YDNT Young Innovations, Inc. (MM)

STATEMENT OF ADDITIONAL INFORMATION
January 31, 2013

This Statement of Additional Information ("SAI") is not a prospectus but supplements and should be read in conjunction with the current prospectus, dated January 31, 2013, for the National Portfolio, High Income Municipal Portfolio, California Portfolio and New York Portfolio (the "Fund Portfolios") of AllianceBernstein Municipal Income Fund, Inc. (the "Fund") that offers the Class A, Class B (except for the High Income Municipal Portfolio), Class C and Advisor Class shares of the Fund Portfolios and for the Arizona Portfolio, Massachusetts Portfolio, Michigan Portfolio, Minnesota Portfolio, New Jersey Portfolio, Ohio Portfolio, Pennsylvania Portfolio and Virginia Portfolio (the "Fund II Portfolios") of AllianceBernstein Municipal Income Fund II (the "Fund II") that offers the Class A, Class B and Class C shares of the Fund II Portfolios (the "Prospectus") (The Fund and Fund II are together referred to as the "Funds"; each of the Fund Portfolios and the Fund II Portfolios are referred to as a "Portfolio" and together as the "Portfolios"). Financial statements for the Funds for the year ended October 31, 2012, in the case of the Fund Portfolios, and September 30, 2012, in the case of the Fund II Portfolios, are included in the Funds' annual reports to shareholders and are incorporated into this SAI by reference. Copies of the Prospectus and the Funds' annual reports may be obtained by contacting AllianceBernstein Investor Services, Inc. ("ABIS") at the address or the "For Literature" telephone number shown above or on the Internet at www.AllianceBernstein.com.

TABLE OF CONTENTS

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DESCRIPTION OF THE PORTFOLIOS.................................................2

INVESTMENT RESTRICTIONS......................................................88

MANAGEMENT OF THE FUNDS......................................................89

EXPENSES OF THE FUNDS.......................................................123

PURCHASE OF SHARES..........................................................133

REDEMPTION AND REPURCHASE OF SHARES.........................................158

SHAREHOLDER SERVICES........................................................161

NET ASSET VALUE.............................................................164

DIVIDENDS, DISTRIBUTIONS AND TAXES..........................................168

PORTFOLIO TRANSACTIONS......................................................174

GENERAL INFORMATION.........................................................178

FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT REGISTERED
  PUBLIC ACCOUNTING FIRM....................................................211

APPENDIX A: BOND AND COMMERCIAL PAPER RATINGS...............................A-1

APPENDIX B: STATEMENT OF POLICIES AND PROCEDURES FOR PROXY VOTING...........B-1

DESCRIPTION OF THE PORTFOLIOS

Except as otherwise noted, the Portfolios' investment objectives and policies described below and in the Prospectus are not designated "fundamental policies" within the meaning of the Investment Company Act of 1940, as amended (the "1940 Act") and may be changed by the Board of Directors or Board of Trustees of the Funds (each a "Board" and together, the "Boards") with respect to a Portfolio without approval of the shareholders of such Portfolio. However, no Portfolio will change its investment objective without at least 60 days' prior written notice to shareholders.

Whenever any investment policy or restriction states a percentage of a Portfolio's assets that may be invested in any security or other asset, it is intended that such percentage limitation be determined immediately after and as a result of the Portfolio's acquisition of such securities or other assets. Accordingly, any later increases or decreases in percentage beyond the specified limitation resulting from a change in values or net assets will not be considered a violation of this percentage limitation.

Each State Portfolio may invest in municipal securities issued by governmental entities (for example, U.S. territories) outside the named state if the municipal securities generate interest exempt from federal income tax and personal income tax in the named state. When AllianceBernstein L.P. (the "Adviser") believes that municipal securities of the named state that meet a State Portfolio's quality standards are not available, any State Portfolio may invest up to 20% of its total assets in securities whose interest payments are only federally tax-exempt.

Under current federal income tax law, (1) interest on tax-exempt municipal securities issued after August 7, 1986 which are "specified private activity bonds," and the proportionate share of any exempt-interest dividend paid by a regulated investment company that receives interest from such specified private activity bonds, will be treated as an item of tax preference for purposes of the AMT imposed on individuals and corporations, though for regular federal income tax purposes such interest will remain fully tax-exempt, and (2) interest on all tax-exempt obligations will be included in "adjusted current earnings" of corporations for AMT purposes. Such private activity bonds ("AMT-Subject Bonds"), which include industrial development bonds and bonds issued to finance such projects as airports, housing projects, solid waste disposal facilities, student loan programs and water and sewage projects, have provided, and may continue to provide, somewhat higher yields than other comparable municipal securities.

In most instances, no state, municipality or other governmental unit with taxing power will be obligated with respect to AMT-Subject Bonds. AMT-Subject Bonds are in most cases revenue bonds and do not generally have the pledge of the credit or the taxing power, if any, of the issuer of such bonds. AMT-Subject Bonds are generally limited obligations of the issuer supported by payments from private business entities and not by the full faith and credit of a state or any governmental subdivision. Typically the obligation of the issuer of AMT-Subject bonds is to make payments to bond holders only out of and to the extent of, payments made by the private business entity for whose benefit the AMT-Subject Bonds were issued. Payment of the principal and interest on such revenue bonds depends solely on the ability of the user of the facilities financed by the bonds to meet its financial obligations and the pledge, if any, of real and personal property so financed as security for such payment.

The insurance feature is generally described in the Prospectus under "Additional Information about the Portfolios' Risks and Investments--Insured Bonds."

The Portfolios may obtain insurance on their municipal bonds or purchase insured municipal bonds covered by policies issued by monoline insurance companies. Currently, only Assured Guaranty Municipal Corp. ("AGM") is writing policies on newly issued municipal bonds. AGM (formerly, Financial Security Assurance Holdings Ltd.) is an indirect subsidiary of Assured Guaranty Ltd. ("Assured"). Prior to the recent financial crisis, there were several other insurers writing policies on municipal bonds, but the ratings of these insurers have been severely downgraded and, while they are still insuring municipal bonds under policies written prior to the financial crisis, they are no longer writing new policies. These insurers include National Public Finance Guarantee Corporation ("National"), a wholly-owned subsidiary of MBIA Inc. ("MBIA"); Financial Guaranty Insurance Company ("FGIC"); Ambac Assurance Corporation ("Ambac"), a wholly-owned subsidiary of Ambac Financial Group, Inc.; ACA Financial Guaranty Corporation ("ACA"); Radian Asset Assurance, Inc. (formerly, Asset Guaranty Insurance Company) ("Radian"), a wholly-owned subsidiary of Radian Group, Inc.; Syncora Guarantee Inc. ("Syncora") (formerly XL Capital Assurance, Inc.), a wholly-owned subsidiary of Syncora Holdings Ltd. (formerly Security Capital Assurance Ltd.); CIFG Assurance North America, Inc. (formerly, CDC IXIS Financial Guaranty North America, Inc.) ("CIFG NA"); and Berkshire Hathaway Assurance Corporation ("BHAC"), a wholly owned subsidiary of Berkshire Hathaway Inc. As noted above, most of these insurers have been downgraded and it is possible that additional downgrades may occur. Moody's and S&P ratings reflect the respective rating agency's current assessment of the creditworthiness of each insurer and its ability to pay claims on its policies of insurance. Any further explanation as to the significance of the ratings may be obtained only from the applicable rating agency. The ratings are not recommendations to buy, sell or hold the municipal bonds, and such ratings may be subject to revision or withdrawal at any time by the rating agencies. Any downward revision or withdrawal of either or both ratings may have an adverse effect on the market price of the municipal bonds.

It should be noted that insurance is not a substitute for the basic credit of an issuer, but supplements the existing credit and provides additional security therefore. Moreover, while insurance coverage for the municipal securities held by the Portfolios may reduce credit risk, it does not protect against market fluctuations caused by changes in interest rates and other factors. As a result of declines in the credit quality and associated downgrades of most fund insurers, insurance has less value than it did in the past. The market now values insured municipal securities primarily based on the credit quality of the issuer of the security with little value given to the insurance feature. In purchasing insured municipal securities, the Adviser currently evaluates the risk and return of such securities through its own research.

The information relating to MBIA, FGIC, Ambac, AGM, ACA, Radian, Syncora, CIFG NA, and BHAC contained below has been furnished by such companies, respectively. No representation is made herein as to the accuracy or adequacy of such information or as to the absence of material adverse changes in such information.

National. National is a wholly-owned subsidiary of MBIA. Neither MBIA nor its shareholders are obligated to pay the debts of or claims against National. National was incorporated and is domiciled in the State of New York and is licensed to do business in all 50 states, the District of Columbia, Guam, the Northern Mariana Islands, the U.S. Virgin Islands, Puerto Rico, the Kingdom of Spain and the Republic of France. As of September 30, 2012, MBIA had total assets of $22.132 billion, and total liabilities of $19.545 billion. The address of National is 113 King Street, Armonk, New York 10504.

FGIC. Until August of 2003, when it was purchased by an investor group, FGIC was a wholly-owned subsidiary of General Electric Capital Corporation. FGIC is now an independent company. FGIC is domiciled in the State of New York and is subject to regulation by the New York State Department of Financial Services. FGIC is currently subject to "Rehabilitation", the rehabilitator is the NY Superintendent of Financial Services. As of September 30, 2012, FGIC had total assets of $2.124billion and total liabilities of $2.120billion. The address of FGIC is 125 Park Avenue, New York, New York 10017.

Ambac. Ambac is a Wisconsin-domiciled stock insurance company, regulated by the Insurance Department of the State of Wisconsin, and licensed to do business in all 50 states, the District of Columbia, Puerto Rico, Guam and the U.S. Virgin Islands. As of September 30, 2012, Ambac Financial Group, Inc. and all of its subsidiaries had total assets of $26.948 billion and total liabilities of $30.435 billion. The address of Ambac's administrative offices is One State Street Plaza, 17th Floor, New York, New York 10004.

AGM. AGM is domiciled in the State of New York, is subject to regulation by the State of New York Insurance Department and is licensed to do business in all 50 states, the District of Columba, Guam, Puerto Rico and the U.S. Virgin Islands. As of September 30, 2012, Assured and its subsidiaries had, on a consolidated basis, total assets of $17.563 billion and total liabilities of $12.611 billion. The registered office of AGM is located at 31 West 52nd Street, New York, New York 10019.

ACA. ACA is a Maryland-domiciled insurance company regulated by the Maryland Insurance Administration ("MIA") and licensed to do business in all 50 states, the District of Columbia, Puerto Rico, Guam and the U.S. Virgin Islands. Since August 2008, when ACA underwent a restructuring, ACA has been operating as a run-off financial guaranty insurance company, meaning that it no longer issues any new insurance policies without the consent of the MIA, but it continues to guarantee timely payment of principal and interest when due on its remaining portfolio of insured municipal obligations. As of September 30, 2012, ACA had total assets of $.464 billion and total liabilities of $436 billion. ACA's principal business office is located at 600 Fifth Avenue, New York, New York 10020.

Radian. Radian is domiciled in the State of New York and is subject to regulation by the New York State Department of Financial Services. Radian specializes in insuring investment-grade securities that do not qualify for coverage from the primary financial guaranty insurance companies. As of September 30, 2012, Radian Group, Inc. had total assets of $6.041 billion and total liabilities of $5.126 billion. Radian's principal business office is located at 1601 Market Street, Philadelphia, Pennsylvania 19103.

Syncora. Syncora is domiciled in the State of New York and is subject to regulation by the New York State Department of Financial Services and is licensed to do business in all 50 states, Puerto Rico, the District of Columbia, the U.S. Virgin Islands and Singapore. Syncora is a wholly-owned subsidiary of Syncora Holdings Ltd., a Bermuda-based holding company and one of the world's leading providers of insurance, reinsurance and related services. As of September 30, 2012, Syncora had total assets of $1.171 billion and total liabilities of $1.143 billion. Syncora's principal business office is located at 825 Eighth Avenue, New York, New York, 10019.

CIFG NA. CIFG NA, a subsidiary of Groupe Caisse d'Epargne, a leading French bank, is domiciled in the State of New York and is subject to regulation by the New York State Department of Financial Services. CIFG NA is licensed to transact financial guaranty insurance in 48 states, the District of Columbia and the Commonwealth of Puerto Rico. As of September 30, 2012, CIFG NA had total assets of $.743 billion and total liabilities of $.742 billion. The address of CIFG NA is 850 Third Avenue, New York, New York 10022.

BHAC. BHAC, established in December 2007 as an indirect subsidiary of Berkshire Hathaway Inc., is domiciled in the State of New York and is subject to regulation by the New York State Department of Financial Services. As of September 30, 2012, Berkshire Hathaway Inc. and its subsidiaries had total assets of $424.115 billion and total liabilities of $235.041 billion. BHAC is currently licensed to transact financial guaranty business in 49 states. BHAC's office is located at the Marine Air Terminal, LaGuardia Airport, New York, New York 11371.

The primary purpose of investing in a portfolio of a single state's municipal securities is the special tax treatment accorded the state's resident individual investors. However, payment of interest and preservation of principal depends upon the continuing ability of the state's issuers and/or obligors on state, municipal and public authority debt obligations to meet their obligations thereunder. Investors should be aware of certain factors that might affect the financial condition of issuers of municipal securities, consider the greater risk of the concentration of a Portfolio versus the safety that comes with a less concentrated investment portfolio and compare yields available in portfolios of the relevant state's issues with those of more diversified portfolios, including out-of-state issues, before making an investment decision.

Municipal securities in which a Portfolio's assets are invested may include debt obligations of the municipalities and other subdivisions of the relevant state issued to obtain funds for various public purposes, including the construction of a wide range of public facilities such as airports, bridges, highways, schools, streets and water and sewer works. Other purposes for which municipal securities may be issued include the obtaining of funds to lend to public or private institutions for the construction of facilities such as educational, hospital, housing, and solid waste disposal facilities. The latter, including most AMT-Subject Bonds, are generally payable from private sources which, in varying degrees, may depend on local economic conditions, but are not necessarily affected by the ability of the state and its political subdivisions to pay their debts. It is not practicable to provide specific detail on each of these obligations in which Portfolio assets may be invested. However, all such securities, the payment of which is not a general obligation of an issuer having general taxing power, must satisfy, at the time of an acquisition by the Portfolio, the minimum rating(s) described in the "More Information About the Portfolios and Their Investments" in the Prospectus. See also "Appendix A: Bond and Commercial Paper Ratings" for a description of ratings and rating criteria. Some municipal securities may be rated based on a "moral obligation" contract which allows the municipality to terminate its obligation by deciding not to make an appropriation. Generally, no legal remedy is available against the municipality that is a party to the "moral obligation" contract in the event of such non-appropriation.

The following brief summaries are included for the purpose of providing certain information regarding the economic climate and financial condition of the states of New York, California, Arizona, Massachusetts, Michigan, Minnesota, New Jersey, Ohio, Pennsylvania and Virginia, and are based primarily on information from the Annual Information Statement dated May 11, 2012, as updated on August 10, 2012, with respect to New York, the Comprehensive Annual Financial Report dated June 30, 2011 with respect to Arizona, and Official Statements dated May 2012 with respect to Virginia, July 2012 with respect to Pennsylvania, August 2012 with respect to Minnesota, September 2012 with respect to Massachusetts and New Jersey, October 2012 with respect to California and Ohio, and November 2012 with respect to Michigan in connection with the issuance of certain securities, and other documents and sources, and does not purport to be complete. The Funds have not undertaken to verify independently such information and the Funds assume no responsibility for the accuracy of such information. These summaries do not provide information regarding many securities in which the Portfolios are permitted to invest and in particular do not provide specific information on the issuers or types of municipal securities in which the Portfolios invest or the private business entities whose obligations support the payments on AMT-Subject Bonds in which the Portfolios will invest. Therefore, the general risk factors as to the credit of the state or its political subdivisions discussed herein may not be relevant to the Portfolios. Although revenue obligations of a state or its political subdivisions may be payable from a specific project or source, there can be no assurance that future economic difficulties and the resulting impact on state and local government finances will not adversely affect the market value of a Portfolio or the ability of the respective obligors to make timely payments of principal and interest on such obligations. In addition, a number of factors may adversely affect the ability of the issuers of municipal securities to repay their borrowings that are unrelated to the financial or economic condition of a state, and that, in some cases, are beyond their control. Furthermore, issuers of municipal securities are generally not required to provide ongoing information about their finances and operations to holders of their debt obligations, although a number of cities, counties and other issuers prepare annual reports.

The following is based on information obtained from the Annual Information Statement of the State of New York, dated May 11, 2012, and the Update to the Annual Information Statement dated August 10, 2012.

The Debt Reform Act of 2000 ("Debt Reform Act") implemented statutory initiatives intended to improve the borrowing practices of the State of New York (the "State"). The Debt Reform Act applies to all new State-supported debt issued on and after April 1, 2000 and includes the following provisions: (a) a phased-in cap on new State-supported debt outstanding of 4% of personal income; (b) a phased-in cap on new State-supported debt service costs of 5% of total governmental funds receipts; (c) a limit on the use of debt to capital works and purposes only; and (d) a limit on the maximum term of new State-supported debt to 30 years.

The cap on new State-supported debt outstanding began at 0.75% of personal income in 2000-01 and was fully phased in at 4% of personal income in 2010-11. Similarly, the phased-in cap on new State-supported debt service costs began at 0.75% of total governmental funds receipts and is gradually increasing until it is fully phased in at 5% in 2013-14.

The Debt Reform Act requires the limitations on the issuance of State-supported debt and debt service costs to be calculated by October 31 of each year and reported in the quarterly Financial Plan Update most proximate to October 31st of each year. If the calculations for new State-supported debt outstanding and debt service costs are less than the State-supported debt outstanding and debt service costs permitted under the Debt Reform Act, new State-supported debt may continue to be issued. However, if either the debt outstanding or the debt service cap is met or exceeded, the State, absent a change in law, would be precluded from contracting new State-supported debt until the next annual cap calculation is made and State-supported debt is found to be within the appropriate limitations. The Division of the Budget ("DOB") intends to manage subsequent capital plans and issuance schedules consistent with the limits.

The State was found to be in compliance with the statutory caps for the most recent calculation period (October 2011).

Current projections estimate that debt outstanding and debt service costs will continue to remain below the limits imposed by the Act throughout the next several years. However, the State has entered into a period of relatively limited debt capacity. Available cap room, in regards to debt outstanding, is expected to decline from $3.6 billion in 2011-12 to $752 million in 2013-14. The State is continuing to implement measures to address capital spending priorities and debt financing practices.

New York is one of the largest issuers of municipal debt, ranking second among the states, behind California, in the amount of debt outstanding. As of March 31, 2012, total State-related debt outstanding was $56.8 billion and 5.7% of personal income. New York ranks fifth in debt per capita, behind Connecticut, Massachusetts, Hawaii and New Jersey.

For purposes of analyzing the financial condition of the State, debt may be classified as State-supported debt and State-related debt. State-supported debt includes general obligation debt, to which the full faith and credit of the State has been pledged, and lease-purchase and contractual obligations of public authorities and municipalities, where the State's legal obligation to make payments to those public authorities and municipalities is subject to and paid from annual appropriations made by the Legislature. State-related debt includes State-supported debt, as well as State-guaranteed debt (to which the full faith and credit of the State has been pledged), moral obligation financings and certain contingent-contractual obligation financings, where debt service is expected to be paid from other sources and State appropriations are contingent in that they may be made and used only under certain circumstances.

The State has never defaulted on any of its general obligation indebtedness or its obligations under lease-purchase or contractual obligation financing arrangements and has never been called upon to make any direct payments pursuant to its guarantees.

As of March 31, 2012, the total amount of general obligation debt outstanding was $3.5 billion. The Enacted Budget Capital Plan projects that about $436 million in general obligation bonds will be issued in 2012-13.

Also included in State-supported debt are certain long-term financing mechanisms, lease-purchase and contractual-obligation financings, including certificates of participation ("COPs"), which involve obligations of public authorities or municipalities where debt service is payable by the State, but are not general obligations of the State. Under these financing arrangements, certain public authorities and municipalities have issued obligations to finance certain payments to local governments (see "New York Local Government Assistance Corporation," below), various capital programs, educational and health facilities, prison construction, housing programs and equipment acquisitions, and expect to meet their debt service requirements through the receipt of rental or other contractual payments made by the State.

The State expects to continue to use lease-purchase and contractual-obligation financing arrangements to finance its capital programs, and expects to finance many of these capital programs with State Personal Income Tax ("PIT") Revenue Bonds. Based on current assumptions, DOB anticipates that there will be $25.5 billion of State PIT Revenue Bonds outstanding during fiscal year 2012-13.

In 1990, as part of a State fiscal reform program, legislation was enacted creating the New York Local Government Assistance Corporation (the "LGAC"), a public benefit corporation empowered to issue long-term obligations to fund certain payments to local governments traditionally funded through the State's annual seasonal borrowing. The legislation also dedicated revenues equal to the first one percent of the State sales and use tax to pay debt service on these bonds. The legislation imposed a limitation on the annual seasonal borrowing of the State except in cases where the Governor and the legislative leaders have certified the need for additional borrowing and provided a schedule for eliminating it over time. Any seasonal borrowing is required by law to be eliminated by the fourth fiscal year after the limit was first exceeded. This provision limiting the seasonal borrowing was included as a covenant with LGAC's bondholders in the resolution authorizing such bonds. No such restrictions were placed on the State's ability to issue deficit notes.

As of June 1995, LGAC had issued bonds and notes to provide net proceeds of $4.7 billion, completing the program. The impact of LGAC's borrowing is that the State has been able to meet its cash flow needs throughout the fiscal year without relying on short-term seasonal borrowings.

The fiscal stability of the State is related, in part, to the fiscal stability of its public authorities (the "Authorities"). Authorities, which have responsibility for financing, constructing and/or operating revenue producing public facilities, are not subject to the constitutional restrictions on the incurrence of debt which apply to the State itself and may issue bonds and notes within the amounts, and as otherwise restricted by, their legislative authorizations. The State's access to the public credit markets could be impaired, and the market price of its outstanding debt may be materially adversely affected, if any of its Authorities were to default on their respective obligations, particularly those using State-supported or State-related financing techniques. As of December 31, 2011, there were 17 Authorities that had aggregate outstanding debt of $163 billion, only a portion of which constitutes State-supported or State-related debt.

Moral obligation financing generally involves the issuance of debt by an Authority to finance a revenue-producing project or other activity. The debt is secured by project revenues and includes statutory provisions requiring the State, subject to appropriation by the Legislature, to make up any deficiencies that may occur in the issuer's debt service reserve fund. There has never been a default on any moral obligation debt of any Authority. The State does not intend to increase statutory authorizations for moral obligation bond programs. From 1976 through 1987, the State was called upon to appropriate and make payments totaling $162.8 million to make up deficiencies in the debt service reserve funds of the Housing Finance Agency pursuant to moral obligation provisions. In the same period, the State also expended additional funds to assist the Project Finance Agency, the New York State Urban Development Corporation and other Authorities that had moral obligation debt outstanding. The State has not been called upon to make any payments pursuant to any moral obligations since the 1986-87 fiscal year and no such requirements are anticipated during the 2012-13 fiscal year.

Authorities' operating expenses and debt service costs are generally paid by revenues generated by the projects financed or operated, such as tolls charged for the use of highways, bridges or tunnels, charges for public power, electric and gas utility services, rentals charged for housing units, and charges for occupancy at medical care facilities. In addition, State legislation authorizes several financing techniques for Authorities. Also, there are statutory arrangements providing for State local assistance payments, otherwise payable to localities, to be made under certain circumstances to Authorities. Although the State has no obligation to provide additional assistance to localities whose local assistance payments have been paid to Authorities under these arrangements, if local assistance payments are so diverted, the affected localities could seek additional State assistance. Some Authorities also receive moneys from State appropriations to pay for the operating costs of certain of their programs.

The Metropolitan Transportation Authority (the "MTA"), which receives the bulk of State appropriations to the Authorities, oversees New York City's subway and bus lines by its affiliates, the New York City Transit Authority and the Manhattan and Bronx Surface Transit Operating Authority (collectively, the "TA"). The MTA operates certain commuter rail and bus lines in the New York metropolitan area through the MTA's subsidiaries, the Long Island Rail Road Company, the Metro-North Commuter Railroad Company and the Metropolitan Suburban Bus Authority. In addition, the Staten Island Rapid Transit Operating Authority, an MTA subsidiary, operates a rapid transit line on Staten Island. Through its affiliated agency, the Triborough Bridge and Tunnel Authority (the "TBTA"), the MTA operates certain intrastate toll bridges and tunnels. Because fare revenues are not sufficient to finance the mass transit portion of these operations, the MTA has depended and will continue to depend on operating support from the State, local governments and TBTA, including loans, grants and subsidies. If current revenue projections are not realized and/or operating expenses exceed current projections, the TA or commuter railroads may be required to seek additional State assistance, raise fares or take other actions.

The State ended FY 2012 in balance on a cash basis in the General Fund, and maintained a closing balance of $1.79 billion, consisting of $1.1 billion in the Tax Stabilization Reserve, $175 million in the Rainy Day Reserve, $102 million in the Community Projects Fund, $21 million in the Contingency Reserve, $283 million reserved for potential retroactive labor settlements, and $75 million in an undesignated fund balance. The FY 2012 closing balance was $411 million greater than the FY 2011 closing balance, which largely reflects actions to establish designated resource that can be used to address costs associated with potential retroactive labor agreements, and to build the State's general emergency reserve fund balances. The State made a $100 million deposit to the Tax Stabilization Reserve at the close of FY 2012, the first deposit to the State's "rainy day" reserves since FY 2008.

General Fund receipts, including transfers from other funds, totaled $56.9 billion in FY 2012. Total receipts during FY 2012 were $2.5 billion (4.5%) higher than in the prior fiscal year. Total tax receipts were $3.1 billion higher than the previous fiscal year, mainly due to growth in PIT collections ($2.4 billion) and business tax collections ($481 million). A decrease in the level of excess balances transferred from other funds partly offset the annual increase in tax receipts.

General Fund disbursements, including transfers to other funds, totaled $56.5 billion in FY 2012, $1.1 billion (2.0%) higher than in the prior fiscal year. Excluding the impact of a $2.1 billion school aid deferral from March 2010 to the statutory deadline of June 2010, annual spending grew by $3.2 billion. Spending growth is largely due to the phase-out of extraordinary Federal aid that temporarily reduced State-share spending in FY 2011. Annual General Fund spending for agency operations in FY 2012 was lower than in FY 2011, consistent with management expectations and continued efforts in managing the workforce and controlling costs.

The State ended FY 2011 in balance on a cash basis in the General Fund. The General Fund ended FY 2011 with a closing balance of $1.38 billion, consisting of $1.0 billion in the Tax Stabilization Reserve, $175 million in the Rainy Day Reserve, $136 million in the Community Projects Fund, $21 million in the Contingency Reserve, and $13 million in an undesignated fund balance. The closing balance was $928 million lower than FY 2010. This reflected the planned use of a fund balance to pay for expenses deferred from FY 2010 into FY 2011.

General Fund receipts, including transfers from other funds, totaled $54.4 billion in FY 2011. Total receipts during FY 2011 were $1.9 billion (3.6%) higher than in the prior fiscal year. Total tax receipts were $2.5 billion higher, mainly due to the growth in PIT collections, sales taxes, estate taxes, and the real estate transfer tax, resulting from changes to the law as well as the economic recovery. Non-tax revenue was $631 million below the prior year. This was primarily due to the following FY 2010 collections that were not received, or were received in lower amounts, in FY 2011: temporary utility surcharge; Power Authority resources; Energy Research and Development Authority; and fine collections. An increase in the level of excess balances transferred from other funds partly offset the annual decline in miscellaneous receipts.

General Fund disbursements, including transfers to other funds, totaled $55.4 billion in FY 2011. Disbursements in FY 2011 were $3.2 billion (6.1%) higher than in the prior fiscal year. Spending growth was affected by the deferral of a $2.06 billion payment to schools from March 2010 to the statutory deadline of June 2010. Adjusting for this anomaly, spending would have been approximately $950 million below FY 2010 levels.

Receipts during FY 2010 fell substantially below projections. General Fund receipts, including transfers from other funds, totaled $52.6 billion, or $1.78 billion lower than the State's initial projections for FY 2010. General Fund disbursements, including transfers to other funds, totaled $52.2 billion, a decrease of $2.71 billion from initial projections. However, actual disbursements were affected by $2.1 billion in payment deferrals (described below) taken by the State to end the fiscal year without the use of its rainy day reserves and other designated balances. Without the deferrals, disbursements for the fiscal year would have been approximately $665 million below initial projections.

In the final quarter of the fiscal year, in order to avoid depleting its reserves, the State deferred a planned payment to school districts ($2.1 billion), which reduced spending from planned levels, and certain tax refunds, which increased available receipts from planned levels ($500 million). Both the school aid payment and the tax refunds were scheduled to be paid in FY 2010 but, by statute, were not due until June 1, 2010. The combined value of the deferrals had the effect of increasing the closing balance in the General Fund for FY 2010 to $2.3 billion, or approximately $900 million above the level required to restore the rainy day reserves and other balances to their anticipated levels. The higher closing balance was due exclusively to the cash management actions described above and did not represent an improvement in the State's financial operations. In early April 2010, the State paid the $500 million in tax refunds that had been deferred from FY 2010 to FY 2011. On June 1, 2010, the State paid the $2.1 billion in school aid deferred from FY 2010.

General Fund receipts, including transfers from other funds were $1.2 billion below FY 2009 results. Tax receipts decreased by $1.2 billion and transfers decreased by $750 million, partly offset by increased miscellaneous receipts of $744 million. The $1.2 billion annual decline in tax receipts included a $541 million decline in personal income taxes and a $302 million decline in sales and use tax receipts.

General Fund disbursements, including transfers to other funds, were $2.4 billion below FY 2009 results. The annual decline reflects the deferral of $2.1 billion in school aid, the impact of mid-year spending reductions, and the use of Federal American Recovery and Reinvestment Act of 2009 ("ARRA") funds in place of General Fund spending.

The General Fund closing balance consisted of $1.2 billion in the State's rainy day reserves, $21 million in the contingency reserve fund (to guard against litigation risks), $96 million in the Community Projects Fund, and $978 million in the Refund Reserve Account, of which approximately $900 million was attributable to the deferrals described above.

New York is the third most populous state in the nation and has a relatively high level of personal wealth. The State's economy is diverse, with a comparatively large share of the nation's financial activities, information, education and health services employment, and a very small share of the nation's farming and mining activity. The State's location and its air transport facilities and natural harbors have made it an important link in international commerce. Travel and tourism constitute an important part of the economy. Like the rest of the nation, the State has a declining proportion of its workforce engaged in manufacturing, and an increasing proportion engaged in service industries.

The services sector, which includes professional and business services, private education and healthcare, leisure and hospitality services, and other services, is the State's leading economic sector. The services sector accounts for more than four of every ten nonagricultural jobs in New York and has a higher proportion of total jobs than does the rest of the nation.

Manufacturing employment continues to decline in importance in New York, as in most other states, and New York's economy is less reliant on this sector than in the past. However, it remains an important sector of the State economy, particularly for the upstate region, as high concentrations of manufacturing industries for transportation equipment, optics and imaging, materials processing, and refrigeration, heating and electrical equipment products are located in the upstate region.

The trade, transportation and utilities sector accounts for the largest component of nonagricultural jobs in New York but is only the fourth largest, when measured by wage share. This sector accounts for slightly less employment and wages for the State than for the nation.

New York City is the nation's leading center of banking and finance and, as a result, this is a far more important sector in the State than in the nation as a whole. Although this sector accounts for under one-tenth of all nonagricultural jobs in the State, it contributes about one-fifth of total wages.

Farming is an important part of the economy in rural areas, although it constitutes a very minor part of total State output. Principal agricultural products of the State include milk and dairy products, greenhouse and nursery products, fruits, and vegetables. New York ranks among the nation's leaders in the production of these commodities.

Federal, State and local government together comprise the second largest sector in terms of nonagricultural jobs, with the bulk of the employment accounted for by local governments. Public education is the source of nearly one-half of total state and local government employment.

The State is likely to be less affected than the nation as a whole during an economic recession that is concentrated in manufacturing and construction, but likely to be more affected during a recession that is concentrated in the services sector.

In the calendar years 1990 through 1998, the State's rate of economic growth was somewhat slower than that of the nation. In particular, during the 1990-91 recession and post-recession period, the economy of the State, and that of the rest of the Northeast, was more heavily damaged than that of the nation as a whole and was slower to recover. However, the situation subsequently improved. In 1999, for the first time in 13 years, the employment growth rate of the State surpassed the national growth rate and, in 2000, the rates were essentially the same. In 2001, the September 11 terrorist attacks resulted in a slowdown in New York that was more serious than in the nation as a whole. In contrast, the State labor market fared better than that of the nation as a whole during the most recent downturn that began in 2008, though New York experienced a historically large wage decline in 2009. The State unemployment rate was higher than the national rate from 1991 to 2000, but the gap between them has since closed, with the State rate below that of the nation from the start of the national recession through the end of 2011. In 2011, the State unemployment rate was 8.2, compared to 9.0% for the nation as a whole.

State per capita personal income has historically been significantly higher than the national average, although the ratio has varied substantially. Because New York City is a regional employment center for a multi-state region, State personal income measured on a residence basis understates the relative importance of the State to the national economy and the size of the base to which State taxation applies. In 2011, New York per capita personal income was $50,545, compared to $41,663 for the nation as a whole.

The most recent data indicate that the pace of New York employment growth remains healthy. Private sector employment growth of 1.5% is now projected for 2012, following growth of 2.0% for 2011. Total employment growth of 1.1% is projected for this year, following growth of 1.2% for 2011. Consistent with a strong job market, State wage growth of 3.1% is expected for 2012, with growth in total personal income projected at 3.4%. Although these growth rates represent an improving outlook, they remain substantially below historical averages.

All of the risks to the U.S. forecast apply to the State forecast as well, although as the nation's financial capital, the volume of financial market activity and equity market volatility pose a particularly large degree of uncertainty for New York. In addition, with Wall Street firms still adjusting their compensation practices in the wake of the passage of financial reform, both the bonus and non-bonus components of employee pay are becoming increasingly difficult to estimate. A weaker labor market than projected could also result in lower wages, which in turn could result in weaker household consumption. Similarly, should financial and real estate markets be weaker than anticipated, taxable capital gains realizations could be negatively affected. These effects could ripple through the State economy, depressing both employment and wage growth. In contrast, stronger national and world economic growth, or a stronger upturn in stock prices, along with even stronger activity in mergers and acquisitions and other Wall Street activities, could result in higher wage and bonus growth than projected.

The fiscal demands on the State may be affected by the fiscal condition of New York City, which relies in part on State aid to balance its budget and meet its cash requirements. It is also possible that the State's finances may be affected by the ability of New York City to market securities successfully in the public credit markets.

Certain localities outside New York City have experienced financial problems and have requested and received additional State assistance during the last several State fiscal years. While a relatively infrequent practice, deficit financing has become more common in recent years. Between 2004 and January 2012, the State Legislature authorized 21 bond issuances to finance local government operating deficits. There were four new or additional deficit financing authorizations during the 2009 and 2010 legislative sessions.

Like the State, local governments must respond to changing political, economic and financial influences over which they have little or no control. Such changes may adversely affect the financial condition of certain local governments. For example, the federal government may reduce (or in some cases eliminate) federal funding of some local programs which, in turn, may require local governments to fund these expenditures from their own resources. The loss of temporary Federal stimulus funding in 2011 also adversely impacted counties and school districts in New York State. The State's cash flow problems have resulted in delays to the payment of State aid, and in some cases, have necessitated borrowing by the localities. Additionally, recent enactment of legislation that caps most local government and school district property tax levies may affect the amount of property tax revenue available for local government and school district purposes. The legislation does not apply to New York City. Changes to sales tax distributions resulting from the 2010 Federal population census may also have a material impact on certain local governments. Ultimately, localities or any of their respective public authorities may suffer serious financial difficulties that could jeopardize local access to the public credit markets, which may adversely affect the marketability of notes and bonds issued by localities within the State. Localities may also face unanticipated problems resulting from certain pending litigation, judicial decisions and long-range economic trends. Other large scale potential problems, such as declining urban populations, increasing expenditures, and the loss of skilled manufacturing jobs, may also adversely affect localities and necessitate State assistance.

The State is a defendant in legal proceedings involving State finances and programs and miscellaneous civil rights, real property, and contract and other tort claims where the monetary claims against the State are deemed to be material, generally in excess of $100 million or involving significant challenges to or impacts on the State's financial policies or practices. These proceedings could affect adversely the financial condition of the State in FY 2013 or thereafter.

Adverse developments in these proceedings or the initiation of new proceedings could affect the ability of the State to maintain a balanced FY 2013 Financial Plan. The State believes that the FY 2013 Enacted Budget Financial Plan includes sufficient reserves for the payment of judgments that may be required during FY 2013. There can be no assurance, however, that adverse decisions in legal proceedings against the State would not exceed the amount of all potential FY 2013 Enacted Budget Financial Plan resources available for the payment of judgments, and could therefore adversely affect the ability of the State to maintain a balanced FY 2013 Enacted Budget Financial Plan.

The following is based on information obtained from an Official Statement, dated October 23, 2012, relating to State of California $539,245,000 Various Purpose General Obligation Refunding Bonds (the "Official Statement").

Certain California (the "State") constitutional amendments, legislative measures, executive orders, civil actions and voter initiatives could adversely affect the ability of issuers of the State's municipal securities to pay interest and principal on municipal securities.

Article XIII B. The State is subject to an annual appropriations limit (the "Appropriations Limit") imposed by Article XIII B to the State Constitution.

Article XIII B was modified substantially by Propositions 98 and 111 in 1988 and 1990, respectively. (See "Proposition 98" below.) "Appropriations subject to limitation," with respect to the State, are authorizations to spend "proceeds of taxes," which consist of tax revenues, and certain other funds, including proceeds from regulatory licenses, user charges or other fees to the extent that such proceeds exceed "the cost reasonably borne by the entity in providing the regulation, product or service," but "proceeds of taxes" exclude most State subsidies to local governments, tax refunds and some benefit payments such as unemployment insurance. No limit is imposed on appropriations of funds which are not "proceeds of taxes," such as reasonable user charges or fees, and certain other non-tax funds.

Not included in the Appropriations Limit are appropriations for the debt service costs of bonds existing or authorized by January 1, 1979, or subsequently authorized by the voters, appropriations required to comply with mandates of courts or the federal government, appropriations for qualified capital outlay projects, appropriations for tax refunds, appropriations of revenues derived from any increase in gasoline taxes and motor vehicle weight fees above January 1, 1990 levels, and appropriation of certain special taxes imposed by initiative (e.g., cigarette and tobacco taxes). The Appropriations Limit may also be exceeded in cases of emergency.

The State's yearly Appropriations Limit is based on the limit for the prior year with annual adjustments for changes in California per capita personal income and population and any transfers of financial responsibility for providing services to or from another unit of government.

The Department of Finance projected the Appropriations Subject to Limit to be $61.796 billion and $70.280 billion under the Appropriations Limit in Fiscal Years 2011-12 and 2012-13, respectively.

Proposition 98. On November 8, 1988, voters approved Proposition 98, a combined initiative constitutional amendment and statute called the "Classroom Instructional Improvement and Accountability Act." Proposition 98 changed State funding of public education below the university level, and the operation of the State Appropriations Limit, primarily by guaranteeing local schools and community colleges ("K-14 schools") a minimum share of General Fund revenues.

Under Proposition 98 (as modified by Proposition 111 which was enacted on June 5, 1990), K-14 schools are guaranteed the greater of (a) in general, a fixed percentage of General Fund revenues (the "first test"), (b) the amount appropriated to K-14 schools in the prior year, adjusted for changes in the cost of living (measured as in Article XIII B by reference to State per capita personal income) and enrollment (the "second test"), or (c) a third test, which would replace the second test in any year when the percentage growth in per capita General Fund revenues from the prior year plus one half of one percent is less than the percentage growth in State per capita personal income. Under the third test, schools would receive the amount appropriated in the prior year adjusted for changes in enrollment and per capita General Fund revenues, plus an additional small adjustment factor. If the third test is used in any year, the difference between the third test and the second test would become a "credit" to schools which would be the basis of payments in future years when per capita General Fund revenue growth exceeds per capita personal income growth.

The Proposition 98 guarantee is funded from two sources: local property taxes and the General Fund. Any amount not funded by local property taxes is funded by the General Fund. Thus, local property tax collections represent an offset to General Fund costs in a second test or third test year.

The State Treasurer is responsible for the sale of debt obligations of the State and its various authorities and agencies. The State has always paid the principal of and interest on its general obligation bonds, general obligation commercial paper notes, lease-purchase debt and short-term obligations, including revenue anticipation notes and revenue anticipation warrants, when due.

The State Constitution prohibits the creation of general obligation indebtedness of the State unless a bond measure is approved by a majority of the electorate voting at a general election or a direct primary. General obligation bond acts provide that debt service on general obligation bonds shall be appropriated annually from the General Fund and all debt service on general obligation bonds is paid from the General Fund. Under the State Constitution, debt service on general obligation bonds is the second charge to the General Fund after the application of moneys in the General Fund to the support of the public school system and public institutions of higher education. Certain general obligation bond programs receive revenues from sources other than the sale of bonds or the investment of bond proceeds.

As of September 1, 2012, the State had outstanding $79,148,265,000 aggregate principal amount of long-term general obligation bonds, and unused voter authorizations for the future issuance of $34,380,904,000 of long-term general obligations bonds, some of which may first be issued as commercial paper notes.

The General Obligation Bond Law permits the State to issue as variable rate indebtedness up to 20% of the aggregate amount of long-term general obligation bonds outstanding. The State had outstanding $4,160,635,000 of variable rate general obligation bonds, representing about 5.3% of the State's total outstanding general obligation bonds as of September 1, 2012.

In addition to general obligation bonds, the State builds and acquires capital facilities through the use of lease-purchase borrowing. Under these arrangements, the State Public Works Board, another State or local agency or a joint powers authority issues bonds to pay for the construction of facilities such as office buildings, university buildings or correctional institutions. These facilities are leased to a State agency, the California State University, the University of California or the Judicial Council under a long-term lease which provides the source of payment of the debt service on the lease-purchase bonds. In some cases, there is not a separate bond issue, but a trustee directly creates certificates of participation in the State's lease obligation, which are marketed to investors. The State had $11,300,005,000 General Fund-supported lease-purchase debt outstanding as of September 1, 2012.

As part of its cash management program, the State has regularly issued short-term obligations to meet cash flow needs. The State has issued revenue anticipation notes ("RANs") in all but one fiscal year since the mid-1980s and they have always been paid at maturity. RANs are issued to partially fund timing differences between revenues and expenditures, as the majority of General Fund revenues are received in the last part of the fiscal year. By law, RANs must mature prior to the end of the fiscal year of issuance. If additional external cash flow borrowings are required, the State has issued revenue anticipation warrants ("RAWs"), which can mature in a subsequent fiscal year.

The State entered Fiscal Year 2012-13 in a stronger cash position than it had in some prior years. Timely enactment of the 2012 Budget Act allowed the State to carry out its regular cash management borrowing with RANs early in the year, and without the need for Interim RANs for the first time in three years. The State issued $10 million of RANs on August 23, 2012.

As in previous years, the Legislature has enacted a cash management bill which authorizes deferral of certain payments during Fiscal Year 2012-13, including payments to K-12 schools, reimbursements to the federal government for certain social service costs, certain local government social services, transportation payments and Proposition 63 mental health payments (not to exceed $1 billion in the aggregate at one time) and higher education. The applicable deferrals were made in July 2012.

The State will also benefit from $1.7 billion of additional internal borrowable resources in the SAIF Fund during the first part of the fiscal year. The deposits in the State Agency Investment Fund are scheduled to be returned in late April 2013. The Legislature has created a Voluntary Investment Program Fund, which could provide additional short-term cash management borrowing resources, but there are no current agreements for deposits into this Fund.

State fiscal officials will continue to monitor the State's cash position during the fiscal year, and will take appropriate steps if necessary to manage any projected cash shortfalls which may occur, as they have done in prior years.

The State's fiscal year begins on July 1 and ends on June 30 of the following year. The State's General Fund Budget operates on a legal basis, generally using a modified accrual system of accounting for its General Fund, with revenues credited in the period in which they are measurable and available and expenditures debited in the period in which the corresponding liabilities are incurred.

The annual budget is proposed by the Governor by January 10 of each year for the next fiscal year (the "Governor's Budget"). Under State law, the annual proposed Governor's Budget cannot provide for projected expenditures in excess of projected revenues for the ensuing fiscal year. Following the submission of the Governor's Budget, the Legislature takes up the proposal. As required by the Balanced Budget Amendment ("Proposition 58"), beginning with fiscal year 2004-2005, the Legislature may not pass a budget bill in which General Fund expenditures exceed estimated General Fund revenues and fund balances at the time of the passage and as set forth in the budget bill. Proposition 58 requires the adoption of a balanced budget and restricts future borrowing to cover budget deficits.

Under the State Constitution, money may be drawn from the Treasury only though an appropriation made by law. The primary source of annual expenditure appropriations is the annual Budget Act as approved by the Legislature and signed by the Governor. The Budget Act must be approved by a two-thirds majority vote of each House of the Legislature. The governor may reduce or eliminate specific line items in the Budget Act or any other appropriations bill without vetoing the entire bill. Such individual line-item vetoes are subject to override by a two-thirds majority vote of each House of the Legislature.

The economic downturn of the last few years adversely affected the State's budget situation. Despite the economy's gradual recovery, the State faced estimated annual gaps between spending and revenues of roughly $20 billion as of January 2011. The State's fiscal challenges were exacerbated by unprecedented levels of debt, deferrals, and budgetary obligations accumulated over the prior decade. The 2011 Budget Act and the 2012 Budget Act have rejected the past approach of over-relying on one-time solutions. The last two budgets addressed this deficit through three dollars of ongoing spending reductions for every dollar of tax increases. Specifically, 76% of the structural deficit has been addressed through spending cuts in health and human services, corrections, education, and other areas. Under current projections, the Administration projects that the General Fund budget will be balanced in an ongoing manner for at least the next four fiscal years, which would represent the first time in over a decade that future spending is expected to stay within available revenues.

Even with this plan, risks to the budget remain. Potential cost increases associated with actions to reduce the federal deficit, federal government actions, court decisions, the pace of the economic recovery, an aging population, and rising health care and pension costs all threaten the ability of the State to achieve and maintain a balanced budget over the long term. In addition, the exact level of capital gains and income growth for top earners remains uncertain, which will have a major impact on personal income tax receipts.

The 2012-13 budget package closed a projected budget gap of $15.7 billion over the two fiscal years 2011-12 and 2012-13, and projected a $948 million reserve by June 30, 2013, by enacting a total of $16.6 billion in solutions (including a combination of expenditure reductions, additional revenues, and other solutions). General Fund revenues and transfers for Fiscal Year 2012-13 were projected at $95.9 billion, an increase of $9.1 billion compared with Fiscal Year 2011-12. General Fund expenditures for Fiscal Year 2012-13 were projected at $91.3 billion, an increase of $4.3 billion compared to the prior year. General Fund spending outside of Proposition 98 is projected to decline by $1.5 billion, or 2.8%, excluding a required one-time repayment of $2.1 billion the State borrowed from local governments in 2009. In approving the 2012 Budget Act, the Governor exercised his line-item veto power to reduce General Fund expenditures by about $129 million. The 2012 Budget Act also includes special fund expenditures of $39.4 billion and bond fund expenditures of $11.7 billion.

The 2011 Budget Act, enacted on June 30, 2011, projected that the State would end Fiscal Year 2011-12 with a $543 million General Fund reserve. General Fund revenues and transfers for Fiscal Year 2011-12 were projected at $88.5 billion, a reduction of $6.3 billion compared with Fiscal Year 2010-11. General Fund expenditures for Fiscal Year 2011-12 were projected at $85.9 billion - a reduction of $5.5 billion compared to the prior year. These amounts compare to the following figures proposed in the 2011-12 Governor's Budget:
revenues and transfers of $89.7 billion, expenditures of $84.6 billion, and an ending reserve of $955 million. In approving the 2011 Budget Act, the Governor exercised his line-item veto power to reduce General Fund expenditures by about $24 million, mostly in the Judicial Branch ($22.9 million related to parole revocation workload). The 2011 Budget Act also includes special fund expenditures of $34.2 billion and bond fund expenditures of $9.4 billion.

The estimated General Fund revenue reflected a combination of factors, including expiration of temporary taxes and surcharges (which totaled approximately $7.1 billion in Fiscal Year 2010-11) and transfer of about one percent of the State sales tax rate to local governments to fund the realignment described further below. Offsetting these reductions were improved revenue estimates for the remaining State tax sources. Expenditures reflected increases needed to offset the termination of federal stimulus funding (ARRA) which supported about $4.2 billion of General Fund programs in Fiscal Year 2010-11.

The 2010 Budget Act enacted on October 8, 2010, projected to end Fiscal Year 2010-11 with a $1.3 billion reserve. General Fund revenues and transfers for Fiscal Year 2010-11 are projected at $94.2 billion, an increase of $7.3 billion compared with Fiscal Year 2009-10. General Fund expenditures for Fiscal Year 2010-11 are projected at $86.6 billion--essentially flat compared to the prior year. These amounts compared to the following, which were proposed in the 2010-11 Governor's Budget: revenues and transfers of $89.3 billion, expenditures of $82.9 billion, and an ending reserve of $1.0 billion. In approving the 2010 Budget Act, the Governor exercised his line-item veto power to reduce General Fund expenditures by about $960 million, mostly in the areas of health care and social services. The 2010 Budget Act also included Special Fund expenditures of $30.9 billion and Bond Fund expenditures of $7.9 billion.

Prior to enactment of the 2010 Budget Act, the Administration had reported a budget gap of $19.3 billion, including a $1.3 billion reserve based on projected General Fund revenues and transfers in Fiscal Year 2010-11 compared against projected expenditures (assuming the workload budget from Fiscal Year 2009-10, adjusted for increases in costs and certain other developments but no changes in law). The 2010 Budget Act planned to close the estimated budget gap by a combination of expenditure reductions, federal funds, and other solutions. The majority of these solutions were one-time or temporary in nature, so that budget gaps would recur in Fiscal Year 2011-12 and beyond. Furthermore, many of the assumed solutions did not come to fruition, and the 2010 Budget Act soon fell out of balance.

The State of California is by far the most populous state in the nation, 50% larger than Texas, the second-ranked state, according to the 2010 U.S. Census. The State's 2011 population of about 37.5 million represented over 12% of the total United States population.

California's economy, the largest among the 50 states and most diverse in the world, has major components in high technology, trade, entertainment, agriculture, manufacturing, government, tourism, construction and services. The relative proportion of the various components of the California economy closely resembles the make-up of the national economy.

In 2011, per capita personal income in California averaged $44,481, compared to $41,663 for the nation. The unemployment rate in 2011 was 11.7%, compared to 8.9% for the nation. The trade, transportation and utilities sector represented the largest component (18.9%) of California's non-farm workforce, followed by federal, state and local government (17.0%), professional and business services (15.1%), educational and health services (13.0%) and leisure and hospitality (10.9%).

The State is a party to numerous legal proceedings. Certain of these proceedings have been identified by the State as having a potentially significant fiscal impact upon the State's expenditures or its revenues.

The Arizona Portfolio seeks the highest level of current income exempt from both federal income tax and State of Arizona ("Arizona" or the "State") personal income tax that is available without assuming what AllianceBernstein L.P., the Funds' adviser (the "Adviser") considers to be undue risk. As a matter of fundamental policy, at least 80% of the Portfolio's net assets will be so invested (except when the Portfolio is in a temporary defensive position), although it is anticipated that under normal circumstances substantially all of the Portfolio's assets will be invested in such Arizona securities. As a matter of fundamental policy, the Arizona Portfolio will invest at least 80% of its net assets in municipal securities the interest on which is exempt from federal income tax.

The following is based on information obtained from the Comprehensive Annual Financial Report of the State of Arizona for the fiscal year ended June 30, 2011, as well as other State publications.

Fueled by multiple consecutive years of substantial tax reductions, Arizona's economy was fast-growing in the 1990s. Personal income taxes were slashed by 31% across the board, and in 2001 the State's corporate income tax was reduced to 6.9% from 7.9%. From 1993 through 1999, the strongest seven-year period of job growth in Arizona history, almost 600,000 private sector jobs were created. According to U.S. Census data, the population of Arizona grew by 40% during the 1990s, second only to Nevada, and is projected to reach 11.17 million by 2050 (a 118% increase from 5.13 million in 2000). Arizona is the second fastest growing state in the United States, and from 1990 to 2006 its population grew at a rate over three times that of the U.S. population. The continuing population growth has been driven by jobs, affordable housing, a warm climate and entrepreneurial flight from more heavily regulated states such as California. It is likely that affordable land and a pervasive pro-development culture will continue to attract employers and job seekers. However, Arizona's population growth peaked at 3.6% in 2005 and 2006. Arizona's population as of April 1, 2010 was 6,392,017, approximately 204,000 less than the July 2009 estimates.

After increasing 1.2% in 2007, Arizona's total non-farm employment decreased by -1.3% in 2008, by -1.1% in 2009 and by -1.0% in 2010. The main economic sectors include services, trade and construction. The single largest economic sector in Arizona is services (including federal, state and local government services), employing 1,082,882 people and retail trade, employing 358,069 people, or 33.8% and 11.2%, respectively, of the State's employment during 2010. Many of these jobs are directly related to tourism, an industry that injects almost $12 billion into the State's economy each year. Arizona's unemployment rate was 8.1% in October 2012, compared to 9.2% in October 2011. Nationwide, the unemployment rate was 7.9% and 8.9% during the same periods.

Geographically, Arizona is the nation's sixth largest state (113,635 square miles). The State is divided into fifteen counties. Two of these counties, Maricopa County (including Phoenix) and Pima County (including Tucson), are more urban in nature and account for 75% of total population and 80% of total wage and salary employment in Arizona, based on 2008 estimates.

Per capita income levels in Arizona have traditionally lagged behind the United States average. However, Arizona's increase in per capita personal income was second in the nation in 1994 and led the nation in 1995. The diversification of Arizona's economy, and its robust performance during the 1990s, led to these increases in per capita income, although Arizona still lags behind, and is expected to continue to lag behind, the United States average per capita income. With per capita personal income of $35,062 in 2011, compared to $41,663 nationwide, Arizona ranked 40th nationwide.

The Finance Division of the Arizona Department of Administration is responsible for preparing and updating financial statements and reports. The State's financial statements are prepared in accordance with generally accepted governmental accounting principles.

While general obligation bonds are often issued by local governments, the State of Arizona is constitutionally prohibited from issuing general obligation debt. The State relies on pay-as-you-go capital outlays, revenue bonds, grant anticipation notes ("GANs") and lease purchase transactions to finance capital projects. Each such project is individually rated based on its specific creditworthiness.

GANs are an innovative financing mechanism secured by revenues received from the Federal Highway Administration under a grant agreement and certain other Federal-Aid revenues. The State issued GANs to help pay for the costs of acquiring right-of-way for design and construction of certain controlled-access highways within Maricopa County. Lease purchase transactions are funded by certificates of participation ("COPs"). The State has used COPs primarily to construct prisons and to purchase and construct other buildings for State government operations. Additionally, the State has issued COPs to finance new school facilities approved by voters under Proposition 301. As of June 30, 2011, there were $5.271 billion in revenue bonds, $392 million in GANs and $3.424 billion in COPs outstanding.

Arizona's Constitution limits the amount of debt payable from general tax revenues that may be contracted by the State to $350,000. This, as a practical matter, precludes the use of general revenue bonds for State projects. Additionally, certain other issuers have the statutory power to issue obligations payable from other sources of revenue which affect the whole or large portions of the State. The debts are not considered debts of the State because they are secured solely by separate revenue sources. For example, the Arizona Department of Transportation may issue debt for highways that is paid from revenues generated from, among other sources, State gasoline taxes. The three public universities in Arizona may issue debt for university building projects payable from tuition and other fees. The Arizona Power Authority and the University Medical Center may also issue debt.

Arizona's Constitution also restricts the debt of certain of the State's political subdivisions. No county, city, town, school district, or other municipal corporation of the State may for any purpose become indebted in any manner in an amount exceeding 6% of the taxable property in such county, city, town, school district, or other municipal corporation without the assent of a majority of the qualified electors thereof voting at an election provided by law to be held for that purpose; provided, however, that (a) under no circumstances may any county or school district of the State become indebted in an amount exceeding 15% (or 30% in the case of a unified school district) of such taxable property and (b) any incorporated city or town of the State with such assent may be allowed to become indebted up to a 20% additional amount for (i) supplying such city or town with water, artificial light, or sewers, when the works for supplying such water, light, or sewers are or shall be owned and controlled by the municipality, (ii) the acquisition and development by the incorporated city or town of land or interests therein for open space preserves, parks, playgrounds and recreational facilities, and (iii) the construction, reconstruction, improvement or acquisition of streets, highways or bridges or interests in land for rights-of-way for streets, highways or bridges. Irrigation, power, electrical, agricultural improvement, drainage, flood control and tax levying public improvement districts are, however, exempt from the restrictions on debt set forth in Arizona's constitution and may issue obligations for limited purposes, payable from a variety of revenue sources.

Arizona's local governmental entities are subject to certain other limitations on their ability to assess taxes and levies which could affect their ability to meet their financial obligations. Subject to certain exceptions, the maximum amount of property taxes levied by any Arizona county, city, town or community college district for its operations and maintenance expenditures cannot exceed the amount levied in a preceding year by more than 2%. Certain taxes are specifically exempt from this limit, including taxes levied for debt service payments.

Arizona is required by law to maintain a balanced budget. To achieve this objective, the State has, in the past, utilized a combination of spending reductions and tax increases. For the 1990-91 budget, the Arizona Legislature increased taxes by over $250 million, which led to a citizen's referendum designed to repeal the tax increase until the voters could consider the measure at a general election. After an unsuccessful court challenge, the tax increase went into effect. In 1992, Arizona voters adopted Proposition 108, an initiative and amendment to the State's Constitution that requires a two-thirds vote by the Legislature and signature by the Governor for any net increase in State revenues, including the imposition of a new tax, an increase in a tax rate or rates and a reduction or elimination of a tax deduction. If the Governor vetoes the measure, then the legislation will not become effective unless it is approved by an affirmative vote of three-fourths of the members of each house of the Legislature. This makes any future tax increase more difficult to achieve. The conservative nature of Arizona's Legislature means that tax increases are less likely. From 1992 through 1996, the State adopted substantial tax relief, including the 20% individual income tax reduction described above. In 1996, the Legislature reduced property taxes by $200 million, in part by repealing the State tax levy of $.47 per $100 assessed valuation. Additional tax relief initiatives were enacted in 1999 and 2001.

Arizona accounts for its revenues and expenditures within various funds. The largest fund supporting the operation of State government is the General Fund, which accounts for the majority of receipts from sales and income taxes. The General Fund ended the June 30, 2012 fiscal year with a total fund balance of $689.742 million, compared to $14.812 million for the June 30, 2011 fiscal year.

The State's Enterprise Funds are comprised of governmental and quasi-governmental agencies that provide goods and services to the public on a charge-for-service basis. One of the largest Enterprise Funds is the Lottery Fund. The Lottery Fund ended the June 30, 2012 fiscal year with net assets of $10.0 million and generated $247.1 million of operating revenues during that period, compared to $5.6 million and $551.8 million, respectively, in the June 30, 2011 fiscal year.

The State has a variety of claims pending against it that arose during the normal course of its activities. Management believes, based on advice of legal counsel, that losses, if any, resulting from settlement of these claims will not have a material effect on the financial position of the State.

The Massachusetts Portfolio seeks the highest level of current income exempt from both federal income tax and Commonwealth of Massachusetts ("Massachusetts" or the "Commonwealth") personal income tax that is available without assuming what the Adviser considers to be undue risk. As a matter of fundamental policy, at least 80% of the Portfolio's net assets will be so invested (except when the Portfolio is in a temporary defensive position), although it is anticipated that under normal circumstances substantially all of the Portfolio's assets will be invested in such Massachusetts securities. As a matter of fundamental policy, the Massachusetts Portfolio will invest at least 80% of its net assets in municipal securities the interest on which is exempt from federal income tax.

The following was obtained from an Official Statement, dated September 25, 2012, relating to $400,000,000 General Obligation Bonds, Consolidated Loan of 2012, Series C, and The Commonwealth of Massachusetts Information Statement dated September 12, 2012.

Massachusetts is a densely populated state with a well-educated population, comparatively high income levels, low rates of unemployment, and a relatively diversified economy. While the total population of Massachusetts has remained fairly stable in the last 25 years, the next 18 years are expected to bring about a continued change in the age distribution of the population. The share of the 65 and over age group, and especially the 85 and over age group, will continue to grow. Income levels in Massachusetts since 1980 have grown significantly more than the national average, and a variety of measures of income show that Massachusetts residents have significantly higher rates of annual income than the national average. These high levels of income have been accompanied by a significantly lower poverty rate and, with the exception of the recession of the early 1990s and a seventeen-month period starting in December 2005, considerably lower unemployment rates in Massachusetts than in the United States since 1980. In October 2007, the unemployment rate was 4.4%, the lowest it had been since October 2001. By June 2012, the Massachusetts unemployment rate was 6.0%, compared to 6.5% in March 2012.

Average per capita personal income for Massachusetts residents was $53,621 in 2011, as compared to the national average of $41,663. While per capita personal income is, on a relative scale, higher in Massachusetts than in the United States as a whole, this is offset to some extent by the higher cost of living in Massachusetts.

The Massachusetts services sector, with 48.9% of the non-agricultural work force in 2010-2011, is the largest sector in the Massachusetts economy. Government employment represents 13.7% of total non-agricultural employment in Massachusetts. After significant declines in 2002 and 2003, total non-agricultural employment in Massachusetts increased 0.5% in 2005 and continued to increase every year through 2008. After a 0.3% increase in 2010, employment grew 0.6% in 2011, still 3.9% below the last peak in 2001. The comparable growth rate for the nation in 2011 was up 1.1% from 2010 and down 0.4% from 2001. The latest seasonally adjusted estimate (3.2 million for May 2012) is about 135,400 below the peak month in 2001 (3.4 million in February 2001) and about 28,100 below the 2009 peak in January (3.23 million). In 2004, manufacturing employment declined 3.5% from 2003, a much smaller decline than the annual declines in the previous two years (10.2% in 2002 and 7.0% in 2003). The manufacturing employment declines in 2007 and 2008 (2.1% and 3.1%, respectively) were similar to the steady declines prior to 2002. After a steep decline of 9.7% in 2009, the decline in 2010 was 2.2%, followed by a slight uptick of 0.2% in 2011.

The economy of Massachusetts remains diversified among several industrial and non-industrial sectors. In 2010-2011, the four largest sectors of the Massachusetts economy (real estate and rental and leasing, professional and technical services, manufacturing, and health care and social assistance) contributed almost 46.0% of the total Massachusetts Gross Domestic Product.

Under its Constitution, the Commonwealth may borrow money (a) for defense or in anticipation of receipts from taxes or other sources, any such loan to be paid out of the revenue of the year in which the loan is made, or (b) by a two-thirds vote of the members of each house of the Legislature present and voting thereon. Legislation enacted in December 1989 imposes a limit on the amount of outstanding "direct" bonds of the Commonwealth. The limit was set at $6.8 billion in fiscal year 1991 and provided that the limit for each subsequent fiscal year was to be 105% of the previous fiscal year's limit. As most recently amended in 2012, the law sets a fiscal 2012 limit of $17.07 billion, and the statutory limit on direct debt during fiscal 2013 is approximately $17.92 billion.

The Commonwealth is authorized to issue three types of direct debt -- general obligation debt, special obligation debt and federal grant anticipation debt.

Certain independent authorities and agencies within the Commonwealth are statutorily authorized to issue bonds and notes for which the Commonwealth is either directly, in whole or in part, or indirectly liable. The Commonwealth's liabilities with respect to these bonds and notes are classified as either (a) Commonwealth-supported debt, (b) Commonwealth-guaranteed debt or
(c) indirect obligations.

On June 30, 2010 the Governor approved the fiscal 2011 budget, which totaled $27.570 billion. The Governor vetoed approximately $457 million from the budget that was enacted by the Legislature. Such vetoes included $372 million of appropriations funded from additional federal Medicaid matching funds (FMAP) that were assumed in the budget, but which the United States Congress had not yet approved. (The FMAP extension legislation was subsequently approved.) A six-month extension of the enhanced FMAP rate was anticipated in the Governor's fiscal 2011 budget proposals filed in January, as well as in both the House and Senate versions of the budget. In addition, the budget enacted by the Legislature included $54 million in anticipated federal assistance for needy families that has not yet been approved by Congress. The budget enacted by the Legislature also included approximately $21 million in Lottery revenues in excess of revenue projections given by the State Lottery Commission. The Governor has vetoed certain funding in the fiscal 2011 budget to solve for these anticipated exposures.

The fiscal 2011 budget included a $100 million withdrawal from the Stabilization Fund, the use of fiscal 2011 interest earnings on the Stabilization Fund and an additional $95 million in savings by suspending the statutory carryover of the General Fund balance into fiscal 2010. Taking all that into account, the Stabilization Fund was projected to have a $556 million balance at the end of fiscal 2011. The fiscal 2011 budget also relied on $809 million in remaining available federal funds under the American Recovery and Reinvestment Act of 2009.

Fiscal 2011 ended on June 30, 2011. On October 27, 2011, Governor Patrick signed a $169 million supplemental budget bill. This final supplemental budget to close out Fiscal 2011 results in a total fiscal 2011 deposit to the Stabilization Fund of $712 million, bringing the Fund's fiscal 2011 year-end balance to approximately $1.4 billion, higher than earlier contemplated.

On January 26, 2011, the Governor filed with the Legislature his budget recommendations for fiscal 2012. The Governor's recommendations called for total spending in fiscal 2012 to be less than total anticipated spending in fiscal 2011 by $570 million, or 1.8%, after accounting for close to $400 million of off-budget spending in fiscal 2011 for Chapter 70 education aid, higher education and special education from federal stimulus funds that would otherwise be accounted for within the State budget. After accounting for one-time resources supporting the fiscal 2011 budget and estimated changes in tax and non tax revenues, the total available resources expected to be available in fiscal 2012 were $1.2 billion less than fiscal 2011. The Governor proposed $627 million in additional resources to support the fiscal 2012 budget resulting in a total budget that was $570 million below fiscal 2011 estimated spending.

Included in the Governor's fiscal 2012 budget, or in legislation filed concurrently with the budget recommendations, were a number of reform initiatives including: pension reform; criminal justice reform; homeless shelter reform; and a municipal relief package. Many of these and other reform proposals were expected to generate savings that have been assumed in the Governor's fiscal 2012 budget proposal.

The budget was enacted by the Legislature on July 1, 2011 and approved by the Governor on July 11, 2011. A $1.250 billion interim budget for the first ten days of fiscal 2012 had been enacted by the Legislature and approved by the Governor on June 27, 2011. Total spending in the final fiscal 2012 budget approved by the Governor amounted to approximately $30.598 billion. The budget assumed tax revenues of $20.615 billion, reflecting the fiscal 2012 consensus tax estimate of $20.525 billion, which was adjusted for the impact of revenue initiatives enacted as part of the budget. The fiscal 2012 budget authorized a $200 million withdrawal from the Stabilization Fund, the use of fiscal 2012 interest earnings on the Stabilization Fund and an additional $103.7 million in savings achieved by suspending the statutorily required deposit into the Stabilization Fund of 0.5% of total tax revenue. The fiscal 2012 budget projections assumed a transfer of $185 million from the Stabilization Fund rather than the authorized $200 million. On that assumption the Stabilization Fund was projected to have $884.9 million balance at the end of fiscal 2012.

Fiscal 2012 ended on June 30, 2012, but, as is customary, the Executive Office of Administration & Finance and the State Comptroller continue to work to close out the fiscal year with supplemental funding requests. After accounting for all supplemental appropriations and updated revenue and spending projections, the Executive Office for Administration and Finance expects fiscal 2012 to end in balance without requiring any unbudgeted withdrawals from the Stabilization Fund. In fact, this projection assumes a net deposit to the Stabilization Fund in fiscal 2012 of $159.9 million, due to $375 million in one-time tax settlements in excess of $10 million being deposited to the Stabilization Fund. These deposits are partially offset by the budgeted $200 million withdrawal of Stabilization Fund reserves to support the operating budget. After accounting for these changes, the Stabilization Fund is projected to have a balance of $1.539 billion at the end of fiscal 2012.

The fiscal 2013 budget was enacted by the legislature on June 28, 2012 and approved by the Governor on July 8, 2012. A $1.250 billion interim budget for the first ten days of fiscal 2013 had been enacted by the Legislature and approved by the Governor on June 26, 2012. Total spending in the fiscal 2013 budget approved by the Governor amounts to approximately $32.508 billion, after accounting for $31.7 million in veto overrides. Spending contemplated by the fiscal 2013 budget is approximately $1.225 billion, or 3.93%, greater than fiscal 2012 estimated spending levels at the time of the signing of the budget.

The fiscal 2013 budget relies on $616 million in one-time resources to support recurring spending, down from the fiscal 2012 assumption of $651 million. Among the one-time resources assumed as part of the fiscal 2013 budget is a $350 million withdrawal from the Stabilization Fund, the use of fiscal 2013 interest earnings on the Stabilization Fund and an additional $110.1 million in savings achieved by suspending the statutorily required deposit into the Stabilization Fund of 0.5% of total tax revenue. The Stabilization Fund is projected to have a $1.284 billion balance at the end of fiscal 2013.

There are pending in courts within the Commonwealth and in the Supreme Court of the United States various suits in which the Commonwealth is a party. In the opinion of the Attorney General, no litigation is pending or, to her knowledge, threatened that is likely to result, either individually or in the aggregate, in final judgments against the Commonwealth that would affect materially its financial condition.

The Michigan Portfolio seeks the highest level of current income exempt from both federal income tax and State of Michigan ("Michigan" or the "State") personal income tax that is available without assuming what the Adviser considers to be undue risk. As a matter of fundamental policy, at least 80% of the Portfolio's net assets will be so invested (except when the Portfolio is in a temporary defensive position), although it is anticipated that under normal circumstances substantially all of the Portfolio's assets will be invested in such Michigan securities. As a matter of fundamental policy, the Michigan Portfolio will invest at least 80% of its net assets in municipal securities the interest on which is exempt from federal income tax.

The following is based on information obtained from an Official Statement, dated November 15, 2012, relating to $92,305,000 State of Michigan General Obligation Environmental Program Refunding Bonds, Series 2012.

In recent years, Michigan's economy has been diversifying, although manufacturing is still an important component of the State's economy. In 2011, total manufacturing employment averaged 506,100, compared to 464,800 in 2010. Michigan's average unemployment rate in 2011 was 10.3%, down from 12.7% in 2010.

Legislation requires that the administration and legislative fiscal agencies prepare two economic forecasts and revenue estimates each year. These are presented to a Consensus Revenue Estimating Conference in January and May of each year. In addition, any one of the three conference principals may call a special revenue conference at any time during the year. The May 2012 conference was held on May 16, 2012. The May 2012 forecast is summarized below.

The State's U.S. economic forecast projects the U.S. economy to grow 2.2% in 2012, followed by 2.5% growth in 2013. Light vehicle sales will rise to 14.4 million units in 2012 and then rise to 15.1 million units in 2013.

The U.S. Consumer Price Index (CPI) is projected to increase 2.3% in 2012 and 2.0% in 2013. Ninety-day T-bill rates are expected to average 0.1% in 2012 and 0.2% in 2013.

Total Michigan wage and salary employment is projected to increase 1.6% in 2012 and 1.1% in 2013. The State's unemployment rate is projected to fall to 8.5% in 2012 and 8.0% in 2013.

Michigan personal income is expected to rise 3.0% in 2012 and 2.6% in 2013. Prices, as measured by the Detroit CPI, are forecast to increase 2.6% in 2012 and 1.9% in 2013. Consequently, real (inflation adjusted) State personal income is projected to increase 0.4% in 2012 and 0.7% in 2013.

As amended in 1978, Michigan's Constitution limits the amount of total State revenues that may be raised from taxes and other sources. State revenues (excluding federal aid and revenues used for payment of principal and interest on general obligation bonds) in any fiscal year are limited to a specified percentage of Michigan personal income in the prior calendar year or an average of the prior three calendar years, whichever is greater. The percentage is based upon the ratio of the 1978-79 fiscal year revenues to total 1977 Michigan personal income (the total income received by persons in Michigan from all sources as defined and officially reported by the United States Department of Commerce). If revenues in any fiscal year exceed the revenue limitation by one percent or more, the entire amount exceeding the limitation must be rebated in the following fiscal year's personal income tax or single business tax. Any excesses of less than one percent may be transferred into Michigan's Counter Cyclical Budget and Economic Stabilization Fund ("BSF"), Michigan's "Rainy Day Fund." Michigan may raise taxes in excess of the limit in emergency situations when deemed necessary by the Governor and two-thirds of the members of each house of the Legislature.

The State Constitution provides that the proportion of State spending paid to all units of local government to total State spending may not be reduced below the proportion in effect in the 1978-79 fiscal year. The State originally determined that proportion to be 41.6%. The proportion has since been recalculated and is now 48.97%. If such spending does not meet the required level in a given year, an additional appropriation for local government units is required by the "following fiscal year," which means the year following the determination of the shortfall, according to an opinion issued by the State's Attorney General. Spending for local units met this requirement for fiscal years 1993-94 through 2010-11.

The State Constitution also requires the State to finance any new or expanded activity of local governments mandated by State law. Any expenditures required by this provision would be counted as State spending for local units of government for purposes of determining compliance with the provision cited above.

Michigan finances its operations through its General Fund and special revenue funds. The Michigan Constitution provides that proposed expenditures from, and revenues of, any fund must be in balance and that any prior year's surplus or deficit in any fund must be included in the succeeding year's budget for that fund.

Total revenue and other sources of funds for general governmental operations for Fiscal Year 2010-11 were $9,027.2 million and were projected to be $9,511.5 million for Fiscal Year 2011-12.

Expenditures and other uses of funds for governmental operations in Fiscal Year 2010-11 were $8,473.5 million, of which $1,818.5 million supported K-12 and higher education and $3,517.1 million supported health services. Expenditures and other uses of funds for governmental operations in Fiscal Year 2011-12 were projected to be $8,855.3 million, of which $1,297.0 million supported K-12 and higher education and $3,738.2 million supported health services.

The BSF was established in 1977 to serve as the State's "savings" account. Calculated on an accrual basis, the unreserved ending balance of the BSF was $2.1 million on September 30, 2007, $2.2 million on September 30, 2008, $2.2 million on September 30, 2009, and $2.2 million on September 30, 2010. During fiscal year 2011, the BSF was reclassified and accounted for as a subfund of the General Fund where its committed balance was $2.2 million on September 30, 2011.

The Michigan Constitution limits Michigan general obligation debt to (i) short-term debt for State operating purposes which must be repaid in the same fiscal year in which it is issued and which cannot exceed 15% of the undedicated revenues received by Michigan during the preceding fiscal year, (ii) short-and long-term debt unlimited in amount for the purpose of making loans to school districts and (iii) long-term debt for voter-approved purposes.

The amount of debt incurred by the State for the purpose of making loans to school districts is recommended by the State Treasurer, who certifies the amounts necessary for loans to school districts for the ensuing two calendar years. The bonds may be issued in whatever amount is required without voter approval. All other general obligation bonds issued by the State must be approved as to amount, purpose and method of repayment by a two-thirds vote of each house of the Legislature and by a majority vote of the public at a general election. There is no limitation as to number or size of such general obligation issues.

The Governor's fiscal year 2010-11 Executive Budget was submitted to the Legislature on February 11, 2010. Revenues for fiscal year 2010-11 for the Executive budget were estimated at the January 11, 2010 Consensus Revenue Estimating Conference. These estimates were revised at the regularly scheduled Consensus Revenue Estimating Conference held on May 21, 2010, January 14, 2011 and May 16, 2011. The legislature enacted a balanced budget on September 29, 2010.

Current revenue estimates for 2010-11, which were reached at the May 2011 Consensus Revenue Estimating Conference, are as follows:

General Purpose revenue generated from enacted ongoing sources and estimated at the Consensus Revenue Estimating Conference is estimated to be $7,524.0 million. After factoring in revenue items not included in the revenue estimates, including certain transfers and any other revenue adjustments, total available General Fund - General Purpose resources are forecast to be $8,880.5 million.

Income tax collections will total an estimated $6,221.5 million. The General Fund - General Purpose portion of net income tax collections will equal an estimated $4,252.2 million for fiscal year 2010-11.

The single business tax, which was repealed effective December 31, 2007, is not expected to generate any net revenue in fiscal year 2010-11. Net Michigan business tax collections for fiscal year 2010-11 are forecast to be $2,060.0 million. The General Fund portion of the Michigan business tax revenue is estimated at $1,320.8 million.

Gross sales tax collections are forecast to total $6,498.6 million. The General Fund - General Purpose share of sales tax revenue will total an estimated $617.9 million in fiscal year 2010-11, which includes enacted reductions in revenue sharing payments.

Gross use tax collections are forecast to total $1,149.0 million in fiscal year 2010-11. In addition, the General Fund will receive an estimated $380.6 million from the use tax on medical services provided by Medicaid managed care organizations in fiscal year 2010-11. The General Fund - General Purpose portion of use tax collections will total an estimated $1,146.6 million.

The Governor's fiscal year 2011-12 Executive Budget was submitted to the Legislature on February 17, 2011 and signed by the Governor on June 21, 2011. Revenues for fiscal year 2011-12 for the Executive Budget were estimated at the January 14, 2011 Consensus Revenue Estimating Conference. These estimates were revised at the regularly scheduled Consensus Revenue Estimating Conference held on May 16, 2011. The legislature enacted a balanced budget on May 26, 2011. Actual revenues for fiscal year 2011-12 will vary from the current estimates.

General Purpose revenue generated from enacted ongoing sources and estimated at the Consensus Revenue Estimating Conference is estimated to be $7,650.8 million. After factoring in revenue items not included in the revenue estimates, including the impact of the recently enacted personal income tax and business tax reforms, certain transfers, other revenue adjustments, and the beginning balance, total available General Fund - General Purpose resources are forecast to be $8,703.5 million.

Income tax collections will total an estimated $6,797.5 million including $559 million in new revenue from the recently enacted changes. The General Fund - General Purpose portion of net income tax collections will equal an estimated $4,697.7 million for fiscal year 2011-12.

The Michigan business tax, which has been eliminated for most businesses effective January 1, 2012, will generate an estimated $604.5 million in fiscal year 2011-12. The Michigan business tax will be replaced by a corporate income tax (effective January 1, 2012) and this new tax is expected to generate $460.2 million in fiscal year 2011-12. All of the Michigan business tax and corporate income tax revenue generated in fiscal year 2011-12 will go to the General Fund.

Gross sales tax collections are forecast to total $6,646.1 million in fiscal year 2011-12. The General Fund - General Purpose share of sales tax revenue will total an estimated $719.5 million, which includes enacted reductions in revenue sharing payments.

Gross use tax collections are forecast to total $1,269.9 million in fiscal year 2011-12. The General Fund - General Purpose portion of use tax collections will total an estimated $846.6 million. During fiscal year 2011-12, the 6% use tax on medical services provided by Medicaid managed care organizations will be eliminated and replaced with a new and revenue neutral 1% tax on certain paid health care claims. Unlike the use tax, the revenue from this new tax will be restricted and not go to the General Fund. This restricted revenue source will provide State matching funds to receive federal funds to support Michigan's Medicaid program.

The Governor's fiscal year 2012-13 Executive Budget was submitted to the Legislature on February 9, 2012 and signed by the Governor in June 2012. Revenues for fiscal year 2012-13 for the Executive Budget were estimated at the January 13, 2012 Consensus Revenue Estimating Conference and these estimates were revised at the May 16, 2012 conference. Actual revenues for fiscal year 2012-13 will vary from the current estimates.

General Purpose revenue generated from enacted ongoing sources and estimated at the Consensus Revenue Estimating Conference is estimated to be $8,969.9 million. After factoring in revenue items not included in the revenue estimates, including certain transfers, tax changes enacted subsequent to the revenue conference, other revenue adjustments, and the beginning balance, total available General Fund - General Purpose resources are forecast to be $9,137.0 million.

Income tax collections will total an estimated $7,907.5 million, including $1,249.5 million in new revenue from the recently enacted changes. The General Fund - General Purpose portion of net income tax collections will equal an estimated $5,576.4 million for fiscal year 2012-13.

The Michigan business tax, which was repealed for most businesses effective January 1, 2012, will pay out more in refunds than will be collected in revenue in fiscal year 2012-13 and, as a result, net collections are estimated at a negative $552.4 million. The new corporate income tax is expected to generate $838.9 million in fiscal year 2012-13. All of the loss in Michigan business tax revenue in fiscal year 2012-13 will impact the General Fund and all of the revenue generated by the new corporate income tax will go to the General Fund.

Gross sales tax collections are forecast to total $7,194.1 million in fiscal year 2012-13. The General Fund - General Purpose share of sales tax revenue will total an estimated $674.1 million, which includes enacted reductions in revenue sharing payments and a one-time transfer to the State Trunkline Fund.

Gross use tax collections are forecast to total $1,252.0 million in fiscal year 2012-13. The General Fund - General Purpose portion of use tax collections will total an estimated $829.7 million.

The State is party to various legal proceedings seeking damages or injunctive or other relief. In addition to routine litigation, certain of these proceedings could, if unfavorably resolved from the point of view of the State, substantially affect State programs or finances. The State is also a party to various legal proceedings which, if resolved in the State's favor, would result in contingency gains to the State's General Fund balance, but without material effect upon the Fund's balance. The ultimate dispositions and consequences of all of these proceedings are not presently determinable.

The Minnesota Portfolio seeks the highest level of current income exempt from both federal income tax and State of Minnesota ("Minnesota" or the "State") personal income tax that is available without assuming what the Adviser considers to be undue risk. As a matter of fundamental policy, at least 80% of the Portfolio's net assets will be so invested (except when the Portfolio is in a temporary defensive position), although it is anticipated that under normal circumstances substantially all of the Portfolio's assets will be invested in such Minnesota securities. As a matter of fundamental policy, the Minnesota Portfolio will invest at least 80% of its net assets in municipal securities the interest on which is exempt from federal income tax.

The following is based on information obtained from an Official Statement, dated August 7, 2012, relating to $658,500,000 State of Minnesota General Obligation Bonds, consisting of $422,000,000 General Obligation State Various Purpose Bonds, Series 2012A, $234,000,000 General Obligation State Trunk Highway Bonds, Series 2012B, and $2,500,000 General Obligation Taxable State Bonds, Series 2012C.

Minnesota's population grew by 12.4% from 1990 to 2000, about the same as the United States as a whole during that period. During the period 2000-2010 the population in Minnesota grew by 7.2%, compared to 9.5% nationally. Minnesota population is currently forecast to grow at an annual compounded rate of 0.79% through 2030, compared to 0.87% nationally.

In 2011, the structure of Minnesota's economy paralleled the structure of the United States economy as a whole. State employment in fourteen major sectors was distributed in approximately the same proportions as national employment. In all sectors except one (education and health services), the share of total State employment was within two percentage points of national employment share.

In the period 1990 to 2000, overall employment growth in Minnesota increased by 23.12%, exceeding the nation, whose growth increased by 19.9%. Manufacturing has been a strong sector, with Minnesota employment growth outperforming that of the United States in the 1990-2000 and 2000-2010 periods. In the durable goods industries, the State's employment in 2010 was highly concentrated in computers and electronics, fabricated metal products, and machinery categories. Of particular importance is the computers and electronics category in which 25.0% of the State's durable goods employment was concentrated in 2010, as compared to 15.6% for the United States as a whole.

The importance of the State's rich resource base for overall employment is apparent in the employment mix in non-durable goods industries. In 2011, 39.7% of Minnesota's non-durable goods employment was concentrated in food manufacturing, compared to 32.7% for the United States as a whole. Food manufacturing relies heavily on renewable resources in the State. Over half of the State's acreage is devoted to agricultural purposes. Printing and publishing is also relatively more important in the State than in the U.S.

Mining is currently a less significant factor in the State economy than it once was. Mining employment, primarily in the iron ore or taconite industry, and logging dropped from 8.4 thousand employed in 1990 to 6.6 thousand employed in 2011. However, Minnesota retains vast quantities of taconite as well as copper, nickel, cobalt, and peat which may be utilized in the future.

Since 1990, State per capita personal income has usually been within nine percentage points of national per capita personal income and has generally remained above the national average. In 2011, Minnesota per capita personal income was 108.2% of its U.S. counterpart. In level of personal income, Minnesota ranked seventh in 1990 and fourth in 2010 among 12 states in the North Central Region. During the period 1990 to 2000, Minnesota ranked first in growth of personal income and sixth during the period 2000 to 2010 among the 12 states in the North Central Region. Over the period 1990 to 2000, Minnesota non-agricultural employment grew 25.7% while the entire North Central Region grew 18.7%. During the 2000-2010 period, Minnesota non-agricultural employment declined by 1.6%, while regional non-agricultural employment declined by 6.9%.

In 2007, Minnesota's unemployment rate averaged 4.6%, the same as the national average. In 2008, Minnesota's unemployment rate averaged 5.4%, compared to the national average of 5.8%. In 2009, Minnesota's unemployment rate averaged 8.0%, compared to the national average of 9.3%. In 2010, Minnesota's unemployment rate averaged 7.3%, compared to the national average of 9.6%. In 2011, Minnesota's unemployment rate averaged 6.4%, compared with the national average of 9.0%.

Minnesota operates on a biennial budget basis. Prior to each fiscal year of a biennium, the Department of Finance allots a portion of the applicable biennial appropriation to each State agency or other entity for which an appropriation has been made. Supplemental appropriation and changes in revenue measures are sometimes adopted by the Legislature during the biennium. An agency or entity may not expend moneys in excess of its allotment. The State's principal sources of non-dedicated revenues are taxes of various types. The Accounting General Fund receives no unrestricted federal grants. The only federal funds deposited into the Accounting General Fund are to reimburse the State for expenditures on behalf of federal programs.

Prior to 1995, Minnesota law established a Budget Reserve and Cash Flow Account in the General Fund which served two functions. In 1995, the Minnesota legislature separated the Budget Reserve and Cash Flow Account into two separate accounts; the Cash Flow Account and the Budget Reserve Account, each having a different function.

The Cash Flow Account was established in the General Fund for the purpose of providing sufficient cash balances to cover monthly revenue and expenditure imbalances. The use of funds from the Cash Flow Account is governed by statute. The Legislature established the Cash Flow Account at $95 million for the Current Biennium (July 1, 2011 - June 30, 2013).

The Budget Reserve Account was established in the General Fund for the purpose of reserving funds to cushion the State from an economic downturn. The use of funds from the Budget Reserve Account is governed by statute. The Budget Reserve Account balance was set for the Current Biennium at $0 million.

The Minnesota Department of Management and Budget ("MMB") prepared a revised forecast of General Fund revenues and expenditures for the Previous and Current Biennium on February 28, 2011 with a projected ending budgetary balance of $666 million in the Previous Biennium. A total of $267 million was added to the projected balance for the Previous Biennium due to additional State tax revenue from the slightly improved economic forecast and a small reduction in projected spending.

Revenues: General Fund revenues were expected to total $30.662 billion in the Previous Biennium, $97 million (0.3%) more than previously forecast. The change in revenues was small with most of the gain resulting from small increases in income, sales and corporate tax forecasts.

Expenditures: General fund expenditures were projected to be $30.168 billion, $164 million (0.6%) below earlier estimates. $165 million of the decrease was in health and human services, largely due to reflecting a delay in the effective date of early expansions of Medical Assistance ($82 million) and higher than expected federal matching for Medical Assistance ($30 million). The expenditure savings were largely one-time and do not continue into the Next Biennium.

Reserves: The State's cash flow account continued to have a projected balance of $266 million and the budget reserve a $9 million balance.

In total, the February 2011 forecast added $264 million to the previous projected budgetary balance of $399 million for the Previous Biennium, yielding a projected balance of $666 million. Typically, any unrestricted budgetary General Fund balance is allocated to restore the cash flow account and budget reserve to their statutory maximums; however, current law waived this statutory requirement through June 30, 2011 due to federal requirements associated with stimulus funds. Under current law, the projected balance carries forward into the Current Biennium.

The November 2011 Forecast revised General Fund revenues and expenditures projected for the Current Biennium. In total, forecast changes improved the Current Biennium by $861 million, increasing the projected ending balance from $15 million to $876 million. The majority of the increase was due to the significant increase in the ending balance for FY 2011.

Revenues: General fund revenues for the Current Biennium forecast to total $33.7 billion, $24 million (0.1%) more than forecast in February 2011. Receipts for the State's four major taxes (individual income, sales, corporate and statewide levy) were projected to be $90 million (0;3%) more than previous estimates, while other taxes and revenues fell by $114 million.

Expenditures: General Fund expenditures for the Current Biennium were forecast to be $33.991 billion, $348 million below end-of-session estimates. Lower estimates for health and human services programs accounted for nearly all of the reduction in spending, down $308 million from end-of-session estimates. Revised estimates for the medical assistance program accounted for $294 million of the reduction from previous estimates.

Reserves: The enacted Current Biennium budget reduced the Cash Flow Account from $266 million to $95 million and the $9 million Budget Reserve Account was reduced to zero. The November forecast added $27 million to the Budget Reserve Account.

Based on the February 2012 forecast, General Fund spending for the Current Biennium was forecast to be $33.761 billion, $230 million (0.7%) below November's estimates. However, buying back a portion of the K-12 education payment shirt added $313 million to K-12 education aids in the Current Biennium, increasing total spending to $34.04 billion, $83 million (0.2%) more than November's estimates.

The 2012 Legislative Session ended in May 2012 with relatively minor adjustments made to the Current Biennium's enacted budget. Without a surplus or deficit, the supplemental budget changes focused o buy-backs of reductions from the previous legislative session, small initiatives supporting veterans, public safety, the Stadium Legislative and a bonding bill. After accounting for the legislative changes, the Current Biennium has a projected budgetary balance of $26.5 million.

Planning estimates for the Next Biennium are based on the February 2012 forecast adjusted for 2012 Legislative Session actions. The planning projections contain revised revenue and expenditure estimates for the Next Biennium based on the most recent information about the national and State economic outlook, caseloads, enrollments, and cost projections, as amended to reflect legislative enactment of the budget for the Current Biennium. The projection methods are different for the Next Biennium and the longer-term estimates carry a higher degree of uncertainty and a larger range of potential error.

The longer term budget projections have improved slightly since February 2012. The changes in the 2012 Legislative Session marginally impacted the projections for the Next Biennium. General Fund revenue projections for the Next Biennium now total $35.861 billion, $100 million (0.3%) more than the February estimates. General Fund spending is forecast to be $36.903 billion, $39 million (0.14%) higher than earlier forecast.

The majority of the revenue increase estimated for the Next Biennium is the result of the Stadium Legislation, which authorized new and expanded gambling within the State, and the levy and collection by the State of excise taxes on the new gambling. Such taxes, as collected, will be deposited into the General Fund in the projected amount of $116 million during the Next Biennium. The State plans to issue general fund appropriation bonds to pay its share under the Stadium Legislation of the cost of constructing the Stadium.

Projected General Fund expenditures for the Next Biennium are now $36.903 billion, $39 million (0.1%) more than previously estimated. Changes in spending for the Next Biennium are relatively minor and are mostly due to the Stadium Legislation and the smaller than expected bonding bill.

The amounts in the Cash Flow Account ($350 million) and the Budget Reserve Account ($658 million), $1.008 billion total, are projected to remain in reserves for the Next Biennium. The Stadium Reserve Account is projected to be $66 million at the end of the Next Biennium.

There are now pending against the State certain legal actions which could, if determined adversely to the State, have a material adverse effect in excess of $15 million on the State's expenditures and revenues during the Current Biennium.

The New Jersey Portfolio seeks the highest level of current income exempt from both federal income tax and State of New Jersey ("New Jersey" or the "State") personal income tax that is available without assuming what the Adviser considers to be undue risk. As a matter of fundamental policy, at least 80% of the Portfolio's net assets will be so invested (except when the Portfolio is in a temporary defensive position). The Fund will invest at least 80% of its net assets in securities the interest on which is exempt from New Jersey personal income tax (i.e., New Jersey municipal securities). In addition, during periods when the Adviser believes that New Jersey municipal securities that meet the Portfolio's standards are not available, the Portfolio may invest a portion of its assets in securities whose interest payments are only federally tax-exempt. However, it is anticipated that under normal circumstances substantially all of the Portfolio's total assets will be invested in New Jersey municipal securities. As a matter of fundamental policy, the New Jersey Portfolio will invest at least 80% of its net assets in municipal securities the interest on which is exempt from federal income tax.

The following is based on information obtained from an Official Statement, dated September 18, 2012, relating to $136,880,000 New Jersey School Facilities Construction Bonds, 2012 Series KK.

New Jersey is the eleventh largest state in population and the fifth smallest in land area. With an average of 1,196 persons per square mile, per the 2010 Census, it is the most densely populated of all the states. Between 1980 and 1990 the annual population growth rate was 0.49% and between 1990 and 2000 the growth rate accelerated to 0.85%. While this rate of growth compared favorably with other Middle Atlantic States, it was less than the national rate of increase. Furthermore, New Jersey is located at the center of the megalopolis that extends from Boston to Washington, and which includes over one-fifth of the country's population. The extensive facilities of the Port Authority of New York and New Jersey, the Delaware River Port Authority and the South Jersey Port Corporation across the Delaware River from Philadelphia augment the air, land and water transportation complex which has influenced much of the State's economy. This central location in the northeastern corridor, the transportation and port facilities and proximity to New York City make the State an attractive location for corporate headquarters and international business offices. A number of Fortune Magazine's top 500 companies maintain headquarters or major facilities in New Jersey, and many foreign-owned firms have located facilities in the State.

The State's economic base is diversified, consisting of a variety of manufacturing, construction and service industries, supplemented by rural areas with selective commercial agriculture. Since 1978, casino gambling in Atlantic City has been an important State tourist attraction.

According to the United States Commerce Department, Bureau of Economic Analysis, New Jersey's real gross domestic product ("GDP") fell 0.5% in 2011, compared to the national increase in GDP of 1.5%. The State's increase in GDP ranked forty-seventh among the 50 states. The weak 2011 performance of New jersey's economy indicated by this advance estimate of real GDP is partly attributable to the Bureau of Economic Analysis's assumption that declines in New Jersey's real estate, rental, and leasing sector reduced the State's economic growth by 1.14%. This advance estimate of real estate activity is based on information on wages paid in the sector, rather than on more comprehensive, but currently unavailable, information on rents paid and earned. Other indicators of activity in the State's real estate markets, such as home sales, housing prices, and estimates of growth in rents, suggest that growth in this sector in 2011 was closer to the national average than is suggested in the estimate included in the Bureau of Economic Analysis's real GDP. Thus, there is good reason to believe that the advance estimate of real GDP for 2011 may present an incorrect picture of the State's growth. Excluding the real estate, rental, and leasing sectors, New Jersey's real GDP rose 0.6% in 2011, compared to a national increase, excluding real estate, rental, and leasing, of 1.8%. On this basis, the State's increase in real GDP excluding real estate, rental, and leasing, ranked thirty-sixth among the 50 states.

The housing sector remains at depressed levels, as only 13,000 permits were granted in 2011. The housing sector is anticipated to improve, as reduced prices, low mortgage rates, and higher rental costs have increased the attractiveness of homeownership. However, continuing reluctance of banks to lend, as well as the significant number of foreclosed properties in the market, will temper the recovery in the housing sector.

New Jersey payroll employment in 2011 averaged 0.1% higher than in 2010, following declines in each of the prior four years. The unemployment rate as of July 2012 was 9.8%, compared to 9.4% as of July 2011. According to the Bureau of Economic Analysis, the growth rate for New Jersey's personal income increased at a rate of 2.6% over the four-quarter period ending in the fourth quarter of 2011 and was lower than the 2.9% increase for the nation as a whole.

The State Constitution provides, in part, that no money shall be drawn from the State Treasury but for appropriations made by law and that no law appropriating money for any State purpose shall be enacted if the appropriations contained therein, together with all prior appropriations made for the same fiscal period, shall exceed the total amount of the revenue on hand and anticipated to be available to meet such appropriations during such fiscal period, as certified by the Governor.

The State Constitution further provides, in part, that the State Legislature shall not, in any manner, create in any fiscal year a debt or liability of the State, which, together with any previous debts or liabilities, shall exceed at any time one percent of the total appropriations for such year, unless the same shall be authorized by a law for some single object or work distinctly specified therein. No such law shall take effect until it shall have been submitted to the people at a general election and approved by a majority of the legally qualified voters voting thereon; provided however, no such voter approval is required for any such law authorizing the creation of a debt for a refinancing of all or any portion of the outstanding debts or liabilities of the State, so long as such refinancing shall produce a debt service savings.

The Debt Limitation Clause was amended by the voters on November 4, 2008. The amendment provides that the State Legislature is prohibited from enacting any law that creates or authorizes the creation of a debt or liability of an autonomous State corporate entity, which debt or liability has a pledge of an annual appropriation as the means to pay the principal of and interest on such debt or liability, unless a law authorizing the creation of that debt or liability for some single object or work distinctly specified therein shall have been submitted to the people and approved by a majority of the legally qualified voters of the State voting thereon at a general election.

The State's governmental funds reported June 30, 2011 combined ending fund balances of $8.3 billion, an increase of $926.0 million from the prior fiscal year.

Actual revenue collections for the first quarter of Fiscal Year 2013 for 16 major revenue sources were $80 million, or 1.9%, higher than in the first quarter of Fiscal Year 2012. Some revenue sources have not met expectations as of the time of enactment of the Fiscal Year 2013 Appropriations Act. The Fiscal Year 2013 projected ending fund balance anticipated at the time of enactment of the Fiscal year 2013 Appropriations Act is $648.1 million, which is more than double the ending fund balance originally proposed in the Governor's Fiscal year 2013 Budget Message. Several potential factors may reduce this projected ending balance.

During the fiscal year ended June 30, 2011, the State's long-term debt obligations for governmental activities totaled $65.0 billion, a $7.1 billion increase over the prior fiscal year. Long-term bonded debt obligations totaled $33.7 billion, while other long-term obligations totaled $27.0 billion. During Fiscal Year 2011, the State issued $4.1 billion in bonds. New money issuances represented $3.0 billion for transportation and education system improvements, while $1.3 billion represented five refunding transactions that provided the State with $13.1 million in net present value savings. During Fiscal Year 2010, the State paid $2.6 billion in debt service on its long-term debt components. Non-bonded portions of the State's long-term debt totaled $21.0 billion. This amount represents a $5.3 billion increase from the prior fiscal year and is mainly attributable to increases in net pension obligations.

The State has entered into a number of leases and contracts, some of which are described below, with several governmental authorities to secure the financing of various State projects. Under the agreements, the State has agreed to make payments equal to the debt services on, and other costs related to, the obligations sold to finance the projects.

Legislation enacted in 1992 by the State authorizes the New Jersey Sports and Exposition Authority ("NJSEA") to issue bonds for various purposes, related to sports and entertainment facilities, payable from State appropriations. Pursuant to this legislation, the NJSEA and the State Treasurer have entered into an agreement (the "NJSEA State Contract") pursuant to which the NJSEA will undertake certain projects, including the refunding of certain outstanding bonds of the NJSEA, and the State Treasurer will credit to the NJSEA amounts from the General Fund sufficient to pay debt service and other costs related to the bonds. The payment of all amounts under the NJSEA State Contract is subject to and dependent upon appropriations being made by the State Legislature. As of June 30, 2012 there were approximately $549,275,000 aggregate principal amount of NJSEA bonds outstanding, the debt service on which is payable from amounts credited to the NJSEA Fund pursuant to the State Contract.

In July 1984, the State created the New Jersey Transportation Trust Fund Authority (the "TTFA"), an instrumentality of the State organized and existing under the New Jersey Transportation Trust Fund Authority Act of 1984, as amended (the "TTFA Act") for the purpose of funding a portion of the State's share of the cost of improvements to the State's transportation system. Pursuant to the TTFA Act, as amended in March 2006, the principal amount of the TTFA's bonds, notes or other obligations which may be issued in any fiscal year commencing with the fiscal year beginning July 1, 2006, and ending with the fiscal year beginning July 1, 2010, generally may not exceed $1.6 billion, reduced by the amount by which the appropriation of State funds to the TTFA exceeds $895 million. These bonds are special obligations of the TTFA payable from the payments made by the State pursuant to a contract between the TTFA, the State Treasurer and the Commissioner of Transportation. As of June 30, 2012, there were approximately $13,395,595,716 aggregate principal amount of TTFA issues outstanding. To the extent these notes are not paid by the State Treasurer, these notes are payable by the TTFA pursuant to a Standby Deficiency Agreement entered into by the TTFA and the Trustee for the notes. The Standby Deficiency Agreement was issued on a parity with all bonds issued by the TTFA.

Pursuant to legislation, the New Jersey Economic Development Authority (the "NJEDA") has been authorized to issue bonds for various purposes, including Economic Recovery Bonds, State Pension Funding Bonds and Market Transition Facility Bonds. The Economic Recovery Bonds have been issued pursuant to legislation enacted in 1992 to finance various economic development purposes. Pursuant to that legislation, NJEDA and the State Treasurer have entered into an agreement (the "ERF Contract") through which NJEDA has agreed to undertake the financing of certain projects and the State Treasurer has agreed to credit to the Economic Recovery Fund from the General Fund amounts equivalent to payments due to the State under an agreement with the port Authority of New York and New Jersey. The payment of all amounts under the ERF Contract is subject to and dependent upon appropriations being made by the State Legislature. As of June 30, 2012, there were approximately $147,151,999 aggregate principal amount of Economic Recovery Fund Bonds outstanding.

Legislation enacted in June 1997 authorizes the NJEDA to issue bonds to pay a portion of the State's unfunded accrued pension liability for the State's retirement systems (the "Unfunded Accrued Pension Liability"), which, together with amounts derived from the revaluation of pension assets pursuant to companion legislation enacted at the same time, will be sufficient to fully fund the Unfunded Accrued Pension Liability. The Unfunded Accrued Pension Liability represents pension benefits earned in prior years which, pursuant to standard actuarial practices, are not yet fully funded. As of June 30, 2012, there were approximately $2,432,889,891 aggregate principal amount of State Pension Funding Bonds outstanding. The EDA and the State Treasurer have entered into an agreement that provides for the payment to the EDA of monies sufficient to pay debt service on the bonds. Such payments are subject to and dependent upon appropriations being made by the State Legislature.

The authorizing legislation for certain State entities provides for specific budgetary procedures with respect to certain obligations issued by such entities. Pursuant to such legislation, a designated official is required to certify any deficiency in a debt service reserve fund maintained to meet payments of principal of and interest on the obligations, and a State appropriation in the amount of the deficiency is to be made. However, the State legislature is not legally bound to make such an appropriation. Bonds issued pursuant to authorizing legislation of this type are sometimes referred to as "moral obligation" bonds. There is no statutory limitation on the amount of "moral obligation" bonds which may be issued by eligible State entities. "Moral obligation" bonded indebtedness issued by State entities as of June 30, 2012 stood at an aggregate principal amount of $2,799,805,000. Of this total, $24,505,000 was issued by the New Jersey Housing and Mortgage Finance Agency. This Agency has never had a deficiency in a debt service reserve fund that required the State to appropriate funds to meet its "moral obligation," and it is anticipated to earn sufficient revenues to cover debt service on its bonds. The Higher Education Assistance Authority and the South Jersey Port Corporation issued moral obligation indebtedness in aggregate principal amounts of $2,493,510,000 and $281,790,000, respectively. It is anticipated that the Higher Education Assistance Authority's revenues will be sufficient to cover debt service on its bonds. However, the State has periodically provided the South Jersey Port Corporation with funds to cover all debt service and property tax requirements, when earned revenues are anticipated to be insufficient to cover these obligations.

At any given time, there are various numbers of claims and cases pending against the State, State agencies and employees, seeking recovery of monetary damages that are primarily paid out of the fund created pursuant to the New Jersey Tort Claims Act. The State does not formally estimate its reserve representing potential exposure for these claims and cases. The State is unable to estimate its exposure for these claims and cases.

The Ohio Portfolio seeks the highest level of income exempt from both federal income tax and State of Ohio ("Ohio" or the "State") personal income tax that is available without assuming what the Adviser considers to be undue risk. As a matter of fundamental policy, at least 80% of the Portfolio's net assets will be so invested (except when the Portfolio is in a temporary defensive position), although it is anticipated that under normal circumstances substantially all of the Portfolio's assets will be invested in such Ohio securities. As a matter of fundamental policy, the Ohio Portfolio will invest at least 80% of its net assets in municipal securities the interest on which is exempt from federal income tax. Shares of the Ohio Portfolio are available only to Ohio residents.

The following is based on information obtained from an Official Statement, dated October 12, 2012, relating to $154,405,000 State of Ohio Common Schools General Obligation Highway Capital Improvements Bonds, Series Q.

Ohio's 2010 decennial census population of 11,536,504 indicated a 1.6% population growth since 2000 and ranked Ohio seventh among the states in population.

Although manufacturing (including auto-related manufacturing) in Ohio remains an important part of the State's economy, the greatest growth in Ohio's economy in recent years has been in the non-manufacturing sectors. In 2010, Ohio ranked eighth in the nation with approximately $466.9 billion in gross state product and was fifth in manufacturing with an approximate value of $73.9 billion and fifth in durable goods with an approximate value of $40.0 billion. As a percent of Ohio's 2010 gross state product, manufacturing was responsible for 15.8%, with 20.08% attributable to the goods-producing sectors and 34.1% to business services sectors, including finance, insurance and real estate. Ohio is the eighth largest exporting state, with 2010 merchandise exports totaling $41.5 billion. The State's three leading export industries are machinery, motor vehicles, and aircraft/spacecraft, which together accounted for 52.4% of the value of Ohio's merchandise exports in 2010.

Payroll employment in Ohio, in the diversifying employment base, decreased in 2001 through 2003, increased in 2004 through 2006, decreased in 2007 through 2010 and increased in 2011. Growth in recent years has been concentrated among non-manufacturing industries, with manufacturing employment tapering off since its 1969 peak. The non-manufacturing sector employs approximately 87% of all non-agricultural payroll workers in Ohio.

With 13.9 million acres (of a total land area of 26.4 million acres) in farmland and an estimated 75,000 individual farms, agriculture and related agricultural sectors combined is an important segment of Ohio's economy. Ohio's 2008 crop production value of $5.2 billion represented 2.9% of total U.S. crop production value. In 2008, Ohio's agricultural sector total output
(consisting of crops, livestock, poultry and dairy, and services and forestry)
reached $8.8 billion with agricultural exports (primarily soybeans, feed grains and wheat, and their related products) estimated at a value of $2.9 billion.

Consistent with the constitutional provision that no appropriation may be made for a period longer than two years, the State operates on the basis of a fiscal biennium for its appropriations and expenditures. The Constitution requires the General Assembly to provide for raising revenue, sufficient to defray the expenses of the State, for each year, and also a sufficient sum to pay the principal and interest as they become due on the State debt. The State is effectively precluded by law from ending a fiscal year or a biennium in a deficit position. State borrowing to meet casual deficits or failures in revenues or to meet expenses not otherwise provided for is limited by the Constitution to $750,000.

The Revised Code provides that if the Governor ascertains that the available revenue receipts and balances for the General Revenue Fund ("GRF") or other funds for the then current fiscal year will in all probability be less than the appropriations for that year, he shall issue such orders to State agencies as will prevent their expenditures and incurred obligations from exceeding those revenue receipts and balances. The Governor implemented this directive in the 2008-2009 Biennium as had been done several times in prior fiscal years.

Most State operations are financed through the GRF. Personal income and sales-use taxes are the major GRF sources. The GRF fund balance for Fiscal Year ended June 30, 2012 was $135.9 million. The State also has maintained a "rainy day" fund, the Budget Stabilization Fund ("BSF"), which under current law and until used (as occurred in the 2008-09 Biennium) may carry a balance of up to 5% of the GRF revenues for the preceding fiscal year. The BSF had a balance of $482.0 million at the end of Fiscal Year 2012.

At present the State itself does not levy ad valorem taxes on real or tangible personal property. Those taxes are levied by political subdivisions and local taxing districts. The Constitution has, since 1934, limited the amount of the aggregate levy of ad valorem property taxes, without a vote of the electors or municipal charter provision, to 1% of true value in money, and statutes limit the amount of the aggregate levy without a vote or charter provision to 10 mills per $1 of assessed valuation -- commonly referred to in the context of Ohio local government finance as the "ten-mill limitation".

The Constitution directs or restricts the use of certain revenues. Highway fees and excises, including gasoline taxes, are limited in use to highway-related purposes. Not less than 50% of the receipts from State income taxes and estate taxes must be returned to the originating political subdivisions and school districts. State lottery net profits are allocated to elementary, secondary, vocational and special education program purposes including, as provided for in the recently passed constitutional amendment, application to debt service on obligations issued to finance capital facilities for a system of common schools.

Effective July 1, 2005, State personal income tax rates, applying generally to federal adjusted gross income, were reduced 4.2% annually for the years 2005 through 2008, and again in 2011 (after a two-year postponement) resulting in an aggregate 21% decrease from the 2004 rates, which ranged from 0.743% on $5,000 or less with increasing bracketed base rates and percentages up to a maximum on incomes over $200,000 of $11,506 plus 7.5% on the amount over $200,000, while the 2011 rates for the equivalent income brackets are 0.587% and 5.925%, respectively.

Municipalities and school districts may also levy certain income taxes. Any municipal rate (applying generally to wages and salaries, and net business income) over 1%, and any school district income tax (applying generally to the State income tax base for individuals and estates), requires voter approval. Most cities and villages levy a municipal income tax. The highest municipal rate in 2010 was 3%. A school district income tax is currently approved in 181 districts. Effective July 1, 2005, there may also be proposed for voter approval municipal income taxes to be shared with school districts, but these taxes may not be levied on non-residents.

Since 1970 the ratio of Ohio to U.S. aggregate personal income has declined, with Ohio's ranking moving from fifth among the states in 1970 to seventh in 1990, moving to between seventh and eighth in 1994 through 2003, and eighth since 2004. This movement in significant measure reflects "catching up" by several other states and a trend in Ohio toward more service sector employment.

Rigorous consideration was given by the General Assembly to the Governor's Executive Budget proposed for the 2010-11 biennium in light of the difficult economic and fiscal conditions resulting from the national recession. The final GRF appropriations Act for the 2010-11 biennium, which was preceded by three seven-day interim appropriations acts, was passed by the General Assembly and signed (with selective vetoes) by the Governor on July 17, 2009. All necessary debt service and lease-rental payments related to State obligations for the entire 2010-11 biennium were fully appropriated for the three week interim appropriations period and under that final Act. Reflecting the final implementation of the restructuring of State taxes commenced in 2006-07 and a conservative underlying economic forecast, that Act provided for total GRF biennial appropriations of approximately $50.5 billion (a 3.8% decrease from 2008-09 biennial expenditures) and total GRF biennial revenue of approximately $51.1 billion (a 4.2% decrease from 2008-09 biennial revenues). GRF appropriations for major program categories compared to 2008-09 actual GRF spending reflected increases of 3.4% for Medicaid and 0.7% for corrections and youth services; and decreases of 13.8% for mental health and developmental disabilities, 8.3% for higher education, and 5.15% for elementary and secondary education. Among other expenditure controls, the Act included a number of Medicaid reform and cost containment initiatives and also included the restructuring of $736 million of Fiscal Years 2010 and 2011 general revenue fund debt service into Fiscal Years 2012 through 2025.

The State ended Fiscal Year 2011 with GRF cash and fund balances of $844.5 million and $430.7 million, respectively. Of that ending GRF fund balance, the State reserved $138.8 million in the GRF reflecting the one-half of one percent of Fiscal Year 2011 GRF revenues the State is required to maintain as an ending fund balance and transferred $45.0 million into disaster services/emergency funds. The remaining $246.9 million was deposited into the BSF. These ending balances reflect the use of approximately $680 million in Fiscal Year 2011 GRF revenue to make payments for Medicaid managed care, the State's share of instruction for higher education, payroll and other commitments that were previously scheduled to be deferred into Fiscal Year 2012.

Consistent with State law, the Governor's Executive Budget for the 2012-13 biennium was released in March 2011 and introduced in the General Assembly. After extended hearings and review, the 2012-13 biennial appropriations Act was passed by the General Assembly and signed (with selective vetoes) by the Governor on June 30, 2011. To address the use of non-recurring funding sources in the prior 2010-11 biennium, the Act includes targeted spending cuts across most State agencies, and major new Medicaid reform and cost containment measures. Reflecting the tax law changes and a conservative underlying economic forecast, that Act provides for total GRF biennial appropriations of approximately $55.78 billion (an 11% increase from the 2010-11 GRF biennial expenditures) and total GRF biennial revenues of approximately $56.07 billion (a 6% increase from 2010-11 GRF biennial revenues). GRF appropriations for major program categories compared to 2010-11 actual GRF spending reflect increases of 30% for Medicaid (increase due in part to absence of ARRA funding in the current biennium) and 3% for elementary and secondary education; decreases of 9% for higher education and 8% for mental health and developmental disabilities; and flat funding for corrections and youth services. That Act also reflects the restructuring of $440 million of Fiscal Year 2012 general revenue fund debt service into Fiscal Years 2013 through 2025, approximately three-quarters of which was accomplished by the July 2011 issuance by the Ohio Public Facilities Commission of $488.8 million in refunding bonds, with the remainder accomplished by the September 2011 issuance by the Ohio Building Authority of $149.3 million in refunding bonds.

The Executive Budget, the GRF appropriations Act and the separate appropriations acts for the biennium included all necessary debt service and lease rental payments related to State obligations (after the restructuring of Fiscal Year 2012 GRF debt service payments).

The State ended Fiscal Year 2012 with GRF cash and fund balances of $973.4 million and $371.0 million, respectively. Of that ending GRF fund balance, the State reserved $135.9 million in the GRF reflecting the one-half of one percent of Fiscal Year GRF revenues the State is required to maintain as an ending fund balance, with the remaining $235.1 million deposited into the BSF.

Ohio has a mixture of urban and rural population, with approximately three-quarters urban. There are 943 incorporated cities and villages (municipalities with populations under 5,000) in the State. Five cities have populations of over 100,000 and 16 over 50,000.

A 1979 act established procedures for identifying and assisting those few cities and villages experiencing defined "fiscal emergencies". A commission composed of State and local officials, and private sector members experienced in business and finance appointed by the Governor, is to monitor the fiscal affairs of a municipality facing substantial financial problems. That act requires the municipality to develop, subject to approval and monitoring by its commission, a financial plan to eliminate deficits and cure any defaults and otherwise remedy fiscal emergency conditions, and to take other actions required under its financial plan. It also provides enhanced protection for the municipality's bonds and notes and, subject to the act's stated standards and controls, permits the State to purchase limited amounts of the municipality's short-term obligations (used only once, in 1980).

The fiscal emergency legislation was amended in 1996 to extend its application to counties and townships. In 2011, the fiscal emergency legislation was further amended to establish a "fiscal caution" category. There are currently 25 local governments in fiscal emergency status, three in fiscal watch status, and one in fiscal caution status.

The State of Ohio is a party to various legal proceedings seeking damages or injunctive relief and generally incidental to its operations. The ultimate disposition of these proceedings is not presently determinable, but in the opinion of the Ohio Attorney General will not have a material adverse effect on payment of State obligations.

The Pennsylvania Portfolio seeks the highest level of current income exempt from both federal income tax and Commonwealth of Pennsylvania ("Pennsylvania" or the "Commonwealth") personal income tax that is available without assuming what the Adviser considers to be undue risk. As a matter of fundamental policy, at least 80% of the Portfolio's net assets will be so invested (except when the Portfolio is in a temporary defensive position), although it is anticipated that under normal circumstances substantially all of the Portfolio's assets will be invested in such Pennsylvania securities. As a matter of fundamental policy, the Pennsylvania Portfolio will invest at least 80% of its net assets in municipal securities the interest on which is exempt from federal income tax. Shares of the Pennsylvania Portfolio are available only to Pennsylvania residents.

The following was obtained from an Official Statement, dated July 24, 2012, relating to the issuance of $362,060,000 Commonwealth of Pennsylvania General Obligation Bonds.

The Commonwealth of Pennsylvania is one of the most populous states, ranking sixth behind California, Texas, New York, Florida and Illinois. Pennsylvania is an established state with a diversified economy. Pennsylvania had been historically identified as a heavy industrial state. That reputation has changed over the last thirty years as the coal, steel and railroad industries declined and the Commonwealth's business environment readjusted to reflect a more diversified economic base. This economic readjustment was a direct result of a long-term shift in jobs, investment, and workers away from the northeast part of the nation. Currently, the major sources of growth in Pennsylvania are in the service sector, including trade, medical and health services, education and financial institutions.

Pennsylvania's agricultural industries remain an important component of the Commonwealth's economic structure, accounting for more than $5.4 billion in crop and livestock products annually. Agribusiness and food related industries reached record export sales, exceeding $1.3 billion in economic activity in 2011. Over 63,000 farms form the backbone of the State's agricultural economy. Farmland in Pennsylvania includes over four million acres of harvested cropland and three million acres of pasture and farm woodlands - nearly one-third of the Commonwealth's total land area. Agricultural diversity in the Commonwealth is demonstrated by the fact that Pennsylvania ranks among the top ten states in the production of a number of agricultural products.

Pennsylvania's extensive public and private forests provide a vast source of material for the lumber, furniture and paper products industries. The forestry and related industries account for 1.5% of employment with economic activity of nearly $5 billion in domestic and international trade. Additionally, the Commonwealth derives a good water supply from underground sources, abundant rainfall and a large number of rivers, streams and lakes. Other natural resources include major deposits of coal, petroleum and natural gas. Annually, about 66 million tons of anthracite and bituminous coal, 1,310 billion cubic feet of natural gas and about 2.2 million barrels of oil are extracted from Pennsylvania.

Pennsylvania is a Mid-Atlantic state within easy reach of the populous eastern seaboard and, as such, is a gateway to the Midwest. The Commonwealth's strategic geographic position is enhanced by a comprehensive transportation grid. The Commonwealth's water systems afford the unique feature of triple port coverage, a deep water port at Philadelphia, a Great Lakes port at Erie and an inland water port at Pittsburgh. Pennsylvania is easily accessible for inter and intra state trade and commerce.

The Commonwealth is highly urbanized. Of the Commonwealth's 2011 mid-year population estimate, 79% resided in the 15 Metropolitan Statistical Areas ("MSAs") of the Commonwealth. The largest MSAs in the Commonwealth are those which include the cities of Philadelphia and Pittsburgh, which together contain almost 44% of the State's total population. The population of Pennsylvania, 12.7 million people in 2011, according to U.S. Bureau of the Census, represents a population growing more slowly than the nation with a higher portion than the nation or the region comprised of persons between 45 or over.

Non-agricultural employment in Pennsylvania over the ten years ending in 2011 increased at an annual rate of 0.08%. This rate compares to a 0.05% rate for the Mid-Atlantic Region and 0.09% for the nation during the same period.

Non-manufacturing employment in Pennsylvania has increased in recent years to 90.1% of total employment in 2011. Consequently, manufacturing employment constitutes a diminished share of total employment within the Commonwealth. Manufacturing, contributing 9.9% of 2011 non-agricultural employment, has fallen behind both the services sector, the trade sector and the government sector as the fourth largest single source of employment within the Commonwealth. In 2011, the services sector accounted for 47.9% of all non-agricultural employment, the trade sector accounted for 15.0%, and the government sector accounted for 13.1%.

Within the manufacturing sector of Pennsylvania's economy, which now accounts for about one-tenth of total non-agricultural employment in Pennsylvania, the fabricated metals industries employed the largest number of workers. Employment in the fabricated materials industries was 14.3% of Pennsylvania manufacturing employment but only 1.4% of total Pennsylvania non-agricultural employment in 2011.

Pennsylvania's annual average unemployment rate has been equivalent to the national average throughout the 2000s. Slower economic growth caused the unemployment rate in the Commonwealth to rise to 8.5% in early 2011, compared to the 4.4% annual unemployment rate in 2007. As of May 2012, the most recent month for which data are available, the seasonally adjusted unemployment rate for the Commonwealth was 7.4%.

Personal income in the Commonwealth for 2011 was $541.2 billion, an increase of 4.8% over the previous year. During the same period, national personal income increased at a rate of 5.0%. Based on the 2011 personal income estimates, per capita income for 2011 was at $42,478 in the Commonwealth compared to per capita income in the United States of $41,663.

The Commonwealth's 2011 average hourly wage rate of $17.49 for manufacturing and production workers compared to the national average of $18.94 for 2011.

The Commonwealth utilizes the fund method of accounting. The General Fund, the Commonwealth's largest fund, receives all tax revenues, non-tax revenues and federal grants and entitlements that are not specified by law to be deposited elsewhere. The majority of the Commonwealth's operating and administrative expenses are payable from the General Fund. Debt service on all obligations, except that issued for highway purposes or for the benefit of other special revenue funds, is payable from the General Fund.

Financial information for the General Fund is maintained on a budgetary basis of accounting. The Commonwealth also prepares annual financial statements in accordance with generally accepted accounting principles ("GAAP").

Fiscal 2012. The subdued level of the economic recovery from the most recent national recession continued to affect the Commonwealth's revenue receipts during Fiscal Year 2012. General Fund revenues of the Commonwealth were below the certified estimate by $162.8 million or 0.6% during Fiscal Year 2012. Final Commonwealth General Fund revenues for the fiscal year totaled $27,680.0 million. Total Fiscal Year 2012 revenues, net of reserves for tax refunds and including public health and human services assessments, totaled $27,101.3 million. Total expenditures, net of appropriation lapses and including public health and human services assessments and expenditures from additional sources, were $27,534.4 million, resulting in a preliminary operating balance for Fiscal Year 2012 of -$433.3 million. However, after accounting for a positive fiscal year 2012 beginning balance of $1,072.8 million, the Commonwealth ended Fiscal Year 2012 with an unappropriated surplus balance of $659.0 million, which was the second largest (following the $1,072.8 million ending balance from Fiscal Year 2011) such unappropriated ending balance since prior to the last recession.

General Fund revenues increased $180.8 million or 0.7% during Fiscal Year 2012 when measured on a year-over-year basis as compared to Fiscal Year 2011. Tax revenue collections grew $687.8 million or 2.6% on a year-over-year basis from Fiscal Year 2011 to Fiscal Year 2012 while non-tax revenue collections declined $507.2 million or 48.9%, primarily from a reduction in balance transfers from Fiscal Year 2011 to Fiscal Year 2012. Corporate tax receipts were $91.2 million lower than Fiscal Year 2011 levels. Year-over-year growth in corporate taxes was -3.1% during Fiscal Year 2012 as corporate net income tax collections decreased 5.1% and capital stock and franchise tax receipts increase 2.2% while collections from the gross receipts tax increased 8.6% on a year-over-year basis. Personal income taxes were $364.8 million above Fiscal Year 2011 actual collection and the year-over-year growth in personal income tax receipts was 3.5%. Personal income tax collections attributable to withholding increased by 3.5% or $282.9 million during Fiscal Year 2012 and tax collections from the non-withholding portion of the personal income tax increased 3.4% or $81.9 million on a year-over-year basis.

Fiscal 2011. While unemployment rates remained at elevated levels within Pennsylvania, the Commonwealth's revenues and receipts benefitted from the moderate uptick in the national economy experienced during a portion of fiscal year 2011. General Fund revenues of the Commonwealth were above the certified estimate by $785.5 million or 2.9% during fiscal year 2011, the first time since fiscal year 2008. Final Commonwealth General Fund revenues for the fiscal year totaled $27,497.2 million. Total fiscal year 2011 revenues, net of reserves for tax refunds and including public health and human services assessments, totaled $26,983.8 million. Total expenditures, net of appropriation lapses and including public health and human services assessments and expenditures from additional sources (federal ARRA funding), were $25,616.8 million, resulting in a preliminary operating balance for fiscal year 2011 of $1,367.0 million. However, after accounting for a negative fiscal year 2010 beginning balance of $294.2 million, the Commonwealth ended fiscal year 2011 with an unappropriated surplus balance of $1,072.8 million, which was the largest such unappropriated ending balance since at least 1949, the earliest period for which such records are available. Additionally, the $1,072.8 million unappropriated ending balance during fiscal year 2011 was the largest such balance as a percent of the Commonwealth budget since at least fiscal year 1975.

Revenues available to the Commonwealth, net of reserves for tax refunds and transfers from the Budget Stabilization Reserve Fund but including public health and human service assessments, decreased $184.8 million or 0.7% during fiscal year 2011. Public health and human service assessments decreased $8.8 million during fiscal year 2011 to $636.6 million.

General Fund revenues decreased $150.9 million or 0.5% during fiscal year 2011 when measured on a year-over-year basis as compared to fiscal year 2010. However, this decline is due primarily to the use of the Budget Stabilization Reserve Fund and other such one-time balance transfers utilized during the 2010 fiscal year. Tax revenue collections grew $1,550.7 million or 6.2% on a year-over-year basis from fiscal year 2010 to fiscal year 2011 while non-tax revenue collections declined $1,701.6 million or 62.1%. Corporate tax receipts were $398.6 million above fiscal year 2010 levels.

Fiscal 2010. The continuing effects of the national economic recession again negatively impacted the Commonwealth's economy during Fiscal Year 2010. While avoiding the contraction in the national economy from the prior fiscal year, the Fiscal Year 2010 budget experienced only minimal economic growth. High levels of unemployment and turbulent financial markets negatively impacted the Commonwealth's revenues and receipts. General Fund revenues of the Commonwealth were below the certified estimate by $1,176.5 million or 4.1% during Fiscal Year 2010. Final Commonwealth General Fund revenues for the fiscal year totaled $27,648.2 million. Total Fiscal Year 2010 revenues, net of reserves for tax refunds and including public health and human services assessments, totaled $27,201.5 million. Total expenditures, net of appropriation lapses and including public health and human services assessments and expenditures from additional sources (federal ARRA funding), were $25,451.2 million, resulting in a preliminary operating balance for Fiscal Year 2010 of $1,750.3 million. However, after accounting for a negative Fiscal Year 2010 beginning balance of $2,799.5 million and an infusion of $755 million from the Budget Stabilization Reserve Fund, the Commonwealth ended Fiscal Year 2010 with an unappropriated surplus balance of -$294.2 million.

Revenues available to the Commonwealth, net of reserves for tax refunds and transfers from the Budget Stabilization Reserve Fund but including public health and human service assessments, increased $2,450.1 million or nearly 10% during Fiscal Year 2010. Fiscal Year 2010 net revenues (all sources but excluding transfers from the Budget Stabilization Reserve Fund) totaled $27,201.5 million, up from $24,750.6 million during Fiscal Year 2009. Public health and human service assessments increased $232.5 million during Fiscal Year 2010. General Fund revenues increased $2,118.4 million or 8.3% during Fiscal Year 2010 when measured on a year-over-year basis. Corporate tax receipts were $510.2 million, or 10% below estimate for the fiscal year. Year-over-year growth in corporate taxes was -5.3% during Fiscal Year 2010 as corporate net income tax collections declined 9.5% and capital stock and franchise tax receipts declined 3.4% while collections from the gross receipts tax declined 6.5% on a year-over-year basis. Personal income taxes were $308.3 million below the estimate, a shortfall of 3.0% versus the estimate, while year-over-year growth in personal income tax receipts was -2.3%.

Fiscal 2012. GAAP basis information for Fiscal Year 2012 is not available at this time.

Fiscal 2011. The General Fund balance at June 30, 2011, was $1,503.5 million, a $157.9 million (9.5%) decrease from the June 30, 2010 General Fund balance. Over the five fiscal years 2007 through 2011, revenues and other sources averaged an annual 1.9% increase. Expenditures and other uses during the same period averaged a 2.0% annual increase.

Overall, total revenues decreased by $770 million during the fiscal year ended June 30, 2011; this represents a 13% decrease from the prior fiscal year. The most significant factor was an $859 million decrease in intergovernmental revenues, where Fiscal Year 2011 payments received from the Pennsylvania Turnpike Commission (PTC) under Act 44 of 2007 decreased by $300 million. Federal revenues (and transportation expenditures) decreased by $191 million due to Fiscal Year 2011 elimination of previously reported Federal pass-through grant amounts to political subdivisions. In addition, Federal revenues (and transportation expenditures) decreased by the return of $176 million in Federal revenues received on projects that did not result in construction and were subsequently converted to state-only projects during Fiscal Year 2011. Partially offsetting the intergovernmental revenues decrease were increases in tax revenues and licenses and fees.

Overall, total expenditures decreased by $477 million during the fiscal year ended June 30, 2011; this represents a 9% decrease from the prior fiscal year. The combination of year-over-year changes in capital outlay ($46 million increase) and transportation ($533 million decrease) expenditures accounted for nearly all of the decrease in expenditures.

Fiscal 2010. At June 30, 2010, the General Fund reported a fund balance of $284.8 million, a decrease of $230.4 million from the reported $515.2 million fund balance at June 30, 2009. On a net basis, total assets increased by $520.0 million to $9,837.0 million. Liabilities increased by $750 million to $9,552 million largely because of a captioning change in liability type for unclaimed property (escheats) liability from accounts payable amounting to $553 million, and higher amounts due to political subdivisions ($319 million) for a variety of agencies, including the Department of Public Welfare ($131 million), the Department of Education ($72 million), Executive Offices ($43 million), and the Department of Health ($38 million). The change in fund balance for the General Fund of -$230 million for fiscal year 2010 compares with a change in the fund balance of -$2,459 million for fiscal year 2009.

General Fund tax revenues increased overall by over $167 million (1.0%) during the fiscal year ended June 30, 2010. This net increase is attributable to two tax types: 'other' and cigarette. 'Other' taxes increased by $551 million, based on a new Gross Receipts Tax (amounting to approximately $533 million) imposed on Managed Care Organizations that are parties to Medicaid managed care contracts with the Department of Public Welfare. This revenue will allow the Commonwealth to draw down additional federal Medicaid matching funds for the Medical Assistance managed care program.

Intergovernmental revenues increased by $3.9 billion, net, resulting primarily from Federal participation in significantly higher expenditures for Medical Assistance and other types of health and human services expenditures. Over $2.6 billion of the increase is attributable to higher Federal revenues from the Federal American Recovery and Reinvestment Act of 2009 (ARRA). Combined licenses/fees/investment and other revenues increased by $422 million primarily because of (1) first-year revenues for Table Game Authorization Fees, amounting to $165 million, and (2) an increase in investment income of $150 million, and (3) increases of 'other' revenues of nearly $46 million.

Total General Fund expenditures increased by 6% during the fiscal year ended June 30, 2010, by over $2.6 billion. Reported expenditures for health and human services expenditures increased by $1,758 million, caused by a higher aggregate need for medical assistance, and income and/or cash grant assistance. Expenditures for Food Stamps, alone, increased by $555 million. Public education expenditures increased by $474 million, net, due primarily to Federally-funded (ARRA) subsidies/grants for basic education ($515 million), offset by a decrease in State-funded basic education ($358 million), net increases in Federally-funded (including ARRA) grants in assorted other programs of $361 million, offset by net decreases in assorted State-funded programs of $144 million, higher accrued liabilities ($80 million), a special education increase ($12 million), a pupil transportation increase ($6 million), and a public school employee social security increase (employer share) ($23 million); also, a decrease in public school employee retirement (employer share) ($44 million).

The enacted Fiscal Year 2013 budget provides appropriations and executive authorizations, net of lapses and other reductions, totaling $28,285.0 million of Commonwealth funds against estimated revenues, net of tax refunds and including public health and human services assessments, of $27,918.6 million. The $366.4 million negative difference between estimated revenues and budgeted appropriations is to be mitigated by a partial draw down of the $659.0 million ending balance from Fiscal Year 2012. General Fund appropriations (prior to any lapses), from all revenue sources are estimated to grow $470.8 million or 1.7% on a year-over-year basis during Fiscal Year 2013. This modest increase follows a net reduction in state spending of over $1,159.9 million or 4.1% on a year-over-year basis during the prior fiscal year.

The Fiscal Year 2013 revenue estimate is based upon an economic assumption that economic growth will total 2.2% annual growth through June 2013. Total revenues of the Commonwealth, prior to reserves for refunds, are expected to increase $912.0 million or 3.3% from Fiscal Year 2012 levels. The enacted budget for Fiscal Year 2013 includes tax reductions totaling $312.9 million, principally from the continued phase-out of the capital stock and franchise tax. Tax revenues of the Commonwealth are estimated to increase 3.4% from Fiscal Year 2012 levels. Fiscal Year 2013 receipts from corporate tax receipts are projected to decrease 4.1%, after adjusting for a restart of the scheduled reduction in the capital stock and franchise tax rate reduction. Personal income tax receipts in Fiscal Year 2013 are expected to grow 4.5% on a year-over-year basis. Sales and use tax receipts are projected to increase 5.1% during Fiscal Year 2013. Non-tax revenues are projected to decline 3.8%.

Philadelphia is the largest city in the Commonwealth with an estimated population of 1,526,006 according to the 2010 U.S. Census.

The Pennsylvania Intergovernmental Cooperation Authority ("PICA") was created by Commonwealth legislation in 1991 to assist Philadelphia in remedying its fiscal emergencies. PICA is designed to provide assistance through the issuance of funding debt and to make factual findings and recommendations to Philadelphia concerning its budgetary and fiscal affairs. This financial assistance has included the refunding of certain city general obligation bonds, funding of capital projects and the liquidation of the cumulative general fund balance deficit of Philadelphia as of June 30, 1992, of $224.9 million. At this time, Philadelphia is operating under a five-year fiscal plan approved by PICA on July 26, 2011.

No further bonds are to be issued by PICA for the purpose of financing a capital project or deficit as the authority for such bond sales expired December 31, 1994. PICA's authority to issue debt for the purpose of financing a cash flow deficit expired on December 31, 1995. Its ability to refund existing outstanding debt is unrestricted. PICA had $453.0 million in special tax revenue bonds outstanding as of June 30, 2012. Neither the taxing power nor the credit of the Commonwealth is pledged to pay debt service on PICA's bonds.

The Constitution permits the Commonwealth to incur the following types of debt: (i) debt to suppress insurrection or rehabilitate areas affected by disaster, (ii) electorate approved debt, (iii) debt for capital projects subject to an aggregate debt limit of 1.75 times the annual average tax revenues of the preceding five fiscal years, and (iv) tax anticipation notes payable in the fiscal year of issuance. All debt except tax anticipation notes must be amortized in substantial and regular amounts. Debt service on Commonwealth general obligation debt is paid from appropriations out of the General Fund except for highway purposes, which is paid from Motor Vehicle Fund appropriations.

Net outstanding general obligation debt totaled $10,724.3 million at June 30, 2012, a net increase of $852.3 million from June 30, 2011. Over the 10-year period ending June 30, 2012, total outstanding general obligation debt increased at an annual rate of 5.9%. Within the most recent 5-year period, outstanding general obligation debt has increased at an annual rate of 6.5%.

Certain State-created organizations have statutory authorization to issue debt for which State appropriations to pay debt service thereon are not required. The debt of these organizations is funded by assets of, or revenues derived from the various projects financed and is not a statutory or moral obligation of the Commonwealth. However, some of these organizations are indirectly dependent upon Commonwealth operating appropriations. In addition, the Commonwealth may choose to take action to financially assist these organizations.

In 1978, the General Assembly approved a limited waiver of sovereign immunity. Damages for any loss are limited to $250,000 for each person and $1,000,000 for each accident. The Supreme Court of Pennsylvania has held that this limitation is constitutional. Approximately 3,150 suits against the Commonwealth remain open. Tort claim payments for the departments and agencies, other than the Department of Transportation, are paid from departmental and agency operating and program appropriations. Tort claim payments for the Department of Transportation are paid from an appropriation from the Motor License Fund. The Motor License Fund tort claim appropriation for Fiscal Year 2011 is $20.0 million.

The Virginia Portfolio seeks the highest level of current income exempt from both federal income tax and Commonwealth of Virginia ("Virginia" or the "Commonwealth") personal income tax that is available without assuming what the Adviser considers to be undue risk. As a matter of fundamental policy at least 80% of the Portfolio's net assets will be so invested (except when the Portfolio is in a temporary defensive position), although it is anticipated that under normal circumstances substantially all of the Portfolio's assets will be invested in such Virginia securities. As a matter of fundamental policy, the Virginia Portfolio will invest at least 80% of its net assets in municipal securities the interest on which is exempt from federal income tax. Shares of the Virginia Portfolio are available only to Virginia residents.

The following is based on information obtained from an Official Statement, dated May 9, 2012, relating to Commonwealth of Virginia $50,620,000 Transportation Contract Revenue Refunding Bonds, Series 2012.

The Commonwealth's 2010 population of 8,001,024 was 2.6% of the United States' total. Among the 50 states, it ranked twelfth in population. With 39,594 square miles of land area, its 2010 population density was 202.1 persons per square mile, compared with 87.3 persons per square mile for the United States.

The Commonwealth is divided into five distinct regions -- a coastal plain cut into peninsulas by four large tidal rivers, a piedmont plateau of rolling farms and woodlands, the Blue Ridge Mountains, the fertile Shenandoah Valley and the Appalachian plateau extending over the southwest corner of the Commonwealth. Approximately one-third of all land in Virginia is used for farming and other agricultural services. This variety of terrain, the location of the Commonwealth on the Atlantic Seaboard at the southern extremity of the northeast population corridor and its close proximity to the nation's capital have had a significant influence on the development of the present economic structure of the Commonwealth.

The largest metropolitan area is the Northern Virginia portion of the Washington, D.C. metropolitan area. This is the fastest growing metropolitan area in the Commonwealth and had a 2009 population of 5,476,241 (including Washington's and Maryland's population of 1,779,580). Northern Virginia has long been characterized by the large number of people employed in both civilian and military work with the federal government. However, it is also one of the nation's leading high-technology centers for computer software and telecommunications.

According to the U.S. Department of Commerce, Virginians received over $355 billion in personal income in 2010. In 2010, Virginia had per capita income of $44,246, the highest of the Southeast region and greater than the national average of $39,945. From 2001 to 2010, the Commonwealth's 3.3% average annual rate of growth in per capita income was more than the national growth rate of 3.0%. Much of Virginia's per capita income gain in these years has been due to the continued strength of the manufacturing sectors, rapid growth of high-technology industries, basic business services, corporate headquarters and regional offices and the attainment of parity with the nation in labor force participation rates.

Employment in the Information Services sector decreased by 17.8% from 2007 to 2011, which may in part be due to intense telecommunications competition. The Professional and Business Services sector, however, gained 2.6% over the same period. From 2007 to 2011, employment in the Financial Activities sector decreased by 10.5%. The Private Education and Health sector employment level increased by 5.5% from 2007 to 2011. The Leisure and Hospitality sector employment level increased by 3.8% over the same period.

The Retail Trade sector decreased by 6.6% from 2007 to 2011. The Wholesale Trade sector decreased by 7.3% from 2007 to 2011.

With Northern Virginia and Hampton Roads, the home of the nation's largest concentration of military installations, the federal government has a greater impact on the Commonwealth relative to its size than all states except Alaska and Hawaii. In 2011, federal government civilian employment in the Commonwealth averaged approximately 174,586, for a 11.5% gain between 2007 and 2011.

State government employment averaged 143,165 in the Commonwealth for 2011, for a 6.4% decrease between 2007 and 2011. Approximately 50% of state government employment is related to general government administration and 50% is related to higher education.

Manufacturing employment dropped 17.3% between 2007 and 2011.

The Commonwealth typically has one of the lowest unemployment rates in the nation, due in large part to the diversity of the Commonwealth's economy. During 2011, an average of 6.2% of the Commonwealth's population was unemployed, compared to 8.5% for the nation.

The Governor is required by statute to present a bill detailing his budget (the "Budget Bill") and a narrative summary of the bill to the General Assembly by December 20th in the year immediately prior to each even-year session. Under constitutional provisions, the Governor retains the right, in his review of legislative action on the Budget Bill, to suggest alterations to or to veto appropriations made by the General Assembly. After enactment, the Budget Bill becomes law (the "Appropriation Act").

In the odd-year sessions of the General Assembly, amendments are considered to the Appropriation Act enacted in the previous year. The Governor submits a Budget Bill by December 20th that includes his proposed amendments. The Appropriation Act enacted in the odd-year session is effective upon passage by the General Assembly, whereas the regular biennial Appropriation Act is effective July 1, the beginning of the biennium.

On December 18, 2009, then Governor Timothy M. Kaine presented the Budget Bill for the 2010-2012 biennium (House Bill 30/Senate Bill 30) (the "2010 Budget Bill").

The 2010 General Assembly convened on January 13, 2010 and on January 16, 2010 Robert F. McDonnell was sworn in as the 71st Governor of Virginia. With the Commonwealth facing a budget shortfall of $4.2 billion, House Bill 30/Senate Bill 30 as introduced by former Governor Kaine was debated and amended.

On March 14, 2010 the General Assembly adjourned. House Bill 30/Senate Bill 30 as approved by the General Assembly was transmitted to the Governor for review. Highlights of the General Assembly's spending action for the 2010-2012 biennium included: depositing $50 million into the Revenue Stabilization Fund in Fiscal Year 2012; providing $29.5 million to unfreeze the Local Composite Index (LCI) in Fiscal Year 2011; providing $174.1 over the biennium to those school divisions whose LCI is increasing; restoring $115.6 million to school divisions for Virginia Public School Authority technology grants; restoring $36.1 million in Medicaid waiver provider rates over the biennium; and providing $43.8 million towards Governor McDonnell's economic development promotion package.

Budget reductions over the biennium included: $250 million over the biennium in targeted K-12; $360.2 million over the biennium in health and human resources mitigated by the receipt of enhanced Federal Medical Assistance Percentage (FMAP) funds; and $120 million in across the board reductions in aid to localities.

On April 13, 2010, Governor McDonnell offered 96 amendments to House Bill 30/Senate Bill 30 to be considered at the reconvened session of the General Assembly on April 21, 2010. These amendments addressed three overarching themes:
economic development and job creation; the provision of critical services; and technical amendments. The spending amendments totaled $42.1 million and were offset by amendments that would result in $51.0 million in savings or additional revenue over the biennium.

The 2010 General Assembly reconvened on April 21, 2010 and on May 17, 2010, the 2010 Budget Bill was approved by Governor McDonnell and enacted as the 2010-12 Appropriation Act.

On December 17, 2010, Governor McDonnell presented his proposed amendments to Chapter 874, the 2010 Virginia Acts of Assembly (the "2011 Budget Bill") affecting the remainder of the 2010-2012 biennium. The Governor addressed unfunded liabilities and core services focusing on four top priorities:
Government Reform, Economic Development, Transportation, and Higher Education.

The revised revenue forecast added $133.9 million in total net revenue for Fiscal Year 2011 and $149.1 million in Fiscal Year 2012, for a total of $283 million over the biennium. Although the revised revenue forecast went up slightly, the Governor called for $191.6 million in cuts, savings, and reprioritization across state government. Utilizing the work of the Government Reform and Restructuring Commission, the Governor identified savings from multiple sources, including: $24 million in reduced interest on bonds for college buildings; $1.4 million by reducing consultants in the tax department; and additional savings from reducing administrative expenses in the offices of the Governor, Lieutenant Governor, and Attorney General.

The 2011 Budget Bill included the following initiatives: $25 million for a technology and research fund to leverage private and federal research dollars to develop commercialized products resulting from research; $3 million to support non-credit courses in the Virginia Community College System to strengthen workforce development efforts; and amendments to seek new money to recapitalize the Virginia Small Business Financing Authority, enhance tourism and marketing activities, and revitalize and redevelop rural and urban areas.

The 2011 Budget Bill was considered by the 2011 General Assembly, which convened on January 12, 2011, and adjourned on February 26, 2011. The 2011 Budget Bill, as amended by the General Assembly, was submitted to the Governor for his approval. The Governor returned the amended bill to the General Assembly with 86 amendments for consideration at its one-day reconvened session held April 6, 2011. The General Assembly upheld all but 20 of the Governor's amendments. On May 2, 2011, the Governor vetoed one item and signed the bill. The 2011 Budget Bill became law on May 2, 2011, as Chapter 890 of the 2011 Virginia Acts of Assembly (the "2011 Appropriation Act").

The General Fund balance increased by $322.7 million in Fiscal Year 2011, an increase of 33.1% from Fiscal Year 2010. However, this was attributed in part to the restatement required under GASB No. 54, which resulted in the inclusion of numerous funds in the General Fund that have previously been reported as special revenue funds. The effect was to increase the General Fund balance by $104 million. Overall tax revenues increased by 5.2% from fiscal year 2010 to fiscal year 2011. Individual and Fiduciary Income tax revenues increased by 9.4%. Additional tax revenue increases occurred in the form of a 1.96% increase in Corporation Income tax collections. Tax revenue decreases occurred in the form of a 3.6% decrease in Public Service Corporation tax collections and a 3.3% decrease in State Sales and Use tax collections. There was a 0.6% increase in other tax collections which includes: Deeds, Contracts, Wills and Suits; Alcoholic Beverage Sales; Tobacco Products; Estate and Other Taxes. Overall revenue and non-tax revenues increased by 5.8% and by 19.7%, respectively. Overall expenditures increased by 3.7% in fiscal year 2011, compared to a 5.2% decrease in fiscal year 2010. Individual and family service expenditures increased by $444.7 million, or 11.1%, and education expenditures declined by $76.3 million, or 1.1%. General government expenditures increased $56.2 million or 2.7%.

On December 19, 2011 Governor McDonnell presented 32 amendments to the 2011 Appropriation Act affecting the remainder of the 2010-2012 biennium. The proposed actions added and subtracted to the overall spending plan, for a net spending decrease of $157.8 million for the remainder of Fiscal Year 2012.

Proposed amendments included appropriations of $67 million of the 2011 General Fund balance to the Transportation Trust Fund, and $30 million for the Federal Action Contingency Trust Fund, a cash reserve being created specifically to mitigate the impact of possible federal budget actions. Additional actions would restore a $10 million dollar reduction to higher education funding; provide $7.3 million in increased funding for inmate medical costs; and provide $6.4 million to adjust child welfare funding.

On December 19, 2011, Governor McDonnell presented the Budget Bill for the 2012-2014 biennium that began July 1, 2012. The 2012 Budget Bill focuses on the core functions of government and was developed with five main objectives:
promotion of job creation, making government programs more efficient; funding the key budget areas of education and transportation; addressing problem areas of pension funding, transportation maintenance and higher education funding; and building up cash reserves and liquidity.

The Commonwealth, its officials and employees are named as defendants in legal proceedings which occur in the normal course of governmental operations, some involving substantial amounts. It is not possible at the present time to estimate the ultimate outcome or liability, if any, of the Commonwealth with respect to these lawsuits. However, any ultimate liability resulting from these suits is not expected to have a material adverse effect on the financial condition of the Commonwealth.

AXA and its subsidiaries                    61.0%
AllianceBernstein Holding, L.P.             37.5
Unaffiliated holders                         1.5
                                    ---------------------
                                           100.0%
                                    =====================

Portfolio                               Share Class            Expense Cap
---------                               -----------            -----------
National Portfolio                      Class A                0.80%
                                        Class B                1.50%
                                        Class C                1.50%
                                        Advisor Class          0.50%

California Portfolio                    Class A                0.80%
                                        Class B                1.50%
                                        Class C                1.50%
                                        Advisor Class          0.50%

New York Portfolio                      Class A                0.80%
                                        Class B                1.50%
                                        Class C                1.50%
                                        Advisor Class          0.50%

Arizona Portfolio                       Class A                0.78%
                                        Class B                1.48%
                                        Class C                1.48%

Massachusetts Portfolio                 Class A                0.82%
                                        Class B                1.52%
                                        Class C                1.52%

Michigan Portfolio                      Class A                 .90%
                                        Class B                1.60%
                                        Class C                1.60%

Minnesota Portfolio                     Class A                0.90%
                                        Class B                1.60%
                                        Class C                1.60%

New Jersey Portfolio                    Class A                0.87%
                                        Class B                1.57%
                                        Class C                1.57%

Ohio Portfolio                          Class A                0.85%
                                        Class B                1.55%
                                        Class C                1.55%

Pennsylvania Portfolio                  Class A                0.90%
                                        Class B                1.60%
                                        Class C                1.60%

Virginia Portfolio                      Class A                0.80%
                                        Class B                1.50%
                                        Class C                1.50%

High Income Portfolio                   Class A                0.80%
                                        Class C                1.50%
                                        Advisor Class          1.50%

                                                        Amounts waived or
                                                        Reimbursed under Fee
                                                        Waiver and/or Expense
Portfolio                       Advisory Fees           Reimbursement Agreement
---------                       -------------           -----------------------
National
2012                              $4,436,262                 $1,010,697
2011                               3,902,370                  1,039,593
2010                               3,943,080                  1,041,228
High Income
2012                              $4,446,659                   $819,490
2011                               2,293,656                    635,742
2010                                 658,012                    551,942
New York
2012                              $2,950,562                   $623,409
2011                               2,680,820                    721,844
2010                               2,701,909                    655,048
California
2012                              $3,006,543                   $586,798
2011                               2,981,311                    661,662
2010                               3,339,629                    697,574
Arizona
2012                                $775,700                   $278,827
2011                                 803,098                    307,606
2010                                 915,668                    320,601
Massachusetts
2012                              $1,304,587                   $175,351
2011                               1,202,320                    196,478
2010                               1,064,012                    252,093
Michigan
2012                                $446,583                    $41,343
2011                                 448,365                     76,958
2010                                 502,503                     55,738
Minnesota
2012                                $498,371                   $124,242
2011                                 514,127                    144,485
2010                                 544,643                    142,724
New Jersey
2012                                $703,419                   $137,654
2011                                 710,652                    152,544
2010                                 776,461                    169,866
Ohio
2012                                $712,317                   $175,924
2011                                 710,865                    176,601
2010                                 735,767                    224,360
Pennsylvania
2012                                $595,901                    $53,557
2011                                 583,709                     73,408
2010                                 613,283                     79,800
Virginia
2012                              $1,252,456                   $467,827
2011                               1,102,338                    464,802
2010                               1,113,208                    493,605

                                                                 PORTFOLIOS IN
                              PRINCIPAL                          ALLIANCEBERNSTEIN    OTHER PUBLIC COMPANY
NAME, ADDRESS,*               OCCUPATION(S)                      FUND COMPLEX         DIRECTORSHIPS
AGE  AND                      DURING PAST FIVE                   OVERSEEN             HELD BY DIRECTOR IN
(YEAR ELECTED**)              YEARS OR LONGER                    BY DIRECTOR          THE PAST FIVE YEARS
----------------              ----------------                   -----------------    --------------------
INDEPENDENT
DIRECTORS
Chairman of the Board
William H. Foulk, Jr., #,##   Investment Adviser and an                101            None
80                            Independent Consultant since
(1998)                        prior to 2008. Previously, he
                              was Senior Manager of Barrett
                              Associates, Inc., a registered
                              investment adviser.  He was
                              formerly Deputy Comptroller and
                              Chief Investment Officer of the
                              State of New York and, prior
                              thereto, Chief Investment
                              Officer of the New York Bank
                              for Savings. He has served as a
                              director or trustee of various
                              AllianceBernstein Funds since
                              1983 and has been Chairman of
                              the AllianceBernstein Funds and
                              of the Independent Directors
                              Committee of such Funds since
                              2003.

John H. Dobkin, #             Independent Consultant since             101            None
70                            prior to 2008.  Formerly,
(1998)                        President of Save Venice, Inc.
                              (preservation organization)
                              from 2001-2002; Senior Advisor
                              from June 1999-June 2000 and
                              President of Historic Hudson
                              Valley (historic preservation)
                              from December 1989-May 1999.
                              Previously, Director of the
                              National Academy of Design. He
                              has served as a director or
                              trustee of various
                              AllianceBernstein Funds since
                              1992.

Michael J. Downey, #          Private Investor since prior to          101            Asia Pacific Fund,
69                            2008.  Formerly, managing                               Inc. and The Merger
(2005)                        partner of Lexington Capital,                           Fund since prior to
                              LLC (investment advisory firm)                          2008 and Prospect
                              from December 1997 until                                Acquisition Corp.
                              December 2003.  From 1987 until                         (financial services)
                              1993, Chairman and CEO of                               from 2007 until 2009
                              Prudential Mutual Fund
                              Management, director of the
                              Prudential mutual funds, and
                              member of the Executive
                              Committee of Prudential
                              Securities Inc.  He has served
                              as a director or trustee of the
                              AllianceBernstein Funds since
                              2005.

D. James Guzy, #              Chairman of the Board of PLX             101            Cirrus Logic
76                            Technology (semi-conductors)                            Corporation
(2005)                        and of SRC Computers Inc., with                         (semi-conductors)
                              which he has been associated                            and PLX Technology
                              since prior to 2008. He was a                           (semi-conductors)
                              director of Intel Corporation                           since prior to 2008
                              (semi-conductors) from 1969                             and Intel Corporation
                              until 2008, and served as                               (semi-conductors)
                              Chairman of the Finance                                 since prior to 2007
                              Committee of such company for                           until 2008
                              several years until May 2008.
                              He has served as a director or
                              trustee of one or more of the
                              AllianceBernstein Funds since
                              1982.

Nancy P. Jacklin, #           Professorial Lecturer at the             101            None
64                            Johns Hopkins School of
(2006)                        Advanced International Studies
                              since 2008. Formerly, U.S.
                              Executive Director of the
                              International Monetary Fund
                              (December 2002-May 2006);
                              Partner, Clifford Chance
                              (1992-2002); Sector Counsel,
                              International Banking and
                              Finance, and Associate General
                              Counsel, Citicorp (1985-1992);
                              Assistant General Counsel
                              (International), Federal
                              Reserve Board of Governors
                              (1982-1985); and Attorney
                              Advisor, U.S. Department of the
                              Treasury (1973-1982).  Member
                              of the Bar of the District of
                              Columbia and of New York; and
                              member of the Council on
                              Foreign Relations. She has
                              served as a director or trustee
                              of the AllianceBernstein Funds
                              since 2006.

Garry L. Moody,#              Independent Consultant.                  101            None
60                            Formerly, Partner, Deloitte &
(2008)                        Touche LLP (1995-2008) where he
                              held a number of senior
                              positions, including Vice
                              Chairman, and U.S. and Global
                              Investment Management Practice
                              Managing Partner; President,
                              Fidelity Accounting and Custody
                              Services Company (1993-1995);
                              and Partner, Ernst & Young LLP
                              (1975-1993), where he served as
                              the National Director of Mutual
                              Fund Tax Services.  He has
                              served as a director or
                              trustee, and as Chairman of the
                              Audit Committee, of the
                              AllianceBernstein Funds since
                              2008.

Marshall C. Turner, Jr., #    Private Investor since prior to          101            Xilinx, Inc.
71                            2008.  Interim CEO of MEMC                              (programmable logic
(2005)                        Electronic Materials, Inc.                              semi-conductors) and
                              (semi-conductor and solar cell                          MEMC Electronic
                              substrates) from November 2008                          Materials, Inc.
                              until March 2009. He was                                (semi-conductor and
                              Chairman and CEO of Dupont                              solar cell
                              Photomasks, Inc. (components of                         substrates) since
                              semi-conductor manufacturing),                          prior to 2008
                              2003-2005, and President and
                              CEO, 2005-2006, after the
                              company was acquired and
                              renamed Toppan Photomasks, Inc.
                              He has served as a director or
                              trustee of one or more of the
                              AllianceBernstein Funds since
                              1992.

Earl D. Weiner, #             Of Counsel, and Partner prior            101            None
73                            to January 2008, of the law
(2007)                        firm Sullivan & Cromwell LLP
                              and member of ABA Federal
                              Regulation of Securities
                              Committee Task Force to draft
                              editions of the Fund Director's
                              Guidebook. He has served as
                              director or trustee of the
                              AllianceBernstein Funds since
                              2007 and is Chairman of the
                              Governance and Nominating
                              Committees of the Funds.

INTERESTED DIRECTOR
-------------------
Robert M. Keith, +            Senior Vice President of the             101            None
1345 Avenue of the Americas   Adviser++ and head of
New York, NY  10105           AllianceBernstein Investments,
52                            Inc. ("ABI")++ since July 2008;
(2010)                        Director of ABI and President
                              of the AllianceBernstein Mutual
                              Funds. Previously, he served as
                              Executive Managing Director of
                              ABI from December 2006 to June
                              2008.  Prior to joining ABI in
                              2006, Executive Managing
                              Director of Bernstein Global
                              Wealth Management, and prior
                              thereto, Senior Managing
                              Director and Global Head of
                              Client Service and Sales of the
                              Adviser's institutional
                              investment management business
                              since 2004.  Prior thereto, he
                              was Managing Director and Head
                              of North American Client
                              Service and Sales in the
                              Adviser's institutional
                              investment management business,
                              with which he had been
                              associated since prior to 2004.

                   Dollar Range of Equity Securities in the Portfolios
                                 As of December 31, 2012

                            NATIONAL             HIGH INCOME      NEW YORK      CALIFORNIA
                            PORTFOLIO            PORTFOLIO        PORTFOLIO     PORTFOLIO
                            ---------            -----------      ---------     -----------
John H. Dobkin                 None                None             None          None
Michael J. Downey              None                None             None          None
William H. Foulk, Jr.          None                None             None          None
D. James Guzy                  None                None             None          None
Nancy P. Jacklin               $50,001-$100,000    None             None          None
Robert M. Keith                None                None             None          None
Garry L. Moody                 None                None             None          None
Marshall C. Turner, Jr.        None                None             None          $10,001-$50,000
Earl D. Weiner                 None                None             None          None


                            ARIZONA              MASSACHUSETTS    MICHIGAN      MINNESOTA
                            PORTFOLIO            PORTFOLIO        PORTFOLIO     PORTFOLIO
                            ---------            ---------        ---------     ---------

John H. Dobkin                 None                None             None          None
Michael J. Downey              None                None             None          None
William H. Foulk, Jr.          None                None             None          None
D. James Guzy                  None                None             None          None
Nancy P. Jacklin               None                None             None          None
Robert M. Keith                None                None             None          None
Garry L. Moody                 None                None             None          None
Marshall C. Turner, Jr.        None                None             None          None
Earl D. Weiner                 None                None             None          None


                            NEW JERSEY           OHIO             PENNSYLVANIA  VIRGINIA
                            PORTFOLIO            PORTFOLIO        PORTFOLIO     PORTFOLIO
                            ----------           ---------        ------------  ---------

John H. Dobkin                 None                None             None          None
Michael J. Downey              None                None             None          None
William H. Foulk, Jr.          None                None             None          None
D. James Guzy                  None                None             None          None
Nancy P. Jacklin               None                None             None          None
Robert M. Keith                None                None             None          None
Garry L. Moody                 None                None             None          None
Marshall C. Turner, Jr.        None                None             None          None
Earl D. Weiner                 None                None             None          None


                            AGGREGATE DOLLAR
                            RANGE OF EQUITY
                            SECURITIES IN THE
                            ALLIANCEBERNSTEIN
                            FUND COMPLEX AS OF
                            DECEMBER 31, 2012
                            -----------------

John H. Dobkin                Over $100,000
Michael J. Downey             Over $100,000
William H. Foulk, Jr.         Over $100,000
D. James Guzy                 Over $100,000
Nancy P. Jacklin              Over $100,000
Robert M. Keith                   None
Garry L. Moody                Over $100,000
Marshall C. Turner, Jr.       Over $100,000
Earl D. Weiner                Over $100,000

NAME, ADDRESS*                         POSITION(S)                          PRINCIPAL OCCUPATION
AND AGE                                HELD WITH FUND                       DURING PAST 5 YEARS
--------------------------             ------------------------             -----------------------------
Robert M. Keith,                       President and Chief Executive        See biography above.
52                                     Officer

Philip L. Kirstein,                    Senior Vice President and            Senior Vice President and Independent
67                                     Independent Compliance Officer       Compliance Officer of the Funds in
                                                                            the AllianceBernstein Fund Complex,
                                                                            with which he has been associated
                                                                            since October 2004.  Prior thereto,
                                                                            he was Of Counsel to Kirkpatrick &
                                                                            Lockhart, LLP from October 2003 to
                                                                            October 2004, and General Counsel of
                                                                            Merrill Lynch Investment Managers,
                                                                            L.P. since prior to March 2003.

Douglas J. Peebles,                    Senior Vice President                Senior Vice President of the
47                                                                          Adviser,** with which he has been
                                                                            associated since prior to 2008, Chief
                                                                            Investment Officer and Co-Head of
                                                                            Fixed Income.

Robert B. (Guy) Davidson III,          Senior Vice President                Senior Vice President of the
51                                                                          Adviser,** with which he has been
                                                                            associated since prior to 2008.

Michael G. Brooks,                     Vice President                       Senior Vice President of the
64                                                                          Adviser,** with which he has been
                                                                            associated since prior to 2008.

Wayne D. Godlin,                       Vice President                       Senior Vice President of the
51                                                                          Adviser,** with which he has been
                                                                            associated since December 2009.
                                                                            Prior thereto, he was an investment
                                                                            manager and a Managing Director of
                                                                            Van Kampen Asset Management with
                                                                            which he had been associated since
                                                                            prior to 2008.

Fred S. Cohen,                         Vice President                       Senior Vice President of the
54                                                                          Adviser,** with which he has been
                                                                            associated since prior to 2008.

Terrance T. Hults,                     Vice President                       Senior Vice President of the
46                                                                          Adviser,** with which he has been
                                                                            associated since prior to 2008.

Emilie D. Wrapp,                       Secretary                            Senior Vice President, Assistant
57                                                                          General Counsel and Assistant
                                                                            Secretary of ABI,** with which she
                                                                            has been associated since prior to
                                                                            2008.

Joseph J. Mantineo,                    Treasurer and Chief Financial        Senior Vice President of ABIS,**
53                                     Officer                              with which he has been associated
                                                                            since prior to 2008.

Phyllis J. Clarke,                     Controller                           Vice President of the ABIS,** with
52                                                                          which she has been associated since
                                                                            prior to 2008.

                                Aggregate             Aggregate
Name of Director                Compensation          Compensation
of the Fund                     From the Fund I       from the Fund II
------------------              ---------------       ----------------

John H. Dobkin                     $ 6,180               $ 6,176
Michael J. Downey                  $ 6,180               $ 6,454
William H. Foulk, Jr.              $11,702               $11,696
D. James Guzy                      $ 6,180               $ 6,562
Nancy P. Jacklin                   $ 6,180               $ 6,463
Robert M. Keith                    $     0               $     0
Garry L. Moody                     $ 6,868               $ 7,002
Marshall C. Turner, Jr.            $ 6,180               $ 6,176
Earl D. Weiner                     $ 6,622               $ 6,618

                                                  Total Number          Total Number
                                                  of Investment         of Investment
                                                  Companies in the      Portfolios within the
                            Total                 AllianceBernstein     AllianceBernstein
                            Compensation          Fund Complex,         Fund Complex,
                            from the              Including the Fund,   Including the Fund,
                            AllianceBernstein     as to which           as to which
Name of Director            Fund Complex,         the Director is a     the Director is a
of the Fund                 Including the Funds   Director or Trustee   Director or Trustee
------------------          -------------------   -------------------   ---------------------
John H. Dobkin              $252,000                      31                     101
Michael J. Downey           $252,000                      31                     101
William H. Foulk, Jr.       $477,000                      31                     101
D. James Guzy               $252,000                      31                     101
Nancy P. Jacklin            $252,000                      31                     101
Robert M. Keith             $0                            31                     101
Garry L. Moody              $280,000                      31                     101
Marshall C. Turner, Jr.     $252,000                      31                     101
Earl D. Weiner              $270,000                      31                     101

Michael G. Brooks                                                    None
Fred S. Cohen                                                        None
R. B. (Guy) Davidson, III                                    $500,001-$1,000,000
Wayne Godlin                                                         None
Terrance T. Hults                                              $10,001-$50,000

Michael G. Brooks                                                    None
Fred S. Cohen                                                        None
R. B. (Guy) Davidson, III                                            None
Wayne Godlin                                                         None
Terrance T. Hults                                              $10,001-$50,000

----------------------------------------------------------------------------------------
               REGISTERED INVESTMENT COMPANIES (excluding the Portfolio)
----------------------------------------------------------------------------------------
                                                           Number of      Total Assets
                           Total           Total           Registered     of Registered
                           Number of       Assets of       Investment     Investment
                           Registered      Registered      Companies      Companies
                           Investment      Investment      Managed with   Managed with
                           Companies       Companies       Performance-   Performance-
Portfolio Manager          Managed         Managed         based Fees     based Fees
----------------------------------------------------------------------------------------
Michael Brooks                29        $17,496,000,000       None            None
Fred S. Cohen                 29        $17,496,000,000       None            None
R. B. (Guy) Davidson III      29        $17,496,000,000       None            None
Wayne Godlin                  29        $17,496,000,000       None            None
Terrance T. Hults             29        $17,496,000,000       None            None
----------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------
               REGISTERED INVESTMENT COMPANIES (excluding the Portfolio)
----------------------------------------------------------------------------------------
                                                          Number of       Total Assets
                           Total           Total          Registered      of Registered
                           Number of       Assets of      Investment      Investment
                           Registered      Registered     Companies       Companies
                           Investment      Investment     Managed with    Managed with
                           Companies       Companies      Performance-    Performance-
Portfolio Manager          Managed         Managed        based Fees      based Fees
----------------------------------------------------------------------------------------
Michael Brooks                60        $20,744,000,000       None            None
R. B. (Guy) Davidson III      60        $20,744,000,000       None            None
Wayne Godlin                  60        $20,744,000,000       None            None
Terrance T. Hults             60        $20,744,000,000       None            None
----------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------
               REGISTERED INVESTMENT COMPANIES (excluding the Portfolio)
----------------------------------------------------------------------------------------
                                                           Number of      Total Assets
                           Total           Total           Registered     of Registered
                           Number of       Assets of       Investment     Investment
                           Registered      Registered      Companies      Companies
                           Investment      Investment      Managed with   Managed with
                           Companies       Companies       Performance-   Performance-
Portfolio Manager          Managed         Managed         based Fees     based Fees
----------------------------------------------------------------------------------------
Michael Brooks                29        $17,931,000,000       None            None
Fred S. Cohen                 29        $17,931,000,000       None            None
R. B. (Guy) Davidson III      29        $17,931,000,000       None            None
Wayne Godlin                  29        $17,931,000,000       None            None
Terrance T. Hults             29        $17,931,000,000       None            None
----------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------
               REGISTERED INVESTMENT COMPANIES (excluding the Portfolio)
----------------------------------------------------------------------------------------
                                                           Number of      Total Assets
                           Total           Total           Registered     of Registered
                           Number of       Assets of       Investment     Investment
                           Registered      Registered      Companies      Companies
                           Investment      Investment      Managed with   Managed with
                           Companies       Companies       Performance-   Performance-
Portfolio Manager          Managed         Managed         based Fees     based Fees
----------------------------------------------------------------------------------------
Michael Brooks                29        $17,894,000,000       None            None
Fred S. Cohen                 29        $17,894,000,000       None            None
R. B. (Guy) Davidson III      29        $17,894,000,000       None            None
Wayne Godlin                  29        $17,894,000,000       None            None
Terrance T. Hults             29        $17,894,000,000       None            None
----------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------
                           OTHER POOLED INVESTMENT VEHICLES
-----------------------------------------------------------------------------------------
                                                           Number of      Total Assets
                           Total           Total           Other Pooled   of Other Pooled
                           Number of       Assets of       Investment     Investment
                           Other Pooled    Other Pooled    Vehicles       Vehicles
                           Investment      Investment      Managed with   Managed with
                           Vehicles        Vehicles        Performance-   Performance-
Portfolio Manager          Managed         Managed         based Fees     based Fees
-----------------------------------------------------------------------------------------
Michael Brooks                54           $280,000,000       None            None
R. B. (Guy) Davidson III      54           $280,000,000       None            None
Wayne Godlin                  54           $280,000,000       None            None
Terrance T. Hults             54           $280,000,000       None            None
-----------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------
                                   OTHER ACCOUNTS(3)
------------------------------------------------------------------------------------------
                                                                            Total
                           Total           Total           Number of        Assets of
                           Number of       Assets of       Other Accounts   Other Accounts
                           Other           Other           Managed with     Managed with
                           Accounts        Accounts        Performance-     Performance-
Portfolio Manager          Managed         Managed         based Fees       based Fees
------------------------------------------------------------------------------------------
Michael Brooks                1,710     $15,623,000,000       6             $729,000,000
R. B. (Guy) Davidson III      1,710     $15,623,000,000       6             $729,000,000
Wayne Godlin                  1,710     $15,623,000,000       6             $729,000,000
Terrance T. Hults             1,710     $15,623,000,000       6             $729,000,000
------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------
                              OTHER POOLED INVESTMENT VEHICLES
----------------------------------------------------------------------------------------------
                           Total Number                                       Total Assets
                           of Other                        Number of Other    of Other
                           Pooled       Total Assets       Pooled Investment  Pooled Investment
                           Investment   of Other           Vehicles Managed   Vehicles Managed
                           Vehicles     Pooled Investment  with Performance-  with Performance-
Portfolio Manager          Managed      Vehicles Managed   based Fees         based Fees
----------------------------------------------------------------------------------------------
Michael Brooks                2          $118,000,000         None                None
R. B. (Guy) Davidson III      2          $118,000,000         None                None
Wayne Godlin                  2          $118,000,000         None                None
Terrance T. Hults             2          $118,000,000         None                None
----------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------
                                   OTHER ACCOUNTS(4)
------------------------------------------------------------------------------------------
                                                                            Total
                           Total           Total           Number of        Assets of
                           Number of       Assets of       Other Accounts   Other Accounts
                           Other           Other           Managed with     Managed with
                           Accounts        Accounts        Performance-     Performance-
Portfolio Manager          Managed         Managed         based Fees       based Fees
------------------------------------------------------------------------------------------
Michael Brooks              1,681       $12,961,000,000        3            $409,000,000
R. B. (Guy) Davidson III    1,681       $12,961,000,000        3            $409,000,000
Wayne Godlin                1,681       $12,961,000,000        3            $409,000,000
Terrance T. Hults           1,681       $12,961,000,000        3            $409,000,000
------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------
               REGISTERED INVESTMENT COMPANIES (excluding the Portfolio)
----------------------------------------------------------------------------------------
                                                           Number of      Total Assets
                           Total           Total           Registered     of Registered
                           Number of       Assets of       Investment     Investment
                           Registered      Registered      Companies      Companies
                           Investment      Investment      Managed with   Managed with
                           Companies       Companies       Performance-   Performance-
Portfolio Manager          Managed         Managed         based Fees     based Fees
----------------------------------------------------------------------------------------
Michael Brooks                29        $18,347,000,000       None            None
Fred S. Cohen                 29        $18,347,000,000       None            None
R. B. (Guy) Davidson III      29        $18,347,000,000       None            None
Wayne Godlin                  29        $18,347,000,000       None            None
Terrance T. Hults             29        $18,347,000,000       None            None
----------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------
               REGISTERED INVESTMENT COMPANIES (excluding the Portfolio)
----------------------------------------------------------------------------------------
                                                           Number of      Total Assets
                           Total           Total           Registered     of Registered
                           Number of       Assets of       Investment     Investment
                           Registered      Registered      Companies      Companies
                           Investment      Investment      Managed with   Managed with
                           Companies       Companies       Performance-   Performance-
Portfolio Manager          Managed         Managed         based Fees     based Fees
----------------------------------------------------------------------------------------
Michael Brooks                29        $18,220,000,000       None            None
Fred S. Cohen                 29        $18,220,000,000       None            None
R. B. (Guy) Davidson III      29        $18,220,000,000       None            None
Wayne Godlin                  29        $18,220,000,000       None            None
Terrance T. Hults             29        $18,220,000,000       None            None
----------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------
               REGISTERED INVESTMENT COMPANIES (excluding the Portfolio)
----------------------------------------------------------------------------------------
                                                           Number of      Total Assets
                           Total           Total           Registered     of Registered
                           Number of       Assets of       Investment     Investment
                           Registered      Registered      Companies      Companies
                           Investment      Investment      Managed with   Managed with
                           Companies       Companies       Performance-   Performance-
Portfolio Manager          Managed         Managed         based Fees     based Fees
----------------------------------------------------------------------------------------
Michael Brooks                29        $18,425,000,000       None            None
Fred S. Cohen                 29        $18,425,000,000       None            None
R. B. (Guy) Davidson III      29        $18,425,000,000       None            None
Wayne Godlin                  29        $18,425,000,000       None            None
Terrance T. Hults             29        $18,425,000,000       None            None
----------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------
               REGISTERED INVESTMENT COMPANIES (excluding the Portfolio)
----------------------------------------------------------------------------------------
                                                           Number of      Total Assets
                           Total           Total           Registered     of Registered
                           Number of       Assets of       Investment     Investment
                           Registered      Registered      Companies      Companies
                           Investment      Investment      Managed with   Managed with
                           Companies       Companies       Performance-   Performance-
Portfolio Manager          Managed         Managed         based Fees     based Fees
----------------------------------------------------------------------------------------
Michael Brooks                29        $18,418,000,000       None            None
Fred S. Cohen                 29        $18,418,000,000       None            None
R. B. (Guy) Davidson III      29        $18,418,000,000       None            None
Wayne Godlin                  29        $18,418,000,000       None            None
Terrance T. Hults             29        $18,418,000,000       None            None
----------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------
               REGISTERED INVESTMENT COMPANIES (excluding the Portfolio)
----------------------------------------------------------------------------------------
                                                           Number of      Total Assets
                           Total           Total           Registered     of Registered
                           Number of       Assets of       Investment     Investment
                           Registered      Registered      Companies      Companies
                           Investment      Investment      Managed with   Managed with
                           Companies       Companies       Performance-   Performance-
Portfolio Manager          Managed         Managed         based Fees     based Fees
----------------------------------------------------------------------------------------
Michael Brooks                29        $18,363,000,000       None            None
Fred S. Cohen                 29        $18,363,000,000       None            None
R. B. (Guy) Davidson III      29        $18,363,000,000       None            None
Wayne Godlin                  29        $18,363,000,000       None            None
Terrance T. Hults             29        $18,363,000,000       None            None
----------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------
               REGISTERED INVESTMENT COMPANIES (excluding the Portfolio)
----------------------------------------------------------------------------------------
                                                           Number of      Total Assets
                           Total           Total           Registered     of Registered
                           Number of       Assets of       Investment     Investment
                           Registered      Registered      Companies      Companies
                           Investment      Investment      Managed with   Managed with
                           Companies       Companies       Performance-   Performance-
Portfolio Manager          Managed         Managed         based Fees     based Fees
----------------------------------------------------------------------------------------
Michael Brooks                29        $18,359,000,000       None            None
Fred S. Cohen                 29        $18,359,000,000       None            None
R. B. (Guy) Davidson III      29        $18,359,000,000       None            None
Wayne Godlin                  29        $18,359,000,000       None            None
Terrance T. Hults             29        $18,359,000,000       None            None
----------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------
               REGISTERED INVESTMENT COMPANIES (excluding the Portfolio)
----------------------------------------------------------------------------------------
                                                           Number of      Total Assets
                           Total           Total           Registered     of Registered
                           Number of       Assets of       Investment     Investment
                           Registered      Registered      Companies      Companies
                           Investment      Investment      Managed with   Managed with
                           Companies       Companies       Performance-   Performance-
Portfolio Manager          Managed         Managed         based Fees     based Fees
----------------------------------------------------------------------------------------
Michael Brooks                29        $18,390,000,000       None            None
Fred S. Cohen                 29        $18,390,000,000       None            None
R. B. (Guy) Davidson III      29        $18,390,000,000       None            None
Wayne Godlin                  29        $18,390,000,000       None            None
Terrance T. Hults             29        $18,390,000,000       None            None
----------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------
               REGISTERED INVESTMENT COMPANIES (excluding the Portfolio)
----------------------------------------------------------------------------------------
                                                           Number of      Total Assets
                           Total           Total           Registered     of Registered
                           Number of       Assets of       Investment     Investment
                           Registered      Registered      Companies      Companies
                           Investment      Investment      Managed with   Managed with
                           Companies       Companies       Performance-   Performance-
Portfolio Manager          Managed         Managed         based Fees     based Fees
----------------------------------------------------------------------------------------
Michael Brooks                29        $18,222,000,000       None            None
Fred S. Cohen                 29        $18,222,000,000       None            None
R. B. (Guy) Davidson III      29        $18,222,000,000       None            None
Wayne Godlin                  29        $18,222,000,000       None            None
Terrance T. Hults             29        $18,222,000,000       None            None
----------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------
                              OTHER POOLED INVESTMENT VEHICLES
----------------------------------------------------------------------------------------------
                           Total Number                                       Total Assets
                           of Other                        Number of Other    of Other
                           Pooled       Total Assets       Pooled Investment  Pooled Investment
                           Investment   of Other           Vehicles Managed   Vehicles Managed
                           Vehicles     Pooled Investment  with Performance-  with Performance-
Portfolio Manager          Managed      Vehicles Managed   based Fees         based Fees
----------------------------------------------------------------------------------------------
Michael Brooks                2           $92,000,000          None                None
Fred S. Cohen                 2           $92,000,000          None                None
R. B. (Guy) Davidson III      2           $92,000,000          None                None
Wayne Godlin                  2           $92,000,000          None                None
Terrance T. Hults             2           $92,000,000          None                None
----------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------
                                   OTHER ACCOUNTS(5)
------------------------------------------------------------------------------------------
                                                                            Total
                           Total           Total           Number of        Assets of
                           Number of       Assets of       Other Accounts   Other Accounts
                           Other           Other           Managed with     Managed with
                           Accounts        Accounts        Performance-     Performance-
Portfolio Manager          Managed         Managed         based Fees       based Fees
------------------------------------------------------------------------------------------
Michael Brooks             1,685        $12,959,000,000       3             $408,000,000
Fred S. Cohen              1,685        $12,959,000,000       3             $408,000,000
R. B. (Guy) Davidson III   1,685        $12,959,000,000       3             $408,000,000
Wayne Godlin               1,685        $12,959,000,000       3             $408,000,000
Terrance T. Hults          1,685        $12,959,000,000       3             $408,000,000
------------------------------------------------------------------------------------------

                                                     Percentage Per Annum of
                                                     the Aggregate Average Daily
                  Distribution Services Fees for     Net Assets Attributable
Portfolio         Expenditures Payable to ABI        to Class A Shares
--------------    ------------------------------     ---------------------------

National                  $2,073,670                            0.30%

High Income               $1,315,102                            0.30%

New York                  $1,594,553                            0.30%

California                $1,576,717                            0.30%

Arizona                   $  411,465                            0.30%

Massachusetts             $  668,559                            0.30%

Michigan                  $  208,209                            0.30%

Minnesota                 $  266,969                            0.30%

New Jersey                $  355,059                            0.30%

Ohio                      $  339,660                            0.30%

Pennsylvania              $  308,100                            0.30%

Virginia                  $  625,986                            0.30%

                                       High
Category                 National      Income      New York     California   Arizona     Massachusetts   Michigan
of Expense               Portfolio     Portfolio   Portfolio    Portfolio    Portfolio   Portfolio       Portfolio
----------               ---------     ---------   ---------    ----------   ---------   ---------       ---------
Advertising/
Marketing                   $7,499        $6,357      $7,005        $6,871     $3,723         $4,281        $3,639

Printing and Mailing
of Prospectuses and
Semi-Annual and
Annual Reports to
Other Than Current
Shareholders                $2,229        $1,294      $2,091        $1,550       $972         $1,102          $969

Compensation to
Underwriters              $290,025      $184,806    $268,601      $222,193   $157,442       $178,184      $152,333

Compensation to
Dealers                 $2,678,219    $2,852,319  $2,211,599    $1,671,130   $426,700       $754,059      $225,649

Compensation to Sales
Personnel                 $188,965      $322,947    $185,676       $40,216    $14,150        $33,781       $11,251

Interest, Carrying or
Other Financing
Charges                         $0            $0          $0            $0         $0             $0            $0

Other (Includes
Personnel Costs of
Those Home Office
Employees Involved in
the Distribution
Effort and the
Travel-related
Expenses Incurred by
the Marketing
Personnel Conducting
Seminars)                  $39,517      $170,755    $221,650      $191,942   $134,562       $153,544      $131,195

Totals                  $3,406,454    $3,538,478  $2,896,622    $2,133,902   $737,549     $1,124,951      $525,036

                                       Minnesota  New Jersey     Ohio         Pennsylvania   Virginia
Category of Expense                    Portfolio  Portfolio      Portfolio    Portfolio      Portfolio
-------------------                    ---------  ---------      ---------    ---------      ---------
Advertising/ Marketing                    $3,587      $3,603        $3,865      $3,552          $4,384

Printing and Mailing of Prospectuses
and Semi-Annual and Annual Reports
to Other Than Current Shareholders          $828      $1,053          $867        $863            $989

Compensation to Underwriters            $140,636    $160,024      $153,134    $140,406        $172,651

Compensation to Dealers                 $286,482    $406,157      $342,452    $318,353        $735,748

Compensation to Sales Personnel          $11,755     $11,589       $21,600      $6,583         $39,284

Interest, Carrying or Other
Financing Charges                             $0          $0            $0          $0              $0

Other (Includes Personnel Costs of
Those Home Office Employees Involved
in the Distribution Effort and the
Travel-related Expenses Incurred by
the Marketing Personnel Conducting
Seminars)                               $122,553    $133,304      $133,338    $123,633        $150,529

Totals                                  $565,841    $715,730      $655,256    $593,390       $1,103,585

                                                     Percentage Per Annum of
                                                     the Aggregate Average Daily
                  Distribution Services Fees for     Net Assets Attributable
Portfolio         Expenditures Payable to ABI        to Class B Shares
--------------    ------------------------------     ---------------------------

National                    $ 63,881                           1.00%

New York                    $121,874                           1.00%

California                  $ 24,218                           1.00%

Arizona                     $ 20,870                           1.00%

Massachusetts               $ 26,824                           1.00%

Michigan                    $ 12,111                           1.00%

Minnesota                   $  3,506                           1.00%

New Jersey                  $ 24,672                           1.00%

Ohio                        $ 23,321                           1.00%

Pennsylvania                $ 23,421                           1.00%

Virginia                    $ 25,912                           1.00%

Category                 National      New York     California   Arizona     Massachusetts
of Expense               Portfolio     Portfolio    Portfolio    Portfolio   Portfolio
----------               ---------     ---------    ----------   ---------   ---------
Advertising/
Marketing                      $15           $30          $5           $0          $8

Printing and Mailing
of Prospectuses and
Semi-Annual and
Annual Reports to
Other Than Current
Shareholders                    $8           $10          $4           $1          $0

Compensation to
Underwriters                  $485          $648        $262          $72         $163

Compensation to
Dealers                    $23,633       $45,295      $7,370       $5,493       $9,391

Compensation to Sales
Personnel                     $180          $237         $19           $6          $39

Interest, Carrying or
Other Financing
Charges                         $0            $0          $0           $0           $0

Other (Includes
Personnel Costs of
Those Home Office
Employees Involved in
the Distribution
Effort and the
Travel-related
Expenses Incurred by
the Marketing
Personnel Conducting
Seminars)                     $428          $696        $201          $52         $182

Totals                     $24,749       $46,916      $7,861       $5,624       $9,783

                                       Michigan     Minnesota    New Jersey  Ohio        Pennsylvania   Virginia
Category of Expense                    Portfolio    Portfolio    Portfolio   Portfolio   Portfolio      Portfolio
-------------------                    ---------    ---------    ---------   ---------   ---------      ---------
Advertising/ Marketing                       $12          $0           $25        $5          $15             $3

Printing and Mailing of Prospectuses
and Semi-Annual and Annual Reports
to Other Than Current Shareholders            $7          $2            $5        $1           $8             $1

Compensation to Underwriters                $930         $37        $1,080      $205         $943           $221

Compensation to Dealers                   $5,348      $1,065        $9,302    $7,990       $7,844         $9,286

Compensation to Sales Personnel              $21          $0           $73       $27          $24            $58

Interest, Carrying or Other
Financing Charges                             $0          $0            $0        $0           $0             $0

Other (Includes Personnel Costs of
Those Home Office Employees Involved
in the Distribution Effort and the
Travel-related Expenses Incurred by
the Marketing Personnel Conducting
Seminars)                                   $683         $50          $881      $183         $732           $173

Totals                                    $7,001      $1,154       $11,366    $8,411       $9,566         $9,742

                                                     Percentage Per Annum of
                                                     the Aggregate Average Daily
                  Distribution Services Fees for     Net Assets Attributable
Portfolio         Expenditures Payable to ABI        to Class C Shares
--------------    ------------------------------     ---------------------------

National                   $1,551,939                         1.00%

High Income                $1,445,266                         1.00%

New York                   $  936,488                         1.00%

California                 $1,090,421                         1.00%

Arizona                    $  331,360                         1.00%

Massachusetts              $  643,728                         1.00%

Michigan                   $  286,267                         1.00%

Minnesota                  $  214,090                         1.00%

New Jersey                 $  354,953                         1.00%

Ohio                       $  427,406                         1.00%

Pennsylvania               $  273,802                         1.00%

Virginia                   $  670,704                         1.00%

                                       High
Category                 National      Income      New York     California   Arizona     Massachusetts
of Expense               Portfolio     Portfolio   Portfolio    Portfolio    Portfolio   Portfolio
----------               ---------     ---------   ---------    ----------   ---------   ---------
Advertising/
Marketing                   $1,810        $2,076      $2,210        $1,297      $1,147         $1,481

Printing and Mailing
of Prospectuses and
Semi-Annual and
Annual Reports to
Other Than
Current Shareholders          $390          $445        $487          $499        $261           $339

Compensation to
Underwriters               $49,434       $60,163     $68,689       $58,398     $45,851        $60,700

Compensation to
Dealers                 $1,772,622    $1,950,252  $1,062,184    $1,137,207    $366,877       $715,105

Compensation to
Sales Personnel            $35,551      $105,165     $42,610        $8,033      $4,990        $11,873

Interest, Carrying or
Other Financing
Charges                         $0            $0          $0            $0          $0             $0

Other (Includes
Personnel Costs of
Those Home Office
Employees Involved in
the Distribution
Effort and the
Travel-related
Expenses Incurred by
the Marketing
Personnel Conducting
Seminars)                  $46,350       $55,430     $61,464       $46,227     $40,078        $51,528

Totals                  $1,906,157    $2,173,531  $1,237,644    $1,251,661    $459,204       $841,026

                         Michigan      Minnesota    New Jersey    Ohio        Pennsylvania   Virginia
Category of Expense      Portfolio     Portfolio    Portfolio     Portfolio   Portfolio      Portfolio
-------------------      ---------     ---------    ---------     ---------   ---------      ---------
Advertising/
Marketing                     $677          $848      $1,120          $915      $1,006          $1,336

Printing and Mailing
of Prospectuses and
Semi-Annual and
Annual Reports to
Other Than Current
Shareholders                  $119          $286        $143          $330        $289            $415

Compensation to
Underwriters               $27,559       $43,642     $37,321       $45,387     $49,778         $61,864

Compensation to
Dealers                   $335,249      $229,426    $383,970      $468,041    $289,936        $717,275

Compensation to Sales
Personnel                   $2,560        $3,408      $4,298        $5,565      $2,519         $12,190

Interest, Carrying or
Other Financing
Charges                         $0            $0          $0            $0          $0              $0

Other (Includes
Personnel Costs of
Those Home Office
Employees Involved in
the Distribution
Effort and the
Travel-related
Expenses Incurred by
the Marketing
Personnel Conducting
Seminars)                  $23,717       $36,023     $36,312       $37,452     $39,910         $51,353

Totals                    $389,881      $313,633    $463,164      $557,690    $383,438        $844,433

                                National     High Income    New York      California    Arizona       Massachusetts
           Class                Portfolio    Portfolio      Portfolio     Portfolio     Portfolio     Portfolio
           -----                ---------    --------       ---------     ---------     ---------     ---------
Class B                             $0           $0             $0            $0           $0              $0
(% of the net assets of Class B)     0%           0%             0%            0%           0%              0%
Class C                          $354,220     $728,264       $301,156      $161,240     $127,842        $197,299
(% of the net assets of Class C)   .21%         .34%           .28%          .15%         .36%            .28%


                                Michigan      Minnesota     New Jersey    Ohio        Pennsylvania    Virginia
           Class                Portfolio     Portfolio     Portfolio     Portfolio   Portfolio       Portfolio
           -----                ---------     ---------     ---------     ---------   ---------       ---------
Class B                             $0           $0             $0            $0           $0             $0
(% of the net assets of Class B)     0%           0%             0%            0%           0%             0%
Class C                          $103,614      $99,544       $108,211      $130,284     $109,636       $173,729
(% of the net assets of Class C)   .36%         .44%           .29%          .30%         .38%           .24%

                                 Amounts         Amounts          Amounts
                                 ABI Received    ABI Received     ABI Received
Fiscal Year                      In CDSCs        In CDSCs         In CDSCs
Ended                            From            From             From
September 30     Portfolio       Class A Shares  Class B Shares   Class C Shares
------------    ----------      --------------- ---------------  ---------------

2012             National            $  23,011     $   1,199      $    8,018
2011                                    45,242         4,930          21,815
2010                                    15,870         8,317           8,110

2012             High Income         $  18,873     $       0      $   23,228
2011                                    73,190           N/A          63,414
2010                                     6,961             0           3,870

2012             California          $     981     $     389      $    5,025
2011                                    13,557         4,245           3,560
2010                                    14,770         3,752           6,241

2012             New York            $  14,409     $     871      $    9,108
2011                                    60,193         5,347          23,006
2010                                    34,207        16,856          13,871

2012             Minnesota           $       0     $       0      $    2,157
2011                                       158           190           6,606
2010                                     3,080            30           2,244

2012             New Jersey          $     196     $     566      $      773
2011                                     1,000         1,728           4,855
2010                                         0         2,457           4,790

2012             Ohio                $       0     $      17      $    3,061
2011                                     7,819         2,234           3,805
2010                                     8,963         1,633           2,084

2012             Pennsylvania        $       0     $       0      $      438
2011                                     2,163           742           1,405
2010                                         0         2,457           1,156

2012             Michigan            $       0     $     279      $    2,394
2011                                       601         4,798           2,146
2010                                        65         2,925           3,226

2012             Massachusetts       $       0     $     130      $    8,047
2011                                    19,001           334          18,427
2010                                     1,086         8,758          12,740

2012             Virginia            $       0     $     278      $    2,902
2011                                    21,682         1,148           5,589
2010                                    11,876         1,739           7,610

2012             Arizona             $   5,250     $     924      $    1,659
2011                                     4,490         1,153           5,057
2010                                       200         1,922           4,113

                                   Sales Charge
                                   ------------

                                                                  Discount or
                                                                 Commission to
                              As % of        As % of the       Dealers or Agents
       Amount               Net Amount     Public Offering       of up to % of
     of Purchase              Invested           Price          Offering Price
-------------------------------------------------------------------------------

Up to $100,000                 3.09%             3.00%               3.00%
$100,000 up to $250,000        2.04              2.00                2.00
$250,000 up to $500,000        1.01              1.00                1.00
$500,000 and above             0.00              0.00                0.00

                                          Contingent Deferred Sales
                                          Charge for the Portfolios
Year Since Purchase               as a % of Dollar Amount Subject to Charge
-------------------               -----------------------------------------

    First                                          3.00%
    Second                                         2.00%
    Third                                          1.00%
    Fourth                                         None

                                            NO. OF SHARES OF
NAME AND ADDRESS                                 CLASS            % OF CLASS
----------------                            ----------------      ----------

Charles Schwab & Co.
For The Exclusive Benefit of Customers
Mutual Fund Operations
211 Main Street
San Francisco, CA 94105-1905                       3,657,433         5.00%

First Clearing, LLC
Special Custody Acct. for the
Exclusive Benefit of Customer
2801 Market Street
Saint Louis, MO 63103-2523                         7,249,823         9.92%

MLPF&S
For the Sole Benefit of Its Customers
Attn: Fund Admin.
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484                        5,907,480         8.08%

Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311                              6,094,101         8.34%

National Financial Services LLC
For the Exclusive Benefit of Our Customers
Attn: Mutual Funds Dept.
499 Washington Boulevard, 4th Floor
Jersey City, NJ 07310                              5,247,282         7.18%

Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052                         6,841,661         9.36%

UBS WM USA
Omni Account M/F
Attn: Department Manager
1000 Harbor Boulevard, 5th Floor
Weehawken, NJ 07086-6761                           8,756,271        11.98%

CLASS B SHARES:
--------------

First Clearing, LLC
Special Custody Acct. for the
Exclusive Benefit of Customer
2801 Market Street
Saint Louis, MO 63103-2523                            54,733        11.28%

LPL Financial
FBO Customer Accounts
Attn: Mutual Fund Operations
P.O. Box 509046
San Diego, CA 92150-9046                              54,781        11.29%

MLPF&S
For the Sole Benefit of Its Customers
Attn: Fund Admin.
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484                           84,242        17.35%

Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311                                 32,698         6.74%

National Financial Services LLC
For the Exclusive Benefit of Our Customers
Attn: Mutual Funds Dept.
499 Washington Boulevard, 4th Floor
Jersey City, NJ 07310                                 42,847         8.83%

Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052                            67,081        13.82%

CLASS C SHARES:
--------------

First Clearing, LLC
Special Custody Acct for the
Exclusive Benefit of Customer
2801 Market Street
Saint Louis, MO 63103-2523                         1,857,864        11.19%

MLPF&S
For the Sole Benefit of Its Customers
Attn: Fund Admin.
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484                        4,984,548        30.03%

Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311                              1,599,078         9.64%

Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052                         1,488,373         8.97%

Raymond James
Omnibus For Mutual Funds
House Acct. Firm
Attn: Courtney Waller
880 Carillon Parkway
St. Petersburg, FL 33716-1102                        963,396         5.80%

UBS WM USA
Omni Account M/F
Attn: Department Manager
1000 Harbor Boulevard, 5th Floor
Weehawken, NJ 07086-6761                           1,288,322         7.76%

ADVISOR CLASS SHARES:
--------------------

Charles Schwab & Co.
For the Exclusive Benefit of Customers
Mutual Fund Operations
211 Main Street
San Francisco, CA 94105-1905                       1,105,568         5.98%

First Clearing, LLC
Special Custody Acct. for the
Exclusive Benefit of Customer
2801 Market Street
Saint Louis, MO 63103-2523                         1,984,332        10.73%

MLPF&S
For the Sole Benefit of Its Customers
Attn: Fund Admin.
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484                        4,951,136        26.77%

Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311                              4,235,736        22.90%

Raymond James
Omnibus for Mutual Funds
House Acct Firm
Attn: Courtney Waller
880 Carillon Parkway
St. Petersburg, FL 33716-1102                      3,702,074        20.02%

First Clearing, LLC
Special Custody Acct. for the
Exclusive Benefit of Customer
2801 Market Street
Saint Louis, MO 63103-2523                         8,080,719        14.51%

MLPF&S
For the Sole Benefit of Its Customers
Attn: Fund Admin.
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484                        5,737,771        10.31%

Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311                              9,497,665        17.06%

National Financial Services LLC
For the Exclusive Benefit of Our Customers
Attn: Mutual Funds Dept.
499 Washington Boulevard, 4th Floor
Jersey City, NJ 07310                              3,612,917         6.49%

Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052                         6,510,462        11.69%

UBS WM USA
Omni Account M/F
Attn: Department Manager
1000 Harbor Boulevard, 5th Floor
Weehawken, NJ 07086-6761                          12,689,848        22.79%

CLASS C SHARES:
--------------

First Clearing, LLC
Special Custody Acct. for the
Exclusive Benefit of Customer
2801 Market Street
Saint Louis, MO 63103-2523                         4,028,659        20.01%

MLPF&S
For the Sole Benefit of Its Customers
Attn: Fund Admin.
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484                        4,278,687        21.25%

Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311                              5,108,582        25.37%

Raymond James
Omnibus for Mutual Funds
House Acct. Firm
Attn: Courtney Waller
880 Carillon Parkway
St. Petersburg, FL 33716-1102                      1,675,119         8.32%

UBS WM USA
Omni Account M/F
Attn: Department Manager
1000 Harbor Boulevard, 5th Floor
Weehawken, NJ 07086-6761                           1,445,969         7.18%

ADVISOR CLASS SHARES:
--------------------

First Clearing, LLC
Special Custody Acct. for the
Exclusive Benefit of Customer
2801 Market Street
Saint Louis, MO 63103-2523                         5,871,080        14.82%

MLPF&S
For the Sole Benefit of Its Customers
Attn: Fund Admin.
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484                       15,210,796        38.40%

Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311                              5,222,682        13.18%

Pershing, LLC
P.O. Box 2052
Jersey City, NJ 07303-2052                         2,374,711         5.99%

Charles Schwab & Co.
For the Exclusive Benefit of Customers
Mutual Fund Operations
211 Main Street
San Francisco, CA 94105-1905                      13,446,620        23.61%

LPL Financial
FBO Customer Accounts
Attn: Mutual Fund Operations
P.O. Box 509046
San Diego, CA 92150-9046                           3,185,237         5.59%

National Financial Services LLC
For the Exclusive Benefit of Our Customers
Attn: Mutual Funds Dept.
499 Washington Boulevard, 4th Floor
Jersey City, NJ 07310                              6,314,121        11.08%

Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052                        12,997,054        22.82%

CLASS B SHARES:
--------------

Charles Schwab & Co.
For the Exclusive Benefit of Customers
Mutual Fund Operations
211 Main Street
San Francisco, CA 94105-1905                         203,039        22.87%

First Clearing, LLC
Special Custody Acct. for the
Exclusive Benefit of Customer
2801 Market Street
Saint Louis, MO 63103-2523                            47,016         5.30%

LPL Financial
FBO Customer Accounts
Attn: Mutual Fund Operations
P.O. Box 509046
San Diego, CA 92150-9046                              50,252         5.66%

MLPF&S
For the Sole Benefit of Its Customers
Attn: Fund Admin.
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484                          119,033        13.41%

National Financial Services LLC
For the Exclusive Benefit of Our Customers
Attn: Mutual Funds Dept.
499 Washington Boulevard, 4th Floor
Jersey City, NJ 07310                                 52,169         5.88%

Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052                           119,238        13.43%

CLASS C SHARES:
--------------

Charles Schwab & Co.
For the Exclusive Benefit of Customers
Mutual Fund Operations
211 Main Street
San Francisco, CA 94105-1905                       3,311,552        32.01%

First Clearing, LLC
Special Custody Acct. for the
Exclusive Benefit of Customer
2801 Market Street
Saint Louis, MO 63103-2523                           630,593         6.10%

MLPF&S
For the Sole Benefit of Its Customers
Attn: Fund Admin.
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484                        1,374,439        13.29%

Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311                                582,799         5.63%

Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052                         2,290,292        22.14%

ADVISOR CLASS SHARES:
--------------------

First Clearing, LLC
Special Custody Acct for the
Exclusive Benefit of Customer
2801 Market Street
Saint Louis, MO 63103-2523                           345,163        14.16%

LPL Financial
FBO Customer Accounts
Attn: Mutual Fund Operations
P.O. Box 509046
San Diego, CA 92150-9046                             223,907         9.18%

MLPF&S
For the Sole Benefit of Its Customers
Attn: Fund Admin.
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484                          572,860        23.50%

Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311                                681,933        27.97%

Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052                           490,457        20.12%

First Clearing, LLC
Special Custody Acct. for the
Exclusive Benefit of Customer
2801 Market Street
Saint Louis, MO 63103-2523                         6,924,436        15.03%

MLPF&S
For the Sole Benefit of its Customers
Attn: Fund Admin.
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484                        6,693,342        14.53%

Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311                              6,235,894        13.54%

Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052                         3,705,421         8.04%

UBS WM USA
Omni Account M/F
Attn: Department Manager
1000 Harbor Boulevard, 5th Floor
Weehawken, NJ 07086-6761                           2,902,722         6.30%

CLASS B SHARES:
---------------

Charles Schwab & Co.
For the Exclusive Benefit of Customers
Mutual Fund Operations
211 Main Street
San Francisco, CA 94105-1905                          38,953        27.38%

First Clearing, LLC
Special Custody Acct. for the
Exclusive Benefit of Customer
2801 Market Street
Saint Louis, MO 63103-2523                            19,543        13.74%

MLPF&S
For the Sole Benefit of Its Customers
Attn: Fund Admin.
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484                            9,075         6.38%

Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311                                 34,407        24.19%

Raymond James
Omnibus For Mutual Funds
House Acct. Firm
Attn: Courtney Waller
880 Carillon Parkway
St. Petersburg, FL 33716-1102                         11,376         8.00%

CLASS C SHARES:
--------------

First Clearing, LLC
Special Custody Acct. for the
Exclusive Benefit of Customer
2801 Market Street
Saint Louis, MO 63103-2523                           994,359        10.50%

MLPF&S
For the Sole Benefit of Its Customers
Attn: Fund Admin.
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484                        2,703,083        28.54%

Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311                              1,672,943        17.66%

Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052                           928,204         9.80%

UBS WM USA
Omni Account M/F
Attn: Department Manager
1000 Harbor Boulevard, 5th Floor
Weehawken, NJ 07086-6761                             663,604         7.01%

ADVISOR CLASS SHARES:
---------------------

First Clearing, LLC
Special Custody Acct. for the
Exclusive Benefit of Customer
2801 Market Street
Saint Louis, MO 63103-2523                           981,885        29.94%

LPL Financial
FBO Customer Accounts
Attn: Mutual Fund Operations
P.O. Box 509046
San Diego, CA 92150-9046                             258,890         7.90%

MLPF&S
For the Sole Benefit of its Customers
Attn: Fund Admin.
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484                          890,559        27.16%

Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311                                695,249        21.10%

Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052                           375,913        11.46%

Charles Schwab & Co.
For the Exclusive Benefit of Customers
Mutual Fund Operations
211 Main Street
San Francisco, CA 94105-1905                       2,858,176        23.66%

First Clearing, LLC
Special Custody Acct. for the
Exclusive Benefit of Customer
2801 Market Street
Saint Louis, MO 63103-2523                         1,831,667        15.16%

MLPF&S
For the Sole Benefit of Its Customers
Attn: Fund Admin.
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484                        1,478,824        12.24%

Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311                                684,022         5.66%

Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052                         1,115,263         9.23%

CLASS B SHARES:
---------------

Charles Schwab & Co.
For the Exclusive Benefit of Customers
Mutual Fund Operations
211 Main Street
San Francisco, CA 94105-1905                          66,421        42.31%

LPL Financial
FBO Customer Accounts
Attn: Mutual Fund Operations
P.O. Box 509046
San Diego, CA 92150-9046                              21,720        13.83%

Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052                            29,622        18.87%

CLASS C SHARES:
---------------

Charles Schwab & Co.
For the Exclusive Benefit of Customers
Mutual Fund Operations
211 Main Street
San Francisco, CA 94105-1905                         471,447        15.05%

First Clearing, LLC
Special Custody Acct. for the
Exclusive Benefit of Customer
2801 Market Street
Saint Louis, MO  63103-2523                          456,962        14.59%

MLPF&S
For the Sole Benefit of Its Customers
Attn: Fund Admin.
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484                          476,597        15.22%

Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311                                383,217        12.24%

Raymond James
Omnibus for Mutual Funds
House Acct. Firm
Attn: Courtney Waller
880 Carillon Parkway
St. Petersburg, FL 33716-1102                        162,620         5.19%

RBC Capital Markets LLC
Mutual Fund Omnibus Processing
Omnibus
Attn: Mutual Fund OPS Manager
510 Marquette Ave. S
Minneapolis, MN  55402-1110                          156,645         5.00%

For the Sole Benefit of Its Customers
Attn: Fund Admin.
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484                        2,812,106        13.87%

Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311                              1,313,316         6.48%

National Financial Services LLC
For the Exclusive Benefit of Our Customers
Attn: Mutual Funds Dept.
499 Washington Boulevard, 4th Floor
Jersey City, NJ 07310                              7,148,365        35.26%

Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052                         1,564,013         7.71%

CLASS B SHARES:
--------------

Cor Clearing LLC
9300 Underwood Ave., Ste. 400
Omaha, NE 68114-2685                                  14,977         9.22%

MLPF&S
For the Sole Benefit of Its Customers
Attn: Fund Admin.
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484                           70,157        43.19%

Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311                                 21,494        13.23%

National Financial Services LLC
For the Exclusive Benefit of Our Customers
Attn: Mutual Funds Dept.
499 Washington Boulevard, 4th Floor
Jersey City, NJ 07310                                 10,148         6.25%

Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052                            10,221         6.29%

Tariq J Hashmi &
Lubna Hashmi JTWROS
47 Pineridge Dr.
Westfield, MA 01085-4544                               8,247         5.08%

For the Sole Benefit of Its Customers
Attn: Fund Admin.
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484                        1,260,446        20.32%

Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311                                445,731         7.19%

National Financial Services LLC
For the Exclusive Benefit of Our Customers
Attn: Mutual Funds Dept.
499 Washington Boulevard, 4th Floor
Jersey City, NJ 07310                              1,084,607        17.49%

Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052                           840,368        13.55%

UBS WM USA
Omni Account M/F
Attn: Department Manager
1000 Harbor Boulevard, 5th Floor
Weehawken, NJ 07086-6761                             354,449         5.72%

Charles Schwab & Co.
For the Exclusive Benefit of Customers
Mutual Fund Operations
211 Main Street
San Francisco, CA 94105-1905                         830,170        12.53%

LPL Financial
FBO Customer Accounts
Attn: Mutual Fund Operations
P.O. Box 509046
San Diego, CA 92150-9046                             334,489         5.05%

MLPF&S
For the Sole Benefit of Its Customers
Attn: Fund Admin.
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484                          571,747         8.63%

Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311                                591,304         8.92%

National Financial Services LLC
For the Exclusive Benefit of Our Customers
Attn: Mutual Funds Dept.
499 Washington Boulevard, 4th Floor
Jersey City, NJ 07310                                707,543        10.68%

Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052                           626,490         9.45%

Raymond James
Omnibus for Mutual Funds
House Acct. Firm
Attn: Courtney Waller
880 Carillon Parkway
St. Petersburg, FL 33716-1102                        520,561         7.86%

CLASS B SHARES:
--------------

Charles Schwab & Co.
For the Exclusive Benefit of Customers
Mutual Fund Operations
211 Main Street
San Francisco, CA 94105-1905                           6,804         9.09%

Leslie W. Neinas TTEE
Linda C. Luke TTEE
Neinas Fam. Rev. Liv. Tr.
UA DTD 11/05/2004
47762 N. Shore Dr.
Belleville, MI 48111-2231                             16,212        21.65%

Michael B. Maxwell &
Ruth A. Maxwell
JTWROS TOD/DE
2273 Tamara Rd., NW
Kalkaska, MI 49646-8941                               10,515        14.04%

MLPF&S
For the Sole Benefit of Its Customers
Attn: Fund Admin.
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484                            8,613        11.50%

Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052                             9,565        12.77%

CLASS C SHARES:
--------------

Charles Schwab & Co.
For the Exclusive Benefit of Customers
Mutual Fund Operations
211 Main Street
San Francisco, CA 94105-1905                         332,223        12.99%

MLPF&S
For the Sole Benefit of Its Customers
Attn: Fund Admin.
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484                          374,794        14.65%

Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ  07311                               153,452         6.00%

Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052                           205,217         8.02%

Raymond James
Omnibus for Mutual Funds
House Acct. Firm
Attn: Courtney Waller
880 Carillon Parkway
St. Petersburg, FL 33716-1102                        286,185        11.19%

UBS WM USA
Omni Account M/F
Attn: Department Manager
1000 Harbor Boulevard, 5th Floor
Weehawken, NJ 07086-6761                             172,288         6.74%

First Clearing, LLC
Special Custody Acct. for the
Exclusive Benefit of Customer
2801 Market Street
Saint Louis, MO  63103-2523                          729,789         9.03%

LPL Financial
FBO Customer Accounts
Attn: Mutual Fund Operations
P.O. Box 509046
San Diego, CA 92150-9046                             547,741         6.78%

Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052                         1,362,920        16.86%

Raymond James
Omnibus for Mutual Funds
House Acct. Firm
Attn: Courtney Waller
880 Carillon Parkway
St. Petersburg, FL 33716-1102                        458,475         5.67%

UBS WM USA
Omni Account M/F
Attn: Department Manager
1000 Harbor Boulevard, 5th Floor
Weehawken, NJ 07086-6761                             610,533         7.55%

CLASS B SHARES:
--------------

Charles Schwab & Co.
For the Exclusive Benefit
of Customers
Mutual Fund Operations
211 Main Street
San Francisco, CA 94105-1905                           3,067        16.81%

MLPF&S
For the Sole Benefit of Its Customers
Attn: Fund Admin.
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484                            1,251         6.86%

National Financial Services LLC
For the Exclusive Benefit of Our Customers
Attn: Mutual Funds Dept.
499 Washington Boulevard, 4th Floor
Jersey City, NJ 07310                                  5,685        31.16%

Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052                             1,159         6.35%

RBC Capital Markets LLC
Mutual Fund Omnibus Processing
Omnibus
Attn: Mutual Fund OPS Manager
510 Marquette Ave. S
Minneapolis, MN  55402-1110                            4,778        26.19%

CLASS C SHARES:
--------------

First Clearing, LLC
Special Custody Acct. for the
Exclusive Benefit of Customer
2801 Market Street
Saint Louis, MO  63103-2523                          328,000        15.31%

MLPF&S
For the Sole Benefit of Its Customers
Attn: Fund Admin.
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484                          171,869         8.02%

Raymond James
Omnibus for Mutual Funds
House Acct. Firm
Attn: Courtney Waller
880 Carillon Parkway
St. Petersburg, FL 33716-1102                        186,644         8.71%

Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052                           356,084        16.62%

RBC Capital Markets LLC
Mutual Fund Omnibus Processing
Omnibus
Attn: Mutual Fund Ops Manager
510 Marquette Ave. S
Minneapolis, MN 55402-1110                           180,994         8.85%

UBS WM USA
Omni Account M/F
Attn: Department Manager
1000 Harbor Blvd., 5th Floor
Weehawken, NJ  07086-6761                            208,849         9.75%

Charles Schwab & Co.
For the Exclusive Benefit
of Customers
Mutual Fund Operations
211 Main Street
San Francisco, CA 94105-1905                       1,423,717        11.39%

First Clearing, LLC
Special Custody Acct. for the
Exclusive Benefit of Customer
2801 Market Street
Saint Louis, MO  63103-2523                        1,275,579        10.21%

MLPF&S
For the Sole Benefit of Its Customers
Attn: Fund Admin.
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484                        1,335,670        10.69%

Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311                              1,518,888        12.15%

National Financial Services LLC
For the Exclusive Benefit of Our Customers
Attn: Mutual Funds Dept.
499 Washington Boulevard, 4th Floor
Jersey City, NJ 07310                              2,506,163        20.06%

Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052                         1,000,665         8.01%

CLASS B SHARES:
---------------

Charles Schwab & Co.
For the Exclusive Benefit
of Customers
Mutual Fund Operations
211 Main Street
San Francisco, CA 94105-1905                          29,562        16.53%

First Clearing, LLC
Special Custody Acct. for the
Exclusive Benefit of Customer
2801 Market Street
Saint Louis, MO 63103-2523                            15,520         8.68%

MLPF&S
For the Sole Benefit of Its Customers
Attn: Fund Admin.
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484                           36,228        20.25%

Patricia Barrett
131 East Magnolia Ave.
Maywood, NJ 07607-1945                                12,924         7.22%

Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052                            25,941        14.50%

CLASS C SHARES:
--------------

Charles Schwab & Co.
For the Exclusive Benefit
of Customers
Mutual Fund Operations
211 Main Street
San Francisco, CA 94105-1905                         445,625        12.01%

First Clearing, LLC
Special Custody Acct. for the
Exclusive Benefit of Customer
2801 Market Street
Saint Louis, MO  63103-2523                          863,299        23.27%

MLPF&S
For the Sole Benefit of Its Customers
Attn: Fund Admin.
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484                        1,072,180        28.90%

Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311                                245,709         6.62%

National Financial Services LLC
For the Exclusive Benefit of Our Customers
Attn: Mutual Funds Dept.
499 Washington Boulevard, 4th Floor
Jersey City, NJ 07310                                189,187         5.10%

Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052                           211,056         5.69%

Charles Schwab & Co.
For the Exclusive Benefit of Customers
Mutual Fund Operations
211 Main Street
San Francisco, CA 94105-1905                       1,168,665        10.15%

First Clearing, LLC
Special Custody Acct. for the
Exclusive Benefit of Customer
2801 Market Street
Saint Louis, MO  63103-2523                        1,790,692        15.55%

MLPF&S
For the Sole Benefit of Its Customers
Attn: Fund Admin.
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484                        1,051,826         9.13%

Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311                                768,395         6.67%

National Financial Services LLC
For the Exclusive Benefit of Our Customers
Attn: Mutual Funds Dept.
499 Washington Boulevard, 4th Floor
Jersey City, NJ 07310                              1,316,476        11.43%

Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052                         1,484,962        12.90%

UBS WM USA
Omni Account M/F
Attn: Department Manager
1000 Harbor Blvd., 5th Floor
Weehawken, NJ  07086-6761                            577,111         5.01%

CLASS B SHARES:
--------------

Charles Schwab & Co.
For the Exclusive Benefit of Customers
Mutual Fund Operations
211 Main Street
San Francisco, CA 94105-1905                          17,263        10.94%

LPL Financial
FBO Customer Accounts
Attn: Mutual Fund Operations
P.O. Box 509046
San Diego, CA 92150-9046                              34,008        21.55%

MLPF&S
For the Sole Benefit of Its Customers
Attn: Fund Admin.
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484                           20,757        13.15%

National Financial Services LLC
For the Exclusive Benefit of Our Customers
Attn: Mutual Funds Dept.
499 Washington Boulevard, 4th Floor
Jersey City, NJ 07310                                 21,719        13.76%

Robert W. Baird & Co. Inc.
777 East Wisconsin Avenue
Milwaukee, WI 53202-5300                              14,569         9.23%

CLASS C SHARES:
---------------

First Clearing, LLC
Special Custody Acct. for the
Exclusive Benefit of Customer
2801 Market Street
Saint Louis, MO  63103-2523                          504,035        11.70%

MLPF&S
For the Sole Benefit of Its Customers
Attn: Fund Admin.
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484                          751,072        17.43%

Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311                                313,704         7.28%

National Financial Services LLC
For the Exclusive Benefit of Our Customers
Attn: Mutual Funds Dept.
499 Washington Boulevard, 4th Floor
Jersey City, NJ 07310                                318,722         7.40%

Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052                           402,965         9.35%

UBS WM USA
Omni Account M/F
Attn: Department Manager
1000 Harbor Boulevard, 5th Floor
Weehawken, NJ 07086-6761                             614,614        14.26%

First Clearing, LLC
Special Custody Acct. for the
Exclusive Benefit of Customer
2801 Market Street
Saint Louis, MO  63103-2523                        1,214,591        12.56%

MLPF&S
For the Sole Benefit of Its Customers
Attn: Fund Admin.
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484                          490,465         5.07%

Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311                                766,879         7.93%

National Financial Services LLC
For the Exclusive Benefit of Our Customers
Attn: Mutual Funds Dept.
499 Washington Boulevard, 4th Floor
Jersey City, NJ 07310                              1,695,603        17.53%

Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052                           982,801        10.16%

CLASS B SHARES:
--------------

First Clearing, LLC
Special Custody Acct. for the
Exclusive Benefit of Customer
2801 Market Street
Saint Louis, MO  63103-2523                           13,504         9.56%

MLPF&S
For the Sole Benefit of Its Customers
Attn: Fund Admin.
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484                           10,402         7.36%

Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052                            21,339        15.11%

CLASS C SHARES:
--------------

First Clearing, LLC
Special Custody Acct. for the
Exclusive Benefit of Customer
2801 Market Street
Saint Louis, MO  63103-2523                          693,683        26.65%

MLPF&S
For the Sole Benefit of Its Customers
Attn: Fund Admin.
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484                          560,240        21.53%

Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311                                236,578         9.09%

National Financial Services LLC
For the Exclusive Benefit of Our Customers
Attn: Mutual Funds Dept.
499 Washington Boulevard, 4th Floor
Jersey City, NJ 07310                                136,527         5.21%

UBS WM USA
Omni Account M/F
Attn: Department Manager
1000 Harbor Boulevard, 5th Floor
Weehawken, NJ 07086-6761                             132,171         5.08%

First Clearing, LLC
Special Custody Acct. for the
Exclusive Benefit of Customer
2801 Market Street
Saint Louis, MO  63103-2523                        3,366,358        16.45%

MLPF&S
For the Sole Benefit of Its Customers
Attn: Fund Admin.
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484                        4,157,607        20.31%

Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311                              1,385,760         6.77%

National Financial Services LLC
For the Exclusive Benefit of Our Customers
Attn: Mutual Funds Dept.
499 Washington Boulevard, 4th Floor
Jersey City, NJ 07310                              1,568,093         7.66%

Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052                         1,529,456         7.47%

CLASS B SHARES:
--------------

First Clearing, LLC
Special Custody Acct. for the
Exclusive Benefit of Customer
2801 Market Street
Saint Louis, MO  63103-2523                           37,375        21.25%

LPL Financial
FBO Customer Accounts
Attn: Mutual Fund Operations
P.O. Box 509046
San Diego, CA 92150-9046                              19,667        11.18%

MLPF&S
For the Sole Benefit of Its Customers
Attn: Fund Admin.
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484                           56,652        32.21%

Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311                                 29,467        16.75%

Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052                            12,672         7.20%

CLASS C SHARES:
--------------

First Clearing, LLC
Special Custody Acct. for the
Exclusive Benefit of Customer
2801 Market Street
Saint Louis, MO  63103-2523                        1,448,184        22.43%

MLPF&S
For the Sole Benefit of Its Customers
Attn: Fund Admin.
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484                        1,828,663        28.33%

Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311                                619,460         9.60%

National Financial Services LLC
For the Exclusive Benefit of Our Customers
Attn: Mutual Funds Dept.
499 Washington Boulevard, 4th Floor
Jersey City, NJ 07310                                427,381         6.62%