As filed with the Securities and Exchange Commission on October 4, 1999
Securities Act File No. __________
Investment Company Act File No. 811-6502
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No.
[ ] Post-Effective Amendment No.
(Check appropriate box or boxes)
----------------------
MuniYield Florida Fund
(Exact Name of Registrant as Specified in Its Charter)
(609) 282-2800
(Registrant's Telephone Number, including Area Code)
800 Scudders Mill Road
Plainsboro, New Jersey 08536
(Address of Principal Executive Offices:
Number, Street, City, State, Zip Code)
Terry K. Glenn
MuniYield Florida Fund
800 Scudders Mill Road, Plainsboro, New Jersey 08536
Mailing Address:
P.O. Box 9011, Princeton, New Jersey 08543-9011
(Name and Address of Agent for Service)
----------------------
Copies to:
Frank P. Bruno, Esq. Michael J. Hennewinkel, Esq.
Brown & Wood LLP Merrill Lynch Asset Management, L.P.
One World Trade Center 800 Scudders Mill Road
New York, NY 10048-0557 Plainsboro, NJ 08536
----------------------
Approximate Date Of Proposed Public Offering: As
soon as practicable after the Registration Statement
becomes effective under the Securities Act of 1933.
----------------------
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
================================================================================================================
Proposed Proposed
Maximum Maximum Amount of
Amount Being Offering Price Aggregate Offering Registration
Title of Securities Being Registered Registered (1) Per Unit (1) Price (1) Fee(3)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Shares ($.10 par value) 6,184,861 $13.57 $83,928,564 $23,332
- ----------------------------------------------------------------------------------------------------------------
Auction Market Preferred Stock, Series B 1,600 $25,000(2) $40,000 $11,120
================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the filing fee.
(2) Represents the liquidation preference of a share of preferred stock after
the reorganization.
(3) Paid by wire transfer to the designated lockbox of the Securities and
Exchange Commission in Pittsburgh, Pennsylvania.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
MUNIYIELD FLORIDA FUND
MUNIVEST FLORIDA FUND
P.O. Box 9011
Princeton, New Jersey 08543-9011
--------------------
NOTICE OF SPECIAL MEETINGS OF SHAREHOLDERS
--------------------
TO BE HELD ON DECEMBER 15, 1999
TO THE SHAREHOLDERS OF
MUNIYIELD FLORIDA FUND
MUNIVEST FLORIDA FUND:
NOTICE IS HEREBY GIVEN that the special meetings of shareholders (the
"Meetings") of MuniYield Florida Fund ("MuniYield Florida") and MuniVest Florida
Fund ("MuniVest Florida") will be held at the offices of Merrill Lynch Asset
Management, L.P., 800 Scudders Mill Road, Plainsboro, New Jersey on Wednesday,
December 15, 1999 at 3:00 p.m. Eastern time (for MuniYield Florida) and 2:00
p.m. Eastern time (for MuniVest Florida) for the following purposes:
(1) To approve or disapprove an Agreement and Plan of Reorganization
(the "Agreement and Plan of Reorganization") contemplating (i) the
acquisition of substantially all of the assets and the assumption of
substantially all of the liabilities of MuniVest Florida by MuniYield
Florida, in exchange solely for an equal aggregate value of newly-issued
common shares of beneficial interest of MuniYield Florida ("MuniYield
Florida Common Shares") and shares of a newly-created series of auction
market preferred shares ("AMPS") of MuniYield Florida to be designated
Series B ("MuniYield Florida Series B AMPS") and the distribution of such
MuniYield Florida Common Shares to the holders of common shares of
beneficial interest of MuniVest Florida and such MuniYield Florida Series B
AMPS to the holders of AMPS of MuniVest Florida; and (ii) the designation
of the currently outstanding series of AMPS of MuniYield Florida as Series
A AMPS. A vote in favor of this proposal also will constitute a vote in
favor of the liquidation and dissolution of MuniVest Florida and the
termination of its registration under the Investment Company Act of 1940;
(2) To transact such other business as properly may come before the
Meetings or any adjournment thereof.
If the proposed Reorganization is approved by the shareholders at the
Meetings and effected by the Funds, any shareholder (1) who files with the
applicable Fund before the taking of the vote on the approval of such Agreement
and Plan of Reorganization, written objection to the proposed Reorganization
stating that he or she intends to demand payment for his or her shares if the
Reorganization takes place and (2) whose shares are not voted in favor of such
Agreement and Plan of Reorganization has or may have the right to demand in
writing from MuniYield Florida Fund, within twenty days after the date of
mailing to him or her of notice in writing that the Reorganization has become
effective, payment for his or her shares and an appraisal of the value thereof.
MuniYield Florida Fund and any such shareholders shall in such cases have the
rights and duties and shall follow the procedure set forth in sections 88 to 98,
inclusive, of chapter 156B of the General Laws of Massachusetts. See "The
Reorganization -- Agreement and Plan of Reorganization -- Appraisal Rights" in
the Proxy Statement, particularly with respect to the intention of MuniYield
Florida Fund to petition a court to determine whether this right of appraisal
has been superseded by a rule of the Securities and Exchange Commission, in the
event that any stockholder elects to exercise such right.
The Boards of Trustees of MuniYield Florida and MuniVest Florida have fixed
the close of business on October 20, 1999 as the record date for the
determination of shareholders entitled to notice of, and to vote at, the
Meetings or any adjournment thereof.
<PAGE>
A complete list of the shareholders of MuniYield Florida and MuniVest
Florida entitled to vote at the Meetings will be available and open to the
examination of any shareholder of MuniYield Florida or MuniVest Florida,
respectively, for any purpose germane to the Meetings during ordinary business
hours from and after December 1, 1999, at the offices of MuniYield Florida, 800
Scudders Mill Road, Plainsboro, New Jersey.
You are cordially invited to attend the Meetings. Shareholders who do not
expect to attend the Meetings in person are requested to complete, date and sign
the enclosed form of proxy applicable to their fund and return it promptly in
the envelope provided for that purpose. The enclosed proxy is being solicited on
behalf of the Board of Trustees of MuniYield Florida or MuniVest Florida, as
applicable.
By Order of the Boards of Trustees
ALICE A. PELLEGRINO
Secretary of MuniYield Florida Fund and
MuniVest Florida Fund
Plainsboro, New Jersey
Dated: ____________, 1999
<PAGE>
- --------------------------------------------------------------------------------
The information in this prospectus is not complete and may be changed. We may
not use this prospectus to sell securities until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and is not soliciting an offer to buy
these securities in any State where the offer or sale is not permitted.
- --------------------------------------------------------------------------------
SUBJECT TO COMPLETION
PRELIMINARY PROXY STATEMENT AND PROSPECTUS DATED October 4, 1999
PROXY STATEMENT AND PROSPECTUS
MUNIYIELD FLORIDA FUND
MUNIVEST FLORIDA FUND
P.O. Box 9011, Princeton, New Jersey 08543-9011
(609) 282-2800
--------------------
SPECIAL MEETINGS OF SHAREHOLDERS
--------------------
DECEMBER 15, 1999
This Joint Proxy Statement and Prospectus is furnished to you as a
shareholder of one of the funds listed above. A Special Meeting of the
shareholders of each of these funds will be held on December 15, 1999 to
consider the items that are listed below and discussed in greater detail
elsewhere in this Proxy Statement and Prospectus. The Board of Trustees of each
of the funds is requesting its shareholders to submit a proxy to be used at the
Special Meeting to vote the shares held by the shareholder submitting the proxy.
The proposals to be considered at the Special Meetings are:
1. To approve or disapprove an Agreement and Plan of Reorganization
between the funds; and
2. To transact such other business as may properly come before the
Special Meetings or any adjournment thereof.
The Agreement and Plan of Reorganization that you are being asked to
consider involves a transaction that will be referred to in this Proxy Statement
and Prospectus as the Reorganization. The Reorganization involves the
combination of two funds into one. The two funds are:
MuniYield Florida Fund ("MuniYield Florida"), which will be the
surviving fund; and
MuniVest Florida Fund ("MuniVest Florida"), which will be the acquired
fund.
MuniYield Florida and MuniVest Florida are sometimes referred to herein
collectively as the "Funds" and individually as a "Fund."
In the Reorganization, MuniYield Florida will (i) acquire substantially all
of the assets and assume substantially all of the liabilities of MuniVest
Florida solely in exchange for an equal aggregate value of newly-issued common
shares of beneficial interest of MuniYield Florida ("MuniYield Florida Common
Shares"), par value $.10 per share, and shares of a newly-created series of its
auction market preferred shares ("AMPS") of MuniYield Florida with a par value
of $.05 per share and a liquidation preference of $25,000 per share to be
designated Series B ("MuniYield Florida Series B AMPS"); and (ii) designate the
currently outstanding series of AMPS of MuniYield Florida as Series A AMPS.
MuniVest Florida will distribute the MuniYield Florida Common Shares and AMPS
received in the Reorganization to its shareholders and will then liquidate and
dissolve and terminate its registration under the Investment Company Act of
1940, as amended (the "Investment Company Act"). MuniYield Florida will continue
to operate as a registered closed-end investment company with the investment
objective and policies described in this Proxy Statement and Prospectus.
In the Reorganization, MuniYield Florida will issue its Common Shares and
AMPS to MuniVest Florida based on the value of the assets transferred to
MuniYield Florida by MuniVest Florida. These shares will then be distributed by
MuniVest Florida to its shareholders based on the value of the shares held by
each shareholder just prior to the Reorganization. A holder of common shares of
beneficial interest of MuniVest Florida will receive MuniYield Florida Common
Shares and a holder of AMPS of MuniVest Florida will receive shares of the
newly-created MuniYield Florida Series B AMPS.
This Proxy Statement and Prospectus serves as a prospectus of MuniYield
Florida in connection with the issuance of MuniYield Florida Common Shares and
the MuniYield Florida Series B AMPS in the Reorganization.
-------------------
The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the adequacy of this Proxy Statement and
Prospectus. Any representation to the contrary is a criminal offense.
-------------------
The date of this Proxy Statement and Prospectus is ________, 1999.
<PAGE>
The Proxy Statement and Prospectus sets forth information about MuniYield
Florida and MuniVest Florida that shareholders of the Funds should know before
considering the Reorganization and should be retained for future reference. Each
of the Funds has authorized the solicitation of proxies in connection with the
Reorganization solely on the basis of this Proxy Statement and Prospectus and
the accompanying documents.
The address of the principal executive offices of MuniYield Florida and
MuniVest Florida is 800 Scudders Mill Road, Plainsboro, New Jersey 08536, and
the telephone number is (609) 282-2800.
The common shares of beneficial interest of each of the Funds ("Common
Shares") are listed on the New York Stock Exchange (the "NYSE") under the
symbols "MYF" (MuniYield Florida) and "MVS" (MuniVest Florida). Subsequent to
the Reorganization, MuniYield Florida Common Shares will continue to be listed
on the NYSE under the symbol "MYF". Reports, proxy materials and other
information concerning either Fund may be inspected at the offices of the NYSE,
20 Broad Street, New York, New York 10005.
2
<PAGE>
TABLE OF CONTENTS
PAGE
-----
INTRODUCTION .............................................................. 5
ITEM 1: THE REORGANIZATION ............................................... 5
SUMMARY ................................................................... 5
RISK FACTORS AND SPECIAL CONSIDERATIONS ................................... 13
Florida Municipal Bonds ................................................ 13
Interest Rate and Credit Risk .......................................... 13
Non-diversification .................................................... 13
Rating Categories ...................................................... 13
Private Activity Bonds ................................................. 13
Leverage ............................................................... 13
Inverse Floating Obligations ........................................... 14
Options and Futures Transactions ....................................... 15
Antitakeover Provisions ................................................ 15
Ratings Considerations ................................................. 15
COMPARISON OF THE FUNDS ................................................... 15
Financial Highlights ................................................... 15
MuniYield Florida .................................................... 15
MuniVest Florida ..................................................... 17
Investment Objective and Policies ...................................... 18
Description of Florida Municipal Bonds and Municipal Bonds ............. 21
Special Considerations Relating to Florida Municipal Bonds ............. 22
Other Investment Policies .............................................. 22
Information Regarding Options and Futures Transactions ................. 23
Investment Restrictions ................................................ 26
Rating Agency Guidelines ............................................... 27
Portfolio Composition .................................................. 28
Portfolio Transactions ................................................. 29
Portfolio Turnover ..................................................... 29
Net Asset Value ........................................................ 30
Shares of Beneficial Interest .......................................... 30
Certain Provisions of the Declaration of Trust ......................... 32
Management of the Funds ................................................ 32
Code of Ethics ......................................................... 34
Voting Rights .......................................................... 34
Shareholder Inquiries .................................................. 35
Dividends and Distributions ............................................ 35
Automatic Dividend Reinvestment Plan ................................... 36
Mutual Fund Investment Option .......................................... 37
Liquidation Rights of Holders of AMPS .................................. 38
Tax Rules Applicable to the Funds and their Shareholders ............... 38
Florida Taxation of the Fund ........................................... 42
AGREEMENT AND PLAN OF REORGANIZATION ...................................... 43
General ................................................................ 43
Procedure .............................................................. 44
Terms of the Agreement and Plan of Reorganization ...................... 44
Potential Benefits to Common Shareholders of the Funds
as a Result of the Reorganization ..................................... 46
Surrender and Exchange of Share Certificates ........................... 47
Tax Consequences of the Reorganization ................................. 47
Appraisal Rights ....................................................... 48
Capitalization ......................................................... 49
3
<PAGE>
INFORMATION CONCERNING THE SPECIAL MEETINGS ............................... 51
Date, Time and Place of Meetings ....................................... 51
Solicitation, Revocation and Use of Proxies ............................ 51
Record Date and Outstanding Shares ..................................... 51
Security Ownership of Certain Beneficial Owners and Management ......... 52
Voting Rights and Required Vote ........................................ 52
ADDITIONAL INFORMATION .................................................... 52
Year 2000 Issues ....................................................... 53
CUSTODIAN ................................................................. 54
TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND REGISTRAR ................... 54
LEGAL PROCEEDINGS ......................................................... 54
LEGAL OPINIONS ............................................................ 54
EXPERTS ................................................................... 54
SHAREHOLDER PROPOSALS ..................................................... 54
INDEX TO FINANCIAL STATEMENTS ............................................. F-1
EXHIBIT I INFORMATION PERTAINING TO EACH FUND ......................... I-1
EXHIBIT II AGREEMENT AND PLAN OF REORGANIZATION ........................ II-1
EXHIBIT III ECONOMIC AND OTHER CONDITIONS IN FLORIDA ................... III-1
EXHIBIT IV SECTIONS 86 THROUGH 98 OF CHAPTER 156B OF THE
MASSACHUSETTS GENERAL LAWS (THE MASSACHUSETTS
BUSINESS CORPORATION LAW) .................................. IV-1
EXHIBIT V RATINGS OF MUNICIPAL BONDS ................................. V-1
4
<PAGE>
INTRODUCTION
This Proxy Statement and Prospectus is furnished in connection with the
solicitation of proxies on behalf of the Boards of Trustees of MuniYield Florida
and MuniVest Florida for use at the Meetings to be held at the offices of
Merrill Lynch Asset Management, L.P. ("MLAM"), 800 Scudders Mill Road,
Plainsboro, New Jersey on December 15, 1999, at 3:00 p.m., Eastern time (for
MuniYield) and 2:00 p.m. Eastern time (for MuniVest). The mailing address for
both Funds is P.O. Box 9011, Princeton, New Jersey 08543-9011. The approximate
mailing date of this Proxy Statement and Prospectus is November ___, 1999.
Any person giving a proxy may revoke it at any time prior to its exercise
by executing a superseding proxy, by giving written notice of the revocation to
the Secretary of MuniYield Florida or MuniVest Florida, as applicable, at the
address indicated above or by voting in person at the appropriate Meeting. All
properly executed proxies received prior to the Meetings will be voted at the
Meetings in accordance with the instructions marked thereon or otherwise as
provided therein. Unless instructions to the contrary are marked, proxies will
be voted "FOR" the proposal, Item 1, to approve the Agreement and Plan of
Reorganization between MuniYield Florida and MuniVest Florida (the "Agreement
and Plan of Reorganization").
With respect to Item 1, assuming a quorum is present at the Meetings,
approval of the Agreement and Plan of Reorganization will require the
affirmative vote of shareholders representing (i) a majority of the outstanding
MuniYield Florida Common Shares and MuniYield Florida AMPS, voting together as a
single class, and a majority of the outstanding MuniYield Florida AMPS, voting
separately as a class, and (ii) a majority of the outstanding MuniVest Florida
Common Shares and MuniVest Florida AMPS, voting together as a single class, and
a majority of the outstanding MuniVest Florida AMPS, voting separately as a
class. Because of the requirement that the Agreement and Plan of Reorganization
be approved by shareholders of both Funds, the Reorganization will not take
place if shareholders of either Fund do not approve the Agreement and Plan of
Reorganization.
The Board of Trustees of each Fund has fixed the close of business on
October 20, 1999 as the record date (the "Record Date") for the determination of
shareholders entitled to notice of, and to vote at, the Meetings or any
adjournment thereof. Shareholders on the Record Date will be entitled to one
vote for each share held, with no shares having cumulative voting rights. At the
Record Date, each Fund had outstanding the number of Common Shares and AMPS
indicated in Exhibit I. To the knowledge of the management of each of the Funds,
no person owned beneficially more than 5% of the respective outstanding shares
of either class of either Fund at the Record Date.
The Boards of Trustees of the Funds know of no business other than that
discussed in Item 1 above that will be presented for consideration at the
Meetings. If any other matter is properly presented, it is the intention of the
persons named in the enclosed proxy to vote in accordance with their best
judgment.
ITEM 1: THE REORGANIZATION
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement and Prospectus and is qualified in its entirety by
reference to the more complete information contained in this Proxy Statement and
Prospectus and in the Agreement and Plan of Reorganization attached hereto as
Exhibit II.
In this Proxy Statement and Prospectus, the term "Reorganization" refers
collectively to (i) the acquisition of substantially all of the assets and the
assumption of substantially all of the liabilities of MuniVest Florida by
MuniYield Florida and the subsequent distribution of MuniYield Florida Common
Shares and MuniYield Florida Series B AMPS to the holders of MuniVest Florida
Common Shares and MuniVest Florida AMPS, respectively; (ii) the designation of
the currently outstanding series of MuniYield Florida AMPS as Series A AMPS, and
(iii) the subsequent deregistration and dissolution of MuniVest Florida.
At meetings of the Boards of Trustees of the Funds, the Board of Trustees
of each Fund approved the Reorganization. Subject to obtaining the necessary
approvals from the shareholders of each Fund, the Board of Trustees of MuniVest
Florida also deemed advisable the deregistration of MuniVest Florida under the
Investment Company Act and its termination under the laws of the Commonwealth of
Massachusetts. The Reorganization requires approval of the shareholders of both
Funds. The Reorganization will not take place if the shareholders of either Fund
do not approve the Agreement and the Plan of Reorganization.
5
<PAGE>
Both Funds seek to provide shareholders with current income exempt from
Federal income taxes and the opportunity to own shares whose value is exempt
from the Florida intangible personal property tax ("Florida Municipal Bonds").
Both of the Funds seek to achieve their investment objectives by investing
primarily in a portfolio of long-term, investment grade municipal obligations,
the interest on which, in the opinion of bond counsel to the issuer, is exempt
from Federal income taxes and which enable shares of the Fund to be exempt from
the Florida intangible personal property tax. Under normal circumstances, at
least 65% of each Fund's total assets will be invested in Florida Municipal
Bonds and at least 80% of each Fund's total assets will be invested in Florida
Municipal Bonds and other long-term municipal obligations exempt from Federal
income taxes ("Municipal Bonds"). MuniVest Florida may invest up to 25% of its
assets in municipal obligations rated below investment grade.
Both of the Funds are non-diversified, leveraged, closed-end management
investment companies registered under the Investment Company Act. If the
shareholders of the Funds approve the Reorganization, MuniYield Florida Common
Shares and MuniYield Florida Series B AMPS will be issued to MuniVest Florida in
exchange for the assets of MuniVest Florida and thereafter MuniVest Florida will
distribute these shares to its shareholders as provided in the Agreement and
Plan of Reorganization. After the Reorganization, MuniVest Florida will
terminate its registration under the Investment Company Act and its Declaration
of Trust under Massachusetts law.
Based upon their evaluation of all relevant information, the Trustees of
each of the Funds have determined that the Reorganization will potentially
benefit the holders of Common Shares of that Fund. Specifically, after the
Reorganization, the MuniVest Florida shareholders will remain invested in a
closed-end fund with an investment objective and policies substantially similar
to those of MuniVest Florida and that uses substantially the same management
personnel. In addition, it is anticipated that common shareholders of both Funds
will be subject to a reduced overall operating expense ratio based on the
anticipated pro forma combined total operating expenses and the total combined
assets of the surviving fund after the Reorganization. The Boards also
considered the relative tax positions of the Funds' portfolios. It is not
anticipated that the Reorganization will directly benefit the holders of AMPS of
either Fund; however, the Reorganization will not adversely affect the holders
of AMPS of either Fund and the expenses of the Reorganization will not be borne
by the holders of AMPS of either Fund.
If all of the requisite approvals are obtained, it is anticipated that the
Reorganization will occur as soon as practicable after such approval, provided
that the Funds have obtained prior to that time a favorable private letter
ruling from the Internal Revenue Service (the "IRS") concerning the tax
consequences of the Reorganization as set forth in the Agreement and Plan of
Reorganization or an opinion of counsel to the same effect. Under the Agreement
and Plan of Reorganization, however, the Board of Trustees of either Fund may
cause the Reorganization to be postponed or abandoned in certain circumstances
should such Board determine that it is in the best interests of the shareholders
of that Fund to do so. The Agreement and Plan of Reorganization may be
terminated, and the Reorganization abandoned, whether before or after approval
by the Funds' shareholders, at any time prior to the Exchange Date (as defined
below), (i) by mutual consent of the Boards of Trustees of MuniYield Florida and
MuniVest Florida or (ii) by the Board of Trustees of either Fund if any
condition to that Fund's obligations has not been fulfilled or waived by such
Fund's Board of Trustees.
Pro Forma Fee Table for Common Shareholders
of MuniYield Florida and MuniVest Florida and
the Combined Fund as of June 30, 1999 (Unaudited)(a)
<TABLE>
<CAPTION>
Actual
---------------------------------
MuniYield MuniVest Pro Forma
Florida Florida Combined
------- ------- ---------
<S> <C> <C> <C>
Common Shareholder Transaction Expenses
Maximum Sales Load (as a percentage of offering price) .. None(b) None(b) None(c)
Dividend Reinvestment Plan Fees ......................... None None None
Annual Expenses (as a percentage of net assets attributable
to Common Shares at June 30, 1999)(d)
Investment Advisory Fees(e) ............................. 0.74% 0.75% 0.75%
Interest Payments on Borrowed Funds ..................... None None None
Other Expenses .......................................... 0.37% 0.45% 0.31%
------- ------- -------
Total Annual Expenses ......................................... 1.11% 1.20% 1.06%
======= ======= =======
</TABLE>
(footnotes on following page)
6
<PAGE>
- ----------
(a) No information is presented with respect to AMPS because neither Fund's
operating expenses nor expenses of the Reorganization will be borne by the
holders of AMPS of either Fund. Generally, AMPS are sold at a fixed
liquidation preference of $25,000 per share and investment return is set at
an auction.
(b) Common Shares purchased in the secondary market may be subject to brokerage
commissions or other charges.
(c) No sales load will be charged on the issuance of shares in the
Reorganization. Common Shares are not available for purchase from the Funds
but may be purchased through a broker-dealer subject to individually
negotiated commission rates.
(d) The pro forma annual operating expenses for the combined fund are
projections for a 12-month period.
(e) Based on average net assets of each Fund and the combined Fund, excluding
assets attributable to AMPS. If assets attributable to AMPS are included,
the Investment Advisory Fee for each Fund and the Combined Fund would be
0.50% and the Total Annual Expenses would be 0.75%, 0.80%, and 0.71%,
respectively.
Example:
Cumulative Expenses Paid on Common Shares
for the Periods Indicated:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a
$1,000 investment, assuming (1) the operating
expense ratio for each Fund (as a percentage
of net assets attributable to Common Shares)
set forth in the table above and (2) a 5%
annual return throughout the period:
MuniYield Florida ......................... $ 11 $ 35 $ 61 $135
MuniVest Florida .......................... $ 12 $ 38 $ 66 $145
Combined Fund* ............................ $ 11 $ 34 $ 58 $129
</TABLE>
- ----------
* Assumes that the Reorganization had taken place on June 30, 1999.
The foregoing Fee Table is intended to assist investors in understanding
the costs and expenses that a common shareholder of each of the Funds will bear
directly or indirectly as compared to the costs and expenses that would be borne
by such investors taking into account the Reorganization. The Example set forth
above assumes that the Common Shares were purchased in the initial offerings and
the reinvestment of all dividends and distributions and uses a 5% annual rate of
return as mandated by Securities and Exchange Commission (the "SEC")
regulations. The Example should not be considered a representation of past or
future expenses or annual rates of return. Actual expenses or annual rates of
return may be more or less than those assumed for purposes of the Example. See
"Comparison of the Funds" and "The Reorganization - Potential Benefits to Common
Shareholders of the Funds as a Result of the Reorganization."
Business of MuniYield Florida ....... MuniYield Florida was organized as a
business trust under the laws of the
Commonwealth of Massachusetts on January
21, 1992 and commenced operations on
February 28, 1992. MuniYield Florida is
a non-diversified, leveraged, closed-end
management investment company whose
investment objective is to provide
shareholders with current income exempt
from Federal income tax. The Fund also
seeks to provide shareholders with the
opportunity to own shares the value of
which is exempt from the Florida
intangible personal property tax.
MuniYield Florida seeks to achieve its
investment objective by investing
primarily in a portfolio of Florida
Municipal Bonds. See "Comparison of the
Funds - Investment Objectives and
Policies."
MuniYield Florida has outstanding both
Common Shares and AMPS. As of August 31,
1999, MuniYield Florida had net assets
of $165,420,385.
Business of MuniVest Florida ........ MuniVest Florida was organized as a
business trust under the laws of the
Commonwealth of Massachusetts on March
5, 1993 and commenced operations on
April 30,
7
<PAGE>
1993. MuniVest Florida is a
non-diversified, leveraged, closed-end
management investment company whose
investment objective is to provide
shareholders with current income exempt
from Federal income tax. The Fund also
seeks to provide shareholders with the
opportunity to own shares the value of
which is exempt from the Florida
intangible personal property tax.
MuniVest Florida seeks to achieve its
investment objective by investing
primarily in a portfolio of Florida
Municipal Bonds.
MuniVest Florida has outstanding both
Common Shares and AMPS. As of August 31,
1999, MuniVest Florida had net assets of
$117,075,211.
Comparison of the Funds ............. Investment Objectives and Policies. The
Funds have substantially similar
investment objectives and policies. Both
Funds seek to provide current income
exempt from Federal income tax and to
provide shareholders with the
opportunity to own shares, the value of
which is, exempt from the Florida
intangible personal property tax. The
Funds seek to maintain as much of their
respective portfolios invested in
Florida Municipal Bonds as possible. In
addition, MuniVest Florida may invest up
to 25% of its assets in below investment
grade municipal obligations. See
"Comparison of the Funds - Investment
Objectives and Policies."
Shares of Beneficial Interest. Each Fund
has outstanding both Common Shares and
AMPS. The Common Shares of both Funds
are traded on the NYSE. As of August 31,
1999, (i) the net asset value per share
of MuniYield Florida Common Shares was
$13.81 and the market price per share
was $12.9375; (ii) the net asset value
per share of MuniVest Florida Common
Shares was $12.87 and the market price
per share was $11.75. The AMPS of both
Funds have a liquidation preference of
$25,000 per share and are sold
principally at auctions. See "Comparison
of the Funds - Shares of Beneficial
Interest."
Auctions generally have been held and
will be held every seven days for each
series of AMPS of each of the Funds
unless the applicable Fund elects,
subject to certain limitations, to have
a special dividend period. In connection
with the Reorganization, a holder of
AMPS of MuniVest Florida may receive
MuniYield Florida AMPS with a dividend
payment date and an auction date that
fall on a day of the week that is
different from the schedule of the AMPS
of MuniYield Florida that he or she
holds. See "Comparison of the
Funds--Shares of Beneficial Interest."
The following table provides information
about the dividend rates for each series
of AMPS of each of the Funds as of a
recent auction.
8
<PAGE>
<TABLE>
<CAPTION>
Auction Date Fund Dividend Rate
------------ ------ -------------
<S> <C> <C> <C>
September 15, 1999 MuniYield Florida 3.50%
September 16, 1999 MuniVest Florida 3.40%
</TABLE>
Advisory Fees. The investment adviser
for both Funds is Fund Asset Management,
L.P. ("FAM"). FAM is an affiliate of
MLAM, and both FAM and MLAM are owned
and controlled by Merrill Lynch & Co.,
Inc. ("ML & Co."). The principal
business address of FAM is 800 Scudders
Mill Road, Plainsboro, New Jersey 08536.
Companies in the Asset Management Group
of ML & Co. (which includes FAM) act as
investment advisers for over 100 other
registered investment companies and also
offer portfolio management and portfolio
analysis services to individuals and
institutional accounts.
FAM is responsible for the management of
each Fund's investment portfolio and for
providing administrative services to
each Fund. William R. Bock serves as
portfolio manager for MuniYield Florida
and MuniVest Florida and is expected to
serve as portfolio manager of the
combined fund.
Pursuant to separate investment advisory
agreements between each Fund and FAM,
each Fund pays FAM a monthly fee at the
annual rate of 0.50% of such Fund's
average weekly net assets, including
assets acquired from the sale of AMPS.
Subsequent to the Reorganization, FAM
will continue to receive compensation at
the rate of 0.50% of the average weekly
net assets, including assets acquired
from the sale of AMPS, of the combined
fund. See "Comparison of the Funds -
Management of the Funds."
Other Significant Fees. The Bank of New
York is the custodian, transfer agent,
dividend disbursing agent and registrar
for the Common Shares of MuniYield
Florida and MuniVest Florida. The Bank
of New York is the auction agent,
transfer agent dividend disbursing agent
and registrar for each Fund's AMPS. The
principal business addresses are as
follows: The Bank of New York, 90
Washington Street, New York, New York
10286 (for its custodial services) and
101 Barclay Street, New York, New York
10286 (for its auction agency and
transfer agency services). See
"Comparison of the Funds Management of
the Funds."
Overall Expense Ratio. As of June 30,
1999, the overall annualized operating
expense ratio for MuniYield Florida was
1.11%, based on average net assets of
approximately $113.5 million excluding
AMPS, and 0.75%, based on average net
assets of approximately $168.5 million
including AMPS; the overall annualized
operating expense ratio for MuniVest
Florida was 1.20%, based on average net
assets of
9
<PAGE>
approximately $79.3 million excluding
AMPS, and 0.80%, based on average net
assets of approximately $119.3 million
including AMPS. If the Reorganization
had taken place on June 30, 1999, the
overall operating expense ratio for the
combined fund on a pro forma basis would
have been 1.06%, based on average net
assets of approximately $192.8 million
excluding AMPS, and 0.71%, based on
average net assets of approximately
$287.8 million including AMPS.
Purchases and Sales of Common Shares and
AMPS. Purchase and sale procedures for
the Common Shares of each of the Funds
are identical, and investors typically
purchase and sell Common Shares of the
Funds through a registered broker-dealer
on the NYSE, thereby incurring a
brokerage commission set by the
broker-dealer. Alternatively, investors
may purchase or sell Common Shares of
the Funds through privately negotiated
transactions with existing shareholders.
Purchase and sale procedures for the
AMPS of each of the Funds also are
identical. Such AMPS generally are
purchased and sold at separate auctions
conducted on a regular basis by The Bank
of New York, as the auction agent for
each Fund's AMPS (the "Auction Agent").
Unless otherwise permitted by the Funds,
existing and potential holders of AMPS
only may participate in auctions through
their broker-dealers. Broker-dealers
submit the orders of their respective
customers who are existing and potential
holders of AMPS to the Auction Agent. On
or prior to each auction date for the
AMPS (the business day next preceding
the first day of each dividend period),
each holder may submit orders to buy,
sell or hold AMPS to its broker-dealer.
Outside of these auctions, shares of
AMPS may be purchased or sold through
broker-dealers for the AMPS in a
secondary trading market maintained by
the broker-dealers. However, there can
be no assurance that a secondary market
will develop or if it does develop, that
it will provide holders with a liquid
trading market for the AMPS of either
Fund.
Ratings of AMPS. The AMPS of each Fund
have each been assigned a rating of AAA
from Standard & Poor's ("S&P") and "aaa"
from Moody's Investors Service, Inc.
("Moody's"). See "Comparison of the
Funds - Rating Agency Guidelines."
Ratings of Municipal Obligations.
MuniYield Florida will invest only in
municipal obligations that at the time
of purchase are considered investment
grade. MuniVest Florida may invest up to
25% of its assets in non-investment
grade municipal obligations.
Portfolio Transactions. The portfolio
transactions in which the Funds may
engage are similar, as are the
procedures for such transactions. See
"Comparison of the Funds - Portfolio
Transactions."
10
<PAGE>
Dividends and Distributions. The methods
of dividend payment and distributions
are similar for all of the Funds, both
with respect to the Common Shares and
the AMPS of each Fund. See "Comparison
of the Funds - Dividends and
Distributions."
Net Asset Value. The net asset value per
Common Share of each Fund is determined
after the close of business on the NYSE
(generally, 4:00 p.m., Eastern time) on
each day during which the NYSE is open
for trading. For purposes of determining
the net asset value of the Common Shares
of each Fund, the value of the
securities held by the Fund plus any
cash or other assets (including interest
accrued but not yet received) minus all
liabilities (including accrued expenses)
and the aggregate liquidation value of
the outstanding AMPS of the Fund is
divided by the total number of Common
Shares of the Fund outstanding at such
time. Expenses, including fees payable
to FAM, are accrued daily. See
"Comparison of the Funds - Net Asset
Value."
Voting Rights. The corresponding voting
rights of the holders of each Fund's
Common Shares are substantially similar.
Likewise, the corresponding voting
rights of the holders of each Fund's
AMPS are substantially similar. See
"Comparison of the Funds - Shares of
Beneficial Interest."
Shareholder Services. An automatic
dividend reinvestment plan is available
to holders of each Fund's Common Shares.
The plans are similar for the two Funds.
See "Comparison of the Funds Automatic
Dividend Reinvestment Plan." Other
shareholder services, including the
provision of annual and semi-annual
reports, are the same for the two Funds.
Outstanding Securities of MuniYield Florida and MuniVest Florida
as of August 31, 1999
<TABLE>
<CAPTION>
Amount
Outstanding
Amount Held By Exclusive of
Amount Fund for its Own Amount Shown in
Title of Class Authorized Account Previous Column
------------ ---------- ---------------- ----------------
<S> <C> <C> <C>
MuniYield Florida
Common Shares Unlimited -0- 7,993,842
AMPS 1,000,000 -0- 2,200
MuniVest Florida
Common Shares Unlimited -0- 5,988,782
AMPS 1,000,000 -0- 1,600
</TABLE>
Tax Considerations .................. The Funds have jointly requested a
private letter ruling from the IRS with
respect to the Reorganization to the
effect that, among other things, neither
Fund will recognize gain or loss on the
transaction and the shareholders of
MuniVest Florida will not recognize gain
or loss on the exchange of their shares
for MuniYield Florida Common Shares
(except to the extent that a holder of
MuniVest Common Shares
11
<PAGE>
receives cash representing an interest
in less than a full share of MuniYield
Florida Common Shares in the
Reorganization) or MuniYield Florida
Series B AMPS. The consummation of the
Reorganization is subject to the receipt
of such ruling or of an opinion of
counsel to the same effect. The
Reorganization will not affect the
status of MuniYield Florida as a
regulated investment company (a "RIC")
under the Internal Revenue Code of 1986,
as amended (the "Code"). MuniVest
Florida will liquidate pursuant to the
Reorganization. See "Agreement and Plan
of Reorganization-- Tax Consequences of
the Reorganization."
12
<PAGE>
RISK FACTORS AND SPECIAL CONSIDERATIONS
Since both MuniYield Florida and MuniVest Florida invest primarily in a
portfolio of Florida Municipal Bonds, any risks inherent in such investments are
equally applicable to both Funds and will be similarly pertinent to the combined
fund after the Reorganization. It is expected that the Reorganization itself
will not adversely affect the rights of holders of Common Shares or AMPS of
either Fund or create additional risks.
Florida Municipal Bonds
Each of the Funds ordinarily invests at least 65% of its portfolio in
Florida Municipal Bonds and at least 80% of its portfolio in Florida Municipal
Bonds and other Municipal Bonds. As a result, each Fund is more exposed to risks
affecting issuers of Florida Municipal Bonds than is a municipal bond fund that
invests more widely. See "Comparison of the Funds -- Special Considerations
Relating to Florida Municipal Bonds" and Exhibit III - "Economic and Other
Conditions in Florida."
Interest Rate and Credit Risk
Each Fund invests in municipal bonds, which are subject to interest rate
and credit 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. 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.
Non-diversification
Each Fund is registered as a "non-diversified" investment company. This
means that the Fund may invest a greater percentage of its assets in a single
issuer than a diversified investment company. Since a Fund may invest a
relatively high percentage of its assets in a limited number of issuers, the
Fund may be more exposed to the effects of any single economic, political or
regulatory occurrence than a more widely-diversified fund. Even as a
non-diversified fund, each Fund must still meet the diversification requirements
of applicable Federal income tax law.
Rating Categories
The Funds intend to invest in municipal bonds that are rated investment
grade by S&P, Moody's or Fitch IBCA, Inc. ("Fitch") or are considered by FAM to
be of comparable quality. Obligations rated in the lowest investment grade
category may have certain speculative characteristics. MuniVest Florida may also
invest up to 25% of its total assets in municipal bonds that are rated below
investment grade or in unrated municipal bonds that FAM believes are of
comparable quality. Although below investment grade bonds generally pay higher
rates of interest than investment grade bonds, they are high risk investments
that may cause income and principal losses for MuniVest Florida.
Private Activity Bonds
Each Fund may invest all or a portion of its assets in certain tax-exempt
securities classified as "private activity bonds." These bonds may subject
certain investors in a Fund to the Federal alternative minimum tax.
Leverage
Use of leverage, through the issuance of AMPS, involves certain risks to
holders of Common Shares of each of the Funds. For example, each Fund's issuance
of AMPS may result in higher volatility of the net asset value of its Common
Shares and potentially more volatility in the market value of its Common Shares.
In addition, changes in the short-term and medium-term dividend rates on, and
the amount of taxable income allocable to, the AMPS will affect the yield to
holders of Common Shares. Under certain circumstances, when a Fund is required
to allocate taxable income to holders of AMPS, the Fund may be required to make
an additional distribution to such holders in an amount approximately equal to
the tax liability resulting from that allocation (an "Additional Distribution").
Leverage will allow holders of each Fund's Common Shares to realize a higher
current rate of return than if the Fund were not leveraged as long as the Fund,
while accounting for its costs and operating
13
<PAGE>
expenses, is able to realize a higher net return on its investment portfolio
than the then-current dividend rate (and any Additional Distribution) paid on
the AMPS. Similarly, since a pro rata portion of each Fund's net realized
capital gains is generally payable to holders of the Fund's Common Shares, the
use of leverage will increase the amount of such gains distributed to holders of
the Fund's Common Shares. However, short-term, medium-term and long-term
interest rates change from time to time as do their relationships to each other
(i.e., the slope of the yield curve) depending upon such factors as supply and
demand forces, monetary and tax policies and investor expectations. Changes in
any or all of such factors could cause the relationship between short-term,
medium-term and long-term rates to change (i.e., to flatten or to invert the
slope of the yield curve) so that short-term and medium-term rates may
substantially increase relative to the long-term obligations in which each Fund
may be invested. To the extent that the current dividend rate (and any
Additional Distribution) on the AMPS approaches the net return on a Fund's
investment portfolio, the benefit of leverage to holders of Common Shares will
be decreased. If the current dividend rate (and any Additional Distribution) on
the AMPS were to exceed the net return on a Fund's portfolio, holders of Common
Shares would receive a lower rate of return than if the Fund were not leveraged.
Similarly, since both the costs of issuing AMPS and any decline in the value of
a Fund's investments (including investments purchased with the proceeds from any
AMPS offering) will be borne entirely by holders of the Fund's Common Shares,
the effect of leverage in a declining market would result in a greater decrease
in net asset value to holders of Common Shares than if the Fund were not
leveraged. If a Fund is liquidated, holders of that Fund's AMPS will be entitled
to receive liquidating distributions before any distribution is made to holders
of Common Shares of that Fund.
In an extreme case, a decline in net asset value could affect each Fund's
ability to pay dividends on its Common Shares. Failure to make such dividend
payments could adversely affect the Fund's qualification as a RIC under the
Federal tax laws. See "Comparison of the Funds -- Tax Rules Applicable to the
Funds and their Shareholders." However, each Fund intends to take all measures
necessary to make Common Shares dividend payments. If a Fund's current
investment income is ever insufficient to meet dividend payments on either the
Common Shares or the AMPS, the Fund may have to liquidate certain of its
investments. In addition, each Fund has the authority to redeem its AMPS for any
reason and may redeem all or part of its AMPS under the following circumstances:
o if the Fund anticipates that its leveraged capital structure will result
in a lower rate of return for any significant amount of time to holders of the
Common Shares than the Fund can obtain if the Common Shares were not leveraged,
o if the asset coverage for the AMPS declines below 200%, either as a
result of a decline in the value of the Fund's portfolio investments or as a
result of the repurchase of Common Shares in tender offers or otherwise, or
o in order to maintain the asset coverage established by Moody's and S&P in
rating the AMPS.
Redemption of the AMPS or insufficient investment income to make dividend
payments, may reduce the net asset value of the Common Shares and require the
Fund to liquidate a portion of its investments at a time when it may be
disadvantageous to do so.
Portfolio Management. The portfolio management strategies of the Funds are
the same. In the event of an increase in short-term or medium-term rates or
other change in market conditions to the point where a Fund's leverage could
adversely affect holders of Common Shares as noted above, or in anticipation of
such changes, each Fund may attempt to shorten the average maturity of its
investment portfolio, which would tend to offset the negative impact of leverage
on holders of its Common Shares. Each Fund also may attempt to reduce the degree
to which it is leveraged by redeeming AMPS pursuant to the provisions of the
Fund's Certificate of Designation establishing the rights and preferences of the
AMPS or otherwise purchasing shares of AMPS. Purchases and sales or redemptions
of AMPS, whether on the open market or in negotiated transactions, are subject
to limitations under the Investment Company Act. If market conditions
subsequently change, each Fund may sell previously unissued shares of AMPS or
shares of AMPS that the Fund previously issued but later repurchased or
redeemed.
Inverse Floating Obligations
A Fund's investments in "inverse floating obligations" or "residual
interest bonds" provide investment leverage because their market value increases
or decreases in response to market changes at a greater rate than fixed rate,
long term tax exempt securities. The market values of such securities are more
volatile than the market values of fixed rate, tax exempt securities.
14
<PAGE>
Options and Futures Transactions
Each Fund may engage in certain options and futures transactions to reduce
its exposure to interest rate movements. If a Fund incorrectly forecasts market
values, interest rates or other factors, that Fund's performance could suffer.
Each Fund also may suffer a loss if the other party to the transaction fails to
meet its obligations. The Funds are not required to use hedging and may choose
not to do so.
Antitakeover Provisions
The Declaration of Trust of each of the Funds includes provisions that
could limit the ability of other entities or persons to acquire control of that
Fund or to change the composition of its Board of Trustees. Such provisions
could limit the ability of shareholders to sell their shares at a premium over
prevailing market prices by discouraging a third party from seeking to obtain
control of the Fund.
Ratings Considerations
The Funds have received ratings of their AMPS of AAA from S&P and "aaa"
from Moody's. In order to maintain these ratings, the Funds are required to
maintain portfolio holdings meeting specified guidelines of such rating
agencies. These guidelines may impose asset coverage requirements that are more
stringent than those imposed by the Investment Company Act.
As described by Moody's and S&P, a preferred stock rating is an assessment
of the capacity and willingness of an issuer to pay preferred stock obligations.
The ratings of the AMPS are not recommendations to purchase, hold or sell shares
of AMPS, inasmuch as the ratings do not comment as to market price or
suitability for a particular investor, nor do the rating agency guidelines
address the likelihood that a holder of shares of AMPS will be able to sell such
shares in an auction. The ratings are based on current information furnished to
Moody's and S&P by the Funds and FAM and information obtained from other
sources. The ratings may be changed, suspended or withdrawn as a result of
changes in, or the unavailability of, such information. The Common Shares of the
Funds have not been rated by a nationally recognized statistical rating
organization.
The Board of Trustees of each of the Funds, without shareholder approval,
may amend, alter or repeal certain definitions or restrictions which have been
adopted by the Fund pursuant to the rating agency guidelines, in the event the
Fund receives confirmation from the rating agencies that any such amendment,
alteration or repeal would not impair the ratings then assigned to shares of
AMPS.
COMPARISON OF THE FUNDS
Financial Highlights
MuniYield Florida
The financial information in the table below, except for the six month
period ended April 30, 1999 which is unaudited and has been provided by FAM, has
been audited in conjunction with the annual audits of the financial statements
of the Fund by Deloitte & Touche LLP, independent auditors. The following per
share data and ratios have been derived from information provided in the
financial statements of the Fund.
<TABLE>
<CAPTION>
For the
Six Months
Ended For the Year Ended October 31,
April 30, ----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Asset Value:
Per Share Operating Performance:
Net asset value, beginning of period .................. $ 15.70 $ 15.59 $ 15.23 $ 15.07 $ 13.82
-------- -------- -------- -------- --------
Investment income - net ............................... .50 1.10 1.13 1.13 1.14
Realized and unrealized gain (loss) on
investments - net ..................................... (.30) .34 .41 .17 1.25
-------- -------- -------- -------- --------
Total from investment operations ...................... .20 1.44 1.54 1.30 2.39
======== ======== ======== ======== ========
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
For the
Six Months
Ended For the Year Ended October 31,
April 30, ----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Less dividends and distributions to Common
Shareholders:
Investment income - net ......................... (.44) (.86) (.89) (.90) (.88)
Realized gain on investments - net .............. (.43) (.22) (.04) -- --
-------- -------- -------- -------- --------
Total dividends and distributions to Common
Shareholders .......................................... (.87) (1.08) (.93) (.90) (.88)
-------- -------- -------- -------- --------
Effect of Preferred Share activity:
Dividends and distributions to Preferred
Shareholders:
Investment income - net ......................... (.05) (.19) (.24) (.24) (.26)
Realized gain on investments - net .............. (.09) (.06) (.01) -- --
-------- -------- -------- -------- --------
Total effect of Preferred Share activity .............. (.14) (.25) (.25) (.24) (.26)
-------- -------- -------- -------- --------
Net asset value, end of period ........................ $ 14.89 $ 15.70 $ 15.59 $ 15.23 $ 15.07
======== ======== ======== ======== ========
Market price per share, end of period ................. $ 14.875 $ 16.00 $ 15.50 $ 14.50 $ 13.375
======== ======== ======== ======== ========
Total Investment Return:**
Based on market price per share ....................... (1.69)%# 10.66% 13.76% 15.29% 25.63%
======== ======== ======== ======== ========
Based on net asset value per share .................... .29%# 7.96% 8.93% 7.47% 16.50%
======== ======== ======== ======== ========
Ratios to Average Net Assets:***
Expenses .............................................. .75%* .72% .75% .74% .77%
======== ======== ======== ======== ========
Investment income - net ............................... 4.54%* 4.90% 5.04% 5.11% 5.32%
======== ======== ======== ======== ========
Supplemental Data:
Net assets, net of Preferred Shares,
end of period (in thousands) .......................... $119,014 $124,455 $122,731 $119,704 $118,402
======== ======== ======== ======== ========
Preferred Shares outstanding, end of period
(in thousands) ........................................ $ 55,000 $ 55,000 $ 55,000 $ 55,000 $ 55,000
======== ======== ======== ======== ========
Portfolio turnover .................................... 55.52 92.25 107.09 119.29 97.93
======== ======== ======== ======== ========
Dividends Per Share on Preferred Shares
Outstanding:
Investment income - net ............................... $ 176 $ 696 $ 826 $ 869 $ 927
======== ======== ======== ======== ========
Leverage:
Asset coverage per $1,000 ............................. $ 3,164 $ 3,263 $ 3,231 $ 3,176 $ 3,153
======== ======== ======== ======== ========
</TABLE>
-----------
* Annualized.
** Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value, may result
in substantially different returns. Total investment returns exclude
the effects of sales loads.
*** Do not reflect the effect of dividends to Preferred shareholders.
# Aggregate total investment return.
16
<PAGE>
MuniVest Florida
The financial information in the table below, except for the six month
period ended April 30, 1999 which is unaudited and has been provided by FAM, has
been audited in conjunction with the annual audits of the financial statements
of the Fund by Deloitte & Touche LLP, independent auditors. The following per
share data and ratios have been derived from information provided in the
financial statements of the Fund.
<TABLE>
<CAPTION>
For the
Six Months
Ended For the Year Ended October 31,
April 30, ----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Asset Value:
Per Share Operating Performance:
Net asset value, beginning of period .................. $ 14.20 $ 13.87 $ 13.39 $ 13.16 $ 11.82
-------- -------- -------- -------- --------
Investment income - net ............................... .47 .99 1.01 .99 1.01
Realized and unrealized gain (loss) on
investments - net ..................................... (.31) .32 48 .23 1.34
-------- -------- -------- -------- --------
Total from investment operations ...................... .16 1.31 1.49 1.22 2.35
-------- -------- -------- -------- --------
Less dividends to Common shareholders from
investment income - net ............................ (.37) (.76) (.78) (.76) (.76)
-------- -------- -------- -------- --------
Effect of Preferred Shares activity:
Dividends to Preferred Shareholders from
investment income - net ............................ (.10) (.22) (.23) (.23) (.25)
-------- -------- -------- -------- --------
Net asset value, end of period ........................ $ 13.89 $ 14.20 $ 13.87 $ 13.39 $ 13.16
======== ======== ======== ======== ========
Market price per share, end of period ................. $13.5625 $ 14.125 $ 13.00 $ 12.75 $ 11.50
======== ======== ======== ======== ========
Total Investment Return:**
Based on market price per share ....................... (1.38)%# 14.78% 8.21% 17.87% 22.93%
======== ======== ======== ======== ========
Based on net asset value per share .................... .47%# 8.16% 9.93% 8.17% 19.02%
======== ======== ======== ======== ========
Ratios to Average Net Assets:***
Expenses .............................................. .79%# .77% .78% .82% .85%
======== ======== ======== ======== ========
Investment income - net ............................... 4.51%# 4.80% 4.96% 4.96% 5.38%
======== ======== ======== ======== ========
Supplemental Data:
Net assets, net of Preferred Shares, end of period
(in thousands) ........................................ $ 83,167 $ 84,949 $ 82,918 $ 80,058 $ 78,695
======== ======== ======== ======== ========
Preferred Shares outstanding, end of period
(in thousands) ........................................ $ 40,000 $ 40,000 $ 40,000 $ 40,000 $ 40,000
======== ======== ======== ======== ========
Portfolio turnover .................................... 46.54% 92.75% 89.21% 116.82% 92.54%
======== ======== ======== ======== ========
Dividends Per Share on Preferred Shares
Outstanding:
Investment income - net ............................... $ 367 $ 829 $ 844 $ 861 $ 940
======== ======== ======== ======== ========
Leverage:
Asset coverage per $1,000 ............................. $ 3,079 $ 3,124 $ 3,073 $ 3,001 $ 2,967
======== ======== ======== ======== ========
</TABLE>
- ----------
* Annualized.
** Total investment returns based on market value, which can be significantly
greater or lesser than the net asset value, may result in substantially
different returns. Total investment returns exclude the effects of sales
loads.
*** Do not reflect the effect of dividends to Preferred Shares shareholders.
# Aggregate total investment return.
17
<PAGE>
Per Share Data for Common Shares*
Traded on the New York Stock Exchange (unaudited)
<TABLE>
<CAPTION>
MuniYield Florida
Premium
(Discount)
Market Price**($) Net Asset Value ($) to Net Value (%)
------------------------ ------------------------ -----------------------
Quarter Ended* High Low High Low High Low
------------- ----- ---- ----- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
January 1, 1997 14.875 14.625 15.19 14.98 (2.46) (5.92)
April 30, 1997 14.625 14.125 14.93 14.72 0.46 (4.87)
July 31, 1997 15.875 15.25 15.73 15.28 1.33 (4.22)
October 31, 1997 15.75 15.0625 15.66 15.37 1.00 (3.94)
January 1, 1998 16.125 15.6875 15.90 15.58 2.63 (2.14)
April 30, 1998 15.5625 14.8125 15.61 15.17 3.37 (2.48)
July 31, 1998 15.75 15.25 15.55 15.44 (0.32) (2.03)
October 31, 1998 16.125 15.625 16.12 15.65 3.04 (3.85)
January 1, 1999 16.4375 15.75 15.31 15.06 9.59 1.71
April 30, 1999 15.625 14.875 15.05 14.89 8.30 (0.10)
July 31, 1999 13.75 13.5625 14.34 14.14 0.57 (5.37)
<CAPTION>
MuniVest Florida
Premium
(Discount)
Market Price**($) Net Asset Value ($) to Net Value (%)
------------------------ ------------------------ -----------------------
Quarter Ended* High Low High Low High Low
------------- ----- ---- ----- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
January 1, 1997 13.375 12.75 13.39 13.18 (4.28) (7.10)
April 30, 1997 12.50 12.00 13.12 12.92 0.19 (7.34)
July 31, 1997 13.9375 13.125 13.90 13.50 (1.80) (7.37)
October 31, 1997 13.6875 12.75 13.91 13.67 (1.32) (6.27)
January 1, 1998 14.3125 13.75 14.36 14.05 (0.87) (4.43)
April 30, 1998 14.0625 13.1875 14.08 13.67 2.12 (4.58)
July 31, 1998 14.25 13.5625 14.04 13.95 0.07 (3.88)
October 31, 1998 14.125 13.9375 14.60 14.13 (0.53) (4.35)
January 1, 1999 14.0625 13.5625 14.25 14.02 1.82 (1.20)
April 30, 1999 13.625 13.3125 14.03 13.89 0.16 (3.92)
July 31, 1999 12.4375 12.00 13.38 13.20 (3.60) (8.95)
</TABLE>
* Calculations are based upon common shares of beneficial interest
outstanding at the end of each quarter.
** As reported in the consolidated transaction operating system.
As indicated in the tables above, for the periods shown, the Common Shares
of the Funds generally have traded at prices close to net asset value, with
small premiums or discounts to net asset value of less than 10% being reflected
in the market value of the shares from time to time. Although there is no reason
to believe that this pattern should be affected by the Reorganization, it is not
possible to predict whether shares of the surviving fund will trade at a premium
or discount to net asset value following the Reorganization, or what the extent
of any such premium or discount might be.
Investment Objective and Policies
The structure, organization and investment policies of the Funds are
substantially similar, with the differences between the two Funds set forth
below. Each Fund seeks as a fundamental investment objective current income
exempt from Federal income tax and to provide shareholders with the opportunity
to own shares, the value of which is exempt from the Florida intangible personal
property tax. The investment objective of each Fund is a fundamental policy that
may not be changed without a vote of a majority of the Fund's outstanding voting
securities.
18
<PAGE>
The investment objective and policies of MuniYield Florida and MuniVest
Florida are similar. The investment objective of each Fund is to provide
shareholders with current income exempt from Federal income taxes. The Funds
also seek to provide shareholders with the opportunity to own shares the value
of which is exempt from Florida intangible personal property taxes. The Funds
seek to achieve their objective by investing primarily in a portfolio of
long-term, municipal obligations issued by or on behalf of the State of Florida,
its political subdivisions, agencies and instrumentalities that pay interest
which, in the opinion of bond counsel to the issuer, is exempt from Federal
income taxes and which enable shares of the Fund to be exempt from Florida
intangible personal property taxes ("Florida Municipal Bonds"). Each Fund will
seek to achieve its investment objective by seeking to invest substantially all
(a minimum of 80%) of its assets in Florida Municipal Bonds, except at times
when, in the judgment of FAM, Florida Municipal Bonds of sufficient quality and
quantity are unavailable for investment by the Fund. At all times, except during
temporary defensive periods, each Fund maintains at least 65% of its assets in
Florida Municipal Bonds. The investment objective of each Fund is a fundamental
policy that may not be changed without the affirmative vote of a majority of the
Fund's outstanding voting securities, as defined below under "Investment
Restrictions." At times the Funds may seek to hedge their portfolios through the
use of futures transactions and options to reduce volatility in the net asset
value of their Common Shares.
The Funds ordinarily do not intend to realize significant investment income
from securities other than Florida Municipal Bonds. To the extent that suitable
Florida Municipal Bonds are not available for investment by the Funds, as
determined by FAM, the Funds may purchase Municipal Bonds. Each Fund may invest
all or a portion of its assets in certain tax-exempt securities classified as
"private activity bonds" (in general, bonds that benefit non-governmental
entities) that may subject certain investors in the Fund to Federal alternative
minimum tax.
Each Fund also may invest in securities not issued by or on behalf of a
state or territory or by an agency or instrumentality thereof, if the Fund
nevertheless believes such securities pay interest or distributions that are
exempt from Federal income taxation ("Non-Municipal Tax-Exempt Securities").
Non-Municipal Tax-Exempt Securities may include securities issued by other
investment companies that invest in Florida Municipal Bonds and Municipal Bonds,
to the extent such investments are permitted by the Investment Company Act.
Other Non-Municipal Tax-Exempt Securities could include trust certificates or
other instruments evidencing interests in one or more long-term Florida
Municipal Bonds or Municipal Bonds. Certain Non-Municipal Tax-Exempt Securities
may be characterized as derivative instruments. Non-Municipal Tax-Exempt
Securities will be considered "Florida Municipal Bonds" or "Municipal Bonds" for
purposes of a Fund's investment objective and policies.
The investment grade Florida Municipal Bonds and Municipal Bonds in which
each Fund primarily invests are those Florida Municipal Bonds and Municipal
Bonds that are rated at the date of purchase in the four highest rating
categories of S&P, Moody's or Fitch or, if unrated, are considered to be of
comparable quality by FAM. In the case of long-term debt, the investment grade
rating categories are AAA through BBB for S&P and Fitch and Aaa through Baa for
Moody's. In the case of short-term notes, the investment grade rating categories
are SP-1 through SP-3 for S&P, MIG-1 through MIG-3 for Moody's and F-1+ through
F-3 for Fitch. In the case of tax-exempt commercial paper, the investment grade
rating categories are A-1+ through A-3 for S&P, Prime-1 through Prime-3 for
Moody's and F-1+ through F-3 for Fitch. Obligations ranked in the lowest
investment grade rating category (BBB, SP-3 and A-3 for S&P; Baa, MIG-3 and
Prime-3 for Moody's; and BBB and F-3 for Fitch), while considered "investment
grade," may have certain speculative characteristics. There may be
sub-categories or graduations indicating relative standing within the ratings
categories set forth above. There is no assurance that a particular rating will
continue for any given period of time or that such rating will not be revised
downward or withdrawn entirely if, in the judgment of the agency originally
establishing the rating, circumstances so warrant. The value of Florida
Municipal Bonds and Municipal Bonds generally may be affected by uncertainties
in the municipal markets as a result of legislation or litigation changing the
taxation of Florida Municipal Bonds and Municipal Bonds or the rights of Florida
Municipal Bond and Municipal Bond holders in the event of a bankruptcy.
Municipal bankruptcies are rare, and certain provisions of the U.S. Bankruptcy
Code governing such bankruptcies are unclear. Further, the application of state
law to Florida Municipal Bond and Municipal Bond issuers could produce varying
results among the states or among Municipal Bond issuers within a state. These
uncertainties could have a significant impact on the prices of the Florida
Municipal Bonds and Municipal Bonds in which the Funds invest.
In assessing the quality of Florida Municipal Bonds and Municipal Bonds
with respect to the foregoing requirements, FAM takes into account the portfolio
insurance as well as the nature of any letters of credit or similar credit
enhancement to which particular Florida Municipal Bonds and Municipal Bonds are
entitled and
19
<PAGE>
the creditworthiness of the insurance company or financial institution that
provided such insurance or credit enhancements. Consequently, if Florida
Municipal Bonds or Municipal Bonds are covered by insurance policies issued by
insurers whose claims-paying ability is rated AAA by S&P or Fitch or Aaa by
Moody's, FAM may consider such municipal obligations to be equivalent to AAA- or
Aaa-rated securities, as the case may be, even though such Florida Municipal
Bonds or Municipal Bonds would generally be assigned a lower rating if the
rating were based primarily upon the credit characteristics of the issuers
without regard to the insurance feature. The insured Florida Municipal Bonds and
Municipal Bonds must also comply with the standards applied by the insurance
carriers in determining eligibility for portfolio insurance. See Exhibit IV --
"Ratings of Municipal Bonds and Commercial Paper."
MuniVest Florida may invest up to 25% of its assets in Florida Municipal
Bonds and Municipal Bonds that are rated below investment grade or, if unrated,
are considered to be of comparable quality by FAM. These high yield bonds are
commonly referred to as "junk bonds" and are regarded as predominantly
speculative as to the issuer's ability to make payments of principal and
interest. Consequently, although such bonds can be expected to provide higher
yields and be less subject to interest rate fluctuations, they may be subject to
greater market price fluctuations and risk of loss of principal than lower
yielding, higher rated fixed-income securities. Such securities are particularly
vulnerable to adverse changes in the issuer's industry and in general economic
conditions. Issuers of high yield bonds may be highly leveraged and may not have
available to them more traditional methods of financing. The risk of loss due to
default by the issuer is significantly greater for holders of these bonds
because such securities may be unsecured and may be subordinated to other
creditors of the issuer. In addition, while the high yield bonds in which the
Fund may invest normally will not include securities that, at the time of
investment, are in default or the issuers of which are in bankruptcy, there can
be no assurance that such events will not occur after MuniVest Florida purchases
a particular security, in which case MuniVest Florida may experience losses and
incur costs. Although MuniVest Florida may invest up to 25% of its total assets
in lower-rated Florida Municipal Bonds and Municipal Bonds, the asset coverage
requirements established by the nationally recognized statistical ratings
organizations ("NRSROs") who may rate the Fund's preferred shares currently
limits such investments to less than ___% of total assets. Currently, there are
[no/___%] lower-rated bonds in MuniVest Florida's portfolio.
High yield bonds frequently have call or redemption features that permit an
issuer to repurchase such bonds from the Fund, which may decrease the net
investment income to MuniVest Florida and dividends to shareholders in the event
that MuniVest Florida is required to replace a called security with a lower
yielding security. MuniVest Florida may have difficulty disposing of certain
high yield bonds because there may be a thin trading market for such securities.
Reduced secondary market liquidity may have an adverse impact on market price
and MuniVest Florida'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. In addition, market
quotations are generally available on many high yield bond issues only from a
limited number of dealers and may not necessarily represent firm bids of such
dealers or prices for actual sales. See Exhibit V -- "Ratings of Municipal Bonds
and Commercial Paper."
Each of the Funds may invest in variable rate demand obligations ("VRDOs")
and VRDOs in the form of participation interests ("Participating VRDOs") in
variable rate tax-exempt obligations held by a financial institution, typically
a commercial bank. The VRDOs in which each Fund may invest are tax-exempt
obligations, in the opinion of counsel to the issuer, that contain a floating or
variable interest rate adjustment formula and a right of demand on the part of
the holder thereof to receive payment of the unpaid principal balance plus
accrued interest on a short notice period not to exceed seven days.
Participating VRDOs provide each Fund with a specified undivided interest (up to
100%) in the underlying obligation and the right to demand payment of the unpaid
principal balance plus accrued interest on the Participating VRDOs from the
financial institution on a specified number of days' notice, not to exceed seven
days. There is, however, the possibility that because of default or insolvency,
the demand feature of VRDOs or Participating VRDOs may not be honored. Each Fund
has been advised by its counsel that the Fund should be entitled to treat the
income received on Participating VRDOs as interest from tax-exempt obligations
for Federal income tax purposes.
The average maturity of each Fund's portfolio securities varies based upon
FAM's assessment of economic and market conditions. The net asset value of
common shares of a closed-end investment company, such as each Fund, which
invests primarily in fixed-income securities, changes as the general levels of
interest rates fluctuate. When interest rates decline, the value of a fixed
income portfolio can be expected to rise. Conversely, when interest rates rise,
the value of a fixed income portfolio can be expected to decline. Prices of
longer-term
20
<PAGE>
securities generally fluctuate more in response to interest rate changes than do
short-term or medium-term securities. These changes in net asset value are
likely to be greater in the case of a fund having a leveraged capital structure,
such as that used by the Funds.
Each Fund intends to invest primarily in long-term Florida Municipal Bonds
and Municipal Bonds. However, each Fund may also invest in short-term tax-exempt
securities, short-term U.S. Government securities, cash. Such short-term
securities or cash will not exceed 20% of each Fund's total assets except during
interim periods pending investment of the net proceeds from public offerings of
the Fund's securities or in anticipation of the repurchase or redemption of the
Fund's securities and temporary periods when, in the opinion of FAM, prevailing
market or economic conditions warrant.
Each Fund is classified as non-diversified within the meaning of the
Investment Company Act, which means that the Fund is not limited by such Act in
the proportion of its total assets that it may invest in securities of a single
issuer. However, each Fund's investments are limited so as to qualify the Fund
for the special tax treatment afforded RICs under the Federal tax laws. To
qualify, among other requirements, each Fund limits its investments so that, at
the close of each quarter of the taxable year, (i) not more than 25% of the
market value of the Fund's total assets will be invested in the securities
(other than U.S. Government securities) of a single issuer, and (ii) with
respect to 50% of the market value of its total assets, not more than 5% of the
market value of its total assets will be invested in the securities (other than
U.S. Government securities) of a single issuer. A fund that elects to be
classified as "diversified" under the Investment Company Act must satisfy the
foregoing 5% requirement with respect to 75% of its total assets. To the extent
that any Fund assumes large positions in the securities of a small number of
issuers, the Fund's yield may fluctuate to a greater extent than that of a
diversified company as a result of changes in the financial condition or in the
market's assessment of the issuers.
Description of Florida Municipal Bonds and Municipal Bonds
Florida Municipal Bonds and 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 private activity bonds ("PABs") are
issued by or on behalf of public authorities to finance various privately
operated facilities, including airports, public ports, mass commuting
facilities, multifamily housing projects, as well as facilities for water
supply, gas, electricity, sewage or solid waste disposal. For purposes of this
prospectus, such obligations are Municipal Bonds if the interest paid thereon is
exempt from Federal income tax and are Florida Municipal Bonds if the interest
thereon is exempt from Federal income tax and the obligation is exempt from
Florida intangible personal property tax, even though such bonds may be
industrial development bonds or PABs as discussed below. Also, for purposes of
this proxy statement and prospectus, Non-Municipal Tax-Exempt Securities as
discussed above will be considered Florida Municipal Bonds or Municipal Bonds.
The two principal classifications of Florida Municipal Bonds and Municipal
Bonds are "general obligation" bonds and "revenue" bonds, which latter category
includes PABs and, for bonds issued on or before August 15, 1986, industrial
development bonds or "IDBs". General obligation bonds are typically secured by
the issuer's pledge of faith, credit and taxing power for the repayment of
principal and the payment of interest. Revenue or special obligation bonds are
typically 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. PABs 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
repayment of principal and the payment of interest on revenue bonds depends
solely on the ability of the user of the facility 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. Florida Municipal Bonds and Municipal
Bonds 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.
The Fund may purchase Florida Municipal Bonds and Municipal Bonds
classified as PABs. Interest received on certain PABs is treated as an item of
"tax preference" for purposes of the Federal alternative minimum tax and may
impact the overall tax liability of investors in the Fund. There is no
limitation on the percentage of the Fund's assets that may be invested in
Florida Municipal Bonds and Municipal Bonds, the interest on which is
21
<PAGE>
treated as an item of "tax preference" for purposes of the Federal alternative
minimum tax. See "Comparison of Funds -- Tax Rules Applicable to the Funds and
their Shareholders."
Also included within the general category of Florida Municipal Bonds and/or
Municipal Bonds are certificates of participation ("COPs") executed and
delivered for the benefit of government authorities or entities to finance the
acquisition or construction of equipment, land and/or facilities. COPs represent
participations in a lease, an installment purchase contract or a conditional
sales contract (hereinafter collectively referred to as "lease obligations")
relating to such equipment, land or facilities. Although lease obligations
typically do not constitute general obligations of the issuer for which the
issuer's unlimited taxing power is pledged, a lease obligation frequently is
backed by the issuer's covenant to budget for, appropriate and make the payments
due under the lease obligation. However, certain lease obligations contain
"non-appropriation" clauses, which provide that the issuer has no obligation to
make lease or installment purchase payments in future years unless money is
appropriated for such purpose on a yearly basis. Although "non-appropriation"
lease obligations are secured by the lease property, disposition of the property
in the event of foreclosure might prove difficult.
Federal tax legislation has limited and may continue to limit the types and
volume of such bonds the interest on which is excludable from income for Federal
income tax purposes. Such legislation may affect the availability of Florida
Municipal Bonds and Municipal Bonds for investment by the Fund.
Special Considerations Relating to Florida Municipal Bonds
The Funds ordinarily will invest at least 80% of their total assets in
Florida Municipal Bonds, and therefore they are more susceptible to factors
adversely affecting issuers of Florida Municipal Bonds than is a municipal bond
fund that is not concentrated in issuers of Florida Municipal Bonds to this
degree. Many different social, environmental and economic factors may affect the
financial condition of Florida and its political subdivisions. From time to time
Florida and its political subdivisions have encountered financial difficulties.
Florida is highly dependent upon sales and use taxes, which account for the
majority of its General Fund revenues. The Florida Constitution does not permit
a state or local personal income tax. The structure of personal income in
Florida is also different from the rest of the nation in that the State has a
proportionally greater retirement age population that is dependent upon transfer
payments (social security, pension benefits, etc.). Such transfer payments can
be affected by Federal legislation. Florida's economic growth is also highly
dependent upon other factors such as changes in population growth, tourism,
interest rates and hurricane activity. The Florida Constitution may limit the
State's ability to raise revenues and may have an adverse effect on the finances
of Florida and its political subdivisions. FAM does not believe that the current
economic conditions in Florida will have a significant adverse effect on the
Funds' ability to invest in investment grade Florida Municipal Bonds. As of
August 20, 1999, the State had a bond ratings of Aa2 from Moody's, AA+ from S&P
and AA from Fitch IBCA, Inc. (AA) on all of its general obligation bonds. For a
discussion of economic and other conditions in the State of Florida, see Exhibit
III, "Economic and Other Conditions in Florida."
Other Investment Policies
The Funds have adopted certain other policies as set forth below:
Borrowings. Each Fund is authorized to borrow amounts of up to 5% of the
value of its total assets at the time of such borrowings; provided, however,
that each Fund is authorized to borrow moneys in excess of 5% of the value of
its total assets at the time of such borrowings to finance the repurchase of its
own common shares pursuant to tender offers or otherwise to redeem or repurchase
preferred shares or for temporary, extraordinary or emergency purposes.
Borrowings by each Fund (commonly known, as with the issuance of preferred
shares, as "leveraging") create an opportunity for greater total return since
the Fund will not be required to sell portfolio securities to repurchase or
redeem shares but, at the same time, increase exposure to capital risk. In
addition, borrowed funds are subject to interest costs that may offset or exceed
the return earned on the borrowed funds.
When-Issued Securities and Delayed Delivery Transactions. Each Fund may
purchase or sell Florida Municipal Bonds and Municipal Bonds on a delayed
delivery basis or on a when-issued basis at fixed purchase or sale terms. These
transactions arise when securities are purchased or sold by a Fund with payment
and delivery taking place in the future. The purchase will be recorded on the
date that the Fund enters into the commitment, and the value of the obligation
thereafter will be reflected in the calculation of the Fund's net asset value.
The value of the obligation on the delivery day may be more or less than its
purchase price. A separate account of the Fund will be established with its
custodian consisting of cash, cash equivalents or liquid securities having a
market value at all times at least equal to the amount of the commitment.
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<PAGE>
Indexed and Inverse Floating Obligations. Each Fund may invest in Florida
Municipal Bonds and Municipal Bonds yielding a return based on a particular
index of value or interest rates. For example, each Fund may invest in Florida
Municipal Bonds and Municipal Bonds that pay interest based on an index of
Municipal Bond interest rates. The principal amount payable upon maturity of
certain Florida Municipal Bonds and Municipal Bonds also may be based on the
value of an index. To the extent a Fund invests in these types of Municipal
Bonds, the Fund's return on such Florida Municipal Bonds and Municipal Bonds
will be subject to risk with respect to the value of the particular index. Also,
a Fund may invest in so-called "inverse floating obligations" or "residual
interest bonds" on which the interest rates typically vary inversely with a
short-term floating rate (which may be reset periodically by a dutch auction, a
remarketing agent, or by reference to a short-term tax-exempt interest rate
index). Each Fund may purchase synthetically-created inverse floating
obligations evidenced by custodial or trust receipts. Generally, income on
inverse floating obligations will decrease when short-term rates increase, and
will increase when short-term rates decrease. 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 that is a multiple (typically two) of the rate at which fixed-rate,
long-term, tax-exempt securities increase or decrease in response to such
changes. As a result, the market values of such securities generally will be
more volatile than the market values of fixed-rate tax-exempt securities. To
seek to limit the volatility of these securities, a Fund may purchase inverse
floating obligations with shorter-term maturities or limitations on the extent
to which the interest rate may vary. FAM believes that indexed and inverse
floating obligations represent a flexible portfolio management instrument for
the Funds that allows FAM to vary the degree of investment leverage relatively
efficiently under different market conditions.
Call Rights. Each of the Funds may purchase a Florida Municipal Bond or
Municipal Bond issuer's rights to call all or a portion of such Florida
Municipal Bond or Municipal Bond for mandatory tender for purchase (a "Call
Right"). A holder of a Call Right may exercise such right to require a mandatory
tender for the purchase of related Florida Municipal Bonds or Municipal Bonds,
subject to certain conditions. A Call Right that is not exercised prior to the
maturity of the related Florida Municipal Bond or Municipal Bond will expire
without value. The economic effect of holding both the Call Right and the
related Florida Municipal Bond or Municipal Bond is identical to holding a
Florida Municipal Bond or Municipal Bond as a non-callable security.
Repurchase Agreements. The Funds may invest in securities pursuant to
repurchase agreements. Repurchase agreements may be entered into only with a
member bank of the Federal Reserve System or a primary dealer in U.S. government
securities or an affiliate thereof. Under such agreements, the seller agrees,
upon entering into the contract, to repurchase the security at a mutually
agreed-upon time and price, thereby determining the yield during the term of the
agreement. The Funds may not invest in repurchase agreements maturing in more
than seven days if such investments, together with all other illiquid
investments, would exceed 15% of the Fund's net assets. In the event of default
by the seller under a repurchase agreement, the Funds may suffer time delays and
incur costs or possible losses in connection with the disposition of the
underlying securities.
In general, for Federal income tax purposes, repurchase agreements are
treated as collateralized loans secured by the securities "sold." Therefore,
amounts earned under such agreements will not be considered tax-exempt interest.
Information Regarding Options and Futures Transactions
Each Fund may hedge all or a portion of its portfolio investments against
fluctuations in interest rates through the use of options and certain financial
futures contracts and options thereon. While each Fund's use of hedging
strategies is intended to reduce the volatility of the net asset value of its
Common Shares, the net asset value of its Common Shares will fluctuate. There
can be no assurance that a Fund's hedging transactions will be effective. In
addition, because of the leveraged nature of the Common Shares, hedging
transactions will result in a larger impact on the net asset value of the Common
Shares than would be the case if the Common Shares were not leveraged.
Furthermore, a Fund may only engage in hedging activities from time to time and
may not necessarily be engaging in hedging activities when movements in interest
rates occur. No Fund has an obligation to enter into hedging transactions and
each may choose not to do so.
Certain Federal income tax requirements may limit a Fund's ability to
engage in hedging transactions. Gains from transactions in options and futures
contracts distributed to shareholders will be taxable as ordinary income or, in
certain circumstances, as long-term capital gains to shareholders. In addition,
in order to obtain ratings of the AMPS from one or more NRSROs, a Fund may be
required to limit its use of hedging techniques in accordance with the specified
guidelines of such rating organizations. See "Rating Agency Guidelines" below.
23
<PAGE>
The following is a description of the options and futures transactions in
which each Fund may engage, limitations on the Fund's use of such transactions
and risks associated with these transactions. The investment policies with
respect to the hedging transactions of a Fund are not fundamental policies and
may be modified by the Board of Trustees of the Fund without the approval of the
Fund's shareholders.
Writing Covered Call Options. Each Fund is authorized to write (i.e., sell)
covered call options with respect to Florida Municipal Bonds and Municipal Bonds
it owns, thereby giving the holder of the option the right to buy the underlying
security covered by the option from the Fund at the stated exercise price until
the option expires. Each Fund writes only covered call options, which means that
so long as the Fund is obligated as the writer of a call option, it will own the
underlying securities subject to the option. The Fund may not write covered call
options on underlying securities in an amount exceeding 15% of the market value
of its total assets.
Each Fund receives a premium from writing a call option, which increases
the Fund's return on the underlying security in the event the option expires
unexercised or is closed out at a profit. By writing a call, a Fund limits its
opportunity to profit from an increase in the market value of the underlying
security above the exercise price of the option for as long as the Fund's
obligation as a writer continues. Covered call options serve as a partial hedge
against a decline in the price of the underlying security. Each Fund may engage
in closing transactions in order to terminate outstanding options that it has
written.
Purchase of Options. Each Fund may purchase put options in connection with
its hedging activities. By buying a put, the Fund has a right to sell the
underlying security at the exercise price, thus limiting its risk of loss
through a decline in the market value of the security until the put expires. The
amount of any appreciation in the value of the underlying security will be
partially offset by the amount of the premium paid for the put option and any
related transaction costs. Prior to its expiration, a put option may be sold in
a closing sale transaction; profit or loss from the sale will depend on whether
the amount received is more or less than the premium paid for the put option
plus the related transaction costs. A closing sale transaction cancels out the
Fund's position as the purchaser of an option by means of an offsetting sale of
an identical option prior to the expiration of the option it has purchased. In
certain circumstances, the Fund may purchase call options on securities held in
its portfolio on which it has written call options, or on securities which it
intends to purchase. A Fund will not purchase options on securities if, as a
result of such purchase, the aggregate cost of all outstanding options on
securities held by the Fund would exceed 5% of the market value of the Fund's
total assets.
Financial Futures Contracts and Options. Each Fund is authorized to
purchase and sell certain financial futures contracts and options thereon solely
for the purposes of hedging its investments in Florida Municipal Bonds and
Municipal Bonds against declines in value and hedging against increases in the
cost of securities it intends 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 financial 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 financial futures
contracts or options. 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 financial futures contracts.
The purchase or sale of a financial futures contract differs from the
purchase or sale of a security in that no price or premium is paid or received.
Instead, an amount of cash or securities acceptable to the broker equal to
approximately 5% of the contract amount must be deposited with the broker. This
amount is known as initial margin. Subsequent payments to and from the broker,
called variation margin, are made on a daily basis as the price of the financial
futures contract fluctuates making the long and short positions in the financial
futures contract more or less valuable.
Each Fund may purchase and sell financial futures contracts based on The
Bond Buyer Municipal Bond Index, a price-weighted measure of the market value of
40 large tax-exempt issues, and purchase and sell put and call options on such
financial futures contracts for the purpose of hedging Florida Municipal Bonds
and Municipal Bonds that the Fund holds or anticipates purchasing against
adverse changes in interest rates. Each Fund also may purchase and sell
financial futures contracts on U.S. Government securities and purchase and sell
put and call options on such financial futures contracts for such hedging
purposes. With respect to U.S. Government securities, currently there are
financial futures contracts based on long-term U.S. Treasury bonds, U.S.
Treasury notes, GNMA Certificates and three-month U.S. Treasury bills.
24
<PAGE>
Subject to policies adopted by its Board of Trustees, each Fund also may
engage in transactions in other financial futures contracts, such as financial
futures contracts on other municipal bond indices that may become available, if
FAM should determine that there is normally sufficient correlation between the
prices of such financial futures contracts and the Florida Municipal Bonds and
Municipal Bonds in which the Fund invests to make such hedging appropriate.
Over-The-Counter Options. Each Fund may engage in options and futures
transactions on exchanges and in the over-the-counter markets ("OTC options").
In general, exchange-traded contracts are third-party contracts (i.e.,
performance of the parties' obligations is guaranteed by an exchange or clearing
corporation) with standardized strike prices and expiration dates. OTC option
transactions are two-party contracts with price and terms negotiated by the
buyer and seller.
Restrictions on OTC Options. Each Fund will engage in transactions in OTC
options only with banks or dealers that have capital of at least $50 million or
whose obligations are guaranteed by an entity having capital of at least $50
million. Certain OTC options and assets used to cover OTC options written by the
Funds are considered to be illiquid. The illiquidity of such options or assets
may prevent a successful sale of such options or assets, result in a delay of
sale, or reduce the amount of proceeds that otherwise might be realized.
Risk Factors in Financial Futures Contracts and Options Thereon. Use of
futures transactions involves the risk of imperfect correlation in movements in
the price of financial futures contracts and movements in the price of the
security that is the subject of the hedge. If the price of the financial futures
contract moves more or less than the price of the security that is the subject
of the hedge, a Fund will experience a gain or loss that will not be completely
offset by movements in the price of such security. There is a risk of imperfect
correlation where the securities underlying financial futures contracts have
different maturities, ratings, geographic compositions or other characteristics
different from those of the security being hedged. In addition, the correlation
may be affected by additions to or deletions from the index that serves as a
basis for a financial futures contract. Finally, in the case of financial
futures contracts on U.S. Government securities and options on such financial
futures contracts, the anticipated correlation of price movements between the
U.S. Government securities underlying the futures or options and Florida
Municipal Bonds 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, the futures
trading activities described herein will not result in a Fund being deemed a
"commodity pool," as defined under such regulations, provided that the Fund
adheres to certain restrictions. In particular, the Fund may purchase and sell
financial futures contracts and options thereon (i) for bona fide hedging
purposes, without regard to the percentage of the Fund's assets committed to
margin and option premiums, and (ii) for non-hedging purposes, if, immediately
thereafter the sum of the amount of initial margin deposits on the Fund's
existing futures positions and option premiums entered into for non-hedging
purposes do not exceed 5% of the market value of the liquidation value of the
Fund's portfolio, after taking into account unrealized profits and unrealized
losses on any such transactions. Margin deposits may consist of cash or
securities acceptable to the broker and the relevant contract market.
When a Fund purchases a financial futures contract, or writes a put option
or purchases a call option thereon, it will maintain an amount of cash, cash
equivalents (e.g., commercial paper and daily tender adjustable notes) or liquid
securities in a segregated account with the Fund's custodian, so that the amount
so segregated plus the amount of initial and variation margin held in the
account of its broker equals the market value of the financial futures contract,
thereby ensuring that the use of such financial futures contract is unleveraged.
Although certain risks are involved in options and futures transactions,
FAM believes that, because each Fund will engage in options and futures
transactions only for hedging purposes, the options and futures portfolio
strategies of a Fund will not subject the Fund to the risks associated with
speculation in options and futures transactions.
The volume of trading in the exchange markets with respect to Florida
Municipal Bonds or Municipal Bond options may be limited, and it is impossible
to predict the amount of trading interest that may exist in such options. In
addition, there can be no assurance that viable exchange markets will continue
to be available.
Each Fund intends to enter into options and futures transactions, on an
exchange or in the over-the-counter market, only if there appears to be a liquid
secondary market for such options or futures. There can be no assurance,
however, that a liquid secondary market will exist at any specific time. Thus,
it may not be possible
25
<PAGE>
to close an option or futures transaction. The inability to close options and
futures positions also could have an adverse impact on a Fund's ability to hedge
effectively its portfolio. There is also the risk of loss by a Fund of margin
deposits or collateral in the event of bankruptcy of a broker with which the
Fund has an open position in an option or financial futures contract.
The liquidity of a secondary market in a financial futures contract may be
adversely affected by "daily price fluctuation limits" established by commodity
exchanges that limit the amount of fluctuation in a financial futures contract
price 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 futures positions. Prices have in the past
reached or exceeded the daily limit on a number of consecutive trading days.
If it is not possible to close a financial futures position entered into by
a Fund, the Fund would continue to be required to make daily cash payments of
variation margin in the event of adverse price movements. In such a situation,
if the Fund 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.
The successful use of these transactions also depends on the ability of FAM
to forecast correctly the direction and extent of interest rate movements within
a given time frame. To the extent these rates remain stable during the period in
which a financial futures contract is held by a Fund or move in a direction
opposite to that anticipated, the Fund may realize a loss on the hedging
transaction that is not fully or partially offset by an increase in the value of
portfolio securities. As a result, the Fund's total return for such period may
be less than if it had not engaged in the hedging transaction. Furthermore, the
Fund will only engage in hedging transactions from time to time and may not
necessarily be engaging in hedging transactions when movements in interest rates
occur.
Investment Restrictions
The Funds have identical investment restrictions. The following are
fundamental investment restrictions of each Fund and may not be changed without
the approval of the holders of a majority of the outstanding Common Shares and
the outstanding AMPS and any other preferred shares, voting together as a single
class, and a majority of the outstanding AMPS and any other preferred shares,
voting separately as a class. (For this purpose and under the Investment Company
Act, "majority" means for each such class the lesser of (i) 67% of the shares of
each class of shares represented at a meeting at which more than 50% of the
outstanding shares of each class of shares are represented or (ii) more than 50%
of the outstanding shares of each class of shares.) Neither Fund may:
1. Make investments for the purpose of exercising control or management.
2. Purchase securities of other investment companies, except in connection
with a merger, consolidation, acquisition or reorganization, or by purchase in
the open market of securities of closed-end investment companies and only if
immediately thereafter not more than 10% of the Fund's total assets would be
invested in such securities.
3. Purchase or sell real estate, real estate limited partnerships,
commodities or commodity contracts; provided, that the Fund may invest in
securities secured by real estate or interests therein or issued by companies
that invest in real estate or interests therein, and the Fund may purchase and
sell financial futures contracts and options thereon.
4. Issue senior securities other than preferred shares or borrow amounts in
excess of 5% of its total assets taken at market value; provided, however, that
the Fund is authorized to borrow moneys in excess of 5% of the value of its
total assets for the purpose of repurchasing Common Shares or redeeming of
preferred shares.
5. Underwrite securities of other issuers except insofar as the Fund may be
deemed an underwriter under the Securities Act of 1933 (the "Securities Act") in
selling portfolio securities.
6. Make loans to other persons, except that the Fund may purchase Florida
Municipal Bonds, Municipal Bonds and other debt in accordance with its
investment objective, policies and limitations.
7. Purchase any securities on margin, except that the Fund may obtain such
short-term credit as may be necessary for the clearance of purchases and sales
of portfolio securities (the deposit or payment by the Fund of initial or
variation margin in connection with financial futures contracts and options
thereon is not considered the purchase of a security on margin).
26
<PAGE>
8. Make short sales of securities or maintain a short position or invest in
put, call, straddle or spread options, except that the Fund may write, purchase
and sell options and futures on Florida Municipal Bonds, Municipal Bonds, U.S.
Government obligations and related indices or otherwise in connection with bona
fide hedging activities.
9. Invest more than 25% of its total assets (taken at market value at the
time of each investment) in securities of issuers in a single industry;
provided, that for purposes of this restriction, states, municipalities and
their political subdivisions are not considered to be part of any industry.
An additional investment restriction adopted by the Fund, which may be
changed by the Trustees, provides that the Fund may not mortgage, pledge,
hypothecate or in any manner transfer, as security for indebtedness, any
securities owned or held by the Fund except as may be necessary in connection
with borrowings mentioned in (4) above or except as may be necessary in
connection with transactions in financial futures contracts and options thereon.
If a percentage restriction on the investment policies or the investment or
use of assets set forth above is adhered to at the time a transaction is
effected, later changes in percentages resulting from changing values will not
be considered a violation.
For so long as shares of AMPS are rated by Moody's, no Fund will change
these additional investment restrictions unless it receives written confirmation
from Moody's that engaging in such transactions would not impair the rating then
assigned to the shares of AMPS by Moody's.
The Fund has no intention to file a voluntary application for relief under
Federal bankruptcy law or any similar application under state law for so long as
the Fund is solvent and does not foresee becoming insolvent.
FAM and Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch") are owned and controlled by Merrill Lynch & Co., Inc. ("ML & Co.").
Because of the affiliation of Merrill Lynch with FAM, each Fund is prohibited
from engaging in certain transactions involving Merrill Lynch except pursuant to
an exemptive order or otherwise in compliance with the provisions of the
Investment Company Act and the rules and regulations thereunder. Included among
such restricted transactions will be purchases from or sales to Merrill Lynch of
securities in transactions in which it acts as principal. An exemptive order has
been obtained that permits the Funds to effect principal transactions with
Merrill Lynch in high quality, short-term, tax-exempt securities subject to
conditions set forth in such order. The Funds may consider in the future
requesting an order permitting other principal transactions with Merrill Lynch,
but there can be no assurance that such application will be made and, if made,
that such order would be granted.
Rating Agency Guidelines
Each Fund intends that, so long as shares of its AMPS are outstanding, the
composition of its portfolio will reflect guidelines established by Moody's and
S&P in connection with the Fund's receipt of a rating for such shares on or
prior to their date of original issue of at least "aaa" from Moody's and AAA
from S&P. Moody's and S&P, which are nationally recognized statistical rating
organizations, issue ratings for various securities reflecting the perceived
creditworthiness of such securities. The guidelines for rating AMPS have been
developed by Moody's and S&P in connection with issuances of asset-backed and
similar securities, including debt obligations and variable rate preferred
shares, generally on a case-by-case basis through discussions with the issuers
of these securities. The guidelines are designed to ensure that assets
underlying outstanding debt or preferred shares will be varied sufficiently and
will be of sufficient quality and amount to justify investment grade ratings.
The guidelines do not have the force of law but have been adopted by each Fund
in order to satisfy current requirements necessary for Moody's and S&P to issue
the above-described ratings for shares of AMPS, which ratings generally are
relied upon by institutional investors in purchasing such securities. The
guidelines provide a set of tests for portfolio composition and asset coverage
that supplement (and in some cases are more restrictive than) the applicable
requirements under the Investment Company Act.
Each Fund may, but is not required to, adopt any modifications to these
guidelines that hereafter may be established by Moody's or S&P. Failure to adopt
any such modifications, however, may result in a change in the ratings described
above or a withdrawal of the ratings altogether. In addition, any rating agency
providing a rating for the shares of AMPS, at any time, may change or withdraw
any such rating. As set forth in the Certificate of Designation of each Fund,
the Board of Trustees, without share approval, may modify certain definitions or
restrictions that have been adopted by the Fund pursuant to the rating agency
guidelines, provided
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<PAGE>
the Board of Trustees has obtained written confirmation from Moody's and S&P
that any such change would not impair the ratings then assigned by Moody's and
S&P to the AMPS. See "The Reorganization--Risk Factors and Special
Considerations--Ratings Considerations."
For so long as any shares of a Fund's AMPS are rated by Moody's or S&P, as
the case may be, a Fund's use of options and financial futures contracts and
options thereon will be subject to certain limitations mandated by the rating
agencies.
Portfolio Composition
There are small differences in concentration among the categories of
issuers of the Florida Municipal Bonds and Municipal Bonds held in the
portfolios of the Funds. For MuniYield Florida, as of August 31, 1999, the
highest concentration of Florida Municipal Bonds and Municipal Bonds was in
Water and Sewer Utilities, Transportation and Other Revenue Bonds accounting for
17%, 16%, and 14% of the Fund's portfolio, respectively and for MuniVest
Florida, the highest concentration was in Industrial Revenue Pollution Control,
Hospitals/Healthcare and Transportation accounting for 21%, 14% and 13% of the
Fund's portfolio, respectively.
Although the investment portfolios of both Funds must satisfy the same
standards of credit quality (except that MuniVest Florida may invest up to 25%
of its assets in "junk bonds"), the actual securities owned by each Fund are
different, as a result of which there are certain differences in the composition
of the two investment portfolios. The tables below set forth rating information
for the Florida Municipal Bonds and Municipal Bonds held by each Fund, as of a
certain date. After the Reorganization, the surviving fund, MuniYield Florida,
will have 0% of its assets in bonds rated below BBB/Baa.
MuniYield Florida
As of August 31, 1999, approximately 96% of the market value of MuniYield
Florida's portfolio was invested in long-term municipal obligations and
approximately 4% of the market value of MuniYield Florida's portfolio was
invested in short-term municipal obligations. The following table sets forth
certain information with respect to the composition of MuniYield Florida's
long-term municipal obligation investment portfolio as of August 31, 1999.
Number of Value
S&P* Moody's* Issues (in thousands) Percent
- ---- -------- ------ -------------- -------
AAA Aaa 45 $125,468 79.8%
AA Aa 2 5,873 3.7
A A 2 15,729 10.0
BBB Baa 2 4,228 2.7
NR NR 1 5,975 3.8
-------- -------- -------
TOTAL 52 $157,273 100.0%
======== ======== =======
- ----------
* Ratings: Using the higher of S&P's or Moody's rating on the Fund's
municipal obligations, S&P's rating categories may be modified further by a
plus (+) or minus (-) in Aa, A and BBB, ratings. Moody's rating categories
may be modified further by a 1, 2 or 3 in Aa, A and Baa ratings. See
Exhibit IV --"Ratings of Municipal Bonds and Commercial Paper."
MuniVest Florida
As of August 31, 1999, approximately 95% of the market value of MuniVest
Florida's portfolio was invested in long-term municipal obligations and
approximately 5% of the market value of MuniVest Florida's portfolio was
invested in short-term municipal obligations. The following table sets forth
certain information with respect to the composition of MuniVest Florida's
long-term municipal obligation investment portfolio as of August 31, 1999.
Number of Value
S&P* Moody's* Issues (in thousands) Percent
- ---- -------- ------ -------------- -------
AAA Aaa 31 $ 84,880 77.1%
AA Aa 5 13,002 11.8
A A 2 4,595 4.2
BBB Baa 3 7,590 6.9
-------- -------- -------
TOTAL 41 $110,067 100.0%
======== ======== =======
- ----------
* Ratings: Using the higher of S&P's or Moody's rating on the Fund's
municipal obligations, S&P's rating categories may be modified further by a
plus (+) or minus (-) in AA, A and BBB ratings. Moody's rating categories
may be modified further by a 1, 2 or 3 in Aa, A and Baa, ratings. See
Exhibit IV --"Ratings of Municipal Bonds and Commercial Paper."
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<PAGE>
Portfolio Transactions
The procedures for engaging in portfolio transactions are the same for each
of the Funds. Subject to policies established by the Board of Trustees of each
Fund, FAM is primarily responsible for the execution of each Fund's portfolio
transactions. In executing such transactions, FAM seeks to obtain the best
results for each Fund, taking into account such factors as price (including the
applicable brokerage commission or dealer spread), size of order, difficulty of
execution and operational facilities of the firm involved and the firm's risk in
positioning a block of securities. While FAM generally seeks reasonably
competitive commission rates, the Funds do not necessarily pay the lowest
commission or spread available.
Neither Fund has any obligation to deal with any broker or dealer in the
execution of transactions in portfolio securities. Subject to obtaining the best
price and execution, securities firms that provide supplemental investment
research to FAM, including Merrill Lynch, may receive orders for transactions by
a Fund. 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
agreements with the Funds, and the expenses of FAM will not necessarily be
reduced as a result of the receipt of such supplemental information.
Each Fund invests in securities that are primarily traded in the
over-the-counter markets, and each Fund normally deals directly with the dealers
who make markets in the securities involved, except in those circumstances where
better prices and execution are available elsewhere. Under the Investment
Company Act, except as permitted by exemptive order, persons affiliated with a
Fund are prohibited from dealing with the Fund as principals in the purchase and
sale of securities. Since transactions in the over-the-counter markets usually
involve transactions with dealers acting as principals for their own account,
the Funds do not deal with affiliated persons, including Merrill Lynch and its
affiliates, in connection with such transactions, except that, pursuant to an
exemptive order obtained by FAM, a Fund may engage in principal transactions
with Merrill Lynch in high quality, short-term, tax-exempt securities. An
affiliated person of a Fund may serve as its broker in over-the-counter
transactions conducted on an agency basis.
The Funds also may purchase tax-exempt debt instruments in individually
negotiated transactions with the issuers. Because an active trading market may
not exist for such securities, the prices that the Funds may pay for these
securities or receive on their resale may be lower than that for similar
securities with a more liquid market.
The Board of Trustees of each Fund has considered the possibility of
recapturing for the benefit of the Funds brokerage commissions, dealer spreads
and other expenses of possible portfolio transactions, such as underwriting
commissions, by conducting portfolio transactions through affiliated entities,
including Merrill Lynch. For example, brokerage commissions received by Merrill
Lynch could be offset against the investment advisory fees paid by the Fund to
FAM. After considering all factors deemed relevant, the Trustees of each Fund
made a determination not to seek such recapture. The Trustees will reconsider
this matter from time to time.
Periodic auctions are conducted for the AMPS of each of the Funds by the
Auction Agent for the Funds. The auctions require the participation of one or
more broker-dealers, each of whom enters into an agreement with the Auction
Agent. After each auction, the Auction Agent pays a service charge, from funds
provided by the issuing Fund, to each broker-dealer at the annual rate of .25%,
calculated on the basis of the purchase price of shares of the relevant AMPS
placed by such broker-dealer at such auction.
Portfolio Turnover
Generally, neither Fund purchases securities for short-term trading
profits. However, any of the Funds may dispose of securities without regard to
the time that they have been held when such action, for defensive or other
reasons, appears advisable to FAM. (The portfolio turnover rate is calculated by
dividing the lesser of purchases or sales of portfolio securities for the
particular fiscal year by the monthly average of the value of the portfolio
securities owned by a Fund during the particular fiscal year. For purposes of
determining this rate, all securities whose maturities at the time of
acquisition are one year or less are excluded.) A high portfolio turnover rate
results in greater transaction costs, which are borne directly by the Fund, and
also has certain tax consequences for shareholders. The portfolio turnover rate
for each of the Funds for the periods indicated is set forth below:
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<PAGE>
MuniYield Florida
Year Ended Year Ended Six Months Ended
10/31/97 10/31/98 April 30, 1999
- ---------------------- ----------------------- --------------------
107.09% 92.25% 55.52%
MuniVest Florida
Year Ended Year Ended Six Months Ended
10/31/97 10/31/98 April 30, 1999
- ---------------------- ----------------------- --------------------
89.21% 92.75% 46.54%
Net Asset Value
The net asset value per Common Share of each Fund is determined after the
close of business on the NYSE (generally, 4:00 p.m., Eastern time) on the last
business day in each week. For purposes of determining the net asset value of a
Common Share of each Fund, the value of the securities held by the Fund plus any
cash or other assets (including interest accrued but not yet received) minus all
liabilities (including accrued expenses) and the aggregate liquidation value of
the outstanding shares of AMPS is divided by the total number of Common Shares
outstanding at such time. Expenses, including the fees payable to FAM, are
accrued daily.
The Florida Municipal Bonds and Municipal Bonds in which each Fund invests
are traded primarily in the over-the-counter markets. In determining net asset
value, each Fund uses the valuations of portfolio securities furnished by a
pricing service approved by its Board of Trustees. The pricing service typically
values portfolio securities at the bid price or the yield equivalent when
quotations are readily available. Florida Municipal Bonds and Municipal Bonds
for which quotations are not readily available are valued at fair market value
on a consistent basis as determined by the pricing service using a matrix system
to determine valuations. The procedures of the pricing service and its
valuations are reviewed by the officers of each Fund under the general
supervision of the Board of Trustees of the Fund. The Board of Trustees of each
Fund has determined in good faith that the use of a pricing service is a fair
method of determining the valuation of portfolio securities. Obligations with
remaining maturities of 60 days or less are valued at amortized cost, unless
this method no longer produces fair valuations. Positions in futures contracts
are valued at closing prices for such contracts established by the exchange on
which they are traded, or if 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 Trustees of each Fund.
Each Fund determines and makes available for publication the net asset
value of its Common Shares weekly. Currently, the net asset values of shares of
publicly traded closed-end investment companies investing in debt securities are
published in Barron's, the Monday edition of The Wall Street Journal, and the
Monday and Saturday editions of The New York Times.
Shares of Beneficial Interest
Each of the Funds has outstanding both Common Shares and AMPS. The Common
Shares of each of the Funds are traded on the NYSE. MuniYield Florida Common
Shares commenced trading on the NYSE on February 28, 1992. As of August 31,
1999, the net asset value per share of MuniYield Florida Common Shares was
$13.81 and the market price per share was $12.9375. MuniVest Florida Common
Shares commenced trading on the NYSE on April 30, 1993. As of August 31, 1999,
the net asset value per share of MuniVest Florida Common Shares was $12.87 and
the market price per share was $11.75.
Each Fund is authorized to issue unlimited capital shares, all of which
shares initially were classified as Common Shares. The Board of Trustees of each
Fund is authorized to classify or reclassify any unissued capital shares by
setting or changing the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemption. In connection with each Fund's offering of shares of
AMPS, MuniYield Florida reclassified 1,000,000 shares of unissued capital shares
as AMPS and MuniVest Florida reclassified 1,000,000 shares of unissued shares of
beneficial interest as AMPS.
The Funds are entities of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of such a trust may,
under certain circumstances, be held personally liable as partners for its
obligations. However, the Declaration of Trust of each of the Funds contains an
express disclaimer of shareholder liability for acts or obligations of that Fund
and provides for indemnification and reimbursement
30
<PAGE>
of expense out of that Fund's property for any shareholder held personally
liable for the obligations of that Fund. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Fund itself would be unable to meet its obligations.
Given the nature of the Fund's assets and operations, the possibility of the
Fund being unable to meet its obligations is remote and, in the opinion of
Massachusetts counsel to the Fund, the risk to Fund shareholders is remote.
The Declaration of Trust of each Fund further provides that no Trustee,
officer, employee or agent of that Fund is liable to that Fund or to any
shareholder, nor is any Trustee, officer, employee or agent liable to any third
persons in connection with the affairs of that Fund, except as such liability
may arise from his or her own bad faith, willful misfeasance, gross negligence,
or reckless disregard of their duties. It also provides that all third persons
shall look solely to the Funds' property for satisfaction of claims arising in
connection with the affairs of each Fund. With the exceptions stated, the
Declaration of Trust of each Fund provides that a Trustee, officer, employee or
agent is entitled to be indemnified against all liability in connection with the
affairs of that Fund.
Common Shares
Holders of each Fund's Common Shares are entitled to share equally in
dividends declared by the Fund's Board of Trustees payable to holders of the
Common Shares and in the net assets of the Fund available for distribution to
holders of the Common Shares after payment of the preferential amounts payable
to holders of any outstanding preferred shares. See "Voting Rights" and
"Liquidation Rights of Holders of AMPS" below. Holders of a Fund's Common Shares
do not have preemptive or conversion rights and shares of a Fund's Common Shares
are not redeemable. The outstanding Common Shares of each Fund are fully paid
and nonassessable.
So long as any shares of a Fund's AMPS or any other preferred shares are
outstanding, holders of the Fund's Common Shares will not be entitled to receive
any dividends of or other distributions from the Fund unless all accumulated
dividends on outstanding shares of the Fund's AMPS and any other preferred
shares have been paid, and unless asset coverage (as defined in the Investment
Company Act) with respect to such AMPS and any other preferred shares would be
at least 200% after giving effect to such distributions.
Preferred Shares
The AMPS of each of the Funds have a similar structure. The AMPS of each
Fund are preferred shares of the Fund that entitle their holders to receive
dividends when, as and if declared by the Board of Trustees, out of funds
legally available therefor, at a rate per annum that may vary for the successive
dividend periods. The AMPS of both Funds have liquidation preferences of $25,000
per share; none of the Fund's AMPS are traded on any stock exchange or
over-the-counter. Each Fund's AMPS can be purchased at an auction or through
broker-dealers who maintain a secondary market in the AMPS.
Auctions generally have been held and will be held every seven days for the
AMPS of each of the Funds, unless the applicable Fund elects, subject to certain
limitations, to declare a special dividend period. The following table provides
information about the dividend rates for AMPS of each of the Funds as of a
recent auction.
Dividend
Auction Date Fund Rate
--------------- ---------------- ---------
September 15, 1999 MuniYield Florida 3.50%
September 16, 1999 MuniVest Florida 3.40
Under the Investment Company Act, each Fund is permitted to have
outstanding more than one series of preferred shares as long as no single series
has priority over another series as to the distribution of assets of the Fund or
the payment of dividends. Holders of a Fund's preferred shares do not have
preemptive rights to purchase any shares of AMPS or any other preferred shares
that might be issued. The net asset value per share of a Fund's AMPS equals its
liquidation preference plus accumulated dividends per share.
The redemption provisions pertaining to the AMPS of each Fund are
substantially similar. It is anticipated that shares of AMPS of each Fund will
generally be redeemable at the option of the Fund at a price equal to their
liquidation preference of $25,000 per share plus accumulated but unpaid
dividends (whether or not earned or declared) to the date of redemption plus,
under certain circumstances, a redemption premium. Shares of AMPS will also be
subject to mandatory redemption at a price equal to their liquidation preference
plus accumulated but
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<PAGE>
unpaid dividends (whether or not earned or declared) to the date of redemption
upon the occurrence of certain specified events, such as the failure of the Fund
to maintain the asset coverage for the AMPS specified by Moody's and S&P in
connection with their issuance of ratings on the AMPS.
Certain Provisions of the Declaration of Trust
Each Fund's Declaration of Trust includes provisions that could have the
effect of limiting the ability of other entities or persons to acquire control
of the Fund or to change the composition of its Board of Trustees and could have
the effect of depriving shareholders of an opportunity to sell their shares at a
premium over prevailing market prices by discouraging a third party from seeking
to obtain control of the Fund. A Trustee may be removed from office with or
without cause by vote of the holders of at least 66 2/3% of the votes entitled
to be voted on the matter. A Trustee elected by all of the holders of shares of
beneficial interest may be removed only by action of such holders, and a Trustee
elected by the holders of AMPS and any other preferred shares may be removed
only by action of the holders of AMPS and any other preferred shares.
In addition, the Declaration of Trust of each Fund requires the favorable
vote of the holders of at least 66 2/3% of all of the Fund's capital shares,
then entitled to be voted, voting as a single class, to approve, adopt or
authorize the following:
o a merger or consolidation or statutory share exchange of the Fund with
any other corporation or entity,
o a sale of all or substantially all of the Fund's assets (other than in
the regular course of the Fund's investment activities), or
o a liquidation or dissolution of the Fund,
unless such action has been approved, adopted or authorized by the affirmative
vote of at least two-thirds of the total number of Trustees fixed in accordance
with the by-laws, in which case the affirmative vote of a majority of all of the
votes entitled to be cast by shareholders of the Fund, voting as a single class,
is required. Such approval, adoption or authorization of the foregoing also
would require the favorable vote of at least a majority of the Fund's preferred
shares then entitled to be voted thereon, including the AMPS, voting as a
separate class, where such action would adversely affect the rights of holders
of preferred shares.
In addition, conversion of a Fund to an open-end investment company would
require an amendment to the Fund's Declaration of Trust. The amendment would
have to be declared advisable by the Board of Trustees prior to its submission
to shareholders. Such an amendment would require the affirmative vote of the
holders of at least 66 2/3% of the Fund's outstanding shares (including the AMPS
and any other preferred shares) entitled to be voted on the matter, voting as a
single class (or a majority of such shares if the amendment was previously
approved, adopted or authorized by at least two-thirds of the total number of
Trustees fixed in accordance with the by-laws), and the affirmative vote of at
least a majority of outstanding preferred shares of a Fund (including the AMPS),
voting as a separate class. Such a vote also would satisfy a separate
requirement in the Investment Company Act that the change be approved by the
shareholders. Shareholders of an open-end investment company may require the
company to redeem their shares of common stock at any time (except in certain
circumstances as authorized by or under the Investment Company Act) at their net
asset value, less such redemption charge, if any, as might be in effect at the
time of a redemption. All redemptions will be made in cash. If the Fund is
converted to an open-end investment company, it could be required to liquidate
portfolio securities to meet requests for redemption and the Common Shares no
longer would be listed on a stock exchange. Conversion to an open-end investment
company would also require redemption of all outstanding preferred shares
(including the AMPS) and would require changes in certain of the Fund's
investment policies and restrictions, such as those relating to the issuance of
senior securities, the borrowing of money and the purchase of illiquid
securities.
The Board of Trustees of each Fund has determined that the 66 2/3% voting
requirements described above, which are greater than the minimum requirements
under Massachusetts law or the Investment Company Act, are in the best interests
of shareholders generally. Reference should be made to the Declaration of Trust
of each Fund on file with the SEC for the full text of these provisions.
Management of the Funds
Trustees and Officers. The Board of Trustees of MuniVest Florida currently
consists of eight persons, six of whom are not "interested persons," as defined
in the Investment Company Act. The Board of Trustees of MuniYield Florida
currently consists of seven persons, five of whom are not "interested persons,"
as defined in
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the Investment Company Act. Terry K. Glenn serves as a Trustee and President of
each of the Funds, and Arthur Zeikel serves as a Trustee of each of the Funds.
The Trustees of each 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 and under applicable
Massachusetts law. The Funds have the same slate of officers with a few
exceptions. For further information regarding the Trustees and officers of each
Fund, see Exhibit I -- "Information Pertaining to Each Fund."
William R. Bock serves as the portfolio manager for MuniYield Florida and
MuniVest Florida. Mr. Bock will continue to serve as the portfolio manager of
the combined fund after the Reorganization. The portfolio manager is primarily
responsible for the management of the applicable Fund's portfolio. Biographical
information about Mr. Bock is contained in Exhibit I -- "Information Pertaining
to Each Fund."
Management and Advisory Arrangements. FAM, which is owned and controlled by
ML & Co., serves as the investment adviser for each of the Funds pursuant to
separate investment advisory agreements that, except for their termination
dates, are identical. FAM provides each Fund with the same investment advisory
and management services. The Asset Management Group of ML & Co. (which includes
FAM) acts as the investment adviser to more than 100 other registered investment
companies and offers services to individuals and institutional accounts. As of
________, the Asset Management Group of ML &Co. had a total of approximately
$_____ billion in investment company and other portfolio assets under management
(approximately $_______ billion of which were invested in municipal securities).
This amount includes assets managed for certain affiliates of FAM. FAM is a
limited partnership, the partners of which are ML & Co. and Princeton Services,
Inc. The principal business address of FAM is 800 Scudders Mill Road,
Plainsboro, New Jersey 08536.
Each Fund's investment advisory agreement with FAM provides that, subject
to the supervision of the Board of Trustees of the Fund, FAM is responsible for
the actual management of the Fund's portfolio. The responsibility for making
decisions to buy, sell or hold a particular security for each Fund rests with
FAM, subject to review by the Board of Trustees of the Fund.
FAM provides the portfolio management for each of the Funds. Such portfolio
management considers analyses from various sources (including brokerage firms
with which each Fund does business), makes the necessary investment decisions,
and places orders for transactions accordingly. FAM also is responsible for the
performance of certain administrative and management services for each Fund.
For the services provided by FAM under each Fund's investment advisory
agreement, the Fund pays a monthly fee at an annual rate of .50 of 1% of the
Fund's average weekly net assets (i.e., the average weekly value of the total
assets of the Fund, including assets acquired from the sale of preferred shares,
minus the sum of accrued liabilities of the Fund and accumulated dividends on
its shares of preferred shares). For purposes of this calculation, average
weekly net assets are determined at the end of each month on the basis of the
average net assets of the Fund for each week during the month. The assets for
each weekly period are determined by averaging the net assets at the last
business day of a week with the net assets at the last business day of the prior
week.
Each Fund's 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 investment and
economic research, trading and investment management of the Fund, as well as the
compensation of all Trustees of the Fund who are affiliated persons of FAM or
any of its affiliates. Each Fund pays all other expenses incurred in the
operation of the Fund, including, among other things, expenses for legal and
auditing services, taxes, costs of printing proxies, listing fees, share
certificates and shareholder reports, charges of the custodian and the transfer
agent, dividend disbursing agent and registrar, fees and expenses with respect
to the issuance of AMPS, SEC fees, fees and expenses of unaffiliated Trustees,
accounting and pricing costs, insurance, interest, brokerage costs, litigation
and other extraordinary or non-recurring expenses, mailing and other expenses
properly payable by the Fund. FAM provides accounting services to each Fund, and
each Fund reimburses FAM for its respective costs in connection with such
services.
Unless earlier terminated as described below, the investment advisory
agreement between each Fund and FAM will continue from year to year if approved
annually (a) by the Board of Trustees of the Fund or by a majority of the Fund's
outstanding Common Shares and AMPS, voting together as a single class, and (b)
by a majority of the Trustees of the Fund who are not parties to such contract
or "interested persons," as defined in the Investment Company Act, of any such
party. The contract is not assignable and it 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.
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Securities held by a Fund may also be held by, or be appropriate
investments for, other funds or investment advisory clients for which FAM or its
affiliates act as an adviser. Because of different objectives or other factors,
a particular security may be bought for an advisory client when other clients
are selling the same security. If purchases or sales of securities by FAM for a
Fund or other funds for which it acts as investment adviser or for 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. Transactions effected by FAM (or
its affiliates) on behalf of more than one of its clients during the same period
may increase the demand for securities being purchased or the supply of
securities being sold, causing an adverse effect on price.
Code of Ethics
The Board of Trustees of each of the Funds has adopted a Code of Ethics
pursuant to Rule 17j-1 under the Investment Company Act that incorporates the
Code of Ethics of FAM (together, the "Codes"). The Codes significantly restrict
the personal investing activities of all employees of FAM and, as described
below, impose additional, more onerous, restrictions on Fund investment
personnel.
The Codes require that all employees of FAM preclear any personal
securities investment (with limited exceptions, such as U.S. Government
securities). The preclearance requirement and associated procedures are designed
to identify any substantive prohibition or limitation applicable to the proposed
investment. The substantive restrictions applicable to all employees of FAM
include a ban on acquiring any securities in a "hot" initial public offering and
a prohibition from profiting on short-term trading securities. In addition, no
employee may purchase or sell any security that at the time is being purchased
or sold (as the case may be), or to the knowledge of the employee is being
considered for purchase or sale, by any fund advised by FAM. Furthermore, the
Codes provide for trading "blackout periods" that prohibit trading by investment
personnel of each of the Funds within periods of trading by the Fund in the same
(or equivalent) security (15 or 30 days depending upon the transaction).
Voting Rights
Voting rights are identical for the holders of each Fund's Common Shares.
Holders of each Fund's Common Shares are entitled to one vote for each share
held and will vote with the holders of any outstanding shares of the Fund's AMPS
or other preferred shares on each matter submitted to a vote of holders of
Common Shares, except as set forth below.
Shareholders of each Fund are entitled to one vote for each share held. The
Common Shares, AMPS and any other preferred shares of each of the Fund's do not
have cumulative voting rights, which means that the holders of more than 50% of
a Fund's Common Shares, AMPS and any other preferred shares voting for the
election of Trustees can elect all of the Trustees standing for election by such
holders, and, in such event, the holders of the Fund's remaining Common shares,
AMPS and any other preferred shares will not be able to elect any of such
Trustees.
Voting rights of the holders of each Fund's AMPS are identical. Except as
otherwise indicated below, and except as otherwise required by applicable law,
holders of shares of a Fund's AMPS will be entitled to one vote per share on
each matter submitted to a vote of the Fund's shareholders and will vote
together with the holders of shares of the Fund's Common Shares as a single
class.
In connection with the election of a Fund's Trustees, holders of a Fund's
AMPS, voting separately as a class, shall be entitled at all times to elect two
of the Fund's Trustees, and the remaining Trustees will be elected by holders of
the Fund's Common Shares and AMPS and any other preferred shares, voting
together as a single class. In addition, if at any time dividends on a Fund's
outstanding AMPS shall be unpaid in an amount equal to at least two full years'
dividends thereon or if at any time holders of any of a Fund's preferred shares
are entitled, together with the holders of the Fund's AMPS, to elect a majority
of the Trustees of the Fund under the Investment Company Act, then the number of
Trustees constituting the Board of Trustees automatically shall be increased by
the smallest number that, when added to the two Trustees elected exclusively by
the holders of AMPS and any other preferred shares as described above, would
constitute a majority of the Board of Trustees as so increased by such smallest
number, and at a special meeting of shareholders which will be called and held
as soon as practicable, and at all subsequent meetings at which Trustees are to
be elected, the holders of the Fund's AMPS and any other preferred shares,
voting separately as a class, will be entitled to elect the smallest number of
additional Trustees that, together with the two Trustees which such holders in
any event will be entitled
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to elect, constitutes a majority of the total number of Trustees of the Fund as
so increased. The terms of office of the persons who are Trustees at the time of
that election will continue. If the Fund thereafter shall pay, or declare and
set apart for payment in full, all dividends payable on all outstanding shares
of AMPS and any other preferred shares for all past dividend periods, the
additional voting rights of the holders of AMPS and any other preferred shares
as described above shall cease, and the terms of office of all of the additional
Trustees elected by the holders of AMPS and any other preferred stock (but not
of the Trustees with respect to whose election the holders of Common Shares were
entitled to vote or the two Trustees the holders of AMPS and any other preferred
shares have the right to elect in any event) will terminate automatically.
The affirmative vote of the holders of a majority of the Fund's AMPS,
voting as a separate class, will be required to (i) authorize, create or issue
any class or series of preferred shares ranking prior to any series of preferred
shares with respect to payment of dividends or the distribution of assets on
liquidation or (ii) amend, alter or repeal the provisions of the Declaration of
Trust, whether by merger, consolidation or otherwise, so as to adversely affect
any of the contract rights expressly set forth in the Declaration of Trust of
holders of preferred shares.
Shareholder Inquiries
Shareholder inquiries with respect to any of the Funds may be addressed to
such Fund by telephone at (609) 282-2800 or at the address set forth on the
cover page of this Proxy Statement and Prospectus.
Dividends and Distributions
The Funds' current policies with respect to dividends and distributions
relating to their Common Shares are identical. Each Fund intends to distribute
all of its net investment income. Dividends from such net investment income are
declared and paid monthly to holders of a Fund's Common Shares. Monthly
distributions to holders of a Fund's Common Shares normally consist of
substantially all of the net investment income remaining after the payment of
dividends on the Fund's AMPS. All net realized long-term or short-term capital
gains, if any, are distributed at least annually, pro rata to holders of shares
of a Fund's Common Shares and AMPS. While any shares of a Fund's AMPS are
outstanding, the Fund may not declare any cash dividend or other distribution on
the Fund's Common Shares, unless at the time of such declaration (1) all
accumulated dividends on the Fund's AMPS have been paid, and (2) the net asset
value of the Fund's portfolio (determined after deducting the amount of such
dividend or other distribution) is at least 200% of the liquidation value of the
Fund's outstanding shares of AMPS. This limitation on a Fund's ability to make
distributions on its Common Shares under certain circumstances could impair the
ability of the Fund to maintain its qualification for taxation as a regulated
investment company under the Federal tax laws which would have an adverse impact
on shareholders. See "Comparison of the Funds -- Tax Rules Applicable to the
Funds and their Shareholders."
Similarly, the Funds' current policies with respect to dividends and
distributions on shares of their AMPS are identical. The holders of shares of a
Fund's AMPS are entitled to receive, when, as and if declared by the Board of
Trustees of the Fund, out of funds legally available therefor, cumulative cash
dividends on their shares. Dividends on a Fund's shares of AMPS so declared and
payable shall be paid (i) in preference to and in priority over any dividends so
declared and payable on the Fund's Common Shares, and (ii) to the extent
permitted under the Code and to the extent available, out of net tax-exempt
income earned on the Fund's investments. Dividends for each Fund's AMPS are paid
through The Depository Trust Company ("DTC") (or a successor securities
depository) on each dividend payment date. DTC's normal procedures now provide
for it to distribute dividends in same-day funds to agent members, who in turn
are expected to distribute such dividends to the person for whom they are acting
as agent in accordance with the instructions of such person. Prior to each
dividend payment date, the relevant Fund is required to deposit with the Auction
Agent sufficient funds for the payment of such declared dividends. None of the
Funds intends to establish any reserves for the payment of dividends, and no
interest will be payable in respect of any dividend payment or payment on the
shares of a Fund's AMPS which may be in arrears.
Dividends paid by each Fund, to the extent paid from tax-exempt income
earned on Municipal Bonds, are exempt from Federal income taxes, subject to the
possible application of the Federal alternative minimum tax. However, each Fund
is required to allocate net capital gains and other income subject to regular
Federal income taxes, if any, proportionately between shares of its Common
Shares and shares of its AMPS in accordance with the current position of the IRS
described herein. See "Tax Rules Applicable to the Funds and their Shareholders"
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below. Each Fund notifies the Auction Agent of the amount of any net capital
gains or other taxable income to be included in any dividend on shares of AMPS
prior to the auction establishing the applicable rate for such dividend. The
Auction Agent in turn notifies each broker-dealer whenever it receives any such
notice from a Fund, and each broker-dealer then notifies its customers who are
holders of the Fund's AMPS. Each Fund also may include such income in a dividend
on shares of its AMPS without giving advance notice thereof if it increases the
dividend by an additional amount to offset the tax effect thereof. The amount of
taxable income allocable to shares of a Fund's AMPS will depend upon the amount
of such income realized by the Fund and other factors, but generally is not
expected to be significant.
For information concerning the manner in which dividends and distributions
to holders of each Fund's Common Shares may be reinvested automatically in
shares of the Fund's Common Shares, see "Automatic Dividend Reinvestment Plan"
below. Dividends and distributions will be subject to the tax treatment
discussed below, whether they are reinvested in shares of a Fund or received in
cash.
If either Fund retroactively allocates any net capital gains or other
income subject to regular Federal income taxes to shares of its AMPS without
having given advance notice thereof as described above, which only may happen
when such allocation is made as a result of the redemption of all or a portion
of the outstanding shares of its AMPS or the liquidation of the Fund, the Fund
will make certain payments to holders of shares of its AMPS to which such
allocation was made to offset substantially the tax effect thereof. In no other
instances will the Fund be required to make payments to holders of shares of its
AMPS to offset the tax effect of any reallocation of net capital gains or other
taxable income.
Automatic Dividend Reinvestment Plan
Pursuant to each Fund's Automatic Dividend Reinvestment Plan (each, a
"Plan"), unless a holder of a Fund's Common Shares elects otherwise, all
dividend and capital gains distributions are automatically reinvested by The
Bank of New York, as agent for shareholders in administering the Plan (as
applicable, the "Plan Agent"), in additional shares of the Fund's Common Shares.
The Bank of New York will be the Plan Agent following the Reorganization.
Holders of a Fund's Common Shares who elect not to participate in the Plan
receive all distributions in cash paid by check mailed directly to the
shareholder of record (or, if the shares are held in street or other nominee
name, then to such nominee) by The Bank of New York as dividend paying agent.
Such shareholders may elect not to participate in the Plan and to receive all
distributions of dividends and capital gains in cash by sending written
instructions to The Bank of New York, as dividend paying agent, at the address
set forth below. Participation in the Plan is completely voluntary and may be
terminated or resumed at any time without penalty by written notice if received
by the Plan Agent not less than ten days prior to any dividend record date;
otherwise, such termination or resumption will be effective with respect to any
subsequently declared dividend or capital gains distribution.
Whenever a Fund declares an ordinary income dividend or a capital gain
dividend (collectively referred to as "dividends") payable either in shares or
in cash, non-participants in the Plan receive cash, and participants in the Plan
receive the equivalent in shares of the Fund's Common Shares. The shares are
acquired by the Plan Agent for the participant's account, depending upon the
circumstances described below, either (i) through receipt of additional unissued
but authorized Common Shares from the Fund ("newly-issued shares") or (ii) by
purchase of outstanding Common Shares on the open market ("open-market
purchases"), on the NYSE or elsewhere. If on the payment date for the dividend,
the net asset value per share of the Fund's Common Shares is equal to or less
than the market price per share of the Fund's Common Shares plus estimated
brokerage commissions (such condition being referred to herein as "market
premium"), the Plan Agent invests the dividend amount in newly-issued shares on
behalf of the participant. The number of newly-issued Common Shares of the Fund
to be credited to the participant's account is determined by dividing the dollar
amount of the dividend by the net asset value per share on the date the shares
are issued, provided that the maximum discount from the then-current market
price per share on the date of issuance may not exceed 5%. If on the dividend
payment date, the net asset value per share is greater than the market value
(such condition being referred to herein as "market discount"), the Plan Agent
invests the dividend amount in shares acquired on behalf of the participant in
open-market purchases.
In the event of a market discount on the dividend payment date, the Plan
Agent has until the last business day before the next date on which the shares
trade on an "ex-dividend" basis or in no event more than 30 days after the
dividend payment date (the "last purchase date") to invest the dividend amount
in shares acquired in
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open-market purchases. Each Fund intends to pay monthly income dividends.
Therefore, the period during which open-market purchases can be made exists only
from the payment date on the dividend through the date before the next
"ex-dividend" date, which typically is approximately ten days. If, before the
Plan Agent has completed its open-market purchases, the market price of a share
of a Fund's Common Shares exceeds the net asset value per share, the average per
share purchase price paid by the Plan Agent may exceed the net asset value of
the Fund's shares, resulting in the acquisition of fewer shares than if the
dividend had been paid in newly-issued shares on the dividend payment date.
Because of the foregoing difficulty with respect to open-market purchases, the
Plan provides that if the Plan Agent is unable to invest the full dividend
amount in open-market purchases during the purchase period or if the market
discount shifts to a market premium during the purchase period, the Plan Agent
ceases making open-market purchases and invests the uninvested portion of the
dividend amount in newly-issued shares at the close of business on the last
purchase date.
The Plan Agent maintains all shareholders' accounts in the Plan and
furnishes written confirmation of all transactions in the account, including
information needed by shareholders for tax records. Shares in the account of
each Plan participant are held by the Plan Agent in non-certificated form in the
name of the participant, and each shareholder's proxy includes those shares
purchased or received pursuant to the Plan. The Plan Agent will forward all
proxy solicitation materials to participants and vote proxies for shares held
pursuant to the Plan in accordance with the instructions of the participants.
In the case of shareholders such as banks, brokers or nominees which hold
shares for others who are the beneficial owners, the Plan Agent will administer
the Plan on the basis of the number of shares certified from time to time by the
record shareholders as representing the total amount registered in the record
shareholder's name and held for the account of beneficial owners who are to
participate in the Plan.
There are no brokerage charges with respect to shares issued directly by
either Fund as a result of dividends or capital gains distributions payable
either in shares or in cash. However, each participant pays a pro rata share of
brokerage commissions incurred with respect to the Plan Agent's open-market
purchases in connection with the reinvestment of dividends.
The automatic reinvestment of dividends and distributions does not relieve
participants of any Federal, state or local income tax that may be payable (or
required to be withheld) on such dividends. See "Comparison of the Funds--Tax
Rules Applicable to the Funds and their Shareholders."
Shareholders participating in the Plan may receive benefits not available
to shareholders not participating in the Plan. If the market price (plus
commissions) of a Fund's Common Shares is higher than net asset value,
participants in the Plan receive the Fund's Common Shares at less than they
otherwise could purchase them and have shares with a cash value greater than the
value of any cash distribution they would have received on their shares. If the
market price plus commissions is less than net asset value, participants receive
distributions of shares with a net asset value greater than the value of any
cash distribution they would have received on their shares. However, there may
be insufficient shares available in the market to make distributions of shares
at prices below the net asset value. Also, since the Funds normally do not
redeem their shares, the price on resale may be more or less than the net asset
value. See "Comparison of the Funds -- Tax Rules Applicable to the Funds and
their Shareholders."
Each Fund reserves the right to amend or terminate its Plan. There is no
direct service charge to participants in the Plan; however, each Fund reserves
the right to amend its Plan to include a service charge payable by the
participants.
After the Reorganization, a holder of shares of MuniVest Florida who has
elected to receive dividends in cash will continue to receive dividends in cash;
all other holders will have their dividends automatically reinvested in shares
of the combined fund. However, if a shareholder owns shares in MuniVest Florida
and in MuniYield Florida, after the Reorganization, the shareholder's election
with respect to the dividends of MuniYield will control unless the shareholder
specifically elects a different option at that time. Following the
Reorganization, all correspondence should be directed to the Plan Agent, The
Bank of New York, at 101 Barclay Street, New York, New York 10286.
Mutual Fund Investment Option
A holder of Common Shares of any Fund, who purchased his or her shares
through Merrill Lynch in the Fund's initial public offering, has the right to
reinvest the net proceeds from a sale of such shares in Class A shares
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of certain Merrill Lynch-sponsored open-end funds without the imposition of an
initial sales charge, if certain conditions are satisfied. A holder of Common
Shares of MuniVest Florida who qualifies for this option will have the same
option with respect to the MuniYield Florida Common Shares received in the
Reorganization.
Liquidation Rights of Holders of AMPS
Upon any liquidation, dissolution or winding up of either Fund, whether
voluntary or involuntary, the holders of shares of the Fund's AMPS will be
entitled to receive, out of the assets of the Fund available for distribution to
shareholders, before any distribution or payment is made upon any of the Fund's
Common Shares or any other shares of beneficial interest of the Fund ranking
junior in right of payment upon liquidation to AMPS, $25,000 per share together
with the amount of any dividends accumulated but unpaid (whether or not earned
or declared) thereon to the date of distribution, and after such payment the
holders of AMPS will be entitled to no other payments except for any additional
dividends. If such assets of the Fund shall be insufficient to make the full
liquidation payment on the AMPS and liquidation payments on any other
outstanding class or series of preferred shares of the Fund ranking on a parity
with the AMPS as to payment upon liquidation, then such assets will be
distributed among the holders of shares of AMPS and the holders of shares of
such other class or series ratably in proportion to the respective preferential
amounts to which they are entitled. After payment of the full amount of
liquidation distribution to which they are entitled, the holders of shares of a
Fund's AMPS will not be entitled to any further participation in any
distribution of assets by the Fund except for any additional dividends. A
consolidation, merger or share exchange of a Fund with or into any other entity
or entities or a sale, whether for cash, shares, securities or properties, of
all or substantially all or any part of the assets of the Fund shall not be
deemed or construed to be a liquidation, dissolution or winding up of the Fund
for this purpose.
Tax Rules Applicable to the Funds and their Shareholders
The tax consequences of investing in Common Shares or AMPS of each of the
Funds are identical. Each of the Funds has elected and qualified for the special
tax treatment afforded RICs under the Code. As a result, in any taxable year in
which they distribute an amount equal to at least 90% of taxable net income and
90% of tax-exempt net income (see below), the Funds are not subject to Federal
income tax to the extent that they distribute their net investment income and
net realized capital gains. In all taxable years through the taxable year of the
Reorganization, each Fund has distributed substantially all of its income.
MuniYield Florida intends to continue to distribute substantially all of its
income following the Reorganization.
Each Fund is qualified to pay "exempt-interest dividends" as defined in
Section 852(b)(5) of the Code. Under such section, if, at the close of each
quarter of its taxable year, at least 50% of the value of a Fund's total assets
consists of obligations exempt from Federal income tax ("tax-exempt
obligations") under Section 103(a) of the Code (relating generally to
obligations of a state or local governmental unit), the Fund is qualified to pay
exempt-interest dividends to its shareholders. Exempt-interest dividends are
dividends or any part thereof paid by a Fund which are attributable to interest
on tax-exempt obligations and designated by the Fund as exempt-interest
dividends in a written notice mailed to shareholders within 60 days after the
close of its taxable year. To the extent that the dividends distributed to a
Fund's shareholders are derived from interest income exempt from Federal income
tax under Code Section 103(a) and are properly designated as exempt-interest
dividends, they are excludable from a shareholder's gross income for Federal
income tax purposes. Exempt-interest dividends are included, however, in
determining the portion, if any, of a person's social security benefits and
railroad retirement benefits subject to Federal income taxes. Interest on
indebtedness incurred or continued to purchase or carry a Fund's shares is not
deductible for Federal income tax purposes to the extent attributable to
exempt-interest dividends. A tax adviser should be consulted with respect to
whether exempt-interest dividends retain the exclusion under Code Section 103(a)
if a shareholder would be treated as a "substantial user" or "related person"
under Code Section 147(a) with respect to property financed with the proceeds
from an issue of "industrial development bonds" or "private activity bonds," if
any, held by a Fund.
Prior to July 1, 1999, shares similar to shares in the Funds were exempt
from Florida intangible personal property tax if the Fund's portfolio consisted
solely of assets exempt from the Florida intangible personal property tax. Under
this provision, each of the Funds received a ruling from the Florida Department
of Revenue that shares of that Fund are exempt from the Florida intangible
personal property tax in the following year, if, on the last day of any calendar
year, that Fund's assets consist solely of assets exempt from Florida intangible
personal property tax. Effective July 1, 1999, the Florida Legislature revised
this requirement so that a fund's shares will be exempt if at least 90% of the
net asset value of the portfolio of assets corresponding to the shares
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in the fund is invested in assets that are exempt from the Florida intangible
personal property tax ("revised asset requirement"). The Funds will apply for a
ruling from the Florida Department of Revenue that if, on the last business day
of any calendar year, at least 90% of the net asset value of the portfolio of
assets corresponding to shares in the Funds is invested in assets that are
exempt from the tax, shares of the Fund owned by Florida residents will be
exempt from the Florida intangible personal property tax in the following year.
Although there is no assurance that the Florida Department of Revenue will issue
a favorable ruling on this issue, the Florida Department of Revenue has
previously issued similar rulings. The Florida Department of Revenue has the
authority to revoke or modify a previously issued ruling; however, if a ruling
is revoked or modified, the revocation or modification is prospective only.
Prior to receipt of the ruling from the Florida Department of Revenue, each Fund
will rely on an opinion of Florida counsel for the Funds, Holland & Knight LLP,
stating that each Fund's shares will be exempt from Florida intangible personal
property tax if the revised asset requirement is met. This opinion is based on
existing Florida law and interpretive authority which could be changed at any
time retroactively. While the opinion represents the best judgment of Holland &
Knight LLP, there is no guarantee that the legal conclusions will not be
challenged by the Department of Revenue or in judicial or administrative
proceedings. Thus, under Florida counsel's opinion or if a favorable ruling is
issued, and if the revised asset requirement is met, shares of each Fund owned
by Florida residents will be exempt from Florida intangible personal property
tax. Assets exempt from Florida intangible personal property tax include
obligations of the State of Florida and its political subdivisions; obligations
of the United States Government or its agencies; and cash.
A Fund may from time to time hold assets that are not exempt from Florida
intangible personal property tax ("non-exempt assets") and may not be able to
dispose of such assets so that 90% of the net asset value of the Fund's assets
on the last business day of the calendar year consists of assets exempt from the
Florida intangible personal property tax. This would subject shares of that Fund
to Florida intangible personal property tax. If shares of a Fund are subject to
Florida intangible personal property tax because of a failure to dispose of
sufficient non-exempt assets, only that portion of the value of the Fund shares
equal to the portion of the net asset value of the Fund that is attributable to
obligations of the United States Government will be exempt from taxation. Each
Fund will attempt to monitor its portfolio so that on the last business day of
each calendar year 90% of the net asset value of the Fund's assets consists of
assets exempt from Florida intangible personal property tax.
Dividends paid by a Fund to individuals who are Florida residents are not
subject to personal income taxation by Florida, because Florida does not impose
a personal income tax. Distribution of investment income and capital gains by a
Fund will be subject to Florida corporate income taxes, state taxes in states
other than Florida and local taxes in cities other than those in Florida.
Shareholders not subject to taxation by Florida do not benefit from the fact
that shares of a Fund will be exempt from the Florida intangible personal
property tax.
The IRS, in a revenue ruling, held that certain AMPS would be treated as
stock for Federal income tax purposes. The terms of the currently outstanding
AMPS of each of the Funds, as well as the Series B AMPS to be issued by
MuniYield Florida, are substantially similar, but not identical, to the AMPS
discussed in the revenue ruling. In the opinion of Brown & Wood LLP, counsel to
both Funds, the shares of each Fund's currently outstanding AMPS, as well as the
Series B AMPS to be issued by MuniYield Florida, constitute shares, and
distributions with respect to shares of such AMPS (other than distributions in
redemption of shares of AMPS subject to Section 302(b) of the Code) will
constitute dividends to the extent of current and accumulated earnings and
profits as calculated for Federal income tax purposes. Nevertheless, the IRS
could take a contrary position, asserting, for example, that the shares of AMPS
constitute debt. If this position were upheld, the discussion of the treatment
of distributions below would not apply to holders of shares of AMPS. Instead,
distributions by each Fund to holders of shares of its AMPS would constitute
interest, whether or not they exceed the earnings and profits of the Fund, would
be included in full in the income of the recipient and taxed as ordinary income.
Counsel believes that such a position, if asserted by the IRS, would be unlikely
to prevail.
To the extent that a Fund's distributions are derived from interest on its
taxable investments or from an excess of net short-term capital gains over net
long-term capital losses ("ordinary income dividends"), such distributions are
considered taxable ordinary income for Federal income tax purposes.
Distributions, if any, from an excess of net long-term capital gains over net
short-term capital losses derived from the sale of securities or from certain
transactions in futures or options ("capital gain dividends") are taxable as
long-term capital gains for Federal income tax purposes, regardless of the
length of time the shareholder has owned Fund shares will be treated as capital
gains which are taxed at ordinary income rates. Certain categories of capital
gains are taxable at different rates for Federal income tax purposes. Generally
not later than 60 days after the close of its taxable year, a Fund provides its
shareholders with a written notice designating the amounts of any
exempt-interest
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dividends or capital gain dividends, as well as any amount of capital gain
dividends in the different categories of capital gain referred to above.
Distributions by a Fund, whether from exempt-interest income, ordinary income or
capital gains, are not eligible for the dividends received deduction for
corporations under the Code.
A loss realized on a sale or exchange of shares of a Fund is disallowed if
other Fund shares are acquired (whether under the Automatic Dividend
Reinvestment Plan 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.
All or a portion of a Fund's gain from the sale or redemption of tax-exempt
obligations purchased at a market discount will be treated as ordinary income
rather than capital gain. This rule may increase the amount of ordinary income
dividends received by shareholders. Any loss upon the sale or exchange of Fund
shares held for six months or less is treated as long-term capital loss to the
extent of exempt-interest dividends received by the shareholder. In addition,
such loss is disallowed to the extent of any capital gain dividends received by
the shareholder. Distributions in excess of a Fund's earnings and profits first
will reduce the adjusted tax basis of a holder's shares and, after such adjusted
tax basis is reduced to zero, will constitute capital gains to such holder
(assuming the shares are held as a capital asset). If a Fund pays a dividend in
January which was declared in the previous October, November or December to
shareholders of record on a specified date in one of such months, then such
dividend is treated for tax purposes as paid by the Fund and received by its
shareholders on December 31 of the year in which such dividend was declared.
The IRS has taken the position in a revenue ruling that if a RIC has two or
more classes of shares it may designate distributions made to each class in any
year as consisting of no more than such class' proportionate share of particular
types of income, including exempt-interest dividends and capital gain dividends.
A class's proportionate share of a particular type of income is determined
according to the percentage of total dividends paid by the RIC during such year
that was paid to such class. Consequently, when Common Shares and one or more
series of AMPS are outstanding, each Fund intends to designate distributions
made to the classes as consisting of particular types of income in accordance
with each class's proportionate share of such income. After the Reorganization,
MuniYield Florida will, likewise, so designate distributions with respect to its
Common Shares and its AMPS. Each Fund may notify the Auction Agent of the amount
of any net capital gains and other taxable income to be included in any dividend
on shares of its AMPS prior to the auction establishing the applicable rate for
such dividend. Except for the portion of any dividend that a Fund informs the
Auction Agent will be treated as capital gains or other taxable income, the
dividends paid on the shares of AMPS constitute exempt-interest dividends.
Alternatively, each Fund may include such income in a dividend on shares of its
AMPS without giving advance notice thereof if it increases the dividend by an
additional amount to offset the tax effect thereof. The amount of net capital
gains and ordinary income allocable to shares of a Fund's AMPS (the "taxable
distribution") depends upon the amount of such gains and income realized by the
Fund and the total dividends paid by the Fund on shares of its Common Shares and
shares of its AMPS during a taxable year, but the taxable distribution generally
is not significant.
In the opinion of Brown & Wood LLP, counsel to both Funds, under current
law the manner in which each Fund allocates, and MuniYield Florida will
allocate, items of tax-exempt income, net capital gains, and other taxable
income, if any, among Common Shares and outstanding AMPS (including, for
MuniYield Florida, AMPS and the newly issued series of AMPS) will be respected
for Federal income tax purposes. However, the tax treatment of additional
dividends may affect a Fund's calculation of each class' allocable share of
capital gains and other taxable income. In addition, there is currently no
direct guidance from the IRS or other sources specifically addressing whether a
Fund's method for allocating tax-exempt income, net capital gains and other
taxable income between its Common Shares and the outstanding series of AMPS will
be respected for Federal income tax purposes, and it is possible that the IRS
could disagree with counsel's opinion and attempt to reallocate a Fund's net
capital gains or other taxable income. In the event of a reallocation, some of
the dividends identified by a Fund as exempt-interest dividends to holders of
shares of its AMPS could be recharacterized as additional capital gains or other
taxable income. In the event of such recharacterization, a Fund is not required
to make payments to such shareholders to offset the tax effect of such
reallocation. In addition, a reallocation could cause a Fund to be liable for
income tax and excise tax on all reallocated taxable income. Brown & Wood LLP
has advised each Fund that, in its opinion, if the IRS were to challenge in
court a Fund's allocations of income and gain, the IRS would be unlikely to
prevail. The opinion of Brown & Wood LLP, however, represents only its best
legal judgment and is not binding on the IRS or the courts.
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The Code requires a RIC to pay a nondeductible 4% excise tax to the extent
it does not distribute during each calendar year 98% of its ordinary income,
determined on a calendar year basis, and 98% of its capital gains, determined in
general, on an October 31 year-end, plus certain undistributed amounts from
previous years. The required distributions, however, are based only on the
taxable income of a RIC. The excise tax, therefore, generally does not apply to
the tax-exempt income of RICs, such as the Funds, that pay exempt-interest
dividends.
The Code subjects interest received on certain otherwise tax-exempt
securities to Federal alternative minimum tax. The alternative minimum tax
applies to interest received on "private activity bonds" issued after August 7,
1986. "Private activity bonds" are bonds which, although tax-exempt, are used
for purposes other than those generally performed by governmental units and
which benefit non-governmental entities (e.g., bonds used for industrial
development or housing purposes). Income received on such bonds is classified as
an item of "tax preference" which could subject investors in such bonds,
including shareholders of the Funds, to an increased Federal alternative minimum
tax. Each Fund purchases such "private activity bonds" and reports to
shareholders within 60 days after calendar year-end the portion of its dividends
declared during the year which constitutes an item of tax preference for
alternative minimum tax purposes. The Code further provides that corporations
are subject to Federal alternative minimum tax based, in part, on certain
differences between taxable income as adjusted for other tax preferences and the
corporation's "adjusted current earnings" which more closely reflect a
corporation's economic income. Because an exempt-interest dividend paid by a
Fund is included in adjusted current earnings, a corporate shareholder may be
required to pay Federal alternative minimum tax on exempt-interest dividends
paid by such Fund.
MuniVest Florida may invest in non-investment grade obligations, as
previously described. Furthermore, the Funds may invest in instruments the
return on which includes nontraditional features such as indexed principal or
interest payments ("nontraditional instruments"). These instruments may be
subject to special tax rules under which a Fund may be required to accrue and
distribute income before amounts due under the obligations are paid. In
addition, it is possible that all or a portion of the interest payments on such
non-investment grade obligations and/or nontraditional instruments could be
recharacterized as taxable ordinary income.
If at any time when shares of AMPS are outstanding a Fund does not meet the
asset coverage requirements of the Investment Company Act, the Fund will be
required to suspend distributions to holders of Common Shares until the asset
coverage is restored. See "Dividends and Distributions." This may prevent such
Fund from distributing at least 90% of its net investment income and may,
therefore, jeopardize the Fund's qualification for taxation as a RIC. If a Fund
were to fail to qualify as a RIC, some or all of the distributions paid by the
Fund would be fully taxable to shareholders for Federal income and New York
State and New York City personal income tax purposes. Upon any failure to meet
the asset coverage requirements of the Investment Company Act, a Fund, in its
sole discretion, may redeem shares of AMPS in order to maintain or restore the
requisite asset coverage and avoid the adverse consequences to the Fund and its
shareholders of failing to qualify as a RIC. There can be no assurance, however,
that any such action would achieve such objectives.
As noted above, a Fund must distribute annually at least 90% of its net
taxable and tax-exempt interest income. A distribution will only be counted for
this purpose if it qualifies for the dividends paid deduction under the Code.
Some types of preferred shares that the Funds have that the Funds have issued
and that MuniYield Florida contemplates issuing may raise an issue as to whether
distributions on such preferred shares are "preferential" under the Code and,
therefore, not eligible for the dividends paid deduction. Counsel has advised
the Funds that the outstanding preferred shares and the preferred shares to be
issued by MuniYield Florida will not result in the payment of a preferential
dividend. If a Fund ultimately relies solely on a legal opinion when it issues
such preferred shares, there is no assurance that the IRS would agree that
dividends on the preferred shares are not preferential. If the IRS successfully
disallowed the dividends paid deduction for dividends on the preferred shares, a
Fund could be disqualified as RICs. In this case, dividends paid by the Funds on
the Common Shares and the AMPS would not be exempt from Federal income taxes.
Additionally, the Fund would be subject to the Federal alternative minimum tax.
Under certain circumstances when a Fund is required to allocate taxable
income to the AMPS, it will pay Additional Distributions to holders of shares of
AMPS. The Federal income tax consequences of Additional Distributions under
existing law are uncertain. The Funds treat and MuniYield Florida intends to
continue to treat a holder as receiving a dividend distribution in the amount of
any Additional Distribution only as and when such Additional Distribution is
paid. An Additional Distribution generally is designated by a Fund as an
exempt-
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interest dividend except as otherwise required by applicable law. However, the
IRS may assert that all or part of an Additional Distribution is a taxable
dividend either in the taxable year for which the allocation of taxable income
is made or in the taxable year in which the Additional Distribution is paid.
The value of shares acquired pursuant to a Fund's dividend reinvestment
plan is generally excluded from gross income to the extent that the cash amount
reinvested would be excluded from gross income. If, when a Fund's shares are
trading at a premium over net asset value, the Fund issues shares pursuant to
the dividend reinvestment plan that have a greater fair market value than the
amount of cash reinvested, it is possible that all or a portion of such discount
(which may not exceed 5% of the fair market value of the Fund's shares) could be
viewed as a taxable distribution. If the discount is viewed as a taxable
distribution, it is also possible that the taxable character of this discount
would be allocable to all of the shareholders, including shareholders who do not
participate in the Fund's dividend reinvestment plan. Thus, shareholders who do
not participate in the dividend reinvestment plan, as well as dividend
reinvestment plan participants, might be required to report as ordinary income a
portion of their distributions equal to the allocable share of the discount.
Under certain provisions of the Code, some shareholders may be subject to a
31% withholding tax on certain ordinary income dividends and on capital gain
dividends and redemption payments ("backup withholding"). Generally,
shareholders subject to backup withholding will be those for whom no taxpayer
identification number is on file with a Fund or who, to the Fund's knowledge,
have furnished an incorrect number. When establishing an account, an investor
must certify under penalty of perjury that such number is correct and that such
shareholder is not otherwise subject to backup withholding.
Ordinary income dividends paid to shareholders who are nonresident aliens
or foreign entities are subject to a 30% United States withholding tax under
existing provisions of the Code applicable to foreign individuals and entities
unless a reduced rate of withholding or a withholding exemption is provided
under applicable treaty law. Nonresident shareholders are urged to consult their
own tax advisers concerning the applicability of the United States withholding
tax.
The Code provides that every shareholder required to file a tax return must
include for information purposes on such return the amount of exempt-interest
dividends received from all sources (including the Funds) during the taxable
year.
Tax Treatment of Options and Futures Transactions
Each Fund may purchase or sell municipal bond index financial futures
contracts and interest rate financial futures contracts on U.S. Government
securities. Each Fund may also purchase and write call and put options on such
financial futures contracts. In general, unless an election is available to a
Fund or an exception applies, such options and financial futures contracts that
are "Section 1256 contracts" will be "marked to market" for Federal income tax
purposes at the end of each taxable year, i.e., each such option or financial
futures contract will be treated as sold for its fair market value on the last
day of the taxable year, and any gain or loss attributable to Section 1256
contracts will be 60% long-term and 40% short-term capital gain or loss.
Application of these rules to Section 1256 contracts held by a Fund may alter
the timing and character of distributions to shareholders. The mark-to-market
rules outlined above, however, will not apply to certain transactions entered
into by a Fund solely to reduce the risk of changes in price or interest rates
with respect to its investments.
Code Section 1092, which applies to certain "straddles," may affect the
taxation of a Fund's sales of securities and transactions in financial futures
contracts and related options. Under Section 1092, a Fund may be required to
postpone recognition for tax purposes of losses incurred in certain sales of
securities and certain closing transactions in financial futures contracts or
the related options.
Florida Taxation of the Fund
If a Fund does not have a taxable nexus to Florida, such as through the
location within the state of the Fund's activities or those of FAM, under
present Florida law, the Fund is not subject to Florida corporate income
taxation. Additionally, if a Fund's assets do not have a taxable situs in
Florida on January 1 of each calendar year, the Fund will not be subject to
Florida intangible personal property tax. If a Fund has a taxable nexus to
Florida or the Fund's assets have a taxable situs in Florida on January 1 of any
year, the Fund will be subject to Florida taxation.
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The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury Regulations and Florida tax laws presently
in effect. For the complete provisions, reference should be made to the
pertinent Code sections, the Treasury Regulations promulgated thereunder and the
applicable tax laws. The Code and the Treasury Regulations, as well as the
Florida tax laws, are subject to change by legislative, judicial or
administrative action either prospectively or retroactively.
Shareholders are urged to consult their tax advisers regarding specific
questions as to Federal, foreign, state or local tax consequences of an
investment in a Fund.
AGREEMENT AND PLAN OF REORGANIZATION
General
Under the Agreement and Plan of Reorganization (attached hereto as Exhibit
I), MuniYield Florida will acquire substantially all of the assets, and will
assume substantially all of the liabilities, of MuniVest Florida, in exchange
solely for an equal aggregate value of MuniYield Florida Common Shares and
MuniYield Florida Series B AMPS to be issued by MuniYield Florida. The number of
MuniYield Florida Common Shares issued to MuniVest Florida will have an
aggregate net asset value equal to the aggregate net asset value of the Common
Shares of MuniVest Florida (except that cash will be paid in lieu of any
fractional shares), and the number of MuniYield Series B AMPS issued to MuniVest
Florida will have an aggregate liquidation preference and value equal to the
aggregate liquidation preference and value the MuniVest AMPS. Upon receipt by
MuniVest Florida of such shares, MuniVest Florida will (i) distribute the
MuniYield Florida Common Shares to the holders of MuniVest Florida Common Shares
in exchange for their MuniVest Common Shares and (ii) distribute the shares of
MuniYield Florida Series B AMPS to the holders of MuniVest Florida AMPS in
exchange for their MuniVest Florida AMPS. A Certificate of Designation of
MuniYield Florida establishing the powers, rights and preferences of the
MuniYield Florida Series B AMPS will have been filed with the Office of the
Secretary of State of the Commonwealth of Massachusetts prior to the closing of
the Reorganization. As soon as practicable after the date that the
Reorganization takes place (the "Exchange Date"), MuniVest Florida will execute
and lodge among the records of MuniVest Florida an instrument in writing setting
forth the fact of the Fund's termination and cause a copy thereof to be filed in
the Office of the Secretary of State of the Commonwealth of Massachusetts.
MuniVest Florida will distribute the MuniYield Florida Common Shares and
MuniYield Florida Series B AMPS received by it pro rata to its holders of record
of Common Shares and AMPS, as applicable, in exchange for such shareholders'
shares in MuniVest Florida. Such distribution would be accomplished by opening
new accounts on the books of MuniYield Florida in the names of the common and
preferred shareholders of MuniVest Florida and transferring to those shareholder
accounts the MuniYield Florida Common Shares or MuniYield Florida Series B AMPS
previously credited on those books to the account of MuniVest Florida. Each
newly-opened account on the books of MuniYield Florida for the previous holders
of Common Shares of MuniVest Florida would represent the respective pro rata
number of MuniYield Florida Common Shares (rounded down, in the case of
fractional shares, to the next largest number of whole shares) due such holder
of Common Shares. No fractional MuniYield Florida Common Shares will be issued.
In lieu thereof, MuniYield Florida's transfer agent, The Bank of New York, will
aggregate all fractional MuniYield Florida Common Shares and sell the resulting
whole shares on the NYSE for the account of all holders of fractional interests,
and each such holder will be entitled to the pro rata share of the proceeds from
such sale upon surrender of the certificates representing MuniVest Florida
Common Shares. Similarly, each newly-opened account on the books of MuniYield
Florida for the previous holders of AMPS of MuniVest Florida would represent the
respective pro rata number of shares of MuniVest Florida Series B AMPS, due such
holder of AMPS. See "Surrender and Exchange of Share Certificates" below for a
description of the procedures to be followed by the shareholders of MuniVest
Florida to obtain their MuniYield Florida Common Shares (and cash in lieu of
fractional shares, if any).
Accordingly, as a result of the Reorganization, every holder of Common
Shares of MuniVest Florida would own MuniYield Florida Common Shares that
(except for cash payments received in lieu of fractional shares) would have an
aggregate net asset value immediately after the Exchange Date equal to the
aggregate net asset value of that shareholder's MuniVest Florida Common Shares
immediately prior to the Exchange Date. Since the MuniYield Florida Common
Shares would be issued at net asset value and the Common Shares of MuniVest
Florida would be valued at net asset value for the purposes of the exchange the
holders of Common Shares of each of the Funds will not be diluted as a result of
the Reorganization. Similarly, since the MuniYield Florida Series B AMPS would
be issued at a liquidation preference and value per share equal to the
liquidation preference
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and value per share of the AMPS of MuniVest Florida, holders of AMPS of each of
the Funds will not be diluted as a result of the Reorganization. However, as a
result of the Reorganization, a shareholder of either of the Funds likely will
hold a reduced percentage of ownership in the larger combined entity than he or
she did in either of the constituent Funds.
Procedure
At a meeting of the Board of Trustees of MuniYield Florida, and at a
meeting of the Board of Trustees of MuniVest Florida, the Board of Trustees of
each of the Funds, including all of the Trustees who are not "interested
persons," as defined in the Investment Company Act, of the applicable Fund,
approved the Agreement and Plan of Reorganization and the submission of such
Agreement and Plan of Reorganization to the shareholders of each of the Funds
for approval.
Also, the Board of Trustees of MuniYield Florida approved the filing of a
Certificate of Designation to MuniYield Florida's Declaration of Trust
establishing the powers, rights and preferences of the MuniYield Florida Series
B AMPS in order that they may be distributed to holders of AMPS of MuniVest
Florida as part of the Reorganization.
As a result of such Board approvals, the Funds have jointly filed this
proxy statement with the SEC soliciting a vote of the shareholders of each of
the Funds to approve the Reorganization. The costs of such solicitation are to
be paid by MuniYield Florida after the Reorganization so as to be borne equally
and exclusively on a per share basis by the holders of Common Shares of each of
the Funds. Special meetings of shareholders of the Funds will be held on
December 15, 1999. If the shareholders of both Funds approve the Reorganization,
the Reorganization will take place as soon as practicable after such approval,
provided that the Funds have obtained prior to that time a favorable private
letter ruling from the IRS concerning the tax consequences of the Reorganization
as set forth in the Agreement and Plan of Reorganization or an opinion of
counsel to the same effect.
The Boards of Trustees of MuniYield Florida and MuniVest Florida, recommend
that the shareholders of the respective Funds approve the Agreement and Plan of
Reorganization.
Terms of the Agreement and Plan of Reorganization
The following is a summary of the significant terms of the Agreement and
Plan of Reorganization. This summary is qualified in its entirety by reference
to the Agreement and Plan of Reorganization, attached hereto as Exhibit I.
Valuation of Assets and Liabilities. The respective assets of each of the
Funds will be valued on the business day prior to the Exchange Date (the
"Valuation Date"). The valuation procedures are the same for both Funds: net
asset value per Common Share of each Fund will be determined after the close of
business on the NYSE (generally, 4:00 P.M., Eastern time) on the Valuation Date.
For the purpose of determining the net asset value of a Common Share of each
Fund, the value of the securities held by the issuing Fund plus any cash or
other assets (including interest accrued but not yet received) minus all
liabilities (including accrued expenses) and the aggregate liquidation value of
the outstanding AMPS of the issuing Fund is divided by the total number of
Common Shares of the issuing Fund outstanding at such time. Daily expenses,
including the fees payable to FAM, will accrue on the Valuation Date.
The Florida Municipal Bonds and Municipal Bonds in which each Fund invests
are traded primarily in the over-the-counter markets. In determining net asset
value on the Valuation Date, each Fund will use the valuations of portfolio
securities furnished by a pricing service approved by the Boards of Trustees of
the Funds. The pricing service typically values portfolio securities at the bid
price or the yield equivalent when quotations are readily available. Florida
Municipal Bonds and Municipal Bonds for which quotations are not readily
available will be valued at fair market value on a consistent basis as
determined by the pricing service using a matrix system to determine valuations.
The Boards of Trustees of the Funds have determined in good faith that the use
of a pricing service is a fair method of determining the valuation of portfolio
securities. Positions in financial futures contracts will be valued on the
Valuation Date at closing prices for such contracts established by the exchange
on which they are traded, or if market quotations are not readily available,
will be valued at fair value on a consistent basis using methods determined in
good faith by the Board of Trustees.
Distribution of MuniYield Florida Common Shares and MuniYield Florida
Series B AMPS. On the Exchange Date, MuniYield Florida will issue to MuniVest
Florida a number of MuniYield Florida Common Shares the aggregate net asset
value of which will equal the aggregate net asset value of Common Shares of
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MuniVest Florida on the Valuation Date. Each holder of Common Shares of MuniVest
Florida will receive the number of MuniYield Florida Common Shares corresponding
to his or her proportionate interest in the aggregate net asset value of the
Common Shares of MuniVest Florida.
On the Exchange Date, MuniYield Florida also will issue to MuniVest Florida
a number of shares of MuniYield Florida Series B AMPS, the aggregate liquidation
preference and value of which will equal the aggregate liquidation preference
and value of MuniVest Florida AMPS on the Valuation Date. Each holder of AMPS of
MuniVest Florida will receive the number of shares of MuniYield Florida Series B
AMPS corresponding to his or her proportionate interest in the aggregate
liquidation preference and value of the AMPS of MuniVest Florida. No sales
charge or fee of any kind will be charged to shareholders of MuniVest Florida in
connection with their receipt of MuniYield Florida Common Shares or Series B
AMPS in the Reorganization. It is anticipated that the auction for MuniYield
Florida Series B AMPS will be held on Tuesday; MuniVest Florida AMPS are
auctioned on Monday. The auction procedures for all of the AMPS are
substantially the same. As a result of the Reorganization, the last dividend
period for the AMPS of MuniVest Florida prior to the Exchange Date may be
shorter than the dividend period for such AMPS determined as set forth in the
applicable Certificate of Designation.
Expenses. MuniYield Florida shall pay, subsequent to the Exchange Date, all
expenses incurred in connection with the Reorganization, including, but not
limited to, all costs related to the preparation and distribution of materials
distributed to each Fund's Board of Trustees, expenses incurred in connection
with the preparation of the Agreement and Plan of Reorganization, a registration
statement on Form N-14 and a private letter ruling request submitted to the IRS,
SEC and state securities commission filing fees and legal and audit fees in
connection with the Reorganization, costs of printing and distributing this
Proxy Statement and Prospectus, legal fees incurred preparing each Fund's board
materials, attending each Fund's board meetings and preparing the minutes,
accounting fees associated with each Fund's financial statements, stock exchange
fees, rating agency fees, portfolio transfer taxes (if any) and any similar
expenses incurred in connection with the Reorganization. In this regard,
expenses of the Reorganization will be deducted from the assets of the combined
fund so as to be borne equally and exclusively on a per share basis by the
holders of Common Shares of each of the Funds. No Fund shall pay any expenses of
its respective shareholders arising out of or in connection with the
Reorganization.
Required Approvals. Under MuniYield Florida's Declaration of Trust (as
amended to date and including the Certificate of Designation establishing the
powers, rights and preferences of the MuniYield Florida AMPS), relevant
Massachusetts law and the rules of the NYSE, shareholder approval of the
Agreement and Plan of Reorganization requires the affirmative vote of
shareholders representing more than 50% of the outstanding Common Shares and
AMPS, voting together as a single class, and more than 50% of the AMPS, voting
separately as a class. Because of the requirement that the Agreement and Plan of
Reorganization be approved by the shareholders of both Funds, the Reorganization
will not take place if the shareholders of either Fund do not approve the
Agreement and Plan of Reorganization.
Deregistration and Termination. Following the transfer of the assets and
liabilities of MuniVest Florida and the distribution of MuniYield Florida Common
Shares and MuniYield Florida Series B AMPS to shareholders of MuniVest Florida,
in accordance with the foregoing, MuniVest Florida will terminate its
registration under the Investment Company Act and its organization under
Massachusetts law and will withdraw its authority to do business in any state
where it is required to do so.
Amendments and Conditions. The Agreement and Plan of Reorganization may be
amended at any time prior to the Exchange Date with respect to any of the terms
therein. The obligations of each Fund pursuant to the Agreement and Plan of
Reorganization are subject to various conditions, including a registration
statement on Form N-14 being declared effective by the Commission, approval by
the shareholders of each of the Funds, favorable IRS rulings or an opinion of
counsel being received as to tax matters, an opinion of counsel as to securities
matters being received and the continuing accuracy of various representations
and warranties of the Funds being confirmed by the respective parties.
Postponement, Termination. Under the Agreement and Plan of Reorganization,
the Board of Trustees of either Fund may cause the Reorganization to be
postponed or abandoned under certain circumstances should either Board determine
that it is in the best interests of the shareholders of its respective Fund to
do so. The Agreement and Plan of Reorganization may be terminated, and the
Reorganization abandoned at any time (whether before or after adoption thereof
by the shareholders of either Fund) prior to the Exchange Date, or the
45
<PAGE>
Exchange Date may be postponed: (i) by mutual consent of the Boards of Trustees
of the Funds and (ii) by the Board of Trustees of any Fund if any condition to
that Fund's obligations set forth in the Agreement and Plan of Reorganization
has not been fulfilled or waived by such Board.
Potential Benefits to Common Shareholders of the Funds as a Result of the
Reorganization
In approving the Reorganization, the Board of Trustees of each Fund
identified certain benefits that are likely to result from the Reorganization,
including lower aggregate operating expenses per Common Share, greater
efficiency and flexibility in portfolio management and a more liquid trading
market for the Common Shares of the combined fund. With respect to MuniVest
Florida, following the Reorganization MuniVest Florida shareholders will remain
invested in a closed-end fund that has investment objectives and policies
substantially similar to those of MuniVest Florida. The Boards also considered
the possible risks and costs of combining the Funds, and examined the relative
credit strength, maturity characteristics, mix of type and purpose, and yield of
the Funds' portfolios of Florida Municipal Bonds and Municipal Bonds and the
costs involved in a transaction such as the Reorganization. The Boards noted the
many similarities between the Funds, including their substantially similar
investment objectives and investment policies, their use of substantially the
same management personnel and their similar portfolios of Florida Municipal
Bonds and Municipal Bonds. The Boards also considered the relative tax positions
of each of the Funds' portfolios. Based on these factors, the Boards concluded
that the Reorganization will potentially benefit the shareholders of each Fund
in that it (i) presents no significant risks that would outweigh the benefits
discussed above and (ii) involves minimal costs (including relatively minor
legal, accounting and administrative costs).
The surviving fund that would result from the Reorganization would have a
larger asset base than either of the Funds has currently. Based on data
presented by FAM, the Board of each Fund believes that administrative expenses
for a larger combined fund would be less than the aggregate expenses for the
individual Funds, resulting in a lower expense ratio for common shareholders of
the combined fund and higher earnings per common share. In particular, certain
fixed costs, such as costs of printing shareholder reports and proxy statements,
legal expenses, audit fees, mailing costs and other expenses will be spread
across a larger asset base, thereby lowering the expense ratio for the combined
fund. To illustrate the potential economies of scale, the table below shows the
total annualized operating expense ratio of each Fund, based on average net
assets both excluding and including assets attributable to AMPS as of June 30,
1999:
<TABLE>
<CAPTION>
Total annualized Average net Total annualized Average net
operating assets, excluding operating assets, including
expense ratio, AMPS expense ratio, AMPS
Fund excluding AMPS (in millions) including AMPS (in millions)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MuniYield Florida 1.11% $113.5 0.75% $ 168.5
- ------------------------------------------------------------------------------------------------------------------
MuniVest Florida 1.20% $79.3 0.80% $ 119.3
- ------------------------------------------------------------------------------------------------------------------
Combined Fund(1) 1.06% $192.8 0.71% $ 287.8
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
(1) Assumes Reorganization had taken place on June 30, 1999.
Management projections estimate that MuniYield Florida will have net assets
in excess of $287.8 million including assets attributable to AMPS upon
completion of the Reorganization. A larger asset base should provide benefits in
portfolio management. After the Reorganization, MuniYield Florida should be able
to purchase larger amounts of Florida Municipal Bonds and Municipal Bonds at
more favorable prices than either of the Funds separately and, with this greater
purchasing power, request improvements in the terms of the Florida Municipal
Bonds and Municipal Bonds (e.g., added indenture provisions covering call
protection, sinking funds and audits for the benefit of large holders) prior to
purchase.
Based on the foregoing, the Boards concluded that the Reorganization is in
the best interests of the shareholders of each of the Funds because the
Reorganization presents no significant risks or costs (including legal,
accounting and administrative costs) that would outweigh the benefits discussed
above.
In approving the Reorganization, the Board of Trustees of each Fund
determined that the Reorganization is in the best interests of that Fund and,
with respect to net asset value and liquidation preference, that the interests
of existing shareholders of that Fund would not be diluted as a result of the
Reorganization. Although the Reorganization is expected to result in a reduction
in net asset value per share of the combined fund after the Reorganization of
approximately $.01 as a result of the estimated costs of the Reorganization,
management of each Fund advised its Board that it expects that such costs would
be recovered within [18] months after the Exchange Date due to a decrease in the
operating expense ratio.
46
<PAGE>
It is not anticipated that the Reorganization directly would benefit the
holders of shares of AMPS of either of the Funds; however, the Reorganization
will not adversely affect the holders of shares of AMPS of either of the Funds
and the expenses of the Reorganization will not be borne by the holders of
shares of AMPS of either of the Funds.
Surrender and Exchange of Share Certificates
After the Exchange Date, each holder of an outstanding certificate or
certificates formerly representing Common Shares of MuniVest Florida will be
entitled to receive, upon surrender of his or her certificate or certificates, a
certificate or certificates representing the number of MuniYield Florida Common
Shares distributable with respect to such holder's Common Shares of MuniVest
Florida, together with cash in lieu of any fractional shares. Promptly after the
Exchange Date, the transfer agent for the MuniYield Florida Common Shares, will
mail to each holder of certificates formerly representing Common Shares of
MuniVest Florida a letter of transmittal for use in surrendering his or her
certificates for certificates representing MuniYield Florida Common Shares or
and cash in lieu of any fractional shares.
Shares of AMPS are held in "street name" by the Depository Trust Company,
and all transfers will be accomplished by book entry. Surrender of physical
certificates for AMPS is not required.
<TABLE>
<CAPTION>
If prior to the Reorganization you held: After the Reorganization, you will hold:
- ------------------------------------------- -----------------------------------------
<S> <C>
MuniYield Florida Common Shares MuniYield Florida Common Shares
MuniYield Florida AMPS MuniYield Florida Series A AMPS
MuniVest Florida Common Shares MuniYield Florida Common Shares
MuniVest Florida AMPS MuniYield Florida Series B AMPS
</TABLE>
Please do not send in any share certificates at this time. Upon
consummation of the Reorganization, common and preferred shareholders of
MuniVest Florida will be furnished with instructions for exchanging their share
certificates for MuniYield Florida share certificates and, if applicable, cash
in lieu of fractional shares.
From and after the Exchange Date, certificates formerly representing Common
Shares or AMPS of MuniVest Florida will be deemed for all purposes to evidence
ownership of the number of full shares of MuniYield Florida Common Shares or
MuniYield Florida AMPS distributable with respect to the shares of MuniVest
Florida held before the Reorganization as described above and as shown in the
table above, provided that, until such share certificates have been so
surrendered, no dividends payable to the holders of record of Common Shares or
AMPS of MuniVest Florida as of any date subsequent to the Exchange Date will be
paid to the holders of such outstanding share certificates. Dividends payable to
holders of record of Common Shares or AMPS of MuniYield Florida, as of any date
after the Exchange Date and prior to the exchange of certificates by any
shareholder of MuniVest Florida, will be paid to such shareholder, without
interest, at the time such shareholder surrenders his or her share certificates
for exchange.
From and after the Exchange Date, there will be no transfers on the share
transfer books of MuniVest Florida. If, after the Exchange Date, certificates
representing shares of Common Shares or AMPS of MuniVest Florida are presented
to MuniYield Florida, they will be canceled and exchanged for certificates
representing Common Shares or Series B AMPS of MuniYield Florida, as applicable,
and cash in lieu of fractional shares, if any, distributable with respect to
such Common Shares or AMPS in the Reorganization.
Tax Consequences of the Reorganization
General. The Reorganization has been structured with the intention that it
qualify for Federal income tax purposes as a tax-free reorganization under
Section 368(a)(1)(C) of the Code. Both Funds have elected and qualified for the
special tax treatment afforded RICs under the Code, and MuniYield Florida
intends to continue to so qualify after the Reorganization. The Funds have
jointly requested a private letter ruling from the IRS that for Federal income
tax purposes: (i) the exchange of assets by MuniVest Florida for MuniYield
Florida shares of beneficial interest, as described, will constitute a
reorganization within the meaning of Section 368(a)(1)(C) of the Code, and each
of MuniYield Florida and MuniVest Florida will be deemed a "party" to a
reorganization within the meaning of Section 368(b) of the Code; (ii) in
accordance with Section 361(a) of the Code, no gain or loss will be recognized
to MuniVest Florida as a result of the Reorganization or on the distribution of
MuniYield Florida Common Shares and MuniYield Florida Series B AMPS to MuniVest
shareholders under Section
47
<PAGE>
361(c)(1) of the Code; (iii) under Section 1032 of the Code, no gain or loss
will be recognized to MuniYield Florida as a result of the Reorganization; (iv)
in accordance with Section 354(a)(1) of the Code, no gain or loss will be
recognized to the shareholders of MuniVest Florida on the receipt of MuniYield
Florida Common Shares and MuniYield Florida Series B AMPS in exchange for their
corresponding Common Shares or AMPS of MuniVest Florida (except to the extent
that MuniVest Common Shareholders receive cash representing an interest in
fractional shares of MuniYield Florida in the Reorganization); (v) in accordance
with Section 362(b) of the Code, the tax basis of the assets of MuniVest Florida
in the hands of MuniYield Florida will be the same as the tax basis of such
assets in the hands of MuniVest Florida immediately prior to the consummation of
the Reorganization; (vi) in accordance with Section 358 of the Code, immediately
after the Reorganization, the tax basis of the MuniYield Florida Common Shares
or MuniYield Florida Series B AMPS received by the shareholders of MuniVest
Florida in the Reorganization will be equal to the tax basis of the Common
Shares or AMPS of MuniVest Florida surrendered in exchange; (vii) in accordance
with Section 1223 of the Code, a shareholder's holding period for the MuniYield
Florida Common Shares or MuniYield Florida Series B AMPS will be determined by
including the period for which such shareholder held the Common Shares or AMPS
of MuniVest Florida exchanged therefor, provided that such shares were held as a
capital asset; (viii) in accordance with Section 1223 of the Code, MuniYield
Florida's holding period with respect to the assets of MuniVest Florida
transferred will include the period for which such assets were held by MuniVest
Florida; (ix) the payment of cash to common shareholders of MuniVest Florida in
lieu of fractional shares of MuniYield Florida will be treated as though the
fractional shares were distributed as part of the Reorganization and then
redeemed, with the result that such shareholders will have short- or long-term
capital gain or loss to the extent that the cash distribution differs from the
shareholder's basis allocable to the MuniYield Florida fractional shares; and
(x) the taxable year of MuniVest Florida will end on the effective date of the
Reorganization and pursuant to Section 381(a) of the Code and regulations
thereunder, MuniYield Florida will succeed to and take into account certain tax
attributes of MuniVest Florida, such as earnings and profits, capital loss
carryovers and method of accounting.
As noted in the discussion under "Comparison of the Funds--Tax Rules
Applicable to the Funds and Their Shareholders," a Fund must distribute annually
at least 90% of its net taxable and tax-exempt income. A distribution only will
be counted for this purpose if it qualifies for the dividends paid deduction
under the Code. In the opinion of Brown & Wood LLP, the issuance of MuniYield
Florida Series B AMPS pursuant to the Reorganization in addition to the already
existing MuniYield Florida AMPS will not cause distributions on any series of
MuniYield Florida AMPS to be treated as preferential dividends ineligible for
the dividends paid deduction. It is possible, however, that the IRS may assert
that, because there is more than one series of AMPS, distributions on such
shares are preferential under the Code and therefore not eligible for the
dividends paid deduction. If the IRS successfully disallowed the dividends paid
deduction for dividends on the AMPS, MuniYield Florida could lose the special
tax treatment afforded RICs. In this case, dividends on the MuniYield Florida
Common Shares and AMPS would not be exempt from Federal income tax.
Additionally, MuniYield Florida would be subject to the federal alternative
minimum tax.
Under Section 381(a) of the Code, MuniYield Florida will succeed to and
take into account certain tax attributes of MuniVest Florida, including, but not
limited to, earnings and profits, any net operating loss carryovers, any capital
loss carryovers and method of accounting. The Code, however, contains special
limitations with regard to the use of net operating losses, capital losses and
other similar items in the context of certain reorganizations, including
tax-free reorganizations pursuant to Section 368(a)(1)(C) of the Code, which
could reduce the benefit of these attributes to MuniYield Florida.
Shareholders should consult their tax advisers regarding the effect of the
Reorganization in light of their individual circumstances. As the foregoing
relates only to Federal income tax consequences, shareholders also should
consult their tax advisers as to the foreign, state and local tax consequences
of the Reorganization.
Regulated Investment Company Status. The Funds have elected and qualified
for taxation as RICs under Sections 851-855 of the Code, and after the
Reorganization MuniYield Florida intends to continue to so qualify.
Appraisal Rights
A shareholder of any of the Funds who does not vote in favor of the
Reorganization may have the right under Massachusetts law to object to the
Reorganization and demand payment for his or her shares from the applicable Fund
and an appraisal thereof upon compliance with the procedures specified in
Sections 86 through 98 of the Massachusetts Business Corporation Law (the
"Massachusetts Business Corporation Law"), which are set forth
48
<PAGE>
in Exhibit VI hereto. A vote against the Reorganization or the execution of a
proxy directing such a vote will not satisfy the requirements of those
provisions. A failure to vote against the Reorganization will not constitute a
waiver of such rights. The Funds take the position that, if available, this
statutory right of appraisal may be exercised only by shareholders of record.
Section 92 of the Massachusetts Business Corporation Law provides that for
purposes of payment to any shareholder who elects to exercise his or her
statutory right of appraisal, the value of shares of such shareholder is to be
determined as of the day preceding the date of the shareholders' vote approving
the Agreement and Plan of Reorganization. However, the SEC's Division of
Investment Management has taken the position that such valuation procedures
would constitute violation of Rule 22c-1 under the Investment Company Act (the
"forwarded pricing" rule which in substance prohibits a registered investment
company from redeeming its shares except at a price based on the net asset value
of such shares next computed after such shares have been tendered for
redemption) and that Rule 22c-1 supersedes contrary provisions of state
statutes. Under the terms of the Agreement and Plan of Reorganization, MuniYield
Pennsylvania will assume the obligations of each of the Funds, if any, with
respect to statutory rights of appraisal. In the event that any shareholder
elects to exercise his or her statutory right of appraisal under Massachusetts
law, it is the present intention of MuniYield Pennsylvania to petition a court
of competent jurisdiction to determine whether such right of appraisal has been
superseded by the provisions of Rule 22c-1. In such event a dissenting
shareholder may not receive any payment until disposition of any such court
proceeding.
For Federal income tax purposes, dissenting shareholders obtaining payment
for their shares will recognize gain or loss measured by the difference between
any such payment and the tax basis for their shares. Shareholders are advised to
consult their personal tax advisers as to the tax consequences of dissenting.
Capitalization
The following table sets forth as of April 30, 1999 (i) the
capitalization of MuniYield Florida, (ii) the capitalization of MuniVest
Florida and (iii) the pro forma capitalization of the combined fund as
adjusted to give effect to the Reorganization.
49
<PAGE>
Pro Forma Capitalization of MuniYield Florida and MuniVest
Florida and the Combined Fund as of April 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Combined
MuniYield MuniVest Pro Forma Fund as
Florida Florida Adjustment adjusted(a)
-------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Net Assets:
Net Assets Attributable to
Common Shares ............................. $119,014,117 $83,167,319 $(2,245,337) $199,936,099
Net Assets Attributable to
AMPS ...................................... $55,000,000 $40,000,000 -- $95,000,000
Shares Outstanding:
Common Shares ............................. 7,993,842 5,988,782 (--) 13,626,741
AMPS
Series A ................................ 2,200 1,600 -- 2,200(b)
Series B -- 1,600(b)
Net Asset Value Per Share:
Common Shares ............................. $14.89 $13.89 -- $14.67
AMPS ...................................... $25,000 $25,000 $25,000
</TABLE>
- ----------
(a) The adjusted balances are presented as if the Reorganization had been
consummated on April 30, 1999 and are for informational purposes only.
Assumes distribution of undistributed net investment income and
undistributed capital gains. No assurance can be given as to how many
MuniYield Florida Common Shares that shareholders of MuniVest Florida will
receive on the Exchange Date, and the foregoing should not be relied upon
to reflect the number of MuniYield Florida Common Shares that actually will
be received on or after such date.
(b) Assumes the issuance of 5,632,899 MuniYield Florida Common Shares and one
newly-created series of AMPS consisting of 1,600 shares in exchange for the
net assets of MuniVest Florida, the number of shares issued was based on
the net asset value of each Fund, net of distributions, on April 30, 1999.
(c) Net Asset Value Per Common Share after distribution of undistributed net
investment income and undistributed capital gains.
INFORMATION CONCERNING THE SPECIAL MEETINGS
Date, Time and Place of Meetings
The Meetings will be held on December 15, 1999 at the offices of MLAM, 800
Scudders Mill Road, Plainsboro, New Jersey at 3:00 p.m. Eastern time (for
MuniYield Florida) and 2:00 p.m. Eastern time (for MuniVest Florida).
Solicitation, Revocation and Use of Proxies
A shareholder executing and returning a proxy has the power to revoke it at
any time prior to its exercise by executing a superseding proxy, by giving
written notice of the revocation to the Secretary of the appropriate Fund or by
voting in person at the Meeting. Although mere attendance at the Meetings will
not revoke a proxy, a shareholder present at the Meetings may withdraw his or
her proxy and vote in person.
All shares represented by properly executed proxies, unless such proxies
previously have been revoked, will be voted at the Meetings in accordance with
the directions on the proxies; if no direction is indicated, the shares will be
voted "FOR" the approval of the Agreement and Plan of Reorganization. It is not
anticipated that any other matters will be brought before the Meetings. If,
however, any other business properly is brought before the Meetings, proxies
will be voted in accordance with the judgment of the persons designated on such
proxies.
Record Date and Outstanding Shares
Only holders of record of Common Shares or AMPS of either Fund at the close
of business on the Record Date are entitled to vote at the Meetings or any
adjournment thereof. At the close of business on the Record Date, the Funds had
the number of shares outstanding indicated in Exhibit I.
50
<PAGE>
Security Ownership of Certain Beneficial Owners and Management
To the knowledge of the Funds, at the date hereof, no person or entity owns
beneficially 5% or more of the Common Shares or AMPS of any Fund.
As of the Record Date, none of the nominees held shares of the Funds except
as set forth in the table below:
Nominee Fund and Class of Shares No. of Shares Held*
------- ------------------------ -------------------
- ----------
* These holdings represent less than [_____]% of the shares of Common Shares
outstanding.
As of the Record Date, the Trustees and officers of MuniYield Florida as a
group (______persons) owned an aggregate of less than 1% of the outstanding
MuniYield Florida Common Shares and owned no MuniYield Florida AMPS.
As of the Record Date, the Trustees and officers of MuniVest Florida as a
group (______persons) owned an aggregate of less than 1% of the outstanding
MuniVest Florida Common Shares and owned no MuniVest Florida AMPS.
On the Record Date, Mr. Glenn, a Trustee and an officer of each of the
Funds, Mr. Zeikel, a Trustee of each of the Funds, and the other Trustees and
officers of each Fund owned an aggregate of less than 1% of the outstanding
shares of Common Stock of ML & Co.
Voting Rights and Required Vote
For purposes of this Proxy Statement and Prospectus, each Common Share and
AMPS of each of the Funds is entitled to one vote. Approval of the Agreement and
Plan of Reorganization requires the approval of each Fund. With respect to each
Fund, approval of the Agreement and Plan of Reorganization requires the
affirmative vote of shareholders representing (i) a majority of the Fund's
outstanding Common Shares and AMPS, voting together as a single class, and (ii)
a majority of the Fund's outstanding AMPS, voting separately as a class. See
Exhibit III -- "Sections 86 through 98 of Chapter 156B of the Massachusetts
General Laws (the Massachusetts Business Corporation Law)" for a discussion of
dissenters' rights under Massachusetts law.
For purposes of each Meeting, a quorum consists of a majority of the shares
entitled to vote at the Meeting, present in person or by proxy. If, by the time
scheduled for each Meeting, a quorum of the applicable Fund's shareholders is
not present, or if a quorum is present but sufficient votes in favor of the
Agreement and Plan of Reorganization are not received from the shareholders of
the applicable Fund, the persons named as proxies may propose one or more
adjournments of the Meeting to permit further solicitation of proxies from
shareholders. Any such adjournment will require the affirmative vote of a
majority of the shares of the applicable Fund present in person or by proxy and
entitled to vote at the session of the Meeting to be adjourned. The persons
named as proxies will vote in favor of any such adjournment if they determine
that adjournment and additional solicitation are reasonable and in the interests
of the applicable Fund's shareholders.
ADDITIONAL INFORMATION
The expenses of preparation, printing and mailing of the enclosed form of
proxy, the accompanying Notice and this Proxy Statement and Prospectus will be
borne by MuniYield Florida, the surviving fund after the Reorganization, so as
to be borne equally and exclusively on a per share basis by the holders of
Common Shares of each of the Funds. If the Reorganization is not approved, these
expenses will be allocated among the Funds according to the net asset value of
the Common Shares of each Fund on the Meeting date.
The Funds likewise will reimburse banks, brokers and others for their
reasonable expenses in forwarding proxy solicitation materials to the beneficial
owners of shares of each of the Funds and certain persons that the Funds may
employ for their reasonable expenses in assisting in the solicitation of proxies
from such beneficial owners of shares of beneficial interest the Funds.
In order to obtain the necessary quorum at the Meetings supplementary
solicitation may be made by mail, telephone, telegraph or personal interview by
officers of the Funds. Each of the Funds has retained, Shareholder
51
<PAGE>
Communication Corporation, 17 State Street, New York, New York 10004, to aid in
the solicitation of proxies, at a cost to be borne by each of the Funds of
approximately $7,500, plus out-of-pocket expenses.
Broker-dealer firms, including Merrill Lynch, holding Fund shares in
"street name" for the benefit of their customers and clients will request the
instructions of such customers and clients on how to vote their shares on each
Item before the Meetings. The Funds understand that with respect to Common
Shares, under the rules of the NYSE, broker-dealer firms, including Merrill
Lynch, will not be permitted to grant voting authority without instructions with
respect to the approval of the Agreement and Plan of Reorganization (Item 1).
Shares of AMPS of a Fund held in "street name," however, may be voted without
instructions under certain conditions by broker-dealer firms with respect to
Item 1 and counted for purposes of establishing a quorum of that Fund if no
instructions are received one business day before the Meeting or, if adjourned,
one business day before the day to which the Meeting is adjourned. With respect
to each Fund, these conditions include, among others, that (i) at least 30% of
that Fund's AMPS outstanding have voted on Item 1, (ii) less than 10% of that
Fund's AMPS outstanding have voted against Item 1 and (iii) holders of that
Fund's Common Shares have voted to approve Item 1. In such instances, the
broker-dealer firm will vote that Fund's AMPS on Item 1 in the same proportion
as the votes cast by all holders of AMPS who voted on Item 1. The Funds will
include shares held of record by broker-dealers as to which such authority has
been granted in its tabulation of the total number of shares present for
purposes of determining whether the necessary quorum of shareholders of each
Fund exists. Proxies that are returned to a Fund but that are marked "abstain"
or on which a broker-dealer has declined to vote on any proposal ("broker
non-votes") will be counted as present for the purposes of determining a quorum.
Merrill Lynch has advised the Funds that it intends to vote shares held in its
name for which no instructions are received, except as limited by agreement or
applicable law, on Item 1 (with respect to AMPS only) in the same proportion as
the votes received from beneficial owners of those shares for which instructions
have been received, whether or not held in nominee name. Abstentions and broker
non-votes will not be counted as votes cast. Abstentions and broker non-votes
will have the same effect as a vote against the Reorganization.
This Proxy Statement and Prospectus does not contain all of the information
set forth in the registration statement and the exhibits relating thereto that
MuniYield Florida has filed with the Commission under the Securities Act and the
Investment Company Act, to which reference is hereby made.
The Funds are subject to the informational requirements of the Exchange Act
and the Investment Company Act and in accordance therewith are required to file
reports, proxy statements and other information with the SEC. Any such reports,
proxy statements and other information can be inspected and copied at the public
reference facilities of the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the following regional offices of the SEC:
Regional Office, at Seven World Trade Center, Suite 1300, New York, New York
10048; Pacific Regional Office, at 5670 Wilshire Boulevard, 11th Floor, Los
Angeles, California 90036; and Midwest Regional Office, at Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of such materials can be obtained from the public reference section of
the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The SEC maintains a Web site at http://www.sec.gov containing reports, proxy and
information statements and other information regarding registrants, including
the Funds, that file electronically with the SEC. Reports, proxy statements and
other information concerning the Funds can also be inspected at the offices of
the New York Stock Exchange, 20 Broad Street, New York, New York 10005.
Year 2000 Issues
Many computer systems were designed using only two digits to designate
years. These systems may not be able to distinguish the Year 2000 from the Year
1900 (commonly known as the "Year 2000 Problem"). The Funds could be adversely
affected if the computer systems used by FAM or other Fund service providers do
not properly address this problem before January 1, 2000. FAM expects to have
addressed this problem before then, and does not anticipate that the services it
provides will be adversely affected. The Funds' other service providers have
told FAM that they also expect to resolve the Year 2000 Problem, and FAM will
continue to monitor the situation as the Year 2000 approaches. However, if the
problem has not been fully addressed, the Funds could be negatively affected.
The Year 2000 Problem could also have a negative impact on the issuers of
securities in which the Funds invest, and this could hurt the Funds' investment
returns.
52
<PAGE>
CUSTODIAN
The Bank of New York acts as the custodian for cash and securities of
MuniYield Florida and MuniVest Florida. The principal business address of The
Bank of New York in such capacity is 90 Washington Street, New York, New York
10286.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND REGISTRAR
The Bank of New York serves as the transfer agent, dividend disbursing
agent and registrar with respect to the Common Shares of MuniYield Florida and
MuniVest Florida, pursuant to separate registrar, transfer agency and service
agreements with each of the Funds. The principal business address of The Bank of
New York in such capacity is 101 Barclay Street, New York, New York 10286.
The Bank of New York serves as the transfer agent, dividend disbursing
agent, registrar and auction agent to MuniYield Florida and MuniVest Florida in
connection with their respective AMPS, pursuant to separate registrar, transfer
dividend disbursing agent, agency and service agreements with each of the Funds.
The principal business address of The Bank of New York in such capacity is 101
Barclay Street, New York, New York 10286.
LEGAL PROCEEDINGS
There are no material legal proceedings to which either Fund is a party.
LEGAL OPINIONS
Certain legal matters in connection with the Reorganization will be passed
upon for the Funds by Brown & Wood LLP, New York, New York. Brown & Wood LLP
will rely as to matters of Massachusetts law on the opinion of Bingham Dana LLP,
Boston, Massachusetts. Certain information under the caption "Taxes" relating to
matters of Florida law will be passed upon for the Fund by Holland & Knight LLP,
Tampa, Florida.
EXPERTS
The financial statements for the fiscal year ended October 31, 1998 and
the financial highlights for each of the years in the five-year period then
ended of MuniYield Florida and MuniVest Florida included in this Proxy Statement
and Prospectus have been so included in reliance on the reports of D&T,
independent auditors , given on their authority as experts in auditing and
accounting. The principal business address of D&T is 117 Campus Drive,
Princeton, New Jersey 08540. D&T will serve as the independent auditors for the
combined fund after the Reorganization.
SHAREHOLDER PROPOSALS
If a shareholder of either Fund intends to present a proposal at the 2000
Annual Meeting of Shareholders of either Fund, both of which are anticipated to
be held in April 2000, and desires to have the proposal included in the Fund's
proxy statement and form of proxy for that meeting, the shareholder must deliver
the proposal to the offices of the appropriate Fund by November 18, 1999.
By Order of the Boards of Trustees
ALICE A. PELLEGRINO
Secretary of MuniVest Florida Fund and
MuniYield Florida Fund
53
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
----
Audited Financial Statements for MuniYield Florida Fund for the
Fiscal Year Ended October 31, 1998 F-2
Unaudited Financial Statements for MuniYield Florida Fund for the
Six-Month Period Ended April 30, 1999 F-13
Audited Financial Statements for MuniVest Florida Fund for the
Fiscal Year Ended October 31, 1998 F-23
Unaudited Financial Statements for MuniVest Florida Fund for the
Six-Month Period Ended April 30, 1999 F-34
Unaudited Financial Statements for Combined Fund on a Pro Forma Basis,
as of April 30, 1999 F-44
F-1
<PAGE>
Audited Financial Statements for
MuniYield Florida Fund
for the Fiscal Year Ended October 31, 1998
F-2
<PAGE>
MuniYield Florida Fund October 31, 1998
================================================================================
INDEPENDENT AUDITORS' REPORT
================================================================================
The Board of Trustees and Shareholders,
MuniYield Florida Fund:
We have audited the accompanying statement of assets, liabilities and capital,
including the schedule of investments, of MuniYield Florida Fund as of October
31, 1998, 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 October
31, 1998 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 MuniYield Florida
Fund, as of October 31, 1998, the results of its operations, the changes in its
net assets, and the financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
December 4, 1998
F-3
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Florida--98.8%
<S> <S> <C> <S> <C>
Boca Raton, Florida, Community Redevelopment Agency, Tax Increment Revenue
Refunding Bonds (Mizner Park)(f)(i):
AAA Aaa $ 1,850 4.95% due 3/01/2015 $ 838
AAA Aaa 1,650 4.98% due 3/01/2016 703
AAA Aaa 1,300 5% due 3/01/2017 523
AAA Aaa 2,600 5% due 3/01/2018 989
AAA Aaa 1,000 5% due 12/01/2018 366
AAA Aaa 2,650 Brevard County, Florida, IDR (NUI Corporation Project), AMT, 6.40% due
10/01/2024 (a) 2,951
A+ A1 13,700 Citrus County, Florida, PCR, Refunding (Florida Power Corporation--Crystal
River), Series A, 6.625% due 1/01/2027 14,843
Dade County, Florida, Aviation Revenue Bonds, AMT, Series B (b):
AAA Aaa 1,000 6.55% due 10/01/2013 1,105
AAA Aaa 5,000 6.60% due 10/01/2022 5,526
Escambia County, Florida, HFA, S/F Mortgage Revenue Bonds, AMT:
NR* Aaa 1,930 (Multi-County Program), Series A, 6.90% due 4/01/2020 (e) 2,041
AAA Aaa 2,805 Refunding (Multi-County Program), 7% due 4/01/2028 (d) 3,097
NR* Aaa 1,850 Series A, 7.40% due 10/01/2023 (e) 1,948
BBB Baa1 3,000 Escambia County, Florida, PCR (Champion International Corporation Project)
AMT, 6.90% due 8/01/2022 3,296
NR* Aaa 1,380 Florida HFA, Home Ownership Revenue Refunding Bonds, AMT, Series G-1, 7.90%
due 3/01/2022 (e) 1,454
Florida State Board of Education, Capital Outlay (Public Education):
AA+ AA2 2,750 Series A, 6.10% due 6/01/2024 3,005
AAA AAA 7,500 Series B, 4.50% due 6/01/2028 (b) 6,935
AAA Aaa 3,000 Florida State Department of General Services, Division Facilities Management
Revenue Bonds (Facilities Pool), Series B, 4.50% due 9/01/2023 (f) 2,792
AAA Aaa 6,500 Florida State Division Board of Finance, Department of General Services
Revenue Bonds (Department of Natural Resource Preservation), Series 2000-A,
6.75% due 7/01/2001 (a)(g) 7,143
Florida State Mid-Bay Bridge Authority Revenue Bonds, Series A:
NR* NR* 5,495 7.50% due 10/01/2017 6,189
NR* Aaa 1,500 5.40% due 10/01/2018 (a)(i) 545
NR* Aaa 3,005 5.40% due 10/01/2019 (a)(i) 1,029
NR* Aaa 1,695 5.45% due 10/01/2020 (a)(i) 550
AAA Aaa 5,000 Florida State Turnpike Authority, Turnpike Revenue Bonds (Department of
Transportation), Series B, 5% due 7/01/2016 (b) 5,062
</TABLE>
================================================================================
PORTFOLIO ABBREVIATIONS
================================================================================
To simplify the listings of MuniYield Florida Fund's portfolio holdings in the
Schedule of Investments, we have abbreviated the names of many of the securities
according to the list at right.
AMT Alternative Minimum Tax (subject to)
DATES Daily Adjustable Tax-Exempt Securities
HFA Housing Finance Agency
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
PCR Pollution Control Revenue Bonds
S/F Single-Family
VRDN Variable Rate Demand Notes
F-4
<PAGE>
MuniYield Florida Fund
October 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Florida (continued)
<S> <S> <C> <S> <C>
AA Aa3 $5,000 Gainesville, Florida, Utilities System Revenue Bonds, Series A, 6.50% due
10/01/2002 (g) $ 5,598
AAA Aaa 4,000 Greater Orlando Aviation Authority Revenue Bonds (Orlando Airport Facilities),
AMT, Series A, 6.50% due 10/01/2012 (c) 4,414
A A3 6,000 Hillsborough County, Florida, Capital Improvement Revenue Bonds (County
Center Project), Second Series, 6.75% due 7/01/2002 (g) 6,725
AAA Aaa 1,000 Hillsborough County, Florida, IDA, Revenue Bonds (Allegany Health System--J.
Knox Village), 6.375% due 12/01/2003 (g) 1,088
Hillsborough County, Florida, Utility Revenue Refunding Bonds:
BBB+ Baa1 1,245 Series A, 7% due 8/01/2014 1,345
AAA Aaa 2,000 Series B, 6.50% due 8/01/2016 (f) 2,171
AAA Aaa 1,300 Indian River County, Florida, Hospital Revenue Refunding Bonds, 5.70% due
10/01/2015 (f) 1,413
AAA Aaa 5,000 Jacksonville, Florida, Capital Improvement Revenue Refunding Bonds (Stadium
Project), 4.75% due 10/01/2025 (a) 4,795
A1+ VMIG1++ 500 Jacksonville, Florida, PCR, Refunding (Florida Power & Light Co. Project),
VRDN, 3.70% due 5/01/2029 (h) 500
AAA Aaa 4,000 Lee County, Florida, Solid Waste System Revenue Bonds, AMT, Series A, 6.50%
due 10/01/2013 (b) 4,345
AAA NR* 1,730 Leon County, Florida, HFA, S/F Mortgage Revenue Bonds (Multi-County Program),
AMT, Series B, 7.30% due 1/01/2028 (e) 2,001
AAA Aaa 2,500 Miami Beach, Florida, Parking Revenue Bonds, 5.125% due 9/01/2022 (f) 2,508
AAA Aaa 5,000 Miami--Dade County, Florida, Special Obligation Revenue Bonds, Sub-Series B,
5% due 10/01/2037 (b) 4,949
AAA Aaa 5,270 Miami--Dade County, Florida, Special Obligation Revenue Refunding Bonds,
Sub-Series A, 13.291% due 10/01/2016 (b)(i) 2,122
AAA Aaa 1,000 Ocoee, Florida, Transportation Revenue Refunding and Improvement Bonds, 4.50%
due 10/01/2023 (b) 931
AAA Aaa 2,625 Okaloosa County, Florida, Gas District Revenue Bonds (Gas System), Series A,
5.20% due 10/01/2019 (b) 2,682
Orange County, Florida, Health Facilities Authority Revenue Bonds (Hospital
--Orlando Regional Healthcare)(b):
AAA Aaa 500 Refunding, Series C, 6.25% due 10/01/2016 586
AAA Aaa 2,000 Series A, 6.25% due 10/01/2013 2,356
AAA Aaa 5,000 Orange County, Florida, Tourist Development, Tax Revenue Bonds, Series B,
6.50% due 10/01/2002 (a)(g) 5,602
AAA Aaa 6,000 Orlando & Orange County Expressway Authority, Florida, Revenue Refunding
Bonds, Junior Lien, 5% due 7/01/2021 (c) 5,983
AAA Aaa 1,500 Palm Beach County, Florida, Criminal Justice Facilities Revenue Bonds, 7.20%
due 6/01/2015 (c) 1,924
NR* Aaa 1,390 Palm Beach County, Florida, HFA, S/F Mortgage Revenue Bonds, AMT, Series A,
6.80% due 10/01/2027 (d) 1,494
NR* Aaa 1,000 Peace River/Manasota, Florida, Regional Water Supply Authority, Revenue
Refunding Bonds (Peace River Option Project), Series A, 5% due 10/01/2023 (b) 997
A1+ VMIG1++ 2,800 Pinellas County, Florida, Health Facilities Authority, Revenue Refunding
Bonds, Pooled Hospital Loan Program, DATES, 3.70% due 12/01/2015 (h) 2,800
</TABLE>
F-5
<PAGE>
MuniYield Florida Fund
October 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Florida (concluded)
<S> <S> <C> <S> <C>
Saint Petersburg, Florida, Health Facilities Authority Revenue Bonds (Allegany
Health System)(b)(g):
AAA Aaa $1,550 (Saint Anthony's), 6.75% due 12/01/2003 $ 1,761
AAA Aaa 2,000 Series A, 7% due 12/01/2001 2,230
Sarasota County, Florida, Public Hospital Board, Revenue Refunding Bonds
(Sarasota Memorial Hospital), Series B (b):
AAA Aaa 3,100 5.25% due 7/01/2024 3,220
AAA Aaa 5,000 5.50% due 7/01/2028 5,392
AAA Aaa 7,250 Tallahassee, Florida, Energy System Revenue Refunding Bonds, Series A, 4.75%
due 10/01/2026 (f) 6,947
AAA Aaa 8,080 Tampa Bay, Florida, Water Utility System Revenue Bonds, Series B, 4.75% due
10/01/2027 (c) 7,737
AAA Aaa 4,000 Tampa--Hillsborough County, Florida, Expressway Authority, Revenue Refunding
Bonds, 5% due 7/01/2027 (a) 3,988
AAA Aaa 2,520 Village Center Community Development District, Florida, Recreational Revenue
Refunding Bonds, Series A, 5% due 11/01/2021 (b) 2,513
AAA Aaa 1,325 Winter Haven, Florida, Utility System Revenue Refunding and Improvement
Bonds, 4.75% due 10/01/2028 (b) 1,266
New York--4.5%
A1+ VMIG1++ 8,100 Long Island, New York, Power Authority, Electric System Revenue Bonds, VRDN,
Sub-Series 5, 3.70% due 5/01/2033 (h) 8,100
North Carolina--2.1%
A1+ NR* 3,800 Raleigh Durham, North Carolina, Airport Authority, Special Facility Revenue
Refunding Bonds (American Airlines), VRDN, Series A, 3.70% due 11/01/2015 (h) 3,800
Puerto Rico--0.6%
BBB+ Baa1 1,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series T, 6% due
7/01/2016 1,087
Utah--1.6%
A1+ VMIG1++ 2,800 Emery County, Utah, PCR, Refunding (Pacificorp Projects), VRDN, 3.70% due
11/01/2024 (h) 2,800
Wyoming--0.6%
NR* P1 1,100 Uinta County, Wyoming, PCR, Refunding (Chevron USA Inc. Project), VRDN,
3.70% due 8/15/2020 (h) 1,100
Total Investments (Cost--$184,915)--108.2% 194,200
Liabilities in Excess of Other Assets--(8.2%) (14,745)
--------
Net Assets--100.0% $179,455
========
<FN>
(a)AMBAC Insured.
(b)MBIA Insured.
(c)FGIC Insured.
(d)FNMA/GNMA Collateralized.
(e)GNMA Collateralized.
(f)FSA Insured.
(g)Prerefunded.
(h)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at October 31, 1998.
(i)Represents a zero coupon bond; the interest rate shown is the
effective yield at the time of purchase by the Fund.
*Not Rated.
+Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche
LLP.
</FN>
See Notes to Financial Statements.
</TABLE>
F-6
<PAGE>
MuniYield Florida Fund
October 31, 1998
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Statement of Assets, Liabilities and Capital as of October 31, 1998
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$184,915,307) (Note 1a) $194,199,798
Cash 95,696
Interest receivable 2,051,816
Prepaid expenses and other assets 10,480
------------
Total assets 196,357,790
------------
Liabilities: Payables:
Securities purchased $ 16,758,094
Investment adviser (Note 2) 79,134 16,837,228
------------
Accrued expenses and other liabilities 65,802
------------
Total liabilities 16,903,030
------------
Net Assets: Net assets $179,454,760
============
Capital: Capital Shares (unlimited number of shares of beneficial
interest authorized) (Note 4):
Preferred Shares, par value $.05 per share (2,200
shares of AMPS* issued and outstanding at $25,000 per
share liquidation preference) $ 55,000,000
Common Shares, par value $.10 per share (7,928,215 shares
issued and outstanding) $ 792,822
Paid-in capital in excess of par 110,663,375
Undistributed investment income--net 1,397,349
Undistributed realized capital gains on investments--net 2,316,723
Unrealized appreciation on investments--net 9,284,491
------------
Total--Equivalent to $15.70 net asset value per Common Share
(market price--$16.00) 124,454,760
------------
Total capital $179,454,760
============
<FN>
*Auction Market Preferred Shares.
</FN>
See Notes to Financial Statements.
</TABLE>
F-7
<PAGE>
MuniYield Florida Fund
October 31, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Year Ended
October 31, 1998
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 9,994,148
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 889,420
Commission fees (Note 4) 139,517
Professional fees 87,226
Accounting services (Note 2) 34,400
Transfer agent fees 30,482
Printing and shareholder reports 26,114
Trustees' fees and expenses 22,915
Custodian fees 14,462
Listing fees 13,522
Pricing fees 7,284
Other 15,259
------------
Total expenses 1,280,601
------------
Investment income--net 8,713,547
------------
Realized & Realized gain on investments--net 4,230,658
Unrealized Gain Change in unrealized appreciation on investments--net (1,550,972)
(Loss) on ------------
Investments Net Increase in Net Assets Resulting from Operations $ 11,393,233
- - --Net (Notes ============
1b, 1d & 3):
See Notes to Financial Statements.
</TABLE>
F-8
<PAGE>
MuniYield Florida Fund
October 31, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended
October 31,
Increase (Decrease) in Net Assets: 1998 1997
<S> <S> <C> <C>
Operations: Investment income--net $ 8,713,547 $ 8,861,646
Realized gain on investments--net 4,230,658 1,872,160
Change in unrealized appreciation on investments--net (1,550,972) 1,383,784
------------ ------------
Net increase in net assets resulting from operations 11,393,233 12,117,590
------------ ------------
Dividends & Investment income--net:
Distributions Common Shares (6,806,895) (7,029,122)
to Shareholders Preferred Shares (1,531,002) (1,816,122)
(Note 1e): Realized gain on investments--net:
Common Shares (1,758,807) (347,814)
Preferred Shares (453,420) (95,370)
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (10,550,124) (9,288,428)
------------ ------------
Beneficial Value of shares issued to Common Shareholders in
Interest reinvestment of dividends and distributions 880,850 197,507
Transactions ------------ ------------
(Note 4):
Net Assets: Total increase in net assets 1,723,959 3,026,669
Beginning of year 177,730,801 174,704,132
------------ ------------
End of year* $179,454,760 $177,730,801
============ ============
<FN>
*Undistributed investment income--net $ 1,397,349 $ 1,021,699
============ ============
</FN>
See Notes to Financial Statements.
</TABLE>
F-9
<PAGE>
MuniYield Florida Fund
October 31, 1998
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. For the
Year Ended October 31,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 15.59 $ 15.23 $ 15.07 $ 13.82 $ 16.74
Operating -------- -------- -------- -------- --------
Performance: Investment income--net 1.10 1.13 1.13 1.14 1.15
Realized and unrealized gain (loss) on
investments--net .34 .41 .17 1.25 (2.46)
-------- -------- -------- -------- --------
Total from investment operations 1.44 1.54 1.30 2.39 (1.31)
-------- -------- -------- -------- --------
Less dividends and distributions to Common
Shareholders:
Investment income--net (.86) (.89) (.90) (.88) (.95)
Realized gain on investments--net (.22) (.04) -- -- (.43)
-------- -------- -------- -------- --------
Total dividends and distributions to Common
Shareholders (1.08) (.93) (.90) (.88) (1.38)
-------- -------- -------- -------- --------
Effect of Preferred Share activity:
Dividends and distributions to Preferred
Shareholders:
Investment income--net (.19) (.24) (.24) (.26) (.15)
Realized gain on investments--net (.06) (.01) -- -- (.08)
-------- -------- -------- -------- --------
Total effect of Preferred Share activity (.25) (.25) (.24) (.26) (.23)
-------- -------- -------- -------- --------
Net asset value, end of year $ 15.70 $ 15.59 $ 15.23 $ 15.07 $ 13.82
======== ======== ======== ======== ========
Market price per share, end of year $ 16.00 $ 15.50 $ 14.50 $ 13.375 $ 11.375
======== ======== ======== ======== ========
Total Investment Based on market price per share 10.66% 13.76% 15.29% 25.63% (24.94%)
Return:* ======== ======== ======== ======== ========
Based on net asset value per share 7.96% 8.93% 7.47% 16.50% (9.43%)
======== ======== ======== ======== ========
Ratios to Average Expenses .72% .75% .74% .77% .76%
Net Assets:** ======== ======== ======== ======== ========
Investment income--net 4.90% 5.04% 5.11% 5.32% 5.15%
======== ======== ======== ======== ========
Supplemental Net assets, net of Preferred Shares, end of
Data: year (in thousands) $124,455 $122,731 $119,704 $118,402 $108,591
======== ======== ======== ======== ========
Preferred Shares outstanding, end of
year (in thousands) $ 55,000 $ 55,000 $ 55,000 $ 55,000 $ 55,000
======== ======== ======== ======== ========
Portfolio turnover 92.25% 107.09% 119.29% 97.93% 18.31%
======== ======== ======== ======== ========
Leverage: Asset coverage per $1,000 $ 3,263 $ 3,231 $ 3,176 $ 3,153 $ 2,974
======== ======== ======== ======== ========
Dividends Investment income--net $ 696 $ 826 $ 869 $ 927 $ 549
Per Share on ======== ======== ======== ======== ========
Preferred Shares
Outstanding:++
<FN>
*Total investment returns based on market value,
which can be significantly greater or lesser
than the net asset value, may result in
substantially different returns. Total investment
returns exclude the effects of sales loads.
**Do not reflect the effect of dividends to
Preferred Shareholders.
+Dividends per share have been adjusted to reflect a
two-for-one stock split that occurred on December 1, 1994.
</FN>
See Notes to Financial Statements.
</TABLE>
F-10
<PAGE>
MuniYield Florida Fund October 31, 1998
================================================================================
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. Significant Accounting Policies:
MuniYield Florida Fund (the "Fund") is registered under the Investment Company
Act of 1940 as a non-diversified, closed-end management investment company. The
Fund determines and makes available for publication the net asset value of its
Common Shares on a weekly basis. The Fund's Common Shares are listed on the New
York Stock Exchange under the symbol MYF. The following is a summary of
significant accounting policies followed by the Fund.
(a) Valuation of investments -- Municipal bonds are traded primarily in the
over-the-counter markets and are valued at the most recent bid price or yield
equivalent as obtained by the Fund's pricing service from dealers that make
markets in such securities. Financial futures contracts and options thereon,
which are traded on exchanges, are valued at their closing prices as of the
close of such exchanges. Options written or purchased are valued at the last
sale price in the case of exchange-traded options. In the case of options traded
in the over-the-counter market, valuation is the last asked price (options
written) or the last bid price (options purchased). Securities with remaining
maturities of sixty days or less are valued at amortized cost, which
approximates market value. Securities and assets for which market quotations are
not readily available are valued at their fair value as determined in good faith
by or under the direction of the Board of Trustees of the Fund, including
valuations furnished by a pricing service retained by the Fund, which may
utilize a matrix system for valuations. The procedures of the pricing service
and its valuations are reviewed by the officers of the Fund under the general
supervision of the Board of Trustees.
(b) Derivative financial instruments -- The Fund may engage in various portfolio
strategies to seek to increase its return by hedging its portfolio against
adverse movements in the debt markets. Losses may arise due to changes in the
value of the contract or if the counterparty does not perform under the
contract.
o Financial futures contracts -- The Fund may purchase or sell financial futures
contracts and options on such futures contracts for the purpose of hedging the
market risk on existing securities 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
Fund deposits and maintains as collateral such initial margin as required by the
exchange on which the transaction is effected. Pursuant to the contract, the
Fund agrees 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 Fund as unrealized gains or losses.
When the contract is closed, the Fund records 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.
o Options -- The Fund is authorized to write covered call options and purchase
put options. When the Fund writes an option, an amount equal to the premium
received by the Fund is reflected as an asset and an equivalent liability. The
amount of the liability is subsequently marked to market to reflect the current
market value of the option written.
When a security is purchased or sold through an exercise of an option, the
related premium paid (or received) is added to (or deducted from) the basis of
the security acquired or deducted from (or added to) the proceeds of the
security sold. When an option expires (or the Fund enters into a closing
transaction), the Fund realizes a gain or loss on the option to the extent of
the premiums received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(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).
F-11
<PAGE>
MuniYield Florida Fund October 31, 1998
================================================================================
================================================================================
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) Dividends and distributions -- Dividends from net investment income are
declared 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"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML &
Co."), which is the limited partner.
FAM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Fund. For such services, the Fund pays a monthly fee at
an annual rate of 0.50% of the Fund's average weekly net assets, including
proceeds from the issuance of Preferred Shares.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or directors of
FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended October 31, 1998 were $164,339,462 and $160,390,223, respectively.
Net realized gains for the year ended October 31, 1998 and net unrealized gains
as of October 31, 1998 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains Gains
- ------------------------------------------------------------ ----------
Long-term investments .................. $4,230,658 $9,284,491
---------- ----------
Total .................................. $4,230,658 $9,284,491
========== ==========
- --------------------------------------------------------------------------------
As of October 31, 1998, unrealized appreciation for Federal income tax purposes
aggregated $9,284,491, of which $9,549,775 related to appreciated securities and
$265,284 related to depreciated securities. The aggregate cost of investments at
October 31, 1998 for Federal income tax purposes was $184,915,307.
4. Beneficial Interest Transactions:
The Fund is authorized to issue an unlimited number of shares of beneficial
interest, including Preferred Shares, par value $.10 per share, all of which
were initially classified as Common Shares. The Board of Trustees is authorized,
however, to reclassify any unissued shares of beneficial interest without
approval of the holders of Common Shares.
Common Shares
Shares issued and outstanding during the years ended October 31, 1998 and
October 31, 1997 increased by 56,492 and 12,947, respectively, as a result of
dividend reinvestment.
Preferred Shares
Auction Market Preferred Shares ("AMPS") are Preferred Shares of the Fund, with
a par value of $.05 per share and a liquidation preference of $25,000 per share,
that entitle their holders to receive cash dividends at an annual rate that may
vary for the successive dividend periods. The yield in effect at October 31,
1998 was 3.23%.
Shares issued and outstanding during the years ended October 31, 1998 and
October 31, 1997 remained constant.
The Fund pays commissions to certain broker-dealers at the end of each auction
at an annual rate ranging from 0.25% to 0.375%, calculated on the proceeds of
each auction. For the year ended October 31, 1998, Merrill Lynch, Pierce, Fenner
& Smith Inc., an affiliate of FAM, earned $72,191 as commissions.
5. Subsequent Event:
On November 5, 1998 the Fund's Board of Trustees declared an ordinary income
dividend to holders of Common Shares in the amount of $.074297 per share,
payable on November 27, 1998 to shareholders of record as of November 20, 1998.
F-12
<PAGE>
Unaudited Financial Statements for
MuniYield Florida Fund
for the Six-Month Period
Ended April 30, 1999
F-13
<PAGE>
<TABLE>
Muni-Yield Fund
April 30, 1999
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<S> <S> <C> <S> <C>
Alabama--1.0%
AAA NR* $ 1,715 Jefferson County, Alabama, Sewer Revenue Bonds, RIB, Series 124, 6.39% due
2/01/2036 (c)(h) $ 1,780
Alaska--0.6%
A1 VMIG1++ 1,000 Valdez, Alaska, Marine Terminal, Revenue Refunding Bonds (Exxon Pipeline
Company Project), VRDN, Series C, 4.05% due 12/01/2033 (g) 1,000
Florida--100.1%
AAA Aaa 2,650 Brevard County, Florida, IDR (NUI Corporation Project), AMT, 6.40% due
10/01/2024 (a) 2,949
AAA Aaa 5,400 Broward County, Florida, Airport System Revenue Bonds (Passenger Facility),
Convertible Lien, Series H-2, 4.75% due 10/01/2023 (a) 5,109
A+ A1 13,700 Citrus County, Florida, PCR, Refunding (Florida Power Corporation--Crystal
River), Series A, 6.625% due 1/01/2027 14,714
Dade County, Florida, Aviation Revenue Bonds, AMT, Series B (b):
AAA Aaa 1,000 6.55% due 10/01/2013 1,094
AAA Aaa 5,000 6.60% due 10/01/2022 5,477
NR* Aaa 1,725 Escambia County, Florida, HFA, S/F Mortgage Revenue Bonds (Multi-County
Program), AMT, Series A, 6.90% due 4/01/2020 (d) 1,814
Escambia County, Florida, HFA, S/F Mortgage Revenue Refunding Bonds, AMT (d):
AAA Aaa 2,805 7% due 4/01/2028 (j) 3,075
NR* Aaa 2,500 (Multi-County Program), 5.20% due 4/01/2032 (b)(j) 2,484
NR* Aaa 1,850 Series A, 7.40% due 10/01/2023 (i) 1,935
BBB Baa1 3,000 Escambia County, Florida, PCR (Champion International Corporation Project),
AMT, 6.90% due 8/01/2022 3,311
A1 VMIG1++ 200 Escambia County, Florida, PCR, Refunding (Gulf Power Company Project), VRDN,
4.20% due 7/01/2022 (g) 200
NR* Aaa 1,155 Florida HFA, Home Ownership Revenue Refunding Bonds, AMT, Series G-1, 7.90%
due 3/01/2022 (d) 1,214
Florida State Board of Education, Capital Outlay, GO (Public Education):
AAA Aaa 1,000 Series A, 6.10% due 6/01/2004 (f) 1,110
AAA Aaa 4,000 Series B, 4.50% due 6/01/2023 (b) 3,648
AAA Aaa 7,500 Series B, 4.50% due 6/01/2028 (b) 6,769
AA+ Aa2 3,600 Florida State Board of Education, Capital Outlay, GO, Refunding (Public
Education), Series C, 5.25% due 6/01/2007 3,852
</TABLE>
================================================================================
PORTFOLIO ABBREVIATIONS
================================================================================
To simplify the listings of MuniYield Florida Fund's portfolio holdings in the
Schedule of Investments, we have abbreviated the names of many of the securities
according to the list below and at right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
DATES Daily Adjustable Tax-Exempt Securities
GO General Obligation Bonds
HFA Housing Finance Agency
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
S/F Single-Family
VRDN Variable Rate Demand Notes
F-14
<PAGE>
MuniYield Florida Fund
April 30, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<S> <S> <C> <S> <C>
Florida (continued)
NR* NR* $ 5,495 Florida State Mid-Bay Bridge Authority Revenue Bonds, Series A, 7.50% due
10/01/2017 $ 6,106
AAA Aaa 5,000 Florida State Turnpike Authority, Turnpike Revenue Bonds (Department of
Transportation), Series B, 5% due 7/01/2016 (b) 5,027
AAA Aaa 4,000 Greater Orlando Aviation Authority, Florida, Revenue Bonds (Orlando Airport
Facilities), AMT, Series A, 6.50% due 10/01/2012 (c) 4,369
AAA Aaa 1,000 Hillsborough County, Florida, IDA, Revenue Bonds (Allegany Health System--J.
Knox Village), 6.375% due 12/01/2003 (b)(f) 1,081
Hillsborough County, Florida, Utility Revenue Refunding Bonds:
BBB+ Baa1 1,245 Series A, 7% due 8/01/2014 1,328
AAA Aaa 2,000 Series B, 6.50% due 8/01/2016 (e) 2,149
AAA Aaa 1,300 Indian River County, Florida, Hospital Revenue Refunding Bonds, 5.70% due
10/01/2015 (e) 1,394
AAA Aaa 5,000 Jacksonville, Florida, Capital Improvement Revenue Refunding Bonds (Stadium
Project), 4.75% due 10/01/2025 (a) 4,713
AA Aa2 2,000 Jacksonville, Florida, Electric Authority, Revenue Refunding Bonds (Saint
Johns River), Issue 2, Series 15, 6% due 10/01/2005 2,216
NR* VMIG1++ 1,100 Jacksonville, Florida, Health Facilities Authority, Hospital Revenue Refunding
Bonds (Genesis Rehabilitation Hospital), VRDN, 4% due 5/01/2021 (g) 1,100
A1+ VMIG1++ 600 Jacksonville, Florida, PCR, Refunding (Florida Power & Light Co. Project),
VRDN, 4.20% due 5/01/2029 (g) 600
AA- A1 5,000 Lakeland, Florida, Electric and Water Revenue Refunding and Improvement Bonds,
Series B, 5.625% due 10/01/2006 (f) 5,510
AAA Aaa 4,000 Lee County, Florida, Solid Waste System Revenue Bonds, AMT, Series A, 6.50% due
10/01/2013 (b) 4,298
AAA NR* 1,640 Leon County, Florida, HFA, S/F Mortgage Revenue Bonds (Multi-County Program),
AMT, Series B, 7.30% due 1/01/2028 (d)(k) 1,864
A1+ VMIG1++ 100 Manatee County, Florida, PCR, Refunding (Florida Power and Light Company
Project), VRDN, 4% due 9/01/2024 (g) 100
AAA Aaa 2,500 Miami Beach, Florida, Parking Revenue Bonds, 5.125% due 9/01/2022 (e) 2,495
AAA Aaa 4,000 Miami--Dade County, Florida, School Board, COP, Revenue Refunding Bonds, Series C,
5% due 8/01/2025 (e) 3,903
AAA Aaa 7,600 Miami--Dade County, Florida, Water and Sewer Revenue Bonds, GO, Series A, 5% due
10/01/2029 (c) 7,414
AAA Aaa 2,625 Okaloosa County, Florida, Gas District, Revenue Refunding Bonds (Gas System),
Series A, 5.20% due 10/01/2019 (b) 2,664
AAA Aaa 2,000 Orange County, Florida, Health Facilities Authority Revenue Bonds (Hospital--
Orlando Regional Healthcare), Series A, 6.25% due 10/01/2013 (b) 2,326
AAA Aaa 500 Orange County, Florida, Health Facilities Authority, Revenue Refunding Bonds
(Hospital--Orlando Regional Healthcare), Series C, 6.25% due 10/01/2016 (b) 582
NR* Aaa 6,250 Orange County, Florida, School Board, COP, Series A, 5.25% due 8/01/2023 (b) 6,350
AAA Aaa 6,000 Orlando and Orange County Expressway Authority, Florida, Expressway Revenue
Refunding Bonds (Junior Lien), 5% due 7/01/2021 (c) 5,928
AAA Aaa 1,500 Palm Beach County, Florida, Criminal Justice Facilities Revenue Bonds, 7.20%
due 6/01/2015 (c) 1,912
NR* Aaa 1,390 Palm Beach County, Florida, HFA, S/F Mortgage Revenue Bonds, AMT, Series A,
6.80% due 10/01/2027 (d)(j) 1,485
</TABLE>
F-15
<PAGE>
MuniYield Florida Fund
April 30, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<S> <S> <C> <S> <C>
Florida (concluded)
AAA AAA $ 1,000 Peace River/Manasota, Florida, Regional Water Supply Authority Revenue
Bonds (Peace River Option Project), Series A, 5% due 10/01/2023 (b) $ 979
AAA Aaa 7,625 Pembroke Pines, Florida, Capital Improvement Revenue Refunding Bonds, 5.25%
due 12/01/2026 (a) 7,734
A1+ VMIG1++ 150 Pinellas County, Florida, Health Facilities Authority, Revenue Refunding
Bonds (Pooled Hospital Loan Program), DATES, 4% due 12/01/2015 (a)(g) 150
AAA Aaa 2,160 Polk County, Florida, School Board, COP, Series A, 5% due 1/01/2024 (e) 2,115
Saint Lucie County, Florida, PCR, Refunding (Florida Power and Light Company
Project), VRDN (g):
A1+ VMIG1++ 600 4% due 1/01/2026 600
A1+ VMIG1++ 4,000 4.20% due 3/01/2027 4,000
Saint Petersburg, Florida, Health Facilities Authority Revenue Bonds (b)(f):
AAA Aaa 1,550 (Allegany Health System--Saint Anthony's), 6.75% due 12/01/2003 1,742
AAA Aaa 2,000 (Allegany Health System), Series A, 7% due 12/01/2001 2,198
Sarasota County, Florida, Public Hospital Board, Revenue Bonds (b):
NR* Aaa 5,000 RIB, Series 99, 6.665% due 7/01/2028 (h) 5,650
AAA Aaa 3,100 (Sarasota Memorial Hospital), Series B, 5.25% due 7/01/2024 3,192
AAA Aaa 6,000 Tampa, Florida, Water and Sewer Revenue Refunding Bonds, Series A, 6.25% due
10/01/2002 (c)(f) 6,524
AAA Aaa 2,520 Village Center Community Development District, Florida, Recreational Revenue
Refunding Bonds, Series A, 5% due 11/01/2021 (b) 2,480
AAA Aaa 1,325 Winter Haven, Florida, Utility System Revenue Refunding and Improvement Bonds,
4.75% due 10/01/2028 (b) 1,245
New York--0.8%
A1+ VMIG1++ 1,400 Long Island Power Authority, New York, Electric System Revenue Bonds, VRDN,
Sub-Series 5, 4.25% due 5/01/2033 (g) 1,400
Puerto Rico--0.6%
BBB+ Baa1 1,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series T, 6% due
7/01/2016 1,079
Texas--2.8%
A1+ NR* 4,800 Harris County, Texas, Health Facilities Development Corporation, Hospital
Revenue Refunding Bonds (Methodist Hospital), VRDN, 4.25% due 12/01/2025 (g) 4,800
Total Investments (Cost--$179,516)--105.9% 184,337
Liabilities in Excess of Other Assets--(5.9%) (10,323)
--------
Net Assets--100.0% $174,014
========
<FN>
(a)AMBAC Insured.
(b)MBIA Insured.
(c)FGIC Insured.
(d)GNMA Collateralized.
(e)FSA Insured.
(f)Prerefunded.
(g)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at April 30, 1999.
(h)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 April 30, 1999.
(i)FHA Insured.
(j)FNMA Collateralized.
(k)FHLMC Collateralized.
*Not Rated.
+Highest short-term rating by Moody's Investors Service, Inc.
</FN>
See Notes to Financial Statements.
</TABLE>
F-16
<PAGE>
MuniYield Florida Fund
April 30, 1999
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Statement of Assets, Liabilities and Capital as of April 30, 1999
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$179,515,730) (Note 1a) $184,337,188
Cash 65,913
Receivables:
Securities sold $ 6,641,594
Interest 2,136,432 8,778,026
------------
Prepaid expenses and other assets 10,480
------------
Total assets 193,191,607
------------
Liabilities: Payables:
Securities purchased 19,075,690
Investment adviser (Note 2) 76,552 19,152,242
------------
Accrued expenses and other liabilities 25,248
------------
Total liabilities 19,177,490
------------
Net Assets: Net assets $174,014,117
============
Capital: Capital Shares (unlimited number of shares of beneficial interest
authorized) (Note 4):
Preferred Shares, par value $.05 per share (2,200 shares of
AMPS* issued and outstanding at $25,000 per share liquidation
preference) $ 55,000,000
Common Shares, par value $.10 per share (7,993,842 shares issued
and outstanding) $ 799,384
Paid-in capital in excess of par 111,667,496
Undistributed investment income--net 1,523,047
Undistributed realized capital gains on investments--net 202,732
Unrealized appreciation on investments--net 4,821,458
Total--Equivalent to $14.89 net asset value per Common Share
(market price--$14.875) 119,014,117
------------
Total capital $174,014,117
============
<FN>
*Auction Market Preferred Shares.
</FN>
See Notes to Financial Statements.
</TABLE>
F-17
<PAGE>
MuniYield Florida Fund
April 30, 1999
FINANCIAL INFORMATION (continued)
<TABLE>>
Statement of Operations
<CAPTION>
For the Six Months Ended
April 30, 1999
<S> <C> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 4,667,312
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 440,528
Commission fees (Note 4) 67,289
Professional fees 40,841
Accounting services (Note 2) 32,176
Transfer agent fees 19,809
Printing and shareholder reports 16,201
Trustees' fees and expenses 11,275
Listing fees 7,806
Custodian fees 6,934
Pricing fees 4,060
Other 13,222
------------
Total expenses 660,141
------------
Investment income--net 4,007,171
------------
Realized & Realized gain on investments--net 2,029,374
Unrealized Gain Change in unrealized appreciation on investments--net (4,463,033)
(Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 1,573,512
(Notes 1b, ============
1d & 3):
See Notes to Financial Statements.
</TABLE>
F-18
<PAGE>
MuniYield Florida Fund
April 30, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the
Months Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 1999 1998
<S> <C> <C> <C>
Operations: Investment income--net $ 4,007,171 $ 8,713,547
Realized gain on investments--net 2,029,374 4,230,658
Change in unrealized appreciation on investments--net (4,463,033) (1,550,972)
------------ ------------
Net increase in net assets resulting from operations 1,573,512 11,393,233
------------ ------------
Dividends & Investment income--net:
Distributions to Common Shares (3,494,801) (6,806,895)
Shareholders Preferred Shares (386,672) (1,531,002)
(Note 1e): Realized gain on investments--net:
Common Shares (3,415,385) (1,758,807)
Preferred Shares (727,980) (453,420)
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (8,024,838) (10,550,124)
------------ ------------
Beneficial Value of shares issued to Common Shareholders in reinvestment
Interest of dividends and distributions 1,010,683 880,850
Transactions ------------ ------------
(Note 4):
Net Assets: Total increase (decrease) in net assets (5,440,643) 1,723,959
Beginning of period 179,454,760 177,730,801
------------ ------------
End of period* $174,014,117 $179,454,760
============ ============
<FN>
*Undistributed investment income--net $ 1,523,047 $ 1,397,349
============ ============
</FN>
See Notes to Financial Statements.
</TABLE>
F-19
<PAGE>
MuniYield Florida Fund
April 30, 1999
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights
<CAPTION>
For the Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended For the Year Ended
April 30, October 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 15.70 $ 15.59 $ 15.23 $ 15.07 $ 13.82
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .50 1.10 1.13 1.13 1.14
Realized and unrealized gain (loss)
on investments--net (.30) .34 .41 .17 1.25
-------- -------- -------- -------- --------
Total from investment operations .20 1.44 1.54 1.30 2.39
-------- -------- -------- -------- --------
Less dividends and distributions to Common
Shareholders:
Investment income--net (.44) (.86) (.89) (.90) (.88)
Realized gain on investments--net (.43) (.22) (.04) -- --
-------- -------- -------- -------- --------
Total dividends and distributions to Common
Shareholders (.87) (1.08) (.93) (.90) (.88)
-------- -------- -------- -------- --------
Effect of Preferred Share activity:
Dividends and distributions to Preferred
Shareholders:
Investment income--net (.05) (.19) (.24) (.24) (.26)
Realized gain on investments--net (.09) (.06) (.01) -- --
-------- -------- -------- -------- --------
Total effect of Preferred Share activity (.14) (.25) (.25) (.24) (.26)
-------- -------- -------- -------- --------
Net asset value, end of period $ 14.89 $ 15.70 $ 15.59 $ 15.23 $ 15.07
======== ======== ======== ======== ========
Market price per share, end of period $ 14.875 $ 16.00 $ 15.50 $ 14.50 $ 13.375
======== ======== ======== ======== ========
Total Investment Based on market price per share (1.69%)++ 10.66% 13.76% 15.29% 25.63%
Return:** ======== ======== ======== ======== ========
Based on net asset value per share .29%++ 7.96% 8.93% 7.47% 16.50%
======== ======== ======== ======== ========
Ratios to Average Expenses .75%* .72% .75% .74% .77%
Net Assets:*** ======== ======== ======== ======== ========
Investment income--net 4.54%* 4.90% 5.04% 5.11% 5.32%
======== ======== ======== ======== ========
Supplemental Net assets, net of Preferred Shares, end
Data: of period (in thousands) $119,014 $124,455 $122,731 $119,704 $118,402
======== ======== ======== ======== ========
Preferred Shares outstanding, end of period
(in thousands) $ 55,000 $ 55,000 $ 55,000 $ 55,000 $ 55,000
======== ======== ======== ======== ========
Portfolio turnover 55.52% 92.25% 107.09% 119.29% 97.93%
======== ======== ======== ======== ========
Leverage: Asset coverage per $1,000 $ 3,164 $ 3,263 $ 3,231 $ 3,176 $ 3,153
======== ======== ======== ======== ========
Dividends Investment income--net $ 176 $ 696 $ 826 $ 869 $ 927
Per Share on ======== ======== ======== ======== ========
Preferred Shares
Outstanding:
<FN>
*Annualized.
**Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value, may result
in substantially different returns. Total investment returns exclude
the effects of sales loads.
***Do not reflect the effect of dividends to Preferred Shareholders.
+Aggregate total investment return.
</FN>
See Notes to Financial Statements.
</TABLE>
F-20
<PAGE>
MuniYield Florida Fund April 30, 1999
================================================================================
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. Significant Accounting Policies:
MuniYield Florida Fund (the "Fund") is registered under the Investment Company
Act of 1940 as a non-diversified, closed-end management investment company. The
Fund's financial statements are prepared in accordance with generally accepted
accounting principles which may require the use of management accruals and
estimates. These unaudited financial statements reflect all adjustments which
are, in the opinion of management, necessary to a fair statement of the results
for the interim period presented. All such adjustments are of a normal recurring
nature. The Fund determines and makes available for publication the net asset
value of its Common Shares on a weekly basis. The Fund's Common Shares are
listed on the New York Stock Exchange under the symbol MYF. The following is a
summary of significant accounting policies followed by the Fund.
(a) Valuation of investments -- Municipal bonds are traded primarily in the
over-the-counter markets and are valued at the most recent bid price or yield
equivalent as obtained by the Fund's pricing service from dealers that make
markets in such securities. Financial futures contracts and options thereon,
which are traded on exchanges, are valued at their closing prices as of the
close of such exchanges. Options written or purchased are valued at the last
sale price in the case of exchange-traded options. In the case of options traded
in the over-the-counter market, valuation is the last asked price (options
written) or the last bid price (options purchased). Securities with remaining
maturities of sixty days or less are valued at amortized cost, which
approximates market value. Securities and assets for which market quotations are
not readily available are valued at their fair value as determined in good faith
by or under the direction of the Board of Trustees of the Fund, including
valuations furnished by a pricing service retained by the Fund, which may
utilize a matrix system for valuations. The procedures of the pricing service
and its valuations are reviewed by the officers of the Fund under the general
supervision of the Board of Trustees.
(b) Derivative financial instruments -- The Fund may engage in various portfolio
strategies to seek to increase its return by hedging its portfolio against
adverse movements in the debt markets. Losses may arise due to changes in the
value of the contract or if the counterparty does not perform under the
contract.
o Financial futures contracts -- The Fund may purchase or sell financial futures
contracts and options on such futures contracts for the purpose of hedging the
market risk on existing securities 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
Fund deposits and maintains as collateral such initial margin as required by the
exchange on which the transaction is effected. Pursuant to the contract, the
Fund agrees 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 Fund as unrealized gains or losses.
When the contract is closed, the Fund records 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.
o Options -- The Fund is authorized to write covered call options and purchase
put options. When the Fund writes an option, an amount equal to the premium
received by the Fund is reflected as an asset and an equivalent liability. The
amount of the liability is subsequently marked to market to reflect the current
market value of the option written.
When a security is purchased or sold through an exercise of an option, the
related premium paid (or received) is added to (or deducted from) the basis of
the security acquired or deducted from (or added to) the proceeds of the
security sold. When an option expires (or the Fund enters into a closing
transaction), the Fund realizes a gain or loss on the option to the extent of
the premiums received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(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.
F-21
<PAGE>
MuniYield Florida Fund April 30, 1999
================================================================================
NOTES TO FINANCIAL STATEMENTS (concluded)
================================================================================
Discounts and market premiums are amortized into interest income. Realized gains
and losses on security transactions are determined on the identified cost basis.
(e) Dividends and distributions -- Dividends from net investment income are
declared 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"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML &
Co."), which is the limited partner.
FAM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Fund. For such services, the Fund pays a monthly fee at
an annual rate of 0.50% of the Fund's average weekly net assets, including
proceeds from the issuance of Preferred Shares.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or directors of
FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended April 30, 1999 were $91,967,863 and $94,242,106, respectively.
Net realized gains for the six months ended April 30, 1999 and net unrealized
gains as of April 30, 1999 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains Gains
- --------------------------------------------------------------------------------
Long-term investments .................. $2,029,374 $4,821,458
---------- ----------
Total .................................. $2,029,374 $4,821,458
========== ==========
- --------------------------------------------------------------------------------
As of April 30, 1999, unrealized appreciation for Federal income tax purposes
aggregated $4,821,458, of which $5,680,630 related to appreciated securities and
$859,172 related to depreciated securities. The aggregate cost of investments at
April 30, 1999 for Federal income tax purposes was $179,515,730.
4. Beneficial Interest Transactions:
The Fund is authorized to issue an unlimited number of shares of beneficial
interest, including Preferred Shares, par value $.10 per share, all of which
were initially classified as Common Shares. The Board of Trustees is authorized,
however, to reclassify any unissued shares of beneficial interest without
approval of the holders of Common Shares.
Common Shares
Shares issued and outstanding during the six months ended April 30, 1999 and the
year ended October 31, 1998 increased by 65,627 and 56,492, respectively, as a
result of dividend reinvestment.
Preferred Shares
Auction Market Preferred Shares ("AMPS") are Preferred Shares of the Fund, with
a par value of $.05 per share and a liquidation preference of $25,000 per share,
that entitle their holders to receive cash dividends at an annual rate that may
vary for the successive dividend periods. The yield in effect at April 30, 1999
was 3.43%.
Shares issued and outstanding during the six months ended April 30, 1999 and the
year ended October 31, 1998 remained constant.
The Fund pays commissions to certain broker-dealers at the end of each auction
at an annual rate ranging from 0.25% to 0.375%, calculated on the proceeds of
each auction. For the six months ended April 30, 1999, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, an affiliate of FAM, earned $34,426 as commissions.
5. Subsequent Event:
On May 6, 1999, the Fund's Board of Trustees declared an ordinary income
dividend to Common Shareholders in the amount of $.066353 per share, payable on
May 27, 1999 to shareholders of record as of May 21, 1999.
F-22
<PAGE>
Audited Financial Statements for
MuniVest Florida Fund
for the Fiscal Year Ended October 31, 1998
F-23
<PAGE>
MuniVest Florida Fund, October 31, 1998
================================================================================
INDEPENDENT AUDITORS' REPORT
================================================================================
The Board of Trustees and Shareholders,
MuniVest Florida Fund:
We have audited the accompanying statement of assets, liabilities and capital,
including the schedule of investments, of MuniVest Florida Fund as of October
31, 1998, 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 October
31, 1998 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 MuniVest Florida
Fund as of October 31, 1998, the results of its operations, the changes in its
net assets, and the financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
December 4, 1998
F-24
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
Alaska--1.6% A1+ P1 $ 2,000 Valdez, Alaska, Marine Terminal Revenue Refunding Bonds (Exxon Pipeline
Co. Project), VRDN, Series C, 3.70% due 12/01/2033 (a) $ 2,000
==================================================================================================================================
Colorado--2.7% A1+ VMIG1+ 3,350 Moffat County, Colorado, PCR, Refunding (Pacificorp Projects), VRDN,
3.75% due 5/01/2013 (a)(b) 3,350
==================================================================================================================================
Florida--97.2% AAA Aaa 1,000 Bay Medical Center, Florida, Hospital Revenue Bonds (Bay Medical Center
Project), 5% due 10/01/2027 (b) 984
AAA Aaa 5,000 Brevard County, Florida, IDR (NUI Corporation Project), AMT, 6.40% due
10/01/2024 (b) 5,568
AAA NR* 1,195 Broward County, Florida, HFA, Revenue Bonds, AMT, Series A, 7.35% due
3/01/2023 (e)(f) 1,261
AAA Aaa 8,200 Citrus County, Florida, PCR, Refunding (Florida Power Corp.--Crystal
River), Series B, 6.35% due 2/01/2022 (c) 8,991
AAA Aaa 1,125 Dade County, Florida, Educational Facilities Authority, Exchangeable
Revenue Bonds (University of Miami), 7.65% due 4/01/2010 (c) 1,208
AA- Aa3 2,250 Dade County, Florida, IDA, Solid Waste Disposal Revenue Bonds (Florida
Power & Light Co. Project), AMT, 7.15% due 2/01/2023 2,436
A1+ VMIG1+ 200 Dade County, Florida, Water and Sewer System Revenue Bonds, VRDN, 3.05%
due 10/05/2022 (a)(d) 200
Escambia County, Florida, HFA, S/F Mortgage Revenue Bonds, AMT (f):
AAA Aaa 3,000 Refunding (Multi-County Program), 7% due 4/01/2028 (e) 3,312
NR* Aaa 2,075 Series A, 7.40% due 10/01/2023 2,185
BBB Baa1 4,045 Escambia County, Florida, PCR (Champion International Corporation
Project), AMT, 6.90% due 8/01/2022 4,444
NR* Aaa 1,355 Florida HFA, Home Ownership Revenue Bonds, AMT, Series G-1, 7.90% due
3/01/2022 (f) 1,428
AAA Aaa 1,155 Florida Ports Financing Commission Revenue Bonds (State Transportation
Trust Fund), AMT, 5.375% due 6/01/2027 (c) 1,178
AAA Aaa 5,000 Florida State Board of Education, Public Education Revenue Bonds
(Capital Outlay), Series B, 4.50% due 6/01/2028 (c) 4,623
AAA Aaa 2,075 Florida State Department of General Services, Division of Facilities
Management Revenue Bonds (Florida Facilities Pool), Series B, 4.50%
due 9/01/2023 (i) 1,931
AAA Aaa 4,700 Florida State Mid-Bay Bridge Authority, Crossover Revenue Refunding
Bonds, Series A, 5.95% due 10/01/2022 (b) 5,150
AAA Aaa 2,775 Florida State Turnpike Authority, Turnpike Revenue Bonds (Department of
Transportation), Series B, 5% due 7/01/2016 (c) 2,809
AAA Aaa 5,000 Fort Myers, Florida, Improvement Revenue Refunding Bonds, Series A, 5%
due 12/01/2022 (b) 4,986
AA Aa3 1,900 Gainesville, Florida, Utilities System Revenue Bonds, Series A, 6.50%
due 10/01/2002 (h) 2,127
A A3 5,400 Hillsborough County, Florida, Capital Improvement Revenue Bonds (County
Center Project), Second Series, 6.75% due 7/01/2002 (h) 6,053
AAA Aaa 2,000 Hillsborough County, Florida, Utility Revenue Refunding Bonds, Series
B, 6.50% due 8/01/2016 (c) 2,171
==================================================================================================================================
</TABLE>
Portfolio Abbreviations
To simplify the listings of MuniVest Florida Fund's portfolio holdings in the
Schedule of Investments, we have abbreviated the names of many of the securities
according to the list below and at right.
AMT Alternative Minimum Tax (subject to)
DATES Daily Adjustable Tax-Exempt Securities
HFA Housing Finance Agency
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
PCR Pollution Control Revenue Bonds
S/F Single-Family
VRDN Variable Rate Demand Notes
F-25
<PAGE>
MuniVest Florida Fund, October 31, 1998
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
Florida AAA Aaa $ 5,065 Jacksonville, Florida, Capital Improvement Revenue Refunding Bonds
(concluded) (Stadium Project), 4.75% due 10/01/2025 (b) $ 4,857
AA Aa2 4,000 Jacksonville, Florida, Electric Authority Revenue Bonds (Electric
System), Series 3-A, 5.10% due 10/01/2032 3,987
Jacksonville, Florida, Health Facilities Authority, Hospital Revenue
Refunding Bonds:
NR* VMIG1+ 100 (Genesis Rehabilitation Hospital), VRDN, 3.75% due 5/01/2021 (a) 100
AA+ NR* 2,000 (Saint Luke's Hospital Association Project), 7.125% due 11/15/2020 2,190
NR* Baa1 345 Jacksonville, Florida, Health Facilities Authority, IDR (National
Benevolent Cypress Village), Series A, 6.125% due 12/01/2016 368
NR* Aaa 3,030 Manatee County, Florida, HFA, S/F Mortgage Revenue Bonds, AMT,
Sub-Series 2, 7.75% due 5/01/2026 (f) 3,544
A1+ VMIG1+ 2,500 Martin County, Florida, PCR, Refunding (Florida Power & Light Co.
Project), VRDN, 3.70% due 9/01/2024 (a) 2,500
Miami-Dade County, Florida, Special Obligation Revenue Bonds (c):
AAA Aaa 2,000 Refunding, Series A, 5.10%** due 10/01/2015 856
AAA Aaa 5,685 Refunding, Series A, 5.461%** due 10/01/2018 2,025
AAA Aaa 5,000 Series B, 5.66%** due 10/01/2032 807
BBB+ Baa 2,890 Nassau County, Florida, PCR, Refunding (ITT Rayonier, Inc. Project),
6.20% due 7/01/2015 3,049
AAA Aaa 1,000 Ocoee, Florida, Revenue Refunding and Improvement Bonds
(Transportation), 4.50% due 10/01/2028 (c) 924
AAA Aaa 1,150 Okaloosa County, Florida, Gas District Revenue Bonds (Gas System),
Series A, 5.125% due 10/01/2016 (c) 1,181
AAA Aaa 5,000 Orlando & Orange County, Florida, Expressway Authority, Revenue
Refunding Bonds (Junior Lien), 5% due 7/01/2021 (d) 4,986
AAA Aaa 1,890 Palm Beach County, Florida, Criminal Justice Facilities Revenue Bonds,
7.20% due 6/01/2015 (d) 2,424
AAA Aaa 2,000 Palm Beach County, Florida, Solid Waste Authority, Revenue Refunding
Bonds, Series A, 4.60%** due 10/01/2012 (b) 1,039
AAA Aaa 2,500 Peace River/Manasota, Florida, Regional Water Supply Authority Revenue
Bonds (Peace River Option Project), Series A, 5% due 10/01/2028 (c) 2,492
A1+ VMIG1+ 300 Pinellas County, Florida, Health Facilities Authority, Revenue
Refunding Bonds (Pooled Hospital Loan Program), DATES, 3.70% due
12/01/2015 (a) 300
AAA Aaa 1,200 Port Everglades Authority, Florida, Port Improvement Revenue Bonds,
7.125% due 11/01/2016 (g) 1,508
A1+ VMIG1+ 100 Saint Lucie County, Florida, PCR, Refunding (Florida Power & Light Co.
Project), VRDN, 3.30% due 3/01/2027 (a) 100
AA- Aa3 1,000 Saint Lucie County, Florida, Solid Waste Disposal Revenue Bonds
(Florida Power & Light Co. Project), AMT, 6.70% due 5/01/2027 1,091
AAA Aaa 5,000 Sarasota County, Florida, Public Hospital Board, Hospital Revenue
Refunding Bonds (Sarasota Memorial Hospital), Series B, 5.50% due
7/01/2028(c) 5,392
AAA Aaa 3,000 Tallahassee, Florida, Energy System Revenue Refunding Bonds, Series A,
4.75% due 10/01/2026 (i) 2,875
AAA Aaa 6,000 Tampa Bay, Florida, Water Utility System, Revenue Refunding Bonds,
Series A, 4.75% due 10/01/2027 (d) 5,745
Tampa, Florida, Sports Authority Revenue Bonds:
AAA Aaa 1,500 Refunding (County Interlocal Payments), 5% due 10/01/2028 (b) 1,495
AAA Aaa 2,500 (Sales Tax Payments--Stadium Project), 5.25% due 1/01/2027 (c) 2,559
==================================================================================================================================
</TABLE>
F-26
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Texas--1.8% A1+ NR* 2,200 Harris County, Texas, Health Facilities Development Corporation,
Hospital Revenue Bonds (Methodist Hospital), VRDN, 3.70% due
12/01/2025 (a) 2,200
==================================================================================================================================
Puerto Rico--3.1% A Baa1 4,000 Puerto Rico Commonwealth Highway and Transportation Authority,
Transportation Revenue Bonds, Series A, 5% due 7/01/2038 3,905
==================================================================================================================================
Total Investments (Cost--$127,554)--106.4% 132,894
Liabilities in Excess of Other Assets--(6.4%) (7,945)
--------
Net Assets--100.0% $124,949
========
==================================================================================================================================
</TABLE>
(a) The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at October 31, 1998.
(b) AMBAC Insured.
(c) MBIA Insured.
(d) FGIC Insured.
(e) FNMA Collateralized.
(f) GNMA Collateralized.
(g) Escrowed to maturity.
(h) Prerefunded.
(i) FSA Insured.
* Not Rated.
** Represents a zero coupon bond; the interest rate shown is the
effective yield at the time of purchase by the Fund.
+ Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
Quality Profile
The quality ratings of securities in the Fund as of October 31, 1998 were as
follows:
- --------------------------------------------------------------------------------
Percent of
S&P Rating/Moody's Rating Net Assets
- --------------------------------------------------------------------------------
AAA/Aaa.............................................................. 70.3%
AA/Aa ............................................................... 13.2
A/A.................................................................. 8.0
BBB/Baa.............................................................. 6.3
Other+............................................................... 8.6
- --------------------------------------------------------------------------------
+ Temporary investments in short-term municipal securities.
F-27
<PAGE>
MuniVest Florida Fund, October 31, 1998
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<TABLE>
<CAPTION>
As of October 31, 1998
==============================================================================================================================
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$127,553,548) (Note 1a) ............. $132,894,252
Cash ........................................................................ 39,957
Receivables:
Interest .................................................................. $ 1,610,500
Securities sold ........................................................... 45,000 1,655,500
------------
Prepaid expenses and other assets ........................................... 6,657
------------
Total assets ................................................................ 134,596,366
------------
==============================================================================================================================
Liabilities: Payables:
Securities purchased ...................................................... 9,485,909
Investment adviser (Note 2) ............................................... 55,103
Dividends to shareholders (Note 1f) ....................................... 46,767 9,587,779
------------
Accrued expenses and other liabilities ...................................... 59,774
------------
Total liabilities ........................................................... 9,647,553
------------
==============================================================================================================================
Net Assets: Net assets .................................................................. $124,948,813
============
==============================================================================================================================
Capital: Capital Shares (unlimited number of shares of beneficial interest
authorized) (Note 4):
Preferred Shares, par value $.05 per share (1,600 shares of AMPS* issued
and outstanding at $25,000 per share liquidation preference) .............. $ 40,000,000
Common Shares, par value $.10 per share (5,982,149 shares issued and
outstanding) .............................................................. $ 598,215
Paid-in capital in excess of par ............................................ 83,246,930
Undistributed investment income--net ........................................ 544,924
Accumulated realized capital losses on investments--net (Note 5) ............ (4,781,960)
Unrealized appreciation on investments--net ................................. 5,340,704
------------
Total--Equivalent to $14.20 net asset value per Common Share (market
price--$14.125) ............................................................. 84,948,813
------------
Total capital ............................................................... $124,948,813
============
==============================================================================================================================
</TABLE>
* Auction Market Preferred Shares.
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Year Ended October 31, 1998
==============================================================================================================================
<S> <C> <C> <C>
Investment Interest and amortization of premium and discount earned .................... $ 6,895,752
Income (Note 1d):
==============================================================================================================================
Expenses: Investment advisory fees (Note 2) ........................................... $ 618,817
Commission fees (Note 4) .................................................... 101,472
</TABLE>
F-28
<PAGE>
<TABLE>
<S> <C> <C> <C>
Professional fees ........................................................... 72,660
Accounting services (Note 2) ................................................ 39,393
Trustees' fees and expenses ................................................. 26,147
Transfer agent fees ......................................................... 24,641
Printing and shareholder reports ............................................ 20,353
Listing fees ................................................................ 15,856
Custodian fees .............................................................. 10,288
Pricing fees ................................................................ 7,090
Amortization of organization expenses (Note 1e) ............................. 2,642
Other ....................................................................... 12,728
------------
Total expenses .............................................................. 952,087
------------
Investment income--net ...................................................... 5,943,665
------------
==============================================================================================================================
Realized & Realized gain on investments--net ........................................... 3,590,397
Unrealized Gain Change in unrealized appreciation on investments--net ....................... (1,665,313)
(Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations ........................ $ 7,868,749
(Notes 1b, 1d & 3): ============
==============================================================================================================================
</TABLE>
See Notes to Financial Statements.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Year Ended October 31,
------------------------------
Increase (Decrease) in Net Assets: 1998 1997
==============================================================================================================================
<S> <C> <C> <C>
Operations: Investment income--net ...................................................... $ 5,943,665 $ 6,012,077
Realized gain on investments--net ........................................... 3,590,397 1,216,839
Change in unrealized appreciation/depreciation on investments--net .......... (1,665,313) 1,616,148
------------ ------------
Net increase in net assets resulting from operations ........................ 7,868,749 8,845,064
------------ ------------
==============================================================================================================================
Dividends to Investment income--net:
Shareholders Common Shares ............................................................. (4,560,158) (4,635,108)
(Note 1f): Preferred Shares .......................................................... (1,326,560) (1,349,984)
------------ ------------
Net decrease in net assets resulting from dividends to shareholders ......... (5,886,718) (5,985,092)
------------ ------------
==============================================================================================================================
Beneficial Interest Value of shares issued to Common Shareholders in reinvestment of dividends .. 49,203 --
Transactions ------------ ------------
(Note 4):
==============================================================================================================================
Net Assets: Total increase in net assets ................................................ 2,031,234 2,859,972
Beginning of year ........................................................... 122,917,579 120,057,607
------------ ------------
End of year* ................................................................ $124,948,813 $122,917,579
============ ============
==============================================================================================================================
*Undistributed investment income--net ........................................ $ 544,924 $ 487,977
============ ============
==============================================================================================================================
</TABLE>
See Notes to Financial Statements.
F-29
<PAGE>
MuniVest Florida Fund, October 31, 1998
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. For the Year Ended October 31,
-------------------------------------------
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year .............................. $ 13.87 $ 13.39 $ 13.16 $ 11.82 $ 14.99
Operating ------- ------- ------- ------- -------
Performance: Investment income--net .......................................... .99 1.01 .99 1.01 1.00
Realized and unrealized gain (loss) on investments--net ......... .32 .48 .23 1.34 (3.05)
------- ------- ------- ------- -------
Total from investment operations ................................ 1.31 1.49 1.22 2.35 (2.05)
------- ------- ------- ------- -------
Less dividends and distributions to Common Shareholders:
Investment income--net ........................................ (.76) (.78) (.76) (.76) (.84)
Realized gain on investments--net ............................. -- -- -- -- (.11)
------- ------- ------- ------- -------
Total dividends and distributions to Common Shareholders ........ (.76) (.78) (.76) (.76) (.95)
------- ------- ------- ------- -------
Effect of Preferred Share activity:
Dividends and distributions to Preferred Shareholders:
Investment income--net ...................................... (.22) (.23) (.23) (.25) (.15)
Realized gain on investments--net ........................... -- -- -- -- (.02)
------- ------- ------- ------- -------
Total effect of Preferred Share activity ........................ (.22) (.23) (.23) (.25) (.17)
------- ------- ------- ------- -------
Net asset value, end of year .................................... $ 14.20 $ 13.87 $ 13.39 $ 13.16 $ 11.82
======= ======= ======= ======= =======
Market price per share, end of year ............................. $14.125 $ 13.00 $ 12.75 $ 11.50 $ 10.00
======= ======= ======= ======= =======
=================================================================================================================================
Total Investment Based on market price per share ................................. 14.78% 8.21% 17.87% 22.93% (28.20%)
Return:* ======= ======= ======= ======= =======
Based on net asset value per share .............................. 8.16% 9.93% 8.17% 19.02% (15.07%)
======= ======= ======= ======= =======
=================================================================================================================================
Ratios to Average Expenses, net of reimbursement .................................. .77% .78% .82% .85% .75%
Net Assets:** ======= ======= ======= ======= =======
Expenses ........................................................ .77% .78% .82% .85% .78%
======= ======= ======= ======= =======
Investment income--net .......................................... 4.80% 4.96% 4.96% 5.38% 4.94%
======= ======= ======= ======= =======
=================================================================================================================================
Supplemental Net assets, net of Preferred Shares, end of year (in thousands).. $84,949 $82,918 $80,058 $78,695 $70,674
Data: ======= ======= ======= ======= =======
Preferred Shares outstanding, end of year (in thousands) ........ $40,000 $40,000 $40,000 $40,000 $40,000
======= ======= ======= ======= =======
Portfolio turnover .............................................. 92.75% 89.21% 116.82% 92.54% 100.98%
======= ======= ======= ======= =======
=================================================================================================================================
Leverage: Asset coverage per $1,000 ....................................... $ 3,124 $ 3,073 $ 3,001 $ 2,967 $ 2,767
======= ======= ======= ======= =======
=================================================================================================================================
Dividends Investment income--net .......................................... $ 829 $ 844 $ 861 $ 940 $ 569
Per Share on ======= ======= ======= ======= =======
Preferred Shares
Outstanding:+
=================================================================================================================================
</TABLE>
* Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value, may result
in substantially different returns. Total investment returns exclude
the effects of sales loads.
** Do not reflect the effect of dividends to Preferred Shareholders.
+ Dividends per share have been adjusted to reflect a two-for-one
stock split that occurred on December 1, 1994.
See Notes to Financial Statements.
F-30
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. Significant Accounting Policies:
MuniVest Florida Fund (the "Fund") is registered under the Investment Company
Act of 1940 as a non-diversified, closed-end management investment company. The
Fund determines and makes available for publication the net asset value of its
Common Shares on a weekly basis. The Fund's Common Shares are listed on the New
York Stock Exchange under the symbol MVS. The following is a summary of
significant accounting policies followed by the Fund.
(a) Valuation of investments--Municipal bonds are traded primarily in the
over-the-counter markets and are valued at the most recent bid price or yield
equivalent as obtained by the Fund's pricing service from dealers that make
markets in such securities. Financial futures contracts and options thereon,
which are traded on exchanges, are valued at their closing prices as of the
close of such exchanges. Options written or purchased are valued at the last
sale price in the case of exchange-traded options. In the case of options traded
in the over-the-counter market, valuation is the last asked price (options
written) or the last bid price (options purchased). Securities with remaining
maturities of sixty days or less are valued at amortized cost, which
approximates market value. Securities and assets for which market quotations are
not readily available are valued at fair value as determined in good faith by or
under the direction of the Board of Trustees of the Fund, including valuations
furnished by a pricing service retained by the Fund, which may utilize a matrix
system for valuations. The procedures of the pricing service and its valuations
are reviewed by the officers of the Fund under the general supervision of the
Board of Trustees.
(b) Derivative financial instruments--The Fund may engage in various portfolio
strategies to seek to increase its return by hedging its portfolio against
adverse movements in the debt markets. Losses may arise due to changes in the
value of the contract or if the counterparty does not perform under the
contract.
o Financial futures contracts--The Fund may purchase or sell financial futures
contracts and options on such futures contracts for the purpose of hedging the
market risk on existing securities 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
Fund deposits and maintains as collateral such initial margin as required by the
exchange on which the transaction is effected. Pursuant to the contract, the
Fund agrees 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 Fund as unrealized gains or losses.
When the contract is closed, the Fund records 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.
o Options--The Fund is authorized to write covered call options and purchase put
options. When the Fund writes an option, an amount equal to the premium received
by the Fund is reflected as an asset and an equivalent liability. The amount of
the liability is subsequently marked to market to reflect the current market
value of the option written.
When a security is purchased or sold through an exercise of an option, the
related premium paid (or received) is added to (or deducted from) the basis of
the security acquired, or deducted from (or added to) the proceeds of the
security sold. When an option expires (or the Fund enters into a closing
transaction), the Fund realizes a gain or loss on the option to the extent of
the premiums received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Income taxes--It is the Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to
F-31
<PAGE>
MuniVest Florida Fund, October 31, 1998
================================================================================
NOTES TO FINANCIAL STATEMENTS
================================================================================
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--Deferred organization expenses are amortized
on a straight-line basis over a period not exceeding five years.
(f) Dividends and distributions--Dividends from net investment income are
declared 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"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML &
Co."), which is the limited partner.
FAM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Fund. For such services, the Fund pays a monthly fee at
an annual rate of 0.50% of the Fund's average weekly net assets, including
proceeds from the issuance of Preferred Shares.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or directors of
FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended October 31, 1998 were $111,836,787 and $112,260,791, respectively.
Net realized gains for the year ended October 31, 1998 and net unrealized gains
as of October 31, 1998 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains Gains
- --------------------------------------------------------------------------------
Long-term investments .................. $3,590,397 $5,340,704
---------- ----------
Total .................................. $3,590,397 $5,340,704
========== ==========
- --------------------------------------------------------------------------------
As of October 31, 1998, net unrealized appreciation for Federal income tax
purposes aggregated $5,339,077, of which $5,602,595 related to appreciated
securities and $263,518 related to depreciated securities. The aggregate cost of
investments at October 31, 1998 for Federal income tax purposes was
$127,555,175.
4. Beneficial Interest Transactions:
The Fund is authorized to issue an unlimited number of shares of beneficial
interest, including Preferred Shares, par value $.10 per share, all of which
were initially classified as Common Shares. The Board of Trustees is authorized,
however, to reclassify any unissued shares of beneficial interest without
approval of holders of Common Shares.
Common Shares
Shares issued and outstanding during the year ended October 31, 1998 increased
by 3,487 as a result of dividend reinvestment and during the year ended October
31, 1997 remained constant.
Preferred Shares
Auction Market Preferred Shares ("AMPS") are Preferred Shares of the Fund, with
a par value of $.05 per share and a liquidation preference of $25,000 per share,
that entitle their holders to receive cash dividends at an annual rate that may
vary for the successive dividend periods. The yield in effect at October 31,
1998 was 3.35%.
Shares issued and outstanding during the years ended October 31, 1998 and
October 31, 1997 remained constant.
The Fund pays commissions to certain broker-dealers at the end of each auction
at an annual rate ranging from 0.25% to 0.375%, calculated on the proceeds of
each auction. For
F-32
<PAGE>
the year ended October 31, 1998, Merrill Lynch, Pierce, Fenner & Smith Inc., an
affiliate of FAM, earned $73,287 as commissions.
5. Capital Loss Carryforward:
At October 31, 1998, the Fund had a capital loss carryforward of approximately
$2,726,000, of which $472,000 expires in 2002 and $2,254,000 expires in 2003.
This amount will be available to offset like amounts of any future taxable
gains.
6. Subsequent Event:
On November 5, 1998, the Fund's Board of Trustees declared an ordinary income
dividend to Common Shareholders in the amount of $.065566 per share, payable on
November 27, 1998 to shareholders of record as of November 20, 1998.
F-33
<PAGE>
Unaudited Financial Statements for
MuniVest Florida Fund
for the Six-Month Period
Ended April 30, 1999
F-34
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Alabama--0.8% AAA NR* $1,000 Jefferson County, Alabama, Sewer Revenue Bonds, RIB, Series 124,
6.39% due 2/01/2036 (d)(i) $ 1,038
===================================================================================================================================
California--1.1% A1+ NR* 1,300 California Pollution Control Financing Authority, PCR, Refunding
(Pacific Gas and Electric), VRDN, Series D, 4.10% due
11/01/2026 (a) 1,300
===================================================================================================================================
Florida--101.9% AAA Aaa 1,000 Bay Medical Center, Florida, Hospital Revenue Bonds (Bay Medical
Center Project), 5% due 10/01/2027 (b) 973
AAA Aaa 5,000 Brevard County, Florida, IDR (NUI Corporation Project), AMT, 6.40%
due 10/01/2024 (b) 5,564
AAA Aaa 4,000 Broward County, Florida, Airport System Revenue Bonds (Passenger
Facility), Convertible Lien, Series H-2, 4.75% due 10/01/2023 (b) 3,784
AAA NR* 1,100 Broward County, Florida, HFA, Revenue Refunding Bonds (Home
Mortgage), AMT, Series A, 7.35% due 3/01/2023 (e)(f) 1,152
AAA Aaa 8,200 Citrus County, Florida, PCR, Refunding (Florida Power
Corporation--Crystal River), Series B, 6.35% due 2/01/2022 (c) 8,918
AAA Aaa 1,125 Dade County, Florida, Educational Facilities Authority Revenue
Bonds (University of Miami), 7.65% due 4/01/2010 (c) 1,188
AA- Aa3 2,250 Dade County, Florida, IDA, Solid Waste Disposal Revenue Bonds
(Florida Power and Light Company Project), AMT, 7.15% due 2/01/2023 2,410
A1+ VMIG1+ 200 Dade County, Florida, Water and Sewer System Revenue Bonds, VRDN,
3.85% due 10/05/2022 (a)(d) 200
Escambia County, Florida, HFA, S/F Mortgage Revenue Refunding
Bonds, AMT (f):
AAA Aaa 3,000 7% due 4/01/2028 (e) 3,289
NR* Aaa 2,075 Series A, 7.40% due 10/01/2023 (j) 2,170
BBB Baa1 4,045 Escambia County, Florida, PCR (Champion International Corporation
Project), AMT, 6.90% due 8/01/2022 4,464
A1 VMIG1+ 600 Escambia County, Florida, PCR, Refunding (Gulf Power Company
Project), VRDN, 4.20% due 7/01/2022 (a) 600
NR* Aaa 1,135 Florida HFA, Home Ownership Revenue Bonds, AMT, Series G-1, 7.90%
due 3/01/2022 (f) 1,193
AAA Aaa 1,155 Florida Ports Financing Commission Revenue Bonds (State
Transportation Trust Fund), AMT, 5.375% due 6/01/2027 (c) 1,175
AAA Aaa 2,000 Florida State Board of Education, Capital Outlay, GO (Public
Education), Series B, 4.50% due 6/01/2023 (c) 1,824
===================================================================================================================================
</TABLE>
Portfolio
Abbreviations
To simplify the listings of MuniVest Florida Fund's portfolio holdings in the
Schedule of Investments, we have abbreviated the names of many of the securities
according to the list below and at right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
DATES Daily Adjustable Tax-Exempt Securities
GO General Obligation Bonds
HFA Housing Finance Agency
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
S/F Single-Family
VRDN Variable Rate Demand Notes
F-35
<PAGE>
MuniVest Florida Fund, April 30, 1999
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Florida AA+ Aa2 $ 3,565 Florida State Board of Education, Capital Outlay, GO, Refunding
(concluded) (Public Education), Series C, 5.25% due 6/01/2007 $ 3,814
AA+ Aa2 5,000 Florida State Board of Education, Capital Outlay, GO, Series C,
5.85% due 6/01/2003 (g) 5,433
AAA Aaa 1,000 Florida State, GO (Department of Transportation--Right of Way),
5.875% due 7/01/2005 (c)(g) 1,111
NR* Aaa 4,700 Florida State Mid-Bay Bridge Authority Revenue Refunding Bonds,
Series A, 5.95% due 10/01/2022 (b) 5,102
AAA Aaa 2,775 Florida State Turnpike Authority, Turnpike Revenue Bonds
(Department of Transportation), Series B, 5% due 7/01/2016 (c) 2,790
AAA Aaa 5,000 Fort Myers, Florida, Improvement Revenue Refunding Bonds, Series A,
5% due 12/01/2022 (b) 4,905
A- Baa1 2,000 Highlands County, Florida, Health Facilities Authority Revenue
Bonds (Adventist Hospital Health System), 5.25% due 11/15/2020 1,950
A A3 3,000 Hillsborough County, Florida, Capital Improvement Revenue Bonds
(County Center Project), Second Series, 6.75% due 7/01/2002 (g) 3,322
AAA Aaa 2,000 Hillsborough County, Florida, Utility Revenue Refunding Bonds,
Series B, 6.50% due 8/01/2016 (c) 2,149
AA Aa2 2,500 Jacksonville, Florida, Electric Authority Revenue Bonds (Electric
System), Series 3-A, 5.10% due 10/01/2032 2,460
AA Aa2 4,000 Jacksonville, Florida, Electric Authority, Revenue Refunding Bonds
(St. John's River), Issue 2, Series 9, 5.25% due 10/01/2021 4,023
Jacksonville, Florida, Health Facilities Authority, Hospital
Revenue Refunding Bonds:
NR* VMIG1+ 1,500 (Genesis Rehabilitation Hospital), VRDN, 4.25% due 5/01/2021 (a) 1,500
AA+ NR* 2,000 (Saint Luke's Hospital Association Project), 7.125% due 11/15/2020 2,169
NR* Baa1 345 Jacksonville, Florida, Health Facilities Authority, IDR (National
Benevolent--Cypress Village), Series A, 6.125% due 12/01/2016 361
NR* Aaa 2,705 Manatee County, Florida, HFA, S/F Mortgage Revenue Bonds, AMT,
Sub-Series 2, 7.75% due 5/01/2026 (f)(k) 2,949
AAA Aaa 2,460 Miami-Dade County, Florida, GO (Parks Program), 4.75% due
11/01/2023 (d) 2,327
BBB+ Baa1 2,890 Nassau County, Florida, PCR, Refunding (ITT Rayonier Inc. Project),
6.20% due 7/01/2015 3,047
AAA Aaa 1,150 Okaloosa County, Florida, Gas District, Revenue Refunding Bonds (Gas
Systems), Series A, 5.125% due 10/01/2016 (c) 1,175
Orange County, Florida, School Board, COP, Series A (c):
NR* Aaa 4,250 5.25% due 8/01/2023 4,318
NR* Aaa 5,000 5% due 8/01/2024 4,887
AAA Aaa 5,000 Orlando and Orange County Expressway Authority, Florida, Expressway
Revenue Refunding Bonds (Junior Lien), 5% due 7/01/2021 (d) 4,940
AAA Aaa 1,890 Palm Beach County, Florida, Criminal Justice Facilities Revenue
Bonds, 7.20% due 6/01/2015 (d) 2,409
AAA Aaa 2,500 Peace River/Manasota, Florida, Regional Water Supply Authority
Revenue Bonds (Peace River Option Project), Series A, 5% due
10/01/2028 (c) 2,443
A1+ VMIG1+ 3,300 Pinellas County, Florida, Health Facilities Authority, Revenue
Refunding Bonds (Pooled Hospital Loan Program), DATES, 4% due
12/01/2015 (a)(b) 3,300
AAA Aaa 1,500 Polk County, Florida, School Board, COP, Series A, 5% due
1/01/2024 (h) 1,469
AAA Aaa 1,200 Port Everglades Authority, Florida, Port Revenue Bonds, 7.125% due
11/01/2016 (l) 1,483
AA- Aa3 1,000 Saint Lucie County, Florida, Solid Waste Disposal Revenue Bonds
(Florida Power and Light Company Project), AMT, 6.70% due 5/01/2027 1,081
NR* Aaa 5,000 Sarasota County, Florida, Public Hospital Board, Revenue Refunding
Bonds, RIB, Series 99, 6.665% due 7/01/2028 (c)(i) 5,650
</TABLE>
F-36
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Florida (concluded) AAA Aaa 2,500 Tampa, Florida, Sports Authority Revenue Bonds (Sales Tax
Payments--Stadium Project), 5.25% due 1/01/2027 (c) 2,540
AAA Aaa 1,500 Tampa, Florida, Sports Authority, Revenue Refunding Bonds (County
Interlocal Payments), 5% due 10/01/2028 (b) 1,466
===================================================================================================================================
New York--3.4% A1+ VMIG1+ 4,200 Long Island Power Authority, New York, Electric System Revenue
Bonds, VRDN, Sub-Series 5, 4.25% due 5/01/2033 (a) 4,200
===================================================================================================================================
Texas--0.9% A1+ NR* 1,100 Harris County, Texas, Health Facilities Development Corporation,
Hospital Revenue Refunding Bonds (Methodist Hospital), VRDN, 4.25%
due 12/01/2025 (a) 1,100
===================================================================================================================================
Total Investments (Cost--$129,490)--108.1% 133,115
Liabilities in Excess of Other Assets--(8.1%) (9,948)
--------
Net Assets--100.0% $123,167
========
===================================================================================================================================
</TABLE>
(a) The interest rate is subject to change periodically based upon prevailing
market rates. The interest rate shown is the rate in effect at April 30,
1999.
(b) AMBAC Insured.
(c) MBIA Insured.
(d) FGIC Insured.
(e) FNMA Collateralized.
(f) GNMA Collateralized.
(g) Prerefunded.
(h) FSA Insured.
(i) 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 April 30, 1999.
(j) FHA Insured.
(k) FHLMC Collateralized.
(l) Escrowed to maturity.
* Not Rated.
+ Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
Quality Profile
The quality ratings of securities in the Fund as of April 30, 1999 were as
follows:
- --------------------------------------------------------------------------------
Percent of
S&P Rating/Moody's Rating Net Assets
- --------------------------------------------------------------------------------
AAA/Aaa............................................................... 70.1%
AA/Aa ................................................................ 17.4
A/A................................................................... 4.3
BBB/Baa............................................................... 6.4
Other+................................................................ 9.9
- --------------------------------------------------------------------------------
+ Temporary investments in short-term municipal securities.
F-37
<PAGE>
MuniVest Florida Fund, April 30, 1999
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<TABLE>
As of April 30, 1999
============================================================================================================================
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$129,489,541) (Note 1a) ..... $133,115,138
Cash ................................................................ 236,325
Receivables:
Interest .......................................................... $ 1,840,678
Securities sold ................................................... 1,189,865 3,030,543
------------
Prepaid expenses and other assets ................................... 6,657
------------
Total assets ........................................................ 136,388,663
------------
============================================================================================================================
Liabilities: Payables:
Securities purchased .............................................. 13,113,067
Investment adviser (Note 2) ....................................... 54,202
Dividends to shareholders (Note 1e) ............................... 42,780 13,210,049
------------
Accrued expenses and other liabilities .............................. 11,295
------------
Total liabilities ................................................... 13,221,344
------------
============================================================================================================================
Net Assets: Net assets .......................................................... $123,167,319
============
============================================================================================================================
Capital: Capital Shares (unlimited number of shares of beneficial interest
authorized) (Note 4):
Preferred Shares, par value $.05 per share (1,600 shares of AMPS*
issued and outstanding at $25,000 per share liquidation preference) $ 40,000,000
Common Shares, par value $.10 per share (5,988,782 shares issued
and outstanding) .................................................. $ 598,878
Paid-in capital in excess of par .................................... 83,340,130
Undistributed investment income--net ................................ 519,558
Accumulated realized capital losses on investments--net (Note 5) .... (4,916,844)
Unrealized appreciation on investments--net ......................... 3,625,597
------------
Total--Equivalent to $13.89 net asset value per Common Share
(market price--$13.5625) ............................................ 83,167,319
------------
Total capital ....................................................... $123,167,319
============
============================================================================================================================
</TABLE>
* Auction Market Preferred Shares.
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
<TABLE>
For the Six Months Ended April 30, 1999
=================================================================================================================
<S> <C> <C>
Investment Interest and amortization of premium and discount earned ... $ 3,287,591
Income (Note 1d):
=================================================================================================================
Expenses: Investment advisory fees (Note 2) .......................... $ 310,276
Commission fees (Note 4) ................................... 49,216
</TABLE>
F-38
<PAGE>
<TABLE>
<S> <C> <C>
Professional fees .......................................... 34,948
Accounting services (Note 2) ............................... 24,905
Transfer agent fees ........................................ 19,382
Printing and shareholder reports ........................... 13,847
Trustees' fees and expenses ................................ 13,318
Listing fees ............................................... 7,852
Custodian fees ............................................. 5,521
Pricing fees ............................................... 3,440
Other ...................................................... 6,861
-----------
Total expenses ............................................. 489,566
-----------
Investment income--net ..................................... 2,798,025
-----------
=================================================================================================================
Realized & Realized loss on investments--net .......................... (134,884)
Unrealized Loss on Change in unrealized appreciation on investments--net ...... (1,715,107)
Investments--Net -----------
(Notes 1b, 1d & 3): Net Increase in Net Assets Resulting from Operations ....... $ 948,034
===========
=================================================================================================================
</TABLE>
See Notes to Financial Statements.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six For the
Months Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 1999 1998
===================================================================================================================================
<S> <C> <C> <C>
Operations: Investment income--net ...................................................... $ 2,798,025 $ 5,943,665
Realized gain (loss) on investments--net .................................... (134,884) 3,590,397
Change in unrealized appreciation/depreciation on investments--net .......... (1,715,107) (1,665,313)
------------ ------------
Net increase in net assets resulting from operations ........................ 948,034 7,868,749
------------ ------------
===================================================================================================================================
Dividends to Investment income--net:
Shareholders Common Shares ............................................................. (2,236,063) (4,560,158)
(Note 1e): Preferred Shares .......................................................... (587,328) (1,326,560)
------------ ------------
Net decrease in net assets resulting from dividends to shareholders ......... (2,823,391) (5,886,718)
------------ ------------
===================================================================================================================================
Beneficial Interest Value of shares issued to Common Shareholders in reinvestment of dividends .. 93,863 49,203
Transactions ------------ ------------
(Note 4):
===================================================================================================================================
Net Assets: Total increase (decrease) in net assets ..................................... (1,781,494) 2,031,234
Beginning of period ......................................................... 124,948,813 122,917,579
------------ ------------
End of period* .............................................................. $123,167,319 $124,948,813
============ ============
===================================================================================================================================
* Undistributed investment income--net ........................................ $ 519,558 $ 544,924
============ ============
===================================================================================================================================
</TABLE>
See Notes to Financial Statements.
F-39
<PAGE>
MuniVest Florida Fund, April 30, 1999
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
The following per share data and ratios have been
derived from information provided in the financial For the Six
statements. Months Ended For the Year Ended October 31,
April 30, -----------------------------------------
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ................... $ 14.20 $ 13.87 $ 13.39 $ 13.16 $ 11.82
Operating -------- -------- -------- -------- --------
Performance: Investment income--net ................................. .47 .99 1.01 .99 1.01
Realized and unrealized gain (loss) on
investments--net ....................................... (.31) .32 .48 .23 1.34
-------- -------- -------- -------- --------
Total from investment operations ....................... .16 1.31 1.49 1.22 2.35
-------- -------- -------- -------- --------
Less dividends to Common Shareholders from investment
income--net ............................................ (.37) (.76) (.78) (.76) (.76)
-------- -------- -------- -------- --------
Effect of Preferred Share activity:
Dividends to Preferred Shareholders from investment
income--net .......................................... (.10) (.22) (.23) (.23) (.25)
-------- -------- -------- -------- --------
Net asset value, end of period ......................... $ 13.89 $ 14.20 $ 13.87 $ 13.39 $ 13.16
======== ======== ======== ======== ========
Market price per share, end of period .................. $13.5625 $ 14.125 $ 13.00 $ 12.75 $ 11.50
======== ======== ======== ======== ========
===================================================================================================================================
Total Investment Based on market price per share ........................ (1.38%)+ 14.78% 8.21% 17.87% 22.93%
Return:** ======== ======== ======== ======== ========
Based on net asset value per share ..................... .47%+ 8.16% 9.93% 8.17% 19.02%
======== ======== ======== ======== ========
===================================================================================================================================
Ratios to Average Expenses ............................................... .79%* .77% .78% .82% .85%
Net Assets:*** ======== ======== ======== ======== ========
Investment income--net ................................. 4.51%* 4.80% 4.96% 4.96% 5.38%
======== ======== ======== ======== ========
===================================================================================================================================
Supplemental Net assets, net of Preferred Shares, end of period
Data: (in thousands) ......................................... $ 83,167 $ 84,949 $ 82,918 $ 80,058 $ 78,695
======== ======== ======== ======== ========
Preferred Shares outstanding, end of period
(in thousands) ......................................... $ 40,000 $ 40,000 $ 40,000 $ 40,000 $ 40,000
======== ======== ======== ======== ========
Portfolio turnover ..................................... 46.54% 92.75% 89.21% 116.82% 92.54%
======== ======== ======== ======== ========
===================================================================================================================================
Leverage: Asset coverage per $1,000 .............................. $ 3,079 $ 3,124 $ 3,073 $ 3,001 $ 2,967
======== ======== ======== ======== ========
===================================================================================================================================
Dividends Investment income--net ................................. $ 367 $ 829 $ 844 $ 861 $ 940
Per Share on ======== ======== ======== ======== ========
Preferred Shares
Outstanding:
===================================================================================================================================
</TABLE>
* Annualized.
** Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value, may result
in substantially different returns. Total investment returns exclude
the effects of sales loads.
*** Do not reflect the effect of dividends to Preferred Shareholders.
+ Aggregate total investment return.
See Notes to Financial Statements.
F-40
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. Significant Accounting Policies:
MuniVest Florida Fund (the "Fund") is registered under the Investment Company
Act of 1940 as a non-diversified, closed-end management investment company. The
Fund's financial statements are prepared in accordance with generally accepted
accounting principles which may require the use of management accruals and
estimates. These unaudited financial statements reflect all adjustments which
are, in the opinion of management, necessary to a fair statement of the results
for the interim period presented. All such adjustments are of a normal recurring
nature. The Fund determines and makes available for publication the net asset
value of its Common Shares on a weekly basis. The Fund's Common Shares are
listed on the New York Stock Exchange under the symbol MVS. The following is a
summary of significant accounting policies followed by the Fund.
(a) Valuation of investments--Municipal bonds are traded primarily in the
over-the-counter markets and are valued at the most recent bid price or yield
equivalent as obtained by the Fund's pricing service from dealers that make
markets in such securities. Financial futures contracts and options thereon,
which are traded on exchanges, are valued at their closing prices as of the
close of such exchanges. Options written or purchased are valued at the last
sale price in the case of exchange-traded options. In the case of options traded
in the over-the-counter market, valuation is the last asked price (options
written) or the last bid price (options purchased). Securities with remaining
maturities of sixty days or less are valued at amortized cost, which
approximates market value. Securities and assets for which market quotations are
not readily available are valued at fair value as determined in good faith by or
under the direction of the Board of Trustees of the Fund, including valuations
furnished by a pricing service retained by the Fund, which may utilize a matrix
system for valuations. The procedures of the pricing service and its valuations
are reviewed by the officers of the Fund under the general supervision of the
Board of Trustees.
(b) Derivative financial instruments--The Fund may engage in various portfolio
strategies to seek to increase its return by hedging its portfolio against
adverse movements in the debt markets. Losses may arise due to changes in the
value of the contract or if the counterparty does not perform under the
contract.
o Financial futures contracts--The Fund may purchase or sell financial futures
contracts and options on such futures contracts for the purpose of hedging the
market risk on existing securities 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
Fund deposits and maintains as collateral such initial margin as required by the
exchange on which the transaction is effected. Pursuant to the contract, the
Fund agrees 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 Fund as unrealized gains or losses.
When the contract is closed, the Fund records 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.
o Options--The Fund is authorized to write covered call options and purchase put
options. When the Fund writes an option, an amount equal to the premium received
by the Fund is reflected as an asset and an equivalent liability. The amount of
the liability is subsequently marked to market to reflect the current market
value of the option written.
When a security is purchased or sold through an exercise of an option, the
related premium paid (or received) is added to (or deducted from) the basis of
the security acquired or deducted from (or added to) the proceeds of the
security sold. When an option expires (or the Fund enters into a closing
transaction), the Fund realizes a gain or loss on the option to the extent of
the premiums received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
F-41
<PAGE>
MuniVest Florida Fund, April 30, 1999
================================================================================
NOTES TO FINANCIAL STATEMENTS (concluded)
================================================================================
Written and purchased options are non-income producing investments.
(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) Dividends and distributions--Dividends from net investment income are
declared 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"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML &
Co."), which is the limited partner.
FAM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Fund. For such services, the Fund pays a monthly fee at
an annual rate of 0.50% of the Fund's average weekly net assets, including
proceeds from the issuance of Preferred Shares.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or directors of
FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended April 30, 1999 were $55,143,745 and $54,496,533, respectively.
Net realized losses for the six months ended April 30, 1999 and net unrealized
gains as of April 30, 1999 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Losses Gains
- --------------------------------------------------------------------------------
Long-term investments ................... $ (134,884) $3,625,597
---------- ----------
Total ................................... $ (134,884) $3,625,597
========== ==========
- --------------------------------------------------------------------------------
As of April 30, 1999, net unrealized appreciation for Federal income tax
purposes aggregated $3,625,597, of which $4,156,868 related to appreciated
securities and $531,271 related to depreciated securities. The aggregate cost of
investments at April 30, 1999 for Federal income tax purposes was $129,489,541.
4. Beneficial Interest Transactions:
The Fund is authorized to issue an unlimited number of shares of beneficial
interest, including Preferred Shares, par value $.10 per share, all of which
were initially classified as Common Shares. The Board of Trustees is authorized,
however, to reclassify any unissued shares of beneficial interest without
approval of holders of Common Shares.
Common Shares
Shares issued and outstanding during the six months ended April 30, 1999
increased by 6,633 as a result of dividend reinvestment and during the year
ended October 31, 1998 remained constant.
Preferred Shares
Auction Market Preferred Shares ("AMPS") are Preferred Shares of the Fund, with
a par value of $.05 per share and a liquidation preference of $25,000 per share,
that entitle their holders to receive cash dividends at an annual rate that may
vary for the successive dividend periods. The yield in effect at April 30, 1999
was 3.31%.
Shares issued and outstanding during the six months ended April 30, 1999 and the
year ended October 31, 1998 remained constant.
F-42
<PAGE>
MuniVest Florida Fund, April 30, 1999
================================================================================
NOTES TO FINANCIAL STATEMENTS (concluded)
================================================================================
The Fund pays commissions to certain broker-dealers at the end of each auction
at an annual rate ranging from 0.25% to 0.375%, calculated on the proceeds of
each auction. For the six months ended April 30, 1999, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, an affiliate of FAM, earned $26,350 as commissions.
5. Capital Loss Carryforward:
At October 31, 1998, the Fund had a capital loss carryforward of approximately
$2,726,000, of which $472,000 expires in 2002 and $2,254,000 expires in 2003.
This amount will be available to offset like amounts of any future taxable
gains.
6. Subsequent Event:
On May 6, 1999, the Fund's Board of Trustees declared an ordinary income
dividend to Common Shareholders in the amount of $.056659 per share, payable on
May 27, 1999 to shareholders of record as of May 21, 1999.
F-43
<PAGE>
Unaudited Financial Statements for
Combined Fund on a Pro Forma Basis,
as of April 30, 1999
F-44
<PAGE>
Combined Schedule of Investments for
MuniYield Florida Fund and MuniVest Florida Fund (Unaudited)
April 30, 1999
(in Thousands)
<TABLE>
<CAPTION>
ProForma for
S&P Moody's Face MuniYield MuniVest Combined
Ratings Ratings Amount Florida++ Florida++ Fund++
<S> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
Alabama--1.0% Issue
- ------------------------------------------------------------------------------------------------------------------------------------
AAA NR* 2,715 Jefferson County, Alabama, Sewer Revenue Bonds, RIB, Series 124, 6.39%
due 2/01/2036(c)(h) ................................................... $ 1,780 $ 1,038 $ 2,818
- ------------------------------------------------------------------------------------------------------------------------------------
Alaska--0.3%
- ------------------------------------------------------------------------------------------------------------------------------------
A-1+ VMIG1+ 1,000 Valdez, Alaska, Marine Terminal Revenue Refunding Bonds (Exxon Pipeline
Company Project), VRDN, Series C, 4.05% due 12/01/2033(g) ............. 1,000 -- 1,000
- ------------------------------------------------------------------------------------------------------------------------------------
California--0.4%
- ------------------------------------------------------------------------------------------------------------------------------------
A1+ NR* 1,300 California Pollution Control Financing Authority, PCR, Refunding
(Pacific Gas and Electric), VRDN, Series D, 4.10% due 11/01/2026(g) ... -- 1,300 1,300
- ------------------------------------------------------------------------------------------------------------------------------------
Florida--101.7%
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Bay Medical Center, Florida, Hospital Revenue Bonds (Bay Medical Center
Project), 5% due 10/01/2027(a) ....................................... -- 973 973
AAA Aaa 7,650 Brevard County, Florida, IDR (NUI Corporation Project), AMT, 6.40%
due 10/01/2024(a) ..................................................... 2,949 5,564 8,513
AAA Aaa 9,400 Broward County, Florida, Airport System Revenue Bonds (Passenger
Facility), Convertible Lien, Series H-2, 4.75% due 10/01/2023(a) ...... 5,109 3,784 8,893
AAA NR* 1,100 Broward County, Florida, HFA Revenue Refunding Bonds (Home Mortgage),
AMT, Series A, 7.35% due 3/01/2023(j)(d) .............................. -- 1,152 1,152
Citrus County, Florida, PCR, Refunding (Florida Power Corporation--
Crystal River):
A+ A1 13,700 Series A, 6.625% due 1/01/2027 ........................................ 14,714 -- 14,714
AAA Aaa 8,200 Series B, 6.35% due 2/01/2022(b) ...................................... -- 8,918 8,918
Dade County, Florida, Aviation Revenue Bonds, AMT, Series B,
AAA Aaa 1,000 6.55% due 10/01/2013(b) ............................................... 1,094 -- 1,094
AAA Aaa 5,000 6.60% due 10/01/2022(b) ............................................... 5,477 -- 5,477
AAA Aaa 1,125 Dade County, Florida, Educational Facilities Authority Revenue Bonds
(University of Miami), 7.65% due 4/01/2010(b) ......................... -- 1,188 1,188
AA-- Aa3 2,250 Dade County, Florida, IDA, Solid Waste Disposal Revenue Bonds
(Florida Power and Light Company Project), AMT, 7.15% due 2/01/2023 ... -- 2,410 2,410
A1+ VMIG1+ 200 Dade County, Florida, Water and Sewer System Revenue Bonds, VRDN, 3.85%
due 10/05/2022(c)(g) .................................................. -- 200 200
NR* Aaa 1,725 Escambia County, Florida, HFA, S/F Mortgage Revenue Bonds (Multi-County
Program), AMT, Series A, 6.90% due 4/01/2020(d) ....................... 1,814 -- 1,814
</TABLE>
F-45
<PAGE>
Combined Schedule of Investments for
MuniYield Florida Fund and MuniVest Florida Fund (Unaudited) (continued)
April 30, 1999
(in Thousands)
<TABLE>
<CAPTION>
ProForma for
S&P Moody's Face MuniYield MuniVest Combined
Ratings Ratings Amount Florida++ Florida++ Fund++
<S> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
Florida (continued) Issue
- ------------------------------------------------------------------------------------------------------------------------------------
Escambia County, Florida, HFA, S/F Mortgage Revenue Refunding Bonds,
AMT(d):
NR* Aaa 5,805 7% due 4/01/2028(d)(j) ................................................ 3,075 3,289 6,364
NR* Aaa 2,500 (Multi-County Program), 5.20% due 4/01/2032(b)(d)(j) .................. 2,484 -- 2,484
NR* Aaa 3,925 Series A, 7.40% due 10/01/2023(d)(i) .................................. 1,935 2,170 4,105
BBB Baa1 7,045 Escambia County, Florida, PCR (Champion International Corporation
Project), AMT, 6.90% due 8/01/2022 .................................. 3,311 4,464 7,775
A1 VMIG1+ 800 Escambia County, Florida, PCR, Refunding (Gulf Power Company Project),
VRDN, 4.20% due 7/01/2022(g) .......................................... 200 600 800
NR* Aaa 2,290 Florida, HFA, Home Ownership Revenue Refunding Bonds, AMT, Series G-1,
7.90% due 3/01/2022(d) ................................................ 1,214 1,193 2,407
AAA Aaa 1,155 Florida Ports Financing Commission Revenue Bonds (State Transportation
Trust Fund), AMT, 5.375% due 6/01/2027(b) ............................. -- 1,175 1,175
Florida State Board of Education, Capital Outlay, GO (Public Education):
AA+ Aaa 1,000 Series A, 6.10% due 6/01/2004(f) ...................................... 1,110 -- 1,110
AA+ Aa2 6,000 Series B, 4.50% due 6/01/2023(b) ...................................... 3,648 1,824 5,472
AAA Aaa 7,500 Series B, 4.50% due 6/01/2028(b) ...................................... 6,769 -- 6,769
AA+ Aa2 7,165 Florida State Board of Education, Capital Outlay, GO, Refunding
(Public Education), Series C, 5.25% due 6/01/2007 ..................... 3,852 3,814 7,666
AA Aa2 5,000 Florida State Board of Education, Capital Outlay, GO, Series C,
5.85% due 6/01/2003(f) ................................................ -- 5,433 5,433
AAA Aaa 1,000 Florida State, GO (Department of Transportation-Right of Way), 5.875%
due 7/01/2005(b)(f) ................................................... -- 1,111 1,111
NR* NR* 5,495 Florida State Mid-Bay Bridge Authority Revenue Bonds, Series A, 7.50%
due 10/01/2017(a) ..................................................... 6,106 -- 6,106
NR* Aaa 4,700 Florida State Mid-Bay Bridge Authority Revenue Refunding Bonds,
Series A, 5.95% due 10/01/2022(a) ..................................... -- 5,102 5,102
AAA Aaa 7,775 Florida State Turnpike Authority, Turnpike Revenue Bonds (Department of
Transportation), Series B, 5% due 7/01/2016(b) ........................ 5,027 2,790 7,817
AAA Aaa 5,000 Fort Myers, Florida, Improvement Revenue Refunding Bonds, Series A,
5% due 12/01/2022(a) .................................................. -- 4,905 4,905
</TABLE>
F-46
<PAGE>
Combined Schedule of Investments for
MuniYield Florida Fund and MuniVest Florida Fund (Unaudited) (continued)
April 30, 1999
(in Thousands)
<TABLE>
<CAPTION>
ProForma for
S&P Moody's Face MuniYield MuniVest Combined
Ratings Ratings Amount Florida++ Florida++ Fund++
<S> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
Florida (continued) Issue
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 4,000 Greater Orlando Aviation Authority Revenue Bonds (Orlando Airport
Facilities), AMT, Series A, 6.50% due 10/01/2012(c) ................... 4,369 -- 4,369
A- Baa1 2,000 Highlands County, Florida, Health Facilities Authority Revenue Bonds
(Adventist Hospital Health System), 5.25% due 11/15/2020 .............. -- 1,950 1,950
A A3 3,000 Hillsborough County, Florida, Capital Improvement Revenue Bonds
(County Center Project) Second Series, 6.75% due 7/01/2002(f) .......... -- 3,322 3,322
AAA Aaa 1,000 Hillsborough County, Florida, IDA Revenue Bonds (Allegany Health
System- J. Knox Village), 6.375% due 12/01/2003(b)(f) ................. 1,081 -- 1,081
Hillsborough County, Florida, Utility Revenue Refunding Bonds:
BBB+ A3 1,245 Series A, 7% due 8/01/2014 ............................................ 1,328 -- 1,328
AAA Aaa 4,000 Series B, 6.50% due 8/01/2016(e) ...................................... 2,149 2,149 4,298
AAA Aaa 1,300 Indian River County, Florida, Hospital Revenue Refunding Bonds,
5.70% due 10/01/2015(e) .............................................. 1,394 -- 1,394
AAA Aaa 5,000 Jacksonville, Florida, Capital Improvement Revenue Refunding Bonds
(Stadium Project), 4.75% due 10/01/2025(a) ............................ 4,713 -- 4,713
AA Aa2 2,500 Jacksonville, Florida, Electric Authority Revenue Bonds (Electric
System), Series 3-A, 5.10% due 10/01/2032 ............................. -- 2,460 2,460
Jacksonville, Florida, Electric Authority, Revenue Refunding Bonds
(St. Johns River), Issue 2:
AA Aa2 4,000 Series 9, 5.25% due 10/01/2021 ........................................ -- 4,023 4,023
AA Aa2 2,000 Series 15, 6% due 10/01/2005 .......................................... 2,216 -- 2,216
Jacksonville, Florida, Health Facilities Authority, Hospital Revenue
Refunding Bonds:
NR* VMIG1+ 2,600 (Genesis Rehabilitation Hospital), VRDN, 4% due 5/01/2021(g) .......... 1,100 1,500 2,600
AA+ NR* 2,000 (Saint Luke's Hospital Association Project), 7.125% due 11/15/2020 .... -- 2,169 2,169
NR* Baa1 345 Jacksonville, Florida, Health Facilities Authority, IDR (National
Benevolent-Cypress Village), Series A, 6.125% due 12/01/2016 ........ -- 361 361
A-1+ VMIG1+ 600 Jacksonville, Florida, PCR, Refunding (Florida Power & Light Co.
Project), VRDN, 4.20% due 5/01/2029(g) ................................ 600 -- 600
AA- A1 5,000 Lakeland, Florida, Electric and Water Revenue Refunding and
Improvement Bonds, Series B, 5.625% due 10/01/2006 .................... 5,510 -- 5,510
AAA Aaa 4,000 Lee County, Florida, Solid Waste System Revenue Bonds, Series A, AMT,
6.50% due 10/01/2013(b) ............................................... 4,298 -- 4,298
</TABLE>
F-47
<PAGE>
Combined Schedule of Investments for
MuniYield Florida Fund and MuniVest Florida Fund (Unaudited) (continued)
April 30, 1999
(in Thousands)
<TABLE>
<CAPTION>
ProForma for
S&P Moody's Face MuniYield MuniVest Combined
Ratings Ratings Amount Florida++ Florida++ Fund++
<S> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
Florida (continued) Issue
- ------------------------------------------------------------------------------------------------------------------------------------
AAA NR* 1,640 Leon County, Florida, HFA, S/F Mortgage Revenue Bonds (Multi-County
Progarm), AMT, Series B, 7.30% due 1/01/2028(d) ....................... 1,864 -- 1,864
NR* Aaa 2,705 Manatee County, Florida, HFA, S/F Mortgage Revenue Bonds, AMT,
Sub-Series 2, 7.75% due 5/01/2026(d) .................................. -- 2,949 2,949
A1+ VMIG1+ 100 Manatee County, Florida, PCR, Refunding (Florida Power and Light
Company Project), VRDN, 4% due 9/01/2024(g) ........................... 100 -- 100
AAA Aaa 2,500 Miami Beach, Florida, Parking Revenue Bonds, 5.125% due 9/01/2022(e) .... 2,495 -- 2,495
AAA Aaa 2,460 Miami-Dade County, Florida, GO (Parks Program), 4.75% due 11/01/2023(c) . -- 2,327 2,327
AAA Aaa 4,000 Miami-Dade County, Florida, School Board, COP, Revenue Refunding Bonds,
Series C, 5% due 8/01/2025(e) ......................................... 3,903 -- 3,903
AAA Aaa 7,600 Miami-Dade County, Florida, Water and Sewer Revenue Bonds, GO, Series
A, 5% due 10/01/2029(c) ............................................... 7,414 -- 7,414
BBB+ Baa2 2,890 Nassau County, Florida, PCR, Refunding (ITT Rayonier Inc. Project),
6.20% due 7/01/2015 ................................................... -- 3,047 3,047
Okaloosa County, Florida, Gas District Revenue Refunding Bonds
(Gas System),Series A:
AAA Aaa 1,150 5.125% due 10/01/2016(b) .............................................. -- 1,175 1,175
AAA Aaa 2,625 5.20% due 10/01/2019(b) ............................................... 2,664 -- 2,664
AAA Aaa 2,000 Orange County, Florida, Health Facilities Authority Revenue Bonds
(Hospital-Orlando Regional Healthcare), Series A, 6.25% due
10/01/2013(b) ......................................................... 2,326 -- 2,326
AAA Aaa 500 Orange County, Florida, Health Facilities Authority Revenue
Refunding Bonds (Hospital-Orlando Regional Healthcare), Series C,
6.25% due 10/01/2016(b) ............................................... 582 -- 582
Orange County, Florida, School Board, COP, Series A(b):
NR* Aaa 10,500 5.25% due 8/01/2023(b) ................................................ 6,350 4,318 10,668
NR* Aaa 5,000 5% due 8/01/2024 ...................................................... -- 4,887 4,887
AAA Aaa 11,000 Orlando and Orange County Expressway Authority, Florida, Expressway
Revenue Refunding Bonds, Junior Lien, 5% due 7/01/2021(c) ............. 5,928 4,940 10,868
AAA Aaa 3,390 Palm Beach County, Florida, Criminal Justice Facilities Revenue Bonds,
7.20% due 6/01/2015(c) ............................................... 1,912 2,409 4,321
NR* Aaa 1,390 Palm Beach County, Florida, HFA, S/F Mortgage Revenue Bonds, AMT,
Series A, 6.80% due 10/01/2027(d)(j) .................................. 1,485 -- 1,485
</TABLE>
F-48
<PAGE>
Combined Schedule of Investments for
MuniYield Florida Fund and MuniVest Florida Fund (Unaudited) (continued)
April 30, 1999
(in Thousands)
<TABLE>
<CAPTION>
ProForma for
S&P Moody's Face MuniYield MuniVest Combined
Ratings Ratings Amount Florida++ Florida++ Fund++
<S> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
Florida (continued) Issue
- ------------------------------------------------------------------------------------------------------------------------------------
Peace River/Manasota, Florida, Regional Water
Supply Authority, Revenue Bonds (Peace River
Option Project), Series A:
AAA NR* 1,000 5% due 10/01/2023(b) .................................................. 979 -- 979
AAA NR* 2,500 5% due 10/01/2028(b) .................................................. -- 2,443 2,443
NR* Aaa 7,625 Pembroke Pines, Florida, Capital Improvement Revenue Refunding Bonds,
5.25% due 12/01/2026(a) ............................................... 7,734 -- 7,734
A-1+ VMIG1+ 3,450 Pinellas County, Florida, Health Facilities Authority, Revenue Refunding
Bonds (Pooled Hospital Loan Program), DATES, 4% due 12/01/2015(a)(g) .. 150 3,300 3,450
AAA Aaa 3,660 Polk County, Florida, School Board, COP, Series A, 5% due 1/01/2024(e) .. 2,115 1,469 3,584
AAA Aaa 1,200 Port Everglades Authority, Florida, Port Revenue Bonds, 7.125% due
11/01/2016 Saint Lucie County, Florida, PCR, Refunding ................. -- 1,483 1,483
(Florida Power and Light Company Project),
VRDN(g):
A-1+ VMIG1+ 600 4% due 1/01/2026(g) ................................................... 600 -- 600
A-1+ VMIG1+ 4,000 4.20% due 3/01/2027(g) ................................................ 4,000 -- 4,000
AA-- Aa3 1,000 Saint Lucie County, Florida, Solid Waste Disposal Revenue Bonds
(Florida Power and Light Company Project), AMT, 6.70% due 5/01/2027 ... -- 1,081 1,081
Saint Petersburg, Florida, Health Facilities Authority Revenue
Bonds(b)(f):
AAA* Aaa 1,550 (Alleghany Health System-Saint Anthony's), 6.75% due 12/01/2003(b)(f) . 1,742 -- 1,742
AAA Aaa 2,000 (Alleghany Health System), Series A, 7% due 12/01/2001(b)(f) .......... 2,198 -- 2,198
Sarasota County, Florida, Public Hospital Board, Revenue Refunding
Bonds(b):
NR* Aaa 10,000 RITR, Series 99, 6.665% due 7/01/2028(b)(h) ........................... 5,650 5,650 11,300
AAA Aaa 3,100 (Sarasota Memorial Hospital), Series B, 5.25% due 7/01/2024(b) ........ 3,192 -- 3,192
AAA Aaa 2,500 Tampa, Florida, Sports Authority Revenue Bonds, Sales Tax Payments
(Stadium Project), 5.25% due 1/01/2027(b) ............................. -- 2,540 2,540
AAA Aaa 1,500 Tampa, Florida, Sports Authority Revenue Refunding Bonds (County
Interlocal Payments), 5% due 10/01/2028(a) ............................ -- 1,466 1,466
AAA Aaa 6,000 Tampa, Florida, Water and Sewer Revenue Refunding Bonds, Series A, 6.25%
due 10/01/2002(c)(f) .................................................. 6,524 -- 6,524
AAA Aaa 2,520 Village Center Community Development District, Florida, Recreational
RevenueRefunding Bonds, Series A, 5% due 11/01/2021(b) ................ 2,480 -- 2,480
AAA Aaa 1,325 Winter Haven, Florida, Utility System Revenue Refunding and
Improvement Bonds, 4.75% due 10/01/2028(b) ............................ 1,245 -- 1,245
</TABLE>
F-49
<PAGE>
Combined Schedule of Investments for
MuniYield Florida Fund and MuniVest Florida Fund (Unaudited) (continued)
April 30, 1999
(in Thousands)
<TABLE>
<CAPTION>
ProForma for
S&P Moody's Face MuniYield MuniVest Combined
Ratings Ratings Amount Florida++ Florida++ Fund++
<S> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
New York--1.9%
- ------------------------------------------------------------------------------------------------------------------------------------
A- VMIG1+ 5,600 Long Island Power Authority, New York, Electric System Revenue Bonds,
VRDN, Sub-Series 5, 4.25% due 5/01/2033(g) ............................ 1,400 4,200 5,600
- ------------------------------------------------------------------------------------------------------------------------------------
Puerto Rico--0.4%
- ------------------------------------------------------------------------------------------------------------------------------------
BBB+ Baa1 1,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series T, 6%
due 7/01/2016 ......................................................... 1,079 -- 1,079
- ------------------------------------------------------------------------------------------------------------------------------------
Texas--2.0%
- ------------------------------------------------------------------------------------------------------------------------------------
A-1+ NR* 5,900 Harris County, Texas, Health Facilities Development Corporation,
Hospital Revenue Refunding Bonds (Methodist Hospital), VRDN,
4.25% due 12/01/2025(g) ............................................... 4,800 1,100 5,900
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments (Cost--$309,006)--107.7% .............................. 184,337 133,115 317,452
Liabilities in Excess of Other Assets--(7.7%) ........................... (10,323) (9,948) (22,690)
-------- -------- --------
Net Assets--100.0% ...................................................... $174,014 $123,167 $294,762
======== ======== ========
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) AMBAC Insured.
(b) MBIA Insured.
(c) FGIC Insured.
(d) GNMA Collateralized.
(e) FSA Insured.
(f) Prerefunded.
(g) The interest rate is subject to change periodically based upon prevailing
market rates. The interest rate shown is the rate in effect at April 30,
1999.
(h) 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 April 30, 1999.
(i) FHA Insured.
(j) FNMA Collateralized.
* Not Rated.
+ Highest short-term rating by Moody's Investors Service, Inc.
++ Value as discussed in the Combined Notes to Financial Statements.
See Notes to Financial Statements.
F-50
<PAGE>
PORTFOLIO ABBREVIATIONS
To simplify the listings of MuniYield Florida Fund's portfolio holdings in
the Schedule of Investments, we have abbreviated the names of many of the
securities according to the list below.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
DATES Daily Adjustable Tax-Exempt Securities
GO General Obligation Bonds
HFA Housing Finance Agency
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
RITR Residual Interest Trust Receipts
S/F Single-Family
VRDN Variable Rate Demand Notes
F-51
<PAGE>
The following unaudited pro forma Combined Statement of Assets, Liabilities
and Capital for the Combined Fund has been derived from the Statements of
Assets, Liabilities and Capital of the respective Funds at April 30, 1999 and
such information has been adjusted to give effect to the Reorganization as if
the Reorganization had occurred at April 30, 1999. The pro forma Combined
Statement of Assets, Liabilities and Capital is presented for informational
purposes only and does not purport to be indicative of the financial condition
that actually would have resulted if the Reorganization had been consummated at
April 30, 1999. The pro forma Combined Statement of Assets, Liabilities and
Capital should be read in conjunction with the Funds' financial statements and
related notes thereto which are included in the Joint Proxy Statement and
Prospectus.
PRO FORMA COMBINED STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
MUNIYIELD FLORIDA FUND AND MUNIVEST FLORIDA FUND
As of April 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Pro Forma
MuniYield MuniVest for
Florida Florida Adjustments Combined Fund
------- ------- ----------- -------------
<S> <C> <C> <C> <C>
Assets:
Investments, at value* (Note 1a) ........... $ 184,337,188 $ 133,115,138 $ 317,452,326
Cash ....................................... 65,913 236,325 302,238
Receivables:
Securities sold ......................... 6,641,594 1,189,865 7,831,459
Interest ............................... 2,136,432 1,840,678 3,977,110
Prepaid expenses and other assets .......... 10,480 6,657 17,137
------------- ------------- ------------- -------------
Total assets ............................... 193,191,607 136,388,663 0 329,580,270
------------- ------------- ------------- -------------
Liabilities:
Payables:
Securities purchased .................... 19,075,690 13,113,067 32,188,757
Dividends to shareholders (Note 1e) ..... 0 42,780 2,245,337(1) 2,288,117
Investment adviser (Note 2) ............. 76,552 54,202 130,754
Accrued expenses and other liabilities ..... 25,248 11,295 36,543
------------- ------------- ------------- -------------
Total liabilities .......................... 19,177,490 13,221,344 2,245,337 34,644,171
------------- ------------- ------------- -------------
Net Assets:
Net Assets ................................. $ 174,014,117 $ 123,167,319 $ (2,245,337) $ 294,936,099
============= ============= ============= =============
Capital
Capital Shares (unlimited number of shares
of beneficial interest authorized)
Preferred Shares, par value $.10 per share
of AMPS** issued and outstanding+ at
$25,000 per share liquidation
preference ............................. $ 55,000,000 $ 40,000,000 $ 95,000,000
Common Shares, par value $.10 per share
issued and outstanding++ ............... 799,384 598,878 (35,588) 1,362,674
Paid-in capital in excess of par ........... 111,667,496 83,340,130 35,588 195,043,214
Undistributed investment income - net ...... 1,523,047 519,558 (2,042,605) 0
Undistributed (accumulated) realized capital
gains (losses) on investments-net ........ 202,732 (4,916,844) (202,732) (4,916,844)
Unrealized appreciation on investments-net . 4,821,458 3,625,597 8,447,055
------------- ------------- ------------- -------------
Total Capital+++ ........................... $ 174,014,117 $ 123,167,319 $ (2,245,337) $ 294,936,099
============= ============= ============= =============
* Identified Cost ....................... $ 179,515,730 $ 129,489,541 -- $ 309,005,271
============= ============= ============= =============
+ AMPS** issued and outstanding .......... 2,200 1,600 -- 3,800
============= ============= ============= =============
++ Shares issued and outstanding .......... 7,993,842 5,988,782 (355,883) $ 13,626,741
============= ============= ============= =============
+++ Net asset value per Common Share ....... $ 14.89 $ 13.89 -- $ 14.67
============= ============= ============= =============
** Auction Market Preferred Shares
</TABLE>
- ----------
(1) Assumes the distribution of undistributed investment income and
undistributed realized capital gains.
See Notes to Financial Statements.
F-52
<PAGE>
The following unaudited pro forma Combined Statement of Operations for the
Combined Fund has been derived from the statement of operations of the
respective Funds for the six months ended April 30, 1999 and such information
has been adjusted to give effect to the Reorganization as if the Reorganization
had occurred on November 1, 1998. The pro forma Combined Statement of Operations
is presented for informational purposes only and does not purport to be
indicative of the results of operations that actually would have resulted if the
Reorganization had been consummated on November 1, 1998 nor which may result
from future operations. The pro forma Combined Statement of Operations should be
read in conjunction with the Funds' financial statements and related notes
thereto which are included in the Joint Proxy Statement and Prospectus.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR MUNIYIELD FLORIDA FUND AND MUNIVEST FLORIDA FUND
For the Six Months Ended April 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Pro Forma
MuniYield MuniVest for
Florida Florida Adjustments Combined Fund
------- ------- ----------- -------------
<S> <C> <C> <C> <C>
Investment Income (Note 1d):
Interest and amortization of premium and
discount earned ......................................... $4,667,312 $3,287,591 0 $7,954,903
---------- ---------- ------- ----------
Expenses:
Investment advisory fees (Note 2) ......................... 440,528 310,276 750,804
Commission fees ........................................... 67,289 49,216 116,505
Professional fees ......................................... 40,841 34,948 (34,948)(1) 40,841
Accounting services (Note 2) .............................. 32,176 24,905 (17,381)(1) 39,700
Transfer agent fees ....................................... 19,809 19,382 39,191
Trustees' fees and expenses ............................... 11,275 13,318 (13,318)(1) 11,275
Printing and shareholder reports .......................... 16,201 13,847 (4,972)(1) 25,076
Listing fees .............................................. 7,806 7,852 15,658
Custodian fees ............................................ 6,934 5,521 12,455
Pricing fees .............................................. 4,060 3,440 7,500
Other ..................................................... 13,222 6,861 20,083
---------- ---------- ------- ----------
Total expenses ............................................ 660,141 489,566 (70,619) 1,079,088
---------- ---------- ------- ----------
Investment income - net ................................... 4,007,171 2,798,025 70,619 6,875,815
---------- ---------- ------- ----------
Realized & Unrealized Gains(Loss) on
Investments - Net (Notes 1b & 1d)
Realized gain (loss) on investments-net ................... 2,029,374 (134,884) 0 1,894,490
Change in unrealized appreciation on
investments - net ....................................... (4,463,033) (1,715,107) 0 (6,178,140)
---------- ---------- ------- ----------
Net Increase in Net Assets Resulting
from Operations ......................................... 1,573,512 948,034 70,619 2,592,165
========== ========== ======= ==========
</TABLE>
+ Commencement of operations.
(1) Reflects the anticipated savings of the Reorganization.
(2) These Pro Forma Combined Statements of Operations exclude non-recurring
estimated Reorganization expenses of $245,000, which will be paid by
MuniYield Florida subsequent to the Reorganization.
F-53
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniYield Florida Fund (the "Fund") is registered under the Investment
Company Act of 1940 as a non-diversified, closed-end management investment
company. The Fund's financial statements are prepared in accordance with
generally accepted accounting principles which may require the use of management
accruals and estimates. These unaudited financial statements reflect all
adjustments which are, in the opinion of management, necessary to a fair
statement of the results for the interim period presented. All such adjustments
are of a normal recurring nature. The Fund determines and makes available for
publication the net asset value of its Common Shares on a weekly basis. The
Fund's Common Shares are listed on the New York Stock Exchange under the symbol
MYF. The following is a summary of significant accounting policies followed by
the Fund.
(a) Valuation of investments -- Municipal bonds are traded primarily in the
over-the-counter markets and are valued at the most recent bid price or yield
equivalent as obtained by the Fund's pricing service from dealers that make
markets in such securities. Financial futures contracts and options thereon,
which are traded on exchanges, are valued at their closing prices as of the
close of such exchanges. Options written or purchased are valued at the last
sale price in the case of exchange-traded options. In the case of options traded
in the over-the-counter market, valuation is the last asked price (options
written) or the last bid price (options purchased). Securities with remaining
maturities of sixty days or less are valued at amortized cost, which
approximates market value. Securities and assets for which market quotations are
not readily available are valued at their fair value as determined in good faith
by or under the direction of the Board of Trustees of the Fund, including
valuations furnished by a pricing service retained by the Fund, which may
utilize a matrix system for valuations. The procedures of the pricing service
and its valuations are reviewed by the officers of the Fund under the general
supervision of the Board of Trustees.
(b) Derivative financial instruments -- The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its portfolio
against adverse movements in the debt markets. Losses may arise due to changes
in the value of the contract or if the counterparty does not perform under the
contract.
o Financial futures contracts -- The Fund may purchase or sell financial
futures contracts and options on such futures contracts for the
purpose of hedging the market risk on existing securities 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 Fund
deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to the
contract, the Fund agrees 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 Fund as unrealized gains or losses. When the
contract is closed, the Fund records 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.
o Options -- The Fund is authorized to write covered call options and
purchase put options. When the Fund writes an option, an amount equal
to the premium received by the Fund is reflected as an asset and an
equivalent liability. The amount of the liability is subsequently
marked to market to reflect the current market value of the option
written.
When a security is purchased or sold through an exercise of an option, the
related premium paid (or received) is added to (or deducted from) the basis of
the security acquired or deducted from (or added to) the proceeds of the
security sold. When an option expires (or the Fund enters into a closing
transaction), the Fund realizes a gain or loss on the option to the extent of
the premiums received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(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.
F-54
<PAGE>
(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) Dividends and distributions -- Dividends from net investment income are
declared 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"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML &
Co."), which is the limited partner.
FAM is responsible for the management of the Fund's portfolio and provides
the necessary personnel, facilities, equipment and certain other services
necessary to the operations of the Fund. For such services, the Fund pays a
monthly fee at an annual rate of 0.50% of the Fund's average weekly net assets,
including proceeds from the issuance of Preferred Shares.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or directors
of FAM, PSI, and/or ML & Co.
F-55
<PAGE>
EXHIBIT I
INFORMATION PERTAINING TO EACH FUND
o General Information Pertaining to the Funds
<TABLE>
<CAPTION>
State of
Defined Term Fiscal Organiza- Meeting
Fund Used in Exhibit I Year End tion Time
- ---- ----------------- -------- --------- -------
<S> <C> <C> <C> <C>
MuniYield Florida ......................................... MuniYield Florida 10/31 MA 3:00 p.m.
MuniVest Florida Fund ..................................... MuniVest Florida 10/31 MA 2:00 p.m.
</TABLE>
<TABLE>
<CAPTION>
Shares of Capital Stock
Outstanding as of
the Record Date
-----------------------
Common AMPS
Fund Shares
- ---- --------- ---------
<S> <C> <C>
MuniYield Florida .................................................. 2,200
MuniVest Florida ................................................... 1,600
</TABLE>
o Information Pertaining to Officers and Trustees
Set forth in the table below is information regarding board and committee
meetings held and the aggregate fees and expenses paid by the Fund to
non-affiliated Board members during each Fund's most recently completed fiscal
year.
<TABLE>
<CAPTION>
Board Audit Committee
--------------------------------- ------------------------------
# Per Aggregate
# Meetings Annual Per Meeting Meetings Annual Meeting Fees and
Fund Held* Fee ($) Fee ($)** Held Fee ($) Fee ($)** Expenses ($)
- --------- ---------- ------- ----------- -------- ------ --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
MuniYield Florida 6 2,500 250 4 500 125 22,908
MuniVest Florida 5 2,500 250 4 500 125 26,147
</TABLE>
- ----------
* Includes meetings held via teleconferencing equipment.
** The fee is payable for each meeting attended in person. A fee is not paid
for telephonic meetings.
Set forth in the table below is information regarding compensation paid by
the Fund to the non-affiliated Board members for the most recently completed
fiscal year.
<TABLE>
<CAPTION>
Compensation From MuniYield Florida ($)*
--------------------------------------------------------------------------
Fund Bodurtha London Martin May Perold
- ---- -------- ------ ------ --- ------
<S> <C> <C> <C> <C> <C>
MuniYield Florida 4,500 4,500 4,500 4,500 4,500
</TABLE>
<TABLE>
<CAPTION>
Compensation From MuniVest Florida ($)*
--------------------------------------------------------------------------
Fund Cecil Crum Meyer Sunderland Touchton Weiss
- ---- ----- ---- ----- ---------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
MuniVest Florida 4,500 4,500 4,500 4,500 4,500 3,250
</TABLE>
- ----------
* No pension or retirement benefits are accrued as part of Fund expenses.
Set forth in the table below is information regarding the aggregate
compensation paid by all registered investment companies advised by FAM and its
affiliate, MLAM ("FAM/MLAM Advised Funds"), including the Funds, to the
non-affiliated Board members for the year ended December 31, 1998.
Aggregate Compensation From FAM/MLAM Advised Funds
Name of Board Member Paid to Board members ($)(1)
- --------------------- --------------------------------------------------
MuniYield Florida
James H. Bodurtha ....................... 163,500
Herbert I. London ....................... 163,500
Robert R. Martin ........................ 163,500
Joseph L. May ........................... 163,500
Andre F. Perold ......................... 163,500
- ----------
(1) The Trustees serve on the boards of FAM/MLAM Advised Funds as follows: Mr.
Bodurtha (29 registered investment companies consisting of 47 portfolios);
Mr. London (29 registered investment companies consisting of 47
portfolios); Mr. Martin (29 registered investment companies consisting of
47 portfolios); Mr. May (29 registered investment companies consisting of
47 portfolios); and Mr. Perold (29 registered investment companies
consisting of 47 portfolios).
I-1
<PAGE>
Aggregate Compensation From FAM/MLAM Advised Funds
Name of Board Member Paid to Board members ($)(2)
- --------------------- --------------------------------------------------
MuniVest Florida
Donald Cecil 277,808
M. Colyer Crum 116,600
Edward H. Meyer 214,558
Jack B. Sunderland 133,600
J. Thomas Touchton 133,660
Fred G. Weiss 140,842
- ----------
(2) The Trustees serve on the boards of MLAM/FAM-advised funds as follows: Mr.
Cecil (36 registered investment companies consisting of 36 portfolios); Mr.
Crum (16 registered investment companies consisting of 16 portfolios); Mr.
Meyer (36 registered investment companies consisting of 36 portfolios); Mr.
Sunderland (19 registered investment companies consisting of 31
portfolios); Mr. Touchton (19 registered investment companies consisting of
31 portfolios) and Mr. Weiss (16 registered investment companies consisting
of 16 portfolios).
Set forth in the table below is information about the Trustees of each of
the Funds. Unless otherwise noted, the address of each Trustee is 800 Scudders
Mill Road, Plainsboro, New Jersey 08536.
<TABLE>
<CAPTION>
Trustee Since
-------------
Name, Address and Biography Age MuniYield MuniVest
--------------------------- --- --------- --------
<S> <C> <C> <C>
James H. Bodurtha ........................................... 55 1995 --
36 Popponesset Road, Cotuit, Massachusetts 02635.
Director and Executive Vice President, The China
Business Group, Inc. since 1996; Chairman and Chief
Executive Officer, China Enterprise Management
Corporation from 1993 to 1996; Chairman, Berkshire
Corporation since 1980; Partner, Squire, Sanders &
Dempsey from 1980 to 1993.
Herbert I. London ........................................... 60 1992 --
2 Washington Square Village, New York, New York 10012.
John M. Olin Professor of Humanities at New York
University since 1993 and Professor thereof since 1980;
Dean, Gallatin Division of New York University from
1976 to 1993; Distinguished Fellow, Herman Kahn Chair
at Hudson Institute from 1984 to 1985; Director, Damon
Corporation from 1991 to 1995; Overseer, Center for
Naval Analyses from 1983 to 1993; Limited Partner,
Hypertech LP in 1996.
Robert R. Martin ............................................ 72 1993 --
513 Grand Hill, St. Paul, Minnesota 55102. Chairman and
Chief Executive Officer, Kinnard Investments, Inc. from
1990 to 1993; Executive Vice President, Dain Bosworth
from 1974 to 1989; Director, Carnegie Capital
Management from 1977 to 1985 and Chairman thereof in
1979; Director, Securities Industry Association from
1981 to 1982 and Public Securities Association from
1979 to 1980; Chairman of the Board, WTC Industries,
Inc. in 1994; Trustee, Northland College since 1992.
Joseph L. May ............................................... 70 1992 --
424 Church Street, Suite 2000, Nashville, Tennessee
37219. Attorney in private practice since 1984;
President, May and Athens Hosiery Mills Division,
Wayne-Gossard Corporation from 1954 to 1983; Vice
President, Wayne-Gossard Corporation from 1972 to 1983;
Chairman, The May Corporation (personal holding
company) from 1972 to 1983; Director, Signal Apparel
Co. from 1972 to 1989.
Andre F. Perold ............................................. 47 1992 --
Morgan Hall, Soldiers Field, Boston, Massachusetts
02163. Professor, Harvard Business School since 1989
and Associate Professor from 1983 to 1989; Trustee, The
Common Fund since 1989; Director of Quantec Limited
since 1991 and TIBCO from 1994 to 1996.
Terry K. Glenn .............................................. 59 1999 1999
Executive Vice President of MLAM and FAM since 1983;
Executive Vice President and Director of Princeton
Services, Inc. ("Princeton Services") since 1993;
President of Princeton Funds Distributor, Inc. ("PFD")
since 1986 and Director thereof since 1991; President
of Princeton Administrators, L.P. since 1988.
</TABLE>
I-2
<PAGE>
<TABLE>
<CAPTION>
Trustee Since
-------------
Name, Address and Biography Age MuniYield MuniVest
--------------------------- --- --------- --------
<S> <C> <C> <C>
Arthur Zeikel ............................................... 67 1992 1993
300 Woodland Avenue, Westfield, New Jersey 07090.
Chairman of FAM and MLAM from 1997 to 1999; President
of FAM and MLAM from 1977 to 1997; Chairman of
Princeton Services from 1997 to 1999, Director thereof
from 1993 to 1999 and President thereof from 1993 to
1997; Executive Vice President of Merrill Lynch & Co.,
Inc. from 1990 to 1999.
Donald Cecil ................................................ 72 -- 1993
1114 Avenue of the Americas, New York, New York 10036.
Special Limited Partner of Cumberland Associates (an
investment partnership) since 1982; Member of Institute
of Chartered Financial Analysts Member and Chairman of
Westchester County (N.Y.) Board of Transportation.
M. Colyer Crum .............................................. 67 -- 1993
104 Westcliff Road, Weston, Massachusetts 02193.
Currently James R. Williston Professor of Investment
Management Emeritus at Harvard Business School; James
R. Williston Professor of Investment Management at
Harvard Business School from 1971 to 1996; Director of
Cambridge Bancorp, Copley Properties, Inc. and Sun Life
Assurance Company of Canada.
Edward H. Meyer ............................................. 72 -- 1993
777 Third Avenue, New York, New York 10017. President
of Grey Advertising Inc. since 1968, Chief Executive
Officer since 1970 and Chairman of the Board of
Directors since 1972; Director of The May Department
Stores Company, Bowne & Co., Inc. (financial printers),
Harman International Industries, Inc. and Ethan Allen
Interiors, Inc.
Jack B. Sunderland .......................................... 70 -- 1993
P.O. Box 7, West Cornwall, Connecticut 06796. President
and Director of American Independent Oil Company, Inc.
(an energy company) since 1987; Member of Council on
Foreign Relations since 1971.
J. Thomas Touchton .......................................... 60 -- 1993
Suite 3405, One Tampa City Center, 201 North Franklin
Street, Tampa, Florida 33062. Managing Partner of The
Witt Touchton Company and its predecessor, The Witt Co.
(a private investment partnership), since 1972; Trustee
Emeritus of Washington and Lee University; Director of
TECO Energy, Inc. (an electric utility holding
company).
Fred G. Weiss ............................................... 58 -- 1998
16410 Maddalena Place, Delray Beach, Florida 33446.
Managing Director of FGW Associates since 1997; Vice
President, Planning Investment, and Development of
Warner Lambert Co. from 1979 to 1997.
</TABLE>
I-3
<PAGE>
Set forth in the table below is information about the officers of each of the
Funds.
<TABLE>
<CAPTION>
Officer Since
-------------
MuniVest MuniYield
Name and Biography Age Office Florida Florida
------------------ --- ------ ---------- ------------
<S> <C> <C> <C> <C>
Terry K. Glenn ................................ 59 President 1993* 1992*
Executive Vice President of MLAM and FAM since 1983;
Executive Vice President and Director of Princeton
Services since 1993; President of Princeton Funds
Distributor, Inc. ("PFD") since 1986 and Director
thereof since 1991; President of Princeton
Administrators, L.P. since 1988.
Vincent R. Giordano ........................... 55 Senior Vice President 1993 1992
Senior Vice President of FAM and MLAM since 1984;
Portfolio Manager of FAM and MLAM since 1977; Senior
Vice President of Princeton Services since 1993.
William R. Bock ............................... 63 Vice President 1999 1999
Vice President of MLAM since 1989.
Kenneth A. Jacob .............................. 48 Vice President 1993 1992
First Vice President of MLAM since 1997; Vice President
of MLAM from 1984 to 1997; Vice President of FAM since
1984.
Donald C Burke ................................ 39 Vice President 1993 1992
Senior Vice President and Treasurer of MLAM and FAM
since Treasurer 1999 1999 1999; Senior Vice President
and Treasurer of Princeton Services since 1999; Vice
President of PFD since 1999; First Vice President of
MLAM from 1997 to 1999; Vice President of MLAM from
1990 to 1997; Director of Taxation of MLAM since 1990.
Alice A. Pellegrino ........................... 39 Secretary 1999 1999
Vice President of MLAM since 1999; Attorney associated
with MLAM since 1997; Associate with Kirkpatrick &
Lockhart LLP from 1992 to 1997.
</TABLE>
- -------
* Mr. Glenn was elected President of each Fund in 1999. Prior to that he
served as Executive Vice President of each Fund.
I-4
<PAGE>
EXHIBIT II
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as of
the _____ day of ________________, 1999, by and between MuniYield Florida Fund,
a Massachusetts business trust ("MuniYield Florida") and MuniVest Florida, a
Massachusetts business trust ("MuniVest Florida"). MuniYield Florida and
MuniVest Florida are sometimes referred to herein collectively as the "Funds".
PLAN OF REORGANIZATION
The reorganization will comprise the following:
(1)the acquisition by MuniYield Florida of substantially all of the assets,
and the assumption by substantially all of the liabilities of MuniVest Florida
in exchange solely for an equal aggregate value of newly issued (A) common
shares, with a par value of $0.10 per share, of MuniYield Florida ("MuniYield
Florida Common Shares") and (B) auction market preferred shares of MuniYield
Florida, with a liquidation preference of $25,000 per share plus an amount equal
to accumulated by unpaid dividends thereon (whether or not earned or declared)
to be designated Series B ("MuniYield Florida Series B AMPS"), and (2) the
subsequent distribution by MuniVest Florida to MuniVest Florida shareholders of
(x) all of the MuniYield Florida Common Shares received by MuniVest Florida in
exchange for such shareholders' shares of common shares, with a par value of
$0.10 per share, of MuniVest Florida ("MuniVest Florida Common shares") and (y)
all of the MuniYield Florida Series B AMPS received by MuniVest Florida in
exchange for such shareholders' shares of auction market preferred shares of
MuniVest Florida, with a liquidation preference of $25,000 per share plus an
amount equal to accumulated but unpaid dividends thereon (whether or not earned
or declared) designated Series A ("MuniVest AMPS");
all upon and subject to the terms hereinafter set forth (collectively, the
"Reorganization").
In the course of the Reorganization, MuniYield Florida Common shares and
Series B AMPS will be distributed to the shareholders of MuniVest Florida as
follows:
(1) each holder of MuniVest Florida Common Shares will be entitled to
receive a number of shares of MuniYield Florida Common Shares equal to the
aggregate net asset value of the MuniVest Florida Common Shares owned by such
Shareholder on the Exchange Date (as defined in Section 7(a) of the Agreement);
and (2) each holder of MuniVest Florida AMPS will be entitled to receive a
number of shares of MuniYield Florida Series B AMPS equal to the aggregate
liquidation preference (and aggregate value) of the MuniVest Florida AMPS owned
by such shareholder on the Exchange Date;
It is intended that the Reorganization described in this Plan shall be a
reorganization within the meaning of Section 368(a)(1)(C) of the Internal
Revenue Code of 1986, as amended (the "Code"), and any successor provision.
Prior to the Exchange Date, MuniVest Florida shall declare a dividend or
dividends which, together with all such previous dividends, shall have the
effect of distributing to its respective shareholders all of MuniVest Florida's
net investment company taxable income to and including the Exchange Date, if any
(computed without regard to any deduction for dividends paid), and all of its
net capital gain, if any, realized to and including the Exchange Date. In this
regard and in connection with the Reorganization, the last dividend period for
the MuniVest Florida AMPS prior to the Exchange Date may be shorter than the
dividend period for such AMPS determined as set forth in the applicable
Certificate of Designation.
A Certificate of Designation of MuniYield Florida establishing the powers,
rights and preferences of the MuniYield Florida Series B AMPS will have been
filed with the Office of the Secretary of State of The Commonwealth of
Massachusetts prior to the Exchange Date.
As promptly as practicable after the consummation of the Reorganization,
MuniVest Florida shall be dissolved in accordance with the laws of the
Commonwealth of Massachusetts and will terminate its registration under the
Investment Company Act of 1940, as amended (the "1940 Act").
II-1
<PAGE>
AGREEMENT
In order to consummate the Reorganization and in consideration of the
promises and the covenants and agreements hereinafter set forth, and intending
to be legally bound, each of the Funds hereby agrees as follows:
1. Representations and Warranties of MuniYield Florida.
MuniYield Florida represents and warrants to, and agrees with, MuniVest
Florida Funds that:
(a) MuniYield Florida is a business trust duly organized, validly existing
and in good standing in conformity with the laws of the Commonwealth of
Massachusetts, and has the power to own all of its assets and to carry out this
Agreement. MuniYield Florida has all necessary Federal, state and local
authorizations to carry on its business as it is now being conducted and to
carry out this Agreement.
(b) MuniYield Florida is duly registered under the 1940 Act as a
non-diversified, closed-end management investment company (File No. 811-6502),
and such registration has not been revoked or rescinded and is in full force and
effect. MuniYield Florida has elected and qualified for the special tax
treatment afforded regulated investment companies ("RICs") under Sections
851-855 of the Code at all times since its inception and intends to continue to
so qualify until consummation of the Reorganization and thereafter.
(c) MuniVest Florida has been furnished with MuniYield Florida's Annual
Report to Shareholders for the fiscal year ended October 31, 1998, and the
audited financial statements appearing therein, having been examined by Deloitte
& Touche LLP, independent public accountants, fairly present the financial
position of MuniYield Florida as of the respective dates indicated, in
conformity with generally accepted accounting principles applied on a consistent
basis.
(d) MuniVest Florida has been furnished with MuniYield Florida's
Semi-Annual Report to Shareholders for the six months ended April 30, 1999, and
the unaudited financial statements appearing therein fairly present the
financial position of MuniYield Florida as of the respective dates indicated, in
conformity with generally accepted accounting principles applied on a consistent
basis.
(e) An unaudited statement of assets, liabilities and capital of MuniYield
Florida and an unaudited schedule of investments of MuniYield Florida, each as
of the Valuation Time (as defined in Section 3(d) of this Agreement), will be
furnished to MuniVest Florida, at or prior to the Exchange Date for the purpose
of determining the number of shares of MuniYield Florida Common Shares,
MuniYield Florida Series B AMPS to be issued pursuant to Section 4 of this
Agreement; each will fairly present the financial position of MuniYield Florida
as of the Valuation Time in conformity with generally accepted accounting
principles applied on a consistent basis.
(f) MuniYield Florida has full power and authority to enter into and
perform its obligations under this Agreement. The execution, delivery and
performance of this Agreement has been duly authorized by all necessary action
of its Board of Trustees, and this Agreement constitutes a valid and binding
contract enforceable in accordance with its terms, subject to the effects of
bankruptcy, insolvency, moratorium, fraudulent conveyance and similar laws
relating to or affecting creditors' rights generally and court decisions with
respect thereto.
(g) There are no material legal, administrative or other proceedings
pending or, to the knowledge of MuniYield Florida, threatened against it which
assert liability on the part of MuniYield Florida or which materially affect its
financial condition or its ability to consummate the Reorganization. MuniYield
Florida is not charged with or, to the best of its knowledge, threatened with
any violation or investigation of any possible violation of any provisions of
any Federal, state or local law or regulation or administrative ruling relating
to any aspect of its business.
(h) MuniYield Florida is not obligated under any provision of its
Declaration of Trust, as amended, or its by-laws, as amended, or a party to any
contract or other commitment or obligation, and is not subject to any order or
decree which would be violated by its execution of or performance under this
Agreement, except insofar as the Funds have mutually agreed to amend such
contract or other commitment or obligation to cure any potential violation as a
condition precedent to the Reorganization.
(i) There are no material contracts outstanding to which MuniYield Florida
is a party that have not been disclosed in the N-14 Registration Statement (as
defined in subsection (l) below) or will not otherwise be disclosed to MuniVest
Florida prior to the Valuation Time.
II-2
<PAGE>
(j) MuniYield Florida has no known liabilities of a material amount,
contingent or otherwise, other than those shown on its statements of assets,
liabilities and capital referred to above, those incurred in the ordinary course
of its business as an investment company since April 30, 1999; and those
incurred in connection with the Reorganization. As of the Valuation Time,
MuniYield Florida will advise MuniVest Florida in writing of all known
liabilities, contingent or otherwise, whether or not incurred in the ordinary
course of business, existing or accrued as of such time, except to the extent
disclosed in the financial statements referred to above.
(k) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by MuniYield Florida of
the Reorganization, except such as may be required under the Securities Act of
1933, as amended (the "1933 Act"), the Securities Exchange Act of 1934, as
amended (the "1934 Act") and the 1940 Act or state securities laws (which term
as used herein shall include the laws of the District of Columbia and Puerto
Rico).
(l) The registration statement filed by MuniYield Florida on Form N-14
which includes the joint proxy statement of the Funds with respect to the
transactions contemplated herein and the prospectus of MuniYield Florida
relating to the MuniYield Florida Common shares and MuniYield Florida Series B
AMPs to be issued pursuant to this Agreement, (the "Joint Proxy Statement and
Prospectus"), and any supplement or amendment thereto or to the documents
therein (as amended or supplemented, the "N-14 Registration Statement"), on its
effective date, at the time of the shareholders' meetings referred to in Section
6(a) of this Agreement and at the Exchange Date, insofar as it relates to
MuniYield Florida (i) complied or will comply in all material respects with the
provisions of the 1933 Act, the 1934 Act and the 1940 Act and the rules and
regulations thereunder and (ii) did not or will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading; and the
Joint Proxy Statement and Prospectus included therein did not or will not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that the
representations and warranties in this subsection only shall apply to statements
in or omissions from the N-14 Registration Statement made in reliance upon and
in conformity with information furnished by MuniYield Florida for use in the
N-14 Registration Statement as provided in Section 6(e) of this Agreement.
(m) MuniYield Florida is authorized to issue an unlimited number of common
shares of beneficial interest, par value $.10 per share and 1,000,000 preferred
shares of beneficial interest, par value $.05 per share, of which 7,993,842
shares have been designated as common shares and 2,200 shares have been
designated as preferred shares; each outstanding share of which is fully paid
and nonassessable and has full voting rights.
(n) The shares of MuniYield Florida Common Shares and MuniYield Florida
Series B AMPS to be issued to MuniVest Florida pursuant to this Agreement will
have been duly authorized and, when issued and delivered pursuant to this
Agreement, will be legally and validly issued and will be fully paid and
nonassessable and will have full voting rights, and no shareholder of MuniYield
Florida will have any preemptive right of subscription or purchase in respect
thereof.
(o) At or prior to the Exchange Date, the MuniYield Florida Common Shares
to be transferred to MuniVest Florida for distribution to the shareholders of
MuniVest Florida on the Exchange Date will be duly qualified for offering to the
public in all states of the United States in which the sale of shares of the
Funds presently are qualified, and there will be a sufficient number of such
shares registered under the 1933 Act and, as may be necessary, with each
pertinent state securities commission to permit the transfers contemplated by
this Agreement to be consummated.
(p) At or prior to the Exchange Date, the shares of MuniYield Florida
Series B AMPS to be transferred to MuniVest Florida on the Exchange Date will be
duly qualified for offering to the public in all states of the United States in
which the sale of AMPS of MuniVest Florida presently are qualified, and there
are a sufficient number of MuniYield Florida Series B AMPS registered under the
1933 Act and with each pertinent state securities commission to permit the
transfers contemplated by this Agreement to be consummated.
(q) At or prior to the Exchange Date, MuniYield Florida will have obtained
any and all regulatory, Director and shareholder approvals necessary to issue
the MuniYield Florida Common Shares and MuniYield Florida Series B AMPS to
MuniVest Florida.
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2. Representations and Warranties of MuniVest Florida.
MuniVest Florida represents and warrants to, and agrees with, MuniYield
Florida, that:
(a) MuniVest Florida is a business trust with transferable shares duly
organized, validly existing and in good standing in conformity with the laws of
the Commonwealth of Massachusetts, and has the power to own all of its assets
and to carry out this Agreement. MuniVest Florida has all necessary Federal,
state and local authorizations to carry on its business as it is now being
conducted and to carry out this Agreement.
(b) MuniVest Florida is duly registered under the 1940 Act as a
non-diversified, closed-end management investment company (File No. 811-7580),
and such registration has not been revoked or rescinded and is in full force and
effect. MuniVest Florida has elected and qualified for the special tax treatment
afforded RICs under Sections 851-855 of the Code at all times since its
inception, and intends to continue to so qualify through its taxable year ending
upon liquidation.
(c) As used in this Agreement, the term "MuniVest Florida Investments"
shall mean (i) the investments of MuniVest Florida shown on the schedule of its
investments as of the Valuation Time furnished to MuniYield Florida; and (ii)
all other assets owned by MuniVest Florida or liabilities incurred as of the
Valuation Time.
(d) MuniVest Florida has full power and authority to enter into and perform
its obligations under this Agreement. The execution, delivery and performance of
this Agreement has been duly authorized by all necessary action of its Board of
Trustees and this Agreement constitutes a valid and binding contract enforceable
in accordance with its terms, subject to the effects of bankruptcy, insolvency,
moratorium, fraudulent conveyance and similar laws relating to or affecting
creditors' rights generally and court decisions with respect thereto.
(e) MuniYield Florida has been furnished with MuniVest Florida's Annual
Report to Shareholders for the fiscal year ended October 31, 1998, and the
audited financial statements appearing therein, having been examined by Deloitte
& Touche LLP, independent public accountants, fairly present the financial
position of MuniVest Florida as of the respective dates indicated, in conformity
with generally accepted accounting principles applied on a consistent basis.
(f) MuniYield Florida has been furnished with MuniVest Florida's
Semi-Annual Report to Shareholders for the six months ended April 30, 1999, and
the unaudited financial statements appearing therein fairly present the
financial position of MuniVest Florida as of the respective dates indicated, in
conformity with generally accepted accounting principles applied on a consistent
basis.
(g) An unaudited statement of assets, liabilities and capital of MuniVest
Florida and an unaudited schedule of investments of MuniVest Florida, each as of
the Valuation Time, will be furnished to each of MuniYield Florida at or prior
to the Exchange Date for the purpose of determining the number of shares of
MuniYield Florida Common Shares and MuniYield Florida Series B AMPS to be issued
to MuniVest Florida pursuant to Section 4 of this Agreement; each will fairly
present the financial position of MuniVest Florida as of the Valuation Time in
conformity with generally accepted accounting principles applied on a consistent
basis.
(h) There are no material legal, administrative or other proceedings
pending or, to the knowledge of MuniVest Florida, threatened against it which
assert liability on the part of MuniVest Florida or which materially affect its
financial condition or its ability to consummate the Reorganization. MuniVest
Florida is not charged with or, to the best of its knowledge, threatened with
any violation or investigation of any possible violation of any provisions of
any Federal, state or local law or regulation or administrative ruling relating
to any aspect of its business.
(i) There are no material contracts outstanding to which MuniVest Florida
is a party that have not been disclosed in the N-14 Registration Statement or
will not otherwise be disclosed to MuniYield Florida prior to the Valuation
Time.
(j) MuniVest Florida is not obligated under any provision of its
Declaration of Trust, as amended, or its by-laws, as amended, or a party to any
contract or other commitment or obligation, and is not subject to any order or
decree which would be violated by its execution of or performance under this
Agreement, except insofar as the Funds have mutually agreed to amend such
contract or other commitment or obligation to cure any potential violation as a
condition precedent to the Reorganization.
(k) MuniVest Florida has no known liabilities of a material amount,
contingent or otherwise, other than those shown on its statements of assets,
liabilities and capital referred to above, those incurred in the ordinary
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course of its business as an investment company since April 30, 1999 and those
incurred in connection with the Reorganization. As of the Valuation Time,
MuniVest Florida will advise MuniYield Florida in writing of all known
liabilities, contingent or otherwise, whether or not incurred in the ordinary
course of business, existing or accrued as of such time.
(l) MuniVest Florida has filed, or has obtained extensions to file, all
Federal, state and local tax returns which are required to be filed by it, and
has paid or has obtained extensions to pay, all Federal, state and local taxes
shown on said returns to be due and owing and all assessments received by it, up
to and including the taxable year in which the Exchange Date occurs. All tax
liabilities of MuniVest Florida have been adequately provided for on its books,
and no tax deficiency or liability of MuniVest Florida has been asserted and no
question with respect thereto has been raised by the Internal Revenue Service or
by any state or local tax authority for taxes in excess of those already paid,
up to and including the taxable year in which the Exchange Date occurs.
(m) At both the Valuation Time and the Exchange Date, MuniVest Florida will
have full right, power and authority to sell, assign, transfer and deliver the
MuniVest Florida Investments. At the Exchange Date, subject only to the
obligation to deliver the MuniVest Florida Investments as contemplated by this
Agreement, MuniVest Florida will have good and marketable title to all of the
MuniVest Florida Investments, and MuniYield Florida will acquire all of the
MuniVest Florida Investments free and clear of any encumbrances, liens or
security interests and without any restrictions upon the transfer thereof
(except those imposed by the Federal or state securities laws and those
imperfections of title or encumbrances as do not materially detract from the
value or use of the MuniVest Florida Investments or materially affect title
thereto).
(n) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by MuniVest Florida of
the Reorganization, except such as may be required under the 1933 Act, the 1934
Act, the 1940 Act or state securities laws.
(o) The N-14 Registration Statement, on its effective date, at the time of
the shareholders' meetings referred to in Section 8(a) of this Agreement and on
the Exchange Date, insofar as it relates to MuniVest Florida (i) complied or
will comply in all material respects with the provisions of the 1933 Act, the
1934 Act and the 1940 Act and the rules and regulations thereunder, and (ii) did
not or will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading; and the Joint Proxy Statement and Prospectus
included therein did not or will not contain any untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that the representations and warranties in this
subsection shall apply only to statements in or omissions from the N-14
Registration Statement made in reliance upon and in conformity with information
furnished by MuniVest Florida for use in the N-14 Registration Statement as
provided in Section 6(e) of this Agreement.
(p) MuniVest Florida is authorized to issue an unlimited number of common
shares of beneficial interest, par value $.10 per share and 1,000,000 preferred
shares of beneficial interest, par value $.05 per share, of which 5,988,782
shares have been designated as common shares and 1,600 shares have been
designated as preferred shares; each outstanding share of which is fully paid
and nonassessable and has full voting rights.
(q) All of the issued and outstanding shares of MuniVest Florida Common
shares and MuniVest Florida AMPS were offered for sale and sold in conformity
with all applicable Federal and state securities laws.
(r) The books and records of MuniVest Florida made available to MuniYield
Florida, MuniYield Florida II, MuniYield Florida III and/or their counsel are
substantially true and correct and contain no material misstatements or
omissions with respect to the operations of MuniVest Florida.
(s) MuniVest Florida will not sell or otherwise dispose of any of the
shares of MuniYield Florida Common shares or MuniYield Florida Series B AMPS to
be received in the Reorganization, except in distribution to the shareholders of
MuniVest Florida, as provided in Section 3 of this Agreement.
3. The Reorganization.
(a) Subject to receiving the requisite approvals of the shareholders of
each of the Funds, and to the other terms and conditions contained herein, (i)
MuniVest Florida agrees to convey, transfer and deliver to MuniYield Florida and
MuniYield Florida agrees to acquire from MuniVest Florida, on the Exchange Date,
all of the MuniVest Florida Investments (including interest accrued as of the
Valuation Time on debt instruments), and
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assume substantially all of the liabilities of MuniVest Florida, in exchange
solely for that number of shares of MuniYield Florida Common shares and
MuniYield Florida Series B AMPS provided in Section 4 of this Agreement.
Pursuant to this Agreement, as soon as practicable after the Exchange Date
MuniVest Florida will distribute all shares of MuniYield Florida Common Shares
and MuniYield Florida Series B AMPS received by it to its shareholders in
exchange for their shares of MuniVest Florida Common Shares and MuniVest Florida
AMPS. Such distributions shall be accomplished by the opening of shareholder
accounts on the stock ledger records of MuniYield Florida in the amounts due the
shareholders of MuniVest Florida based on their respective holdings in MuniVest
Florida as of the Valuation Time.
(b) Prior to the Exchange Date, MuniVest Florida shall declare a dividend
or dividends which, together with all such previous dividends, shall have the
effect of distributing to its shareholders all of its net investment company
taxable income to and including the Exchange Date, if any (computed without
regard to any deduction for dividends paid), and all of its net capital gain, if
any, realized to and including the Exchange Date. In this regard and in
connection with the Reorganization, the last dividend period for the MuniVest
Florida AMPS prior to the Exchange Date may be shorter than the dividend period
for such AMPS determined as set forth in the applicable Certificate of
Designation.
(c) MuniVest Florida will pay or cause to be paid to MuniYield Florida any
interest MuniVest Florida receives on or after the Exchange Date with respect to
any of MuniVest Florida Investments transferred to MuniYield Florida hereunder.
(d) The Valuation Time shall be 4:00 p.m., Eastern time, on February __,
2000, or such earlier or later day and time as may be mutually agreed upon in
writing (the "Valuation Time").
(e) Recourse for liabilities assumed from MuniVest Florida by MuniYield
Florida in the Reorganization will be limited to the net assets of MuniVest
Florida acquired by MuniYield Florida. The known liabilities of MuniVest
Florida, as of the Valuation Time, shall be confirmed in writing to MuniYield
Florida pursuant to Section 2(k) of this Agreement.
(f) The Funds will jointly file Certificate of Termination with the
Secretary of State of the Commonwealth of Massachusetts and any other such
instrument as may be required by the Commonwealth of Massachusetts to effect the
transfer of MuniVest Florida Investments.
(g) MuniVest Florida will be terminated following the Exchange Date by
terminating its organization under the Investment Company Act and its
organization under Massachusetts law and will withdraw its authority to do
business in any state where it is required to do so.
(h) MuniYield Florida will file with the Secretary of State of the
Commonwealth of Massachusetts a Certificate of Designation to its Declaration of
Trust establishing the powers, rights and preferences of the MuniYield Florida
Series B AMPS prior to the closing of the Reorganization.
(i) As promptly as practicable after the liquidation of MuniVest pursuant
to the Reorganization, MuniVest Florida shall terminate its registration under
the 1940 Act.
4. Issuance and Valuation of MuniYield Florida Common Shares and MuniYield
Florida Series B AMPS in the Reorganization.
Full shares of MuniYield Florida Common Shares and MuniYield Florida Series
B AMPS of an aggregate net asset value or liquidation preference, as the case
may be, equal (to the nearest one ten thousandth of one cent) to the value of
the assets of MuniVest Florida acquired in the Reorganization determined as
hereinafter provided, reduced by the amount of liabilities of MuniVest Florida
assumed by MuniYield Florida in the Reorganization, shall be issued by MuniYield
Florida to MuniVest Florida in exchange for such assets of MuniVest Florida,
plus cash in lieu of fractional shares. MuniYield Florida will issue to MuniVest
Florida (a) a number of shares of MuniYield Florida Common shares, the aggregate
net asset value of which will equal the aggregate net asset value of the shares
of MuniVest Florida Common shares, determined as set forth below, and (b) a
number of shares of MuniYield Florida Series B AMPS, the aggregate liquidation
preference and value of which will equal the aggregate liquidation preference
and value of the MuniVest Florida AMPS, determined as set forth below.
The net asset value of each of the Funds and the liquidation preference and
value of the AMPS of each of the Funds shall be determined as of the Valuation
Time in accordance with the procedures described in (i) the
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<PAGE>
prospectus of MuniYield Florida, dated February 21, 1992, relating to the
MuniYield Florida Common shares and (ii) the final prospectus of MuniYield
Florida, dated April 6, 1992, relating to the MuniYield Florida AMPS, and no
formula will be used to adjust the net asset value so determined of any Fund to
take into account differences in realized and unrealized gains and losses.
Values in all cases shall be determined as of the Valuation Time. The value of
MuniVest Florida Investments to be transferred to MuniYield Florida shall be
determined by MuniYield Florida pursuant to the procedures utilized by MuniYield
Florida in valuing its own assets and determining its own liabilities for
purposes of the Reorganization. Such valuation and determination shall be made
by MuniYield Florida in cooperation with MuniVest Florida and shall be confirmed
in writing by MuniYield Florida to MuniVest Florida. The net asset value per
share of the MuniYield Florida Common Shares and the liquidation preference and
value per share of the MuniYield Florida Series B AMPS shall be determined in
accordance with such procedures and MuniYield Florida shall certify the
computations involved. For purposes of determining the net asset value of a
Common Share of each Fund, the value of the securities held by the Fund plus any
cash or other assets (including interest accrued but not yet received) minus all
liabilities (including accrued expenses) and the aggregate liquidation value of
the outstanding shares of AMPS of that Fund is divided by the total number of
shares of Common Shares of that Fund outstanding at such time.
MuniYield Florida shall issue to MuniVest Florida separate certificates or
share deposit receipts for the MuniYield Florida Common Shares and the MuniYield
Florida Series B AMPS, each registered in the name of MuniVest Florida. MuniVest
Florida then shall distribute the MuniYield Florida Common Shares and the
MuniYield Florida Series B AMPS to the holders of MuniVest Florida Common Shares
and MuniVest Florida AMPS by redelivering the certificates or share deposit
receipts evidencing ownership of (i) the MuniYield Florida Common Shares to The
Bank of New York, as the transfer agent and registrar for the MuniYield Florida
Common shares for distribution to the holders of MuniVest Florida Common Shares
on the basis of such holder's proportionate interest in the aggregate net asset
value of the Common Shares of MuniVest Florida and (ii) the MuniYield Florida
Series B AMPS to The Bank of New York, as the transfer agent and registrar for
the MuniYield Florida Series B AMPS for distribution to the holders of MuniVest
Florida AMPS on the basis of such holder's proportionate interest in the
aggregate liquidation preference and value of the AMPS of MuniVest Florida. With
respect to any MuniVest Florida shareholder holding certificates evidencing
ownership of either MuniVest Florida Common Shares or MuniVest Florida AMPS as
of the Exchange Date, and subject to MuniYield Florida being informed thereof in
writing by MuniVest Florida, MuniYield Florida will not permit such shareholder
to receive new certificates evidencing ownership of the MuniYield Florida Common
Shares or MuniYield Florida Series B AMPS, exchange MuniYield Florida Common
Shares or MuniYield Florida Series B AMPS credited to such shareholder's account
for shares of other investment companies managed by Merrill Lynch Asset
Management, L.P. ("MLAM") or any of its affiliates, or pledge or redeem such
MuniYield Florida Common Shares or MuniYield Florida Series B AMPS, in any case,
until notified by MuniVest Florida or its agent that such shareholder has
surrendered his or her outstanding certificates evidencing ownership of MuniVest
Florida Common Shares or MuniVest Florida AMPS or, in the event of lost
certificates, posted adequate bond. MuniVest Florida, at its own expense, will
request its shareholders to surrender their outstanding certificates evidencing
ownership of MuniVest Florida Common Shares or MuniVest Florida AMPS, as the
case may be, or post adequate bond therefor.
Dividends payable to holders of record of shares of MuniYield Florida
Common Shares or MuniYield Florida Series B AMPS, as the case may be, as of any
date after the Exchange Date and prior to the exchange of certificates by any
shareholder of MuniVest Florida shall be payable to such shareholder without
interest; however, such dividends shall not be paid unless and until such
shareholder surrenders the share certificates representing Common Shares or AMPS
of MuniVest Florida, as the case may be, for exchange.
No fractional shares of MuniYield Florida Common Shares will be issued to
holders of MuniVest Florida Common Shares. In lieu thereof, MuniYield Florida's
transfer agent, The Bank of New York, will aggregate all fractional shares of
MuniYield Florida Common Shares and sell the resulting full shares on the New
York Stock Exchange at the current market price for shares of MuniYield Florida
Common Shares for the account of all holders of fractional interests, and each
such holder will receive such holder's pro rata share of the proceeds of such
sale upon surrender of such holder's certificates representing MuniVest Florida
Common Shares.
5. Payment of Expenses.
(a) With respect to expenses incurred in connection with the
Reorganization, (i) each Fund shall pay all expenses incurred that are
attributable solely to such Fund and the conduct of its business, and (ii)
MuniYield
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Florida shall pay, subsequent to the Exchange Date and pro rata according to
each Fund's net assets on the Exchange Date, all expenses incurred in connection
with the Reorganization, including, but not limited to, all costs related to the
preparation and distribution of the N-14 Registration Statement. Such fees and
expenses shall include the cost of preparing and filing a ruling request with
the Internal Revenue Service, legal and accounting fees, printing costs, filing
fees, stock exchange fees, rating agency fees, portfolio transfer taxes (if any)
and any similar expenses incurred in connection with the Reorganization.
(b) If for any reason the Reorganization is not consummated, no party shall
be liable to any other party for any damages resulting therefrom, including,
without limitation, consequential damages.
6. Covenants of the Funds.
(a) Each Fund agrees to call an annual meeting of its shareholders as soon
as is practicable after the effective date of the N-14 Registration Statement
for the purpose of considering the Reorganization as described in this
Agreement.
(b) Each Fund covenants to operate its business as presently conducted
between the date hereof and the Exchange Date.
(c) MuniVest Florida agrees that following the consummation of the
Reorganization, it will dissolve in accordance with the laws of the Commonwealth
of Massachusetts and any other applicable law, it will not make any
distributions of any shares of MuniYield Florida Common Shares or MuniYield
Florida Series B AMPS, as applicable other than to its respective shareholders
and without first paying or adequately providing for the payment of all of its
respective liabilities not assumed by MuniYield Florida, if any, and on and
after the Exchange Date it shall not conduct any business except in connection
with its termination.
(d) MuniVest Florida undertakes that if the Reorganization is consummated,
it will file an application pursuant to Section 8(f) of the 1940 Act for an
order declaring that MuniVest Florida has ceased to be a registered investment
company.
(e) MuniYield Florida will file the N-14 Registration Statement with the
Securities and Exchange Commission (the "Commission") and will use its best
efforts to provide that the N-14 Registration Statement becomes effective as
promptly as practicable. Each Fund agrees to cooperate fully with the others,
and each will furnish to the others the information relating to itself to be set
forth in the N-14 Registration Statement as required by the 1933 Act, the 1934
Act, the 1940 Act, and the rules and regulations thereunder and the state
securities laws.
(f) MuniYield Florida has no plan or intention to sell or otherwise dispose
of MuniVest Florida Investments, except for dispositions made in the ordinary
course of business.
(g) Each of the Funds agrees that by the Exchange Date all of its Federal
and other tax returns and reports required to be filed on or before such date
shall have been filed and all taxes shown as due on said returns either have
been paid or adequate liability reserves have been provided for the payment of
such taxes. In connection with this covenant, the Funds agree to cooperate with
each other in filing any tax return, amended return or claim for refund,
determining a liability for taxes or a right to a refund of taxes or
participating in or conducting any audit or other proceeding in respect of
taxes. MuniYield Florida agrees to retain for a period of ten (10) years
following the Exchange Date all returns, schedules and work papers and all
material records or other documents relating to tax matters of MuniVest Florida
for its taxable period first ending after the Exchange Date and for all prior
taxable periods. Any information obtained under this subsection shall be kept
confidential except as otherwise may be necessary in connection with the filing
of returns or claims for refund or in conducting an audit or other proceeding.
After the Exchange Date, MuniVest Florida shall prepare, or cause its agents to
prepare, any Federal, state or local tax returns, including any Forms 1099,
required to be filed by such fund with respect to its final taxable year ending
with its complete liquidation and for any prior periods or taxable years and
further shall cause such tax returns and Forms 1099 to be duly filed with the
appropriate taxing authorities. Notwithstanding the aforementioned provisions of
this subsection, any expenses incurred by MuniVest Florida (other than for
payment of taxes) in connection with the preparation and filing of said tax
returns and Forms 1099 after the Exchange Date shall be borne by such Fund to
the extent such expenses have been accrued by such Fund in the ordinary course
without regard to the Reorganization; any excess expenses shall be borne by Fund
Asset Management, L.P. ("FAM") at the time such tax returns and Forms 1099 are
prepared.
(h) The Funds each agree to mail to its respective shareholders of record
entitled to vote at the annual meeting of shareholders at which action is to be
considered regarding this Agreement, in sufficient time to comply
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<PAGE>
with requirements as to notice thereof, a combined proxy statement and
prospectus which complies in all material respects with the applicable
provisions of Section 14(a) of the 1934 Act and Section 20(a) of the 1940 Act,
and the rules and regulations, respectively, thereunder.
(i) Following the consummation of the Reorganization, MuniYield Florida
will stay in existence and continue its business as a non-diversified,
closed-end management investment company registered under the 1940 Act.
7. Exchange Date.
(a) Delivery of the assets of MuniVest Florida to be transferred, together
with any other MuniVest Florida Investments, and the shares of MuniYield Florida
Common Shares and MuniYield Florida Series B AMPS to be issued as provided in
this Agreement, shall be made at the offices of Brown & Wood LLP, One World
Trade Center, New York, New York 10048, at 10:00 a.m. on the next full business
day following the Valuation Time, or at such other place, time and date agreed
to by the Funds, the date and time upon which such delivery is to take place
being referred to herein as the "Exchange Date." To the extent that any MuniVest
Florida Investments, for any reason, are not transferable on the Exchange Date,
MuniVest Florida shall cause such MuniVest Florida Investments to be transferred
to MuniYield Florida's account with The Bank of New York at the earliest
practicable date thereafter.
(b) MuniVest Florida will deliver to MuniYield Florida on the Exchange Date
confirmations or other adequate evidence as to the tax basis of MuniVest Florida
Investments delivered to MuniYield Florida hereunder, certified by Deloitte &
Touche LLP.
(c) As soon as practicable after the close of business on the Exchange
Date, MuniVest Florida shall deliver to MuniYield Florida a list of the names
and addresses of all of the shareholders of record of MuniVest Florida on the
Exchange Date and the number of shares of common shares and AMPS of MuniVest
Florida owned by each such shareholder, certified to the best of their knowledge
and belief by the applicable transfer agent for MuniVest Florida or by its
President.
8. MuniVest Florida Conditions.
The obligations of each Acquired Fund hereunder shall be subject to the
following conditions:
(a) That this Agreement shall have been adopted, and the Reorganization
shall have been approved, by the affirmative vote of two-thirds of the members
of the Board of Trustees of each of the Funds and by the affirmative vote of (i)
the holders of (a) a majority of the MuniYield Florida Common Shares and
MuniYield Florida AMPS, voting together as a single class, and (b) a majority of
the MuniYield Florida AMPS, voting separately as a class, in each case issued
and outstanding and entitled to vote thereon; (ii) the holders of (a) a majority
of the MuniVest Florida Common Shares and MuniVest Florida AMPS, voting together
as a single class, and (b) a majority of the MuniVest Florida AMPS, voting
separately as a class, in each case issued and outstanding and entitled to vote
thereon, and further that each Fund shall have delivered to each other Fund a
copy of the resolution approving this Agreement adopted by such Fund's Board of
Trustees, and a certificate setting forth the vote of such Fund's shareholders
obtained at its Annual Meeting, each certified by the Secretary of the
appropriate Fund.
(b) MuniVest Florida shall have received from MuniYield Florida and from
each other Acquired Fund a statement of assets, liabilities and capital, with
values determined as provided in Section 4 of this Agreement, together with a
schedule of such fund's investments, all as of the Valuation Time, certified on
the Fund's behalf by its President (or any Vice President) and its Treasurer,
and a certificate signed by the Fund's President (or any Vice President) and its
Treasurer, dated as of the Exchange Date, certifying that as of the Valuation
Time and as of the Exchange Date there has been no material adverse change in
the financial position of the Fund since the date of such Fund's most recent
Annual or Semi-Annual Report as applicable, other than changes in its portfolio
securities since that date or changes in the market value of its portfolio
securities.
(c) That MuniYield Florida shall have furnished to the Acquired Funds a
certificate signed by MuniYield Florida's President (or any Vice President) and
its Treasurer, dated as of the Exchange Date, certifying that, as of the
Valuation Time and as of the Exchange Date all representations and warranties of
MuniYield Florida made in this Agreement are true and correct in all material
respects with the same effect as if made at and as of such dates, and that
MuniYield Florida has complied with all of the agreements and satisfied all of
the conditions on its part to be performed or satisfied at or prior to each of
such dates.
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(d) That there shall not be any material litigation pending with respect to
the matters contemplated by this Agreement.
(e) That MuniVest Florida shall have received an opinion or opinions of
Brown & Wood LLP, as counsel to the Funds, in form and substance satisfactory to
MuniVest Florida and dated the Exchange Date, to the effect that (i) each of the
Funds is a business trust with transferable shares duly organized, validly
existing and in good standing in conformity with the laws of the Commonwealth of
Massachusetts; (ii) the MuniYield Florida Common Shares and MuniYield Florida
Series B AMPS to be issued pursuant to this Agreement are duly authorized and,
upon delivery, will be validly issued and outstanding and fully paid and
nonassessable by MuniYield Florida, and no shareholder of MuniYield Florida has
any preemptive right to subscription or purchase in respect thereof (pursuant to
the Certificate of Designation or the by-laws of MuniYield Florida or the law of
the Commonwealth of Massachusetts, or to the best of such counsel's knowledge,
otherwise); (iii) this Agreement has been duly authorized, executed and
delivered by each of the Funds, and represents a valid and binding contract,
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization or other similar laws
pertaining to the enforcement of creditors' rights generally and court decisions
with respect thereto; provided, such counsel shall express no opinion with
respect to the application of equitable principles in any proceeding, whether at
law or in equity; (iv) the execution and delivery of this Agreement does not,
and the consummation of the Reorganization will not, violate any material
provisions of Massachusetts law or the Declaration of Trust, as amended, the
by-laws, as amended, or any agreement (known to such counsel) to which any Fund
is a party or by which any Fund is bound, except insofar as the parties have
agreed to amend such provision as a condition precedent to the Reorganization;
(v) MuniVest Florida has the power to sell, assign, transfer and deliver the
assets transferred by it hereunder and, upon consummation of the Reorganization
in accordance with the terms of this Agreement, MuniVest Florida will have duly
transferred such assets and liabilities in accordance with this Agreement; (vi)
to the best of such counsel's knowledge, no consent, approval, authorization or
order of any United States federal court, Massachusetts state court or
governmental authority is required for the consummation by the Funds of the
Reorganization, except such as have been obtained under the 1933 Act, the 1934
Act and the 1940 Act and the published rules and regulations of the Commission
thereunder and under Massachusetts law and such as may be required under state
securities laws; (vii) the N-14 Registration Statement has become effective
under the 1933 Act, no stop order suspending the effectiveness of the N-14
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are pending or contemplated under the 1933 Act, and the N-14
Registration Statement, and each amendment or supplement thereto, as of their
respective effective dates, appear on their face to be appropriately responsive
in all material respects to the requirements of the 1933 Act, the 1934 Act and
the 1940 Act and the published rules and regulations of the Commission
thereunder; (viii) the descriptions in the N-14 Registration Statement of
statutes, legal and governmental proceedings and contracts and other documents
are accurate and fairly present the information required to be shown; (ix) the
information in the Joint Proxy Statement and Prospectus under "Comparison of the
Funds--Tax Rules Applicable to the Funds and their Shareholders" and "Agreement
and Plan of Reorganization--Tax Consequences of the Reorganization," to the
extent that it constitutes matters of law, summaries of legal matters or legal
conclusions, has been reviewed by such counsel and is correct in all material
respects as of the date of the Joint Proxy Statement and Prospectus; (x) such
counsel does not know of any statutes, legal or governmental proceedings or
contracts or other documents related to the Reorganization of a character
required to be described in the N-14 Registration Statement which are not
described therein or, if required to be filed, filed as required; (xi) no Fund,
to the knowledge of such counsel, is required to qualify to do business as a
foreign corporation in any jurisdiction except as may be required by state
securities laws, and except where each has so qualified or the failure so to
qualify would not have a material adverse effect on such Fund or its respective
shareholders; (xii) such counsel does not have actual knowledge of any material
suit, action or legal or administrative proceeding pending or threatened against
any of the Funds, the unfavorable outcome of which would materially and
adversely affect such Fund; (xiii) all corporate actions required to be taken by
the Funds to authorize this Agreement and to effect the Reorganization have been
duly authorized by all necessary corporate actions on the part of such Fund; and
(xiv) such opinion is solely for the benefit of the Funds and their Trustees and
officers. Such opinion also shall state that (x) while such counsel cannot make
any representation as to the accuracy or completeness of statements of fact in
the N-14 Registration Statement or any amendment or supplement thereto, nothing
has come to their attention that would lead them to believe that, on the
respective effective dates of the N-14 Registration Statement and any amendment
or supplement thereto, (1) the N-14 Registration Statement or any amendment or
supplement thereto contained any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or necessary to make
the statements therein not
II-10
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misleading; and (2) the prospectus included in the N-14 Registration Statement
contained any untrue statement of a material fact or omitted to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (y) such counsel
does not express any opinion or belief as to the financial statements or other
financial or statistical data relating to any Fund contained or incorporated by
reference in the N-14 Registration Statement. In giving the opinion set forth
above, Brown & Wood LLP may state that it is relying on certificates of officers
of a Fund with regard to matters of fact and certain certificates and written
statements of governmental officials with respect to the good standing of a
Fund.
(f) That MuniVest Florida shall have received either (a) a private letter
ruling from the Internal Revenue Service or (b) an opinion of Brown & Wood LLP,
to the effect that for Federal income tax purposes (i) the transfer by MuniVest
Florida of substantially all of its assets to MuniYield Florida in exchange
solely for shares of MuniYield Florida Common Shares and MuniYield Florida
Series B AMPS as provided in this Agreement will constitute a reorganization
within the meaning of Section 368(a)(1)(C) of the Code, and the respective Funds
will each be deemed to be a "party" to a reorganization within the meaning of
Section 368(b); (ii) in accordance with Section 361(a) of the Code, no gain or
loss will be recognized to MuniVest Florida as a result of the asset transfer
solely in exchange for shares of MuniYield Florida Common Shares and MuniYield
Florida Series B AMPS, as the case may be, or on the distribution of the
MuniYield Florida shares to shareholders of MuniVest Florida under Section
361(c)(1); (iii) under Section 1032 of the Code, no gain or loss will be
recognized to MuniYield Florida on the receipt of assets of MuniVest Florida in
exchange for its shares; (iv) in accordance with Section 354(a)(1) of the Code,
no gain or loss will be recognized to the shareholders of MuniVest Florida on
the receipt of shares of MuniYield Florida in exchange for their shares of
MuniVest Florida (except to the extent that common shareholders receive cash
representing an interest in fractional shares of MuniYield Florida Common
Shares in the Reorganization); (v) in accordance with Section 362(b) of the
Code, the tax basis of MuniVest Florida's assets in the hands of MuniYield
Florida will be the same as the tax basis of such assets in the hands of
MuniVest Florida immediately prior to the consummation of the Reorganization;
(vi) in accordance with Section 358 of the Code, immediately after the
Reorganization, the tax basis of the shares of MuniYield Florida received by the
shareholders of MuniVest Florida in the Reorganization will be equal, in the
aggregate, to the tax basis of the shares of MuniVest Florida surrendered in
exchange; (vii) in accordance with Section 1223 of the Code, a shareholder's
holding period for the shares of MuniYield Florida will be determined by
including the period for which such shareholder held MuniVest Florida shares
exchanged therefor, provided that such shares were held as a capital asset;
(viii) in accordance with Section 1223 of the Code, MuniYield Florida's holding
period with respect to MuniVest Florida's assets transferred will include the
period for which such assets were held by MuniVest Florida; (ix) the payment of
cash to common shareholders of MuniVest Florida in lieu of fractional shares of
MuniYield Florida Common Shares will be treated as though the fractional shares
were distributed as part of the Reorganization and then redeemed, with the
result that such shareholders will have short- or long-term capital gain or loss
to the extent that the cash distribution differs from the shareholder's basis
allocable to the MuniYield Florida fractional shares; and (x) the taxable year
of MuniVest Florida will end on the effective date of the Reorganization and
pursuant to Section 381(a) of the Code and regulations thereunder, MuniYield
Florida will succeed to and take into account certain tax attributes of MuniVest
Florida, such as earnings and profits, capital loss carryovers and method of
accounting.
(g) That all proceedings taken by each of the Funds and its counsel in
connection with the Reorganization and all documents incidental thereto shall be
satisfactory in form and substance to the others.
(h) That the N-14 Registration Statement shall have become effective under
the 1933 Act, and no stop order suspending such effectiveness shall have been
instituted or, to the knowledge of MuniYield Florida, be contemplated by the
Commission.
(i) That MuniVest Florida shall have received from Deloitte & Touche LLP a
letter dated as of the effective date of the N-14 Registration Statement and a
similar letter dated within five days prior to the Exchange Date, in form and
substance satisfactory to them, to the effect that (i) they are independent
public accountants with respect to MuniYield Florida within the meaning of the
1933 Act and the applicable published rules and regulations thereunder; (ii) in
their opinion, the financial statements and supplementary information of
MuniYield Florida included or incorporated by reference in the N-14 Registration
Statement and reported on by them comply as to form in all material respects
with the applicable accounting requirements of the 1933 Act and the published
rules and regulations thereunder; (iii) on the basis of limited procedures
agreed upon by the Funds and described in such letter (but not an examination in
accordance with generally accepted auditing standards) consisting of a reading
of any unaudited interim financial statements and unaudited supplementary
information of MuniYield
II-11
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Florida included in the N-14 Registration Statement, and inquiries of certain
officials of MuniYield Florida responsible for financial and accounting matters,
nothing came to their attention that caused them to believe that (a) such
unaudited financial statements and related unaudited supplementary information
do not comply as to form in all material respects with the applicable accounting
requirements of the 1933 Act and the published rules and regulations thereunder,
(b) such unaudited financial statements are not fairly presented in conformity
with generally accepted accounting principles, applied on a basis substantially
consistent with that of the audited financial statements, or (c) such unaudited
supplementary information is not fairly stated in all material respects in
relation to the unaudited financial statements taken as a whole; and (iv) on the
basis of limited procedures agreed upon by the Funds and described in such
letter (but not an examination in accordance with generally accepted auditing
standards), the information relating to MuniYield Florida appearing in the N-14
Registration Statement, which information is expressed in dollars (or
percentages derived from such dollars) (with the exception of performance
comparisons, if any), if any, has been obtained from the accounting records of
MuniYield Florida or from schedules prepared by officials of MuniYield Florida
having responsibility for financial and reporting matters and such information
is in agreement with such records, schedules or computations made therefrom.
(j) That the Commission shall not have issued an unfavorable advisory
report under Section 25(b) of the 1940 Act, nor instituted or threatened to
institute any proceeding seeking to enjoin consummation of the Reorganization
under Section 25(c) of the 1940 Act, and no other legal, administrative or other
proceeding shall be instituted or threatened which would materially affect the
financial condition of MuniYield Florida or would prohibit the Reorganization.
(k) That MuniVest Florida shall have received from the Commission such
orders or interpretations as Brown & Wood LLP, as their counsel, deems
reasonably necessary or desirable under the 1933 Act and the 1940 Act in
connection with the Reorganization, provided, that such counsel shall have
requested such orders as promptly as practicable, and all such orders shall be
in full force and effect.
9. MuniYield Florida Conditions.
The obligations of MuniYield Florida hereunder shall be subject to the
following conditions:
(a) That this Agreement shall have been adopted, and the Reorganization
shall have been approved, by the Board of Trustees and the shareholders of each
of the Funds as set forth in Section 8(a); and that MuniVest Florida shall have
delivered to MuniYield Florida a copy of the resolution approving this Agreement
adopted by such MuniVest Florida's Board of Trustees, and a certificate setting
forth the vote of the shareholders of MuniVest Florida obtained, each certified
by its Secretary.
(b) That MuniVest Florida shall have furnished to MuniYield Florida a
statement of its assets, liabilities and capital, with values determined as
provided in Section 4 of this Agreement, together with a schedule of investments
with their respective dates of acquisition and tax costs, all as of the
Valuation Time, certified on such Fund's behalf by its President (or any Vice
President) and its Treasurer, and a certificate signed by such Fund's President
(or any Vice President) and its Treasurer, dated as of the Exchange Date,
certifying that as of the Valuation Time and as of the Exchange Date there has
been no material adverse change in the financial position of MuniVest Florida
since the date of such Fund's most recent Annual Report or Semi-Annual Report,
as applicable, other than changes in MuniVest Florida Investments since that
date or changes in the market value of MuniVest Florida Investments.
(c) That MuniVest Florida shall have furnished to MuniYield Florida a
certificate signed by such Fund's President (or any Vice President) and its
Treasurer, dated the Exchange Date, certifying that as of the Valuation Time and
as of the Exchange Date all representations and warranties of MuniVest Florida
made in this Agreement are true and correct in all material respects with the
same effect as if made at and as of such dates and the Acquired Fund has
complied with all of the agreements and satisfied all of the conditions on its
part to be performed or satisfied at or prior to such dates.
(d) That MuniVest Florida shall have delivered to MuniYield Florida a
letter from Deloitte & Touche LLP, dated the Exchange Date, stating that such
firm has performed a limited review of the Federal, state and local income tax
returns of MuniVest Florida for the period ended _______________ (which returns
originally were prepared and filed by MuniVest Florida), and that based on such
limited review, nothing came to their attention which caused them to believe
that such returns did not properly reflect, in all material respects, the
Federal, state and local income taxes of MuniVest Florida for the period covered
thereby; and that for the period
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<PAGE>
from _____________, to and including the Exchange Date and for any taxable year
of MuniVest Florida ending upon the liquidation of MuniVest Florida, such firm
has performed a limited review to ascertain the amount of applicable Federal,
state and local taxes, and has determined that either such amount has been paid
or reserves have been established for payment of such taxes, this review to be
based on unaudited financial data; and that based on such limited review,
nothing has come to their attention which caused them to believe that the taxes
paid or reserves set aside for payment of such taxes were not adequate in all
material respects for the satisfaction of Federal, state and local taxes for the
period from ______________, to and including the Exchange Date and for any
taxable year of MuniVest Florida, ending upon the liquidation of such fund or
that such fund would not qualify as a regulated investment company for Federal
income tax purposes for the tax years in question.
(e) That there shall not be any material litigation pending with respect to
the matters contemplated by this Agreement.
(f) That MuniYield Florida shall have received an opinion of Brown & Wood
LLP, as counsel to the Funds, in form and substance satisfactory to MuniYield
Florida and dated the Exchange Date, with respect to the matters specified in
Section 8(e) of this Agreement and such other matters as MuniYield Florida
reasonably may deem necessary or desirable.
(g) That MuniYield Florida shall have received a private letter ruling from
the Internal Revenue Service or an opinion of Brown & Wood LLP with respect to
the matters specified in Section 8(f) of this Agreement.
(h) That MuniYield Florida shall have received from Deloitte & Touche LLP a
letter dated as of the effective date of the N-14 Registration Statement and a
similar letter dated within five days prior to the Exchange Date, in form and
substance satisfactory to MuniYield Florida, to the effect that (i) they are
independent public accountants with respect to such fund within the meaning of
the 1933 Act and the applicable published rules and regulations thereunder; (ii)
in their opinion, the financial statements and supplementary information of such
fund included or incorporated by reference in the N-14 Registration Statement
and reported on by them comply as to form in all material respects with the
applicable accounting requirements of the 1933 Act and the published rules and
regulations thereunder; (iii) on the basis of limited procedures agreed upon by
the Funds and described in such letter (but not an examination in accordance
with generally accepted auditing standards) consisting of a reading of any
unaudited interim financial statements and unaudited supplementary information
of MuniVest Florida included in the N-14 Registration Statement, and inquiries
of certain officials of MuniVest Florida responsible for financial and
accounting matters, nothing came to their attention that caused them to believe
that (a) such unaudited financial statements and related unaudited supplementary
information do not comply as to form in all material respects with the
applicable accounting requirements of the 1933 Act and the published rules and
regulations thereunder, (b) such unaudited financial statements are not fairly
presented in conformity with generally accepted accounting principles, applied
on a basis substantially consistent with that of the audited financial
statements, or (c) such unaudited supplementary information is not fairly stated
in all material respects in relation to the unaudited financial statements taken
as a whole; and (iv) on the basis of limited procedures agreed upon by the Funds
and described in such letter (but not an examination in accordance with
generally accepted auditing standards), the information relating to MuniVest
Florida appearing in the N-14 Registration Statement, which information is
expressed in dollars (or percentages derived from such dollars) (with the
exception of performance comparisons, if any), if any, has been obtained from
the accounting records of MuniVest Florida or from schedules prepared by
officials of MuniVest Florida having responsibility for financial and reporting
matters and such information is in agreement with such records, schedules or
computations made therefrom.
(i) That MuniVest Florida Investments to be transferred to MuniYield
Florida shall not include any assets or liabilities which MuniYield Florida, by
reason of limitations in the Declaration of Trust or otherwise, may not properly
acquire or assume.
(j) That the N-14 Registration Statement shall have become effective under
the 1933 Act and no stop order suspending such effectiveness shall have been
instituted or, to the knowledge of MuniVest Florida, be contemplated by the
Commission.
(k) That the Commission shall not have issued an unfavorable advisory
report under Section 25(b) of the 1940 Act, nor instituted or threatened to
institute any proceeding seeking to enjoin consummation of the Reorganization
under Section 25(c) of the 1940 Act, and no other legal, administrative or other
proceeding shall
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be instituted or threatened which would materially affect the financial
condition of MuniVest Florida or would prohibit the Reorganization.
(l) That MuniYield Florida shall have received from the Commission such
orders or interpretations as Brown & Wood LLP, as counsel to MuniYield Florida,
deems reasonably necessary or desirable under the 1933 Act and the 1940 Act in
connection with the Reorganization, provided, that such counsel shall have
requested such orders as promptly as practicable, and all such orders shall be
in full force and effect.
(m) That all proceedings taken by MuniVest Florida and its counsel in
connection with the Reorganization and all documents incidental thereto shall be
satisfactory in form and substance to MuniYield Florida.
(n) That prior to the Exchange Date, MuniVest Florida shall have declared a
dividend or dividends which, together with all such previous dividends, shall
have the effect of distributing to its shareholders all of its net investment
company taxable income for the period to and including the Exchange Date, if any
(computed without regard to any deduction for dividends paid), and all of its
net capital gain, if any, realized to and including the Exchange Date. In this
regard, the last dividend period for the MuniVest Florida AMPS may be shorter
than the dividend period for such AMPS determined as set forth in the applicable
Certificate of Designation.
10. Termination, Postponement and Waivers.
(a) Notwithstanding anything contained in this Agreement to the contrary,
this Agreement may be terminated and the Reorganization abandoned at any time
(whether before or after adoption thereof by the shareholders of the Funds)
prior to the Exchange Date, or the Exchange Date may be postponed, (i) by mutual
consent of the Boards of Trustees of the Funds, (ii) by the Board of Trustees of
MuniVest Florida if any condition of MuniVest Florida's obligations set forth in
Section 8 of this Agreement has not been fulfilled or waived by such Board; or
(iii) by the Board of Trustees of MuniYield Florida if any condition of
MuniYield Florida's obligations set forth in Section 10 of this Agreement have
not been fulfilled or waived by such Board.
(b) If the transactions contemplated by this Agreement have not been
consummated by August __, 2000, this Agreement automatically shall terminate on
that date, unless a later date is mutually agreed to by the Boards of Trustees
of the Funds.
(c) In the event of termination of this Agreement pursuant to the
provisions hereof, the same shall become void and have no further effect, and
there shall not be any liability on the part of any Fund or persons who are
their Trustees, trustees, officers, agents or shareholders in respect of this
Agreement.
(d) At any time prior to the Exchange Date, any of the terms or conditions
of this Agreement may be waived by the Board of Trustees of any Fund (whichever
is entitled to the benefit thereof), if, in the judgment of such Board after
consultation with its counsel, such action or waiver will not have a material
adverse effect on the benefits intended under this Agreement to the shareholders
of their respective fund, on behalf of which such action is taken. In addition,
the Boards of Trustees of the Funds have delegated to FAM the ability to make
non-material changes to the transaction if it deems it to be in the best
interests of the Funds to do so.
(e) The respective representations and warranties contained in Sections 1
and 2 of this Agreement shall expire with, and be terminated by, the
consummation of the Reorganization, and no Fund nor any of its officers,
Trustees, trustees, agents or shareholders shall have any liability with respect
to such representations or warranties after the Exchange Date. This provision
shall not protect any officer, director, trustee, agent or shareholder of any
Fund against any liability to the entity for which that officer, director,
trustee, agent or shareholder so acts or to its shareholders, to which that
officer, director, trustee, agent or shareholder otherwise would be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties in the conduct of such office.
(f) If any order or orders of the Commission with respect to this Agreement
shall be issued prior to the Exchange Date and shall impose any terms or
conditions which are determined by action of the Boards of Trustees of the Funds
to be acceptable, such terms and conditions shall be binding as if a part of
this Agreement without further vote or approval of the shareholders of the Funds
unless such terms and conditions shall result in a change in the method of
computing the number of shares of MuniYield Florida Common Shares or MuniYield
Florida Series B AMPS, as applicable, in which event, unless such terms and
conditions shall have been included in the proxy solicitation materials
furnished to the shareholders of the Funds prior to the meetings at which the
Reorganization shall have been approved, this Agreement shall not be consummated
and shall terminate unless
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the Funds promptly shall call a special meeting of shareholders at which such
conditions so imposed shall be submitted for approval.
11. Indemnification.
(a) MuniVest Florida hereby severally agrees to indemnify and hold
MuniYield Florida harmless from all loss, liability and expenses (including
reasonable counsel fees and expenses in connection with the contest of any
claim) which MuniYield Florida may incur or sustain by reason of the fact that
(i) MuniYield Florida shall be required to pay any corporate obligation of
MuniVest Florida, whether consisting of tax deficiencies or otherwise, based
upon a claim or claims against MuniVest Florida which were omitted or not fairly
reflected in the financial statements to be delivered to MuniYield Florida in
connection with the Reorganization; (ii) any representations or warranties made
by MuniVest Florida in this Agreement should prove to be false or erroneous in
any material respect; (iii) any covenant of MuniVest Florida has been breached
in any material respect; or (iv) any claim is made alleging that (a) the N-14
Registration Statement included any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary to
make the statements therein attributable to such Fund not misleading or (b) the
Joint Proxy Statement and Prospectus delivered to the shareholders of the Funds
and forming a part of the N-14 Registration Statement included any untrue
statement of a material fact or omitted to state any material fact necessary to
make the statements therein attributable to such Fund, in the light of the
circumstances under which they were made, not misleading, except with respect to
(iv)(a) and (b) herein insofar as such claim is based on written information
furnished to MuniVest Florida by MuniYield Florida.
(b) MuniYield Florida hereby agrees to indemnify and hold MuniVest Florida
harmless from all loss, liability and expenses (including reasonable counsel
fees and expenses in connection with the contest of any claim) which MuniVest
Florida may incur or sustain by reason of the fact that (i) any representations
or warranties made by MuniYield Florida in this Agreement should prove false or
erroneous in any material respect, (ii) any covenant of MuniYield Florida has
been breached in any material respect, or (iii) any claim is made alleging that
(a) the N-14 Registration Statement included any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary to make the statements therein, not misleading or (b) the Joint Proxy
Statement and Prospectus delivered to shareholders of the Funds and forming a
part of the N-14 Registration Statement included any untrue statement of a
material fact or omitted to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except with respect to (iii)(a) and (b) herein insofar as
such claim is based on written information furnished to MuniYield Florida by
MuniVest Florida seeking indemnification.
(c) In the event that any claim is made against MuniYield Florida in
respect of which indemnity may be sought by MuniYield Florida from MuniVest
Florida under Section 11(a) of this Agreement, or in the event that any claim is
made against MuniVest Florida in respect of which indemnity may be sought by
MuniVest Florida from MuniYield Florida under Section 13(b) of this Agreement,
then the party seeking indemnification (the "Indemnified Party"), with
reasonable promptness and before payment of such claim, shall give written
notice of such claim to the other party (the "Indemnifying Party"). If no
objection as to the validity of the claim is made in writing to the Indemnified
Party by the Indemnifying Party within thirty (30) days after the giving of
notice hereunder, then the Indemnified Party may pay such claim and shall be
entitled to reimbursement therefor, pursuant to this Agreement. If, prior to the
termination of such thirty-day period, objection in writing as to the validity
of such claim is made to the Indemnified Party, the Indemnified Party shall
withhold payment thereof until the validity of such claim is established (i) to
the satisfaction of the Indemnifying Party, or (ii) by a final determination of
a court of competent jurisdiction, whereupon the Indemnified Party may pay such
claim and shall be entitled to reimbursement thereof, pursuant to this
Agreement, or (iii) with respect to any tax claims, within seven (7) calendar
days following the earlier of (A) an agreement between MuniYield Florida and
MuniVest Florida seeking indemnification that an indemnity amount is payable,
(B) an assessment of a tax by a taxing authority, or (C) a "determination" as
defined in Section 1313(a) of the Code. For purposes of this Section 13, the
term "assessment" shall have the same meaning as used in Chapter 63 of the Code
and Treasury Regulations thereunder, or any comparable provision under the laws
of the appropriate taxing authority. In the event of any objection by the
Indemnifying Party, the Indemnifying Party promptly shall investigate the claim,
and if it is not satisfied with the validity thereof, the Indemnifying Party
shall conduct the defense against such claim. All costs and expenses incurred by
the Indemnifying Party in connection with such investigation and defense of such
claim shall be borne by it. These indemnification provisions are in addition to,
and not in limitation of, any other rights the parties may have under applicable
law.
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<PAGE>
12. Other Matters.
(a) Pursuant to Rule 145 under the 1933 Act, and in connection with the
issuance of any shares to any person who at the time of the Reorganization is,
to its knowledge, an affiliate of a party to the Reorganization pursuant to Rule
145(c), MuniYield Florida will cause to be affixed upon the certificate(s)
issued to such person (if any) a legend as follows:
THESE SHARES ARE SUBJECT TO RESTRICTIONS ON TRANSFER UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED
EXCEPT TO MUNIYIELD FLORIDA FUND, INC. (OR ITS STATUTORY SUCCESSOR),
OR ITS PRINCIPAL UNDERWRITER UNLESS (I) A REGISTRATION STATEMENT WITH
RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT OF 1933 OR (II)
IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE FUND, SUCH
REGISTRATION IS NOT REQUIRED.
and, further, that stop transfer instructions will be issued to MuniYield
Florida's transfer agent with respect to such shares. MuniVest Florida will
provide MuniYield Florida on the Exchange Date with the name of any shareholder
of MuniVest Florida who is to the knowledge of MuniVest Florida an affiliate of
MuniVest Florida on such date.
(b) All covenants, agreements, representations and warranties made under
this Agreement and any certificates delivered pursuant to this Agreement shall
be deemed to have been material and relied upon by each of the parties,
notwithstanding any investigation made by them or on their behalf.
(c) Any notice, report or demand required or permitted by any provision of
this Agreement shall be in writing and shall be made by hand delivery, prepaid
certified mail or overnight service, addressed to any Fund, at 800 Scudders Mill
Road, Plainsboro, New Jersey 08536, Attn: Terry K. Glenn, President.
(d) This Agreement supersedes all previous correspondence and oral
communications between the parties regarding the Reorganization, constitutes the
only understanding with respect to the Reorganization, may not be changed except
by a letter of agreement signed by each party and shall be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed in said state.
(e) It is expressly agreed that the obligations of the Funds hereunder
shall not be binding upon any of their respective Trustees, shareholders,
nominees, officers, agents, or employees personally, but shall bind only the
trust property of the respective Funds as provided in such Fund's Declaration of
Trust. The execution and delivery of this Agreement have been authorized by the
Trustees of each Fund and signed by authorized officers of each Fund, acting as
such, and neither such authorization by such Trustees nor such execution and
delivery by such officers shall be deemed to have been made by any of them
individually or to impose liability on any of them personally, but shall bind
only the trust property of each Fund, as provided in such Fund's Declaration of
Trust.
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<PAGE>
This Agreement may be executed in any number of counterparts, each of
which, when executed and delivered, shall be deemed to be an original but all
such counterparts together shall constitute but one instrument.
MUNIYIELD FLORIDA FUND
By: _____________________________________
Attest:
________________________________
MUNIVEST FLORIDA FUND
By: _____________________________________
Attest:
________________________________
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<PAGE>
EXHIBIT III
ECONOMIC AND OTHER CONDITIONS IN FLORIDA
The following information is a brief summary of factors affecting the
economy of the State of Florida (the "State") and does not purport to be a
complete description of such factors Other factors will affect issuers. The
summary is based upon one or more of the most recent publicly available offering
statements relating to debt offerings of the State, however, it has not been
updated. The Fund has not independently verified the information.
In the early 1990s, the State's unemployment rate generally tracked above
that of the nation. Beginning in calendar year 1995, the State's unemployment
rate has generally tracked below the national average. The State's unemployment
rate is projected to be 4.2% in calendar year 1999 and 4.4 in calendar year
2000, while the nation's unemployment rate for those calendar years is projected
to be 4.5% and 4.6%, respectively. (The projections set forth in this Appendix
were obtained from a report, prepared by the Revenue and Economic Analysis Unit
of the Executive Office of the Governor for the State of Florida, contained
within a recent official statement, dated August 20, 1999 for a State of Florida
debt offering ("State of Florida Report")).
During calendar years 1992 through 1998, the State's per capita income is
projected to have expanded approximately 29.0%, while the national per capita
income will have increased by approximately 30.3%. Real personal income in
Florida is estimated to increase 4.9% in fiscal year 1998-99 and 3.5% in fiscal
year 1999-2000 while real personal income per capita is projected to grow at
3.1% in fiscal year 1998-99 and 1.8% in fiscal year 1999-2000. The State's
fiscal year begins July 1 and ends June 30.
The structure of Florida's income differs from that of the nation and the
Southeast. Because Florida has a proportionally greater retirement age
population, property income (dividends, interest, and rent) and transfer
payments (social security and pension benefits, among other sources of income)
are relatively more important sources of income. For example, Florida's
employment income in calendar year 1998 represented 62.0% of total personal
income, while the nation's share of total personal income in the form of wages
and salaries and other labor benefits was 72.2%. Florida's income is dependent
upon transfer payments controlled by the federal government.
The State's strong population growth is one fundamental reason why its
economy has typically performed better than the nation as a whole. In census
year 1980, the State was ranked seventh among the 50 states with a population of
9.7 million people. The State has grown dramatically since then and as of April
1, 1998 ranked fourth with an estimated population of 15.0 million. Since census
year 1990, the State's estimated average annual rate of population increase has
been approximately 1.9% as compared to an approximately 1.0% for the nation as a
whole. While annual growth in the State's population is expected to decline
somewhat, it is expected to have grown to over 200,000 new residents per year
throughout the 1990's.
Tourism is one of the State's most important industries. An estimated forty
eight million seven hundred thousand (48.7 million) people visited the State in
calendar year 1998, according to the Florida Department of Commerce. Tourism
arrivals are expected to increase by 2.0% in fiscal year 1998-99 and 1.7% the
following fiscal year. In fiscal year 1998-99, tourist arrivals are projected to
approximate 49.7 million. In fiscal year 1999-2000, tourist arrivals are
projected to reach 50.6 million. Florida tourism appears to be recovering from
the effects of negative publicity regarding crime against tourists in the State.
Factors such as "product maturity" of a Florida vacation package, higher prices,
and more aggressive marketing by competing vacation destinations, could
contribute to a tourism slowdown.
Florida's dependency on the highly cyclical construction and
construction-related manufacturing sectors has declined. Total contract
construction employment as a share of total non-farm employment declined from
7.5% in the late 1980s to approximately 5.3% in calendar year 1998. Florida,
nevertheless, has an important construction industry, with Florida's single and
multi-family housing starts projected to reach a combined level of 144,000 in
fiscal year 1998-99 and 143,000 in fiscal year 1999-2000. Multi-family starts
have been slow to recover from the early 1990's recession, but are showing
stronger growth now and are expected to approximate 46,500 in fiscal year
1998-99 and 46,300 in fiscal year 1999-2000. Total construction expenditures in
fiscal years 1998-99 and 1999-2000 are forecasted to increase 8.6% and 2.5%,
respectively. A driving force behind the State's construction industry is its
rapid population growth. Net migration to the State is forecasted to slow,
although the State's population is expected to have grown by over 200,000
persons per year during the 1990's.
Financial operations of the State covering all receipts and expenditures
are maintained through the use of four funds -- the General Revenue Fund, Trust
Funds, the Working Capital Fund, and the Budget Stabilization Fund. In fiscal
year 1996-97, the State derived approximately 67% of its total direct revenues
to these funds from State taxes and fees. Federal funds and other special
revenues accounted for the remaining revenues. Major sources of tax revenues to
the General Revenue Fund are the sales and use tax, corporate income tax,
intangible personal property tax, beverage tax, and estate tax which amounted to
68%, 8%, 4%, 3% and 3%, respectively,
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<PAGE>
of total General Revenue Funds available. State expenditures are categorized for
budget and appropriation purposes by type of fund and spending unit, which are
further subdivided by line item. In fiscal year 1996-97, expenditures from the
General Revenue Fund for education, health and welfare, and public safety
amounted to approximately 53%, 26% and 14%, respectively, of total General
Revenues.
The Sales and Use Tax is the greatest single source of tax receipts in the
State. For fiscal year 1996-97, receipts from this source were $12,089 million,
an increase of 5.5% from fiscal year 1995-96, although not all of these receipts
are credited to the General Revenue Fund. The second largest source of State tax
receipts is the Motor Fuel Tax. The collections from this source during fiscal
year 1996-97 were $2,012 million, although these revenues are almost entirely
dedicated trust funds for specific purposes and are not included in the General
Revenue Fund. Alcoholic beverage tax revenues totalled $447.2 million for fiscal
year 1996-97, an increase of $5.7 million from the previous fiscal year. The
receipts of corporate income tax for fiscal year 1996-97 were $1,362.3 million,
an increase of 17.2% from fiscal year 1995-96. Documentary stamp tax collections
totalled $844.2 million during fiscal year 1996-97, posting an 8.9% increase
from the previous fiscal year. Gross receipts utility tax collections for fiscal
year 1996-97 totalled $575.7 million, an increase of 6.0% over the previous
fiscal year. The intangible personal property tax is a tax on stocks, bonds,
notes, governmental leaseholds, certain limited partnership interests, mortgages
and other obligations secured by liens on Florida realty, and other intangible
personal property. Total collections from intangible personal property taxes
were $952.4 million during fiscal year 1996-97, a 6.3% increase from the
previous fiscal year. Recent reductions in the intangible personal property tax
rate and expansions in the exclusions from that tax could reduce future revenues
from that source. A significant portion of these tax proceeds are unavailable to
the General Revenue Fund. The State's estate tax on resident decedents' estates
is generally equal to the amount allowable as a credit against federal estate
tax for state death taxes paid, and does not increase the estate's total federal
estate tax liability. For fiscal year 1996-97, estate tax receipts were $546.9
million, an increase of 30% from the prior fiscal year. In fiscal year 1996-97,
State-operated lotteries produced gross revenue of $2.09 billion. State law
requires allocating lottery revenues 50% to prizes, at least 38% to public
education, and no more than 12% to lottery administrative costs. In fiscal year
1996-97, education received approximately $792.3 million.
In addition to the foregoing information, the State of Florida Report
contains the following General Revenue information for fiscal year 1997-1998 in
tabular form.
State of Florida
Total General Revenues
Fiscal Years 1997-98
(in millions of dollars)
1997-98
Actual
---------
General Revenue Fund:
Sales Tax-GR ..................................... $11,828.7
Beverage Tax & Licenses .......................... 550.1
Corporate Income Tax ............................. 1,395.7
Documentary Stamp Tax ............................ 429.6
Cigarette Tax .................................... 142.1
Insurance Premium Tax ............................ 295.5
Pari-Mutuels Tax ................................. 25.6
Intangibles Tax .................................. 756.0
Estate Tax ....................................... 595.0
Interest Earnings ................................ 217.9
Public Safety Licenses ........................... 61.2
Medical & Hospital Fees .......................... 99.8
Motor Vehicle Charges ............................ 41.3
Auto Title & Lien Fees ........................... 24.0
Severance Taxes .................................. 35.4
Service Charges .................................. 383.8
Other Taxes, Licenses & Fees ..................... 262.5
Less: Refunds .................................... (204.6)
---------
Net General Revenue .............................. $16,939.4
=========
Executive Office of the Governor
Revenue and Economic Analysis
March 8, 1999
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Those tables also disclose that State Fuel Tax Trust Fund Revenues for
fiscal year 1997-1998 were $1,175.7 million.
For fiscal year 1998-99 the estimated General Revenue plus Working Capital
and Budget Stabilization funds available total $19,481.8 million, a 5.2%
increase over 1997-98. The $17,779.5 million in the Estimated Revenues component
of the fiscal year 1998-99 total represent a 5.0% increase over the analogous
figure in 1997-98. With combined General Revenue, Working Capital Fund and
Budget Stabilization Fund appropriations at $18,222.0 million, unencumbered
reserves at the end of 1998-99 are estimated at $1,360.7 million. For fiscal
year 1999-2000, the estimated total of General Revenue plus Working Capital and
Budget Stabilization funds available are $20,133.9 million, a 3.3% increase over
the total estimated for fiscal year 1998-99. The $18,555.2 million in the
Estimated Revenues component of the estimated 1999-2000 total represent a 4.4%
increase over the analogous figure for fiscal year 1998-99.
The State Constitution does not permit a state or local personal income
tax. An amendment to the State Constitution by the electors of the State would
be required in order to impose a personal income tax in the State.
Property valuations for homestead property are subject to a growth cap.
Growth in the just (market) value of property qualifying for the homestead
exemption is limited to 3% or the change in the Consumer Price Index, whichever
is less. If the property changes ownership or homestead status, it is to be
re-valued at full just value on the next tax roll. Although the impact of the
growth cap cannot be determined, it may have the effect of causing local
government units in the State to rely more on non-ad valorem tax revenues to
meet operating expenses and other requirements normally funded with ad valorem
tax revenues.
The State Constitution provides that State revenues collected for any
fiscal year shall be limited to State revenues allowed under that provision for
the prior fiscal year plus an adjustment for growth. Growth is defined as an
amount equal to the average annual rate of growth in State personal income over
the most recent twenty quarters times the State revenues allowed under that
provision for the prior fiscal year. State revenues collected for any fiscal
year in excess of this limitation are required to be transferred to the Budget
Stabilization Fund until the fund reaches the maximum balance specified in
Section 19(g) of Article III of the State Constitution, and thereafter is
required to be refunded to taxpayers as provided by general law. The limitation
on State revenues may be increased by the Legislature, by a two-thirds vote of
each house.
"State revenues" are defined as taxes, fees, licenses, and charges for
services imposed by the Legislature on individuals, businesses, or agencies
outside State government. However, the term "State revenues" does not include:
(i) revenues that are necessary to meet the requirements set forth in documents
authorizing the issuance of Bonds by the State; (ii) revenues that are used to
provide matching funds for the federal Medicaid program with the exception of
the revenues used to support the Public Medical Assistance Trust Fund or its
successor program and with the exception of State matching funds used to fund
elective expansions made after July 1, 1994; (iii) proceeds from the State
lottery returned as prizes; (iv) receipts of the Florida Hurricane Catastrophe
Fund; (v) balances carried forward from prior fiscal years; (vi) taxes,
licenses, fees and charges for services imposed by local, regional, or school
district governing bodies; or (vii) revenue from taxes, licenses, fees and
charges for services required to be imposed by any amendment or revision to the
State Constitution after July 1, 1994.
It should be noted that many of these provisions, which were adopted by
constitutional amendment in 1994, are ambiguous, and likely will not be
clarified until State courts have ruled on their meanings. Further, it is
uncertain how the Legislature will implement the provisions and whether such
implementing legislation will itself be the subject of court interpretation.
The Fund cannot predict the impact of these provisions on State finances.
To the extent local governments traditionally receive revenues from the State
which are subject to, and limited by, these provisions, the future distribution
of such State revenues may be adversely affected.
Hurricanes continue to endanger the coastal and interior portions of
Florida. Substantial damage resulted from tropical storms and hurricanes in the
1992, 1995 and 1998 hurricane seasons. The hurricane season runs from June 1
through November 30. The Fund cannot predict the economic impact, if any, of
future hurricanes and storms.
As of August 20, 1999, the State had a high bond rating from Moody's
Investors Service, Inc. (Aa2), Standard & Poor's (AA+) and Fitch IBCA, Inc. (AA)
on all of its general obligation bonds. Outstanding general obligation bonds at
June 30, 1998 totalled almost $8.7 billion and were issued to finance capital
outlay for
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educational projects of both local school districts, community colleges and
state universities, environmental protection and highway construction. The State
has issued over $787 million of general obligation bonds since July 1, 1998.
In May 1999, as supplemented in June 1999, the Florida Auditor General
notified the Governor's Office that it identified, as of September 30, 1997,
forty local government entities as meeting one or more of the financial
emergency conditions prescribed by State statute. The Auditor General's
notification indicated that ten of those local government entities (including
the city of Miami) were on September 30, 1997 in a state of financial emergency.
Stating that a statutorily defined financial emergency is not necessarily
indicative of a local governmental entity's solvency or ability to pay its
current financial obligations, the Auditor General's notification indicated that
the remaining thirty local government entities were not facing a true financial
crisis and / or the financial emergency was due to accounting practices. For
these purposes, a state of emergency is considered two consecutive years of
budget deficits. Municipalities or special districts that may be in a state of
financial emergency are those that the Auditor General was unable to conclude
had sufficient revenues to cover their deficits. The operations of all these
entities mentioned in the Auditor General's notification may be adversely
affected by their financial condition.
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<PAGE>
EXHIBIT IV
SECTIONS 86 THROUGH 98 OF CHAPTER 156B
OF THE MASSACHUSETTS GENERAL LAWS
(THE MASSACHUSETTS BUSINESS CORPORATION LAW)
ss. 86. Sections applicable to appraisal; prerequisites
If a corporation proposes to take a corporate action as to which any
section of this chapter provides that a stockholder who objects to such action
shall have the right to demand payment for his shares and an appraisal thereof,
sections eighty-seven to ninety-eight, inclusive, shall apply except as
otherwise specifically provided in any section of this chapter. Except as
provided in sections eighty-two and eighty-three, no stockholder shall have such
right unless (1) he files with the corporation before taking the vote of the
shareholders on such corporate action, written objection to the proposed action
stating that he intends to demand payment for his shares if the action is taken
and (2) his shares are not voted in favor of the proposed action.
ss. 87. Statement of rights of objecting stockholders in notice of meeting;
form
The notice of the meeting of stockholders at which the approval of such
proposed action to be considered shall contain a statement of the rights of
objecting stockholders. The giving of such notice shall not be deemed to create
any rights in any stockholder receiving the same to demand payment for his
stock, and the directors may authorize the inclusion in any such notice of a
statement of opinion by the management as to the existence or non-existence of
the right of stockholders to demand payment for their stock on account of the
proposed corporate action. The notice may be in such form as the directors or
officers calling the meeting deem advisable, but the following form of notice
shall be sufficient to comply with this section:
"If the action proposed is approved by the stockholders at the meeting and
effected by the corporation, any stockholder (1) who files with the corporation
before the taking of the vote on the approval of such action, written objection
to the proposed action stating that he intends to demand payment for his shares
if the action is taken and (2) whose shares are not voted in favor of such
action has or may have the right to demand in writing from the corporation (or,
in the case of a consolidation or merger, the name of the resulting or surviving
corporation shall be inserted), within twenty days after the date of mailing to
him of notice in writing that the corporate action has become effective, payment
for his shares and an appraisal of the value thereof. Such corporation and any
such stockholder shall in such cases have the rights and duties and shall follow
the procedure set forth in sections 88 to 98, inclusive, of chapter 156B of the
General Laws of Massachusetts."
ss. 88. Notice of effectiveness of action objected to
The corporation taking such action, or in the case of a merger or
consolidation the surviving or resulting corporation, shall, within ten days
after the date on which such corporate action became effective, notify each
stockholder who filed a written objection meeting the requirements of section
eighty-six and whose shares were not voted in favor of the approval of such
action, that the action approved at the meeting of the corporation of which he
is a stockholder has become effective. The giving of such notice shall not be
deemed to create any rights in any stockholder receiving the same to demand
payment for his stock. The notice shall be sent by registered or certified mail,
addressed to the stockholder at his last known address as it appears in the
records of the corporation.
ss. 89. Demand for payment; time for payment
If within twenty days after the date of mailing of a notice under
subsection (e) of section eighty-two, subsection (f) of section eighty-three, or
section eighty-eight, any stockholder to whom the corporation was required to
give such notice shall demand in writing from the corporation taking such
action, or in the case of a consolidation or merger from the resulting or
surviving corporation, payment for his stock, the corporation upon which such
demand is made shall pay to him the fair value of his stock within thirty days
after the expiration of the period during which such demand may be made.
ss. 90. Demand for determination of value; bill in equity; venue
If during the period of thirty days provided for in section eighty-nine the
corporation upon which such demand is made and any such objecting stockholder
fail to agree as to the value of such stock, such corporation or any such
stockholder may within four months after the expiration of such thirty-day
period demand a determination of the value of the stock of all such objecting
stockholders by a bill in equity filed in the superior
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court in the county where the corporation in which such objecting stockholder
held stock had or has its principal office in the commonwealth.
ss. 91. Parties to suit to determine value; service
If the bill is filed by the corporation, it shall name as parties
respondent all stockholders who have demanded payment for their shares and with
whom the corporation has not reached agreement as to the value thereof. If the
bill is filed by a stockholder, he shall bring the bill in his own behalf and in
behalf of all other stockholders who have demanded payment for their shares and
with whom the corporation has not reached agreement as to the value thereof, and
service of the bill shall be made upon the corporation by subpoena with a copy
of the bill annexed. The corporation shall file with its answer a duly verified
list of all such other stockholders, and such stockholders shall thereupon be
deemed to have been added as parties to the bill. The corporation shall give
notice in such form and returnable on such date as the court shall order to each
stockholder party to the bill by registered or certified mail, addressed to the
last known address of such stockholder as shown in the records of the
corporation, and the court may order such additional notice by publication or
otherwise as it deems advisable. Each stockholder who makes demand as provided
in section eighty-nine shall be deemed to have consented to the provisions of
this section relating to notice, and the giving of notice by the corporation to
any such stockholder in compliance with the order of the court shall be
sufficient service of process on him. Failure to give notice to any stockholder
making demand shall not invalidate the proceedings as to other stockholders to
whom notice was properly given, and the court may at any time before the entry
of a final decree make supplementary orders of notice.
ss. 92. Decree determining value and ordering payment; valuation date
After hearing the court shall enter a decree determining the fair value of
the stock of those stockholders who have become entitled to the valuation of and
payment for their shares, and shall order the corporation to make payment of
such value, together with interest, if any, as hereinafter provided to the
stockholders entitled thereto upon the transfer by them to the corporation of
the certificates representing such stock if certificated or, if uncertificated,
upon receipt of the instruction transferring such stock to the corporation. For
this purpose, the value of the shares shall be determined as of the day
preceding the date of the vote approving the proposed corporate action and shall
be exclusive of any element of value arising from the expectation or
accomplishment of the proposed corporate action.
ss. 93 Reference to special master
The court in its discretion may refer the bill or any question arising
thereunder to a special master to hear the parties, make findings and report the
same to the court, all in accordance with the usual practice in suits in equity
in the superior court.
ss. 94. Notation on stock certificates of pendency of bill
On motion the court may order stockholder parties to the bill to submit
their certificates of stock to the corporation for notation of the pendency of
the bill and may order the corporation to note such pendency in its records with
respect to any uncertificated shares held by such stockholder parties, and may
on motion dismiss the bill as to any stockholder who fails to comply with such
order.
ss. 95. Costs; interest
The costs of the bill, including the reasonable compensation and expenses
of any master appointed by the court, but exclusive of fees of counsel or of
experts retained by any party, shall be determined by the court and taxed upon
the parties to the bill, or any of them, in such manner as appears to be
equitable, except that all costs of giving notice to stockholders as provided in
this chapter shall be paid by the corporation. Interest shall be paid upon any
award from the date of the vote approving the proposed corporate action, and the
court may on application of any interested party determine the amount of
interest to be paid in the case of any stockholder.
ss. 96. Dividends and voting rights after demand for payment
Any stockholder who has demanded payment for his stock as provided in this
chapter shall not thereafter be entitled to notice of any meeting of
stockholders or to vote such stock for any purpose and shall not be entitled to
the payment of dividends or other distribution on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the date of the vote, approving the proposed corporate action) unless:
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<PAGE>
1) A bill shall not be filed within the time provided in section ninety;
2) A bill, if filed, shall be dismissed as to such stockholder; or
3) Such stockholder shall with the written approval of the corporation,
or in the case of a consolidation or merger, the resulting or
surviving corporation, deliver to it a written withdrawal of his
objections to and an acceptance of such corporate action.
Notwithstanding the provisions of clauses (1) to (3), inclusive, said
stockholder shall have only the rights of a stockholder who did not so demand
payment for his stock as provided in this chapter.
ss. 97. Status of shares paid for
The shares of the corporation paid for by the corporation pursuant to the
provisions of this chapter shall have the status of treasury stock, or in the
case of a consolidation or merger the shares or the securities of the resulting
or surviving corporation into which the shares of such objecting stockholder
would have been converted had he not objected to such consolidation or merger
shall have the status of treasury stock or securities.
ss. 98. Exclusive remedy; exception
The enforcement by a stockholder of his right to receive payment for his
shares in the manner provided in this chapter shall be an exclusive remedy that
this chapter shall not exclude in the right of such stockholder to bring or
maintain an appropriate proceeding to obtain relief on the ground that such
corporate action will be or is illegal or fraudulent as to him.
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EXHIBIT V
RATINGS OF MUNICIPAL BONDS
Description of Moody's Investors Service, Inc.'s ("Moody'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 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
some time in the future.
Baa Bonds which are rated Baa are considered as 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 a 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 arc 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.
Note: These bonds in the Aa, A, Baa, Ba and B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols Aal,
Al, Baal, Bal and Bl.
Short-term Notes: The three ratings of Moody's for short-term notes are MIG
1/VMIG 1, MIG 2/VMIG 2, and MIG 3/VMIG 3; MIG 1 /VMIG 1 denotes "best quality,
enjoying strong protection from established cash flows"; MIG 2/VMIG 2 denotes
"high quality" with "ample margins of protection"; MIG 3/VMIG 3 instruments are
of "favorable quality ... but ... lacking the undeniable strength of the
preceding grades."
Description of Moody's Commercial Paper Ratings
Moody's Commercial Paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity 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 supporting institutions) have a superior ability
for repayment of short-term promissory obligations. Prime-1 repayment capacity
will often be evidenced by the following characteristics:
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leading market positions in well established industries; high rates of return on
funds employed; conservative capitalization structures with moderate reliance on
debt and ample asset protection; broad margins, in earning coverage of fixed
financial charges and high internal cash generation; and with established access
to a range of financial markets and assured sources of alternate liquidity.
Issuers rated Prime-2 (or supporting institutions) have a strong ability
for repayment of short-term promissory obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of short-term promissory obligations. The effects of
industry characteristics and market composition may be more pronounced.
Variability in earnings and profitability may result in changes to the level of
debt protection measurements and the requirement for relatively high financial
leverage. Adequate alternate liquidity is maintained.
Issuers rated Not Prime do not fall within any of the Prime rating
categories.
Description of Standard & Poor's, a Division of The McGraw-Hill Companies, Inc.
("Standard & Poor'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 financial obligation,
a specific class of financial obligations or a specific program. It takes into
consideration the creditworthiness of guarantors, insurers, or other forms of
credit enhancement on the obligation.
The debt rating is not a recommendation to purchase, sell or hold a
financial obligation, 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
ratings may be changed, suspended or withdrawn as a result of changes in, or
unavailability of, such information, or based on 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 to, and relative position of, the obligation
in the event of bankruptcy, reorganization or other arrangement under the
laws of bankruptcy and other laws affecting creditors' rights.
AAA Debt rated "AAA" has the highest rating assigned by Standard & Poor's.
Capacity of the obligor to meet its financial commitment on the
obligation is extremely strong.
AA Debt rated "AA" differs from the highest-rated issues only in small
degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A Debt rated "A" is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in
higher-rated categories. However, the obligor's capacity to meet its
financial commitment on the obligation is still strong.
BBB Debt rated "BBB" exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.
BB Debt rated "BB," "B," "CCC," "CC", and "C" are regarded as having
significant speculative
B characteristics. "BB" indicates the least degree of speculation and
"C" the highest degree of
CCC speculation. While such debt will likely have some quality and
protective characteristics, these
C may be outweighed by large uncertainties or major risk exposures to
adverse conditions.
V-2
<PAGE>
D Debt rated "D" is in payment default. The "D" rating category is used
when payments on an obligation are not made on the date due even if
the applicable grace period has not expired, unless Standard & Poor's
believes that such payments will be made during such grace period. The
"D" rating also will be used upon the filing of a bankruptcy petition
or the taking of similar action if payments on an obligation are
jeopardized.
Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
Description of Standard & Poor'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 several categories, ranging from "A-1" for the
highest quality obligations to "D" for the lowest. These categories are as
follows:
A-1 This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as
for issues designated "A-1."
A-3 Issues carrying this designation have adequate capacity for timely
payment. They are, however, 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 speculative capacity for
timely payment.
C This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D Debt rated "D" is in payment default. The "D" rating category is used
when interest payments or principal payments are not made on the date
due, even if the applicable grace period has not expired unless
Standard & Poor's believes that such payments will be made during such
grace period.
c The "c" subscript is used to provide additional information to
investors that the bank may terminate its obligation to purchase
tendered bonds if the long-term credit rating of the issuer is below
an investment-grade level and/or the issuer's bonds are deemed
taxable.
p The letter "p" indicates that the rating is provisional. A provisional
rating assumes the successful completion of the project financed by
the debt being rated and indicates that payment of the debt service
requirements is largely or entirely dependent upon the successful,
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.
Continuance of the ratings is contingent upon Standard & Poor's
receipt of an executed copy of the escrow agreement or closing
documentation confirming investments and cash flows.
r The "r" highlights derivative, hybrid, and certain other obligations
that Standard & Poor's believes may experience high volatility or high
variability in expected returns as a result of noncredit risks.
Examples of such obligations are securities with principal or interest
return indexed to equities, commodities, or currencies; certain swaps
and options; and interest-only and principal-only mortgage securities.
The absence of an "r" symbol should not be taken as an indication that
an obligation will exhibit no volatility or variability in total
return.
A 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.
V-3
<PAGE>
A Standard & Poor's note rating reflects the liquidity factors and market
access risks unique to such notes. Notes due in three years or less will likely
receive a note rating. Notes maturing beyond three 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 Strong capacity to pay principal and interest. An issue determined to
possess a very strong capacity to pay debt service is given a plus (+)
designation.
SP-2 Satisfactory capacity to pay principal and interest with some
vulnerability to adverse financial and economic changes over the term
of the notes.
SP-3 Speculative capacity to pay principal and interest
Description of Fitch IBCA, Inc.'s ("Fitch") Investment Grade Bond Ratings
Fitch investment grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The rating
represents Fitch's assessment of the issuer's ability to meet the obligations of
a specific debt issue or class of debt in a timely manner.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the issuer's
future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be provided by
insurance policies or financial guarantees unless otherwise indicated.
Bonds that have the same rating are of similar but not necessarily
identical credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell, or hold any security.
Ratings do not comment on the adequacy of market price, the suitability of any
security for a particular investor, or the tax-exempt nature or taxability of
payments made in respect of any security.
Fitch ratings are based on information obtained from issuers, other
obligors, underwriters, their experts, and other sources Fitch believes to be
reliable. Fitch does not audit or verify the truth or accuracy of such
information. Ratings may be changed, suspended, or withdrawn as a result of
changes in, or the unavailability of, information or for other reasons.
AAA Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated "AAA."
Because bonds rated in the "AAA" and "AA" categories are not
significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated "F-1+."
A Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes
in economic conditions and circumstances than bonds with higher
ratings.
BBB Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have an adverse impact on
these
V-4
<PAGE>
bonds, and therefore impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher than
for bonds with higher ratings.
Plus (+) or Minus (-): Plus and minus signs are used with a rating symbol
to indicate the relative position of a credit within the rating category. Plus
and minus signs, however, are not used in the "AAA" category.
NR Indicates that Fitch does not rate the specific issue.
Conditional
A conditional rating is premised on the successful completion of a project
or the occurrence of a specific event.
Suspended
A rating is suspended when Fitch deems the amount of information available
from the issuer to be inadequate for rating purposes.
Withdrawn
A rating will be withdrawn when an issue matures or is called or refinanced
and, at Fitch's discretion, when an issuer fails to furnish proper and timely
information.
FitchAlert
Ratings are placed on FitchAlert to notify investors of an occurrence that
is likely to result in a rating change and the likely direction of such change.
These are designated as "Positive," indicating a potential upgrade, "Negative,"
for potential downgrade, or "Evolving," where ratings may be raised or lowered.
FitchAlert is relatively short-term, and should be resolved within three to 12
months.
Ratings Outlook
An outlook is used to describe the most likely direction of any rating
change over the intermediate term. It is described as "Positive" or "Negative."
The absence of a designation indicates a stable outlook.
Description of Fitch's Speculative Grade Bond Ratings
Fitch speculative grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
("BB" to "C") represent Fitch's assessment of the likelihood of timely payment
of principal and interest in accordance with the terms of obligation for bond
issues not in default. For defaulted bonds, the rating ("DDD" to "D") is an
assessment of the ultimate recovery value through reorganization or liquidation.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the issuer's
future financial strength.
Bonds that have the rating are of similar but not necessarily identical
credit quality since rating categories cannot fully reflect the differences in
degrees of credit risk.
BB Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can be
identified which could assist the obligor in satisfying its debt
service requirements.
B Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the
obligor's limited margin of safety and the need for reasonable
business and economic activity throughout the life of the issue.
CCC Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations
requires an advantageous business and economic environment.
V-5
<PAGE>
CC Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C Bonds are in imminent default in payment of interest or principal.
DDD Bonds are in default on interest and/or principal payments. Such bonds
are extremely
DD speculative and should be valued on the basis of their ultimate
recovery value in liquidation or
D reorganization of the obligor. "DDD" represents the highest potential
for recovery on these bonds, and "D" represents the lowest potential
for recovery.
Plus (+) or Minus (-): Plus and minus signs are used with a rating symbol
to indicate the relative position of a credit within the rating category. Plus
and minus signs, however, are not used in the "DDD," "DD," or "D" categories.
Description of Fitch's Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
The short-term rating places greater emphasis than a long-term rating on
the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.
Fitch short-term ratings are as follows:
F-1+ Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely
payment.
F-1 Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues
rated "F-l+".
F-2 Good Credit Quality. Issues assigned this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is
not as great as for issues assigned "F-1+" and "F-l" ratings.
F-3 Fair Credit Quality. Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is
adequate; however, near-term adverse changes could cause these
securities to be rated below investment grade.
F-S Weak Credit Quality. Issues assigned this rating have characteristics
suggesting a minimal degree of assurance for timely payment and are
vulnerable to near-term adverse changes in financial and economic
conditions.
D Default. Issues assigned this rating are in actual or imminent payment
default.
LOC The symbol "LOC" indicates that the rating is based on a letter of
credit issued by a commercial bank.
V-6
<PAGE>
COMMON SHARES
MUNIYIELD FLORIDA FUND
P.O. BOX 9011
PRINCETON, NEW JERSEY 08543-9011
PROXY
This proxy is solicited on behalf of the Board of Trustees
The undersigned hereby appoints Terry K. Glenn, Donald C. Burke and Alice
A. Pellegrino as proxies, each with the power to appoint his or her substitute,
and hereby authorizes each of them to represent and to vote, as designated on
the reverse hereof, all of the Common Shares of MuniYield Florida Fund (the
"Fund") held of record by the undersigned on October 20, 1999 at a Special
Meeting of Shareholders of the Fund to be held on December 15, 1999, or any
adjournment thereof.
This proxy when properly executed will be voted in the manner herein
directed by the undersigned shareholder. If no direction is made, this proxy
will be voted "FOR" item 1.
(Continued, and to be signed on the reverse side)
<PAGE>
Please mark boxes /X/ or [X] in blue or black ink.
1. To consider and act upon a proposal to approve the Agreement and Plan
of Reorganization between the Fund and MuniVest Florida Fund.
For |_| Against |_| Abstain |_|
2. In the discretion of such proxies, upon such other business as
properly may come before the meeting or any adjournment thereof.
Please sign exactly as name appears
hereon. When shares are held by joint
tenants, both should sign. When signing
as attorney or as executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by president or other
authorized officer. If a partnership,
please sign in partnership name by
authorized persons.
Dated _________________________________
X______________________________________
Signature
X______________________________________
Signature, if held jointly
Sign, date and return the Proxy Card promptly using the enclosed envelope.
<PAGE>
AUCTION MARKET
PREFERRED SHARES
MUNIYIELD FLORIDA FUND
P.O. BOX 9011
PRINCETON, NEW JERSEY 08543-9011
PROXY
This proxy is solicited on behalf of the Board of Trustees
The undersigned hereby appoints Terry K. Glenn, Donald C. Burke and Alice
A. Pellegrino as proxies, each with the power to appoint his or her substitute,
and hereby authorizes each of them to represent and to vote, as designated on
the reverse hereof, all the Auction Market Preferred Shares of MuniYield
Florida Fund (the "Fund") held of record by the undersigned on October 20, 1999
at a Special Meeting of Shareholders of the Fund to be held on December 15,
1999, or any adjournment thereof.
This proxy when properly executed will be voted in the manner herein
directed by the undersigned shareholder. If no direction is made, this proxy
will be voted "FOR" item 1.
(Continued, and to be signed on the reverse side)
<PAGE>
Please mark boxes /X/ or [X] in blue or black ink.
1. To consider and act upon a proposal to approve the Agreement and Plan
of Reorganization between the Fund and MuniVest Florida Fund.
For |_| Against |_| Abstain |_|
2. In the discretion of such proxies, upon such other business as
properly may come before the meeting or any adjournment thereof.
If the undersigned is a broker-dealer, it hereby instructs the
proxies, pursuant to Rule 452 of the New York Stock Exchange, to vote
any uninstructed Auction Market Preferred Shares, in the same
proportion as votes cast by holders of Auction Market Preferred
Shares, who have responded to this proxy solicitation.
Please sign exactly as name appears
hereon. When shares are held by joint
tenants, both should sign. When signing
as attorney or as executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by president or other
authorized officer. If a partnership,
please sign in partnership name by
authorized persons.
Dated __________________________________
X_______________________________________
Signature
X_______________________________________
Signature, if held jointly
Sign, date and return the Proxy Card promptly using the enclosed envelope.
<PAGE>
COMMON SHARES
MUNIVEST FLORIDA FUND
P.O. BOX 9011
PRINCETON, NEW JERSEY 08543-9011
PROXY
This proxy is solicited on behalf of the Board of Trustees
The undersigned hereby appoints Terry K. Glenn, Donald C. Burke and Alice
A. Pellegrino as proxies, each with the power to appoint his or her substitute,
and hereby authorizes each of them to represent and to vote, as designated on
the reverse hereof, all of the Common Shares of MuniVest Florida Fund (the
"Fund") held of record by the undersigned on October 20, 1999 at a Special
Meeting of Shareholders of the Fund to be held on December 15, 1999, or any
adjournment thereof.
This proxy when properly executed will be voted in the manner herein
directed by the undersigned shareholder. If no direction is made, this proxy
will be voted "FOR" item 1.
(Continued, and to be signed on the reverse side)
<PAGE>
Please mark boxes /X/ or [X] in blue or black ink.
1. To consider and act upon a proposal to approve the Agreement and Plan
of Reorganization between the Fund and MuniYield Florida Fund.
For |_| Against |_| Abstain |_|
2. In the discretion of such proxies, upon such other business as properly
may come before the meeting or any adjournment thereof.
Please sign exactly as name appears
hereon. When shares are held by joint
tenants, both should sign. When signing
as attorney or as executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by president or other
authorized officer. If a partnership,
please sign in partnership name by
authorized persons.
Dated __________________________________
X_______________________________________
Signature
X_______________________________________
Signature, if held jointly
Sign, date and return the Proxy Card promptly using the enclosed envelope.
<PAGE>
AUCTION MARKET
PREFERRED SHARES
MUNIVEST FLORIDA FUND
P.O. BOX 9011
PRINCETON, NEW JERSEY 08543-9011
PROXY
This proxy is solicited on behalf of the Board of Trustees
The undersigned hereby appoints Terry K. Glenn, Donald C. Burke and Alice A.
Pellegrino as proxies, each with the power to appoint his or her substitute, and
hereby authorizes each of them to represent and to vote, as designated on the
reverse hereof, all the Auction Market Preferred Shares of MuniVest Florida Fund
(the "Fund") held of record by the undersigned on October 20, 1999 at a Special
Meeting of Shareholders of the Fund to be held on December 15, 1999, or any
adjournment thereof.
This proxy when properly executed will be voted in the manner herein
directed by the undersigned shareholder. If no direction is made, this proxy
will be voted "FOR" item 1.
(Continued, and to be signed on the reverse side)
<PAGE>
Please mark boxes /X/ or [X] in blue or black ink.
1. To consider and act upon a proposal to approve the Agreement and Plan
of Reorganization between the Fund and MuniYield Florida Fund.
For |_| Against |_| Abstain |_|
2. In the discretion of such proxies, upon such other business as
properly may come before the meeting or any adjournment thereof.
If the undersigned is a broker-dealer, it hereby instructs the proxies,
pursuant to Rule 452 of the New York Stock Exchange, to vote any
uninstructed Auction Market Preferred Shares, in the same proportion as
votes cast by holders of Auction Market Preferred Shares, who have
responded to this proxy solicitation.
Please sign exactly as name appears
hereon. When shares are held by joint
tenants, both should sign. When signing
as attorney or as executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by president or other
authorized officer. If a partnership,
please sign in partnership name by
authorized persons.
Dated __________________________________
X_______________________________________
Signature
X_______________________________________
Signature, if held jointly
Sign, date and return the Proxy Card promptly using the enclosed envelope.
<PAGE>
PART C
OTHER INFORMATION
Item 15. Indemnification.
Section 5.3 of the Registrant's Declaration of Trust provides as follows:
"The Trust shall indemnify each of its Trustees, officers, employees, and
agents (including persons who serve at its request as directors, officers or
trustees of another organization in which it has any interest as a shareholder,
creditor or otherwise) against all liabilities and expenses (including amounts
paid in satisfaction of judgments, in compromise, as fines and penalties, and as
counsel fees) reasonably incurred by him in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or criminal,
in which he may be involved or with which he may be threatened, while in office
or thereafter, by reason of his being or having been such a trustee, officer,
employee or agent, except with respect to any matter as to which he shall have
been adjudicated to have acted in bad faith, willful misfeasance, gross
negligence or reckless disregard of his duties; provided, however, that as to
any matter disposed of by a compromise payment by such person, pursuant to a
consent decree or otherwise, no indemnification either for said payment or for
any other expenses shall be provided unless the Trust shall have received a
written opinion from independent legal counsel approved by the Trustees to the
effect that if either the matter of willful misfeasance, gross negligence or
reckless disregard of duty, or the matter of good faith and reasonable belief as
to the best interests of the Trust, had been adjudicated, it would have been
adjudicated in favor of such person. The rights accruing to any Person under
these provisions shall not exclude any other right to which he may be lawfully
entitled; provided that no Person may satisfy any right of indemnity or
reimbursement granted herein or in Section 5.1 or to which he may be otherwise
entitled except out of the property of the Trust, and no Shareholder shall be
personally liable to any Person with respect to any claim for indemnity or
reimbursement or otherwise. The Trustees may make advance payments in connection
with indemnification under this Section 5.3, provided that the indemnified
person shall have given a written undertaking to reimburse the Trust in the
event it is subsequently determined that he is not entitled to such
indemnification."
The Registrant's By-Laws provide that insofar as the conditional advancing
of indemnification moneys pursuant to Section 5.3 of the Declaration of Trust
for actions based upon the Investment Company Act of 1940 may be concerned, such
payments will be made only on the following conditions: (i) the advances must be
limited to amounts used, or to be used, for the preparation or presentation of a
defense to the action, including costs connected with the preparation of a
settlement; (ii) advances may be made only upon receipt of a written promise by,
or on behalf of, the receipt to repay that amount of the advance which exceeds
the amount to which it is ultimately determined he is entitled to receive from
the Registrant by reason of indemnification; and (iii) (a) such promise must be
secured by a surety bond, other suitable insurance or an equivalent form of
security which assures that any repayments may be obtained by the Registrant
without delay or litigation, which bond, insurance or other form of security
must be provided by the recipient of the advance, or (b) a majority of a quorum
of the Registrant's disinterested, non-party Trustees, or an independent legal
counsel in a written opinion, shall determine, based upon a review of readily
available facts, that the recipient of the advance ultimately will be found
entitled to indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to Trustees, officers and controlling persons of the Registrant
and the principal underwriter pursuant to the foregoing provisions or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the 1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Trustee, officer or controlling
person of the Registrant and the principal underwriter in connection with any
successful defense of any action, suit or proceeding) is asserted by such
Trustee, officer or controlling person or the principal underwriter in
connection with the shares being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication of such issue.
Reference is made to (i) Section 6 of the Purchase Agreement relating to
the Registrant's Common Shares, a form of which was filed as an exhibit to the
Common Shares Registration Statement, and (ii) Section 7 of the
C-1
<PAGE>
Purchase Agreement relating to the Registrant's AMPS, a form of which was filed
as an exhibit to the to the AMPS Registration Statement (defined below), for
provisions relating to the indemnification of the underwriter.
Item 16. Exhibits.
1 (a) -- Declaration of Trust of the Registrant, dated January 21, 1992.*
(b) -- Amendment to Declaration of Trust relating to term of office of
Trustees.*
(c) -- Form of Certificate of Designation creating the Series A AMPS.*
(d) -- Form of Certificate of Designation creating the Series B AMPS.
2 -- By-Laws of the Registrant.*
3 -- Not Applicable.
4 -- Form of Agreement and Plan of Reorganization among the Registrant and
MuniVest Florida Fund (included in Exhibit II to the Proxy Statement
and Prospectus contained in this Registration Statement).
5 (a) -- Copies of instruments defining the rights of shareholders, including
the relevant portions of the Declaration of Trust and the By-Laws
of the Registrant.*
(b) -- Form of specimen certificate for the Common Shares of the Registrant.
*
(c) -- Form of specimen certificate for the AMPS of the Registrant.*
6 -- Form of Investment Advisory Agreement between Registrant and Fund
Asset Management, L.P.*
7 (a) -- Form of Purchase Agreement for the Common Shares.*
(b) -- Form of Purchase Agreement for the AMPS.*
(c) -- Form of Merrill Lynch Standard Dealer Agreement.*
8 -- Not applicable.
9 -- Custodian Agreement between the Registrant and The Bank of New York.*
10 -- Not applicable.
11 -- Opinion and Consent of Brown & Wood LLP, counsel for the Registrant.*
12 -- Private Letter Ruling from the Internal Revenue Service.*
13 (a) -- Transfer Agency, Dividend Disbursing Agency and Shareholder Servicing
Agency Agreement between the Registrant and The Bank of New York.*
(b) -- Form of Auction Agent Agreement between the Registrant and IBJ
Whitehall Bank & Trust Company.*
(c) -- Form of Broker-Dealer Agreement.*
(d) -- Form of Letter of Representations.*
14 -- Consents of Deloitte & Touche LLP, independent auditors for the
Registrant and MuniVest Florida Fund.
15 -- Not applicable.
16 -- Power of Attorney (Included on the signature page of this
Registration Statement).
- ----------
* To be filed by amendment.
C-2
<PAGE>
Item 17. Undertakings.
(1) The undersigned Registrant agrees that prior to any public reoffering of
the securities registered through use of a prospectus which is part of this
Registration Statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act of
1933, as amended, the reoffering prospectus will contain information called
for by the applicable registration form for reofferings by persons who may
be deemed underwriters, in addition to the information called for by other
items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is filed under
paragraph (1) above will be filed as part of an amendment to the
registration statement and will not be used until the amendment is
effective, and that, in determining any liability under the Securities Act
of 1933, as amended, each post-effective amendment shall be deemed to be a
new registration statement for the securities offered therein, and the
offering of securities at that time shall be deemed to be the initial bona
fide offering of them.
(3) The Registrant undertakes to file, by post-effective amendment, either a
copy of the Internal Revenue Service private letter ruling applied for or
an opinion of counsel as to certain tax matters, within a reasonable time
after receipt of such ruling or opinion.
C-3
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, this Registration Statement has
been signed on behalf of the Registrant, in the Township of Plainsboro and State
of New Jersey, on the 4th day of October, 1999.
MUNIYIELD FLORIDA FUND
(Registrant)
By /s/ TERRY K. GLENN
---------------------------------
(Terry K. Glenn, President)
Each person whose signature appears below hereby authorizes Terry K. Glenn,
Donald C. Burke and Alice A. Pellegrino, or any of them, as attorney-in-fact, to
sign on his behalf, individually and in each capacity stated below, any
amendments to this Registration Statement (including post-effective amendments)
and to file the same, with all exhibits thereto, with the Securities and
Exchange Commission.
As required by the Securities Act of 1933, this Registration Statement has
been signed by the following persons in the capacities and on the dates
indicated.
Signatures Title Date
---------- ----- ----
/s/ TERRY K. GLENN President and Director October 4, 1999
- -------------------------------- (Principal Executive
(Terry K. Glenn) Officer)
/s/ DONALD C. BURKE Treasurer (Principal October 4, 1999
- -------------------------------- Financial and Accounting
(Donald C. Burke) Officer)
/s/ JAMES H. BODURTHA Director October 4, 1999
- --------------------------------
(James H. Bodurtha)
/s/ HERBERT I. LONDON Director October 4, 1999
- --------------------------------
(Herbert I. London)
/s/ ROBERT R. MARTIN Director October 4, 1999
- --------------------------------
(Robert R. Martin)
/s/ JOSEPH L. MAY Director October 4, 1999
- --------------------------------
(Joseph L. May)
/s/ ANDRE F. PEROLD Director October 4, 1999
- --------------------------------
(Andre F. Perold)
/s/ ARTHUR ZEIKEL Director October 4, 1999
- --------------------------------
(Arthur Zeikel)
C-4
<PAGE>
EXHIBIT INDEX
1 (e) -- Form of Certificate of Designation creating the Series B AMPS.
14 -- Consents of Deloitte & Touche LLP, independent auditors for the
Registrant and MuniVest Florida.
C-5
MUNIYIELD FLORIDA FUND
CERTIFICATE OF DESIGNATION DATED , 2000
ESTABLISHING POWERS, QUALIFICATIONS, RIGHTS
AND PREFERENCES OF ONE SERIES OF AUCTION MARKET
PREFERRED SHARES ("AMPS(R)")
WHEREAS the Board of Trustees of MuniYield Florida Fund (the "Trust") is
expressly empowered pursuant to Section 6.1 of the Trust's Declaration of Trust
to authorize the issuance of preferred shares of the Trust in one or more
series, with such preferences, powers, restrictions, limitations or
qualifications as determined by the Board of Trustees and as set forth in the
resolution or resolutions providing for the issuance of such preferred shares.
AND WHEREAS the Board of Trustees has determined that it is in the best
interests of the Trust to issue one series of such preferred shares.
NOW THEREFORE, the Board of Trustees does hereby authorize the issuance of
one series of preferred shares, par value $0.05 per share, liquidation
preference $25,000 per share plus an amount equal to accumulated but unpaid
dividends thereon (whether or not earned or declared), to be designated Auction
Market Preferred Shares, Series B.
The preferences, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption, of the preferred shares
are as follows:
DESIGNATION
A series of 1,600 preferred shares, par value $.05 per share, liquidation
preference $25,000 per share plus an amount equal to accumulated but unpaid
dividends (whether or not earned or declared) thereon, is hereby designated
"Auction Market Preferred Shares, Series B."
- ----------
(R) Registered trademark of Merrill Lynch & Co., Inc.
<PAGE>
Each Auction Market Preferred Share, Series B (sometimes referred to herein as
"AMPS") shall be issued on a date to be determined by the Board of Trustees of
the Trust or pursuant to their delegated authority; have an Initial Dividend
Rate and an Initial Dividend Payment Date as shall be determined in advance of
the issuance thereof by the Board of Trustees of the Trust or pursuant to their
delegated authority; and have such other preferences, voting powers, limitations
as to dividends, qualifications and terms and conditions of redemption as are
set forth in this Certificate of Designation. The Auction Market Preferred
Shares, Series B shall constitute a separate series of preferred shares of the
Trust, and each Auction Market Preferred Share, Series B shall be identical.
1. Definitions. (a) Unless the context or use indicates another or
different meaning or intent, in this Certificate of Designation the following
terms have the following meanings, whether used in the singular or plural:
"'AA" Composite Commercial Paper Rate," on any date of determination,
means (i) the Interest Equivalent of the rate on commercial paper placed on
behalf of issuers whose corporate bonds are rated "AA" by S&P or "Aa" by Moody's
or the equivalent of such rating by another nationally recognized rating agency,
as such rate is made available on a discount basis or otherwise by the Federal
Reserve Bank of New York for the Business Day immediately preceding such date,
or (ii) in the event that the Federal Reserve Bank of New York does not make
available such a rate, then the arithmetic average of the Interest Equivalent of
the rate on commercial paper placed on behalf of such issuers, as quoted on a
discount basis or otherwise by Merrill Lynch, Pierce, Fenner & Smith
Incorporated or its successors that are Commercial Paper Dealers, to the Auction
Agent for the close of business on the Business Day immediately preceding such
date. If one of the Commercial Paper Dealers does not quote a rate required to
2
<PAGE>
determine the "AA" Composite Commercial Paper Rate, the "AA" Composite
Commercial Paper Rate will be determined on the basis of the quotation or
quotations furnished by any Substitute Commercial Paper Dealer or Substitute
Commercial Paper Dealers selected by the Trust to provide such rate or rates not
being supplied by the Commercial Paper Dealer. If the number of Dividend Period
days shall be (i) 7 or more but fewer than 49 days, such rate shall be the
Interest Equivalent of the 30-day rate on such commercial paper; (ii) 49 or more
but fewer than 70 days, such rate shall be the Interest Equivalent of the 60-day
rate on such commercial paper; (iii) 70 or more days but fewer than 85 days,
such rate shall be the arithmetic average of the Interest Equivalent on the
60-day and 90-day rates on such commercial paper; (iv) 85 or more days but fewer
than 99 days, such rate shall be the Interest Equivalent of the 90-day rate on
such commercial paper; (v) 99 or more days but fewer than 120 days, such rate
shall be the arithmetic average of the Interest Equivalent of the 90-day and
120-day rates on such commercial paper; (vi) 120 or more days but fewer than 141
days, such rate shall be the Interest Equivalent of the 120-day rate on such
commercial paper; (vii) 141 or more days but fewer than 162 days, such rate
shall be the arithmetic average of the Interest Equivalent of the 120-day and
180-day rates on such commercial paper; and (viii) 162 or more days but fewer
than 183 days, such rate shall be the Interest Equivalent of the 180-day rate on
such commercial paper.
"Accountant's Confirmation" has the meaning set forth in paragraph 7(c) of
this Certificate of Designation.
"Additional Dividend" has the meaning set forth in paragraph 2(e) of this
Certificate of Designation.
"Adviser" means the Trust's investment adviser which initially shall be
Fund Asset Management, L.P.
3
<PAGE>
"Affiliate" means any Person, other than Merrill Lynch, Pierce, Fenner &
Smith Incorporated or its successors, known to the Auction Agent to be
controlled by, in control of, or under common control with, the Trust.
"Agent Member" means a member of the Securities Depository that will act
on behalf of a Beneficial Owner of one or more AMPS or a Potential Beneficial
Owner.
"AMPS" means the Auction Market Preferred Shares, Series B.
"AMPS Basic Maintenance Amount," as of any Valuation Date, means the
dollar amount equal to (i) the sum of (A) the product of the number of AMPS and
Other AMPS Outstanding on such Valuation Date multiplied by the sum of (a)
$25,000 and (b) any applicable redemption premium attributable to the
designation of a Premium Call Period; (B) the aggregate amount of cash dividends
(whether or not earned or declared) that will have accumulated for each share of
AMPS and Other AMPS Outstanding, in each case, to (but not including) the end of
the current Dividend Period that follows such Valuation Date in the event the
then current Dividend Period will end within 49 calendar days of such Valuation
Date or through the 49th day after such Valuation Date in the event the then
current Dividend Period will not end within 49 calendar days of such Valuation
Date; (C) in the event the then current Dividend Period will end within 49
calendar days of such Valuation Date, the aggregate amount of cash dividends
that would accumulate at the Maximum Applicable Rate applicable to a Dividend
Period of 28 or fewer days on any AMPS and Other AMPS Outstanding from the end
of such Dividend Period through the 49th day after such Valuation Date,
multiplied by the larger of the Moody's Volatility Factor and the S&P Volatility
Factor, determined from time to time by Moody's and S&P, respectively (except
that if such Valuation Date occurs during a Non-Payment Period, the cash
dividend for purposes of calculation would accumulate at the then current
Non-Payment Period Rate); (D) the
4
<PAGE>
amount of anticipated expenses of the Trust for the 90 days subsequent to such
Valuation Date; (E) the amount of the Trust's Maximum Potential Additional
Dividend Liability as of such Valuation Date; and (F) any current liabilities as
of such Valuation Date to the extent not reflected in any of (i)(A) through
(i)(E) (including, without limitation, and immediately upon determination, any
amounts due and payable by the Trust pursuant to repurchase agreements and any
amounts payable for Florida Municipal Bonds or Municipal Bonds purchased as of
such Valuation Date) less (ii) either (A) the Discounted Value of any of the
Trust's assets, or (B) the face value of any of the Trust's assets if such
assets mature prior to or on the date of redemption of AMPS or payment of a
liability and are either securities issued or guaranteed by the United States
Government or Deposit Securities, in both cases irrevocably deposited by the
Trust for the payment of the amount needed to redeem AMPS subject to redemption
or to satisfy any of (i)(B) through (i)(F).
"AMPS Basic Maintenance Cure Date," with respect to the failure by the
Trust to satisfy the AMPS Basic Maintenance Amount (as required by paragraph
7(a) of this Certificate of Designation) as of a given Valuation Date, means the
sixth Business Day following such Valuation Date.
"AMPS Basic Maintenance Report" means a report signed by any of the
President, Treasurer, any Senior Vice President or any Vice President of the
Trust which sets forth, as of the related Valuation Date, the assets of the
Trust, the Market Value and the Discounted Value thereof (seriatim and in
aggregate), and the AMPS Basic Maintenance Amount.
"Anticipation Notes" shall mean the following Florida Municipal Bonds:
revenue anticipation notes, tax anticipation notes, tax and revenue anticipation
notes, grant anticipation notes and bond anticipation notes.
5
<PAGE>
"Applicable Percentage" has the meaning set forth in paragraph 10(a)(vii)
of this Certificate of Designation.
"Applicable Rate" means the rate per annum at which cash dividends are
payable on the AMPS or Other AMPS, as the case may be, for any Dividend Period.
"Auction" means a periodic operation of the Auction Procedures.
"Auction Agent" means IBJ Whitehall Bank & Trust Company unless and until
another commercial bank, trust company or other financial institution appointed
by a resolution of the Board of Trustees of the Trust or a duly authorized
committee thereof enters into an agreement with the Trust to follow the Auction
Procedures for the purpose of determining the Applicable Rate and to act as
transfer agent, registrar, dividend disbursing agent and redemption agent for
the AMPS and Other AMPS.
"Auction Procedures" means the procedures for conducting Auctions set
forth in paragraph 10 of this Certificate of Designation.
"Beneficial Owner" means a customer of a Broker-Dealer who is listed on
the records of that Broker-Dealer (or, if applicable, the Auction Agent) as a
holder of AMPS or a Broker-Dealer that holds AMPS for its own account.
"Broker-Dealer" means any broker-dealer, or other entity permitted by law
to perform the functions required of a Broker-Dealer in paragraph 10 of this
Certificate of Designation, that has been selected by the Trust and has entered
into a Broker-Dealer Agreement with the Auction Agent that remains effective.
6
<PAGE>
"Broker-Dealer Agreement" means an agreement between the Auction Agent and
a Broker-Dealer pursuant to which such Broker-Dealer agrees to follow the
procedures specified in paragraph 10 of this Certificate of Designation.
"Business Day" means a day on which the New York Stock Exchange, Inc. is
open for trading and which is not a Saturday, Sunday or other day on which banks
in The City of New York are authorized or obligated by law to close.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commercial Paper Dealers" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated and such other commercial paper dealer or dealers as the Trust may
from time to time appoint, or, in lieu of any thereof, their respective
affiliates or successors.
"Common Shares" means the common shares of beneficial interest, par value
$.10 per share, of the Trust.
"Date of Original Issue" means, with respect to any share of AMPS or Other
AMPS, the date on which the Trust originally issues such share.
"Declaration" means the Declaration of Trust, as amended and supplemented
(including this Certificate of Designation), of the Trust on file with the
office of the Secretary of State of the Commonwealth of Massachusetts.
"Deposit Securities" means cash and Florida Municipal Bonds and Municipal
Bonds rated at least A2 (having a remaining maturity of 12 months or less), P-1,
VMIG-1 or MIG-1 by Moody's or A (having a remaining maturity of 12 months or
less), A-1+ or SP-1+ by S&P.
"Discounted Value" means (i) with respect to an S&P Eligible Asset, the
quotient of the Market Value thereof divided by the applicable S&P Discount
Factor and (ii) with respect to a
7
<PAGE>
Moody's Eligible Asset, the lower of par and the quotient of the Market Value
thereof divided by the applicable Moody's Discount Factor.
"Dividend Payment Date," with respect to AMPS, has the meaning set forth
in paragraph 2(b)(i) of this Certificate of Designation and, with respect to
Other AMPS, has the equivalent meaning.
"Dividend Period" means the Initial Dividend Period, any 7-Day Dividend
Period and any Special Dividend Period.
"Existing Holder" means a Broker-Dealer or any such other Person as may be
permitted by the Trust that is listed as the holder of record of AMPS in the
Share Books.
"Fitch" means Fitch IBCA, Inc. or its successors.
"Florida Municipal Bonds" means Municipal Bonds issued by or on behalf of
the State of Florida, its political subdivisions, agencies and instrumentalities
and by other qualifying issuers that pay interest which, in the opinion of bond
counsel to the issuer, is exempt from Federal income taxes and Florida
intangible personal property taxes, and includes Inverse Floaters.
"Forward Commitment" has the meaning set forth in paragraph 8(c) of this
Certificate of Designation.
"Holder" means a Person identified as a holder of record of AMPS in the
Share Register.
"Independent Accountant" means a nationally recognized accountant, or firm
of accountants, that is, with respect to the Trust, an independent public
accountant or firm of independent public accountants under the Securities Act of
1933, as amended.
8
<PAGE>
"Initial Dividend Payment Date" means the Initial Dividend Payment Date as
determined by the Board of Trustees of the Trust with respect to the AMPS or
Other AMPS, as the case may be.
"Initial Dividend Period," with respect to the AMPS, has the meaning set
forth in paragraph 2(c)(i) of this Certificate of Designation and, with respect
to Other AMPS, has the equivalent meaning.
"Initial Dividend Rate," with respect to the AMPS, means the rate per
annum applicable to the Initial Dividend Period for the AMPS and, with respect
to Other AMPS, has the equivalent meaning.
"Initial Margin" means the amount of cash or securities deposited with a
broker as a margin payment at the time of purchase or sale of a futures
contract.
"Interest Equivalent" means a yield on a 360-day basis of a discount basis
security which is equal to the yield on an equivalent interest-bearing security.
"Inverse Floaters" means trust certificates or other instruments
evidencing interests in one or more Florida Municipal Bonds that qualify as S&P
Eligible Assets (and are not part of a private placement of Florida Municipal
Bonds and satisfy the issuer and original issue size or ratings requirements of
clause (vi) of the definition of S&P Eligible Assets) the interest rates on
which are adjusted at short term intervals on a basis that is inverse to the
simultaneous readjustment of the interest rates on corresponding floating rate
trust certificates or other instruments issued by the same issuer, provided that
the ratio of the aggregate dollar amount of floating rate instruments to inverse
floating rate instruments issued by the same issuer does not
9
<PAGE>
exceed one to one at their time of original issuance unless the floating rate
instruments have only one reset remaining until maturity.
"Long Term Dividend Period" means a Special Dividend Period consisting of
a specified period of one whole year or more but not greater than five years.
"Mandatory Redemption Price" means $25,000 per share of AMPS plus an
amount equal to accumulated but unpaid dividends (whether or not earned or
declared) to the date fixed for redemption and excluding Additional Dividends.
"Marginal Tax Rate" means the maximum marginal regular Federal individual
income tax rate applicable to ordinary income or the maximum marginal regular
Federal corporate income tax rate, whichever is greater.
"Market Value" of any asset of the Trust shall be the market value thereof
determined by the Pricing Service. Market Value of any asset shall include any
interest accrued thereon. The Pricing Service shall value portfolio securities
at the quoted bid prices or the mean between the quoted bid and asked price or
the yield equivalent when quotations are not readily available. Securities for
which quotations are not readily available shall be valued at fair value as
determined by the Pricing Service using methods which include consideration of:
yields or prices of municipal bonds of comparable quality, type of issue,
coupon, maturity and rating; indications as to value from dealers; and general
market conditions. The Pricing Service may employ electronic data processing
techniques and/or a matrix system to determine valuations. In the event the
Pricing Service is unable to value a security, the security shall be valued at
the lower of two dealer bids obtained by the Trust from dealers who are members
of the National Association of Securities Dealers, Inc. and who make a market in
the security, at least one of which shall be in writing. Futures contracts and
options are valued at closing prices for such
10
<PAGE>
instruments established by the exchange or board of trade on which they are
traded, or if 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 Trustees.
"Maximum Applicable Rate," with respect to AMPS, has the meaning set forth
in paragraph 10(a)(vii) of this Certificate of Designation and, with respect to
Other AMPS, has the equivalent meaning.
"Maximum Potential Additional Dividend Liability," as of any Valuation
Date, means the aggregate amount of Additional Dividends that would be due if
the Trust were to make Retroactive Taxable Allocations, with respect to any
fiscal year, estimated based upon dividends paid and the amount of undistributed
realized net capital gains and other taxable income earned by the Trust, as of
the end of the calendar month immediately preceding such Valuation Date and
assuming such Additional Dividends are fully taxable.
"Moody's" means Moody's Investors Service, Inc. or its successors.
"Moody's Discount Factor" means, for purposes of determining the
Discounted Value of any Florida Municipal Bond or Municipal Bond which
constitutes a Moody's Eligible Asset, the percentage determined by reference to
(a) the rating by Moody's or S&P on such Bond and (b) the Moody's Exposure
Period, in accordance with the table set forth below:
<TABLE>
<CAPTION>
Rating Category
---------------------------------------------
Moody's Exposure Period Aaa* Aa* A* Baa* Other** VMIG-1*** SP-1+***
- ----------------------- ---- --- -- ---- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
7 weeks or less ........ 151% 159% 168% 202% 229% 136% 148%
8 weeks or less but
greater than seven weeks 154 164 173 205 235 137 149
9 weeks or less but
greater than eight weeks 158 169 179 209 242 138 150
</TABLE>
- ----------
* Moody's rating.
** Florida Municipal Bonds and Municipal Bonds not rated by Moody's but rated
BBB or BBB+ by S&P.
*** Florida Municipal Bonds and Municipal Bonds rated MIG-1, VMIG-1 or P-1 or,
if not rated by Moody's, rated SP-1+ or A-1+ by S&P which do not mature or
have a demand feature at par exercisable within the Moody's Exposure
Period and which do not have a long-term rating. For the purposes of the
definition of Moody's Eligible Assets, these
11
<PAGE>
securities will have an assumed rating of "A" by Moody's.
Notwithstanding the foregoing, (i) a 102% Moody's Discount Factor will be
applied to short-term Florida Municipal Bonds and short-term Municipal Bonds, so
long as such Florida Municipal Bonds and Municipal Bonds are rated at least
MIG-1, VMIG-1 or P-1 by Moody's and mature or have a demand feature at par
exercisable within the Moody's Exposure Period, and the Moody's Discount Factor
for such Bonds will be 125% if such Bonds are not rated by Moody's but are rated
A-1+ or SP-1+ or AA by S&P and mature or have a demand feature at par
exercisable within the Moody's Exposure Period, and (ii) no Moody's Discount
Factor will be applied to cash or to Receivables for Florida Municipal Bonds or
Municipal Bonds Sold. "Receivables for Florida Municipal Bonds or Municipal
Bonds Sold," for purposes of calculating Moody's Eligible Assets as of any
Valuation Date, means no more than the aggregate of the following: (i) the book
value of receivables for Florida Municipal Bonds or Municipal Bonds sold as of
or prior to such Valuation Date if such receivables are due within five Business
Days of such Valuation Date, and if the trades which generated such receivables
are (x) settled through clearing house firms with respect to which the Trust has
received prior written authorization from Moody's or (y) with counterparties
having a Moody's long-term debt rating of at least Baa3; and (ii) the Moody's
Discounted Value of Florida Municipal Bonds or Municipal Bonds sold as of or
prior to such Valuation Date which generated receivables, if such receivables
are due within five Business Days of such Valuation Date but do not comply with
either of conditions (x) or (y) of the preceding clause (i).
"Moody's Eligible Asset" means cash, Receivables for Florida Municipal
Bonds or Municipal Bonds Sold, a Florida Municipal Bond or a Municipal Bond that
(i) pays interest in cash, (ii) is publicly rated Baa or higher by Moody's or,
if not rated by Moody's but rated by S&P, is rated at least BBB by S&P (provided
that, for purposes of determining the Moody's
12
<PAGE>
Discount Factor applicable to any such S&P-rated Florida Municipal Bond or
S&P-rated Municipal Bond, such Florida Municipal Bond or Municipal Bond
(excluding any short-term Florida Municipal Bond or Municipal Bond) will be
deemed to have a Moody's rating which is one full rating category lower than its
S&P rating), (iii) does not have its Moody's rating suspended by Moody's; and
(iv) is part of an issue of Florida Municipal Bonds or Municipal Bonds of at
least $10,000,000. In addition, Florida Municipal Bonds and Municipal Bonds in
the Trust's portfolio must be within the following diversification requirements
in order to be included within Moody's Eligible Assets:
<TABLE>
<CAPTION>
Maximum
Minimum Maximum Maximum Maximum State or
Issue Underlying Issue Type County Territory
Size Obligor Concentration Concentration Concentration
Rating ($ Millions) (%) (1) (%) (1) (3) (%) (1) (4) (1) (5)
- ------ ------------ ------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C>
Aaa ........... 10 100 100 100 100
Aa ............ 10 20 60 60 60
A ............. 10 10 40 40 40
Baa ........... 10 6 20 20 20
Other(2) ...... 10 4 12 12 12
</TABLE>
- ----------
(1) The referenced percentages represent maximum cumulative totals for the
related rating category and each lower rating category.
(2) Florida Municipal Bonds and Municipal Bonds not rated by Moody's but rated
BBB or BBB+ by S&P.
(3) Does not apply to general obligation bonds.
(4) Applicable to general obligation bonds only.
(5) Does not apply to Florida Municipal Bonds. Territorial bonds (other than
those issued by Puerto Rico and counted collectively) are each limited to
10% of Moody's Eligible Assets. For diversification purposes, Puerto Rico
will be treated as a state.
For purposes of the maximum underlying obligor requirement described above, any
Florida Municipal Bond or Municipal Bond backed by the guaranty, letter of
credit or insurance issued by a third party will be deemed to be issued by such
third party if the issuance of such third party credit is the sole determinant
of the rating on such Bond. For purposes of the issue type concentration
requirement described above, Florida Municipal Bonds and Municipal Bonds will be
classified within one of the following categories: health care issues (teaching
and non-teaching hospitals, public and private), housing issues (single- and
multi-family), educational facilities issues (public and private schools),
student loan issues, resource recovery issues, transportation issues (mass
transit, airport and highway bonds), industrial revenue/pollution control bond
issues, utility issues (including water, sewer and electricity), general
obligation
13
<PAGE>
issues, lease obligations/certificates of participation, escrowed bonds and
other issues ("Other Issues") not falling within one of the aforementioned
categories (includes special obligations to crossover, excise and sales tax
revenue, recreation revenue, special assessment and telephone revenue bonds). In
no event shall (a) more than 10% of Moody's Eligible Assets consist of student
loan issues, (b) more than 10% of Moody's Eligible Assets consist of resource
recovery issues or (c) more than 10% of Moody's Eligible Assets consist of Other
Issues.
When the Trust sells a Florida Municipal Bond or Municipal Bond and agrees
to repurchase it at a future date, the Discounted Value of such Bond will
constitute a Moody's Eligible Asset and the amount the Trust is required to pay
upon repurchase of such Bond will count as a liability for purposes of
calculating the AMPS Basic Maintenance Amount. For so long as the AMPS are rated
by Moody's, the Trust will not enter into any such reverse repurchase agreements
unless it has received written confirmation from Moody's that such transactions
would not impair the ratings then assigned the AMPS by Moody's. When the Trust
purchases a Florida Municipal Bond or Municipal Bond and agrees to sell it at a
future date to another party, cash receivable by the Trust thereby will
constitute a Moody's Eligible Asset if the long-term debt of such other party is
rated at least A2 by Moody's and such agreement has a term of 30 days or less;
otherwise the Discounted Value of such Bond will constitute a Moody's Eligible
Asset.
Notwithstanding the foregoing, an asset will not be considered a Moody's
Eligible Asset if it is (i) held in a margin account, (ii) subject to any
material lien, mortgage, pledge, security interest or security agreement of any
kind, (iii) held for the purchase of a security pursuant to a Forward Commitment
or (iv) irrevocably deposited by the Trust for the payment of dividends or
redemption.
14
<PAGE>
"Moody's Exposure Period" means a period that is the same length or longer
than the number of days used in calculating the cash dividend component of the
AMPS Basic Maintenance Amount and shall initially be the period commencing on
and including a given Valuation Date and ending 48 days thereafter.
"Moody's Hedging Transactions" has the meaning set forth in paragraph 8(b)
of this Certificate of Designation.
"Moody's Volatility Factor" means 272% as long as there has been no
increase enacted to the Marginal Tax Rate. If such an increase is enacted but
not yet implemented, the Moody's Volatility Factor shall be as follows:
% Change in
Marginal Tax Moody's Volatility
Rate Factor
------------ ------------------
<= 5% 292%
>5% but <= 10% 313%
>10% but <= 15% 338%
>15% but <= 20% 364%
>20% but <= 25% 396%
>25% but <= 30% 432%
>30% but <= 35% 472%
>35% but <= 40% 520%
Notwithstanding the foregoing, the Moody's Volatility Factor may mean such other
potential dividend rate increase factor as Moody's advises the Trust in writing
is applicable.
"Municipal Bonds" means "Municipal Bonds" as defined in the Trust's Registration
Statement on Form N-14 (File No. 333- ) relating to the AMPS on file with the
Securities and Exchange Commission, as such Registration Statement may be
amended from time to time, as well as short-term municipal obligations and
Inverse Floaters.
15
<PAGE>
"Municipal Index" has the meaning set forth in paragraph 8(a) of this
Certificate of Designation.
"1940 Act" means the Investment Company Act of 1940, as amended from time
to time.
"1940 Act AMPS Asset Coverage" means asset coverage, as defined in section
18(h) of the 1940 Act, of at least 200% with respect to all outstanding senior
securities of the Trust which are shares of beneficial interest, including all
outstanding AMPS and Other AMPS (or such other asset coverage as may in the
future be specified in or under the 1940 Act as the minimum asset coverage for
senior securities which are stock of a closed-end investment company as a
condition of paying dividends on its common stock).
"1940 Act Cure Date," with respect to the failure by the Trust to maintain
the 1940 Act AMPS Asset Coverage (as required by paragraph 6 of this Certificate
of Designation) as of the last Business Day of each month, means the last
Business Day of the following month.
"Non-Call Period" has the meaning set forth under the definition of
"Specific Redemption Provisions."
"Non-Payment Period" means, with respect to the AMPS, any period
commencing on and including the day on which the Trust shall fail to (i)
declare, prior to the close of business on the second Business Day preceding any
Dividend Payment Date, for payment on or (to the extent permitted by paragraph
2(c)(i) of this Certificate of Designation) within three Business Days after
such Dividend Payment Date to the Holders as of 12:00 noon, New York City time,
on the Business Day preceding such Dividend Payment Date, the full amount of any
dividend on AMPS payable on such Dividend Payment Date or (ii) deposit,
irrevocably in trust, in same-day funds, with the Auction Agent by 12:00 noon,
New York City time, (A) on such Dividend Payment
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Date the full amount of any cash dividend on such shares payable (if declared)
on such Dividend Payment Date or (B) on any redemption date for any AMPS called
for redemption, the Mandatory Redemption Price per share of such AMPS or, in the
case of an optional redemption, the Optional Redemption Price per share, and
ending on and including the Business Day on which, by 12:00 noon, New York City
time, all unpaid cash dividends and unpaid redemption prices shall have been so
deposited or shall have otherwise been made available to Holders in same-day
funds; provided that, a Non-Payment Period shall not end unless the Trust shall
have given at least five days' but no more than 30 days' written notice of such
deposit or availability to the Auction Agent, all Existing Holders (at their
addresses appearing in the Share Books) and the Securities Depository.
Notwithstanding the foregoing, the failure by the Trust to deposit funds as
provided for by clauses (ii)(A) or (ii)(B) above within three Business Days
after any Dividend Payment Date or redemption date, as the case may be, in each
case to the extent contemplated by paragraph 2(c)(i) of this Certificate of
Designation, shall not constitute a "Non-Payment Period."
"Non-Payment Period Rate" means, initially, 200% of the applicable
Reference Rate (or 275% of such rate if the Trust has provided notification to
the Auction Agent prior to the Auction establishing the Applicable Rate for any
dividend pursuant to paragraph 2(f) hereof that net capital gains or other
taxable income will be included in such dividend on AMPS), provided that the
Board of Trustees of the Trust shall have the authority to adjust, modify, alter
or change from time to time the initial Non-Payment Period Rate if the Board of
Trustees of the Trust determines and Moody's and S&P (and any Substitute Rating
Agency in lieu of Moody's or S&P in the event either of such parties shall not
rate the AMPS) advise the Trust in writing that such
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adjustment, modification, alteration or change will not adversely affect their
then-current ratings on the AMPS.
"Normal Dividend Payment Date" has the meaning set forth in paragraph
2(b)(i) of this Certificate of Designation.
"Notice of Redemption" means any notice with respect to the redemption of
AMPS pursuant to paragraph 4 of this Certificate of Designation.
"Notice of Revocation" has the meaning set forth in paragraph 2(c)(iii) of
this Certificate of Designation.
"Notice of Special Dividend Period" has the meaning set forth in paragraph
2(c)(iii) of this Certificate of Designation.
"Optional Redemption Price" means $25,000 per share plus an amount equal
to accumulated but unpaid dividends (whether or not earned or declared) to the
date fixed for redemption and excluding Additional Dividends plus any applicable
redemption premium attributable to the designation of a Premium Call Period.
"Other AMPS" means the auction rate preferred shares of the Trust, other
than the AMPS.
"Outstanding" means, as of any date (i) with respect to AMPS, AMPS
theretofore issued by the Trust except, without duplication, (A) any AMPS
theretofore cancelled or delivered to the Auction Agent for cancellation, or
redeemed by the Trust, or as to which a Notice of Redemption shall have been
given and Deposit Securities shall have been deposited in trust or segregated by
the Trust pursuant to paragraph 4(c) and (B) any AMPS as to which the Trust or
any Affiliate thereof shall be a Beneficial Owner, provided that AMPS held by an
Affiliate shall be deemed
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outstanding for purposes of calculating the AMPS Basic Maintenance Amount and
(ii) with respect to other Preferred Shares, has the equivalent meaning.
"Parity Shares" means the AMPS and each other outstanding series of
Preferred Shares the holders of which, together with the holders of the AMPS,
shall be entitled to the receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in proportion to the
full respective preferential amounts to which they are entitled, without
preference or priority one over the other.
"Person" means and includes an individual, a partnership, a corporation, a
trust, an unincorporated association, a joint venture or other entity or a
government or any agency or political subdivision thereof.
"Potential Beneficial Owner" means a customer of a Broker-Dealer or a
Broker-Dealer that is not a Beneficial Owner of AMPS but that wishes to purchase
such shares, or that is a Beneficial Owner that wishes to purchase additional
AMPS.
"Potential Holder" means any Broker-Dealer or any such other Person as may
be permitted by the Trust, including any Existing Holder, who may be interested
in acquiring AMPS (or, in the case of an Existing Holder, additional AMPS).
"Preferred Shares" means the preferred shares of beneficial interest of
the Trust, and includes AMPS and Other AMPS.
"Premium Call Period" has the meaning set forth under the definition of
"Specific Redemption Provisions."
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"Pricing Service" means J.J. Kenny or any pricing service designated by
the Board of Trustees of the Trust provided the Trust obtains written assurance
from S&P and Moody's that such designation will not impair the rating then
assigned by S&P and Moody's to the AMPS.
"Quarterly Valuation Date" means the twenty-first day of the last month of
each fiscal quarter of the Trust (or, if such day is not a Business Day, the
next succeeding Business Day) in each fiscal year of the Trust, commencing ,
2000.
"Receivables for Florida Municipal Bonds Sold" has the meaning set forth
under the definition of S&P Discount Factor.
"Receivables for Florida Municipal Bonds or Municipal Bonds Sold" has the
meaning set forth under the definition of Moody's Discount Factor.
"Reference Rate" means: (i) with respect to a Dividend Period or a Short
Term Dividend Period having 28 or fewer days, the higher of the applicable "AA"
Composite Commercial Paper Rate and the Taxable Equivalent of the Short-Term
Municipal Bond Rate, (ii) with respect to any Short Term Dividend Period having
more than 28 but fewer than 183 days, the applicable "AA" Composite Commercial
Paper Rate, (iii) with respect to any Short Term Dividend Period having 183 or
more but fewer than 364 days, the applicable U.S. Treasury Bill Rate and (iv)
with respect to any Long Term Dividend Period, the applicable U.S. Treasury Note
Rate.
"Request for Special Dividend Period" has the meaning set forth in
paragraph 2(c)(iii) of this Certificate of Designation.
"Response" has the meaning set forth in paragraph 2(c)(iii) of this
Certificate of Designation.
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"Retroactive Taxable Allocation" has the meaning set forth in paragraph
2(e) of this Certificate of Designation.
"Right," with respect to the AMPS, has the meaning set forth in paragraph
2(e) of this Certificate of Designation and, with respect to Other AMPS, has the
equivalent meaning.
"S&P" means Standard & Poor's, a division of The McGraw-Hill Companies,
Inc. or its successors.
"S&P Discount Factor" means, for purposes of determining the Discounted
Value of any Florida Municipal Bond which constitutes an S&P Eligible Asset, the
percentage determined by reference to (a) the rating by S&P, Moody's or Fitch on
such Bond and (b) the S&P Exposure Period, in accordance with the tables set
forth below:
For Florida Municipal Bonds:
Rating Category
---------------------------------------
S&P Exposure Period AAA* AA* A* BBB*
- ------------------- ---------------------------------------
45 Business Days................. 205% 210% 225% 265%
25 Business Days................. 185 190 205 245
10 Business Days................. 170 175 190 230
7 Business Days................. 165 170 185 225
3 Business Days................. 145 150 165 205
- ----------
* S&P rating.
Notwithstanding the foregoing, (i) the S&P Discount Factor for short-term
Florida Municipal Bonds will be 115%, so long as such Florida Municipal Bonds
are rated A-1+ or SP-1+ by S&P and mature or have a demand feature exercisable
in 30 days or less, or 120% so long as such Florida Municipal Bonds are rated
A-1 or SP-1 by S&P and mature or have a demand feature exercisable in 30 days or
less, or 125% if such Florida Municipal Bonds are not rated by S&P but are rated
VMIG-1, P-1 or MIG-1 by Moody's or F-1 + by Fitch; provided,
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however, such short-term Florida Municipal Bonds rated by Moody's or Fitch but
not rated by S&P having a demand feature exercisable in 30 days or less must be
backed by a letter of credit, liquidity facility or guarantee from a bank or
other financial institution having a short-term rating of at least A-1+ from
S&P; and further provided that such short-term Florida Municipal Bonds rated by
Moody's or Fitch but not rated by S&P may comprise no more than 50% of
short-term Florida Municipal Bonds that qualify as S&P Eligible Assets, (ii) the
S&P Discount Factor for Receivables for Florida Municipal Bonds Sold that are
due in more than five Business Days from such Valuation Date will be the S&P
Discount Factor applicable to the Florida Municipal Bonds sold, and (iii) no S&P
Discount Factor will be applied to cash or to Receivables for Florida Municipal
Bonds Sold if such receivables are due within five Business Days of such
Valuation Date. "Receivables for Florida Municipal Bonds Sold," for purposes of
calculating S&P Eligible Assets as of any Valuation Date, means the book value
of receivables for Florida Municipal Bonds sold as of or prior to such Valuation
Date. The Trust may adopt S&P Discount Factors for Municipal Bonds other than
Florida Municipal Bonds provided that S&P advises the Trust in writing that such
action will not adversely affect its then current rating on the AMPS. For
purposes of the foregoing, Anticipation Notes rated SP-1 or, if not rated by
S&P, rated VMIG-1 by Moody's or F-1 + by Fitch, which do not mature or have a
demand feature exercisable in 30 days and which do not have a long-term rating,
shall be considered to be short-term Florida Municipal Bonds.
"S&P Eligible Asset" means cash, Receivables for Florida Municipal Bonds
Sold or a Florida Municipal Bond that (i) is interest bearing and pays interest
at least semi-annually; (ii) is payable with respect to principal and interest
in United States Dollars; (iii) is publicly rated BBB or higher by S&P or,
except in the case of Anticipation Notes that are grant anticipation notes or
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bond anticipation notes which must be rated by S&P to be included in S&P
Eligible Assets, if not rated by S&P but rated by Moody's or Fitch, is rated at
least A by Moody's or Fitch (provided that such Moody's-rated or Fitch-rated
Florida Municipal Bonds will be included in S&P Eligible Assets only to the
extent the Market Value of such Florida Municipal Bonds does not exceed 50% of
the aggregate Market Value of the S&P Eligible Assets; and further provided
that, for purposes of determining the S&P Discount Factor applicable to any such
Moody's-rated or Fitch-rated Florida Municipal Bond, such Florida Municipal Bond
will be deemed to have an S&P rating which is one full rating category lower
than its Moody's rating or Fitch rating); (iv) is not subject to a covered call
or covered put option written by the Trust; (v) except for Inverse Floaters, is
not part of a private placement of Florida Municipal Bonds; and (vi) except for
Inverse Floaters, is part of an issue of Florida Municipal Bonds with an
original issue size of at least $10 million or, if of an issue with an original
issue size below $10 million (but in no event below $5 million), is either (a)
issued by an issuer with a total of at least $25 million of securities
outstanding or (b) rated at least A by S&P with all such Florida Municipal Bonds
not constituting more than 20% of the aggregate Market Value of S&P Eligible
Assets. Notwithstanding the foregoing:
(1) Florida Municipal Bonds of any one issuer or guarantor
(excluding bond insurers) will be considered S&P Eligible Assets only to
the extent the Market Value of such Florida Municipal Bonds does not
exceed 10% of the aggregate Market Value of the S&P Eligible Assets,
provided that 2% is added to the applicable S&P Discount Factor for every
1% by which the Market Value of such Florida Municipal Bonds exceeds 5% of
the aggregate Market Value of the S&P Eligible Assets;
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(2) Florida Municipal Bonds of any one issue type category (as
described below) will be considered S&P Eligible Assets only to the extent
the Market Value of such Bonds does not exceed 25% of the aggregate Market
Value of S&P Eligible Assets, except that Florida Municipal Bonds falling
within the utility issue type category will be broken down into three
sub-categories (as described below) and such Florida Municipal Bonds will
be considered S&P Eligible Assets to the extent the Market Value of such
Bonds in each such sub-category does not exceed 25% of the aggregate
Market Value of S&P Eligible Assets and the Market Value of such Bonds in
all three sub-categories combined does not exceed 60% of the aggregate
Market Value of S&P Eligible Assets, except that Florida Municipal Bonds
falling within the transportation issue type category will be broken down
into two sub-categories (as described below) and such Florida Municipal
Bonds will be considered S&P Eligible Assets to the extent the Market
Value of such Bonds in both sub-categories combined (as described below)
does not exceed 40% of the aggregate Market Value of S&P Eligible Assets
and except that Florida Municipal Bonds falling within the general
obligation issue type category will be considered S&P Eligible Assets to
the extent the Market Value of such Bonds does not exceed 50% of the
aggregate Market Value of S&P Eligible Assets. For purposes of the issue
type category requirement described above, Florida Municipal Bonds will be
classified within one of the following categories: health care issues,
housing issues, educational facilities issues, student loan issues,
transportation issues, industrial development bond issues, utility issues,
general obligation issues, lease obligations, escrowed bonds and other
issues not falling within one of the aforementioned categories. The
general obligation issue type category includes any issuer that is
directly or indirectly guaranteed by the State of Florida or its political
subdivisions. Utility issuers are included in the general obligation issue
type category if the issuer is directly or indirectly
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guaranteed by the State of Florida or its political subdivisions. For
purposes of the issue type category requirement described above, Florida
Municipal Bonds in the utility issue type category will be classified
within one of the three following sub-categories: (i) electric, gas and
combination issues (if the combination issue includes an electric issue),
(ii) water and sewer utilities and combination issues (if the combination
issue does not include an electric issue), and (iii) irrigation, resource
recovery, solid waste and other utilities, provided that Florida Municipal
Bonds included in this sub-category (iii) must be rated by S&P in order to
be included in S&P Eligible Assets. For purposes of the issue type
category requirement described above, Florida Municipal Bonds in the
transportation issue type category will be classified within one of the
two following sub-categories: (i) streets and highways, toll roads,
bridges and tunnels, airports and multi-purpose port authorities (multiple
revenue streams generated by toll roads, airports, real estate, bridges),
(ii) mass transit, parking, seaports and others. Exposure to
transportation sub-category (i) is limited to 25% of the aggregate Market
Value of S&P Eligible Assets, provided, however, exposure to
transportation sub-category (i) can exceed the 25% limit to the extent
that exposure to transportation sub-category (ii) is reduced, for a total
exposure up to and not exceeding 40% of the aggregate Market Value of S&P
Eligible Assets for the transportation issue type category; and
(3) Florida Municipal Bonds which are escrow bonds or defeased bonds
may compose up to 100% of the aggregate Market Value of S&P Eligible
Assets if such Bonds initially are assigned a rating by S&P in accordance
with S&P's legal defeasance
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<PAGE>
criteria or rerated by S&P as economic defeased escrow bonds and assigned
an AAA rating. Florida Municipal Bonds may be rated as escrow bonds by
another nationally recognized rating agency or rerated as an escrow bond
and assigned the equivalent of an S&P AAA rating, provided that such
equivalent rated Bonds are limited to 50% of the aggregate Market Value of
S&P Eligible Assets and are deemed to have an AA S&P rating for purposes
of determining the S&P Discount Factor applicable to such Florida
Municipal Bonds. The limitations on Florida Municipal Bonds of any one
issuer in clause (1) above are not applicable to escrow bonds, however,
economically defeased bonds that are either initially rated or rerated by
S&P or another nationally recognized rating agency and assigned the same
rating level as the issuer of the Bonds will remain in its original issue
type category set forth in clause (2) above. Florida Municipal Bonds that
are legally defeased and secured by securities issued or guaranteed by the
United States Government are not required to meet the minimum issuance
size requirement set forth above.
The Trust may include Municipal Bonds other than Florida Municipal Bonds
as S&P Eligible Assets pursuant to guidelines and restrictions to be established
by S&P provided that S&P advises the Trust in writing that such action will not
adversely affect its then current rating on the AMPS.
"S&P Exposure Period" means the maximum period of time following a
Valuation Date, including the Valuation Date and the AMPS Basic Maintenance Cure
Date, that the Trust has under this Certificate of Designation to cure any
failure to maintain, as of such Valuation Date, the Discounted Value for its
portfolio at least equal to the AMPS Basic Maintenance Amount (as described in
paragraph 7(a) of this Certificate of Designation).
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"S&P Hedging Transactions" has the meaning set forth in paragraph 8(a) of
this Certificate of Designation.
"S&P Volatility Factor" means 277% or such other potential dividend rate
increase factor as S&P advises the Trust in writing is applicable.
"Securities Depository" means The Depository Trust Company or any
successor company or other entities elected by the Trust as securities
depository for the AMPS that agrees to follow the procedures required to be
followed by such securities depository in connection with the AMPS.
"Service" means the United States Internal Revenue Service.
"7-Day Dividend Period" means a Dividend Period consisting of seven days.
"Share Books" means the books maintained by the Auction Agent setting
forth at all times a current list, as determined by the Auction Agent, of
Existing Holders of the AMPS.
"Share Register" means the register of Holders maintained on behalf of the
Trust by the Auction Agent in its capacity as transfer agent and registrar for
the AMPS.
"Short Term Dividend Period" means a Special Dividend Period consisting of
a specified number of days (other than seven), evenly divisible by seven and not
fewer than seven nor more than 364.
"Special Dividend Period" means a Dividend Period consisting of (i) a
specified number of days (other than seven), evenly divisible by seven and not
fewer than seven nor more than 364 or (ii) a specified period of one whole year
or more but not greater than five years (in each case subject to adjustment as
provided in paragraph 2(b)(i)).
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"Specific Redemption Provisions" means, with respect to a Special Dividend
Period either, or any combination of, (i) a period (a "Non-Call Period")
determined by the Board of Trustees of the Trust, after consultation with the
Auction Agent and the Broker-Dealers, during which the AMPS subject to such
Dividend Period shall not be subject to redemption at the option of the Trust
and (ii) a period (a "Premium Call Period"), consisting of a number of whole
years and determined by the Board of Trustees of the Trust, after consultation
with the Auction Agent and the Broker-Dealers, during each year of which the
AMPS subject to such Dividend Period shall be redeemable at the Trust's option
at a price per share equal to $25,000 plus accumulated but unpaid dividends plus
a premium expressed as a percentage of $25,000, as determined by the Board of
Trustees of the Trust after consultation with the Auction Agent and the
Broker-Dealers.
"Subsequent Dividend Period," with respect to AMPS, has the meaning set
forth in paragraph 2(c)(i) of this Certificate of Designation and, with respect
to Other AMPS, has the equivalent meaning.
"Substitute Commercial Paper Dealers" means such Substitute Commercial
Paper Dealer or Dealers as the Trust may from time to time appoint or, in lieu
of any thereof, their respective affiliates or successors.
"Substitute Rating Agency" and "Substitute Rating Agencies" mean a
nationally recognized statistical rating organization or two nationally
recognized statistical rating organizations, respectively, selected by Merrill
Lynch, Pierce, Fenner & Smith Incorporated or its affiliates and successors,
after consultation with the Trust, to act as the substitute rating agency or
substitute rating agencies, as the case may be, to determine the credit ratings
of the AMPS.
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"Taxable Equivalent of the Short-Term Municipal Bond Rate" on any date
means 90% of the quotient of (A) the per annum rate expressed on an interest
equivalent basis equal to the Kenny S&P 30-day High Grade Index (the "Kenny
Index") or any successor index, made available for the Business Day immediately
preceding such date but in any event not later than 8:30 A.M., New York City
time, on such date by Kenny Information Systems Inc. or any successor thereto,
based upon 30-day yield evaluations at par of bonds the interest on which is
excludable for regular Federal income tax purposes under the Code of "high
grade" component issuers selected by Kenny Information Systems Inc. or any such
successor from time to time in its discretion, which component issuers shall
include, without limitation, issuers of general obligation bonds but shall
exclude any bonds the interest on which constitutes an item of tax preference
under Section 57(a)(5) of the Code, or successor provisions, for purposes of the
"alternative minimum tax," divided by (B) 1.00 minus the Marginal Tax Rate
(expressed as a decimal); provided, however, that if the Kenny Index is not made
so available by 8:30 A.M., New York City time, on such date by Kenny Information
Systems Inc. or any successor, the Taxable Equivalent of the Short-Term
Municipal Bond Rate shall mean the quotient of (A) the per annum rate expressed
on an interest equivalent basis equal to the most recent Kenny Index so made
available for any preceding Business Day, divided by (B) 1.00 minus the Marginal
Tax Rate (expressed as a decimal). The Trust may not utilize a successor index
to the Kenny Index unless Moody's and S&P provide the Trust with written
confirmation that the use of such successor index will not adversely affect the
then-current respective Moody's and S&P ratings of the AMPS.
"Treasury Bonds" has the meaning set forth in paragraph 8(a) of this
Certificate of Designation.
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"Trust" means MuniYield Florida Fund, a Massachusetts business trust.
"U.S. Treasury Bill Rate" on any date means (i) the Interest Equivalent of
the rate on the actively traded Treasury Bill with a maturity most nearly
comparable to the length of the related Dividend Period, as such rate is made
available on a discount basis or otherwise by the Federal Reserve Bank of New
York in its Composite 3:30 P.M. Quotations for U.S. Government Securities report
for such Business Day, or (ii) if such yield as so calculated is not available,
the Alternate Treasury Bill Rate on such date. "Alternate Treasury Bill Rate" on
any date means the Interest Equivalent of the yield as calculated by reference
to the arithmetic average of the bid price quotations of the actively traded
Treasury Bill with a maturity most nearly comparable to the length of the
related Dividend Period, as determined by bid price quotations as of any time on
the Business Day immediately preceding such date, obtained from at least three
recognized primary U.S. Government securities dealers selected by the Auction
Agent.
"U.S. Treasury Note Rate" on any date means (i) the yield as calculated by
reference to the bid price quotation of the actively traded, current coupon
Treasury Note with a maturity most nearly comparable to the length of the
related Dividend Period, as such bid price quotation is published on the
Business Day immediately preceding such date by the Federal Reserve Bank of New
York in its Composite 3:30 P.M. Quotations for U.S. Government Securities report
for such Business Day, or (ii) if such yield as so calculated is not available,
the Alternate Treasury Note Rate on such date. "Alternate Treasury Note Rate" on
any date means the yield as calculated by reference to the arithmetic average of
the bid price quotations of the actively traded, current coupon Treasury Note
with a maturity most nearly comparable to the length of the related Dividend
Period, as determined by the bid price quotations as of any time on the Business
Day
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immediately preceding such date, obtained from at least three recognized primary
U.S. Government securities dealers selected by the Auction Agent.
"Valuation Date" means, for purposes of determining whether the Trust is
maintaining the AMPS Basic Maintenance Amount, each Business Day commencing with
the Date of Original Issue.
"Variation Margin" means, in connection with an outstanding futures
contract owned or sold by the Trust, the amount of cash or securities paid to or
received from a broker (subsequent to the Initial Margin payment) from time to
time as the price of such futures contract fluctuates.
(b) The foregoing definitions of Accountant's Confirmation, AMPS Basic
Maintenance Amount, AMPS Basic Maintenance Cure Date, AMPS Basic Maintenance
Report, Deposit Securities, Discounted Value, Independent Accountant, Initial
Margin, Inverse Floaters, Market Value, Maximum Potential Additional Dividend
Liability, Moody's Discount Factor, Moody's Eligible Asset, Moody's Exposure
Period, Moody's Hedging Transactions, Moody's Volatility Factor, S&P Discount
Factor, S&P Eligible Asset, S&P Exposure Period, S&P Hedging Transactions, S&P
Volatility Factor, Valuation Date and Variation Margin have been determined by
the Board of Trustees of the Trust in order to obtain a "aaa" rating from
Moody's and a AAA rating from S&P on the AMPS on their Date of Original Issue;
and the Board of Trustees of the Trust shall have the authority, without
shareholder approval, to amend, alter or repeal from time to time the foregoing
definitions and the restrictions and guidelines set forth thereunder if Moody's
and S&P or any Substitute Rating Agency advises the Trust in writing that such
amendment, alteration or repeal will not adversely affect their then current
ratings on the AMPS.
2. Dividends. (a) The Holders shall be entitled to receive, when, as and
if declared by the Board of Trustees of the Trust, out of funds legally
available therefor, cumulative dividends
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each consisting of (i) cash at the Applicable Rate, (ii) a Right to receive cash
as set forth in paragraph 2(e) below, and (iii) any additional amounts as set
forth in paragraph 2(f) below, and no more, payable on the respective dates set
forth below. Dividends on the AMPS so declared and payable shall be paid (i) in
preference to and in priority over any dividends declared and payable on the
Common Shares, and (ii) to the extent permitted under the Code and to the extent
available, out of net tax-exempt income earned on the Trust's investments. To
the extent permitted under the Code, dividends on AMPS will be designated as
exempt-interest dividends. For the purposes of this section, the term "net
tax-exempt income" shall exclude capital gains of the Trust.
(b) (i) Cash dividends on AMPS shall accumulate from the Date of Original
Issue and shall be payable, when, as and if declared by the Board of Trustees,
out of funds legally available therefor, commencing on the Initial Dividend
Payment Date with respect to the AMPS. Following the Initial Dividend Payment
Date for the AMPS, dividends on the AMPS will be payable, at the option of the
Trust, either (i) with respect to any 7-Day Dividend Period and any Short Term
Dividend Period of 35 or fewer days, on the day next succeeding the last day
thereof or (ii) with respect to any Short Term Dividend Period of more than 35
days and with respect to any Long Term Dividend Period, monthly on the first
Business Day of each calendar month during such Short Term Dividend Period or
Long Term Dividend Period and on the day next succeeding the last day thereof
(each such date referred to in clause (i) or (ii) being herein referred to as a
"Normal Dividend Payment Date"), except that if such Normal Dividend Payment
Date is not a Business Day, then the Dividend Payment Date shall be the first
Business Day next succeeding such Normal Dividend Payment Date. Although any
particular Dividend Payment Date may not occur on the originally scheduled date
because of the exceptions
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discussed above, the next succeeding Dividend Payment Date, subject to such
exceptions, will occur on the next following originally scheduled date. If for
any reason a Dividend Payment Date cannot be fixed as described above, then the
Board of Trustees shall fix the Dividend Payment Date. The Board of Trustees by
resolution prior to authorization of a dividend by the Board of Trustees may
change a Dividend Payment Date if such change does not adversely affect the
contract rights of the Holders of AMPS set forth in the Declaration. The Initial
Dividend Period, 7-Day Dividend Periods and Special Dividend Periods are
hereinafter sometimes referred to as Dividend Periods. Each dividend payment
date determined as provided above is hereinafter referred to as a "Dividend
Payment Date."
(ii) Each dividend shall be paid to the Holders as they appear in the
Share Register as of 12:00 noon, New York City time, on the Business Day
preceding the Dividend Payment Date. Dividends in arrears for any past Dividend
Period may be declared and paid at any time, without reference to any regular
Dividend Payment Date, to the Holders as they appear on the Share Register on a
date, not exceeding 15 days prior to the payment date therefor, as may be fixed
by the Board of Trustees of the Trust.
(c) (i) During the period from and including the Date of Original Issue to
but excluding the Initial Dividend Payment Date for the AMPS (the "Initial
Dividend Period"), the Applicable Rate shall be the Initial Dividend Rate.
Commencing on the Initial Dividend Payment Date for the AMPS, the Applicable
Rate for each subsequent dividend period (hereinafter referred to as a
"Subsequent Dividend Period"), which Subsequent Dividend Period shall commence
on and include a Dividend Payment Date and shall end on and include the calendar
day prior to the next Dividend Payment Date (or last Dividend Payment Date in a
Dividend Period if there is more
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than one Dividend Payment Date), shall be equal to the rate per annum that
results from implementation of the Auction Procedures.
The Applicable Rate for each Dividend Period commencing during a
Non-Payment Period shall be equal to the Non-Payment Period Rate; and each
Dividend Period, commencing after the first day of, and during, a Non-Payment
Period shall be a 7-Day Dividend Period. Except in the case of the willful
failure of the Trust to pay a dividend on a Dividend Payment Date or to redeem
any AMPS on the date set for such redemption, any amount of any dividend due on
any Dividend Payment Date (if, prior to the close of business on the second
Business Day preceding such Dividend Payment Date, the Trust has declared such
dividend payable on such Dividend Payment Date to the Holders of such AMPS as of
12:00 noon, New York City time, on the Business Day preceding such Dividend
Payment Date) or redemption price with respect to any AMPS not paid to such
Holders when due may be paid to such Holders in the same form of funds by 12:00
noon, New York City time, on any of the first three Business Days after such
Dividend Payment Date or due date, as the case may be, provided that, such
amount is accompanied by a late charge calculated for such period of non-payment
at the Non-Payment Period Rate applied to the amount of such non-payment based
on the actual number of days comprising such period divided by 365. In the case
of a willful failure of the Trust to pay a dividend on a Dividend Payment Date
or to redeem any AMPS on the date set for such redemption, the preceding
sentence shall not apply and the Applicable Rate for the Dividend Period
commencing during the Non-Payment Period resulting from such failure shall be
the Non-Payment Period Rate. For the purposes of the foregoing, payment to a
person in same-day funds on any Business Day at any time shall be considered
equivalent to payment to such person in New York Clearing House (next-day) funds
at the same time on the preceding Business Day,
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and any payment made after 12:00 noon, New York City time, on any Business Day
shall be considered to have been made instead in the same form of funds and to
the same person before 12:00 noon, New York City time, on the next Business Day.
(ii) The amount of cash dividends per share of the AMPS payable (if
declared) on the Initial Dividend Payment Date, each 7-Day Dividend Period and
each Dividend Payment Date of each Short Term Dividend Period shall be computed
by multiplying the Applicable Rate for such Dividend Period by a fraction, the
numerator of which will be the number of days in such Dividend Period or part
thereof that such share was outstanding and the denominator of which will be
365, multiplying the amount so obtained by $25,000, and rounding the amount so
obtained to the nearest cent. During any Long Term Dividend Period, the amount
of cash dividends per share of AMPS payable (if declared) on any Dividend
Payment Date shall be computed by multiplying the Applicable Rate for such
Dividend Period by a fraction, the numerator of which will be such number of
days in such part of such Dividend Period that such share was outstanding and
for which dividends are payable on such Dividend Payment Date and the
denominator of which will be 360, multiplying the amount so obtained by $25,000,
and rounding the amount so obtained to the nearest cent.
(iii) With respect to each Dividend Period that is a Special Dividend
Period, the Trust may, at its sole option and to the extent permitted by law, by
telephonic and written notice (a "Request for Special Dividend Period") to the
Auction Agent and to each Broker-Dealer, request that the next succeeding
Dividend Period for the AMPS be a number of days (other than seven), evenly
divisible by seven, and not fewer than seven nor more than 364 in the case of a
Short Term Dividend Period or one whole year or more but not greater than five
years in the case of a Long Term Dividend Period, specified in such notice,
provided that the Trust may not give a
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Request for Special Dividend Period of greater than 28 days (and any such
request shall be null and void) unless, for any Auction occurring after the
initial Auction, Sufficient Clearing Bids were made in the last occurring
Auction and unless full cumulative dividends, any amounts due with respect to
redemptions, and any Additional Dividends payable prior to such date have been
paid in full. Such Request for Special Dividend Period, in the case of a Short
Term Dividend Period, shall be given on or prior to the second Business Day but
not more than seven Business Days prior to an Auction Date for the AMPS and, in
the case of a Long Term Dividend Period, shall be given on or prior to the
second Business Day but not more than 28 days prior to an Auction Date for the
AMPS. Upon receiving such Request for Special Dividend Period, the
Broker-Dealer(s) shall jointly determine whether, given the factors set forth
below, it is advisable that the Trust issue a Notice of Special Dividend Period
for the AMPS as contemplated by such Request for Special Dividend Period and the
Optional Redemption Price of the AMPS during such Special Dividend Period and
the Specific Redemption Provisions and shall give the Trust and the Auction
Agent written notice (a "Response") of such determination by no later than the
second Business Day prior to such Auction Date. In making such determination the
Broker-Dealer(s) will consider (1) existing short-term and long-term market
rates and indices of such short-term and long-term rates, (2) existing market
supply and demand for short-term and long-term securities, (3) existing yield
curves for short-term and long-term securities comparable to the AMPS, (4)
industry and financial conditions which may affect the AMPS, (5) the investment
objective of the Trust, and (6) the Dividend Periods and dividend rates at which
current and potential beneficial holders of the AMPS would remain or become
beneficial holders. If the Broker-Dealer(s) shall not give the Trust and the
Auction Agent a Response by such second Business Day or if the Response states
that given the factors set forth above it is not
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advisable that the Trust give a Notice of Special Dividend Period for the series
of AMPS, the Trust may not give a Notice of Special Dividend Period in respect
of such Request for Special Dividend Period. In the event the Response indicates
that it is advisable that the Trust give a Notice of Special Dividend Period for
the AMPS, the Trust may by no later than the second Business Day prior to such
Auction Date give a notice (a "Notice of Special Dividend Period") to the
Auction Agent, the Securities Depository and each Broker-Dealer which notice
will specify (i) the duration of the Special Dividend Period, (ii) the Optional
Redemption Price as specified in the related Response and (iii) the Specific
Redemption Provisions, if any, as specified in the related Response. The Trust
also shall provide a copy of such Notice of Special Dividend Period to Moody's
and S&P. The Trust shall not give a Notice of Special Dividend Period and, if
the Trust has given a Notice of Special Dividend Period, the Trust is required
to give telephonic and written notice of its revocation (a "Notice of
Revocation") to the Auction Agent, each Broker-Dealer, and the Securities
Depository on or prior to the Business Day prior to the relevant Auction Date if
(x) either the 1940 Act AMPS Asset Coverage is not satisfied or the Trust shall
fail to maintain S&P Eligible Assets and Moody's Eligible Assets each with an
aggregate Discounted Value at least equal to the AMPS Basic Maintenance Amount,
in each case on each of the two Valuation Dates immediately preceding the
Business Day prior to the relevant Auction Date on an actual basis and on a pro
forma basis giving effect to the proposed Special Dividend Period (using as a
pro forma dividend rate with respect to such Special Dividend Period the
dividend rate which the Broker-Dealers shall advise the Trust is an
approximately equal rate for securities similar to the AMPS with an equal
dividend period), provided that, in calculating the aggregate Discounted Value
of Moody's Eligible Assets for this purpose, the Moody's Exposure Period shall
be deemed to be one week longer, (y) sufficient
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funds for the payment of dividends payable on the immediately succeeding
Dividend Payment Date have not been irrevocably deposited with the Auction Agent
by the close of business on the third Business Day preceding the related Auction
Date or (z) the Broker-Dealer(s) jointly advise the Trust that after
consideration of the factors listed above they have concluded that it is
advisable to give a Notice of Revocation. The Trust also shall provide a copy of
such Notice of Revocation to Moody's and S&P. If the Trust is prohibited from
giving a Notice of Special Dividend Period as a result of any of the factors
enumerated in clause (x), (y) or (z) above or if the Trust gives a Notice of
Revocation with respect to a Notice of Special Dividend Period for the AMPS, the
next succeeding Dividend Period will be a 7-Day Dividend Period. In addition, in
the event Sufficient Clearing Bids are not made in the applicable Auction or
such Auction is not held for any reason, such next succeeding Dividend Period
will be a 7-Day Dividend Period and the Trust may not again give a Notice of
Special Dividend Period for the AMPS (and any such attempted notice shall be
null and void) until Sufficient Clearing Bids have been made in an Auction with
respect to a 7-Day Dividend Period.
(d) (i) Holders shall not be entitled to any dividends, whether payable in
cash, property or shares, in excess of full cumulative dividends and applicable
late charges, as herein provided, on the AMPS (except for Additional Dividends
as provided in paragraph 2(e) hereof and additional payments as provided in
paragraph 2(f) hereof). Except for the late charge payable pursuant to paragraph
2(c)(i) hereof, no interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment on the AMPS that may be in arrears.
(ii) For so long as any share of AMPS is Outstanding, the Trust shall not
declare, pay or set apart for payment any dividend or other distribution (other
than a dividend or distribution paid in shares of, or options, warrants or
rights to subscribe for or purchase, Common Shares or other shares of beneficial
interest, if any, ranking junior to the AMPS as to dividends or upon
liquidation) in respect of the Common Shares or
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any other shares of the Trust ranking junior to or on a parity with the AMPS as
to dividends or upon liquidation, or call for redemption, redeem, purchase or
otherwise acquire for consideration any shares of the Common Shares or any other
such junior shares of beneficial interest (except by conversion into or exchange
for shares of the Trust ranking junior to the AMPS as to dividends and upon
liquidation) or any other such Parity Shares (except by conversion into or
exchange for shares of the Trust ranking junior to or on a parity with the AMPS
as to dividends and upon liquidation), unless (A) immediately after such
transaction, the Trust shall have S&P Eligible Assets and Moody's Eligible
Assets each with an aggregate Discounted Value equal to or greater than the AMPS
Basic Maintenance Amount and the Trust shall maintain the 1940 Act AMPS Asset
Coverage, (B) full cumulative dividends on AMPS and shares of Other AMPS due on
or prior to the date of the transaction have been declared and paid or shall
have been declared and sufficient funds for the payment thereof deposited with
the Auction Agent, (C) any Additional Dividend required to be paid under
paragraph 2(e) below on or before the date of such declaration or payment has
been paid and (D) the Trust has redeemed the full number of AMPS required to be
redeemed by any provision for mandatory redemption contained herein.
(e) Each dividend shall consist of (i) cash at the Applicable Rate, (ii)
an uncertificated right (a "Right") to receive an Additional Dividend (as
defined below), and (iii) any additional amounts as set forth in paragraph 2(f)
below. Each Right shall thereafter be independent of the AMPS on which the
dividend was paid. The Trust shall cause to be maintained a record of each Right
received by the respective Holders. A Right may not be transferred other than by
operation of law. If the Trust retroactively allocates any net capital gains or
other income subject
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to regular Federal income taxes to AMPS without having given advance notice
thereof to the Auction Agent as described in paragraph 2(f) hereof solely by
reason of the fact that such allocation is made as a result of the redemption of
all or a portion of the outstanding AMPS or the liquidation of the Trust (the
amount of such allocation referred to herein as a "Retroactive Taxable
Allocation"), the Trust will, within 90 days (and generally within 60 days)
after the end of the Trust's fiscal year for which a Retroactive Taxable
Allocation is made, provide notice thereof to the Auction Agent and to each
holder of a Right applicable to such AMPS (initially Cede & Co. as nominee of
The Depository Trust Company) during such fiscal year at such holder's address
as the same appears or last appeared on the Share Books of the Trust. The Trust
will, within 30 days after such notice is given to the Auction Agent, pay to the
Auction Agent (who will then distribute to such holders of Rights), out of funds
legally available therefor, an amount equal to the aggregate Additional Dividend
with respect to all Retroactive Taxable Allocations made to such holders during
the fiscal year in question.
An "Additional Dividend" means payment to a present or former holder of
AMPS of an amount which, when taken together with the aggregate amount of
Retroactive Taxable Allocations made to such holder with respect to the fiscal
year in question, would cause such holder's dividends in dollars (after Federal
and Florida income tax consequences) from the aggregate of both the Retroactive
Taxable Allocations and the Additional Dividend to be equal to the dollar amount
of the dividends which would have been received by such holder if the amount of
the aggregate Retroactive Taxable Allocations would have been excludable from
the gross income of such holder. Such Additional Dividend shall be calculated
(i) without consideration being given to the time value of money; (ii) assuming
that no holder of AMPS is subject to the Federal alternative minimum tax with
respect to dividends received from the Trust; and (iii)
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assuming that each Retroactive Taxable Allocation would be taxable in the hands
of each holder of AMPS at the greater of: (x) the maximum marginal regular
Federal individual income tax rate applicable to ordinary income or capital
gains depending on the taxable character of the distribution (including any
surtax); or (y) the maximum combined marginal regular Federal and Florida
corporate income tax rate applicable to ordinary income or capital gains
depending on the taxable character of the distribution (taking into account in
both (x) and (y) the Federal income tax deductibility of state taxes paid or
incurred but not any phase out of, or provision limiting, personal exemptions,
itemized deductions, or the benefit of lower tax brackets and assuming the
taxability of Federally tax-exempt dividends for corporations for Florida income
tax purposes).
(f) Except as provided below, whenever the Trust intends to include any
net capital gains or other income subject to regular Federal income taxes in any
dividend on AMPS, the Trust will notify the Auction Agent of the amount to be so
included at least five Business Days prior to the Auction Date on which the
Applicable Rate for such dividend is to be established. The Trust may also
include such income in a dividend on shares of the AMPS without giving advance
notice thereof if it increases the dividend by an additional amount calculated
as if such income was a Retroactive Taxable Allocation and the additional amount
was an Additional Dividend, provided that the Trust will notify the Auction
Agent of the additional amounts to be included in such dividend at least five
Business Days prior to the applicable Dividend Payment Date.
(g) No fractional AMPS shall be issued.
3. Liquidation Rights. Upon any liquidation, dissolution or winding up of
the Trust, whether voluntary or involuntary, the Holders shall be entitled to
receive, out of the assets of the Trust available for distribution to
shareholders, before any distribution or payment is made upon
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any Common Shares or any other shares of beneficial interest ranking junior in
right of payment upon liquidation to the AMPS, the sum of $25,000 per share plus
accumulated but unpaid dividends (whether or not earned or declared) thereon to
the date of distribution, and after such payment the Holders will be entitled to
no other payments other than Additional Dividends as provided in paragraph 2(e)
hereof. If upon any liquidation, dissolution or winding up of the Trust, the
amounts payable with respect to the AMPS and any other Outstanding class or
series of Preferred Shares of the Trust ranking on a parity with the AMPS as to
payment upon liquidation are not paid in full, the Holders and the holders of
such other class or series will share ratably in any such distribution of assets
in proportion to the respective preferential amounts to which they are entitled.
After payment of the full amount of the liquidating distribution to which they
are entitled, the Holders will not be entitled to any further participation in
any distribution of assets by the Trust except for any Additional Dividends. A
consolidation, merger or statutory share exchange of the Trust with or into any
other corporation or entity or a sale, whether for cash, shares of stock,
securities or properties, of all or substantially all or any part of the assets
of the Trust shall not be deemed or construed to be a liquidation, dissolution
or winding up of the Trust.
4. Redemption. (a) Shares of AMPS shall be redeemable by the Trust as
provided below:
(i) To the extent permitted under the 1940 Act and Massachusetts
law, upon giving a Notice of Redemption, the Trust at its option may
redeem AMPS, in whole or in part, out of funds legally available therefor,
at the Optional Redemption Price per share, on any Dividend Payment Date;
provided that no share of AMPS may be redeemed at the option of the Trust
during (A) the Initial Dividend Period with respect to such series of
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shares or (B) a Non-Call Period to which such share is subject. In
addition, holders of AMPS which are redeemed shall be entitled to receive
Additional Dividends to the extent provided herein. The Trust may not give
a Notice of Redemption relating to an optional redemption as described in
this paragraph 4(a)(i) unless, at the time of giving such Notice of
Redemption, the Trust has available Deposit Securities with maturity or
tender dates not later than the day preceding the applicable redemption
date and having a value not less than the amount due to Holders by reason
of the redemption of their AMPS on such redemption date.
(ii) The Trust shall redeem, out of funds legally available
therefor, at the Mandatory Redemption Price per share, AMPS to the extent
permitted under the 1940 Act, on a date fixed by the Board of Trustees, if
the Trust fails to maintain S&P Eligible Assets and Moody's Eligible
Assets each with an aggregate Discounted Value equal to or greater than
the AMPS Basic Maintenance Amount as provided in paragraph 7(a) or to
satisfy the 1940 Act AMPS Asset Coverage as provided in paragraph 6 and
such failure is not cured on or before the AMPS Basic Maintenance Cure
Date or the 1940 Act Cure Date (herein collectively referred to as a "Cure
Date"), as the case may be. In addition, holders of AMPS so redeemed shall
be entitled to receive Additional Dividends to the extent provided herein.
The number of AMPS to be redeemed shall be equal to the lesser of (i) the
minimum number of AMPS the redemption of which, if deemed to have occurred
immediately prior to the opening of business on the Cure Date, together
with all shares of other Preferred Shares subject to redemption or
retirement, would result in the Trust having S&P Eligible Assets and
Moody's Eligible Assets each with an aggregate Discounted Value equal to
or greater than the AMPS Basic Maintenance Amount or
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satisfaction of the 1940 Act AMPS Asset Coverage, as the case may be, on
such Cure Date (provided that, if there is no such minimum number of AMPS
and of other Preferred Shares the redemption of which would have such
result, all AMPS and other Preferred Shares then Outstanding shall be
redeemed), and (ii) the maximum number of AMPS, together with all other
Preferred Shares subject to redemption or retirement, that can be redeemed
out of funds expected to be legally available therefor on such redemption
date. In determining the number of AMPS required to be redeemed in
accordance with the foregoing, the Trust shall allocate the number
required to be redeemed which would result in the Trust having S&P
Eligible Assets and Moody's Eligible Assets each with an aggregate
Discounted Value equal to or greater than the AMPS Basic Maintenance
Amount or satisfaction of the 1940 Act AMPS Asset Coverage, as the case
may be, pro rata among AMPS of all series, Other AMPS and other Preferred
Shares subject to redemption pursuant to provisions similar to those
contained in this paragraph 4(a)(ii); provided that, AMPS which may not be
redeemed at the option of the Trust due to the designation of a Non-Call
Period applicable to such shares (A) will be subject to mandatory
redemption only to the extent that other shares are not available to
satisfy the number of shares required to be redeemed and (B) will be
selected for redemption in an ascending order of outstanding number of
days in the Non-Call Period (with shares with the lowest number of days to
be redeemed first) and by lot in the event of shares having an equal
number of days in such Non-Call Period. The Trust shall effect such
redemption on a Business Day which is not later than 35 days after such
Cure Date, except that if the Trust does not have funds legally available
for the redemption of all of the required number of AMPS and other
Preferred Shares which are subject to mandatory redemption
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or the Trust otherwise is unable to effect such redemption on or prior to
35 days after such Cure Date, the Trust shall redeem those AMPS which it
is unable to redeem on the earliest practicable date on which it is able
to effect such redemption out of funds legally available therefor.
(b) Notwithstanding any other provision of this paragraph 4, no AMPS may
be redeemed pursuant to paragraph 4(a)(i) of this Certificate of Designation (i)
unless all dividends in arrears on all remaining outstanding Parity Shares shall
have been or are being contemporaneously paid or declared and set apart for
payment and (ii) if redemption thereof would result in the Trust's failure to
maintain Moody's Eligible Assets or S&P Eligible Assets with an aggregate
Discounted Value equal to or greater than the AMPS Basic Maintenance Amount. In
the event that less than all the outstanding shares of AMPS are to be redeemed
and there is more than one Holder, the shares of AMPS to be redeemed shall be
selected by lot or such other method as the Trust shall deem fair and equitable.
(c) Whenever AMPS are to be redeemed, the Trust, not less than 17 nor more
than 60 days prior to the date fixed for redemption, shall mail a notice
("Notice of Redemption") by first-class mail, postage prepaid, to each Holder of
AMPS to be redeemed and to the Auction Agent. The Trust shall cause the Notice
of Redemption to also be published in the eastern and national editions of The
Wall Street Journal. The Notice of Redemption shall set forth (i) the redemption
date, (ii) the amount of the redemption price, (iii) the aggregate number of
AMPS of such series to be redeemed, (iv) the place or places where AMPS of such
series are to be surrendered for payment of the redemption price, (v) a
statement that dividends on the shares to be redeemed shall cease to accumulate
on such redemption date (except that holders may be entitled to Additional
Dividends) and (vi) the provision of this Certificate of Designation
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pursuant to which such shares are being redeemed. No defect in the Notice of
Redemption or in the mailing or publication thereof shall affect the validity of
the redemption proceedings, except as required by applicable law.
If the Notice of Redemption shall have been given as aforesaid and,
concurrently or thereafter, the Trust shall have deposited in trust with the
Auction Agent, or segregated in an account at the Trust's custodian bank for the
benefit of the Auction Agent, Deposit Securities (with a right of substitution)
having an aggregate Discounted Value (utilizing in the case of S&P an S&P
Exposure Period of 22 Business Days) equal to the redemption payment for the
AMPS as to which such Notice of Redemption has been given with irrevocable
instructions and authority to pay the redemption price to the Holders of such
shares, then upon the date of such deposit or, if no such deposit is made, then
upon such date fixed for redemption (unless the Trust shall default in making
the redemption payment), all rights of the Holders of such shares as
shareholders of the Trust by reason of the ownership of such shares will cease
and terminate (except their right to receive the redemption price in respect
thereof and any Additional Dividends, but without interest), and such shares
shall no longer be deemed outstanding. The Trust shall be entitled to receive,
from time to time, from the Auction Agent the interest, if any, on such Deposit
Securities deposited with it and the Holders of any shares so redeemed shall
have no claim to any of such interest. In case the Holder of any shares so
called for redemption shall not claim the redemption payment for his shares
within one year after the date of redemption, the Auction Agent shall, upon
demand, pay over to the Trust such amount remaining on deposit and the Auction
Agent shall thereupon be relieved of all responsibility to the Holder of such
shares called for redemption and such Holder thereafter shall look only to the
Trust for the redemption payment.
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5. Voting Rights. (a) General. Except as otherwise provided in the
Declaration or By-Laws, each Holder of AMPS shall be entitled to one vote for
each share held on each matter submitted to a vote of shareholders of the Trust,
and the holders of outstanding Preferred Shares, including AMPS, and of Common
Shares vote together as a single class; provided that, at any meeting of the
shareholders of the Trust held for the election of trustees, the holders of
outstanding Preferred Shares, including AMPS, shall be entitled, as a class, to
the exclusion of the holders of all other securities and classes of shares of
beneficial interest of the Trust, to elect two trustees of the Trust. Subject to
paragraph 5(b) hereof, the holders of outstanding shares of beneficial interest
of the Trust, including the holders of outstanding Preferred Shares, including
AMPS, voting as a single class, shall elect the balance of the trustees.
(b) Right to Elect Majority of Board of Trustees. During any period in
which any one or more of the conditions described below shall exist (such period
being referred to herein as a "Voting Period"), the number of trustees
constituting the Board of Trustees shall be automatically increased by the
smallest number that, when added to the two trustees elected exclusively by the
holders of Preferred Shares, would constitute a majority of the Board of
Trustees as so increased by such smallest number; and the holders of Preferred
Shares shall be entitled, voting separately as one class (to the exclusion of
the holders of all other securities and classes of shares of beneficial interest
of the Trust), to elect such smallest number of additional trustees, together
with the two trustees that such holders are in any event entitled to elect. A
Voting Period shall commence:
(i) if at any time accumulated dividends (whether or not earned or
declared, and whether or not funds are then legally available in an amount
sufficient therefor) on the outstanding AMPS equal to at least two full
years' dividends shall be due and unpaid
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and sufficient cash or specified securities shall not have been deposited
with the Auction Agent for the payment of such accumulated dividends; or
(ii) if at any time holders of any other Preferred Shares are
entitled to elect a majority of the trustees of the Trust under the 1940
Act.
Upon the termination of a Voting Period, the voting rights described in
this paragraph 5(b) shall cease, subject always, however, to the reverting of
such voting rights in the Holders upon the further occurrence of any of the
events described in this paragraph 5(b).
(c) Right to Vote with Respect to Certain Other Matters. So long as any
AMPS are outstanding, the Trust shall not, without the affirmative vote of the
holders of a majority of the Preferred Shares Outstanding at the time, voting
separately as one class: (i) authorize, create or issue, or increase the
authorized or issued amount of, any class or series of shares ranking prior to
or on a parity with any series of Preferred Shares with respect to payment of
dividends or the distribution of assets on liquidation, or (ii) amend, alter or
repeal the provisions of the Declaration, whether by merger, consolidation or
otherwise, so as to adversely affect any of the contract rights expressly set
forth in the Declaration of holders of AMPS or any other Preferred Shares. To
the extent permitted under the 1940 Act, in the event shares of more than one
series of AMPS are outstanding, the Trust shall not approve any of the actions
set forth in clause (i) or (ii) which adversely affects the contract rights
expressly set forth in the Declaration of a Holder of shares of a series of AMPS
differently than those of a Holder of shares of any other series of AMPS without
the affirmative vote of the holders of at least a majority of the AMPS of each
series adversely affected and outstanding at such time (each such adversely
affected series voting separately as a class). The Trust shall notify Moody's
and S&P ten Business Days prior to any such vote described in clause (i) or
(ii). Unless a higher percentage is provided for under the
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Declaration, the affirmative vote of the holders of a majority of the
outstanding Preferred Shares, including AMPS, voting together as a single class,
will be required to approve any plan of reorganization (including bankruptcy
proceedings) adversely affecting such shares or any action requiring a vote of
security holders under Section 13(a) of the 1940 Act. The class vote of holders
of Preferred Shares, including AMPS, described above will in each case be in
addition to a separate vote of the requisite percentage of shares of beneficial
interest and Preferred Shares, including AMPS, voting together as a single class
necessary to authorize the action in question.
(d) Voting Procedures.
(i) As soon as practicable after the accrual of any right of the holders
of Preferred Shares to elect additional trustees as described in paragraph 5(b)
above, the Trust shall call a special meeting of such holders and instruct the
Auction Agent to mail a notice of such special meeting to such holders, such
meeting to be held not less than 10 nor more than 20 days after the date of
mailing of such notice. If the Trust fails to send such notice to the Auction
Agent or if the Trust does not call such a special meeting, it may be called by
any such holder on like notice. The record date for determining the holders
entitled to notice of and to vote at such special meeting shall be the close of
business on the fifth Business Day preceding the day on which such notice is
mailed. At any such special meeting and at each meeting held during a Voting
Period, such Holders, voting together as a class (to the exclusion of the
holders of all other securities and classes of shares of beneficial interest of
the Trust), shall be entitled to elect the number of trustees prescribed in
paragraph 5(b) above. At any such meeting or adjournment thereof in the absence
of a quorum, a majority of such holders present in person or by proxy shall have
the power to adjourn the meeting without notice, other than by an announcement
at the meeting, to a date not more than 120 days after the original record date.
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(ii) For purposes of determining any rights of the Holders to vote on any
matter or the number of shares required to constitute a quorum, whether such
right is created by this Certificate of Designation, by the other provisions of
the Declaration, by statute or otherwise, a share of AMPS which is not
Outstanding shall not be counted.
(iii) The terms of office of all persons who are trustees of the Trust at
the time of a special meeting of Holders and holders of other Preferred Shares
to elect trustees shall continue, notwithstanding the election at such meeting
by the Holders and such other holders of the number of trustees that they are
entitled to elect, and the persons so elected by the Holders and such other
holders, together with the two incumbent trustees elected by the Holders and
such other holders of Preferred Shares and the remaining incumbent trustees
elected by the holders of the Common Shares and Preferred Shares, shall
constitute the duly elected trustees of the Trust.
(iv) Simultaneously with the expiration of a Voting Period, the terms of
office of the additional trustees elected by the Holders and holders of other
Preferred Shares pursuant to paragraph 5(b) above shall terminate, the remaining
trustees shall constitute the trustees of the Trust and the voting rights of the
Holders and such other holders to elect additional trustees pursuant to
paragraph 5(b) above shall cease, subject to the provisions of the last sentence
of paragraph 5(b).
(e) Exclusive Remedy. Unless otherwise required by law, the Holders of
AMPS shall not have any rights or preferences other than those specifically set
forth herein. The Holders of AMPS shall have no preemptive rights or rights to
cumulative voting. In the event that the Trust fails to pay any dividends on the
AMPS, the exclusive remedy of the Holders shall be the right to vote for
trustees pursuant to the provisions of this paragraph 5.
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(f) Notification to S&P and Moody's. In the event a vote of Holders of
AMPS is required pursuant to the provisions of Section 13(a) of the 1940 Act,
the Trust shall, not later than ten Business Days prior to the date on which
such vote is to be taken, notify S&P and Moody's that such vote is to be taken
and the nature of the action with respect to which such vote is to be taken and,
not later than ten Business Days after the date on which such vote is taken,
notify S&P and Moody's of the result of such vote.
6. 1940 Act AMPS Asset Coverage. The Trust shall maintain, as of the last
Business Day of each month in which any share of AMPS is outstanding, the 1940
Act AMPS Asset Coverage.
7. AMPS Basic Maintenance Amount. (a) The Trust shall maintain, on each
Valuation Date, and shall verify to its satisfaction that it is maintaining on
such Valuation Date, (i) S&P Eligible Assets having an aggregate Discounted
Value equal to or greater than the AMPS Basic Maintenance Amount and (ii)
Moody's Eligible Assets having an aggregate Discounted Value equal to or greater
than the AMPS Basic Maintenance Amount. Upon any failure to maintain the
required Discounted Value, the Trust will use its best efforts to alter the
composition of its portfolio to reattain a Discounted Value at least equal to
the AMPS Basic Maintenance Amount on or prior to the AMPS Basic Maintenance Cure
Date.
(b) On or before 5:00 p.m., New York City time, on the third Business Day
after a Valuation Date on which the Trust fails to satisfy the AMPS Basic
Maintenance Amount, the Trust shall complete and deliver to the Auction Agent,
and Moody's and S&P, as the case may be, a complete AMPS Basic Maintenance
Report as of the date of such failure, which will be deemed to have been
delivered to the Auction Agent if the Auction Agent receives a copy or telecopy,
telex or other electronic transcription thereof and on the same day the Trust
mails to the
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Auction Agent for delivery on the next Business Day the complete AMPS Basic
Maintenance Report. The Trust will deliver an AMPS Basic Maintenance Report to
the Auction Agent and Moody's and S&P, as the case may be, on or before 5:00
p.m., New York City time, on the third Business Day after a Valuation Date on
which the Trust cures its failure to maintain Moody's Eligible Assets or S&P
Eligible Assets, as the case may be, with an aggregate Discounted Value equal to
or greater than the AMPS Basic Maintenance Amount or on which the Trust fails to
maintain Moody's Eligible Assets or S&P Eligible Assets, as the case may be,
with an aggregate Discounted Value which exceeds the AMPS Basic Maintenance
Amount by 5% or more. The Trust will also deliver an AMPS Basic Maintenance
Report to the Auction Agent, Moody's and S&P as of each Quarterly Valuation Date
on or before the third Business Day after such date. Additionally, on or before
5:00 p.m., New York City time, on the third Business Day after the first day of
a Special Dividend Period, the Trust will deliver an AMPS Basic Maintenance
Report to S&P and the Auction Agent. The Trust shall also provide Moody's and
S&P with an AMPS Basic Maintenance Report when specifically requested by either
Moody's or S&P. A failure by the Trust to deliver an AMPS Basic Maintenance
Report under this paragraph 7(b) shall be deemed to be delivery of an AMPS Basic
Maintenance Report indicating the Discounted Value for S&P Eligible Assets and
Moody's Eligible Assets of the Trust is less than the AMPS Basic Maintenance
Amount, as of the relevant Valuation Date.
(c) Within ten Business Days after the date of delivery of an AMPS Basic
Maintenance Report in accordance with paragraph 7(b) above relating to a
Quarterly Valuation Date, the Independent Accountant will confirm in writing to
the Auction Agent, S&P and Moody's (i) the mathematical accuracy of the
calculations reflected in such Report (and in any other AMPS Basic Maintenance
Report, randomly selected by the Independent Accountant, that was delivered
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by the Trust during the quarter ending on such Quarterly Valuation Date), (ii)
that, in such Report (and in such randomly selected Report), the Trust correctly
determined the assets of the Trust which constitute S&P Eligible Assets or
Moody's Eligible Assets, as the case may be, at such Quarterly Valuation Date in
accordance with this Certificate of Designation, (iii) that, in such Report (and
in such randomly selected Report), the Trust determined whether the Trust had,
at such Quarterly Valuation Date (and at the Valuation Date addressed in such
randomly selected Report) in accordance with this Certificate of Designation,
S&P Eligible Assets of an aggregate Discounted Value at least equal to the AMPS
Basic Maintenance Amount and Moody's Eligible Assets of an aggregate Discounted
Value at least equal to the AMPS Basic Maintenance Amount, (iv) with respect to
the S&P ratings on Florida Municipal Bonds or Municipal Bonds, the issuer name,
issue size and coupon rate listed in such Report, that the Independent
Accountant has requested that S&P verify such information and the Independent
Accountant shall provide a listing in its letter of any differences, (v) with
respect to the Moody's ratings on Florida Municipal Bonds or Municipal Bonds,
the issuer name, issue size and coupon rate listed in such Report, that such
information has been verified by Moody's (in the event such information is not
verified by Moody's, the Independent Accountant will inquire of Moody's what
such information is, and provide a listing in its letter of any differences),
(vi) with respect to the bid or mean price (or such alternative permissible
factor used in calculating the Market Value) provided by the custodian of the
Trust's assets to the Trust for purposes of valuing securities in the Trust's
portfolio, the Independent Accountant has traced the price used in such Report
to the bid or mean price listed in such Report as provided to the Trust and
verified that such information agrees (in the event such information does not
agree, the Independent Accountant will provide a listing in its letter of such
differences) and (vii) with respect to such
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confirmation to Moody's, that the Trust has satisfied the requirements of
paragraph 8(b) of this Certificate of Designation (such confirmation is herein
called the "Accountant's Confirmation").
(d) Within ten Business Days after the date of delivery to the Auction
Agent, S&P and Moody's of an AMPS Basic Maintenance Report in accordance with
paragraph 7(b) above relating to any Valuation Date on which the Trust failed to
maintain S&P Eligible Assets with an aggregate Discounted Value and Moody's
Eligible Assets with an aggregate Discounted Value equal to or greater than the
AMPS Basic Maintenance Amount, and relating to the AMPS Basic Maintenance Cure
Date with respect to such failure, the Independent Accountant will provide to
the Auction Agent, S&P and Moody's an Accountant's Confirmation as to such AMPS
Basic Maintenance Report.
(e) If any Accountant's Confirmation delivered pursuant to subparagraph
(c) or (d) of this paragraph 7 shows that an error was made in the AMPS Basic
Maintenance Report for a particular Valuation Date for which such Accountant's
Confirmation as required to be delivered, or shows that a lower aggregate
Discounted Value for the aggregate of all S&P Eligible Assets or Moody's
Eligible Assets, as the case may be, of the Trust was determined by the
Independent Accountant, the calculation or determination made by such
Independent Accountant shall be final and conclusive and shall be binding on the
Trust, and the Trust shall accordingly amend and deliver the AMPS Basic
Maintenance Report to the Auction Agent, S&P and Moody's promptly following
receipt by the Trust of such Accountant's Confirmation.
(f) On or before 5:00 p.m., New York City time, on the first Business Day
after the Date of Original Issue of the AMPS, the Trust will complete and
deliver to S&P and Moody's an AMPS Basic Maintenance Report as of the close of
business on such Date of Original Issue. Within five Business Days of such Date
of Original Issue, the Independent Accountant will
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confirm in writing to S&P and Moody's (i) the mathematical accuracy of the
calculations reflected in such Report and (ii) that the aggregate Discounted
Value of S&P Eligible Assets and the aggregate Discounted Value of Moody's
Eligible Assets reflected thereon equals or exceeds the AMPS Basic Maintenance
Amount reflected thereon. Also, on or before 5:00 p.m., New York City time, on
the first Business Day after Common Shares are repurchased by the Trust, the
Trust will complete and deliver to S&P and Moody's an AMPS Basic Maintenance
Report as of the close of business on such date that Common Shares are
repurchased.
(g) For so long as AMPS are rated by Moody's, in managing the Trust's
portfolio, the Adviser will not alter the composition of the Trust's portfolio
if, in the reasonable belief of the Adviser, the effect of any such alteration
would be to cause the Trust to have Moody's Eligible Assets with an aggregate
Discounted Value, as of the immediately preceding Valuation Date, less than the
AMPS Basic Maintenance Amount as of such Valuation Date; provided, however, that
in the event that, as of the immediately preceding Valuation Date, the aggregate
Discounted Value of Moody's Eligible Assets exceeded the AMPS Basic Maintenance
Amount by five percent or less, the Adviser will not alter the composition of
the Trust's portfolio in a manner reasonably expected to reduce the aggregate
Discounted Value of Moody's Eligible Assets unless the Trust shall have
confirmed that, after giving effect to such alteration, the aggregate Discounted
Value of Moody's Eligible Assets would exceed the AMPS Basic Maintenance Amount.
8. Certain Other Restrictions and Requirements. (a) For so long as any
AMPS are rated by S&P, the Trust will not purchase or sell futures contracts,
write, purchase or sell options on futures contracts or write put options
(except covered put options) or call options (except covered call options) on
portfolio securities unless it receives written confirmation from S&P
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that engaging in such transactions will not impair the ratings then assigned to
the AMPS by S&P, except that the Trust may purchase or sell futures contracts
based on the Bond Buyer Municipal Bond Index (the "Municipal Index") or United
States Treasury Bonds or Notes ("Treasury Bonds") and write, purchase or sell
put and call options on such contracts (collectively, "S&P Hedging
Transactions"), subject to the following limitations:
(i) the Trust will not engage in any S&P Hedging Transaction based
on the Municipal Index (other than transactions which terminate a futures
contract or option held by the Trust by the Trust's taking an opposite
position thereto ("Closing Transactions")), which would cause the Trust at
the time of such transaction to own or have sold the least of (A) more
than 1,000 outstanding futures contracts based on the Municipal Index, (B)
outstanding futures contracts based on the Municipal Index exceeding in
number 25% of the quotient of the Market Value of the Trust's total assets
divided by $1,000 or (C) outstanding futures contracts based on the
Municipal Index exceeding in number 10% of the average number of daily
traded futures contracts based on the Municipal Index in the 30 days
preceding the time of effecting such transaction as reported by The Wall
Street Journal;
(ii) the Trust will not engage in any S&P Hedging Transaction based
on Treasury Bonds (other than Closing Transactions) which would cause the
Trust at the time of such transaction to own or have sold the lesser of
(A) outstanding futures contracts based on Treasury Bonds exceeding in
number 50% of the quotient of the Market Value of the Trust's total assets
divided by $100,000 ($200,000 in the case of the two-year United States
Treasury Note) or (B) outstanding futures contracts based on Treasury
Bonds exceeding in number 10% of the average number of daily traded
futures
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contracts based on Treasury Bonds in the 30 days preceding the time of
effecting such transaction as reported by The Wall Street Journal;
(iii) the Trust will engage in Closing Transactions to close out any
outstanding futures contract which the Trust owns or has sold or any
outstanding option thereon owned by the Trust in the event (A) the Trust
does not have S&P Eligible Assets with an aggregate Discounted Value equal
to or greater than the AMPS Basic Maintenance Amount on two consecutive
Valuation Dates and (B) the Trust is required to pay Variation Margin on
the second such Valuation Date;
(iv) the Trust will engage in a Closing Transaction to close out any
outstanding futures contract or option thereon in the month prior to the
delivery month under the terms of such futures contract or option thereon
unless the Trust holds the securities deliverable under such terms; and
(v) when the Trust writes a futures contract or option thereon, it
will either maintain an amount of cash, cash equivalents or high grade
(rated A or better by S&P), fixed-income securities in a segregated
account with the Trust's custodian, so that the amount so segregated plus
the amount of Initial Margin and Variation Margin held in the account of
or on behalf of the Trust's broker with respect to such futures contract
or option equals the Market Value of the futures contract or option, or,
in the event the Trust writes a futures contract or option thereon which
requires delivery of an underlying security, it shall hold such underlying
security in its portfolio.
For purposes of determining whether the Trust has S&P Eligible Assets with
a Discounted Value that equals or exceeds the AMPS Basic Maintenance Amount, the
Discounted Value of cash or securities held for the payment of Initial Margin or
Variation Margin shall be
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zero and the aggregate Discounted Value of S&P Eligible Assets shall be reduced
by an amount equal to (i) 30% of the aggregate settlement value, as marked to
market, of any outstanding futures contracts based on the Municipal Index which
are owned by the Trust plus (ii) 25% of the aggregate settlement value, as
marked to market, of any outstanding futures contracts based on Treasury Bonds
which contracts are owned by the Trust.
(b) For so long as any AMPS are rated by Moody's, the Trust will not buy
or sell futures contracts, write, purchase or sell call options on futures
contracts or purchase put options on futures contracts or write call options
(except covered call options) on portfolio securities unless it receives written
confirmation from Moody's that engaging in such transactions would not impair
the ratings then assigned to the AMPS by Moody's, except that the Trust may
purchase or sell exchange-traded futures contracts based on the Municipal Index
or Treasury Bonds and purchase, write or sell exchange-traded put options on
such futures contracts and purchase, write or sell exchange-traded call options
on such futures contracts (collectively, "Moody's Hedging Transactions"),
subject to the following limitations:
(i) the Trust will not engage in any Moody's Hedging Transaction
based on the Municipal Index (other than Closing Transactions) which would
cause the Trust at the time of such transaction to own or have sold (A)
outstanding futures contracts based on the Municipal Index exceeding in
number 10% of the average number of daily traded futures contracts based
on the Municipal Index in the 30 days preceding the time of effecting such
transaction as reported by The Wall Street Journal or (B) outstanding
futures contracts based on the Municipal Index having a Market Value
exceeding 50% of the Market Value of all Municipal Bonds constituting
Moody's Eligible Assets owned by
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the Trust (other than Moody's Eligible Assets already subject to a Moody's
Hedging Transaction);
(ii) the Trust will not engage in any Moody's Hedging Transaction
based on Treasury Bonds (other than Closing Transactions) which would
cause the Trust at the time of such transaction to own or have sold (A)
outstanding futures contracts based on Treasury Bonds having an aggregate
Market Value exceeding 20% of the aggregate Market Value of Moody's
Eligible Assets owned by the Trust and rated Aa by Moody's (or, if not
rated by Moody's but rated by S&P, rated AAA by S&P) or (B) outstanding
futures contracts based on Treasury Bonds having an aggregate Market Value
exceeding 40% of the aggregate Market Value of all Municipal Bonds
constituting Moody's Eligible Assets owned by the Trust (other than
Moody's Eligible Assets already subject to a Moody's Hedging Transaction)
and rated Baa or A by Moody's (or, if not rated by Moody's but rated by
S&P, rated A or AA by S&P) (for purposes of the foregoing clauses (i) and
(ii), the Trust shall be deemed to own the number of futures contracts
that underlie any outstanding options written by the Trust);
(iii) the Trust will engage in Closing Transactions to close out any
outstanding futures contract based on the Municipal Index if the amount of
open interest in the Municipal Index as reported by The Wall Street
Journal is less than 5,000;
(iv) the Trust will engage in a Closing Transaction to close out any
outstanding futures contract by no later than the fifth Business Day of
the month in which such contract expires and will engage in a Closing
Transaction to close out any outstanding option on a futures contract by
no later than the first Business Day of the month in which such option
expires;
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(v) the Trust will engage in Moody's Hedging Transactions only with
respect to futures contracts or options thereon having the next settlement
date or the settlement date immediately thereafter;
(vi) the Trust will not engage in options and futures transactions
for leveraging or speculative purposes and will not write any call options
or sell any futures contracts for the purpose of hedging the anticipated
purchase of an asset prior to completion of such purchase; and
(vii) the Trust will not enter into an option or futures transaction
unless, after giving effect thereto, the Trust would continue to have
Moody's Eligible Assets with an aggregate Discounted Value equal to or
greater than the AMPS Basic Maintenance Amount.
For purposes of determining whether the Trust has Moody's Eligible Assets
with an aggregate Discounted Value that equals or exceeds the AMPS Basic
Maintenance Amount, the Discounted Value of Moody's Eligible Assets which the
Trust is obligated to deliver or receive pursuant to an outstanding futures
contract or option shall be as follows: (i) assets subject to call options
written by the Trust which are either exchange-traded and "readily reversible"
or which expire within 49 days after the date as of which such valuation is made
shall be valued at the lesser of (a) Discounted Value and (b) the exercise price
of the call option written by the Trust; (ii) assets subject to call options
written by the Trust not meeting the requirements of clause (i) of this sentence
shall have no value; (iii) assets subject to put options written by the Trust
shall be valued at the lesser of (A) the exercise price and (B) the Discounted
Value of the subject security; (iv) futures contracts shall be valued at the
lesser of (A) settlement price and (B) the Discounted Value of the subject
security, provided that, if a contract matures within 49 days after
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the date as of which such valuation is made, where the Trust is the seller the
contract may be valued at the settlement price and where the Trust is the buyer
the contract may be valued at the Discounted Value of the subject securities;
and (v) where delivery may be made to the Trust with any security of a class of
securities, the Trust shall assume that it will take delivery of the security
with the lowest Discounted Value.
For purposes of determining whether the Trust has Moody's Eligible Assets
with an aggregate Discounted Value that equals or exceeds the AMPS Basic
Maintenance Amount, the following amounts shall be subtracted from the aggregate
Discounted Value of the Moody's Eligible Assets held by the Trust: (i) 10% of
the exercise price of a written call option; (ii) the exercise price of any
written put option; (iii) where the Trust is the seller under a futures
contract, 10% of the settlement price of the futures contract; (iv) where the
Trust is the purchaser under a futures contract, the settlement price of assets
purchased under such futures contract; (v) the settlement price of the
underlying futures contract if the Trust writes put options on a futures
contract; and (vi) 105% of the Market Value of the underlying futures contracts
if the Trust writes call options on a futures contract and does not own the
underlying contract.
(c) For so long as any AMPS are rated by Moody's, the Trust will not enter
into any contract to purchase securities for a fixed price at a future date
beyond customary settlement time (other than such contracts that constitute
Moody's Hedging Transactions that are permitted under paragraph 8(b) of this
Certificate of Designation), except that the Trust may enter into such contracts
to purchase newly-issued securities on the date such securities are issued
("Forward Commitments"), subject to the following limitations:
(i) the Trust will maintain in a segregated account with its
custodian cash, cash equivalents or short-term, fixed-income securities
rated P-1, MIG-1 or VMIG-1 by
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Moody's and maturing prior to the date of the Forward Commitment with a
Market Value that equals or exceeds the amount of the Trust's obligations
under any Forward Commitments to which it is from time to time a party or
long-term fixed income securities with a Discounted Value that equals or
exceeds the amount of the Trust's obligations under any Forward Commitment
to which it is from time to time a party; and
(ii) the Trust will not enter into a Forward Commitment unless,
after giving effect thereto, the Trust would continue to have Moody's
Eligible Assets with an aggregate Discounted Value equal to or greater
than the AMPS Basic Maintenance Amount.
For purposes of determining whether the Trust has Moody's Eligible Assets
with an aggregate Discounted Value that equals or exceeds the AMPS Basic
Maintenance Amount, the Discounted Value of all Forward Commitments to which the
Trust is a party and of all securities deliverable to the Trust pursuant to such
Forward Commitments shall be zero.
(d) For so long as AMPS are rated by S&P or Moody's, the Trust will not,
unless it has received written confirmation from S&P and/or Moody's, as the case
may be, that such action would not impair the ratings then assigned to AMPS by
S&P and/or Moody's, as the case may be, (i) borrow money except for the purpose
of clearing transactions in portfolio securities (which borrowings shall under
any circumstances be limited to the lesser of $10 million and an amount equal to
5% of the Market Value of the Trust's assets at the time of such borrowings and
which borrowings shall be repaid within 60 days and not be extended or renewed
and shall not cause the aggregate Discounted Value of Moody's Eligible Assets
and S&P Eligible Assets to be less than the AMPS Basic Maintenance Amount), (ii)
engage in short sales of securities, (iii) lend any securities, (iv) issue any
class or series of shares ranking prior to or on a parity with the
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AMPS with respect to the payment of dividends or the distribution of assets upon
dissolution, liquidation or winding up of the Trust, (v) reissue any AMPS
previously purchased or redeemed by the Trust, (vi) merge or consolidate into or
with any other corporation or entity, (vii) change the Pricing Service or (viii)
engage in reverse repurchase agreements.
(e) For so long as AMPS are rated by Moody's, the Trust agrees to provide
Moody's with the following, unless the Trust has received written confirmation
from Moody's that the provision of such information is no longer required and
that the current rating then assigned to the AMPS by Moody's would not be
impaired: a notification letter at least 30 days prior to any material change in
the Declaration; a copy of the AMPS Basic Maintenance Report prepared by the
Trust in accordance with this Certificate of Designation; and a notice upon the
occurrence of any of the following events: (i) any failure by the Trust to
declare or pay any dividends on the AMPS or successfully remarket the AMPS; (ii)
any mandatory or optional redemption of the AMPS effected by the Trust; (iii)
any assumption of control of the Board of Trustees of the Trust by the holders
of the AMPS; (iv) a general unavailability of dealer quotes on the assets of the
Trust; (v) any material auditor discrepancies on valuations; (vi) the dividend
rate on the AMPS equals or exceeds 95% of the Aaa Composite Commercial Paper
Rate; (vii) the occurrence of any Special Dividend Period; (viii) any change in
the Maximum Applicable Rate or the Reference Rate; (ix) the acquisition by any
person of beneficial ownership of more than 5% of the Trust's voting shares of
beneficial interest (inclusive of Common Shares and Preferred Shares); (x) the
occurrence of any change in Internal Revenue Service rules with respect to the
payment of Additional Dividends; (xi) any change in the Pricing Service employed
by the Trust; (xii) any change in the Investment Adviser; (xiii) any increase of
greater than 40% to the maximum marginal Federal income tax rate applicable to
individuals or corporations; and (xiv)
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the maximum marginal Federal income tax rate applicable to individuals or
corporations is increased to a rate in excess of 50%.
9. Notice. All notices or communications, unless otherwise specified in
the By-Laws of the Trust or this Certificate of Designation, shall be
sufficiently given if in writing and delivered in person or mailed by
first-class mail, postage prepaid. Notice shall be deemed given on the earlier
of the date received or the date seven days after which such notice is mailed.
10. Auction Procedures.
(a) Certain definitions. As used in this paragraph 10, the following terms
shall have the following meanings, unless the context otherwise requires:
(i) "AMPS" means the AMPS being auctioned pursuant to this paragraph
10.
(ii) "Auction Date" means the first Business Day preceding the first
day of a Dividend Period.
(iii) "Available AMPS" has the meaning specified in paragraph
10(d)(i) below.
(iv) "Bid" has the meaning specified in paragraph 10(b)(i) below.
(v) "Bidder" has the meaning specified in paragraph 10(b)(i) below.
(vi) "Hold Order" has the meaning specified in paragraph 10(b)(i)
below.
(vii) "Maximum Applicable Rate" for any Dividend Period will be the
Applicable Percentage of the Reference Rate. The Applicable Percentage
will be determined based on (i) the lower of the credit rating or ratings
assigned on such date to such shares by Moody's and S&P (or if Moody's or
S&P or both shall not make such rating available, the equivalent of either
or both of such ratings by a Substitute Rating Agency or two Substitute
Rating
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Agencies or, in the event that only one such rating shall be available,
such rating) and (ii) whether the Trust has provided notification to the
Auction Agent prior to the Auction establishing the Applicable Rate for
any dividend pursuant to paragraph 2(f) hereof that net capital gains or
other taxable income will be included in such dividend on AMPS as follows:
Applicable Applicable
Percentage of Percentage of
Credit Ratings Reference Reference
- ----------------------------------- Rate - Rate -
Moody's S&P No Notification Notification
- ---------------- ----------------- --------------- ------------
"aa3" or higher AA- or higher 110% 150%
"a3" to "a1" A- to A+ 125% 160%
"baa3" to "baa1" BBB- to BBB+ 150% 250%
Below "baa3" Below BBB- 200% 275%
The Trust shall take all reasonable action necessary to enable S&P and
Moody's to provide a rating for each series of the AMPS. If either S&P or
Moody's shall not make such a rating available, or neither S&P nor Moody's shall
make such a rating available, Merrill Lynch, Pierce, Fenner & Smith Incorporated
or its affiliates and successors, after consultation with the Trust, shall
select a nationally recognized statistical rating organization or two nationally
recognized statistical rating organizations to act as a Substitute Rating Agency
or Substitute Rating Agencies, as the case may be.
(viii) "Order" has the meaning specified in paragraph 10(b)(i)
below.
(ix) "Sell Order" has the meaning specified in paragraph 10(b)(i)
below.
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(x) "Submission Deadline" means 1:00 P.M., New York City time, on
any Auction Date or such other time on any Auction Date as may be
specified by the Auction Agent from time to time as the time by which each
Broker-Dealer must submit to the Auction Agent in writing all Orders
obtained by it for the Auction to be conducted on such Auction Date.
(xi) "Submitted Bid" has the meaning specified in paragraph 10(d)(i)
below.
(xii) "Submitted Hold Order" has the meaning specified in paragraph
10(d)(i) below.
(xiii) "Submitted Order" has the meaning specified in paragraph
10(d)(i) below.
(xiv) "Submitted Sell Order" has the meaning specified in paragraph
10(d)(i) below.
(xv) "Sufficient Clearing Bids" has the meaning specified in
paragraph 10(d)(i) below.
(xvi) "Winning Bid Rate" has the meaning specified in paragraph
10(d)(i) below.
(b) Orders by Beneficial Owners, Potential Beneficial Owners, Existing
Holders and Potential Holders.
(i) Unless otherwise permitted by the Trust, Beneficial Owners and
Potential Beneficial Owners may only participate in Auctions through their
Broker-Dealers. Broker-Dealers will submit the Orders of their respective
customers who are Beneficial Owners and Potential Beneficial Owners to the
Auction Agent, designating themselves as Existing Holders in respect of
shares subject to Orders submitted or deemed submitted to
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them by Beneficial Owners and as Potential Holders in respect of shares
subject to Orders submitted to them by Potential Beneficial Owners. A
Broker-Dealer may also hold AMPS in its own account as a Beneficial Owner.
A Broker-Dealer may thus submit Orders to the Auction Agent as a
Beneficial Owner or a Potential Beneficial Owner and therefore participate
in an Auction as an Existing Holder or Potential Holder on behalf of both
itself and its customers. On or prior to the Submission Deadline on each
Auction Date:
(A) each Beneficial Owner may submit to its Broker-Dealer
information as to:
(1) the number of Outstanding shares, if any, of AMPS held by
such Beneficial Owner which such Beneficial Owner desires to
continue to hold without regard to the Applicable Rate for the next
succeeding Dividend Period;
(2) the number of Outstanding shares, if any, of AMPS held by
such Beneficial Owner which such Beneficial Owner desires to
continue to hold, provided that the Applicable Rate for the next
succeeding Dividend Period shall not be less than the rate per annum
specified by such Beneficial Owner; and/or
(3) the number of Outstanding shares, if any, of AMPS held by
such Beneficial Owner which such Beneficial Owner offers to sell
without regard to the Applicable Rate for the next succeeding
Dividend Period; and
(B) each Broker-Dealer, using a list of Potential Beneficial Owners
that shall be maintained in good faith for the purpose of conducting a
competitive Auction, shall contact Potential Beneficial Owners, including
Persons that are not Beneficial Owners, on such list to determine the
number of Outstanding shares, if any, of AMPS which each such Potential
Beneficial Owner offers to purchase, provided that the Applicable Rate for
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the next succeeding Dividend Period shall not be less than the rate per
annum specified by such Potential Beneficial Owner.
For the purposes hereof, the communication by a Beneficial Owner or
Potential Beneficial Owner to a Broker-Dealer, or the communication by a
Broker-Dealer acting for its own account to the Auction Agent, of information
referred to in clause (A) or (B) of this paragraph 10(b)(i) is hereinafter
referred to as an "Order" and each Beneficial Owner and each Potential
Beneficial Owner placing an Order, including a Broker-Dealer acting in such
capacity for its own account, is hereinafter referred to as a "Bidder"; an Order
containing the information referred to in clause (A)(1) of this paragraph
10(b)(i) is hereinafter referred to as a "Hold Order"; an Order containing the
information referred to in clause (A)(2) or (B) of this paragraph 10(b)(i) is
hereinafter referred to as a "Bid"; and an Order containing the information
referred to in clause (A)(3) of this paragraph 10(b)(i) is hereinafter referred
to as a "Sell Order." Inasmuch as a Broker-Dealer participates in an Auction as
an Existing Holder or a Potential Holder only to represent the interests of a
Beneficial Owner or Potential Beneficial Owner, whether it be its customers or
itself, all discussion herein relating to the consequences of an Auction for
Existing Holders and Potential Holders also applies to the underlying beneficial
ownership interests represented.
(ii) (A) A Bid by an Existing Holder shall constitute an irrevocable
offer to sell:
(1) the number of Outstanding AMPS specified in such Bid if
the Applicable Rate determined on such Auction Date shall be less
than the rate per annum specified in such Bid; or
(2) such number or a lesser number of Outstanding AMPS to be
determined as set forth in paragraph 10(e)(i)(D) if the Applicable
Rate
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determined on such Auction Date shall be equal to the rate per annum
specified therein; or
(3) a lesser number of Outstanding AMPS to be determined as
set forth in paragraph 10(e)(ii)(C) if such specified rate per annum
shall be higher than the Maximum Applicable Rate and Sufficient
Clearing Bids do not exist.
(B) A Sell Order by an Existing Holder shall constitute an
irrevocable offer to sell:
(1) the number of Outstanding AMPS specified in such Sell
Order; or
(2) such number or a lesser number of Outstanding AMPS to be
determined as set forth in paragraph 10(e)(ii)(C) if Sufficient
Clearing Bids do not exist.
(C) A Bid by a Potential Holder shall constitute an irrevocable
offer to purchase:
(1) the number of Outstanding AMPS specified in such Bid if
the Applicable Rate determined on such Auction Date shall be higher
than the rate per annum specified in such Bid; or
(2) such number or a lesser number of Outstanding AMPS to be
determined as set forth in paragraph 10(e)(i)(E) if the Applicable
Rate determined on such Auction Date shall be equal to the rate per
annum specified therein.
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(c) Submission of Orders by Broker-Dealers to Auction Agent.
(i) Each Broker-Dealer shall submit in writing or through the
Auction Agent's Auction Processing System to the Auction Agent prior to
the Submission Deadline on each Auction Date all Orders obtained by such
Broker-Dealer, designating itself (unless otherwise permitted by the
Trust) as an Existing Holder in respect of shares subject to Orders
submitted or deemed submitted to it by Beneficial Owners and as a
Potential Holder in respect of shares subject to Orders submitted to it by
Potential Beneficial Owners, and specifying with respect to each Order:
(A) the name of the Bidder placing such Order (which shall be the
Broker-Dealer unless otherwise permitted by the Trust);
(B) the aggregate number of Outstanding AMPS that are the subject of
such Order;
(C) to the extent that such Bidder is an Existing Holder:
(1) the number of Outstanding shares, if any, of AMPS subject
to any Hold Order placed by such Existing Holder;
(2) the number of Outstanding shares, if any, of AMPS subject
to any Bid placed by such Existing Holder and the rate per annum
specified in such Bid; and
(3) the number of Outstanding shares, if any, of AMPS subject
to any Sell Order placed by such Existing Holder; and
(D) to the extent such Bidder is a Potential Holder, the rate per
annum specified in such Potential Holder's Bid.
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(ii) If any rate per annum specified in any Bid contains more than
three figures to the right of the decimal point, the Auction Agent shall
round such rate up to the next highest one-thousandth (.001) of 1%.
(iii) If an Order or Orders covering all of the Outstanding AMPS
held by an Existing Holder are not submitted to the Auction Agent prior to
the Submission Deadline, the Auction Agent shall deem a Hold Order (in the
case of an Auction relating to a Dividend Period which is not a Special
Dividend Period of 28 days or more) and a Sell Order (in the case of an
Auction relating to a Special Dividend Period of 28 days or more) to have
been submitted on behalf of such Existing Holder covering the number of
Outstanding AMPS held by such Existing Holder and not subject to Orders
submitted to the Auction Agent.
(iv) If one or more Orders on behalf of an Existing Holder covering
in the aggregate more than the number of Outstanding AMPS held by such
Existing Holder are submitted to the Auction Agent, such Order shall be
considered valid as follows and in the following order of priority:
(A) any Hold Order submitted on behalf of such Existing Holder shall
be considered valid up to and including the number of Outstanding AMPS
held by such Existing Holder; provided that if more than one Hold Order is
submitted on behalf of such Existing Holder and the number of AMPS subject
to such Hold Orders exceeds the number of Outstanding AMPS held by such
Existing Holder, the number of AMPS subject to each of such Hold Orders
shall be reduced pro rata so that such Hold Orders, in the aggregate, will
cover exactly the number of Outstanding AMPS held by such Existing Holder;
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(B) any Bids submitted on behalf of such Existing Holder shall be
considered valid, in the ascending order of their respective rates per
annum if more than one Bid is submitted on behalf of such Existing Holder,
up to and including the excess of the number of Outstanding AMPS held by
such Existing Holder over the number of AMPS subject to any Hold Order
referred to in paragraph 10(c)(iv)(A) above (and if more than one Bid
submitted on behalf of such Existing Holder specifies the same rate per
annum and together they cover more than the remaining number of shares
that can be the subject of valid Bids after application of paragraph
10(c)(iv)(A) above and of the foregoing portion of this paragraph
10(c)(iv)(B) to any Bid or Bids specifying a lower rate or rates per
annum, the number of shares subject to each of such Bids shall be reduced
pro rata so that such Bids, in the aggregate, cover exactly such remaining
number of shares); and the number of shares, if any, subject to Bids not
valid under this paragraph 10(c)(iv)(B) shall be treated as the subject of
a Bid by a Potential Holder; and
(C) any Sell Order shall be considered valid up to and including the
excess of the number of Outstanding AMPS held by such Existing Holder over
the number of AMPS subject to Hold Orders referred to in paragraph
10(c)(iv)(A) and Bids referred to in paragraph 10(c)(iv)(B); provided that
if more than one Sell Order is submitted on behalf of any Existing Holder
and the number of AMPS subject to such Sell Orders is greater than such
excess, the number of AMPS subject to each of such Sell Orders shall be
reduced pro rata so that such Sell Orders, in the aggregate, cover exactly
the number of AMPS equal to such excess.
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(v) If more than one Bid is submitted on behalf of any Potential
Holder, each Bid submitted shall be a separate Bid with the rate per annum
and number of AMPS therein specified.
(vi) Any Order submitted by a Beneficial Owner as a Potential
Beneficial Owner to its Broker-Dealer, or by a Broker-Dealer to the
Auction Agent, prior to the Submission Deadline on any Auction Date shall
be irrevocable.
(d) Determination of Sufficient Clearing Bids, Winning Bid Rate and
Applicable Rate.
(i) Not earlier than the Submission Deadline on each Auction Date,
the Auction Agent shall assemble all Orders submitted or deemed submitted
to it by the Broker-Dealers (each such Order as submitted or deemed
submitted by a Broker-Dealer being hereinafter referred to individually as
a "Submitted Hold Order," a "Submitted Bid" or a "Submitted Sell Order,"
as the case may be, or as a "Submitted Order") and shall determine:
(A) the excess of the total number of Outstanding AMPS over the
number of Outstanding AMPS that are the subject of Submitted Hold Orders
(such excess being hereinafter referred to as the "Available AMPS");
(B) from the Submitted Orders whether the number of Outstanding AMPS
that are the subject of Submitted Bids by Potential Holders specifying one
or more rates per annum equal to or lower than the Maximum Applicable Rate
exceeds or is equal to the sum of:
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(1) the number of Outstanding AMPS that are the subject of
Submitted Bids by Existing Holders specifying one or more rates per
annum higher than the Maximum Applicable Rate, and
(2) the number of Outstanding AMPS that are subject to
Submitted Sell Orders (if such excess or such equality exists (other
than because the number of Outstanding AMPS in clause (1) above and
this clause (2) are each zero because all of the Outstanding AMPS
are the subject of Submitted Hold Orders), such Submitted Bids by
Potential Holders being hereinafter referred to collectively as
"Sufficient Clearing Bids"); and
(C) if Sufficient Clearing Bids exist, the lowest rate per annum
specified in the Submitted Bids (the "Winning Bid Rate") that if:
(1) each Submitted Bid from Existing Holders specifying the
Winning Bid Rate and all other Submitted Bids from Existing Holders
specifying lower rates per annum were rejected, thus entitling such
Existing Holders to continue to hold the AMPS that are the subject
of such Submitted Bids, and
(2) each Submitted Bid from Potential Holders specifying the
Winning Bid Rate and all other Submitted Bids from Potential Holders
specifying lower rates per annum were accepted, thus entitling the
Potential Holders to purchase the AMPS that are the subject of such
Submitted Bids, would result in the number of shares subject to all
Submitted Bids specifying the Winning Bid Rate or a lower rate per
annum being at least equal to the Available AMPS.
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(ii) Promptly after the Auction Agent has made the determinations
pursuant to paragraph 10(d)(i), the Auction Agent shall advise the Trust
of the Maximum Applicable Rate and, based on such determinations, the
Applicable Rate for the next succeeding Dividend Period as follows:
(A) if Sufficient Clearing Bids exist, that the Applicable Rate for
the next succeeding Dividend Period shall be equal to the Winning Bid
Rate;
(B) if Sufficient Clearing Bids do not exist (other than because all
of the Outstanding AMPS are the subject of Submitted Hold Orders), that
the Applicable Rate for the next succeeding Dividend Period shall be equal
to the Maximum Applicable Rate; or
(C) if all of the Outstanding AMPS are the subject of Submitted Hold
Orders, that the Dividend Period next succeeding the Auction shall
automatically be the same length as the immediately preceding Dividend
Period and the Applicable Rate for the next succeeding Dividend Period
shall be equal to 40% of the Reference Rate (or 60% of such rate if the
Trust has provided notification to the Auction Agent prior to the Auction
establishing the Applicable Rate for any dividend pursuant to paragraph
2(f) hereof that net capital gains or other taxable income will be
included in such dividend on AMPS) on the date of the Auction.
(e) Acceptance and Rejection of Submitted Bids and Submitted Sell Orders
and Allocation of Shares. Based on the determinations made pursuant to paragraph
10(d)(i), the Submitted Bids and Submitted Sell Orders shall be accepted or
rejected and the Auction Agent shall take such other action as set forth below:
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(i) If Sufficient Clearing Bids have been made, subject to the
provisions of paragraph 10(e)(iii) and paragraph 10(e)(iv), Submitted Bids
and Submitted Sell Orders shall be accepted or rejected in the following
order of priority and all other Submitted Bids shall be rejected:
(A) the Submitted Sell Orders of Existing Holders shall be accepted
and the Submitted Bid of each of the Existing Holders specifying any rate
per annum that is higher than the Winning Bid Rate shall be accepted, thus
requiring each such Existing Holder to sell the Outstanding AMPS that are
the subject of such Submitted Sell Order or Submitted Bid;
(B) the Submitted Bid of each of the Existing Holders specifying any
rate per annum that is lower than the Winning Bid Rate shall be rejected,
thus entitling each such Existing Holder to continue to hold the
Outstanding AMPS that are the subject of such Submitted Bid;
(C) the Submitted Bid of each of the Potential Holders specifying
any rate per annum that is lower than the Winning Bid Rate shall be
accepted;
(D) the Submitted Bid of each of the Existing Holders specifying a
rate per annum that is equal to the Winning Bid Rate shall be rejected,
thus entitling each such Existing Holder to continue to hold the
Outstanding AMPS that are the subject of such Submitted Bid, unless the
number of Outstanding AMPS subject to all such Submitted Bids shall be
greater than the number of Outstanding AMPS ("Remaining Shares") equal to
the excess of the Available AMPS over the number of Outstanding AMPS
subject to Submitted Bids described in paragraph 10(e)(i)(B) and paragraph
10(e)(i)(C), in which event the Submitted Bids of each such Existing
Holder shall be accepted, and each such
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Existing Holder shall be required to sell Outstanding AMPS, but only in an
amount equal to the difference between (1) the number of Outstanding AMPS
then held by such Existing Holder subject to such Submitted Bid and (2)
the number of AMPS obtained by multiplying (x) the number of Remaining
Shares by (y) a fraction the numerator of which shall be the number of
Outstanding AMPS held by such Existing Holder subject to such Submitted
Bid and the denominator of which shall be the sum of the number of
Outstanding AMPS subject to such Submitted Bids made by all such Existing
Holders that specified a rate per annum equal to the Winning Bid Rate; and
(E) the Submitted Bid of each of the Potential Holders specifying a
rate per annum that is equal to the Winning Bid Rate shall be accepted but
only in an amount equal to the number of Outstanding AMPS obtained by
multiplying (x) the difference between the Available AMPS and the number
of Outstanding AMPS subject to Submitted Bids described in paragraph
10(e)(i)(B), paragraph 10(e)(i)(C) and paragraph 10(e)(i)(D) by (y) a
fraction the numerator of which shall be the number of Outstanding AMPS
subject to such Submitted Bid and the denominator of which shall be the
sum of the number of Outstanding AMPS subject to such Submitted Bids made
by all such Potential Holders that specified rates per annum equal to the
Winning Bid Rate.
(ii) If Sufficient Clearing Bids have not been made (other than
because all of the Outstanding AMPS are subject to Submitted Hold Orders),
subject to the provisions of paragraph 10(e)(iii), Submitted Orders shall
be accepted or rejected as follows in the following order of priority and
all other Submitted Bids shall be rejected:
(A) the Submitted Bid of each Existing Holder specifying any rate
per annum that is equal to or lower than the Maximum Applicable Rate shall
be rejected, thus
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entitling such Existing Holder to continue to hold the Outstanding AMPS
that are the subject of such Submitted Bid;
(B) the Submitted Bid of each Potential Holder specifying any rate
per annum that is equal to or lower than the Maximum Applicable Rate shall
be accepted, thus requiring such Potential Holder to purchase the
Outstanding AMPS that are the subject of such Submitted Bid; and
(C) the Submitted Bids of each Existing Holder specifying any rate
per annum that is higher than the Maximum Applicable Rate shall be
accepted and the Submitted Sell Orders of each Existing Holder shall be
accepted, in both cases only in an amount equal to the difference between
(1) the number of Outstanding AMPS then held by such Existing Holder
subject to such Submitted Bid or Submitted Sell Order and (2) the number
of AMPS obtained by multiplying (x) the difference between the Available
AMPS and the aggregate number of Outstanding AMPS subject to Submitted
Bids described in paragraph 10(e)(ii)(A) and paragraph 10(e)(ii)(B) by (y)
a fraction the numerator of which shall be the number of Outstanding AMPS
held by such Existing Holder subject to such Submitted Bid or Submitted
Sell Order and the denominator of which shall be the number of Outstanding
AMPS subject to all such Submitted Bids and Submitted Sell Orders.
(iii) If, as a result of the procedures described in paragraph
10(e)(i) or paragraph 10(e)(ii), any Existing Holder would be entitled or
required to sell, or any Potential Holder would be entitled or required to
purchase, a fraction of a share of AMPS on any Auction Date, the Auction
Agent shall, in such manner as in its sole discretion it shall determine,
round up or down the number of AMPS to be purchased or sold by any
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Existing Holder or Potential Holder on such Auction Date so that each
Outstanding share of AMPS purchased or sold by each Existing Holder or
Potential Holder on such Auction Date shall be a whole share of AMPS.
(iv) If, as a result of the procedures described in paragraph
10(e)(i), any Potential Holder would be entitled or required to purchase
less than a whole share of AMPS on any Auction Date, the Auction Agent
shall, in such manner as in its sole discretion it shall determine,
allocate AMPS for purchase among Potential Holders so that only whole AMPS
are purchased on such Auction Date by any Potential Holder, even if such
allocation results in one or more of such Potential Holders not purchasing
any AMPS on such Auction Date.
(v) Based on the results of each Auction, the Auction Agent shall
determine, with respect to each Broker-Dealer that submitted Bids or Sell
Orders on behalf of Existing Holders or Potential Holders, the aggregate
number of Outstanding AMPS to be purchased and the aggregate number of the
Outstanding AMPS to be sold by such Potential Holders and Existing Holders
and, to the extent that such aggregate number of Outstanding shares to be
purchased and such aggregate number of Outstanding shares to be sold
differ, the Auction Agent shall determine to which other Broker-Dealer or
Broker-Dealers acting for one or more purchasers such Broker-Dealer shall
deliver, or from which other Broker-Dealer or Broker-Dealers acting for
one or more sellers such Broker-Dealer shall receive, as the case may be,
Outstanding AMPS.
(f) Miscellaneous. The Trust may interpret the provisions of this
paragraph 10 to resolve any inconsistency or ambiguity, remedy any formal defect
or make any other change or modification that does not substantially adversely
affect the rights of Beneficial Owners of
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AMPS. A Beneficial Owner or an Existing Holder (A) may sell, transfer or
otherwise dispose of AMPS only pursuant to a Bid or Sell Order in accordance
with the procedures described in this paragraph 10 or to or through a
Broker-Dealer, provided that in the case of all transfers other than pursuant to
Auctions such Beneficial Owner or Existing Holder, its Broker-Dealer, if
applicable, or its Agent Member advises the Auction Agent of such transfer and
(B) except as otherwise required by law, shall have the ownership of the AMPS
held by it maintained in book entry form by the Securities Depository in the
account of its Agent Member, which in turn will maintain records of such
Beneficial Owner's beneficial ownership. Neither the Trust nor any Affiliate
shall submit an Order in any Auction. Any Beneficial Owner that is an Affiliate
shall not sell, transfer or otherwise dispose of AMPS to any Person other than
the Trust. All of the Outstanding AMPS of a series shall be represented by a
single certificate registered in the name of the nominee of the Securities
Depository unless otherwise required by law or unless there is no Securities
Depository. If there is no Securities Depository, at the Trust's option and upon
its receipt of such documents as it deems appropriate, any AMPS may be
registered in the Share Register in the name of the Beneficial Owner thereof and
such Beneficial Owner thereupon will be entitled to receive certificates
therefor and required to deliver certificates therefor upon transfer or exchange
thereof.
11. Securities Depository; Share Certificates. (a) If there is a
Securities Depository, one certificate for all of the AMPS of each series shall
be issued to the Securities Depository and registered in the name of the
Securities Depository or its nominee. Additional certificates may be issued as
necessary to represent AMPS. All such certificates shall bear a legend to the
effect that such certificates are issued subject to the provisions restricting
the transfer of AMPS contained in this Certificate of Designation. Unless the
Trust shall have elected, during a Non-
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Payment Period, to waive this requirement, the Trust will also issue
stop-transfer instructions to the Auction Agent for the AMPS. Except as provided
in paragraph (b) below, the Securities Depository or its nominee will be the
Holder, and no Beneficial Owner shall receive certificates representing its
ownership interest in such shares.
(b) If the Applicable Rate applicable to all AMPS of a series shall be the
Non-Payment Period Rate or there is no Securities Depository, the Trust may at
its option issue one or more new certificates with respect to such shares
(without the legend referred to in paragraph 11(a)) registered in the names of
the Beneficial Owners or their nominees and rescind the stop-transfer
instructions referred to in paragraph 11(a) with respect to such shares.
12. Personal Liability. The Declaration of Trust establishing MuniYield
Florida Fund, dated January 21, 1992, a copy of which, together with all
amendments thereto, is on file in the office of the Secretary of the
Commonwealth of Massachusetts, provides that the name "MuniYield Florida Fund"
refers to the trustees under the Declaration collectively as trustees, but not
as individuals or personally; and no trustee, shareholder, officer, employee or
agent of the Trust shall be held to any personal liability, nor shall resort be
had to their private property for the satisfaction of any obligation or claim or
otherwise in connection with the affairs of the Trust, but the "Trust Property"
only shall be liable.
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MUNIYIELD FLORIDA FUND
CERTIFICATE
The undersigned hereby certifies that she is the Secretary of MuniYield
Florida Fund, an unincorporated business trust organized and existing under the
laws of The Commonwealth of Massachusetts (the "Trust"), that annexed hereto is
the Certificate of Designation dated , 1999, establishing the powers,
qualifications, rights and preferences of the Auction Market Preferred Shares,
Series B of the Trust, which Certificate has been adopted by the Board of
Trustees of the Trust in a manner provided in the Trust's Declaration of Trust.
Dated this day of , 1999.
---------------------------------
Alice A. Pellegrino
Secretary
INDEPENDENT AUDITORS' CONSENT
MuniYield Florida Fund:
We consent to the use in this Registration Statement on Form N-14 of our report
dated December 4, 1998 appearing in the Proxy Statement and Prospectus, which is
a part of such Registration Statement, and to the reference to us under the
captions "Comparison of the Funds - Financial Highlights" and "Experts" also
appearing in such Proxy Statement and Prospectus.
Deloitte & Touche LLP
Princeton, New Jersey
September 30, 1999
<PAGE>
INDEPENDENT AUDITORS' CONSENT
MuniVest Florida Fund:
We consent to the use in this Registration Statement on Form N-14 of our report
dated December 4, 1998 appearing in the Proxy Statement and Prospectus, which is
a part of such Registration Statement, and to the reference to us under the
captions "Comparison of the Funds - Financial Highlights" and "Experts" also
appearing in such Proxy Statement and Prospectus.
Deloitte & Touche LLP
Princeton, New Jersey
September 30, 1999
