This section contains a summary discussion of the general risks of investing in the Portfolios. As with any mutual fund, there can be no guarantee that any Portfolio will meet its goals or that any Portfolio’s performance will be positive for any period of time.

Bond Market and Selection Risk  — Bond market risk is the risk that the bond market will go down in value, including the possibility that the market will go down sharply and unpredictably. Selection risk is the risk that the

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Credit Risk  — Credit risk is the risk that the issuer will be unable to pay the interest or principal when due. The degree of credit risk depends on both the financial condition of the issuer and the terms of the obligation.

Interest Rate Risk  — Interest rate risk is the risk that prices of municipal bonds generally increase when interest rates decline and decrease when interest rates increase. Prices of longer term securities generally change more in response to interest rate changes than prices of shorter term securities.

Call and Redemption Risk  — A bond’s issuer may call a bond for redemption before it matures. If this happens to a bond a Portfolio holds, the Portfolio may lose income and may have to invest the proceeds in bonds with lower yields.

Risks associated with certain types of obligations in which the Portfolios may invest include:

General Obligation Bonds  — The faith, credit and taxing power of the municipality that issues a general obligation bond secures payment of interest and repayment of principal. Timely payments depend on the issuer’s credit quality, ability to raise tax revenues and ability to maintain an adequate tax base.

Revenue Bonds  — Payments of interest and principal on revenue bonds are made only from the revenues generated by a particular facility, class of facilities or the proceeds of a special tax or other revenue source. These payments depend on the money earned by the particular facility or class of facilities.

Industrial Development Bonds  — Industrial development bonds are one type of revenue bond. Municipalities and other public authorities issue industrial development bonds to finance development of industrial facilities for use by a private enterprise. The private enterprise pays the principal and interest on the bond, and the issuer does not pledge its faith, credit and taxing power for repayment. If the private enterprise defaults on its payments, a Portfolio may not receive any income or get its money back from the investment.

Junk Bonds  — Only the National Portfolio invests in junk bonds. Junk bonds are debt securities that are rated below investment grade by the major rating

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Insured Municipal Bonds  — Bonds purchased by each of the Portfolios may be covered by insurance that guarantees timely interest payments and repayment of principal on maturity. If a bond’s insurer fails to fulfill its obligations or loses its credit rating, the value of the bond could drop.

Moral Obligation Bonds  — Moral obligation bonds are generally issued by special purpose public authorities of a state or municipality. If the issuer is unable to meet its obligations, the repayment of these bonds becomes a moral commitment, but not a legal obligation, of the state or municipality.

Municipal Lease Obligations  — Municipal lease obligations are participation certificates in a lease entered into by a state or political subdivision to finance the acquisition, development or construction of equipment, land or facilities. In a municipal lease obligation, the issuer agrees to budget for and appropriate municipal funds to make payments due on the lease obligation. However, this does not ensure that funds will actually be appropriated in future years. The issuer does not pledge its unlimited taxing power for payment of the lease obligation, but the leased property secures the obligation. However, disposition of the property upon foreclosure may be difficult and the proceeds of a sale may not cover the Portfolio’s loss.

Variable Rate Demand Obligations  — Variable rate demand obligations (VRDOs) are floating rate securities that combine an interest in a long term municipal bond with a right to demand payment before maturity from a bank or other financial institution. If the bank or financial institution is unable to pay, a Portfolio may lose money.

Derivatives  — Each Portfolio may use derivatives. Derivatives are financial instruments whose value is derived from another security, a commodity (such

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as gold or oil) or an index (such as the S&P 500). Derivatives allow the Portfolio to increase or decrease its risk exposure more quickly and efficiently than other types of instruments. Each Portfolio may purchase and sell certain financial futures contracts and options thereof, and may also invest in indexed and inverse floating obligations. Derivatives are volatile and involve significant risks, including:

		Leverage risk  — the risk associated with certain types of investments or trading strategies (such as borrowing money to increase the amount of investments) that relatively small market movements may result in large changes in the value of an investment. Certain investments or trading strategies that involve leverage can result in losses that greatly exceed the amount originally invested.
		Credit risk  — the risk that the counterparty (the party on the other side of the transaction) on a derivative transaction will be unable to honor its financial obligation to the Portfolio.
		Liquidity Risk  — the risk that certain securities may be difficult or impossible to sell at the time that the seller would like or at the price that the seller believes the security is currently worth.

Indexed and Inverse Floating Rate Securities  — Each of the Portfolios may invest in securities whose potential returns are directly related to changes in an underlying index or interest rate, known as indexed securities. The return on indexed securities will rise when the underlying index or interest rate rises and fall when the index or interest rate falls. The Portfolios may also invest in securities whose return is inversely related to changes in an interest rate (inverse floaters). In general, income on inverse floaters will decrease when short term interest rates increase and increase when short term interest rates decrease. Investments in inverse floaters may subject the Portfolios to the risks of reduced or eliminated interest payments and losses of principal. In addition, certain indexed securities and inverse floaters may increase or decrease in value at a greater rate than the underlying interest rate which effectively leverages the Portfolio’s investment. As a result, the market value of such securities will generally be more volatile than that of fixed rate, tax exempt securities. Both indexed securities and inverse floaters are derivative securities and can be considered speculative.

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When-Issued Securities, Delayed-Delivery Securities and Forward Commitments  — When-issued and delayed-delivery securities and forward commitments involve the risk that the security a Portfolio buys will lose value prior to its delivery. There also is the risk that the security will not be issued or that the other party will not meet its obligation, in which case the Portfolio loses the investment opportunity of the assets it has set aside to pay for the security and any gain in the security’s price.

Illiquid Investments  — Each Portfolio may invest up to 15% of its net assets in illiquid securities that it cannot easily resell within seven days at current value or that have contractual or legal restrictions on resale. If the Portfolio buys illiquid securities it may be unable to quickly resell them or may be able to sell them only at a price below current value.

Borrowing and Leverage  — Each Portfolio may borrow for temporary emergency purposes including to meet redemptions. Borrowing may exaggerate changes in the net asset value of a Portfolio’s shares and its yield. Borrowing will cost a Portfolio interest expense and other fees. The costs of borrowing may reduce a Portfolio’s return. Certain securities that a Portfolio buys may create leverage including, for example, when-issued securities and forward commitments.

If you would like further information about the Fund, including how it invests, please see the Statement of Additional Information.

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Each Portfolio offers four share classes, each with its own sales charge and expense structure, allowing you to invest in the way that best suits your needs. Each share class represents the same ownership interest in the portfolio investments of the particular Portfolio. When you choose your class of shares you should consider the size of your investment and how long you plan to hold your shares. Your Merrill Lynch Financial Consultant can help
you determine which share class is best suited to your personal financial goals.

For example, if you select Class A or D shares, you pay a sales charge at the time of purchase. If you buy Class D shares, you also pay an ongoing account maintenance fee of 0.25% for the Insured Portfolio and National Portfolio, and a 0.10% account maintenance fee for the Limited Maturity Portfolio. If you select Class B or C shares, you can invest the full amount of your purchase price but you will be subject to a distribution fee and account maintenance fee payable over time and possibly a deferred sales charge when you sell shares. You may be eligible for a sales charge waiver. See below.

If you purchase Class B or C shares, you pay an account maintenance fee of 0.25% for the Insured Portfolio and National Portfolio, and 0.15% for the Limited Maturity Portfolio on an ongoing basis. In addition, if you purchase Class B or C shares of the Insured Portfolio or National Portfolio you pay distribution fees of 0.50% and 0.55% on Class B and C shares, respectively, on an ongoing basis. If you purchase Class B and C shares of the Limited Maturity Portfolio you pay distribution fees of 0.20% on an ongoing basis. Because these fees are paid out of each Portfolio’s assets on an ongoing basis, over time these fees increase the cost of your investment and may cost you more than paying an initial sales charge.

It should be noted that Class C shares of the Limited Maturity Portfolio are offered only through the exchange privilege and may only be purchased through exchange of the Class C shares of another Portfolio or another fund utilizing the Merrill Lynch Select Pricing ^SM System.

Each Portfolio’s shares are distributed by Merrill Lynch Funds Distributor, a division of Princeton Funds Distributor, Inc., an affiliate of Merrill Lynch.

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*	Rounded to the nearest one-hundredth percent.
**	If you invest $1,000,000 or more in Class A or Class D shares, you may not pay an initial sales charge. However, if you redeem your shares within one year after purchase, you may be charged a deferred sales charge. This charge is 1% (for the Insured Portfolio and National Portfolio) or 0.20% (for the Limited Maturity Portfolio). Such deferred sales charge may be waived in connection with certain fee-based programs.

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Letter of Intent  — permits you to pay the sales charge that would be applicable if you add up all shares of Merrill Lynch Select Pricing System funds that you agree to buy within a 13 month period. Certain restrictions apply.

No initial sales charge applies to Class A or Class D shares that you buy through reinvestment of dividends or distributions.

A reduced or waived sales charge on a purchase of Class A or Class D shares may apply for:

	•	Purchases under a Right of Accumulation or Letter of Intent

	•	Merrill Lynch Blueprint SM Program participants
	•	TMA SM Managed Trusts
	•	Certain Merrill Lynch investment or central asset accounts
	•	Certain employer-sponsored retirement or savings plans
	•	Purchases using proceeds from the sale of certain Merrill Lynch closed-end funds under certain circumstances
	•	Certain investors, including directors of Merrill Lynch mutual funds and Merrill Lynch employees
	•	Certain Merrill Lynch fee-based programs

Only certain investors are eligible to buy Class A shares. Your Merrill Lynch Financial Consultant can help you determine whether you are eligible to buy Class A shares or to participate in any of these programs.

If you decide to buy shares under the initial sales charge alternative and you are eligible to buy both Class A and Class D shares, you should buy Class A since Class D shares are subject to an account maintenance fee, while Class A shares are not.

If you redeem Class A or Class D shares and within 30 days buy new shares of the same class, you will not pay a sales charge on the new purchase amount. The amount eligible for this “Reinstatement Privilege” may not exceed the amount of your redemption proceeds. To exercise the privilege, contact your Merrill Lynch Financial Consultant or the Fund’s Transfer Agent at 1-800-MER-FUND.

Class B and Class C Shares — Deferred Sales Charge Options

If you select Class B or Class C shares, you do not pay an initial sales charge at the time of purchase. However, if you redeem your Class B shares within four years (or within one year for the Limited Maturity Portfolio) after purchase or your Class C shares within one year after purchase, you may be required to pay a deferred sales charge. You will also pay account maintenance fees of 0.25% (or 0.15% for Class B and C shares of the

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Limited Maturity Portfolio) and distribution fees each year under a distribution plan that the Fund has adopted under Rule 12b-1. If you invest in the Insured Portfolio or National Portfolio, you will pay distribution fees for your Class B and C shares in the amount of 0.50% or 0.55%, respectively, of your investment each year. Distribution fees for Class B and Class C shares of the Limited Maturity Portfolio are 0.20% each year. Because these fees are paid out of each Portfolio’s assets on an ongoing basis, over time these fees increase the cost of your investment and may cost you more than paying an initial sales charge. The Distributor uses the money that it receives from the deferred sales charges and the distribution fees to cover the costs of marketing, advertising and compensating the Merrill Lynch Financial Consultant or other securities dealer who assists you in purchasing
Portfolio shares.

Class B Shares

If you redeem Class B shares within four years (or within one year for the Limited Maturity Portfolio) after purchase, you may be charged a deferred sales charge. The amount of the charge gradually decreases as you hold your shares over time, according to the following schedules:

*

The percentage charge will apply to the lesser of the original cost of the shares being redeemed or the proceeds of your redemption. Shares acquired through reinvestment of dividends or distributions are not subject to a deferred sales charge. Not all Merrill Lynch funds have identical deferred sales charge schedules. If you exchange your shares for shares of another fund, the higher charge will apply.

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The deferred sales charge relating to Class B shares may be reduced or waived in certain circumstances, such as:

	•	Certain post-retirement withdrawals from an IRA or other retirement plan if you are over 59 1/2 years old.
	•	Redemption by certain eligible 401(a) and 401(k) plans, certain related accounts and group plans participating in the Merrill Lynch Blueprint Program and certain retirement plan rollovers.
	•	Redemption in connection with participation in certain Merrill Lynch fee-based programs.
	•	Withdrawals resulting from shareholder death or disability as long as the waiver request is made within one year of death or disability or, if later, reasonably promptly following completion of probate, or in connection with involuntary termination of an account in which Fund shares are held.
	•	Withdrawal through the Merrill Lynch Systematic Withdrawal Plan of up to 10% per year of your Class B account value at the time the plan is established.

Your Class B shares convert automatically into Class D shares approximately ten years after purchase. Any Class B shares received through reinvestment of dividends or distributions paid on converting shares will also convert at that time. Class D shares are subject to lower annual expenses than Class B shares. The conversion of Class B to Class D shares is not a taxable event for federal income tax purposes.

Different conversion schedules apply to Class B shares of different Merrill Lynch mutual funds. For example, Class B shares of a fixed-income fund convert approximately ten years after purchase compared to approximately eight years for equity funds. If you exchange Class B shares with an eight-year conversion schedule for Class B shares with a ten-year conversion schedule, or vice versa, the conversion schedule applicable to the Class B shares acquired in the exchange will apply. If you acquire your Class B shares in an exchange from another fund, the Fund’s ten year conversion schedule will apply. If you exchange your Class B shares in a Portfolio for Class B shares of another fund, the other fund’s conversion schedule will

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Class C Shares

If you redeem Class C shares within one year after purchase, you may be charged a deferred sales charge of 1.00%. The charge will apply to the lesser of the original cost of the shares being redeemed or the proceeds of your redemption. You will not be charged a deferred sales charge when you redeem shares that you acquire through reinvestment of Fund dividends or distributions. The deferred sales charge relating to Class C shares may be reduced or waived in connection with participation in certain Merrill Lynch fee-based programs, involuntary termination of an account in which Portfolio shares are held and withdrawals through the Merrill Lynch Systematic Withdrawal Plan.

Class C shares do not offer a conversion privilege.

The chart below summarizes how to buy, sell, transfer and exchange shares through Merrill Lynch or other securities dealers. You may also buy shares through the Transfer Agent. To learn more about buying shares through the Transfer Agent, call 1-800-MER-FUND. Because the selection of a mutual fund involves many considerations, your Merrill Lynch Financial Consultant may help you with this decision.

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Generally, Class A shares will have the highest net asset value because that class has the lowest expenses, and Class D shares will have a higher net asset value than Class B or Class C shares. Class B shares will have a higher NAV than Class C shares because Class B shares have lower distribution expenses than Class C shares. Also dividends paid on Class A and Class D shares will generally be higher than dividends paid on Class B and Class C shares because Class A and Class D shares have lower expenses.

If you participate in certain fee-based programs offered by Merrill Lynch, you may be able to buy Class A shares at net asset value, including by exchanges from other share classes. Sales charges on the shares being exchanged may be reduced or waived under certain circumstances.

You generally cannot transfer shares held through a fee-based program into another account. Instead, you will have to redeem your shares held through the program and purchase shares of another class, which may be subject to distribution and account maintenance fees. This may be a taxable event and you will pay any applicable sales charges.

If you leave one of these programs, your shares may be redeemed or automatically exchanged into another class of the particular Portfolio or into a money market fund. The class you receive may be the class you originally owned when you entered the program, or in certain cases, a different class. If the exchange is into Class B shares, the period before conversion to Class D shares may be modified. Any redemption or exchange will be at net asset value. However, if you participate in the program for less than a specified period, you may be charged a fee in accordance with the terms of the program.

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“BUYING A DIVIDEND”

Unless your investment is in a tax-deferred account, you may want to avoid buying shares shortly before a Portfolio pays a taxable dividend. The reason? If you buy shares when a fund has realized but not yet distributed taxable income or capital gains, you will pay the full price for the shares and then receive a portion of the price back in the form of a taxable dividend. Before investing you may want to consult your tax adviser.

Details about these features and the relevant charges are included in the client agreement for each fee-based program and are available from your Merrill Lynch Financial Consultant.

Each Portfolio will pay as a dividend any net investment income monthly, and any net realized capital gains at least annually. Each Portfolio may also pay a special dividend at the end of the calendar year to comply with Federal tax requirements. If your account is with Merrill Lynch and you would like to receive dividends in cash, contact your Merrill Lynch Financial Consultant. If your account is with the Transfer Agent and you would like to receive dividends in cash, contact the Transfer Agent.

To the extent that the dividends distributed by a Portfolio is from municipal bond interest income, they are exempt from Federal income tax; however, they may be subject to state and local taxes. However, certain investors may be subject to alternative minimum tax on dividends received from a Portfolio. Interest income from other investments may produce taxable dividends.

Generally, within 60 days after the end of the Fund’s taxable year, each Portfolio will tell you the amount of exempt-interest dividends, ordinary income dividends and capital gains dividends paid by the Portfolios you received that year. The Fund anticipates that in general the dividends it pays will be exempt-interest dividends. Generally, ordinary income dividends and capital gains dividends are taxable, although they may be taxed at different Federal income tax rates. Capital gain dividends are taxable as long term capital gains to you, regardless of how long you have held your shares. The tax treatment of dividends from a Portfolio is the same whether you choose to receive them in cash or to have them reinvested in shares of the Portfolio.

If you redeem Portfolio shares or exchange them for shares of another fund, any gain on the transaction may be subject to tax.

By law, Portfolios must withhold 31% of your dividends and proceeds from redemptions if you have not provided a taxpayer identification number or social security number.

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This section summarizes some of the consequences under current federal tax law of an investment in a Portfolio. It is not a substitute for personal tax advice. Consult your personal tax adviser about the potential tax consequences of an investment in a Portfolio under all applicable tax laws.

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