co-Owner (if any)
2. Dividend and Capital Gain Distribution Options
Ordinary Income Dividends Long-term Capital Gains
Select / / Reinvest Select / / Reinvest
One: / / Cash One / / Cash
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If no election is made, dividends and capital gains will be automatically
reinvested at net asset value without a sales charge.
If cash, specify how you would like your distributions paid to you:
/ / Check or / / Direct Deposit to bank account
If direct deposit to bank account is selected, please complete below:
I hereby authorize payment of dividend and capital gain distributions by
direct deposit to my bank account and, if necessary, debit entries and
adjustments for any credit entries made to my account in accordance with
the terms I have selected on the Merrill Lynch Municipal Bond Fund
Authorization Form.
Specify type of account (check one) / / checking / / savings
Name on your account......................................................
Bank Name ............ Bank Number ............ Account Number ............
Bank address..............................................................
I agree that this authorization will remain in effect until I provide
written notification to Financial Data Services, Inc. amending or
terminating this service.
Signature of Depositor....................................................
Signature of Depositor....................... Date.......................
(if joint account, both must sign)
Note: If direct deposit to bank account is selected, your blank, unsigned check marked "VOID" or a deposit slip from your savings account should accompany this application.
3. Social Security Number or Taxpayer Identification Number
Social Security Number or Taxpayer
Identification Number
Under penalty of perjury, I certify (1) that the number set forth above is
my correct Social Security Number or Taxpayer Identification Number and
(2) that I am not subject to backup withholding (as discussed in the
Prospectus under "Dividends, Distributions and Taxes-Federal Income Taxes")
either because I have not been notified that I am subject thereto as a result
of a failure to report all interest or dividends, or the Internal Revenue
Service ("IRS") has notified me that I am no longer subject thereto.
Instruction: You must strike out the language in (2) above if you have been notified that you are subject to backup withholding due to under-reporting and if you have not received a notice from the IRS that backup withholding has been terminated. The undersigned authorizes the furnishing of this certification to other Merrill Lynch sponsored mutual funds.
Signature of Owner ........... Signature of Co-Owner (if any)........... (In the case of co-owners, a joint tenancy with right of survivorship will be presumed unless otherwise specified)
Dear Sir/Madam: ..............................., 19....
Date of initial purchase
Although I am not obligated to do so, I intend to purchase shares of Merrill Lynch Municipal Bond Fund or any other investment company with an initial sales charge or deferred sales charge for which the Merrill Lynch Funds Distributor, Inc. acts as distributor over the next 13 month period which will equal or exceed:
Insured Portfolio / / $25,000 / / $50,000 / / $100,000 / / $250,000 / / $1,000,000 National Portfolio / / $25,000 / / $50,000 / / $100,000 / / $250,000 / / $1,000,000 |
Limited Maturity Portfolio / / $100,000 / / $250,000 / /$500,000 / / $1,000,000
Each purchase will be made at the then reduced offering price
applicable to the amount checked above, as described in the Merrill Lynch
Municipal Bond Fund Prospectus.
I agree to the terms and conditions of the Letter of Intention. I
hereby irrevocably constitute and appoint Merrill Lynch Funds Distributor,
Inc., my attorney, with full power of substitution, to surrender for
redemption any or all shares of Merrill Lynch Municipal Bond Fund held as
security.
By.................................. ....................................
Signature of Owner Signature of Co-Owner (If registered
in joint names, both must sign)
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In making purchases under this letter, the following are the related accounts on which reduced offering prices are to apply:
(1) Name........................... (2) Name...........................
Account Number..................... Account Number.....................
5. For Dealer Only
Branch Office, Address, Stamp
----------------------------------------
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We hereby authorize Merrill Lynch Funds Distributor, Inc. to act as our agent in connection with transactions under this authorization form and agree to notify the Distributor of any purchases made under a Letter of Intention or Systematic Withdrawal Plan. We guarantee the shareholder's
signature.
..........................................................................
Dealer Name and Address
MERRILL LYNCH MUNICIPAL BOND FUND-AUTHORIZATION FORM (PART 2)
Name of Owner ........................
Name of Co-Owner (if any) ............
Address ..............................
..............................
Social Security Number
or Taxpayer Identification Number
Account Number .....................
(if existing account)
2. Systematic Withdrawal Plan-Class A and D Shares Only (See terms and conditions in the Statement of Additional Information)
Minimum Requirements: $10,000 for monthly disbursements, $5,000 for quarterly, of / / Class A or / / Class D of the Insured Portfolio, / / Class A or / / Class D shares of the National Portfolio, or / / Class A or / /Class D shares of the Limited Maturity Portfolio in Merrill Lynch Municipal Bond Fund at cost or current offering price. Withdrawals to be made either (check one) / / Monthly on the 24th day of each month, or / / Quarterly on the 24th day of March, June, September and December. If the 24th falls on a weekend or holiday, the next succeeding business day will be utilized. Begin systematic withdrawals on ----------or as soon as possible thereafter.
(month)
Specify how you would like your withdrawal paid to you (check one): / / $---------- or / /----------% of the current value of / / Class A or / / Class D shares in the account.
Specify withdrawal method: / / check or / / direct deposit to bank account (check one and complete part (a) or (b) below):
Draw checks payable (check one)
(a) I hereby authorize payment by check / / as indicated in Item 1. / / to the order of......................................................
Mail to (check one)
/ / the address indicated in item 1.
/ / Name (please print)..................................................
Address ..................................................................
..................................................................
Signature of Owner..................... Date.....................
Signature of Co-Owner (if any)....................................
(b) I hereby authorize payment by direct deposit to bank account and, if
necessary, debit entries and adjustments for any credit entries made to my
account. I agreee that this authorization will remain in effect until I
provide written notification to Financial Data Services, Inc. amending or
terminating this service.
Specify type of account (check one) / / checking / / savings
Name on your account ..................................................... Bank Name................................................................. Bank Number........................ Account Number........................ Bank Address.............................................................. .......................................................................... Signature of Depositor....................... Date....................... Signature of Depositor.................................................... (If joint account, both must sign) |
Note: If direct deposit is elected, your blank, unsigned check marked "VOID" or a deposit slip from your savings account should accompany this application.
3. Application for Automatic Investment Plan
I hereby request that Financial Data Services, Inc. draw an automated clearing house ("ACH") debit on my checking account as described below each month to purchase: (choose one)
/ / Class A shares / / Class B shares / / Class C shares / / Class D shares
of Merrill Lynch Municipal Bond Fund subject to the terms set forth below. In the event that I am not eligible to purchase Class A shares, I understand that Class D shares will be purchased.
FINANCIAL DATA SERVICES, INC.
You are hereby authorized to draw an ACH debit each month on my bank account
for investment in Merrill Lynch Municipal Bond Fund as indicated below:
Amount of each ACH debit $.................................................
Account number.............................................................
Please date and invest ACH debits on the 20th of each month beginning
............................................................................
............................................................... (Month) or as soon thereafter as possible.
I agree that you are drawing these ACH debits voluntarily at my request and that you shall not be liable for any loss arising from any delay in preparing or failure to prepare any such debit. If I change banks or desire to terminate or suspend this program, I agree to notify you promptly in writing. I hereby authorize you to take any action to correct erroneous ACH debits of my bank account or purchases of fund shares including liquidating shares of the Fund and credit my bank account. I further agree that if a check or debit is not honored upon presentation, Financial Data Services, Inc. is authorized to discontinue immediately the Automatic Investment Plan and to liquidate sufficient shares held in my account to offset the purchase made with the dishonored debit.
............ ........................
Date Signature of Depositor
........................
Signature of Depositor
(If joint account, both
must sign)
AUTHORIZATION TO HONOR ACH DEBITS
DRAWN BY FINANCIAL DATA SERVICES, INC.
To......................................................................Bank
(Investor's Bank)
Bank Address ...............................................................
City................... State................... Zip Code...................
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As a convenience to me, I hereby request and authorize you to pay and charge to my account ACH debits drawn on my account by and payable to Financial Data Services, Inc. I agree that your rights in respect to each such debit shall be the same as if it were a check drawn on you and signed personally by me. This authority is to remain in effect until revoked personally by me in writing. Until you receive such notice, you shall be fully protected in honoring any such debit. I further agree that if any such debit be dishonored, whether with or without cause and whether intentionally or inadvertently, you shall be under no liability.
. . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . .
Date Signature of Depositor
. . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . Bank Account Number Signature of Depositor
(If joint account, both must sign)
Note: If Automatic Investment Plan is elected, your blank, unsigned check marked "VOID" should accompany this Application.
Investment Adviser Fund Asset Management P.O. Box 9011 Princeton, New Jersey 08543-9011
Distributor Merrill Lynch Funds Distributor, Inc. P.O. Box 9011 Princeton, New Jersey 08543-9011 (609) 282-2800
Custodian The Bank of New York 90 Washington Street, 12th Floor New York, New York 10286
Transfer Agent Financial Data Services, Inc.
Administrative Offices Transfer Agency Mutual Funds Operations 4800 Deer Lake Drive East Jacksonville, Florida 32246-6484 Mailing Address:
P.O. Box 45289
Jacksonville, Florida 32232-5289
Legal Counsel
Rogers & Wells
200 Park Avenue
New York, New York 10166
Independent Auditors
Deloitte & Touche LLP
117 Campus Drive
Princeton, New Jersey 08540
====================================================== ======================================================
No person has been authorized to give
any information or to make any Prospectus
representations, other than those contained
in this Prospectus, in connection with the
offer contained in this Prospectus, and, if
given or made, such other information or
representations must not be relied upon as
having been authorized by the Fund, the
Investment Adviser, or the Distributor. This
Prospectus does not constitute an offering
in any state in which such offering may not
lawfully be made.
----------
TABLE OF CONTENTS
(ART APPEARS HERE)
Page
Fee Table 2
Merrill Lynch Select Pricing
System...................... 8
Financial Highlights.......... 13
Investment Objective and
Policies.................... 16
Investment Policies of the
Portfolios.................. 17
Insured Portfolio........... 17
National Portfolio.......... 18 MERRILL LYNCH
Limited Maturity Portfolio.. 19 MUNICIPAL BOND
Investment Adviser............ 22 FUND, INC.
Directors..................... 23
Purchase of Shares............ 24
Initial Sales Charge
Alternative-Class A and
Class D Shares............ 27
Deferred Sales Charge
Alternative-Class B and
Class C Shares............ 30
Distribution Plans.......... 33 October 21, 1994
Limitations on the Payment
of Deferred Sales Charges. 35
Redemption of Shares.......... 36
Dividends, Distributions and
Taxes....................... 37
Portfolio Transactions........ 40
Shareholder Services.......... 40 Distributor:
Additional Information...... 43 Merrill Lynch
Determination of Net Asset Funds Distributor, Inc.
Value..................... 43
Performance Data............ 43
Rating Information.......... 45
Organization of the Fund.... 49
Custodian................... 49
Transfer Agent.............. 50
Counsel and Auditor......... 50
Shareholder Reports......... 50
Additional Information...... 50
Authorization Form............ 51
This prospectus should be
retained for future reference.
Code #10051 - 1094
====================================================== ======================================================
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OCTOBER 21, 1994
MERRILL LYNCH MUNICIPAL BOND FUND, INC.
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 * PHONE NO. (609) 282-2800
Merrill Lynch Municipal Bond Fund, Inc. (the "Fund") is a professionally managed, diversified, open-end investment company which seeks to provide shareholders with as high a level of income exempt from Federal income taxes as is consistent with the investment policies of each of its Portfolios and prudent investment management. The Fund is comprised of three separate Portfolios: the Insured Portfolio, the National Portfolio and the Limited Maturity Portfolio, each of which invests primarily in a diversified portfolio of tax-exempt Municipal Bonds, principally consisting of state, municipal and public authority securities.
The Fund is a series fund and is comprised of three separate Portfolios. Each Portfolio is, in effect, a separate fund issuing its own shares. Pursuant to the Merrill Lynch Select PricingSM System, each Portfolio of the Fund offers four classes of shares, each with a different combination of sales charges, ongoing fees and other features except that Class C shares of the Limited Maturity Portfolio are available only through the Exchange Privilege. The Merrill Lynch Select Pricing System permits an investor to choose the method of purchasing shares that the investor believes is most beneficial, given the amount of the purchase, the length of time the investor expects to hold the shares and other relevant circumstances.
This Statement of Additional Information of the Fund is not a prospectus and should be read in conjunction with the Prospectus of the Fund (the "Prospectus") dated October 21, 1994, which has been filed with the Securities and Exchange Commission and is available upon oral or written request without charge. Copies of the Prospectus can be obtained by calling or writing the Fund at the above telephone number or address. This Statement of Additional Information has been incorporated by reference into the Prospectus.
FUND ASSET MANAGEMENT-INVESTMENT ADVISER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.-DISTRIBUTOR
INVESTMENT OBJECTIVE AND POLICIES
Reference is made to "Investment Objective and Policies" in the Prospectus for a discussion of the investment objective and policies of the Fund.
At June 30, 1994, the average maturity of the Insured Portfolio, National Portfolio and the Limited Maturity Portfolio was approximately 21.7 years, 21.5 years and 1.3 years, respectively.
INSURANCE ON PORTFOLIO SECURITIES
Reference is made to the discussion of the Insured Portfolio under "Investment Policies of the Portfolios" in the Prospectus. As stated in the Prospectus, the Fund has purchased from AMBAC Indemnity Corporation ("AMBAC"), Municipal Bond Investors Assurance Corporation ("MBIA") and Financial Security Assurance Inc. ("FSA") separate Mutual Fund Insurance Policies (the "Policies").
The Policies guarantee the payment of the principal at maturity and interest on all Municipal Bonds which are purchased by the Insured Portfolio at a time when they are eligible for insurance. Municipal Bonds are eligible for insurance if they are, at the time of purchase by the Insured Portfolio, identified separately or by category in qualitative guidelines furnished by AMBAC, MBIA or FSA and are in compliance with the aggregate limitations on amounts set forth in such guidelines. AMBAC, MBIA and/or FSA may withdraw particular securities from the classifications of securities eligible for insurance while continuing to insure previously acquired bonds of such ineligible issues so long as they remain in the Insured Portfolio and may limit the aggregate amount of each issue or category of municipal securities thereof. The restrictions on investment imposed by the eligibility requirement of the Policies may reduce the yield of the Insured Portfolio.
RISK FACTORS IN TRANSACTIONS IN JUNK BONDS
The National Portfolio may invest in Municipal Bonds which are rated below Baa by Moody's or below BBB by Standard & Poor's or which, in the Investment Adviser's judgment, possess similar credit characteristics ("junk bonds"). See "Additional Information-Rating Information" in the Prospectus for additional information regarding ratings of debt securities. The Investment Adviser considers the ratings assigned by Standard & Poor's or Moody's as one of several factors in its independent credit analysis of issuers.
Junk bonds are considered by Standard & Poor's and Moody's to have varying degrees of speculative characteristics. Consequently, although junk bonds can be expected to provide higher yields, such securities may be subject to greater market price fluctuations and risk of loss of principal than lower yielding, higher rated debt securities. Investments in junk bonds will be made only when, in the judgment of the Investment Adviser, such securities provide attractive total return potential relative to the risk of such securities, as compared to higher quality debt securities. The National Portfolio will not invest in debt securities in the lowest rating categories (those rated CC or lower by Standard & Poor's or Ca or lower by Moody's) unless the Investment Adviser believes that the financial condition of the issuer or the protection afforded the particular securities is stronger than would otherwise be indicated by such low ratings. The National Portfolio does not intend to purchase debt securities that are in default or which the Investment Adviser believes will be in default.
Issuers of junk bonds may be highly leveraged and may not have available to them more traditional methods of financing. Therefore, the risks associated with acquiring the securities of such issuers generally are greater than is the case with higher rated securities. For example, during an economic downturn or a sustained period of rising interest rates, issuers of high yield securities may be more likely to experience financial stress,
especially if such issuers are highly leveraged. In addition, the market for high yield municipal securities is relatively new and has not weathered a major economic recession, and it is unknown what effects such a recession might have on such securities. During such a period, such issuers may not have sufficient revenues to meet their interest payment obligations. The issuer's ability to service its debt obligations also may be adversely affected by specific issuer developments, or the issuer's inability to meet specific projected business forecasts, or the unavailability of additional financing. The risk of loss due to default by the issuer is significantly greater for the holders of junk bonds because such securities may be unsecured and may be subordinated to other creditors of the issuer.
Junk bonds frequently have call or redemption features that would permit an issuer to repurchase the security from the National Portfolio. If a call were exercised by the issuer during a period of declining interest rates, the National Portfolio likely would have to replace such called security with a lower yielding security, thus decreasing the net investment income to the National Portfolio and dividends to shareholders.
The National Portfolio may have difficulty disposing of certain junk bonds because there may be a thin trading market for such securities. Because not all dealers maintain markets in all junk bonds, there is no established secondary market for many of these securities, and the National Portfolio anticipates that such securities could be sold only to a limited number of dealers or institutional investors. To the extent that a secondary trading market for junk bonds does exist, it is generally not as liquid as the secondary market for higher rated securities. Reduced secondary market liquidity may have an adverse impact on market price and the National Portfolio's ability to dispose of particular issues when necessary to meet its liquidity needs or in response to a specific economic event such as a deterioration in the creditworthiness of the issuer. Reduced secondary market liquidity for certain securities also may make it more difficult for the National Portfolio to obtain accurate market quotations for purposes of valuing its portfolio. Market quotations are generally available on many junk bonds only from a limited number of dealers and may not necessarily represent firm bids of such dealers or prices for actual sales.
It is expected that a significant portion of the junk bonds acquired by the National Portfolio will be purchased upon issuance, which may involve special risks because the securities so acquired are new issues. In such instances the National Portfolio may be a substantial purchaser of the issue and therefore have the opportunity to participate in structuring the terms of the offering. Although this may enable the National Portfolio to seek to protect itself against certain of such risks, the considerations discussed herein would nevertheless remain applicable.
Adverse publicity and investor perceptions, which may not be based on fundamental analysis, also may decrease the value and liquidity of junk bonds, particularly in a thinly traded market. Factors adversely affecting the market value of such securities are likely to affect adversely the National Portfolio's net asset value. In addition, the National Portfolio may incur additional expenses to the extent that it is required to seek recovery upon a default on a portfolio holding or participate in the restructuring of the obligation.
TRANSACTIONS IN FUTURES CONTRACTS
The National Portfolio and the Limited Maturity Portfolio (collectively, the "Portfolios") may engage in the purchase and sale of futures contracts on an index of municipal bonds or on U.S. Treasury securities, or options on such futures contracts, for hedging purposes only. The Portfolios may sell such futures contracts in anticipation of a decline in the value of municipal bonds held by them or may purchase such futures contracts in
anticipation of an increase in the cost of municipal bonds they intend to acquire. The Portfolios also are authorized to purchase and sell other financial futures contracts which in the opinion of management provide an appropriate hedge for some or all of the Fund's portfolio securities.
Because of low initial margin deposits made upon the opening of a futures position, futures transactions involve substantial leverage. As a result, relatively small movements in the price of the futures contract can result in substantial unrealized gains or losses. Because the Portfolios will engage in the purchase and sale of financial futures contracts solely for hedging purposes, however, any losses incurred in connection therewith should, if the hedging strategy is successful, be offset in whole or in part by increases in the value of securities held by the Portfolios or decreases in the price of securities the Portfolios intend to acquire. Further, the Portfolios will maintain cash, cash equivalents and high-grade securities with the Fund's custodian, so that the amount segregated plus the initial margin equals the value represented by the futures contract purchased by the Portfolios, thereby ensuring that such transactions are actually unleveraged.
Municipal bond index futures contracts commenced trading in June 1985, and it is possible that trading in such futures contracts will be less liquid than that in other futures contracts. The trading of futures contracts and options thereon is subject to certain market risks, such as trading halts, suspensions, exchange or clearing house equipment failures, government intervention or other disruptions of normal trading activity, which could at times make it difficult or impossible to liquidate existing positions.
The liquidity of the market in futures contracts may be further adversely affected by "daily price fluctuation limits" established by contract markets, which limit the amount of a fluctuation in the price of a futures contract or option thereon during a single trading day. Once the daily limit has been reached in the contract, no trades may be entered into at a price beyond the limit, thus preventing the liquidation of open positions at prices beyond the limit. Prices of existing contracts have in the past moved the daily limit on a number of consecutive trading days. The Portfolios will enter into a futures position only if, in the judgment of the Investment Adviser, there appears to be an actively traded market for such futures contracts.
The successful use of transactions in futures contracts and options thereon depends on the ability of the Investment Adviser correctly to forecast the direction and extent of price movements of these instruments, as well as price movements of the securities held by the Portfolios within a given time frame. To the extent these price movements are not correctly forecast or move in a direction opposite to that anticipated, the Portfolios may realize a loss on the hedging transaction which is not fully or partially offset by an increase in the value of portfolio securities. As a result, either Portfolio's total return for such period may be less than if it had not engaged in the hedging transaction. See "Additional Information-Description of Financial Futures Contract" below for a further discussion of the risks of futures trading.
CURRENT INVESTMENT RESTRICTIONS
The Fund has adopted the following investment restrictions, none of
which may be changed without the approval of a majority of the Fund's
outstanding shares, including a majority of the shares of each Portfolio,
which for this purpose means the vote of (i) 67% or more of the Fund's
shares present at a meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy, or
(ii) more than 50% of the Fund's outstanding shares, whichever is less.
For purposes of the following restrictions, the Fund's "Permissible
Investments" consist of Municipal Bonds and money market securities
referred to in the Prospectus as "Temporary Investments." The Fund may
not:
(1) Purchase any securities other than Municipal Bonds and Temporary Investments;
(2) Invest more than 5% of the total assets of any Portfolio (taken at market value at the time of each investment) in the securities of any one issuer (including repurchase agreements with any one bank or dealer) except that such restrictions shall not apply to United States Government or Government agency securities (for the purposes of this restriction, the Fund will regard each state and each political subdivision, agency or instrumentality of such state and each multi-state agency of which such state is a member and each public authority which issues industrial development bonds on behalf of a private entity as a separate issuer);
(3) Purchase, in connection with Temporary Investments, securities (other than securities of the United States Government, its agencies and instrumentalities) if, as a result of such purchase, more than 20% of the total assets of any Portfolio (taken at market value) would be invested in any one industry;
(4) Enter into a repurchase agreement if, as a result thereof, more than 10% of the total assets of any Portfolio (taken at market value at the time of each investment) would be subject to repurchase agreements maturing in more than seven days;
(5) Make investments for the purpose of exercising control or management;
(6) Purchase securities of other investment companies, except in connection with a merger, consolidation, acquisition or reorganization;
(7) Purchase or sell real estate (provided that such restriction shall not apply to Permissible Investments secured by real estate or issued by companies which invest in real estate or interests therein), commodities or commodity contracts (provided that such restriction shall not apply to financial futures contracts), interests in oil, gas or other mineral exploration or development programs;
(8) Purchase any securities on margin, except (a) to use short-term credit necessary for clearance or purchases and sales of portfolio securities and (b) to make margin payments in connection with transactions in financial futures contracts;
(9) Make short sales of securities or maintain a short position in securities or write, purchase or sell puts, calls, straddles, spreads or combinations thereof (this restriction does not apply to transactions in options on financial futures contracts);
(10) Make loans to other persons, provided that the Fund may make Permissible Investments (the acquisition of Municipal Bonds or bonds, debentures or other corporate debt securities which are not publicly distributed is considered to be the making of a loan under the Investment Company Act of 1940);
(11) Borrow amounts in any Portfolio in excess of 10% of the total assets of such Portfolio, taken at market value, and then only from banks as a temporary measure for extraordinary or emergency purposes (usually only "leveraged" investment companies may borrow in excess of 5% of their assets; however, the Portfolios will not borrow to increase income but only to meet redemption requests which might otherwise require untimely dispositions of portfolio securities);
(12) Mortgage, pledge, hypothecate or in any manner transfer as security for indebtedness any securities owned or held by any Portfolio except as may be necessary in connection with borrowings mentioned in (11) above, in which case such mortgaging, pledging or hypothecating may not exceed 10% of such Portfolio's total assets, taken at market value, or as may be necessary in connection with transactions in financial futures contracts as set forth in (8) above;
(13) Invest in securities with legal or contractual restrictions on resale (except for repurchase agreements) or for which no readily available market exists if, regarding all such securities, more than 5% of the total assets of any Portfolio (taken at market value) would be invested in such securities;
(14) Act as an underwriter of securities, except to the extent that the Fund may technically be deemed an underwriter when engaged in the activities described in (10) above or insofar as the Fund may be deemed an underwriter under the Securities Act of 1933 in selling portfolio securities; and
(15) Invest in securities of any one issuer with a record of less than three years of continuous operation, including predecessors, except obligations issued or guaranteed by the United States Government or its agencies or Municipal Bonds (except that, in case of industrial revenue bonds, this restriction shall apply to the entity supplying the revenues from which the issue is to be paid), if such investments by any Portfolio would exceed 5% of the value of its total assets (taken at market value).
Proposed Uniform Investment Restrictions. As discussed in the Prospectus under "Investment Objective and Policies-Investment Restrictions", the Board of Directors of the Fund has approved the replacement of the Fund's existing investment restrictions with the fundamental and non-fundamental investment restrictions set forth below. These uniform investment restrictions have been proposed for adoption by all of the non-money market mutual funds advised by the Investment Adviser or its affiliate, Merrill Lynch Asset Management, L.P. ("MLAM"). The investment objectives and policies of the Fund will be unaffected by the adoption of the proposed investment restrictions.
Shareholders of the Fund are currently considering whether to approve the proposed revised investment restrictions. If such shareholder approval is obtained, the Fund's current investment restrictions will be replaced by the proposed restrictions, and the Fund's Prospectus and Statement of Additional Information will be supplemented to reflect such change.
Under the proposed fundamental investment restrictions, the Fund may not:
1. Make any investment inconsistent with the Fund's classification as a diversified company under the Investment Company Act.
2. Invest more than 25% of its assets, taken at market value, in the securities of issuers in any particular industry (excluding the U.S. Government and its agencies and instrumentalities).
3. Make investments for the purpose of exercising control or management.
4. Purchase or sell real estate, except that to the extent permitted by applicable law the Fund may invest in securities directly or indirectly secured by real estate or interests therein or issued by companies which invest in real estate or interests therein.
5. Make loans to other persons, except that the acquisition of bonds, debentures or other corporate debt securities and investments in government obligations, commercial paper, pass-through instruments, certificates of deposit, bankers' acceptances, repurchase agreements or any similar instruments shall not be deemed to be the making of a loan, and except further that the Fund may lend its portfolio securities, provided that the lending of portfolio securities may be made only in accordance with applicable law and the guidelines set forth in the Fund's Prospectus and Statement of Additional Information, as they may be amended from time to time.
6. Issue senior securities to the extent such issuance would violate applicable law.
7. Borrow money, except that (i) the Fund may borrow from banks (as defined in the Investment Company Act) in amounts up to 33 1/3% of its total assets (including the amount borrowed), (ii) the Fund may borrow up to an additional 5% of its total assets for temporary purposes, (iii) the Fund may obtain such short-term credit as may be necessary for the clearance of purchases and sales of portfolio securities and (iv) the Fund may purchase securities on margin to the extent permitted by applicable law. The Fund may not pledge its assets other than to secure such borrowings or, to the extent permitted by the Fund's investment policies as set forth in its Prospectus and Statement of Additional Information, as they may be amended from time to time, in connection with hedging transactions, short sales, when-issued and forward commitment transactions and similar investment strategies.
8. Underwrite securities of other issuers except insofar as the Fund technically may be deemed an underwriter under the Securities Act of 1933, as amended (the "Securities Act") in selling portfolio securities.
9. Purchase or sell commodities or contracts on commodities, except to the extent that the Fund may do so in accordance with applicable law and the Fund's Prospectus and Statement of Additional Information, as they may be amended from time to time, and without registering as a commodity pool operator under the Commodity Exchange Act.
Under the proposed non-fundamental investment restrictions, each Fund may not:
a. Purchase securities of other investment companies, except to the extent such purchases are permitted by applicable law.
b. Make short sales of securities or maintain a short position, except to the extent permitted by applicable law. The Fund currently does not intend to engage in short sales, except short sales "against the box."
c. Invest in securities which cannot be readily resold because of legal or contractual restrictions or which cannot otherwise be marketed, redeemed or put to the issuer or a third party, if at the time of acquisition more than 15% of its total assets would be invested in such securities. This restriction shall not apply to securities which mature within seven days or securities which the Board of Directors of the Fund has otherwise determined to be liquid pursuant to applicable law.
Notwithstanding the 15% limitation herein, to the extent the laws of any state in which the Fund's shares are registered or qualified for sale require a lower limitation, the Fund will observe such limitation. As of the date hereof, therefore, the Fund will not invest more than 10% of its total assets in securities which are subject to this investment restriction (c).
d. Invest in warrants if, at the time of acquisition, its investments in warrants, valued at the lower of cost or market value, would exceed 5% of the Fund's net assets; included within such limitation, but not to exceed 2% of the Fund's net assets, are warrants which are not listed on the New York Stock Exchange or American Stock Exchange or a major foreign exchange. For purposes of this restriction, warrants acquired by the Fund in units or attached to securities may be deemed to be without value.
e. Invest in securities of companies having a record, together with predecessors, of less than three years of continuous operation, if more than 5% of the Fund's total assets would be invested in such securities. This restriction shall not apply to mortgage-backed securities, asset-backed securities or obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
f. Purchase or retain the securities of any issuer, if those individual officers and directors of the Fund, the officers and general partner of the Investment Adviser, the directors of such general partner or the officers and directors of any subsidiary thereof each owning beneficially more than one-half of one percent of the securities of such issuer own in the aggregate more than 5% of the securities of such issuer.
g. Invest in real estate limited partnership interests or interests in oil, gas or other mineral leases, or exploration or development programs, except that the Fund may invest in securities issued by companies that engage in oil, gas or other mineral exploration or development activities.
h. Write, purchase or sell puts, calls, straddles, spreads or combinations thereof, except to the extent permitted in the Fund's Prospectus and Statement of Additional Information, as they may be amended from time to time.
Notwithstanding fundamental investment restriction (7) above, the Fund currently does not intend to borrow amounts in any Portfolio in excess of 10% of the total assets of such Portfolio, taken at market value, and then only from banks as a temporary measure for extraordinary or emergency purposes such as the redemption of Fund shares. In addition, the Fund will not purchase securities while borrowings are outstanding.
MANAGEMENT OF THE FUND
DIRECTORS AND OFFICERS
The directors and executive officers of the Fund and their principal occupations for at least the last five years are set forth below. Unless otherwise noted, the address of each director and officer is P.O. Box 9011, Princeton, New Jersey 08543-9011.
ARTHUR ZEIKEL-President and Director(1)(2)-President, Director and Chief Investment Officer of the Investment Adviser (which term as used herein includes its corporate predecessors) since 1977; President of MLAM (which term as used herein includes its corporate predecessors) since 1977 and Director and Chief Investment Officer since 1976; President and Director of Princeton Services, Inc. ("Princeton Services") since 1993; Executive Vice President of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") since 1990 and Executive Vice President of Merrill Lynch & Co. ("ML & Co.") since 1990 and Senior Vice President from 1985 to 1990; and Director of Merrill Lynch Funds Distributor, Inc. (the "Distributor").
RONALD W. FORBES-Director(2)-1400 Washington Avenue, Albany, New York 12222. Associate Professor of Finance, School of Business, State University of New York at Albany, Member, Task Force on Municipal Securities Markets, Twentieth Century Fund; Consultant, Public Finance Banking, Shearson Lehman Brothers, Inc.
CYNTHIA A. MONTGOMERY-Director(2)-Harvard Business School, Soldiers Field Road, Boston, Massachusetts 02163. Professor, Harvard Business School, since 1989; Associate Professor, J.L. Kellogg Graduate School of Management, Northwestern University, 1985-1989; Assistant Professor, Graduate School of Business Administration, the University of Michigan, 1979-1985; Director, UNUM Corporation.
CHARLES C. REILLY-Director(2)-9 Hampton Harbor Road, Hampton Bays, New York 11946. Adjunct Professor, Columbia University Graduate School of Business, since 1990; Adjunct Professor, Wharton School, University of Pennsylvania, 1990; President and Chief Investment Officer of Versus Capital, Inc. from 1979 to 1990; Senior Vice President of Arnhold and S. Bleichroeder, Inc. from 1973 to 1990.
KEVIN A. RYAN-Director(2)-127 Commonwealth Avenue, Chestnut Hill, Massachusetts 02167, Professor of Education at Boston University since 1982. Founder and current Director, Boston University Center for Advancement of Ethics and Character, since 1989; formerly taught on the faculties of the University of Chicago, Stanford University and The Ohio State University.
RICHARD R. WEST-Director(2)-482 Tepi Drive, Southbury, Connecticut 06488. Professor of Finance at New York University School of Business Administration since 1993. Dean of New York University School of Business Administration from 1984 to 1993; Professor of Finance at the Amos Tuck School of Business Administration, Dartmouth College, from 1976 to 1984 and Dean from 1976 to 1983; Director, Vornado, Inc. (real estate holding company), Director of Re Capital Corp. (reinsurance holding company), Constar International, Inc. (manufacturer of plastic containers), Alexander's Inc. (department stores), and Smith Corona Corporation (manufacturer of typewriters and word processors).
TERRY K. GLENN-Executive Vice President(1)(2)-Executive Vice President of the Investment Adviser and MLAM since 1983 and Director since 1992; Executive Vice President and Director of Princeton Services since 1993; President and Director of the Distributor since 1986.
VINCENT R. GIORDANO-Senior Vice President(1)(2)-Senior Vice President of the Investment Adviser and MLAM since 1984; Portfolio manager of the Investment Adviser since 1977 and Vice President from 1980 to 1984.
DONALD C. BURKE-Vice President(2)-Vice President and Director of Taxation of MLAM since 1990; employee of Deloitte & Touche LLP from 1981 to 1990.
KENNETH A. JACOB-Vice President(1)(2)-Vice President of the Investment Adviser since 1984 and portfolio manager since 1982; employed by the Investment Adviser since 1978.
GERALD M. RICHARD-Treasurer(1)(2)-Senior Vice President and Treasurer of the Investment Adviser and MLAM since 1984; Senior Vice President and Treasurer of Princeton Services since 1993; Treasurer of the Distributor since 1984; Vice President of the Distributor since 1981 and Treasurer of the Distributor since 1984.
Mr. Zeikel, a director of the Fund, and the officers of the Fund owned
on September 30, 1994 an aggregate of less than 1/4 of 1% of the
outstanding shares of Common Stock of ML & Co.
The Fund has an Audit Committee consisting of all of the directors of
the Fund who are not interested persons of the Fund.
Each director of the Fund who is not an officer or employee of ML & Co. or its subsidiaries receives an annual fee of $4,000 plus $800 per meeting of the Board of Directors attended and an annual fee of $2,000 for serving on the Audit Committee. In addition, the Fund pays all Directors' actual out-of-pocket expenses relating to attendance at meetings of the Board of Directors of the Fund or of any committee thereof. Mr. West is paid an additional annual fee of $1,000 for serving as Chairman of the Audit Committee. For the year ended June 30,
1994, fees and expenses paid to the unaffiliated directors of the Fund aggregated $48,135. No officer or employee of ML & Co., Inc. or its subsidiaries receives any compensation from the Fund for acting as a director or officer of the Fund. The Fund requires no employees other than its officers, all of whom are compensated by FAM or the Distributor.
INVESTMENT ADVISORY ARRANGEMENTS
Fund Asset Management, L.P. ("FAM"), a subsidiary of MLAM, an indirect subsidiary of Merrill Lynch & Co., Inc., acts as the investment adviser for the Fund and provides the Fund with management services. While FAM is at all times subject to the direction of the Board of Directors of the Fund, under the Investment Advisory Agreement, FAM is responsible for the actual management of each Portfolio and constantly reviews the holdings of each Portfolio in light of its own research analysis and analyses from other relevant sources. The responsibility for making decisions to buy, sell or hold a particular security rests with FAM. FAM provides the portfolio managers for each Portfolio, who consider analyses from various sources, make the necessary investment decisions and place transactions accordingly. FAM is also obligated to perform certain administrative and management services for the Fund and is obligated to provide all the office space, facilities, equipment and personnel necessary to perform its duties under the Agreement.
Securities held by the Fund may also be held by other funds for which FAM or MLAM acts as an adviser or by investment advisory clients of MLAM. If purchases or sales of securities for the Fund or other funds for which FAM or MLAM acts as investment adviser or for their advisory clients arise for consideration at or about the same time, transactions in such securities will be made, insofar as feasible, for the respective funds and clients in a manner deemed equitable to all. To the extent that transactions on behalf of more than one client of the Investment Adviser or MLAM during the same period may increase the demand for securities being purchased or the supply of securities being sold, there may be an adverse effect on price.
Advisory Fee. As compensation for its services to the Portfolios, FAM receives at the end of each month a fee with respect to each Portfolio at the annual rates set forth below, which are based upon the average daily value of the Fund's net assets. The rates are subject to reduction to the extent that the aggregate of the average daily net assets of the three combined Portfolios exceeds $250 million, $400 million, $550 million and $1.5 billion, respectively. The reductions will be applicable to each Portfolio regardless of size on a "uniform percentage" basis. Determination of the portion of the net assets of each Portfolio to which the reduced rate is applicable is made by multiplying the net assets of that Portfolio by the "uniform percentages," derived by dividing the amount by which the combined assets of all Portfolios exceeds the various applicable breakpoints by such combined assets. In addition, although under the Investment Advisory Agreement FAM is entitled to a fee with respect to the Insured Portfolio at an annual rate of 0.375% when the Fund's aggregate net assets exceed $1.5 billion, as reflected in the table below, FAM has agreed to waive such fee in excess of an annual rate of 0.35%.
RATE OF ADVISORY FEE
-------------------------------------------
LIMITED
INSURED NATIONAL MATURITY
AGGREGATE OF AVERAGE DAILY NET ASSETS OF THE THREE COMBINED PORTFOLIOS PORTFOLIO PORTFOLIO PORTFOLIO
---------------------------------------------------------------------- --------- --------- ---------
Not exceeding $250 million.................................................... 0.40 % 0.50 % 0.40 %
In excess of $250 million but not exceeding $400 million...................... 0.375 0.475 0.375
In excess of $400 million but not exceeding $550 million...................... 0.375 0.475 0.35
In excess of $550 million but not exceeding $1.5 billion...................... 0.375 0.475 0.325
In excess of $1.5 billion..................................................... 0.35 0.475 0.325
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At the date of this Statement of Additional Information, the only state which imposes limitations on the expenses of the Fund is the State of California. California's annual expense limitations require that FAM reimburse each Portfolio for advisory fees received by it from the Fund, to the extent that such Portfolio's aggregate ordinary operating expenses (excluding interest, taxes, brokerage fees and commissions, extraordinary charges such as litigation costs and a percentage of distribution fees) exceed in any fiscal year 2.5% of the Portfolio's first $30,000,000 of average net assets, 2.0% of the next $70,000,000 of its average net assets and 1.5% of the remaining net assets. No fee payment will be made to FAM with respect to any Portfolio during any fiscal year which will cause the expenses of such Portfolio to exceed the pro rata expense limitation applicable to such Portfolio at the time of such payment.
For the year ended June 30, 1992, FAM received $9,530,756 from the Insured Portfolio, $7,118,326 from the National Portfolio and $1,571,887 from the Limited Maturity Portfolio as advisory fees. For the year ended June 30, 1993, FAM received $10,497,116 from the Insured Portfolio, $7,817,631 from the National Portfolio and $2,526,397 from the Limited Maturity Portfolio as advisory fees. For the year ended June 30, 1994, FAM received $11,040,540 from the Insured Portfolio, $8,514,268 from the National Portfolio and $3,305,839 from the Limited Maturity Portfolio as advisory fees.
Payment of Expenses. The Investment Advisory Agreement obligates FAM to provide investment advisory services and to pay all compensation of and furnish office space for officers and employees of the Fund connected with economic research, investment research, trading and investment management of the Fund, as well as the fees of all directors of the Fund who are affiliated persons of Merrill Lynch & Co., Inc. or any of its subsidiaries. Each Portfolio pays all other expenses incurred in its operation and a portion of the Fund's general administrative expenses allocated on the basis of the asset size of the respective Portfolios. Expenses that will be borne directly by the Portfolios include redemption expenses, expenses of portfolio transactions, shareholder servicing costs, portfolio insurance maintained and paid by the Insured Portfolio, expenses of registering the shares under Federal and state securities laws, pricing costs (including the daily calculation of net asset value), interest, certain taxes, charges of the Custodian and Transfer Agent and other expenses attributable to a particular Portfolio. Expenses which will be allocated on the basis of the size of the respective Portfolios include directors' fees, legal expenses, state franchise taxes, auditing services, costs of printing proxies, stock certificates, shareholder reports and prospectuses (except to the extent paid by the Distributor), Securities and Exchange Commission fees, accounting costs and other expenses properly payable by the Fund and allocable on the basis of the size of the respective Portfolios. Accounting services are provided for the Fund by FAM, and the Fund reimburses FAM for its costs in connection with such services. During the year ended June 30, 1994, the Fund reimbursed FAM $414,293 for such services. Depending upon the nature of a lawsuit, litigation costs may be directly applicable to the Portfolios or allocated on the basis of the size of the respective Portfolios. The Board of Directors has determined that this is an appropriate method of allocation of expenses. As required by
the Distribution Agreement, the Distributor will pay certain of the expenses of each Portfolio incurred in connection with the offering of shares of each Portfolio, including the expense of printing the prospectuses used in connection with the continuous offering of shares by each Portfolio. See "Purchase of Shares-Distribution Agreement" in the Prospectus.
Duration and Termination. Unless earlier terminated as described below, the Investment Advisory Agreement will continue in effect from year to year if approved annually (a) by the Board of Directors of the Fund or by a majority of the outstanding voting shares of each Portfolio and (b) by a majority of the Directors who are not parties to such contract or interested persons (as defined in the Investment Company Act of 1940) of any such party. Such contract terminates upon assignment and may be terminated without penalty on 60 days' written notice at the option of either party thereto or by the vote of the shareholders of the Fund.
If the shareholders of any Portfolio fail to approve the continuance of the Investment Advisory Agreement, the Investment Advisory Agreement will continue in effect as to any other Portfolio if the shareholders of such Portfolio have approved the contract.
NET ASSET VALUE
The net asset value of the shares of each Portfolio is determined by FAM once daily as of 4:15 P.M., New York City time, on each day that the New York Stock Exchange is open for trading immediately after the declaration of dividends. The New York Stock Exchange is not open for trading on the following holidays: New Year's Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset value per share is computed by dividing the sum of the value of the portfolio securities held by each Portfolio plus any cash or other assets (including interest and dividends accrued but not yet received) minus all liabilities (including accrued expenses) by the total number of shares outstanding at such time, rounded to the nearest cent. Expenses, including the investment advisory and any account maintenance and/or distribution fees, are accrued daily.
The per share net asset value of the Class B, Class C and Class D shares of a Portfolio generally will be lower than the per share net asset value of the Class A shares of that Portfolio reflecting the daily expense accruals of the account maintenance distribution and higher transfer agency fees applicable with respect to the Class B, Class C and Class D shares and daily expense accruals of the account maintenance fees applicable with respect to the Class D shares. Moreover the per share net asset value of the Class B and Class C shares generally will be lower than the per share net asset value of its Class D shares reflecting the daily expense accruals of the distribution fees and higher transfer agency fees applicable with respect to the Class B and Class C shares. It is expected, however, that the per share net asset value of the four classes of a Portfolio will tend to converge immediately after the payment of dividends, which will differ by approximately the amount of the expense accrual differential among the classes.
The Municipal Bonds and money market securities in which each Portfolio invests are traded primarily in the over-the-counter markets and are valued at the most recent bid price or yield equivalent as obtained from dealers that make markets in such securities. Positions in futures contracts are valued at closing prices for such contracts established by the exchange on which they are traded on each day during which trading is conducted thereon. Assets for which market quotations are not readily available are valued at fair value on a consistent basis using methods determined in good faith by the Board of Directors, including valuations furnished by a pricing service retained by the Fund, which may utilize a matrix system for valuations.
It is the intention of FAM, subject to guidelines established by the Board of Directors of the Fund, to hold Insured Municipal Bonds in the Insured Portfolio which are in default, or in significant risk of default, in the payment of principal or interest until the default has been cured or the principal and interest are paid by the issuer or the insurer. In accordance with such guidelines, FAM will consider the following factors in determining the effective value of Insured Municipal Bonds in the Insured Portfolio which are in default or in significant risk of default, in the payment of principal or interest: (1) the market value of the bonds; (2) the market value of securities of similar issuers whose securities carry similar interest rates; and (3) the value of the insurance guaranteeing interest and principal payments. Absent unusual or unforeseen circumstances, the value ascribed to the insurance feature of the bonds would be the difference between the market value of the bonds and the market value of securities of a similar nature which are not in default or significant risk of default. It is the position of the Board of Directors that this is a fair method of valuing the insurance feature and reflects a proper valuation method in accordance with the provisions of the Investment Company Act of 1940. This method of valuing securities will mean that shareholders of the Insured Portfolio, whether they decide to redeem or decide to retain their investment in the Insured Portfolio, will in normal circumstances receive the benefit of the insurance. Because of the unusual circumstances surrounding the bonds held in the Insured Portfolio which were in default at the end of the Fund's last fiscal year, the insurance feature was valued in an amount which, when combined with the market value of the bonds, resulted in the bonds' having an effective value of par.
PORTFOLIO TRANSACTIONS
Under the Investment Company Act of 1940, persons affiliated with the Fund are prohibited from dealing with the Fund as a principal in the purchase and sale of securities unless an exemptive order allowing such transactions is obtained from the Securities and Exchange Commission. Since over-the-counter transactions are usually principal transactions, affiliated persons of the Fund, including Merrill Lynch, may not serve as a dealer in connection with transactions with the Fund. However, the Fund has obtained an exemptive order permitting it to engage in certain principal transactions involving high quality short-term Municipal Bonds. Affiliated persons of the Fund may serve as its broker in over-the-counter transactions conducted on an agency basis. Certain court decisions have raised questions as to the extent to which investment companies should seek exemptions under the Investment Company Act in order to seek to recapture underwriting and dealer spreads from affiliated entities. The Directors have considered the possibilities of seeking to recapture spreads for the benefit of the Fund and, after considering factors deemed relevant, have made a determination not to seek such recapture at this time. The Board will reconsider this matter from time to time.
Under the Investment Company Act of 1940, the Fund may not purchase Municipal Bonds from any underwriting syndicate of which Merrill Lynch is a member except pursuant to an exemptive order or rules adopted by the Securities and Exchange Commission. During the year ended June 30, 1993, the Fund made no purchases of Municipal Bonds in transactions pursuant to an exemptive order or such a rule. During the year ended June 30, 1994, the Fund purchased $230,231,897 of Municipal Bonds in 77 transactions pursuant to an exemptive order or such a rule.
The Fund does not expect to use any particular dealer in the execution of transactions for its Portfolios, but, subject to obtaining the best net results, dealers who provide supplemental investment research (such as economic data and market forecasts) to FAM may receive orders for transactions by any Portfolio. Information so received will be in addition to and not in lieu of the services required to be performed by FAM under its Investment Advisory Agreement and FAM's expenses will not necessarily be reduced as a result of the receipt of such supplemental information.
FAM expects that the portfolio turnover rate for the Insured Portfolio and the National Portfolio should not generally exceed 100%. Because of the short-term nature of the Limited Maturity Portfolio, its turnover rate may be substantially higher. In any particular year, however, market conditions could result in portfolio activity of a Portfolio at a greater or lesser rate than anticipated.
PURCHASE OF SHARES
The Fund has entered into separate distribution agreements (the "Distribution Agreements") with the Distributor in connection with the offering of each class of shares of the three Portfolios. The Distribution Agreements obligate the Distributor to pay certain expenses in connection with the offering of the Fund's shares. After the prospectuses, statements of additional information and periodic reports have been prepared, set in type and mailed to shareholders, the Distributor pays for the printing and distribution of copies thereof used in connection with the offering to dealers and investors. The Distributor also pays for other supplementary sales literature and advertising costs. The Distribution Agreements are subject to the same renewal requirements and termination provisions as the Investment Advisory Agreement described above.
ALTERNATIVE SALES ARRANGEMENTS
The Fund is a series fund comprised of three separate Portfolios. All three Portfolios are divided into four classes of shares under the Merrill Lynch Select Pricing SM System. Class A and Class D shares of the three Portfolios are sold to investors choosing the initial sales charge alternative and Class B and Class C shares are sold to investors choosing the deferred sales charge alternative. Each Class A, Class B, Class C and Class D share of a Portfolio represents an identical interest in the investment portfolio of the Portfolio, has the same rights and is identical in all respects to the other classes of shares, except that Class B, Class C and Class D shares of the Portfolio bear the expenses of the ongoing account maintenance fees and Class B and Class C shares bear the expenses of the ongoing distribution fees and the additional transfer agency costs resulting from the deferred sales charge arrangements. Class B, Class C and Class D shares each have exclusive voting rights with respect to the Rule 12b-1 distribution plan adopted with respect to such class pursuant to which the distribution fee is paid. Each class has different exchange privileges. See "Exchange Privilege."
INITIAL SALES CHARGE ALTERNATIVES-CLASS A and Class D SHARES
For the year ending June 30, 1994, sales charges were $3,435,864, of which the Distributor received $343,837 and Merrill Lynch received $3,092,027. For the year ending June 30, 1993, sales charges were $5,700,495, of which the Distributor received $496,721 and Merrill Lynch received $5,203,774. For the year ended June 30, 1992, sales charges for Class A shares of the Insured Portfolio, the National Portfolio and the Limited Maturity Portfolio were $4,922,010, of which the Distributor received $444,198 and Merrill Lynch received $4,477,812. All of such sales charges were attributable to payments of initial sales charges in connection with purchases of Class A shares of the Portfolios.
Reduced Initial Sales Charges-Class A and Class D Shares. As set forth in the Prospectus, a reduced sales charge is available for any purchase in excess of $25,000 (in the case of the Insured Portfolio and National Portfolio) and $100,000 for the Limited Maturity Portfolio of Class A or Class D shares of a Portfolio. The term "purchase" as used in the Prospectus and Statement of Additional Information in connection with investment in Class A and Class D shares of the Fund refers to a single purchase by an individual, or to concurrent purchases, which in the aggregate are at least equal to the prescribed amounts by an individual, his spouse and their
children under the age of 21 years purchasing shares for his or their own account and to single purchases by a trustee or fiduciary purchasing shares for a single trust or estate or single fiduciary account although more than one beneficiary is involved. The term "purchase" also includes purchases by any "company," as that term is defined in the Investment Company Act of 1940, but does not include purchases by any such company which has not been in existence for at least six months or has no purpose other than the purchase of shares of the Fund or shares of other registered investment companies at a discount; provided, however, that it will not include purchases by any group of individuals whose sole organizational nexus is that the participants therein are credit card holders of a company, policyholders of an insurance company, customers of either a bank or broker-dealer or clients of an investment adviser.
Right of Accumulation. Reduced sales charges are applicable through a right of accumulation under which investors are permitted to purchase shares of any of the three Portfolios subject to an initial sales charge at the offering price applicable to the total of (a) the public offering price of the shares then being purchased plus (b) an amount equal to the then current net asset value or cost, whichever is higher, of the purchaser's combined holdings of all classes of the shares of all of the Portfolios and of other MLAM-advised mutual funds. For any such right of accumulation to be made available, the Distributor must be provided at the time of purchase, by the purchaser or the purchaser's securities dealer, with sufficient information to permit confirmation of qualification, and acceptance of the purchase order is subject to such confirmation. The right of accumulation may be amended or terminated at any time. Shares held in the name of a nominee or custodian under pension, profit-sharing or other employee benefits plans may not be combined with other shares to qualify for the right of accumulation.
Letter of Intention. Reduced sales charges are applicable to purchases of Class A and Class D shares of the Portfolios, or any other MLAM-advised mutual funds, where purchases of such shares aggregating $25,000 or more for the Insured Portfolio and National Portfolio or $100,000 or more for the Limited Maturity Portfolio are made through any dealer within a 13-month period starting with the first purchase pursuant to a Letter of Intention in the form provided by the Distributor. The Letter of Intention is not a binding obligation to purchase any amount of Class A or Class D shares, but its execution will result in the purchaser's paying a lower sales charge at the appropriate quantity purchase level. The Letter of Intention is available only to investors whose accounts are maintained at the Fund's Transfer Agent. A purchase not originally made pursuant to a Letter of Intention may be included under a subsequent letter executed within 90 days of such purchase if the Distributor is informed in writing of this intent within such 90-day period. The value of Class A and Class D shares of the Portfolios and of other MLAM-advised mutual funds (or eligible shares) presently held, at cost or maximum offering price (whichever is higher) on the date of the first purchase under the Letter of Intention, may be included as a credit toward the completion of such Letter, but the reduced sales charge applicable to the amount covered by the Letter of Intention will be applied only to new purchases. If the total amount of shares purchased does not equal the amount stated in the Letter of Intention (minimum of $25,000 for the National and Insured Portfolio or $100,000 for the Limited Maturity Portfolio), the investor will be notified and must pay, within 20 days of the expiration of such Letter, the difference between the sales charge on Class A or Class D shares purchased at the reduced rate and the sales charge applicable to the shares actually purchased through the Letter. Class A and Class D shares equal to five percent of the intended amount will be held in escrow during the 13-month period (while remaining registered in the name of the purchaser) for this purpose and will be involuntarily redeemed to pay the additional sales charge, if necessary. The first purchase under the Letter of Intention must be at least five percent of the dollar amount of such Letter. If during the term of such Letter a purchase brings the total amount invested to an amount equal to or in excess of the amount indicated in the Letter, the purchaser will be entitled on that purchase and subsequent purchases to the reduced percentage sales charge
which would be applicable to a single purchase equal to the total dollar value of the shares then being purchased plus the total cost of all shares previously purchased under such Letter, but there will be no retroactive reduction of the sales charges on any previous purchase. The value of any shares redeemed or otherwise disposed of by the purchaser prior to termination or completion of the Letter of Intention will be deducted from the total purchases made under such Letter. An exchange from a MLAM-advised money market fund into any Portfolio that creates a sales charge will count toward completing a new or existing Letter of Intention in any Portfolio.
TMA SM Managed Trusts. Class A shares are offered to TMA SM Managed Trusts to which Merrill Lynch Trust Company provides discretionary trustee services at net asset value.
Employer Sponsored Non-Qualified After-Tax Savings and Investment Programs. Class A and Class D shares are offered at net asset value to employer sponsored non-qualified After-Tax Savings and Investment programs maintained on the Merrill Lynch Group Employee Services system, provided the program, or certain other plans or programs sponsored by the employer, has $5 million or more in existing plan assets initially invested in portfolios, mutual funds or trusts advised by the Investment Adviser or an affiliate. Class A and Class D shares are also offered at net asset value to After-Tax Savings and Investment programs, provided the program has accumulated $5 million or more in existing assets invested in mutual funds advised by the Investment Adviser or an affiliated adviser charging a front-end sales charge or contingent deferred sales charge. In this case as well, assets of certain other plans sponsored by the same sponsor or an affiliated sponsor may be aggregated. The Class A and Class D shares share reduced load breakpoints also apply to these aggregated assets. After-Tax Savings and Investment programs are also offered Class A or Class D shares at net asset value, provided such plan initially has 1,000 or more employees eligible to participate in the plan. Employees eligible to participate in such plans of the same sponsoring employer or its affiliates may be aggregated. The minimum initial and subsequent purchase requirements are waived in connection with all the above-referenced plans.
Merrill Lynch Blueprint SM Program. Class D shares of any of the three Portfolios are offered to participants in the Merrill Lynch Blueprint SM Program ("Blueprint"). In addition, participants in Blueprint who own Class A shares of a Portfolio may purchase additional Class A shares of the Portfolio through Blueprint. Blueprint is directed to small investors, group IRAs and participants in certain affinity groups such as credit unions and trade associations. Investors placing orders to purchase Class A or Class D shares of a Portfolio through Blueprint will acquire the shares at net asset value plus a sales charge calculated in accordance with Blueprint sales charge schedule (i.e., up to $5,000 at 0.80% for Limited Maturity Portfolio, up to $5,000 at 3.5% for the Insured Portfolio or National Portfolio, and $5,000.01 or more at the standard disclosed sales charge rate in the Prospectus). In addition, Class A or Class D shares of the Portfolios are being offered at net asset value plus a sales charge of 1/2 of 1% for corporate or group IRA programs placing orders to purchase their Class A or Class D shares through Blueprint. However, services, including the exchange privilege, available to Class A or Class D shareholders through Blueprint may differ from those available to other investors. Class A and Class D shares are offered at net asset value, to Blueprint participants through the Merrill Lynch Directed IRA Rollover Program ("IRA Rollover Program") available from Merrill Lynch Business Financial Services, a business unit of Merrill Lynch. The IRA Rollover Program is available to custodian rollover assets from Employee Sponsored Retirement and Savings Plans (as defined below) whose Trustee and/or Plan Sponsor has entered into a Merrill Lynch Directed IRA Rollover Program Service Agreement. Orders for purchases and redemptions of Class A or Class D shares of the Portfolios may be grouped for execution purposes which, in some circumstances, may involve the execution of such orders two business days following the day such orders are placed. The minimum initial purchase price is $100, with a $50 minimum for subsequent purchases through Blueprint. There are no minimum initial or subsequent purchase requirements for participants who are part of an
automatic investment plan. Additional information concerning purchases through Blueprint, including any annual fees and transaction charges, is available from Merrill Lynch, Pierce, Fenner & Smith Incorporated, The Blueprint SM Program, P.O. Box 30441, New Brunswick, New Jersey 08989-0441.
Closed-End Fund Investment Option. Class A shares of the Fund and other MLAM-advised mutual funds ("Eligible Class A Shares") are offered at net asset value to shareholders of certain closed-end funds advised by MLAM or the Investment Adviser who purchased such closed-end fund shares prior to October 21, 1994 and wish to reinvest the net proceeds from a sale of their closed-end fund shares of common stock in Eligible Class A shares, if the conditions set forth below are satisfied. Alternatively, closed-end fund shareholders who purchased such shares on or after October 21, 1994 and wish to reinvest the net proceeds from a sale of their closed-end fund shares are offered Class A shares (if eligible to purchase Class A shares) or Class D shares of the Fund and other MLAM-advised mutual funds ("Eligible Class D Shares"), if the following conditions are met. First, the sale of the closed-end fund shares must be made through Merrill Lynch, and the net proceeds therefrom must be immediately reinvested in Eligible Class A or Class D shares. Second, the closed-end fund shares must either have been acquired in the initial public offering or be shares representing dividends from shares of common stock acquired in such offering. Third, the closed-end fund shares must have been continuously maintained in a Merrill Lynch securities account. Fourth, there must be a minimum purchase of $250 to be eligible for the investment option. Class A shares of the Fund are offered at net asset value to shareholders of Merrill Lynch Senior Floating Rate Fund, Inc. ("Senior Floating Rate Fund") who wish to reinvest the net proceeds from a sale of certain of their shares of common stock of Senior Floating Rate Fund in shares of the Fund. In order to exercise this investment option, Senior Floating Rate Fund shareholders must sell their Senior Floating Rate Fund shares to the Senior Floating Rate Fund in connection with a tender offer conducted by the Senior Floating Rate Fund and reinvest the proceeds immediately in the Fund. This investment option is available only with respect to the proceeds of Senior Floating Rate Fund shares as to which no Early Withdrawal Charge (as defined in the Senior Floating Rate Fund prospectus) is applicable. Purchase orders from Senior Floating Rate Fund shareholders wishing to exercise this investment option will be accepted only on the day that the related Senior Floating Rate Fund tender offer terminates and will be effected at the net asset value of the Fund at such day.
Purchase Privileges of Certain Persons. Directors of the Fund, members of the Boards of other MLAM-advised investment companies, ML & Co., Inc. and its subsidiaries, (the term "subsidiaries", when used herein with respect to Merrill Lynch & Co., Inc., includes MLAM, FAM and certain other entities directly or indirectly wholly-owned and controlled by Merrill Lynch & Co., Inc.), and their directors and employees and any trust, pension, profit-sharing or other benefit plan for such persons, may purchase Class A shares of the Fund at net asset value.
Class D shares of the Fund will be offered at net asset value, without sales charge, to an investor who has a business relationship with a financial consultant who joined Merrill Lynch from another investment firm within six months prior to the date of purchase by such investor, if the following conditions are satisfied. First, the investor must advise Merrill Lynch that it will purchase Class D shares of the Fund with proceeds from a redemption of a mutual fund that was sponsored by the financial consultant's previous firm and was subject to a sales charge either at the time of purchase or on a deferred basis. Second, the investor also must establish that such redemption had been made within 60 days prior to the investment in the Fund, and the proceeds from the redemption had been maintained in the interim in cash or a money market fund.
Class D shares of the Fund are also offered at net asset value, without sales charge, to an investor who has a business relationship with a Merrill Lynch financial consultant and who has invested in a mutual fund spon-
sored by a non-Merrill Lynch company for which Merrill Lynch has served as a selected dealer and where Merrill Lynch has either received or given notice that such arrangement will be terminated ("notice"), if the following conditions are satisfied: First, the investor must purchase Class D shares of the Fund with proceeds from a redemption of shares of such other mutual fund and such fund was subject to a sales charge either at the time of purchase or on a deferred basis. Second, such purchase of Class D shares must be made within 90 days after such notice.
Class D shares of the Fund will be offered at net asset value, without sales charge, to an investor who has a business relationship with a Merrill Lynch financial consultant and who has invested in a mutual fund for which Merrill Lynch has not served as a selected dealer if the following conditions are satisfied: First, the investor must advise Merrill Lynch that it will purchase Class D shares of the Fund with proceeds from the redemption of such shares of other mutual fund and that such shares have been outstanding for a period of no less than six months. Second, such purchase of Class D shares must be made within 60 days after the redemption and the proceeds from the redemption must be maintained in the interim in cash or a money market fund.
A purchase of $1 million or more in a single transaction by an investor, or a purchase by a TMA SM Managed Trust, of Class A and Class D Shares of the Fund's Portfolios will not be subject to an initial sales charge. Such purchases will be subject to a contingent deferred sales charge if the shares are redeemed within one year after purchase at the following rates: 1.00% on purchases of $1,000,000 to $2,500,000; 0.60% on purchases of $2,500,000 to $3,500,000; 0.40% on purchases of $3,500,000 to $5,000,000; and 0.25% on purchases of more than $5,000,000 in lieu of paying an initial sales charge.
Acquisition of Certain Investment Companies. The public offering price of Class D shares of the Portfolios may be reduced to the net asset value per share in connection with the acquisition of the assets of or merger or consolidation with a personal holding company or a public or private investment company. The value of the assets or company acquired in a tax-free transaction may in appropriate cases be adjusted to reduce possible adverse tax consequences to the Fund which might result from an acquisition of assets having net unrealized appreciation which is disproportionately higher at the time of acquisition than the realized or unrealized appreciation of the Fund.
The issuance of Class D shares for consideration other than cash is limited to bona fide reorganizations, statutory mergers or other acquisitions of portfolio securities which (i) meet the investment objectives and policies of the Fund; (ii) are acquired for investment and not for resale (subject to the understanding that the disposition of the Fund's portfolio securities shall at all times remain within its control); and (iii) are liquid securities, the value of which is readily ascertainable, which are not restricted as to transfer either by law or illiquidity of market (except that the Fund may acquire through such transactions restricted or illiquid securities to the extent the Fund does not exceed the applicable limits on acquisition of such securities set forth under "Investment Objective and Policies" herein).
Purchases by Banks. Class A shares of the Fund's Insured Portfolio may be purchased at net asset value, without a sales charge, by banks which have invested a minimum of $25 million in such shares.
DEFERRED SALES CHARGE ALTERNATIVE-CLASS B SHARES
Distribution Plans. Reference is made to "Purchase of Shares- Distribution Plans" in the Prospectus for certain information with respect to the distribution plans for Class B and Class C shares pursuant to Rule 12b-1 under the Investment Company Act (each, a "Distribution Plan") with respect to the account maintenance and/or distribution fees paid by the Fund to the Distributor with respect to such classes.
Payments of the account maintenance fees and/or distribution fees are subject to the provisions of Rule 12b-1 under the Investment Company Act of 1940. Among other things, each Distribution Plan provides that the Distributor shall provide and the directors shall review quarterly reports of the disbursement of the account maintenance and/or distribution fees paid to the Distributor. In their consideration of each Distribution Plan, the directors must consider all factors they deem relevant, including information as to the benefits of the Distribution Plan to the Fund and the related class of shareholders of the relevant Portfolio. Each Distribution Plan further provides that, so long as the Distribution Plan remains in effect, the selection and nomination of directors who are not "interested persons" of the Fund, as defined in the Investment Company Act of 1940 (the "Independent Directors"), shall be committed to the discretion of the Independent Directors then in office. In approving each Distribution Plan in accordance with Rule 12b-1, the Independent Directors concluded that there is reasonable likelihood that such Distribution Plan will benefit the Fund and the related class of shareholders of the Portfolio. Each Distribution Plan can be terminated at any time, without penalty, by the vote of a majority of the Independent Directors or by the vote of the holders of a majority of the outstanding related voting securities of the relevant Portfolio. A Distribution Plan cannot be amended to increase materially the amount to be spent by any Portfolio without the approval of the related class of shareholders of such Portfolio and all material amendments are required to be approved by the vote of directors, including a majority of the Independent Directors who have no direct or indirect financial interest in such Distribution Plan, cast in person at a meeting called for that purpose. Rule 12b-1 further requires that the Fund preserve copies of each class of Distribution Plan and any report made pursuant to such plan for a period of not less than six years from the date of such Distribution Plan or such report, the first two years in an easily accessible place.
For the year ended June 30, 1994, the Fund paid distribution fees of $6,980,635 with respect to the Class B shares of the Insured Portfolio, distribution fees of $3,496,610 with respect to the Class B shares of the National Portfolio and distribution fees of $466,701 with respect to the Class B shares of the Limited Maturity Portfolio. For the year ended June 30, 1993, the Fund paid distribution fees of $6,039,420 with respect to the Class B shares of the Insured Portfolio, distribution fees of $2,578,458 with respect to the Class B shares of the National Portfolio and distribution fees of $112,800 with respect to the Class B shares of the Limited Maturity Portfolio. The distribution-related expenses incurred by the Distributor and Merrill Lynch in connection with the Class B shares consist primarily of financial consultant compensation, branch office and regional operation center selling and transaction processing expenses, advertising, sales promotion and marketing expenses and corporate overhead.
Limitations on the Payment of Deferred Sales Charges
The maximum sales charge rule in the Rules of Fair Practice of the National Association of Securities Dealers, Inc. ("NASD") imposes a limitation on certain asset-based sales charges such as the distribution fee and the CDSC borne by the Class B and Class C shares but not the account maintenance fee. The maximum sales charge rule is applied separately to each class of each Portfolio. As applicable to the Fund, the maximum sales charge rule limits the aggregate of distribution fee payments and CDSCs payable by the Fund with respect to Class B or Class C shares of a Portfolio to (1) 6.25% of eligible gross sales of such shares, computed separately for each class of a Portfolio (defined to exclude shares issued pursuant to dividend reinvestments and exchanges), plus (2) interest on the unpaid balance for the respective class, computed separately, at the prime rate plus 1% (the unpaid balance being the maximum amount payable minus amounts received from the payment of the distribution fee and the CDSC). In connection with the Class B shares, the Distributor has voluntarily agreed to waive interest charges on the unpaid balance in excess of 0.50% of eligible gross sales. Consequently, the maximum amount payable to the Distributor (referred to as the "voluntary maximum") in connection with
the Class B shares of a Portfolio is 6.75% of eligible gross sales. The Distributor retains the right to stop waiving the interest charges at any time. To the extent payments would exceed the voluntary maximum, the Fund will not make further payments of the distribution fee with respect to Class B shares of the relevant Portfolio, and any CDSCs with respect to that class will be paid to the Fund rather than to the Distributor; however, the Fund will continue to make payments of the account maintenance fee. In certain circumstances the amount payable pursuant to the voluntary maximum may exceed the amount payable under the NASD formula. In such circumstances payment in excess of the amount payable under the NASD formula will not be made.
The following tables set forth comparative information as of June 30, 1994 with respect to the Class B shares of the Fund indicating the maximum allowable payments that can be made under the NASD maximum sales charge rule and the Distributor's voluntary maximum for the period October 21, 1988 (commencement of Class B operations) to June 30, 1994 for the National and Insured Portfolios, and for the period November 2, 1992 (commencement of Class B operations) to June 30, 1994 for the Limited Maturity Portfolio. Since Class C shares of the Fund had not been publicly issued prior to the date of this Prospectus, information concerning Class C shares is not provided below:
DATA CALCULATED AS OF JUNE 30, 1994
National Portfolio
(In thousands)
Annual
Distribution
Allowable Allowable Amounts Fee at
Eligible Aggregate Interest Maximum Previously Aggregate Current
Gross Sales on Unpaid Amount Paid to Unpaid Net Asset
Sales(1) Charges Balance(2) Payable Distributor(3) Balance Level(4)
-------- ------- ---------- ------- -------------- ------- --------
Under NASD
Rule as
Adopted $555,411 $34,713 $7,265 $41,978 $10,322 $31,656 $2,296
Under
Distributor's
Voluntary
Waiver ......... $555,411 $34,713 $2,777 $37,490 $10,322 $27,168 $2,296
|
Insured Portfolio
(In thousands)
Annual
Distribution
Allowable Allowable Amounts Fee at
Eligible Aggregate Interest Maximum Previously Aggregate Current
Gross Sales on Unpaid Amount Paid to Unpaid Net Asset
Sales(1) Charges Balance(2) Payable Distributor(3) Balance Level(4)
-------- ------- ---------- ------- -------------- ------- --------
Under NASD
Rule as
Adopted $1,126,993 $70,437 $16,503 $86,940 $23,420 $63,520 $4,330
Under
Distributor's
Voluntary
Waiver ......... $1,126,993 $70,437 $5,635 $76,072 $23,420 $52,652 $4,330
|
Limited Maturity Portfolio
(In thousands)
Annual
Distribution
Allowable Allowable Amounts Fee at
Eligible Aggregate Interest Maximum Previously Aggregate Current
Gross Sales on Unpaid Amount Paid to Unpaid Net Asset
Sales(5) Charges Balance(2) Payable Distributor(6) Balance Level(4)
-------- ------- ---------- ------- -------------- ------- --------
Under NASD
Rule as
Adopted $141,633 $8,852 $642 $9,494 $642 $8,852 $3,639
Under
Distributor's
Voluntary
Waiver ......... $141,633 $8,852 $708 $9,560 $642 $8,918 $3,639
|
REDEMPTION OF SHARES
The right to redeem shares or to receive payment with respect to any such redemption may be suspended for any period during which trading on the New York Stock Exchange is restricted as determined by the Securities and Exchange Commission or such Exchange is closed (other than customary weekend and holiday closings), for any period during which an emergency exists as defined by the Commission as a result of which disposal of portfolio securities or determination of the net asset value of any Portfolio is not reasonably practicable, and for such other periods as the Securities and Exchange Commission may by order permit for the protection of shareholders of each Portfolio. Reference is made to "Redemption of Shares" in the Prospectus, for certain information as to the redemption and repurchase of Fund shares.
The value of shares at the time of redemption may be more or less than the shareholder's cost, depending on the market value of the securities held by each Portfolio at such time.
REINSTATEMENT PRIVILEGE
Holders of Class A or Class D shares of any Portfolio who have redeemed their shares have a one-time privilege to reinstate their accounts by purchasing Class A or Class D shares, as the case may be, of the Portfolio in which they had invested at net asset value without a sales charge up to the dollar amount redeemed. The reinstatement privilege may be exercised as follows. A notice to exercise this privilege along with a check for the amount to be reinstated must be received by the Transfer Agent within 30 days after the date the request for redemption was executed by the Transfer Agent or the Distributor. The reinstatement will be made at the net asset value per share next determined after the notice of reinstatement is received and cannot exceed the amount of the redemption proceeds.
DEFERRED SALES CHARGE-CLASS B
As discussed in the Prospectus under "Purchase of Shares-Deferred Sales Charge Alternatives-Class B and Class C Shares", while Class B shares of the Insured Portfolio and National Portfolio redeemed within four years of purchase and Class B shares of the Limited Maturity Portfolio redeemed within one year of purchase are subject to a contingent deferred sales charge under most circumstances, the charge is waived on redemptions of Class B shares following the death or disability of a Class B shareholder. Redemptions for which the waiver applies are any partial or complete redemptions following the death or disability (as defined in the Internal Revenue Code) of a Class B shareholder (including one who owns the Class B shares of any Portfolio as joint tenant with his or her spouse), provided the redemption is requested within one year of the death or initial determination of disability.
For the year ended June 30, 1994, contingent deferred sales charges paid by shareholders of the Fund to the Distributor were $718,890 for the National Portfolio, $1,469,123 for the Insured Portfolio, and $190,903 for the Limited Maturity Portfolio. All of such contingent deferred sales charges were attributable to payments made in connection with redemptions of Class B shares of the Portfolios.
Merrill Lynch Blueprint SM Program. Class B shares of all three Portfolios are offered to certain participants in the Merrill Lynch Blueprint SM Program ("Blueprint"). Blueprint is directed to small investors and participants in certain affinity groups such as trade associations and credit unions. Class B shares are offered through Blueprint only to members of certain affinity groups. The CDSC is waived for shareholders who are members of such affinity groups at the time of placing orders to purchase Class B shares through Blueprint. However, services, including the exchange privilege, available to Class B shareholders through Blueprint may
differ from those available to other Class B investors. Orders for purchases and redemptions of Class B shares of any of the three Portfolios may be grouped for execution purposes which, in some circumstances, may involve the execution of such orders two business days following the day such orders are placed. The minimum initial purchase price is $100, with a $50 minimum for subsequent purchases throughout Blueprint. There is no minimum initial or subsequent purchase requirement for investors who are part of the Blueprint automatic investment plan. Additional information concerning Blueprint, including any annual fees or transaction charges, is available from Merrill Lynch, Pierce, Fenner & Smith Incorporated. The Blueprint(SM) Program, P.O. Box 30441, New Brunswick, New Jersey 08989-0441.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Reference is made to "Dividends, Distributions and Taxes-Federal Income Taxes" in the Prospectus.
Each Portfolio intends to qualify to pay "exempt-interest" dividends as defined in Section 852(b)(5) of the Internal Revenue Code of 1986, as amended (the "Code"). Under that section if, at the close of each quarter of its taxable year, at least 50% of the value of its total assets consists of obligations exempt from federal income tax ("tax-exempt obligations"), pursuant to Section 103(a) of the Code (relating to obligations of a state, territory, or a possession of the United States, or any political sub-division of any of the foregoing, or of the District of Columbia), the Portfolio will be qualified to pay exempt-interest dividends to its shareholders. Exempt-interest dividends are dividends or any part thereof (other than any capital gain distributions) paid by the Portfolio which are attributable to interest on tax-exempt obligations and designated by the Portfolio as exempt-interest dividends in a written notice mailed to the Portfolio's shareholders within sixty days after the close of its taxable year. The percentage of the total dividends paid by the Portfolio during any taxable year which qualifies as exempt-interest dividends will be the same for all shareholders of each Portfolio receiving dividends during such year. Exempt-interest dividends may be treated by shareholders for all purposes as items of interest excludible from their gross income under Section 103(a) of the Code. However, a shareholder is advised to consult his tax adviser with respect to whether exempt-interest dividends retain the exclusion under Section 103(a) if such shareholder would be treated as a "substantial user" under Section 147(a)(1) with respect to some or all of the tax-exempt obligations held by the Portfolio.
Dividends paid by each Portfolio from its taxable income (i.e., interest on money market securities) and distributions of net realized short-term capital gains (whether from tax-exempt or taxable obligations) are taxable to shareholders as ordinary income. If a Portfolio acquires tax-exempt obligations having market discount (generally, obligations acquired for a price less than their principal amount) after April 30, 1993, gain on the disposition or retirement of such obligations will be treated as ordinary income to the extent of accrued market discount. To the extent the Portfolio has both taxable and tax-exempt income, expenses of the Fund will be allocated between the taxable and the tax-exempt income on a proportional basis. Since the Portfolio will not invest in the stock of domestic corporations, the dividends received deductions for corporations will not be available. The per share dividends on Class B and Class C shares of any Portfolio will be lower than the per share dividends on Class A and Class D shares of those Portfolios as a result of the account maintenance distribution and higher transfer agency fees applicable to Class B and Class C shares; similarly the per share dividends and distributions on Class D shares will be lower than the per share dividends and distributions on Class A shares as a result of the account maintenance fees applicable with respect to the Class D shares. See "Net Asset Value." The Code provides that interest on indebtedness incurred or continued to purchase or carry shares of the Portfolio is not deductible to the extent attributable to exempt-interest dividends.
As a result of trading in futures contracts, a Portfolio may realize net capital gains which, when distributed to shareholders, would be taxable in the hands of the shareholders. For example, if the Portfolios sold municipal bond index futures contracts in anticipation of a decline in the value of securities they own and that index in fact declines in value, the Portfolios would realize a capital gain upon the closing out of that futures contract. Furthermore, if a Portfolio holds such a futures contract on the last day of its taxable year, it would be deemed under the Code to have sold that futures contract at its fair market value on the last day of its taxable year and thus would realize a gain or loss. Such gain or loss is treated as 60% long-term capital gain or loss and 40% short-term capital gain or loss (hereinafter "blended gain or loss"), notwithstanding the holding period of the futures contract. Since the futures transaction was entered into to hedge the anticipated decline in the portfolio securities of the Portfolio in question, it is likely that the gain on the futures transactions would be partly or
completely offset by a corresponding decline in the value of the portfolio securities of such Portfolio. However, unless the Portfolios sell such securities so as to "realize" such losses in a manner to offset the blended gain for Federal income tax purposes, the Portfolio would have a blended gain. Such blended gain would result in taxable income to the shareholders of the Fund.
A redemption resulting in a gain is a taxable event whether or not the reinstatement privilege is exercised. A redemption resulting in a loss will not be a taxable event to the extent the reinstatement privilege is exercised and an adjustment will be made to the shareholder's tax basis in shares acquired pursuant to the reinstatement. For shares of a Portfolio acquired after October 3, 1989, if a shareholder disposes of those shares and subsequently reacquires shares of the Portfolio pursuant to the reinstatement privilege, then the shareholder's tax basis in those shares will be reduced to the extent the sales charge paid to the Portfolio reduces any sales charge such shareholder would have been required to pay on the subsequent acquisition in the absence of the reinstatement privilege. Instead, such sales charge will be treated as an additional amount paid for the subsequently acquired shares and will be included in the shareholder's tax basis for such shares.
No gain or loss will be recognized by Class B shareholders on the conversion of their Class B shares for Class D shares. A shareholder's basis in the Class D shares acquired will be the same as such shareholder's basis in the Class B shares converted, and the holding period of the acquired Class D shares will include the holding period of the converted Class B shares.
If a shareholder exercises his exchange privilege within 90 days after the date such shares were acquired to acquire shares in such fund or another fund ("New Fund"), then the loss, if any, recognized on the exchange will be reduced (or the gain, if any, increased) to the extent the load charge paid to the Fund reduces any load charge such shareholder would have been required to pay on the acquisition of the New Fund shares in the absence of the exchange privilege. Instead, such load charge will be treated as an amount paid for the New Fund shares and will be included in the shareholder's basis for such shares.
A loss realized on a sale or exchange of shares of the Fund will be disallowed if other Fund shares are acquired (whether through the automatic reinvestment of dividends or otherwise) within a 61-day period beginning 30 days before and ending 30 days after the date that the shares are disposed of. In such a case, the basis of the shares acquired will be adjusted to reflect the disallowed loss.
An exchange between funds pursuant to the Exchange Privilege is treated as a sale for federal income tax purposes and, depending upon the circumstances, a short- or long-term capital gain or loss may be realized. In addition, any shareholder of the Fund who exercises the Exchange Privilege and becomes a shareholder of another fund must certify to such other fund his Social Security Number or Taxpayer Identification Number and
that he is not subject to the backup withholding tax if he wishes to avoid a 31% backup withholding tax on the gross proceeds paid by such other fund on redemption of shares and on dividend distributions made to him by such other fund.
Any dividend declared by a Portfolio in October, November or December of any year and made payable to shareholders of record in such a month will be deemed to be received on December 31 of such year if actually paid during the following January. Accordingly, those dividends, to the extent taxable, will be taxable to shareholders in the year declared, and not in the year in which shareholders actually receive the dividend.
Not later than sixty days after the end of each fiscal year of the Fund, the Fund will send to its shareholders the written notice required by the Code designating the amount of its dividends that constitute exempt-interest dividends, the amount of the dividends and distributions which are ordinary taxable income and the amount of distributions which are taxable to shareholders as long-term capital gains.
Every person required to file a tax return must disclose on that return the amount of exempt-interest dividends received from a Portfolio during the taxable year. The disclosure of this amount is for information purposes only. In addition, with respect to a shareholder who receives exempt-interest dividends on shares held for less than six months, any loss on the sale or exchange of such shares will, to the extent of the amount of such exempt-interest dividends, be disallowed.
Interest income with respect to certain tax-exempt bonds, known as "private activity" bonds, is a preference item for purposes of the corporate and individual alternative minimum tax. To the extent that a Portfolio invests in private activity bonds, shareholders of the Portfolio will have preference items attributable to their proportionate shares of the interest income received by the Portfolio from such bonds, thereby increasing a Shareholders' alternative minimum taxable income. In addition, a corporation must increase its alternative minimum taxable income by 75 percent of the amount by which adjusted current earnings exceed alternative minimum taxable income (without regard to this provision or the alternative net operating loss deduction). Adjusted current earnings are computed by making certain adjustments, which generally follow the rules applicable to corporations in computing earnings and profits. All tax-exempt dividends received by the corporate shareholders of a Portfolio are included in their current earnings, thus, increasing a corporate shareholders' alternative minimum taxable income.
The Code imposes a four percent nondeductible excise tax on a regulated investment company, such as a Portfolio of the Fund, if the company does not distribute to its shareholders during the calendar year an amount equal to 98 percent of the investment company's taxable income, with certain adjustments, for such calendar year, plus 98 percent of the company's capital gain net income for the one-year period ending on October 31 of such calendar year. In addition, an amount equal to any undistributed investment company taxable income or capital gain net income from the previous calendar year must also be distributed to avoid the excise tax. The excise tax is imposed on the amount by which a company does not meet the foregoing distribution requirements. The excise tax will not, however, generally apply to the tax-exempt income of a regulated investment company, such as a Portfolio of the Fund, that pays exempt-interest dividends. In addition, if a Portfolio has taxable income that would be subject to the excise tax, the Fund intends to distribute the income of such Portfolio so as to avoid payment of the excise tax.
At June 30, 1994, the Fund had a net capital loss carryforward of approximately $4,250,000 in the Limited Maturity Portfolio, of which $1,416,000 expires in 1997, $2,787,000 expires in 1998, $22,000 expires in 1999 and $25,000 expires in 2002. These will be available to offset like amounts of any future taxable gains.
The foregoing is a general and abbreviated summary of the applicable provisions of the Code and Treasury Regulations presently in effect. For the complete provisions, reference should be made to the pertinent Code sections and the Treasury Regulations promulgated thereunder. The Code and these Regulations are subject to change by legislative or administrative action.
SYSTEMATIC WITHDRAWAL PLANS
A holder of Class A or Class D shares of any of the three Portfolios may elect to make systematic withdrawals of either a monthly or calendar quarterly basis as provided below. Quarterly withdrawals of such shares are available for shareholders who have acquired Class A or Class D shares having a value, based upon cost or the current offering price, of $5,000 or more, and monthly withdrawals are available for shareholders with Class A or Class D shares with such a value of $10,000 or more.
At the time of each withdrawal payment, sufficient Class A or Class D shares are redeemed from those on deposit in the shareholder's account to provide the withdrawal payment specified by the shareholder. The shareholder may specify either a dollar amount or a percentage of the value of his Class A or Class D shares. Redemptions will be made at net asset value as determined at the close of business on the New York Stock Exchange (currently 4:00 pm New York time) on the 24th day of each month or the 24th day of the last month of each quarter, whichever is applicable. If the Exchange is not open for business on that day, Class A or Class D shares will be redeemed at the close of business on the following business day. The check for the withdrawal payment will be mailed or the direct deposit for the withdrawal payment will be made on the next business day following redemption. When a shareholder is making systematic withdrawals, dividends and distributions on all Class A or Class D shares in the Investment Account are automatically reinvested in Class A or Class D shares, respectively. A shareholder's Systematic Withdrawal Plan Account is automatically reinvested in shares of the same class. A shareholder's Systematic Withdrawal Plan may be terminated at any time, without charge or penalty, by the shareholder, the Fund, the Fund's Transfer Agent or the Distributor.
Withdrawal payments should not be considered as dividends, yield or income. Each withdrawal is a taxable event. If periodic withdrawals continuously exceed reinvested dividends, the shareholder's original investment may be correspondingly reduced. Purchases of additional Class A or Class D shares concurrent with withdrawals are ordinarily disadvantageous to the shareholder because of sales charges and tax liabilities. The Fund will not knowingly accept additions to an Investment Account in which an election has been made to receive systematic withdrawals unless such addition is equal to at least one year's scheduled withdrawals or $1,200, whichever is greater. Periodic investments may not be made into an Investment Account in which the shareholder has elected to make systematic withdrawals.
A Class A or Class D shareholder whose shares are held within a CMA|Pr or CBA|Pr Account may elect to have shares redeemed on a monthly, bimonthly, quarterly, semiannual or annual basis through the Systematic Redemption Program. The minimum fixed dollar amount redeemable is $25. The proceeds of systematic redemptions will be posted to the shareholder's account five business days after the date the shares are redeemed. Monthly systematic redemptions will be made at net asset value on the first Monday of each month, bimonthly systematic redemptions will be made at net asset value on the first Monday of every other month, and quarterly, semiannual or annual redemptions are made at net asset value on the first Monday of months selected at the shareholder's option. If the first Monday of the month is a holiday, the redemption will be processed at net asset value on the next business day. The Systematic Redemption Program is not available if Fund shares are being purchased within the account pursuant to the Automatic Investment Program. For more information on the Systematic Redemption Program, eligible shareholders should contact their Financial Consultant.
EXCHANGE PRIVILEGE
Shareholders of each class of shares of a Portfolio of the Fund have an exchange privilege with other Portfolios of the Fund and with certain other MLAM-advised mutual funds listed below. Under the Merrill Lynch Select PricingSM System, Class A shareholders may exchange Class A shares of a Portfolio for Class A shares of another Portfolio or a second MLAM-advised mutual fund if the shareholder holds any Class A shares of the other Portfolio or second fund in his account in which the exchange is made at the time of the exchange or is otherwise eligible to purchase Class A shares of the second fund. If the Class A shareholder wants to exchange Class A shares for shares of another Portfolio or a second MLAM-advised mutual fund, and the shareholder does not hold Class A shares of the other Portfolio or second fund in his account at the time of the exchange and is not otherwise eligible to acquire Class A shares of the other Portfolio or second fund, the shareholder will receive Class D shares of the other Portfolio or second fund as a result of the exchange. Class D shares also may be exchanged for Class A shares of another Portfolio or a second MLAM-advised mutual fund at any time as long as, at the time of the exchange, the shareholder holds Class A shares of the other Portfolio or second fund in the account in which the exchange is made or is otherwise eligible to purchase Class A shares of the other Portfolio or second fund. Class B, Class C and Class D of a Portfolio shares will be exchangeable with shares of the same class of another Portfolio or other MLAM-advised mutual funds. For purposes of computing the CDSC that may be payable upon a disposition of the shares acquired in the exchange, the holding period for the previously owned shares of the Portfolio is "tacked" to the holding period of the newly acquired shares of the other Portfolio or other Fund as more fully described below. Class A, Class B, Class C and Class D shares also will be exchangeable for shares of certain MLAM-advised money market funds specifically designated below as available for exchange by holders of Class A, Class B, Class C or Class D shares. Shares with a net asset value of at least $100 are required to qualify for the exchange privilege, except that there is no minimum value of shares which must be exchanged by shareholders of the Insured Portfolio who exchange their shares for shares of either the National Portfolio or the Limited Maturity Portfolio and any shares utilized in an exchange must have been held by the shareholder for at least 15 days. The exchange privilege available to participants in the Merrill Lynch BlueprintSM Program may be different from that available to other investors.
Exchanges of Class A and Class D shares of a Portfolio outstanding ("outstanding Class A and Class D shares") for Class A or Class D shares of another Portfolio or another MLAM-advised mutual fund ("new Class A or Class D shares) are transacted on the basis of relative net asset value per Class A or Class D share respectively, plus an amount equal to the difference, if any, between the sales charge previously paid on the outstanding Class A or Class D shares and the sales charge payable at the time of the exchange on the new Class A or Class D shares. With respect to outstanding Class A or Class D shares as to which previous exchanges have taken place, the 'sales charge previously paid' will include the aggregate of the sales charges paid with respect to such Class A or Class D shares in the initial purchase and any subsequent exchange. Class A or Class D shares issued pursuant to dividend reinvestment are sold on a no-load basis in each of the funds offering Class A or Class D shares. For purposes of the exchange privilege, dividend reinvestment Class A or Class D shares will be exchanged into the Class A or Class D shares of the other funds or into shares of the Class A or Class D money market funds without a sales charge.
In addition, the Fund offers to exchange Class B and Class C shares of a Portfolio outstanding ("outstanding Class B or Class C shares") for Class B or Class C shares respectively of another Portfolio or any of the other MLAM-advised mutual funds ("new Class B or Class C shares") on the basis of relative net asset value per Class B or Class C share, without the payment of any CDSC that might otherwise be due on redemp-
tion of the outstanding shares. Class B shareholders of a Portfolio exercising the exchange privilege will continue to be subject to that Portfolio's contingent deferred sales charge schedule if such schedule is higher than the CDSC schedule relating to the new Class B shares acquired through the use of the exchange privilege. In addition, Class B shares of the Portfolio acquired through the use of the exchange privilege will be subject to that Portfolio's CDSC schedule if such schedule is higher than the CDSC schedule relating to the Class B shares of the fund or Portfolio from which the exchange has been made. For purposes of computing the sales charge that may be payable on a disposition of the new Class B or Class C shares, the holding period for the outstanding Class B shares is "tacked" to the holding period of the new Class B or Class C shares. For example, an investor may exchange Class B or Class C shares of the National Portfolio for those of the Merrill Lynch Basic Value Fund, Inc. after having held the National Portfolio Class B shares for two and a half years. The 2% contingent deferred sales charge that generally would apply to a redemption would not apply to the exchange. Two years later the investor may decide to redeem the Class B shares of Merrill Lynch Basic Value Fund, Inc. and receive cash. There will be no contingent deferred sales charge due on this redemption, since by "tacking" the two and a half year holding period of National Portfolio Class B shares to the two year holding period for the Merrill Lynch Basic Value Fund, Inc. Class B shares, the investor will be deemed to have held the new Class B shares for more than four years.
Shareholders also may exchange shares of the Fund into shares of a money market fund advised by the Investment Adviser or its affiliates, but the period of time that Class B or Class C shares are held in a Class B or Class C money market fund will not count towards satisfaction of the holding period requirement for purposes of reducing the CDSC or, with respect to the Class B shares, towards satisfaction of the conversion period. However, shares of a Class B money market fund which were acquired as a result of an exchange for Class B or Class C shares of a fund may, in turn, be exchanged back into Class B or Class C shares of any fund offering such shares, in which event the holding period for Class B or Class C shares of the fund will be aggregated with previous holding periods for purposes of reducing the CDSC. Thus, for example, an investor may exchange Class B shares of the National Portfolio for shares of Merrill Lynch Institutional Fund ("Institutional Fund") after having held the Class B shares for two and a half years, and two years later decide to redeem the shares of Institutional Fund for cash. At the time of this redemption, the 2% CDSC that would have been due had the Class B shares of the National Portfolio been redeemed for cash rather than exchanged for shares of Institutional Fund will be payable. If, instead of such redemption the shareholder exchanged such shares for Class B shares of a fund which the shareholder continued to hold for an additional one and a half years, any subsequent redemption will not incur a CDSC.
A list of the funds into which exchanges may be made and their respective investment objectives is as follows:
Funds Issuing Class A, Class B, Class C and Class D Shares
MERRILL LYNCH ADJUSTABLE RATE
SECURITIES FUND, INC.......High current income consistent with a policy
of limiting the degree of fluctuation in net
asset value by investing primarily in a
portfolio of adjustable rate securities,
consisting principally of mortgage-backed and
asset-backed securities.
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MERRILL LYNCH AMERICAS INCOME
FUND, INC..................A high level of current income, consistent
with prudent investment risk, by investing
primarily in debt securities denominated in a
currency of a country located in the Western
Hemisphere (i.e., North and South America and
the surrounding waters).
MERRILL LYNCH ARIZONA LIMITED
MATURITY MUNICIPAL BOND
FUND.......................A portfolio of Merrill Lynch Multi-State
Limited Maturity Muncipal Series Trust, a
series fund, whose objective is to provide as
high a level of income exempt from Federal
and Arizona income taxes as is consistent
with prudent investment management through
investment in a portfolio primarily of
intermediate-term investment grade Arizona
Municipal Bonds.
MERRILL LYNCH ARIZONA
MUNICIPAL BOND FUND........A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Arizona income
taxes as is consistent with prudent
investment management.
MERRILL LYNCH ARKANSAS
MUNICIPAL BOND FUND........A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Arkansas
income taxes as is consistent with prudent
investment management.
MERRILL LYNCH ASSET GROWTH
FUND, INC..................High total investment return, consistent with
prudent risk, from investment in United
States and foreign equity, debt and money
market securities, the combination of which
will be varied both with respect to types of
securities and markets in response to
changing market and economic trends.
MERRILL LYNCH ASSET INCOME
FUND, INC..................A high level of current income through
investment primarily in United States fixed
income securities.
MERRILL LYNCH BALANCED FUND
FOR INVESTMENT AND
RETIREMENT................. As high a level of total investment return as
is consistent with a relatively low level of
risk through investment in common stocks and
other types of securities, including fixed
income securities and convertible securities.
MERRILL LYNCH BASIC VALUE
FUND, INC..................Capital appreciation and, secondarily, income
by investing in securities, primarily
equities, that are under-valued and therefore
represent basic investment value.
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MERRILL LYNCH CALIFORNIA
MUNICIPAL BOND FUND........Currently the only portfolio of Merrill Lynch
California Municipal Series Trust, a series
fund, whose objective is to provide as high a
level of income exempt from Federal and
California income taxes as is consistent with
prudent investment management.
MERRILL LYNCH CALIFORNIA
INSURED MUNICIPAL BOND
FUND.......................A portfolio of Merrill Lynch California
Municipal Series Trust, a series fund, whose
objective is to provide shareholders with as
high a level of income exempt from Federal
and California income taxes as is consistent
with prudent investment management through
investment in a portfolio primarily of
insured California Municipal Bonds.
MERRILL LYNCH CALIFORNIA
LIMITED MATURITY MUNCIPAL
BOND FUND................. A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide
shareholders with as high a level of income
exempt from Federal and California income
taxes as is consistent with prudent
investment management through investment in a
portfolio primarly of intermediate-term
investment grade California Municipal Bonds.
MERRILL LYNCH CAPITAL FUND,
INC........................The highest total investment return
consistent with prudent risk through a fully
managed investment policy utilizing equity,
debt and convertible securities.
MERRILL LYNCH COLORADO
MUNICIPAL BOND FUND........A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Colorado
income taxes as is consistent with prudent
investment management.
MERRILL LYNCH CONNECTICUT
MUNICIPAL BOND FUND........A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Connecticut
income taxes as is consistent with prudent
investment management.
MERRILL LYNCH CORPORATE BOND
FUND, INC. ................Current income from three diversified
portfolios of fixed income securities.
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MERRILL LYNCH DEVELOPING
CAPITAL MARKETS FUND, INC. Long-term appreciation through investment in securities, principally equities, of issuers in countries having smaller capital markets.
MERRILL LYNCH DRAGON FUND,
INC.........................Capital appreciation primarily through
investment in equity and debt securities of
issuers domiciled in developing countries
located in Asia and the Pacific Basin.
MERRILL LYNCH EUROFUND ......Capital appreciation primarily through
investment in equity securities of
corporations domiciled in Western Europe.
MERRILL LYNCH FEDERAL
SECURITIES TRUST ..........High current return through investments in
U.S. government and governmental agency
securities, including GNMA mortgage-
backed certificates and other mortgage-backed
government securities.
MERRILL LYNCH FLORIDA LIMITED
MATURITY MUNICIPAL BOND
FUND.......................A portfolio of Merrill Lynch Multi-State
Limited Maturity Series Trust, a series fund,
whose objective is to provide as high a level
of income exempt from Federal income taxes as
is consistent with prudent investment
management while seeking to offer
shareholders the opportunity to own
securities exempt from Florida intangible
personal property taxes through investment in
a portfolio primarily of intermediate-term
investment grade Florida Municipal Bonds.
MERRILL LYNCH FLORIDA
MUNICIPAL BOND FUND........A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal income taxes as is
consistent with prudent investment management
while seeking to offer shareholders the
opportunity to own securities exempt from
Florida intangible personal property taxes.
MERRILL LYNCH FUND FOR
TOMORROW, INC..............Long-term growth through investment in a
portfolio of high quality securities,
primarily common stock, potentially
positioned to benefit from demographic and
cultural changes as they affect consumer
markets.
MERRILL LYNCH FUNDAMENTAL
GROWTH FUND, INC...........Long-term growth through investment in a
diversified portfolio of equity securities
placing particular emphasis on companies that
have exhibited above-average growth rates in
earnings.
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MERRILL LYNCH GLOBAL
ALLOCATION FUND, INC.......High total investment return, consistent with
prudent risk, through a fully-managed
investment policy utilizing United States and
foreign equity, debt and money market
securities, the combination of which will be
varied from time to time both with respect to
the types of securities and markets in
response to changing market and economic
trends.
MERRILL LYNCH GLOBAL BOND
FUND FOR INVESTMENT AND
RETIREMENT.................High total investment return by investing in
a global portfolio of debt investments
denominated in various currencies and
multinational currency units.
MERRILL LYNCH GLOBAL
CONVERTIBLE FUND, INC. ....High total return from investment primarily
in an internationally diversified portfolio
of convertible debt securities, convertible
preferred stock and "synthetic" convertible
securities consisting of a combination of
debt securities or preferred stock and
warrants or options.
MERRILL LYNCH GLOBAL
HOLDINGS, INC. (residents
of Arizona must meet
investor suitability
standards).................The highest total investment return
consistent with prudent risk through
worldwide investment in an internationally
diversified portfolio of securities.
MERRILL LYNCH GLOBAL
RESOURCES TRUST............Long-term growth and protection of capital
from investment in securities of foreign and
domestic companies that possess substantial
natural resource assets.
MERRILL LYNCH GLOBAL SMALLCAP
FUND, INC..................Long-term growth of capital by investing
primarily in equity securities of companies
with relatively small market capitalizations
located in various foreign countries and in
the United States.
MERRILL LYNCH GLOBAL UTILITY
FUND, INC..................Capital appreciation and current income
through investment of at least 65% of its
total assets in equity and debt securities
issued by domestic and foreign companies
primarily engaged in the ownership or
operation of facilities used to generate,
transmit or distribute electricity,
telecommunications, gas or water.
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MERRILL LYNCH GROWTH FUND FOR
INVESTMENT AND RETIREMENT..Growth of capital and, secondarily, income
from investment in a diversified portfolio of
equity securities placing principal emphasis
on those securities which management of the
fund believes to be undervalued.
MERRILL LYNCH HEALTHCARE
FUND, INC. (residents of
Wisconsin must meet
investor suitability
standards).................Capital appreciation through worldwide
investment in equity securities of companies
that derive or are expected to derive a
substantial portion of their sales from
products and services in healthcare.
MERRILL LYNCH INTERNATIONAL
EQUITY FUND................Capital appreciation and, secondarily, income
by investing in a diversified portfolio of
equity securities of issuers located in
countries other than the United States.
MERRILL LYNCH LATIN AMERICA
FUND....................... Capital appreciation by investing primarily
in Latin American equity and debt securities.
MERRILL LYNCH MARYLAND
MUNICIPAL BOND FUND........A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Maryland
income taxes as is consistent with prudent
investment management.
MERRILL LYNCH MASSACHUSETTS
LIMITED MATURITY MUNICIPAL
BOND FUND..................A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide as
high a level of income exempt from Federal
and Massachusetts income taxes as is
consistent with prudent investment management
through investment in a portfolio primarily
of intermediate-term investment grade
Massachusetts Municipal Bonds.
MERRILL LYNCH MASSACHUSETTS
MUNICIPAL BOND FUND........A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Massachusetts
income taxes as is consistent with prudent
investment management.
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MERRILL LYNCH MICHIGAN
LIMITED MATURITY MUNICIPAL
BOND FUND..................A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide as
high a level of income exempt from Federal
and Michigan income taxes as is consistent
with prudent investment in a portfolio
primarily of intermediate-term investment
grade Michigan Municipal Bonds.
MERRILL LYNCH MICHIGAN
MUNICIPAL BOND FUND .......A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Michigan
personal income taxes as is consistent with
prudent investment management.
MERRILL LYNCH MINNESOTA
MUNICIPAL BOND FUND .......A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Minnesota
income taxes as is consistent with prudent
investment management.
MERRILL LYNCH MUNICIPAL
INTERMEDIATE TERM FUND ....Currently the only portfolio of Merrill Lynch
Municipal Series Trust, a series fund, whose
objective is to provide as high a level as
possible of income exempt from Federal income
taxes by investing in investment grade
obligations with a dollar weighted average
maturity of five to twelve years.
MERRILL LYNCH NEW JERSEY
LIMITED MATURITY MUNICIPAL
BOND FUND..................A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide as
high a level of income exempt from Federal
and New Jersey income taxes as is consistent
with prudent investment management through a
portfolio primarily of intermediate-term
investment grade New Jersey Municipal Bonds.
MERRILL LYNCH NEW JERSEY
MUNICIPAL BOND FUND .......A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and New Jersey
income taxes as is consistent with prudent
investment management.
MERRILL LYNCH NEW MEXICO
MUNICIPAL BOND FUND........A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and New Mexico
income taxes as is consistent with prudent
investment management.
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MERRILL LYNCH NEW YORK
LIMITED MATURITY MUNICIPAL
BOND FUND .................A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide as
high a level of income exempt from Federal,
New York State and New York City income taxes
as is consistent with prudent investment
management through investment in a portfolio
primarily of intermediate-term investment
grade New York Municipal Bonds.
MERRILL LYNCH NEW YORK
MUNICIPAL BOND FUND .......A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal, New York State
and New York City income taxes as is
consistent with prudent investment
management.
MERRILL LYNCH NORTH CAROLINA
MUNICIPAL BOND FUND........A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and North Carolina
income taxes as is consistent with prudent
investment management.
MERRILL LYNCH OHIO MUNICIPAL
BOND FUND..................A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Ohio income
taxes as is consistent with prudent
investment management.
MERRILL LYNCH OREGON
MUNICIPAL BOND FUND........A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Oregon income
taxes as is consistent with prudent
investment management.
MERRILL LYNCH PACIFIC FUND,
INC. ..................... Capital appreciation primarily through
investment in equities of corporations
domiciled in Far Eastern or Western Pacific
countries, including Japan, Australia, Hong
Kong and Singapore.
MERRILL LYNCH PENNSYLVANIA
LIMITED MATURITY MUNICIPAL
BOND FUND..................A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide as
high a level of income exempt from Federal
and Pennsylvania income taxes as is
consistent with prudent investment management
through investment in a portfolio primarily
of intermediate-term investment grade
Pennsylvania Municipal Bonds.
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MERRILL LYNCH PENNSYLVANIA
MUNICIPAL BOND FUND........A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Pennsylvania
income taxes as is consistent with prudent
investment management.
MERRILL LYNCH PHOENIX FUND,
INC. ......................Long-term growth of capital from investing in
equity and fixed income securities, including
tax-exempt securities, of issuers in weak
financial condition or experiencing poor
operating results that are undervalued
relative to the assessment of the current or
prospective condition of such issuer.
MERRILL LYNCH SHORT-TERM
GLOBAL INCOME FUND, INC. ..As high a level of current income as is
consistent with prudent investment management
from a global portfolio of high quality debt
securities denominated in various currencies
and multinational currency units and having
remaining maturities not exceeding three
years.
MERRILL LYNCH SPECIAL VALUE
FUND, INC. ................Long-term growth of capital from investments
in securities, primarily common stocks, or
relatively small companies believed to have
special investment value and emerging growth
companies regardless of size.
MERRILL LYNCH STRATEGIC
DIVIDEND FUND..............Long-term total return from investment in
dividend-paying common stocks which yield
more than Standard & Poor's 500 Composite
Stock Price Index.
MERRILL LYNCH TECHNOLOGY
FUND, INC. ................Long-term capital appreciation through
worldwide investment in equity securities of
companies that derive or are expected to
derive a substantial portion of their sales
from products and services in technology.
MERRILL LYNCH TEXAS MUNICIPAL
BOND FUND .................A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal income taxes as is
consistent with prudent investment management
from a portfolio of long-term, investment
grade obligations issued by the State of
Texas, its political subdivisions, agencies
and instrumentalities.
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MERRILL LYNCH UTILITY INCOME
FUND, INC..................High current income through investment in
equity and debt securities issued by
companies which are primarily engaged in the
ownership or operation of facilities used to
generate, transmit or distribute electricity,
telecommunications, gas or water.
MERRILL LYNCH WORLD INCOME
FUND, INC..................High current income by investing in a global
portfolio of fixed income securities
denominated in various currencies, including
multinational currency units.
Class A Share Money Market
Funds:
MERRILL LYNCH READY ASSETS
TRUST..................... Preservation of capital, liquidity and the
highest possible current income consistent
with the foregoing objectives from the
short-term money market securities in which
the Trust invests.
MERRILL LYNCH RETIREMENT
RESERVES MONEY FUND
(available only for
exchanges within certain
retirement plans)..........Currently the only portfolio of Merrill Lynch
Retirement Series Trust, a series fund, whose
objectives are current income, preservation
of capital and liquidity available from
investing in a diversified portfolio of
short-term money market securities.
MERRILL LYNCH U.S.A.
GOVERNMENT RESERVES........Preservation of capital, current income and
liquidity available from investing in direct
obligations of the U.S. Government and
repurchase agreements relating to such
securities.
MERRILL LYNCH U.S. TREASURY
MONEY FUND.................Preservation of capital, liquidity and
current income through investment exclusively
in a diversified portfolio of short-term
marketable securities which are direct
obligations of the U.S. Treasury.
Class B, Class C and Class D
Share Money Market Funds:
MERRILL LYNCH GOVERNMENT
FUND......................A portfolio of Merrill Lynch Funds for
Institutions Series, a series fund, whose
objective is to provide current income
consistent with liquidity and security of
principal from investment in securities
issued or guranteed by the U.S. Government,
its agencies and instrumentalities and in
repurchase agreements secured by such
obligations.
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MERRILL LYNCH INSTITUTIONAL
FUND...................... A portoflio of Merrill Lynch Funds for
Institutions Series, a series fund, whose
objective is to provide maximum current
income consistent with liquidity and the
maintenance of a high-quality portfolio of
money market securities.
MERRILL LYNCH INSTITUTIONAL
TAX-EXEMPT FUND............A portfolio of Merrill Lynch Funds for
Institutions Series, a series fund, whose
objective is to provide current income exempt
from Federal income taxes, preservation of
capital and liquidity available from
investing in a diversified portfolio of
short-term, high quality municipal bonds.
MERRILL LYNCH TREASURY FUND..A portfolio of Merrill Lynch funds for
Institutions Series, a series fund, whose
objective is to provide current income
consistent with liquidity and security of
principal from investment in direct
obligations of the U.S. Treasury and up to
10% of its total assets in repurchase
agreements secured by such obligations.
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Before effecting an exchange, shareholders of the Fund should obtain a currently effective prospectus of the fund into which the exchange is to be made. Exercise of the exchange privilege is treated as a sale for Federal income tax purposes and, depending on the circumstances, a short- or long-term capital gain or loss may be realized. In addition, a shareholder exchanging shares of any of the funds may be subject to a backup withholding tax unless such shareholder certifies under penalty of perjury that the taxpayer identification number on file with any such fund is correct and that such shareholder is not otherwise subject to backup withholding. See "Dividends, Distributions and Taxes" below.
To exercise the Exchange Privilege, shareholders should contact their listed dealer, who will advise the Fund of the exchange, or the shareholder may write to the Transfer Agent requesting that the exchange be effected. Such letter must be signed exactly as the account is registered with signature(s) guaranteed by "eligible guarantor institution" (including, for example, Merrill Lynch branch offices and certain other financial institutions) as such is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, the existence and validity of which may be verified by the transfer agent through the use of industry publications. Shareholders of the Fund, and shareholders of the other funds described above with shares for which certificates have not been issued may exercise the Exchange Privilege by wire through their securities dealers. The Fund reserves the right to require a properly completed Exchange Application. These funds may suspend the continuous offering of their shares to the public at any time and may thereafter resume such offering from time to time.
The Exchange Privilege may be modified or terminated at any time on 60 days' notice. The Fund reserves the right to limit the number of times an investor may exercise the Exchange Privilege. The exchange privilege is available only to U.S. shareholders in states where the exchange legally may be made.
PERFORMANCE DATA
From time to time the Fund may include its average annual total return and other total return data, as well as yield and tax equivalent yield, in advertisements or information furnished to present or prospective shareholders. Total return yield, and tax equivalent yield figures are based on the Fund's historical performance and are
not intended to indicate future performance. Average annual total return, yield and tax equivalent yield are determined separately for Class A, Class B, Class C and Class D shares, in accordance with formulas specified by the Securities and Exchange Commission.
Average annual total return quotations for the specified periods are computed by finding the average annual compounded rates of return (based on net investment income and any realized and unrealized capital gains or losses on portfolio investments over such periods) that would equate the initial amount invested to the redeemable value of such investment at the end of each period. Average annual total return is computed assuming all dividends and distributions are reinvested and taking into account all applicable recurring and nonrecurring expenses, including the maximum sales charge in the case of Class A and Class D shares and the CDSC that would be applicable to a complete redemption of the investment at the end of the specified period in the case of Class B and Class C shares.
The Fund also may quote annual, average annual and annualized total return and aggregate total return performance data, both as a percentage and as a dollar amount based on a hypothetical $1,000 investment, for various periods other than those noted below. Such data will be computed as described above, except that, (1) as required by the periods of the quotations, actual annual, annualized or aggregate data, rather than average annual data, may be quoted (2) the maximum applicable sales charges will not be included with respect to annual or annualized rates of return calculations. Aside from the impact on the performance data calculation of including or excluding the maximum applicable sales charges, actual annual or annualized total return data generally will be lower than average annual total return data since the average rates of return reflect compounding of return. Aggregate total return data generally will be higher than average annual total return data since the aggregate rates of return reflect compounding over a longer period of time.
Set forth below is total return information for the Class A and Class B shares of the Insured Portfolio and National Portfolio and shares of the Limited Maturity Portfolio for the periods indicated. Since Class C and Class D Shares have not been issued prior to the date of this Statement of Additional Information, performance information concerning Class C and Class D shares is not yet provided.
Expressed as a Percentage Based on Redeemable Value of a Hypothetical $1,000
a Hypothetical $1,000 Investment Investment at the End of the Period
---------------------------------- -----------------------------------------
Limited Limited
National Insured Maturity National Insured Maturity
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- --------- --------- ---------
Average Annual Total Return (including
maximum applicable sales charges)
One Year Ended June 30, 1994
Class A ............................... (4.45)% (5.03)% 1.27% $ 955.50 $ 949.70 $1,012.70
Class B ............................... (5.03) (5.44) 1.00 949.70 945.60 1,010.00
Five Years Ended June 30, 1994
Class A................................ 6.67 6.62 5.20 1,381.20 1,377.80 1,288.40
Class B................................ 6.72 6.67 - 1,384.50 1,381.00 -
Ten Years Ended June 30, 1994 .......... 9.84 9.61 5.69 2,555.90 2,503.80 1,739.60
Class B shares 10/21/88-6/30/94 ........ 7.06 7.08 - 1,474.30 1,476.00 -
Class B shares 11/02/92-6/30/94 ........ - - 3.17 - - 1,053.10
39
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Annual Total Return
(excluding maximum applicable sales charge)
Year Ended June 30,
1994
(Class A) ............................. (0.47)% (1.08)% 2.30% $ 995.30 $ 989.20 $1,023.00
(Class B) ............................. (1.39) (1.81) 1.98 986.10 981.90 1,019.80
1993
(Class A) ............................. 12.21 12.43 5.28 1,122.10 1,124.30 1,052.80
(Class B)* ............................ 11.47 11.45 3.26 1,114.70 1,114.50 1,032.60
1992
(Class A) ............................. 13.09 12.11 6.93 1,130.90 1,121.10 1,069.30
(Class B) ............................. 12.25 11.27 - 1,122.50 1,112.70 -
1991
(Class A) ............................. 7.94 8.84 6.45 1,079.40 1,088.40 1,064.50
(Class B) ............................. 7.14 8.02 - 1,071.40 1,080.20 -
1990
(Class A) ............................. 5.53 5.76 6.16 1,055.30 1,057.60 1,061.60
(Class B) ............................. 4.74 4.98 - 1,047.40 1,049.80 -
1989
(Class A) ............................. 11.89 11.62 5.96 1,118.90 1,116.20 1,059.60
(Class B) (10/21/88-6/30/89) .......... 6.48 6.88 - 1,064.80 1,068.80 -
1988 ................................... 6.89 7.75 4.83 1,068.90 1,077.50 1,048.30
1987 ................................... 8.00 6.94 4.99 1,080.00 1,069.40 1,049.90
1986 ................................... 17.09 15.62 6.50 1,170.90 1,156.20 1,065.00
1985 ................................... 22.36 22.21 8.72 1,223.60 1,222.10 1,087.20
1984 ................................... 4.44 3.00 5.58 1,044.40 1,030.00 1,055.80
1983 ................................... 32.66 31.60 8.59 1,326.60 1,316.00 1,085.90
1982 ................................... 2.73 (.33) 7.96 1,027.30 996.70 1,079.60
1981 ................................... (2.72) (10.27) 4.55 972.80 897.30 1,045.50
1980 ................................... 4.21 (5.88) 5.91 1,042.10 941.20 1,059.10
1979 ................................... - 5.48 - - 1,054.80 -
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Aggregate Total Return
(including maximum applicable sales charges)
From Inception to June 30, 1994*
Class A.............................. 268.77% 192.19% 138.41% $3,687.70 $2,921.90 $2,384.10
Class B ............................. 47.43 47.60 5.31 1,474.30 1,476.00 1,053.10
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In order to reflect the reduced sales charges applicable to certain investors the performance data in advertisements distributed to investors whose purchases are subject to reduced sales load, in the case of Class A or Class D shares, or waiver of the contingent deferred sales charge in the case of the Class B and Class C shares, may take into account the reduced, and not the maximum, sales charge or may not take into account the contingent deferred sales charge and therefore may reflect greater total return since, due to the reduced sales charge, a lower amount of expenses is deducted.
The Fund's total return may be expressed either as a percentage or as a dollar amount in order to illustrate such total return on a hypothetical investment in the Fund at the beginning of each specified period.
Yield quotations will be computed based on a 30-day period by dividing
(a) the net income based on the yield of each security earned during the
period by (b) the average daily number of shares outstanding during the
period that were entitled to receive dividends multiplied by the maximum
offering price per share on the last day of the period. Tax equivalent
yield quotations will be computed by dividing (a) the part of the Fund's
yield that is tax-exempt by (b) one minus a stated tax rate and adding the
result to that part, if any, of the Fund's yield that is not tax-exempt.
The yield for the 30-day period ending June 30, 1994 for National
Portfolio Class A shares was 5.59%, for National Portfolio Class B shares
was 5.05%, for Insured Portfolio Class A shares was 5.20%, for Insured
Portfolio Class B shares was 4.65%, for Limited Maturity Portfolio Class A
shares was 3.89%, and for Limited Maturity Portfolio Class B shares was
3.56%. The tax-equivalent yield for the same period (based on a tax rate
of 28%) for National Portfolio Class A shares was 7.76%, for National
Portfolio Class B shares was 7.01%, for Insured Portfolio Class A shares
was 7.22%, for Insured Portfolio Class B shares was 6.46%, for Limited
Maturity Portfolio Class A shares was 5.40%, and for Limited Maturity
Portfolio Class B shares was 4.94%.
Total return, yield and tax equivalent yield figures are based on the Fund's historical performance and are not intended to indicate future performance. The Fund's total return, yield and tax equivalent yield will vary depending on market conditions, the securities comprising the Fund's portfolio, the Fund's operating expenses and the amount of realized and unrealized net capital gains or losses during the period. The value of an investment in the Fund will fluctuate and an investor's shares, when redeemed, may be worth more or less than their original cost.
ADDITIONAL INFORMATION
Description of Municipal Bonds
Municipal Bonds include debt obligations issued to obtain funds for various public purposes, including construction of a wide range of public facilities, refunding of outstanding obligations and obtaining funds for general operating expenses and loans to other public institutions and facilities. In addition, certain types of industrial development bonds are issued by or on behalf of public authorities to finance various privately- operated facilities, including pollution control facilities. Such obligations are included within the term Municipal Bonds if the interest paid thereon is exempt from federal income tax. Municipal Bonds also include short-term tax-exempt municipal obligations such as tax anticipation notes, bond anticipation notes, revenue anticipation notes, variable rate demand notes and Public Housing Authority notes that are fully secured by a pledge of the full faith and credit of the United States.
The two principal classifications of Municipal Bonds are "general obligation" and "revenue" or "special obligation" bonds. General obligation bonds are secured by the issuer's pledge of faith, credit, and taxing power for the payment of principal and interest. Revenue or special obligation bonds are payable only from the
revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise tax or other specific revenue source such as from the user of the facility being financed. Industrial development bonds are in most cases revenue bonds and do not generally constitute the pledge of the credit or taxing power of the issuer of such bonds. The payment of the principal and interest on such industrial revenue bonds depends solely on the ability of the user of the facilities financed by the bonds to meet its financial obligations and the pledge, if any, of real and personal property so financed as security for such payment. The Portfolio may also include "moral obligation" bonds which are normally issued by special purpose public authorities. If an issuer of moral obligation bonds is unable to meet its obligations, the repayment of such bonds becomes a moral commitment but not a legal obligation of the state or municipality in question.
Municipal Bonds may at times be purchased or sold on a delayed delivery basis or a when-issued basis. These transactions arise when securities are purchased or sold by a Portfolio with payment and delivery taking place in the future, often a month or more after the purchase. The payment obligation and the interest rate are each fixed at the time the buyer enters into the commitment. The Fund will only make commitments to purchase such securities with the intention of actually acquiring the securities, but the Fund may sell these securities prior to the settlement date if it is deemed advisable. Purchasing Municipal Bonds on a when-issued basis involves the risk that the yields available in the market when the delivery takes place may actually be higher than those obtained in the transaction itself; if yields so increase, the value of the when-issued obligation will generally decrease. When a Portfolio engages in when-issued and delayed delivery transactions, the Portfolio relies on the buyer or seller, as the case may be, to consummate the trade. Failure of the buyer or seller to do so may result in the Portfolio's missing the opportunity of obtaining a price considered to be advantageous. The Fund will maintain a separate account as its custodian bank consisting of cash or liquid Municipal Bonds (valued on a daily basis) equal at all times to the amount of the when-issued commitment.
Variable rate demand notes ("VRDNs") are tax-exempt obligations which contain a floating or variable interest rate adjustment formula and an unconditional right of demand to receive payment of the unpaid principal balance plus accrued interest upon a short notice period not to exceed seven days. The interest rates are adjustable at intervals ranging from daily up to six months to some prevailing market rate for similar investments, such adjustment formula being calculated to maintain the market value of the VRDN at approximately the par value of the VRDN upon the adjustment date. The adjustments are typically based upon the prime rate of a bank or some other appropriate interest rate adjustment index.
The Fund may also invest in VRDNs in the form of participation interests ("Participating VRDNs") in variable rate tax-exempt obligations held by a financial institution, typically a commercial bank ("institution"). Participating VRDNs provide the Fund with a specified undivided interest (up to 100%) of the underlying obligation and the right to demand payment of the unpaid principal balance plus accrued interest on the Participating VRDNs from the institution upon a specified number of days' notice, not to exceed seven days. In addition, the Participating VRDN is backed by an irrevocable letter of credit or guaranty of the institution. The Fund has an undivided interest in the underlying obligation and thus participates on the same basis as the institution in such obligation except that the institution typically retains fees out of the interest paid on the obligation for servicing the obligation, providing the letter of credit and issuing the repurchase commitment.
The Fund has been advised by its counsel to the effect that the interest received on Participating VRDNs will be treated as interest from tax-exempt obligations as long as the Fund does not invest more than a limited amount (not more than 20%) of its total assets in such investments and certain other conditions are met. It is contemplated that the Fund will not invest more than a limited amount of its total assets in Participating VRDNs.
Yields on Municipal Bonds are dependent on a variety of factors, including the general condition of the money market and of the municipal bond market, the size of a particular offering, the maturity of the obligation, and the rating of the issue. The ability of a Portfolio to achieve its investment objective is also dependent on the continuing ability of the issuers of the Municipal Bonds in which the Portfolio invests to meet their obligations for the payment of interest and principal when due. There are variations in the risks involved in holding Municipal Bonds, within a particular classification and between classifications, depending on numerous factors. Furthermore, the rights of holders of Municipal Bonds and the obligations of the issuers of such Municipal Bonds may be subject to applicable bankruptcy, insolvency and similar laws and court decisions affecting the rights of creditors generally and such laws, if any, that may be enacted by Congress or state legislatures imposing a moratorium on the payment of principal and interest or imposing other constraints or conditions on the payment of principal of and interest on Municipal Bonds.
From time to time, proposals have been introduced before Congress for the purpose of restricting or eliminating the federal income tax exemption for interest on Municipal Bonds. It may be expected that similar proposals may be introduced in the future. If such a proposal were enacted, the ability of the Portfolios to pay "exempt-interest" dividends might be adversely affected and the Fund would re-evaluate its investment objective and policies and consider changes in its structure. See "Dividends, Distributions and Taxes."
Description of Temporary Investments
The short-term money market securities in which the Portfolios may invest as temporary investments consist of United States Government securities, United States Government agency securities, domestic bank certificates of deposit and bankers' acceptances, short-term corporate debt securities such as commercial paper, and repurchase agreements. The money market securities must have a stated maturity not in excess of one year from the date of purchase. U.S. Government securities consist of various types of marketable securities issued by or guaranteed as to principal and interest by the U.S. Government and supported by the full faith and credit of the U.S. Treasury. U.S. Government agency securities consist of debt securities issued by government sponsored enterprises, federal agencies and international institutions. Such securities are not direct obligations of the Treasury but involve government sponsorship or guarantees by government agencies or enterprises. The Fund has established the following standards with respect to money market securities in which the Portfolios invest. Commercial paper investments at the time of purchase must be rated "A" by Standard & Poor's Corporation or "Prime" by Moody's Investors Service, Inc. or, if not rated, issued by companies having an outstanding debt issue rated at least "A" by Standard & Poor's or Moody's. Investments in corporate bonds and debentures (which must have maturities at the date of purchase of one year or less) must be rated at the time of purchase at least "A" by Standard & Poor's or by Moody's. The Portfolios may not invest in any securities issued by a commercial bank or a savings and loan association unless the bank or association is organized and operating in the United States, has total assets of at least one billion dollars and is a member of the Federal Deposit Insurance Corporation.
Insurance on Portfolio Securities
Set forth below is further information with respect to the Mutual Fund Insurance Policies (the "Policies") which the Fund has obtained from AMBAC Indemnity Corporation ("AMBAC"), Municipal Bond Investors Assurance Corporation ("MBIA") and Financial Security Assurance Inc. ("FSA"), with respect to Insured Municipal Bonds held by the Insured Portfolio (see "Investment Policies of the Portfolios-Insured Portfolio"
in the Prospectus). During the fiscal year ended June 30, 1994, the premium for the policies aggregated $74,901 or approximately 0.002% of the average net assets of the Insured Portfolio. During the fiscal year ended June 30, 1993, the premium for the Policies aggregated $162,176 or approximately 0.01% of the average net assets of the Insured Portfolio.
In determining eligibility for insurance, AMBAC, MBIA and FSA have applied their own standards, which correspond generally to the standards they normally use in establishing the insurability of new issues of Municipal Bonds and which are not necessarily the criteria which would be used in regard to the purchase of Municipal Bonds by the Insured Portfolio. The Policies do not insure (i) municipal securities ineligible for insurance, or (ii) municipal securities which are no longer owned by the Insured Portfolio. In addition, the AMBAC policy does not insure municipal obligations which were insured as to the payment of principal and interest at the time of their issuance by AMBAC.
The Policies do not guarantee the market value of the Insured Municipal Bonds or the value of the shares of the Insured Portfolio. In addition, if the provider of an original issuance insurance policy is unable to meet its obligations under such policy or if the rating assigned to the claims paying ability of any such insurer deteriorates, neither AMBAC nor MBIA nor FSA has any obligation to insure any issue held by the Insured Portfolio which is adversely affected by either of the above described events. The AMBAC policy provides for an annual policy period, which is renewable by the Fund for successive annual periods for so long as the Fund is in compliance with the terms of the AMBAC policy. In addition to the payment of premiums, the Policies require that the Insured Portfolio notify AMBAC and MBIA as to all Municipal Bonds in the Insured Portfolio and permit AMBAC and MBIA to audit records. The insurance premiums are payable monthly by the Insured Portfolio in accordance with a premium schedule which was furnished by AMBAC, MBIA and FSA at the time the Policies were issued. Premiums are based upon the amounts covered and the composition of the portfolio. AMBAC has reserved the right to change the premium schedule for any renewal policy period as to any municipal securities purchased by the Insured Portfolio during such renewal period. The FSA policy and the MBIA policy both provide that the premium rate for subsequent purchases by the Insured Portfolio of the same obligations will be determined by FSA or MBIA as of the date of such purchases.
AMBAC has received a letter ruling from the Internal Revenue Service, which holds in effect that insurance proceeds representing maturing interest on defaulted municipal obligations paid by AMBAC to municipal bond funds substantially similar to the Insured Portfolio, under policy provisions substantially identical to the policy described herein, will be excludable from federal gross income under Section 103(a) of the Internal Revenue Code.
AMBAC insures the portfolio of the Insured Portfolio and the prompt payment of the interest and principal of new issues of Municipal Bonds and Municipal Bond portfolios of individuals, banks, trust companies, corporations, insurance companies and units trusts. As of June 30, 1994, the admitted assets of AMBAC were approximately $2.060 billion (unaudited) with a qualified capital of approximately $766.7 million (unaudited). Qualified capital consists of the statutory contingency reserve and policyholders' surplus of the insurance company.
FSA insures the prompt payment of interest and principal of new issues of Municipal Bonds and Municipal Bond portfolios of individuals, banks, trust companies, corporations, insurance companies and unit trusts. As of June 30, 1994, the total admitted assets (unaudited) of FSA were approximately $604.8 million with a total capital and surplus (unaudited) of approximately $367.7 million as reported to the Insurance Department of the State of New York.
MBIA insures the prompt payment of interest and principal of new issues of Municipal Bonds and Municipal Bond portfolios of individuals, banks, trust companies, corporations, insurance companies and unit trusts. As of June 30, 1994, the total admitted assets of MBIA were approximately $3.253 billion (unaudited) with total capital and surplus of approximately $1,049 million (unaudited).
AMBAC has entered into reinsurance agreements with a number of unaffiliated reinsurers, relating to the municipal bond insurance programs of AMBAC including the insurance obtained by the Fund for the portfolio of the Insured Portfolio.
The contracts of insurance relating to the Insured Portfolio and the negotiations in respect thereof represent the only significant relationship between AMBAC, MBIA and FSA and the Fund. Otherwise neither AMBAC or any associate thereof, nor MBIA or any associate thereof, nor FSA or any associate thereof has any material business relationship, direct or indirect, with the Fund.
AMBAC, MBIA and FSA are subject to regulation by the department of insurance in each state in which they are qualified to do business. Such regulation, however, is not a guarantee that any of AMBAC, MBIA or FSA will be able to perform on its contractual insurance in the event a claim should be made thereunder at some time in the future.
The information relating to AMBAC, MBIA and FSA set forth above, including the financial information, has been furnished by such corporations. Financial information with respect to AMBAC, MBIA and FSA appears in reports filed by AMBAC, MBIA and FSA with state insurance regulatory authorities and is subject to audit and review by such authorities. No representation is made herein as to the accuracy or adequacy of such information with respect to AMBAC, MBIA or FSA or as to the absence of material adverse changes in such information subsequent to the date thereof.
Description of Financial Futures Contracts
Futures Contracts. A financial futures contract obligates the seller of a contract to deliver and the purchaser of a contract to take delivery of the type of financial instrument called for in the contract or, in some instances, to make a cash settlement based upon the value of an instrument or an index of values, at a specified future time for a specified price. Although the terms of a contract call for actual delivery of the underlying financial instrument, or for a cash settlement, in most cases the contracts are closed out before the delivery date without the delivery taking place. The Fund intends to close out its futures contracts prior to the delivery date of such contracts.
The National and Limited Maturity Portfolios (the "Portfolios") may sell futures contracts in anticipation of a decline in the value of their investments in municipal bonds. The loss associated with any such decline could be reduced without employing futures as a hedge by selling long-term securities and either reinvesting the proceeds in securities with shorter maturities or by holding assets in cash. This strategy, however, entails increased transaction costs in the form of brokerage commissions and dealer spreads and will typically reduce the Portfolio's average yields as a result of the shortening of maturities.
The purchase or sale of a futures contract differs from the purchase or sale of a security in that the total cash value reflected by the futures contract is not paid. Instead, an amount of cash or securities acceptable to the Fund's futures commission merchant ("FCM") and the relevant contract market, which varies but is generally about 5% or less of the contract amount, must be deposited with the FCM. This amount is known as "initial margin," and represents a "good faith" deposit assuring the performance of both the purchaser and the seller
under the futures contract. Subsequent payments to and from the FCM, known as "maintenance" or "variation margin," are required to be made on a daily basis as the price of the futures contract fluctuates, making the long or short position in the futures contract more or less valuable, a process known as "marking to the market." Prior to the settlement date of the futures contract, the position may be closed out by taking an opposite position which will operate to terminate the position in the futures contract. A final determination of variation margin is then made, additional cash is required to be paid to or released by the FCM, and the purchaser realizes a loss or gain. In addition, a commission is paid on each completed purchase and sale transaction.
The sale of financial futures contracts provides an alternative means of hedging a Portfolio against declines in the value of its investments in Municipal Bonds. As such values decline, the value of the Portfolio's positions in the futures contracts are expected to increase, thus offsetting all or a portion of the depreciation in the market value of the Portfolios' fixed income investments which are being hedged. While the Portfolios will incur commission expenses in establishing and closing out futures positions, commissions on futures transactions may be significantly lower than transaction costs incurred in the purchase and sale of fixed income securities. In addition, the ability of the Portfolios to trade in the standardized contracts available in the futures market may offer a more effective hedging strategy than a program to reduce the average maturity of portfolio securities, due to the unique and varied credit and technical characteristics of the municipal debt instruments available to the Portfolios. Employing futures as a hedge may also permit the Portfolios to assume a hedging posture without reducing the yield on their investments beyond any amounts required to engage in futures trading.
The Portfolios engage in the purchase and sale of future contracts on an index of municipal securities. These instruments provide for the purchase or sale of a hypothetical portfolio of municipal bonds at a fixed price in a stated delivery month. Unlike most other futures contracts, however, a municipal bond index futures contract does not require actual delivery of securities but results in a cash settlement based upon the difference in value of the index between the time the contract was entered into and the time it is liquidated.
The municipal bond index underlying the futures contracts traded by the Portfolios is The Bond Buyer Municipal Bond Index, developed by The Bond Buyer and the Chicago Board of Trade ("CBT"), the contract market on which the futures contracts are traded. As currently structured, the index is comprised of 40 tax-exempt term municipal revenue and general obligation bonds. Each bond included in the index must be rated either A|m- or higher by Standard & Poor's or A or higher by Moody's Investors Service and must have a remaining maturity of 19 years or more. Twice a month new issues satisfying the eligibility requirements are added to, and an equal number of old issues will be deleted from, the index. The value of the index is computed daily according to a formula based upon the price of each bond in the Index, as evaluated by four dealer-to-dealers brokers.
The Portfolios may also purchase and sell futures contracts on U.S. Treasury bills, notes and bonds for the same types of hedging purposes. Such futures contracts provide for delivery of the underlying security at a specified future time for a fixed price, and the value of the futures contract generally fluctuates with movements in interest rates.
The municipal bond index futures contract, futures contracts on U.S. Treasury securities and options on such futures contracts are traded on the CBT and the Chicago Mercantile Exchange, which, like other contract markets, assures the performance of the parties to each futures contract through a clearing corporation, a nonprofit organization managed by the exchange membership, which is also responsible for handling daily accounting of deposits or withdrawals of margin.
The Portfolios may also purchase financial futures contracts when they are not fully invested in municipal bonds in anticipation of an increase in the cost of securities they intend to purchase. As such securities are purchased, an equivalent amount of futures contracts will be closed out. In a substantial majority of these transactions, the Portfolios will purchase municipal bonds upon termination of the futures contracts. Due to changing market conditions and interest rate forecasts, however, a futures position may be terminated without a corresponding purchase of securities. Nevertheless, all purchases of futures contracts by the Portfolios will be subject to certain restrictions, described below.
Options on Futures Contracts. An option on a futures contract provides the purchaser with the right, but not the obligation, to enter into a long position in the underlying futures contract (i.e., purchase the futures contract), in the case of a "call" option, or to enter into a short position (i.e., sell the futures contract), in the case of a "put" option, for a fixed price (the "exercise" or "strike" price) up to a stated expiration date. The option is purchased for a non-refundable fee, known as the "premium." Upon exercise of the option, the contract market clearing house assigns each party the appropriate position in the underlying futures contract. In the event of exercise, therefore, the parties are subject to all of the risks of futures trading, such as payment of initial and variation margin. In addition, the seller, or "writer", of the option is subject to margin requirements on the option position. Options on futures contracts are traded on the same contract markets as the underlying futures contracts.
The Portfolios may purchase options on futures contracts for the same types of hedging purposes described above in connection with futures contracts. For example, in order to protect against an anticipated decline in the value of securities it holds, a Portfolio could purchase put options on futures contracts, instead of selling the underlying futures contracts. Conversely, in order to protect against the adverse effects of anticipated increases in the cost of securities to be acquired, a Portfolio could purchase call options on futures contracts, instead of purchasing the underlying futures contracts. The Portfolios generally will sell options on futures contracts only to close out an existing position.
The Portfolios will not engage in transactions in such instruments unless and until the Investment Adviser determines that market conditions and the circumstances of the Portfolios warrant such trading. To the extent the Portfolios engage in the purchase and sale of futures contracts or options thereon, they will do so only at a level which is reflective of the Investment Adviser's view of the hedging needs of the Portfolios, the liquidity of the market for futures contracts and the anticipated correlation between movements in the value of the futures or option contract and the value of securities held by the Portfolios.
Restrictions on the Use of Futures Contracts and Options on Futures Contracts. Under regulations of the Commodity Futures Trading Commission ("CFTC"), the futures trading activities described herein will not result in the Portfolios' being deemed to be "commodity pools," as defined under such regulations, provided that certain trading restrictions are adhered to. In particular, CFTC regulations require that a notice of eligibility be filed and that all futures and option positions entered into by the Portfolios qualify as bona fide hedge transactions, as defined under CFTC regulations, or that any non-qualifying positions be limited so that the sum of the amount of initial margin deposits and premiums paid on such positions would not exceed 5% of the market value of the respective Portfolio's net assets.
When either Portfolio purchases a futures contract, it will maintain an amount of cash, cash equivalents or commercial paper or other short-term high grade fixed income securities in a segregated account with the Fund's custodian, so that the amount so segregated plus the amount of initial margin held in the account of its broker equals the market value of the futures contract, thereby ensuring that the use of such futures is unleveraged.
Risk Factors in Transactions in Futures Contracts and Options Thereon. The particular municipal bonds comprising the index underlying the municipal bond index futures contract may vary from the bonds held by the Portfolios. In addition, the securities underlying futures contracts on U.S. Treasury securities will not be the same as securities held by the Portfolios. As a result, the Portfolios' ability effectively to hedge all or a portion of the value of their municipal bonds through the use of futures contracts will depend in part on the degree to which price movements in the index underlying the municipal bond index futures contract, or the U.S. Treasury securities underlying other futures contracts traded, correlate with price movements of the Municipal Bonds held by the Portfolios.
For example, where prices of securities in the Portfolios do not move in the same direction or to the same extent as the values of the securities or index underlying a futures contract, the trading of such futures contracts may not effectively hedge the Portfolios' investments and may result in trading losses. The correlation may be affected by disparities in the average maturity, ratings, geographical mix or structure of the Portfolios' investments as compared to those comprising the index, and general economic or political factors. In addition, the correlation between movements in the value of the index underlying a futures contract may be subject to change over time, as additions to and deletions from the index alter its structure. In the case of futures contracts on U.S. Treasury securities and options thereon, the anticipated correlation of price movements between the U.S. Treasury securities underlying the futures or options and Municipal Bonds may be adversely affected by economic, political, legislative or other developments that have a disparate impact on the respective markets for such securities. In the event that the Investment Adviser determines to enter into transactions in financial futures contracts other than the municipal bond index futures contract or futures on U.S. Treasury securities, the risk of imperfect correlation between movements in the prices of such futures contracts and the prices of Municipal Bonds held by the Portfolios may be greater.
The trading of futures contracts on an index also entails the risk of imperfect correlation between movements in the price of the futures contract and the value of the underlying index. The anticipated spread between the prices may be affected due to differences in the nature of the markets, such as margin requirements, liquidity and the participation of speculators in the futures markets. The risk of imperfect correlation, however, generally diminishes as the delivery month specified in the futures contract approaches.
Prior to exercise or expiration, and absent delivery, a position in futures contracts or options thereon may be terminated only by entering into a closing purchase or sale transaction on the relevant contract market. A Portfolio will enter into a futures or option position only if there appears to be a liquid market therefor, although there can be no assurance that such a liquid market will exist for any particular contract at any specific time. Thus, it may not be economically practicable, or otherwise possible, to close out a position once it has been established. Under such circumstances, a portfolio could be required to make continuing daily cash payments of variation margin in the event of adverse price movements. In such situations, if the Portfolio has insufficient cash, it may be required to sell portfolio securities to meet daily variation margin requirements at a time when it may be disadvantageous to do so. In addition, the Portfolio may be required to perform under the terms of the futures or option contracts it holds. The inability to close out futures or options positions also could have an adverse impact on the Portfolio's ability effectively to hedge its portfolio.
When a Portfolio purchases an option on a futures contract, its risk is limited to the amount of the premium, plus related transaction costs, although this entire amount may be lost. In addition, in order to profit from the purchase of an option on a futures contract, a Portfolio may be required to exercise the option and liquidate the underlying futures contract, subject to the availability of a liquid market. The trading of options on futures
contracts also entails the risk that changes in the value of the underlying futures contract will not be fully reflected in the value of the option, although the risk of imperfect correlation generally tends to diminish as the maturity date of the futures contract or expiration date of the option approaches.
"Position Limits" are generally imposed on the maximum number of contracts which any person may hold or control at a given time. A contract market may order the liquidation of positions found to be in violation of these limits and it may impose other sanctions or restrictions. The Investment Adviser does not believe that position limits will have any adverse impact on the portfolio strategies for hedging a Portfolio's investments.
Further, the trading of futures contracts is subject to the risk of the insolvency of a brokerage firm or the relevant exchange or clearing corporation, which could make it difficult or impossible to liquidate existing positions or to recover margin or other payments due.
In addition to the risks of imperfect correlation and lack of a liquid secondary market for such instruments, transactions in futures contracts involve risks related to leveraging such that a change in the price of a futures contract could result in substantial gains or losses. The potential for incorrect forecasts of the direction and extent of interest rate movements within a given time frame also involves the risk of loss in the event such forecasts are inaccurate.
Computation of Offering Price per Share
The offering price for Class A and Class B shares of the Insured, National and Limited Maturity, based on the value of each Portfolio's net asset and the number of shares outstanding asof June 30, 1994, is calculated as set forth below. Information is not provided for Class C or Class D shares since no Class C or Class D shares were publicly offered prior to the date of this Statement of Additional Information.
Issued Portfolio
Class A Class B
--------- ---------
Net Assets............................... $1,941,741,107 $866,193,154
============== ============
Number of Shares Outstanding............. 246,434,764 110,011,150
============== ============
Net Asset Value Per Share (net assets
divided by number of shares outstanding $7.88 $7.87
Sales Charge* (for Class A shares: 4.00%
of offering price (4.17% of net asset
value))................................. .33 **
-------------- ------------
Offering Price........................... $8.21 $7.87
============== ============
----------
|
*Rounded to the nearest one-hundredth percent; assumes maximum sales charge
is applicable.
**Class B and Class C shares are not subject to an initial sales charge but
may be subject to a CDSC on redemption of shares. See "Purchase of Shares--
Deferred Sales Charge Alternatives--Class B and Class C Shares"
in the Prospectus.
National Portfolio
Class A Class B
--------- ---------
Net Assets............................... $1,203,180,964 $459,168,936
============== ============
Number of Shares Outstanding............. 119,410,837 45,583,411
============== ============
Net Asset Value Per Share (net assets
divided by number of shares outstanding $10.08 $10.07
Sales Charge* (for Class A shares: 4.00%
of offering price (4.17% of net asset
value))................................. .42 **
-------------- ------------
Offering Price........................... $10.50 $10.07
============== ============
----------
|
*Rounded to the nearest one-hundredth percent; assumes maximum sales charge
is applicable.
**Class B and Class C shares are not subject to an initial sales charge but
may be subject to a CDSC on redemption of shares. See "Purchase of Shares--
Deferred Sales Charge Alternatives--Class B and Class C Shares"
in the Prospectus.
Limited Maturity Portfolio
Class A Class B
--------- ---------
Net Assets............................... $790,142,342 $145,534,427
============ ============
Number of Shares Outstanding............. 80,064,850 14,744,916
============ ============
Net Asset Value Per Share (net assets
divided by number of shares outstanding $9.87 $9.87
Sales Charge* (for Class A shares: 1.00%
of offering price (1.01% of the net
asset value))........................... .10 **
------------ ------------
Offering Price........................... $9.97 $9.87
============ ============
----------
|
*Rounded to the nearest one-hundredth percent; assumes maximum sales charge
is applicable.
**Class B and Class C shares are not subject to an initial sales charge but
may be subject to a CDSC on redemption of shares within one year of
purchase. See "Purchase of Shares--Deferred Sales Charge Alternatives--
Class B and Class C Shares" in the Prospectus.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders, Merrill Lynch Municipal Bond Fund, Inc.:
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of the Insured, National and Limited Maturity Portfolios of Merrill Lynch Municipal Bond Fund, Inc. as of June 30, 1994, 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 June 30, 1994 by correspondence with the custodian and brokers. 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 the Insured, National and Limited Maturity Portfolios of Merrill Lynch Municipal Bond Fund, Inc. as of June 30, 1994, the results of their operations, the changes in their net assets, and the financial highlights for the respective stated periods in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
July 29, 1994
SCHEDULE OF INVESTMENTS (in Thousands)
Municipal Bonds Insured Portfolio
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
Alabama--0.8% Auburn University, Alabama, Revenue Refunding Bonds(e):
AAA Aaa $ 5,925 (Athletic Project), 5.25% due 4/01/2010 $ 5,430
AAA Aaa 5,000 (General Fee), 5.25% due 6/01/2013 4,429
AAA Aaa 1,500 (Housing and Dining), 5.25% due 6/01/2012 1,344
AAA Aaa 1,250 Mobile, Alabama, GO, Refunding and Capital Improvement Bonds,
10.875% due 11/01/2007(e) 1,712
AAA Aaa 7,465 Montgomery, Alabama, Baptist Medical Center, Special Care
Facilities Financing Authority Revenue Bonds, Series A, 5.75% due
1/01/2022(h) 6,850
Alaska--0.7% Kenai Peninsula Borough, Alaska, GO(b):
AAA Aaa 6,450 8.40% due 1/01/2000 7,394
AAA Aaa 8,460 8.40% due 1/01/2001 9,841
|
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
Municipal Bonds Insured Portfolio
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
Arizona--2.1% AAA Aaa $ 4,000 Arizona State Municipal Financing Program, COP, Series 34,
7.25% due 8/01/2009(g) $ 4,491
AAA Aaa 3,800 Maricopa County, Arizona, IDA, Health Facilities Revenue Bonds
(Saint Joseph's Care Center Project), Series A, 7.75% due
7/01/2020(e) 4,241
Maricopa County, Arizona, IDA, Hospital Facilities Revenue Bonds
(Samaritan Health Services Hospital):
AAA Aaa 4,000 Refunding, Series A, 7% due 12/01/2013(e) 4,318
A1+ VMIG1 500 VRDN, Series B2, 2.90% due 12/01/2008(f) 500
AAA Aaa 7,000 Maricopa County, Arizona, Unified School District No. 97 Revenue
Bonds (Deer Valley Project), 1986 Series E, 10% due 7/01/2000(h) 8,685
Mesa, Arizona, IDA, Health Care Facilities Revenue Bonds (Western
Health Network)(g):
AAA Aaa 10,000 Refunding, Series A-2, 7.625% due 1/01/2013 10,902
AAA Aaa 7,340 Series A-1, 7.625% due 1/01/2019 8,104
Phoenix, Arizona, Street and Highway User, Revenue Refunding Bonds,
Series A(h)(j):
AAA Aaa 5,000 5.63% due 7/01/2012 1,527
AAA Aaa 5,000 5.63% due 7/01/2013 1,421
AAA Aaa 7,000 Tucson, Arizona, Refunding Bonds, 4.90% due 7/01/2013(h) 5,937
AAA Aaa 5,250 University of Arizona Medical Center Corporation, Hospital Revenue
Refunding Bonds, 5% due 7/01/2021(e) 4,311
|
California--6.5% AAA Aaa 5,000 Anaheim, California, Public Financing Authority Revenue Bonds, 2nd
Series-Electric Utility, San Juan 4, 5.75% due 10/01/2022(h) 4,571
AAA Aaa 6,000 Anaheim, California, Public Financing Authority, Revenue Refunding
Bonds (Electric Utility Projects), 5.625% due 10/01/2022(e) 5,388
AAA Aaa 8,000 Central Coast Water Authority, California, Revenue Bonds (State
Water Project Regional Facilities), 6.60% due 10/01/2022(b) 8,160
AAA Aaa 12,000 Fresno, California, Sewer Revenue Bonds, Series A-1, 6.25% due
9/01/2014(b) 12,067
AAA Aaa 2,415 Los Angeles, California, Regional Airports Improvement Corporation,
Lease Revenue Bonds (Los Angeles International Airport), AMT, 6.50%
due 1/01/2012(h) 2,459
Los Angeles, California, Wastewater System Revenue Bonds(e):
AAA Aaa 5,000 Series A, 5.70% due 6/01/2013 4,671
AAA Aaa 5,000 Series C, 5.60% due 6/01/2015 4,569
AAA Aaa 20,000 Series C, 5.60% due 6/01/2020 18,033
NR NR 28,800 Los Angeles County, California, Metropolitan Transportation
Authority, Sales Tax Revenue Refunding Bonds (Proposition C--Second
Series), VRDN, Series A, 2.60% due 7/01/2020(e)(f) 28,800
AAA Aaa 6,000 Los Angeles County, California, Transportation Commission, Sales
Tax Revenue Bonds, Series A, 6.75% due 7/01/2001(a)(h) 6,643
A1+ VMIG1 11,100 Mountain View, California, M/F Housing Revenue Bonds (Villa
Mariposa Project), VRDN, Series A, 2.40% due 3/01/2017(f) 11,100
AAA Aaa 17,600 Northern California Power Agency, Multiple Capital Facilities
Revenue Bonds, 6.53% due 8/01/2025(a)(e) 18,932
University of California, Revenue Bonds (Multiple Purpose Projects)(b):
AAA Aaa 4,650 Series C, 5% due 9/01/2012 3,983
AAA Aaa 12,075 Series C, 5.25% due 9/01/2016 10,415
AAA Aaa 33,500 Series C, 5% due 9/01/2023 27,074
AAA Aaa 5,000 Series D, 6.375% due 9/01/2024 4,996
AAA Aaa 9,000 West and Central Basin Financing Authority, California, Revenue
Bonds, 6.125% due 8/01/2022(b) 8,707
Colorado--0.0% AAA Aaa 1,000 Colorado Health Facilities Authority, Revenue Refunding Bonds (Rose
Medical Center Project), 5.125% due 8/15/2021(e) 844
Connecticut--0.4% AAA Aaa 1,325 Connecticut State Health and Educational Facilities Authority Revenue
Bonds (New Britain General Hospital), Series B, 6% due 7/01/2024(b) 1,261
AAA Aaa 3,500 Connecticut State Health and Educational Facilities Authority
Revenue Bonds (Saint Francis Hospital and Medical Center), Series C,
5% due 7/01/2023(h) 2,850
AAA Aaa 625 Connecticut State Health and Educational Facilities Authority,
Revenue Refunding Bonds (Fairfield University), Series G, 5% due
7/01/2018(e) 518
AAA Aaa 8,400 Connecticut State Municipal Electric Energy Cooperative Power Supply
System, Revenue Refunding Bonds, Series A, 5% due 1/01/2018(e) 7,003
AAA Aaa 885 New Britain Connecticut, UT, 5% due 2/01/2014(e) 769
|
Delaware--0.3% AAA Aaa 6,000 Delaware EDA, PCR, Refunding (Delmarva Power and Light Company),
Series B, 7.30% due 3/01/2014(e) 6,552
AAA Aaa 3,750 Delaware State Health Facilities Authority, Crossover Revenue
Refunding Bonds (Delaware Medical Center), 7% due 10/01/2015(e) 4,019
District of District of Columbia, Hospital Revenue Refunding Bonds (National
Columbia--0.7% Rehabilitation Hospital-Medlantic), Series A(e):
AAA Aaa 7,000 7.10% due 11/01/2011 7,552
AAA Aaa 9,250 7.125% due 11/01/2019 9,985
|
Florida--8.0% AAA Aaa 2,735 Altamonte Springs, Florida, Health Facilities Authority, Hospital
Revenue Bonds (Adventist Health/Sunbelt), Series A, 7% due
11/15/2014(b) 2,954
A1+ VMIG1 23,200 Dade County, Florida, Water and Sewer System Revenue Bonds, VRDN,
3% due 10/05/2022(f)(h) 23,200
Florida Municipal Power Agency Revenue Bonds:
AAA Aaa 22,710 (All Requirement Power Supply Project), 5.10% due 10/01/2025(b) 18,804
AAA Aaa 5,000 Refunding (Saint Lucie Project), 5.25% due 10/01/2021(h) 4,378
AAA Aaa 4,840 Florida Municipal Power Agency, Revenue Refunding Bonds (All
Requirement Power Supply Project), 6.25% due 10/01/2019(a)(b) 5,180
AAA Aaa 5,000 Florida State Division, Board of Finance, Department of General
Services Revenue Bonds (Department of Natural Resource
Preservation), Series 2000-A, 6.75% due 7/01/2013 5,237
Florida Turnpike Authority, Turnpike Revenue Bonds, Series A:
AAA Aaa 2,935 9.50% due 7/01/2001(b) 3,658
AAA Aaa 4,500 5% due 7/01/2015(h) 3,838
Jacksonville, Florida, Health Facilities Authority, Hospital Revenue
Refunding and Improvement Bonds (Baptist Medical Center Project):
AAA Aaa 500 11.50% due 10/01/2012 783
AAA Aaa 26,500 Series A, 7.30% due 6/01/2019(e) 28,721
AAA Aaa 8,750 Jacksonville, Florida, Port Authority Revenue Bonds, AMT,
7.875% due 11/01/2018(g) 9,536
AAA Aaa 20,000 Lee County, Florida, Hospital Board of Directors, Hospital Revenue
Bonds, 6.60% due 4/01/2020(e) 20,531
AAA Aaa 16,700 Martin County, Florida, PCR, Refunding (Florida Power and Light
Company Project), 7.30% due 7/01/2020(e) 18,125
AAA Aaa 11,640 Orange County, Florida, Health Facilities Authority, Revenue
Refunding Bonds (Pooled Hospital Loan), Series B, 7.875% due
12/01/2025(g) 12,513
AAA Aaa 3,950 Orange County, Florida, HFA, Mortgage Revenue Refunding Bonds,
Series A, 7.60% due 1/01/2024(h) 4,077
AAA Aaa 4,495 Orange County, Florida, Sales Tax Revenue Bonds, 6.125% due
1/01/2019(h) 4,392
Palm Beach County, Florida, Criminal Justice Facilities, Revenue
Refunding Bonds(h):
AAA Aaa 5,000 5.375% due 6/01/2008 4,757
AAA Aaa 11,985 5.375% due 6/01/2009 11,320
AAA Aaa 4,935 5.375% due 6/01/2010 4,597
AAA Aaa 34,690 Reedy Creek, Florida, Improvement District, Florida Utilities
Revenue Refunding Bonds, Series 1, 5% due 10/01/2019(e) 28,984
AAA Aaa 3,500 Saint Lucie County, Florida, Sales Tax, Revenue Refunding Bonds,
5% due 10/01/2023(h) 2,891
AAA Aaa 5,700 South Broward, Florida, Hospital District Revenue Bonds, 6.61% due
5/01/2021(b) 5,857
AAA Aaa 2,000 Tampa, Florida, Water and Sewer System Revenue Bonds, Series A,
7.25% due 10/01/2016(b) 2,159
AAA Aaa 2,240 West Coast Regional Water Supply Authority, Florida, Capital
Improvement Revenue Bonds (Hillsborough County Project), 10.40%
due 10/01/2010(a)(b) 3,215
|
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
Municipal Bonds Insured Portfolio
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
Georgia--3.4% AAA Aaa $ 5,000 Douglasville-Douglas County, Georgia, Water and Sewer Authority,
Water and Sewer Revenue Bonds, 5.625% due 6/01/2015(b) $ 4,638
AAA Aaa 20,000 Georgia Municipal Electric Authority Revenue Bonds, Series EE,
7% due 1/01/2025(b) 21,945
Metropolitan Atlanta Rapid Transit Authority, Georgia, Sales Tax
Revenue Refunding Bonds(b):
AAA Aaa 1,000 Series A, 5.125% due 7/01/2016 862
AAA Aaa 4,990 Series A, 5.125% due 7/01/2019 4,235
AAA Aaa 10,500 Series A, 5.125% due 7/01/2020 8,885
AAA Aaa 18,605 Series P, 6% due 7/01/2013 18,092
AAA Aaa 28,165 Series P, 6.25% due 7/01/2020 27,879
AAA Aaa 9,000 Municipal Electric Authority, Georgia, Special Obligation Bonds
(Fifth Crossover Series, Project One), 6.40% due 1/01/2013(b) 9,157
Hawaii--2.3% Hawaii Airport System Revenue Bonds, AMT:
AAA Aaa 21,795 7.30% due 7/01/2020(b) 23,420
AAA Aaa 23,200 Second Series, 7.50% due 7/01/2020(h) 25,160
Hawaii County, Hawaii, Revenue Refunding and Improvement Bonds,
Series A, UT(h):
AAA Aaa 1,000 5.60% due 5/01/2012 941
AAA Aaa 1,000 5.60% due 5/01/2013 939
Hawaii Department of Budget and Finance, Special Purpose Mortgage
Revenue Bonds (Hawaiian Electric Company), AMT(e):
AAA Aaa 4,340 7.625% due 12/01/2018 4,873
AAA Aaa 5,000 Series C, 7.375% due 12/01/2020 5,421
AAA Aaa 4,500 Hawaii Harbor Capital Improvement Revenue Bonds, AMT, 7% due
7/01/2017(e) 4,716
|
Illinois--5.5% AAA Aaa 25,000 Chicago, Illinois, Public Building Commission Revenue Bonds (Community
College District No. 508), Series B, 8.75% due 1/01/2007(c)(g) 27,636
AAA Aaa 25,000 Chicago, Illinois, Public Building Commission Revenue Bonds, Series
A, 7.125% due 1/01/2015(c)(e) 27,756
AAA Aaa 20,000 Cook County, Illinois, GO, UT, Series A, 6.60% due 11/15/2022(e) 20,207
AAA Aaa 11,000 Evergreen Park, Illinois, Hospital Facility Revenue Refunding Bonds
(Little Company of Mary Hospital), 7.75% due 2/15/2009(e) 12,021
Illinois Health Facilities Authority Revenue Bonds:
AAA Aaa 3,250 (Elmhurst Memorial Hospital), 6.625% due 1/01/2022(h) 3,292
AAA Aaa 4,000 (Methodist Health Project), 6.903% due 5/01/2021(b) 4,133
AAA Aaa 5,500 (Northern Illinois Medical Center), 7.875% due 9/01/2014(b) 6,035
AAA Aaa 16,000 (Rush-Presbyterian Saint Luke's Medical Center), 6.80% due
10/01/2024(e) 16,439
Metropolitan Pier and Exposition Authority, Illinois, Dedicated
State Tax Revenue Bonds, Series A(h)(j)(k):
AAA Aaa 7,000 5.67% due 6/15/2010 2,521
AAA Aaa 5,000 5.70% due 6/15/2011 1,675
AAA Aaa 27,215 5.75% due 6/15/2013 8,017
AAA Aaa 25,845 5.75% due 6/15/2014 7,001
AAA Aaa 1,940 6.10% due 6/15/2015 492
AAA Aaa 9,750 6.10% due 6/15/2016 2,317
AAA Aaa 8,400 6.50% due 6/15/2027 8,388
AAA Aaa 3,025 Northwest Suburban Municipal Joint Action Water Agency, Illinois,
Water Supply System Revenue Refunding Bonds, Series A, 5.90% due
5/01/2015(e) 2,845
Indiana--0.8% AAA Aaa 6,725 Goshen-Chandler, Indiana, School Building Corporation, First Mortgage
Revenue Refunding Bonds, UT, 5.75% due 1/15/2010(e) 6,439
AAA Aaa 2,470 Indiana Employment Development Commission, Environmental Revenue
Bonds (Public Service Company of Indiana), AMT, 7.50% due 3/15/2015(e) 2,693
AAA Aaa 4,040 Indianapolis, Indiana, Local Public Improvement Bond Bank, Series A,
7.90% due 2/01/2002(a)(g) 4,662
AAA Aaa 2,000 Jasper County, Indiana, PCR, Refunding (Northern Indiana Public
Service), 7.10% due 7/01/2017(e) 2,140
AAA Aaa 3,830 Purdue University, Indiana, University Revenue Bonds (Purdue
University Dormitory System), Series B, 6% due 7/01/2001(a)(b) 4,057
AAA Aaa 3,550 Rockport, Indiana, PCR, Refunding (Indiana-Michigan Power), Series B,
7.60% due 3/01/2016(h) 3,904
Iowa--0.4% AAA Aaa 5,000 Des Moines, Iowa, Parking Facilities Revenue Bonds, 7.25% due
7/01/2015(h) 5,413
Iowa Finance Authority, Hospital Facilities Revenue Refunding Bonds
(Allen Memorial Hospital), Series A(b):
AAA Aaa 3,500 5.50% due 2/15/2013 3,188
AAA Aaa 2,100 5.60% due 2/15/2020 1,865
|
Kentucky--0.9% AAA Aaa 4,500 Boone County, Kentucky, PCR, Refunding (Cincinnati Gas and Electric),
5.50% due 1/01/2024 3,977
AAA Aaa 11,470 Kentucky Development Finance Authority, Hospital Revenue Refunding
and Improvement Bonds (Saint Elizabeth Medical Center), Series A, 9%
due 11/01/2000(h) 13,748
Owensboro, Kentucky, Electric Light and Power Revenue Bonds,
Series B(b)(j)(k):
AAA Aaa 1,000 5.70% due 1/01/2011 346
AAA Aaa 5,000 5.90% due 1/01/2014 1,407
AAA Aaa 9,125 5.80% due 1/01/2015 2,410
AAA Aaa 7,675 5.90% due 1/01/2016 1,900
AAA Aaa 3,500 5.72% due 1/01/2019 713
Louisiana--0.4% AAA Aaa 8,700 Louisiana Public Facilities Authority, Health and Education Capital
Facilities Revenue Bonds (Our Lady of the Lake Regional Medical
Center), Series C, 8.20% due 12/01/2015(g) 9,776
Maryland--1.4% Baltimore, Maryland, Revenue Refunding Bonds (Water Projects),
Series A(h):
AAA Aaa 10,000 6.25% due 7/01/2002(a) 10,677
AAA Aaa 9,125 5% due 7/01/2024 7,482
Maryland Health and Higher Educational Facilities Authority
Revenue Bonds (University of Maryland Medical Systems) (h):
AAA Aaa 2,250 Series A, 7% due 7/01/2001(a) 2,505
AAA Aaa 4,400 Series B, 7% due 7/01/2022 4,948
Maryland Health and Higher Educational Facilities Authority,
Revenue Refunding Bonds:
AAA Aaa 6,325 (Greater Baltimore Medical Center), 5% due 7/01/2013(h) 5,409
AAA Aaa 7,500 (Sinai Hospital Project), 5.25% due 7/01/2019(b) 6,415
Massachusetts--1.6% AAA Aaa 3,175 Massachusetts Bay Transportation Authority, Massachusetts General
Transportation System Revenue Bonds, Series A, 7.10% due
3/01/1999(a)(g) 3,491
AAA Aaa 13,000 Massachusetts Bay Transportation Authority Revenue Bonds, COP,
Series A, 7.65% due 8/01/2015(i) 14,451
AAA Aaa 5,505 Massachusetts Educational Loan Authority Revenue Bonds, AMT, Issue D,
Series A, 7.25% due 1/01/2009(e) 5,717
Massachusetts Health and Educational Facilities Authority Revenue
Bonds:
AAA Aaa 2,355 (Massachusetts General Hospital), Refunding, Series G, 5.25%
due 7/01/2023(b) 1,986
AAA Aaa 6,200 (Saint Elizabeth Hospital), 6.56% due 8/15/2021(i) 6,413
AAA Aaa 3,250 Massachusetts Port Authority Revenue Bonds, 13% due 7/01/2013(c) 5,382
AAA Aaa 5,500 Massachusetts State Industrial Finance Agency Revenue Bonds
(Brandeis University), Series C, 6.80% due 10/01/2019(e) 5,670
AAA Aaa 4,500 Massachusetts State Turnpike Authority Turnpike Revenue Refunding
Bonds, Series A, 5.125% due 1/01/2023(h) 3,765
|
Michigan--3.6% AAA Aaa 10,500 Chippewa Valley, Michigan, Schools Revenue Refunding Bonds, 5% due
5/01/2021(h) 8,695
AAA Aaa 10,000 Grand Rapids, Michigan, Water Supply Systems, Revenue Refunding
Bonds, 5.75% due 1/01/2018(h) 9,318
A1+ VMIG1 700 Michigan Higher Education Student Loan Authority, Revenue Refunding
Bonds, VRDN, AMT, Series X11-B, 2.65% due 10/01/2013(b)(f) 700
AAA Aaa 26,120 Michigan State Trunk Line, Series A, 5.80% due 11/15/2024 (h) 24,326
Monroe County, Michigan, PCR (Detroit Edison Company Project), AMT:
AAA Aaa 16,500 Project 1, 7.65% due 9/01/2020(h) 18,159
AAA Aaa 13,255 Series CC, 7.50% due 12/01/2019(b) 14,696
AAA Aaa 9,745 Series I-B, 7.50% due 9/01/2019(b) 10,771
AAA Aaa 15,000 Western Michigan University Revenue Bonds, Series A, 6.50% due
7/15/2001(a)(b) 16,328
|
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
Municipal Bonds Insured Portfolio
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
Minnesota--0.2% AAA Aaa $ 5,000 Northern Municipal Power Agency, Minnesota, Electric Systems,
Revenue Refunding Bonds, Series A, 6% due 1/01/2019(b) $ 4,832
Mississippi--0.6% AAA Aaa 1,320 Harrison County, Mississippi, Wastewater Management District,
Revenue Refunding Bonds, Wastewater Treatment Facilities, Series A,
8.50% due 2/01/2013(h) 1,656
AAA Aaa 1,750 Hinds County, Mississippi, Revenue Refunding Bonds (Methodist
Hospital and Rehabilitation), 5.60% due 5/01/2012(b) 1,632
AAA Aaa 13,000 Mississippi Hospital Equipment and Facilities Authority, Revenue
Refunding and Improvement Bonds (North Mississippi Health
Services), 5.75% due 3/08/2016(b) 12,083
Montana--0.2% AAA Aaa 5,600 Montana Health Facilities Authority, Hospital Facilities Revenue
Bonds (Deaconess Medical Center Project), SAVRS, Series A, 2.80%
due 2/15/2016(b)(d) 5,600
|
Nevada--2.7% AAA Aaa 6,500 Clark County, Nevada, Airport Improvement Revenue Bonds, AMT, 8.125%
due 7/01/2018(g) 7,307
Clark County, Nevada, Airport Revenue Bonds(a)(h):
AAA Aaa 4,450 6.90% due 6/01/2009 4,871
AAA Aaa 5,590 6.25% due 6/01/2011 5,920
AAA VMIG1 200 Clark County, Nevada, Airport Revenue Refunding Bonds, Series A,
VRDN, 2.85% due 7/01/2012(e)(f) 200
AAA Aaa 10,000 Clark County, Nevada, Passenger Facility Revenue Bonds (Las Vegas
McCarran International Airport), Series A, 6% due 7/01/2022(b) 9,570
AAA Aaa 8,000 Henderson, Nevada, Health Care Facility Revenue Refunding Bonds
(Catholic Healthcare), Series A, 5% due 7/01/2020(b) 6,529
Las Vegas, Nevada, Revenue Refunding Bonds(h):
AAA Aaa 1,500 6.50% due 10/01/2007 1,554
AAA Aaa 2,665 6.50% due 10/01/2008 2,747
AAA Aaa 35,000 Washoe County, Nevada, Water Facility Revenue Bonds (Sierra Pacific
Power), AMT, 6.65% due 6/01/2017(e) 35,709
New Jersey--1.7% AAA Aaa 3,350 Cape May County, New Jersey, Industrial Pollution Control Financing
Authority, Revenue Refunding Bonds (Atlantic City Electric Company),
Series A, 6.80% due 3/01/2021(e) 3,666
AAA Aaa 4,750 Jersey City, New Jersey, Sewer Authority Revenue Refunding Bonds,
6.25% due 1/01/2014(b) 4,847
AAA Aaa 5,000 New Jersey EDA, Water Facilities, Revenue Refunding Bonds (Hackensack
Water Company), Series A, 7% due 1/01/2019(b) 5,297
A1 VMIG1 4,000 New Jersey Sports and Exposition Authority, State Contract Revenue
Bonds, Series C, VRDN, 2.70% due 9/01/2024(e)(f) 4,000
New Jersey State Housing and Mortgage Finance Agency Revenue Bonds
(Home Buyer), AMT(e):
AAA Aaa 7,530 Series B, 7.90% due 10/01/2022 7,784
AAA Aaa 17,470 Series D, 7.70% due 10/01/2029 18,028
NR VMIG1 5,800 New Jersey State Turnpike Authority, Turnpike Revenue Refunding Bonds,
Series D, VRDN, 2.60% due 1/01/2018(f)(h) 5,800
New York--5.2% AAA Aaa 9,650 Metropolitan Transportation Authority, New York, Service Contract
Revenue Refunding Bonds (Transportation Facilities), Series L, 7.50%
due 7/01/2017(b) 10,571
New York City, New York, GO, Series I(b):
AAA Aaa 2,645 7.25% due 8/15/2013 2,893
AAA Aaa 10,130 7.25% due 8/15/2016 11,012
AAA Aaa 4,505 UT, 7.25% due 8/15/2013 4,991
AAA Aaa 6,010 New York City, New York, Health and Hospital Authority, Local
Government Revenue Refunding Bonds, Series A, 5.625% due 2/15/2013(b) 5,556
New York City, New York, Municipal Water Finance Authority, Water
and Sewer System Revenue Bonds:
AAA Aaa 50,000 5.20% due 6/15/2008(d) 46,479
AAA Aaa 4,510 Series C, 6.20% due 6/15/2021(b) 4,423
AAA Aaa 4,000 Series F, 5.50% due 6/15/2023(e) 3,519
New York City, New York, Municipal Water Finance Authority, Water
and Sewer System Revenue Bonds(h):
AAA Aaa 12,075 Refunding, Series A, 5.75% due 6/15/2018 11,189
AAA Aaa 1,090 Series A, 6.75% due 6/15/2014 1,128
New York City, New York, Municipal Water Finance Authority, Water
and Sewer System Revenue Bonds, VRDN(f)(h):
A1+ VMIG1 10,500 Series C, 3.30% due 6/15/2022 10,500
AAA VMIG1 500 Series C, 3.30% due 6/15/2023(g) 500
AAA VMIG1 6,100 Series G, 3.10% due 6/15/2024 6,100
New York City, New York, Series B, VRDN(f)(h):
A1+ VMIG1 2,500 3.30% due 10/01/2020 2,500
A1+ VMIG1 3,200 3.30% due 10/01/2022 3,200
A1+ VMIG1 300 3.30% due 10/01/2021 300
New York State Medical Care Facilities Finance Agency Revenue Bonds
(Mental Health Services):
AAA Aaa 3,085 Series C, 7.375% due 8/15/2019(e) 3,375
AAA Aaa 11,500 Series D, 5.90% due 8/15/2022(b) 10,824
Suffolk County, New York, Water Authority, Waterworks Revenue
Refunding Bonds(b):
AAA Aaa 1,235 7.375% due 6/01/2012 1,358
AAA Aaa 7,345 5.75% due 6/01/2013 6,979
AAA Aaa 1,100 Series C, 5.75% due 6/01/2002(a) 1,143
|
North Carolina--0.8% AAA VMIG1 100 Charlotte, North Carolina, Airport Revenue Refunding Bonds,
VRDN, Series A, 2.55% due 7/01/2016(e)(f) 100
AAA Aaa 27,855 North Carolina Municipal Power Agency, Electric Revenue Refunding
Bonds (Catawba Electric Project No. 1), 5% due 1/01/2018(e) 23,221
Ohio--1.3% AAA Aaa 12,000 Clermont County, Ohio, Hospital Facilities Revenue Refunding Bonds
(Mercy Health Systems), Series A, 7.50% due 9/01/2019(b) 13,299
AAA Aaa 2,250 Cleveland, Ohio, Revenue Refunding Bonds, 5.375% due 9/01/2009(b) 2,124
AAA Aaa 6,700 Ohio Municipal Electric Generation Agency, Joint Ventures, COP,
5.376% due 2/15/2013(b) 6,101
AAA Aaa 15,000 Ohio State Air Quality Development Authority, Revenue Refunding
Bonds, PCR, Series B, Ohio Edison, 5.625% due 11/15/2029(b) 13,571
Oklahoma--1.3% AAA Aaa 7,500 Oklahoma Industrial Authority, Hospital Revenue Bonds (Baptist
Medical Center), Series A, 7% due 8/15/2014(b) 7,946
AAA Aaa 5,000 Tulsa, Oklahoma, Airports Revenue Bonds, 7.50% due 6/01/2008(e) 5,455
AAA Aaa 21,560 Tulsa, Oklahoma, Industrial Authority, Hospital Revenue Bonds
(Saint John's Medical Center, Inc.), 7.25% due 12/01/2009(e) 23,788
Oregon--0.2% AAA Aaa 1,200 Jefferson County, Oregon (School District No 509j), 5.50% due
6/15/2013(i) 1,113
AAA Aaa 4,000 Port Portland, Oregon, Portland International Airport, Airport
Revenue Bonds, Series 7-B, AMT, 7.10% due 7/01/2021(e) 4,273
Pennsylvania--8.8% AAA Aaa 1,500 Allegheny County, Pennsylvania, Airport Revenue Bonds (Greater
Pittsburgh International Airport), AMT, Series C, 7% due
1/01/2018(e) 1,579
AAA Aaa 1,750 Allegheny County, Pennsylvania, Hospital Development Authority
Revenue Bonds (Mercy Hospital of Pittsburgh), 6.75% due 4/01/2021(b) 1,796
AAA Aaa 6,900 Beaver County, Pennsylvania, Hospital Authority Revenue Bonds (Medical
Center of Beaver, Pennsylvania Incorporated), Series A, 6.25% due
7/01/2022(b) 6,705
AAA Aaa 3,365 Beaver County, Pennsylvania, IDA, PCR, Refunding (Ohio Edison
Company), Series A, 7% due 6/01/2021(h) 3,576
AAA Aaa 3,610 Berks County, Pennsylvania, Municipal Revenue Bonds (Reading Hospital
Medical Center Project), 5.70% due 10/01/2014(e) 3,356
AAA Aaa 6,500 Bethlehem, Pennsylvania, Water Authority Revenue Refunding Bonds,
5.20% due 11/15/2021(e) 5,498
AAA Aaa 9,000 Bucks County Pennsylvania, IDA, Revenue Bonds (Grand View Hospital
Project), 7% due 7/01/2001(a)(b) 10,033
AAA Aaa 10,000 Lehigh County, Pennsylvania, Revenue Refunding Bonds, UT, 5.125%
due 11/15/2011(h) 8,788
AAA Aaa 3,400 Monroeville, Pennsylvania, Hospital Authority, Hospital Revenue Bonds
(Forbes Health System), Series B, 7.35% due 10/01/2015(g) 3,656
AAA Aaa 8,000 Montgomery County, Pennsylvania, Higher Education and Health
Authority, Hospital Revenue Bonds (Abington Memorial Hospital),
5.125% due 6/01/2014(b) 6,880
|
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
Municipal Bonds Insured Portfolio
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
Pennsylvania AAA Aaa $ 9,725 Pennsylvania Convention Center Authority Revenue Bonds, Series A,
(concluded) 6.70% due 9/01/2016(c)(h) $10,391
Pennsylvania Higher Educational Assistance Agency, Student Loan
Revenue Bonds, AMT:
AAA Aaa 34,000 6.03% due 3/01/2022(b) 31,750
AAA Aaa 20,000 6.71% due 9/03/2026(b) 20,437
AAA Aaa 16,000 7.437% due 3/01/2020(e) 16,940
Pennsylvania State Higher Educational Facilities Authority, College
and University Revenue Bonds:
AAA Aaa 1,500 (Bryn Mawr College), 6.50% due 12/01/2009(h) 1,555
AAA Aaa 4,250 (Temple University), First Series, 6.50% due 4/01/2021(e) 4,278
AAA Aaa 20,390 Pennsylvania Turnpike Commission, Turnpike Revenue Bonds, Series L,
6.25% due 6/01/2011(1) 20,499
Philadelphia, Pennsylvania, Airport Revenue Bonds, AMT(e):
AAA Aaa 8,150 7.75% due 6/15/2015 8,996
AAA Aaa 24,000 7.375% due 6/15/2018 25,967
AAA Aaa 5,000 Philadelphia, Pennsylvania, Gas Works Revenue Bonds, 12th Series B,
7% due 5/15/2020(c)(e) 5,588
AAA Aaa 5,750 Philadelphia, Pennsylvania, Parking Authority, Airport Parking
Revenue Bonds, 7.375% due 9/01/2018(b) 6,254
AAA Aaa 26,800 Philadelphia, Pennsylvania, Water and Wastewater Revenue Bonds, 5.01%
due 6/15/2004(h) 26,068
Pittsburgh, Pennsylvania, Revenue Refunding Bonds, UT, Series A(b):
AAA Aaa 1,200 5.10% due 9/01/2005 1,145
AAA Aaa 1,000 5.20% due 9/01/2006 947
AAA Aaa 1,000 5.40% due 9/01/2008 944
Pittsburgh, Pennsylvania, Water and Sewer Authority, Water and Sewer
System Revenue Refunding Bonds, Series A(h):
AAA Aaa 5,000 6.50% due 9/01/2001(a) 5,447
AAA Aaa 9,000 4.75% due 9/01/2016 7,217
AAA Aaa 7,500 University Area Joint Authority, Pennsylvania, Sewer Revenue
Refunding Bonds, 4.75% due 11/01/2020(e) 5,902
|
Rhode Island--2.4% Providence, Rhode Island, GO, UT(e):
AAA Aaa 1,540 6.75% due 1/15/2008 1,635
AAA Aaa 1,540 6.75% due 1/15/2009 1,631
AAA Aaa 1,540 6.75% due 1/15/2010 1,627
Rhode Island Depositors Economic Protection Corporation, Special
Obligation Bonds, Series A(i):
AAA Aaa 35,000 5.75% due 8/01/2019 32,174
AAA Aaa 6,100 6.625% due 8/01/2002(a) 6,680
AAA Aaa 21,600 Rhode Island Health and Educational Building Corporation Revenue
Bonds (Rhode Island Hospital), 6.71% due 8/15/2021(h) 22,336
South Carolina-- AAA Aaa 7,000 Charleston, South Carolina, Waterworks and Sewer Revenue Refunding
6.8% Improvement Bonds, 6% due 1/01/2016(b) 6,754
AAA Aaa 5,000 Florence County, South Carolina, Hospital Revenue Bonds (McLeod
Regional Medical Center Project), 6.75% due 11/01/2020(h) 5,137
AAA Aaa 4,000 Georgetown County, South Carolina, Hospital Facilities Revenue
Refunding Bonds (Georgetown Memorial Hospital), Series B, 7.25%
due 11/01/2017(b) 4,413
AAA Aaa 1,750 Greenville, South Carolina, Hospital System, Hospital Facilities
Revenue Bonds, Series A, 7.50% due 5/01/2016(h) 1,866
AAA Aaa 2,410 Myrtle Beach, South Carolina, Water and Sewer System Revenue Bonds,
5.25% due 3/01/2020(e) 2,063
AAA Aaa 3,500 Pickens and Richland Counties, South Carolina, Hospital Facilities
Revenue Bonds (Baptist Hospital), Series A, 7% due 8/01/2001(a)(b) 3,896
Piedmont Municipal Power Agency, South Carolina, Electric Revenue
Refunding Bonds:
AAA Aaa 9,150 6.25% due 1/01/2021(h) 9,103
AAA Aaa 12,235 5% due 1/01/2022(h) 9,964
AAA Aaa 10,000 6.30% due 1/01/2022(e) 9,859
AAA Aaa 15,750 Series A, 7.40% due 1/01/2018(b) 17,057
AAA Aaa 29,100 South Carolina Jobs, EDA, Hospital Facilities Revenue Bonds,
5.41% due 8/01/2021(b) 24,802
South Carolina State Public Service Authority, Revenue Refunding
Bonds (Santee Cooper):
AAA Aaa 6,000 Series A, 5.50% due 7/01/2011(b) 5,568
AAA Aaa 37,805 Series A, 5.50% due 7/01/2021(e) 33,195
AAA Aaa 17,090 Series A, 6.375% due 7/01/2021(b) 16,970
AAA Aaa 4,000 Series B, 6.10% due 7/01/2027(b) 3,804
AAA Aaa 2,750 Series C, 5% due 1/01/2014(b) 2,324
AAA Aaa 18,500 Series C, 5% due 1/01/2018(h) 15,257
AAA Aaa 25,400 Series C, 5% due 1/01/2025(h) 20,485
Tennessee--0.2% AAA Aaa 1,905 Jackson, Tennessee, Water and Sewer System Revenue Bonds, 10.375%
due 7/01/2012 2,205
AAA Aaa 2,200 Knox County, Tennessee, Health, Educational and Housing Facilities
Board, Hospital Facilities Crossover Revenue Refunding Bonds (Mercy
Health Care System), Series A, 7.60% due 9/01/2019 2,465
|
Texas--13.8% Austin, Texas, Utility System Revenue Bonds(e):
AAA Aaa 11,190 9.25% due 11/15/2004(a)(g) 14,245
AAA Aaa 5,250 Refunding, Series B, 5.25% due 5/15/2018 4,510
AAA Aaa 2,000 Bexar, Texas, Metropolitan Water District, Water Works System
Revenue Bonds, 5% due 5/01/2019(b) 1,650
Brazos River Authority, Texas, PCR, Refunding (Texas Utilities
Electric Company Project), AMT:
AAA Aaa 6,000 6.50% due 12/01/2027(b) 6,013
AAA Aaa 12,000 Series B, 6.625% due 6/01/2022(h) 12,134
Brazos River Authority, Texas, Revenue Refunding Bonds (Houston
Light and Power):
AAA Aaa 12,700 5.60% due 12/01/2017(e) 11,446
AAA Aaa 13,900 Series B, 7.20% due 12/01/2018(h) 15,159
AAA Aaa 20,000 Brownsville, Texas, Utility System Revenue Refunding Bonds, 6.25%
due 9/01/2014(e) 20,066
A1+ VMIG1 600 Harris County, Texas, Health Facilities Development Corporation,
Special Facilities, Revenue Bonds (Texas Medical Center Project),
VRDN, 3.40% due 2/15/2022(e)(f) 600
AAA Aaa 5,000 Harris County, Texas, Hospital District Mortgage, Revenue Refunding
Bonds, 7.40% due 2/15/2010(b) 5,616
AAA Aaa 1,695 Harris County, Texas, Toll Road Revenue Bonds, Series A, 6.50%
due 8/15/2011 1,734
Harris County, Texas, Toll Road Senior Lien Revenue Bonds:
AAA Aaa 6,045 5.30% due 8/15/2013(b) 5,378
AAA Aaa 2,750 6.50% due 8/15/2017(b) 2,770
AAA Aaa 42,065 5.375% due 8/15/2020(h) 36,624
AAA Aaa 4,000 5.50% due 8/15/2021(h) 3,539
AAA Aaa 10,305 Series A, 6.50% due 8/15/2002(a)(h) 11,218
AAA Aaa 15,250 Series A, 6.50% due 8/15/2002(a)(b) 16,622
AAA Aaa 8,390 Houston, Texas, Independent School District Refunding and School
House Bonds, 5.65% due 8/15/2009(b)(j)(k) 3,198
Houston, Texas, Water and Sewer System, Revenue Refunding Bonds,
Series C(b)(j)(k):
AAA Aaa 11,250 5.70% due 12/01/2009 4,258
AAA Aaa 17,700 5.70% due 12/01/2010 6,192
AAA Aaa 45,960 5.70% due 12/01/2011 15,005
AAA Aaa 53,850 5.78% due 12/01/2012 16,429
AAA Aaa 3,500 Houston, Texas, Water Conveyance System COP, Series J, 6.25%
due 12/15/2013(b) 3,527
Lower Colorado River Authority, Texas, Revenue Refunding Bonds:
AAA Aaa 5,000 5.15% due 1/01/2021 4,196
AAA Aaa 27,500 Fifth Supplemental Series, 5.25% due 1/01/2015(e) 24,029
AAA Aaa 4,415 Series B, 5.60% due 1/01/2009(c)(e)(j) 1,771
AAA Aaa 650 Series B, 7% due 1/01/2001(a)(b) 718
Matagorda County, Texas, Navigation District No. 1, PCR, AMT:
AAA Aaa 5,000 (Central Power and Light Company Project), 7.50% due 3/01/2020(b) 5,485
AAA Aaa 8,250 (Houston Light and Power), Series D, 7.60% due 10/01/2019(h) 9,063
Matagorda County, Texas, Navigation District No. 1, Revenue
Refunding Bonds (Houston Light and Power):
AAA Aaa 11,800 Series A, 6.70% due 3/01/2027(b) 12,034
AAA Aaa 26,305 Series C, 7.125% due 7/01/2019(h) 28,361
AAA Aaa 6,470 Series E, 7.20% due 12/01/2018(h) 7,031
|
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
Municipal Bonds Insured Portfolio
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
Texas AAA Aaa $ 15,000 Southwest Higher Education Authority Incorporated, Texas, Revenue
(concluded) Refunding Bonds (Southern Methodist University), Series B,
6.25% due 10/01/2022(h) $ 14,591
Tarrant County, Texas, Water Control and Improvement District No.
001, Water Revenue Refunding Bonds(b):
AAA Aaa 5,000 4.50% due 3/01/2011 4,074
AAA Aaa 5,000 4.75% due 3/01/2013 4,113
Texas Municipal Power Agency, Revenue Refunding Bonds:
AAA Aaa 10,000 5.50% due 9/01/2010(e) 9,388
AAA Aaa 33,885 6.10% due 9/01/2014(e)(j) 9,127
AAA Aaa 2,900 Series A, 6.75% due 9/01/2012(b) 3,008
Texas State Public Finance Authority, Building Revenue Capital
Appreciation Refunding Bonds(e)(j):
AAA Aaa 7,000 5.80% due 2/01/2009 2,761
AAA Aaa 2,890 6.10% due 2/01/2011 995
AAA Aaa 8,500 5.81% due 2/01/2012 2,736
Texas Turnpike Authority, Turnpike Revenue Refunding Bonds (Dallas
North Thruway)(b):
AAA Aaa 3,230 4.75% due 1/01/2011 2,733
AAA Aaa 2,085 4.75% due 1/01/2013 1,720
AAA Aaa 3,725 4.75% due 1/01/2014 3,042
AAA Aaa 25,875 Trinity River Authority, Texas, Regional Wastewater System, Revenue
Refunding Bonds, Series A, 5% due 8/01/2016(b) 21,688
Utah--1.5% AAA Aaa 2,805 Salt Lake City, Utah, Hospital Revenue Bonds (Holy Cross Health
System Corporation--Holy Cross Hospital), 7.375% due 12/01/2018(h) 3,020
AAA Aaa 28,000 Salt Lake City, Utah, Hospital Revenue Refunding Bonds (IHC Hospital,
Incorporated), 6.75% due 5/15/2020(b) 28,766
AA- Aaa 1,000 Uintah County, Utah, PCR (Deseret Generation and Transmission
Cooperative-National Rural Utilities Company), Series 1984 F-2,
10.50% due 6/15/2001(a) 1,298
AAA Aaa 2,650 Utah Board of Regents, Student Loan Revenue Bonds, AMT, Series F,
7.45% due 11/01/2008(b) 2,775
A1+ VMIG1 3,100 Utah Board of Regents, Student Loan Revenue Bonds, AMT, VRDN,
Series C, 2.60% due 11/01/2013(b)(f) 3,100
Utah Municipal Power Agency, Electric System Revenue Refunding
Bonds, Series A(h):
AAA Aaa 3,120 5.50% due 7/01/2012 2,850
AAA Aaa 3,295 5.50% due 7/01/2013 2,988
|
Vermont--0.7% AAA Aaa 18,950 Vermont HFA Revenue Bonds (Home Mortgage Purchase), AMT, Series B,
7.60% due 12/01/2024(e) 19,578
Virginia--1.6% AAA Aaa 16,800 Prince William County, Virginia, Service Authority, Water and Sewer
System, Revenue Refunding Bonds, 5% due 7/01/2021(h) 13,758
AAA Aaa 19,020 Roanoke, Virginia, IDA, Hospital Revenue Bonds (Roanoke Memorial
Hospital Projects), Series A, 5% due 7/01/2024(e) 15,359
AAA Aaa 11,000 Upper Occoquan Sewer Authority, Virginia, Regional Sewer Revenue
Bonds, 6% due 7/01/2001(a)(e) 11,498
AAA Aaa 5,000 Winchester, Virginia, IDA, Hospital Facilities Revenue Refunding
Bonds (Winchester Medical Center--First Mortgage), SAVRS, 3.08%
due 1/21/2014(b)(d) 5,000
Washington--4.2% Seattle, Washington, Municipality, Metropolitan Seattle, Sewer
Revenue Bonds, Series W(e):
AAA Aaa 2,465 6.25% due 1/01/2022 2,405
AAA Aaa 4,485 6.25% due 1/01/2023 4,374
Seattle, Washington, Municipality, Metropolitan Seattle, Sewer
Revenue Refunding Bonds(h):
AAA Aaa 8,155 Series X, 5.30% due 1/01/2008 7,632
AAA Aaa 9,605 Series X, 5.375% due 1/01/2009 8,915
AAA Aaa 9,755 Series X, 5.40% due 1/01/2010 8,966
AAA Aaa 10,960 Series X, 5.40% due 1/01/2011 10,020
AAA Aaa 6,560 Series Y, 5.70% due 1/01/2015 6,082
AAA Aaa 3,315 Series Y, 5.70% due 1/01/2016 3,050
AAA Aaa 10,000 Seattle, Washington, Solid Waste Utility, Revenue Refunding
Bonds, Series A, 6.875% due 5/01/2009(g) 10,518
Tacoma, Washington, Sewer Revenue Bonds(e):
AAA Aaa 3,425 7.625% due 12/01/2006 3,741
AAA Aaa 4,075 7.625% due 12/01/2007 4,450
AAA Aaa 4,400 7.625% due 12/01/2008 4,805
AAA Aaa 3,250 University of Washington Revenue Bonds (Housing and Dining), 7% due
12/01/2021(e) 3,486
AAA Aaa 7,000 Washington Health Care Facilities Authority Revenue Bonds (Southwest
Washington Hospital-Vancouver), 7.125% due 10/01/2019(g) 7,600
D NR 719 Washington Public Power Supply System, Generating Facilities Revenue
Bonds (Nuclear Project Numbers 4 & 5), Series D, 12.50% due 7/01/2010 719
Washington Public Power Supply System, Revenue Refunding Bonds(e):
AAA Aaa 5,750 Project No. 1, 6.25% due 7/01/2017 5,606
AAA Aaa 12,380 Project No. 2, Series A, 5.70% due 7/01/2008 12,054
AAA Aaa 2,530 Washington Public Power Supply Systems, Revenue Refunding Bonds,
Project No. 1, Series A, 5.70% due 7/01/2017(e) 2,301
AAA Aaa 10,000 Washington Public Power Supply System, Revenue Refunding Bonds,
Project No. 1, Series B, 5.60% due 7/01/2015(e) 9,072
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West Virginia--0.8% AAA Aaa 9,270 Kanawha County, West Virginia, Building Commission Revenue Refunding
Bonds (Charleston Area Medical Center Inc.), Series A, 7.10% due
6/01/2013(e) 9,976
AAA Aaa 7,650 Putnam County, West Virginia, PCR, Refunding (Appalachian Power
Company Project), Series D, 5.45% due 6/01/2019(b) 6,690
AAA Aaa 5,600 West Virginia School Building Authority Revenue Bonds (Capital
Improvement), Series B, 6.75% due 7/01/2010(e) 5,810
Wisconsin--1.5% AAA Aaa 7,000 Superior, Wisconsin, Limited Obligation Revenue Refunding Bonds
(Midwest Energy Resources), Series E, 6.90% due 8/01/2021(h) 7,590
Wisconsin Health and Educational Facilities Authority Revenue Bonds:
AAA Aaa 1,500 (Saint Lukes Medical Center Project), 7.10% due 8/15/2019(e) 1,594
AAA Aaa 5,750 (Waukesha Memorial Hospital), Series B, 7.25% due 8/15/2019(b) 6,134
Wisconsin Public Power System Incorporated, Power Supply System
Revenue Bonds, Series A(b):
AAA Aaa 18,485 5.25% due 7/01/2021 15,644
AAA Aaa 6,500 6.875% due 7/01/2001(a) 7,211
Total Investments (Cost--$2,690,286)--96.3% 2,702,602
Other Assets Less Liabilities--3.7% 105,332
----------
Net Assets--100.0% $2,807,934
==========
(a)Prerefunded.
(b)AMBAC Insured.
(c)Escrowed to maturity.
(d)The interest rate is subject to change periodically and inversely based upon the
prevailing market rate. The interest rate shown is the rate in effect at June 30,
1994.
(e)MBIA Insured.
(f)The interest rate is subject to change periodically based upon the prevailing
market rate. The interest rate shown is the rate in effect at June 30, 1994.
(g)BIG Insured.
(h)FGIC Insured.
(i)FSA Insured.
(j)Principal only securities which are traded on a discount basis and are amortized
to maturity.
(k)The interest rate shown represents the yield to maturity.
Ratings of issues shown have not been
audited by Deloitte & Touche.
See Notes to Financial Statements.
|
SCHEDULE OF INVESTMENTS (in Thousands)
Municipal Bonds National Portfolio
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
Alaska--1.0% Valdez, Alaska, Marine Terminal Revenue Refunding Bonds:
AA- A1 $ 5,000 (British Petroleum Pipeline), Series B, 7% due 12/01/2025 $ 5,229
AA- A1 11,250 (Sohio Pipeline), 7.125% due 12/01/2025 11,819
Arizona--6.2% AA Aa 5,000 Arizona State Transportation Board, Highway Revenue Refunding
Bonds, Series A, 5% due 7/01/2010 4,467
A A3 19,500 Greenlee County, Arizona, IDA, PCR, Revenue Refunding (Phelps Dodge
Corporation Project), 5.45% due 6/01/2009 18,070
NR P1+ 3,100 Maricopa County, Arizona, IDA, M/F Housing Revenue Bonds (Vista
Ventana Apartments Project), VRDN, AMT, Series D, 2.60% due 6/01/2034
(a) 3,100
Phoenix, Arizona, Civic Improvement Corporation, Wastewater System,
Lease Revenue Bonds:
A NR 4,000 6.125% due 7/01/2003(k) 4,236
A A1 20,865 Refunding, 5% due 7/01/2018 16,807
A A1 6,930 Refunding, 4.75% due 7/01/2023 5,240
A1+ VMIG1 7,500 Phoenix, Arizona, VRDN, Series 1, 3.30% due 6/01/2018(a) 7,500
AA Aa 49,400 Salt River Project, Arizona, Agricultural Improvement and Power
District, Electric System Revenue Bonds, 5.050% due
1/01/2011(m) 43,354
Arkansas--0.0% AAA NR 500 Arkansas State, Development Finance Authority, S/F Mortgage
Revenue Bonds, Mortgage Back Securities Program, Series D,
5.65% due 6/01/2016(g) 452
NR NR 520 Hot Springs, Arkansas, Water Revenue Refunding Bonds, 5.60%
due 9/01/2008 501
California--2.6% SP1 MIG1++ 5,100 California State, RAN, Series B, 3.50% due 7/26/1994 5,102
NR NR 4,000 Long Beach, California, GO, Special Tax Community Facilities,
District No. 3, 6.375% due 9/01/2023 3,613
Los Angeles, California, Department of Water and Power, Electric
Plant Revenue Bonds, Second Issue:
AA Aa 5,000 4.75% due 10/15/2020 3,904
AA Aa 10,000 Crossover Refunding, 4.75% due 11/15/2019 7,869
SP1+ MIG2 20,000 Los Angeles County, California, Revenue Bonds, TRAN, 4.50% due
6/30/1995 20,154
A1+ VMIG1 3,900 Mountain View, California, M/F Housing Revenue Bonds (Villa
Mariposa Project), VRDN, Series A, 2.40% due 3/01/2017(a) 3,900
|
Colorado--2.0% Boulder County, Colorado, Hospital Revenue Refunding Bonds
(Longmont United Hospital Project):
BBB+ Baa1 2,000 5.80% due 12/01/2013 1,790
BBB+ Baa1 1,000 5.875% due 12/01/2020 872
NR VMIG1 4,700 Colorado Student Obligation Bond Authority, Student Loan Revenue
Bonds, VRDN, Series A, 2.30% due 3/01/2024(a) 4,700
Denver, Colorado, City and County Airport Revenue Bonds, AMT:
BB Baa 8,570 Series A, 8% due 11/15/2025 8,600
BB Baa 1,310 Series B, 7.25% due 11/15/2007 1,282
BB Baa 3,000 Series B, 7.25% due 11/15/2023 2,765
BB Baa 5,650 Series C, 6.75% due 11/15/2022 4,952
BB Baa 7,840 Series D, 7.75% due 11/15/2021 7,716
Connecticut--1.4% AA+ Aa 2,500 Connecticut State Clean Water Fund Revenue Bonds, 5.80% due
6/01/2016 2,358
AA- Aa 4,900 Connecticut State, GO, Revenue Refunding Bonds, UT, Series B,
5.50% due 3/15/2012 4,599
A NR 750 Connecticut State Health and Educational Facilities Authority
Revenue Bonds (Taft School Issue),Series B, 5.40% due 7/01/2020 641
AA Aa 5,000 Connecticut State, HFA, Housing Mortgage Finance Program, Series B,
6.30% due 5/15/2024 4,856
AA- A 6,550 Connecticut State Resource Recovery Authority Revenue Bonds (American
Refuse Fuel), AMT, Series A, 8% due 11/15/2015 7,164
AA- A1 1,000 Connecticut State Special Tax Obligation Revenue Bonds (Trans-
portation Infrastructure), Series C, 5% due 10/01/2013 857
AA Aa 1,280 Danbury, Connecticut, UT, 4.50% due 2/01/2014 1,018
AAA Aaa 1,000 South Central Connecticut, Regional Water Authority, Water System
Revenue Bonds, 11th Series, 5.75% due 8/01/2012(f) 964
Westport, Connecticut, UT:
NR Aaa 580 5.70% due 6/15/2011 565
NR Aaa 580 5.75% due 6/15/2012 566
NR Aaa 580 5.75% due 6/15/2013 564
NR Aaa 580 5.75% due 6/15/2014 561
Delaware--0.5% BBB A1 7,500 Delaware State Health Facilities Authority Revenue Bonds (Beebe
Medical Center Project), 8.50% due 6/01/2016 8,125
District of AA- A1 7,500 District of Columbia Revenue Bonds (Georgetown University), 6.56% due
Columbia--0.5% 4/01/2022 7,463
|
Florida--5.0% NR Aaa 10,580 Florida HFA, Home Ownership Revenue Bonds, AMT, Series G1, 7.90%
due 3/01/2022(g) 10,872
Florida State, Board of Education, Capital Outlay Refunding, UT,
Series B:
NR Aa 23,400 5.125% due 6/01/2008 21,485
NR Aa 21,600 5.125% due 6/01/2009 19,535
AA- Aa2 5,000 Hillborough County, Florida, IDA, PCR, Refunding (Tampa Electric
Company Project), Series 1991, 7.875% due 8/01/2021 5,562
AA Aa1 7,240 Jacksonville, Florida, Electric Authority Revenue Refunding Bonds
(Saint John's River Power Park System), Issue 2, Series 9, 5.25%
due 10/01/2021 6,155
NR NR 2,700 Leesburg, Florida, Hospital Capital Improvement Revenue Bonds
(Leesburg Regional Medical Center Project), Series 1991-A,
7.50% due 7/01/2002(k) 3,107
AAA NR 4,800 Orange County, Florida, HFA, Mortgage Revenue Bonds, AMT, Series A,
8.375% due 3/01/2021(g) 4,919
A1 VMIG1 6,085 Pinellas County, Florida, Health Facilities Authority Revenue
Refunding Bonds (Pooled Hospital Loan Program), DATES, VRDN,
3.40% due 12/01/2015(a)(f) 6,085
AA- Aa 5,000 Saint Petersburg, Florida, Public Utility, Revenue Bonds, 5.60%
due 10/01/2018 4,539
Georgia--1.7% AA- Aa 30,705 Atlanta, Georgia, Water and Sewer Revenue Refunding Bonds, 4.75%
due 1/01/2023 23,806
AA Aa 5,500 Fulton County, Georgia, School District, UT, 5.625% due 1/01/2021 4,972
Idaho--0.2% AA NR 2,775 Idaho Housing Agency, S/F Mortgage Revenue Bonds, AMT, Series E, 7.875%
due 7/01/2024(b) 2,864
|
Illinois--6.0% Chicago, Illinois, Gas Supply Revenue Bonds (Peoples Gas, Light &
Coke Company Project), AMT, Series A:
AA- Aa3 8,000 8.10% due 5/05/2020 8,950
AA- Aa3 12,450 5.75% due 12/01/2023 10,981
Chicago, Illinois, O'Hare International Airport, Special Facilities
Revenue Bonds (United Airlines, Inc.):
BB Baa2 4,895 AMT, Series B, 8.95% due 5/01/2018 5,329
BB Baa2 14,330 Series 1984-B, 8.85% due 5/01/2018 15,642
AAA Aaa 5,015 Chicago, Illinois, Public Building Commission Revenue Bonds (Community
College District No. 508), Series B, 8.75% due 1/01/2007(d)(i) 5,544
A1+ MIG1++ 8,200 Chicago, Illinois, Tender Notes, VRDN, Series B, 2.30% due 10/31/1995
(a) 8,200
BBB NR 3,000 Illinois Educational Facilities Authority, Revenue Refunding Bonds
(Columbia College), 6.875% due 12/01/2017 3,003
Illinois Health Facilities Authority Revenue Bonds:
AAA Aaa 3,000 (Methodist Health Project), 6.90% due 5/01/2021(c) 3,100
AAA Aaa 10,000 (Rush-Presbyterian Saint Luke's Medical Center), 6.80% due
10/01/2024(f) 10,274
A+ A1 5,905 Illinois Health Facilities Authority, Revenue Refunding Bonds (OSF
Healthcare Systems), 6% due 11/15/2023 5,412
A+ Aa 11,500 Illinois Housing Development Authority, Residential Mortgage Revenue
Bonds, AMT, 6.874% due 2/01/2018 11,493
Metropolitan Pier and Exposition Authority, Illinois, Dedicated
State Tax Revenue Bonds (McCormick Place Expansion Project),
Series A(e)(j)(l):
AAA Aaa 18,595 5.75% due 6/15/2015 4,718
AAA Aaa 26,250 5.75% due 6/15/2016 6,239
NR A1 4,000 Southwestern Illinois, Development Authority, Sewer Facilities
Revenue Bonds (Monsanto Company Project), AMT, 7.30% due 7/15/2015 4,248
|
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
Municipal Bonds National Portfolio
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
Indiana--0.7% NR Baa1 $ 3,500 Indiana Health Facilities Financing Authority, Hospital Revenue
Bonds (Riverview Hospital Project), 6.875% due 8/01/2017 $ 3,395
A+ A1 2,000 Indiana Transportation Finance Authority, Highway Revenue Bonds,
Series A, 7.25% due 6/01/2015 2,239
A+ NR 5,000 Indianapolis, Indiana, Local Public Improvement Refunding Bond Bank,
Series D, 6.75% due 2/01/2020 5,030
NR Aa 1,500 Marion County, Indiana, Hospital Authority, Hospital Facility
Revenue Bonds (Daughters of Charity--Saint Vincent's Hospital Project),
10.125% due 11/01/2015 1,626
|
Iowa--0.6% NR NR 9,000 Iowa Financing Authority, Health Care Facilities Revenue Bonds (Mercy
Health Initiatives Project), 9.95% due 7/01/2019 9,512
Kentucky--1.0% Owensboro, Kentucky, Electric Light and Power Revenue Bonds, Series
B(c)(j)(l):
AAA Aaa 6,100 5.72% due 1/01/2011 2,112
AAA Aaa 6,475 5.75% due 1/01/2012 2,096
AAA Aaa 2,750 5.75% due 1/01/2013 830
NR NR 4,500 Perry County, Kentucky, Solid Waste Disposal Revenue Bonds (TJ
International Project), AMT, 7% due 6/01/2024 4,444
AA Aa2 6,345 Trimble County, Kentucky, PCR (Louisville Gas and Electric Company),
AMT, Series A, 7.625% due 11/01/2020 6,846
Louisiana--1.7% NR Ba1 24,000 Lake Charles, Louisiana, Harbor and Terminal District Port Facilities,
Revenue Refunding Bonds (Trunkline LNG Company Project), 7.75% due
8/15/2022 25,525
BB- NR 3,000 Port New Orleans, Louisiana, IDR, Refunding (Continental Grain
Company Project), 7.50% due 7/01/2013 2,963
Maryland--1.5% AA- Aa 7,000 Maryland State Stadium Authority, Sports Facilities Lease Revenue
Bonds, AMT, Series D, 7.60% due 12/15/2019 7,733
A+ A1 14,750 Montgomery County, Maryland, PCR, Refunding (Potomac Electric Power
Company), 5.375% due 2/15/2024 12,700
NR Baa 2,850 Prince Georges County, Maryland, Hospital Revenue Bonds (Greater
Southeast Healthcare Systems), 6.375% due 1/01/2023 2,635
Massachusetts-- AAA Aaa 6,000 Massachusetts Bay Transportation Authority Revenue Bonds, Series B,
5.6% 7.875% due 3/01/2001(a) 6,965
A+ A 4,000 Massachusetts Bay Transportation Authority Refunding Bonds, Series B,
6.20% due 3/01/2016 3,943
A+ A 20,000 Massachusetts State, Consolidated Loans, UT, Series B, 9.25% due
7/01/2000 24,051
Massachusetts State, Health and Educational Facilities Authority
Revenue Bonds:
A- NR 4,250 (Jordon Hospital), Series C, 6.875% due 10/01/2022 4,241
NR NR 9,600 (North Adams Regional Hospital), Series A, 9.625% due 7/01/2018 10,240
NR Baa 12,350 Massachusetts State, Health and Educational Facilities Authority,
Revenue Refunding Bonds (New England Memorial Hospital), Series B,
6.25% due 7/01/2023 10,984
A1 VMIG1 4,000 Massachusetts State, Industrial Finance Agency Revenue Bonds, VRDN,
3.40% due 3/15/2004(a) 4,000
A+ A1 13,750 Massachusetts State, Turnpike Authority, Turnpike Revenue Refunding
Bonds, Series A, 5% due 1/01/2020 11,315
A A 12,105 Massachusetts State, Water Resources Authority, Refunding, Series B,
5% due 3/01/2022 9,721
A A 6,985 Massachusetts State, Water Resources Authority, Series A, 5.75% due
12/01/2021 6,318
|
Michigan--5.3% A+ A 1,000 Marquette, Michigan, City Hospital Finance Authority, Hospital
Revenue Refunding Bonds (Marquette General Hospital), Series C,
7.50% due 4/01/2019 1,063
AAA VMIG1 6,600 Michigan Higher Education Student Loan Authority Revenue Bonds, AMT,
Series XII-F, 2.30% due 10/01/2020(a)(c) 6,600
Michigan State Building Authority Revenue Bonds:
AA- A 3,000 Refunding, Series I, 6.25% due 10/01/2020 2,917
AA- A 14,000 Series II, 6.25% due 10/01/2020 13,611
Michigan State Hospital Finance Authority, Hospital Revenue Bonds
(Detroit Medical Center):
A- A 3,500 Refunding, Obligation Group, Series A, 7.50% due 8/15/2011 3,766
A- A 6,500 Refunding, Series A, 6.50% due 8/15/2018 6,285
A- A 19,585 Refunding, Series B, 5.75% due 8/15/2013 17,594
A- A 10,000 Refunding, Series B, 5.50% due 8/15/2023 8,437
AAA Aaa 7,365 Michigan State Trunk Line, GO, Series A, 5.67% due 10/01/2012 2,271
BBB Baa1 9,350 Monroe County, Michigan, PCR (Detroit Edison Project), AMT, Series
A, 7.75% due 12/01/2019 10,056
Royal Oaks, Michigan, Hospital Financing Authority, Hospital
Revenue Refunding Bonds (William Beaumont Hospital), Series G:
AA Aa 3,250 5.50% due 11/15/2013 2,894
AA Aa 12,000 5.25% due 11/15/2019 10,017
West Ottowa, Michigan, Public School District, Revenue Refunding
Bonds UT(e)(j)(1):
AAA Aaa 5,275 5.85% due 5/01/2016 1,278
AAA Aaa 5,755 5.85% due 5/01/2017 1,306
Minnesota--1.2% AA+ NR 6,215 Minnesota State, HFA, S/F Mortgage Bonds, AMT, Series A, 7.45%
due 7/01/2022(b) 6,436
AAA NR 9,255 Saint Paul, Minnesota, Housing and Redevelopment Authority, S/F
Mortgage Revenue Refunding Bonds, Series C, 6.95% due 12/01/2031(g) 9,367
A+ A1 4,250 Southern Minnesota, Municipal Power Agency, Power Supply Systems,
Revenue Refunding Bonds, Series A, 4.75% due 1/01/2016 3,416
Mississippi--0.9% BBB Baa 5,950 Lowndes County, Mississippi, Hospital Revenue Refunding Bonds
(Golden Triangle Medical Center), 8.50% due 2/01/2010 6,446
Medical Center Educational Building Corporation, Mississippi,
Revenue Bonds (University of Mississippi Medical Center Project):
A- NR 1,000 5.65% due 12/01/2009 941
A- NR 1,500 5.80% due 12/01/2014 1,362
A- NR 5,000 5.90% due 12/01/2023 4,448
|
Missouri--0.9% BBB- NR 3,625 Joplin, Missouri, IDA, Hospital Facilities Revenue Refunding and
Improvement Bonds (Tri-State Osteopathic), 8.25% due 12/15/2014 3,899
NR Baa1 6,150 Missouri State Health and Educational Facilities Authority, Health
Facilities Revenue Refunding Bonds (Jefferson Memorial Hospital
Association Project), 6% due 8/15/2023 5,275
A+ A1 4,000 Missouri State Regional Convention and Sports Complex Authority
Refunding Bonds, Series A, 5.60% due 8/15/2017 3,533
St. Louis County, Missouri, Regional Convention and Sports Complex
Authority Refunding Bonds, Series B:
BBB+ A 2,575 5.50% due 8/15/2013 2,267
BBB+ A 4,760 5.75% due 8/15/2021 4,155
Missouri & BBB+ NR 11,400 Bi-State Development Agency, Missouri and Illinois, Metropolitan
Illinois--0.9% No. 5, Revenue Refunding Bonds (American Commonwealth), No. 5,
7.75% due 6/01/2010 12,225
Montana--1.0% Forsyth, Montana, PCR, Refunding (The Montana Power Company):
BBB+ Baa1 12,000 Project A, 6.125% due 5/01/2023 11,180
BBB+ Baa1 5,000 Series B, 5.90% due 12/01/2023 4,512
Nebraska--0.6% AAA Aaa 10,600 Nebraska Investment Finance Authority, S/F Mortgage Revenue Bonds,
AMT, 7.631% due 9/10/2030(g) 11,037
New Hampshire--1.3% NR Baa1 7,065 New Hampshire Higher Educational and Health Facilities Authority
Revenue Bonds (Saint Anselm College), 6.375% due 7/01/2023 6,721
A+ Aa 3,315 New Hampshire State, HFA, S/F Residential Mortgage Bonds, AMT, 7.90%
due 7/01/2022 3,428
New Hampshire State, IDA, PCR (Public Service Co. of New Hampshire
Project), AMT:
BB+ Baa3 4,850 Series A, 7.65% due 5/01/2021 5,063
BB+ Baa3 6,500 Series C, 7.65% due 5/01/2021 6,792
|
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
Municipal Bonds National Portfolio
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
New Jersey--2.3% New Jersey Building Authority, State Building Revenue Refunding
Bonds:
AA- Aa $ 15,000 5% due 6/15/2015 $12,888
AA- Aa 10,000 5% due 6/15/2018 8,381
NR NR 6,700 New Jersey Health Care Facilities Financing Authority Revenue
Bonds (Riverwood Center Issue), Series A, 9.90% due 7/01/2021 7,363
AA A 9,500 University Medicine and Dentistry of New Jersey, Revenue Bonds,
Series C, 7.20% due 12/01/2019 10,331
New Mexico--0.7% BB Ba2 12,000 Farmington, New Mexico, PCR, Refunding (Public Service Company,
San Juan Project), Series A, 6.40% due 8/15/2023 10,889
New York and Port Authority of New York and New Jersey, Consolidated Refunding
New Jersey--1.1% Bonds:
AA- A1 4,265 87th Series, 5.20% due 7/15/2012 3,797
AA- A1 3,705 87th Series, 5.25% due 7/15/2014 3,258
AA- A1 6,000 89th Series, 5.125% due 10/01/2021 4,985
AA- A1 8,000 91st Series, 5.20% due 11/15/2016 6,977
|
New York--15.4% A A 5,700 Battery Park City Authority, New York, Revenue Refunding Bonds
(Junior Lien), Series A, 5.70% due 11/01/2023 5,005
Metropolitan Transportation Authority, New York, Service Contract
Revenue Refunding Bonds (Commuter Facilities), Series 5:
BBB Baa1 2,145 6.90% due 7/01/2006 2,247
BBB Baa1 5,000 7% due 7/01/2012 5,231
New York City, New York, GO, UT:
A- Baa1 3,600 Series A, 7.75% due 8/15/2016 3,968
A- Baa1 4,065 Series A, 7.75% due 8/15/2017 4,481
A- Baa1 1,450 Series A, 8% due 8/15/2018 1,647
A-1 VMIG1 6,000 Series B, 3.25% due 9/01/1995(a) 6,000
A- Baa1 5,375 Series B, 8.25% due 6/01/2006 6,348
A- Baa1 2,700 Series B, 8.25% due 6/01/2007 3,200
A- Baa1 10,000 Series B, 7.75% due 2/01/2011 11,046
A- Baa1 4,500 Series B, 7.75% due 2/01/2012 4,953
A- Baa1 2,875 Series B, 7.75% due 2/01/2013 3,165
A- Baa1 1,650 Series B, 7.75% due 2/01/2014 1,816
A- Baa1 2,000 Series D, 7.70% due 2/01/2011 2,203
A- Baa1 3,575 Series D, Group C, 8% due 8/01/2015 4,058
A- Aaa 1,085 Series F, 8.25% due 11/15/2001(k) 1,297
A- Aaa 5,495 Series F, 8.25% due 11/15/2001(k) 6,567
AAA VMIG1 6,500 New York City, New York, Municipal Water Finance Authority, Water
and Sewer System Revenue Bonds, VRDN, Series C, 3.30% due 6/15/2023
(a) 6,500
New York State Dormitory Authority Revenue Bonds (City University
Systems), Series A:
BBB Baa1 10,000 Consolidated, 2nd General, Series A, 5.75% due 7/01/2013 9,178
BBB Baa1 4,900 Crossover, Refunding, Series E, 5.75% due 7/01/2011 4,563
New York State Dormitory Authority Revenue Bonds (State University
Educational Facilities):
BBB Baa1 7,500 Refunding, Series A, 5.50% due 5/15/2010 6,868
BBB Baa1 5,000 Refunding, Series A, 5.875% due 5/15/2011 4,702
BBB+ Baa1 5,725 Refunding, Series A, 5.50% due 5/15/2013 5,101
BBB+ Baa1 6,000 Refunding, Series A, 6.25% due 5/15/2017 5,774
BBB+ Baa1 4,000 Refunding, Series A, 5.50% due 5/15/2019 3,501
BBB+ Baa1 15,000 Refunding, Series B, 5.25% due 5/15/2011 13,150
BBB+ Baa1 5,085 Refunding, Series B 7.375% due 5/15/2014 5,466
BBB+ Baa1 5,000 Series A, 7.50% due 5/15/2013 5,633
New York State Energy Research and Development Authority, Electric
Facilities Revenue Bonds (Long Island Lighting), AMT, Series A:
BB+ Ba1 10,500 7.15% due 6/01/2020 10,474
BB+ Ba1 13,000 7.15% due 12/01/2020 12,983
A-1+ NR 1,000 New York State Environmental Facilities Corporation, Resource Recovery
Revenue Bonds (OFS Equity Huntington Project), AMT, VRDN, 2.95% due
11/01/2014(a) 1,000
New York State Local Government Assistance Corporation:
A A 10,000 Refunding, Series A, 6.50% due 4/01/2020 10,052
A A 5,000 Refunding, Series B, 5.375% due 4/01/2016 4,376
A A 6,000 Series A, 7% due 4/01/2012(k) 6,369
A Aaa 4,000 Series B, 7.375% due 4/01/2012(k) 4,546
|
A A 10,000 Series B, 6% due 4/01/2018 9,432
AAA Aaa 6,000 Series B, 7.50% due 4/01/2020 6,862
A A 5,000 Series D, 5.375% due 4/01/2014 4,419
A A 15,325 Series D, 5% due 4/01/2023 12,349
A A1 5,380 New York State Thruway Authority, General Revenue Bonds, Series A,
5.75% due 1/01/2019 4,938
Triborough Bridge and Tunnel Authority, New York, General Purpose
Revenue Refunding Bonds:
A+ Aa 9,000 Series A, 4.75% due 1/01/2019 7,110
A+ Aa 9,075 Series Q, 6.75% due 1/01/2009 9,710
A+ Aa 10,000 Series Y, 5.50% due 1/01/2017 8,962
Ohio--3.1% A A1 3,610 Cuyahoga County, Ohio, Hospital Revenue Bonds (Meridia Health
Systems), 7.25% due 8/15/2019 3,783
NR VMIG1 2,300 Cuyahoga County, Ohio, Hospital Revenue Bonds (University Hospital
of Cleveland), VRDN, 3% due 1/01/2016(a) 2,300
NR VMIG1 2,100 Franklin County, Ohio, Health Systems Revenue Bonds (Franciscan
Sisters--Saint Anthony Medical Center), Series B, VRDN, 3% due
7/01/2015(a) 2,100
NR VMIG1 3,000 Hamilton County, Ohio, Health System Revenue Bonds (Franciscan
Sisters Poor Health), Series A, 2.55% due 3/01/2017(a) 3,000
Ohio HFA, S/F Mortgage Revenue Bonds, AMT(g):
AAA Aaa 22,000 RIB, Series B-4, 6.903% due 3/31/2031 22,031
AAA NR 2,980 Series B, 8.25% due 12/15/2019 3,060
AAA NR 4,955 Series C, 7.85% due 9/01/2021 5,135
BBB- Baa2 14,000 Ohio State Air Quality Development Authority, PCR, Refunding
(Ohio-Edison), Series A, 5.95% due 5/15/2029 12,252
NR VMIG1 1,000 Student Loan Funding Corporation Cincinnati Ohio Student Loan
Revenue, Series A-2, AMT, VRDN, 2.25% due 1/01/2007(a) 1,000
Oregon--0.2% AA- Aa 1,135 Oregon State, PCR, UT, Series C, 5.625% due 6/01/2013 1,076
AAA Aaa 1,200 Polk County, Oregon, School District No. 002, GO, UT, 5.40% due
6/01/2012(h) 1,108
|
Pennsylvania--5.8% NR A1 7,600 Allegheny County, Pennsylvania, Industrial Development Authority,
PCR, Refunding (Parkway Center Project), 3.35% due 5/01/2009 7,600
BB+ Baa3 15,650 Beaver County, Pennsylvania, IDA, PCR, Refunding (Ohio Edison
Project), Series A, 7.75% due 9/01/2024 16,399
A1+ NR 2,500 Geisinger Authority, Pennsylvania, Health System Revenue Bonds,
VRDN, Series B, 3.30% due 7/01/2022(a) 2,500
AA Aa 17,600 Pennsylvania, HFA, Revenue Refunding Bonds, 7% due 10/01/2023 17,800
NR P1 2,100 Pennsylvania Higher Educational Facilities Authority, College
and University Revenue Bonds (Temple University), VRDN, 3.10%
due 10/01/2009(a) 2,100
AAA Aaa 20,000 Pennsylvania State Higher Educational Assistance Agency, Student
Loan Revenue Bonds, AMT, 6.80% due 9/03/2026(c) 20,437
A1+ VMIG1 4,300 Pennsylvania State Higher Educational Assistance Agency Student Loan
Revenue Bonds, AMT, VRDN, Series B, 2.30% due 7/01/2018(a) 4,300
BBB Baa1 2,000 Philadelphia, Pennsylvania, Hospital and Higher Educational Facilities
Authority, Hospital Revenue Bonds (Frankford Hospital), Series A, 6%
due 6/01/2023 1,712
BBB Baa1 5,400 Philadelphia, Pennsylvania, Hospital and Higher Educational
Facilities Authority Revenue Bonds (Graduate Health Systems),
Series A, 6.25% due 7/01/2013 5,010
|
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
Municipal Bonds National Portfolio
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
Pennsylvania BBB Baa $ 7,335 Philadelphia, Pennsylvania, Water and Wastewater Revenue Refunding
(concluded) Bonds, 5.75% due 6/15/2013 $ 6,636
AAA Aaa 4,800 Pittsburgh, Pennsylvania, Water and Sewer Authority, Water and
Sewer System Revenue Refunding Bonds, Series A, 6.75% due 9/01/2001
(e) 5,294
BBB Baa 5,650 Ridley Park, Pennsylvania, Hospital Authority Revenue Refunding
Bonds (Taylor Hospital), Series A, 6.125% due 12/01/2020 4,924
AAA Aaa 2,500 York County, Pennsylvania, Hospital Authority Revenue Bonds (York
Hospital), 7% due 7/01/2001(c)(k) 2,767
A1+ P1 800 York County, Pennsylvania, IDA, PCR, Refunding (Philadelphia
Electric Company), Series A, 3.10% due 8/01/2016(a) 800
|
Puerto Rico--0.7% BB Baa 1,025 Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue,
Series A, 7% due 7/01/2019 1,062
A Baa1 5,000 Puerto Rico Commonwealth Highway and Transportation Authority,
Highway Revenue Bonds, Series W, 5.25% due 7/01/2020 4,210
A Baa1 1,000 Puerto Rico Commonwealth Highway and Transportation Authority,
Highway Revenue Refunding Bonds, Series K, 5.50% due 7/01/2015 905
A Baa1 1,000 Puerto Rico Commonwealth Refunding Bonds, UT, 5.25% due 7/01/2018 849
NR Aaa 1,500 Puerto Rico, Industrial, Medical and Environmental Pollution Control
Facilities, Financing Authority Revenue Bonds, Series A, 5.10% due
12/01/2018 1,294
Rhode Island--2.4% Rhode Island Depositors Economic Protection Corporation, Special
Obligation Bonds, Series A:
AAA NR 5,250 6.95% due 8/01/2002(k) 5,856
A- Baa1 5,500 Refunding, 5.75% due 8/01/2012 5,032
A- Baa1 30,000 Refunding, 6.25% due 8/01/2016 28,519
South Carolina--0.9% BBB- Baa 8,355 South Carolina Jobs, EDA, Economic Development Revenue Bonds (Saint
Francis Hospital--Franciscan Sisters), 7% due 7/01/2015 8,229
A+ A1 8,750 South Carolina State, Public Service Authority, Revenue Refunding
Bonds, Series C, 5.125% due 1/01/2021 7,210
Tennessee--0.6% NR NR 10,000 Knox County, Tennessee, Health, Educational and Housing Facilities
Board, Hospital Facilities Revenue Bonds (Baptist Health System of
East Tennessee), 8.60% due 4/15/2016 10,537
Texas--9.0% A- NR 13,500 Brazos County, Texas, Health Facility Development Corporation,
Franciscan Services Corporation, Revenue Refunding Bonds (Saint
Joseph Hospital and Health Center), Series B, 6% due 1/01/2013 12,320
Brazos River Authority, Texas, PCR (Texas Utilities Electric
Company Project), AMT, Series A:
BBB Baa2 2,095 8.25% due 1/01/2019 2,271
BBB Baa2 18,150 7.875% due 3/01/2021 19,585
A A2 12,350 Brazos River Authority, Texas, Revenue Refunding Bonds (Houston
Light and Power), Series 1989-A, 7.625% due 5/01/2019 13,183
Dallas, Texas, Waterworks and Sewer Systems, Revenue Refunding
and Improvement Bonds, Series A:
AA Aa 2,195 4% due 10/01/2012 1,565
AA Aa 2,320 4% due 10/01/2013 1,634
BBB Baa1 5,000 Gulf Coast Waste Disposal Authority, Texas, Revenue Bonds (Champion
International Corporation), AMT, 7.45% due 5/01/2026 5,182
Harris County, Texas, Certificates of Obligation, Tax and Revenue
Bonds:
AA+ Aa 2,400 10% due 10/01/2000 3,009
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AA+ Aa 2,400 10% due 10/01/2001 3,077
A1+ NR 1,200 Harris County, Texas, Health Facilities Development Corporation,
Hospital Revenue Bonds (Saint Lukes Episcopal), Series D, 3% due
2/15/2016(a) 1,200
Houston, Texas, Water and Sewer System, Revenue Refunding Bonds
(Junior Lien), Series C(c)(j)(l):
AAA Aaa 3,500 5.80% due 12/01/2009 1,325
AAA Aaa 5,000 5.80% due 12/01/2010 1,749
BBB- Baa 8,255 Jefferson County, Texas, Health Facilities Development Corporation,
Hospital Revenue Bonds (Baptist Healthcare System Project), 8.875%
due 6/01/2021 9,196
A NR 19,410 Lower Colorado River Authority, Texas, Revenue Refunding Bonds
(Junior Lien 4th), 5.25% due 1/01/2015(i) 17,494
AA Aa 24,000 North Central Texas, Health Facilities Development Corporation
Revenue Bonds (Baylor University Medical Center), Series A,
6.70% due 5/15/2016 24,801
AAA Aaa 13,685 Round Rock, Texas, Independent School District and School Building
Refunding Bonds, UT, 5.80% due 8/15/2011(f)(j)(l) 4,553
San Antonio, Texas, Refunding and General Improvement Bonds:
AA Aa 2,535 4% due 8/01/2011 1,917
AA Aa 4,610 4% due 8/01/2012 3,475
AA Aa 4,885 4% due 8/01/2013 3,614
AA Aa 5,775 4% due 8/01/2014 4,158
A+ Aa 10,105 Texas Housing Agency, Residential Development Mortgage Revenue
Bonds, Series A, 7.50% due 7/01/2015(g) 10,182
BBB Baa2 2,000 West Side Calhoun County, Texas, Navigation District, Solid Waste
Disposal Revenue Bonds (Union Carbide Chemicals Project), AMT, 6.40%
due 5/01/2023 1,859
Utah--0.9% AA Aa 7,835 Intermountain Power Agency, Utah, Power Supply Revenue Bonds, Series
B, 5.35% due 7/01/2004(j)(l) 4,337
AA Aa 5,000 Intermountain Power Agency, Utah, Power Supply Revenue Refunding
Bonds, Series A, 5.81% due 7/01/2017(j)(l) 1,098
A1+ VMIG1 8,100 Utah State Board Regents, Student Loan Revenue Bonds, Series B,
2.25% due 11/01/2000(a) 8,100
Virginia--0.5% A+ A1 9,000 Alexandria, Virginia, IDA, PCR, Refunding (Potomac Electric Project),
5.375% due 2/15/2024 7,738
Washington--2.2% AA Aa 20,000 Washington State, GO, Series A, 4.50% due 10/01/2018 14,903
Washington State Public Power Supply System, Revenue Refunding
Bonds (Nuclear Project #2), Series A:
AA Aa 16,470 5.80% due 7/01/2007 15,995
AA Aa 6,195 5.75% due 7/01/2012 5,682
Total Investments (Cost--$1,634,001)--96.1% 1,597,539
Other Assets Less Liabilities--3.9% 64,811
----------
Net Assets--100.0% $1,662,350
==========
|
(a)The interest rate is subject to change periodically based upon prevailing
market rates. The interest rate shown is the rate in effect at June 30, 1994.
(b)FHA Insured.
(c)AMBAC Insured.
(d)BIG Insured.
(e)FGIC Insured.
(f)MBIA Insured.
(g)GNMA/FNMA Collateralized.
(h)FSA Insured.
(i)Escrowed to Maturity.
(j)The interest rate shown represents the yield to maturity.
(k)Prerefunded.
(l)Principal only securities which are traded on a discount basis and are
amortized to maturity.
(m)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
June 30, 1994.
++Represents the highest short-term rating issued by Moody's Investors Service, Inc.
Ratings off issues shown have not been audited by Deloitte & Touche.
See Notes to Financial Statements.
|
SCHEDULE OF INVESTMENTS (in Thousands)
Municipal Bonds Limited Maturity Portfolio
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
Alabama--0.5% NR Aa $ 5,050 Alabama State Public School and College Authority, Refunding
Bonds, 3.70% due 12/01/1996 $ 4,962
|
Alaska--1.0% Alaska State Housing Finance Corporation, GO, Series A:
A+ Aa 2,300 3.80% due 12/01/1994 2,304
A+ Aa 1,700 4.20% due 12/01/1995 1,692
AAA Aaa 5,000 Anchorage, Alaska, GO, Refunding Bonds, 4.85% due 7/01/1995(d) 5,045
Arizona--0.9% A+ A1 3,000 Maricopa County, Arizona, Transportation Board, Excise Tax Revenue
Bonds, 7.10% due 7/01/1996 3,140
AAA NR 5,000 Phoenix, Arizona, Street and Highway Revenue Refunding Bonds, 7.50%
due 7/01/1994(a) 5,101
AA P1 300 Pinal County, Arizona, IDA, PCR (Magma Copper/Newmont Mining Corp),
DDN, 3.40% due 12/01/2009(b) 300
California--3.0% NR VMIG1 5,850 California Higher Education Loan Authority, Student Loan Revenue
Refunding Bonds, Senior Lien, Series A-1, 3.90% due 7/01/1995 5,850
SP-1 MIG1++ 2,200 California State, RAN, Series B, 3.50% due 7/26/1994 2,201
A+ Aa 10,000 California State Various Purpose Bonds, GO, 4% due 10/01/1995 10,030
AA Aa 5,005 California Statewide Communities Development Authority, Revenue
Bonds, COP (Saint Joseph Health Systems), 4.10% due 7/01/1997 4,907
AA- Aa 1,100 San Diego County, California, Water Authority, Water Revenue Bonds,
COP, Series A, 4.10% due 5/01/1995 1,102
AAA Aaa 4,750 San Francisco, California, City and County Airports, International
Airport Revenue Refunding Bonds, Second Series, Issue 1, 6.10% due
5/01/1998(c) 4,940
Colorado--2.4% NR A 5,000 Colorado Student Obligation Bond Authority, Student Loan Revenue
Bonds, Series B, 5.10% due 12/01/1994 5,033
NR NR 10,000 Denver, Colorado, City and County Airport Revenue Bonds, Sub-series
B, 4.25% due 9/01/1995(b) 10,040
AAA Aaa 3,500 Denver, Colorado, Metropolitan Major League Baseball Stadium
District, Revenue Refunding Bonds (Sales Tax--Baseball Stadium
Project), 3.65% due 10/01/1997(f) 3,393
AA Baa1 3,810 Jefferson County, Colorado District No. R-001, Revenue Refunding
Bonds, Series A, 3.65% due 12/15/1996 3,737
Connecticut--3.4% Connecticut State Economic Recovery Notes, GO, Series A:
AA- Aa 4,200 5.25% due 12/15/1994 4,245
AA- Aa 3,900 5.40% due 12/15/1995 3,985
AA- Aa 3,250 5.50% due 6/15/1996 3,329
Connecticut State, GO:
AA- Aa 3,650 Series A, 5.20% due 3/15/1996 3,698
AA- Aa 6,705 Series B, 4.90% due 11/15/1995 6,800
NR Aa3 3,955 Connecticut State Housing Mortgage Revenue Bonds (Chestnut
Hill Apartments), 4.60% due 4/01/1997 3,940
AA- A1 3,515 Connecticut State Special Tax Obligation Revenue Bonds, Trans-
portation Infrastructure, Series C, 4.40% due 10/01/1997 3,485
AAA Aaa 2,000 Stratford, Connecticut, GO, 3.50% due 11/01/1996(f) 1,959
|
Delaware--0.2% AAA Aaa 1,500 Delaware Realty Transfer Tax Revenue Bonds (Land and Water Con-
servation Trust Fund Program), 5.30% due 4/01/1995(f) 1,518
District of District of Columbia, General Fund Recovery Bonds DDN:
Columbia--1.8% A1+ VMIG1 3,400 Series B-3, 3.45% due 7/01/1994 3,400
AAA Aaa 11,000 Series C, 5.50% due 6/01/1995(f) 11,120
AAA Aaa 1,465 District of Columbia, GO, Series B, UT, 5.30% due 6/01/1995(d) 1,478
Florida--4.8% Dade County, Florida, Aviation Revenue Refunding Bonds, Series X:
A Aa 3,595 3.75% due 10/01/1994 3,599
A Aa 2,000 4.10% due 10/01/1995 2,010
AAA Aaa 1,900 Dade County, Florida, Water System Revenue Refunding Bonds, 4%
due 6/01/1995(f)(g) 1,907
Florida State Division, Board of Finance Revenue Bonds (Department
of Natural Resources Preservation 2000), Series A(c):
AAA Aaa 5,000 6.10% due 7/01/1994 5,000
AAA Aaa 5,000 6.10% due 7/01/1995 5,111
Florida State, GO, COP (Construction Equipment Financing Program):
A+ A 15,000 5.55% due 11/15/1994 15,109
A+ A 3,860 5.75% due 11/15/1995 3,945
Florida State Turnpike Authority, Turnpike Revenue Bonds, Series
A(f):
AAA Aaa 2,000 5% due 7/01/1994 2,000
AAA Aaa 2,375 5% due 7/01/1995 2,401
AAA Aaa 4,000 Homestead, Florida, Special Insurance Assessment Revenue Bonds
(Hurricane Andrew Covered Claim), 4.20% due 3/01/1996(d) 3,984
Georgia--1.1% A- A3 5,000 Crisp County, Georgia, Development Authority, Solid Waste Disposal
Revenue Bonds (International Paper Company), AMT, Series B, 3.35%
due 9/10/1994 4,999
AA Aa1 2,000 Gwinnett County, Georgia, COP (Water and Sewer), 7.60% due 8/01/1995 2,076
AAA Aaa 3,965 Metropolitan Atlanta, Georgia, Rapid Transit Authority, Sales Tax
Revenue Refunding Bonds, Series P, 4.75% due 7/01/1995(c) 3,998
|
Illinois--7.3% Chicago, Illinois, Metropolitan Water Reclamation District, Greater
Chicago Revenue Refunding Bonds:
AA Aa 5,000 4% due 12/01/1996 4,944
AA Aa 3,100 4.10% due 12/01/1995 3,109
AA Aa 3,000 4.50% due 12/01/1996 2,998
A+ A1 2,580 Chicago, Illinois, O'Hare International Airport Revenue Bonds,
Series A, AMT, 4.40% due 1/01/1995 2,589
SP1+ NR 10,000 Chicago, Illinois, Park District Notes, GO, 3.25% due 10/01/1994 9,986
AAA Aaa 2,755 Chicago, Illinois, School Financing Authority, Revenue Refunding
Bonds, Series A, 5% due 6/01/1995(f) 2,773
Chicago, Illinois, Tender Notes:
A1+ VMIG1 7,500 Series A-1, 3.10% due 10/31/1995 7,500
A1+ VMIG1 15,000 Series B, 3.85% due 10/31/1994 15,046
AAA Aaa 3,750 Cook County, Illinois, High School District No. 205 Revenue Bonds,
UT (Thornton Township), 5% due 6/01/1995(f) 3,797
AAA Aaa 3,975 Illinois Educational Facilities Authority Revenue Bonds (University
of Chicago), 7% due 12/01/1996(a) 4,267
Illinois State, GO:
AA- Aa 3,000 5.50% due 6/01/1995 3,039
AA- Aa 4,120 5.25% due 10/01/1994 4,139
A A1 3,625 Illinois State Toll and Highway Authority, Revenue Refunding Bonds,
Series A, 3.70% due 1/01/1996 3,577
Indiana--0.5% AA- Aa 4,800 Purdue University, Indiana, University Revenue Bonds, Student
Fees, Series J, 4.15% due 7/01/1996 4,762
Kentucky--1.8% A A 13,000 Kentucky State Property and Building Community, Revenue Refunding
Bonds, Project No. 55, 3.60% due 9/01/1996 12,737
AAA Aaa 3,250 Kentucky State Turnpike Authority, Economic Development,
Refunding Revenue Bonds (Revitalization Projects), 4% due
7/01/1996(c) 3,224
Louisiana--1.1% Louisiana State Offshore Terminal Authority Revenue Bonds
(Deepwater Port), Series B:
A A3 4,000 4.20% due 9/01/1994 3,997
A A3 5,410 4.60% due 9/01/1995 5,441
NR NR 905 New Orleans, Louisiana, COP, 6.75% due 10/01/1994 912
|
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
Municipal Bonds Limited Maturity Portfolio
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
Maine--0.6% AA+ Aa $ 5,255 Maine State General Purpose Bonds, 4.10% due 9/01/1995 $ 5,279
Maryland--0.6% AA+ Aaa 1,000 Baltimore County, Maryland, Metropolitan District, 63rd Issue,
Special Assessment Revenue Bonds, UT, 5.70% due 7/01/1994 1,000
A+ A1 4,535 Maryland State Transportation Authority Revenue Bonds UT, 6% due
7/01/1995 4,626
Massachusetts-- BBB+ NR 4,157 Massachusetts State, COP, 5.10% due 6/30/1996 4,186
4.9% A+ A 7,000 Massachusetts State, GO, Revenue Refunding Bonds, Series C, 3.55%
due 9/01/1994 6,991
AAA Aaa 2,900 Massachusetts State, GO, Series A, Dedicated Income Tax, 7% due
6/01/1995 (f) 2,978
AAA Aaa 7,535 Massachusetts State, GO, Series A, 7.87% due 6/01/1997 8,195
Massachusetts State Health and Educational Facilities Authority
Revenue Bonds:
AAA NR 4,590 (Melrose-Wakefield Hospital), Series A, 8.625% due 7/01/1996(a) 5,042
AAA Aaa 2,005 (New England Medical Center Hospitals), Series G, 3.80% due
7/01/1997(d) 1,950
Massachusetts State, HFA, Housing Projects, Revenue Refunding Bonds,
Series A:
A+ A1 6,720 3.90% due 4/01/1995(g) 6,688
A+ A1 3,600 4.40% due 10/01/1996 3,572
Massachusetts State Water Resource Authority, GO, Series A:
A A 1,690 6.70% due 4/01/1995 1,722
AAA Aaa 2,555 6.70% due 4/01/1995(g) 2,617
NR NR 1,015 South Hadley, Massachusetts, Industrial Revenue Bonds (South Hadley
Health Care), AMT, Series A, 5% due 12/01/1996 1,015
Michigan--1.4% NR VMG1 1,000 Detroit, Michigan, Downtown Development Authority Revenue Bonds
(Millender Center Project), VRDN, 2.40% due 7/01/1994(b) 1,000
SP1 MIG1++ 5,075 Detroit, Michigan, GO, Notes, 3.80% due 7/01/1995 5,136
A1 NR 600 Detroit, Michigan, Tax Increment Finance Authority Revenue Bonds, VRDN,
2.75% due 7/01/1994(b) 600
AAA NR 5,475 Michigan State Hospital Finance Authority Revenue Bonds (Harper--Grace
& Huron Valley Hospitals), Series A, 10% due 10/01/1995(a) 5,958
NR VMG1 800 Michigan State Strategic Fund, Solid Waste Disposal Revenue Bonds
(Grayling Generating Project), AMT, DDN, 2.75% due 1/01/2014(b) 800
|
Minnesota--1.3% A1+ VMIG1 300 Duluth, Minnesota, Tax Increment Revenue Bonds (Lake Superior Paper),
DDN, 2.65% due 7/01/1994(b) 300
Hennepin County, Minnesota, Capital Improvement Bonds, Series B:
AAA Aaa 4,300 2.80% due 12/01/1994 4,292
AAA Aaa 3,225 3.25% due 12/01/1995 3,206
AAA Aaa 1,600 Minneapolis and St. Paul, Minnesota, Metropolitan Airports Revenue
Bonds, AMT, Series 8, 4.60% due 1/01/1995 1,607
AA+ NR 1,650 Minnesota Public Facilities Authority, Water Pollution Control
Revenue Bonds, Series A, 4.70% due 3/01/1995 1,662
Mississippi--1.1% A NR 10,000 Mississippi Higher Education Assistance Corporation, Student Loan
Revenue Refunding Bonds, Series C, AMT, 5.40% due 1/01/1996 10,126
Missouri--1.7% NR VMIG1 2,300 Missouri Higher Education Loan Authority, Student Loan Revenue
Bonds, DDN, AMT, Series A, 2.85% due 6/01/2017(b) 2,300
SP1+ NR 14,500 Missouri State Environmental Improvement and Energy Resource
Authority, Water, PCR (State Revolving Fund Program), Series
A, 3.90% due 9/01/1996 14,265
Nebraska--2.5% Nebraska Public Power District Revenue Bonds:
A+ A1 8,000 (Nuclear Facility), 3.60% due 7/01/1994 8,000
A+ A1 7,000 (Nuclear Facility), 4% due 7/01/1995 6,999
A+ A1 3,570 (Power Supply System), Series C, 3.50% due 1/01/1996 3,516
A+ A1 3,500 Refunding (Electric System), Series A, 4.50% due 1/01/1995 3,516
Nevada--0.8% AAA Aaa 7,000 Washoe County, Nevada, Airport Authority, Airport Systems
Improvement Revenue Bonds, AMT, Series A, 3.90% due 7/01/1995(d) 6,982
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New Jersey--7.9% Camden County, New Jersey, Improvement Authority (Solid Waste
Disposal), Revenue Refunding Bonds (Landfill Project):
A- A1 1,125 3.55% due 7/01/1995 1,121
A- A1 2,000 4% due 7/01/1997 1,954
AA+ Aaa 4,500 Middlesex County, New Jersey, Refunding Bonds, 3.60% due 7/15/1996 4,442
AAA Aaa 3,820 Middlesex County, New Jersey, Utility Authority, Solid Waste System
Revenue Bonds, 5.20% due 12/01/1995(f) 3,890
AA- Aa 4,365 New Jersey State Building Authority, Revenue Refunding Bonds, 4.20%
due 6/15/1997 4,314
AA+ NR 6,000 New Jersey State Governmental, GO, 5.80% due 8/01/1994(g) 6,015
New Jersey State Housing and Mortgage Finance Agency, Revenue
Refunding Bonds, Series 1:
A+ NR 3,670 4% due 11/01/1994 3,679
A+ VMIG1 5,000 3.40% due 3/29/1995 5,000
A+ NR 3,765 4.50% due 11/01/1995 3,760
New Jersey State Transportation Trust Fund Authority Revenue
Bonds (Transportation Systems):
A+ AA 5,505 Refunding, Series B, 3.20% due 6/15/1995 5,463
A+ AA 25,000 Series A, 5% due 12/15/1997 25,157
A A 2,160 New Jersey State Turnpike Authority, Revenue Refunding Bonds,
Series A, 5.50% due 1/01/1996 2,189
Passaic Valley, New Jersey, Sewage Commissioners Revenue Refunding
Bonds, Series D(c):
AAA Aaa 3,100 5.70% due 12/01/1994 3,132
AAA Aaa 3,265 5.70% due 12/01/1995 3,348
New Mexico--0.8% A1+ P1 5,000 Farmington, New Mexico, PCR, Refunding (Arizona Public Service Co.),
Series A, DDN, 3.30% due 5/01/2024(b) 5,000
AAA Aaa 2,500 New Mexico Education Loan Assistance Foundation, Student Loan
Revenue Bonds, Series A, AMT, 5.75% due 4/01/1996(c) 2,531
New York--4.4% AAA Aaa 4,000 Albany County, New York, Revenue Refunding Bonds, 3.30% due
10/01/1995(f) 3,985
AAA Aaa 2,000 Nassau County, New York, GO, 3.62% due 10/01/1997(c) 1,919
New York City, New York, GO:
A- Baa1 5,000 Refunding, Series A, 4.60% due 8/01/1995 5,028
A- Baa1 3,000 Series A, 7.20% due 3/15/1995(a)(g) 3,079
A- Aaa 945 Series D, 6.40% due 2/01/1995(a)(g) 962
A- Baa1 10,405 Series D, 6.40% due 2/01/1995 10,550
New York State Dormitory Authority Revenue Bonds, Series B:
A1+ VMIG1 7,000 (Cornell University), DDN, 3% due 7/01/2025(b) 7,000
A1+ VMIG1 7,000 (New York Public Library), 3.875% due 7/01/1995 7,029
A A 2,000 New York State Local Government Assistance Corporation Revenue
Bonds, Series A, 5% due 4/01/1995 2,014
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North Carolina--1.3% AAA Aaa 9,490 North Carolina Municipal Power Agency, Revenue Refunding Bonds
(Catawba Electric Project No. 1), 4.60% due 1/01/1997(f) 9,470
NR VMIG1 3,700 Person County, North Carolina, Industrial Facilities and Pollution
Control Financing Authority Revenue Bonds (Solid Waste Disposal-
Carolina Power and Light Company Project), AMT, DDN, 3.30% due
11/01/2016(b) 3,700
North Dakota--0.5% NR Aa 5,000 North Dakota Student Loan Revenue Refunding Bonds, Series A, 5.40%
due 7/01/1996 5,072
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SCHEDULE OF INVESTMENTS (continued) (in Thousands)
Municipal Bonds Limited Maturity Portfolio
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
Ohio--11.6% Cincinnati, Ohio, City School District:
A+ NR $ 2,500 RAN, 5.35% due 6/15/1996 $ 2,535
A+ NR 7,500 TAN, 5% due 6/01/1995 7,593
Cleveland, Ohio, City School District, RAN(c):
AAA Aaa 3,000 4.20% due 6/01/1996 2,984
AAA Aaa 10,000 4.35% due 6/01/1997 9,858
NR Aa1 2,700 Columbus, Ohio, Sewer Improvement Revenue Bonds (Waterworks
Parks), 6.75% due 7/01/1995(g) 2,777
NR MIG1++ 5,100 North Olmsted, Ohio, BAN, 3.97% due 12/15/1994 5,125
Ohio State Air Quality Development Authority, PCR (Ohio Edison
Company):
AAA Aaa 6,700 5.65% due 9/01/1994 6,714
A1+ VMIG1 10,500 Refunding, Series A, 4.25% due 8/01/1996 10,427
A1+ VMIG1 6,700 Series A, 3.45% due 2/01/1996 6,582
A1+ P1 3,000 Series C, AMT, 3.125% due 9/01/1994 3,000
A+ A1 2,500 Ohio State Building Authority, Revenue Refunding Bonds (State
Correctional Facility), Series A, 3.70% due 10/01/1994 2,501
A+ A1 5,620 Ohio State Higher Education Facilities Revenue Bonds, Series II-B,
5.875% due 12/01/1994 5,677
Ohio State Public Facilities Commission, Higher Education Facilities:
A+ A1 3,300 Capital Facilities, Series II-A, 5.30% due 12/01/1996 3,347
AAA AAA 5,000 Capital Facilities, Series II-A, Refunding, 4.60% due 6/01/1997(c) 4,973
A+ A1 3,090 Capital Facilities, Series II-C, Refunding, 4% due 12/01/1994 3,100
AAA Aaa 1,995 Series II-A, 6.25% due 5/01/1995(c) 2,039
A+ A1 8,500 Series II-B, 4.625% due 12/01/1996 8,514
A1+ P1 4,000 Ohio State Water Development Authority, Pollution Control Facility
Revenue Bonds (Ohio Edison Company Project), AMT, Series B, 3.125%
due 9/01/1994 4,000
NR MIG1++ 6,140 Toledo, Ohio, City Services Special Assessment Notes, 3.20% due
12/01/1994 6,145
AAA Aaa 10,250 Trumbull County, Ohio, Hospital Revenue Bonds (Trumbull Memorial
Hospital Project), 9.625% due 11/01/2012(a)(f) 11,172
|
Oklahoma--0.7% A+ Aa 6,370 Oklahoma County, Oklahoma, Independent School District No. 89, 6.50%
due 2/01/1998 6,705
Pennsylvania--0.3% AAA Aaa 3,000 Pittsburgh, Pennsylvania, Water and Sewer Authority, Revenue
Refunding Bonds, Series A, 3.50% due 9/01/1996(f) 2,937
Puerto Rico--1.2% BBB Baa 7,065 Puerto Rico, Finance Housing Agency, Revenue Refunding Bonds, 3.75%
due 12/01/1995 6,978
A Baa1 3,415 Puerto Rico Public Buildings Authority, Revenue Refunding Bonds,
Series J, 5.20% due 7/01/1995 3,452
Rhode Island--2.3% Providence, Rhode Island, Redevelopment Agency, BAN:
NR NR 3,120 (Parcel 12 Project), Series 2, 4.25% due 7/28/1994 3,122
NR NR 3,435 (Promenade Project), Series I, 4.25% due 7/28/1994 3,437
Rhode Island Depositors Economic Protection Corporation, Special
Obligation Bonds, Series A(e):
AAA Aaa 4,395 4.70% due 8/01/1994 4,400
AAA Aaa 4,180 5% due 8/01/1995 4,228
NR A 6,000 Rhode Island State, Student Loan Authority, Student Loan Revenue
Refunding Bonds, Series A, 5.70% due 12/01/1996 6,188
South Carolina--1.4% NR NR 7,800 Berkeley County, South Carolina, Water and Sewer, BAN, 3.25% due
9/01/1994 7,802
AA- A1 1,000 Charleston, South Carolina, Waterworks and Sewer Improvement Revenue
Refunding Bonds, 4.45% due 1/01/1995 1,004
A+ A1 5,170 South Carolina State Public Service Authority Revenue Refunding
Bonds, Series C, 3.80% due 1/01/1997 5,043
|
Texas--9.1% AAA Aaa 4,880 Austin, Texas, Utility System Revenue Refunding Bonds, Series A,
Prior Lien, 4.80% due 11/15/1995(d) 4,937
Brazos, Texas, Higher Education Authority, Student Loan Revenue
Refunding Bonds, AMT:
NR Aaa 2,250 Series A-1, 5% due 12/01/1996 2,254
NR Aaa 2,000 Series C-1, 5% due 11/01/1995 2,021
NR Aa 5,455 Series C-1, 5.60% due 11/01/1997 5,596
AAA Aaa 3,250 Dallas, Texas, Regional Airport Revenue Refunding Bonds
(Dallas-Fort Worth International Airport), 3.75% due 11/01/1996(d) 3,192
NR A1 950 Fort Bend County, Texas, IDR, Corporate, Refunding (Frito Lay
Incorporated Project), 4% due 10/01/1996 936
NR A1 3,650 Fort Bend County, Texas, PCR, Corporate, IDR, Refunding (Frito Lay
Incorporated Project), 4% due 10/01/1996 3,595
Harris County, Texas, Health Facilities Development Corporation,
Hospital Revenue Bonds (Saint Luke's Episcopal Hospital), DDN(b):
AA NR 500 Series B, 3.50% due 2/15/2016 500
AA NR 2,000 Series C, 3.30% due 2/15/2016 2,000
AA- Aa 3,915 Houston, Texas, Certificates of Obligation, Tax and Revenue Bonds,
Series F, 3.60% due 3/01/1997 3,791
A1+ NR 5,400 Houston, Texas, Health Facilities Development Corporation, Hospital
Revenue Bonds (Methodist Hospital Project), DDN, 3.50% due
12/01/2014(b) 5,400
AAA Aaa 9,500 Houston, Texas, Water and Sewer System, Revenue Refunding Bonds,
Series D, Junior Lien, 5.55% due 12/01/1995(f) 9,697
Panhandle-Plains, Texas, Higher Education Authority Incorporated,
Student Loan Revenue Refunding Bonds (Student Loan Marketing
Association):
NR VMIG1 6,000 Series A, 3.65% due 3/01/1995 6,001
NR Aaa 2,000 Series C, 3.95% due 9/01/1996 1,961
NR Aaa 2,675 Series C, 4.15% due 9/01/1997 2,607
San Antonio, Texas, Electric and Gas Revenue Refunding Bonds,
Series A, Junior Lien:
AA Aa1 9,000 5.80% due 2/01/1995 9,109
AA Aa1 3,000 6% due 2/01/1996 3,067
AA Aa 4,525 Texas State, GO, Refunding, 6.40% due 12/01/1994 4,583
AA Aa 3,000 Texas State Public Finance Authority Revenue Bonds, Series A, 6%
due 10/01/1995 3,077
AAA Aaa 4,770 Texas State Public Property Finance Corporation, Revenue Refunding
Bonds (Mental Health and Retardation), 4.25% due 9/01/1995 4,788
SP1+ MIG1++ 5,500 Texas State, TRAN, 3.25% due 8/31/1994 5,504
AAA Aaa 1,500 Texas Water Development Board Revenue Bonds (State Revolving Fund-
Senior Lien), 4.35% due 7/15/1995 1,505
AAA Aaa 3,000 University of Texas, Revenue Refunding Bonds (Financing System),
Series A, 5.60% due 8/15/1994 3,008
|
Utah--4.3% NR NR 24,243 Carbon County, Utah, Solid Waste Disposal Revenue Refunding Bonds
(East Carbon Landfill Project), AMT, 6.04% due 5/01/1997 24,196
Intermountain Power Agency, Utah, Power Supply Revenue Refunding
Bonds:
AA Aa 1,250 Series A, 3.90% due 7/01/1996 1,230
AA Aa 4,250 Series B, 4.60% due 7/01/1995 4,268
AA- NR 1,715 University of Utah, Revenue Refunding Bonds (University Hospital
Project), Series A, 5% due 5/15/1995 1,728
AAA Aaa 3,250 Utah State Board of Regents, Student Loan Revenue Bonds, AMT,
Series D, 6.90% due 11/01/1994(c) 3,288
AAA Aaa 4,825 Utah State Building and Highway, GO, UT, 4.50% due 7/01/1994 4,825
Virginia--2.2% NR Aaa 2,000 Virginia Education Loan Authority, Revenue Refunding Bonds (Guaranteed
Student Loan Program), Series E, 4.625% due 3/01/1995 2,010
AAA Aaa 2,500 Virginia Port Authority Facilities, Revenue Refunding Bonds, 5% due
7/01/1995(c) 2,526
Virginia State Housing Development Authority, Commonwealth Mortgage
Revenue Bonds, AMT, Series B, Sub Series B-1:
AA+ Aa 5,275 5% due 7/01/1994 5,275
AA+ Aa 5,400 5.30% due 1/01/1995 5,412
AA+ Aa 2,975 5.50% due 1/01/1996 3,000
AA Aa 1,500 Virginia State Public Building Authority, Building Revenue Bonds,
Series C, 3.95% due 8/01/1995 1,504
|
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
Municipal Bonds Limited Maturity Portfolio
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
Washington--4.8% Port Seattle, Washington, Revenue Refunding Bonds:
AA- A1 $ 1,075 Series A, 4.25% due 4/01/1996 $ 1,068
AA- A1 3,000 Series B, 4% due 11/01/1995 2,996
SP1+ MIG1++ 7,655 Seattle, Washington, Metropolitan Municipality, Seattle Sewer
Revenue, BAN, 3.50% due 7/01/1995 7,640
A1+ VMIG1 5,000 Seattle, Washington, Municipal Light and Power Revenue Bonds
(Bond Purchase Agreement), Series A, 5.05% due 11/01/1994 5,030
AA Aa 7,250 Washington State, GO, Series R-93-B-1, 4.125% due 10/01/1997 7,134
Washington State Public Power Supply System, Revenue Refunding
Bonds, Series A:
AA Aa 8,000 (Nuclear Project No. 1), 4.20% due 7/01/1995 7,998
AA Aa 6,275 (Nuclear Project No. 2), 4.20% due 7/01/1995(g) 6,309
AA Aa 2,000 (Nuclear Project No. 2), 3.50% due 7/01/1996 1,951
AA Aa 4,890 (Nuclear Project No. 2), 3.75% due 7/01/1997 4,714
|
Wisconsin--1.2% AA- A1 2,500 Milwaukee County, Wisconsin, GO, Series A, 6% due 12/01/1994 2,527
AA Aa 3,500 Milwaukee County, Wisconsin, Metropolitan Sewer District Revenue
Bonds, Series A, 5.25% due 9/01/1995 3,550
Wisconsin Housing and EDA, Housing Revenue Refunding Bonds,
Series C:
A A1 2,200 3.60% due 11/01/1995 2,175
A A1 2,795 4.30% due 11/01/1997 2,739
Wyoming--1.2% NR P1 11,700 Unita County, Wyoming, PCR, Refunding (Chevron USA Incorporated
Project), DDN, 3.25% due 8/15/2020(b) 11,700
Total Investments (Cost--$936,308)--99.9% 934,920
Other Assets Less Liabilities--0.1% 757
--------
Net Assets--100.0% $935,677
========
|
(a)Prerefunded.
(b)The interest rate is subject to change periodically based upon the
prevailing market rate. The interest rate shown is the rate in effect
at June 30, 1994.
(c)AMBAC Insured.
(d)MBIA Insured.
(e)FSA Insured.
(f)FGIC Insured.
(g)Escrowed to maturity.
++Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche.
See Notes to Financial Statements.
|
STATEMENTS OF ASSETS AND LIABILITIES
Limited
Insured National Maturity
As of June 30, 1994 Portfolio Portfolio Portfolio
Assets: Investments, at value* (Note 1a) $2,702,601,800 $1,597,539,473 $ 934,920,346
Cash 9,802,505 53,398 7,971,761
Receivables:
Securities sold 80,588,196 65,574,768 --
Interest 49,770,068 28,668,824 12,158,961
Capital shares sold 2,541,957 1,642,703 1,886,281
Prepaid registration fees and other assets (Note 1e) 76,710 55,688 39,846
-------------- -------------- -------------
Total assets 2,845,381,236 1,693,534,854 956,977,195
-------------- -------------- -------------
|
Liabilities: Payables:
Securities purchased 23,200,000 21,648,397 12,866,592
Capital shares redeemed 8,078,154 5,699,836 6,993,374
Dividends to shareholders (Note 1f) 4,300,670 2,571,687 975,562
Investment adviser (Note 2) 856,903 665,520 258,042
Distributor (Note 2) 547,427 288,679 42,550
Accrued expenses and other liabilities 463,821 310,835 164,306
-------------- -------------- -------------
Total liabilities 37,446,975 31,184,954 21,300,426
-------------- -------------- -------------
Net Assets: Net assets $2,807,934,261 $1,662,349,900 $ 935,676,769
============== ============== =============
Net Assets Class A Common Stock, $0.10 par value++ $ 24,643,476 $ 11,941,084 $ 8,006,485
Consist of: Class B Common Stock, $0.10 par value++++ 11,001,115 4,558,341 1,474,492
Paid-in capital in excess of par 2,714,075,637 1,653,959,042 932,777,155
Undistributed realized capital gains
(losses)--net (Note 5) 45,898,099 28,352,719 (5,193,769)
Unrealized appreciation/depreciation on investments--net 12,315,934 (36,461,286) (1,387,594)
-------------- -------------- -------------
Net assets $2,807,934,261 $1,662,349,900 $ 935,676,769
============== ============== =============
Net Asset Class A:
Value: Net assets $1,941,741,107 $1,203,180,964 $ 790,142,342
============== ============== =============
Shares outstanding 246,434,764 119,410,837 80,064,850
============== ============== =============
Net asset value and redemption price per share $ 7.88 $ 10.08 $ 9.87
============== ============== =============
Class B:
Net assets $ 866,193,154 $ 459,168,936 $ 145,534,427
============== ============== =============
Shares outstanding 110,011,150 45,583,411 14,744,916
============== ============== =============
Net asset value and redemption price per share $ 7.87 $ 10.07 $ 9.87
============== ============== =============
*Identified cost $2,690,285,866 $1,634,000,759 $ 936,307,940
============== ============== =============
++Authorized shares--Class A 500,000,000 375,000,000 150,000,000
============== ============== =============
++++Authorized shares--Class B 375,000,000 375,000,000 150,000,000
============== ============== =============
See Notes to Financial Statements.
|
STATEMENTS OF OPERATIONS
Limited
Insured National Maturity
For the Year Ended June 30, 1994 Portfolio Portfolio Portfolio
Investment Income Interest and amortization of premium and discount earned $ 183,856,750 $ 112,169,662 $ 40,921,727
(Note 1d): Other 226 1,522 812
-------------- -------------- -------------
Total income 183,856,976 112,171,184 40,922,539
-------------- -------------- -------------
Expenses: Investment advisory fees (Note 2) 11,040,540 8,514,268 3,305,839
Distribution fees--Class B (Note 2) 6,980,635 3,496,610 466,701
Transfer agent fees--Class A (Note 2) 656,700 490,579 163,948
Printing and shareholder reports 165,241 93,551 54,317
Transfer agent fees--Class B (Note 2) 333,290 202,133 31,266
Custodian fees 220,118 161,442 96,955
Accounting services (Note 2) 170,190 143,453 100,650
Registration fees (Note 1e) 79,615 104,423 178,362
Professional fees 71,762 40,697 36,001
Pricing services 62,080 37,290 29,099
Portfolio insurance 74,901 8,383 4,674
Directors' fees and expenses 27,619 12,004 8,512
Amortization of organization expenses (Note 1e) 6,857 6,070 --
Other 25,079 11,449 15,230
-------------- -------------- -------------
Total expenses 19,914,627 13,322,352 4,491,554
-------------- -------------- -------------
Investment income--net 163,942,349 98,848,832 36,430,985
-------------- -------------- -------------
Realized & Realized gain (loss) on investments--net 80,935,129 62,008,845 (968,336)
Unrealized Change in unrealized appreciation/depreciation on
Gain (Loss) on investments--net (275,252,365) (172,722,080) (13,063,534)
Investments--Net -------------- -------------- -------------
(Notes 1d & 3): Net Increase (Decrease) in Net Assets Resulting
from Operations $ (30,374,887) $ (11,864,403) $ 22,399,115
============== ============== =============
See Notes to Financial Statements.
|
STATEMENTS OF CHANGES IN NET ASSETS
Insured Portfolio National Portfolio
--------------------------- ---------------------------
For the Year Ended June 30, For the Year Ended June 30,
--------------------------- ---------------------------
Increase (Decrease) in Net Assets: 1994 1993 1994 1993
Operations: Investment income--net $ 163,942,349 $ 167,805,641 $ 98,848,832 $ 99,669,395
Realized gain (loss) on investments--net 80,935,129 67,994,693 62,008,845 38,689,103
Change in unrealized appreciation/
depreciation on investments--net (275,252,365) 101,260,716 (172,722,080) 49,677,981
-------------- -------------- -------------- --------------
Net increase (decrease) in net assets
resulting from operations (30,374,887) 337,061,050 (11,864,403) 188,036,479
-------------- -------------- -------------- --------------
Dividends & Investment income--net:
Distributions to Class A (119,441,701) (126,159,264) (75,680,507) (80,896,286)
Shareholders Class B (44,500,648) (41,646,377) (23,168,325) (18,773,109)
(Note 1f): Realized gain on investments--net:
Class A (57,171,047) (26,812,986) (36,128,677) (22,563,878)
Class B (24,972,443) (10,208,890) (12,798,152) (5,793,680)
-------------- -------------- -------------- --------------
Net decrease in net assets resulting from
dividends and distributions to shareholders (246,085,839) (204,827,517) (147,775,661) (128,026,953)
-------------- -------------- -------------- --------------
Capital Share Net increase (decrease) in net assets
Transactions derived from capital share transactions (52,099,956) 235,653,905 44,114,517 153,435,527
(Note 4): -------------- -------------- -------------- --------------
Net Assets: Total increase (decrease) in net assets (328,560,682) 367,887,438 (115,525,547) 213,445,053
Beginning of period 3,136,494,943 2,768,607,505 1,777,875,447 1,564,430,394
-------------- -------------- -------------- --------------
End of period $2,807,934,261 $3,136,494,943 $1,662,349,900 $1,777,875,447
============== ============== ============== ==============
++Commencement of Operations.
See Notes to Financial Statements.
|
STATEMENTS OF CHANGES IN NET ASSETS
Limited Maturity Portfolio
-------------------------------------
For the Year For the Period
Ended June 30, Nov. 2, 1992++ to
Increase (Decrease) in Net Assets: 1994 June 30, 1993
Operations: Investment income--net $ 36,430,985 $ 31,371,404
Realized gain (loss) on investments--net (968,336) 2,133,811
Change in unrealized appreciation/
depreciation on investments--net (13,063,534) 4,480,891
-------------- --------------
Net increase (decrease) in net assets
resulting from operations 22,399,115 37,986,106
-------------- --------------
Dividends & Investment income--net:
Distributions to Class A (31,987,779) (30,211,746)
Shareholders Class B (4,443,206) (1,159,658)
(Note 1f): Realized gain on investments--net:
Class A -- --
Class B -- --
-------------- --------------
Net decrease in net assets resulting from
dividends and distributions to shareholders (36,430,985) (31,371,404)
-------------- --------------
Capital Share Net increase (decrease) in net assets
Transactions derived from capital share transactions 7,793,356 321,893,595
(Note 4): -------------- --------------
Net Assets: Total increase (decrease) in net assets (6,238,514) 328,508,297
Beginning of period 941,915,283 613,406,986
-------------- --------------
End of period $ 935,676,769 $ 941,915,283
============== ==============
++Commencement of Operations.
See Notes to Financial Statements.
|
FINANCIAL HIGHLIGHTS
Insured Portfolio
-----------------------------------------------------------
The following per share data and ratios Class A
have been derived from information -----------------------------------------------------------
provided in the financial statements. For the Year Ended June 30,
-----------------------------------------------------------
Increase (Decrease) in Net Asset Value: 1994 1993 1992 1991 1990
Per Share Net asset value, beginning of year $ 8.64 $ 8.26 $ 7.92 $ 7.86 $ 7.97
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .47 .50 .52 .54 .55
Realized and unrealized gain (loss) on
investments--net (.53) .49 .41 .12 (.11)
---------- ---------- ---------- ---------- ----------
Total from investment operations (.06) .99 .93 .66 .44
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.47) (.50) (.52) (.54) (.55)
Realized gain on investments--net (.23) (.11) (.07) (.06) --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.70) (.61) (.59) (.60) (.55)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 7.88 $ 8.64 $ 8.26 $ 7.92 $ 7.86
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share (1.08%) 12.43% 12.11% 8.84% 5.76%
Return:* ========== ========== ========== ========== ==========
Ratios to Expenses, excluding distribution fees .42% .42% .44% .45% .46%
Average Net ========== ========== ========== ========== ==========
Assets: Expenses .42% .42% .44% .45% .46%
========== ========== ========== ========== ==========
Investment income--net 5.53% 5.94% 6.44% 6.90% 7.03%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year (in thousands) $1,941,741 $2,225,188 $2,062,591 $1,984,307 $2,019,166
Data: ========== ========== ========== ========== ==========
Portfolio turnover 28.34% 43.86% 22.50% 33.12% 23.20%
========== ========== ========== ========== ==========
|
*Total investment returns exclude the effects of sales loads.
See Notes to Financial Statements.
|
FINANCIAL HIGHLIGHTS
Insured Portfolio
-----------------------------------------------------------
The following per share data and ratios Class B
have been derived from information -----------------------------------------------------------
provided in the financial statements. For the Year Ended June 30,
-----------------------------------------------------------
Increase (Decrease) in Net Asset Value: 1994 1993 1992 1991 1990
Per Share Net asset value, beginning of year $ 8.63 $ 8.26 $ 7.92 $ 7.86 $ 7.97
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .40 .44 .46 .48 .49
Realized and unrealized gain (loss) on
investments--net (.53) .48 .41 .12 (.11)
---------- ---------- ---------- ---------- ----------
Total from investment operations (.13) .92 .87 .60 .38
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.40) (.44) (.46) (.48) (.49)
Realized gain on investments--net (.23) (.11) (.07) (.06) --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.63) (.55) (.53) (.54) (.49)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 7.87 $ 8.63 $ 8.26 $ 7.92 $ 7.86
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share (1.81%) 11.45% 11.27% 8.02% 4.98%
Return:* ========== ========== ========== ========== ==========
Ratios to Expenses, excluding distribution fees .42% .43% .44% .45% .47%
Average Net ========== ========== ========== ========== ==========
Assets: Expenses 1.17% 1.18% 1.19% 1.20% 1.22%
========== ========== ========== ========== ==========
Investment income--net 4.78% 5.17% 5.69% 6.13% 6.27%
========== ========== ========== ========== ==========
|
Supplemental Net assets, end of year (in thousands) $ 866,193 $ 911,307 $ 706,016 $ 537,755 $ 408,641
Data: ========== ========== ========== ========== ==========
Portfolio turnover 28.34% 43.86% 22.50% 33.12% 23.20%
========== ========== ========== ========== ==========
*Total investment returns exclude the effects of sales loads.
See Notes to Financial Statements.
|
FINANCIAL HIGHLIGHTS (concluded)
National Portfolio
-----------------------------------------------------------
The following per share data and ratios Class A
have been derived from information -----------------------------------------------------------
provided in the financial statements. For the Year Ended June 30,
-----------------------------------------------------------
Increase (Decrease) in Net Asset Value: 1994 1993 1992 1991 1990
Per Share Net asset value beginning of year $ 11.02 $ 10.64 $ 10.17 $ 10.12 $ 10.31
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .62 .67 .71 .73 .74
Realized and unrealized gain (loss) on
investments--net (.64) .57 .58 .05 (.19)
---------- ---------- ---------- ---------- ----------
Total from investment operations (.02) 1.24 1.29 .78 .55
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.62) (.67) (.71) (.73) (.74)
Realized gain on investments--net (.30) (.19) (.11) -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.92) (.86) (.82) (.73) (.74)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 10.08 $ 11.02 $ 10.64 $ 10.17 $ 10.12
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share (0.47%) 12.21% 13.09% 7.94% 5.53%
Return:** ========== ========== ========== ========== ==========
|
Ratios to Expenses, excluding distribution fees .55% .55% .55% .55% .55%
Average Net ========== ========== ========== ========== ==========
Assets: Expenses .55% .55% .55% .55% .55%
========== ========== ========== ========== ==========
Investment income--net 5.72% 6.23% 6.80% 7.20% 7.27%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year (in thousands) $1,203,181 $1,353,805 $1,278,055 $1,255,820 $1,365,541
Data: ========== ========== ========== ========== ==========
Portfolio turnover 73.33% 65.43% 50.94% 75.25% 48.80%
========== ========== ========== ========== ==========
FINANCIAL HIGHLIGHTS (concluded)
National Portfolio
-----------------------------------------------------------
The following per share data and ratios Class B
have been derived from information -----------------------------------------------------------
provided in the financial statements. For the Year Ended June 30,
-----------------------------------------------------------
Increase (Decrease) in Net Asset Value: 1994 1993 1992 1991 1990
Per Share Net asset value beginning of year $ 11.02 $ 10.63 $ 10.16 $ 10.11 $ 10.30
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .54 .59 .63 .65 .66
Realized and unrealized gain (loss) on
investments--net (.65) .58 .58 .05 (.19)
---------- ---------- ---------- ---------- ----------
Total from investment operations (.11) 1.17 1.21 .70 .47
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.54) (.59) (.63) (.65) (.66)
Realized gain on investments--net (.30) (.19) (.11) -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.84) (.78) (.74) (.65) (.66)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 10.07 $ 11.02 $ 10.63 $ 10.16 $ 10.11
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share (1.39%) 11.47% 12.25% 7.14% 4.74%
Return:** ========== ========== ========== ========== ==========
Ratios to Expenses, excluding distribution fees .55% .56% .56% .56% .56%
Average Net ========== ========== ========== ========== ==========
Assets: Expenses 1.30% 1.31% 1.31% 1.31% 1.31%
========== ========== ========== ========== ==========
Investment income--net 4.97% 5.46% 6.03% 6.43% 6.52%
========== ========== ========== ========== ==========
|
Supplemental Net assets, end of year (in thousands) $ 459,169 $ 424,071 $ 286,375 $ 213,581 $ 179,362
Data: ========== ========== ========== ========== ==========
Portfolio turnover 73.33% 65.43% 50.94% 75.25% 48.80%
========== ========== ========== ========== ==========
Limited Maturity Portfolio
-------------------------------------------------
Class A
-------------------------------------------------
The following per share data and ratios have been derived
from information provided in the financial statements.
For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: 1994 1993 1992 1991 1990
Per Share Net asset value, beginning of period $ 10.01 $ 9.91 $ 9.75 $ 9.71 $ 9.73
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .37 .41 .50 .57 .60
Realized and unrealized gain (loss) on investments--net (.14) .10 .16 .04 (.02)
-------- -------- -------- -------- --------
Total from investment operations .23 .51 .66 .61 .58
-------- -------- -------- -------- --------
Less dividends:
Investment income--net (.37) (.41) (.50) (.57) (.60)
-------- -------- -------- -------- --------
Net asset value, end of period $ 9.87 $ 10.01 $ 9.91 $ 9.75 $ 9.71
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 2.30% 5.28% 6.93% 6.45% 6.16%
Return:** ======== ======== ======== ======== ========
Ratios to Expenses, excluding distribution fees .40% .41% .40% .40% .40%
Average Net ======== ======== ======== ======== ========
Assets: Expenses .40% .41% .40% .40% .40%
======== ======== ======== ======== ========
Investment income--net 3.68% 4.13% 5.02% 5.88% 6.21%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $790,142 $846,736 $613,407 $350,549 $352,005
Data: ======== ======== ======== ======== ========
Portfolio turnover 45.67% 65.43% 96.32% 93.06% 106.44%
======== ======== ======== ======== ========
|
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
++++Aggregate total investment return.
See Notes to Financial Statements.
Limited Maturity Portfolio
--------------------------
Class B
--------------------------
For the
For the Period
The following per share data and ratios have been derived Year Nov. 2,
from information provided in the financial statements. Ended 1992++ to
June 30, June 30,
Increase (Decrease) in Net Asset Value: 1994 1993
Per Share Net asset value, beginning of period $ 10.01 $ 9.93
Operating -------- --------
Performance: Investment income--net .33 .24
Realized and unrealized gain (loss) on investments--net (.14) .08
-------- --------
Total from investment operations .19 .32
-------- --------
Less dividends:
Investment income--net (.33) (.24)
-------- --------
Net asset value, end of period $ 9.87 $ 10.01
======== ========
Total Investment Based on net asset value per share 1.98% 3.26%++++
Return:** ======== ========
Ratios to Expenses, excluding distribution fees .41% .41%*
Average Net ======== ========
Assets: Expenses .76% .76%*
======== ========
Investment income--net 3.33% 3.60%*
======== ========
Supplemental Net assets, end of period (in thousands) $145,534 $ 95,179
Data: ======== ========
Portfolio turnover 45.67% 65.43%
======== ========
|
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
++++Aggregate total investment return.
See Notes to Financial Statements.
|
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Municipal Bond Fund, Inc. (the "Fund") is
registered under the Investment Company Act of 1940 as a
diversified, open-end management investment company. The Fund's
Portfolios offer Class A and Class B Shares. Class A Shares are
sold with a front-end sales charge. Class B Shares may be subject
to a contingent deferred sales charge. Both classes of shares
have identical voting, dividend, liquidation and other rights and
the same terms and conditions, except that Class B Shares bear
certain expenses related to the distribution of such shares and
have exclusive voting rights with respect to matters relating to
such distribution expenditures. The following is a summary of
significant accounting policies followed by the Fund.
(a)Valuation of investments--Insured Portfolio: Where bonds in the Portfolio have not been insured pursuant to policies obtained by the issuer, the Fund has obtained insurance with respect to the payment of interest and principal of each bond. Such insurance is valid as long as the bonds are held by the Fund.
All Portfolios: Municipal bonds and money market securities are traded primarily in the over-the-counter markets and are valued at the most recent bid price or yield equivalent as obtained from dealers that make markets in such securities. Positions in futures contracts are valued at closing prices as of the close of such exchanges. Options, which are traded on exchanges, are valued at their last sale price as of the close of such exchanges or, lacking any sales, at the last available bid price. Assets for which market quotations are not readily available are valued at fair value on a consistent basis using methods determined in good faith by the Fund's Board of Directors, including valuations furnished by a pricing service retained by the Fund, which may utilize a matrix system for valuations.
(b)Financial futures contracts--The National and Limited Maturity Portfolios (the "Portfolios") may purchase or sell interest rate futures contracts and options on such futures contracts for the purpose of hedging the market risk on existing 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 Portfolios deposit and maintain as collateral such initial margin as required by the exchange on which the transaction is effected. Pursuant to the contract, the Portfolios agree 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 Portfolios as unrealized gains or losses. When the contract is closed, the Portfolios record 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 expenses on a straight-line basis over a five-year period. Costs related to the organization of the second class of shares are charged to expense over a period not exceeding five years. Prepaid registration fees are charged to expenses 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.
2. Investment Advisory Agreement and Transactions
with Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Fund Asset Management, L.P. ("FAM"). Effective January 1, 1994
the investment advisory business of FAM was reorganized from a
corporation to a limited partnership. Both prior to and after the
reorganization, ultimate control of FAM was vested with Merrill
Lynch & Co., Inc. ("ML & Co."). The general partner of FAM is
Princeton Services, Inc., an indirect wholly-owned subsidiary
of ML & Co. The limited partners are ML & Co. and Fund Asset
Management, Inc. ("FAMI"), which is also an indirect wholly-owned
subsidiary of ML & Co. The Fund also entered into Distribution
Agreements and a Distribution Plan with Merrill Lynch Funds
Distributor, Inc. ("MLFD" or the "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Investment Management, Inc.
FAM is responsible for the management of the Fund's Portfolios and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of the Fund. For such services, FAM receives at the end of each month a fee with respect to each Portfolio at the annual rates set forth below which are based upon the average daily value of the Fund's net assets.
Rate of Advisory Fee
Aggregate of Average Daily Limited
Net Assets of the Three Insured National Maturity
Combined Portfolios Portfolio Portfolio Portfolio
Not exceeding $250 million 0.40 % 0.50 % 0.40 %
In excess of $250 million but not
exceeding $400 million. 0.375 0.475 0.375
In excess of $400 million but not
exceeding $550 million 0.375 0.475 0.35
In excess of $550 million but not
exceeding $1.5 billion 0.375 0.475 0.325
In excess of $1.5 billion 0.35 0.475 0.325
|
The Investment Advisory Agreement obligates FAM to reimburse the Fund to the extent that the Fund's expenses (excluding interest, taxes, distribution fees, brokerage fees and commissions and extraordinary items) exceed 2.5% of the Fund's first $30 million of average daily net assets, 2.0% of the Fund's next $70 million of average daily net assets, and 1.5% of the average daily net assets in excess thereof. No fee payment will be made to FAM with respect to any Portfolio during any fiscal year which will cause the expenses of such Portfolio to exceed the pro rata expense limitation applicable to such Portfolio at the time of such payment.
The Fund has adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940 pursuant to which MLFD receives a distribution fee from the Fund for the sale of Class B Shares of the Portfolios at the end of each month at the annual rate of 0.50% (in the case of the Insured Portfolio and the National Portfolio) or 0.25% (in the case of the Limited Maturity Portfolio) and an account maintenance fee at the annual rate of 0.25% (in the case of the Insured Portfolio and the National Portfolio) or 0.10% (in the case of the Limited Maturity Portfolio) of the average daily net assets of the Class B Shares of the respective Portfolios. Pursuant to a sub-agreement with the Distributor, Merrill Lynch also provides the account maintenance and distribution services to the Fund. The ongoing account maintenance fee compensates the Distributor and Merrill Lynch for providing account maintenance services to Class B shareholders. This fee is to compensate the Distributor for services provided and the expenses borne by it under the Plan. As authorized by the Plan, the Distributor has entered into an agreement with Merrill Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S"), an affiliate of Merrill Lynch Investment Management, Inc., which provides for the compensation of MLPF&S for providing distribution-related services to the Fund.
For the year ended June 30, 1994, MLFD earned underwriting discounts, and MLPF&S earned dealer concessions on sales of the Fund's Class A Shares as follows:
Insured National Limited Maturity
Portfolio Portfolio Portfolio
MLFD $1,456,474 $103,594 $657,688
MLPF&S 151,583 977,865 88,660
|
MLPF&S received contingent deferred sales charges of $2,370,916 relating to transactions in Class B Shares, amounting to $1,469,123, $718,890 and $190,903 in the Insured, National and Limited Maturity Portfolios, 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 directors of the Fund are officers and/or directors of FAM, FAMI, MLFD, FDS, MLPF&S, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term
securities, for the year ended June 30, 1994 were as follows:
Purchases Sales
Insured Portfolio $ 819,735,196 $ 1,269,238,817
National Portfolio 1,217,057,053 1,382,174,524
Limited Maturity Portfolio 478,060,792 393,735,111
|
Net realized and unrealized gains (losses) as of June 30, 1994 were as follows:
Realized Unrealized
Insured Portfolio Gains Gains
Long-term investments $ 80,935,129 $ 12,315,934
-------------- ---------------
Total $ 80,935,129 $ 12,315,934
============== ===============
Realized Unrealized
National Portfolio Gains Losses
Long-term investments $ 43,882,749 $ (36,461,286)
Short-term investments 297,749 --
Financial future contracts on options 17,828,347 --
-------------- ---------------
Total $ 62,008,845 $ (36,461,286)
============== ===============
Realized Unrealized
Limited Maturity Portfolio Losses Losses
Long-term investments $ (903,904) $ (1,387,594)
Short-term investments (64,432) --
-------------- ---------------
Total $ (968,336) $ (1,387,594)
============== ===============
|
As of June 30, 1994, net unrealized appreciation/depreciation for Federal income tax purposes were as follows:
Gross Gross Net Unrealized
Unrealized Unrealized Appreciation
Appreciation Depreciation (Depreciation)
Insured Portfolio $105,945,234 $93,629,300 $ 12,315,934
National Portfolio 37,049,072 73,510,358 (36,461,286)
Limited Maturity Portfolio 3,054,399 4,441,993 (1,387,594)
|
The aggregate cost of investments at June 30, 1994 for Federal income tax purposes was $2,690,285,866 for the Insured Portfolio, $1,634,000,759 for the National Portfolio, and $936,307,940 for the Limited Maturity Portfolio.
4. Capital Share Transactions:
Net increase (decrease) in net assets derived from capital share
transactions for the years ended June 30, 1994 and June 30, 1993
were ($52,099,956) and $235,653,905, respectively, for the Insured
Portfolio; $44,114,517 and $153,435,527, respectively, for the
National Portfolio and $7,793,356 and $321,893,595, respectively,
for the Limited Maturity Portfolio.
Transactions in capital shares for Class A and Class B Shares were as follows:
Insured Portfolio
Class A Shares for the Year Dollar
Ended June 30, 1994 Shares Amount
Shares sold 33,131,876 $ 280,935,110
Shares issued to shareholders in
reinvestment of dividends and
distributions 9,445,296 80,198,475
----------- --------------
Total issued 42,577,172 361,133,585
Shares redeemed (53,818,184) (453,958,624)
----------- --------------
Net decrease (11,241,012) $ (92,825,039)
=========== ==============
Insured Portfolio
Class A Shares for the Year Dollar
Ended June 30, 1993 Shares Amount
Shares sold 32,564,428 $ 274,538,370
Shares issued to shareholders in
reinvestment of dividends and
distributions 8,286,565 69,474,166
----------- --------------
Total issued 40,850,993 344,012,536
Shares redeemed (32,853,753) (276,837,512)
----------- --------------
Net increase 7,997,240 $ 67,175,024
=========== ==============
|
Insured Portfolio
Class B Shares for the Year Dollar
Ended June 30, 1994 Shares Amount
Shares sold 21,671,550 $ 184,351,353
Shares issued to shareholders in
reinvestment of dividends and
distributions 4,290,552 36,402,265
----------- --------------
Total issued 25,962,102 220,753,618
Shares redeemed (21,552,384) (180,028,535)
----------- --------------
Net increase 4,409,718 $ 40,725,083
=========== ==============
Insured Portfolio
Class B Shares for the Year Dollar
Ended June 30, 1993 Shares Amount
Shares sold 32,402,900 $ 272,169,578
Shares issued to shareholders in
reinvestment of dividends and
distributions 3,185,099 26,690,639
----------- --------------
Total issued 35,587,999 298,860,217
Shares redeemed (15,508,409) (130,381,336)
----------- --------------
Net increase 20,079,590 $ 168,478,881
=========== ==============
National Portfolio
Class A Shares for the Year Dollar
Ended June 30, 1994 Shares Amount
Shares sold 8,490,083 $ 92,184,282
Shares issued to shareholders in
reinvestment of dividends and
distributions 5,189,718 56,058,472
----------- --------------
Total issued 13,679,801 148,242,754
Shares redeemed (17,141,264) (182,785,636)
----------- --------------
Net decrease (3,461,463) $ (34,542,882)
=========== ==============
|
National Portfolio
Class A Shares for the Year Dollar
Ended June 30, 1993 Shares Amount
Shares sold 11,991,383 $ 128,971,704
Shares issued to shareholders in
reinvestment of dividends and
distributions 4,869,454 52,127,903
----------- --------------
Total issued 16,860,837 181,099,607
Shares redeemed (14,162,108) (152,405,959)
----------- --------------
Net increase 2,698,729 $ 28,693,648
=========== ==============
National Portfolio
Class B Shares for the Year Dollar
Ended June 30, 1994 Shares Amount
Shares sold 14,847,862 $ 161,270,898
Shares issued to shareholders in
reinvestment of dividends and
distributions 1,710,325 18,453,990
----------- --------------
Total issued 16,558,187 179,724,888
Shares redeemed (9,473,731) (101,067,489)
----------- --------------
Net increase 7,084,456 $ 78,657,399
=========== ==============
National Portfolio
Class B Shares for the Year Dollar
Ended June 30, 1993 Shares Amount
Shares sold 17,460,542 $ 188,034,227
Shares issued to shareholders in
reinvestment of dividends and
distributions 1,136,290 12,165,013
----------- --------------
Total issued 18,596,832 200,199,240
Shares redeemed (7,032,886) (75,457,361)
----------- --------------
Net increase 11,563,946 $ 124,741,879
=========== ==============
|
Limited Maturity Portfolio
Class A Shares for the Year Dollar
Ended June 30, 1994 Shares Amount
Shares sold 37,619,639 $ 375,440,124
Shares issued to shareholders in
reinvestment of dividends 1,983,800 19,748,994
----------- --------------
Total issued 39,603,439 395,189,118
Shares redeemed (44,144,662) (439,707,786)
----------- --------------
Net decrease (4,541,223) $ (44,518,668)
=========== ==============
Limited Maturity Portfolio
Class A Shares for the Year Dollar
Ended June 30, 1993 Shares Amount
Shares sold 56,244,112 $ 561,589,090
Shares issued to shareholders in
reinvestment of dividends 1,844,279 18,415,744
----------- --------------
Total issued 58,088,391 580,004,834
Shares redeemed (35,373,885) (353,118,455)
----------- --------------
Net increase 22,714,506 $ 226,886,379
=========== ==============
Limited Maturity Portfolio
Class B Shares for the Year Dollar
Ended June 30, 1994 Shares Amount
Shares sold 10,622,252 $ 105,858,053
Shares issued to shareholders in
reinvestment of dividends 284,833 2,836,330
----------- --------------
Total issued 10,907,085 108,694,383
Shares redeemed (5,671,375) (56,382,359)
----------- --------------
Net increase 5,235,710 $ 52,312,024
=========== ==============
|
Limited Maturity Portfolio
Class B Shares for the Period Dollar
Nov. 2, 1992++ to June 30, 1993 Shares Amount
Shares sold 10,536,340 $ 105,289,015
Shares issued to shareholders in
reinvestment of dividends 69,735 697,915
----------- --------------
Total issued 10,606,075 105,986,930
Shares redeemed (1,096,869) (10,979,714)
----------- --------------
Net increase 9,509,206 $ 95,007,216
=========== ==============
|
++Commencement of Operations.
5. Capital Loss Carryforward:
At June 30, 1994, the Fund had a net capital loss carryforward of
approximately $4,250,000 in the Limited Maturity Portfolio, of
which $1,416,000 expires in 1997, $2,787,000 expires in 1998,
$22,000 expires in 1999 and $25,000 expires in 2002. These will
be available to offset like amounts of any future taxable gains.
INVESTMENT ADVISER
Fund Asset Management
P.O. Box 9011
Princeton, New Jersey 08543-9011
DISTRIBUTOR
Merrill Lynch Funds Distributor, Inc.
P.O. Box 9011
Princeton, New Jersey 08543-9011
(609) 282-2800
CUSTODIAN
The Bank of New York
90 Washington Street, 12th Floor
New York, New York 10286
TRANSFER AGENT
Financial Data Services, Inc.
ADMINISTRATIVE OFFICES
TRANSFER AGENCY
Mutual Funds Operations
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
MAILING ADDRESS
P.O. Box 45289
Jacksonville, Florida 32223-5289
LEGAL COUNSEL
Rogers & Wells
200 Park Avenue
New York, New York 10166
INDEPENDENT AUDITORS
Deloitte & Touche LLP
117 Campus Drive
Princeton, New Jersey 08540
====================================================== ======================================================
Statement of
Additional Information
TABLE OF CONTENTS
Page
----
Investment Objective and Policies..... 2
Current Investment Restrictions....... 4
Management of the Fund................ 8
Net Asset Value....................... 12
Portfolio Transactions ............... 13
Purchase of Shares.................... 14
Alternative Sales Arrangement......... 14
Initial Sales Charge Alternatives- (ART APPEARS HERE)
Class A and Class D Shares........ 14
Deferred Sales Charge Alternative-
Class B Shares.................... 18
Redemption of Shares.................. 22
Reinstatement Privilege............. 22
Deferred Sales Charge-Class B Shares 22
Dividends, Distributions and Taxes.... 23
Systematic Withdrawal Plans........... 26
Exchange Privilege.................... 27
Performance Data ..................... 38
Additional Information ............... 41 MERRILL LYNCH
Description of Municipal Bonds...... 41 MUNICIPAL BOND
Description of Temporary Investments 43 FUND, INC.
Insurance on Portfolio Securities... 43
Description of Financial Futures
Contracts ........................ 45
Computation of Offering Price per
Share.............................. 49
Independent Auditors' Report.......... 51
Financial Statements.................. 52
Code #10130-1094
Distributor:
Merrill Lynch
Funds Distributor, Inc.
October 21, 1994
====================================================== ======================================================
|
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
Contained in Part A:
Financial Highlights for each of the years in the ten year period ended June 30, 1994.
Contained in Part B:
Schedules of Investments, as of June 30, 1994.
Statements of Assets and Liabilities, as of June 30, 1994.
Statements of Operations for the year ended June 30, 1994.
Statements of Changes in Net Assets for the years ended June 30, 1994 and 1993.
Financial Highlights for each of the years in the five year period ended June 30, 1994.
(b) Exhibits:
1. (a) Articles of Incorporation (incorporated by reference to Exhibit 1 to Post-Effective Amendment No. 4 to Registrant's Registration Statement on Form N-1, filed October 31, 1980 (Post-Effective Amendment No. 4).
(b) Articles of Amendment (incorporated by reference to Exhibit 1 to Post-Effective Amendment No. 13 to Registrant's Registration Statement on Form N-1A, filed October 12, 1988 (Post-Effective Amendment No. 13).
(c) Articles Supplementary to the Articles of Incorporation increasing the authorized capital stock of the Insured Portfolio (incorporated by reference to Exhibit 1(c) to Post-Effective Amendment No. 15 to Registrant's Registration Statement on Form N-1A, filed October 29, 1990 (Post-Effective Amendment No. 15).
(d) Articles Supplementary to the Articles of Incorporation establishing Class B Common Stock of Limited Maturity Portfolio (incorporated by reference to Exhibit 1(d) to Post-Effective Amendment No. 16).
2. By-Laws (incorporated by reference to Exhibit 2 to Post-Effective Amendment No. 13).
3. Inapplicable.
4. (a) Specimen certificates for Class A shares of Insured Portfolio Series and National Portfolio Series Common Stock of Registrant (incorporated by reference to Exhibit 4 to Post-Effective Amendment No. 13).
(b) Specimen certificates for Class B shares of Insured Portfolio Series and National Portfolio Series Common Stock of Registrant (incorporated by reference to Exhibit 4 to Post-Effective Amendment No. 13).
(c) Specimen certificates for Class A shares of Limited Maturity Portfolio Series Common Stock of Registrant (incorporated by reference to Exhibit 4 to Post-Effective Amendment No. 4).
5. Advisory Agreement between Registrant and Fund Asset Management, Inc. (incorporated by reference to Exhibit 5 to Post-Effective Amendment No. 4).
6. (a) Form of Amended Class A Distribution Agreement between Registrant and Merrill Lynch Funds Distributor, Inc. (including form of Selected Dealers Agreement (included herein).
(c) Form of Class C Distribution Agreement between Registrant and Merrill Lynch Funds Distribution Inc. (including form of Selected Dealers Agreement) (included herein).
(d) Form of Class D Distribution Agreement between Registrant and Merrill Lynch Funds Distributor, Inc. (including form of Selected Dealers Agreement) (included herein)
7. Inapplicable.
8. Custodian Agreement between Registrant and The Bank of New York (incorporated by reference to Exhibit 8 to Post-Effective Amendment No. 4).
9. (a) Transfer Agency. Dividend Disbursing Agency and Shareholder Servicing Agency Agreement between Insured Portfolio of Registrant and Financial Data Services, Inc. (incorporated by reference to Exhibit 9 to Post-Effective Amendment No. 13).
(b) Transfer Agency, Dividend Disbursing Agency and Shareholder Servicing Agency Agreement between National Portfolio of Registrant and Financial Data Services, Inc. (incorporated by reference to Exhibit 9 to Post-Effective Amendment No. 13).
(c) Transfer Agency, Dividend Disbursing Agency and Shareholder Servicing Agency Agreement between Limited Maturity Portfolio of Registrant and Merrill Lynch Financial Data Services, Inc. (incorporated by reference to Post-Effective Amendment No. 13).
10. (a) Inapplicable. (Filed with Rule 24f-2 Notice).
11. Consent of Deloitte & Touche LLP (included herein).
12. Inapplicable.
13. (a) Letter from Fund Asset Management, Inc. with respect to the purchase of 10,417 shares of Registrant's Common Stock (incorporated by reference to Exhibit 13 to Post-Effective Amendment No. 3 to Registrant's Registration Statement on Form N-1, filed August 10, 1979).
(b) Letter from Fund Asset Management, L.P. with respect to the purchase of shares of Registrant's Class C and Class D Common Stock of the Insured Portfolio (included herein).
(c) Letter from Fund Asset Management, L.P. with respect to the purchase of shares of Registrant's Class C and Class D Common Stock of the National Portfolio (included herein).
(d) Letter from Fund Asset Management, L.P. with respect to the purchase of shares of Registrant's Class C and Class D Common Stock of the Limited Maturity Portfolio (included herein).
14. Inapplicable.
15. (a) Amended and Restated Class B Distribution Plan of Registrant (including Class B Distribution Plan Sub-Agreement).
(b) Form of Class C Distribution Plan of Registrant (including Class C Distribution Plan Sub-Agreement) (included herein)
(c) Form of Class D Distribution Plan of Registrant (including Class D Distribution Plan Sub-Agreement) (included herein)
16. (a) Schedule for computation of each performance quotation for the Class B shares of the Insured Portfolio and National Portfolio provided in the Registration Statement in response to Item 22 (incorporated by reference to Exhibit 16 to Post-Effective Amendment No. 14 to Registrant's Registration Statement on Form N-1A, filed October 27, 1989).
(b) Schedule for computation of each performance quotation for the Class A shares of the Insured Portfolio and National Portfolio and the shares of the Limited Maturity Portfolio provided in the Registration Statement in response to Item 22 (incorporated by reference to Exhibit 16 to Post-Effective Amendment No. 13).
(c) Schedule for computation of each performance quotation for the Class B shares of the Limited Maturity Portfolio provided in Registration Statement in response to Item 22 (incorporated by reference to Exhibit 16 to Post Effective Amendment No. 14 to Registrant's Registration Statement on Form N-1A).
17.(a) Financial Data Schedule-Class A shares.
17.(b) Financial Data Schedule-Class B shares.
18. (a) Power of Attorney for Cynthia A. Montgomery (included herein).
Item 25. Persons Controlled by or under Common Control with Registrant.
Inapplicable.
Item 26. Number of Holders of Securities.
Number of Record
Holders at
Title of Class August 31, 1994
-------------- ---------------
Insured Portfolio Series-- Class A Common Stock.................................... 9,935
Class B Common Stock.................................... 1,691
Class C Common Stock.................................... 0
Class D Common Stock.................................... 0
National Portfolio Series-- Class A Common Stock.................................... 6,831
Class B Common Stock.................................... 765
Class C Common Stock.................................... 0
Class D Common Stock.................................... 0
Limited Maturity Portfolio-- Class A Common Stock.................................... 1,494
Class B Common Stock.................................... 84
Class C Common Stock.................................... 0
Class D Common Stock.................................... 0
|
Item 27. Indemnification.
Reference is made to Article VI of Registrant's Articles of Incorporation, Article VI of Registrant's By-Laws, Section 2-418 of the Maryland General Corporation Law and Section 9 of the Distribution Agreement.
Item 28. Business and Other Connections of Investment Adviser.
Fund Asset Management, L.P. (the "Investment Adviser") acts as the
investment adviser for the following investment companies: Apex Municipal
Fund, Inc., Merrill Lynch Basic Value Fund, Inc., Merrill Lynch California
Municipal Series Trust, Merrill Lynch Corporate High Yield Fund, Inc.,
Merrill Lynch Corporate High Yield Fund II, Inc., Merrill Lynch Corporate
Bond Fund, Inc., Merrill Lynch Federal Securities Trust, Merrill Lynch
Funds For Institutions Series, Merrill Lynch Multi-State Limited Maturity
Municipal Series Trust, Merrill Lynch Multi-State Municipal Series Trust,
Merrill Lynch Municipal Bond Fund, Inc., Merrill Lynch High Income
Municipal Bond Fund, Inc., MuniYield California Fund, Inc., Muni Yield
California Insured Fund, Inc., MuniYield Florida Fund, MuniYield Florida
Insured Fund, MuniYield Michigan Fund, Inc., MuniYield Michigan Insured
Fund, Inc., MuniYield New York Insured Fund, Inc., Muni Yield New York
Insured Fund II, Inc., MuniYield New York Insured Fund III, MuniYield
Pennsylvania Fund, Inc., MuniYield Fund, Inc., Muni Yield Quality Fund,
Inc., Emerging Tigers Fund, Inc., MuniYield Quality Fund II, Inc., Senior
High Income Portfolio, Inc., Senior High Income Portfolio, II, Inc.,
MuniInsured Fund, Inc., MuniYield Insured Fund II, Inc., Merrill Lynch
Phoenix Fund, Inc., Merrill Lynch Special Value Fund, Inc., CBA Money
Fund, CMA Government Securities Fund, CMA Treasury Fund, CMA Money Fund,
CMA Tax-Exempt Fund, Financial Institutions Series Trust, Income
Opportunities Fund 1999, Inc., Income Opportunities Fund 2000, Inc., The
Corporate Fund Accumulation Program, Inc., The Municipal Fund Accumulation
Program, Inc., CMA Multi-State Municipal Series Trust, MuniEnhanced Fund,
Inc., Senior Strategic Income Fund, Inc., Taurus MuniCalifornia Holdings,
Inc., Taurus MuniNew York Holdings, Inc., Worldwide DollarVest, Inc.,
MuniVest Fund, Inc., MuniVest Fund II, Inc., MuniVest California Insured
Fund, Inc., MuniVest Florida Fund, MuniVest Michigan Insured Fund, Inc.,
MuniVest New Jersey Fund, Inc., MuniVest New York Insured Fund, Inc.,
MuniVest Pennsylvania Insured Fund, Muni Yield Arizona Fund Inc.,
MuniYield Arizona Fund II, Inc., MuniYield California Insured Fund II,
Inc., MuniYield Insured Fund, Inc., MuniYield New Jersey Fund, Inc.,
MuniYield New Jersey Insured Fund, Inc. and World Income Fund, Inc.
Merrill Lynch Investment Management, Inc. (doing business as Merrill Lynch
Asset Management "MLAM"), the parent of the Investment Adviser, acts as
investment adviser for the following registered investment companies:
Merrill Lynch Adjustable Rate Securities Fund, Inc., Convertible Holdings,
Inc., Merrill Lynch Americas Income Fund, Inc., Merrill Lynch Balanced
Fund for Investment and Retirement, Merrill Lynch Capital Fund, Inc.,
Merrill Lynch Developing Capital Markets Fund, Inc., Merrill Lynch Dragon
Fund, Inc., Merrill Lynch EuroFund, Merrill Lynch
Fund For Tomorrow, Inc., Merrill Lynch Fundamental Growth Fund, Inc., Merrill Lynch Global Allocation Fund, Inc., Merrill Lynch Global Bond Fund for Investment and Retirement, Merrill Lynch Global Small Cap Fund, Inc., Merrill Lynch Global Convertible Fund, Inc., Merrill Lynch Global Utility Fund, Inc., Merrill Lynch High Income Municipal Bond Fund, Inc., Merrill Lynch Growth Fund for Investment and Retirement, Merrill Lynch Healthcare Fund, Merrill Lynch Institutional Intermediate Fund, Merrill Lynch International Equity Fund, Merrill Lynch Global Holdings, Inc., Merrill Lynch Latin America Fund, Inc., Merrill Lynch Senior Floating Rate Fund, Inc., Merrill Lynch Municipal Series Trust, Merrill Lynch Natural Resources Trust, Merrill Lynch Pacific Fund, Inc., Merrill Lynch Ready Assets Trust, Merrill Lynch Balanced Fund for Investment and Retirement, Merrill Lynch Global Bond Fund for Investment and Retirement, Merrill Lynch Retirement Series Trust, Merrill Lynch Series Fund, Inc., Merrill Lynch Short-Term Global Income Fund, Inc., Merrill Lynch Strategic Dividend Fund, Merrill Lynch Technology Fund, Merrill Lynch Utility Income Fund, Inc., Merrill Lynch Variable Series Funds, Inc., Merrill Lynch U.S.A. Government Reserves, Merrill Lynch U.S. Treasury Money Fund and (residents of Wisconsin must meet investor suitability requirements). The address of each of these investment companies is P.O. Box 9011, Princeton, New Jersey 08543-9011, except that the address of Merrill Lynch Funds For Institutions Series, also Merrill Lynch Institutional Intermediate Fund and is One Financial Center, 15th Floor, Boston, Massachusetts 02111-2665. The address of the Investment Adviser and of Merrill Lynch Funds Distributor, Inc. (the 'Distributor'), and their parent corporation, Merrill Lynch Asset Management ("MLAM"), is also P.O. Box 9011, Princeton, New Jersey 08543-9011. The address of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and Merrill Lynch & Co., Inc. is World Financial Center, North Tower, 250 Vesey Street, New York, New York 10281. The address of Financial Data Services is 4800 Deer Lake Drive East, Jacksonville, Florida 32246-6484.
Set forth below is a list of each officer and director of the Investment Adviser indicating each business, profession, vocation or employment of a substantial nature in which each such person has been engaged since November 30, 1987 for his own account or in the capacity of director, officer, partner or trustee. In addition, Messrs. Zeikel, Glenn and Richard hold the same positions with substantially all of the investment companies described in the preceding paragraph and Messrs. Giordano, Harvey and Monagle are directors or officers of one or more of such companies. Messrs. Zeikel and Richard also hold the same positions with all or substantially all of the investment companies advised by MLAM as they do with the Investment Adviser. Messrs. Durnin, Giordano, Harvey, Hewitt, Kirstein, Richard, Monagle and Ms. Griffith are directors or officers of one or more of such companies.
Other Substantial Business,
Position with Profession, Vocation
Name Investment Adviser or Employment
---- ------------------ -------------
Arthur Zeikel....................... President and Director President and Director of MLAM;
Executive Vice President of Merrill
Lynch & Co. and Merrill Lynch;
Director of MLFD.
Terry K. Glenn...................... Executive Vice President and Executive Vice President of MLAM;
Director President and Director of MLFD;
Director of Financial Data Services,
Inc.
Robert W. Crook..................... Senior Vice President Senior Vice President of MLFD since
1990; Vice President of MLFD from
1978 to 1990 and Vice President of
Investment Adviser from 1981 to
1990.
Bernard J. Durnin................... Senior Vice President Senior Vice President of MLAM.
Vincent R. Giordano................. Senior Vice President Senior Vice President of MLAM.
Elizabeth Griffin................... Senior Vice President Senior Vice President of MLAM since
1983; Vice President of MLAM prior
thereto.
|
Other Substantial Business,
Position with Profession, Vocation
Name Investment Adviser or Employment
---- ------------------ -------------
Norman R. Harvey.................... Senior Vice President Senior Vice President of MLAM.
N. John Hewitt...................... Senior Vice President Senior Vice President of MLAM.
Philip L. Kirstein.................. Senior Vice President, General Senior Vice President, General
Counsel, Director and Secretary Counsel, Director and Secretary of
MLAM.
Ronald M. Kloss..................... Senior Vice President Senior Vice President and Controller
of MLAM.
Stephen M.M. Miller................. Senior Vice President Executive Vice President of
Princeton Administrators, Inc. since
1989; Vice President and Secretary
of Merrill Lynch from 1982 to 1989;
Secretary of Merrill Lynch & Co.
from 1982 to 1989.
Joseph T. Monagle................... Senior Vice President Senior Vice President of MLAM since
1990; Vice President of MLAM from
1978 to 1990.
Gerald M. Richard................... Senior Vice President Senior Vice President and Treasurer
and Treasurer of MLAM; Vice
President of MLFD since 1981 and
Treasurer since 1984.
Richard L. Rufener.................. Senior Vice President Senior Vice President of MLAM since
1986 and Vice President of MLFD.
Ronald L. Welburn................... Senior Vice President Senior Vice President of MLAM since
1988; Investment Fund Manager
Glickenhaus & Co. from 1983 to 1988.
Anthony Wiseman..................... Senior Vice President Senior Vice President of MLAM since
1991; Vice President from 1988 to
1991.
|
Item 29. Principal Underwriters.
(a) Merrill Lynch Funds Distributor, Inc. ("MLFD") acts as the principal underwriter for the Registrant. MLFD acts as the principal underwriter for each of the investment companies referred to in Item 28, except MuniInsured Fund, Inc., MuniVest Fund, Inc., MuniVest Fund II, Inc., MuniVest California Insured Fund, Inc., MuniVest Florida Fund, MuniVest Michigan Insured Fund, Inc., MuniVest New Jersey Fund, Inc., MuniVest New York Insured Fund, Inc., MuniVest Pennsylvania Fund, MuniYield Arizona Fund, MuniYield Arizona Fund, II, Inc., Apex Municipal Fund Inc., CMA Money Fund, CMA Government Securities Fund, CMA Tax-Exempt Fund, CBA Money Fund, CMA Multi-State Municipal Series Trust, MuniEnhanced Fund, Inc., Taurus MuniCalifornia Holdings, Inc., Taurus MuniNew York Holdings, Inc., The Corporate Fund Accumulation Program, Inc., Corporate High Yield Fund, Inc., Income Opportunities Fund 1999, Inc., Income Opportunities Fund 2000, Inc., MuniAssets Fund, Inc., MuniBond Income Fund, Inc., The Municipal Fund Accumulation Program, Inc., CMA Treasury Fund, Convertible Holdings, Inc., MuniYield California Fund, Inc., MuniYield Florida Fund, MuniYield Florida Insured Fund, Inc., MuniYield Michigan Fund, Inc., MuniYield Michigan Insured Fund, Inc., MuniYield New Jersey Fund, MuniYield New Jersey Insured Fund,
Inc., MuniYield New York Insured Fund, Inc., MuniYield New York Insured Fund II, Inc., MuniYield New York Insured Fund III, Inc., MuniYield Pennsylvania Fund, MuniYield Quality Fund, Inc., MuniYield Quality Fund II, Inc., Senior High Income Portfolio, Inc., Senior High Income Portfolio II, Inc., MuniYield Fund, Inc., MuniYield Insured Fund, Inc., MuniYield Insured Fund II, Inc., MuniYield California Insured Fund, Inc., WorldWide DollarVest, Inc. York Insured Fund II, Inc., MuniYield Quality Fund, Inc.
(b) Set forth below is information concerning each director and officer of MLFD. The principal business address of each such person is P.O. Box 9011, Princeton, New Jersey 08543-9011, except that the address of Messrs. Crook, Aldrich, Breen, Brady, Fatseas, Graczyk, Maguire and Wasel and Ms. Schena is One Financial Center, 15th Floor, Boston, Massachusetts 02111-2665.
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
---- ---------------- ---------------
Terry K. Glenn............................ President Trustee
Arthur Zeikel............................. Director None
Philip Kirstein........................... Director None
William E. Aldrich........................ Senior Vice President None
Robert W. Crook........................... Senior Vice President None
Gerald M. Richard......................... Vice President and Treasurer Treasurer
Sharon Creveling.......................... Vice President and Assistant None
Treasurer
Kevin P. Boman............................ Vice President None
Mark A. DeSario........................... Vice President None
Michelle T. Lau........................... Vice President None
Salvatore Venezia......................... Vice President None
Michael J. Brady.......................... Vice President None
William M. Breen.......................... Vice President None
James T. Fatseas.......................... Vice President None
|
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets all of the requirements for this Post-Effective Amendment to its Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the Township of Plainsboro and State of New Jersey on the 13 day of October, 1994.
MERRILL LYNCH MUNICIPAL BOND FUND, INC.
(Registrant)
/s/ ARTHUR ZEIKEL
By:-------------------------------------
Arthur Zeikel, President
|
Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registrant's Registration Statement has been signed below by the following persons in the capacities indicated and on the dates indicated.
Signature Title Date
--------- ----- -----
/s/ ARTHUR ZEIKEL President and Trustee October 13, 1994
-------------------------------------- (Principal Executive Officer)
(Arthur Zeikel)
/s/ GERALD M. RICHARD Treasurer (Principal October 13, 1994
-------------------------------------- Financial and Accounting Officer)
(Gerald M. Richard)
* Director October 13, 1994
--------------------------------------
Ronald W. Forbes
* Director October 13, 1994
--------------------------------------
Charles C. Reilly
* Director October 13, 1994
--------------------------------------
Kevin A. Ryan
* Director October 13, 1994
--------------------------------------
Richard R. West
* Director October 13, 1994
--------------------------------------
Marc A. White
/s/ ARTHUR ZEIKEL
*By:--------------------------------------- October 13, 1994
Arthur Zeikel
Attorney-in-Fact
|
EXHIBIT INDEX
Exhibit Page
Number Description No.
-------- ----------- ----
6(a) Form of Amended Class A Distribution Agreement (including Form of Selected Dealer Agreement)....
6(c) Form of Class C Shares Distribution Agreement (including Form of Selected Dealer Agreement).....
6(d) Form of Class D Shares Distribution Agreement (including Form of Selected Dealer Agreement).....
11 Consent of Deloitte & Touche LLP Independent Auditors...........................................
13(b) Investment Letter-Class C and D shares of the National Portfolio................................
13(c) Investment Letter-Class C and D shares of Insured Portfolio.....................................
13(d) Investment Letter-Class C and D shares of the Limited Maturity Portfolio........................
15(a) Amended and Restated Class B Distribution Plan of Registrant (including Class B Distribution
Plan Sub-Agreement..............................................................................
15(b) Form of Class C Distribution Plan of Registrant (including Class C Distribution Plan Sub-
Agreement)......................................................................................
15(c) Form of Class D Distribution Plan of Registrant (including Class D Distribution Plan
Sub-Agreement)..................................................................................
17.(a) Financial Data Schedule-Class A shares.
17.(b) Financial Data Schedule-Class B shares.
18(a) Power of Attorney for Cynthia A. Montgomery.....................................................
|
APPENDIX FOR GRAPHIC AND IMAGE MATERIAL
Pursuant to Rule 304 of Regulation S-T, the following table presents fair and accurate narrative descriptions of graphic and image material omitted from this EDGAR submission file due to ASCII-incompatibility and cross-references this material to the location of each occurrence in the text.
DESCRIPTION OF OMITTED LOCATION OF GRAPHIC
GRAPHIC OR IMAGE OR IMAGE IN TEXT
---------------------- -------------------
Compass plate, circular Back cover of Prospectus and
graph paper and Merrill Lynch back cover of Statement of
logo including stylized market Additional Information
bull
|
CLASS A SHARES
AMENDED DISTRIBUTION AGREEMENT
AGREEMENT made as of the 19th day of September, 1979 and amended this 21st day of October, 1994 between MERRILL LYNCH MUNICIPAL BOND FUND, INC., a Maryland corporation (the "Fund"), and MERRILL LYNCH FUNDS DISTRIBUTOR, INC., a Delaware corporation (the "Distributor").
W I T N E S S E T H :
WHEREAS, the Fund is engaged in business as a diversified open-end
investment company and is registered under the Investment Company Act of 1940,
as amended (the "Investment Company Act") and it is affirmatively in the
interest of the Fund to offer its shares for sale continuously pursuant to a
currently effective prospectus under the Securities Act of 1933, as amended (the
"Securities Act"); and
WHEREAS, the Fund is comprised of three separate Portfolios, each of
which pursues its investment objective through separate investment policies; and
WHEREAS, the Distributor is a securities firm engaged in the
business of selling shares of investment companies either directly to purchasers
or through other securities dealers; and
WHEREAS, the Fund and the Distributor wish to enter into an
agreement with each other with respect to the continuous offering of shares of
the Class A Common Stock of the Fund's three Portfolios in order to promote the
growth of the Fund and facilitate the distribution of its shares.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor. The Fund hereby appoints
the Distributor as the principal underwriter and distributor of the Fund to sell
shares of Class A Common Stock of each of the Fund's three Portfolios (which
shares are collectively referred to herein as "shares") to the public. The Fund
hereby agrees to sell shares of the Fund to the Distributor during the term of
this Agreement upon the terms and conditions herein set forth.
Section 2. Exclusive Nature of Duties. The Distributor shall be the
exclusive representative of the Fund to act as principal underwriter and
distributor, except that:
(a) The Fund may, upon written notice to the Distributor, from time
to time designate other principal underwriters and distributors of its
shares with respect to areas other than the United States as to which the
Distributor may have expressly waived in writing its right to act as such.
If such designation is deemed exclusive, the right of the Distributor
under this Agreement to sell shares in the areas so designated shall
terminate, but this Agreement shall remain otherwise in full effect until
terminated in accordance with the other provisions hereof.
(b) The exclusive rights granted to the Distributor to purchase
shares from the Fund shall not apply to shares of the Fund issued in
connection with the merger or consolidation of any other investment
company or personal holding company with the Fund or the acquisition by
purchase or otherwise of all
(or substantially all) the assets or the outstanding shares of any such
company by the Fund.
(c) Such exclusive rights shall also not apply to shares issued by
the Fund pursuant to reinvestment of dividends or capital gains
distributions.
(d) Such exclusive rights shall also not apply to shares issued by
the Fund pursuant to the reinstatement privilege afforded redeeming
shareholders.
Section 3. Purchase of Shares from the Fund.
(a) The Fund will offer its Class A shares and thereafter the
Distributor shall have the right to buy from the Fund the Class A shares needed,
but not more than the shares needed (except for clerical errors in transmission)
to fill unconditional orders for shares of the Fund placed with the Distributor
by investors or securities dealers. The price which the Distributor shall pay
for the shares of any Portfolio so purchased from the Fund shall be the net
asset value, determined as set forth in Section 3(d) hereof, used in determining
the public offering price on which such orders were based.
(b) The shares are to be resold by the Distributor to investors at
the public offering price, as set forth in Section 3(d) hereof, or to securities
dealers having agreements with the Distributor upon the terms and conditions set
forth in Section 7 hereof.
(c) The public offering price(s) of the shares of each Portfolio,
i.e., the price per share at which the Distributor or selected dealers may sell
shares to the public, shall be the public
offering price as set forth in the currently effective prospectus of the
Fund under the Securities Act (the "prospectus"), relating to such shares, but
not to exceed the net asset value at which the Distributor is to purchase the
shares, plus a sales charge not to exceed 4.00% of the public offering price
(4.17% of the net amount invested) for the National and Insured Portfolios and
1.00% of the offering price (1.01% of the net amount invested) of the Limited
Maturity Portfolio, subject to reductions for volume purchases. Shares may be
sold to employees of Merrill Lynch & Co., Inc. and its subsidiaries without a
sales charge upon terms and conditions set forth in the prospectus. If the
public offering price does not equal an even cent, the public offering price may
be adjusted to the nearest cent. All payments to the Fund hereunder shall be
made in the manner set forth in Section 3(f).
(d) The net asset value of shares of each Portfolio shall be
determined by the Fund or any agent of the Fund, as of the close of the New York
Stock Exchange on each business day on which said Exchange is open, in
accordance with the method set forth in the prospectus of the Fund and
guidelines established by the Board of Directors of the Fund. The Fund may also
cause the net asset value to be determined in substantially the same manner or
estimated in such manner and as of such other hour or hours as may from time to
time be agreed upon in writing by the Fund and the Distributor.
(e) The Fund shall have the right to suspend the sale of its shares
at times when redemption is suspended pursuant to the conditions set forth in
Section 4(b) hereof. The Fund shall also
have the right to suspend the sale of its shares if trading on the New York
Stock Exchange shall have been suspended, if a banking moratorium shall have
been declared by Federal or New York authorities, or if there shall have been
some other extraordinary event, which, in the judgment of the Fund, makes it
impracticable to sell the shares.
(f) The Fund, or any agent of the Fund designated in writing by the
Fund, shall be promptly advised of all purchase orders for shares received by
the Distributor. Any order may be rejected by the Fund; provided, however, that
the Fund will not arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of shares. The Fund (or its agent) will confirm
orders upon their receipt, will make appropriate book entries and, upon receipt
by the Fund (or its agent) of payment therefor, will deliver deposit receipts or
certificates for such shares pursuant to the instructions of the Distributor.
Payment shall be made to the Fund in New York Clearing House funds. The
Distributor agrees to cause such payment and such instructions to be delivered
promptly to the Fund (or its agent).
Section 4. Repurchase or Redemption of Shares by the Fund.
(a) Any of the outstanding shares may be tendered for redemption at
any time, and the Fund agrees to repurchase or redeem the shares so tendered in
accordance with its obligations as set forth in Article VII of its Articles of
Incorporation, as amended from time to time, and in accordance with the
applicable provisions set forth in the prospectus of the Fund. The price to be
paid to
redeem or repurchase the shares shall be equal to the net asset value calculated
in accordance with the provisions of Section 3(e) hereof. All payments by the
Fund hereunder shall be made in the manner set forth below. The redemption or
repurchase by the Fund of any of the shares purchased by or through the
Distributor will not affect the sales charge secured by the Distributor or any
selected dealer in the course of the original sale, except that if any shares
are tendered for redemption or repurchase within seven business days after the
date of the confirmation of the original purchase, the right to the sales charge
shall be forfeited by the Distributor and the selected dealer which sold such
shares.
The Fund shall pay the total amount of the redemption price as
defined in the above paragraph pursuant to the instructions of the Distributor
in New York Clearing House funds on or before the seventh business day
subsequent to its having received the notice of redemption in proper form.
(b) Redemption of shares or payment may be suspended at times when
the New York Stock Exchange is closed, when trading on said Exchange is closed,
when trading on said Exchange is restricted, when an emergency exists as a
result of which disposal by the Fund of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Fund fairly to determine
the value of the net assets of its Portfolios, or during any other period when
the Securities and Exchange Commission, by order, so permits.
Section 5. Duties of the Fund.
(a) The Fund shall furnish to the Distributor copies of all
information, financial statements and other papers which the Distributor may
reasonably request for use in connection with the distribution of shares of the
Fund, and this shall include one certified copy, upon request by the
Distributor, of all financial statements prepared for the Fund by independent
public accountants. The Fund shall make available to the Distributor such number
of copies of its prospectus as the Distributor shall reasonably request.
(b) The Fund shall take, from time to time, such action as may be
necessary to register the shares of each Portfolio under the Securities Act, to
the end that there will be available for sale such number of shares as the
Distributor reasonably may be expected to sell.
(c) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of shares of each Portfolio for sale
under the securities laws of such states as the Distributor and the Fund may
approve. Any such qualification may be withheld, terminated or withdrawn by the
Fund at any time in its discretion. As provided in Section 8(c) hereof, the
expense of qualification and maintenance of qualification shall be borne by the
Fund. The Distributor shall furnish such information and other material relating
to its affairs and activities as may be required by the Fund in connection with
such qualification.
(d) The Fund will furnish, in reasonable quantities upon request by
the Distributor, copies of annual and interim reports of the Fund.
Section 6. Duties of the Distributor.
(a) The Distributor shall devote reasonable time and effort to
effect sales of shares of the Fund, but shall not be obligated to sell any
specific number of shares. The services of the Distributor to the Fund hereunder
are not to be deemed exclusive and nothing herein contained shall prevent the
Distributor from entering into like arrangements with other investment companies
so long as the performance of their obligations hereunder is not impaired
thereby.
(b) In selling the shares of the Fund, the Distributor shall use its
best efforts in all respects duly to conform with the requirements of all
federal and state laws relating to the sale of such securities. Neither the
Distributor nor any selected dealer nor any other person is authorized by the
Fund to give any information or to make any representations, other than those
contained in the registration statement or related prospectus and any sales
literature specifically approved by the Fund.
(c) The Distributor shall adopt and follow procedures, as approved
by the officers of the Fund, for the confirmation of sales to investors and
selected dealers, the collection of amounts payable by investors and selected
dealers on such sales, and the cancellation of unsettled transactions, as may be
necessary to comply with the requirements of the National Association of
Securities Dealers, Inc. (the "NASD"), as such requirements may from time to
time exist.
Section 7. Selected Dealers Agreement.
(a) The Distributor shall have the right to enter into selected
dealers agreements with securities dealers of its choice ("selected dealers")
for the sale of shares and fix therein the portion of the sales charge which may
be allocated to the selected dealers; provided that the Fund shall approve the
forms of agreements with dealers and the dealer compensation set forth therein
and shall evidence such approval by filing said forms and amendments thereto as
exhibits to its currently effective registration statement on Form N-1A filed
under the Securities Act. Shares sold to selected dealers shall be for resale by
such dealers only at the public offering price(s) set forth in the prospectus.
The initial form of agreement with selected dealers to be used in the continuous
offering of the shares is attached hereto as Exhibit A.
(b) Within the United States, the Distributor shall offer and sell
shares only to selected dealers which are members on good standing of the NASD.
Section 8. Payment of Expenses.
(a) The Fund shall bear all costs and expenses of the Fund,
including fees and disbursements of its counsel and auditors, in connection with
the preparation and filing of any required registration statements and/or
prospectuses under the Investment Company Act, the Securities Act, and all
amendments and supplements thereto, and preparing and mailing annual and interim
reports and
proxy materials to shareholders (including but not limited to the expense of
setting in type any such registration statements, prospectuses, annual or
interim reports or proxy materials).
(b) After the prospectuses and annual and interim reports have been
prepared and set in type, the Distributor shall bear the costs and expenses of
printing and distributing any copies thereof which are to be used in connection
with the offering of shares to selected dealers or investors. The Distributor
shall bear the costs and expenses of preparing, printing and distributing any
other literature used by the Distributor or furnished by it for use by selected
dealers in connection with the offering of the shares for sale to the public and
any expenses of advertising in connection with such offering.
(c) Each Portfolio shall bear the cost of expenses of qualification
of the shares for sale, and, if necessary or advisable in connection therewith,
of qualifying the Fund as a broker or dealer, in such states of the United
States or other jurisdictions as shall be selected by the Fund and the
Distributor pursuant to Section 5(c) hereof and the cost and expenses payable to
each such state for continuing qualification therein until the Fund decides to
discontinue such qualification pursuant to Section 5(c) hereof.
Section 9. Indemnification.
(a) The Fund shall indemnify and hold harmless the Distributor and
each person, if any, who controls the Distributor against any loss, liability,
claim, damage or expense (including the reasonable cost of investigating or
defending any alleged loss,
liability, claim, damage or expense and reasonable counsel fees incurred in connection therewith), arising by reason of any person acquiring any shares, which may be based upon the Securities Act, or on any other statute or at common law, on the ground that the registration statement or related prospectus, as from time to time amended and supplemented, or the annual or interim reports to shareholders of the Fund, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading, unless such statement or omission was made in reliance upon, and in conformity with, information furnished to the Fund in connection therewith by or on behalf of the Distributor; provided, however, that in no case (i) is the indemnity of the Fund in favor of the Distributor and any such controlling persons to be deemed to protect such Distributor or any such controlling persons thereof against any liability to the Fund or its security holders to which the Distributor or any such controlling persons would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of their duties or by reason of the reckless disregard of their obligations and duties under this Agreement, or (ii) is the Fund to be liable under its indemnity agreement contained in this paragraph with respect to any claim made against the Distributor or any such controlling persons, unless the Distributor or such controlling persons, as the case may be, shall have notified the Fund in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon
the Distributor or such controlling persons (or after the Distributor or such
controlling persons shall have received notice of such service on any designated
agent), but failure to notify the Fund of any such claim shall not relieve it
from any liability which it may have to the person against whom such action is
brought otherwise than on account of its indemnity agreement contained in this
paragraph. The Fund will be entitled to participate at its own expense in the
defense, or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if the Fund elects to assume the defense, such
defense shall be conducted by counsel chosen by it and satisfactory to the
Distributor or such controlling person or persons, defendant or defendants in
the suit. In the event the Fund elects to assume the defense of any such suit
and retain such counsel, the Distributor or such controlling person or persons,
defendant or defendants in the suit, shall bear the fees and expenses of any
additional counsel retained by them, but, in case the Fund does not elect to
assume the defense of any such suit, it will reimburse the Distributor or such
controlling person or persons, defendant or defendants in the suit, for the
reasonable fees and expenses of any counsel retained by them. The Fund shall
promptly notify the Distributor of the commencement of any litigation or
proceedings against it or any of its officers or directors in connection with
the issuance or sale of any of the shares.
(b) The Distributor shall indemnify and hold harmless the Fund and
each of its directors and officers and each person, if any, who controls the
Fund against any loss, liability, claim,
damage or expense described in the foregoing indemnity contained in subsection
(a) of this Section, but only with respect to statements or omissions made in
reliance upon, and in conformity with, information furnished to the Fund in
writing by or on behalf of the Distributor for use in connection with the
registration statement or related prospectus, as from time to time amended, or
the annual or interim reports to shareholders. In case any action shall be
brought against the Fund or any person so indemnified, in respect of which
indemnity may be sought against the Distributor, the Distributor shall have the
rights and duties given to the Fund, and the Fund and each person so indemnified
shall have the rights and duties given to the Distributor by the provisions of
subsection (a) of this Section 9.
Section 10. Merrill Lynch Mutual Fund Adviser Program. In connection
with the Merrill Lynch Mutual Fund Adviser Program, the Distributor and its
affiliate, Merrill Lynch, Pierce, Fenner & Smith Incorporated, are authorized to
offer and sell shares of the Fund, as agent for the Fund, to participants in
such program. The terms of this Agreement shall apply to such sales, including
terms as to offering price of shares, the proceeds to be paid to the Fund, the
duties of the Distributor, the payment of expenses and indemnification
obligations of the Fund and the Distributor.
Section 11. Duration and Termination of this Agreement. This
Agreement shall become effective as of the date first above written and shall
remain in force until October 21, 1996 and thereafter as to any Portfolio, but
only so long as such continuance is specifically approved at least annually by
(i) the
Board of Directors of the Fund, or by the vote of a majority of the outstanding
shares of that Portolio, and (ii) a majority of those directors who are not
parties to this Agreement or interested persons of any such party cast in person
at a meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of
any penalty, by the Board of Directors of the Fund or by vote of a majority of
the outstanding shares of the Fund, or by the Distributor, on sixty days'
written notice to the other party. This Agreement shall automatically terminate
in the event of its assignment.
Section 12. Amendments of this Agreement. This Agreement may be
amended by the parties as to any Portfolio only if such amendment is
specifically approved by (i) the Board of Directors of the Fund, or by the vote
of a majority of outstanding voting securities of that Portfolio, and (ii)
a majority of those directors of the Fund who are not parties to this Agreement
or interested persons of any such party cast in person at a meeting called for
the purpose of voting on such approval.
Section 13. Definitions. The terms "assignment," "affiliated person"
and "interested person," when used in this Agreement, shall have the respective
meanings specified in the Investment Company Act. As used with respect to the
Fund or any of its Portfolios, the term "majority of the outstanding shares"
means the lesser of (i) 67% of the shares represented at a meeting at
which more than 50% of the outstanding shares are represented or (ii) more than
50% of the outstanding shares.
Section 13. Governing Law. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the Investment Company
Act. To the extent that the applicable law of the State of New York, or any of
the provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of October 21, 1994.
MERRILL LYNCH MUNICIPAL BOND FUND, INC.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
MERRILL LYNCH MUNICIPAL BOND FUND, INC.
SHARES OF COMMON STOCK
SELECTED DEALERS AGREEMENT
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an agreement with Merrill Lynch Municipal Bond Fund, Inc., a Maryland corporation (the "Fund"), pursuant to which it acts as the distributor for the sale of shares of Class A Insured Portfolio Series Common Stock, Class A Limited Maturity Portfolio Series Common Stock and Class A National Portfolio Series Common Stock, par value $0.10 per share, of the Fund, and as such has the right to distribute shares of the Fund for resale. The Fund is a diversified open-end investment company registered under the Investment Company Act of 1940, as amended, and its shares being offered to the public are registered under the Securities Act of 1933, as amended. You have received a copy of the Distribution Agreement between ourself and the Fund and reference is made herein to certain provisions of such Distribution Agreement. The term Prospectus as used herein refers to the prospectus on file with the Securities and Exchange Commission which is part of the most recent effective registration statement pursuant to the Securities Act of 1933, as amended. As principal, we offer to sell to you, as a member of the Selected Dealers Group, shares of the Fund upon the following terms and conditions:
1. In all sales of these shares to the public you shall act as dealer for your own account, and in no transaction shall you
have any authority to act as agent for the Fund, for us or for any other member of the Selected Dealers Group, except in connection with the Merrill Lynch Mutual Fund Adviser program and such other special programs as we from time to time agree, in which case you shall have authority to offer and sell shares, as agent for the Fund, to participants in such program.
2. Orders received from you will be accepted through us only as the public offering price applicable to each order, as set forth in the current Prospectus of the Fund. The procedure relating to the handling of orders shall be subject to Section 5 hereof and instructions which we or the Fund shall forward from time to time to you. All orders are subject to acceptance or rejection by the Distributor or the Fund in the sole discretion of either. The minimum initial and subsequent purchase requirements are set forth in the current prospectus and Statement of Additional Information of the Fund.
3. The sales charges for sales to the public, computed as percentages of the public offering price and the amount invested, and the related discount to Selected Dealers are as follows:
Class A Shares of the Insured and National Portfolios
Discount to
Sales Charge Selected
Sales Charge as Percentage Dealers as
Amount as Percentage of the Net Percentage
of of the Amount of the
Purchase Offering Price Invested Offering Price
-------- -------------- ------------- --------------
Less than $25,000 4.00% 4.17% 3.75%
$25,000 but less
than $50,000 3.75 3.90 3.50
$50,000 but less
than $100,000 3.25 3.36 3.00
$100,000 but less
than $250,000 2.50 2.56 2.25
$250,000 but less
than $1,000,000 1.50 1.52 1.25
$1,000,000 and over** .00 .00 .00
Class A Shares of the
Limited Maturity Portfolio
Discount to
Sales Charge Selected
Sales Charge as Percentage Dealers as
Amount as Percentage of the Net Percentage
of of the Amount of the
Purchase Offering Price Invested Offering Price
-------- -------------- ------------- --------------
Less than $25,000 1.00% 1.01% .95%
$25,000 but less
than $100,000 .75 .76 .70
$100,000 but less
than $500,000 .50 .50 .45
$500,000 but less
than $1,000,000 .30 .30 .27
$1,000,000 and over** .00 0.00 .00
|
* Rounded to the nearest one-hundredth percent ** Initial sales charges may be waived for certain classes of offerees as set forth in the current Prospectus and Statement of Additional Information. Such purchases may be subject to a contingent deferred sales charge as set forth in the current Prospectus and Statement of Additional Information.
The term "purchase" refers to a single purchase by an individual, or to concurrent purchases, which in the aggregate are at least equal to the prescribed amounts, by an individual, his spouse and their children under the age of 21 years purchasing
shares for his or their own account and to single purchases by a trustee or other fiduciary purchasing shares for a single trust estate or single fiduciary account although more than one beneficiary is involved. The term "purchase" also includes purchases by any "company" as that term is defined in the Investment Company Act of 1940, as amended, but does not include purchases by any such company which has not been in existence for at least six months or which has no purpose other than the purchase of shares of the Fund or shares of other registered investment companies at a discount; provided, however, that it shall not include purchases by any group of individuals whose sole organizational nexus is that the participants therein are credit cardholders of a company, policyholders of an insurance company, customers of either a bank or broker-dealer or clients of an investment adviser.
The reduced sales charges are applicable through a right of accumulation under which investors are permitted to purchase shares of the Fund at the offering price applicable to the total of (a) the public offering price of the shares then being purchased plus (b) an amount equal to the then current net asset value or cost, whichever is higher, of the purchaser's combined hold- ings of the shares of the Fund and of any other investment company with a sales charge for which the Distributor acts as the distributor. For any such right of accumulation to be made available, the Distributor must be provided at the time of purchase, by the purchaser or you, with sufficient
information to permit confirmation of qualification, and acceptance of the purchase order is subject to such confirmation.
The reduced sales charges are applicable to purchases of shares through you aggregating $25,000 or more for the Insured and National Portfolios or $100,000 or more for the Limited Maturity Portfolio made within a thirteen-month period starting with the first purchase pursuant to a Letter of Intention in the form provided in the Prospectus. A purchase not originally made pursuant to a Letter of Intention may be included under a subsequent letter executed within 90 days of such purchase if the Distributor is informed in writing of this intent within such 90-day period. If the intended amount of shares is not purchased within the thirteen-month period, an appropriate price adjustment will be made pursuant to the terms of the Letter of Intention.
You agree to advise us promptly at our request as to amounts of any sales made by you to the public qualifying for reduced sales charges. Further information as to the reduced sales charges pursuant to the right of accumulation or a Letter of Intention is set forth in the Prospectus.
4. You shall not place orders for any of the shares unless you have already received purchase orders for such shares at the applicable public offering prices and subject to the terms hereof and of the Distribution Agreement. You agree that you will not offer or sell any of the shares except under circumstances that
will result in compliance with the applicable Federal and state securities laws and that in connection with sales and offers to sell shares you will furnish to each person to whom any such sale or offer is made a copy of the Prospectus (as then amended or supplemented) and will not furnish to any person any information relating to the shares of the Fund, which is inconsistent in any respect with the information contained in the Prospectus (as then amended or supplemented) or cause any advertisement to be published in any newspaper or posted in any public place without our consent and the consent of the Fund.
5. As a selected dealer, you are hereby authorized (i) to place orders directly with the Fund for shares of the Fund to be resold by us to you subject to the applicable terms and conditions governing the placement of orders by us set forth in Section 3 of the Distribution Agreement and subject to the compensation provisions of Section 3 hereof, and (ii) to tender shares directly to the Fund or its agent for redemption subject to the applicable terms and conditions set forth in Section 4 of the Distribution Agreement.
6. You shall not withhold placing orders received from your customers so as to profit yourself as a result of such withholding: e.g., by a change in the "net asset value" from that used in determining the offering price to your customers.
7. If any shares sold to you under the terms of this Agreement are repurchased by the Fund or by us for the account of the Fund or are tendered for redemption within seven business days after the date of the confirmation of the original purchase by you, it is agreed that you shall forfeit your right to, and refund to us, any discount received by you on such shares.
8. No person is authorized to make any representations concerning shares of the issuer except those contained in the current Prospectus of the Fund and in such printed information subsequently issued by us or the Fund as information supplemental to such Prospectus. In purchasing shares through us you shall rely solely on the representations contained in the Prospectus and supplemental information above mentioned. Any printed information which we furnish you other than the Fund's Prospectus, periodic reports and proxy solicitation material are our sole responsibility and not the responsibility of the Fund, and you agree that the Fund shall have no liability or responsibility to you in these respects unless expressly assumed in connection therewith.
9. You agree to deliver to each of the purchasers making purchases from you a copy of the then current Prospectus at or prior to the time of offering or sale and you agree thereafter to deliver to such purchasers copies of the annual and interim reports and proxy solicitation materials of the Fund. You further agree to endeavor to obtain proxies from such purchasers. Additional copies of the Prospectus, annual or interim reports and
proxy solicitation materials of the Fund will be supplied to you in reasonable quantities upon request.
10. We reserve the right in our discretion, without notice, to suspend sales or withdraw the offering of shares entirely. Each party hereto has the right to cancel this agreement upon notice to the other party.
11. We shall have full authority to take such action as we may deem advisable in respect of all matters pertaining to the continuous offering. We shall be under no liability to you except for lack of good faith and for obligations expressly assumed by us herein. Nothing contained in this paragraph is intended to operate as, and the provisions of this paragraph shall not in any way whatsoever constitute, a waiver by you of compliance with any provision of the Securities Act of 1933, as amended, or of the rules and regulations of the Securities and Exchange Commission issued thereunder.
12. You represent that you are a member of the National Association of Securities Dealers, Inc. and, with respect to any sales in the United States, we both hereby agree to abide by the Rules of Fair Practice of such Association.
13. Upon application to us, we will inform you as to the states in which we believe the shares have been qualified for sale under, or are exempt from the requirements of, the respective
securities laws of such states, but we assume no responsibility or obligation as to your right to sell shares in any jurisdiction. We will file with the Department of State in New York a Further State Notice with respect to the shares, if necessary.
14. All communications to us should be sent to the address set forth below. Any notice to you shall be duly given if mailed or telegraphed to you at the address specified by you below.
15. Your first order placed pursuant to this Agreement for the purchase of shares of the Fund will represent your acceptance of this Agreement.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
Please return one signed copy of this agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
One Liberty Plaza
165 Broadway
New York, New York 10006
Accepted:
CLASS C SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 21st day of October 1994, between MERRILL LYNCH MUNICIPAL BOND FUND, INC., a Maryland corporation (the "Fund"), and MERRILL LYNCH FUNDS DISTRIBUTOR, INC., a Delaware corporation (the "Distributor").
W I T N E S S E T H :
WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"), as an open-end investment
company, and it is affirmatively in the interest of the Fund to offer its shares
for sale continuously; and
WHEREAS, the Fund is comprised of three separate portfolios, namely,
the Insured Portfolio, the National Portfolio and the Limited Maturity Portfolio
(the "Portfolios"), each of which pursues its own investment objective through
separate investment policies; and
WHEREAS, the Distributor is a securities firm engaged in the
business of selling shares of investment companies either directly to purchasers
or through other securities dealers; and
WHEREAS, the Fund and the Distributor wish to enter into an
agreement with each other with respect to the continuous offering of the shares
of the Class C Insured Portfolio Series Common Stock, the Class C National
Portfolio Series Common Stock and the Class C Limited Maturity Portfolio Series
Common Stock of the Fund (collectively, the "Class C shares" ) in order to
promote
the growth of the Fund and facilitate the distribution of its Class C shares.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor. The Fund hereby appoints
the Distributor as the principal underwriter and distributor of the Fund to sell
Class C shares of common stock in the Fund (sometimes herein referred to as
"Class C shares") to the public and hereby agrees during the term of this
Agreement to sell shares of the Fund to the Distributor upon the terms and
conditions herein set forth.
Section 2. Exclusive Nature of Duties. The Distributor shall be the
exclusive representative of the Fund to act as principal underwriter and
distributor of the Class C shares, except that:
(a) The Fund may, upon written notice to the Distributor, from time
to time designate other principal underwriters and distributors of Class C
shares with respect to areas other than the United States as to which the
Distributor may have expressly waived in writing its right to act as such. If
such designation is deemed exclusive, the right of the Distributor under this
Agreement to sell Class C shares in the areas so designated shall terminate, but
this Agreement shall remain otherwise in full effect until terminated in
accordance with the other provisions hereof.
(b) The exclusive right granted to the Distributor to purchase Class
C shares from the Fund shall not apply to Class C shares of the Fund issued in
connection with the merger or conso-
lidation of any other investment company or personal holding company with the
Fund or the acquisition by purchase or otherwise of all (or substantially all)
the assets or the outstanding Class C shares of any such company by the Fund.
(c) Such exclusive right also shall not apply to Class C shares
issued by the Fund pursuant to reinvestment of dividends or capital gains
distributions.
(d) Such exclusive right also shall not apply to Class C shares
issued by the Fund pursuant to any conversion, exchange or reinstatement
privilege afforded redeeming shareholders or to any other Class C shares as
shall be agreed between the Fund and the Distributor from time to time.
Section 3. Purchase of Class C Shares from the Fund.
(a) It is contemplated that the Fund will commence an offering of
its Class C shares, and thereafter the Distributor shall have the right to buy
from the Fund the Class C shares of each Portfolio needed, but not more than the
Class C shares of each Portfolio needed (except for clerical errors in
transmission) to fill unconditional orders for Class C shares of the relevant
Portfolio placed with the Distributor by eligible investors or securities
dealers. Investors eligible to purchase Class C shares of a Portfolio shall be
those persons so identified in the currently effective prospectus and statement
of additional information of the Fund (the "prospectus" and "statement of
additional information", respectively) under the Securities Act of 1933, as
amended (the "Securities Act"), relating to such Class C shares. The price which
the Distributor shall pay for the Class C
shares of a Portfolio so purchased from the Fund shall be the net asset value
for that Portfolio, determined as set forth in Section 3(c) hereof.
(b) The Class C shares of a Portfolio are to be resold by the
Distributor to investors at net asset value for that Portfolio, as set forth in
Section 3(c) hereof, or to securities dealers having agreements with the
Distributor upon the terms and conditions set forth in Section 7 hereof.
(c) The net asset value of Class C shares of a Portfolio shall be
determined by the Fund or any agent of the Fund in accordance with the method
set forth in the prospectus and statement of additional information and
guidelines established by the Board of Directors.
(d) The Fund shall have the right to suspend the sale of Class C
shares of any Portfolio at times when redemption is suspended pursuant to the
conditions set forth in Section 4(b) hereof. The Fund shall also have the right
to suspend the sale of Class C shares of any Portfolio if trading on the New
York Stock Exchange shall have been suspended, if a banking moratorium shall
have been declared by Federal or New York authorities, or if there shall have
been some other event, which, in the judgment of the Fund, makes it
impracticable or inadvisable to sell the Class C shares.
(e) The Fund, or any agent of the Fund designated in writing by the
Fund, shall be promptly advised of all purchase orders for Class C shares
received by the Distributor. Any order may be rejected by the Fund; provided,
however, that the Fund will
not arbitrarily or without reasonable cause refuse to accept or confirm orders
for the purchase of Class C shares. The Fund (or its agent) will confirm orders
upon their receipt, will make appropriate book entries and, upon receipt by the
Fund (or its agent) of payment therefor, will deliver deposit receipts or
certificates for such Class C shares pursuant to the instructions of the
Distributor. Payment shall be made to the Fund in New York Clearing House funds.
The Distributor agrees to cause such payment and such instructions to be
delivered promptly to the Fund (or its agent).
Section 4. Repurchase or Redemption of Class C Shares by the Fund.
(a) Any of the outstanding Class C shares may be tendered for
redemption at any time, and the Fund agrees to repurchase or redeem the Class C
shares so tendered in accordance with its obligations as set forth in Article
VII of its Articles of Incorporation, as amended from time to time, and in
accordance with the applicable provisions set forth in the prospectus and
statement of additional information of the Fund. The price to be paid to redeem
or repurchase the Class C shares of a Portfolio shall be equal to the net asset
value for that Portfolio calculated in accordance with the provisions of Section
3(c) hereof, less any contingent deferred sales charge ("CDSC"), redemption fee
or other charge(s), if any, set forth in the prospectus and statement of
additional information of the Fund. All payments by the Fund hereunder shall be
made in the manner set forth below.
The Fund shall pay the total amount of the redemption price as
defined in the above paragraph pursuant to the
instructions of the Distributor on or before the seventh business day subsequent
to its having received the notice of redemption in proper form. The proceeds of
any redemption of shares shall be paid by the Fund as follows: (i) any
applicable CDSC shall be paid to the Distributor, and (ii) the balance shall be
paid to or for the account of the shareholder, in each case in accordance with
the applicable provisions of the prospectus and statement of additional
information.
(b) Redemption of Class C shares of any Portfolio or payment may be
suspended at times when the New York Stock Exchange is closed, when trading on
said Exchange is suspended, when trading on said Exchange is restricted, when an
emergency exists as a result of which disposal by the Fund of securities owned
by it is not reasonably practicable or it is not reasonably practicable for the
Fund fairly to determine the value of its net assets, or during any other period
when the Securities and Exchange Commission, by order, so permits.
Section 5. Duties of the Fund.
(a) The Fund shall furnish to the Distributor copies of all
information, financial statements and other papers which the Distributor may
reasonably request for use in connection with the distribution of Class C shares
of the Fund, and this shall include, upon request by the Distributor, one
certified copy of all financial statements prepared for the Fund by independent
public accountants. The Fund shall make available to the Distributor such number
of copies of its prospectus and statement of additional information as the
Distributor shall reasonably request.
(b) The Fund shall take, from time to time, but subject to any
necessary approval of the shareholders, all necessary action to fix the number
of authorized shares and such steps as may be necessary to register the same
under the Securities Act to the end that there will be available for sale such
number of Class C shares as the Distributor reasonably may be expected to sell.
(c) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of its Class C shares for sale under the
securities laws of such states as the Distributor and the Fund may approve. Any
such qualification may be withheld, terminated or withdrawn by the Fund at any
time in its discretion. As provided in Section 8(c) hereof, the expense of
qualification and maintenance of qualification shall be borne by the Fund. The
Distributor shall furnish such information and other material relating to its
affairs and activities as may be required by the Fund in connection with such
qualification.
(d) The Fund will furnish, in reasonable quantities upon request by
the Distributor, copies of annual and interim reports of the Fund.
Section 6. Duties of the Distributor.
(a) The Distributor shall devote reasonable time and effort to
effect sales of Class C shares of the Fund but shall not be obligated to sell
any specific number of shares. The services of the Distributor to the Fund
hereunder are not to be deemed exclusive and nothing herein contained shall
prevent the Distributor from entering into like arrangements with other in-
vestment companies so long as the performance of its obligations hereunder is
not impaired thereby.
(b) In selling the Class C shares of the Fund, the Distributor shall
use its best efforts in all respects duly to conform with the requirements of
all Federal and state laws relating to the sale of such securities. Neither the
Distributor nor any selected dealer, as defined in Section 7 hereof, nor any
other person is authorized by the Fund to give any information or to make any
representations, other than those contained in the registration statement or
related prospectus and statement of additional information and any sales
literature specifically approved by the Fund.
(c) The Distributor shall adopt and follow procedures, as approved
by the officers of the Fund, for the confirmation of sales to investors and
selected dealers, the collection of amounts payable by investors and selected
dealers on such sales, and the cancellation of unsettled transactions, as may be
necessary to comply with the requirements of the National Association of
Securities Dealers, Inc. (the "NASD"), as such requirements may from time to
time exist.
Section 7. Selected Dealer Agreements.
(a) The Distributor shall have the right to enter into selected
dealer agreements with securities dealers of its choice ("selected dealers") for
the sale of Class C shares; provided, that the Fund shall approve the forms of
agreements with dealers. Class C shares sold to selected dealers shall be for
resale by such dealers only at net asset value determined as set forth in
Section
3(c) hereof. The form of agreement with selected dealers to be used during the
continuous offering of the shares is attached hereto as Exhibit A.
(b) Within the United States, the Distributor shall offer and sell
Class C shares only to such selected dealers that are members in good standing
of the NASD.
Section 8. Payment of Expenses.
(a) The Fund shall bear all costs and expenses of the Fund,
including fees and disbursements of its counsel and auditors, in connection with
the preparation and filing of any required registration statements and/or
prospectuses and statements of additional information under the Investment
Company Act, the Securities Act, and all amendments and supplements thereto, and
preparing and mailing annual and interim reports and proxy materials to Class C
shareholders (including but not limited to the expense of setting in type any
such registration statements, prospectuses, statements of additional
information, annual or interim reports or proxy materials).
(b) The Distributor shall be responsible for any payments made to
selected dealers as reimbursement for their expenses associated with payments of
sales commissions to financial consultants. In addition, after the prospectuses,
statements of additional information and annual and interim reports have been
prepared and set in type, the Distributor shall bear the costs and expenses of
printing and distributing any copies thereof which are to be used in connection
with the offering of Class C shares to selected dealers or investors pursuant to
this Agreement. The
Distributor shall bear the costs and expenses of preparing, printing and
distributing any other literature used by the Distributor or furnished by it for
use by selected dealers in connection with the offering of the Class C shares
for sale to the public and any expenses of advertising incurred by the
Distributor in connection with such offering. It is understood and agreed that
so long as the Fund's Class C Shares Distribution Plan pursuant to Rule 12b-1
under the Investment Company Act remains in effect, any expenses incurred by the
Distributor hereunder may be paid from amounts recovered by it from the Fund
under such Plan.
(c) Each Portfolio shall bear the cost and expenses of qualification
of the Class C shares for sale pursuant to this Agreement and, if necessary or
advisable in connection therewith, of qualifying the Fund as a broker or dealer
in such states of the United States or other jurisdictions as shall be selected
by the Fund and the Distributor pursuant to Section 5(c) hereof and the cost and
expenses payable to each such state for continuing qualification therein until
the Fund decides to discontinue such qualification pursuant to Section 5(c)
hereof.
Section 9. Indemnification.
(a) The Fund shall indemnify and hold harmless the Distributor and
each person, if any, who controls the Distributor against any loss, liability,
claim, damage or expense (including the reasonable cost of investigating or
defending any alleged loss, liability, claim, damage or expense and reasonable
counsel fees incurred in connection therewith), as incurred, arising by reason
of any person acquiring any Class C shares, which may be based upon
the Securities Act, or on any other statute or at common law, on the ground that the registration statement or related prospectus and statement of additional information, as from time to time amended and supplemented, or an annual or interim report to Class C shareholders of the Fund, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading, unless such statement or omission was made in reliance upon, and in conformity with, information furnished to the Fund in connection therewith by or on behalf of the Distributor; provided, however, that in no case (i) is the indemnity of the Fund in favor of the Distributor and any such controlling persons to be deemed to protect such Distributor or any such controlling persons thereof against any liability to the Fund or its security holders to which the Distributor or any such controlling persons would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of their duties or by reason of the reckless disregard of their obligations and duties under this Agreement; or (ii) is the Fund to be liable under its indemnity agreement contained in this paragraph with respect to any claim made against the Distributor or any such controlling persons, unless the Distributor or such controlling persons, as the case may be, shall have notified the Fund in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon the Distributor or such controlling persons (or after the Distributor or such controlling persons shall have received notice
of such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve it from any liability which it may have to the
person against whom such action is brought otherwise than on account of its
indemnity agreement contained in this paragraph. The Fund will be entitled to
participate at its own expense in the defense or, if it so elects, to assume the
defense of any suit brought to enforce any such liability, but if the Fund
elects to assume the defense, such defense shall be conducted by counsel chosen
by it and satisfactory to the Distributor or such controlling person or persons,
defendant or defendants in the suit. In the event the Fund elects to assume the
defense of any such suit and retain such counsel, the Distributor or such
controlling person or persons, defendant or defendants in the suit shall bear
the fees and expenses, as incurred, of any additional counsel retained by them,
but in case the Fund does not elect to assume the defense of any such suit, it
will reimburse the Distributor or such controlling person or persons, defendant
or defendants in the suit, for the reasonable fees and expenses, as incurred, of
any counsel retained by them. The Fund shall promptly notify the Distributor of
the commencement of any litigation or proceedings against it or any of its
officers or Directors in connection with the issuance or sale of any of the
Class C shares.
(b) The Distributor shall indemnify and hold harmless the Fund and
each of its Directors and officers and each person, if any, who controls the
Fund against any loss, liability, claim, damage or expense, as incurred,
described in the foregoing indemnity contained in subsection (a) of this
Section, but only with
respect to statements or omissions made in reliance upon, and in conformity
with, information furnished to the Fund in writing by or on behalf of the
Distributor for use in connection with the registration statement or related
prospectus and statement of additional information, as from time to time
amended, or the annual or interim reports to shareholders. In case any action
shall be brought against the Fund or any person so indemnified, in respect of
which indemnity may be sought against the Distributor, the Distributor shall
have the rights and duties given to the Fund, and the Fund and each person so
indemnified shall have the rights and duties given to the Distributor by the
provisions of subsection (a) of this Section 9.
Section 10. Duration and Termination of this Agreement.
This Agreement shall become effective as of the date first above
written and shall remain in force until October 21, 1996 and thereafter as to
any Portfolio, but only for so long as such continuance is specifically approved
at least annually by (i) the Directors or by the vote of a majority of the
outstanding voting securities of that Portfolio and (ii) by the vote of a
majority of those Directors who are not parties to this Agreement or interested
persons of any such party cast in person at a meeting called for the purpose of
voting on such approval.
This Agreement may be terminated at any time, without the payment of
any penalty, by the Directors or by vote of a majority of the outstanding voting
securities of the Fund, or by the Distributor, on sixty days' written notice to
the other party.
This Agreement shall automatically terminate in the event of its assignment.
The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
Section 11. Amendments of this Agreement. This Agreement may be
amended as to any Portfolio by the parties only if such amendment is
specifically approved by (i) the Board of Directors of the Fund or by the vote
of a majority of outstanding voting securities that Portfolio of the Fund and
(ii) by the vote of a majority of those Directors of the Fund who are not
parties to this Agreement or interested persons of any such party cast in person
at a meeting called for the purpose of voting on such approval.
Section 12. Governing Law. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the Investment Company
Act. To the extent that the applicable law of the State of New York, or any of
the provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
MERRILL LYNCH MUNICIPAL BOND FUND, INC.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
EXHIBIT A
MERRILL LYNCH MUNICIPAL BOND FUND, INC.
CLASS C SHARES OF COMMON STOCK
SELECTED DEALER AGREEMENT
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an agreement with MERRILL LYNCH MUNICIPAL BOND FUND, INC., a Maryland corporation (the "Fund"), pursuant to which it acts as the distributor for the sale of shares of Class C Insured Portfolio Series Common Stock, Class C National Portfolio Series Common Stock and Class C Limited Maturity Portfolio Series Common Stock par value $0.10 per share (collectively the "Class C shares"), of the Fund and as such has the right to distribute Class C shares of the Fund for resale. The Fund is an open-end investment company registered under the Investment Company Act of 1940, as amended, and its Class C shares being offered to the public are registered under the Securities Act of 1933, as amended. You have received a copy of the Class C Shares Distribution Agreement (the "Distribution Agreement") between ourself and the Fund and reference is made herein to certain provisions of such Distribution Agreement. The terms "Prospectus" and "Statement of Additional Information" as used herein refer to the prospectus and statement of additional information, respectively, on file with the Securities and Exchange Commission which is part of the most recent effective registration statement pursuant to the Securities Act of 1933, as amended. We offer to sell to you, as a member of the Selected Dealers Group, Class C shares of the Fund upon the following terms and conditions:
1. In all sales of these Class C shares to the public, you shall act as dealer for your own account and in no transaction shall you have any authority to act as agent for the Fund, for us or for any other member of the Selected Dealers Group.
2. Orders received from you will be accepted through us only at the public offering price applicable to each order, as set forth in the current Prospectus and Statement of Additional Information of the Fund. The procedure relating to the handling of orders shall be subject to Section 4 hereof and instructions which we or the Fund shall forward from time to time to you. All orders are subject to acceptance or rejection by the Distributor or the Fund in the sole discretion of either. The minimum initial and
subsequent purchase requirements are as set forth in the current Prospectus and Statement of Additional Information of the Fund.
3. You shall not place orders for any of the Class C shares of a Portfolio unless you have already received purchase orders for such Class C shares at the applicable public offering prices and subject to the terms hereof and of the Distribution Agreement. You agree that you will not offer or sell any of the Class C shares except under circumstances that will result in compliance with the applicable Federal and state securities laws and that in connection with sales and offers to sell Class C shares you will furnish to each person to whom any such sale or offer is made a copy of the Prospectus and, if requested, the Statement of Additional Information (as then amended or supplemented) and will not furnish to any person any information relating to the Class C shares of the Fund which is inconsistent in any respect with the information contained in the Prospectus and Statement of Additional Information (as then amended or supplemented) or cause any advertisement to be published in any newspaper or posted in any public place without our consent and the consent of the Fund.
4. As a selected dealer, you are hereby authorized (i) to place orders directly with the Fund for Class C shares of the Fund to be resold by us to you subject to the applicable terms and conditions governing the placement of orders by us set forth in Section 3 of the Distribution Agreement and (ii) to tender Class C shares directly to the Fund or its agent for redemption subject to the applicable terms and conditions set forth in Section 4 of the Distribution Agreement.
5. You shall not withhold placing orders received from your customers so as to profit yourself as a result of such with- holding: e.g., by a change in the "net asset value" from that used in determining the offering price to your customers.
6. No person is authorized to make any representations concerning Class C shares of the Fund except those contained in the current Prospectus and Statement of Additional Information of the Fund and in such printed information subsequently issued by us or the Fund as information supplemental to such Prospectus and Statement of Additional Information. In purchasing Class C shares through us you shall rely solely on the representations contained in the Prospectus and Statement of Additional Information and supplemental information above mentioned. Any printed information which we furnish you other than the Fund's Prospectus, Statement of Additional Information, periodic reports and proxy solicitation material is our sole responsibility and not the responsibility of the Fund, and you agree that the Fund shall have no liability or responsibility to you in these respects unless expressly assumed in connection therewith.
7. You agree to deliver to each of the purchasers making purchases from you a copy of the then current Prospectus
and, if requested, the Statement of Additional Information at or prior to the time of offering or sale and you agree thereafter to deliver to such purchasers copies of the annual and interim reports and proxy solicitation materials of the Fund. You further agree to endeavor to obtain proxies from such purchasers. Additional copies of the Prospectus and Statement of Additional Information, annual or interim reports and proxy solicitation materials of the Fund will be supplied to you in reasonable quantities upon request.
8. We reserve the right in our discretion, without notice, to suspend sales or withdraw the offering of Class C shares entirely or to certain persons or entities in a class or classes specified by us. Each party hereto has the right to cancel this Agreement upon notice to the other party.
9. We shall have full authority to take such action as we may deem advisable in respect of all matters pertaining to the continuous offering. We shall be under no liability to you except for lack of good faith and for obligations expressly assumed by us herein. Nothing contained in this paragraph is intended to operate as, and the provisions of this paragraph shall not in any way whatsoever constitute, a waiver by you of compliance with any provision of the Securities Act of 1933, as amended, or of the rules and regulations of the Securities and Exchange Commission issued thereunder.
10. You represent that you are a member of the National Association of Securities Dealers, Inc. and, with respect to any sales in the United States, we both hereby agree to abide by the Rules of Fair Practice of such Association.
11. Upon application to us, we will inform you as to the states in which we believe the Class C shares have been qualified for sale under, or are exempt from the requirements of, the respective securities laws of such states, but we assume no responsibility or obligation as to your right to sell Class C shares in any jurisdiction. We will file with the Department of State in New York a Further State Notice with respect to the Class C shares, if necessary.
12. All communications to us should be sent to the address below. Any notice to you shall be duly given if mailed or telegraphed to you at the address specified by you below.
13. Your first order placed pursuant to this Agreement for the purchase of Class C shares of the Fund will represent your acceptance of this Agreement.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
Please return one signed copy of this Agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
Box 9011
Princeton, New Jersey 08543-9011
Accepted:
Firm Name: Merrill Lynch, Pierce, Fenner & Smith Inc.
By: Gerald M. Richard
Address: 800 Scudders Mill Road
Plainsboro, New Jersey 08536
CLASS D SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 21st day of October, 1994 between MERRILL LYNCH MUNICIPAL BOND FUND, INC., a Maryland corporation (the "Fund"), and MERRILL LYNCH FUNDS DISTRIBUTOR, INC., a Delaware corporation (the "Distributor").
W I T N E S S E T H :
WHEREAS, the Fund is registered under the Investment Company Act of 1940, as amended (the "Investment Company Act"), as an open-end investment company, and it is affirmatively in the interest of the Fund to offer its shares for sale continuously; and
WHEREAS, the Fund is comprised of three separate portfolios, namely, the Insured Portfolio, the National Portfolio and the Limited Maturity Portfolio (the "Portfolios"), each of which pursues its own investment objective through separate investment policies; and
WHEREAS, the Distributor is a securities firm engaged in the business of selling shares of investment companies either directly to purchasers or through other securities dealers; and
WHEREAS, the Fund and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of the Class D Insured
Portfolio Series Common Stock, the Class D National Portfolio Series Common
Stock and the Class D Limited Maturity Portfolio Series Common Stock of the Fund
(collectively, the "Class D shares") in order to promote growth of the Fund and
facilitate the distribution of its Class D shares.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor. The Fund hereby appoints the
Distributor as the principal underwriter and distributor of the Fund to sell
Class D shares of common stock in the Fund (sometimes herein referred to as
"Class D shares") to the public and hereby agrees during the term of this
Agreement to sell Class D shares of the Fund to the Distributor upon the terms
and conditions herein set forth.
Section 2. Exclusive Nature of Duties. The Distributor shall be the
exclusive representative of the Fund to act as principal underwriter and
distributor of its Class D shares, except that:
(a) The Fund may, upon written notice to the Distributor, from time to
time designate other principal underwriters and distributors of Class D shares
with respect to areas other than the United States as to which the Distributor
may have expressly waived in writing its right to act as such. If such
designation is deemed exclusive, the right of the Distributor under this
Agreement to sell Class D shares in the areas so designated shall terminate, but
this Agreement shall remain otherwise in full effect until terminated in
accordance with the other provisions hereof.
(b) The exclusive right granted to the Distributor to purchase Class D
shares from the Fund shall not apply to Class D shares issued in connection with
the merger or consolidation of any other investment company or personal holding
company with the Fund or the acquisition by purchase or otherwise of all (or
substantially all) the assets or the outstanding Class D shares of any such
company by the Fund.
(c) Such exclusive right also shall not apply to Class D shares issued by
the Fund pursuant to reinvestment of dividends or capital gains distributions.
(d) Such exclusive right also shall not apply to Class D shares issued by
the Fund pursuant to any conversion, exchange or reinstatement privilege
afforded redeeming shareholders or to any other Class D shares as shall be
agreed between the Fund and the Distributor from time to time.
Section 3. Purchase of Class D Shares from the Fund.
(a) It is contemplated that the Fund will commence an
offering of its Class D shares, and thereafter the Distributor shall have the
right to buy from the Fund the Class D shares needed, but not more than the
Class D shares needed (except for clerical errors in transmission) to fill
unconditional orders for Class D shares of the Fund placed with the Distributor
by eligible investors or securities dealers. Investors eligible to purchase
Class D shares shall be those persons so identified in the
currently effective prospectus and statement of additional information of the
Fund (the "prospectus" and "statement of additional information", respectively)
under the Securities Act of 1933, as amended (the "Securities Act"), relating to
such Class D shares. The price which the Distributor shall pay for the Class D
shares so purchased from the Fund shall be the net asset value, determined as
set forth in Section 3(d) hereof, used in determining the public offering price
on which such orders were based.
(b) The Class D shares are to be resold by the Distributor to investors at
the public offering price, as set forth in Section 3(c) hereof, or to securities
dealers having agreements with the Distributor upon the terms and conditions set
forth in Section 7 hereof.
(c) The public offering price(s) of the Class D shares, i.e., the price
per share at which the Distributor or selected dealers may sell Class D shares
to the public, shall be the public offering price as set forth in the prospectus
and statement of additional information relating to such Class D shares, but not
to exceed the net asset value at which the Distributor is to purchase the Class
D shares, plus a sales charge not to exceed 4.00% of the public offering price
(4.17% of the net amount invested) for the Insured and National Portfolios and
1.00% of the public offering price (1.01% of the net amount invested) for the
Limited Maturity Portfolio, subject to reductions for volume purchases. Class D
shares may be sold to certain Directors, officers and employees of the Fund,
of Merrill Lynch & Co., Inc. and
its subsidiaries, and their directors and employees and to certain other persons
described in the prospectus and statement of additional information, without
a sales charge or at a reduced sales charge, upon terms and conditions set
forth in the prospectus and statement of additional information. If the public
offering price does not equal an even cent, the public offering price may be
adjusted to the nearest cent. All payments to the Fund hereunder shall be made
in the manner set forth in Section 3(f).
(d) The net asset value of Class D shares shall be determined by the Fund
or any agent of the Fund in accordance with the method set forth in the
prospectus and statement of additional information of the Fund and guidelines
established by the Board of Directors of the Fund.
(e) The Fund shall have the right to suspend the sale of its Class D
shares at times when redemption is suspended pursuant to the conditions set
forth in Section 4(b) hereof. The Fund shall also have the right to suspend the
sale of its Class D shares if trading on the New York Stock Exchange shall have
been suspended, if a banking moratorium shall have been declared by Federal or
New York authorities, or if there shall have been some other event, which, in
the judgment of the Fund, makes it impracticable or inadvisable to sell the
Class D shares.
(f) The Fund, or any agent of the Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for Class D shares received by
the Distributor. Any order may be rejected by the Fund; provided, however, that
the Fund will not
arbitrarily or without reasonable cause refuse to accept or confirm orders for
the purchase of Class D shares. The Fund (or its agent) will confirm orders upon
their receipt, will make appropriate book entries and, upon receipt by the Fund
(or its agent) of payment therefor, will deliver deposit receipts or
certificates for such Class D shares pursuant to the instructions of the
Distributor. Payment shall be made to the Fund in New York Clearing House funds.
The Distributor agrees to cause such payment and such instructions to be
delivered promptly to the Fund (or its agent).
Section 4. Repurchase or Redemption of Class D Shares by the Fund.
(a) Any of the outstanding Class D shares may be tendered for redemption
at any time, and the Fund agrees to repurchase or redeem the Class D shares so
tendered in accordance with its obligations as set forth in Article VII of its
Articles of Incorporation, as amended from time to time, and in accordance with
the applicable provisions set forth in the prospectus and statement of
additional information. The price to be paid to redeem or repurchase the Class D
shares shall be equal to the net asset value calculated in accordance with the
provisions of Section 3(d) hereof, less any contingent deferred sales charge
("CDSC"), redemption fee or other charge(s), if any, set forth in the prospectus
and statement of additional information of the Fund. All payments by the Fund
hereunder shall be made in the manner set forth below. The redemption or
repurchase by the Fund of any of the Class D shares purchased by or through the
Distributor will not affect the sales
charge secured by the Distributor or any selected dealer in the course of the
original sale, except that if any Class D shares are tendered for redemption or
repurchase within seven business days after the date of the confirmation of the
original purchase, the right to the sales charge shall be forfeited by the
Distributor and the selected dealer which sold such Class D shares.
The Fund shall pay the total amount of the redemption price as defined in
the above paragraph pursuant to the instructions of the Distributor in New York
Clearing House funds on or before the seventh business day subsequent to its
having received the notice of redemption in proper form. The proceeds of any
redemption of shares shall be paid by the Fund as follows: (i) any applicable
CDSC shall be paid to the Distributor, and (ii) the balance shall be paid to or
for the account of the shareholder, in each case in accordance with the
applicable provisions of the prospectus and statement of additional information.
(b) Redemption of Class D shares or payment may be suspended at times when
the New York Stock Exchange is closed, when trading on said Exchange is
suspended, when trading on said Exchange is restricted, when an emergency exists
as a result of which disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Fund fairly
to determine the value of its net assets, or during any other period when the
Securities and Exchange Commission, by order, so permits.
Section 5. Duties of the Fund.
(a) The Fund shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of Class D shares of the
Fund, and this shall include, upon request by the Distributor, one certified
copy of all financial statements prepared for the Fund by independent public
accountants. The Fund shall make available to the Distributor such number of
copies of the prospectus and statement of additional information as the
Distributor shall reasonably request.
(b) The Fund shall take, from time to time, but subject to any necessary
approval of the Class D shareholders, all necessary action to fix the number of
authorized Class D shares and such steps as may be necessary to register the
same under the Securities Act, to the end that there will be available for sale
such number of Class D shares as the Distributor may reasonably be expected to
sell.
(c) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of its Class D shares for sale under the
securities laws of such states as the Distributor and the Fund may approve. Any
such qualification may be withheld, terminated or withdrawn by the Fund at any
time in its discretion. As provided in Section 8(c) hereof, the expense of
qualification and maintenance of qualification shall be borne by the Fund. The
Distributor shall furnish such information and other
material relating to its affairs and activities as may be required by the Fund
in connection with such qualification.
(d) The Fund will furnish, in reasonable quantities upon request by the
Distributor, copies of annual and interim reports of the Fund.
Section 6. Duties of the Distributor.
(a) The Distributor shall devote reasonable time and effort to effect
sales of Class D shares of the Fund but shall not be obligated to sell any
specific number of Class D shares. The services of the Distributor to the Fund
hereunder are not to be deemed exclusive and nothing herein contained shall
prevent the Distributor from entering into like arrangements with other
investment companies so long as the performance of its obligations hereunder is
not impaired thereby.
(b) In selling the Class D shares of the Fund, the Distributor shall use
its best efforts in all respects duly to conform with the requirements of all
Federal and state laws relating to the sale of such securities. Neither the
Distributor nor any selected dealer, as defined in Section 7 hereof, nor any
other person is authorized by the Fund to give any information or to make any
representations, other than those contained in the registration statement or
related prospectus and statement of additional information and any sales
literature specifically approved by the Fund.
(c) The Distributor shall adopt and follow procedures, as approved by the
officers of the Fund, for the confirmation of sales to investors and selected
dealers, the collection of amounts payable by investors and selected dealers on
such sales, and the cancellation of unsettled transactions, as may be necessary
to comply with the requirements of the National Association of Securities
Dealers, Inc. (the "NASD"), as such requirements may from time to time exist.
Section 7. Selected Dealers Agreements.
(a) The Distributor shall have the right to enter into selected dealers
agreements with securities dealers of its choice ("selected dealers") for the
sale of Class D shares and fix therein the portion of the sales charge which may
be allocated to the selected dealers; provided that the Fund shall approve the
forms of agreements with dealers and the dealer compensation set forth therein.
Class D shares sold to selected dealers shall be for resale by such dealers only
at the public offering price(s) set forth in the prospectus and statement of
additional information. The form of agreement with selected dealers to be used
during the continuous offering of the Class D shares is attached hereto as
Exhibit A.
(b) Within the United States, the Distributor shall offer and sell Class D
shares only to such selected dealers as are members in good standing of the
NASD.
Section 8. Payment of Expenses.
(a) The Fund shall bear all costs and expenses of the Fund, including fees
and disbursements of its counsel and auditors, in connection with the
preparation and filing of any required registration statements and/or
prospectuses and statements of additional information under the Investment
Company Act, the Securities Act, and all amendments and supplements thereto, and
preparing and mailing annual and interim reports and proxy materials to Class D
shareholders (including but not limited to the expense of setting in type any
such registration statements, prospectuses, statements of additional
information, annual or interim reports or proxy materials).
(b) The Distributor shall be responsible for any payments made to selected
dealers as reimbursement for their expenses associated with payments of sales
commissions to financial consultants. In addition, after the prospectuses,
statements of additional information and annual and interim reports have been
prepared and set in type, the Distributor shall bear the costs and expenses of
printing and distributing any copies thereof which are to be used in connection
with the offering of Class D shares to selected dealers or investors pursuant to
this Agreement. The Distributor shall bear the costs and expenses of preparing,
printing and distributing any other literature used by the Distributor or
furnished by it for use by selected dealers in connection with the offering of
the Class D shares for sale to the public and any expenses of advertising
incurred by the Distributor
in connection with such offering. It is understood and agreed that so long as
the Fund's Class D Shares Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act remains in effect, any expenses incurred by the
Distributor hereunder in connection with account maintenance activities may be
paid from amounts recovered by it from the Fund under such Plan.
(c) Each Portfolio shall bear the cost and expenses of qualification of
the Class D shares for sale pursuant to this Agreement and, if necessary or
advisable in connection therewith, of qualifying the Fund as a broker or dealer
in such states of the United States or other jurisdictions as shall be selected
by the Fund and the Distributor pursuant to Section 5(c) hereof and the cost and
expenses payable to each such state for continuing qualification therein until
the Fund decides to discontinue such qualification pursuant to Section 5(c)
hereof.
Section 9. Indemnification.
(a) The Fund shall indemnify and hold harmless the Distributor and each
person, if any, who controls the Distributor against any loss, liability, claim,
damage or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damage or expense and reasonable counsel
fees incurred in connection therewith), as incurred, arising by reason of any
person acquiring any Class D shares, which may be based upon the Securities Act,
or on any other statute or at common law, on the ground that the registration
statement or related prospectus and statement of additional information, as from
time to time
amended and supplemented, or an annual or interim report to shareholders of the Fund, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading, unless such statement or omission was made in reliance upon, and in conformity with, information furnished to the Fund in connection therewith by or on behalf of the Distributor; provided, however, that in no case (i) is the indemnity of the Fund in favor of the Distributor and any such controlling persons to be deemed to protect such Distributor or any such controlling persons thereof against any liability to the Fund or its security holders to which the Distributor or any such controlling persons would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of their duties or by reason of the reckless disregard of their obligations and duties under this Agreement; or (ii) is the Fund to be liable under its indemnity agreement contained in this paragraph with respect to any claim made against the Distributor or any such controlling persons, unless the Distributor or such controlling persons, as the case may be, shall have notified the Fund in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon the Distributor or such controlling persons (or after the Distributor or such controlling persons shall have received notice of such service on any designated agent), but failure to notify the Fund of any such claim shall not relieve it from any liability
which it may have to the person against whom such action is brought otherwise
than on account of its indemnity agreement contained in this paragraph. The Fund
will be entitled to participate at its own expense in the defense or, if it so
elects, to assume the defense of any suit brought to enforce any such liability,
but if the Fund elects to assume the defense, such defense shall be conducted by
counsel chosen by it and satisfactory to the Distributor or such controlling
person or persons, defendant or defendants in the suit. In the event the Fund
elects to assume the defense of any such suit and retain such counsel, the
Distributor or such controlling person or persons, defendant or defendants in
the suit shall bear the fees and expenses of any additional counsel retained by
them, but in case the Fund does not elect to assume the defense of any such
suit, it will reimburse the Distributor or such controlling person or persons,
defendant or defendants in the suit, for the reasonable fees and expenses of any
counsel retained by them. The Fund shall promptly notify the Distributor of the
commencement of any litigation or proceedings against it or any of its officers
or Directors in connection with the issuance or sale of any of the Class D
shares.
(b) The Distributor shall indemnify and hold harmless the Fund and each of
its Directors and officers and each person, if any, who controls the Fund
against any loss, liability, claim, damage or expense described in the foregoing
indemnity contained in subsection (a) of this Section, but only with respect to
statements or omissions made in reliance upon, and in conformity with,
information furnished to the Fund in writing by or on behalf of the Distributor
for use in connection with the registration statement or related prospectus and
statement of additional information, as from time to time amended, or the annual
or interim reports to Class D shareholders. In case any action shall be brought
against the Fund or any person so indemnified, in respect of which indemnity may
be sought against the Distributor, the Distributor shall have the rights and
duties given to the Fund, and the Fund and each person so indemnified shall have
the rights and duties given to the Distributor by the provisions of subsection
(a) of this Section 9.
Section 10. Merrill Lynch Mutual Fund Adviser Program. In connection with
the Merrill Lynch Mutual Fund Adviser Program, the Distributor and its
affiliate, Merrill Lynch, Pierce, Fenner & Smith Incorporated, are authorized to
offer and sell shares of the Fund, as agent for the Fund, to participants in
such program. The terms of this Agreement shall apply to such sales, including
terms as to offering price of shares, the proceeds to be paid to the Fund, the
duties of the Distributor, the payment of expenses and indemnification
obligations of the Fund and the Distributor.
Section 11. Duration and Termination of this Agreement. This Agreement
shall become effective as of the date first above written and shall remain in
force until October 21, 1996 and thereafter, but only for so long as such
continuance is specifically approved as to a Portfolio at least annually
by (i) the Board of Directors or by the vote of a majority of the outstanding
voting securities of that Portfolio and
(ii) by the vote of a majority of those Directors who are not parties to this
Agreement or interested persons of any such party cast in person at a meeting
called for the purpose of voting on such approval.
This Agreement may be terminated as to a Portfolio at any time, without
the payment of any penalty, by the Directors or by vote of a majority of the
outstanding Class D voting securities of the that Portfolio, or by the
Distributor, on sixty days' written notice to the other party. This Agreement
shall automatically terminate in the event of its assignment.
The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
Section 12. Amendments of this Agreement. This Agreement may be amended by
the parties only if such amendment is specifically approved as to a Portfolio by
(i) the Board of Directors or by the vote of a majority of outstanding voting
securities of that Portfolio and (ii) by the vote of a majority of those
Directors of the Fund who are not parties to this Agreement or interested
persons of any such party cast in person at a meeting called for the purpose of
voting on such approval.
Section 13. Governing Law. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the Investment Company
Act. To the extent that the
applicable law of the State of New York, or any of the provisions herein, conflict with the applicable provisions of the Investment Company Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
MERRILL LYNCH MUNICIPAL BOND FUND, INC.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
EXHIBIT A
MERRILL LYNCH MUNICIPAL BOND FUND, INC.
CLASS D SHARES OF COMMON STOCK
SELECTED DEALER AGREEMENT
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an agreement with Merrill Lynch Municipal Bond Fund, Inc., a Maryland corporation (the "Fund"), pursuant to which it acts as the distributor for the sale of shares of Class D Insured Portfolio Series Common Stock, Class D National Portfolio Series Common Stock and Class D Limited Maturity Portfolio Series Common Stock, par value $0.10 per share (herein referred to as "Class D shares"), of the Fund and as such has the right to distribute Class D shares of the Fund for resale. The Fund is an open-end investment company registered under the Investment Company Act of 1940, as amended, and its Class D shares being offered to the public are registered under the Securities Act of 1933, as amended. You have received a copy of the Class D Shares Distribution Agreement (the "Distribution Agreement") between ourself and the Fund and reference is made herein to certain provisions of such Distribution Agreement. The terms "Prospectus" and "Statement of Additional Information" used herein refer to the prospectus and statement of additional information, respectively, on file with the Securities and Exchange Commission which is part of the most recent effective registration statement pursuant to the Securities Act of 1933, as amended. As principal, we offer to sell to you, as a member of the Selected Dealers Group, Class D shares of the Fund upon the following terms and conditions:
1. In all sales of these Class D shares to the public, you shall act as dealer for your own account and in no transaction shall you have any authority to act as agent for the Fund, for us or for any other member of the Selected Dealers Group, except in connection with the Merrill Lynch Mutual Fund Adviser program and such other special programs as we from time to time agree, in which case you shall have authority to offer and sell shares, as agent for the Fund, to participants in such program.
2. Orders received from you will be accepted through us only at the public offering price applicable to each order, as set forth in the current Prospectus and Statement of Additional Information of the Fund. The procedure relating to the handling of orders shall be subject to Section 5 hereof and instructions which we or the Fund shall forward from time to time to you. All orders are
subject to acceptance or rejection by the Distributor or the Fund in the sole discretion of either. The minimum initial and subsequent purchase requirements are as set forth in the current Prospectus and Statement of Additional Information of the Fund.
3. The sales charges for sales to the public, computed as percentages of the public offering price and the amount invested, and the related discount to Selected Dealers are as follows:
Class D Shares of Insured and National Portfolios
Discount to
Selected
Sales Charge Dealers as
Sales Charge as Percentage* Percentage
as Percentage of the Net of the
of the Amount Offering
Amount of Purchase Offering Price Invested Price
- ------------------ -------------- ---------- -----
Less than $25,000 .............. 4.00% 4.17% 3.75%
$25,000 but less
than $50,000 .................. 3.75% 3.90% 3.50%
$50,000 but less
than $100,000 ................. 3.25% 3.36% 3.00%
$100,000 but less
than $250,000 ................. 2.50% 2.56% 2.25%
$250,000 but less
than $1,000,000 ............... 1.50% 1.52% 1.25%
$1,000,000 and over** .......... .00% .00% .00%
|
Class D Shares of Limited Maturity Portfolio
Discount to
Selected
Sales Charge Dealers as
Sales Charge as Percentage* Percentage
as Percentage of the Net of the
of the Amount Offering
Amount of Purchase Offering Price Invested Price
- ------------------ -------------- ---------- -----
Less than $100,000 ............ 1.00% 1.01% .95%
$100,000 but less
that $250,000 ................ .75% .76% .70%
$250,000 but less
than $500,000 ................ .50% .50% .45%
$500,000 but less
than $1,000,000 .............. .30% .30% .27%
$1,000,000 and over** ......... .00% .00% .20%
|
The term "purchase" refers to a single purchase by an individual, or to concurrent purchases, which in the aggregate are at least equal to the prescribed amounts, by an individual, his spouse and their children under the age of 21 years purchasing Class D shares for his or their own account and to single purchases by a trustee or other fiduciary purchasing Class D shares for a single trust estate or single fiduciary account although more than one beneficiary is involved. The term "purchase" also includes purchases by any "company" as that term is defined in the Investment Company Act of 1940, as amended, but does not include purchases by any such company which has not been in existence for at least six months or which has no purpose other than the purchase of Class D shares of the Fund or Class D shares of other registered investment companies at a discount; provided, however, that it shall not include purchases by any group of individuals whose sole organizational nexus is that the participants therein are credit cardholders of a company, policyholders of an insurance company, customers of either a bank or broker-dealer or clients of an investment adviser.
The reduced sales charges are applicable through a right of accumulation under which eligible investors are permitted to purchase Class D shares of the Fund at the offering price applicable to the total of (a) the public offering price of the shares then being purchased plus (b) an amount equal to the then current net asset value or cost, whichever is higher, of the purchaser's combined holdings of Class A, Class B, Class C and Class D shares of the Fund and of any other investment company with an initial sales charge for which the Distributor acts as the distributor. For any such right of accumulation to be made available, the Distributor must be provided at the time of purchase, by the purchaser or you, with sufficient information to permit confirmation of qualification, and acceptance of the purchase order is subject to such confirmation.
The reduced sales charges are applicable to purchases aggregating $25,000 or more for the Insured and National Portfolios and $100,000 or more for the Limited Maturity Portfolio of Class A shares or of Class D shares of any other investment company with an initial sales charge for which the Distributor acts as the distributor made through you within a thirteen-month period starting with the first purchase pursuant to a Letter of Intention in the form provided in the Prospectus. A purchase not originally made pursuant to a Letter of Intention may be included under a subsequent letter executed within 90 days of such purchase if the Distributor is informed in writing of this intent within such 90-day period. If the intended amount of shares is not purchased within the thirteen-month period, an appropriate price adjustment will be made pursuant to the terms of the Letter of Intention.
You agree to advise us promptly at our request as to amounts of any sales made by you to the public qualifying for reduced sales charges. Further information as to the reduced sales charges pursuant to the right of accumulation or a Letter of Intention is set forth in the Prospectus and Statement of Additional Information.
4. You shall not place orders for any of the Class D shares unless you have already received purchase orders for such Class D shares at the applicable public offering prices and subject to the terms hereof and of the Distribution Agreement. You agree that you will not offer or sell any of the Class D shares except under circumstances that will result in compliance with the applicable Federal and state securities laws and that in connection with sales and offers to sell Class D shares you will furnish to each person to whom any such sale or offer is made a copy of the Prospectus and, if requested, the Statement of Additional Information (as then amended or supplemented) and will not furnish to any person any information relating to the Class D shares of the Fund which is inconsistent in any respect with the information contained in the Prospectus and Statement of Additional Information (as then amended or supplemented) or cause any advertisement to be published in any newspaper or posted in any public place without our consent and the consent of the Fund.
5. As a selected dealer, you are hereby authorized (i) to place orders directly with the Fund for Class D shares of the Fund to be resold by us to you subject to the applicable terms and conditions governing the placement of orders by us set forth in Section 3 of the Distribution Agreement and subject to the compensation provisions of Section 3 hereof and (ii) to tender Class D shares directly to the Fund or its agent for redemption subject to the applicable terms and conditions set forth in Section 4 of the Distribution Agreement.
6. You shall not withhold placing orders received from your customers so as to profit yourself as a result of such withholding: e.g., by a change in the "net asset value" from that used in determining the offering price to your customers.
7. If any Class D shares sold to you under the terms of this Agreement are repurchased by the Fund or by us for the account of the Fund or are tendered for redemption within seven business days after the date of the confirmation of the original purchase by you, it is agreed that you shall forfeit your right to, and refund to us, any discount received by you on such Class D shares.
8. No person is authorized to make any representations concerning Class D shares of the Fund except those contained in the current Prospectus and Statement of Additional Information of the Fund and in such printed information subsequently issued by us or
the Fund as information supplemental to such Prospectus and Statement of Additional Information. In purchasing Class D shares through us you shall rely solely on the representations contained in the Prospectus and Statement of Additional Information and supplemental information above mentioned. Any printed information which we furnish you other than the Fund's Prospectus, Statement of Additional Information, periodic reports and proxy solicitation material is our sole responsibility and not the responsibility of the Fund, and you agree that the Fund shall have no liability or responsibility to you in these respects unless expressly assumed in connection therewith.
9. You agree to deliver to each of the purchasers making purchases from you a copy of the then current Prospectus and, if requested, the Statement of Additional Information at or prior to the time of offering or sale and you agree thereafter to deliver to such purchasers copies of the annual and interim reports and proxy solicitation materials of the Fund. You further agree to endeavor to obtain proxies from such purchasers. Additional copies of the Prospectus and Statement of Additional Information, annual or interim reports and proxy solicitation materials of the Fund will be supplied to you in reasonable quantities upon request.
10. We reserve the right in our discretion, without notice, to suspend sales or withdraw the offering of Class D shares entirely or to certain persons or entities in a class or classes specified by us. Each party hereto has the right to cancel this agreement upon notice to the other party.
11. We shall have full authority to take such action as we may deem advisable in respect of all matters pertaining to the continuous offering. We shall be under no liability to you except for lack of good faith and for obligations expressly assumed by us herein. Nothing contained in this paragraph is intended to operate as, and the provisions of this paragraph shall not in any way whatsoever constitute, a waiver by you of compliance with any provision of the Securities Act of 1933, as amended, or of the rules and regulations of the Securities and Exchange Commission issued thereunder.
12. You represent that you are a member of the National Association of Securities Dealers, Inc. and, with respect to any sales in the United States, we both hereby agree to abide by the Rules of Fair Practice of such Association.
13. Upon application to us, we will inform you as to the states in which we believe the Class D shares have been qualified for sale under, or are exempt from the requirements of, the respective securities laws of such states, but we assume no responsibility or obligation as to your right to sell Class D shares in any jurisdiction. We will file with the Department of
State in New York a Further State Notice with respect to the Class D shares, if necessary.
14. All communications to us should be sent to the address below. Any notice to you shall be duly given if mailed or telegraphed to you at the address specified by you below.
15. Your first order placed pursuant to this Agreement for the purchase of Class D shares of the Fund will represent your acceptance of this Agreement.
MERRILL LYNCH FUNDS DISTRIBUTOR,INC.
Please return one signed copy of this agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
Box 9011
Princeton, New Jersey 08543-9011
Accepted:
[Rogers & Wells Letterhead]
October , 1994
Merrill Lynch Municipal Bond
Fund, Inc.
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Ladies and Gentlemen:
Merrill Lynch Asset Management, L.P. ("MLAM") agrees to purchase one share of Class C Common Stock , par value $.10 per share, and one share of Class D Common Stock , par value $.10 per share (the "Shares"), of the National Portfolio of Merrill Lynch Municipal Bond Fund, Inc. (the "Fund") at a price of $_________ per share. MLAM shall tender to the Fund the amount of $ _________ in full payment for the Shares.
MLAM represents and warrants to the Fund that the Shares are being acquired for investment and not with a view to distribution thereof, and that MLAM has no present intention to redeem or dispose of any of the Shares.
Very truly yours,
MERRILL LYNCH ASSET
MANAGEMENT, L.P.
By: Princeton Services, Inc.
General Partner
Title:
[Rogers & Wells Letterhead]
October , 1994
Merrill Lynch Municipal Bond
Fund, Inc.
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Ladies and Gentlemen:
Merrill Lynch Asset Management, L.P. ("MLAM") agrees to purchase one share of Class C Common Stock, par value $.10 per share, and one share of Class D Common Stock , par value $.10 per share (the "Shares"), of the Insured Portfolio of Merrill Lynch Municipal Bond Fund, Inc. (the "Fund") at a price of $__________ per share. MLAM shall tender to the Fund the amount of $___________ in full payment for the Shares.
MLAM represents and warrants to the Fund that the Shares are being acquired for investment and not with a view to distribution thereof, and that MLAM has no present intention to redeem or dispose of any of the Shares.
Very truly yours,
MERRILL LYNCH ASSET
MANAGEMENT, L.P.
By: Princeton Services, Inc.
General Partner
Title:
[Rogers & Wells Letterhead]
October , 1994
Merrill Lynch Municipal Bond
Fund, Inc.
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Ladies and Gentlemen:
Merrill Lynch Asset Management, L.P. ("MLAM") agrees to purchase one share of Class C Common Stock, par value $.10 per share, and one share of Class D Common Stock, par value $.10 per share (the "Shares"), of the Limited Maturity Portfolio of Merrill Lynch Municipal Bond Fund, Inc. (the "Fund") at a price of $_________ per share. MLAM shall tender to the Fund the amount of $_________ in full payment for the Shares.
MLAM represents and warrants to the Fund that the Shares are being acquired for investment and not with a view to distribution thereof, and that MLAM has no present intention to redeem or dispose of any of the Shares.
Very truly yours,
MERRILL LYNCH ASSET
MANAGEMENT, L.P.
By: Princeton Services, Inc.
General Partner
Title:
AMENDED AND RESTATED
CLASS B DISTRIBUTION PLAN
OF
MERRILL LYNCH MUNICIPAL BOND FUND, INC.
PURSUANT TO RULE 12b-1
DISTRIBUTION PLAN made as of the 31st day of October, 1988 and amended and restated as of the 6th day of July, 1993, by and between Merrill Lynch Municipal Bond Fund, Inc., a Maryland corporation (the "Fund"), and Merrill Lynch Funds Distributor, Inc., a Delaware corporation ("MLFD").
W I T N E S S E T H:
WHEREAS, the Fund intends to engage in business as an open-end investment company registered under the Investment Company Act of 1940, as amended (the "Investment Company Act"); and
WHEREAS, the Fund is comprised of three separate portfolios, namely, the Insured Portfolio, the High Yield Portfolio and the Limited Maturity Portfolio (the "Portfolios"), each of which pursues its own investment objective through separate investment policies, and may in the future comprise one or more additional portfolios; and
WHEREAS, MLFD is a securities firm engaged in the business of selling shares of investment companies either directly to purchasers or through other securities dealers; and
WHEREAS, the Fund has entered into an Amended Class B Shares Distribution Agreement with MLFD, pursuant to which MLFD acts as the exclusive distributor and representative of the Fund in the offer and sale of shares of the Class B Insured Portfolio Series Common Stock, the Class B High Yield Portfolio Series Common Stock and the Class B Limited Maturity Portfolio Series Common Stock, par value $0.10 per share (collectively, the "Class B shares") of the Fund to the public; and
WHEREAS, the Fund has entered into a Class B Distribution Plan (the "Prior Plan") pursuant to Rule 12b-1 under the Investment Company Act; and
WHEREAS, the Fund desires to adopt this Amended and Restated Class B Distribution Plan pursuant to Rule 12b-1 under the Investment Company Act, pursuant to which the Fund with respect to
the Insured and High Yield Portfolios will pay an account maintenance fee and a distribution fee to MLFD in connection with the distribution of Class B shares of each such Portfolio;
WHEREAS, the Fund desires to adopt this Distribution Plan with respect to Class B Limited Maturity Portfolio Series Common Stock; and
WHEREAS, the Directors of the Fund have determined that there is a reasonable likelihood that adoption of this Distribution Plan will benefit the Fund and its Class B shareholders.
NOW, THEREFORE, the Fund hereby adopts, and the Distributor hereby agrees to the terms of, this Distribution Plan (the "Plan") in accordance with Rule 12b-l under the Investment Company Act on the following terms and conditions:
1. The Fund shall pay MLFD an account maintenance fee under the Plan at the end of each month with respect to each Portfolio of the Fund (i) at the annual rate of 0.50% of the respective average daily net asset value of the Class B shares of the Insured and High Yield Portfolios, and (ii) at the annual rate of 0.20% of the average daily net asset value of the Class B shares of the Limited Maturity Portfolio to compensate MLFD and securities firms with which MLFD enters into related agreements ("Sub-Agreements") pursuant to Paragraph 3 hereof for account maintenance activities with respect to Class B shareholders of the Fund. Only account maintenance expenditures properly attributable to the sale of Class B shares of a Portfolio will be used to justify any fee paid by the Fund with respect to that Portfolio pursuant to this Plan, and, to the extent that such expenditures relate to more than one Portfolio, the expenditures will be allocated between the affected Portfolios in a manner deemed appropriate by the Board of Directors of the Fund.
2. The Fund shall pay MLFD a distribution fee under the Plan with respect to each Portfolio of the Fund at the end of each month (i) at the annual rate of 0.50% of the respective average daily net asset value of the Class B shares of the Insured and High Yield Portfolios, and (ii) at the annual rate of 0.20% of the average daily net asset value of the Class B shares of the Limited Maturity Portfolio, to compensate MLFD and securities firms with which MLFD enters into related agreements ("Sub-Agreements") pursuant to Paragraph 3 hereof for providing sales and promotional activities and services. Such activities and services will relate to the sale, promotion and marketing of the Class B shares of such Portfolios and payments related to the furnishing of services to Class B shareholders by sales and marketing personnel. Such expenditures may consist of sales commissions to financial consultants for selling Class B shares of such Portfolios, compensation, sales incentives and payments to sales and marketing personnel, and the payment of expenses incurred in its sales and promotional activities, including advertising expenditures related
to the Class B shares of such Portfolios, the costs of preparing and distributing promotional materials. The distribution fee may also be used to pay the financing costs of carrying on the unreimbursed expenditures described in this Paragraph 2. Payment of the distribution fee described in this Paragraph 2 shall be subject to any limitations set forth in applicable regulation of the National Association of Securities Dealers, Inc. Only distribution expenditures properly attributable to the sale of Class B shares of a Portfolio will be used to justify any fee paid by the Fund with respect to that Portfolio pursuant to this Plan, and, to the extent that such expenditures relate to more than one Portfolio, the expenditures will be allocated between the affected Portfolios in a manner deemed appropriate by the Board of Directors of the Fund.
3. The Fund hereby authorizes MLFD to enter into Sub-Agreements with certain securities firms ("Securities Firms"), including Merrill Lynch, Pierce, Fenner & Smith Incorporated, to provide compensation to such Securities Firms for activities and services of the type referred to in Paragraph 1 and 2 hereof. MLFD may reallocate all or a portion of its distribution fee to such Securities Firms as compensation for the above-mentioned activities and services. Such Sub-Agreement shall provide that the Securities Firms shall provide MLFD with such information as is reasonably necessary to permit MLFD to comply with the reporting requirements set forth in Paragraph 4 hereof.
4. MLFD shall provide the Fund for review by the Board of Directors, and the Directors shall review, at least quarterly, a written report complying with the requirements of Rule 12b-1 regarding the disbursement of the account maintenance fee and distribution fee during such period.
5. The Prior Plan has been approved by a vote of at least a majority, as defined in the Investment Company Act, of the outstanding Class B voting securities of the Fund. The Plan has not been submitted to the Class B shareholders because the amendments do not materially increase the rate of payments by the Fund provided for in the Prior Plan.
6. The Plan shall not take effect with respect to a Portfolio until it has been approved, together with any related agreements with respect to that Portfolio, by votes of a majority of both (a) the Board of Directors of the Fund and (b) those Directors of the Fund who are not "interested persons" of the Fund, as defined in the Investment Company Act, and have no direct or indirect financial interest in the operation of the Plan or any agreements related to it (the "Rule 12b-1 Directors"), cast in person at a meeting or meetings called for the purpose of voting on the Plan and such related agreements.
7. The Plan shall continue in effect for so long as such continuance is specifically approved at least annually in the manner provided for approval of the Plan in Paragraph 6.
8. The Plan may be terminated with respect to a Portfolio at any time by vote of a majority of the Rule 12b-l Directors or by vote of a majority of the outstanding Class B voting securities of that Portfolio.
9. The Plan may not be amended to increase materially the rate of payments provided for herein with respect to a Portfolio of the Fund unless such amendment is approved by at least a majority, as defined in the Investment Company Act, of the outstanding Class B voting securities of such Portfolio and by the Board of Directors of the Fund in the manner provided for in Paragraph 6 hereof, and no material amendment to the Plan shall be made unless approved in the manner provided for approval and annual renewal in Paragraph 6 hereof.
10. While the Plan is in effect, the selection and nomination of Directors who are not interested persons, as defined in the Investment Company Act, of the Fund shall be committed to the discretion of the Directors who are not interested persons.
11. The Fund shall preserve copies of the Plan and any related agreements and all reports made pursuant to Paragraph 4 hereof, for a period of not less than six years from the date of the Plan, or the agreements or such report, as the case may be, the first two years in an easily accessible place.
IN WITNESS WHEREOF, the parties hereto have executed this Plan as of July 6, 1993.
MERRILL LYNCH Municipal BOND FUND, INC.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
CLASS B SHARES DISTRIBUTION PLAN SUB-AGREEMENT
AGREEMENT made as of the 31st day of October, 1994 and amended as of the 6th day of July, 1993 by and between Merrill Lynch Funds Distributor, Inc., a Delaware corporation ("MLFD"), and Merrill Lynch, Pierce, Fenner & Smith Incorporated, a Delaware corporation (the "Securities Firm")
W I T N E S S E T H:
WHEREAS, MLFD has entered into an agreement with Merrill Lynch Municipal Bond Fund, Inc., a Maryland corporation (the "Fund"), pursuant to which it acts as the exclusive distributor for the sale of Class B shares of the Class B Insured Portfolio Series Common Stock, the Class B High Yield Portfolio Series Common Stock and the Class B Limited Maturity Portfolio Series Common Stock (collectively, the "Class B shares") of the Fund; and
WHEREAS, MLFD and the Fund have entered into an Amended and Restated Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") pursuant to which MLFD receives an account maintenance fee from the Fund at the annual rate of 0.25% of the average daily net assets of the Fund's Insured Portfolio and High Yield Portfolio and at an annual rate of 0.15% of the average daily net assets relating to Class B shares for account maintenance activities related to Class B shares of the Fund and a distribution fee from the Fund at the annual rate of 0.50% of the average daily net asset value of the Class B shares of the Fund's Insured Portfolio and National Portfolio and at the annual rate of .20% of the average daily net assets of the Fund's Class B Shares of the Limited Maturity Portfolio for providing sales and promotional activities and services related to the distribution of Class B shares of the Fund; and
WHEREAS, MLFD desires the Securities Firm to perform certain account maintenance activities and sales and promotional activities and services for the Fund's Class B shareholders, and the Securities Firm is willing to perform such services;
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereby agree as follows:
1. The Securities Firm shall provide account maintenance activities and services with respect to the Class B shares of the Fund and incur expenditures in connection with such activities and services of the types referred to in Paragraph 1 of the Plan.
2. The Securities Firm shall provide sales and promotional activities and services with respect to the sale of the
Class B shares of the Fund, and incur distribution expenditures, of the types referred to in Paragraph 2 of the Plan.
3. As compensation for its activities and services performed under this Agreement, MLFD shall pay the Securities Firm an account maintenance fee and a distribution fee at the end of each calendar month in an amount agreed upon by the parties hereto.
4. The Securities Firm shall provide MLFD, at least quarterly, such information as reasonably requested by MLFD to enable MLFD to comply with the reporting requirements of Rule 12b-1 regarding the disbursement of the account maintenance fee and the distribution fee during such period referred to in Paragraph 4 of the Plan.
5. This Sub-Agreement shall not take effect with respect to a Portfolio until it has been approved with respect to that Portfolio by votes of a majority of both (a) the Board of Directors of the Fund and (b) those Directors of the Fund who are not "interested persons" of the Fund, as defined in the Act, and have no direct or indirect financial interest in the operation of the Plan, this Agreement, or any agreements related to the Plan or this Agreement (the "Rule 12b-1 Directors"), cast in person at a meeting or meetings called for the purpose of voting on this Agreement.
6. This Agreement shall continue in effect for as long as such continuance is specifically approved at least annually in the manner provided for approval of the Plan in Paragraph 6.
7. This Agreement shall automatically terminate in the event of its assignment or in the event of the termination of the Plan or any amendment to the Plan that requires such termination.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of July 6, 1993.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
CLASS C DISTRIBUTION PLAN
OF
MERRILL LYNCH MUNICIPAL BOND FUND, INC.
PURSUANT TO RULE 12b-1
DISTRIBUTION PLAN made as of the 21st day of October 1994, by and between MERRILL LYNCH MUNICIPAL BOND FUND, INC., a Maryland corporation (the "Fund"), and Merrill Lynch Funds Distributor, Inc., a Delaware corporation ("MLFD").
W I T N E S S E T H :
WHEREAS, the Fund is engaged in business as an open-end investment company registered under the Investment Company Act of 1940, as amended (the "Investment Company Act"); and
WHEREAS, the Fund is comprised of three separate portfolios, namely, the Insured Portfolio, the National Portfolio and the Limited Maturity Portfolio (the "Portfolios"), each of which pursues its own investment objective through separate investment policies, and may in the future comprise one or more additional portfolios; and
WHEREAS, MLFD is a securities firm engaged in the business of selling shares of investment companies either directly to purchasers or through other securities dealers; and
WHEREAS, the Fund proposes to enter into a Class C Shares Distribution Agreement with MLFD, pursuant to which MLFD will act as the exclusive distributor and representative of the Fund in the offer and sale of shares of the Class C Insured Portfolio Series Common Stock, the Class C National Portfolio Series Common Stock and the Class C Limited Portfolio Series Common Stock, par value $0.10 per share (collectively, the "Class C shares"), of the Fund to the public; and
WHEREAS, the Fund desires to adopt this Class C Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act, pursuant to which the Fund will pay an account maintenance fee and a distribution fee to MLFD with respect to the Class C shares of each Portfolio; and
WHEREAS, the Directors of the Fund have determined that there is a reasonable likelihood that adoption of the Plan will benefit the Fund and shareholders of each Portfolio.
NOW, THEREFORE, the Fund hereby adopts, and MLFD hereby agrees to the terms of, the Plan in accordance with Rule 12b-1
under the Investment Company Act on the following terms and conditions:
1. The Fund shall pay MLFD an account maintenance fee under the Plan at the end of each month with respect to each Portfolio of the Fund at the annual rate of 0.25% (in the case of Insured Portfolio and the National Portfolio, or 0.15% (in the case of the Limited Maturity Portfolio) of the average daily net assets of such Portfolio relating to the Class C shares to compensate MLFD and securities firms with which MLFD enters into related agreements pursuant to Paragraph 3 hereof ("Sub-Agreements") for providing account maintenance activities with respect to Class C shareholders of the Portfolio. Expenditures under the Plan may consist of payments to financial consultants for maintaining accounts in connection with Class C shares of each Portfolio of the Fund and payment of expenses incurred in connection with such account maintenance activities including the costs of making services available to shareholders including assistance in connection with inquiries related to shareholder accounts. Only account maintenance expenditures properly attributable to the sale of Class C shares of a Portfolio will be used to justify any fee paid by the Fund with respect to that Portfolio pursuant to this Plan, and, to the extent that such expenditures relate to more than one Portfolio, the expenditures will be allocated between the affected Portfolios in a manner deemed appropriate by the Board of Directors of the Fund.
2. The Fund shall pay MLFD a distribution fee under the Plan with respect to each Portfolio of the Fund at the end of each month (i) at the annual rate of 0.55% (in the case of the Insured and the National Portfolio, or 0.20% ( in the case of the Limited Maturity Portfolio) of average daily net assets of such Portfolio relating to Class C shares to compensate MLFD and securities firms with which MLFD enters into related Sub-Agreements for providing sales and promotional activities and services. Such activities and services will relate to the sale, promotion and marketing of the Class C shares of each Portfolio. Such expenditures may consist of sales commissions to financial consultants for selling Class C shares of each Portfolio, compensation, sales incentives and payments to sales and marketing personnel, and the payment of expenses incurred in its sales and promotional activities, including advertising expenditures related to the Portfolio and the costs of preparing and distributing promotional materials. The distribution fee may also be used to pay the financing costs of carrying the unreimbursed expenditures described in this Paragraph 2. Payment of the distribution fee described in this Paragraph 2 shall be subject to any limitations set forth in any applicable regulation of the National Association of Securities Dealers, Inc. Only distribution expenditures properly attributable to the sale of Class C shares of a Portfolio will be used to justify any fee paid by the Fund with respect to that Portfolio pursuant to this Plan, and, to the extent that such expenditures relate to more than one Portfolio, the expenditures will be allocated between
the affected Portfolios in a manner deemed appropriate by the Board of Directors of the Fund.
3. The Fund hereby authorizes MLFD to enter into Sub-Agreements with certain securities firms ("Securities Firms"), including Merrill Lynch, Pierce, Fenner & Smith Incorporated, to provide compensation to such Securities Firms for activities and services of the type referred to in Paragraphs 1 and 2 hereof. MLFD may reallocate all or a portion of its account maintenance fee or distribution fee to such Securities Firms as compensation for the above-mentioned activities and services. Such Sub-Agreement shall provide that the Securities Firms shall provide MLFD with such information as is reasonably necessary to permit MLFD to comply with the reporting require- ments set forth in Paragraph 4 hereof.
4. MLFD shall provide the Fund for review by the Board of Directors, and the Directors shall review, at least quarterly, a written report complying with the requirements of Rule 12b-1 regarding the disbursement of the account maintenance fee and the distribution fee during such period.
5. This Plan shall not take effect with respect to a Portfolio of the Fund until it has been approved by a vote of at least a majority, as defined in the Investment Company Act, of the outstanding Class C voting securities of such Portfolio.
6. This Plan shall not take effect until it has been approved, together with any related agreements, by votes of a majority of both (a) the Board of Directors of the Fund and (b) those Directors of the Fund who are not "interested persons" of the Fund, as defined in the Investment Company Act, and have no direct or indirect financial interest in the operation of this Plan or any agreements related to it (the "Rule 12b-1 Directors"), cast in person at a meeting or meetings called for the purpose of voting on the Plan and such related agreements.
7. The Plan shall continue in effect for so long as such continuance is specifically approved at least annually in the manner provided for approval of the Plan in Paragraph 6.
8. The Plan may be terminated at any time with respect to a Portfolio of the Fund by vote of a majority of the Rule 12b-1 Directors, or by vote of a majority of the outstanding Class C voting securities of that Portfolio.
9. The Plan may not be amended to increase materially the rate of payments provided for herein with respect to a Portfolio of the Fund unless such amendment is approved by at least a majority, as defined in the Investment Company Act, of the outstanding Class C voting securities of such Portfolio, and by the Board of Directors of the Fund in the manner provided for in Paragraph 5 hereof, and no material amendment to the Plan shall
be made unless approved in the manner provided for approval and annual renewal in Paragraph 6 hereof.
10. While the Plan is in effect, the selection and nomina- tion of Directors who are not interested persons, as defined in the Investment Company Act, of the Fund shall be committed to the discretion of the Directors who are not interested persons.
11. The Fund shall preserve copies of the Plan and any related agreements and all reports made pursuant to Paragraph 4 hereof, for a period of not less than six years from the date of the Plan, or the agreements or such report, as the case may be, the first two years in an easily accessible place.
IN WITNESS WHEREOF, the parties hereto have executed this Distribution Plan as of the date first above written.
MERRILL LYNCH MUNICIPAL BOND FUND, INC.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
CLASS C SHARES DISTRIBUTION PLAN SUB-AGREEMENT
AGREEMENT made as of the 21st day of October, 1994 by and between
Merrill Lynch Funds Distributor, Inc., a Delaware corporation ("MLFD"), and
Merrill Lynch, Pierce, Fenner & Smith Incorporated, a Delaware corporation
("Securities Firm")
W I T N E S S E T H:
WHEREAS, MLFD has entered into an agreement with Merrill Lynch Municipal Bond Fund, Inc., a Maryland corporation (the "Fund"), pursuant to which it acts as the exclusive distributor for the sale of shares of the Class C Insured Portfolio Series Common Stock, the Class C Limited Maturity Portfolio Series Common Stock and the Class C National Portfolio Series Common Stock par value $0.10 per share (collectively, the "Class C shares") of the Fund; and
WHEREAS, MLFD and the Fund have entered into a Class C Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended, (the "Act") pursuant to which MLFD receives an account
|
maintenance fee from the Fund at the annual rate of 0.25% (in the case of the Insured Portfolio and the National Portfolio ) or 0.15% (in the case of the Limited Maturity Portfolio) of the average daily net assets of the Fund relating to Class C shares for account maintenance activities related to Class C shares of the Fund and a distribution fee from the Fund at the annual rate of 0.55% (in the case of the Insured Portfolio and the National Portfolio ) or 0.20% (in the case of the Limited Maturity Portfolio) of average daily net assets of the Fund relating to Class C shares for providing sales and promotional activities and services related to the distribution of Class C shares of the Fund; and
WHEREAS, MLFD desires the Securities Firm to perform certain account maintenance activities and sales and promotional activities and services for the Fund's Class C shareholders, and the Securities Firm is willing to perform such services;
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereby agree as follows:
1. The Securities Firm shall provide account maintenance activities and services with respect to the Class C shares of the Fund and incur expenditures in connection with such activities and services of the types referred to in Paragraph 1 of the Plan.
2. The Securities Firm shall provide sales and promotional activities and services with respect to the sale of the Class C shares of the Fund, and incur distribution expenditures, of the types referred to in Paragraph 2 of the Plan.
3. As compensation for its activities and services performed under this Agreement, MLFD shall pay the Securities Firm
an account maintenance fee and a distribution fee at the end of each calendar month in an amount agreed upon by the parties hereto.
4. The Securities Firm shall provide MLFD, at least quarterly, such information as reasonably requested by MLFD to enable MLFD to comply with the reporting requirements of Rule 12b-1 regarding the disbursement of the account maintenance fee and distribution fee during such period referred to in Paragraph 4 of the Plan.
5. This Agreement shall not take effect with respect to a Portfolio until it has been approved with respect to that Portfolio by votes of a majority of both (a) the Board of Directors of the Fund and (b) those Directors of the Fund who are not "interested persons" of the Fund, as defined in the Act, and have no direct or indirect financial interest in the operation of the Plan, this Agreement or any agreements related to the Plan or this agreement (the "Rule 12b-1 Directors") cast in person at a meeting or meetings called for the purpose of voting on this Agreement.
6. This Agreement shall continue in effect for as long as such continuance is specifically approved at least annually in the manner provided for approval of the Plan in Paragraph 6.
7. This Agreement shall automatically terminate in the event of its assignment or in the event of the termination of the Plan or any amendment to the Plan that requires such termination.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of October 21, 1994.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
CLASS D DISTRIBUTION PLAN
OF
MERRILL LYNCH MUNICIPAL BOND FUND, INC.
PURSUANT TO RULE 12b-1
DISTRIBUTION PLAN made as of the 21st day of October 1994, by and between MERRILL LYNCH MUNICIPAL BOND FUND, INC., a Maryland corporation (the "Fund"), and Merrill Lynch Funds Distributor, Inc., a Delaware corporation ("MLFD").
W I T N E S S E T H :
WHEREAS, the Fund is engaged in business as an open-end investment company registered under the Investment Company Act of 1940, as amended (the "Investment Company Act"); and
WHEREAS, the Fund is comprised of three separate portfolios, namely, the Insured Portfolio, the National Portfolio and the Limited Maturity Portfolio (the "Portfolios"), each of which pursues its own investment objective through separate investment policies, and may in the future comprise one or more additional portfolios; and
WHEREAS, MLFD is a securities firm engaged in the business of selling shares of investment companies either directly to purchasers or through other securities dealers; and
WHEREAS, the Fund proposes to enter into a Class D Shares Distribution Agreement with MLFD, pursuant to which MLFD will act as the exclusive distributor and representative of the Fund in the offer and sale of shares of the Class D Insured Portfolio Series Common Stock, the Class D National Portfolio Series Common Stock and the Class D Limited Maturity Portfolio Series Common Stock, par value $0.10 per share (collectively, the "Class D shares"), of the Fund to the public; and
WHEREAS, the Fund desires to adopt this Class D Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act, pursuant to which the Fund will pay an account maintenance fee to MLFD with respect to the Class D shares of each Portfolio; and
WHEREAS, the Directors of the Fund have determined that there is a reasonable likelihood that adoption of the Plan will benefit the Fund and shareholders of each Portfolio.
NOW, THEREFORE, the Fund hereby adopts, and MLFD hereby agrees to the terms of, the Plan in accordance with Rule 12b-1 under the Investment Company Act on the following terms and conditions:
1. The Fund shall pay MLFD an account maintenance fee under the Plan at the end of each month with respect to each Portfolio of the Fund (i) at the annual rate of 0.25% of average daily net assets of the Class D shares of the Insured and National Portfolios and (ii) at the annual rate of 0.10% of the average daily net assets of the Class D shares of the Limited Maturity Portfolio, to compensate MLFD and securities firms with which MLFD enters into related agreements pursuant to Paragraph 3 hereof ("Sub-Agreements") for providing account maintenance activities with respect to Class D shareholders of the Portfolio. Expenditures under the Plan may consist of payments to financial consultants for maintaining accounts in connection with Class D shares of each Portfolio of the Fund and payment of expenses incurred in connection with such account maintenance activities including the costs of making services available to shareholders including assistance in connection with inquiries related to shareholder accounts. Only account maintenance expenditures properly attributable to the Class D shares of a Portfolio will be used to justify any fee paid by the Fund with respect to that Portfolio pursuant to this Plan, and, to the extent that such expenditures relate to more than one Portfolio, the expenditures will be allocated between the affected Portfolios in a manner deemed appropriate by the Board of Directors of the Fund.
2. The Fund hereby authorizes MLFD to enter into Sub-Agreements with certain securities firms ("Securities Firms"), including Merrill Lynch, Pierce, Fenner & Smith Incorporated, to provide compensation to such Securities Firms for activities and services of the type referred to in Paragraphs 1 and 2 hereof. MLFD may reallocate all or a portion of its account maintenance fee to such Securities Firms as compensation for the above-mentioned activities and services. Such Sub-Agreement shall provide that the Securities Firms shall provide MLFD with such information as is reasonably necessary to permit MLFD to comply with the reporting requirements set forth in Paragraph 3 hereof.
3. MLFD shall provide the Fund for review by the Board of Directors, and the Directors shall review, at least quarterly, a written report complying with the requirements of Rule 12b-1 regarding the disbursement of the account maintenance fee during such period.
4. This Plan shall not take effect with respect to a Portfolio of the Fund until it has been approved by a vote of at least a majority, as defined in the Investment Company Act, of the outstanding Class D voting securities of such Portfolio.
5. This Plan shall not take effect until it has been approved, together with any related agreements, by votes of a majority of both (a) the Board of Directors of the Fund and (b) those Directors of the Fund who are not "interested persons" of the Fund, as defined in the Investment Company Act, and have no direct or indirect financial interest in the operation of this Plan or any agreements related to it (the "Rule 12b-1 Directors"), cast in person at a meeting or meetings called for the purpose of voting on the Plan and such related agreements.
6. The Plan shall continue in effect for so long as such continuance is specifically approved at least annually in the manner provided for approval of the Plan in Paragraph 5.
7. The Plan may be terminated at any time with respect to a Portfolio of the Fund by vote of a majority of the Rule 12b-1 Directors, or by vote of a majority of the outstanding Class D voting securities of that Portfolio.
8. The Plan may not be amended to increase materially the rate of payments provided for herein with respect to a Portfolio of the Fund unless such amendment is approved by at least a majority, as defined in the Investment Company Act, of the outstanding Class D voting securities of such Portfolio, and by the Board of Directors of the Fund in the manner provided for in Paragraph 6 hereof, and no material amendment to the Plan shall be made unless approved in the manner provided for approval and annual renewal in Paragraph 5 hereof.
9. While the Plan is in effect, the selection and nomination of Directors who are not interested persons, as defined in the Investment Company Act, of the Fund shall be committed to the discretion of the Directors who are not interested persons.
10. The Fund shall preserve copies of the Plan and any related agreements and all reports made pursuant to Paragraph 4 hereof, for a period of not less than six years from the date of the Plan, or the agreements or such report, as the case may be, the first two years in an easily accessible place.
IN WITNESS WHEREOF, the parties hereto have executed this Distribution Plan as of the date first above written.
MERRILL LYNCH MUNICIPAL BOND FUND, INC.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
CLASS D SHARES DISTRIBUTION PLAN SUB-AGREEMENT
AGREEMENT made as of the 21st day of October, 1994 by and between
Merrill Lynch Funds Distributor, Inc., a Delaware corporation ("MLFD"), and
Merrill Lynch, Pierce, Fenner & Smith Incorporated, a Delaware corporation
("Securities Firm")
W I T N E S S E T H:
WHEREAS, MLFD has entered into an agreement with Merrill Lynch Municipal Bond Fund, Inc., a Maryland corporation (the "Fund"), pursuant to which it acts as the exclusive distributor for the sale of shares of the Class D Insured Portfolio Series Common Stock, the Class D Limited Maturity Portfolio Series Common Stock and the Class D National Portfolio Series Common Stock (collectively, the "Class D shares") of the Fund; and
WHEREAS, MLFD and the Fund have entered into a Class D Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended, (the "Act") pursuant to which MLFD receives an account maintenance fee from the Fund at a rate of 0.25% of the average daily net asset value of the Class D shares of the Fund's Insured Portfolio and National Portfolio and at an annual rate of 0.10% of the average daily net asset value of the Class D shares of the Fund's Limited Maturity Portfolio for providing account maintenance services related to the Class D shares of the Fund; and
WHEREAS, MLFD desires the Securities Firm to perform certain services for the Fund's Class D shareholders, and the Securities Firm is willing to perform such services;
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereby agree as follows:
1. The Securities Firm shall provide account maintenance activities and services with respect to the Class D shares of the Fund and incur expenditures in connection with such activities and services of the types referred to in Paragraph 1 of the Plan.
2. As compensation for its services performed under this Agreement, MLFD shall pay the Securities Firm a fee at the end of each calendar month in an amount agreed upon by the parties hereto.
3. The Securities Firm shall provide MLFD, at least quarterly, such information as reasonably requested by MLFD to enable MLFD to comply with the reporting requirements of Rule 12b-1
regarding the disbursement of the fee during such period referred to in Paragraph 3 of the Plan.
4. This Agreement shall not take effect with respect to a Portfolio until it has been approved with respect to that Portfolio by votes of a majority of both (a) the Board of Directors of the Fund and (b) those Directors of the Fund who are not "interested persons" of the Fund, as defined in the Act, and have no direct or indirect financial interest in the operation of this Plan or any agreements related to it, cast in person at a meeting or meetings called for the purpose of voting on this Agreement.
5. This Agreement shall continue in effect for as long as such continuance is specifically approved at least annually in the manner provided for approval of the Plan in Paragraph 5.
6. This Agreement shall automatically terminate in the event of its assignment or in the event of the termination of the Plan or any amendment to the Plan that requires such termination.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of October 21, 1994.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
INDEPENDENT AUDITOR'S CONSENT
Merrill Lynch Municipal Bond Fund, Inc.:
We consent to use in Post-Effectice Amendment No. 19 to Registration Statement No. 2-57354 of our report dated July 29, 1994 appearing in the Statement of Additional Information, which is part of such Registration Statement, and to the reference to us under the caption "Financial Highlights" appearing in the Prospectus, which also is a part of such Registration Statement.
DELOITTE & TOUCHE LLP
Princeton, New Jersey
October 12, 1994
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
| ARTICLE 6 |
| CIK: 0000225635 |
| NAME: MERRILL LYNCH MUNICIPAL BOND FUND, INC. |
| SERIES: |
| NUMBER: 2 |
| NAME: INSURED PORTFOLIO |
| PERIOD TYPE | YEAR |
| FISCAL YEAR END | JUN 30 1994 |
| PERIOD START | JUL 01 1993 |
| PERIOD END | JUN 30 1994 |
| INVESTMENTS AT COST | 2690285866 |
| INVESTMENTS AT VALUE | 2702601800 |
| RECEIVABLES | 132900221 |
| ASSETS OTHER | 9879215 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 2845381236 |
| PAYABLE FOR SECURITIES | 23200000 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 14246975 |
| TOTAL LIABILITIES | 37446975 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 2749720228 |
| SHARES COMMON STOCK | 246434764 |
| SHARES COMMON PRIOR | 257675777 |
| ACCUMULATED NII CURRENT | 0 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | 45898099 |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | 12315934 |
| NET ASSETS | 1941741107 |
| DIVIDEND INCOME | 0 |
| INTEREST INCOME | 183856750 |
| OTHER INCOME | 226 |
| EXPENSES NET | 19914627 |
| NET INVESTMENT INCOME | 163942349 |
| REALIZED GAINS CURRENT | 80935129 |
| APPREC INCREASE CURRENT | (275252365) |
| NET CHANGE FROM OPS | (30374887) |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 119441701 |
| DISTRIBUTIONS OF GAINS | 57171047 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 33131876 |
| NUMBER OF SHARES REDEEMED | 53818184 |
| SHARES REINVESTED | 9445296 |
| NET CHANGE IN ASSETS | (328560682) |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | 47106459 |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 11040540 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 19914627 |
| AVERAGE NET ASSETS | 2158026011 |
| PER SHARE NAV BEGIN | 8.64 |
| PER SHARE NII | .47 |
| PER SHARE GAIN APPREC | (.53) |
| PER SHARE DIVIDEND | .47 |
| PER SHARE DISTRIBUTIONS | .23 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 7.88 |
| EXPENSE RATIO | .42 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
| ARTICLE 6 |
| CIK: 0000225635 |
| NAME: MERRILL LYNCH MUNICIPAL BOND FUND, INC. |
| SERIES: |
| NUMBER: 1 |
| NAME: NATIONAL PORTFOLIO |
| PERIOD TYPE | YEAR |
| FISCAL YEAR END | JUN 30 1994 |
| PERIOD START | JUL 01 1993 |
| PERIOD END | JUN 30 1994 |
| INVESTMENTS AT COST | 1634000759 |
| INVESTMENTS AT VALUE | 1597539473 |
| RECEIVABLES | 95886295 |
| ASSETS OTHER | 109086 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 1693534854 |
| PAYABLE FOR SECURITIES | 21648397 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 9536557 |
| TOTAL LIABILITIES | 31184954 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 1670458467 |
| SHARES COMMON STOCK | 119410837 |
| SHARES COMMON PRIOR | 122872300 |
| ACCUMULATED NII CURRENT | 0 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | 28352719 |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | (36461286) |
| NET ASSETS | 1203180964 |
| DIVIDEND INCOME | 0 |
| INTEREST INCOME | 112169662 |
| OTHER INCOME | 1522 |
| EXPENSES NET | 13322352 |
| NET INVESTMENT INCOME | 98848832 |
| REALIZED GAINS CURRENT | 62008845 |
| APPREC INCREASE CURRENT | (172722080) |
| NET CHANGE FROM OPS | (11864403) |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 75680507 |
| DISTRIBUTIONS OF GAINS | 36128677 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 8490083 |
| NUMBER OF SHARES REDEEMED | 17141264 |
| SHARES REINVESTED | 5189718 |
| NET CHANGE IN ASSETS | (115525547) |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | 15270704 |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 8514268 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 13322352 |
| AVERAGE NET ASSETS | 1322259870 |
| PER SHARE NAV BEGIN | 11.02 |
| PER SHARE NII | .62 |
| PER SHARE GAIN APPREC | (.64) |
| PER SHARE DIVIDEND | .62 |
| PER SHARE DISTRIBUTIONS | .30 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 10.08 |
| EXPENSE RATIO | .55 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
| ARTICLE 6 |
| CIK: 0000225635 |
| NAME: MERRILL LYNCH MUNICIPAL BOND FUND, INC. |
| SERIES: |
| NUMBER: 3 |
| NAME: LIMITED MATURITY PORTFOLIO |
| PERIOD TYPE | YEAR |
| FISCAL YEAR END | JUN 30 1994 |
| PERIOD START | JUL 01 1993 |
| PERIOD END | JUN 30 1994 |
| INVESTMENTS AT COST | 936307940 |
| INVESTMENTS AT VALUE | 934920346 |
| RECEIVABLES | 14045242 |
| ASSETS OTHER | 8011607 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 956977195 |
| PAYABLE FOR SECURITIES | 12866592 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 8433834 |
| TOTAL LIABILITIES | 21300426 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 942258132 |
| SHARES COMMON STOCK | 80064850 |
| SHARES COMMON PRIOR | 84606074 |
| ACCUMULATED NII CURRENT | 0 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | (5193769) |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | (1387594) |
| NET ASSETS | 790142342 |
| DIVIDEND INCOME | 0 |
| INTEREST INCOME | 40921727 |
| OTHER INCOME | 812 |
| EXPENSES NET | 4491554 |
| NET INVESTMENT INCOME | 36430985 |
| REALIZED GAINS CURRENT | (968336) |
| APPREC INCREASE CURRENT | (13063534) |
| NET CHANGE FROM OPS | 22399115 |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 31987779 |
| DISTRIBUTIONS OF GAINS | 0 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 37619639 |
| NUMBER OF SHARES REDEEMED | 44144662 |
| SHARES REINVESTED | 1983800 |
| NET CHANGE IN ASSETS | (6238514) |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | (4225433) |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 3305839 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 4491554 |
| AVERAGE NET ASSETS | 868104670 |
| PER SHARE NAV BEGIN | 10.01 |
| PER SHARE NII | .37 |
| PER SHARE GAIN APPREC | (.14) |
| PER SHARE DIVIDEND | .37 |
| PER SHARE DISTRIBUTIONS | 0 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 9.87 |
| EXPENSE RATIO | .40 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |
| ARTICLE 6 |
| CIK: 0000225635 |
| NAME: MERRILL LYNCH MUNICIPAL BOND FUND, INC. |
| SERIES: |
| NUMBER: 2 |
| NAME: INSURED PORTFOLIO |
| PERIOD TYPE | YEAR |
| FISCAL YEAR END | JUN 30 1994 |
| PERIOD START | JUL 01 1993 |
| PERIOD END | JUN 30 1994 |
| INVESTMENTS AT COST | 2690285866 |
| INVESTMENTS AT VALUE | 2702601800 |
| RECEIVABLES | 132900221 |
| ASSETS OTHER | 9879215 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 2845381236 |
| PAYABLE FOR SECURITIES | 2320000 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 14246975 |
| TOTAL LIABILITIES | 37446975 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 2749720228 |
| SHARES COMMON STOCK | 110011150 |
| SHARES COMMON PRIOR | 105601431 |
| ACCUMULATED NII CURRENT | 0 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | 45898099 |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | 12315934 |
| NET ASSETS | 1941741107 |
| DIVIDEND INCOME | 0 |
| INTEREST INCOME | 183856750 |
| OTHER INCOME | 226 |
| EXPENSES NET | 19914627 |
| NET INVESTMENT INCOME | 163942349 |
| REALIZED GAINS CURRENT | 80935129 |
| APPREC INCREASE CURRENT | (275252365) |
| NET CHANGE FROM OPS | (30374887) |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 44500648 |
| DISTRIBUTIONS OF GAINS | 24972443 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 21671550 |
| NUMBER OF SHARES REDEEMED | 21552384 |
| SHARES REINVESTED | 4290552 |
| NET CHANGE IN ASSETS | (328560682) |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | 47106459 |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 11040540 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 19914627 |
| AVERAGE NET ASSETS | 930751384 |
| PER SHARE NAV BEGIN | 8.63 |
| PER SHARE NII | .40 |
| PER SHARE GAIN APPREC | (.53) |
| PER SHARE DIVIDEND | .40 |
| PER SHARE DISTRIBUTIONS | .23 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 7.87 |
| EXPENSE RATIO | 1.17 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |
| ARTICLE 6 |
| CIK: 0000225635 |
| NAME: MERRILL LYNCH MUNICIPAL BOND FUND, INC. |
| SERIES: |
| NUMBER: 1 |
| NAME: NATIONAL PORTFOLIO |
| PERIOD TYPE | YEAR |
| FISCAL YEAR END | JUN 30 1994 |
| PERIOD START | JUL 01 1993 |
| PERIOD END | JUN 30 1994 |
| INVESTMENTS AT COST | 1634000759 |
| INVESTMENTS AT VALUE | 1597539473 |
| RECEIVABLES | 95886295 |
| ASSETS OTHER | 109086 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 1693534854 |
| PAYABLE FOR SECURITIES | 21648397 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 9536557 |
| TOTAL LIABILITIES | 31184954 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 1670458467 |
| SHARES COMMON STOCK | 45583411 |
| SHARES COMMON PRIOR | 38498956 |
| ACCUMULATED NII CURRENT | 0 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | 28352719 |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | (36461286) |
| NET ASSETS | 459168936 |
| DIVIDEND INCOME | 0 |
| INTEREST INCOME | 112169662 |
| OTHER INCOME | 1522 |
| EXPENSES NET | 13322352 |
| NET INVESTMENT INCOME | 98848832 |
| REALIZED GAINS CURRENT | 62008845 |
| APPREC INCREASE CURRENT | (172722080) |
| NET CHANGE FROM OPS | (11864403) |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 23168325 |
| DISTRIBUTIONS OF GAINS | 12798152 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 14847862 |
| NUMBER OF SHARES REDEEMED | 9473731 |
| SHARES REINVESTED | 1710325 |
| NET CHANGE IN ASSETS | (115525547) |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | 15270704 |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 8514268 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 1322352 |
| AVERAGE NET ASSETS | 466214643 |
| PER SHARE NAV BEGIN | 11.02 |
| PER SHARE NII | .54 |
| PER SHARE GAIN APPREC | (.65) |
| PER SHARE DIVIDEND | .54 |
| PER SHARE DISTRIBUTIONS | .30 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 10.07 |
| EXPENSE RATIO | 1.30 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |
| ARTICLE 6 |
| CIK: 0000225635 |
| NAME: MERRILL LYNCH MUNICIPAL BOND FUND, INC. |
| SERIES: |
| NUMBER: 3 |
| NAME: LIMITED MATURITY PORTFOLIO |
| PERIOD TYPE | YEAR |
| FISCAL YEAR END | JUN 30 1994 |
| PERIOD START | JUL 01 1993 |
| PERIOD END | JUN 30 1994 |
| INVESTMENTS AT COST | 936307940 |
| INVESTMENTS AT VALUE | 934920346 |
| RECEIVABLES | 14045242 |
| ASSETS OTHER | 8011607 |
| OTHER ITEMS ASSETS | 0 |
| TOTAL ASSETS | 956977195 |
| PAYABLE FOR SECURITIES | 12866592 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 8433834 |
| TOTAL LIABILITIES | 21300426 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 942258132 |
| SHARES COMMON STOCK | 14744916 |
| SHARES COMMON PRIOR | 9509206 |
| ACCUMULATED NII CURRENT | 0 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | (5193769) |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | (1387594) |
| NET ASSETS | 790142342 |
| DIVIDEND INCOME | 0 |
| INTEREST INCOME | 40921727 |
| OTHER INCOME | 812 |
| EXPENSES NET | 4491554 |
| NET INVESTMENT INCOME | 36430985 |
| REALIZED GAINS CURRENT | (968336) |
| APPREC INCREASE CURRENT | (13063534) |
| NET CHANGE FROM OPS | 22399115 |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 4443206 |
| DISTRIBUTIONS OF GAINS | 0 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 10622252 |
| NUMBER OF SHARES REDEEMED | 5671375 |
| SHARES REINVESTED | 284833 |
| NET CHANGE IN ASSETS | (6238514) |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | (4225433) |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 3305839 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 4491554 |
| AVERAGE NET ASSETS | 133343254 |
| PER SHARE NAV BEGIN | 10.01 |
| PER SHARE NII | .33 |
| PER SHARE GAIN APPREC | (.14) |
| PER SHARE DIVIDEND | .33 |
| PER SHARE DISTRIBUTIONS | 0 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 9.87 |
| EXPENSE RATIO | .76 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENT, that Cynthia A. Montgomery hereby constitutes and appoints Arthur Zeikel and Gerald M. Richard, and each of them, her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for her and in her name, place and stead, in any and all capacities, to sign any and all Amendments (including pre- effective and post-effective amendments) to the Registration Statement (File No. 2-57354) of The Municipal Bond Fund, Inc. and to the Registration Statement (File No. 2-62329) of the Corporate Bond Fund, Inc., and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange and Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue thereof.
Dated: September 9, 1994
/s/ Cynthia A. Montgomery
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Cynthia A. Montgomery
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