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<SEC-DOCUMENT>0000891092-05-001781.txt : 20050914
<SEC-HEADER>0000891092-05-001781.hdr.sgml : 20050914
<ACCEPTANCE-DATETIME>20050914152608
ACCESSION NUMBER:		0000891092-05-001781
CONFORMED SUBMISSION TYPE:	N-2/A
PUBLIC DOCUMENT COUNT:		3
FILED AS OF DATE:		20050914
DATE AS OF CHANGE:		20050914

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			MUNIYIELD QUALITY FUND INC
		CENTRAL INDEX KEY:			0000890196
		IRS NUMBER:				223170744
		STATE OF INCORPORATION:			NJ
		FISCAL YEAR END:			1031

	FILING VALUES:
		FORM TYPE:		N-2/A
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-126755
		FILM NUMBER:		051084366

	BUSINESS ADDRESS:	
		STREET 1:		800 SCUDDER MILL ROAD
		CITY:			PLAINSBORO
		STATE:			NJ
		ZIP:			08536
		BUSINESS PHONE:		6092822800

	MAIL ADDRESS:	
		STREET 1:		P O BOX 9011
		CITY:			PRINCETON
		STATE:			NJ
		ZIP:			08543-9011

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			MUNIYIELD QUALITY FUND INC
		CENTRAL INDEX KEY:			0000890196
		IRS NUMBER:				223170744
		STATE OF INCORPORATION:			NJ
		FISCAL YEAR END:			1031

	FILING VALUES:
		FORM TYPE:		N-2/A
		SEC ACT:		1940 Act
		SEC FILE NUMBER:	811-06660
		FILM NUMBER:		051084367

	BUSINESS ADDRESS:	
		STREET 1:		800 SCUDDER MILL ROAD
		CITY:			PLAINSBORO
		STATE:			NJ
		ZIP:			08536
		BUSINESS PHONE:		6092822800

	MAIL ADDRESS:	
		STREET 1:		P O BOX 9011
		CITY:			PRINCETON
		STATE:			NJ
		ZIP:			08543-9011
</SEC-HEADER>
<DOCUMENT>
<TYPE>N-2/A
<SEQUENCE>1
<FILENAME>e21115_n2a.htm
<DESCRIPTION>FORM N-2/A
<TEXT>
<HTML>
<HEAD>
<TITLE>
</TITLE>
</HEAD>
<BODY>


<div align="center"><font face="Times New Roman, Times, Serif" size=2>As filed
  with the Securities and Exchange Commission on September 14, 2005 </font><!-- MARKER FORMAT-SHEET="Right Head 2 Bold" FSL="Workstation" -->
</div>

<p align=RIGHT><font face="Times New Roman, Times, Serif" size=2>Securities Act
  File No. 333-126755 <br>
  Investment Company Act File No. 811-06660 </font></p>


<!-- MARKER FORMAT-SHEET="Center Head 3 Bold" FSL="Workstation" -->
<p align=CENTER><font face="Times New Roman, Times, Serif" size=3><b><font size="4">SECURITIES
  AND EXCHANGE COMMISSION</font><br>
  Washington, D.C. 20549 </b></font></p>
<!-- MARKER FORMAT-SHEET="Cutoff rule centered" FSL="Workstation" -->
<hr size=1 noshade align=CENTER width=150>


<!-- MARKER FORMAT-SHEET="Center Head 2-Bold" FSL="Workstation" -->
<p align=CENTER><font face="Times New Roman, Times, Serif" size=2><b>FORM N-2<br>
  [X] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 </b></font></p>
<!-- MARKER FORMAT-SHEET="Center Head 2-Bold" FSL="Workstation" -->
<p align=CENTER><font face="Times New Roman, Times, Serif" size=2><b>[X] PRE-EFFECTIVE
  AMENDMENT NO. 1</b></font></p>
<!-- MARKER FORMAT-SHEET="Center Head 2-Bold" FSL="Workstation" -->
<p align=CENTER><font face="Times New Roman, Times, Serif" size=2><b>[_] POST-EFFECTIVE
  AMENDMENT NO.<br>
  AND/OR<br>
  [C] REGISTRATION STATEMENT UNDER THE<br>
  INVESTMENT COMPANY ACT OF 1940 </b></font></p>
 <!-- MARKER FORMAT-SHEET="Center Head 2-Bold" FSL="Workstation" -->
<p align=CENTER><font face="Times New Roman, Times, Serif" size=2><b>[X] AMENDMENT
  NO. 6<br>
  (Check appropriate box or boxes) </b></font></p>


<!-- MARKER FORMAT-SHEET="Cutoff rule centered" FSL="Workstation" -->
<hr size=1 noshade align=CENTER width=150>
<!-- MARKER FORMAT-SHEET="Center Head 2-Bold" FSL="Workstation" -->
<p align=CENTER><font face="Times New Roman, Times, Serif" size=2><b>MUNIYIELD
  QUALITY FUND, INC.<br>
  (Exact Name of Registrant as Specified in Charter) </b></font></p>
<!-- MARKER FORMAT-SHEET="Cutoff rule centered" FSL="Workstation" -->
<hr size=1 noshade align=CENTER width=150>
<!-- MARKER FORMAT-SHEET="Center no bold" FSL="Workstation" -->
<p align=CENTER><font face="Times New Roman, Times, Serif" size=2>800 Scudders
  Mill Road<br>
  Plainsboro, New Jersey 08536<br>
  (Address of Principal Executive Offices) </font></p>
<!-- MARKER FORMAT-SHEET="Cutoff rule centered" FSL="Workstation" -->
<hr size=1 noshade align=CENTER width=150>
<!-- MARKER FORMAT-SHEET="Center no bold" FSL="Workstation" -->
<p align=CENTER><font face="Times New Roman, Times, Serif" size=2>(609) 282-2800<br>
  (Registrant&#146;s Telephone Number, Including Area Code) </font></p>
<!-- MARKER FORMAT-SHEET="Cutoff rule centered" FSL="Workstation" -->
<hr size=1 noshade align=CENTER width=150>
<!-- MARKER FORMAT-SHEET="Center no bold" FSL="Workstation" -->
<p align=CENTER><font face="Times New Roman, Times, Serif" size=2>Robert C. Doll,
  Jr.<br>
  MuniYield Quality Fund, Inc.<br>
  800 Scudders Mill Road, Plainsboro, New Jersey 08536<br>
  Mailing Address: P.O. Box 9011, Princeton, New Jersey 08543-9011<br>
  (Name and Address of Agent for Service) </font></p>
<!-- MARKER FORMAT-SHEET="Cutoff rule centered" FSL="Workstation" -->
<hr size=1 noshade align=CENTER width=150>
<!-- MARKER FORMAT-SHEET="Center no bold" FSL="Workstation" -->
<p align=CENTER><font face="Times New Roman, Times, Serif" size=2>Copies to: </font></p>
<!-- MARKER FORMAT-SHEET="Cutoff rule centered" FSL="Workstation" -->
<table border=0 cellspacing=0 cellpadding=0 width="100%">
  <tr>
    <td width=348 valign=top>
      <p align=center><font face="Times New Roman" size="2"><b>Andrew J. Donohue,
        Esq.</b></font></p>
    </td>
    <td width=457 valign=top>
      <p align=center><font face="Times New Roman" size="2"><b>Frank P. Bruno,
        Esq.</b></font></p>
    </td>
  </tr>
  <tr>
    <td width=348 valign=top>
      <p align=center><font face="Times New Roman" size="2"><b>FUND ASSET MANAGEMENT,
        L.P.</b></font></p>
    </td>
    <td width=457 valign=top>
      <p align=center><font face="Times New Roman" size="2"><b>SIDLEY AUSTIN BROWN
        &amp; WOOD <font size="1">LLP</font></b></font></p>
    </td>
  </tr>
  <tr>
    <td width=348 valign=top>
      <p align=center><font face="Times New Roman" size="2"><b>P.O. Box 9011</b></font></p>
    </td>
    <td width=457 valign=top>
      <p align=center><font face="Times New Roman" size="2"><b>787 Seventh Avenue</b></font></p>
    </td>
  </tr>
  <tr>
    <td width=348 valign=top>
      <p align=center><font face="Times New Roman" size="2"><b>Princeton, New
        Jersey 08543-9011</b></font></p>
    </td>
    <td width=457 valign=top>
      <p align=center><font face="Times New Roman" size="2"><b>New York, New York
        10019</b></font></p>
    </td>
  </tr>
</table>
<br>
<hr size=1 noshade align=CENTER width=150>
<!-- MARKER FORMAT-SHEET="Center no bold" FSL="Workstation" -->
<p align=CENTER><font face="Times New Roman, Times, Serif" size=2>Approximate
  date of proposed public offering: As soon as practicable after the<br>
  effective date of this Registration Statement. </font></p>
<!-- MARKER FORMAT-SHEET="Cutoff rule centered" FSL="Workstation" -->
<hr size=1 noshade align=CENTER width=150>
<!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>If any of the securities
  being registered on this form are to be offered on a delayed or continuous basis
  pursuant to Rule 415 under the Securities Act of 1933, as amended (the &#147;Securities
  Act&#148;), other than securities offered only in connection with dividend or
  interest reinvestment plans, check the following box. [_] </font></p>
<!-- MARKER FORMAT-SHEET="Cutoff rule centered" FSL="Workstation" -->
<hr size=1 noshade align=CENTER width=150>
<!-- MARKER FORMAT-SHEET="Center Head 2-Bold" FSL="Workstation" --> <font face="Times New Roman, Times, Serif" size=2><b><br>
</b></font>
<table border=0 cellspacing=0 cellpadding=0 width="100%">
  <tr>
    <td width=810 valign=bottom colspan="5">
      <p align=CENTER><font face="Times New Roman, Times, Serif" size=2><b>CALCULATION
        OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933</b></font>
    </td>
  </tr>
  <tr>
    <td width=810 valign=bottom colspan="5">
      <hr noshade size="1">
    </td>
  </tr>
  <tr>
    <td width=252 valign=bottom>
      <p align=center><font face="Times New Roman" size="1"><b>Title of Securities<br>
        Being Registered</b></font></p>
    </td>
    <td width=108 valign=bottom>
      <p align=center><font face="Times New Roman" size="1"><b>Amount being<br>
        Registered</b></font></p>
    </td>
    <td width=138 valign=bottom>
      <p align=center><font face="Times New Roman" size="1"><b>Proposed Maximum<br>
        Offering Price Per Unit(1)</b></font></p>
    </td>
    <td width=132 valign=bottom>
      <p align=center><font face="Times New Roman" size="1"><b>Proposed Maximum
        <br>
        Aggregate Offering<br>
        Price(1)</b></font></p>
    </td>
    <td width=180 valign=bottom>
      <p align=center><font face="Times New Roman" size="1"><b>Amount of<br>
        Registration Fee(2)</b></font></p>
    </td>
  </tr>
  <tr>
    <td width=810 valign=bottom colspan="5">
      <hr noshade size="1">
    </td>
  </tr>
  <tr>
    <td width=252 valign=bottom>
      <p><font face="Times New Roman" size="1">Auction Market Preferred Stock</font></p>
    </td>
    <td width=108 valign=bottom>
      <p align=center><font face="Times New Roman" size="1"><b>2,000 shares</b></font></p>
    </td>
    <td width=138 valign=bottom>
      <p align=center><font face="Times New Roman" size="1"><b>$25,000</b></font></p>
    </td>
    <td width=132 valign=bottom>
      <p align=center><font face="Times New Roman" size="1"><b>$50,000,000</b></font></p>
    </td>
    <td width=180 valign=bottom>
      <p align=center><font face="Times New Roman" size="1"><b>$5,885</b></font></p>
    </td>
  </tr>
  <tr>
    <td width=810 valign=bottom colspan="5">
      <hr noshade size="1">
    </td>
  </tr>
</table>
<br>
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>(1) </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>Estimated
      solely for the purpose of calculating the registration fee. </font></td>
  </tr>
</table>


<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>(2) </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>Previously paid. </font></td>
  </tr>
</table>


<br>
<!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>The Registrant hereby amends
  this Registration Statement on such date or dates as may become necessary to
  delay its effective date until the Registrant shall file a further amendment,
  which specifically states that this Registration Statement shall thereafter
  become effective in accordance with Section 8(a) of the Securities Act of 1933
  or until the Registration Statement shall become effective on such date as the
  Commission, acting pursuant to said Section 8(a), may determine. </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> </font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>








<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 1; page: 1" -->





<!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The information in this prospectus
is not complete and may be changed. We may not sell these securities until the
registration statement filed with the Securities and Exchange Commission is effective.
This prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not permitted. </FONT></P>


<!-- MARKER FORMAT-SHEET="Center Head 2 Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Subject to
Completion <BR>
Preliminary Prospectus dated September 14, 2005 </B></FONT></P>


<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>PROSPECTUS</B></U> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Center Head 2 Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4><B>$50,000,000<br>
  </B></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=5><B>MuniYield Quality
  Fund, Inc. </B></FONT></P>

<!-- MARKER FORMAT-SHEET="Center Head 2 Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>Auction Market
Preferred Stock (&#147;AMPS&#148;) <BR>
                             2,000 Shares, Series E <BR>
                    Liquidation Preference $25,000 per Share </B></FONT></P>


<!-- MARKER FORMAT-SHEET="Cutoff rule centered" FSL="Workstation" -->
<HR SIZE=1 noshade ALIGN=CENTER WIDTH=150>



<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MuniYield
Quality Fund, Inc. is a non-diversified, closed-end management investment company seeking
to provide shareholders with as high a level of current income exempt from Federal income
taxes as is consistent with its investment policies and prudent investment management.
The Fund seeks to achieve its investment objective by investing, as a fundamental policy,
at least 80% of an aggregate of the Fund&#146;s net assets (including proceeds from the
issuance of preferred stock), plus the amounts of any borrowings for investment purposes,
in a portfolio of municipal obligations the interest on which, in the opinion of bond
counsel to the issuer, is excludable from gross income for Federal income tax purposes
(except that the interest may be includable in taxable income for purposes of the Federal
alternative minimum tax). The Fund invests in a portfolio of municipal obligations which
are rated in the three highest quality ratings categories (A or better) or, if unrated,
are considered by the Fund&#146;s Investment Adviser to be of comparable quality. The
Fund may invest in certain tax exempt securities classified as &#147;private activity
bonds,&#148; as discussed within, that may subject certain investors in the Fund to an
alternative minimum tax. There can be no assurance that the Fund&#146;s investment
objective will be realized. </FONT></P>


<!-- MARKER FORMAT-SHEET="Left Head 2 Italic" FSL="Workstation" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>(continued on
following page) </I></FONT></P>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Investing
  in the AMPS involves certain risks that are described in the &#147;Risk Factors
  and Special Considerations&#148; section beginning on page&nbsp;11 of this prospectus.
  The minimum purchase amount for the AMPS is $25,000.</B> </FONT> </P>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 align="center" WIDTH=600>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT WIDTH=410>&nbsp;</TD>
    <TD ALIGN=center WIDTH=64><b><font size=1>Per Share</font> </b>
      <hr width=100% size=1 noshade>
    </TD>
    <TD ALIGN=center colspan="2"><b><font size=1>Total</font> </b>
      <hr width=60% size=1 noshade>
    </TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT WIDTH=410><FONT SIZE=2>Public offering price</FONT></TD>
    <TD ALIGN=right WIDTH=64><FONT SIZE=2>$25,000</FONT></TD>
    <TD ALIGN=right WIDTH=95><FONT SIZE=2>$50,000,000</FONT></TD>
    <TD ALIGN=right WIDTH=31>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT width="410"><FONT SIZE=2>Underwriting discount</FONT></TD>
    <TD ALIGN=right width="64"><FONT SIZE=2>$250</FONT></TD>
    <TD ALIGN=right width="95"><FONT SIZE=2>$500,000</FONT></TD>
    <TD ALIGN=right width="31">&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT width="410"><FONT SIZE=2>Proceeds, before expenses, to the
      Fund(1)</FONT></TD>
    <TD ALIGN=right width="64"><FONT SIZE=2>$24,750</FONT></TD>
    <TD ALIGN=right width="95"><FONT SIZE=2>$49,500,000</FONT></TD>
    <TD ALIGN=right width="31">&nbsp;</TD>
  </TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Footnote Left" FSL="Workstation" -->
<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=100% ALIGN=left VALIGN=top colspan="3"><FONT SIZE="1"> (1) </FONT><FONT SIZE="1">The
      estimated offering expenses payable by the Fund are $150,000.</FONT></TD>
  </TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
public offering price per share will be increased by the amount of accumulated dividends,
if any, from the date the shares are first issued. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Neither
the Securities and Exchange Commission nor any state securities commission has approved
or disapproved of these securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal offense. </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
AMPS will be ready for delivery in book-entry form through The Depository Trust Company
on or about , 2005. </FONT></P>



<!-- MARKER FORMAT-SHEET="Cutoff rule centered" FSL="Workstation" -->
<HR SIZE=1 noshade ALIGN=CENTER WIDTH=150>


<!-- MARKER FORMAT-SHEET="Center Head 2 Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4><B>Merrill Lynch &amp; Co. </B></FONT></P>


<!-- MARKER FORMAT-SHEET="Cutoff rule centered" FSL="Workstation" -->
<HR SIZE=1 noshade ALIGN=CENTER WIDTH=150>

<!-- MARKER FORMAT-SHEET="Center Head 2 no bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The date of
  this prospectus is &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
  2005. </FONT></P>

<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <BR>
<TABLE WIDTH=100%><TR><TD WIDTH=20% ALIGN=left><FONT SIZE=1>&nbsp;</FONT></TD><TD WIDTH=60% ALIGN=center><FONT SIZE="2">
</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR ALIGN=LEFT WIDTH=100% SIZE=5 noshade><BR>







<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 2; page: 2" -->




<!-- MARKER FORMAT-SHEET="Left Head 2 Italic" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>(continued from
previous page) </I></FONT></P>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
  prospectus contains information you should know before investing, including
  information about risks. Please read it before you invest and keep it for future
  reference. The Fund&#146;s statement of additional information dated &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
  2005 contains further information about the Fund and is incorporated by reference
  (legally considered to be part of this prospectus) and the table of contents
  of the statement of additional information appears on page 49 of this prospectus.
  A copy of the statement of additional information and copies of the Fund&#146;s
  semi-annual and annual reports may be obtained without charge by writing to
  the Fund at its address at 800 Scudders Mill Road, Plainsboro, New Jersey 08536,
  or by calling the Fund at (800) 543-6217. Copies of the Fund&#146;s semi-annual
  and annual reports may also be obtained without charge at mutualfunds.ml.com.
  Due to the relatively short offering period for the AMPS, the statement of additional
  information is not available at this website. In addition, you may request other
  information about the Fund or make stockholder inquiries by calling the Fund
  toll-free at (800) 543-6217. In addition, the Securities and Exchange Commission
  maintains a website (http://sec.gov) that contains the statement of additional
  information, material incorporated by reference and other information regarding
  registrants that file electronically with the Securities and Exchange Commission.
  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain
capitalized terms used herein not otherwise defined in this prospectus have the meaning
provided in the Glossary at the back of this prospectus. </FONT></P>



<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
<BR>
<TABLE WIDTH=100%><TR><TD WIDTH=20% ALIGN=left><FONT SIZE=1>&nbsp;</FONT></TD><TD WIDTH=60% ALIGN=center><FONT SIZE="2">
2</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR ALIGN=LEFT WIDTH=100% SIZE=5 noshade><BR>






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 3; page: 3" -->



<!-- MARKER FORMAT-SHEET="Center Head 2 Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>TABLE OF CONTENTS </B></FONT></P>




<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600 align="center">
  <TR VALIGN=Bottom>
    <TH>&nbsp;</TH>
    <TH><FONT SIZE=1>Page</FONT>
      <hr width=95% size=1 noshade>
    </TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD WIDTH=91% ALIGN=LEFT><FONT SIZE=2>Prospectus Summary</FONT></TD>
    <TD WIDTH=3% ALIGN=RIGHT><FONT SIZE=2>5</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Risk Factors and Special Considerations</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>11</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Financial Highlights</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>15</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>The Fund</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>17</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Use of Proceeds</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>17</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Capitalization</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>17</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Portfolio Composition</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>17</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Investment Objective and Policies</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>18</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Other Investment Policies</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>25</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Description of AMPS</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>28</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>The Auction</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>34</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Rating Agency Guidelines</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>41</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Investment Advisory and Management Arrangements</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>42</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Taxes</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>43</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Description of Capital Stock</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>44</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Custodian</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>47</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Underwriting</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>47</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Transfer Agent, Dividend Disbursing Agent and
      Registrar</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>47</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Accounting Services Provider</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>47</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Legal Matters</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>48</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Independent Registered Public Accounting Firm
      and Experts</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>48</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Additional Information</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>48</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Table of Contents of Statement of Additional Information</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>49</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Glossary</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>50</FONT></TD>
  </TR>
</TABLE>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Information
about the Fund can be reviewed and copied at the Securities and Exchange Commission&#146;s
Public Reference Room in Washington, D.C. Call 1-202-551-8090 for information on the
operation of the public reference room. This information is also available on the
Securities and Exchange Commission&#146;s Internet site at http://www.sec.gov and copies
may be obtained upon payment of a duplicating fee by writing to the Public Reference
Section of the Securities and Exchange Commission, Washington, D.C. 20549-0102.</B> </FONT> </P>




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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You
should rely only on the information contained in this prospectus. We have not, and the
underwriter has not, authorized any other person to provide you with different
information. If anyone provides you with different or inconsistent information, you
should not rely on it. We are not, and the underwriter is not, making an offer to sell
these securities in any jurisdiction where the offer or sale is not permitted. You should
assume that the information appearing in this prospectus is accurate only as of the date
on the front cover of this prospectus. Our business, financial condition, results of
operations and prospects may have changed since that date. </FONT></P>



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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>PROSPECTUS SUMMARY </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>This
summary is qualified in its entirety by reference to the detailed information included in
this prospectus and the statement of additional information.</I> </FONT> </P>

<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=25%><font face="Times New Roman, Times, Serif" size="2"><b>The Fund
      </b> </font> </td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=75%><font face="Times New Roman, Times, Serif" size=2> MuniYield
      Quality Fund, Inc. is a non-diversified, closed-end management investment
      company.</font></td>
  </tr>
</table>
<br>
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=25%><font face="Times New Roman, Times, Serif" size="2"><b>The Offering
      </b> </font> </td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=75%><font face="Times New Roman, Times, Serif" size=2> The Fund
      is offering a total of 2,000 shares of Auction Market Preferred Stock, Series
      E, at a purchase price of $25,000 per share plus accumulated dividends,
      if any, from the date the shares are first issued. The shares of AMPS are
      being offered by Merrill Lynch, Pierce, Fenner &amp; Smith Incorporated
      (&#147;Merrill Lynch&#148;), as underwriter. </font></td>
  </tr>
</table>
<br>
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=25%>&nbsp;</td>
    <td>&nbsp;</td>
    <td width=75%><font size="2">The Series E AMPS will be shares of preferred
      stock of the Fund that entitle their holders to receive cash dividends at
      an annual rate that may vary for the successive dividend periods. In general,
      except as described below, each dividend period following the initial dividend
      period will be seven days. The applicable dividend for a particular dividend
      period will be determined by an auction conducted on the business day next
      preceding the start of that dividend period.</font></td>
  </tr>
</table>
<br>
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=25%>&nbsp;</td>
    <td>&nbsp;</td>
    <td width=75%><font size="2">Investors and potential investors in shares of
      Series E AMPS may participate in auctions for the AMPS through their broker-dealers.</font></td>
  </tr>
</table>
<br>
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=25%>&nbsp;</td>
    <td>&nbsp;</td>
    <td width=75%><font size="2">Generally, AMPS investors will not receive certificates
      representing ownership of their shares. Ownership of AMPS will be maintained
      in book-entry form by the securities depository (The Depository Trust Company)
      or its nominee for the account of the investor&#146;s agent member (generally
      the investor&#146;s broker-dealer). The investor&#146;s agent member, in
      turn, will maintain records of such investor&#146;s beneficial ownership
      of AMPS.</font></td>
  </tr>
</table>
<br>
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=25%><font face="Times New Roman, Times, Serif" size="2"><b>Investment
      Objective <br>
      &nbsp;&nbsp;&nbsp;&nbsp;and Policies</b> </font> </td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=75%><font face="Times New Roman, Times, Serif" size=2> The investment
      objective of the Fund is to provide shareholders with as high a level of
      current income exempt from Federal income taxes as is consistent with its
      investment policies and prudent investment management. The Fund seeks to
      achieve its investment objective by investing, as a fundamental policy,
      at least 80% of its net assets (including proceeds from the issuance of
      preferred stock), and the proceeds of any borrowings for investment purposes,
      in a portfolio of municipal obligations issued by or on behalf of states,
      territories and possessions of the United States and their political subdivisions,
      agencies or instrumentalities, each of which pays interest that, in the
      opinion of bond counsel to the issuer, is excludable from gross income for
      Federal income tax purposes (&#147;Municipal Bonds&#148;). In general, the
      Fund does not intend for its investments to earn a large amount of interest
      income that is not exempt from Federal income tax, except that the interest
      may be includable in taxable income for purposes of the Federal alternative
      minimum tax. There can be no assurance that the Fund&#146;s investment objective
      will be realized.</font></td>
  </tr>
</table>
<br>
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=25%>&nbsp;</td>
    <td>&nbsp;</td>
    <td width=75%><font size="2"><i>Maturity</i>. The average maturity of the
      Fund&#146;s portfolio securities varies from time to time based upon an
      assessment of economic and market conditions by Fund Asset Management, L.P.,
      the Fund&#146;s investment adviser (the &#147;Investment Adviser&#148;).
      The Fund intends to invest primarily in long term Municipal Bonds (that
      is, Municipal Bonds with maturities of more than ten years). However, the
      Fund also may invest in intermediate term Municipal Bonds with remaining
      maturities of between three years and ten years. The Fund also may invest
      from time to time in short term Municipal Bonds with remaining maturities
      of less than three years. </font></td>
  </tr>
</table>

<br>
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=25%>&nbsp;</td>
    <td>&nbsp;</td>
    <td width=75%><font size="2"><i>Municipal Bond Ratings.</i> The Fund invests
      in a portfolio of Municipal Bonds that are rated in the three highest quality
      ratings categories by one or more nationally recognized statistical rating
      organizations (&#147;NRSROs&#148;) (A or higher by Moody&#146;s</font></td>
  </tr>
</table>


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<HR SIZE=1 noshade WIDTH=100% ALIGN=LEFT>
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=25%>&nbsp;</td>
    <td>&nbsp;</td>
    <td width=75%><font size="2">Investors Service, Inc. (&#147;Moody&#146;s&#148;),
      Standard &amp; Poor&#146;s (&#147;S&amp;P&#148;) or Fitch Ratings (&#147;Fitch&#148;)),
      or in unrated bonds considered by the Investment Adviser to be of comparable
      quality. In assessing the quality of Municipal Bonds, the Investment Adviser
      takes into account any letters of credit or similar credit enhancement to
      which particular Municipal Bonds are entitled and the creditworthiness of
      the financial institution that provided such credit enhancement. </font></td>
  </tr>
</table>
<br>
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=25%>&nbsp;</td>
    <td>&nbsp;</td>
    <td width=75%><font size="2"><i>Indexed and Inverse Floating Rate Securities.</i>
      The Fund may invest in securities whose potential returns are directly related
      to changes in an underlying index or interest rate, known as indexed securities.
      The return on indexed securities will rise when the underlying index or
      interest rate rises and fall when the index or interest rate falls. The
      Fund may also invest in securities whose return is inversely related to
      changes in an interest rate (inverse floaters). In general, income on inverse
      floaters will decrease when short term interest rates increase and increase
      when short term interest rates decrease. Investments in inverse floaters
      may subject the Fund to the risks of reduced or eliminated interest payments
      and loss of principal. In addition, certain indexed securities and inverse
      floaters may increase or decrease in value at a greater rate than the underlying
      interest rate, which effectively leverages the Fund&#146;s investment. As
      a result, the market value of such securities will generally be more volatile
      than that of fixed rate, tax exempt securities. Both indexed securities
      and inverse floaters are derivative securities and can be considered speculative.
      </font></td>
  </tr>
</table>
<br>
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=25%>&nbsp;</td>
    <td>&nbsp;</td>
    <td width=75%><font size="2"><i>Hedging Transactions.</i> The Fund may seek
      to hedge its portfolio against changes in interest rates using options and
      financial futures contracts or swap transactions. The Fund&#146;s hedging
      transactions are designed to reduce volatility, but come at some cost. For
      example, the Fund may try to limit its risk of loss from a decline in price
      of a portfolio security by purchasing a put option. However, the Fund must
      pay for the option, and the price of the security may not in fact drop.
      In large part, the success of the Fund&#146;s hedging activities depends
      on its ability to forecast movements in securities prices and interest rates.
      The Fund is not required to hedge its portfolio and may choose not to do
      so. The Fund cannot guarantee that any hedging strategies it uses will work.
      </font></td>
  </tr>
</table>
<br>
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=25%>&nbsp;</td>
    <td>&nbsp;</td>
    <td width=75%><font size="2"><i>Swap Agreements.</i> The Fund is authorized
      to enter into swap agreements, which are over-the-counter contracts in which
      one party agrees to make periodic payments based on the change in the market
      value of a specific bond, basket of bonds or index in return for periodic
      payments based on a fixed or variable interest rate or the change in market
      value of a different bond, basket of bonds or index. Swap agreements may
      be used to obtain exposure to a bond or market without owning or taking
      physical custody of securities. </font></td>
  </tr>
</table>
<br>
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=25%>&nbsp;</td>
    <td>&nbsp;</td>
    <td width=75%><font size="2"><i>Tax Considerations.</i> While exempt-interest
      dividends are excluded from gross income for Federal income tax purposes,
      they may be subject to the Federal alternative minimum tax in certain circumstances.
      Distributions of any capital gain or other taxable income will be taxable
      to stockholders. The Fund may not be a suitable investment for investors
      subject to the Federal alternative minimum tax or who would become subject
      to such tax by investing in the Fund. See &#147;Taxes.&#148; </font></td>
  </tr>
</table>
<br>
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=25%><font size="2"><b>Risk Factors</b></font></td>
    <td>&nbsp;</td>
    <td width=75%><font size="2"><i>Set forth below is a summary of the main risks
      of investing in the Fund&#146;s Series E AMPS. For a more detailed description
      of the main risks as well as certain other risks associated with investing
      in the Fund&#146;s Series E AMPS, see &#147;Risk Factors and Special Considerations.&#148;</i>
      </font></td>
  </tr>
</table><BR>
<br>
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=25%><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td width=5%>&#149;<font face="Times New Roman, Times, Serif" size=2> </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=70%><font face="Times New Roman, Times, Serif" size=2>The credit
      ratings of the AMPS could be reduced or terminated while an investor holds
      the AMPS, which could affect liquidity. </font></td>
  </tr>
</table><BR>
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    <TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=5%>&#149;<FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
    <TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Neither
broker-dealers nor the Fund are                                obligated to purchase
shares of AMPS in an                                auction or otherwise, nor is the Fund
required                                to redeem shares of AMPS in the event of a
                               failed auction.</FONT></TD>
  </TR>
</TABLE><BR>

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    <TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=5%>&#149;<FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
    <TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
If
sufficient bids do not exist in an auction,                                the applicable
dividend rate will be the maximum                                applicable dividend
rate, and in such event,                                owners of AMPS wishing to sell
will not be able                                to sell all, and may not be able to sell
any,                                AMPS in the auction. As a result, investors may
                               not have liquidity of investment.</FONT></TD>
  </TR>
</TABLE><BR>

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    <TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=5%>&#149;<FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
    <TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
As
a result of bidding by broker-dealers in an                                auction for
their own account, the dividend rate                                that would apply at
the auction may be higher or                                lower than the rate that
would have prevailed                                had the broker-dealer not bid.</FONT></TD>
  </TR>
</TABLE><BR>

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    <TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=5%>&#149;<FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
    <TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
A
broker-dealer may bid in an auction in order                                to prevent
what would otherwise be (i) a failed                                auction, (ii) an
&#147;all-hold&#148; auction, or (iii) an                                applicable
dividend rate that the broker-dealer                                believes, in its sole
discretion, does not                                reflect the market for the AMPS at
the time of                                the auction.</FONT></TD>
  </TR>
</TABLE><BR>

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  <TR VALIGN=TOP>
    <TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=5%>&#149;<FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
    <TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
relative buying and selling interest of                                market
participants in AMPS and in the auction                                rate securities
market as a whole will vary over                                time, and such variations
may be affected by,                                among other things, news relating to
the issuer,                                the attractiveness of alternative investments,
                               the perceived risk of owning the security
                               (whether related to credit, liquidity or any
                               other risk), the tax treatment accorded the
                               instruments, the accounting treatment accorded
                               auction rate securities, including recent
                               clarifications of U.S. generally accepted
                               principles relating to the treatment of auction
                               rate securities, reactions to regulatory actions
                               or press reports, financial reporting cycles and
                               market sentiment generally. Shifts of demand in
                               response to any one or simultaneous particular
                               events cannot be predicted and may be
                               short-lived or exist for longer periods.</FONT></TD>
  </TR>
</TABLE><BR>

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    <TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=5%>&#149;<FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
    <TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Merrill
Lynch, Pierce, Fenner &amp; Smith                                Incorporated (&#147;Merrill
Lynch&#148;) has advised the                                Fund that it and various
other broker-dealers                                and other firms that participate in
the auction                                rate securities market received letters from
the                                staff of the Securities and Exchange Commission
                               last spring. The letters requested that each of
                               these firms voluntarily conduct an investigation
                               regarding its respective practices and
                               procedures in that market. Pursuant to this
                               request, Merrill Lynch conducted its own
                               voluntary review and reported its findings to
                               the Securities and Exchange Commission staff. At
                               the Securities and Exchange Commission staff&#146;s
                               request, Merrill Lynch, together with certain
                               other broker-dealers and other firms that
                               participate in the auction rate securities
                               market, is engaging in discussions with the
                               Securities and Exchange Commission staff
                               concerning its inquiry. Neither Merrill Lynch
                               nor the Fund can predict the ultimate outcome of
                               the inquiry or how that outcome will affect the
                               market for the AMPS or the auctions.</FONT></TD>
  </TR>
</TABLE><BR>

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    <TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=5%>&#149;<FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
    <TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Broker-dealers
have no obligation to maintain a                                secondary trading market
in the AMPS outside of                                auctions and there can be no
assurance that a                                secondary market for the AMPS will
develop or,                                if it does develop, that it will provide
holders                                with a liquid trading market. An increase in the
                               level of interest rates likely will have an
                               adverse effect on the secondary market price of
                               the AMPS, and a selling stockholder may have to
                               sell AMPS between auctions at a price per share
                               of less than $25,000.</FONT></TD>
  </TR>
</TABLE><BR>

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    <TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=5%>&#149;<FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
    <TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Fund will issue the AMPS only if the AMPS                                have received a
rating of Aaa from Moody&#146;s and                                AAA from S&amp;P.
Under certain circumstances, the                                Fund may voluntarily
terminate compliance with                                Moody&#146;s or S&amp;P
guidelines, or both, in which                                case the AMPS may no longer
be rated by Moody&#146;s                                or S&amp;P, as applicable, but
will be rated by at                                least one rating agency.</FONT></TD>
  </TR>
</TABLE><BR>

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7</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR ALIGN=LEFT WIDTH=100% SIZE=5 noshade><BR>







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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
  <TR VALIGN=TOP>
    <TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=5%>&#149;<FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
    <TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Fund issues shares of AMPS, which generally                                pay dividends
based on short term interest                                rates. The Fund generally
will purchase                                Municipal Bonds that pay interest at fixed
or                                adjustable rates. If market interest rates rise,
                               this could negatively impact the value of the
                               Fund&#146;s investment portfolio, reducing the amount
                               of assets serving as asset coverage for the
                               AMPS. If the asset coverage becomes too low, the
                               Fund may be required to redeem some or all of
                               the shares of AMPS.</FONT></TD>
  </TR>
</TABLE><BR>

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    <TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=5%>&#149;<FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
    <TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Fund is registered as a &#147;non-diversified&#148;                               investment
company, the Fund may invest a                                greater percentage of its
assets in a single                                issuer than a diversified investment
company.                                Since the Fund may invest a relatively high
                               percentage of its assets in a limited number of
                               issuers, the Fund may be more exposed to any
                               single economic, political or regulatory
                               occurrence than a more widely diversified fund.</FONT></TD>
  </TR>
</TABLE><BR>

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  <TR VALIGN=TOP>
    <TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=5%>&#149;<FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
    <TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
amount of public information available about                                Municipal
Bonds in the Fund&#146;s portfolio is                                generally less than
that for corporate equities                                or bonds, and the investment
performance of the                                Fund may, therefore, be more dependent
on the                                analytical abilities of the Investment Adviser
                               than the performance of a stock fund or taxable
                               bond fund.</FONT></TD>
  </TR>
</TABLE><BR>

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  <TR VALIGN=TOP>
    <TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=5%>&#149;<FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
    <TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Fund&#146;s investments in Municipal Bonds are                                subject to
interest rate and credit risk.                                Interest rate risk is the
risk that prices of                                Municipal Bonds generally increase
when interest                                rates decline and decrease when interest
rates                                increase. Prices of the longer term securities
                               in which the Fund primarily invests generally
                               change more in response to changes in interest
                               rates than prices of shorter term securities.
                               Credit risk is the risk that the issuer will be
                               unable to pay the interest or principal when
                               due. Changes in an issuer&#146;s credit rating or the
                               market&#146;s perception of an issuer&#146;s
                               creditworthiness may affect the value of the
                               Fund&#146;s investment in that issuer.</FONT></TD>
  </TR>
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    <TD WIDTH=25%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Investment Adviser</B> </FONT> </TD>
    <TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Investment Adviser provides investment                               advisory and
administrative services to the Fund.                               For its services, the
Fund pays the Investment                               Adviser a monthly fee at the
annual rate of 0.50%                               of the Fund&#146;s average weekly net
assets (including                               any proceeds from the issuance of
preferred                               stock).</FONT></TD>
  </TR>
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    <TD WIDTH=25%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Dividends and Dividend <BR>&nbsp;&nbsp;&nbsp;Periods</B> </FONT> </TD>
    <TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dividends
on the Series E AMPS will be cumulative from the date the shares are
                       first issued and payable at the annualized cash dividend rate for
the initial dividend period on the                               initial dividend payment
date as follows:.</FONT></TD>
  </TR>
</TABLE>

<br>

<table cellpadding=0 cellspacing=0 border=0 align="center" width=100%>
  <tr valign=Bottom>
    <th align="left" width="25%">&nbsp;</th>
    <th align="left" width="17%"><font size=1>AMPS Series </font>
      <hr width=95% size=1 noshade align="left">
    </th>
    <th align="left" width="3%">&nbsp;</th>
    <th width="19%"><font size=1>Initial <br>
      Dividend <br>
      Rate </font>
      <hr width=95% size=1 noshade>
    </th>
    <th width="2%">&nbsp;</th>
    <th width="12%"><font size=1>Initial <br>
      Dividend <br>
      Period <br>
      Ending </font>
      <hr width=95% size=1 noshade>
    </th>
    <th width="2%">&nbsp;&nbsp;</th>
    <th width="20%"><font size=1>Initial <br>
      Dividend <br>
      Payment <br>
      Date </font>
      <hr width=95% size=1 noshade>
    </th>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT width=25%>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td align=LEFT width=17%><font size=2>Series E</font></td>
    <td align=LEFT width=3%>&nbsp;&nbsp;</td>
    <td align=CENTER width=19%><font size=2>%</font></td>
    <td align=CENTER width=2%>&nbsp;</td>
    <td align=CENTER width=12%><font size=2>, 2005</font></td>
    <td align=CENTER width=2%>&nbsp;</td>
    <td align=CENTER width=20%><font size=2>, 2005</font></td>
  </tr>
</table>

 <BR>
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    <TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
                       &nbsp;  </FONT></TD>
    <TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>After
the initial dividend period, each dividend                               period for the
Series E AMPS will generally                               consist of seven days;
provided however, that                               before any auction, the Fund may
decide, subject                               to certain limitations and only if it gives
notice                               to holders, to declare a special dividend period
                              of up to five years.</FONT></TD>
  </TR>
</TABLE>

<br>
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    <TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
                   &nbsp;     </FONT></TD>
    <TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>After
the initial dividend period, in the case of                               dividend
periods that are not special dividend                               periods, dividends
generally will be payable on                               each succeeding Monday.</FONT></TD>
  </TR>
</TABLE><BR>

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    <TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
                      &nbsp;   </FONT></TD>
    <TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dividends
for the Series E AMPS will be paid                               through the securities
depository (The Depository                               Trust Company) on each dividend
payment date for                               the AMPS.</FONT></TD>
  </TR>
</TABLE><BR>

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    <TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
                         &nbsp;  </FONT></TD>
    <TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For
each subsequent dividend period, the auction                               agent (The
Bank of New York) will hold an auction                               to determine the
cash dividend rate on the shares                               of the Series E AMPS.</FONT></TD>
  </TR>
</TABLE><BR>




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<TABLE WIDTH=100%><TR><TD WIDTH=20% ALIGN=left><FONT SIZE=1>&nbsp;</FONT></TD><TD WIDTH=60% ALIGN=center><FONT SIZE="2">
8</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR ALIGN=LEFT WIDTH=100% SIZE=5 noshade><BR>







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  <TR VALIGN=TOP>
    <TD WIDTH=25%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Determination of <BR>&nbsp;&nbsp;&nbsp;Maximum Dividend <BR>&nbsp;&nbsp;&nbsp;Rates</B> </FONT> </TD>
    <TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Generally,
the applicable dividend rate for any dividend period         for the Series E
              AMPS will not be more than the maximum         applicable rate attributable
to such         shares. The maximum applicable rate                         for the
Series E AMPS will be the higher of (A) the applicable
                              percentage of the reference rate on the auction
                              date or (B) the applicable spread plus the
                              reference rate on the auction date. The reference
                              rate is (A) the higher of the applicable LIBOR
                              Rate (as defined in the Glossary) and the Taxable
                              Equivalent of the Short-Term Municipal Bond Rate
                              (as defined in the Glossary) (for a dividend
                              period or special dividend period of 364 or fewer
                              days), or (B) the applicable Treasury Index Rate
                              (as defined in the Glossary)(for a special
                              dividend period of 365 days or more). The maximum
                              applicable rate for the AMPS will depend on the
                              credit rating assigned to the shares, the length
                              of the dividend period and whether or not the Fund
                              has given notification prior to the auction for
                              the dividend period that any taxable income will
                              be included in the dividend on the AMPS for that
                              dividend period. The applicable percentage and
                              applicable spread are as follows:</FONT></TD>
  </TR>
</TABLE><BR>
<table cellpadding=0 cellspacing=0 border=0 width=100%>
  <tr valign=top align="center">
    <td width="3%">&nbsp;</td>
    <td colspan="3" align="center" valign="bottom"><font size="1"><b>Credit Ratings
      </b> </font>
      <hr width=98% size=1 noshade>
    </td>
    <td align="center" valign="bottom" width="1%">&nbsp;</td>
    <td align="center" valign="bottom" width="15%"><font size="1"><b>Applicable<br>
      Percentage<br>
      of Reference<br>
      Rate&#151;No</b></font></td>
    <td align="center" valign="bottom" width="1%">&nbsp;</td>
    <td align="center" valign="bottom" width="15%"><font size="1"><b>Applicable<br>
      Percentage<br>
      of Reference<br>
      Rate&#151;</b></font></td>
    <td align="center" valign="bottom" width="1%">&nbsp;</td>
    <td align="center" valign="bottom" width="15%"><font size="1"><b>Applicable<br>
      Spread Over<br>
      Reference<br>
      Rate&#151;No</b></font></td>
    <td align="center" valign="bottom" width="6%">&nbsp;</td>
    <td align="center" valign="bottom" width="11%"><font size="1"><b>Applicable<br>
      Spread Over<br>
      Reference<br>
      Rate&#151;</b></font></td>
  </tr>
  <tr valign=top align="center">
    <td width="3%">&nbsp;</td>
    <td width="15%"><font size="1"><b>Moody&#146;s </b> </font>
      <hr width=95% size=1 noshade>
    </td>
    <td width="1%">&nbsp;</td>
    <td width="16%"><font size="1"><b>S&amp;P </b> </font>
      <hr width=95% size=1 noshade>
    </td>
    <td width="1%">&nbsp;</td>
    <td width="15%"><font size="1"><b>Notification </b> </font>
      <hr width=95% size=1 noshade>
    </td>
    <td width="1%">&nbsp;</td>
    <td width="15%"><font size="1"><b>Notification </b> </font>
      <hr width=95% size=1 noshade>
    </td>
    <td width="1%">&nbsp;</td>
    <td width="15%"><font size="1"><b>Notification </b> </font>
      <hr width=95% size=1 noshade>
    </td>
    <td width="6%">&nbsp;</td>
    <td width="11%"><font size="1"><b>Notification </b> </font>
      <hr width=95% size=1 noshade>
    </td>
  </tr>
  <tr valign=Bottom>
    <td align=center width="3%"><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td align=center width="15%"><font size="1">Aaa&nbsp;</font></td>
    <td align=center width="1%"><font size="1">&nbsp;&nbsp;</font></td>
    <td align=CENTER width="16%"><font size="1">AAA</font></td>
    <td align=CENTER width="1%"><font size="1">&nbsp;&nbsp;</font></td>
    <td align=center width="15%"><font size="1">110%</font></td>
    <td align=center width="1%"><font size="1">&nbsp;&nbsp;</font></td>
    <td align=center width="15%"><font size="1">125%</font></td>
    <td align=center width="1%"><font size="1">&nbsp;&nbsp;</font></td>
    <td align=center width="15%"><font size="1">1.10%</font></td>
    <td align=center width="6%"><font size="1">&nbsp;&nbsp;</font></td>
    <td align=center width="11%"><font size="1">1.25%</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=center width="3%">&nbsp;</td>
    <td align=center width="15%"><font size="1">Aa3 to Aa1&nbsp;</font></td>
    <td align=center width="1%">&nbsp;</td>
    <td align=CENTER width="16%"><font size="1">AA- to AA&#134;</font></td>
    <td align=CENTER width="1%">&nbsp;</td>
    <td align=center width="15%"><font size="1">125%</font></td>
    <td align=center width="1%">&nbsp;</td>
    <td align=center width="15%"><font size="1">150%</font></td>
    <td align=center width="1%">&nbsp;</td>
    <td align=center width="15%"><font size="1">1.25%</font></td>
    <td align=center width="6%">&nbsp;</td>
    <td align=center width="11%"><font size="1">1.50%</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=center width="3%">&nbsp;</td>
    <td align=center width="15%"><font size="1">A3 to A1&nbsp;</font></td>
    <td align=center width="1%">&nbsp;</td>
    <td align=CENTER width="16%"><font size="1">A- to A&#134;</font></td>
    <td align=CENTER width="1%">&nbsp;</td>
    <td align=center width="15%"><font size="1">150%</font></td>
    <td align=center width="1%">&nbsp;</td>
    <td align=center width="15%"><font size="1">200%</font></td>
    <td align=center width="1%">&nbsp;</td>
    <td align=center width="15%"><font size="1">1.50%</font></td>
    <td align=center width="6%">&nbsp;</td>
    <td align=center width="11%"><font size="1">2.00%</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=center width="3%">&nbsp;</td>
    <td align=center width="15%"><font size="1">Baa3 to Baa1&nbsp;</font></td>
    <td align=center width="1%">&nbsp;</td>
    <td align=CENTER width="16%"><font size="1">BBB- to BBB&#134;</font></td>
    <td align=CENTER width="1%">&nbsp;</td>
    <td align=center width="15%"><font size="1">175%</font></td>
    <td align=center width="1%">&nbsp;</td>
    <td align=center width="15%"><font size="1">250%</font></td>
    <td align=center width="1%">&nbsp;</td>
    <td align=center width="15%"><font size="1">1.75%</font></td>
    <td align=center width="6%">&nbsp;</td>
    <td align=center width="11%"><font size="1">2.50%</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=center width="3%">&nbsp;</td>
    <td align=center width="15%"><font size="1">Below Baa3&nbsp;</font></td>
    <td align=center width="1%">&nbsp;</td>
    <td align=CENTER width="16%"><font size="1">Below BBB-</font></td>
    <td align=CENTER width="1%">&nbsp;</td>
    <td align=center width="15%"><font size="1">200%</font></td>
    <td align=center width="1%">&nbsp;</td>
    <td align=center width="15%"><font size="1">300%</font></td>
    <td align=center width="1%">&nbsp;</td>
    <td align=center width="15%"><font size="1">2.00%</font></td>
    <td align=center width="6%">&nbsp;</td>
    <td align=center width="11%"><font size="1">3.00%</font></td>
  </tr>
</table>
<br>
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  <TR VALIGN=TOP>
    <TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&nbsp;  </FONT></TD>
    <TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
                              applicable percentage and the applicable spread as
                              so determined may be subject to upward but not
                              downward adjustment in the discretion of the Board
                              of Directors of the Fund after consultation with
                              the broker-dealers participating in the auction
                              for the AMPS.</FONT></TD>
  </TR>
</TABLE><BR>

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  <TR VALIGN=TOP>
    <TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&nbsp;  </FONT></TD>
    <TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>There
is no minimum applicable dividend rate for any dividend period.</FONT></TD>
  </TR>
</TABLE><BR>

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  <TR VALIGN=TOP>
    <TD WIDTH=25%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Other AMPS</B> </FONT> </TD>
    <TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Fund has outstanding 8,000 shares of four other series of Auction Market Preferred Stock,
each with                               a liquidation preference of $25,000 per share,
plus accumulated but unpaid dividends, for an aggregate
                              initial liquidation preference of $200,000,000 (the &#147;Other
AMPS&#148;). The Other AMPS are as follows: 2,000                               shares of
Auction Market Preferred Stock, Series A; 2,000 shares of Auction Market Preferred Stock,
                              Series B; 2,000 shares of Auction Market Preferred Stock,
Series C; and 2,000 shares of Auction Market                               Preferred
Stock, Series D. The Series E AMPS offered hereby rank on a parity with the Other AMPS
with                               respect to dividends and liquidation preference.</FONT></TD>
  </TR>
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<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Asset Maintenance</B> </FONT> </TD>
    <TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Under
the Fund&#146;s Articles Supplementary creating the Series E AMPS (the &#147;Articles
Supplementary&#148;), the                               Fund must maintain:</FONT></TD>
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    <TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=5%>&#149;<FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
    <TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
asset
coverage of the AMPS and Other AMPS as required by the rating agencies rating the AMPS,
and</FONT></TD>
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    <TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=5%>&#149;<FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></TD>
    <TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
asset
coverage of the AMPS and Other AMPS of at                                 least 200% as
required by the Investment Company                                 Act of 1940 (the &#147;1940
Act&#148;).</FONT></TD>
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                 &nbsp;  </FONT></TD>
    <TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Fund estimates that, based on the composition                               of its
portfolio at April 30, 2005, asset coverage                               of the AMPS and
Other AMPS as required by the 1940                               Act would be
approximately 287% immediately after                               the Fund issues the
shares of AMPS offered by this                               prospectus representing
approximately 35% of the                               Fund&#146;s capital, or
approximately 53% of the Fund&#146;s                               common stock equity,
immediately after the                               issuance of such AMPS.</FONT></TD>
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<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Mandatory Redemption</B> </FONT> </TD>
    <TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If
the required asset coverage is not                               maintained or, when
necessary, restored, the Fund                               must redeem shares of the
Series E AMPS at the                               price of $25,000 per share plus
accumulated but                               unpaid dividends thereon (whether or not
earned or                               declared). The provisions of the 1940 Act may
                              restrict the Fund&#146;s ability to make such a
                              mandatory redemption.</FONT></TD>
  </TR>
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<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Optional Redemption</B> </FONT> </TD>
    <TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Fund may, at its option, choose to                               redeem all or a portion
of the shares of AMPS on                               any dividend payment date at the
price of $25,000                               per share, plus accumulated but unpaid
dividends                               thereon (whether or not earned or declared) plus
                              any applicable premium.</FONT></TD>
  </TR>
</TABLE><BR>

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<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Liquidation Preference</B> </FONT> </TD>
    <TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
liquidation preference (that is,                               the amount the Fund must
pay to holders of AMPS if                               the Fund is liquidated) of each
share of AMPS will                               be $25,000, plus an amount equal to
accumulated                               but unpaid dividends (whether or not earned or
                              declared).</FONT></TD>
  </TR>
</TABLE><BR>

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<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Ratings</B> </FONT> </TD>
    <TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
AMPS will be issued with a rating of Aaa from Moody&#146;s and AAA from S&amp;P.</FONT></TD>
  </TR>
</TABLE><BR>

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<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Voting Rights</B> </FONT> </TD>
    <TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
1940 Act requires that the holders of AMPS and any other preferred stock, including the
Other AMPS,                               voting as a separate class, have the right to
elect at least two directors at all times and to elect a
                              majority of the directors at any time when dividends on the
AMPS or any other preferred stock, including                               the Other
AMPS, are unpaid for two full years. The Fund&#146;s Charter, the 1940 Act and the
General                               Corporation Laws of the State of Maryland require
holders of AMPS and any other preferred stock,                               including
the Other AMPS, to vote as a separate class on certain other matters. </FONT></TD>
  </TR>
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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>RISK FACTORS AND
SPECIAL CONSIDERATIONS </B></FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>An investment in the Fund&#146;s AMPS should not constitute a complete investment program.</I> </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Set forth below are the main risks of investing in the Fund&#146;s AMPS.</I> </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Investment Considerations. Investors in AMPS should consider the following factors:</I> </FONT> </P><!-- MARKER FORMAT-SHEET="Bullet 00" FSL="Workstation" -->
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    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD><TD WIDTH=3% VALIGN=top></TD><TD WIDTH=95% VALIGN=top><FONT SIZE=2>The
credit ratings of the AMPS could be reduced or terminated while            an investor
holds the AMPS, which could affect liquidity.</FONT></TD></TR></TABLE><!-- MARKER FORMAT-SHEET="Bullet 00" FSL="Workstation" -->
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  <TR>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD><TD WIDTH=3% VALIGN=top></TD><TD WIDTH=95% VALIGN=top><FONT SIZE=2>Neither
broker-dealers nor the Fund are obligated to purchase shares            of AMPS in an
auction or otherwise, nor is the Fund required to            redeem shares of AMPS in the
event of a failed auction.</FONT></TD></TR></TABLE><!-- MARKER FORMAT-SHEET="Bullet 00" FSL="Workstation" -->
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  <TR>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD><TD WIDTH=3% VALIGN=top></TD><TD WIDTH=95% VALIGN=top><FONT SIZE=2>If
sufficient bids do not exist in an auction, the applicable            dividend rate will
be the maximum applicable dividend rate, and in            such event, owners of AMPS
wishing to sell will not be able to sell            all, and may not be able to sell any,
AMPS in the auction. As a            result, investors may not have liquidity of
investment.</FONT></TD></TR></TABLE><!-- MARKER FORMAT-SHEET="Bullet 00" FSL="Workstation" -->
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  <TR>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD><TD WIDTH=3% VALIGN=top></TD><TD WIDTH=95% VALIGN=top><FONT SIZE=2>Broker-dealers
may submit orders in auctions for the AMPS for their            own account. If a
broker-dealer submits an order for its own account            in any auction, it may have
knowledge of orders placed through it in            that auction and therefore have an
advantage over other bidders, but            such broker-dealer would not have knowledge
of orders submitted by            other broker-dealers in that auction. As a result of
bidding by a            broker-dealer in an auction, the dividend rate that would apply
at            the auction may be higher or lower than the rate that would have
           prevailed had the broker-dealer not bid.</FONT></TD></TR></TABLE><!-- MARKER FORMAT-SHEET="Bullet 00" FSL="Workstation" -->
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  <TR>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD><TD WIDTH=3% VALIGN=top></TD><TD WIDTH=95% VALIGN=top><FONT SIZE=2>A
broker-dealer may bid in an auction in order to prevent what would            otherwise
be (i) a failed auction, (ii) an &#147;all-hold&#148; auction, or            (iii) an
applicable dividend rate that the broker-dealer believes, in            its sole
discretion, does not reflect the market for the AMPS at the            time of the
auction. A broker-dealer may, but is not obligated to,            advise owners of AMPS
that the dividend rate that would apply in an            &#147;all-hold&#148; auction may
be lower than would apply if owners submit            bids and such advice, if given, may
facilitate the submission of bids            by owners that would avoid the occurrence of
an &#147;all-hold&#148; auction.</FONT></TD></TR></TABLE><!-- MARKER FORMAT-SHEET="Bullet 00" FSL="Workstation" -->
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  <TR>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD><TD WIDTH=3% VALIGN=top></TD><TD WIDTH=95% VALIGN=top><FONT SIZE=2>The
relative buying and selling interest of market participants in AMPS and in the auction
rate securities market as a            whole will vary over time, and such variations may
be affected by, among other things, news relating to the issuer, the
           attractiveness of alternative investments, the perceived risk of owning the
security (whether related to credit, liquidity            or any other risk), the tax
treatment accorded the instruments, the accounting treatment accorded auction rate
securities,            including recent clarifications of U.S. generally accepted
principles relating to the treatment of auction rate securities,            reactions to
regulatory actions or press reports, financial reporting cycles and market sentiment
generally. Shifts of            demand in response to any one or simultaneous particular
events cannot be predicted and may be short-lived or exist for            longer periods.</FONT></TD></TR></TABLE><!-- MARKER FORMAT-SHEET="Bullet 00" FSL="Workstation" -->
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  <TR>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD><TD WIDTH=3% VALIGN=top></TD><TD WIDTH=95% VALIGN=top><FONT SIZE=2>Merrill
Lynch has advised the Fund that it and various other broker-dealers and other firms that
participate in the auction            rate securities market received letters from the
staff of the Securities and Exchange Commission last spring. The letters
           requested that each of these firms voluntarily conduct an investigation
regarding its respective practices and procedures            in that market. Pursuant to
this request, Merrill Lynch conducted its own voluntary review and reported its findings
to the            Securities and Exchange Commission staff. At the Securities and
Exchange Commission staff&#146;s request, Merrill Lynch,            together with certain
other broker-dealers and other firms that participate in the auction rate securities
market, is            engaging in discussions with the Securities and Exchange Commission
staff concerning its inquiry. Neither Merrill Lynch nor            the Fund can predict
the ultimate outcome of the inquiry or how that outcome will affect the market for the
AMPS or the            auctions.</FONT></TD></TR></TABLE><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Secondary
Market. </I>Broker-dealers have no obligation to maintain a secondary trading market in the
AMPS outside of auctions and there can be no assurance that a secondary market for the
AMPS will develop or, if it does develop, that it will provide holders with a liquid
trading market. The AMPS will not be registered on any stock exchange or on any automated
quotation system. An increase in the level of interest rates likely will have an adverse
effect on the secondary market price of the AMPS, and a selling stockholder may have to
sell AMPS between auctions at a price per share of less than $25,000. </FONT> </P><!-- MARKER FORMAT-SHEET="1 pt rule no space" FSL="Workstation" -->
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Rating
Agencies. </I>The Fund will issue the AMPS only if the AMPS have received a rating of Aaa
from Moody&#146;s and AAA from S&amp;P. As a result of such ratings the Fund will be
subject to guidelines of Moody&#146;s, S&amp;P or another substitute NRSRO that may issue
ratings for its preferred stock. These guidelines may impose asset coverage or portfolio
composition requirements that are more stringent than those imposed by the 1940 Act and
may prohibit or limit the use by the Fund of certain portfolio management techniques or
investments. The Fund does not expect these guidelines to prevent the Investment Adviser
from managing the Fund&#146;s portfolio in accordance with the Fund&#146;s investment
objective and policies. Also, under certain circumstances, the Fund may voluntarily
terminate compliance with Moody&#146;s or S&amp;P&#146;s guidelines, or both, in which
case the AMPS may no longer be rated by Moody&#146;s or S&amp;P, as applicable, but will
be rated by at least one rating agency. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Non-Diversification.
</I>The Fund is registered as a &#147;non-diversified&#148;investment company. This means
that the Fund may invest a greater percentage of its assets in a single issuer than a
diversified investment company. Since the Fund may invest a relatively high percentage of
its assets in a limited number of issuers, the Fund may be more exposed to any single
economic, political or regulatory occurrence than a more widely diversified fund. Even as
a non-diversified fund, the Fund must still meet the diversification requirements
applicable to regulated investment companies under the Federal income tax laws. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Interest
Rate Risk and AMPS. </I>The Fund issues shares of AMPS, which generally pay dividends based
on short-term interest rates. The Fund generally will purchase Municipal Bonds that pay
interest at fixed or adjustable rates. If short-term interest rates rise, dividend rates
on the shares of AMPS may rise so that the amount of dividends paid to the holders of
shares of AMPS exceeds the income from the Fund&#146;s portfolio securities. Because
income from the Fund&#146;s entire investment portfolio (not just the portion of the
portfolio purchased with the proceeds of the AMPS offering) is available to pay dividends
on the shares of AMPS, dividend rates on the shares of AMPS would need to greatly exceed
the Fund&#146;s net portfolio income before the Fund&#146;s ability to pay dividends on
the shares of AMPS would be jeopardized. If market interest rates rise, this could
negatively impact the value of the Fund&#146;s investment portfolio, reducing the amount
of assets serving as asset coverage for the AMPS. If the asset coverage becomes too low,
the Fund may be required to redeem some or all of the shares of AMPS. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Market
Risk and Selection Risk. </I>Market risk is the risk that the bond market will go down in
value, including the possibility that the market will go down sharply and unpredictably.
Selection risk is the risk that the securities that Fund management selects will
underperform the bond market, the market relevant indices, or other funds with similar
investment objectives and investment strategies. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Tax
Exempt Securities Market Risk. </I>The amount of public information available about Municipal
Bonds in the Fund&#146;s portfolio is generally less than that for corporate equities or
bonds, and the investment performance of the Fund may therefore be more dependent on the
analytical abilities of the Investment Adviser than that of a stock fund or taxable bond
fund. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Interest
Rate and Credit Risk. </I>The Fund invests in Municipal Bonds, which are subject to interest
rate and credit risk. Interest rate risk is the risk that prices of Municipal Bonds
generally increase when interest rates decline and decrease when interest rates increase.
Prices of longer term securities generally change more in response to interest rate
changes than prices of shorter term securities. The Fund&#146;s use of leverage by the
issuance of preferred stock and its investment in inverse floating obligations, as
discussed below, may increase interest rate risk. Because market interest rates are
currently near their lowest levels in many years, there is a greater risk that the Fund&#146;s
portfolio will decline in value if interest rates increase in the future. Changes in an
issuer&#146;s credit rating or the market&#146;s perception of an issuer&#146;s
creditworthiness may affect the value of the Fund&#146;s investment in that issuer.
Credit risk is the risk that the issuer will be unable to pay the interest or principal
when due. The degree of credit risk depends on both the financial condition of the issuer
and the terms of the obligation. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Set
forth below are certain other risks associated with investing in the Fund&#146;s AMPS.</I> </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Call
and Redemption Risk. </I>A Municipal Bond&#146;s issuer may call the bond for redemption
before it matures. If this happens to a Municipal Bond that the Fund holds, the Fund may
lose income and may have to invest the proceeds in Municipal Bonds with lower yields. </FONT> </P><!-- MARKER FORMAT-SHEET="1 pt rule no space" FSL="Workstation" -->
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Reinvestment
Risk. </I>Reinvestment risk is the risk that income from the Fund&#146;s Municipal Bond
portfolio will decline if and when the Fund invests the proceeds from matured, traded or
called bonds at market interest rates that are below the portfolio&#146;s current
earnings rate. A decline in income could negatively affect the Fund&#146;s yield, return
or the market price of the common stock. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Private
Activity Bonds. </I>The Fund may invest in certain tax exempt securities classified as &#147;private
activity bonds.&#148; These bonds may subject certain investors in the Fund to the
Federal alternative minimum tax. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Liquidity
of Investments. </I>Certain Municipal Bonds in which the Fund invests may lack an established
secondary trading market or are otherwise considered illiquid. Liquidity of a security
relates to the ability to easily dispose of the security and the price to be obtained and
does not generally relate to the credit risk or likelihood of receipt of cash at
maturity. Illiquid securities may trade at a discount from comparable, more liquid
investments. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Portfolio
Strategies. </I>The Fund may engage in various portfolio strategies both to seek to increase
the return of the Fund and to seek to hedge its portfolio against adverse effects from
movements in interest rates and in the securities markets. These portfolio strategies
include the use of derivatives, such as indexed securities, inverse securities, options,
futures, options on futures, interest rate swap transactions and credit default swaps.
Such strategies subject the Fund to the risk that, if the Investment Adviser incorrectly
forecasts market values, interest rates or other applicable factors, the Fund&#146;s
performance could suffer. Certain of these strategies such as investments in inverse
securities and credit default swaps may provide investment leverage to the Fund&#146;s
portfolio. The Fund is not required to use derivatives or other portfolio strategies to
seek to increase return or to seek to hedge its portfolio and may choose not to do so.
There can be no assurance that the Fund&#146;s portfolio strategies will be effective.
Some of the derivative strategies that the Fund may use to seek to increase its return
are riskier than its hedging transactions and have speculative characteristics. Such
strategies do not attempt to limit the Fund&#146;s risk of loss. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>General
Risks Related to Derivatives. </I>Derivatives are financial contracts or instruments whose
value depends on, or is derived from, the value of an underlying asset, reference rate or
index (or relationship between two indices). The Fund may invest in a variety of
derivative instruments for investment purposes, hedging purposes or to seek to increase
its return, such as options, futures contracts and swap agreements. The Fund may use
derivatives as a substitute for taking a position in an underlying security or other
asset and/or as part of a strategy designed to reduce exposure to other risks, such as
interest rate risk. The Fund also may use derivatives to add leverage to the portfolio
and/or to hedge against increases in the Fund&#146;s costs associated with the dividend
payments on the preferred stock, including the AMPS. The Fund also may invest in certain
derivative products that pay tax exempt income interest via a trust or partnership
through which the Fund holds interests in one or more underlying long term municipal
securities. The Fund&#146;s use of derivative instruments involves risks different from,
and possibly greater than, the risks associated with investing directly in securities and
other traditional investments. Derivatives are subject to a number of risks such as
liquidity risk, interest rate risk, credit risk, leverage risk and management risk. They
also involve the risk of mispricing or improper valuation and correlation risk (<i>i.e.</i>, the
risk that changes in the value of the derivative may not correlate perfectly with the
underlying asset, rate or index). If the Fund invests in a derivative instrument it could
lose more than the principal amount invested. Moreover, derivatives raise certain tax,
legal, regulatory and accounting issues that may not be presented by investments in
Municipal Bonds, and there is some risk that certain issues could be resolved in a manner
that could adversely impact the performance of the Fund and/or the tax exempt nature of
the dividends paid by the Fund. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Also,
suitable derivative transactions may not be available in all circumstances and there can
be no assurance that the Fund will engage in these transactions to reduce exposure to
other risks when that would be beneficial. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Swaps.
</I>Swap agreements are types of derivatives. In order to seek to hedge the value of the Fund&#146;s
portfolio, to hedge against increases in the Fund&#146;s cost associated with the
dividend payments on preferred stock, including the AMPS, or to seek to increase the Fund&#146;s
return, the Fund may enter into interest rate or credit default swap transactions. In
interest rate swap transactions, there is a risk that yields will move in the direction
opposite of the direction anticipated by the Fund, which would cause the Fund to make
payments to its counterparty in the transaction that could adversely affect Fund
performance. In addition to the risks applicable to swaps generally, credit default swap
transactions involve special risks because they are difficult to value, are highly
susceptible to liquidity and credit risk, and generally pay a return to the party that
has paid the premium only in the event of an </FONT> </P><!-- MARKER FORMAT-SHEET="1 pt rule no space" FSL="Workstation" -->
<HR SIZE=1 noshade WIDTH=100% ALIGN=LEFT>



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<TABLE WIDTH=100%><TR><TD WIDTH=20% ALIGN=left><FONT SIZE=1>&nbsp;</FONT></TD><TD WIDTH=60% ALIGN=center><FONT SIZE="2">
13</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR ALIGN=LEFT WIDTH=100% SIZE=5 noshade><BR>






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<HR SIZE=1 noshade WIDTH=100% ALIGN=LEFT>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>actual default by the issuer of the
underlying obligation (as opposed to a credit downgrade or other indication of financial
difficulty). The Fund is not required to enter into interest rate or credit default swap
transactions for hedging purposes or to enhance its return and may choose not to do so. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Federal
Taxability Risk. </I>The Fund intends to minimize the payment of taxable income to
stockholders by investing in Municipal Bonds and other tax exempt securities in reliance
on an opinion of bond counsel to the issuer that the interest paid on those securities
will be excludable from gross income for Federal income tax purposes. Such securities,
however, may be determined for Federal income tax purposes to pay, or to have paid,
taxable income subsequent to the Fund&#146;s acquisition of the securities. In that
event, the Internal Revenue Service may demand that the Fund pay taxes on the affected
interest income, and, if the Fund agrees to do so, the Fund&#146;s yield on its common
stock could be adversely affected. A determination that interest on a security held by
the Fund is includable in gross income for Federal income tax purposes retroactively to
its date of issue may, likewise, cause a portion of prior distributions received by
stockholders, including holders of AMPS, to be taxable to those stockholders in the year
of receipt. The Fund will not pay an Additional Dividend (as defined herein) to a holder
of AMPS under these circumstances. </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Antitakeover
Provisions. </I>The Fund&#146;s Charter, By-laws and the General Corporation Law of the State
of Maryland include provisions that could limit the ability of other entities or persons
to acquire control of the Fund or to change the composition of its Board of Directors.
Such provisions could limit the ability of stockholders to sell their shares at a premium
over prevailing market prices by discouraging a third party from seeking to obtain
control of the Fund. See &#147;Description of Capital Stock &#151; Certain Provisions of
the Charter and By-laws.&#148; </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Market
Disruption. </I>The terrorist attacks in the United States on September 11, 2001 had a
disruptive effect on the securities markets, some of which were closed for a four-day
period. The continued threat of similar attacks and related events, including U.S.
military actions in Iraq and continued unrest in the Middle East, have led to increased
short term market volatility and may have long term effects on U.S. and world economies
and markets. Similar disruptions of the financial markets could adversely affect the
market prices of the Fund&#146;s portfolio securities, interest rates, auctions,
secondary trading, ratings, credit risk, inflation and other factors relating to the Fund&#146;s
AMPS. </FONT> </P><!-- MARKER FORMAT-SHEET="1 pt rule no space" FSL="Workstation" -->
<HR SIZE=1 noshade WIDTH=100% ALIGN=LEFT>



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<BR>
<TABLE WIDTH=100%><TR><TD WIDTH=20% ALIGN=left><FONT SIZE=1>&nbsp;</FONT></TD><TD WIDTH=60% ALIGN=center><FONT SIZE="2">
14</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR ALIGN=LEFT WIDTH=100% SIZE=5 noshade><BR>







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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>FINANCIAL HIGHLIGHTS </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following Financial Highlights table is intended to help you understand the Fund&#146;s
financial performance for the periods shown. Certain information reflects financial
results for a single share of common stock or preferred stock of the Fund. The total
returns in the table represent the rate an investor would have earned or lost on an
investment in shares of common stock of the Fund (assuming reinvestment of all
dividends). The information with respect to the fiscal years ended October 31, 1995 to
October 31, 2004 has been audited by Deloitte &amp; Touche <font size=1>LLP</font>, whose report for the
fiscal year ended October 31, 2004, along with the financial statements of the Fund, is
included in the Fund&#146;s 2004 Annual Report, which is incorporated by reference
herein. The information with respect to the six months ended April 30, 2005 is unaudited
and is included in the Fund&#146;s 2005 Semi-Annual Report, which is incorporated by
reference herein. You may obtain a copy of the Fund&#146;s 2004 Annual Report and the
2005 Semi-Annual Report at no cost by calling (800) 543-6217 between 8:30 a.m. and 5:30
p.m. Eastern time on any business day. </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following per share data and ratios have been derived from information provided in the
financial statements. </FONT></P>

<table cellpadding=0 cellspacing=0 border=0 align=Center width=740>
  <tr valign=Bottom>
    <th colspan=2>&nbsp;</th>
    <th colspan=2><font size=1>For the Six <br>
      Months Ended <br>
      April 30, 2005 <br>
      (unaudited) </font>
      <hr width=95% size=1 noshade>
    </th>
    <th colspan=2><font size=1>2004 </font>
      <hr width=95% size=1 noshade>
    </th>
    <th colspan=2><font size=1>2003 </font>
      <hr width=95% size=1 noshade>
    </th>
    <th colspan=2><font size=1>2002 </font>
      <hr width=95% size=1 noshade>
    </th>
    <th colspan=2><font size=1>2001## </font>
      <hr width=95% size=1 noshade>
    </th>
    <th colspan=2><font size=1>2000## </font>
      <hr width=95% size=1 noshade>
    </th>
    <th colspan=2><font size=1>1999## </font>
      <hr width=95% size=1 noshade>
    </th>
    <th colspan=2><font size=1>1998## </font>
      <hr width=95% size=1 noshade>
    </th>
    <th colspan=2><font size=1>1997 </font>
      <hr width=95% size=1 noshade>
    </th>
    <th colspan=2><font size=1>1996 </font>
      <hr width=95% size=1 noshade>
    </th>
    <th colspan=2><font size=1>1995 </font>
      <hr width=95% size=1 noshade>
    </th>
  </tr>
  <tr valign=Bottom>
    <td width=17% align=LEFT><b><font size=1>Per Share Operating</font></b></td>
    <td width=2% align=LEFT><font size=1>&nbsp;</font></td>
    <td width=5% align=RIGHT>&nbsp;</td>
    <td width=2% align=LEFT><font size=1>&nbsp;</font></td>
    <td width=5% align=RIGHT>&nbsp;</td>
    <td width=2% align=LEFT><font size=1>&nbsp;</font></td>
    <td width=5% align=RIGHT>&nbsp;</td>
    <td width=2% align=LEFT><font size=1>&nbsp;</font></td>
    <td width=5% align=RIGHT>&nbsp;</td>
    <td width=2% align=LEFT><font size=1>&nbsp;</font></td>
    <td width=5% align=RIGHT>&nbsp;</td>
    <td width=2% align=LEFT><font size=1>&nbsp;</font></td>
    <td width=6% align=RIGHT>&nbsp;</td>
    <td width=2% align=LEFT><font size=1>&nbsp;</font></td>
    <td width=6% align=RIGHT>&nbsp;</td>
    <td width=2% align=LEFT><font size=1>&nbsp;</font></td>
    <td width=6% align=RIGHT>&nbsp;</td>
    <td width=2% align=LEFT><font size=1>&nbsp;</font></td>
    <td width=6% align=RIGHT>&nbsp;</td>
    <td width=2% align=LEFT><font size=1>&nbsp;</font></td>
    <td width=5% align=RIGHT>&nbsp;</td>
    <td width=2% align=LEFT><font size=1>&nbsp;</font></td>
    <td width=5% align=RIGHT>&nbsp;</td>
    <td width=2% align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><b><font size=1>Performance</font></b></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>Net asset value,</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;beginning of period</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$15.54</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$15.36</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$15.19</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$15.27</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$14.18</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$13.54</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$15.58</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$15.17</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$14.57</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$14.58</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$13.16</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan=2></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>Investment income &#151; net</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>.50</font></td>
    <td align=LEFT><font size=1>&#134;</font></td>
    <td align=RIGHT><font size=1>1.03</font></td>
    <td align=LEFT><font size=1>&#134;</font></td>
    <td align=RIGHT><font size=1>1.07</font></td>
    <td align=LEFT><font size=1>&#134;</font></td>
    <td align=RIGHT><font size=1>1.06</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>1.06</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>1.07</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>1.07</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>1.12</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>1.13</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>1.14</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>1.15</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>Realized and unrealized</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;gain (loss) &#151; net</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>(.08</font></td>
    <td align=LEFT><font size=1>)</font></td>
    <td align=RIGHT><font size=1>.19</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>.13</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>(.13</font></td>
    <td align=LEFT><font size=1>)</font></td>
    <td align=RIGHT><font size=1>1.08</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>.66</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>(2.04</font></td>
    <td align=LEFT><font size=1>)</font></td>
    <td align=RIGHT><font size=1>.40</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>.59</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>(.01</font></td>
    <td align=LEFT><font size=1>)</font></td>
    <td align=RIGHT><font size=1>1.43</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>Less dividends and</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;distributions</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;to Preferred Stock</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;shareholders:</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;Investment income &#151; net </font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>(.06</font></td>
    <td align=LEFT><font size=1>)</font></td>
    <td align=RIGHT><font size=1>(.07</font></td>
    <td align=LEFT><font size=1>)</font></td>
    <td align=RIGHT><font size=1>(.07</font></td>
    <td align=LEFT><font size=1>)</font></td>
    <td align=RIGHT><font size=1>(.09</font></td>
    <td align=LEFT><font size=1>)</font></td>
    <td align=RIGHT><font size=1>(.21</font></td>
    <td align=LEFT><font size=1>)</font></td>
    <td align=RIGHT><font size=1>(.27</font></td>
    <td align=LEFT><font size=1>)</font></td>
    <td align=RIGHT><font size=1>(.21</font></td>
    <td align=LEFT><font size=1>)</font></td>
    <td align=RIGHT><font size=1>(.23</font></td>
    <td align=LEFT><font size=1>)</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;Realized Gain &#151; net</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;&#134;&#134;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan=2></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>Total from investment</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;operations</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>.36</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>1.15</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>1.13</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>.84</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>1.93</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>1.46</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>(1.18</font></td>
    <td align=LEFT><font size=1>)</font></td>
    <td align=RIGHT><font size=1>1.29</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>1.72</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>1.13</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>2.58</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan=2></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>Less dividends and</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;distributions</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;to Common Stock</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;shareholders:</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;Investment income</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;&#151; net </font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>(.49</font></td>
    <td align=LEFT><font size=1>)</font></td>
    <td align=RIGHT><font size=1>(.97</font></td>
    <td align=LEFT><font size=1>)</font></td>
    <td align=RIGHT><font size=1>(.96</font></td>
    <td align=LEFT><font size=1>)</font></td>
    <td align=RIGHT><font size=1>(.91</font></td>
    <td align=LEFT><font size=1>)</font></td>
    <td align=RIGHT><font size=1>(.84</font></td>
    <td align=LEFT><font size=1>)</font></td>
    <td align=RIGHT><font size=1>(.82</font></td>
    <td align=LEFT><font size=1>)</font></td>
    <td align=RIGHT><font size=1>(.86</font></td>
    <td align=LEFT><font size=1>)</font></td>
    <td align=RIGHT><font size=1>(.88</font></td>
    <td align=LEFT><font size=1>)</font></td>
    <td align=RIGHT><font size=1>(.89</font></td>
    <td align=LEFT><font size=1>)</font></td>
    <td align=RIGHT><font size=1>(.90</font></td>
    <td align=LEFT><font size=1>)</font></td>
    <td align=RIGHT><font size=1>(.89</font></td>
    <td align=LEFT><font size=1>)</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;Realized gain &#151; net</font></td>
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    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>(.01</font></td>
    <td align=LEFT><font size=1>)</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>(.02</font></td>
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  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;In excess of</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;&nbsp;realized gain &#151; net</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;&#134;&#134;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan=2></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>Total dividends and</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;distributions to</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;Common Stock</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;shareholders</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>(.49</font></td>
    <td align=LEFT><font size=1>)</font></td>
    <td align=RIGHT><font size=1>(.97</font></td>
    <td align=LEFT><font size=1>)</font></td>
    <td align=RIGHT><font size=1>(.96</font></td>
    <td align=LEFT><font size=1>)</font></td>
    <td align=RIGHT><font size=1>(.92</font></td>
    <td align=LEFT><font size=1>)</font></td>
    <td align=RIGHT><font size=1>(.84</font></td>
    <td align=LEFT><font size=1>)</font></td>
    <td align=RIGHT><font size=1>(.82</font></td>
    <td align=LEFT><font size=1>)</font></td>
    <td align=RIGHT><font size=1>(.86</font></td>
    <td align=LEFT><font size=1>)</font></td>
    <td align=RIGHT><font size=1>(.88</font></td>
    <td align=LEFT><font size=1>)</font></td>
    <td align=RIGHT><font size=1>(.89</font></td>
    <td align=LEFT><font size=1>)</font></td>
    <td align=RIGHT><font size=1>(.90</font></td>
    <td align=LEFT><font size=1>)</font></td>
    <td align=RIGHT><font size=1>(.91</font></td>
    <td align=LEFT><font size=1>)</font></td>
  </tr>
  <tr>
    <td colspan=2></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>Effect of Preferred</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;Stock activity:</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>Dividends and</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;distributions to</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;Preferred Stock</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;shareholders:</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;Investment income &#151; net</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>(.23</font></td>
    <td align=LEFT><font size=1>)</font></td>
    <td align=RIGHT><font size=1>(.24</font></td>
    <td align=LEFT><font size=1>)</font></td>
    <td align=RIGHT><font size=1>(.25</font></td>
    <td align=LEFT><font size=1>)</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;Realized gain &#151; net</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;&#134;&#134;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;In excess of realized</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;&nbsp;gain &#151; net</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;&#134;&#134;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan=2></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>Total Effect of</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;Preferred Stock</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;activity</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>(.23</font></td>
    <td align=LEFT><font size=1>)</font></td>
    <td align=RIGHT><font size=1>(.24</font></td>
    <td align=LEFT><font size=1>)</font></td>
    <td align=RIGHT><font size=1>(.25</font></td>
    <td align=LEFT><font size=1>)</font></td>
  </tr>
  <tr>
    <td colspan=2></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>Net asset value,</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;end of period</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$15.41</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$15.54</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$15.36</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$15.19</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$15.27</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$14.18</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$13.54</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$15.58</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$15.17</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$14.57</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$14.58</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan=2></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>Market price per share,</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;end of period</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$14.54</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$14.83</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$14.35</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$13.74</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$14.24</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$12.0625</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$12.0625</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$15.5625</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$14.4375</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$12.875</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$12.625</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan=2></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1><b>Total Investment Return**</b></font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>Based on net asset value</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;per share</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>2.50</font></td>
    <td align=LEFT><font size=1>%&#135;</font></td>
    <td align=RIGHT><font size=1>8.26</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>8.13</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>6.12</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>14.46</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>12.09</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>(7.62</font></td>
    <td align=LEFT><font size=1>%)</font></td>
    <td align=RIGHT><font size=1>8.93</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>11.03</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>6.93</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>19.34</font></td>
    <td align=LEFT><font size=1>%</font></td>
  </tr>
  <tr>
    <td colspan=2></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>Based on market price</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;per share</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>1.34</font></td>
    <td align=LEFT><font size=1>%&#135;</font></td>
    <td align=RIGHT><font size=1>10.58</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>11.68</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>2.94</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>25.47</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>7.03</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>(17.61</font></td>
    <td align=LEFT><font size=1>%)</font></td>
    <td align=RIGHT><font size=1>14.33</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>19.58</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>9.12</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>23.63</font></td>
    <td align=LEFT><font size=1>%</font></td>
  </tr>
  <tr>
    <td colspan=2></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><b><font size=1>Ratios Based on</font></b></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><b><font size=1>Average Net Assets of</font></b></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><b><font size=1>Common Stock</font></b></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>Total expenses, net of</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;reimbursement***</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>.94</font></td>
    <td align=LEFT><font size=1>%*</font></td>
    <td align=RIGHT><font size=1>.94</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>.94</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>.96</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>.98</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>.99</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>.95</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>.91</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>.94</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>.96</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>.97</font></td>
    <td align=LEFT><font size=1>%</font></td>
  </tr>
  <tr>
    <td colspan=2></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>Total expenses***</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>.94</font></td>
    <td align=LEFT><font size=1>%*</font></td>
    <td align=RIGHT><font size=1>.95</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>.95</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>.96</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>.98</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>.99</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>.95</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>.91</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>.94</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>.96</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>.97</font></td>
    <td align=LEFT><font size=1>%</font></td>
  </tr>
  <tr>
    <td colspan=2></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>Total investment</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;income &#151; net***</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>6.55</font></td>
    <td align=LEFT><font size=1>%*</font></td>
    <td align=RIGHT><font size=1>6.74</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>6.89</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>7.03</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>7.18</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>7.74</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>7.17</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>7.30</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>7.69</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>7.79</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>8.28</font></td>
    <td align=LEFT><font size=1>%</font></td>
  </tr>
  <tr>
    <td colspan=2></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>Amount of dividends</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>to Preferred Stock</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>shareholders</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>.77</font></td>
    <td align=LEFT><font size=1>%*</font></td>
    <td align=RIGHT><font size=1>.45</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>.42</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>.61</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>1.45</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>1.94</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>1.41</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>1.50</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>1.56</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>1.64</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>1.78</font></td>
    <td align=LEFT><font size=1>%</font></td>
  </tr>
  <tr>
    <td colspan=2></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>Investment income &#151; net,</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;to Common Stock</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;shareholders</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>5.78</font></td>
    <td align=LEFT><font size=1>%*</font></td>
    <td align=RIGHT><font size=1>6.29</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>6.47</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>6.42</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>5.73</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>5.81</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>5.76</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>5.80</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>6.13</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>6.15</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>6.50</font></td>
    <td align=LEFT><font size=1>%</font></td>
  </tr>
  <tr>
    <td colspan=2></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
  </tr>
</table>

<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <BR>
<TABLE WIDTH=100%><TR><TD WIDTH=20% ALIGN=left><FONT SIZE=1>&nbsp;</FONT></TD><TD WIDTH=60% ALIGN=center><FONT SIZE="2">
15</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR ALIGN=LEFT WIDTH=100% SIZE=5 noshade><BR>







<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 16; page: 16" -->




<!-- MARKER FORMAT-SHEET="Left Head 2 Italic" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>(continued from prior
page) </I></FONT></P>

<table cellpadding=0 cellspacing=0 border=0 align=Center width=740>
  <tr valign=Bottom>
    <th colspan=2>&nbsp;</th>
    <th colspan=2><font size=1>For the Six <br>
      Months Ended <br>
      April 30, 2005 <br>
      (unaudited) </font>
      <hr width=95% size=1 noshade>
    </th>
    <th colspan=2><font size=1>2004 </font>
      <hr width=95% size=1 noshade>
    </th>
    <th colspan=2><font size=1>2003 </font>
      <hr width=95% size=1 noshade>
    </th>
    <th colspan=2><font size=1>2002 </font>
      <hr width=95% size=1 noshade>
    </th>
    <th colspan=2><font size=1>2001## </font>
      <hr width=95% size=1 noshade>
    </th>
    <th colspan=2><font size=1>2000## </font>
      <hr width=95% size=1 noshade>
    </th>
    <th colspan=2><font size=1>1999## </font>
      <hr width=95% size=1 noshade>
    </th>
    <th colspan=2><font size=1>1998##</font>
      <hr width=95% size=1 noshade>
    </th>
    <th colspan=2><font size=1>1997 </font>
      <hr width=95% size=1 noshade>
    </th>
    <th colspan=2><font size=1>1996 </font>
      <hr width=95% size=1 noshade>
    </th>
    <th colspan=2><font size=1>1995 </font>
      <hr width=95% size=1 noshade>
    </th>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><b><font size=1>Ratios Based on Average</font></b><b><font size=1><br>
      Net Assets of Preferred</font></b><b><font size=1><br>
      Stock</font></b></td>
    <td align=LEFT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>Dividends to Preferred<br>
      &nbsp;&nbsp;&nbsp;Stock shareholders</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>1.81</font></td>
    <td align=LEFT><font size=1>%*</font></td>
    <td align=RIGHT><font size=1>1.04</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>.99</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>1.40</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>3.27</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>4.03</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>3.21</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>3.51</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>3.51</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>3.61</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>3.78</font></td>
    <td align=LEFT><font size=1>%</font></td>
  </tr>
  <tr>
    <td colspan=2></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1><b>Supplemental Data</b></font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>Net assets applicable</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;to Common Stock,</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;end of period</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;(in thousands)</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$468,970</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$472,848</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$467,370</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$462,156</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$464,522</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$431,471</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$411,883</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$473,898</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$461,647</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$443,154</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$443,718</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan=2></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>Preferred Stock outstanding,</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;end of period</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;(in thousands)</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$200,000</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$200,000</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$200,000</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$200,000</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$200,000</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$200,000</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$200,000</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$200,000</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$200,000</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$200,000</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$200,000</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan=2></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>Portfolio turnover</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>14.76</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>32.87</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>33.92</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>46.29</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>89.58</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>51.19</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>91.78</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>42.95</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>36.87</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>68.22</font></td>
    <td align=LEFT><font size=1>%</font></td>
    <td align=RIGHT><font size=1>57.56</font></td>
    <td align=LEFT><font size=1>%</font></td>
  </tr>
  <tr>
    <td colspan=2></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1><b>Leverage</b></font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>Asset coverage</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;per $1,000 .</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$3,345</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$3,364</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$3,337</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$3,311</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$3,323</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$3,157</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$3,059</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$3,369</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$3,308</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$3,216</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$3,219</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan=2></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>Liquidation preference</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;per share</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$25,000</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$25,000</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$25,000</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$25,000</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$25,000</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$25,000</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$25,000</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$25,000</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$25,000</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$25,000</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$25,000</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan=2></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>Average market value</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;per share#</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$25,000</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$25,000</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$25,000</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$25,000</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$25,000</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$25,000</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$25,000</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$25,000</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$25,000</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$25,000</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$25,000</font></td>
    <td align=LEFT>&nbsp;</td>
  </tr>
  <tr>
    <td colspan=2></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><b><font size=1>Dividends Per Share</font></b></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><b><font size=1>on Preferred Stock</font></b></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><b><font size=1>Outstanding</font></b></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>Series A&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;Investment income &#151; net</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$213</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$271</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$273</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$370</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$852</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$1,024</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$824</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$961</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$864</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$953</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$961</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan=2></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>Series B&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;Investment income &#151; net</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$225</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$255</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$238</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$337</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$792</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$1,015</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$779</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$879</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$892</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$880</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$917</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan=2></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>Series C&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;Investment income &#151; net</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$243</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$261</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$253</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$349</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$832</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$999</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$809</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$815</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$884</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$888</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$977</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan=2></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>Series D&#151;</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size=1>&nbsp;&nbsp;Investment income &#151; net</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$224</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$251</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$228</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$339</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$791</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$1,002</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$787</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$856</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$873</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$885</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
    <td align=RIGHT><font size=1>$921</font></td>
    <td align=LEFT><font size=1>&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan=2></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
    <td align=RIGHT>
      <hr noshade color=#000000 size=1>
    </td>
    <td></td>
  </tr>
</table>

 <!-- MARKER FORMAT-SHEET="Cutoff rule Footnote" FSL="Workstation" -->
<HR SIZE=1 noshade ALIGN=left  WIDTH=75>


<!-- MARKER FORMAT-SHEET="Footnote Right" FSL="Workstation" -->
<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="1">* </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">Annualized.</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Footnote Right" FSL="Workstation" -->
<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="1">** </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">Total
investment returns based on market value, which can be significantly      greater or
lesser than the net asset value, may result in substantially      different returns.
Total investment returns exclude the effects of sales      charges.</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Footnote Right" FSL="Workstation" -->
<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="1">*** </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">Do
not reflect the effect of dividends to Preferred Stock shareholders. </FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Footnote Right" FSL="Workstation" -->
<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="1">&#134;</FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">Based
on average shares outstanding.</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Footnote Right" FSL="Workstation" -->
<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="1">&#134;</FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">&#134;    Amount
is less than $(.01)       per shares. </FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Footnote Right" FSL="Workstation" -->
<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="1">&#135;</FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">Aggregate
total investment return.</FONT></TD></TR></TABLE>


<!-- MARKER FORMAT-SHEET="Footnote Right" FSL="Workstation" -->
<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="1"># </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">Based
on monthly market value per share.</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Footnote Right" FSL="Workstation" -->
<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="1">## </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">Certain
prior year amounts have been reclassified to conform to current year presentation.</FONT></TD></TR></TABLE>


<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
<BR>
<TABLE WIDTH=100%><TR><TD WIDTH=20% ALIGN=left><FONT SIZE=1>&nbsp;</FONT></TD><TD WIDTH=60% ALIGN=center><FONT SIZE="2">
16</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR ALIGN=LEFT WIDTH=100% SIZE=5 noshade><BR>







<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 17; page: 17" -->



<!-- MARKER FORMAT-SHEET="Center Head 2 Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>THE FUND </B></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MuniYield
Quality Fund, Inc. (the &#147;Fund&#148;) is a non-diversified, closed-end fund. The Fund
was incorporated under the laws of the State of Maryland on May 5, 1992, and has
registered under the Investment Company Act of 1940, as amended (the &#147;1940 Act&#148;).
The Fund&#146;s principal executive office is located at 800 Scudders Mill Road,
Plainsboro, New Jersey 08536, and its telephone number is (609) 282-2800. </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board of Directors of the Fund may at any time consider a merger, consolidation or other
form of reorganization of the Fund with one or more other investment companies advised by
Fund Asset Management, L.P. (the &#147;Investment Adviser&#148;) that have similar
investment objectives and policies as the Fund. Any such merger, consolidation or other
form of reorganization would require the prior approval of the Board of Directors and, if
the Fund is the acquired fund, the stockholders of the Fund. See &#147;Description of
Capital Stock &#151; Certain Provisions of the Charter and By-laws.&#148; </FONT></P><!-- MARKER FORMAT-SHEET="Center Head 2 Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>USE OF PROCEEDS </B></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
net proceeds of this offering will be approximately $49,350,000 after payment of offering
expenses (estimated to be approximately $150,000) and the deduction of the underwriting
discount. </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
net proceeds of the offering will be invested in accordance with the Fund&#146;s
investment objective and policies within approximately three months after completion of
this offering, depending on market conditions and the availability of appropriate
securities. Pending such investment, it is anticipated that the proceeds will be invested
in short term, tax exempt securities. See &#147;Investment Objective and Policies.&#148; </FONT></P><!-- MARKER FORMAT-SHEET="Center Head 2 Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>CAPITALIZATION </B></FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth the unaudited capitalization of the Fund as of April 30, 2005
and as adjusted to give effect to the issuance of the shares of AMPS offered hereby. </FONT></P>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=700>
  <TR VALIGN=Bottom>
    <TD WIDTH=71% ALIGN=LEFT>&nbsp;</TD>
    <td align=center><b><font size=1>Actual</font> </b>
      <hr width=95% size=1 noshade>
    </td>
    <td align=center>&nbsp;</td>
    <td align=center><b><font size=1>As Adjusted</font> </b>
      <hr width=95% size=1 noshade>
    </td>
    <TD WIDTH=2% ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD WIDTH=71% ALIGN=LEFT><font size=2>Preferred Stock (8,000 shares of Other
      AMPS authorized, issued and <br>
      &nbsp;&nbsp; outstanding at $25,000 per share liquidation preference, plus
      accumulated <br>
      &nbsp;&nbsp; but unpaid dividends; 10,000 shares of AMPS and Other AMPS
      authorized, <br>
      &nbsp;&nbsp; issued and outstanding, as adjusted, at $25,000 per share liquidation
      <br>
      &nbsp;&nbsp; preference, plus accumulated but unpaid dividends)</font></TD>
    <td align=RIGHT><font size=2>$&nbsp;200,024,220</font></td>
    <td align=LEFT><font size=2>&nbsp;</font></td>
    <td align=RIGHT><font size=2>$&nbsp;250,024,220</font></td>
    <TD WIDTH=2% ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size=2>Common stock, par value $.10 per share (199,992,000
      shares authorized, <br>
      &nbsp;&nbsp; 30,425,258 shares issued and outstanding; 199,990,000 shares
      authorized, <br>
      &nbsp;&nbsp; 30,425,258 shares issued and outstanding, as adjusted)</font></TD>
    <TD ALIGN=RIGHT><font size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,042,526</font></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT><font size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,042,526</font></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Paid-in capital in excess of par value</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>423,867,385</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>423,217,385</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Undistributed investment income &#151; net</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>5,870,848</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>5,870,848</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Accumulated realized capital losses &#151; net</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>(8,409,058</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>(8,409,058</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Unrealized appreciation &#151; net</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>44,598,613</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>44,598,613</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>
      <hr noshade size="1">
    </TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>
      <hr noshade size="1">
    </TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Net assets applicable to outstanding common stock</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>$&nbsp;468,970,314</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>$&nbsp;468,320,314</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>
      <hr noshade size="2">
    </TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>
      <hr noshade size="2">
    </TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Center Head 2 Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>PORTFOLIO COMPOSITION </B></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of April 30, 2005, approximately 99.15% of the market value of the Fund&#146;s portfolio
was invested in long term and intermediate term municipal obligations and approximately
0.85% of the market value of the Fund&#146;s portfolio was invested in short term tax
exempt securities. The following table sets forth certain information with respect to the
composition of the Fund&#146;s long term and intermediate term municipal obligations
investment portfolio as of April 30, 2005. </FONT></P>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
  <TR VALIGN=Bottom>
    <TH width="18%"><FONT SIZE=1>Moody&#146;s* </FONT>
      <HR WIDTH=95% SIZE=1 noshade>
    </TH>
    <TH width="9%"><FONT SIZE=1>S&amp;P* </FONT>
      <HR WIDTH=95% SIZE=1 noshade>
    </TH>
    <TH COLSPAN=2><FONT SIZE=1>Number of <BR>
      Issues </FONT>
      <HR WIDTH=95% SIZE=1 noshade>
    </TH>
    <TH COLSPAN=2><FONT SIZE=1>Value <BR>
      (in thousands) </FONT>
      <HR WIDTH=95% SIZE=1 noshade>
    </TH>
    <TH COLSPAN=2><FONT SIZE=1>Percent </FONT>
      <HR WIDTH=95% SIZE=1 noshade>
    </TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD WIDTH=18% ALIGN=center><FONT SIZE=2>Aaa</FONT></TD>
    <TD WIDTH=9% ALIGN=center><FONT SIZE=2>AAA</FONT></TD>
    <TD WIDTH=18% ALIGN=RIGHT><FONT SIZE=2>127</FONT></TD>
    <TD WIDTH=7% ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=18% ALIGN=RIGHT><FONT SIZE=2>$584,519</FONT></TD>
    <TD WIDTH=9% ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=13% ALIGN=RIGHT><FONT SIZE=2>87.95</FONT></TD>
    <TD WIDTH=8% ALIGN=LEFT><FONT SIZE=2>%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=center width="18%"><FONT SIZE=2>&nbsp;Aa</FONT></TD>
    <TD ALIGN=center width="9%"><FONT SIZE=2>AA</FONT></TD>
    <TD ALIGN=RIGHT width="18%"><FONT SIZE=2>9</FONT></TD>
    <TD ALIGN=LEFT width="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT width="18%"><FONT SIZE=2>26,051</FONT></TD>
    <TD ALIGN=LEFT width="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT width="13%"><FONT SIZE=2>3.92</FONT></TD>
    <TD ALIGN=LEFT width="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=center width="18%"><FONT SIZE=2>&nbsp;&nbsp;A</FONT></TD>
    <TD ALIGN=center width="9%"><FONT SIZE=2>A</FONT></TD>
    <TD ALIGN=RIGHT width="18%"><FONT SIZE=2>13</FONT></TD>
    <TD ALIGN=LEFT width="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT width="18%"><FONT SIZE=2>44,791</FONT></TD>
    <TD ALIGN=LEFT width="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT width="13%"><FONT SIZE=2>6.74</FONT></TD>
    <TD ALIGN=LEFT width="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=center width="18%"><FONT SIZE=2>&nbsp;Baa</FONT></TD>
    <TD ALIGN=center width="9%"><FONT SIZE=2>BBB</FONT></TD>
    <TD ALIGN=RIGHT width="18%"><FONT SIZE=2>2</FONT></TD>
    <TD ALIGN=LEFT width="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT width="18%"><FONT SIZE=2>2,422</FONT></TD>
    <TD ALIGN=LEFT width="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT width="13%"><FONT SIZE=2>0.36</FONT></TD>
    <TD ALIGN=LEFT width="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=center width="18%"><FONT SIZE=2>NR**</FONT></TD>
    <TD ALIGN=center width="9%"><FONT SIZE=2>NR**</FONT></TD>
    <TD ALIGN=RIGHT width="18%"><FONT SIZE=2>1</FONT></TD>
    <TD ALIGN=LEFT width="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT width="18%"><FONT SIZE=2>6,821</FONT></TD>
    <TD ALIGN=LEFT width="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT width="13%"><FONT SIZE=2>1.03</FONT></TD>
    <TD ALIGN=LEFT width="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD align="center" width="18%"></TD>
    <TD align="center" width="9%"></TD>
    <TD ALIGN=RIGHT width="18%">
      <hr noshade color=#000000 size=1 align="right" width="60">
    </TD>
    <TD width="7%"></TD>
    <TD ALIGN=RIGHT width="18%">
      <hr noshade color=#000000 size=1 align="right" width="60">
    </TD>
    <TD width="9%"></TD>
    <TD ALIGN=RIGHT width="13%">
      <hr noshade color=#000000 size=1 align="right" width="60">
    </TD>
    <TD width="8%"></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=left width="18%"><FONT SIZE=2>Total</FONT></TD>
    <TD ALIGN=LEFT width="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT width="18%"><FONT SIZE=2>152</FONT></TD>
    <TD ALIGN=LEFT width="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT width="18%"><FONT SIZE=2>$664,604</FONT></TD>
    <TD ALIGN=LEFT width="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT width="13%"><FONT SIZE=2>100.00</FONT></TD>
    <TD ALIGN=LEFT width="8%"><FONT SIZE=2>%</FONT></TD>
  </TR>
  <TR>
    <TD width="18%"></TD>
    <TD width="9%"></TD>
    <TD ALIGN=RIGHT width="18%">
      <hr noshade color=#000000 size=2 align="right" width="60">
    </TD>
    <TD width="7%"></TD>
    <TD ALIGN=RIGHT width="18%">
      <hr noshade color=#000000 size=2 align="right" width="60">
    </TD>
    <TD width="9%"></TD>
    <TD ALIGN=RIGHT width="13%">
      <hr noshade color=#000000 size=2 align="right" width="60">
    </TD>
    <TD width="8%"></TD>
  </TR>
</TABLE>



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<HR SIZE=1 noshade ALIGN=left  WIDTH=75>

<!-- MARKER FORMAT-SHEET="Footnote Left" FSL="Workstation" -->
<TABLE WIDTH=100%><TR>
    <TD WIDTH=2% ALIGN=right VALIGN=top><FONT SIZE="1"> * </FONT></TD>
    <TD WIDTH=1%>&nbsp;</TD>
    <TD WIDTH=97% ALIGN=left VALIGN=top><FONT SIZE="1">Ratings:
Using the higher of Moody&#146;s or S&amp;P ratings on the Fund&#146;s      investments.
Moody&#146;s rating categories may be modified further by a 1, 2 or      3 in Aa, A, Baa,
Ba, B and Caa ratings. S&amp;P rating categories may be      modified further by a plus (&#134;)
or minus (-) in AA, A, BBB, BB, B and CCC      ratings.</FONT></TD></TR></TABLE><!-- MARKER FORMAT-SHEET="Footnote Left" FSL="Workstation" -->
<TABLE WIDTH=100%><TR>
    <TD WIDTH=2% ALIGN=right VALIGN=top><FONT SIZE="1">** </FONT></TD>
    <TD WIDTH=1%>&nbsp;</TD>
    <TD WIDTH=97% ALIGN=left VALIGN=top><FONT SIZE="1">Not
Rated.</FONT></TD></TR></TABLE><!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
<BR>
<TABLE WIDTH=100%><TR><TD WIDTH=20% ALIGN=left><FONT SIZE=1>&nbsp;</FONT></TD><TD WIDTH=60% ALIGN=center><FONT SIZE="2">
17</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR ALIGN=LEFT WIDTH=100% SIZE=5 noshade><BR>







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<!-- MARKER FORMAT-SHEET="Center Head 2 Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>INVESTMENT OBJECTIVE
AND POLICIES </B></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund&#146;s investment objective is to provide shareholders with as high a level of
current income exempt from Federal income taxes as is consistent with its investment
policies and prudent investment management. The Fund seeks to achieve its investment
objective by investing, as a fundamental policy, at least 80% of an aggregate of the Fund&#146;s
net assets (including proceeds from the issuance of preferred stock), and the proceeds of
any borrowings for investment purposes, in a portfolio of municipal obligations issued by
or on behalf of states, territories and possessions of the United States and their
political subdivisions, agencies or instrumentalities, each of which pays interest that,
in the opinion of bond counsel to the issuer, is excludable from gross income for Federal
income tax purposes (except that the interest may be includable in taxable income for
purposes of the Federal alternative minimum tax) (&#147;Municipal Bonds&#148;). The Fund
invests in Municipal Bonds which are rated in the three highest quality ratings
categories (A or better) or, if unrated, are considered by the Investment Adviser to be
of comparable quality. The Fund&#146;s investment objective and its policy of investing
at least 80% of an aggregate of the Fund&#146;s net assets (including proceeds from the
issuance of preferred stock), and the proceeds of any borrowings for investment purposes,
in Municipal Bonds are fundamental policies that may not be changed without a vote of a
majority of the outstanding voting securities of the Fund (as defined in the 1940 Act).
There can be no assurance that the Fund&#146;s investment objective will be realized. </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund may invest in certain tax exempt securities classified as &#147;private activity
bonds&#148; (or industrial development bonds, under pre-1986 law) (&#147;PABs&#148;) (in
general, bonds that benefit non-governmental entities) that may subject certain investors
in the Fund to an alternative minimum tax. See &#147;Taxes.&#148; The percentage of the
Fund&#146;s total assets invested in PABs will vary from time to time. The Fund will not
invest more than 25% of its total assets (taken at market value) in Municipal Bonds whose
issuers are located in the same state. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Municipal Bonds in which the Fund invests are those Municipal Bonds rated at the date of
purchase in the three highest quality ratings as determined by either Moody&#146;s
Investors Service, Inc. (&#147;Moody&#146;s&#148;) (currently Aaa, Aa and A), Standard
&amp; Poor&#146;s (&#147;S&amp;P&#148;) (currently AAA, AA and A) or Fitch Ratings (&#147;Fitch&#148;)
(currently AAA, AA and A). In the case of short term notes, these quality rating
categories are SP-1&#134; through SP-2 for S&amp;P, MIG-1 through MIG-3 for Moody&#146;s
and F-1&#134; through F-2 for Fitch. In the case of tax exempt commercial paper, these
quality rating categories are A-1&#134; through A-2 for S&amp;P, Prime-1 through Prime-2
for Moody&#146;s and F-1&#134; through F-2 for Fitch. There may be sub-categories or
gradations indicating relative standing within the rating categories set forth above. In
assessing the quality of Municipal Bonds with respect to the foregoing requirements, the
Investment Adviser takes into account the nature of any letters of credit or similar
credit enhancement to which particular Municipal Bonds are entitled and the
creditworthiness of the financial institution that provided such credit enhancement. See
Appendix A &#151; &#147;Description of Municipal Bond Ratings&#148; to the statement of
additional information. If unrated, such securities will possess creditworthiness
comparable, in the opinion of the Investment Adviser, to other obligations in which the
Fund may invest. </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
percentage and ratings limitations on securities in which the Fund may invest apply at
the time of making an investment and shall not be considered violated if an investment
rating is subsequently downgraded to a rating that would have precluded the Fund&#146;s
initial investment in such security. In the event that the Fund disposes of a portfolio
security subsequent to its being downgraded, the Fund may experience a greater risk of
loss than if such security had been sold prior to such downgrade. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
net asset value of the shares of common stock of a closed-end investment company, such as
the Fund, which invests primarily in fixed income securities, changes as the general
levels of interest rates fluctuate. When interest rates decline, the value of a fixed
income portfolio can be expected to rise. Conversely, when interest rates rise, the value
of a fixed income portfolio can be expected to decline. Prices of longer term securities
in which the Fund primarily invests generally fluctuate more in response to interest rate
changes than do shorter term securities. These changes in net asset value are likely to
be greater in the case of a fund having a leveraged capital structure, such as the Fund. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund intends to invest primarily in long term Municipal Bonds with maturities of more
than ten years. However, the Fund also may invest in intermediate term Municipal Bonds
with maturities of between three years and ten years. The Fund also may invest from time
to time in short term Municipal Bonds with maturities of less than three years. The
average maturity of the Fund&#146;s portfolio securities will vary based upon the
Investment Adviser&#146;s assessment of economic and market conditions. As of April 30,
2005, the weighted average maturity of the Fund&#146;s portfolio was approximately 20.22
years. </FONT></P>




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<BR>
<TABLE WIDTH=100%><TR><TD WIDTH=20% ALIGN=left><FONT SIZE=1>&nbsp;</FONT></TD><TD WIDTH=60% ALIGN=center><FONT SIZE="2">
18</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR ALIGN=LEFT WIDTH=100% SIZE=5 noshade><BR>







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<!-- MARKER PAGE="sheet: 19; page: 19" -->



<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
temporary periods or to provide liquidity, the Fund has the authority to invest as much
as 20% of its total assets in tax exempt and taxable money market obligations with a
maturity of one year or less (such short term obligations being referred to herein as
&#147;Temporary Investments&#148;). In addition, the Fund reserves the right as a
defensive measure to invest temporarily a greater portion of its assets in Temporary
Investments, when, in the opinion of the Investment Adviser, prevailing market or
financial conditions warrant. Taxable money market obligations will yield taxable income.
The Fund also may invest in variable rate demand obligations (&#147;VRDOs&#148;) and
VRDOs in the form of participation interests (&#147;Participating VRDOs&#148;) in
variable rate tax exempt obligations held by a financial institution. See &#147;Other
Investment Policies &#151;Temporary Investments.&#148; The Fund&#146;s hedging
strategies, which are described in more detail under &#147;Hedging Transactions &#151; Financial
Futures Transactions and Options,&#148; are not fundamental policies and may be modified
by the Board of Directors of the Fund without the approval of the Fund&#146;s
stockholders. The Fund is also authorized to invest in indexed and inverse floating rate
obligations for hedging purposes and to seek to enhance return. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund may invest in securities not issued by or on behalf of a state or territory or by an
agency or instrumentality thereof, if the Fund receives an opinion of counsel to the
issuer that such securities pay interest that is excludable from gross income for Federal
income tax purposes (&#147;Non-Municipal Tax Exempt Securities&#148;). Non-Municipal Tax
Exempt Securities could include trust certificates, partnership interests or other
instruments evidencing interest in one or more long term municipal securities.
Non-Municipal Tax Exempt Securities also may include securities issued by other
investment companies that invest in Municipal Bonds, to the extent such investments are
permitted by the Fund&#146;s investment restrictions and applicable law. Non-Municipal
Tax Exempt Securities are subject to the same risks associated with an investment in
Municipal Bonds as well as many of the risks associated with investments in derivatives.
While the Fund receives opinions of legal counsel to the effect that the income from the
Non-Municipal Tax Exempt Securities in which the Fund invests is excludable from gross
income for Federal income tax purposes to the same extent as the underlying municipal
securities, the Internal Revenue Service (&#147;IRS&#148;) has not issued a ruling on
this subject. Were the IRS to issue an adverse ruling or take an adverse position with
respect to the taxation of these types of securities, there is a risk that the interest
paid on such securities would be deemed taxable at the Federal level. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund ordinarily does not intend to realize significant investment income not exempt from
Federal income tax. From time to time, the Fund may realize taxable capital gains. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Federal
tax legislation has limited the types and volume of bonds the interest on which qualifies
for a Federal income tax exemption. As a result, this legislation and legislation that
may be enacted in the future may affect the availability of Municipal Bonds for
investment by the Fund. </FONT></P><!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Risk Factors and
Special Considerations Relating to Municipal Bonds </B></FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
risks and special considerations involved in investment in Municipal Bonds vary with the
types of instruments being acquired. Investments in Non-Municipal Tax Exempt Securities
may present similar risks, depending on the particular product. Certain instruments in
which the Fund may invest may be characterized as derivative instruments. See &#147;&#151; Description
of Municipal Bonds&#148;and &#147;&#151; Hedging Transactions &#151; Financial Futures
Transactions and Options.&#148; </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
value of Municipal Bonds generally may be affected by uncertainties in the municipal
markets as a result of legislation or litigation, including legislation or litigation
that changes the taxation of Municipal Bonds or the rights of Municipal Bond holders in
the event of a bankruptcy. Municipal bankruptcies are rare, and certain provisions of the
U.S. Bankruptcy Code governing such bankruptcies are unclear. Further, the application of
state law to Municipal Bond issuers could produce varying results among the states or
among Municipal Bond issuers within a state. These uncertainties could have a significant
impact on the prices of the Municipal Bonds in which the Fund invests. </FONT></P><!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Description of
Municipal Bonds </B></FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set
forth below is a detailed description of the Municipal Bonds and Temporary Investments in
which the Fund may invest. Information with respect to ratings assigned to tax exempt
obligations that the Fund may purchase is set forth in Appendix A &#151; &#147;Description
of Municipal Bond Ratings&#148; to the statement of additional information. Obligations
are included within the term Municipal Bonds if the interest paid thereon is excluded
from gross income for Federal income tax purposes in the opinion of bond counsel to the
issuer. </FONT></P><!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
<BR>
<TABLE WIDTH=100%><TR><TD WIDTH=20% ALIGN=left><FONT SIZE=1>&nbsp;</FONT></TD><TD WIDTH=60% ALIGN=center><FONT SIZE="2">
19</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR ALIGN=LEFT WIDTH=100% SIZE=5 noshade><BR>







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<!-- MARKER PAGE="sheet: 20; page: 20" -->



<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Municipal
Bonds include debt obligations issued to obtain funds for various public purposes,
including the construction of a wide range of public facilities, refunding of outstanding
obligations and obtaining funds for general operating expenses and loans to other public
institutions and facilities. In addition, certain types of bonds are issued by or on
behalf of public authorities to finance various privately owned or operated facilities,
including certain facilities for the local furnishing of electric energy or gas, sewage
facilities, solid waste disposal facilities and other specialized facilities. Other types
of industrial development bonds or private activity bonds, the proceeds of which are used
for the construction, equipment or improvement of privately operated industrial or
commercial facilities, may constitute Municipal Bonds, although the current Federal tax
laws place substantial limitations on the size of such issues. The interest on Municipal
Bonds may bear a fixed rate or be payable at a variable or floating rate. The two
principal classifications of Municipal Bonds are &#147;general obligation&#148; and &#147;revenue&#148; bonds,
which latter category includes PABs. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund has not established any limit on the percentage of its portfolio that may be
invested in IDBs or PABs. The Fund may not be a suitable investment for investors who are
already subject to the Federal alternative minimum tax or who would become subject to the
Federal alternative minimum tax as a result of an investment in the Fund&#146;s common
stock. See &#147;Taxes.&#148; </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>General
Obligation Bonds. </I>General obligation bonds are secured by the issuer&#146;s pledge of its
faith, credit and taxing power for the payment of principal and interest. The taxing
power of any governmental entity may be limited, however, by provisions of its state
constitution or laws, and an entity&#146;s creditworthiness will depend on many factors,
including potential erosion of its tax base due to population declines, natural
disasters, declines in the state&#146;s industrial base or inability to attract new
industries, economic limits on the ability to tax without eroding the tax base, state
legislative proposals or voter initiatives to limit ad valorem real property taxes and
the extent to which the entity relies on Federal or state aid, access to capital markets
or other factors beyond the state&#146;s or entity&#146;s control. Accordingly, the
capacity of the issuer of a general obligation bond as to the timely payment of interest
and the repayment of principal when due is affected by the issuer&#146;s maintenance of
its tax base. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Revenue
Bonds. </I>Revenue bonds are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a special excise
tax or other specific revenue sources such as payments from the user of the facility
being financed. Accordingly, the timely payment of interest and the repayment of
principal in accordance with the terms of the revenue or special obligation bond is a
function of the economic viability of such facility or such revenue source. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>PABs.
</I>The Fund may purchase PABs. PABs are, in most cases, tax exempt securities issued by
states, municipalities or public authorities to provide funds, usually through a loan or
lease arrangement, to a private entity for the purpose of financing construction or
improvement of a facility to be used by the entity. Such bonds are secured primarily by
revenues derived from loan repayments or lease payments due from the entity which may or
may not be guaranteed by a parent company or otherwise secured. PABs generally are not
secured by a pledge of the taxing power of the issuer of such bonds. Therefore, an
investor should be aware that repayment of such bonds generally depends on the revenues
of a private entity and be aware of the risks that such an investment may entail.
Continued ability of an entity to generate sufficient revenues for the payment of
principal and interest on such bonds will be affected by many factors including the size
of the entity, capital structure, demand for its products or services, competition,
general economic conditions, government regulation and the entity&#146;s dependence on
revenues for the operation of the particular facility being financed. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Moral
Obligation Bonds. </I>The Fund also may invest in &#147;moral obligation&#148;bonds, which
are normally issued by special purpose public authorities. If an issuer of moral
obligation bonds is unable to meet its obligations, the repayment of such bonds becomes a
moral commitment but not a legal obligation of the state or municipality in question. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Municipal
Lease Obligations. </I>Also included within the general category of Municipal Bonds are
certificates of participation (&#147;COPs&#148;) issued by government authorities or
entities to finance the acquisition or construction of equipment, land and/or facilities.
COPs represent participations in a lease, an installment purchase contract or a
conditional sales contract (hereinafter collectively called &#147;lease obligations&#148;)
relating to such equipment, land or facilities. Although lease obligations do not
constitute general obligations of the issuer for which the issuer&#146;s unlimited taxing
power is pledged, a lease obligation is frequently backed by the issuer&#146;s covenant
to budget for, </FONT> </P><!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>appropriate and make the payments
due under the lease obligation. However, certain lease obligations contain &#147;non-appropriation&#148; clauses
which provide that the issuer has no obligation to make lease or installment purchase
payments in future years unless money is appropriated for such purpose on a yearly basis.
Although &#147;non-appropriation&#148; lease obligations are secured by the leased
property, disposition of the property in the event of foreclosure might prove difficult
and the value of the property may be insufficient to issue lease obligations. Certain
investments in lease obligations may be illiquid. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Indexed
and Inverse Floating Rate Securities. </I>The Fund may invest in Municipal Bonds (and Non-
Municipal Tax Exempt Securities) that yield a return based on a particular index of value
or interest rates. For example, the Fund may invest in Municipal Bonds that pay interest
based on an index of Municipal Bond interest rates. The principal amount payable upon
maturity of certain Municipal Bonds also may be based on the value of the index. To the
extent the Fund invests in these types of Municipal Bonds, the Fund&#146;s return on such
Municipal Bonds will be subject to risk with respect to the value of the particular
index. Interest and principal payable on the Municipal Bonds may also be based on
relative changes among particular indices. Also, the Fund may invest in so-called &#147;inverse
floating obligations&#148; or &#147;residual interest bonds&#148; on which the interest
rates vary inversely with a short term floating rate (which may be reset periodically by
a dutch auction, a remarketing agent, or by reference to a short term tax exempt interest
rate index). The Fund may purchase synthetically created inverse floating rate bonds
evidenced by custodial or trust receipts. Generally, income on inverse floating rate
bonds will decrease when short term interest rates increase, and will increase when short
term interest rates decrease. Such securities have the effect of providing a degree of
investment leverage, since they may increase or decrease in value in response to changes,
as an illustration, in market interest rates at a rate which is a multiple (typically
two) of the rate at which fixed rate long term tax exempt securities increase or decrease
in response to such changes. As a result, the market values of such securities will
generally be more volatile than the market values of fixed rate tax exempt securities. To
seek to limit the volatility of these securities, the Fund may purchase inverse floating
obligations with shorter-term maturities or which contain limitations on the extent to
which the interest rate may vary. Certain investments in such obligations may be illiquid. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>When
Issued Securities, Delayed Delivery Securities and Forward Commitments. </I>The Fund may
purchase or sell securities that it is entitled to receive on a when issued basis. The
Fund may also purchase or sell securities on a delayed delivery basis. The Fund may also
purchase or sell securities through a forward commitment. These transactions involve the
purchase or sale of securities by the Fund at an established price with payment and
delivery taking place in the future. The purchase will be recorded on the date the Fund
enters into the commitment and the value of the securities will thereafter be reflected
in the Fund&#146;s net asset value. The Fund enters into these transactions to obtain
what is considered an advantageous price to the Fund at the time of entering into the
transaction. The Fund has not established any limit on the percentage of its assets that
may be committed in connection with these transactions. When the Fund purchases
securities in these transactions, the Fund segregates liquid securities in an amount
equal to the amount of its purchase commitments. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There
can be no assurance that a security purchased on a when issued basis will be issued or
that a security purchased or sold through a forward commitment will be delivered. A
default by a counterparty may result in the Fund missing the opportunity of obtaining a
price considered to be advantageous. The value of securities in these transactions on the
delivery date may be more or less than the Fund&#146;s purchase price. The Fund may bear
the risk of a decline in the value of the security in these transactions and may not
benefit from an appreciation in the value of the security during the commitment period. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Call
Rights. </I>The Fund may purchase a Municipal Bond issuer&#146;s right to call all or a
portion of such Municipal Bond for mandatory tender for purchase (a &#147;Call Right&#148;).
A holder of a Call Right may exercise such right to require a mandatory tender for the
purchase of related Municipal Bonds, subject to certain conditions. A Call Right that is
not exercised prior to maturity of the related Municipal Bond will expire without value.
The economic effect of holding both the Call Right and the related Municipal Bond is
identical to holding a Municipal Bond as a non-callable security. Certain investments in
such obligations may be illiquid. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Yields.
</I>Yields on Municipal Bonds are dependent on a variety of factors, including the general
condition of the money market and of the municipal bond market, the size of a particular
offering, the financial condition of the issuer, the maturity of the obligation and the
rating of the issue. The ability of the Fund to achieve its investment objective is also
dependent on the continuing ability of the issuers of the securities in which the Fund
invests to meet their obligations for the payment of interest and principal when due.
There are variations in the </FONT> </P><!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>risks involved in holding Municipal
Bonds, both within a particular classification and between classifications, depending on
numerous factors. Furthermore, the rights of owners of Municipal Bonds and the
obligations of the issuer of such Municipal Bonds may be subject to applicable
bankruptcy, insolvency and similar laws and court decisions affecting the rights of
creditors generally and to general equitable principles, which may limit the enforcement
of certain remedies. </FONT></P><!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Hedging Transactions </B></FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund may hedge all or a portion of its portfolio investments against fluctuations in
interest rates through the use of options and certain financial futures contracts and
options thereon. While the Fund&#146;s use of hedging strategies is intended to reduce
the volatility of the net asset value of the Fund&#146;s shares of common stock, the net
asset value of the Fund&#146;s shares of common stock will fluctuate. No assurance can be
given that the Fund&#146;s hedging transactions will be effective. The Fund only may
engage in hedging activities from time to time and may not necessarily be engaging in
hedging activities when movements in interest rates occur. The Fund has no obligation to
enter into hedging transactions and may choose not to do so. Furthermore, for so long as
the AMPS are rated by Moody&#146;s and S&amp;P, the Fund&#146;s use of options and
certain financial futures and options thereon will be subject to the limitations
described under &#147;Rating Agency Guidelines.&#148; </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Financial
Futures Transactions and Options. </I>The Fund is authorized to purchase and sell certain
exchange traded financial futures contracts (&#147;financial futures contracts&#148;) in
order to hedge its investments in Municipal Bonds against declines in value, and to hedge
against increases in the cost of securities it intends to purchase or to seek to enhance
the Fund&#146;s return. However, any transactions involving financial futures or options
(including puts and calls associated therewith) will be in accordance with the Fund&#146;s
investment policies and limitations. A financial futures contract obligates the seller of
a contract to deliver and the purchaser of a contract to take delivery of the type of
financial instrument covered by the contract, or in the case of index-based futures
contracts to make and accept a cash settlement, at a specific future time for a specified
price. To hedge its portfolio, the Fund may take an investment position in a futures
contract which will move in the opposite direction from the portfolio position being
hedged. A sale of financial futures contracts may provide a hedge against a decline in
the value of portfolio securities because such depreciation may be offset, in whole or in
part, by an increase in the value of the position in the financial futures contracts. A
purchase of financial futures contracts may provide a hedge against an increase in the
cost of securities intended to be purchased because such appreciation may be offset, in
whole or in part, by an increase in the value of the position in the futures contracts. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Distributions,
if any, of net long term capital gains from certain transactions in futures or options
are taxable at long term capital gains rates for Federal income tax purposes. See &#147;Taxes.&#148; </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Futures
Contracts. </I>A futures contract is an agreement between two parties to buy and sell a
security or, in the case of an index-based futures contract, to make and accept a cash
settlement for a set price on a future date. A majority of transactions in futures
contracts, however, do not result in the actual delivery of the underlying instrument or
cash settlement, but are settled through liquidation, <i>i.e.</i>, by entering into an
offsetting transaction. Futures contracts have been designed by boards of trade which
have been designated &#147;contracts markets&#148; by the Commodity Futures Trading
Commission (&#147;CFTC&#148;). </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
purchase or sale of a futures contract differs from the purchase or sale of a security in
that no price or premium is paid or received. Instead, an amount of cash or securities
acceptable to the broker and the relevant contract market, which varies, but is generally
about 5% of the contract amount, must be deposited with the broker. This amount is known
as &#147;initial margin&#148; and represents a &#147;good faith&#148; deposit assuring
the performance of both the purchaser and seller under the futures contract. Subsequent
payments to and from the broker, called &#147;variation margin,&#148; are required to be
made on a daily basis as the price of the futures contract fluctuates making the long and
short positions in the futures contract more or less valuable, a process known as &#147;marking
to the market.&#148; At any time prior to the settlement date of the futures contract,
the position may be closed out by taking an opposite position that will operate to
terminate the position in the futures contract. A final determination of variation margin
is then made, additional cash is required to be paid to or released by the broker and the
purchaser realizes a loss or gain. In addition, a nominal commission is paid on each
completed sale transaction. </FONT></P><!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund deals in financial futures contracts based on a long term municipal bond index
developed by the Chicago Board of Trade (&#147;CBT&#148;) and The Bond Buyer (the &#147;Municipal
Bond Index&#148;). The Municipal Bond Index is comprised of 40 tax exempt municipal
revenue and general obligation bonds. Each bond included in the Municipal Bond Index must
be rated A or higher by Moody&#146;s or S&amp;P and must have a remaining maturity of 19
years or more. Twice a month new issues satisfying the eligibility requirements are added
to, and an equal number of old issues are deleted from, the Municipal Bond Index. The
value of the Municipal Bond Index is computed daily according to a formula based on the
price of each bond in the Municipal Bond Index, as evaluated by six dealer-to-dealer
brokers. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Municipal Bond Index futures contract is traded only on the CBT. Like other contract
markets, the CBT assures performance under futures contracts through a clearing
corporation, a nonprofit organization managed by the exchange membership which is also
responsible for handling daily accounting of deposits or withdrawals of margin. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund may also purchase and sell financial futures contracts on U.S. Government securities
as a hedge against adverse changes in interest rates as described below. With respect to
U.S. Government securities, currently there are financial futures contracts based on long
term U.S. Treasury bonds, U.S. Treasury notes, Government National Mortgage Association (&#147;GNMA&#148;)
Certificates and three-month U.S. Treasury bills. The Fund may purchase and write call
and put options on futures contracts on U.S. Government securities and purchase and sell
Municipal Bond Index futures contracts in connection with its hedging strategies. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund also may engage in other futures contracts transactions such as futures contracts on
other municipal bond indices that may become available if the Investment Adviser should
determine that there is normally a sufficient correlation between the prices of such
futures contracts and the Municipal Bonds in which the Fund invests to make such hedging
appropriate. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Futures
Strategies. </I>The Fund may sell a financial futures contract (<i>i.e.</i>, assume a short
position) in anticipation of a decline in the value of its investments in Municipal Bonds
resulting from an increase in interest rates or otherwise. The risk of decline could be
reduced without employing futures as a hedge by selling such Municipal Bonds and either
reinvesting the proceeds in securities with shorter maturities or by holding assets in
cash. This strategy, however, entails increased transaction costs in the form of dealer
spreads and typically would reduce the average yield of the Fund&#146;s portfolio
securities as a result of the shortening of maturities. The sale of futures contracts
provides an alternative means of hedging against declines in the value of its investments
in Municipal Bonds. As such values decline, the value of the Fund&#146;s positions in the
futures contracts will tend to increase, thus offsetting all or a portion of the
depreciation in the market value of the Fund&#146;s Municipal Bond investments that are
being hedged. While the Fund will incur commission expenses in selling and closing out
futures positions, commissions on futures transactions are lower than transaction costs
incurred in the purchase and sale of Municipal Bonds. In addition, the ability of the
Fund to trade in the standardized contracts available in the futures markets may offer a
more effective defensive position than a program to reduce the average maturity of the
portfolio securities due to the unique and varied credit and technical characteristics of
the municipal debt instruments available to the Fund. Employing futures as a hedge also
may permit the Fund to assume a defensive posture without reducing the yield on its
investments beyond any amounts required to engage in futures trading. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When
the Fund intends to purchase Municipal Bonds, the Fund may purchase futures contracts as
a hedge against any increase in the cost of such Municipal Bonds resulting from a
decrease in interest rates or otherwise, that may occur before such purchases can be
effected. Subject to the degree of correlation between the Municipal Bonds and the
futures contracts, subsequent increases in the cost of Municipal Bonds should be
reflected in the value of the futures held by the Fund. As such purchases are made, an
equivalent amount of futures contracts will be closed out. Due to changing market
conditions and interest rate forecasts, however, a futures position may be terminated
without a corresponding purchase of portfolio securities. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Call
Options on Futures Contracts. </I>The Fund may also purchase and sell exchange traded call
and put options on financial futures contracts. The purchase of a call option on a
futures contract is analogous to the purchase of a call option on an individual security.
Depending on the pricing of the option compared to either the futures contract upon which
it is based or the price of the underlying debt securities, it may or may not be less
risky than ownership of the futures contract or underlying debt securities. Like the
purchase of a futures contract, the Fund will purchase a call option on a futures
contract to hedge against a market advance when the Fund is not fully invested. </FONT> </P><!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
writing of a call option on a futures contract constitutes a partial hedge against
declining prices of the securities which are deliverable upon exercise of the futures
contract. If the futures price at expiration is below the exercise price, the Fund will
retain the full amount of the option premium which provides a partial hedge against any
decline that may have occurred in the Fund&#146;s portfolio holdings. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Put
Options on Futures Contracts. </I>The purchase of a put option on a futures contract is
analogous to the purchase of a protective put option on portfolio securities. The Fund
will purchase a put option on a futures contract to hedge the Fund&#146;s portfolio
against the risk of rising interest rates. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
writing of a put option on a futures contract constitutes a partial hedge against
increasing prices of the securities which are deliverable upon exercise of the futures
contract. If the futures price at expiration is higher than the exercise price, the Fund
will retain the full amount of the option premium which provides a partial hedge against
any increase in the price of Municipal Bonds which the Fund intends to purchase. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
writer of an option on a futures contract is required to deposit initial and variation
margin pursuant to requirements similar to those applicable to futures contracts.
Premiums received from the writing of an option will be included in initial margin. The
writing of an option on a futures contract involves risks similar to those relating to
futures contracts. </FONT></P><!-- MARKER FORMAT-SHEET="Cutoff rule centered" FSL="Workstation" -->
<HR SIZE=1 noshade ALIGN=CENTER WIDTH=150>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
regulations of the CFTC, the futures trading activity described herein will not result in
the Fund being deemed a &#147;commodity pool&#148; and the Fund need not be operated by a
person registered with the CFTC as a &#147;commodity pool operator.&#148; </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When
the Fund purchases a futures contract, or writes a put option or purchases a call option
thereon, an amount of cash, cash equivalents (<i>e.g.</i>, high grade commercial paper and daily
tender adjustable notes) or liquid securities will be segregated, so that the amount so
segregated plus the amount of initial and variation margin held in the account of its
broker equals the market value of the futures contracts, thereby ensuring that the use of
such futures contract is unleveraged. It is not anticipated that transactions in futures
contracts will have the effect of increasing portfolio turnover. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Risk
Factors in Futures Transactions and Options. </I>Investment in futures contracts involves the
risk of imperfect correlation between movements in the price of the futures contract and
the price of the security being hedged. The hedge will not be fully effective when there
is imperfect correlation between the movements in the prices of two financial
instruments. For example, if the price of the futures contract moves more or less than
the price of the hedged security, the Fund will experience either a loss or gain on the
futures contract which is not completely offset by movements in the price of the hedged
securities. To compensate for imperfect correlations, the Fund may purchase or sell
futures contracts in a greater dollar amount than the hedged securities if the volatility
of the hedged securities is historically greater than the volatility of the futures
contracts. Conversely, the Fund may purchase or sell fewer futures contracts if the
volatility of the price of the hedged securities is historically less than that of the
futures contracts. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
particular municipal bonds comprising the index underlying the Municipal Bond Index
financial futures contract may vary from the bonds held by the Fund. As a result, the Fund&#146;s
ability to hedge effectively all or a portion of the value of its Municipal Bonds through
the use of such financial futures contracts will depend in part on the degree to which
price movements in the index underlying the financial futures contract correlate with the
price movements of the Municipal Bonds held by the Fund. The correlation may be affected
by disparities in the average maturity, ratings, geographical mix or structure of the Fund&#146;s
investments as compared to those comprising the Municipal Bond Index and general economic
or political factors. In addition, the correlation between movements in the value of the
Municipal Bond Index may be subject to change over time as additions to and deletions
from the Municipal Bond Index alter its structure. The correlation between futures
contracts on U.S. Government securities and the Municipal Bonds held by the Fund may be
adversely affected by similar factors and the risk of imperfect correlation between
movements in the prices of such futures contracts and the prices of Municipal Bonds held
by the Fund may be greater. Municipal Bond Index futures contracts were approved for
trading in 1986. Trading in such futures contracts may tend to be less liquid than
trading in other futures contracts. The trading of futures contracts also is subject to
certain market risks, such as inadequate trading activity, which could at times make it
difficult or impossible to liquidate existing positions. </FONT></P><!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund expects to liquidate a majority of the futures contracts it enters into through
offsetting transactions on the applicable contract market. There can be no assurance,
however, that a liquid secondary market will exist for any particular futures contract at
any specific time. Thus, it may not be possible to close out a futures position. In the
event of adverse price movements, the Fund would continue to be required to make daily
cash payments of variation margin. In such situations, if the Fund has insufficient cash,
it may be required to sell portfolio securities to meet daily variation margin
requirements at a time when it may be disadvantageous to do so. The inability to close
out futures positions also could have an adverse impact on the Fund&#146;s ability to
hedge effectively its investments in Municipal Bonds. The liquidity of a secondary market
in a futures contract may be adversely affected by &#147;daily price fluctuation limits&#148; established
by commodity exchanges which limit the amount of fluctuation in a futures contract price
during a single trading day. Once the daily limit has been reached in the contract, no
trades may be entered into at a price beyond the limit, thus preventing the liquidation
of open futures positions. Prices have in the past moved beyond the daily limit on a
number of consecutive trading days. The Fund will enter into a futures position only if,
in the judgment of the Investment Adviser, there appears to be an actively traded
secondary market for such futures contracts. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
successful use of transactions in futures and related options also depends on the ability
of the Investment Adviser to forecast correctly the direction and extent of interest rate
movements within a given time frame. To the extent interest rates remain stable during
the period in which a futures contract or option is held by the Fund or such rates move
in a direction opposite to that anticipated, the Fund may realize a loss on the hedging
transaction which is not fully or partially offset by an increase in the value of
portfolio securities. As a result, the Fund&#146;s total return for such period may be
less than if it had not engaged in the hedging transaction. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because
of low initial margin deposits made upon the opening of a futures position, futures
transactions involve substantial leverage. As a result, relatively small movements in the
price of the futures contracts can result in substantial unrealized gains or losses.
There is also the risk of loss by the Fund of margin deposits in the event of bankruptcy
of a broker with whom the Fund has an open position in a financial futures contract.
Because the Fund will engage in the purchase and sale of futures contracts for hedging
purposes or to seek to enhance the Fund&#146;s return, any losses incurred in connection
therewith should, if the hedging strategy is successful, be offset in whole or in part by
increases in the value of securities held by the Fund or decreases in the price of
securities the Fund intends to acquire. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
amount of risk the Fund assumes when it purchases an option on a futures contract is the
premium paid for the option plus related transaction costs. In addition to the
correlation risks discussed above, the purchase of an option on a futures contract also
entails the risk that changes in the value of the underlying futures contract will not be
fully reflected in the value of the option purchased. </FONT></P><!-- MARKER FORMAT-SHEET="Center Head 2 Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>OTHER INVESTMENT
POLICIES </B></FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund has adopted certain other policies as set forth below. </FONT></P><!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Temporary Investments </B></FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund may invest in short term tax exempt and taxable securities subject to the
limitations set forth above. The tax exempt money market securities may include municipal
notes, municipal commercial paper, municipal bonds with a remaining maturity of less than
one year, variable rate demand notes and participations therein. Municipal notes include
tax anticipation notes, bond anticipation notes, revenue anticipation notes and grant
anticipation notes. Anticipation notes are sold as interim financing in anticipation of
tax collection, bond sales, government grants or revenue receipts. Municipal commercial
paper refers to short term unsecured promissory notes generally issued to finance short
term credit needs. The taxable money market securities in which the Fund may invest as
Temporary Investments consist of U.S. Government securities, U.S. Government agency
securities, domestic bank or savings institution certificates of deposit and bankers&#146; acceptances,
short term corporate debt securities such as commercial paper and repurchase agreements.
These Temporary Investments must have a stated maturity not in excess of one year from
the date of purchase. The Fund may not invest in any security issued by a commercial bank
or a savings institution unless the bank or institution is organized and operating in the
United States, has total assets of at least one billion dollars and is a member of the
Federal Deposit Insurance Corporation (&#147;FDIC&#148;), except that up to 10% of total
assets may be invested in certificates of deposit of smaller institutions if such
certificates are fully insured by the FDIC. </FONT></P><!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Interest Rate Swap
Transactions </B></FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
order to seek to hedge the value of the Fund against interest rate fluctuations, to hedge
against increases in the Fund&#146;s costs associated with the dividend payments on any
preferred stock, including the AMPS, or to seek to increase the Fund&#146;s return, the
Fund may enter into interest rate swap transactions such as Municipal Market Data AAA
Cash Curve swaps (&#147;MMD Swaps&#148;) or Bond Market Association Municipal Swap Index
swaps (&#147;BMA Swaps&#148;). To the extent that the Fund enters into these
transactions, the Fund expects to do so primarily to preserve a return or spread on a
particular investment or portion of its portfolio as a duration management technique or
to protect against any increase in the price of securities the Fund anticipates
purchasing at a later date. The Fund may enter into these transactions primarily as a
hedge or for duration or risk management rather than as a speculative investment.
However, the Fund also may invest in MMD Swaps and BMA Swaps to seek to enhance return or
gain or to increase the Fund&#146;s yield, for example, during periods of steep interest
rate yield curves (<i>i.e.</i>, wide differences between short term and long term interest
rates). </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund may purchase and sell BMA Swaps in the BMA swap market. In a BMA Swap, the Fund
exchanges with another party their respective commitments to pay or receive interest
(<i>e.g.</i>, an exchange of fixed rate payments for floating rate payments linked to the Bond
Market Association Municipal Swap Index). Because the underlying index is a tax exempt
index, BMA Swaps may reduce cross-market risks incurred by the Fund and increase the Fund&#146;s
ability to hedge effectively. BMA Swaps are typically quoted for the entire yield curve,
beginning with a seven day floating rate index out to 30 years. The duration of a BMA
Swap is approximately equal to the duration of a fixed rate Municipal Bond with the same
attributes as the swap (<i>e.g.</i>, coupon, maturity, call feature). </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund also may purchase and sell MMD Swaps, also known as MMD rate locks. An MMD Swap
permits the Fund to lock in a specified municipal interest rate for a portion of its
portfolio to preserve a return on a particular investment or a portion of its portfolio
as a duration management technique or to protect against any increase in the price of
securities to be purchased at a later date. By using an MMD Swap, the Fund can create a
synthetic long or short position, allowing the Fund to select the most attractive part of
the yield curve. An MMD Swap is a contract between the Fund and an MMD Swap provider
pursuant to which the parties agree to make payments to each other on a notional amount,
contingent upon whether the Municipal Market Data AAA General Obligation Scale is above
or below a specified level on the expiration date of the contract. For example, if the
Fund buys an MMD Swap and the Municipal Market Data AAA General Obligation Scale is below
the specified level on the expiration date, the counterparty to the contract will make a
payment to the Fund equal to the specified level minus the actual level, multiplied by
the notional amount of the contract. If the Municipal Market Data AAA General Obligation
Scale is above the specified level on the expiration date, the Fund will make a payment
to the counterparty equal to the actual level minus the specified level, multiplied by
the notional amount of the contract. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
connection with investments in BMA and MMD Swaps, there is a risk that municipal yields
will move in the opposite direction than anticipated by the Fund, which would cause the
Fund to make payments to its counterparty in the transaction that could adversely affect
the Fund&#146;s performance. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund has no obligation to enter into BMA or MMD Swaps and may not do so. The net amount
of the excess, if any, of the Fund&#146;s obligations over its entitlements with respect
to each interest rate swap will be accrued on a daily basis, and the Fund will segregate
liquid securities having an aggregate net asset value at least equal to the accrued
excess. </FONT></P><!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Credit Default Swap
Agreements </B></FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund may enter into credit default swap agreements for hedging purposes or to seek to
increase its return. The credit default swap agreement may have as reference obligations
one or more securities that are not currently held by the Fund. The protection &#147;buyer&#148; in
a credit default contract may be obligated to pay the protection &#147;seller&#148; an
upfront or a periodic stream of payments over the term of the contract provided that no
credit event on a reference obligation has occurred. If a credit event occurs, the seller
generally must pay the buyer the &#147;par value&#148; (full notional value) of the swap
in exchange for an equal face amount of deliverable obligations of the reference entity
described in the swap, or the seller may be required to deliver the related net cash
amount, if the swap is cash settled. The Fund may be either the buyer or seller in the
transaction. If the Fund  </FONT></P><!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>is a buyer and no credit event
occurs, the Fund may recover nothing if the swap is held through its termination date.
However, if a credit event occurs, the buyer generally may elect to receive the full
notional value of the swap in exchange for an equal face amount of deliverable
obligations of the reference entity whose value may have significantly decreased. As a
seller, the Fund generally receives an upfront payment or a fixed rate of income
throughout the term of the swap, which typically is between six months and three years,
provided that there is no credit event. If a credit event occurs, generally the seller
must pay the buyer the full notional value of the swap in exchange for an equal face
amount of deliverable obligations of the reference entity whose value may have
significantly decreased. As the seller, the Fund would effectively add leverage to its
portfolio because, in addition to its total net assets, the Fund would be subject to
investment exposure on the notional amount of the swap. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Credit
default swap agreements involve greater risks than if the Fund had invested in the
reference obligation directly since, in addition to general market risks, credit default
swaps are subject to illiquidity risk, counterparty risk and credit risks. The Fund will
enter into credit default swap agreements only with counterparties who are rated
investment grade quality by at least one nationally recognized statistical rating
organization at the time of entering into such transaction or whose creditworthiness is
believed by the Investment Adviser to be equivalent to such rating. A buyer generally
also will lose its investment and recover nothing should no credit event occur and the
swap is held to its termination date. If a credit event were to occur, the value of any
deliverable obligation received by the seller, coupled with the upfront or periodic
payments previously received, may be less than the full notional value it pays to the
buyer, resulting in a loss of value to the seller. The Fund&#146;s obligations under a
credit default swap agreement will be accrued daily (offset against any amounts owing to
the Fund). The Fund will at all times segregate with its custodian in connection with
each such transaction liquid securities or cash with a value at least equal to the Fund&#146;s
exposure (any accrued but unpaid net amounts owed by the Fund to any counterparty), on a
marked-to-market basis (as calculated pursuant to requirements of the Securities and
Exchange Commission). Such segregation will ensure that the Fund has assets available to
satisfy its obligations with respect to the transaction and will avoid any potential
leveraging of the Fund&#146;s portfolio. Such segregation will not limit the Fund&#146;s
exposure to loss. </FONT></P><!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>VRDOs and
Participating VRDOs </B></FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;VRDOs
are tax exempt obligations that contain a floating or variable interest rate adjustment
formula and right of demand on the part of the holder thereof to receive payment of the
unpaid principal balance plus accrued interest upon a short notice period not to exceed
seven days. There is, however, the possibility that because of default or insolvency the
demand feature of VRDOs and Participating VRDOs may not be honored. The interest rates
are adjustable at intervals (ranging from daily to up to one year) to some prevailing
market rate for similar investments, such adjustment formula being calculated to maintain
the market value of the VRDOs, at approximately the par value of the VRDOs on the
adjustment date. The adjustments typically are based upon the Public Securities
Association Index or some other appropriate interest rate adjustment index. The Fund may
invest in all types of tax exempt instruments currently outstanding or to be issued in
the future which satisfy its short term maturity and quality standards. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Participating
VRDOs provide the Fund with a specified undivided interest (up to 100%) of the underlying
obligation and the right to demand payment of the unpaid principal balance plus accrued
interest on the Participating VRDOs from the financial institution upon a specified
number of days&#146; notice, not to exceed seven days. In addition, the Participating
VRDO is backed by an irrevocable letter of credit or guaranty of the financial
institution. The Fund would have an undivided interest in the underlying obligation and
thus participate on the same basis as the financial institution in such obligation except
that the financial institution typically retains fees out of the interest paid on the
obligation for servicing the obligation, providing the letter of credit and issuing the
repurchase commitment. The Fund has been advised by its counsel that the Fund should be
entitled to treat the income received on Participating VRDOs as interest from tax exempt
obligations as long as the Fund does not invest more than 20% of its total assets in such
investments and certain other conditions are met. It is contemplated that the Fund will
not invest more than 20% of its assets in Participating VRDOs. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;VRDOs
that contain an unconditional right of demand to receive payment of the unpaid principal
balance plus accrued interest on a notice period exceeding seven days may be deemed to be
illiquid securities. The Directors may adopt guidelines and delegate to the Investment
Adviser the daily function of determining and monitoring liquidity of such VRDOs. The
Directors, however, will retain sufficient oversight and will be ultimately responsible
for such determinations. </FONT></P><!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Temporary Investments, VRDOs and Participating VRDOs in which the Fund may invest will be
in the following rating categories at the time of purchase: MIG-1/VMIG-1 through
MIG-3/VMIG-3 for notes and VRDOs and Prime-1 through Prime-3 for commercial paper (as
determined by Moody&#146;s), SP-1 through SP-2 for notes and A-1 through A-3 for VRDOs
and commercial paper (as determined by S&amp;P), or F-1 through F-3 for notes, VRDOs and
commercial paper (as determined by Fitch). Temporary Investments, if not rated, must be
of comparable quality in the opinion of the Investment Adviser. In addition, the Fund
reserves the right to invest temporarily a greater portion of its assets in Temporary
Investments for defensive purposes, when, in the judgment of the Investment Adviser,
market conditions warrant. </FONT></P><!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Repurchase Agreements </B></FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund may invest in securities pursuant to repurchase agreements. Repurchase agreements
may be entered into only with a member bank of the Federal Reserve System or a primary
dealer or an affiliate thereof, in U.S. Government securities. Under such agreements, the
bank or primary dealer or an affiliate thereof agrees, upon entering into the contract,
to repurchase the security at a mutually agreed upon time and price, thereby determining
the yield during the term of the agreement. This results in a fixed rate of return
insulated from market fluctuations during such period. In repurchase agreements, the
prices at which the trades are conducted do not reflect accrued interest on the
underlying obligations. Such agreements usually cover short periods, such as under one
week. Repurchase agreements may be construed to be collateralized loans by the purchaser
to the seller secured by the securities transferred to the purchaser. In a repurchase
agreement, the Fund will require the seller to provide additional collateral if the
market value of the securities falls below the repurchase price at any time during the
term of the repurchase agreement. In the event of default by the seller under a
repurchase agreement construed to be a collateralized loan, the underlying securities are
not owned by the Fund but only constitute collateral for the seller&#146;s obligation to
pay the repurchase price. Therefore, the Fund may suffer time delays and incur costs or
possible losses in connection with the disposition of the collateral. In the event of a
default under such a repurchase agreement, instead of the contractual fixed rate of
return, the rate of return to the Fund shall be dependent upon intervening fluctuations
of the market value of such security and the accrued interest on the security. In such
event, the Fund would have rights against the seller for breach of contract with respect
to any losses arising from market fluctuations following the failure of the seller to
perform. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
general, for Federal income tax purposes, repurchase agreements are treated as
collateralized loans secured by the securities &#147;sold.&#148; Therefore, amounts
earned under such agreements will not be considered tax exempt interest. The treatment of
purchase and sales contracts is less certain. </FONT></P><!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Borrowings </B></FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund is authorized to borrow money in amounts of up to 5% of the value of its total
assets at the time of such borrowings; provided, however, that the Fund is authorized to
borrow moneys in amounts of up to 33<font size=1><sup>1</sup></font>/<font size=1>3</font>% of the value of its total assets at the time of
such borrowings to finance the repurchase of its own common stock pursuant to tender
offers or otherwise to redeem or repurchase shares of preferred stock. Borrowings by the
Fund (commonly known, as with the issuance of preferred stock, as &#147;leveraging&#148;)
create an opportunity for greater total return since, for example, the Fund will not be
required to sell portfolio securities to repurchase or redeem shares but, at the same
time, increase exposure to capital risk. In addition, borrowed funds are subject to
interest costs that may offset or exceed the return earned on the borrowed funds. </FONT></P><!-- MARKER FORMAT-SHEET="Center Head 2 Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>DESCRIPTION OF AMPS </B></FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Certain
of the capitalized terms used herein not otherwise defined in this prospectus have the
meaning provided in the Glossary at the back of this prospectus.</I> </FONT> </P><!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>General </B></FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Series E AMPS will be shares of preferred stock that entitle their holders to receive
dividends when, as and if declared by the Board of Directors, out of funds legally
available therefor, at a rate per annum that may vary for the successive Dividend
Periods. After the Initial Dividend Period, each Subsequent Dividend Period for the
Series E AMPS generally will be a 7-Day Dividend Period; provided however, that prior to
any Auction, the Fund may elect, subject to certain limitations described herein, upon
giving notice to holders thereof, a special  </FONT></P><!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
<BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>dividend period of up to five years
(a &#147;Special Dividend Period&#148;). The Applicable Rate for a particular Dividend
Period will be determined by an Auction conducted on the Business Day before the start of
such Dividend Period. Beneficial Owners and Potential Beneficial Owners of shares of AMPS
may participate in Auctions therefor, although, except in the case of a Special Dividend
Period of more than 28 days, Beneficial Owners desiring to continue to hold all of their
shares of AMPS regardless of the Applicable Rate resulting from Auctions need not
participate. For an explanation of Auctions and the method of determining the Applicable
Rate, see &#147;The Auction&#148; herein and in the statement of additional information. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund has outstanding 8,000 shares of four other series of Auction Market Preferred Stock,
each with a liquidation preference of $25,000 per share, plus accumulated but unpaid
dividends, for an aggregate initial liquidation preference of $200,000,000 (the &#147;Other
AMPS&#148;). The Other AMPS are as follows: 2,000 shares of Auction Market Preferred
Stock, Series A; 2,000 shares of Auction Market Preferred Stock, Series B; 2,000 shares
of Auction Market Preferred Stock, Series C; and 2,000 shares of Auction Market Preferred
Stock, Series D. The Series E AMPS offered hereby rank on a parity with the Other AMPS
with respect to dividends and liquidation preference. The terms of the shares of Other
AMPS are substantially the same as the terms of the shares of AMPS described below. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following is a brief description of the terms of the shares of the Series E AMPS. This
description does not purport to be complete and is subject to and qualified in its
entirety by reference to the Fund&#146;s Charter and Articles Supplementary, including
the provisions thereof establishing the Series E AMPS. The Fund&#146;s Charter and the
form of Articles Supplementary establishing the terms of the Series E AMPS have been
filed as exhibits to the Registration Statement of which this prospectus is a part. </FONT></P><!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Dividends </B></FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>General.
</I>The holders of shares of AMPS will be entitled to receive, when, as and if declared by
the Board of Directors of the Fund, out of funds legally available therefor, cumulative
cash dividends on their shares, at the Applicable Rate determined as set forth below
under &#147;Determination of Dividend Rate,&#148;payable on the respective dates set
forth below. Dividends on the shares of AMPS so declared and payable shall be paid (i) in
preference to and in priority over any dividends so declared and payable on the Fund&#146;s
common stock, and (ii) to the extent permitted under the Code, and to the extent
available, out of net tax exempt income earned on the Fund&#146;s investments. Generally,
dividends on shares of AMPS, to the extent that they are derived from interest paid on
Municipal Bonds, will be exempt from Federal income taxes, subject to possible
application of the alternative minimum tax. See &#147;Taxes.&#148; </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dividends
on the shares of AMPS will accumulate from the date on which the Fund originally issues
the shares of AMPS (the &#147;Date of Original Issue&#148;) and will be payable on the
dates described below. Dividends on shares of AMPS with respect to the Initial Dividend
Period shall be payable on the Initial Dividend Payment Date. Following the Initial
Dividend Payment Date for AMPS, dividends on AMPS will be payable, at the option of the
Fund, either (i) with respect to any 7-Day Dividend Period and any Short Term Dividend
Period of 35 or fewer days, on the day next succeeding the last day thereof or (ii) with
respect to any Short Term Dividend Period of more than 35 days and with respect to any
Long Term Dividend Period, monthly on the first Business Day of each calendar month
during such Short Term Dividend Period or Long Term Dividend Period and on the day next
succeeding the last day thereof (each such date referred to in clause (i) or (ii) being
referred to herein as a &#147;Normal Dividend Payment Date&#148;), except that if such
Normal Dividend Payment Date is not a Business Day, the Dividend Payment Date shall be
the first Business Day next succeeding such Normal Dividend Payment Date. Thus, following
the Initial Dividend Payment Date for AMPS, dividends generally will be payable (in the
case of Dividend Periods which are not Special Dividend Periods) on each succeeding
Monday in the case of the Series E AMPS. Although any particular Dividend Payment Date
may not occur on the originally scheduled date because of the exceptions discussed above,
the next succeeding Dividend Payment Date, subject to such exceptions, will occur on the
next following originally scheduled date. If for any reason a Dividend Payment Date
cannot be fixed as described above, then the Board of Directors shall fix the Dividend
Payment Date. The Board of Directors by resolution prior to authorization of a dividend
by the Board of Directors may change a Dividend Payment Date if such change does not
adversely affect the contract rights of the holders of shares of AMPS set forth in the
Charter. The Initial Dividend Period, 7-Day Dividend Periods and Special Dividend Periods
are hereinafter sometimes referred to as &#147;Dividend Periods.&#148; Each dividend
payment date determined as provided above is hereinafter referred to as a &#147;Dividend
Payment Date.&#148; </FONT></P><!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior
to each Dividend Payment Date, the Fund is required to deposit with the Auction Agent
sufficient funds for the payment of declared dividends. The Fund does not intend to
establish any reserves for the payment of dividends. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
dividend will be paid to the record holder of the AMPS, which holder is expected to be
the nominee of the Securities Depository. See &#147;The Auction &#151;Securities
Depository.&#148; The Securities Depository will credit the accounts of the Agent Members
of the Existing Holders in accordance with the Securities Depository&#146;s normal
procedures which provide for payment in same-day funds. The Agent Member of an Existing
Holder will be responsible for holding or disbursing such payments on the applicable
Dividend Payment Date to such Existing Holder in accordance with the instructions of such
Existing Holder. Dividends in arrears for any past Dividend Period may be declared and
paid at any time, without reference to any regular Dividend Payment Date, to the nominee
of the Securities Depository. Any dividend payment made on shares of AMPS first shall be
credited against the earliest declared but unpaid dividends accumulated with respect to
such shares. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders
of shares of AMPS will not be entitled to any dividends, whether payable in cash,
property or stock, in excess of full cumulative dividends except as described below under
&#147;&#151; Additional Dividends&#148; in this prospectus and under &#147;Description of
AMPS &#151; Dividends &#151; Non-Payment Period; Late Charge&#148; in the statement of
additional information. No interest will be payable in respect of any dividend payment or
payments on the shares of AMPS that may be in arrears. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
amount of cash dividends per share of the AMPS payable (if declared) on the Initial
Dividend Payment Date, and on each Dividend Payment Date of each 7-Day Dividend Period
and each Short Term Dividend Period, shall be computed by multiplying the Applicable Rate
for such Dividend Period by a fraction, the numerator of which will be the number of days
in such Dividend Period or part thereof that such share was outstanding and for which
dividends are payable on such Dividend Payment Date and the denominator of which will be
365, multiplying the amount so obtained by $25,000, and rounding the amount so obtained
to the nearest cent. During any Long Term Dividend Period, the amount of cash dividends
per share of AMPS payable (if declared) on any Dividend Payment Date shall be computed by
multiplying the Applicable Rate for such Dividend Period by a fraction, the numerator of
which will be such number of days in such part of such Dividend Period that such share
was outstanding and for which dividends are payable on such Dividend Payment Date and the
denominator of which will be 360, multiplying the amount so obtained by $25,000, and
rounding the amount so obtained to the nearest cent. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Notification
of Dividend Period. </I>With respect to each Dividend Period that is a Special Dividend
Period, the Fund, at its sole option and to the extent permitted by law, by telephonic
and written notice (a &#147;Request for Special Dividend Period&#148;) to the Auction
Agent and to each Broker-Dealer, may request that the next succeeding Dividend Period for
the AMPS will be a number of days (other than seven), evenly divisible by seven, and not
fewer than seven nor more than 364 in the case of a Short Term Dividend Period or one
whole year or more but not greater than five years in the case of a Long Term Dividend
Period, specified in such notice, provided that the Fund may not give a Request for
Special Dividend Period (and any such request shall be null and void) unless, for any
Auction occurring after the initial Auction, Sufficient Clearing Bids were made in the
last occurring Auction and unless full cumulative dividends and any amounts due with
respect to redemptions, and any Additional Dividends payable prior to such date have been
paid in full. Such Request for Special Dividend Period, in the case of a Short Term
Dividend Period, shall be given on or prior to the second Business Day but not more than
seven Business Days prior to an Auction Date for the AMPS and, in the case of a Long Term
Dividend Period, shall be given on or prior to the second Business Day but not more than
28 days prior to an Auction Date for the AMPS. Upon receiving such Request for Special
Dividend Period, the Broker-Dealers jointly shall determine whether, given the factors
set forth below, it is advisable that the Fund issue a Notice of Special Dividend Period
for the AMPS as contemplated by such Request for Special Dividend Period and the Optional
Redemption Price of the AMPS during such Special Dividend Period and the Specific
Redemption Provisions and shall give the Fund written notice (a &#147;Response&#148;) of
such determination by no later than the second Business Day prior to such Auction Date.
In the event the Response indicates that it is advisable that the Fund give a notice of a
Special Dividend Period for the AMPS, the Fund, by no later than the second Business Day
prior to such Auction Date may give a notice (a &#147;Notice of Special Dividend Period&#148;)
to the Auction Agent, the Securities Depository and each Broker-Dealer. See &#147;Description
of AMPS &#151; Dividends &#151; Notification of Dividend Period&#148; in the statement of
additional information for a detailed description of these procedures. </FONT> </P><!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
<BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Determination
of Dividend Rate. </I>The dividend rate on shares of the AMPS during the period from and
including the Date of Original Issue for the AMPS to but excluding the Initial Dividend
Payment Date (the &#147;Initial Dividend Period&#148;) with respect to the AMPS will be
the rate per annum set forth above under &#147;Prospectus Summary &#151; Dividends and
Dividend Periods.&#148; Commencing on the Initial Dividend Payment Date for the AMPS, the
Applicable Rate on the AMPS for each Subsequent Dividend Period, which Subsequent
Dividend Period shall be a period commencing on and including a Dividend Payment Date and
ending on and including the calendar day prior to the next Dividend Payment Date (or
calendar day prior to the last Dividend Payment Date in a Dividend Period if there is
more than one Dividend Payment Date), shall be equal to the rate per annum that results
from the Auction with respect to such Subsequent Dividend Period. The Initial Dividend
Period and Subsequent Dividend Period for AMPS is referred to herein as a &#147;Dividend
Period.&#148; Cash dividends shall be calculated as set forth above under &#147;Dividends
&#151; General.&#148; </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Restrictions
on Dividends and Other Payments. </I>Under the 1940 Act, the Fund may not declare dividends
or make other distributions on shares of common stock or purchase any such shares if, at
the time of the declaration, distribution or purchase, as applicable (and after giving
effect thereto), asset coverage (as defined in the 1940 Act) with respect to the
outstanding shares of AMPS (and Other AMPS) would be less than 200% (or such other
percentage as in the future may be required by law). The Fund estimates that, based on
the composition of its portfolio at April 30, 2005, asset coverage with respect to shares
of AMPS would be approximately 287% representing approximately 35% of the Fund&#146;s
capital and 53% of the Fund&#146;s common stock equity immediately after the issuance of
the shares of AMPS offered hereby. Under the Code, the Fund, among other things, must
distribute at least 90% of its investment company taxable income each year in order to
maintain its qualification for tax treatment as a regulated investment company. The
foregoing limitations on dividends, distributions and purchases under certain
circumstances may impair the Fund&#146;s ability to maintain such qualification. See
&#147;Taxes&#148; in the statement of additional information. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
any failure to pay dividends on shares of AMPS for two years or more, the holders of the
shares of AMPS will acquire certain additional voting rights. See &#147;Voting Rights&#148; below.
Such rights shall be the exclusive remedy of the holders of shares of AMPS upon any
failure to pay dividends on shares of the Fund. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Additional
Dividends. </I>If the Fund retroactively allocates any net capital gain or other income
subject to regular Federal income taxes to shares of AMPS without having given advance
notice thereof to the Auction Agent as described under &#147;The Auction &#151; Auction
Procedures &#151; Auction Date; Advance Notice of Allocation of Taxable Income; Inclusion
of Taxable Income in Dividends&#148; below, which may only happen when such allocation is
made as a result of the redemption of all or a portion of the outstanding shares of AMPS
or the liquidation of the Fund (the amount of such allocation referred to herein as a
&#147;Retroactive Taxable Allocation&#148;), the Fund, within 90 days (and generally
within 60 days) after the end of the Fund&#146;s fiscal year for which a Retroactive
Taxable Allocation is made, will provide notice thereof to the Auction Agent and to each
holder of shares (initially Cede as nominee of the Securities Depository) during such
fiscal year at such holder&#146;s address as the same appears or last appeared on the
stock books of the Fund. The Fund, within 30 days after such notice is given to the
Auction Agent, will pay to the Auction Agent (who then will distribute to such holders of
shares of AMPS), out of funds legally available therefor, an amount equal to the
aggregate Additional Dividend (as defined below) with respect to all Retroactive Taxable
Allocations made to such holders during the fiscal year in question. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An
&#147;Additional Dividend&#148; means payment to a present or former holder of shares of
AMPS of an amount which, when taken together with the aggregate amount of Retroactive
Taxable Allocations made to such holder with respect to the fiscal year in question,
would cause such holder&#146;s dividends in dollars (after Federal income tax
consequences) from the aggregate of both the Retroactive Taxable Allocations and the
Additional Dividend to be equal to the dollar amount of the dividends which would have
been received by such holder if the amount of the aggregate Retroactive Taxable
Allocations had been excludable from the gross income of such holder. Such Additional
Dividend shall be calculated (i) without consideration being given to the time value of
money; (ii) assuming that no holder of shares of AMPS is subject to the Federal
alternative minimum tax with respect to dividends received from the Fund; and (iii)
assuming that each Retroactive Taxable Allocation would be taxable in the hands of each
holder of shares of AMPS at the greater of: (a) the maximum marginal regular Federal
individual income tax rate applicable to ordinary income or capital gains depending on
the taxable character of the distribution (including any surtax); or (b) the maximum
marginal regular Federal corporate income tax rate applicable to ordinary income or
capital gains depending on the taxable character of the distribution (disregarding  </FONT></P><!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
<BR>
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<!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>in both (a) and (b) the effect of
any state or local taxes and the phase out of, or provision limiting, personal
exemptions, itemized deductions, or the benefit of lower tax brackets). Although the Fund
generally intends to designate any Additional Dividend as an exempt-interest dividend to
the extent permitted by applicable law, it is possible that all or a portion of any
Additional Dividend will be taxable to the recipient thereof. See &#147;Taxes&#148; in
the statement of additional information. The Fund will not pay a further Additional
Dividend with respect to any taxable portion of an Additional Dividend. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the Fund does not give advance notice of the amount of taxable income to be included in a
dividend on shares of AMPS in the related Auction, the Fund may include such taxable
income in a dividend on shares of AMPS if it increases the dividend by an additional
amount calculated as if such income were a Retroactive Taxable Allocation and the
additional amount were an Additional Dividend and notifies the Auction Agent of such
inclusion at least five Business Days prior to the applicable Dividend Payment Date. See
&#147;The Auction &#151; Auction Procedures &#151; Auction Date; Advance Notice of
Allocation of Taxable Income; Inclusion of Taxable Income in Dividends&#148; below. </FONT></P><!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Asset Maintenance </B></FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund will be required to satisfy two separate asset maintenance requirements under the
terms of the Articles Supplementary. These requirements are summarized below. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>1940
Act AMPS Asset Coverage. </I>The Fund will be required under the Articles Supplementary to
maintain, with respect to shares of AMPS, as of the last Business Day of each month in
which any shares of AMPS are outstanding, asset coverage of at least 200% with respect to
senior securities that are stock, including the shares of AMPS and Other AMPS (or such
other asset coverage as in the future may be specified in or under the 1940 Act as the
minimum asset coverage for senior securities that are stock of a closed-end investment
company as a condition of paying dividends on its common stock) (&#147;1940 Act AMPS
Asset Coverage&#148;). If the Fund fails to maintain 1940 Act AMPS Asset Coverage and
such failure is not cured as of the last Business Day of the following month (the &#147;1940
Act Cure Date&#148;), the Fund will be required under certain circumstances to redeem
certain of the shares of AMPS. See &#147;Redemption&#148; below. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based
upon the composition of the Fund&#146;s portfolio on April 30, 2005, the 1940 Act AMPS
Asset Coverage immediately following the issuance of AMPS offered hereby (after giving
effect to the deduction of the underwriting discount and offering expenses for the shares
of AMPS) will be computed as follows: </FONT></P>

<div align="center">
  <TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
    <TR VALIGN=Bottom>
      <TD ALIGN=center><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Value of Fund
        assets less liabilities</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=LEFT>&nbsp;</TD>
      <TD ALIGN=LEFT>&nbsp;</TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=center><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;not
        constituting senior securities</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=center><FONT SIZE=2>=</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>$718,320,314</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;</FONT></TD>
      <TD ALIGN=center><font size=2>=</font></TD>
      <TD ALIGN=LEFT>&nbsp;&nbsp;</TD>
      <TD ALIGN=LEFT>&nbsp;</TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=center>
        <hr size="1" noshade align="center">
      </TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=center>&nbsp;</TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER>
        <hr size="1" noshade align="center">
      </TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=LEFT>&nbsp;</TD>
      <TD ALIGN=LEFT>&nbsp;</TD>
      <TD ALIGN=center><FONT SIZE=2>&nbsp;287%</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=center><FONT SIZE=2>Senior securities representing indebtedness
        plus</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=center><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>$250,024,220&nbsp;</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=LEFT>&nbsp;</TD>
      <TD ALIGN=LEFT>&nbsp;</TD>
      <TD ALIGN=LEFT>&nbsp;</TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=center><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;liquidation
        value of the shares of AMPS</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
  </TABLE>
</div>

 <!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>AMPS
Basic Maintenance Amount. </I>So long as shares of AMPS are outstanding, the Fund will be
required under the Articles Supplementary to maintain as of the last Business Day of
each week (a &#147;Valuation Date&#148;) Moody&#146;s Eligible Assets and S&amp;P
Eligible Assets each having in the aggregate a Discounted Value at least equal to the
AMPS Basic Maintenance Amount. The AMPS Basic Maintenance Amount includes the sum of (i)
the aggregate liquidation value of AMPS and Other AMPS then outstanding and (ii) certain
accrued and projected payment obligations of the Fund. See &#147;Description of AMPS
&#151; Asset Maintenance &#151; AMPS Basic Maintenance Amount&#148; in the statement of
additional information. If the Fund fails to meet such requirement as of any Valuation
Date and such failure is not cured on or before the sixth Business Day after such
Valuation Date (the &#147;AMPS Basic Maintenance Cure Date&#148;), the Fund will be
required under certain circumstances to redeem certain of the shares of AMPS. Upon any
failure to maintain the required Discounted Value, the Fund will use its best efforts to
alter the composition of its portfolio to reattain a Discounted Value at least equal to
the AMPS Basic Maintenance Amount on or prior to the AMPS Basic Maintenance Cure Date.
See &#147;Redemption&#148; herein and in the statement of additional information. </FONT> </P><!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Redemption </B></FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Optional
Redemption. </I>To the extent permitted under the 1940 Act and under Maryland law, upon
giving a Notice of Redemption, as provided in the statement of additional information,
the Fund, at its option, may redeem shares of AMPS, in whole or in part, out of funds
legally available therefor, at the Optional Redemption Price per </FONT> </P><!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
<BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>share on any Dividend Payment Date;
provided that no share of AMPS may be redeemed at the option of the Fund during (a) the
Initial Dividend Period with respect to such share or (b) a Non-Call Period to which such
share is subject. &#147;Optional Redemption Price&#148; means $25,000 per share of AMPS
plus an amount equal to accumulated but unpaid dividends (whether or not earned or
declared) to the date fixed for redemption plus any applicable redemption premium, if
any, attributable to the designation of a Premium Call Period. In addition, holders of
AMPS may be entitled to receive Additional Dividends in the event of redemption of such
AMPS to the extent provided herein. See &#147;Dividends &#151; Additional Dividends.&#148; The
Fund has the authority to redeem the AMPS for any reason and may redeem all or part of
the outstanding shares of AMPS if it anticipates that the Fund&#146;s leveraged capital
structure will result in a lower rate of return to holders of common stock for any
significant period of time than that obtainable if the common stock were unleveraged. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Mandatory
Redemption. </I>The Fund will be required to redeem, out of funds legally available therefor,
at the Mandatory Redemption Price per share, shares of AMPS to the extent permitted under
the 1940 Act and Maryland law, on a date fixed by the Board of Directors, if the Fund
fails to maintain Moody&#146;s Eligible Assets and S&amp;P Eligible Assets each with an
aggregate Discounted Value equal to or greater than the AMPS Basic Maintenance Amount or
to satisfy the 1940 Act AMPS Asset Coverage and such failure is not cured on or before
the AMPS Basic Maintenance Cure Date or the 1940 Act Cure Date (herein collectively
referred to as a &#147;Cure Date&#148;), as the case may be. &#147;Mandatory Redemption
Price&#148; means $25,000 per share of AMPS plus an amount equal to accumulated but
unpaid dividends (whether or not earned or declared) to the date fixed for redemption. In
addition, holders of AMPS may be entitled to receive Additional Dividends in the event of
redemption of such AMPS to the extent provided herein. See &#147;Dividends &#151; Additional
Dividends.&#148; </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
a discussion of the allocation procedures to be used if fewer than all of the outstanding
shares of AMPS are to be redeemed and for a discussion of other redemption procedures,
see &#147;Description of AMPS &#151; Redemption&#148; in the statement of additional
information. </FONT></P><!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Liquidation Rights </B></FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
any liquidation, dissolution or winding up of the Fund, whether voluntary or involuntary,
the holders of shares of AMPS will be entitled to receive, out of the assets of the Fund
available for distribution to stockholders, before any distribution or payment is made
upon any shares of common stock or any other capital stock of the Fund ranking junior in
right of payment upon liquidation of AMPS, $25,000 per share together with the amount of
any dividends accumulated but unpaid (whether or not earned or declared) thereon to the
date of distribution, and after such payment the holders of AMPS will be entitled to no
other payments except for Additional Dividends. If such assets of the Fund shall be
insufficient to make the full liquidation payment on the outstanding shares of AMPS and
liquidation payments on any other outstanding class or series of preferred stock of the
Fund ranking on a parity with the AMPS as to payment upon liquidation, including the
Other AMPS, then such assets will be distributed among the holders of such shares of AMPS
and the holders of shares of such other class or series, including the Other AMPS,
ratably in proportion to the respective preferential amounts to which they are entitled.
After payment of the full amount of liquidation distribution to which they are entitled,
the holders of AMPS will not be entitled to any further participation in any distribution
of assets by the Fund. A consolidation, merger or share exchange of the Fund with or into
any other entity or entities or a sale, whether for cash, shares of stock, securities or
properties, of all or substantially all or any part of the assets of the Fund shall not
be deemed or construed to be a liquidation, dissolution or winding up of the Fund. </FONT></P><!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Voting Rights </B></FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
as otherwise indicated in this prospectus and the statement of additional information and
except as otherwise required by applicable law, holders of shares of AMPS will be
entitled to one vote per share on each matter submitted to a vote of stockholders of the
Fund and will vote together with holders of shares of common stock as a single class. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
1940 Act and the Articles Supplementary require that the holders of preferred stock,
including the AMPS and Other AMPS, voting as a separate class, have the rights to elect
two of the Fund&#146;s Directors at all times and to elect a majority of the Directors at
any time that two full years&#146; dividends on the AMPS (and Other AMPS) are unpaid. The
holders of AMPS (and Other AMPS) will vote as a separate class or classes on certain  </FONT></P><!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
<BR>
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33</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR ALIGN=LEFT WIDTH=100% SIZE=5 noshade><BR>







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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>other matters as required under the
Articles Supplementary, the 1940 Act and Maryland law. In addition, the Series E AMPS
(and Other AMPS) may vote as a separate series under certain circumstances. See &#147;Description
of AMPS &#151; Voting Rights&#148; in the statement of additional information. </FONT></P><!-- MARKER FORMAT-SHEET="Center Head 2 Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>THE AUCTION </B></FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Certain
of the capitalized terms used herein not otherwise defined in this prospectus have the
meaning provided in the Glossary at the back of this prospectus.</I> </FONT> </P><!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>General </B></FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders
of the shares of the Series E AMPS will be entitled to receive cumulative cash dividends
on their shares when, as and if declared by the Board of Directors of the Fund, out of
funds legally available therefor, on the Initial Dividend Payment Date with respect to
the Initial Dividend Period and, thereafter, on each Dividend Payment Date with respect
to a Subsequent Dividend Period (generally a period of seven days, subject to certain
exceptions set forth under &#147;Description of AMPS &#151; Dividends &#151; General&#148;)
at the rate per annum equal to the Applicable Rate for each such Dividend Period. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
provisions of the Articles Supplementary establishing the terms of the shares of the
Series E AMPS offered hereby will provide that the Applicable Rate for the shares of AMPS
for each Dividend Period after the Initial Dividend Period therefor will be equal to the
rate per annum that the Auction Agent advises has resulted on the Business Day preceding
the first day of such Dividend Period due to implementation of the auction procedures set
forth in the Articles Supplementary (the &#147;Auction Procedures&#148;) in which persons
determine to hold or offer to purchase or sell shares of AMPS. The Auction Procedures are
attached as Appendix C to the statement of additional information. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
periodic operation of such procedures with respect to the shares of AMPS is referred to
hereinafter as an &#147;Auction.&#148; If, however, the Fund should fail to pay or duly
provide for the full amount of any dividend on shares of AMPS or the redemption price of
shares of AMPS called for redemption, the Applicable Rate for shares of AMPS will be
determined as set forth under &#147;Description of AMPS &#151; Dividends &#151; Non-Payment
Period; Late Charge&#148; in the statement of additional information. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Auction
Agent Agreement. </I>The Fund has entered into an agreement with The Bank of New York
(together with any successor bank or trust company or other entity entering into a
similar agreement with this Fund, the &#147;Auction Agent&#148;) (the &#147;Auction Agent
Agreement&#148;), which provides, among other things, that the Auction Agent will follow
the Auction Procedures for the purpose of determining the Applicable Rate for the AMPS.
The Fund will pay the Auction Agent compensation for its services under the Auction Agent
Agreement. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Broker-Dealer
Agreements. </I>The Auction Agent has entered into agreements with Merrill Lynch and more
than fifteen other broker-dealers and may enter into similar agreements (collectively,
the &#147;Broker-Dealer Agreements&#148;) with one or more other broker-dealers
(collectively, the &#147;Broker-Dealers&#148;) selected by the Fund, which provide for
the participation of such Broker-Dealers in Auctions. Merrill Lynch is an affiliate of
the Investment Adviser in that they share a common parent, Merrill Lynch &amp; Co., Inc. </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Securities
  Depository</i>. The Depository Trust Company initially will act as the Securities
  Depository for the Agent Members with respect to the shares of Series E AMPS.
  One or more registered certificates for all of the shares of the Series E AMPS
  initially will be registered in the name of Cede, as nominee of the Securities
  Depository. The certificate will bear a legend to the effect that such certificate
  is issued subject to the provisions restricting transfers of shares of AMPS
  to which it relates contained in the Articles Supplementary. Cede initially
  will be the holder of record of all shares of AMPS, and Beneficial Owners will
  not be entitled to receive certificates representing their ownership interest
  in such shares. The Securities Depository will maintain lists of its participants
  and will maintain the positions (ownership interests) of shares of AMPS held
  by each Agent Member, whether as the Beneficial Owner thereof for its own account
  or as nominee for the Beneficial Owner thereof. Payments made by the Fund to
  holders of AMPS will be duly made by making payments to the nominee of the Securities
  Depository. </FONT></P>
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<BR>
<TABLE WIDTH=100%><TR><TD WIDTH=20% ALIGN=left><FONT SIZE=1>&nbsp;</FONT></TD><TD WIDTH=60% ALIGN=center><FONT SIZE="2">
34</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR ALIGN=LEFT WIDTH=100% SIZE=5 noshade><BR>







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<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Auction Procedures </B></FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following is a brief discussion of the procedures to be used in conducting Auctions. This
summary is qualified by reference to the Auction Procedures set forth in Appendix C to
the statement of additional information. The Settlement Procedures to be used with
respect to Auctions are set forth in Appendix B to the statement of additional
information. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Auction
Date; Advance Notice of Allocation of Taxable Income; Inclusion of Taxable Income in
Dividends. </I>An Auction to determine the Applicable Rate for the shares of the Series E
AMPS offered hereby for each Dividend Period (other than the Initial Dividend Period
therefor) will be held on the first Business Day (as hereinafter defined) preceding the
first day of such Dividend Period, which first day is also a Dividend Payment Date for
the preceding Dividend Period (the date of each Auction being referred to herein as an
&#147;Auction Date&#148;). &#147;Business Day&#148; means a day on which the New York
Stock Exchange (the &#147;NYSE&#148;) is open for trading and which is not a Saturday,
Sunday or other day on which banks in the City of New York are authorized or obligated by
law to close. Auctions for shares of the Series E AMPS for Dividend Periods after the
Initial Dividend Period normally will be held every Friday after the preceding Dividend
Payment Date, and each subsequent Dividend Period normally will begin on the following
Monday (also a Dividend Payment Date). The Auction Date and the first day of the related
Dividend Period for the Series E AMPS (both of which must be Business Days) need not be
consecutive calendar days. For example, in most cases, if the Friday that normally would
be an Auction Date for Series E AMPS is not a Business Day, then such Auction Date will
be the preceding Thursday and the first day of the related Dividend Period will continue
to be the following Monday. See &#147;Description of AMPS &#151; Dividends&#148; for
information concerning the circumstances under which a Dividend Payment Date may fall on
a date other than the days specified above, which may affect the Auction Date. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
as noted below, whenever the Fund intends to include any net capital gain or other income
subject to regular Federal income taxes in any dividend on shares of AMPS, the Fund will
notify the Auction Agent of the amount to be so included at least five Business Days
prior to the Auction Date on which the Applicable Rate for such dividend is to be
established. Whenever the Auction Agent receives such notice from the Fund, in turn it
will notify each Broker-Dealer, who, on or prior to such Auction Date, in accordance with
its Broker-Dealer Agreement, will notify its customers who are Beneficial Owners and
Potential Beneficial Owners believed to be interested in submitting an Order in the
Auction to be held on such Auction Date. The Fund also may include such income in a
dividend on shares of AMPS without giving advance notice thereof if it increases the
dividend by an additional amount calculated as if such income were a Retroactive Taxable
Allocation and the additional amount were an Additional Dividend; provided that the Fund
will notify the Auction Agent of the additional amounts to be included in such dividend
at least five Business Days prior to the applicable Dividend Payment Date. See &#147;Description
of AMPS &#151;Dividends &#151; Additional Dividends&#148; above. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Orders
by Beneficial Owners, Potential Beneficial Owners, Existing Holders and Potential
Holders. </I>On or prior to each Auction Date: </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD><TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)
each Beneficial Owner may submit to its Broker-Dealer by telephone a:  </FONT>
</TD></TR>
</TABLE><BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD><TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
Hold Order &#151; indicating the number of outstanding shares, if            any, of AMPS
that such Beneficial Owner desires to continue to hold            without regard to the
Applicable Rate for the next Dividend Period            for such shares;  </FONT>
</TD></TR>
</TABLE><BR>

<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD><TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)
Bid &#151; indicating the number of outstanding shares, if any,            of AMPS that
such Beneficial Owner desires to continue to hold,            provided that the
Applicable Rate for the next Dividend Period for            such shares is not less than
the rate per annum then specified by            such Beneficial Owner; and/or  </FONT>
</TD></TR>
</TABLE><BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD><TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)
Sell Order &#151; indicating the number of outstanding shares,            if any, of AMPS
that such Beneficial Owner offers to sell without            regard to the Applicable
Rate for the next Dividend Period for such            shares; and  </FONT>
</TD></TR>
</TABLE><BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD><TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)
Broker-Dealers will contact customers who are Potential       Beneficial Owners of shares
of AMPS to determine whether such Potential       Beneficial Owners desire to submit Bids
indicating the number of shares of       AMPS which they offer to purchase provided that
the Applicable Rate for       the next Dividend Period for such shares is not less than
the rates per       annum specified in such Bids. </FONT>
</TD></TR>
</TABLE><BR>




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<BR>
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35</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR ALIGN=LEFT WIDTH=100% SIZE=5 noshade><BR>







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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
communication by a Beneficial Owner or Potential Beneficial Owner to a Broker-Dealer and
the communication by a Broker-Dealer, whether or not acting for its own account, to the
Auction Agent of the foregoing information is hereinafter referred to as an &#147;Order&#148; and
collectively as &#147;Orders.&#148; A Beneficial Owner or a Potential Beneficial Owner
placing an Order, including a Broker-Dealer acting in such capacity for its own account,
is hereinafter referred to as a &#147;Bidder&#148; and collectively as &#147;Bidders.&#148; Any
Order submitted by a Beneficial Owner or a Potential Beneficial Owner to its
Broker-Dealer, or by a Broker-Dealer to the Auction Agent, prior to the Submission
Deadline on any Auction Date shall be irrevocable. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
an Auction, a Beneficial Owner may submit different types of Orders with respect to
shares of AMPS then held by such Beneficial Owner, as well as Bids for additional shares
of AMPS. For information concerning the priority given to different types of Orders
placed by Beneficial Owners, see &#147;Submission of Orders by Broker-Dealers to Auction
Agent&#148; below. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Maximum Applicable Rate for shares of AMPS will be the higher of (A) the Applicable
Percentage of the Reference Rate or (B) the Applicable Spread plus the Reference Rate.
The Auction Agent will round each applicable Maximum Applicable Rate to the nearest
one-thousandth (0.001) of one percent per annum, with any such number ending in five
ten-thousandths of one percent being rounded upwards to the nearest one-thousandth
(0.001) of one percent. The Auction Agent will not round the applicable Reference Rate as
part of its calculation of the Maximum Applicable Rate. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Maximum Applicable Rate for shares of AMPS will depend on the credit rating
  or ratings assigned to such shares. The Applicable Percentage and the Applicable
  Spread will be determined based on (i) the lower of the credit rating or ratings
  assigned on such date to such shares by Moody&#146;s and S&amp;P (or if Moody&#146;s
  or S&amp;P or both shall not make such rating available, the equivalent of either
  or both of such ratings by a Substitute Rating Agency or two Substitute Rating
  Agencies or, in the event that only one such rating shall be available, such
  rating) and (ii) whether the Fund has provided notification to the Auction Agent
  prior to the Auction establishing the Applicable Rate for any dividend that
  net capital gain or other taxable income will be included in such dividend on
  shares of AMPS as follows: </FONT></P>
<div align="center">
  <TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=640>
    <TR VALIGN=Bottom align="center">
      <TD colspan="3"><b><font size="1">Credit Ratings</font></b>
        <hr width=100% size=1 noshade>
        <b><font size="1"> </font></b></TD>
      <TD>&nbsp;</TD>
      <TD><b><font size=1>Applicable <br>
        Percentage <br>
        of Reference <br>
        Rate&#151;No </font></b></TD>
      <TD>&nbsp;</TD>
      <TD><b><font size=1>Applicable <br>
        Percentage <br>
        of Reference <br>
        Rate&#151; </font></b></TD>
      <TD>&nbsp;</TD>
      <TD><b><font size=1>Applicable <br>
        Spread Over <br>
        Reference <br>
        Rate&#151;No </font></b></TD>
      <TD>&nbsp;</TD>
      <TD><b><font size=1>Applicable <br>
        Spread Over <br>
        Reference <br>
        Rate&#151; </font></b></TD>
    </TR>
    <TR VALIGN=top align="center">
      <TD><b><font size=1>Moody&#146;s </font> </b>
        <hr width=100% size=1 noshade>
      </TD>
      <TD>&nbsp;</TD>
      <TD><b><font size=1>S&amp;P </font> </b>
        <hr width=100% size=1 noshade>
      </TD>
      <TD>&nbsp;</TD>
      <TD><b><font size=1>Notification </font> </b>
        <hr width=100% size=1 noshade>
      </TD>
      <TD>&nbsp;</TD>
      <TD><b><font size=1>Notification </font> </b>
        <hr width=100% size=1 noshade>
      </TD>
      <TD>&nbsp;</TD>
      <TD><b><font size=1>Notification </font> </b>
        <hr width=100% size=1 noshade>
      </TD>
      <TD>&nbsp;</TD>
      <TD><b><font size=1>Notification </font> </b>
        <hr width=100% size=1 noshade>
      </TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=center><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Aaa</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=center><FONT SIZE=2>AAA</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>110%</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>125%</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>1.10%</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>1.25%</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=center><FONT SIZE=2>&nbsp;Aa3 to Aa1</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=center><FONT SIZE=2>AA- to AA&#134;</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>125%</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>150%</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>1.25%</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>1.50%</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=center><FONT SIZE=2>&nbsp;&nbsp;A3 to A1</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=center><FONT SIZE=2>A- to A&#134;</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>150%</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>200%</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>1.50%</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>2.00%</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=center><FONT SIZE=2>Baa3 to Baa1</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=center><FONT SIZE=2>BBB- to BBB&#134;</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>175%</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>250%</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>1.75%</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>2.50%</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=center><FONT SIZE=2>&nbsp;Below Baa3</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=center><FONT SIZE=2>Below BBB-</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>200%</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>300%</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>2.00%</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>3.00%</FONT></TD>
    </TR>
  </TABLE>
  <br>
</div>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>There is no minimum Applicable Rate
in respect of any Dividend Period. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Applicable Percentage and the Applicable Spread as so determined may be further subject
to upward but not downward adjustment in the discretion of the Board of Directors of the
Fund after consultation with the Broker-Dealers, provided that immediately following any
such increase, the Fund would be in compliance with the AMPS Basic Maintenance Amount.
The Fund will take all reasonable action necessary to enable either S&amp;P or Moody&#146;s,
or both to provide a rating for the AMPS, subject to the Fund&#146;s ability to terminate
compliance with the rating agency guidelines as discussed under &#147;Rating Agency
Guidelines.&#148;If either S&amp;P or Moody&#146;s, or both, shall not make such a rating
available, and subject to the Fund&#146;s ability to terminate compliance with the rating
agency guidelines discussed under &#147;Rating Agency Guidelines,&#148; Merrill Lynch or
its affiliates and successors, after obtaining the Fund&#146;s approval, will select
another NRSRO (a &#147;Substitute Rating Agency&#148;) or two other NRSROs (&#147;Substitute
Rating Agencies&#148;) to act as a Substitute Rating Agency or Substitute Rating
Agencies, as the case may be. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
Bid by a Beneficial Owner specifying a rate per annum higher than the Maximum Applicable
Rate will be treated as a Sell Order, and any Bid by a Potential Beneficial Owner
specifying a rate per annum higher than the Maximum Applicable Rate will not be
considered. See &#147;Determination of Sufficient Clearing Bids, Winning Bid Rate and
Applicable Rate&#148; and &#147;Acceptance and Rejection of Submitted Bids and Submitted
Sell Orders and Allocation of Shares.&#148; </FONT></P><!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
<BR>
<TABLE WIDTH=100%><TR><TD WIDTH=20% ALIGN=left><FONT SIZE=1>&nbsp;</FONT></TD><TD WIDTH=60% ALIGN=center><FONT SIZE="2">
36</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR ALIGN=LEFT WIDTH=100% SIZE=5 noshade><BR>







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<!-- MARKER PAGE="sheet: 37; page: 37" -->



<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Neither
the Fund nor the Auction Agent will be responsible for a Broker-Dealer&#146;s failure to
comply with the foregoing. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
Broker-Dealer also may hold AMPS in its own account as a Beneficial Owner. A
Broker-Dealer thus may submit Orders to the Auction Agent as a Beneficial Owner or a
Potential Beneficial Owner and therefore participate in an Auction as an Existing Holder
or Potential Holder on behalf of both itself and its customers. Any Order placed with the
Auction Agent by a Broker-Dealer as or on behalf of a Beneficial Owner or a Potential
Beneficial Owner will be treated in the same manner as an Order placed with a
Broker-Dealer by a Beneficial Owner or a Potential Beneficial Owner. Similarly, any
failure by a Broker-Dealer to submit to the Auction Agent an Order in respect of any AMPS
held by it or its customers who are Beneficial Owners will be treated in the same manner
as a Beneficial Owner&#146;s failure to submit to its Broker-Dealer an Order in respect
of AMPS held by it, as described in the next paragraph. Inasmuch as a Broker-Dealer
participates in an Auction as an Existing Holder or a Potential Holder only to represent
the interests of a Beneficial Owner or Potential Beneficial Owner, whether it be its
customers or itself, all discussion herein relating to the consequences of an Auction for
Existing Holders and Potential Holders also applies to the underlying beneficial
ownership interests represented thereby. For information concerning the priority given to
different types of Orders placed by Existing Holders, see &#147;Submission of Orders by
Broker-Dealers to Auction Agent.&#148; Each purchase or sale in an Auction will be
settled on the Business Day next succeeding the Auction Date at a price per share equal
to $25,000. See &#147;Notification of Results; Settlement&#148; below. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
one or more Orders covering in the aggregate all of the outstanding shares of AMPS held
by a Beneficial Owner are not submitted to the Auction Agent prior to the Submission
Deadline, either because a Broker-Dealer failed to contact such Beneficial Owner or
otherwise, the Auction Agent shall deem a Hold Order (in the case of an Auction relating
to a Dividend Period which is not a Special Dividend Period of more than 28 days) and a
Sell Order (in the case of an Auction relating to a Special Dividend Period of more than
28 days) to have been submitted on behalf of such Beneficial Owner covering the number of
outstanding shares of AMPS held by such Beneficial Owner and not subject to Orders
submitted to the Auction Agent. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
all of the outstanding shares of AMPS are subject to Submitted Hold Orders, the Dividend
Period next succeeding the Auction automatically shall be the same length as the
immediately preceding Dividend Period, and the Applicable Rate for the next Dividend
Period for all shares of AMPS will be 60% of the Reference Rate on the date of the
applicable Auction (or 90% of such rate if the Fund has provided notification to the
Auction Agent prior to the Auction establishing the Applicable Rate for any dividend that
net capital gain or other taxable income will be included in such dividend on shares of
AMPS). </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
the purposes of an Auction, shares of AMPS for which the Fund shall have given notice of
redemption and deposited moneys therefor with the Auction Agent in trust or segregated in
an account at the Fund&#146;s custodian bank for the benefit of holders of AMPS to be
redeemed and for payment to the Auction Agent, as set forth under &#147;Description of
AMPS &#151; Redemption&#148; in the statement of additional information, will not be
considered as outstanding and will not be included in such Auction. Pursuant to the
Articles Supplementary of the Fund, the Fund will be prohibited from reissuing and its
affiliates (other than Merrill Lynch) will be prohibited from transferring (other than to
the Fund) any shares of AMPS they may acquire. Neither the Fund nor any affiliate of the
Fund may submit an Order in any Auction, except that an affiliate of the Fund that is a
Broker-Dealer (<i>i.e.</i>, Merrill Lynch) may submit an Order. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Submission
of Orders by Broker-Dealers to Auction Agent. </I>Prior to 1:00 p.m., Eastern time, on each
Auction Date, or such other time on the Auction Date as may be specified by the Auction
Agent (the &#147;Submission Deadline&#148;), each Broker-Dealer will submit to the
Auction Agent in writing or through a mutually acceptable electronic means all Orders
obtained by it for the Auction to be conducted on such Auction Date, designating itself
(unless otherwise permitted by the Fund) as the Existing Holder or Potential Holder in
respect of the shares of AMPS subject to such Orders. Any Order submitted by a Beneficial
Owner or a Potential Beneficial Owner to its Broker-Dealer, or by a Broker-Dealer to the
Auction Agent, prior to the Submission Deadline on any Auction Date, shall be irrevocable. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the rate per annum specified in any Bid contains more than three figures to the right of
the decimal point, the Auction Agent will round such rate per annum up to the next
highest one-thousandth (.001) of 1%. </FONT></P><!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
<BR>
<TABLE WIDTH=100%><TR><TD WIDTH=20% ALIGN=left><FONT SIZE=1>&nbsp;</FONT></TD><TD WIDTH=60% ALIGN=center><FONT SIZE="2">
37</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR ALIGN=LEFT WIDTH=100% SIZE=5 noshade><BR>







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<!-- MARKER PAGE="sheet: 38; page: 38" -->



<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
one or more Orders of an Existing Holder are submitted to the Auction Agent and such
Orders cover in the aggregate more than the number of outstanding shares of AMPS held by
such Existing Holder, such Orders will be considered valid in the following order of
priority: </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD><TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)
any Hold Order will be considered valid up to and including the       number of
outstanding shares of AMPS held by such Existing Holder,       provided that if more than
one Hold Order is submitted by such Existing       Holder and the number of shares of
AMPS subject to such Hold Orders       exceeds the number of outstanding shares of AMPS
held by such Existing       Holder, the number of shares of AMPS subject to each of such
Hold Orders       will be reduced pro rata so that such Hold Orders, in the aggregate,
will       cover exactly the number of outstanding shares of AMPS held by such
      Existing Holder; </FONT>
</TD></TR>
</TABLE><BR>

<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD><TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)
any Bids will be considered valid, in the ascending order of       their respective rates
per annum if more than one Bid is submitted by such       Existing Holder, up to and
including the excess of the number of       outstanding shares of AMPS held by such
Existing Holder over the number of       outstanding shares of AMPS subject to any Hold
Order referred to in clause       (a) above (and if more than one Bid submitted by such
Existing Holder       specifies the same rate per annum and together they cover more than
the       remaining number of shares that can be the subject of valid Bids after
      application of clause (a) above and of the foregoing portion of this       clause
(b) to any Bid or Bids specifying a lower rate or rates per annum,       the number of
shares subject to each of such Bids will be reduced pro rata       so that such Bids, in
the aggregate, cover exactly such remaining number       of outstanding shares); and the
number of outstanding shares, if any,       subject to Bids not valid under this clause
(b) shall be treated as the       subject of a Bid by a Potential Holder; and </FONT>
</TD></TR>
</TABLE><BR>

<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD><TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)
any Sell Order will be considered valid up to and including the       excess of the
number of outstanding shares of AMPS held by such Existing       Holder over the sum of
the number of shares of AMPS subject to Hold Orders       referred to in clause (a) above
and the number of shares of AMPS subject       to valid Bids by such Existing Holder
referred to in clause (b) above;       provided that, if more than one Sell Order is
submitted by any Existing       Holder and the number of shares of AMPS subject to such
Sell Orders is       greater than such excess, the number of shares of AMPS subject to
each of       such Sell Orders will be reduced pro rata so that such Sell Orders, in the
      aggregate, will cover exactly the number of shares of AMPS equal to such
      excess. </FONT>
</TD></TR>
</TABLE><BR>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
more than one Bid of any Potential Holder is submitted in any Auction, each Bid submitted
in such Auction will be considered a separate Bid with the rate per annum and number of
shares of AMPS therein specified. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Determination
of Sufficient Clearing Bids, Winning Bid Rate and Applicable Rate. </I>Not earlier than the
Submission Deadline for each Auction, the Auction Agent will assemble all Orders
submitted or deemed submitted to it by the Broker-Dealers (each such &#147;Hold Order,&#148; &#147;Bid&#148; or
&#147;Sell Order&#148; as submitted or deemed submitted by a Broker-Dealer hereinafter
being referred to as a &#147;Submitted Hold Order,&#148; a &#147;Submitted Bid&#148; or a
&#147;Submitted Sell Order,&#148; as the case may be, or as a &#147;Submitted Order&#148;)
and will determine the excess of the number of outstanding shares of AMPS over the number
of outstanding shares of AMPS subject to Submitted Hold Orders (such excess being
referred to as the &#147;Available AMPS&#148;) and whether Sufficient Clearing Bids have
been made in such Auction. Sufficient Clearing Bids will have been made if the number of
outstanding shares of AMPS that are the subject of Submitted Bids of Potential Holders
with rates per annum not higher than the Maximum Applicable Rate equals or exceeds the
number of outstanding shares that are the subject of Submitted Sell Orders (including the
number of shares subject to Bids of Existing Holders specifying rates per annum higher
than the Maximum Applicable Rate). </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
Sufficient Clearing Bids have been made, the Auction Agent will determine the lowest rate
per annum specified in the Submitted Bids (the &#147;Winning Bid Rate&#148;) which would
result in the number of shares subject to Submitted Bids specifying such rate per annum
or a lower rate per annum being at least equal to the Available AMPS. If Sufficient
Clearing Bids have been made, the Winning Bid Rate will be the Applicable Rate for the
next Dividend Period for all shares of AMPS then outstanding. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
Sufficient Clearing Bids have not been made (other than because all outstanding shares of
AMPS are the subject of Submitted Hold Orders), the Dividend Period next following the
Auction automatically will be a 7-Day Dividend Period in the case of the Series E AMPS,
and the Applicable Rate for such Dividend Period will be equal to the Maximum Applicable
Rate. </FONT></P><!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
<BR>
<TABLE WIDTH=100%><TR><TD WIDTH=20% ALIGN=left><FONT SIZE=1>&nbsp;</FONT></TD><TD WIDTH=60% ALIGN=center><FONT SIZE="2">
38</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR ALIGN=LEFT WIDTH=100% SIZE=5 noshade><BR>







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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
Sufficient Clearing Bids have not been made, Beneficial Owners that have Submitted Sell
Orders will not be able to sell in the Auction all, and may not be able to sell any,
shares of AMPS subject to such Submitted Sell Orders. See &#147;Acceptance and Rejection
of Submitted Bids and Submitted Sell Orders and Allocation of Shares.&#148; Thus, under
some circumstances, Beneficial Owners may not have liquidity of investment. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Acceptance
and Rejection of Submitted Bids and Submitted Sell Orders and Allocation of Shares. </I>Based
on the determinations described under &#147;Determination of Sufficient Clearing Bids,
Winning Bid Rate and Applicable Rate&#148; and subject to the discretion of the Auction
Agent to round as described below, Submitted Bids and Submitted Sell Orders will be
accepted or rejected in the order of priority set forth in the Auction Procedures with
the result that Existing Holders and Potential Holders of AMPS will sell, continue to
hold and/or purchase shares of AMPS as set forth below. Existing Holders that submit or
are deemed to have submitted Hold Orders will continue to hold the shares of AMPS subject
to such Hold Orders. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
Sufficient Clearing Bids have been made: </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD><TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)
each Existing Holder that placed a Submitted Bid specifying a       rate per annum higher
than the Winning Bid Rate or a Submitted Sell Order       will sell the outstanding
shares of AMPS subject to such Submitted Bid or       Submitted Sell Order; </FONT>
</TD></TR>
</TABLE><BR>

<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD><TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)
each Existing Holder that placed a Submitted Bid specifying a       rate per annum lower
than the Winning Bid Rate will continue to hold the       outstanding shares of AMPS
subject to such Submitted Bid; </FONT>
</TD></TR>
</TABLE><BR>

<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD><TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)
each Potential Holder that placed a Submitted Bid specifying a       rate per annum lower
than the Winning Bid Rate will purchase the number of       shares of AMPS subject to
such Submitted Bid; </FONT>
</TD></TR>
</TABLE><BR>

<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD><TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)
each Existing Holder that placed a Submitted Bid specifying a       rate per annum equal
to the Winning Bid Rate will continue to hold the       outstanding shares of AMPS
subject to such Submitted Bids, unless the       number of outstanding shares of AMPS
subject to all such Submitted Bids of       Existing Holders is greater than the excess
of the Available AMPS over the       number of shares of AMPS accounted for in clauses
(b) and (c) above, in       which event each Existing Holder with such a Submitted Bid
will sell a       number of outstanding shares of AMPS determined on a pro rata basis
based       on the number of outstanding shares of AMPS subject to all such Submitted
      Bids of such Existing Holders; and </FONT>
</TD></TR>
</TABLE><BR>

<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD><TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)
each Potential Holder that placed a Submitted Bid specifying a       rate per annum equal
to the Winning Bid Rate will purchase any Available       AMPS not accounted for in
clause (b), (c) or (d) above on a pro rata basis       based on the shares of AMPS
subject to all such Submitted Bids of       Potential Holders. </FONT>
</TD></TR>
</TABLE><BR>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
Sufficient Clearing Bids have not been made (other than because all outstanding shares of
AMPS are the subject of Submitted Hold Orders): </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD><TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)
each Existing Holder that placed a Submitted Bid specifying a       rate per annum equal
to or lower than the Maximum Applicable Rate will       continue to hold the outstanding
shares of AMPS subject to such Submitted       Bid; </FONT>
</TD></TR>
</TABLE><BR>

<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD><TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)
each Potential Holder that placed a Submitted Bid specifying a       rate per annum equal
to or lower than the Maximum Applicable Rate will       purchase the number of shares of
AMPS subject to such Submitted Bid; and </FONT>
</TD></TR>
</TABLE><BR>

<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD><TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)
each Existing Holder that placed a Submitted Bid specifying a       rate per annum higher
than the Maximum Applicable Rate or a Submitted Sell       Order will sell a number of
outstanding shares of AMPS determined on a pro       rata basis based on the outstanding
shares of AMPS subject to all such       Submitted Bids and Submitted Sell Orders. </FONT>
</TD></TR>
</TABLE><BR>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
as a result of the Auction Procedures described above any Existing Holder would be
entitled or required to sell, or any Potential Holder would be entitled or required to
purchase, a fraction of a share of AMPS, the Auction Agent, in such manner as, in its
sole discretion, it shall determine, will round up or down the number of shares of AMPS
being sold or purchased on such Auction Date so that each share sold or purchased by each
Existing Holder or Potential Holder will be a whole share of AMPS. If any Potential
Holder would be entitled or required to purchase less than a whole share of AMPS, the
Auction Agent, in such manner as, in its sole discretion, it shall  </FONT></P><!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
<BR>
<TABLE WIDTH=100%><TR><TD WIDTH=20% ALIGN=left><FONT SIZE=1>&nbsp;</FONT></TD><TD WIDTH=60% ALIGN=center><FONT SIZE="2">
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>determine, will allocate shares of
AMPS for purchase among Potential Holders so that only whole shares of AMPS are purchased
by any such Potential Holder, even if such allocation results in one or more of such
Potential Holders not purchasing any shares of AMPS. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Notification
of Results; Settlement. </I>The Auction Agent will advise each Broker-Dealer who submitted a
Bid or Sell Order in an Auction whether such Bid or Sell Order was accepted or rejected
in whole or in part and of the Applicable Rate for the next Dividend Period for the
related shares of AMPS by telephone at approximately 3:00 p.m., Eastern time, on the
Auction Date for such Auction. Each such Broker-Dealer that submitted an Order for the
account of a customer then will advise such customer whether such Bid or Sell Order was
accepted or rejected, will confirm purchases and sales with each customer purchasing or
selling shares of AMPS as a result of the Auction and will advise each customer
purchasing or selling shares of AMPS to give instructions to its Agent Member of the
Securities Depository to pay the purchase price against delivery of such shares or to
deliver such shares against payment therefor as appropriate. If a customer selling shares
of AMPS as a result of an Auction shall fail to instruct its Agent Member to deliver such
shares, the Broker-Dealer that submitted such customer&#146;s Bid or Sell Order will
instruct such Agent Member to deliver such shares against payment therefor. Each
Broker-Dealer that submitted a Hold Order in an Auction on behalf of a customer also will
advise such customer of the Applicable Rate for the next Dividend Period for the AMPS.
The Auction Agent will record each transfer of shares of AMPS on the record book of
Existing Holders to be maintained by the Auction Agent. In accordance with the Securities
Depository&#146;s normal procedures, on the day after each Auction Date, the transactions
described above will be executed through the Securities Depository, and the accounts of
the respective Agent Members at the Securities Depository will be debited and credited as
necessary to effect the purchases and sales of shares of AMPS as determined in such
Auction. Purchasers will make payment through their Agent Members in same-day funds to
the Securities Depository against delivery through their Agent Members; the Securities
Depository will make payment in accordance with its normal procedures, which now provide
for payment in same-day funds. If the procedures of the Securities Depository applicable
to AMPS shall be changed to provide for payment in next-day funds, then purchasers may be
required to make payment in next day funds. If any Existing Holder selling shares of AMPS
in an Auction fails to deliver such shares, the Broker-Dealer of any person that was to
have purchased shares of AMPS in such Auction may deliver to such person a number of
whole shares of AMPS that is less than the number of shares that otherwise was to be
purchased by such person. In such event, the number of shares of AMPS to be so delivered
will be determined by such Broker- Dealer. Delivery of such lesser number of shares will
constitute good delivery. Each Broker-Dealer Agreement also will provide that neither the
Fund nor the Auction Agent will have responsibility or liability with respect to the
failure of a Potential Beneficial Owner, Beneficial Owner or their respective Agent
Members to deliver shares of AMPS or to pay for shares of AMPS purchased or sold pursuant
to an Auction or otherwise. </FONT> </P><!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Broker-Dealers </B></FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>General.
</I>The Broker-Dealer Agreements provide that a Broker-Dealer may submit Orders in Auctions
for its own account, unless the Fund notifies all Broker-Dealers that they no longer may
do so; provided that Broker-Dealers may continue to submit Hold Orders and Sell Orders.
If a Broker-Dealer submits an Order for its own account in any Auction of the AMPS, it
may have knowledge of Orders placed through it in that Auction and therefore have an
advantage over other Bidders, but such Broker-Dealer would not have knowledge of Orders
submitted by other Broker-Dealers in that Auction. As a result of bidding by a
Broker-Dealer in an Auction, the Applicable Rate may be higher or lower than the rate
that would have prevailed had the Broker-Dealer not Bid. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
Broker-Dealer may also Bid in an Auction in order to prevent what would otherwise be (i)
a failed Auction, (ii) an &#147;all-hold&#148; Auction, or (iii) an Applicable Rate that
the Broker-Dealer believes, in its sole discretion, does not reflect the market for the
AMPS at the time of the Auction. A Broker-Dealer may, but is not obligated to, advise
Beneficial Owners of AMPS that the Applicable Rate that would apply in an &#147;all-hold&#148; Auction
(<i>i.e.</i>, all of the outstanding AMPS are subject to Submitted Hold Orders) may be lower
than would apply if Beneficial Owners submit Bids and such advice, if given, may
facilitate the submission of Bids by Beneficial Owners that would avoid the occurrence of
an &#147;all-hold&#148; Auction. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Commission
Inquiries. </I>Merrill Lynch has advised the Fund that it and various other broker-dealers
and other firms that participate in the auction rate securities market received letters
from the staff of the Securities and Exchange Commission last spring. The letters
requested that each of these firms voluntarily conduct an </FONT> </P><!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>investigation regarding its
respective practices and procedures in that market. Pursuant to this request, Merrill
Lynch conducted its own voluntary review and reported its findings to the Commission
staff. At the Commission staff&#146;s request, Merrill Lynch, together with certain other
broker-dealers and other firms that participate in the auction rate securities market, is
engaging in discussions with the Commission staff concerning its inquiry. Neither Merrill
Lynch nor the Fund can predict the ultimate outcome of the inquiry or how that outcome
will affect the market for the AMPS or the auctions. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Fees.
</I>The Auction Agent after each Auction will pay a service charge from funds provided by the
Fund to each Broker-Dealer on the basis of the purchase price of shares of AMPS placed by
such Broker-Dealer at such Auction. The service charge (i) for any 7-Day Dividend Period
shall be payable at the annual rate of 0.25% of the purchase price of the shares of AMPS
placed by such Broker-Dealer in any such Auction and (ii) for any Special Dividend Period
shall be determined by mutual consent of the Fund and any such Broker-Dealer or
Broker-Dealers and shall be based upon a selling concession that would be applicable to
an underwriting of fixed or variable rate preferred shares with a similar final maturity
or variable rate dividend period, respectively, at the commencement of the Dividend
Period with respect to such Auction. For the purposes of the preceding sentence, shares
of AMPS will be placed by a Broker-Dealer if such shares were (i) the subject of Hold
Orders deemed to have been made by Beneficial Owners that were acquired by such
Beneficial Owners through such Broker-Dealer or (ii) the subject of the following Orders
submitted by such Broker-Dealer: (A) a Submitted Bid of a Beneficial Owner that resulted
in such Beneficial Owner continuing to hold such shares as a result of the Auction, (B) a
Submitted Bid of a Potential Beneficial Owner that resulted in such Potential Beneficial
Owner purchasing such shares as a result of the Auction or (C) a Submitted Hold Order. A
Broker-Dealer may share a portion of any such fees with non-participating broker-dealers
that submit Orders to the Broker-Dealer for an Auction that are placed by that
Broker-Dealer in such Auction. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Secondary
Trading Market. </I>Broker-Dealers have no obligation to maintain a secondary trading market
in the AMPS outside of Auctions and there can be no assurance that a secondary market for
the AMPS will develop or, if it does develop, that it will provide holders with a liquid
trading market (<i>i.e.</i>, trading will depend on the presence of willing buyers and sellers
and the trading price is subject to variables to be determined at the time of the trade
by the Broker-Dealers). The AMPS will not be registered on any stock exchange or on any
automated quotation system. An increase in the level of interest rates, particularly
during any Long-Term Dividend Period, likely will have an adverse effect on the secondary
market price of the AMPS, and a selling stockholder may sell AMPS between Auctions at a
price per share of less than $25,000. </FONT> </P><!-- MARKER FORMAT-SHEET="Center Head 2 Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>RATING AGENCY
GUIDELINES </B></FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Certain
of the capitalized terms used herein not otherwise defined in this prospectus have the
meaning provided in the Glossary at the back of this prospectus.</I> </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund currently intends that, so long as shares of AMPS are outstanding and the AMPS are
rated by Moody&#146;s and S&amp;P, the composition of its portfolio will reflect
guidelines established by Moody&#146;s and S&amp;P in connection with the Fund&#146;s
receipt of a rating for such shares on or prior to their Date of Original Issue of at
least Aaa from Moody&#146;s and AAA from S&amp;P. Moody&#146;s and S&amp;P, which are
NRSROs, issue ratings for various securities reflecting the perceived creditworthiness of
such securities. The Board of Directors of the Fund, however, may determine that it is
not in the best interest of the Fund to continue to comply with the guidelines of Moody&#146;s
or S&amp;P (described below). If the Fund voluntarily terminates compliance with Moody&#146;s
or S&amp;P guidelines, the Fund will no longer be required to maintain a Moody&#146;s
Discounted Value or a S&amp;P Discounted Value, as applicable, at least equal to the AMPS
Basic Maintenance Amount. If the Fund voluntarily terminates compliance with Moody&#146;s
or S&amp;P guidelines, or both, at the time of termination, it must continue to be rated
by at least one NRSRO. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
guidelines described below have been developed by Moody&#146;s and S&amp;P in connection
with issuances of asset-backed and similar securities, including debt obligations and
variable rate preferred stock, generally on a case-by-case basis through discussions with
the issuers of these securities. The guidelines are designed to ensure that assets
underlying outstanding debt or preferred stock will be varied sufficiently and will be of
sufficient quality and amount to justify investment-grade ratings. The guidelines do not
have the force of law but have been adopted by the Fund in order to satisfy current
requirements necessary for Moody&#146;s and S&amp;P to issue the above-described ratings
for shares of AMPS, which ratings generally are relied upon by institutional investors in </FONT></P><!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>purchasing such securities. The
guidelines provide a set of tests for portfolio composition and asset coverage that
supplement (and in some cases are more restrictive than) the applicable requirements
under the 1940 Act. See &#147;Description of AMPS &#151; Asset Maintenance&#148; herein
and in the statement of additional information. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund intends to maintain a Discounted Value for its portfolio at least equal to the AMPS
Basic Maintenance Amount. Moody&#146;s and S&amp;P each has established separate
guidelines for determining Discounted Value. To the extent any particular portfolio
holding does not satisfy the applicable rating agency&#146;s guidelines, all or a portion
of such holding&#146;s value will not be included in the calculation of Discounted Value
(as defined by such rating agency). The Moody&#146;s and S&amp;P guidelines do not impose
any limitations on the percentage of Fund assets that may be invested in holdings not
eligible for inclusion in the calculation of the Discounted Value of the Fund&#146;s
portfolio. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
any failure to maintain the required Discounted Value, the Fund will seek to alter the
composition of its portfolio to reattain a Discounted Value at least equal to the AMPS
Basic Maintenance Amount on or prior to the AMPS Basic Maintenance Cure Date, thereby
incurring additional transaction costs and possible losses and/or gains on dispositions
of portfolio securities. To the extent any such failure is not cured in a timely manner,
shares of AMPS will be subject to redemption. See &#147;Description of AMPS &#151; Asset
Maintenance&#148; and &#147;Description of AMPS &#151; Redemption&#148; herein and in the
statement of additional information. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund may, but is not required to, adopt any modifications to these guidelines that
hereafter may be established by Moody&#146;s or S&amp;P. Failure to adopt any such
modifications, however, may result in a change in the ratings described above or a
withdrawal of ratings altogether. In addition, any rating agency providing a rating for
the shares of AMPS, at any time, may change or withdraw any such rating. As set forth in
the Articles Supplementary, the Board of Directors, without stockholder approval, may
modify certain definitions or restrictions that have been adopted by the Fund pursuant to
the rating agency guidelines, provided the Board of Directors has obtained written
confirmation from Moody&#146;s and S&amp;P that any such change would not impair the
ratings then assigned by Moody&#146;s and S&amp;P to the AMPS. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
described by Moody&#146;s and S&amp;P, a preferred stock rating is an assessment of the
capacity and willingness of an issuer to pay preferred stock obligations. The ratings on
the AMPS are not recommendations to purchase, hold or sell shares of AMPS, inasmuch as
the ratings do not comment as to market price or suitability for a particular investor,
nor do the rating agency guidelines described above address the likelihood that a holder
of shares of AMPS will be able to sell such shares in an Auction. The ratings are based
on current information furnished to Moody&#146;s and S&amp;P by the Fund and the
Investment Adviser and information obtained from other sources. The ratings may be
changed, suspended or withdrawn as a result of changes in, or the unavailability of, such
information. The common stock has not been rated by a nationally recognized statistical
rating organization. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
additional information concerning the Moody&#146;s and S&amp;P ratings guidelines, see
&#147;Rating Agency Guidelines&#148; in the statement of additional information. </FONT></P><!-- MARKER FORMAT-SHEET="Center Head 2 Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>INVESTMENT ADVISORY
AND MANAGEMENT ARRANGEMENTS </B></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Investment Adviser, which is owned and controlled by Merrill Lynch &amp;Co. Inc. (&#147;ML
&amp; Co.&#148;), a financial services holding company and the parent of Merrill Lynch,
provides the Fund with investment advisory and administrative services. The Investment
Adviser acts as the investment adviser to more than 50 registered investment companies
and offers investment advisory services to individuals and institutional accounts. As of
June 30, 2005, the Investment Adviser and its affiliates, including Merrill Lynch
Investment Managers, L.P. (&#147;MLIM&#148;), had a total of approximately $474 billion
in investment company and other portfolio assets under management, including
approximately $221 billion in fixed income assets. This amount includes assets managed by
certain affiliates of the Investment Adviser. The Investment Adviser is a limited
partnership, the partners of which are ML &amp; Co. and Princeton Services. The principal
business address of the Investment Adviser is 800 Scudders Mill Road, Plainsboro, New
Jersey 08536. </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Investment Advisory Agreement provides that, subject to the oversight of the Fund&#146;s
Board of Directors, the Investment Adviser is responsible for the actual management of
the Fund&#146;s portfolio. The responsibility for making decisions to buy, sell or hold a
particular security rests with the Investment Adviser, subject to oversight by the Board
of Directors. </FONT></P><!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
portfolio manager primarily responsible for the Fund&#146;s day-to-day management is
Michael A. Kalinoski. Mr. Kalinoski has been a portfolio manager and Vice President of
MLIM since 1999 and has 12 years of experience investing in Municipal Bonds, including
six years as a portfolio manager on behalf of registered investment companies. He has
been a Vice President and portfolio manager of the Fund since 2000. The Fund&#146;s
portfolio manager will consider analyses from various sources, make the necessary
investment decisions, and place orders for transactions accordingly. The statement of
additional information provides additional information about the Fund&#146;s portfolio
manager&#146;s compensation, other accounts managed by the portfolio manager, and the
portfolio manager&#146;s ownership of securities of the Fund. </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
its services, the Fund pays the Investment Adviser a monthly fee at the annual rate of
0.50% of the Fund&#146;s average weekly net assets (&#147;average weekly net assets&#148; means
the average weekly value of the total assets of the Fund, including the amount obtained
from leverage and any proceeds from the issuance of preferred stock, minus the sum of (i)
accrued liabilities of the Fund, (ii) any accrued and unpaid interest on outstanding
borrowings and (iii) accumulated dividends on shares of preferred stock). For purposes of
this calculation, average weekly net assets is determined at the end of each month on the
basis of the average net assets of the Fund for each week during the month. The assets
for each weekly period are determined by averaging the net assets at the last business
day of a week with the net assets at the last business day of the prior week. The
liquidation preference of any outstanding preferred stock (other than accumulated
dividends) is not considered a liability in determining the Fund&#146;s average weekly
net assets. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Investment Advisory Agreement obligates the Investment Adviser to provide investment
advisory services and to pay all compensation of and furnish office space for officers
and employees of the Fund connected with investment and economic research, trading and
investment management of the Fund, as well as the compensation of all Directors of the
Fund who are affiliated persons of the Investment Adviser or any of its affiliates. The
Fund pays all other expenses incurred in the operation of the Fund, including, among
other things, expenses for legal and auditing services, taxes, costs of preparing,
printing and mailing proxies, listing fees, stock certificates and stockholder reports,
charges of the custodian and the transfer agent, dividend disbursing agent and registrar,
Securities and Exchange Commission fees, fees and expenses of non-interested Directors,
accounting and pricing costs, insurance, interest, brokerage costs, litigation and other
extraordinary or non-recurring expenses, mailing and other expenses properly payable by
the Fund. Certain accounting services are provided to the Fund by State Street Bank and
Trust Company (&#147;State Street&#148;) pursuant to an agreement between State Street
and the Fund. The Fund will pay the costs of these services. In addition, the Fund will
reimburse the Investment Adviser for certain additional accounting services. </FONT></P><!-- MARKER FORMAT-SHEET="Center Head 2 Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>TAXES </B></FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
the extent derived from Municipal Bond interest income, dividends on the AMPS will be
excludable from gross income for Federal income tax purposes in the hands of holders of
such AMPS, subject to the possible application of the Federal alternative minimum tax and
any state or local income taxes. Interest income from other investments may produce
taxable dividends. The Fund is required to allocate net capital gain and other taxable
income, if any, proportionately among the common stock and the AMPS and Other AMPS in
accordance with the current position of the IRS described under the heading &#147;Taxes&#148; in
the statement of additional information. The Fund may notify the Auction Agent of the
amount of any net capital gain or other anticipated taxable income to be included in any
dividend on the AMPS prior to the Auction establishing the Applicable Dividend Rate for
such dividend. The Auction Agent will in turn notify holders of the AMPS and prospective
purchasers. The Fund also may include such income in a dividend on shares of AMPS without
giving advance notice thereof if it increases the dividend by an additional amount
calculated as if such income were a Retroactive Taxable Allocation and the additional
amount were an Additional Dividend. See &#147;The Auction &#151; Auction Procedures &#151;Auction
Date; Advance Notice of Allocation of Taxable Income; Inclusion of Taxable Income in
Dividends.&#148; The amount of taxable income allocable to the AMPS will depend upon the
amount of such income realized by the Fund and cannot be determined with certainty prior
to the end of the Fund&#146;s fiscal year, but it is not generally expected to be
significant. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the Fund makes a Retroactive Taxable Allocation, it will pay Additional Dividends to
holders of AMPS who are subject to the Retroactive Taxable Allocation. See &#147;Description
of AMPS &#151; Dividends &#151; Additional Dividends.&#148; The Federal income tax
consequences of Additional Dividends under existing law are uncertain. The Fund intends
to treat a holder as receiving a dividend distribution in the amount of any Additional
Dividend only  </FONT></P><!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>as and when such Additional Dividend
is paid. An Additional Dividend generally will be designated by the Fund as an
exempt-interest dividend except as otherwise required by applicable law. However, the IRS
may assert that all or part of an Additional Dividend is a taxable dividend either in the
taxable year for which the Retroactive Taxable Allocation is made or in the taxable year
in which the Additional Dividend is paid. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Generally
within 60 days after the end of the Fund&#146;s taxable year, the Fund will tell you the
amount of exempt-interest dividends and capital gain dividends you received during that
year. Capital gain dividends are taxable as long-term capital gains to you regardless of
how long you have held your shares. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund will only purchase a Municipal Bond or Non-Municipal Tax Exempt Security if it is
accompanied by an opinion of counsel to the issuer, which is delivered on the date of
issuance of the security, that the interest paid on such security is excludable from
gross income for Federal income tax purposes (<i>i.e.</i>, &#147;tax exempt&#148;). To the
extent that the dividends distributed by the Fund are from interest income that is
excludable from gross income for Federal income tax purposes, they are exempt from
Federal income tax. There is a possibility that events occurring after the date of
issuance of a security, or after the Fund&#146;s acquisition of a security, may result in
a determination that the interest on that security is, in fact, includable in gross
income for Federal income tax purposes retroactively to its date of issue. Such a
determination may cause a portion of prior distributions received by stockholders,
including holders of AMPS, to be taxable to those stockholders in the year of receipt.
The Fund will not pay an Additional Dividend to a holder of AMPS under these
circumstances. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because
the Fund may from time to time invest a substantial portion of its portfolio in Municipal
Bonds bearing income that could increase an AMPS holder&#146;s tax liability under the
Federal alternative minimum tax, the Fund would not ordinarily be a suitable investment
for investors who are subject to the alternative minimum tax. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
at any time when AMPS are outstanding the Fund does not meet the asset coverage
requirements of the 1940 Act, the Fund will be required to suspend distributions to
holders of common stock until the asset coverage is restored. See &#147;Description of
AMPS &#151; Dividends &#151; Restrictions on Dividends and Other Payments&#148; herein
and in the statement of additional information. This may prevent the Fund from meeting
certain distribution requirements for qualification as a RIC. Upon any failure to meet
the asset coverage requirements of the 1940 Act, the Fund, in its sole discretion, may,
and under certain circumstances will be required to, redeem AMPS in order to maintain or
restore the requisite asset coverage and avoid the adverse consequences to the Fund and
its stockholders of failing to qualify as a RIC. See &#147;Description of AMPS &#151;Redemption&#148; herein
and in the statement of additional information. There can be no assurance, however, that
any such action would achieve such objectives. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By
law, your dividends and redemption proceeds will be subject to a withholding tax if you
have not provided a tax identification number or social security number or if the number
you have provided is incorrect. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
section summarizes some of the consequences of an investment in the Fund under current
Federal income tax laws. It is not a substitute for personal tax advice. Stockholders are
urged to consult their tax advisers regarding the applicability of any state or local
taxes and with specific questions regarding Federal taxes. </FONT></P><!-- MARKER FORMAT-SHEET="Center Head 2 Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>DESCRIPTION OF
CAPITAL STOCK </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund is authorized to issue 200,000,000 shares of capital stock, all of which shares
initially were classified as common stock, par value $.10 per share. The Board of
Directors is authorized, however, to classify and reclassify any unissued shares of
capital stock into one or more additional or other classes or series as may be
established from time to time by setting or changing in any one or more respects the
designations, preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications or terms or conditions of redemption of such
shares of stock and pursuant to such classification or reclassification to increase or
decrease the number of authorized shares of any existing class or series. In this regard,
the Board of Directors previously reclassified 8,000 shares of unissued common stock as
Other AMPS and reclassified 2,000 shares of unissued common stock as AMPS, which are
being offered hereby. See &#147;Description of AMPS&#148; herein and in the statement of
additional information. </FONT></P>




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<BR>
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44</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR ALIGN=LEFT WIDTH=100% SIZE=5 noshade><BR>






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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table shows the amount of (i) capital stock authorized, (ii) capital stock held
by the Fund for its own account and (iii) capital stock outstanding for each class of
authorized securities of the Fund as of April 30, 2005. </FONT></P>

<div align="center">
  <TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
    <TR VALIGN=Bottom align="center">
      <TD WIDTH=181><b><font size=1>Title of Class </font> </b>
        <hr width=95% size=1 noshade>
      </TD>
      <TD WIDTH=54>&nbsp;</TD>
      <TD WIDTH=113><b><font size=1>Amount Authorized </font> </b>
        <hr width=95% size=1 noshade>
      </TD>
      <TD WIDTH=4>&nbsp;</TD>
      <TD WIDTH=121><b><font size=1>Amount Held By Fund <br>
        For Its Own Account </font> </b>
        <hr width=95% size=1 noshade>
      </TD>
      <TD WIDTH=4>&nbsp;</TD>
      <TD WIDTH=123><b><font size=1>Amount Outstanding <br>
        (Exclusive Of Amount <br>
        Held By Fund For <br>
        Its Own Account) </font> </b>
        <hr width=95% size=1 noshade>
      </TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT WIDTH=181><FONT SIZE=2>Common Stock</FONT></TD>
      <TD ALIGN=LEFT WIDTH=54><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER WIDTH=113><FONT SIZE=2>199,992,000</FONT></TD>
      <TD ALIGN=LEFT WIDTH=4><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER WIDTH=121><FONT SIZE=2>- 0 -</FONT></TD>
      <TD ALIGN=LEFT WIDTH=4><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER WIDTH=123><FONT SIZE=2>30,425,258</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="181"><FONT SIZE=2>Auction Market Preferred Stock</FONT></TD>
      <TD ALIGN=LEFT width="54"><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="181"><FONT SIZE=2>&nbsp;&nbsp;Series A</FONT></TD>
      <TD ALIGN=LEFT width="54"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER width="113"><FONT SIZE=2>2,000</FONT></TD>
      <TD ALIGN=LEFT width="4"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER width="121"><FONT SIZE=2>- 0 -</FONT></TD>
      <TD ALIGN=LEFT width="4"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER width="123"><FONT SIZE=2>2,000</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="181"><FONT SIZE=2>&nbsp;&nbsp;Series B</FONT></TD>
      <TD ALIGN=LEFT width="54"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER width="113"><FONT SIZE=2>2,000</FONT></TD>
      <TD ALIGN=LEFT width="4"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER width="121"><FONT SIZE=2>- 0 -</FONT></TD>
      <TD ALIGN=LEFT width="4"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER width="123"><FONT SIZE=2>2,000</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="181"><FONT SIZE=2>&nbsp;&nbsp;Series C</FONT></TD>
      <TD ALIGN=LEFT width="54"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER width="113"><FONT SIZE=2>2,000</FONT></TD>
      <TD ALIGN=LEFT width="4"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER width="121"><FONT SIZE=2>- 0 -</FONT></TD>
      <TD ALIGN=LEFT width="4"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER width="123"><FONT SIZE=2>2,000</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="181"><FONT SIZE=2>&nbsp;&nbsp;Series D</FONT></TD>
      <TD ALIGN=LEFT width="54"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER width="113"><FONT SIZE=2>2,000</FONT></TD>
      <TD ALIGN=LEFT width="4"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER width="121"><FONT SIZE=2>- 0 -</FONT></TD>
      <TD ALIGN=LEFT width="4"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER width="123"><FONT SIZE=2>2,000</FONT></TD>
    </TR>
  </TABLE>
</div>

 <!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund will send unaudited reports at least semi-annually and audited annual financial
statements to all of its stockholders. </FONT></P><!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Common Stock </B></FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders
of common stock are entitled to share equally in dividends declared by the Board of
Directors payable to holders of common stock and in the net assets of the Fund available
for distribution to holders of common stock after payment of the preferential amounts
payable to holders of any outstanding preferred stock. Neither holders of common stock
nor holders of preferred stock have pre-emptive or conversion rights and shares of common
stock are not redeemable. The outstanding shares of common stock are fully paid and
non-assessable. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders
of common stock are entitled to one vote for each share held and will vote with the
holders of any outstanding shares of AMPS or other preferred stock, including the Other
AMPS on each matter submitted to a vote of holders of common stock, except as described
under &#147;Description of AMPS &#151; Voting Rights&#148;herein and in the statement of
additional information. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stockholders
are entitled to one vote for each share held. The shares of common stock, AMPS, Other
AMPS and any other preferred stock do not have cumulative voting rights, which means that
the holders of more than 50% of the shares of common stock, AMPS, Other AMPS and any
other preferred stock voting for the election of Directors can elect all of the Directors
standing for election by such holders, and, in such event, the holders of the remaining
shares of common stock, AMPS, Other AMPS and any other preferred stock will not be able
to elect any of such Directors. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;So
long as any shares of the Fund&#146;s preferred stock are outstanding, including the AMPS
and Other AMPS, holders of common stock will not be entitled to receive any net income of
or other distributions from the Fund unless all accumulated dividends on preferred stock
have been paid, and unless asset coverage (as defined in the 1940 Act) with respect to
preferred stock would be at least 200% after giving effect to such distributions. See
&#147;Description of AMPS &#151; Dividends &#151; Restrictions on Dividends and Other
Payments&#148; herein and in the statement of additional information. </FONT></P><!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Preferred Stock </B></FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund has issued an aggregate of 8,000 shares of Other AMPS. Under the Articles
Supplementary for the AMPS, the Fund is authorized to issue an aggregate of 2,000 shares
of Series E AMPS. The terms of the shares of the Other AMPS are substantially the same as
the terms of the shares of the AMPS. See &#147;Description of AMPS.&#148; Under the 1940
Act, the Fund is permitted to have outstanding more than one series of preferred stock as
long as no single series has priority over another series as to the distribution of
assets of the Fund or the payment of dividends. Neither holders of common stock nor
holders of preferred stock have pre-emptive rights to purchase any shares of AMPS, Other
AMPS or any other preferred stock that might be issued. It is anticipated that the net
asset value per share of the AMPS will equal its original purchase price per share plus
accumulated dividends per share. </FONT></P><!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
<BR>
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45</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR ALIGN=LEFT WIDTH=100% SIZE=5 noshade><BR>







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<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Certain Provisions of
the Charter and By-laws </B></FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund&#146;s Charter includes provisions that could have the effect of limiting the
ability of other entities or persons to acquire control of the Fund or to change the
composition of its Board of Directors and could have the effect of depriving common
stockholders of an opportunity to sell their shares at a premium over prevailing market
prices by discouraging a third party from seeking to obtain control of the Fund. A
Director may be removed from office with or without cause but only by vote of the holders
of at least 66<font size=1><sup>2</sup></font>/<font size=1>3</font>% of the shares entitled to vote in an election to fill that
directorship. A director elected by all of the holders of capital stock may be removed
only by action of such holders, and a director elected by the holders of AMPS and any
other preferred stock may be removed only by action of the holders of AMPS and any other
preferred stock. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, the Charter requires the favorable vote of the holders of at least 66<font size=1><sup>2</sup></font>/<font size=1>3</font>% of
the Fund&#146;s shares to approve, adopt or authorize the following: </FONT></P><!-- MARKER FORMAT-SHEET="Bullet 10" FSL="Workstation" -->
<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=5%></TD><TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD><TD WIDTH=3%></TD><TD WIDTH=90%><FONT SIZE=2>a
merger or consolidation or statutory share exchange of the Fund with any other
corporation;</FONT></TD></TR></TABLE><!-- MARKER FORMAT-SHEET="Bullet 10" FSL="Workstation" -->
<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=5%></TD><TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD><TD WIDTH=3%></TD><TD WIDTH=90%><FONT SIZE=2>a
sale of all or substantially all of the Fund&#146;s assets (other than in the regular
course of the Fund&#146;s investment            activities); or</FONT></TD></TR></TABLE><!-- MARKER FORMAT-SHEET="Bullet 10" FSL="Workstation" -->
<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=5%></TD><TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD><TD WIDTH=3%></TD><TD WIDTH=90%><FONT SIZE=2>a
liquidation or dissolution of the Fund;</FONT></TD></TR></TABLE><!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>unless such action has been
approved, adopted or authorized by the affirmative vote of at least two-thirds of the
total number of Directors fixed in accordance with the By-laws, in which case the
affirmative vote of a majority of the Fund&#146;s shares of capital stock is required.
The approval, adoption or authorization of the foregoing also requires the favorable vote
of a majority of the Fund&#146;s outstanding shares (as defined in the 1940 Act) of
preferred stock, including the AMPS and the Other AMPS, then entitled to be voted, voting
as a separate class. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, conversion of the Fund to an open-end investment company would require an
amendment to the Fund&#146;s Charter. The amendment would have to be declared advisable
by the Board of Directors prior to its submission to stockholders. Such an amendment
would require the favorable vote of the holders of at least 66<font size=1><sup>2</sup></font>/<font size=1>3</font>% of the Fund&#146;s
outstanding shares of capital stock (including the AMPS, the Other AMPS and any other
preferred stock) entitled to be voted on the matter, voting as a single class (or a
majority of such shares if the amendment was previously approved, adopted or authorized
by at least two-thirds of the total number of Directors fixed in accordance with the
By-laws), and the affirmative vote of a majority of outstanding shares (as defined in the
1940 Act) of preferred stock of the Fund (including the AMPS and the Other AMPS), voting
as a separate class. Such a vote also would satisfy a separate requirement in the 1940
Act that the change be approved by the stockholders. Stockholders of an open-end
investment company may require the company to redeem their shares of common stock at any
time (except in certain circumstances as authorized by or under the 1940 Act) at their
net asset value, less such redemption charge, if any, as might be in effect at the time
of a redemption. If the Fund is converted to an open-end investment company, it could be
required to liquidate portfolio securities to meet requests for redemption, and the
common stock would no longer be listed on a stock exchange. Conversion to an open-end
investment company would also require redemption of all outstanding shares of preferred
stock (including the AMPS and the Other AMPS) and would require changes in certain of the
Fund&#146;s investment policies and restrictions, such as those relating to the issuance
of senior securities, the borrowing of money and the purchase of illiquid securities. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Charter and By-laws provide that the Board of Directors has the power to make, amend,
alter or repeal any of the By-laws (except for any By-law specified not to be altered or
repealed by the Board), subject to the requirements of the 1940 Act. Neither this
provision of the Charter, nor any of the foregoing provisions of the Charter requiring
the affirmative vote of 66<font size=1><sup>2</sup></font>/<font size=1>3</font>% of shares of capital stock of the Fund, can be amended or
repealed except by the vote of such required number of shares. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board of Directors has determined that the 66<font size=1><sup>2</sup></font>/<font size=1>3</font>% voting requirements described above,
which are greater than the minimum requirements under Maryland law or the 1940 Act, are
in the best interests of stockholders generally. Reference should be made to the Charter
on file with the Securities and Exchange Commission for the full text of these provisions. </FONT></P><!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
<BR>
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46</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR ALIGN=LEFT WIDTH=100% SIZE=5 noshade><BR>







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<!-- MARKER FORMAT-SHEET="Center Head 2 Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>CUSTODIAN </B></FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund&#146;s securities and cash are held under a custodian agreement with State Street
Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts. </FONT></P><!-- MARKER FORMAT-SHEET="Center Head 2 Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>UNDERWRITING </B></FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Merrill
Lynch, Pierce, Fenner &amp; Smith Incorporated (the &#147;Underwriter&#148;) has agreed,
subject to the terms and conditions contained in a purchase agreement with the Fund and
the Investment Adviser, to purchase from the Fund all of the shares of AMPS offered
hereby. The Underwriter has agreed to purchase all such shares if any are purchased. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund and the Investment Adviser have agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as amended, or to
contribute to payments the Underwriter may be required to make in respect of those
liabilities. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Underwriter is offering the shares, subject to prior sale, when, as and if issued to and
accepted by them, subject to approval of legal matters by its counsel, including the
validity of the shares, and other conditions contained in the purchase agreement, such as
the receipt by the Underwriter of officer&#146;s certificates and legal opinions. The
Underwriter reserves the right to withdraw, cancel or modify offers to the public and to
reject orders in whole or in part. </FONT></P><!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Commissions and
Discounts </B></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Underwriter has advised the Fund that it proposes initially to offer the shares
  of AMPS to the public at the initial public offering price on the cover page
  of this prospectus and to dealers at that price less a concession not in excess
  of $137.50 per share. There is a sales charge or underwriting discount of $250
  per share, which is equal to 1% of the initial public offering price per share.
  After the initial public offering, the public offering price and concession
  may be changed. Investors must pay for any AMPS purchased in the offering on
  or before&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  , 2005. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
expenses of the offering, excluding underwriting discount, are estimated at $150,000 and
are payable by the Fund. </FONT></P>


<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Other Relationships </B></FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Merrill
Lynch acts in Auctions as a Broker-Dealer as set forth under &#147;The Auction &#151; General
&#151; Broker-Dealer Agreements&#148; and will be entitled to fees for services as a
Broker-Dealer as set forth under &#147;The Auction &#151; Broker-Dealers.&#148;Merrill
Lynch also may provide information to be used in ascertaining the Reference Rate. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund also anticipates that Merrill Lynch may from time to time act as a broker in
connection with the execution of its portfolio transactions. See &#147;Portfolio
Transactions&#148; in the statement of additional information. Merrill Lynch is an
affiliate of the Investment Adviser. See &#147;Investment Restrictions&#148;and &#147;Portfolio
Transactions&#148; in the statement of additional information. </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
address of the Underwriter is 4 World Financial Center, New York, New York 10080. </FONT></P><!-- MARKER FORMAT-SHEET="Center Head 2 Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>TRANSFER AGENT,
DIVIDEND DISBURSING AGENT AND REGISTRAR </B></FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
transfer agent, dividend disbursing agent and registrar for the Fund&#146;s shares of
AMPS and Other AMPS is The Bank of New York, 101 Barclay Street, New York, New York
10286. The transfer agent, dividend disbursing agent and registrar for the Fund&#146;s
shares of common stock is EquiServe Trust Company, N.A., 150 Royall Street, Canton,
Massachusetts 02021 </FONT></P><!-- MARKER FORMAT-SHEET="Center Head 2 Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>ACCOUNTING SERVICES
PROVIDER </B></FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;State
Street Bank and Trust Company, 500 College Road East, Princeton, New Jersey 08540,
provides certain accounting services for the Fund. </FONT></P><!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
<BR>
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47</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR ALIGN=LEFT WIDTH=100% SIZE=5 noshade><BR>







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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>LEGAL MATTERS </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain
legal matters in connection with the AMPS offered hereby are passed on for the Fund and
the Underwriter by Sidley Austin Brown &amp; Wood <font size=1>LLP</font>, New York, New York 10019. </FONT></P>


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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM AND EXPERTS </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deloitte
&amp; Touche <font size=1>LLP</font> is the Fund&#146;s independent registered public accounting firm. The
audited financial statements of the Fund and certain of the information appearing under
the caption &#147;Financial Highlights&#148; included in this prospectus have been
audited by Deloitte &amp; Touche <font size=1>LLP</font>, for the periods indicated in its report with
respect thereto, and are included in reliance upon such report and upon the authority of
such firm as experts in accounting and auditing. Deloitte &amp; Touche <font size=1>LLP</font> has an office
at 750 College Road East, Princeton, New Jersey 08540. </FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>ADDITIONAL
INFORMATION </B></FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund is subject to the informational requirements of the Securities Exchange Act of 1934
and the 1940 Act and in accordance therewith is required to file reports, proxy
statements and other information with the Securities and Exchange Commission. Any such
reports and other information, including the Fund&#146;s Code of Ethics, can be inspected
and copied at the public reference facilities of the Commission at 100 F Street, N.E.,
Washington, D.C. 20549. Information on the operation of such public reference facilities
may be obtained by calling the Commission at 1-202-551-8090. Copies of such materials can
be obtained from the public reference section of the Commission by writing to 100 F
Street, N.E., Washington, D.C. 20549, at prescribed rates, or by electronic request at
publicinfo@sec.gov. The Commission maintains a Web site at http://www.sec.gov containing
reports and information statements and other information regarding registrants, including
the Fund, that file electronically with the Commission. Reports, proxy statements and
other information concerning the Fund can also be inspected at the offices of the New
York Stock Exchange, 20 Broad Street, New York, New York 10005. </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additional
information regarding the Fund is contained in the Registration Statement on Form N-2,
including amendments, exhibits and schedules thereto, relating to such shares filed by
the Fund with the Commission in Washington, D.C. This prospectus does not contain all of
the information set forth in the Registration Statement, including any amendments,
exhibits and schedules thereto. For further information with respect to the Fund and the
shares offered hereby, reference is made to the Registration Statement. Statements
contained in this prospectus as to the contents of any contract or other document
referred to are not necessarily complete and in each instance reference is made to the
copy of such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such reference. A copy
of the Registration Statement may be inspected without charge at the Commission&#146;s
principal office in Washington, D.C., and copies of all or any part thereof may be
obtained from the Commission upon the payment of certain fees prescribed by the
Commission. </FONT></P>


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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>TABLE OF CONTENTS OF
STATEMENT OF ADDITIONAL INFORMATION </B></FONT></P>


<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0 align="center">
  <TR VALIGN=Bottom>
    <TH WIDTH="65%">&nbsp;</TH>
    <TH COLSPAN="2" WIDTH="25%"><FONT SIZE=1>Page</FONT>
      <hr size="1" noshade width="50%">
    </TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN="LEFT" WIDTH="65%">&nbsp;</TD>
    <TD ALIGN="RIGHT" WIDTH="25%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD ALIGN="RIGHT" WIDTH="10%">&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN="LEFT" WIDTH="65%"><FONT SIZE=2>Investment Objective and Policies</FONT></TD>
    <TD ALIGN="RIGHT" WIDTH="25%"><FONT SIZE=2>3 </FONT></TD>
    <TD ALIGN="RIGHT" WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN="LEFT" WIDTH="65%"><FONT SIZE=2>Investment Restrictions</FONT></TD>
    <TD ALIGN="RIGHT" WIDTH="25%"><FONT SIZE=2>3 </FONT></TD>
    <TD ALIGN="RIGHT" WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN="LEFT" WIDTH="65%"><FONT SIZE=2>Description of AMPS</FONT></TD>
    <TD ALIGN="RIGHT" WIDTH="25%"><FONT SIZE=2>4 </FONT></TD>
    <TD ALIGN="RIGHT" WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN="LEFT" WIDTH="65%"><FONT SIZE=2>The Auction</FONT></TD>
    <TD ALIGN="RIGHT" WIDTH="25%"><FONT SIZE=2>12 </FONT></TD>
    <TD ALIGN="RIGHT" WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN="LEFT" WIDTH="65%"><FONT SIZE=2>Rating Agency Guidelines</FONT></TD>
    <TD ALIGN="RIGHT" WIDTH="25%"><FONT SIZE=2>13 </FONT></TD>
    <TD ALIGN="RIGHT" WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN="LEFT" WIDTH="65%"><FONT SIZE=2>Directors and Officers</FONT></TD>
    <TD ALIGN="RIGHT" WIDTH="25%"><FONT SIZE=2>20 </FONT></TD>
    <TD ALIGN="RIGHT" WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN="LEFT" WIDTH="65%"><FONT SIZE=2>Investment Advisory and Management
      Arrangements</FONT></TD>
    <TD ALIGN="RIGHT" WIDTH="25%"><FONT SIZE=2>25 </FONT></TD>
    <TD ALIGN="RIGHT" WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN="LEFT" WIDTH="65%"><FONT SIZE=2>Portfolio Transactions</FONT></TD>
    <TD ALIGN="RIGHT" WIDTH="25%"><FONT SIZE=2>34 </FONT></TD>
    <TD ALIGN="RIGHT" WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN="LEFT" WIDTH="65%"><FONT SIZE=2>Taxes</FONT></TD>
    <TD ALIGN="RIGHT" WIDTH="25%"><FONT SIZE=2>35 </FONT></TD>
    <TD ALIGN="RIGHT" WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN="LEFT" WIDTH="65%"><FONT SIZE=2>Conflicts of Interest</FONT></TD>
    <TD ALIGN="RIGHT" WIDTH="25%"><FONT SIZE=2>40 </FONT></TD>
    <TD ALIGN="RIGHT" WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN="LEFT" WIDTH="65%"><FONT SIZE=2>Net Asset Value</FONT></TD>
    <TD ALIGN="RIGHT" WIDTH="25%"><FONT SIZE=2>42 </FONT></TD>
    <TD ALIGN="RIGHT" WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN="LEFT" WIDTH="65%"><FONT SIZE=2>Financial Statements</FONT></TD>
    <TD ALIGN="RIGHT" WIDTH="25%"><FONT SIZE=2>42 </FONT></TD>
    <TD ALIGN="RIGHT" WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN="LEFT" WIDTH="65%"><FONT SIZE=2>APPENDIX A Ratings of Municipal Bonds</FONT></TD>
    <TD ALIGN="RIGHT" WIDTH="25%"><FONT SIZE=2>A-1 </FONT></TD>
    <TD ALIGN="RIGHT" WIDTH="10%">&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN="LEFT" WIDTH="65%"><FONT SIZE=2>APPENDIX B Settlement Procedures</FONT></TD>
    <TD ALIGN="RIGHT" WIDTH="25%"><FONT SIZE=2>B-1 </FONT></TD>
    <TD ALIGN="RIGHT" WIDTH="10%">&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN="LEFT" WIDTH="65%"><FONT SIZE=2>APPENDIX C Auction Procedures</FONT></TD>
    <TD ALIGN="RIGHT" WIDTH="25%"><FONT SIZE=2>C-1 </FONT></TD>
    <TD ALIGN="RIGHT" WIDTH="10%">&nbsp;</TD>
  </TR>
</TABLE>

<p>




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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>GLOSSARY </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Additional
Dividend&#148; </I>has the meaning set forth on page 31 of this prospectus. </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Agent
Member&#148; </I>means the member of the Securities Depository that will act on behalf of a
Beneficial Owner of one or more shares of AMPS or on behalf of a Potential Beneficial
Owner. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;AMPS&#148; </I>means
the Auction Market Preferred Stock, Series E with a par value of $.10 per share and a
liquidation preference of $25,000 per share plus an amount equal to accumulated but
unpaid dividends thereon (whether or not earned or declared) of the Fund. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;AMPS
Basic Maintenance Amount&#148; </I>has the meaning set forth on page 32 of this
prospectus. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;AMPS
Basic Maintenance Cure Date&#148; </I>has the meaning set forth on page 32 of this
prospectus. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;AMPS
Basic Maintenance Report&#148; </I>has the meaning set forth on page 9 of the statement of
additional information. </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Anticipation
Notes&#148; </I>shall mean the following Municipal Bonds: revenue anticipation notes, tax
anticipation notes, tax and revenue anticipation notes, grant anticipation notes and bond
anticipation notes. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Applicable
Percentage&#148; </I>has the meaning set forth on page 36 of this prospectus. </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Applicable
Rate&#148; </I>means the rate per annum at which cash dividends are payable on shares of AMPS
for any Dividend Period. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Applicable
Spread&#148; </I>has the meaning set forth on page 36 of this prospectus. </FONT> </P>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Articles
Supplementary&#148; </I>means the Articles Supplementary of the Fund specifying the powers,
preferences and rights of the shares of the AMPS. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Auction&#148; </I>means
a periodic operation of the Auction Procedures. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Auction
Agent&#148; </I>means The Bank of New York unless and until another commercial bank, trust
company or other financial institution appointed by a resolution of the Board of
Directors of the Fund or a duly authorized committee thereof enters into an agreement
with the Fund to follow the Auction Procedures for the purpose of determining the
Applicable Rate and to act as transfer agent, registrar, dividend disbursing agent and
redemption agent for the AMPS. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Auction
Agent Agreement&#148; </I>means the agreement entered into between the Fund and the Auction
Agent which provides, among other things, that the Auction Agent will follow the Auction
Procedures for the purpose of determining the Applicable Rate. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Auction
Date&#148; </I>has the meaning set forth on page 35 of this prospectus. </FONT> </P>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Auction
Procedures&#148; </I>means the procedures for conducting Auctions set forth in Appendix C to
the statement of additional information. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Available
AMPS&#148; </I>has the meaning set forth on page 38 of this prospectus. </FONT> </P>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Beneficial
Owner&#148; </I>means a customer of a Broker-Dealer who is listed on the records of that
Broker-Dealer (or if applicable, the Auction Agent) as a holder of shares of AMPS or a
Broker-Dealer that holds AMPS for its own account. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Bid&#148; </I>has
the meaning set forth on page 35 of this prospectus. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Bidder&#148; </I>has
the meaning set forth on page 36 of this prospectus. </FONT> </P>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Board
of Directors&#148; </I>or &#147;Board&#148; means the Board of Directors of the Fund. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Broker-Dealer&#148; </I>means
any broker-dealer, or other entity permitted by law to perform the functions required of
a Broker-Dealer in the Auction Procedures, that has been selected by the Fund and has
entered into a Broker-Dealer Agreement with the Auction Agent that remains effective. </FONT> </P><!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
<BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Broker-Dealer
Agreement&#148; </I>means an agreement entered into between the Auction Agent and a Broker-
Dealer, including Merrill Lynch, Pierce, Fenner &amp;Smith Incorporated, pursuant to
which such Broker-Dealer agrees to follow the Auction Procedures. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Business
Day&#148; </I>means a day on which the New York Stock Exchange is open for trading and which
is not a Saturday, Sunday or other day on which banks in The City of New York are
authorized or obligated by law to close. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Cede&#148; </I>means
Cede &amp; Co., the nominee of DTC, and in whose name the shares of AMPS initially will
be registered. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Charter&#148; </I>means
the Articles of Incorporation, as amended and supplemented (including the Articles
Supplementary and the Other AMPS Articles Supplementary), of the Fund. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Code&#148; </I>means
the Internal Revenue Code of 1986, as amended. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Common
stock&#148; </I>means the common stock, par value $.10 per share, of the Fund. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Date
of Original Issue&#148; </I>means, with respect to each share of AMPS, the date on which such
share first is issued by the Fund. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Deposit
Securities&#148; </I>means cash and Municipal Bonds rated at least A2 (having a remaining
maturity of 12 months or less), P-1, VMIG-1 or MIG-1 by Moody&#146;s or A (having a
remaining maturity of 12 months or less), A-1&#134; or SP-1&#134;by S&amp;P or A (having
a remaining maturity of 12 months or less) or F-1&#134; by Fitch. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Discount
Factor&#148; </I>means a Moody&#146;s Discount Factor or an S&amp;P Discount Factor, as the
case may be. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Discounted
Value&#148; </I>means (i) with respect to an S&amp;P Eligible Asset, the quotient of the fair
market value thereof divided by the applicable S&amp;P Discount Factor and (ii) with
respect to a Moody&#146;s Eligible Asset, the lower of par and the quotient of the fair
market value thereof divided by the applicable Moody&#146;s Discount Factor. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Dividend
Payment Date&#148; </I>has the meaning set forth on page 29 of this prospectus. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Dividend
Period&#148; </I>has the meaning set forth on page 29 of this prospectus. </FONT> </P>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;DTC&#148; </I>means
The Depository Trust Company. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Eligible
Assets&#148; </I>means Moody&#146;s Eligible Assets or S&amp;P Eligible Assets, as the case
may be. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Existing
Holder&#148; </I>means a Broker-Dealer or any such other person as may be permitted by the
Fund that is listed as the holder of record of shares of AMPS in the records of the
Auction Agent. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Fitch&#148; </I>means
Fitch Ratings or its successors. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Forward
Commitment&#148; </I>has the meaning set forth on page 19 of the statement of additional
information. </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Fund&#148; </I>means
MuniYield Quality Fund, Inc., a Maryland corporation that is the issuer of the AMPS. </FONT> </P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;High
Yield Municipal Bonds&#148; </I>means (a) with respect to Moody&#146;s (1) Municipal Bonds
rated Ba1 to B3 by Moody&#146;s, (2) Municipal Bonds not rated by Moody&#146;s, but rated
BB+ to B- by S&amp;P or Fitch, and (3) Municipal Bonds not explicitly rated by Moody&#146;s,
S&amp;P or Fitch, but rated at least the equivalent of B3 internally by the Investment
Adviser, provided that Moody&#146;s reviews and achieves sufficient comfort with the
Investment Adviser&#146;s internal credit rating processes, and (b) with respect to S&amp;P
(1) Municipal Bonds not rated by S&amp;P but rated equivalent to BBB+ or lower by
another NRSRO and (2) Municipal Bonds rated BB&#134; or lower by S&amp;P. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Hold
Order&#148; </I>has the meaning set forth on page 35 of this prospectus. </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Initial
Dividend Payment Date&#148; </I>means the first Dividend Payment Date for the Series E AMPS. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Initial
Dividend Period&#148; </I>means the period from and including the Date of Original Issue to
but excluding the Initial Dividend Payment Date for the Series E AMPS. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Initial
Margin&#148; </I>means the amount of cash or securities deposited with a broker as a margin
payment at the time of purchase or sale of a financial futures contract. </FONT> </P><!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
<BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Inverse
Floaters&#148; </I>means trust certificates or other instruments evidencing interests in one
or more Municipal Bonds that qualify as (i) S&amp;P Eligible Assets the interest rates on
which are adjusted at short term intervals on a basis that is inverse to the simultaneous
readjustment of the interest rates on corresponding floating rate trust certificates or
other instruments issued by the same issuer, provided that the ratio of the aggregate
dollar amount of floating rate instruments to inverse floating rate instruments issued by
the same issuer does not exceed one to one at their time of original issuance unless the
floating rate instrument has only one reset remaining until maturity or (ii) Moody&#146;s
Eligible Assets the interest rates on which are adjusted at short term intervals on a
basis that is inverse to the simultaneous readjustment of the interest rates on
corresponding floating rate trust certificates or other instruments issued by the same
issuer, provided that (a) such Inverse Floaters are rated by Moody&#146;s with the
Investment Adviser having the capability to collapse (or relink) within seven days as a
liquidity enhancement measure, and (b) the issuer of such Inverse Floaters employs a
leverage factor (<i>i.e.</i>, the ratio of underlying capital appreciation bonds or other
instruments to residual long-term derivative instruments) of not more than 2:1. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Investment
Adviser&#148; </I>means Fund Asset Management, L.P. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;IRS&#148; </I>means
the United States Internal Revenue Service. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;LIBOR
Dealer&#148; </I>means Merrill Lynch, Pierce, Fenner &amp; Smith Incorporated and such other
dealer or dealers as the Fund from time to time may appoint or, in lieu thereof, their
respective affiliates and successors. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;LIBOR
Rate,&#148; </I>on any Auction Date, means (i) the rate for deposits in U.S. dollars for the
designated Dividend Period, which appears on display page 3750 of Moneyline&#146;s
Telerate Service (&#147;Telerate Page 3750&#148;) (or such other page as may replace that
page on that service, or such other service as may be selected by the LIBOR Dealer or its
successors that are LIBOR Dealers) as of 11:00 a.m., London time, on the day that is the
London Business Day preceding the Auction Date (the &#147;LIBOR Determination Date&#148;),
or (ii) if such rate does not appear on Telerate Page 3750 or such other page as may
replace such Telerate Page 3750, (A) the LIBOR Dealer shall determine the arithmetic mean
of the offered quotations of the Reference Banks to leading banks in the London interbank
market for deposits in U.S. dollars for the designated Dividend Period in an amount
determined by such LIBOR Dealer by reference to requests for quotations as of
approximately 11:00 a.m. (London time) on such date made by such LIBOR Dealer to the
Reference Banks, (B) if at least two of the Reference Banks provide such quotations,
LIBOR Rate shall equal such arithmetic mean of such quotations, (C) if only one or none
of the Reference Banks provide such quotations, LIBOR Rate shall be deemed to be the
arithmetic mean of the offered quotations that leading banks in The City of New York
selected by the LIBOR Dealer (after obtaining the Fund&#146;s approval) are quoting on
the relevant LIBOR Determination Date for deposits in U.S. dollars for the designated
Dividend Period in an amount determined by the LIBOR Dealer (after obtaining the Fund&#146;s
approval) that is representative of a single transaction in such market at such time by
reference to the principal London offices of leading banks in the London interbank
market; provided, however, that if one of the LIBOR Dealers does not quote a rate
required to determine the LIBOR Rate, the LIBOR Rate will be determined on the basis of
the quotation or quotations furnished by any Substitute LIBOR Dealer or Substitute LIBOR
Dealers selected by the Fund to provide such rate or rates not being supplied by the
LIBOR Dealer; provided further, that if the LIBOR Dealer and Substitute LIBOR Dealers are
required but unable to determine a rate in accordance with at least one of the procedures
provided above, the LIBOR Rate shall be the LIBOR Rate as determined on the previous
Auction Date. If the number of Dividend Period days shall be (i) 7 or more but fewer than
21 days, such rate shall be the seven-day LIBOR rate; (ii) 21 or more but fewer than 49
days, such rate shall be the one-month LIBOR rate; (iii) 49 or more but fewer than 77
days, such rate shall be the two-month LIBOR rate; (iv) 77 or more but fewer than 112
days, such rate shall be the three-month LIBOR rate; (v) 112 or more but fewer than 140
days, such rate shall be the four-month LIBOR rate; (vi) 140 or more but fewer than 168
days, such rate shall be the five-month LIBOR rate; (vii) 168 or more but fewer than 189
days, such rate shall be the six-month LIBOR rate; (viii) 189 or more but fewer than 217
days, such rate shall be the seven-month LIBOR rate; (ix) 217 or more but fewer than 252
days, such rate shall be the eight-month LIBOR rate; (x) 252 or more but fewer than 287
days, such rate shall be the nine-month LIBOR rate; (xi) 287 or more but fewer than 315
days, such rate shall be the ten-month LIBOR rate; (xii) 315 or more but fewer than 343
days, such rate shall be the eleven-month LIBOR rate; and (xiii) 343 or more but fewer
than 365 days, such rate shall be the twelve-month LIBOR rate. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;London
Business Day&#148; </I>means any day on which commercial banks are generally open for
business in London. </FONT> </P><!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
<BR>
<TABLE WIDTH=100%><TR><TD WIDTH=20% ALIGN=left><FONT SIZE=1>&nbsp;</FONT></TD><TD WIDTH=60% ALIGN=center><FONT SIZE="2">
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Long
Term Dividend Period&#148; </I>means a Special Dividend Period consisting of a specified
period of one whole year or more but not greater than five years. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Mandatory
Redemption Price&#148; </I>has the meaning set forth on page 33 of this prospectus. </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Marginal
Tax Rate&#148; </I>means the maximum marginal regular Federal individual income tax rate
applicable to ordinary income or the maximum marginal regular Federal corporate income
tax rate, whichever is greater. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Maximum
Applicable Rate&#148; </I>has the meaning set forth on page 36 of this prospectus. </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Moody&#146;s&#148; </I>means
Moody&#146;s Investors Service, Inc. or its successors. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Moody&#146;s
Discount Factor&#148; </I>has the meaning set forth on pages 16 to 17 of the statement of
additional information. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Moody&#146;s
Eligible Assets&#148; </I>has the meaning set forth on pages 17 to 18 of the statement of
additional information. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Moody&#146;s
Hedging Transactions&#148; </I>has the meaning set forth on page 18 of the statement of
additional information. </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Moody&#146;s
Volatility Factor&#148; </I>means 272% as long as there has been no increase enacted to the
Marginal Tax Rate. If such an increase is enacted but not yet implemented, the Moody&#146;s
Volatility Factor shall be as follows: </FONT> </P>

<div align="center">
  <TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=500>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT WIDTH=64>&nbsp;</TD>
      <TD ALIGN=center WIDTH=156><b><font size=1>% Change in <br>
        Marginal Tax Rate </font> </b>
        <hr width=95% size=1 noshade>
      </TD>
      <TD ALIGN=center WIDTH=184>&nbsp;</TD>
      <TD ALIGN=center colspan="2" WIDTH=196><b><font size=1>Moody&#146;s Volatility
        <br>
        Factor </font> </b>
        <hr width=95% size=1 noshade>
      </TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT WIDTH=64>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
      <TD ALIGN=LEFT WIDTH=156><FONT SIZE=2>=5%</FONT></TD>
      <TD ALIGN=LEFT WIDTH=184><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=center colspan="2" WIDTH=196><FONT SIZE=2>292</FONT><FONT SIZE=2>%</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="64">&nbsp;</TD>
      <TD ALIGN=LEFT width="156"><FONT SIZE=2>>5% but = 10%</FONT></TD>
      <TD ALIGN=LEFT width="184"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=center colspan="2" width="196"><FONT SIZE=2>313</FONT><FONT SIZE=2>%</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="64">&nbsp;</TD>
      <TD ALIGN=LEFT width="156"><FONT SIZE=2>>10% but = 15%</FONT></TD>
      <TD ALIGN=LEFT width="184"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=center colspan="2" width="196"><FONT SIZE=2>338</FONT><FONT SIZE=2>%</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="64">&nbsp;</TD>
      <TD ALIGN=LEFT width="156"><FONT SIZE=2>>15% but = 20%</FONT></TD>
      <TD ALIGN=LEFT width="184"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=center colspan="2" width="196"><FONT SIZE=2>364</FONT><FONT SIZE=2>%</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="64">&nbsp;</TD>
      <TD ALIGN=LEFT width="156"><FONT SIZE=2>>20% but = 25%</FONT></TD>
      <TD ALIGN=LEFT width="184"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=center colspan="2" width="196"><FONT SIZE=2>396</FONT><FONT SIZE=2>%</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="64">&nbsp;</TD>
      <TD ALIGN=LEFT width="156"><FONT SIZE=2>>25% but = 30%</FONT></TD>
      <TD ALIGN=LEFT width="184"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=center colspan="2" width="196"><FONT SIZE=2>432</FONT><FONT SIZE=2>%</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="64">&nbsp;</TD>
      <TD ALIGN=LEFT width="156"><FONT SIZE=2>>30% but = 35%</FONT></TD>
      <TD ALIGN=LEFT width="184"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=center colspan="2" width="196"><FONT SIZE=2>472</FONT><FONT SIZE=2>%</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="64">&nbsp;</TD>
      <TD ALIGN=LEFT width="156"><FONT SIZE=2>>35% but = 40%</FONT></TD>
      <TD ALIGN=LEFT width="184"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=center colspan="2" width="196"><FONT SIZE=2>520</FONT><FONT SIZE=2>%</FONT></TD>
    </TR>
  </TABLE>
</div>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding
the foregoing, the Moody&#146;s Volatility Factor may mean such other potential dividend
rate increase factor as Moody&#146;s advises the Fund in writing is applicable. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Municipal
Bonds&#148; </I>has the meaning set forth on page 5 of this prospectus. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Municipal
Index&#148; </I>has the meaning set forth on page 15 of the statement of additional
information. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;1940
Act&#148; </I>means the Investment Company Act of 1940, as amended from time to time. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;1940
Act AMPS Asset Coverage&#148; </I>has the meaning set forth on page 32 of this prospectus. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;1940
Act Cure Date&#148; </I>has the meaning set forth on page 32 of this prospectus. </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Non-Call
Period&#148; </I>has the meaning set forth under &#147;Specific Redemption Provisions&#148; below. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Non-Payment
Period&#148; </I>has the meaning set forth on page 6 of the statement of additional
information. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Non-Payment
Period Rate&#148; </I>has the meaning set forth on page 7 of the statement of additional
information. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Normal
Dividend Payment Date&#148; </I>has the meaning set forth on page 29 of this prospectus. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Notice
of Revocation&#148; </I>has the meaning set forth on page 6 of the statement of additional
information. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Notice
of Special Dividend Period&#148; </I>has the meaning set forth on page 30 of this prospectus. </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;NRSRO&#148; </I>means
any nationally recognized statistical rating organization, as that term is used in Rule
15a3-1 under the Securities and Exchange Act of 1934, as amended, or any successor
provisions. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Optional
Redemption Price&#148; </I>has the meaning set forth on page 33 of this prospectus. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Order&#148; </I>has
the meaning set forth on page 36 of this prospectus. </FONT> </P>




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53</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR ALIGN=LEFT WIDTH=100% SIZE=5 noshade><BR>







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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Other
AMPS&#148; </I>means the Auction Market Preferred Stock, Series A; the Auction Market
Preferred Stock, Series B; the Auction Market Preferred Stock, Series C; and the Auction
Market Preferred Stock, Series D, each with a liquidation preference of $25,000 per share
plus an amount equal to accumulated but unpaid dividends thereon (whether or not earned
or declared) of the Fund. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Other
AMPS Articles Supplementary&#148; </I>means the Articles Supplementary, as amended and
supplemented, of the Fund specifying the powers, preferences and rights of the shares of
the Other AMPS. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Potential
Beneficial Owner&#148; </I>means a customer of a Broker-Dealer or a Broker-Dealer that is not
a Beneficial Owner of shares of AMPS but that wishes to purchase such shares, or that is
a Beneficial Owner that wishes to purchase additional shares of AMPS. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Potential
Holder&#148; </I>means any Broker-Dealer or any such other person as may be permitted by the
Fund, including any Existing Holder, who may be interested in acquiring shares of AMPS
(or, in the case of an Existing Holder, additional shares of AMPS). </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Preferred
stock&#148; </I>means preferred stock of the Fund and includes the AMPS. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Premium
Call Period&#148; </I>has the meaning set forth under &#147;Specific Redemption Provisions&#148; below. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Receivables
for Municipal Bonds Sold&#148; </I>for Moody&#146;s has the meaning set forth under the
definition of Moody&#146;s Discount Factor, and for S&amp;P has the meaning set forth
under the definition of S&amp;P Discount Factor. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Reference
Banks&#148; </I>means four major banks in the London interbank market selected by Merrill
Lynch, Pierce, Fenner &amp; Smith Incorporated or its affiliates or successors or such
other party as the Fund may from time to time appoint. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Reference
Rate&#148; </I>means: (i) with respect to a Dividend Period having 364 or fewer days, the
higher of the applicable LIBOR Rate and the Taxable Equivalent of the Short-Term
Municipal Bond Rate, or (ii) with respect to any Dividend Period having 365 or more days,
the applicable Treasury Index Rate. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Request
for Special Dividend Period&#148; </I>has the meaning set forth on page 30 of this prospectus. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Response&#148; </I>has
the meaning set forth on page 30 of this prospectus. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Retroactive
Taxable Allocation&#148; </I>has the meaning set forth on page 31 of this prospectus. </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Rule
2a-7 Money Market Funds&#148; </I>means investment companies registered under the 1940 Act
that comply with the requirements of Rule 2a-7 thereunder. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Series
E AMPS&#148; </I>means the Auction Market Preferred Stock, Series E, with a par value of $.05
per share and a liquidation preference of $25,000 per share plus an amount equal to
accumulated but unpaid dividends thereon (whether or not earned or declared), of the Fund. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;S&amp;P&#148; </I>means
Standard &amp; Poor&#146;s or its successors. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;S&amp;P
Discount Factor&#148; </I>has the meaning set forth on page 13 of the statement of additional
information. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;S&amp;P
Eligible Assets&#148; </I>has the meaning set forth on pages 14 to 15 of the statement of
additional information. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;S&amp;P
Hedging Transactions&#148; </I>has the meaning set forth on page 15 of the statement of
additional information. </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;S&amp;P
Volatility Factor&#148; </I>means 277% or such other potential dividend rate increase factor
as S&amp;P advises the Fund in writing is applicable. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Securities
Depository&#148; </I>means The Depository Trust Company and its successors and assigns or any
successor securities depository selected by the Fund that agrees to follow the procedures
required to be followed by such securities depository in connection with shares of AMPS. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Sell
Order&#148; </I>has the meaning specified in Subsection 10(b)(i) of the Auction Procedures. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;7-Day
Dividend Period&#148; </I>means a Dividend Period consisting of seven days. </FONT> </P><!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
<BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Short
Term Dividend Period&#148; </I>means a Special Dividend Period consisting of a specified
number of days (other than seven) evenly divisible by seven, and not fewer than seven
days nor more than 364 days. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Special
Dividend Period&#148; </I>has the meaning set forth on page 29 of this prospectus. </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Specific
Redemption Provisions&#148; </I>means, with respect to a Special Dividend Period, either, or
any combination of, (i) a period (a &#147;Non-Call Period&#148;) determined by the Board
of Directors of the Fund, after consultation with the Auction Agent and the
Broker-Dealers, during which the shares of AMPS subject to such Dividend Period shall not
be subject to redemption at the option of the Fund and (ii) a period (a &#147;Premium
Call Period&#148;), consisting of a number of whole years and determined by the Board of
Directors of the Fund, after consultation with the Auction Agent and the Broker-Dealers,
during each year of which the shares of AMPS subject to such Dividend Period shall be
redeemable at the Fund&#146;s option at a price per share equal to $25,000 plus
accumulated but unpaid dividends plus a premium expressed as a percentage of $25,000, as
determined by the Board of Directors of the Fund after consultation with the Auction
Agent and the Broker-Dealers. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Submission
Deadline&#148; </I>has the meaning set forth on page 37 of this prospectus. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Submitted
Bid&#148; </I>has the meaning set forth on page 38 of this prospectus. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Submitted
Hold Order&#148; </I>has the meaning set forth on page 38 of this prospectus. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Submitted
Order&#148; </I>has the meaning set forth on page 38 of this prospectus. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Submitted
Sell Order&#148; </I>has the meaning set forth on page 38 of this prospectus. </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Subsequent
Dividend Period&#148; </I>means each Dividend Period after the Initial Dividend Period. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Substitute
Rating Agency&#148; </I>and &#147;Substitute Rating Agencies&#148; shall mean a NRSRO or two
NRSROs, respectively, selected by Merrill Lynch, Pierce, Fenner &amp;Smith Incorporated,
or its respective affiliates and successors, after obtaining the Fund&#146;s approval, to
act as a substitute rating agency or substitute rating agencies, as the case may be, to
determine the credit ratings of the AMPS. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Sufficient
Clearing Bids&#148; </I>has the meaning set forth on page 38 of this prospectus. </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Taxable
Equivalent of the Short-Term Municipal Bond Rate&#148; </I>on any date means 90% of the
quotient of (A) the per annum rate expressed on an interest equivalent basis equal to the
Kenny S&amp;P 30-day High Grade Index (the &#147;Kenny Index&#148;) or any successor
index, made available for the Business Day immediately preceding such date but in any
event not later than 8:30 a.m. Eastern time, on such date by Kenny Information Systems
Inc. or any successor thereto, based upon 30-day yield evaluations at par of bonds the
interest on which is excludable for regular Federal income tax purposes under the Code of
&#147;high grade&#148; component issuers selected by Kenny Information Systems Inc. or
any such successor from time to time in its discretion, which component issuers shall
include, without limitation, issuers of general obligation bonds but shall exclude any
bonds the interest on which constitutes an item of tax preference under Section 57(a)(5)
of the Code, or successor provisions, for purposes of the &#147;alternative minimum tax,&#148; divided
by (B) 1.00 minus the Marginal Tax Rate (expressed as a decimal); provided, however, that
if the Kenny Index is not made so available by 8:30 a.m. Eastern time, on such date by
Kenny Information Systems Inc. or any successor, the Taxable Equivalent of the Short-Term
Municipal Bond Rate shall mean the quotient of (A) the per annum rate expressed on an
interest equivalent basis equal to the most recent Kenny Index so made available for any
preceding Business Day, divided by (B) 1.00 minus the Marginal Tax Rate (expressed as a
decimal). The Fund may not utilize a successor index to the Kenny Index unless Moody&#146;s
and S&amp;P provide the Fund with written confirmation that the use of such successor
index will not adversely affect the then-current respective Moody&#146;s and S&amp;P
ratings of the AMPS. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Treasury
Bonds&#148; </I>means U.S. Treasury Bonds or Notes. </FONT> </P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Treasury
Index Rate&#148; </I>means the average yield to maturity for actively traded marketable fixed
interest rate U.S. Treasury Securities having the same number of 30-day periods to
maturity as the length of the applicable Dividend Period, determined, to the extent
necessary, by linear interpolation based upon the yield for such securities having the
next shorter and next longer number of 30-day periods to maturity treating all Dividend
Periods with a length greater than the longest maturity for such securities as having a
length equal to such longest maturity, in all cases based upon data set forth in the most
recent weekly statistical release published by the Board of Governors of the Federal
Reserve System (currently in H.15(519)); provided, however, if the most recent such </FONT> </P><!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
<BR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>statistical release shall not have
been published during the 15 days preceding the date of computation, the foregoing
computations shall be based upon the average of comparable data as quoted to the Fund by
at least three recognized dealers in U.S. Government Securities selected by the Fund. </FONT></P><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;U.S.
Treasury Securities&#148; </I>means direct obligations of the United States Treasury that are
entitled to the full faith and credit of the United States government. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Valuation
Date&#148; </I>has the meaning set forth on page 32 of this prospectus. </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Variation
Margin&#148; </I>means, in connection with an outstanding futures contract owned or sold by
the Fund, the amount of cash or securities paid to or received from a broker (subsequent
to the Initial Margin payment) from time to time as the price of such futures contract
fluctuates. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Winning
Bid Rate&#148; </I>has the meaning set forth on page 38 of this prospectus. </FONT> </P>




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intentionally left blank </FONT></P>


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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(This page
intentionally left blank </FONT></P>



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<BR>
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<HR ALIGN=LEFT WIDTH=100% SIZE=1 noshade>

<!-- MARKER FORMAT-SHEET="Center Head 2 Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4><B>$50,000,000 </B></FONT></P><!-- MARKER FORMAT-SHEET="Center Head 2 Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=5><B>MuniYield Quality
Fund, Inc. </B></FONT></P><!-- MARKER FORMAT-SHEET="Center Head 2 Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4><B>Auction Market
Preferred Stock (&#147;AMPS&#148;) </B></FONT></P><!-- MARKER FORMAT-SHEET="Center Head 2 Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4><B>2,000 Shares, Series
E </B></FONT></P><!-- MARKER FORMAT-SHEET="Center Head 2 Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4><B>Liquidation
Preference $25,000 Per Share </B></FONT></P><!-- MARKER FORMAT-SHEET="Cutoff rule centered" FSL="Workstation" -->
<HR SIZE=1 noshade ALIGN=CENTER WIDTH=150>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>PROSPECTUS </B></FONT></P><!-- MARKER FORMAT-SHEET="Cutoff rule centered" FSL="Workstation" -->
<HR SIZE=1 noshade ALIGN=CENTER WIDTH=150>

<!-- MARKER FORMAT-SHEET="Center Head 2 Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4><B>Merrill Lynch &amp; Co. </B></FONT></P>

<!-- MARKER FORMAT-SHEET="Center Head 2 Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>, 2005 </B></FONT></P>




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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The  information in this statement
of additional  information is not complete and may be changed.  We may not sell these
securities until the registration statement filed with the Securities and Exchange
Commission is effective. This statement of additional information is not an offer to sell
these securities and it is not soliciting an offer to buy these securities in any state
where the offer or sale is not permitted. </FONT></P>


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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Subject to
Completion <BR>Preliminary Statement of Additional Information dated September 14, 2005 </B></FONT></P>


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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>STATEMENT OF
ADDITIONAL INFORMATION</B></U> </FONT> </P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4><B>$50,000,000
  </B></FONT></P>
<font size="4"><!-- MARKER FORMAT-SHEET="Center Head 3 Bold" FSL="Workstation" -->
</font>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=5><B>MuniYield
  Quality Fund, Inc. </B></FONT></P>


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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>Auction Market
Preferred Stock (&#147;AMPS&#148;)                              <BR>2,000 Shares, Series E
                    <BR>Liquidation Preference $25,000 per Share </B></FONT></P>


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<HR SIZE=1 noshade ALIGN=CENTER WIDTH=150>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MuniYield
Quality Fund, Inc. (the &#147;Fund&#148;) is a non-diversified, closed-end management
investment company seeking to provide shareholders with as high a level of current income
exempt from Federal income taxes as is consistent with its investment policies and
prudent investment management. The Fund seeks to achieve its investment objective by
investing, as a fundamental policy, at least 80% of an aggregate of the Fund&#146;s net
assets (including proceeds from the issuance of preferred stock), plus the amounts of any
borrowings for investment purposes, in a portfolio of municipal obligations the interest
on which, in the opinion of bond counsel to the issuer, is excludable from gross income
for Federal income tax purposes (except that the interest may be includable in taxable
income for purposes of the Federal alternative minimum tax). The Fund invests in a
portfolio of municipal obligations which are rated in the three highest quality ratings
categories (A or better) or, if unrated, are considered by the Investment Adviser to be
of comparable quality. The Fund may invest in certain tax exempt securities classified as
&#147;private activity bonds,&#148; as discussed within, that may subject certain
investors in the Fund to an alternative minimum tax. There can be no assurance that the
Fund&#146;s investment objective will be realized. </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain
capitalized terms not otherwise defined in this statement of additional information have
the meaning provided in the Glossary included as part of the prospectus. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
statement of additional information is not a prospectus, but should be read in
conjunction with the prospectus of the Fund, which has been filed with the Securities and
Exchange Commission (the &#147;Commission&#148;) and can be obtained, without charge, by
calling (800) 543-6217. The prospectus is incorporated by reference into this statement
of additional information, and this statement of additional information is incorporated
by reference into the prospectus. </FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4><B>Merrill
  Lynch &amp; Co. </B></FONT></P>
<font size="4"><!-- MARKER FORMAT-SHEET="Cutoff rule centered" FSL="Workstation" -->
</font>
<HR SIZE=1 noshade ALIGN=CENTER WIDTH=150>


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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The date of this
statement of additional information is &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2005. </FONT></P>




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<BR>&nbsp;
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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>TABLE OF CONTENTS OF
STATEMENT OF ADDITIONAL INFORMATION </B></FONT></P>




<div align="center">
  <TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
    <TR VALIGN=Bottom>
      <TH COLSPAN=2>&nbsp;</TH>
      <TH width="8%"><FONT SIZE=1>Page</FONT>
        <hr width=95% size="1" noshade>
      </TH>
    </TR>
    <TR VALIGN=Bottom>
      <TD WIDTH=90% ALIGN=LEFT><FONT SIZE=2>Investment Objective and Policies</FONT></TD>
      <TD WIDTH=2% ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD WIDTH=8% ALIGN=RIGHT><FONT SIZE=2>3</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="90%"><FONT SIZE=2>Investment Restrictions</FONT></TD>
      <TD ALIGN=LEFT width="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="8%"><FONT SIZE=2>3</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="90%"><FONT SIZE=2>Description of AMPS</FONT></TD>
      <TD ALIGN=LEFT width="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="8%"><FONT SIZE=2>4</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="90%"><FONT SIZE=2>The Auction</FONT></TD>
      <TD ALIGN=LEFT width="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="8%"><FONT SIZE=2>12</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="90%"><FONT SIZE=2>Rating Agency Guidelines</FONT></TD>
      <TD ALIGN=LEFT width="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="8%"><FONT SIZE=2>13</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="90%"><FONT SIZE=2>Directors and Officers</FONT></TD>
      <TD ALIGN=LEFT width="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="8%"><FONT SIZE=2>20</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="90%"><FONT SIZE=2>Investment Advisory and Management
        Arrangements</FONT></TD>
      <TD ALIGN=LEFT width="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="8%"><FONT SIZE=2>25</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="90%"><FONT SIZE=2>Portfolio Transactions</FONT></TD>
      <TD ALIGN=LEFT width="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="8%"><FONT SIZE=2>34</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="90%"><FONT SIZE=2>Taxes</FONT></TD>
      <TD ALIGN=LEFT width="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="8%"><FONT SIZE=2>35</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="90%"><FONT SIZE=2>Conflicts of Interest</FONT></TD>
      <TD ALIGN=LEFT width="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="8%"><FONT SIZE=2>40</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="90%"><FONT SIZE=2>Net Asset Value</FONT></TD>
      <TD ALIGN=LEFT width="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="8%"><FONT SIZE=2>42</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="90%"><FONT SIZE=2>Financial Statements</FONT></TD>
      <TD ALIGN=LEFT width="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="8%"><FONT SIZE=2>42</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="90%"><FONT SIZE=2>APPENDIX A Ratings Of Municipal
        Bonds</FONT></TD>
      <TD ALIGN=LEFT width="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="8%"><FONT SIZE=2>A-1</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="90%"><FONT SIZE=2>APPENDIX B Settlement Procedures</FONT></TD>
      <TD ALIGN=LEFT width="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="8%"><FONT SIZE=2>B-1</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="90%"><FONT SIZE=2>APPENDIX C Auction Procedures</FONT></TD>
      <TD ALIGN=LEFT width="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="8%"><FONT SIZE=2>C-1</FONT></TD>
    </TR>
  </TABLE>
</div>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>INVESTMENT OBJECTIVE
AND POLICIES </B></FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MuniYield
Quality Fund, Inc. is a non-diversified, closed-end management investment company seeking
to provide shareholders with as high a level of current income exempt from Federal income
taxes as is consistent with its investment policies and prudent investment management.
The Fund seeks to achieve its investment objective by investing, as a fundamental policy,
at least 80% of an aggregate of the Fund&#146;s net assets (including proceeds from the
issuance of preferred stock), and the proceeds of any borrowings for investment purposes,
in a portfolio of municipal obligations issued by or on behalf of states, territories and
possessions of the United States and their political subdivisions, agencies or
instrumentalities, each of which pays interest that, in the opinion of bond counsel to
the issuer, is excludable from gross income for Federal income tax purposes (except that
the interest may be includable in taxable income for purposes of the Federal alternative
minimum tax) (&#147;Municipal Bonds&#148;). The Fund invests in Municipal Bonds which are
rated in the three highest quality ratings categories (A or better) or, if unrated, are
considered by the Investment Adviser to be of comparable quality. The Fund may invest in
certain tax exempt securities classified as &#147;private activity bonds,&#148; as
discussed within, that may subject certain investors in the Fund to an alternative
minimum tax. There can be no assurance that the Fund&#146;s investment objective will be
realized. </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reference
is made to &#147;Investment Objective and Policies&#148; and &#147;Other Investment
Policies&#148; in the prospectus for information regarding other types of securities that
the Fund may invest in to achieve its objective. </FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>INVESTMENT
RESTRICTIONS </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following are fundamental investment restrictions of the Fund and may not be changed
without the approval of the holders of a majority of the Fund&#146;s outstanding shares
of common stock and outstanding shares of AMPS, Other AMPS and any other preferred stock,
voting together as a single class, and a majority of the outstanding shares of AMPS,
Other AMPS and any other preferred stock, voting as a separate class (which for this
purpose and under the 1940 Act means the lesser of (i) 67% of the shares of each class of
capital stock represented at a meeting at which more than 50% of the outstanding shares
of each class of capital stock are represented or (ii) more than 50% of the outstanding
shares of each class of capital stock). The Fund may not: </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.
Make investments for the purpose of exercising control or       management. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.
Purchase securities of other investment companies, except (i) in       connection with a
merger, consolidation, acquisition or reorganization,       (ii) by purchase of shares of
tax-exempt money market funds advised by the       Investment Adviser or its affiliates
(as defined in the 1940 Act) to the       extent permitted by an exemptive order issued
to the Fund by the       Securities and Exchange Commission, or (iii) by purchase in the
open       market of securities of closed-end investment companies and only if
      immediately thereafter no more than 10% of the Fund&#146;s total assets       would
be invested in such securities. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.
Purchase or sell real estate, real estate limited partnerships,       commodities or
commodity contracts; provided that the Fund may invest in       securities secured by
real estate or interests therein or issued by       companies that invest in real estate
or interests therein, and the Fund       may purchase and sell financial futures
contracts and options thereon. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.
Issue senior securities other than preferred stock or borrow       amounts in excess of
5% of its total assets taken at market value;       provided, however, that the Fund is
authorized to borrow money in excess       of 5% of the value of its total assets for the
purpose of repurchasing       shares of common stock or redeeming shares of preferred
stock. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.
Underwrite securities of other issuers except insofar as the Fund       may be deemed an
underwriter under the Securities Act of 1933, as amended,       in selling portfolio
securities. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.
Make loans to other persons, except that the Fund may purchase       Municipal Bonds and
other debt securities in accordance with its       investment objective, policies and
limitations. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.
Purchase any securities on margin, except that the Fund may obtain       such short-term
credit as may be necessary for the clearance of purchases       and sales of portfolio
securities (the deposit or payment by the Fund of       initial or variation margin in
connection with financial futures contracts       and options thereon is not considered
the purchase of a security on       margin). </FONT>
</TD>
</TR>
</TABLE>
<BR>




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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.
Make short sales of securities or maintain a short position or       invest in put, call,
straddle or spread options, except that the Fund may       write, purchase and sell
options and futures on Municipal Bonds, U.S.       Government obligations and related
indices or otherwise in connection with       bona fide hedging activities. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.
Invest more than 25% of its total assets (taken at market value at       the time of each
investment) in the securities of issuers in a single       industry; provided that, for
purposes of this restriction, states,       municipalities and their political
subdivisions are not considered to be       part of any industry. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
purposes of investment restriction (4) above, the Fund may borrow moneys in excess of 5%
of the value of its total assets to the extent permitted by Section 18 of the 1940 Act or
otherwise as permitted by applicable law for the purpose of repurchasing shares of common
stock or redeeming shares of preferred stock. For purposes of investment restriction (9)
above, the exception for states, municipalities and their political subdivisions applies
only to tax exempt securities issued by such entities. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An
additional investment restriction adopted by the Fund, which may be changed by the Board
of Directors without stockholder approval, provides that the Fund may not mortgage,
pledge, hypothecate or in any manner transfer, as security for indebtedness, any
securities owned or held by the Fund except as may be necessary in connection with
borrowings mentioned in investment restriction (4) above or except as may be necessary in
connection with transactions in financial futures contracts and options thereon. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
a percentage restriction on investment policies or the investment or use of assets set
forth above is adhered to at the time a transaction is effected, later changes in
percentage resulting from changing values will not be considered a violation. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund is classified as non-diversified within the meaning of the 1940 Act, which means
that the Fund is not limited by the 1940 Act in the proportion of its assets that it may
invest in securities of a single issuer. As a non-diversified fund, the Fund&#146;s
investments are limited, however, in order to allow the Fund to continue to qualify as a
regulated investment company under the Internal Revenue Code of 1986, as amended (the
&#147;Code&#148;). See &#147;Taxes.&#148; To qualify, the Fund complies with certain
requirements, including limiting its investments so that at the close of each quarter of
the taxable year (i) not more than 25% of the market value of the Fund&#146;s total
assets will be invested in the securities of a single issuer or in qualified publicly
traded partnerships as defined in the Code and (ii) with respect to 50% of the market
value of its total assets, not more than 5% of the market value of its total assets will
be invested in the securities of a single issuer and the Fund will not own more than 10%
of the outstanding voting securities of a single issuer. For purposes of this
restriction, the Fund will regard each state and each political subdivision, agency or
instrumentality of such state and each multi-state agency of which such state is a member
and each public authority which issues securities on behalf of a private entity as a
separate issuer, except that if the security is backed only by the assets and revenues of
a non-government entity then the entity with the ultimate responsibility for the payment
of interest and principal may be regarded as the sole issuer. These tax-related
limitations may be changed by the Board of Directors of the Fund to the extent necessary
to comply with changes in the Federal tax requirements. A fund that elects to be
classified as &#147;diversified&#148; under the 1940 Act must satisfy the foregoing 5%
and 10% requirements with respect to 75% of its total assets. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Investment Adviser of the Fund and Merrill Lynch, Pierce, Fenner &amp;Smith Incorporated (&#147;Merrill
Lynch&#148;) are owned and controlled by Merrill Lynch &amp; Co., Inc. (&#147;ML &amp; Co.&#148;).
Because of the affiliation of Merrill Lynch with the Investment Adviser, the Fund is
prohibited from engaging in certain transactions involving Merrill Lynch except pursuant
to an exemptive order or otherwise in compliance with the provisions of the 1940 Act and
the rules and regulations thereunder. Included among such restricted transactions will be
purchases from or sales to Merrill Lynch of securities in transactions in which it acts
as principal. See &#147;Portfolio Transactions&#148; in this statement of additional
information. </FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>DESCRIPTION OF AMPS </B></FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain
of the capitalized terms used herein and not otherwise defined in this statement of
additional information have the meaning provided in the Glossary at the back of the
prospectus. </I></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Series E AMPS will be shares of preferred stock that entitle their holders to receive
dividends when, as and if declared by the Board of Directors, out of funds legally
available therefor, at a rate per annum that may vary for the successive Dividend
Periods. After the Initial Dividend Period, each Subsequent Dividend Period for  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the Series E AMPS generally will be
a 7-Day Dividend Period; provided however, that prior to any Auction, the Fund may elect,
subject to certain limitations described herein, upon giving notice to holders thereof, a
Special Dividend Period. The Applicable Rate for a particular Dividend Period will be
determined by an Auction conducted on the Business Day before the start of such Dividend
Period. Beneficial Owners and Potential Beneficial Owners of shares of AMPS may
participate in Auctions therefor, although, except in the case of a Special Dividend
Period of more than 28 days, Beneficial Owners desiring to continue to hold all of their
shares of AMPS regardless of the Applicable Rate resulting from Auctions need not
participate. For an explanation of Auctions and the method of determining the Applicable
Rate, see Appendix C &#147;Auction Procedures.&#148; </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
as otherwise required by law or unless there is no Securities Depository, all outstanding
shares of the AMPS will be represented by one or more certificates registered in the name
of the nominee of the Securities Depository (initially expected to be Cede), and no
person acquiring shares of AMPS will be entitled to receive a certificate representing
such shares. See Appendix C &#147;Auction Procedures.&#148; As a result, the nominee of
the Securities Depository is expected to be the sole holder of record of the shares of
AMPS. Accordingly, each purchaser of AMPS must rely on (i) the procedures of the
Securities Depository and, if such purchaser is not a member of the Securities
Depository, such purchaser&#146;s Agent Member, to receive dividends, distributions and
notices and to exercise voting rights (if and when applicable) and (ii) the records of
the Securities Depository and, if such purchaser is not a member of the Securities
Depository, such purchaser&#146;s Agent Member, to evidence its beneficial ownership of
shares of AMPS. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When
issued and sold, the shares of AMPS will have a liquidation preference of $25,000 per
share plus an amount equal to accumulated but unpaid dividends (whether or not earned or
declared) and will be fully paid and non-assessable. See &#147;Description of AMPS &#151;
Liquidation Rights&#148; in the prospectus. The shares of AMPS will not be convertible
into shares of common stock or other capital stock of the Fund, and the holders thereof
will have no preemptive rights. The AMPS will not be subject to any sinking fund but will
be subject to redemption at the option of the Fund at the Optional Redemption Price on
any Dividend Payment Date (except during the Initial Dividend Period and during a
Non-Call Period) and, under certain circumstances, will be subject to mandatory
redemption by the Fund at the Mandatory Redemption Price stated in the prospectus. See
&#147;Description of AMPS &#151; Redemption&#148; in the prospectus. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund also has outstanding four series of shares of Other AMPS with terms that are
substantially the same as the terms of the shares of AMPS described herein and in the
prospectus. Cede, the nominee of the Securities Depository, 55 Water Street, New York,
New York 10041-0099, is the sole holder of record of the shares of Other AMPS. The Series
E AMPS offered hereby rank on a parity with the Other AMPS with respect to dividends and
liquidation preference. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition to serving as the Auction Agent in connection with the Auction Procedures
described in the prospectus, The Bank of New York will be the transfer agent, registrar,
dividend disbursing agent and redemption agent for the shares of AMPS. The Auction Agent,
however, will serve merely as the agent of the Fund, acting in accordance with the Fund&#146;s
instructions, and will not be responsible for any evaluation or verification of any
matters certified to it. </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
in an Auction, the Fund will have the right (to the extent permitted by applicable law)
to purchase or otherwise acquire any shares of AMPS so long as the Fund is current in the
payment of dividends on AMPS and on any other capital stock of the Fund ranking on a
parity with the AMPS, including the Other AMPS, with respect to the payment of dividends
or upon liquidation. </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following supplements the description of the terms of the shares of AMPS set forth in the
prospectus. This description does not purport to be complete and is subject to and
qualified in its entirety by reference to the Fund&#146;s Charter and Articles
Supplementary, including the provisions thereof establishing the AMPS. The Fund&#146;s
Charter and the form of Articles Supplementary establishing the terms of the AMPS have
been filed as exhibits to the Registration Statement of which this statement of
additional information is a part. </FONT></P>




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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Dividends </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>General.
</I>The holders of shares of the Series E AMPS will be entitled to receive, when, as and if
declared by the Board of Directors of the Fund, out of funds legally available therefor,
cumulative cash dividends on their shares, at the Applicable Rate. Dividends on the
shares of AMPS so declared and payable shall be paid (i) in preference to and in priority
over any dividends so declared and payable on the common stock, and (ii) to the extent
permitted under the Code and to the extent available, out of net tax-exempt income earned
on the Fund&#146;s investments. Generally, dividends on shares of AMPS, to the extent
that they are derived from interest paid on Municipal Bonds, will be exempt from Federal
income taxes, subject to possible application of the alternative minimum tax. See &#147;Taxes.&#148; </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Notification
of Dividend Period. </I>In determining whether the Fund should issue a Notice of Special
Dividend for the AMPS, the Broker-Dealers will consider (i) existing short-term and
long-term market rates and indices of such short-term and long-term rates, (ii) existing
market supply and demand for short-term and long-term securities, (iii) existing yield
curves for short-term and long-term securities comparable to the AMPS, (iv) industry and
financial conditions that may affect the AMPS, (v) the investment objective of the Fund,
and (vi) the Dividend Periods and dividend rates at which current and potential
beneficial holders of the AMPS would remain or become beneficial holders. If the
Broker-Dealers shall not give the Fund a Response by such second Business Day or if the
Response states that given the factors set forth above it is not advisable that the Fund
give a Notice of Special Dividend Period for the AMPS, the Fund may not give a Notice of
Special Dividend Period in respect of such Request for Special Dividend Period. In the
event the Response indicates that it is advisable that the Fund give a Notice of Special
Dividend Period for the AMPS, the Fund, by no later than the second Business Day prior to
such Auction Date, may give a notice (a &#147;Notice of Special Dividend Period&#148;) to
the Auction Agent, the Securities Depository and each Broker-Dealer, which notice will
specify (i) the duration of the Special Dividend Period, (ii) the Optional Redemption
Price as specified in the related Response and (iii) the Specific Redemption Provisions,
if any, as specified in the related Response. The Fund also shall provide a copy of such
Notice of Special Dividend Period to Moody&#146;s and S&amp;P. The Fund shall not give a
Notice of Special Dividend Period, and, if such Notice of Special Dividend Period shall
have been given already, shall give telephonic and written notice of its revocation (a
&#147;Notice of Revocation&#148;) to the Auction Agent, each Broker-Dealer, and the
Securities Depository on or prior to the Business Day prior to the relevant Auction Date
if (x) either the 1940 Act AMPS Asset Coverage is not satisfied or the Fund shall fail to
maintain S&amp;P Eligible Assets and Moody&#146;s Eligible Assets each with an aggregate
Discounted Value at least equal to the AMPS Basic Maintenance Amount, in each case on the
Valuation Date immediately preceding the Business Day prior to the relevant Auction Date
on an actual basis and on a pro forma basis giving effect to the proposed Special
Dividend Period (using as a pro forma dividend rate with respect to such Special Dividend
Period the dividend rate which the Broker-Dealers shall advise the Fund is an
approximately equal rate for securities similar to the AMPS with an equal dividend
period), (y) sufficient funds for the payment of dividends payable on the immediately
succeeding Dividend Payment Date have not been segregated in an account at the Fund&#146;s
custodian bank or on the books of the Fund by the close of business on the third Business
Day preceding the related Auction Date or (z) the Broker-Dealers jointly advise the Fund
that, after consideration of the factors listed above, they have concluded that it is
advisable to give a Notice of Revocation. The Fund also shall provide a copy of such
Notice of Revocation to Moody&#146;s and S&amp;P. If the Fund is prohibited from giving a
Notice of Special Dividend Period as a result of the factors enumerated in clause (x),
(y) or (z) above or if the Fund gives a Notice of Revocation with respect to a Notice of
Special Dividend Period, the next succeeding Dividend Period will be a 7-Day Dividend
Period. In addition, in the event Sufficient Clearing Bids are not made in any Auction or
an Auction is not held for any reason, the next succeeding Dividend Period will be a
7-Day Dividend Period, and the Fund may not again give a Notice of Special Dividend
Period (and any such attempted notice shall be null and void) until Sufficient Clearing
Bids have been made in an Auction with respect to a 7-Day Dividend Period. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Non-Payment
Period; Late Charge. </I>A Non-Payment Period will commence if the Fund fails to (i) declare,
prior to the close of business on the second Business Day preceding any Dividend Payment
Date, for payment on or (to the extent permitted as described below) within three
Business Days after such Dividend Payment Date to the persons who held such shares as of
12:00 noon, Eastern time, on the Business Day preceding such Dividend Payment Date, the
full amount of any dividend on shares of AMPS payable on such Dividend Payment Date or
(ii) deposit, irrevocably in trust, in same-day funds, with the Auction Agent by 12:00
noon, Eastern time, (A) on such Dividend Payment Date the full amount of any cash
dividend on such shares (if declared) payable on such </FONT> </P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dividend Payment Date or (B) on any
redemption date for shares of AMPS called for redemption, the Mandatory Redemption Price
per share of such AMPS or, in the case of an optional redemption, the Optional Redemption
Price per share. Such Non-Payment Period will consist of the period commencing on and
including the aforementioned Dividend Payment Date or redemption date, as the case may
be, and ending on and including the Business Day on which, by 12:00 noon, Eastern time,
all unpaid cash dividends and unpaid redemption prices shall have been so deposited or
otherwise shall have been made available to the applicable holders in same-day funds,
provided that a Non-Payment Period for AMPS will not end unless the Fund shall have given
at least five days&#146; but no more than 30 days&#146; written notice of such deposit or
availability to the Auction Agent, the Securities Depository and all holders of shares of
AMPS. Notwithstanding the foregoing, the failure by the Fund to deposit funds as provided
for by clause (ii) (A) or (ii) (B) above within three Business Days after any Dividend
Payment Date or redemption date, as the case may be, in each case to the extent
contemplated below, shall not constitute a &#147;Non-Payment Period.&#148; </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Applicable Rate for each Dividend Period for shares of AMPS, commencing during a
Non-Payment Period, will be equal to the Non-Payment Period Rate; and each Dividend
Period commencing after the first day of, and during, a Non-Payment Period shall be a
7-Day Dividend Period. Any dividend on shares of AMPS due on any Dividend Payment Date
for such shares (if, prior to the close of business on the second Business Day preceding
such Dividend Payment Date, the Fund has declared such dividend payable on such Dividend
Payment Date to the persons who held such shares as of 12:00 noon, Eastern time, on the
Business Day preceding such Dividend Payment Date) or redemption price with respect to
such shares not paid to such persons when due may be paid to such persons in the same
form of funds by 12:00 noon, Eastern time, on any of the first three Business Days after
such Dividend Payment Date or due date, as the case may be, provided that such amount is
accompanied by a late charge calculated for such period of non-payment at the Non-Payment
Period Rate applied to the amount of such non-payment based on the actual number of days
comprising such period divided by 365. In the case of a willful failure of the Fund to
pay a dividend on a Dividend Payment Date or to redeem any shares of AMPS on the date set
for such redemption, the preceding sentence shall not apply and the Applicable Rate for
the Dividend Period commencing during the Non-Payment Period resulting from such failure
shall be the Non-Payment Period Rate. For the purposes of the foregoing, payment to a
person in same-day funds on any Business Day at any time will be considered equivalent to
payment to that person in New York Clearing House (next-day) funds at the same time on
the preceding Business Day, and any payment made after 12:00 noon, Eastern time, on any
Business Day shall be considered to have been made instead in the same form of funds and
to the same person before 12:00 noon, Eastern time, on the next Business Day. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Non-Payment Period Rate initially will be 200% of the applicable Reference Rate (or 300%
of such rate if the Fund has provided notification to the Auction Agent prior to the
Auction establishing the Applicable Rate for any dividend that net capital gain or other
taxable income will be included in such dividend on shares of AMPS), provided that the
Board of Directors of the Fund shall have the authority to adjust, modify, alter or
change from time to time by resolution or otherwise the initial Non-Payment Period Rate
if the Board of Directors of the Fund determines and Moody&#146;s and S&amp;P (and any
Substitute Rating Agency or Substitute Rating Agencies, as the case may be, in lieu of
Moody&#146;s or S&amp;P, or both, in the event either or both of such parties shall not
rate the AMPS) advise the Fund in writing that such adjustment, modification, alteration
or change will not adversely affect their then current ratings on the AMPS. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Restrictions
on Dividends and Other Payments. </I>For so long as any shares of AMPS are outstanding, the
Fund will not declare, pay or set apart for payment any dividend or other distribution
(other than a dividend or distribution paid in shares of, or options, warrants or rights
to subscribe for or purchase, common stock or other stock, if any, ranking junior to
shares of AMPS as to dividends or upon liquidation) in respect of common stock or any
other stock of the Fund ranking junior to or on a parity with shares of AMPS as to
dividends or upon liquidation, or call for redemption, redeem, purchase or otherwise
acquire for consideration any shares of common stock or any other such junior stock
(except by conversion into or exchange for stock of the Fund ranking junior to AMPS as to
dividends and upon liquidation) or any such parity stock (except by conversion into or
exchange for stock of the Fund ranking junior to or on a parity with AMPS as to dividends
and upon liquidation), unless (A) immediately after such transaction, the Fund would have
S&amp;P Eligible Assets and Moody&#146;s Eligible Assets each with an aggregate
Discounted Value equal to or greater than the AMPS Basic Maintenance Amount, and the 1940
Act AMPS Asset Coverage (see &#147;Asset Maintenance&#148; and &#147;Redemption&#148; below)
would be satisfied, (B) full cumulative dividends on shares of AMPS and shares of the
Other AMPS due on or prior to the date of the </FONT> </P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>transaction have been declared and
paid or shall have been declared and sufficient funds for the payment thereof deposited
with the Auction Agent, (C) any Additional Dividend required to be paid on or before the
date of such declaration or payment has been paid, and (D) the Fund has redeemed the full
number of shares of AMPS required to be redeemed by any provision for mandatory
redemption contained in the Articles Supplementary. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Asset Maintenance </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1940
Act AMPS Asset Coverage. The Fund will be required under the Articles Supplementary to
maintain, with respect to shares of AMPS, as of the last Business Day of each month in
which any shares of AMPS are outstanding, asset coverage of at least 200% with respect to
senior securities that are stock, including the shares of AMPS and Other AMPS (or such
other asset coverage as in the future may be specified in or under the 1940 Act as the
minimum asset coverage for senior securities that are stock of a closed-end investment
company as a condition of paying dividends on its common stock) (&#147;1940 Act AMPS
Asset Coverage&#148;). If the Fund fails to maintain 1940 Act AMPS Asset Coverage and
such failure is not cured as of the last Business Day of the following month (the &#147;1940
Act Cure Date&#148;), the Fund will be required under certain circumstances to redeem
certain of the shares of AMPS. See &#147;Description of AMPS &#151; Redemption&#148; in the
prospectus and &#147;&#151; Redemption&#148; below. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>AMPS
Basic Maintenance Amount. </I>So long as shares of AMPS are outstanding, the Fund will be
required under the Articles Supplementary as of the last Business Day of each week (a
&#147;Valuation Date&#148;) to maintain S&amp;P Eligible Assets and Moody&#146;s Eligible
Assets each having in the aggregate a Discounted Value at least equal to the AMPS Basic
Maintenance Amount. If the Fund fails to meet such requirement as of any Valuation Date
and such failure is not cured on or before the sixth Business Day after such Valuation
Date (the &#147;AMPS Basic Maintenance Cure Date&#148;), the Fund will be required under
certain circumstances to redeem certain of the shares of AMPS. See &#147;Description of
AMPS &#151; Redemption&#148; in the prospectus and &#147;&#151; Redemption&#148; below. Upon any
failure to maintain the required Discounted Value, the Fund will use its best efforts to
alter the composition of its portfolio to reattain a Discounted Value at least equal to
the AMPS Basic Maintenance Amount on or prior to the AMPS Basic Maintenance Cure Date. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
AMPS Basic Maintenance Amount as of any Valuation Date, means the dollar amount equal to
(i) the sum of (A) the product of the number of shares of AMPS and Other AMPS outstanding
on such Valuation Date multiplied by the sum of $25,000 and any applicable redemption
premium attributable to the designation of a Premium Call Period; (B) the aggregate
amount of cash dividends (whether or not earned or declared) that will have accumulated
for the AMPS and Other AMPS outstanding to (but not including) the end of the current
Dividend Period for the AMPS that follows such Valuation Date in the event the then
current Dividend Period will end within 49 calendar days of such Valuation Date or
through the 49th day after such Valuation Date in the event the then current Dividend
Period will not end within 49 calendar days of such Valuation Date; (C) in the event the
then current Dividend Period will end within 49 calendar days of such Valuation Date, the
aggregate amount of cash dividends that would accumulate at the Maximum Applicable Rate
applicable to a Dividend Period of 28 or fewer days on any shares of AMPS and Other AMPS
outstanding from the end of such Dividend Period through the 49th day after such
Valuation Date, multiplied by the larger of the Moody&#146;s Volatility Factor and the S&amp;P
Volatility Factor, determined from time to time by Moody&#146;s and S&amp;P, respectively
(except that if such Valuation Date occurs during a Non-Payment Period, the cash dividend
for purposes of calculation would accumulate at the then current Non-Payment Period
Rate); (D) the amount of anticipated expenses of the Fund for the 90 days subsequent to
such Valuation Date; (E) the amount of current outstanding balances of any indebtedness
that is senior to the AMPS plus interest actually accrued together with 30 days
additional interest on the current outstanding balances calculated at the current rate;
(F) the amount of the Fund&#146;s maximum potential Additional Dividend liability as of
such Valuation Date; and (G) any current liabilities as of such Valuation Date to the
extent not reflected in any of (i)(A) through (i)(F) (including, without limitation, and
immediately upon determination, any amounts due and payable by the Fund for portfolio
securities purchased as of such Valuation Date and any liabilities incurred for the
purpose of clearing securities transactions) less (ii) either (A) the Discounted Value of
any of the Fund&#146;s assets, or (B) the face value of any of the Fund&#146;s assets if
such assets mature prior to or on the date of redemption of AMPS or payment of a
liability and are either securities issued or guaranteed by the United States Government
or Deposit Securities, in both cases irrevocably deposited by the Fund for the payment of
the amount needed to redeem shares of AMPS subject to redemption or to satisfy any of
(i)(B) through (i)(G). </FONT></P>




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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Discount Factors and guidelines for determining the market value of the Fund&#146;s
portfolio holdings have been based on criteria established in connection with rating the
AMPS. These factors include, but are not limited to, the sensitivity of the market value
of the relevant asset to changes in interest rates, the liquidity and depth of the market
for the relevant asset, the credit quality of the relevant asset (for example, the lower
the rating of a debt obligation, the higher the related discount factor) and the
frequency with which the relevant asset is marked to market. In no event shall the
Discounted Value of any asset of the Fund exceed its unpaid principal balance or face
amount as of the date of calculation. The Discount Factor relating to any asset of the
Fund and the AMPS Basic Maintenance Amount, the assets eligible for inclusion in the
calculation of the Discounted Value of the Fund&#146;s portfolio and certain definitions
and methods of calculation relating thereto may be changed from time to time by the Fund,
without stockholder approval, but only in the event the Fund receives written
confirmation from S&amp;P, Moody&#146;s and any Substitute Rating Agency that any such
changes would not impair the rating then assigned to the shares of AMPS by S&amp;P or
Moody&#146;s or any Substitute Rating Agency. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
or before the seventh Business Day in the case of Moody&#146;s and the next Business Day
in the case of S&amp;P after a Valuation Date on which the Fund fails to maintain S&amp;P
Eligible Assets and Moody&#146;s Eligible Assets each with an aggregate Discounted Value
equal to or greater than the AMPS Basic Maintenance Amount, the Fund is required to (i)
deliver to Moody&#146;s a report with respect to the calculation of the AMPS Basic
Maintenance Amount, the value of its portfolio holdings and the net asset value and
market price of the Fund&#146;s common stock as of the date of such failure (an &#147;AMPS
Basic Maintenance Report&#148;) and (ii) send S&amp;P an electronic notification of such
failure. The Fund also will deliver an AMPS Basic Maintenance Report as of the 21st day
of each month (or if such day is not a Business Day, as of the next succeeding Business
Day) or as of the last Business Day of the month in which the Fund&#146;s fiscal year
ends on or before the seventh Business Day after such day. Within ten Business Days after
delivery of such report relating to the month in which the Fund&#146;s fiscal year ends,
the Fund will deliver a letter prepared by the Fund&#146;s independent accountants
regarding the accuracy of the calculations made by the Fund in such AMPS Basic
Maintenance Report. If any such letter prepared by the Fund&#146;s independent
accountants shows that an error was made in the AMPS Basic Maintenance Report, the
calculation or determination made by the Fund&#146;s independent accountants will be
conclusive and binding on the Fund. The Fund will also (i) provide Moody&#146;s with an
AMPS Basic Maintenance Report and (ii) send S&amp;P an electronic notification, as of
each Valuation Date on or before the seventh Business Day in the case of Moody&#146;s and
the next Business Day in the case of S&amp;P after such date when the Discounted Value of
Moody&#146;s Eligible Assets or S&amp;P Eligible Assets, as the case may be, fails to
exceed the AMPS Basic Maintenance Amount by 10% or more. Also, on or before 5:00 p.m.,
Eastern time, on the first Business Day after shares of common stock are repurchased by
the Fund, the Fund will complete and deliver to Moody&#146;s an AMPS Basic Maintenance
Report as of the close of business on such date that common stock is repurchased. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Redemption </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Mandatory
Redemption. </I>The number of shares of AMPS to be redeemed will be equal to the lesser of
(a) the minimum number of shares of AMPS the redemption of which, if deemed to have
occurred immediately prior to the opening of business on the Cure Date, together with all
other shares of the preferred stock subject to redemption or retirement, would result in
the Fund having S&amp;P Eligible Assets and Moody&#146;s Eligible Assets each with an
aggregate Discounted Value equal to or greater than the AMPS Basic Maintenance Amount or
satisfaction of the 1940 Act AMPS Asset Coverage, as the case may be, on such Cure Date
(provided that, if there is no such minimum number of shares the redemption of which
would have such result, all shares of AMPS then outstanding will be redeemed), and (b)
the maximum number of shares of AMPS, together with all other shares of preferred stock
subject to redemption or retirement, that can be redeemed out of funds expected to be
legally available therefor on such redemption date. In determining the number of shares
of AMPS required to be redeemed in accordance with the foregoing, the Fund shall allocate
the number required to be redeemed which would result in the Fund having S&amp;P Eligible
Assets and Moody&#146;s Eligible Assets each with an aggregate Discounted Value equal to
or greater than the AMPS Basic Maintenance Amount or satisfaction of the 1940 Act AMPS
Asset Coverage, as the case may be, pro rata among shares of AMPS, Other AMPS and other
preferred stock subject to redemption pursuant to provisions similar to those set forth
below; provided that, shares of AMPS which may not be redeemed at the option of the Fund
due to the designation of a Non-Call Period applicable to such shares (A) will be subject
to mandatory redemption only to the extent that other shares are not available to satisfy
the number of shares required to be redeemed and (B) will be selected for redemption in
an ascending order of outstanding </FONT> </P>






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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>number of days in the Non-Call
Period (with shares with the lowest number of days to be redeemed first) and by lot in
the event of shares having an equal number of days in such Non-Call Period. The Fund is
required to effect such a mandatory redemption on a Business Day which is not later than
30 days after such Cure Date, except that if the Fund does not have funds legally
available for the redemption of all of the required number of shares of AMPS and shares
of other preferred stock which are subject to mandatory redemption or the Fund otherwise
is unable to effect such redemption on a Business Day which is on or prior to 30 days
after such Cure Date, the Fund will redeem those shares of AMPS that it was unable to
redeem on the earliest practicable date on which it is able to effect such redemption out
of funds legally available therefor. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Notice
of Redemption. </I>If shares of AMPS are to be redeemed, a notice of redemption will be
mailed to each record holder of such shares of AMPS (initially Cede as nominee of the
Securities Depository) and to the Auction Agent not less than 17 nor more than 60 days
prior to the date fixed for the redemption thereof. Each notice of redemption will
include a statement setting forth: (i) the redemption date, (ii) the redemption price,
(iii) the aggregate number of shares of AMPS to be redeemed, (iv) the place or places
where shares of AMPS are to be surrendered for payment of the redemption price, (v) a
statement that dividends on the shares to be redeemed will cease to accumulate on such
redemption date (except that holders may be entitled to Additional Dividends) and (vi)
the provision of the Articles Supplementary pursuant to which such shares are being
redeemed. The notice also will be published in the eastern and national editions of The
Wall Street Journal. No defect in the notice of redemption or in the mailing or
publication thereof will affect the validity of the redemption proceedings, except as
required by applicable law. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the event that less than all of the outstanding shares of AMPS are to be redeemed, the
shares to be redeemed will be selected by lot or such other method as the Fund shall deem
fair and equitable, and the results thereof will be communicated to the Auction Agent.
The Auction Agent will give notice to the Securities Depository, whose nominee will be
the record holder of all shares of AMPS, and the Securities Depository will determine the
number of shares to be redeemed from the account of the Agent Member of each Existing
Holder. Each Agent Member will determine the number of shares to be redeemed from the
account of each Existing Holder for which it acts as agent. An Agent Member may select
for redemption shares from the accounts of some Existing Holders without selecting for
redemption any shares from the accounts of other Existing Holders. Notwithstanding the
foregoing, if neither the Securities Depository nor its nominee is the record holder of
all of the shares of AMPS, the particular shares to be redeemed shall be selected by the
Fund by lot or by such other method as the Fund shall deem fair and equitable. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the Fund gives notice of redemption, and concurrently or thereafter deposits in trust
with the Auction Agent, or segregates in an account at the Fund&#146;s custodian bank for
the benefit of the holders of the AMPS to be redeemed and for payment to the Auction
Agent, Deposit Securities (with a right of substitution) having an aggregate Discounted
Value equal to the redemption payment for the shares of AMPS as to which notice of
redemption has been given, with irrevocable instructions and authority to pay the
redemption price to the record holders thereof, then upon the date of such deposit or, if
no such deposit is made, upon such date fixed for redemption (unless the Fund shall
default in making payment of the redemption price), all rights of the holders of such
shares called for redemption will cease and terminate, except the right of such holders
to receive the redemption price in respect thereof and any Additional Dividends, but
without interest, and such shares no longer will be deemed to be outstanding. The Fund
will be entitled to receive, from time to time, the interest, if any, earned on such
Deposit Securities deposited with the Auction Agent, and the holders of any shares so
redeemed will have no claim to any such interest. Any funds so deposited which are
unclaimed at the end of one year from such redemption date will be repaid, upon demand,
to the Fund, after which the holders of the shares of AMPS so called for redemption may
look only to the Fund for payment thereof. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;So
long as any shares of AMPS are held of record by the nominee of the Securities Depository
(initially Cede), the redemption price for such shares will be paid on the redemption
date to the nominee of the Securities Depository. The Securities Depository&#146;s normal
procedures now provide for it to distribute the amount of the redemption price to Agent
Members who, in turn, are expected to distribute such funds to the persons for whom they
are acting as agent. Notwithstanding the provisions for redemption described above, no
shares of AMPS shall be subject to optional redemption (i) unless all dividends in
arrears on the outstanding shares of AMPS, and all capital stock of the Fund ranking on a
parity with the AMPS with respect to the payment of dividends or upon liquidation,
including the Other AMPS, have been or are being contemporaneously paid or declared and
set  </FONT></P>






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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>aside for payment and (ii) if
redemption thereof would result in the Fund&#146;s failure to maintain Moody&#146;s
Eligible Assets or S&amp;P Eligible Assets with an aggregate Discounted Value equal to or
greater than the AMPS Basic Maintenance Amount. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Voting Rights </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
connection with the election of the Fund&#146;s directors, holders of shares of AMPS,
Other AMPS and any other preferred stock, voting separately as a single class, shall be
entitled at all times to elect two of the Fund&#146;s directors, and the remaining
directors will be elected by holders of shares of common stock and shares of AMPS, Other
AMPS and any other preferred stock, voting together as a single class. In addition, if at
any time dividends on outstanding shares of AMPS shall be unpaid in an amount equal to at
least two full years&#146; dividends thereon or if at any time holders of any shares of
preferred stock, including Other AMPS, are entitled, together with the holders of AMPS,
to elect a majority of the directors of the Fund under the 1940 Act, then the number of
directors constituting the Board of Directors automatically shall be increased by the
smallest number that, when added to the two directors elected exclusively by the holders
of shares of AMPS, Other AMPS and any other preferred stock as described above, would
constitute a majority of the Board of Directors as so increased by such smallest number,
and at a special meeting of stockholders which will be called and held as soon as
practicable, and at all subsequent meetings at which directors are to be elected, the
holders of shares of AMPS, Other AMPS and any other preferred stock, voting as a separate
class, will be entitled to elect the smallest number of additional directors that,
together with the two directors that such holders in any event will be entitled to elect,
constitutes a majority of the total number of directors of the Fund as so increased. The
terms of office of the persons who are directors at the time of that election will
continue. If the Fund thereafter shall pay, or declare and set apart for payment in full,
all dividends payable on all outstanding shares of AMPS and any other preferred stock,
including Other AMPS, for all past Dividend Periods, the additional voting rights of the
holders of shares of AMPS and any other preferred stock, including Other AMPS, as
described above shall cease, and the terms of office of all of the additional directors
elected by the holders of shares of AMPS, Other AMPS and any other preferred stock (but
not of the directors with respect to whose election the holders of common stock were
entitled to vote or the two directors the holders of shares of AMPS, Other AMPS and any
other preferred stock have the right to elect in any event) will terminate automatically. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
affirmative vote of a majority of the votes entitled to be cast by holders of outstanding
shares of AMPS and any other preferred stock, including Other AMPS, voting as a separate
class, will be required to (i) authorize, create or issue any class or series of stock
ranking prior to the AMPS or any other series of preferred stock with respect to the
payment of dividends or the distribution of assets on dissolution, liquidation or winding
up the affairs of the Fund, or (ii) amend, alter or repeal the provisions of the Charter,
whether by merger, consolidation or otherwise, so as to adversely affect any of the
contract rights expressly set forth in the Charter of holders of shares of AMPS or any
other preferred stock. To the extent permitted under the 1940 Act, in the event shares of
more than one series of preferred stock are outstanding, the Fund shall not approve any
of the actions set forth in clause (i) or (ii) which adversely affects the contract
rights expressly set forth in the Charter of a holder of shares of AMPS differently than
those of a holder of shares of any other series of preferred stock without the
affirmative vote of at least a majority of votes entitled to be cast by holders of the
shares of AMPS adversely affected and outstanding at such time (voting separately as a
class). The Board of Directors, however, without stockholder approval, may amend, alter
or repeal any or all of the various rating agency guidelines described herein in the
event the Fund receives confirmation from the rating agencies that any such amendment,
alteration or repeal would not impair the ratings then assigned to shares of AMPS.
Furthermore, the Board of Directors, without stockholder approval, may terminate
compliance with the Moody&#146;s or S&amp;P guidelines as discussed under &#147;Rating
Agency Guidelines&#148; in the prospectus. Unless a higher percentage is provided for
under &#147;Description of Capital Stock &#151; Certain Provisions of the Charter and
By-laws&#148; in the prospectus, the affirmative vote of the holders of a majority of the
outstanding shares of preferred stock (as defined under &#147;Investment Restrictions&#148;),
including AMPS and Other AMPS, entitled to be cast, voting as a separate class, will be
required to approve any plan of reorganization (including bankruptcy proceedings)
adversely affecting such shares or any action requiring a vote of security holders under
Section 13(a) of the 1940 Act including, among other things, changes in the Fund&#146;s
investment objective or changes in the investment policies and restrictions described as
fundamental policies in the prospectus and under &#147;Investment Restrictions.&#148; So
long as any shares of AMPS are outstanding, the affirmative vote of the holders of a
majority of the outstanding shares of preferred stock (as defined under  </FONT></P>






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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;Investment Restrictions&#148;),
including AMPS and Other AMPS, voting together as a single class, will be required to
approve any voluntary application by the Fund for relief under Federal bankruptcy law or
any similar application under state law for so long as the Fund is solvent and does not
foresee becoming insolvent. The class vote of holders of shares of AMPS, Other AMPS and
any other preferred stock described above in each case will be in addition to a separate
vote of the requisite percentage of shares of common stock and shares of AMPS, Other AMPS
and any other preferred stock, voting together as a single class, necessary to authorize
the action in question. An increase in the number of authorized shares of preferred stock
pursuant to the Charter or the issuance of additional shares of any series of preferred
stock (including AMPS and Other AMPS) pursuant to the Charter shall not in and of itself
be considered to adversely affect the contract rights of the holders of the AMPS. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding
the foregoing, and except as otherwise required by the 1940 Act, (i) holders of
outstanding shares of the AMPS will be entitled as a series, to the exclusion of the
holders of all other securities, including other preferred stock, common stock and other
classes of capital stock of the Fund, to vote on matters affecting the AMPS that do not
materially adversely affect any of the contract rights of holders of such other
securities, including other preferred stock, common stock and other classes of capital
stock, as expressly set forth in the Charter, and (ii) holders of outstanding shares of
AMPS will not be entitled to vote on matters affecting any other preferred stock that do
not materially adversely affect any of the contract rights of holders of the AMPS, as
expressly set forth in the Charter. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
foregoing voting provisions will not apply to any shares of AMPS if, at or prior to the
time when the act with respect to which such vote otherwise would be required shall be
effected, such shares shall have been (i) redeemed or (ii) called for redemption and
sufficient funds shall have been deposited in trust to effect such redemption. </FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>THE AUCTION </B></FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Auction Agent Agreement </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Auction Agent will act as agent for the Fund in connection with Auctions. In the absence
of bad faith or negligence on its part, the Auction Agent will not be liable for any
action taken, suffered or omitted, or for any error of judgment made, by it in the
performance of its duties under the Auction Agent Agreement, and will not be liable for
any error of judgment made in good faith unless the Auction Agent shall have been
negligent in ascertaining, or failing to ascertain, the pertinent facts. Pursuant to the
Auction Agent Agreement, the Fund is required to indemnify the Auction Agent for certain
losses and liabilities incurred by the Auction Agent without negligence or bad faith on
its part in connection with the performance of its duties under such agreement. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Auction Agent may terminate the Auction Agent Agreement upon notice to the Fund, which
termination may be no earlier than 60 days following delivery of such notice. If the
Auction Agent resigns, the Fund will use its best efforts to enter into an agreement with
a successor Auction Agent containing substantially the same terms and conditions as the
Auction Agent Agreement. The Fund may terminate the Auction Agent Agreement at any time,
provided that prior to such termination the Fund shall have entered into such an
agreement with respect thereto with a successor Auction Agent. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Broker-Dealer
Agreements </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Auctions require the participation of one or more broker-dealers. A Broker-Dealer
Agreement may be terminated by the Auction Agent or a Broker-Dealer on five days&#146; notice
to the other party, provided that the Broker-Dealer Agreement with Merrill Lynch may not
be terminated without the prior written consent of the Fund, which consent may not be
unreasonably withheld. </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
the six months ended April 30, 2005 and the fiscal years ended October 31, 2004, 2003 and
2002, Merrill Lynch, an affiliate of the Investment Adviser, earned $112,045, $233,047,
$190,653 and $246,754, respectively, pursuant to its Broker-Dealer Agreement with the
Fund. </FONT></P>








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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Auction Procedures </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Auction Procedures are set forth in Appendix C to this statement of additional
information. The Settlement Procedures to be used with respect to Auctions are set forth
in Appendix B to this statement of additional information. </FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>RATING AGENCY
GUIDELINES </B></FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>S&amp;P AAA Rating
Guidelines </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Discounted Value of the Fund&#146;s S&amp;P Eligible Assets is calculated on
  each Valuation Date. See &#147;Description of AMPS &#151; Asset Maintenance
  &#151; AMPS Basic Maintenance Amount.&#148; S&amp;P Eligible Assets include
  cash, Receivables for Municipal Bonds Sold (as defined below), Rule 2a-7 Money
  Market Funds and Municipal Bonds eligible for consideration under S&amp;P&#146;s
  current guidelines. For purposes of calculating the Discounted Value of the
  Fund&#146;s portfolio under current S&amp;P guidelines, the fair market value
  of Municipal Bonds eligible for consideration under such guidelines must be
  discounted by the applicable S&amp;P Discount Factor set forth in the table
  below. The Discounted Value of a Municipal Bond eligible for consideration under
  S&amp;P guidelines is the fair market value thereof divided by the S&amp;P Discount
  Factor. The S&amp;P Discount Factor used to discount a particular Municipal
  Bond will be determined by reference to the rating by S&amp;P, Moody&#146;s
  or Fitch on such Municipal Bond; provided, however, for purposes of determining
  the S&amp;P Discount Factor applicable to Municipal Bonds not rated by S&amp;P,
  the Municipal Bonds will carry an S&amp;P rating one full rating category lower
  than the S&amp;P rating category that is the equivalent of the rating category
  in which such Municipal Bond is placed by a NRSRO, in accordance with the table
  set forth below: </FONT></P>
<div align="center">
  <TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
    <TR VALIGN=Bottom>
      <TH COLSPAN=23><FONT SIZE=1>S&amp;P&#146;s Rating Category (1)</FONT>
        <hr width=100% size="1" noshade>
      </TH>
    <TR VALIGN=Bottom>
      <TH COLSPAN=2><FONT SIZE=1>AAA*(2)</FONT>
        <hr width=100% size="1" noshade>
      </TH>
      <TH>&nbsp;&nbsp;</TH>
      <TH COLSPAN=2><FONT SIZE=1>AA*</FONT>
        <hr width=95% size="1" noshade>
      </TH>
      <TH>&nbsp;&nbsp;</TH>
      <TH COLSPAN=2><FONT SIZE=1>A*</FONT>
        <hr width=95% size="1" noshade>
      </TH>
      <TH>&nbsp;&nbsp;</TH>
      <TH COLSPAN=2><FONT SIZE=1>BBB*</FONT>
        <hr width=95% size="1" noshade>
      </TH>
      <TH>&nbsp;&nbsp;</TH>
      <TH COLSPAN=2><FONT SIZE=1>BB*</FONT>
        <hr width=95% size="1" noshade>
      </TH>
      <TH>&nbsp;&nbsp;</TH>
      <TH COLSPAN=2><FONT SIZE=1>B*</FONT>
        <hr width=95% size="1" noshade>
      </TH>
      <TH>&nbsp;&nbsp;</TH>
      <TH COLSPAN=2><FONT SIZE=1>CCC*</FONT>
        <hr width=95% size="1" noshade>
      </TH>
      <TH>&nbsp;&nbsp;</TH>
      <TH COLSPAN=2><FONT SIZE=1>NR**</FONT>
        <hr width=95% size="1" noshade>
      </TH>
    </TR>
    <TR VALIGN=Bottom align="center">
      <TD colspan="2"><FONT SIZE=2>144</FONT><FONT SIZE=2>.75%</FONT></TD>
      <TD>&nbsp;</TD>
      <TD colspan="2"><FONT SIZE=2>147</FONT><FONT SIZE=2>.75%</FONT></TD>
      <TD>&nbsp;</TD>
      <TD colspan="2"><FONT SIZE=2>150</FONT><FONT SIZE=2>.75%</FONT></TD>
      <TD>&nbsp;</TD>
      <TD colspan="2"><FONT SIZE=2>153</FONT><FONT SIZE=2>.75%</FONT></TD>
      <TD>&nbsp;</TD>
      <TD colspan="2"><FONT SIZE=2>175</FONT><FONT SIZE=2>.11%</FONT></TD>
      <TD>&nbsp;</TD>
      <TD colspan="2"><FONT SIZE=2>195</FONT><FONT SIZE=2>.11%</FONT></TD>
      <TD>&nbsp;</TD>
      <TD colspan="2"><FONT SIZE=2>215</FONT><FONT SIZE=2>.11%</FONT></TD>
      <TD>&nbsp;</TD>
      <TD colspan="2"><FONT SIZE=2>220</FONT><FONT SIZE=2>.00%</FONT></TD>
    </TR>
  </TABLE>
</div>
<HR SIZE=1 noshade ALIGN=left  WIDTH=75>


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<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="1"> * </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">S&amp;P
rating.</FONT></TD></TR></TABLE>

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<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="1">** </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">Not
rated.</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Footnote Right" FSL="Workstation" -->
<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="1">(1) </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">For
Municipal Bonds of any one issuer rated at least BBB- by S&amp;P, or if      not rated by
S&amp;P, rated at least A- by another NRSRO, 2% is added to      the applicable S&amp;P
Discount Factor for every 1% by which the fair      market value of such Municipal Bonds
exceeds 5% of the aggregate fair      market value of the S&amp;P Eligible Assets, but in
no event greater than      10%; or for any percentage over 5% add 10 percentage points to
the      applicable S&amp;P Discount Factor.</FONT></TD></TR></TABLE>

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<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="1">(2) </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">For
zero coupon Municipal Bonds, the S&amp;P Discount Factor is 441.80%.</FONT></TD></TR></TABLE>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding
the foregoing, (i) the S&amp;P Discount Factor for short-term Municipal Bonds will be
115%, so long as such Municipal Bonds are rated A-1+ or SP-1+ by S&amp;P and mature or
have a demand feature exercisable in 30 days or less, or 120% so long as such Municipal
Bonds are rated A-1 or SP-1 by S&amp;P and mature or have a demand feature exercisable in
30 days or less, or 125% if such Municipal Bonds are not rated by S&amp;P but are rated
VMIG-1, P-1 or MIG-1 by Moody&#146;s or F-1+ by Fitch; provided, however, such short-term
Municipal Bonds rated by Moody&#146;s or Fitch but not rated by S&amp;P having a demand
feature exercisable in 30 days or less must be backed by a letter of credit, liquidity
facility or guarantee from a bank or other financial institution having a short-term
rating of at least A-1+ from S&amp;P; and further provided that such short-term Municipal
Bonds rated by Moody&#146;s or Fitch but not rated by S&amp;P may comprise no more than
50% of short-term Municipal Bonds that qualify as S&amp;P Eligible Assets, (ii) the S&amp;P
Discount Factor for Rule 2a-7 Money Market Funds will be 110%, (iii) the S&amp;P Discount
Factor for Receivables for Municipal Bonds Sold that are due in more than five Business
Days from such Valuation Date will be the S&amp;P Discount Factor applicable to the
Municipal Bonds sold and (iv) no S&amp;P Discount Factor will be applied to cash or to
Receivables for Municipal Bonds Sold if such receivables are due within five Business
Days of such Valuation Date. &#147;Receivables for Municipal Bonds Sold,&#148; for
purposes of calculating S&amp;P Eligible Assets as of any Valuation Date, means the book
value of receivables for Municipal Bonds sold as of or prior to such Valuation Date. For
purposes of the foregoing, Anticipation Notes rated SP-1 or, if not rated by S&amp;P,
rated VMIG-1 by Moody&#146;s or F-1+ by Fitch, which do not mature or have a demand
feature exercisable in 30 days and which do not have a long-term rating, shall be
considered to be short-term Municipal Bonds. </FONT></P>





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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
S&amp;P guidelines require certain minimum issue size and impose other requirements for
purposes of determining S&amp;P Eligible Assets. In order to be considered S&amp;P
Eligible Assets, Municipal Bonds must: </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(i)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>be
issued by any of the 50 states of the United States, its            territories and their
subdivisions, counties, cities, towns,            villages, and school districts,
agencies, such as authorities and            special districts created by the states, and
certain federally            sponsored agencies such as local housing authorities
(payments made            on these bonds are exempt from regular Federal income taxes and
are            generally exempt from state and local taxes in the state of
           issuance); </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(ii)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>except
for zero coupon Municipal Bonds rated AAA by S&amp;P that            mature in 30 years
or less, be interest bearing and pay interest at            least semi-annually; </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(iii)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>be
payable with respect to principal and interest in U.S. dollars; </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(iv)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>not
be subject to a covered call or covered put option written by the Fund; </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(v)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>except
for Inverse Floaters, not be part of a private placement; and </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(vi)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>except
for Inverse Floaters and legally defeased bonds that are            secured by securities
issued or guaranteed by the United States            Government, be part of an issue with
an original issue size of at            least $10 million or, if of an issue with an
original issue size            below $10 million, is rated at least AA or higher by S&amp;P. </FONT></TD>
</TR>
</TABLE>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding
the foregoing: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
Municipal Bonds issued by issuers in any one state or territory will be considered S&amp;P
Eligible Assets only to the extent the fair market value of such Municipal Bonds does not
exceed 25% of the aggregate fair market value of S&amp;P Eligible Assets; </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)
Municipal Bonds which are escrow bonds or defeased bonds may compose up to 100% of the
aggregate fair market value of S&amp;P Eligible Assets if such Bonds initially are
assigned a rating by S&amp;P in accordance with S&amp;P&#146;s legal defeasance criteria
or rerated by S&amp;P as economic defeased escrow bonds and assigned an AAA rating.
Municipal Bonds may be rated as escrow bonds by another NRSRO or rerated as an escrow
bond and assigned the equivalent of an S&amp;P AAA rating, provided that such equivalent
rated Bonds are limited to 50% of the aggregate fair market value of S&amp;P Eligible
Assets and are deemed to have an AA S&amp;P rating for purposes of determining the S&amp;P
Discount Factor applicable to such Municipal Bonds. The limitations on Municipal Bonds in
clause (i) above and clauses (iii) and (iv) below are not applicable to escrow bonds; </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)
Municipal Bonds which are not rated by any NRSRO may comprise no more than 10% of S&amp;P
Eligible Assets; </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)
Municipal Bonds rated at least BBB- by S&amp;P, or if not rated by S&amp;P, rated at
least A- by another NRSRO, of any one issuer or guarantor (excluding bond insurers) will
be considered S&amp;P Eligible Assets only to the extent the fair market value of such
Municipal Bonds does not exceed 10% of the aggregate fair market value of the S&amp;P
Eligible Assets, High Yield Municipal Bonds of any issuer may comprise no more than 5% of
S&amp;P Eligible Assets, and Municipal Bonds of any one issuer which are not rated by any
NRSRO will be considered S&amp;P Eligible Assets only to the extent the fair market value
of such Municipal Bonds does not exceed 5% of the aggregate fair market value of the S&amp;P
Eligible Assets. In the aggregate, the maximum issuer exposure is limited to 10% of the S&amp;P
Eligible Assets; and </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)
Municipal Bonds not rated by S&amp;P but rated by another NRSRO will be included in S&amp;P
Eligible Assets only to the extent the fair market value of such Municipal Bonds does not
exceed 50% of the aggregate fair market value of the S&amp;P Eligible Assets. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
discussed in the prospectus, the Fund may engage in options or futures transactions. For
so long as any shares of AMPS are rated by S&amp;P, the Fund will not purchase or sell
financial futures contracts, write, purchase or sell options on financial futures
contracts or write put options (except covered put options) or call options (except
covered call options) on portfolio securities unless it receives written confirmation
from S&amp;P that engaging in such transactions will not impair the ratings then assigned
to the shares of AMPS by S&amp;P, except that the Fund  </FONT></P>




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14</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR SIZE=5 noshade WIDTH=100% ALIGN=LEFT>





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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>may purchase or sell financial
futures contracts based on the Bond Buyer Municipal Bond Index (the &#147;Municipal Index&#148;)
or Treasury Bonds and write, purchase or sell put and call options on such contracts
(collectively, &#147;S&amp;P Hedging Transactions&#148;), subject to the following
limitations: </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
      the Fund will not engage in any S&amp;P Hedging Transaction based on the
      Municipal Index (other than transactions that terminate a financial futures
      contract or option held by the Fund by the Fund&#146;s taking an opposite
      position thereto (&#147;Closing Transactions&#148;)), that would cause the
      Fund at the time of such transaction to own or have sold the least of (A)
      more than 1,000 outstanding financial futures contracts based on the Municipal
      Index, (B) outstanding financial futures contracts based on the Municipal
      Index exceeding in number 25% of the quotient of the fair market value of
      the Fund&#146;s total assets divided by $1,000 or (C) outstanding financial
      futures contracts based on the Municipal Index exceeding in number 10% of
      the average number of daily traded financial futures contracts based on
      the Municipal Index in the 30 days preceding the time of effecting such
      transaction as reported by <i>The Wall Street Journal</i>; </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)
      the Fund will not engage in any S&amp;P Hedging Transaction based on Treasury
      Bonds (other than Closing Transactions) that would cause the Fund at the
      time of such transaction to own or have sold the lesser of (A) outstanding
      financial futures contracts based on Treasury Bonds exceeding in number
      50% of the quotient of the fair market value of the Fund&#146;s total assets
      divided by $100,000 ($200,000 in the case of the two-year United States
      Treasury Note) or (B) outstanding financial futures contracts based on Treasury
      Bonds exceeding in number 10% of the average number of daily traded financial
      futures contracts based on Treasury Bonds in the 30 days preceding the time
      of effecting such transaction as reported by <i>The Wall Street Journal</i>;
      </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)
the Fund will engage in Closing Transactions to close out any       outstanding financial
futures contract that the Fund owns or has sold or       any outstanding option thereon
owned by the Fund in the event (A) the Fund       does not have S&amp;P Eligible Assets
with an aggregate Discounted Value       equal to or greater than the AMPS Basic
Maintenance Amount on two       consecutive Valuation Dates and (B) the Fund is required
to pay Variation       Margin on the second such Valuation Date; </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)
the Fund will engage in a Closing Transaction to close out any       outstanding
financial futures contract or option thereon in the month       prior to the delivery
month under the terms of such financial futures       contract or option thereon unless
the Fund holds the securities       deliverable under such terms; and </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)
when the Fund writes a financial futures contract or an option       thereon, it will
either maintain an amount of cash, cash equivalents or       liquid assets in a
segregated account with the Fund&#146;s custodian, so       that the amount so segregated
plus the amount of Initial Margin and       Variation Margin held in the account of or on
behalf of the Fund&#146;s       broker with respect to such financial futures contract or
option equals       the fair market value of the financial futures contract or option,
or, in       the event the Fund writes a financial futures contract or option thereon
      that requires delivery of an underlying security, it shall hold such
      underlying security in its portfolio. </FONT>
</TD>
</TR>
</TABLE>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
purposes of determining whether the Fund has S&amp;P Eligible Assets with a Discounted
Value that equals or exceeds the AMPS Basic Maintenance Amount, the Discounted Value of
cash or securities held for the payment of Initial Margin or Variation Margin shall be
zero and the aggregate Discounted Value of S&amp;P Eligible Assets shall be reduced by an
amount equal to (i) 30% of the aggregate settlement value, as marked to market, of any
outstanding financial futures contracts based on the Municipal Index that are owned by
the Fund plus (ii) 25% of the aggregate settlement value, as marked to market, of any
outstanding financial futures contracts based on Treasury Bonds which contracts are owned
by the Fund. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Moody&#146;s Aaa
Rating Guidelines </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Discounted Value of the Fund&#146;s Moody&#146;s Eligible Assets is calculated on each
Valuation Date. See &#147;Description of AMPS &#151; Asset Maintenance &#151; AMPS Basic
Maintenance Amount.&#148; Moody&#146;s Eligible Assets include cash, Receivables for
Municipal Bonds Sold (as defined below), Rule 2a-7 Money Market Funds and Municipal Bonds
eligible for consideration under Moody&#146;s guidelines. For purposes of calculating the
Discounted Value of the Fund&#146;s portfolio under current Moody&#146;s guidelines, the
fair market value of Municipal Bonds eligible for consideration under such guidelines
must be discounted by the applicable Moody&#146;s Discount Factor set forth in the table
below. The Discounted Value of a Municipal Bond eligible for consideration under Moody&#146;s  </FONT></P>








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<BR>&nbsp;
<TABLE WIDTH=100%><TR><TD WIDTH=20% ALIGN=left><FONT SIZE=1>&nbsp;</FONT></TD><TD WIDTH=60% ALIGN=center><FONT SIZE="2">
15</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR SIZE=5 noshade WIDTH=100% ALIGN=LEFT>








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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>guidelines is the lower of
  par and the quotient of the fair market value thereof divided by the Moody&#146;s
  Discount Factor. The Moody&#146;s Discount Factor used to discount a particular
  Municipal Bond will be determined by reference to the rating by Moody&#146;s,
  S&amp;P or Fitch on such Municipal Bond, in accordance with the tables set forth
  below: </FONT></P>
<div align="center">
  <TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
    <TR VALIGN=Bottom>
      <TH COLSPAN=20><FONT SIZE=1>Moody&#146;s Rating Category (1)</FONT>
        <hr width=100% size="1" noshade>
      </TH>
    <TR VALIGN=Bottom>
      <TH COLSPAN=2><FONT SIZE=1>Aaa</FONT>
        <hr width=95% size="1" noshade>
      </TH>
      <TH>&nbsp;&nbsp;</TH>
      <TH COLSPAN=2><FONT SIZE=1>Aa</FONT>
        <hr width=95% size="1" noshade>
      </TH>
      <TH>&nbsp;&nbsp;</TH>
      <TH COLSPAN=2><FONT SIZE=1>A</FONT>
        <hr width=95% size="1" noshade>
      </TH>
      <TH>&nbsp;&nbsp;</TH>
      <TH COLSPAN=2> <font size="1">Baa</font>
        <hr width=95% size="1" noshade>
      </TH>
      <TH>&nbsp;&nbsp;</TH>
      <TH COLSPAN=2><FONT SIZE=1>Other (2)</FONT>
        <hr width=95% size="1" noshade>
      </TH>
    </TR>
    <TR VALIGN=Bottom align="center">
      <TD colspan="2"><FONT SIZE=2>151</FONT><FONT SIZE=2>%</FONT></TD>
      <TD>&nbsp;</TD>
      <TD colspan="2"><FONT SIZE=2>159</FONT><FONT SIZE=2>%</FONT></TD>
      <TD>&nbsp;</TD>
      <TD colspan="2"><FONT SIZE=2>160</FONT><FONT SIZE=2>%</FONT></TD>
      <TD>&nbsp;</TD>
      <TD colspan="2"><FONT SIZE=2>173</FONT><FONT SIZE=2>%</FONT></TD>
      <TD>&nbsp;</TD>
      <TD colspan="2"><FONT SIZE=2>225</FONT><FONT SIZE=2>%</FONT></TD>
    </TR>
  </TABLE>
</div>
<HR SIZE=1 noshade ALIGN=left  WIDTH=75>

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<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=left VALIGN=top><FONT SIZE="1">(1) </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">Ratings
assigned by S&amp;P or Fitch are generally accepted by Moody&#146;s      at face value.
However, adjustments to face value may be made to particular      categories of credits
for which the S&amp;P and/or Fitch rating does not      seem to approximate a Moody&#146;s
rating equivalent. Split rated      securities assigned by S&amp;P and Fitch will be
accepted at the lower of      the two ratings.</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Footnote Left" FSL="Workstation" -->
<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=left VALIGN=top><FONT SIZE="1">(2) </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">Municipal
Bonds rated Ba1 to B3 by Moody&#146;s or, if not rated by      Moody&#146;s, rated BB+ to
B- by S&amp;P or Fitch. In addition, Municipal      Bonds not explicitly rated by Moody&#146;s,
S&amp;P or Fitch, but rated at      least the equivalent of B3 internally by the
Investment Adviser, provided      that Moody&#146;s reviews and achieves sufficient
comfort with the      Investment Adviser&#146;s internal credit rating processes, will be
     included under &#147;Other&#148; in the table. Unless conclusions regarding
     liquidity risk as well as estimates of both the probability and severity of
     default for the Fund&#146;s assets can be derived from other sources as      well as
combined with a number of sources as presented by the Fund to      Moody&#146;s, unrated
Municipal Bonds which are rated at least the      equivalent of B3 by the Investment
Adviser internally are limited to 10% of      Moody&#146;s Eligible Assets.</FONT></TD></TR></TABLE>





<br>
<div align="center">
  <TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
    <TR VALIGN=Bottom>
      <TH COLSPAN=5><font size="1">Moody&#146;s Rating Category </font>
        <hr width=100% size="1" noshade>
      </TH>
    </TR>
    <TR VALIGN=Bottom align="center">
      <TD colspan="2"><b><font size=1>MIG-1, VMIG-1, P-1 (1) </font> </b>
        <hr width=100% size="1" noshade>
      </TD>
      <TD WIDTH=27%>&nbsp;</TD>
      <TD WIDTH=35% colspan="2"><b><font size=1>MIG-1, VMIG-1, P-1 (2) </font>
        </b>
        <hr width=100% size="1" noshade>
      </TD>
    </TR>
    <TR VALIGN=Bottom align="center">
      <TD colspan="2"><FONT SIZE=2>100</FONT><FONT SIZE=2>%</FONT></TD>
      <TD WIDTH=27%>&nbsp;</TD>
      <TD WIDTH=35% colspan="2"><FONT SIZE=2>136</FONT><FONT SIZE=2>%</FONT></TD>
    </TR>
  </TABLE>
</div>
<HR SIZE=1 noshade ALIGN=left  WIDTH=75>

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<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=left VALIGN=top><FONT SIZE="1">(1) </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">Moody&#146;s
rated Municipal Bonds that have a maturity less than or equal      to 49 days and
Municipal Bonds not rated by Moody&#146;s but rated the      equivalent to MIG-1, VMIG-1,
or P-1 by S&amp;P or Fitch that have a      maturity less than or equal to 49 days.</FONT></TD></TR></TABLE>

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<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=left VALIGN=top><FONT SIZE="1">(2) </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">Moody&#146;s
rated Municipal Bonds that have a maturity greater than 49      days and Municipal Bonds
not rated by Moody&#146;s but rated the equivalent      to MIG-1, VMIG-1, or P-1 by S&amp;P
or Fitch that have a maturity greater      than 49 days.</FONT></TD></TR></TABLE>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding
the foregoing, no Moody&#146;s Discount Factor will be applied to cash or to Receivables
for Municipal Bonds Sold that are due within five Business Days of such Valuation Date.
The Moody&#146;s Discount Factor for Receivables for Municipal Bonds Sold that are due
within six and 30 Business Days of such Valuation Date will be the Moody&#146;s Discount
Factor applicable to the Municipal Bonds sold. &#147;Receivables for Municipal Bonds Sold,&#148;for
purposes of calculating Moody&#146;s Eligible Assets as of any Valuation Date, means the
book value of receivables for Municipal Bonds sold as of or prior to such Valuation Date
if such receivables are due within 30 Business Days of such Valuation Date. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Moody&#146;s Discount Factor for Inverse Floaters shall be the product of (x) the
percentage determined by reference to the rating on the security underlying such Inverse
Floaters multiplied by (y) 1.25. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Moody&#146;s Discount Factor for Rule 2a-7 Money Market Funds shall be 110%. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Moody&#146;s guidelines impose certain requirements as to minimum issue size,
  issuer diversification and geographical concentration, as well as other requirements
  for purposes of determining whether Municipal Bonds constitute Moody&#146;s
  Eligible Assets, as set forth in the table on the following page: </FONT></P>
<div align="center">
  <TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
    <TR VALIGN=Bottom align="center">
      <TD><b><font size="1">Rating </font> </b>
        <hr width=35 size="1" noshade>
      </TD>
      <TD>&nbsp;</TD>
      <TD><b><font size="1">Minimum Issue Size <br>
        ($ Millions) </font> </b>
        <hr width=95 size="1" noshade>
      </TD>
      <TD>&nbsp;</TD>
      <td><b><font size="1">Maximum Underlying <br>
        Obligor (%) (1) </font> </b>
        <hr width=110 size="1" noshade>
      </td>
      <td>&nbsp;</td>
      <td><b><font size="1">Maximum State <br>
        Allowed (%) (1) (3) </font> </b>
        <hr width=100 size="1" noshade>
      </td>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=center><font size="2">Aaa</font></TD>
      <TD ALIGN=LEFT><font size="2">&nbsp;&nbsp;</font></TD>
      <TD ALIGN=center><font size="2">*</font></TD>
      <TD ALIGN=center><font size="2">&nbsp;&nbsp;</font></TD>
      <td align=center><font size="2">100</font></td>
      <td align=center><font size="2">&nbsp;&nbsp;&nbsp;</font></td>
      <td align=center><font size="2">100</font></td>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=center><font size="2">&nbsp;&nbsp;&nbsp;Aa</font></TD>
      <TD ALIGN=LEFT><font size="2">&nbsp;</font></TD>
      <TD ALIGN=center><font size="2">10</font></TD>
      <TD ALIGN=center><font size="2">&nbsp;</font></TD>
      <TD ALIGN=center><font size="2">20</font></TD>
      <TD ALIGN=center><font size="2">&nbsp;</font></TD>
      <TD ALIGN=center><font size="2">60</font></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=center><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;A</font></TD>
      <TD ALIGN=LEFT><font size="2">&nbsp;</font></TD>
      <TD ALIGN=center><font size="2">10</font></TD>
      <TD ALIGN=center><font size="2">&nbsp;</font></TD>
      <TD ALIGN=center><font size="2">10</font></TD>
      <TD ALIGN=center><font size="2">&nbsp;</font></TD>
      <TD ALIGN=center><font size="2">40</font></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=center><font size="2">&nbsp;&nbsp;&nbsp;Baa</font></TD>
      <TD ALIGN=LEFT><font size="2">&nbsp;</font></TD>
      <TD ALIGN=center><font size="2">10</font></TD>
      <TD ALIGN=center><font size="2">&nbsp;</font></TD>
      <TD ALIGN=center><font size="2">6</font></TD>
      <TD ALIGN=center><font size="2">&nbsp;</font></TD>
      <TD ALIGN=center><font size="2">20</font></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=center><font size="2">&nbsp;&nbsp;&nbsp;Ba</font></TD>
      <TD ALIGN=LEFT><font size="2">&nbsp;</font></TD>
      <TD ALIGN=center><font size="2">10</font></TD>
      <TD ALIGN=center><font size="2">&nbsp;</font></TD>
      <TD ALIGN=center><font size="2">4</font></TD>
      <TD ALIGN=center><font size="2">&nbsp;</font></TD>
      <TD ALIGN=center><font size="2">12</font></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=center><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;B</font></TD>
      <TD ALIGN=LEFT><font size="2">&nbsp;</font></TD>
      <TD ALIGN=center><font size="2">10</font></TD>
      <TD ALIGN=center><font size="2">&nbsp;</font></TD>
      <TD ALIGN=center><font size="2">3</font></TD>
      <TD ALIGN=center><font size="2">&nbsp;</font></TD>
      <TD ALIGN=center><font size="2">12</font></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=center><font size="2">Other (2)</font></TD>
      <TD ALIGN=LEFT><font size="2">&nbsp;</font></TD>
      <TD ALIGN=center><font size="2">10</font></TD>
      <TD ALIGN=center><font size="2">&nbsp;</font></TD>
      <TD ALIGN=center><font size="2">2</font></TD>
      <TD ALIGN=center><font size="2">&nbsp;</font></TD>
      <TD ALIGN=center><font size="2">12</font></TD>
    </TR>
  </TABLE>

</div>
<HR SIZE=1 noshade ALIGN=left  WIDTH=75>

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<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="1">* </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">Not
applicable.</FONT></TD></TR></TABLE>

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<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="1">(1) </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">The
referenced percentages represent maximum cumulative totals for the related rating
category and each lower rating category. </FONT></TD></TR></TABLE>

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<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="1">(2) </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">Municipal
Bonds not rated by Moody&#146;s, S&amp;P or Fitch, but rated at least the equivalent of
B3 internally by the Investment Adviser. </FONT></TD></TR></TABLE>

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<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="1">(3) </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">Territorial
bonds (other than those issued by Puerto Rico and counted collectively) are each limited
to 10% of Moody&#146;s Eligible Assets. For diversification purposes, Puerto Rico will be
treated as a state.</FONT></TD></TR></TABLE>



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<BR>&nbsp;
<TABLE WIDTH=100%><TR><TD WIDTH=20% ALIGN=left><FONT SIZE=1>&nbsp;</FONT></TD><TD WIDTH=60% ALIGN=center><FONT SIZE="2">
16</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR SIZE=5 noshade WIDTH=100% ALIGN=LEFT>





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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
purposes of the maximum underlying obligor requirement described above, any Municipal
Bond backed by the guaranty, letter of credit or insurance issued by a third party will
be deemed to be issued by such third party if the issuance of such third party credit is
the sole determinant of the rating on such Bond. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current
Moody&#146;s guidelines also require that Municipal Bonds constituting Moody&#146;s
Eligible Assets pay interest in cash, are publicly rated B3 or higher by Moody&#146;s or,
if not rated by Moody&#146;s, but rated by S&amp;P or Fitch, are publicly rated at least
B- by S&amp;P or Fitch, or if not explicitly rated by Moody&#146;s, S&amp;P or Fitch, be
rated at least the equivalent of B3 internally by the Investment Adviser, provided that
Moody&#146;s reviews and achieves sufficient comfort with the Investment Adviser&#146;s
internal credit rating processes, not have suspended ratings by Moody&#146;s, if an
Inverse Floater, be explicitly rated by Moody&#146;s, and be part of an issue of
Municipal Bonds of at least $10,000,000 (except for issues rated Aaa by Moody&#146;s, as
provided in the chart above). </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When
the Fund sells a Municipal Bond and agrees to repurchase it at a future date, the
Discounted Value of such Municipal Bond will constitute a Moody&#146;s Eligible Asset and
the amount the Fund is required to pay upon repurchase of such Bond will count as a
liability for purposes of calculating the AMPS Basic Maintenance Amount. For so long as
the AMPS are rated by Moody&#146;s, the Fund will not enter into any such reverse
repurchase agreements unless it has received written confirmation from Moody&#146;s that
such transactions would not impair the rating then assigned the AMPS by Moody&#146;s.
When the Fund purchases a Municipal Bond and agrees to sell it at a future date to
another party, cash receivable by the Fund thereby will constitute a Moody&#146;s
Eligible Asset if the long-term debt of such other party is rated at least A2 by Moody&#146;s
and such agreement has a term of 30 days or less; otherwise the Discounted Value of such
Bond will constitute a Moody&#146;s Eligible Asset. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;High
Yield Municipal Bonds may comprise no more than 20% of Moody&#146;s Eligible Assets.
Unless conclusions regarding liquidity risk as well as estimates of both the probability
and severity of default for the Fund&#146;s assets can be derived from other sources as
well as combined with a number of sources as presented by the Fund to Moody&#146;s,
unrated High Yield Municipal Bonds which are rated at least the equivalent of B3 by the
Investment Adviser internally are limited to 10% of Moody&#146;s Eligible Assets. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inverse
Floaters, including primary market and secondary market residual interest bonds, may
constitute no more than 10% of Moody&#146;s Eligible Assets. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding
the foregoing, an asset will not be considered a Moody&#146;s Eligible Asset if it is (i)
held in a margin account, (ii) subject to any material lien, mortgage, pledge, security
interest or security agreement of any kind, (iii) held for the purchase of a security
pursuant to a Forward Commitment or (iv) irrevocably deposited by the Fund for the
payment of dividends or redemption. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
so long as shares of AMPS are rated by Moody&#146;s, in managing the Fund&#146;s
portfolio, the Investment Adviser will not alter the composition of the Fund&#146;s
portfolio if, in the reasonable belief of the Investment Adviser, the effect of any such
alteration would be to cause the Fund to have Moody&#146;s Eligible Assets with an
aggregate Discounted Value, as of the immediately preceding Valuation Date, less than the
AMPS Basic Maintenance Amount as of such Valuation Date; provided, however, that in the
event that, as of the immediately preceding Valuation Date, the aggregate Discounted
Value of Moody&#146;s Eligible Assets exceeded the AMPS Basic Maintenance Amount by 5% or
less, the Investment Adviser will not alter the composition of the Fund&#146;s portfolio
in a manner reasonably expected to reduce the aggregate Discounted Value of Moody&#146;s
Eligible Assets unless the Fund shall have confirmed that, after giving effect to such
alteration, the aggregate Discounted Value of Moody&#146;s Eligible Assets would exceed
the AMPS Basic Maintenance Amount. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
so long as any shares of AMPS are rated by Moody&#146;s, the Fund will not engage in Bond
Market Association Municipal Swap Index swap transactions (&#147;BMA swap transactions&#148;),
buy or sell financial futures contracts, write, purchase or sell call options on
financial futures contracts or purchase put options on financial futures contracts or
write call options (except covered call options) on portfolio securities unless it
receives written confirmation from Moody&#146;s that engaging in such transactions would
not impair the ratings then assigned to the shares of AMPS by Moody&#146;s, except that
the Fund may engage in BMA swap transactions, purchase or sell exchange-traded financial
futures contracts based on any index approved by Moody&#146;s or Treasury Bonds, and  </FONT></P>









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<BR>&nbsp;
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17</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR SIZE=5 noshade WIDTH=100% ALIGN=LEFT>







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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>purchase, write or sell
exchange-traded put options on such financial futures contracts, and purchase, write or
sell exchange-traded call options on such financial futures contracts (collectively,
&#147;Moody&#146;s Hedging Transactions&#148;), subject to the following limitations: </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
the Fund will not engage in any Moody&#146;s Hedging Transaction       based on the
Municipal Index (other than Closing Transactions) that would       cause the Fund at the
time of such transaction to own or have sold (A)       outstanding financial futures
contracts based on the Municipal Index       exceeding in number 10% of the average
number of daily traded financial       futures contracts based on the Municipal Index in
the 30 days preceding       the time of effecting such transaction as reported by The
Wall Street       Journal or (B) outstanding financial futures contracts based on the
      Municipal Index having a fair market value exceeding 50% of the fair       market
value of all Municipal Bonds constituting Moody&#146;s Eligible       Assets owned by the
Fund (other than Moody&#146;s Eligible Assets already       subject to a Moody&#146;s
Hedging Transaction); </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)
the Fund will not engage in any Moody&#146;s Hedging Transaction       based on Treasury
Bonds (other than Closing Transactions) that would cause       the Fund at the time of
such transaction to own or have sold (A)       outstanding financial futures contracts
based on Treasury Bonds having an       aggregate fair market value exceeding 40% of the
aggregate fair market       value of Moody&#146;s Eligible Assets owned by the Fund and
rated Aa by       Moody&#146;s (or, if not rated by Moody&#146;s but rated by S&amp;P,
rated       AAA by S&amp;P) or (B) outstanding financial futures contracts based on
      Treasury Bonds having an aggregate fair market value exceeding 80% of the
      aggregate fair market value of all Municipal Bonds constituting       Moody&#146;s
Eligible Assets owned by the Fund (other than Moody&#146;s       Eligible Assets already
subject to a Moody&#146;s Hedging Transaction) and       rated Baa or A by Moody&#146;s
(or, if not rated by Moody&#146;s but rated       by S&amp;P, rated A or AA by S&amp;P)
(for purposes of the foregoing       clauses (i) and (ii), the Fund shall be deemed to
own the number of       financial futures contracts that underlie any outstanding options
written       by the Fund); </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)
the Fund will engage in Closing Transactions to close out any       outstanding financial
futures contract based on the Municipal Index if the       amount of open interest in the
Municipal Index as reported by The Wall       Street Journal is less than 5,000; </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)
the Fund will engage in a Closing Transaction to close out any       outstanding
financial futures contract by no later than the fifth Business       Day of the month in
which such contract expires and will engage in a       Closing Transaction to close out
any outstanding option on a financial       futures contract by no later than the first
Business Day of the month in       which such option expires; </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)
the Fund will engage in Moody&#146;s Hedging Transactions only       with respect to
financial futures contracts or options thereon having the       next settlement date or
the settlement date immediately thereafter; </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)
the Fund (A) will not engage in options and futures transactions       for leveraging or
speculative purposes, except that the Fund may engage in       an option or futures
transaction so long as the combination of the       Fund&#146;s non-derivative positions,
together with the relevant option or       futures transaction, produces a synthetic
investment position, or the same       economic result, that could be achieved by an
investment, consistent with       the Fund&#146;s investment objective and policies, in a
security that is       not an option or futures transaction, subject to the Investment
Adviser       periodically demonstrating to Moody&#146;s that said economic results are
      achieved, and (B) will not write any call options or sell any financial
      futures contracts for the purpose of hedging the anticipated purchase of       an
asset prior to completion of such purchase; </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii)
the Fund will not enter into an option or futures transaction       unless, after giving
effect thereto, the Fund would continue to have       Moody&#146;s Eligible Assets with
an aggregate Discounted Value equal to       or greater than the AMPS Basic Maintenance
Amount; and </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii)
the Fund will not engage in BMA swap transactions with respect       to more than 20% of
the Fund&#146;s net assets; provided that the       Fund&#146;s use of futures will
proportionately decrease as the       Fund&#146;s use of BMA swap transactions increases,
and vice-versa. </FONT>
</TD>
</TR>
</TABLE>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
purposes of determining whether the Fund has Moody&#146;s Eligible Assets with an
aggregate Discounted Value that equals or exceeds the AMPS Basic Maintenance Amount, the
Discounted Value of Moody&#146;s Eligible Assets that the Fund is obligated to deliver or
receive pursuant to an outstanding futures contract or option shall  </FONT></P>





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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>be as follows: (i) assets subject to
call options written by the Fund that are either exchange-traded and &#147;readily
reversible&#148; or that expire within 49 days after the date as of which such valuation
is made shall be valued at the lesser of (A) Discounted Value and (B) the exercise price
of the call option written by the Fund; (ii) assets subject to call options written by
the Fund not meeting the requirements of clause (i) of this sentence shall have no value;
(iii) assets subject to put options written by the Fund shall be valued at the lesser of
(A) the exercise price and (B) the Discounted Value of the subject security; (iv) futures
contracts shall be valued at the lesser of (A) settlement price and (B) the Discounted
Value of the subject security, provided that, if a contract matures within 49 days after
the date as of which such valuation is made, where the Fund is the seller the contract
may be valued at the settlement price and where the Fund is the buyer the contract may be
valued at the Discounted Value of the subject securities; and (v) where delivery may be
made to the Fund with any security of a class of securities, the Fund shall assume that
it will take delivery of the security with the lowest Discounted Value. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
purposes of determining whether the Fund has Moody&#146;s Eligible Assets with an
aggregate Discounted Value that equals or exceeds the AMPS Basic Maintenance Amount, the
following amounts shall be subtracted from the aggregate Discounted Value of the Moody&#146;s
Eligible Assets held by the Fund: (i) 10% of the exercise price of a written call option;
(ii) the exercise price of any written put option; (iii) where the Fund is the seller
under a financial futures contract, 10% of the settlement price of the financial futures
contract; (iv) where the Fund is the purchaser under a financial futures contract, the
settlement price of assets purchased under such financial futures contract; (v) the
settlement price of the underlying financial futures contract if the Fund writes put
options on a financial futures contract; and (vi) 105% of the fair market value of the
underlying financial futures contracts if the Fund writes call options on a financial
futures contract and does not own the underlying contract. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
so long as any shares of AMPS are rated by Moody&#146;s, the Fund will not enter into any
contract to purchase securities for a fixed price at a future date beyond customary
settlement time (other than such contracts that constitute Moody&#146;s Hedging
Transactions), except that the Fund may enter into such contracts to purchase
newly-issued securities on the date such securities are issued (&#147;Forward Commitments&#148;),
subject to the following limitations: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
the Fund will maintain in a segregated account with its custodian       cash, cash
equivalents or short-term, fixed-income securities rated P-1,       MIG-1 or VMIG-1 by
Moody&#146;s and maturing prior to the date of the       Forward Commitment with a fair
market value that equals or exceeds the       amount of the Fund&#146;s obligations under
any Forward Commitments to       which it is from time to time a party or long-term,
fixed income       securities with a Discounted Value that equals or exceeds the amount
of       the Fund&#146;s obligations under any Forward Commitment to which it is
      from time to time a party, and </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)
the Fund will not enter into a Forward Commitment unless, after       giving effect
thereto, the Fund would continue to have Moody&#146;s       Eligible Assets with an
aggregate Discounted Value equal to or greater       than the AMPS Basic Maintenance
Amount. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
purposes of determining whether the Fund has Moody&#146;s Eligible Assets with an
aggregate Discounted Value that equals or exceeds the AMPS Basic Maintenance Amount, the
Discounted Value of all Forward Commitments to which the Fund is a party and of all
securities deliverable to the Fund pursuant to such Forward Commitments shall be zero. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
so long as shares of AMPS are rated by S&amp;P or Moody&#146;s, the Fund, unless it has
received written confirmation from S&amp;P and/or Moody&#146;s, as the case may be, that
such action would not impair the ratings then assigned to the AMPS by S&amp;P and/or Moody&#146;s,
as the case may be, will not (i) borrow money except for the purpose of clearing
transactions in portfolio securities (which borrowings under any circumstances shall be
limited to the lesser of $10 million and an amount equal to 5% of the fair market value
of the Fund&#146;s assets at the time of such borrowings and which borrowings shall be
repaid within 60 days and not be extended or renewed and shall not cause the aggregate
Discounted Value of Moody&#146;s Eligible Assets and S&amp;P Eligible Assets to be less
than the AMPS Basic Maintenance Amount), (ii) engage in short sales of securities, (iii)
lend any securities, (iv) issue any class or series of stock ranking prior to or on a
parity with the AMPS with respect to the payment of  </FONT></P>






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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>dividends or the distribution of
assets upon dissolution, liquidation or winding up of the Fund, (v) reissue any AMPS
previously purchased or redeemed by the Fund, (vi) merge or consolidate into or with any
other corporation or entity, (vii) change the Fund&#146;s pricing service or (viii)
engage in reverse repurchase agreements. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
as long as the AMPS are rated by S&amp;P, the Fund will not, unless it has received
written confirmation from S&amp;P that such action would not impair the rating then
assigned to the shares of AMPS by S&amp;P, engage in interest rate swaps, caps and
floors, except that the Fund may, without obtaining the written consent described above,
engage in swaps, caps and floors if: (i) the counterparty to the swap transaction has a
short-term rating of A-1 or, if the counterparty does not have a short-term rating, the
counterparty&#146;s senior unsecured long-term debt rating is A- or higher, (ii) the
original aggregate notional amount of the interest rate swap transaction or transactions
is not to be greater than the liquidation preference of the AMPS, (iii) the interest rate
swap transaction will be marked-to-market weekly by the swap counterparty, (iv) if the
Fund fails to maintain an aggregate discounted value at least equal to the AMPS Basic
Maintenance Amount on two consecutive Valuation Dates then the agreement shall terminate
immediately, (v) for the purpose of calculating the Discounted Value of S&amp;P Eligible
Assets, 90% of any positive mark-to-market valuation of the Fund&#146;s rights will be S&amp;P
Eligible Assets, 100% of any negative mark-to-market valuation of the Fund&#146;s rights
will be included in the calculation of the AMPS Basic Maintenance Amount, and (vi) the
Fund must maintain liquid assets with a value at least equal to the net amount of the
excess, if any, of the Fund&#146;s obligations over its entitlement with respect to each
swap. For caps/floors, the Fund must maintain liquid assets with a value at least equal
to the Fund&#146;s obligations with respect to such caps or floors. </FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>DIRECTORS AND
OFFICERS </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Directors of the Fund consist of eight individuals, seven of whom are not &#147;interested
persons&#148; of the Fund as defined in the 1940 Act (the &#147;non-interested Directors&#148; or
&#147;independent Directors&#148;). The Directors are responsible for the oversight of
the operations of the Fund and perform the various duties imposed on the directors of
investment companies by the 1940 Act. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
non-interested Director is a member of the Fund&#146;s Audit Committee (the &#147;Audit
Committee&#148;). The principal responsibilities of the Audit Committee are the
appointment, compensation, retention and oversight of the Fund&#146;s independent
registered public accounting firm, including the resolution of disagreements regarding
financial reporting between Fund management and such independent registered public
accounting firm. The Audit Committee&#146;s responsibilities include, without limitation,
to (i) review with the independent registered public accounting firm the arrangements for
and scope of annual and special audits and any other services provided by the independent
registered public accounting firm to the Fund; (ii) review with the independent
registered public accounting firm any audit problems or difficulties encountered during
or relating to the conduct of the audit; (iii) ensure that the independent registered
public accounting firm submits on a periodic basis a formal written statement with
respect to their independence, discuss with the independent registered public accounting
firm any relationships or services that may impact the objectivity and independence of
the Fund&#146;s independent registered public accounting firm; and (iv) consider
information and comments of the independent registered public accounting firm with
respect to the Fund&#146;s accounting and financial reporting policies, procedures and
internal control over financial reporting and Fund management&#146;s responses thereto.
The Board of Directors of the Fund has adopted a written charter for the Audit Committee.
The Audit Committee has retained independent legal counsel to assist it in connection
with these duties. The Audit Committee met four times during the Fund&#146;s fiscal year
ended October 31, 2004. </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Roberta
Cooper Ramo, Herbert I. London and Robert S. Salomon, Jr. are the members of the Fund&#146;s
Nominating Committee (the &#147;Nominating Committee&#148;). The principal
responsibilities of the Nominating Committee are to identify individuals qualified to
serve as non-interested Directors of the Fund and to recommend its nominees for
consideration by the full Board. While the Nominating Committee is solely responsible for
the selection and nomination of the Fund&#146;s non-interested Directors, the Nominating
Committee may consider nominations for the office of the Director made by Fund
stockholders in such manner as it deems appropriate. Fund stockholders who wish to
recommend a nominee should send nominations to the Secretary of the Fund that include
biographical information and set forth the qualifications of the proposed nominee. The
Nominating Committee did not meet during the Fund&#146;s fiscal year ended October 31,
2004. </FONT></P>







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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Biographical
Information </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain
  biographical and other information relating to the non-interested Directors
  of the Fund is set forth below, including their ages, their principal occupations
  for at least the last five years, the length of time served, the total number
  of portfolios overseen in the complex of funds advised by the Investment Adviser,
  Merrill Lynch Investment Managers, L.P. (&#147;MLIM&#148;) or their affiliates
  (&#147;MLIM/FAM-advised funds&#148;) and other public directorships. </FONT></P>

<div align="center">
  <table border=0 cellspacing=0 cellpadding=0 width="700">
    <tr align="center" valign="bottom">
      <td width=136> <b><font size="1">Name, <br>
        Address* and <br>
        Age of Director </font></b>
        <hr size="1" noshade>
      </td>
      <td width=14><b>&nbsp;&nbsp; </b></td>
      <td width=55> <b><font size="1">Position(s) <br>
        Held with <br>
        the Fund </font></b>
        <hr size="1" noshade>
      </td>
      <td width=15><b>&nbsp;&nbsp; </b></td>
      <td width=73> <b><font size="1">Term of <br>
        Office** and <br>
        Length of <br>
        Time Served </font></b>
        <hr size="1" noshade>
      </td>
      <td width=15><b>&nbsp;&nbsp; </b></td>
      <td width=216> <b><font size="1">Principal Occupation(s) <br>
        During the Past Five Years </font></b>
        <hr size="1" noshade>
      </td>
      <td width=14><b>&nbsp;&nbsp; </b></td>
      <td width=74> <b><font size="1">Number of <br>
        MLIM/FAM- <br>
        Advised Funds <br>
        and Portfolios <br>
        Overseen </font></b>
        <hr size="1" noshade>
      </td>
      <td width=20><b>&nbsp;&nbsp; </b></td>
      <td width=68> <b><font size="1">Public <br>
        Directorships </font></b>
        <hr size="1" noshade>
      </td>
    </tr>
    <tr align="left">
      <td valign=top width=136>&nbsp;</td>
      <td valign=top width=14>&nbsp;</td>
      <td valign=top width=55>&nbsp;</td>
      <td valign=top width=15>&nbsp;</td>
      <td valign=top width=73>&nbsp;</td>
      <td valign=top width=15>&nbsp;</td>
      <td valign=top width=216>&nbsp;</td>
      <td valign=top width=14>&nbsp;</td>
      <td valign=top width=74>&nbsp;</td>
      <td valign=top width=20>&nbsp;</td>
      <td valign=top width=68>&nbsp;</td>
    </tr>
    <tr align="left">
      <td valign=top width=136> <font size="1">James H. Bodurtha (61) ***</font></td>
      <td valign=top width=14>&nbsp; </td>
      <td valign=top width=55> <font size="1">Director</font></td>
      <td valign=top width=15>&nbsp; </td>
      <td valign=top width=73> <font size="1">Director since 1995 and Co-Chairman
        of the Board since 2005</font></td>
      <td valign=top width=15>&nbsp; </td>
      <td valign=top width=216> <font size="1">Director, The China Business Group,
        Inc. since 1996 and Executive Vice President thereof from 1996 to 2003;
        Chairman of the Board, Berkshire Holding Corporation since 1980; Partner,
        Squire, Sanders &amp; Dempsey from 1980 to 1993.</font></td>
      <td valign=top width=14>&nbsp; </td>
      <td valign=top width=74> <font size="1">39 registered investment companies
        consisting of <br>
        59 portfolios</font></td>
      <td valign=top width=20>&nbsp; </td>
      <td valign=top width=68> <font size="1">None</font></td>
    </tr>
    <tr align="left">
      <td valign=top width=136>&nbsp;</td>
      <td valign=top width=14>&nbsp;</td>
      <td valign=top width=55>&nbsp;</td>
      <td valign=top width=15>&nbsp;</td>
      <td valign=top width=73>&nbsp;</td>
      <td valign=top width=15>&nbsp;</td>
      <td valign=top width=216>&nbsp;</td>
      <td valign=top width=14>&nbsp;</td>
      <td valign=top width=74>&nbsp;</td>
      <td valign=top width=20>&nbsp;</td>
      <td valign=top width=68>&nbsp;</td>
    </tr>
    <tr align="left">
      <td valign=top width=136> <font size="1">Kenneth A. Froot (48)</font></td>
      <td valign=top width=14>&nbsp; </td>
      <td valign=top width=55> <font size="1">Director</font></td>
      <td valign=top width=15>&nbsp; </td>
      <td valign=top width=73> <font size="1">Director since 2005</font></td>
      <td valign=top width=15>&nbsp; </td>
      <td valign=top width=216> <font size="1">Professor, Harvard University,
        since 1992.</font></td>
      <td valign=top width=14>&nbsp; </td>
      <td valign=top width=74> <font size="1">39 registered investment companies
        consisting of <br>
        59 portfolios</font></td>
      <td valign=top width=20>&nbsp; </td>
      <td valign=top width=68> <font size="1">None</font></td>
    </tr>
    <tr align="left">
      <td valign=top width=136>&nbsp;</td>
      <td valign=top width=14>&nbsp;</td>
      <td valign=top width=55>&nbsp;</td>
      <td valign=top width=15>&nbsp;</td>
      <td valign=top width=73>&nbsp;</td>
      <td valign=top width=15>&nbsp;</td>
      <td valign=top width=216>&nbsp;</td>
      <td valign=top width=14>&nbsp;</td>
      <td valign=top width=74>&nbsp;</td>
      <td valign=top width=20>&nbsp;</td>
      <td valign=top width=68>&nbsp;</td>
    </tr>
    <tr align="left">
      <td valign=top width=136> <font size="1">Joe Grills (70) ***</font></td>
      <td valign=top width=14>&nbsp; </td>
      <td valign=top width=55> <font size="1">Director</font></td>
      <td valign=top width=15>&nbsp; </td>
      <td valign=top width=73> <font size="1">Director since 2002 and Co-Chairman
        of the Board since 2005</font></td>
      <td valign=top width=15>&nbsp; </td>
      <td valign=top width=216> <font size="1">Member of the Committee of Investment
        of Employee Benefit Assets of the Association of Financial Professionals
        (&#147;CIEBA&#148;) since 1986; Member of CIEBA&#146;s Executive Committee
        since 1988 and its Chairman from 1991 to 1992; Assistant Treasurer of
        International Business Machines Corporation (&#147;IBM&#148;) and Chief
        Investment Officer of IBM Retirement Funds from 1986 to 1993; Member of
        the Investment Advisory Committee of the State of New York Common Retirement
        Fund since 1989; Member of the Investment Advisory Committee of the Howard
        Hughes Medical Institute from 1997 to 2000; Director, Duke University
        Management Company from 1992 to 2004, Vice Chairman thereof from 1998
        to 2004, and Director Emeritus thereof since 2004; Director, LaSalle Street
        Fund from 1995 to 2001; Director, Kimco Realty Corporation since 1997;
        Member of the Investment Advisory Committee of the Virginia Retirement
        System since 1998, Vice Chairman thereof from 2002 to 2005, and Chairman
        thereof since 2005; Director, Montpelier Foundation since 1998 and its
        Vice Chairman since 2000; Member of the Investment Committee of the Woodberry
        Forest School since 2000; Member of the Investment Committee of the National
        Trust for Historic Preservation since 2000.</font></td>
      <td valign=top width=14>&nbsp; </td>
      <td valign=top width=74> <font size="1">39 registered investment companies
        consisting of <br>
        59 portfolios</font></td>
      <td valign=top width=20>&nbsp; </td>
      <td valign=top width=68> <font size="1">Kimco Realty Corporation</font></td>
    </tr>
  </table>
 </div>


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<p>

<div align="center">
  <table border=0 cellspacing=0 cellpadding=0 width="700">
    <tr align="center" valign="bottom">
      <td width=136> <b><font size="1">Name, <br>
        Address* and <br>
        Age of Director </font></b>
        <hr size="1" noshade>
      </td>
      <td width=14><b>&nbsp;&nbsp; </b></td>
      <td width=55> <b><font size="1">Position(s) <br>
        Held with <br>
        the Fund </font></b>
        <hr size="1" noshade>
      </td>
      <td width=15><b>&nbsp;&nbsp; </b></td>
      <td width=73> <b><font size="1">Term of <br>
        Office** and <br>
        Length of <br>
        Time Served </font></b>
        <hr size="1" noshade>
      </td>
      <td width=15><b>&nbsp;&nbsp; </b></td>
      <td width=216> <b><font size="1">Principal Occupation(s) <br>
        During the Past Five Years </font></b>
        <hr size="1" noshade>
      </td>
      <td width=14><b>&nbsp;&nbsp; </b></td>
      <td width=74> <b><font size="1">Number of <br>
        MLIM/FAM- <br>
        Advised Funds <br>
        and Portfolios <br>
        Overseen </font></b>
        <hr size="1" noshade>
      </td>
      <td width=20><b>&nbsp;&nbsp; </b></td>
      <td width=68> <b><font size="1">Public <br>
        Directorships </font></b>
        <hr size="1" noshade>
      </td>
    </tr>
    <tr align="left">
      <td valign=top width=136>&nbsp;</td>
      <td valign=top width=14>&nbsp;</td>
      <td valign=top width=55>&nbsp;</td>
      <td valign=top width=15>&nbsp;</td>
      <td valign=top width=73>&nbsp;</td>
      <td valign=top width=15>&nbsp;</td>
      <td valign=top width=216>&nbsp;</td>
      <td valign=top width=14>&nbsp;</td>
      <td valign=top width=74>&nbsp;</td>
      <td valign=top width=20>&nbsp;</td>
      <td valign=top width=68>&nbsp;</td>
    </tr>
    <tr align="left">
      <td valign=top width=136> <font size="1">Herbert I. London (66)</font></td>
      <td valign=top width=14>&nbsp; </td>
      <td valign=top width=55> <font size="1">Director</font></td>
      <td valign=top width=15>&nbsp; </td>
      <td valign=top width=73> <font size="1">Director since 1992</font></td>
      <td valign=top width=15>&nbsp; </td>
      <td valign=top width=216> <font size="1">John M. Olin professor of Humanities,
        New York University since 1993 and Professor thereof since 1980; President,
        Hudson Institute since 1997 and Trustee thereof since 1980; Dean, Gallatin
        Division of New York University from 1976 to 1993; Distinguished Fellow,
        Herman Kahn Chair, Hudson Institute from 1984 to 1985; Director, Damon
        Corp. from 1991 to 1995; Overseer, Center for Naval Analyses from 1983
        to 1993; Limited Partner, Hypertech LP since 1996.</font></td>
      <td valign=top width=14>&nbsp; </td>
      <td valign=top width=74> <font size="1">39 registered investment companies
        consisting of <br>
        59 portfolios</font></td>
      <td valign=top width=20>&nbsp; </td>
      <td valign=top width=68> <font size="1">None</font></td>
    </tr>
    <tr align="left">
      <td valign=top width=136>&nbsp;</td>
      <td valign=top width=14>&nbsp;</td>
      <td valign=top width=55>&nbsp;</td>
      <td valign=top width=15>&nbsp;</td>
      <td valign=top width=73>&nbsp;</td>
      <td valign=top width=15>&nbsp;</td>
      <td valign=top width=216>&nbsp;</td>
      <td valign=top width=14>&nbsp;</td>
      <td valign=top width=74>&nbsp;</td>
      <td valign=top width=20>&nbsp;</td>
      <td valign=top width=68>&nbsp;</td>
    </tr>
    <tr align="left">
      <td valign=top width=136> <font size="1">Roberta Cooper Ramo (63) ****</font></td>
      <td valign=top width=14>&nbsp; </td>
      <td valign=top width=55> <font size="1">Director</font></td>
      <td valign=top width=15>&nbsp; </td>
      <td valign=top width=73> <font size="1">Director since 1999</font></td>
      <td valign=top width=15>&nbsp; </td>
      <td valign=top width=216> <font size="1">Shareholder, Modrall, Sperling,
        Roehl, Harris &amp; Sisk, P.A. since 1993; President, American Bar Association
        from 1995 to 1996 and Member of the Board of Governors thereof from 1994
        to 1997; Shareholder, Poole, Kelly &amp; Ramo, Attorneys at Law, P.C.
        from 1977 to 1993; Director, Coopers, Inc. since 1999; Director of ECMC
        Group (service provider to students, schools and lenders) since 2001;
        Director, United New Mexico Bank (now Wells Fargo) from 1983 to 1988;
        Director, First National Bank of New Mexico (now Wells Fargo) from 1975
        to 1976.</font></td>
      <td valign=top width=14>&nbsp; </td>
      <td valign=top width=74> <font size="1">39 registered investment companies
        consisting of <br>
        59 portfolios</font></td>
      <td valign=top width=20>&nbsp; </td>
      <td valign=top width=68> <font size="1">None</font></td>
    </tr>
    <tr align="left">
      <td valign=top width=136>&nbsp;</td>
      <td valign=top width=14>&nbsp;</td>
      <td valign=top width=55>&nbsp;</td>
      <td valign=top width=15>&nbsp;</td>
      <td valign=top width=73>&nbsp;</td>
      <td valign=top width=15>&nbsp;</td>
      <td valign=top width=216>&nbsp;</td>
      <td valign=top width=14>&nbsp;</td>
      <td valign=top width=74>&nbsp;</td>
      <td valign=top width=20>&nbsp;</td>
      <td valign=top width=68>&nbsp;</td>
    </tr>
    <tr align="left">
      <td valign=top width=136> <font size="1">Robert S. Salomon, Jr. (68)</font></td>
      <td valign=top width=14>&nbsp; </td>
      <td valign=top width=55> <font size="1">Director</font></td>
      <td valign=top width=15>&nbsp; </td>
      <td valign=top width=73> <font size="1">Director since 2002</font></td>
      <td valign=top width=15>&nbsp; </td>
      <td valign=top width=216> <font size="1">Principal of STI Management (investment
        adviser) since 1994; Chairman and CEO of Salomon Brothers Asset Management
        from 1992 until 1995; Chairman of Salomon Brothers equity mutual funds
        from 1992 until 1995; regular columnist with Forbes Magazine from 1992
        to 2002; Director of Stock Research and U.S. Equity Strategist at Salomon
        Brothers from 1975 until 1991; Trustee, Commonfund from 1980 to 2001.</font></td>
      <td valign=top width=14>&nbsp; </td>
      <td valign=top width=74> <font size="1">39 registered investment companies
        consisting of <br>
        59 portfolios</font></td>
      <td valign=top width=20>&nbsp; </td>
      <td valign=top width=68> <font size="1">None</font></td>
    </tr>
    <tr align="left">
      <td valign=top width=136>&nbsp;</td>
      <td valign=top width=14>&nbsp;</td>
      <td valign=top width=55>&nbsp;</td>
      <td valign=top width=15>&nbsp;</td>
      <td valign=top width=73>&nbsp;</td>
      <td valign=top width=15>&nbsp;</td>
      <td valign=top width=216>&nbsp;</td>
      <td valign=top width=14>&nbsp;</td>
      <td valign=top width=74>&nbsp;</td>
      <td valign=top width=20>&nbsp;</td>
      <td valign=top width=68>&nbsp;</td>
    </tr>
    <tr align="left">
      <td valign=top width=136> <font size="1">Stephen B. Swensrud (72)</font></td>
      <td valign=top width=14>&nbsp; </td>
      <td valign=top width=55> <font size="1">Director</font></td>
      <td valign=top width=15>&nbsp; </td>
      <td valign=top width=73> <font size="1">Director since 2002</font></td>
      <td valign=top width=15>&nbsp; </td>
      <td valign=top width=216> <font size="1">Chairman of Fernwood Associates
        (investment adviser) since 1996; Principal, Fernwood Associates (financial
        consultants) since 1975; Chairman of R.P.P. Corporation (manufacturing
        company) since 1978; Director of International Mobile Communications,
        Incorporated (telecommunications company), since 1998.</font></td>
      <td valign=top width=14>&nbsp; </td>
      <td valign=top width=74> <font size="1">40 registered investment companies
        consisting of <br>
        60 portfolios</font></td>
      <td valign=top width=20>&nbsp; </td>
      <td valign=top width=68> <font size="1">International Mobile Communications,
        Inc.</font></td>
    </tr>
  </table>
</div>

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<HR SIZE=1 noshade ALIGN=left  WIDTH=75>
<!-- MARKER FORMAT-SHEET="Footnote Right" FSL="Workstation" -->
<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="1">   * </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">The
address of each non-interested Director is P.O. Box 9095, Princeton, New Jersey
08543-9095.</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Footnote Right" FSL="Workstation" -->
<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="1">  ** </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">Each
Director serves until his or her successor is elected and qualified,       until December
31 of the year in which he or she turns 72, or until his or       her death, resignation,
or removal as provided in the Fund&#146;s By-Laws       or Charter.</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Footnote Right" FSL="Workstation" -->
<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="1"> *** </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">Co-Chair
of the Audit Committee.</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Footnote Right" FSL="Workstation" -->
<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="1">**** </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">Chair
of the Nominating Committee.</FONT></TD></TR></TABLE>




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<BR>&nbsp;
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22</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR SIZE=5 noshade WIDTH=100% ALIGN=LEFT>





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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain
  biographical and other information relating to the Director who is an &#147;interested
  person&#148; of the Fund as defined in the 1940 Act (the &#147;interested Director&#148;)
  and the other officers of the Fund is set forth below, including their ages,
  their principal occupations for at least the last five years, the length of
  time served, the total number of portfolios overseen in MLIM/FAM-advised funds
  and public directorships held. </FONT></P>

<div align="center">
  <table border=0 cellspacing=0 cellpadding=0 width="700">
    <tr align="center" valign="bottom">
      <td width=119> <b><font size="1">Name, <br>
        Address* <br>
        and Age </font></b>
        <hr size="1" noshade>
      </td>
      <td width=17>&nbsp; </td>
      <td width=76> <b><font size="1">Position(s) <br>
        Held with <br>
        the Fund </font></b>
        <hr size="1" noshade>
      </td>
      <td width=15>&nbsp; </td>
      <td width=71> <b><font size="1">Term of <br>
        Office** and <br>
        Length of <br>
        Time Served </font></b>
        <hr size="1" noshade>
      </td>
      <td width=17>&nbsp; </td>
      <td width=215> <b><font size="1">Principal Occupation(s) <br>
        During the Past Five Years </font></b>
        <hr size="1" noshade>
      </td>
      <td width=14>&nbsp; </td>
      <td width=76> <b><font size="1">Number of <br>
        MLIM/FAM- <br>
        Advised Funds <br>
        and Portfolios <br>
        Overseen </font></b>
        <hr size="1" noshade>
      </td>
      <td width=14>&nbsp; </td>
      <td width=66> <b><font size="1">Public <br>
        Directorships </font></b>
        <hr size="1" noshade>
      </td>
    </tr>
    <tr align="left">
      <td valign=top width=119>&nbsp;</td>
      <td valign=top width=17>&nbsp;</td>
      <td valign=top width=76>&nbsp;</td>
      <td valign=top width=15>&nbsp;</td>
      <td valign=top width=71>&nbsp;</td>
      <td valign=top width=17>&nbsp;</td>
      <td valign=top width=215>&nbsp;</td>
      <td valign=top width=14>&nbsp;</td>
      <td valign=top width=76>&nbsp;</td>
      <td valign=top width=14>&nbsp;</td>
      <td valign=top width=66>&nbsp;</td>
    </tr>
    <tr align="left">
      <td valign=top width=119> <font size="1">Robert C. Doll, Jr. (50)***</font></td>
      <td valign=top width=17>&nbsp;&nbsp; </td>
      <td valign=top width=76> <font size="1">President and Director</font></td>
      <td valign=top width=15>&nbsp;&nbsp; </td>
      <td valign=top width=71> <font size="1">President and Director**** since
        2005</font></td>
      <td valign=top width=17>&nbsp;&nbsp; </td>
      <td valign=top width=215> <font size="1">President of MLIM/FAM advised funds
        since 2005; President of MLIM and FAM since 2001; Co-Head (Americas Region)
        FAM and MLIM from 2000 to 2001 and Senior Vice President thereof from
        1999 to 2001; Director of Princeton Services, Inc. (&#147;Princeton Services&#148;)
        since 2001; President of Princeton Administrators, L.P. since 2001; Chief
        Investment Officer of OppenheimerFunds, Inc. in 1999 and Executive Vice
        President thereof from 1991 to 1999.</font></td>
      <td valign=top width=14>&nbsp;&nbsp; </td>
      <td valign=top width=76> <font size="1">125 registered investment companies
        consisting of <br>
        164 portfolios</font></td>
      <td valign=top width=14>&nbsp;&nbsp; </td>
      <td valign=top width=66> <font size="1">None</font></td>
    </tr>
    <tr align="left">
      <td valign=top width=119>&nbsp;</td>
      <td valign=top width=17>&nbsp;</td>
      <td valign=top width=76>&nbsp;</td>
      <td valign=top width=15>&nbsp;</td>
      <td valign=top width=71>&nbsp;</td>
      <td valign=top width=17>&nbsp;</td>
      <td valign=top width=215>&nbsp;</td>
      <td valign=top width=14>&nbsp;</td>
      <td valign=top width=76>&nbsp;</td>
      <td valign=top width=14>&nbsp;</td>
      <td valign=top width=66>&nbsp;</td>
    </tr>
    <tr align="left">
      <td valign=top width=119> <font size="1">Kenneth A. Jacob (53)</font></td>
      <td valign=top width=17>&nbsp; </td>
      <td valign=top width=76> <font size="1">Senior Vice President</font></td>
      <td valign=top width=15>&nbsp; </td>
      <td valign=top width=71> <font size="1">Senior Vice President since 2002</font></td>
      <td valign=top width=17>&nbsp; </td>
      <td valign=top width=215> <font size="1">Managing Director of MLIM since
        2000; First Vice President of MLIM from 1997 to 2000; Vice President of
        MLIM from 1984 to 1997.</font></td>
      <td valign=top width=14>&nbsp; </td>
      <td valign=top width=76> <font size="1">38 registered investment companies
        consisting of <br>
        50 portfolios</font></td>
      <td valign=top width=14>&nbsp; </td>
      <td valign=top width=66> <font size="1">None</font></td>
    </tr>
    <tr align="left">
      <td valign=top width=119>&nbsp;</td>
      <td valign=top width=17>&nbsp;</td>
      <td valign=top width=76>&nbsp;</td>
      <td valign=top width=15>&nbsp;</td>
      <td valign=top width=71>&nbsp;</td>
      <td valign=top width=17>&nbsp;</td>
      <td valign=top width=215>&nbsp;</td>
      <td valign=top width=14>&nbsp;</td>
      <td valign=top width=76>&nbsp;</td>
      <td valign=top width=14>&nbsp;</td>
      <td valign=top width=66>&nbsp;</td>
    </tr>
    <tr align="left">
      <td valign=top width=119> <font size="1">John M. Loffredo (41)</font></td>
      <td valign=top width=17>&nbsp; </td>
      <td valign=top width=76> <font size="1">Senior Vice President</font></td>
      <td valign=top width=15>&nbsp; </td>
      <td valign=top width=71> <font size="1">Senior Vice President since 2001</font></td>
      <td valign=top width=17>&nbsp; </td>
      <td valign=top width=215> <font size="1">Managing Director of MLIM since
        2000; First Vice President of MLIM from 1997 to 2000; Vice President of
        MLIM from 1991 to 1997; Portfolio Manager with MLIM and FAM since 1997.</font></td>
      <td valign=top width=14>&nbsp; </td>
      <td valign=top width=76> <font size="1">39 registered investment companies
        consisting of <br>
        51 portfolios</font></td>
      <td valign=top width=14>&nbsp; </td>
      <td valign=top width=66> <font size="1">None</font></td>
    </tr>
    <tr align="left">
      <td valign=top width=119>&nbsp;</td>
      <td valign=top width=17>&nbsp;</td>
      <td valign=top width=76>&nbsp;</td>
      <td valign=top width=15>&nbsp;</td>
      <td valign=top width=71>&nbsp;</td>
      <td valign=top width=17>&nbsp;</td>
      <td valign=top width=215>&nbsp;</td>
      <td valign=top width=14>&nbsp;</td>
      <td valign=top width=76>&nbsp;</td>
      <td valign=top width=14>&nbsp;</td>
      <td valign=top width=66>&nbsp;</td>
    </tr>
    <tr align="left">
      <td valign=top width=119> <font size="1">Michael Kalinoski (34)</font></td>
      <td valign=top width=17>&nbsp; </td>
      <td valign=top width=76> <font size="1">Vice President</font></td>
      <td valign=top width=15>&nbsp; </td>
      <td valign=top width=71> <font size="1">Vice President since 2000</font></td>
      <td valign=top width=17>&nbsp; </td>
      <td valign=top width=215> <font size="1">Vice President of MLIM since 1999</font></td>
      <td valign=top width=14>&nbsp; </td>
      <td valign=top width=76> <font size="1">4 registered investment companies
        consisting of <br>
        4 portfolios</font></td>
      <td valign=top width=14>&nbsp; </td>
      <td valign=top width=66> <font size="1">None</font></td>
    </tr>
    <tr align="left">
      <td valign=top width=119>&nbsp;</td>
      <td valign=top width=17>&nbsp;</td>
      <td valign=top width=76>&nbsp;</td>
      <td valign=top width=15>&nbsp;</td>
      <td valign=top width=71>&nbsp;</td>
      <td valign=top width=17>&nbsp;</td>
      <td valign=top width=215>&nbsp;</td>
      <td valign=top width=14>&nbsp;</td>
      <td valign=top width=76>&nbsp;</td>
      <td valign=top width=14>&nbsp;</td>
      <td valign=top width=66>&nbsp;</td>
    </tr>
    <tr align="left">
      <td valign=top width=119> <font size="1">Donald C. Burke (45)</font></td>
      <td valign=top width=17>&nbsp; </td>
      <td valign=top width=76> <font size="1">Vice President and Treasurer</font></td>
      <td valign=top width=15>&nbsp; </td>
      <td valign=top width=71> <font size="1">Vice President since 1994 and Treasurer
        since 1999</font></td>
      <td valign=top width=17>&nbsp; </td>
      <td valign=top width=215> <font size="1">First Vice President of FAM and
        MLIM since 1997 and Treasurer thereof since 1999; Senior Vice President
        and Treasurer of Princeton Services since 1999 and Director since 2004;
        Vice President of FAM Distributors, Inc. (&#147;FAMD&#148;) since 1999;
        Vice President of MLIM and FAM from 1990 to 1997; Director of Taxation
        of MLIM from 1990 to 2001.</font></td>
      <td valign=top width=14>&nbsp; </td>
      <td valign=top width=76> <font size="1">127 registered investment companies
        consisting of <br>
        166 portfolios</font></td>
      <td valign=top width=14>&nbsp; </td>
      <td valign=top width=66> <font size="1">None</font></td>
    </tr>
    <tr align="left">
      <td valign=top width=119>&nbsp;</td>
      <td valign=top width=17>&nbsp;</td>
      <td valign=top width=76>&nbsp;</td>
      <td valign=top width=15>&nbsp;</td>
      <td valign=top width=71>&nbsp;</td>
      <td valign=top width=17>&nbsp;</td>
      <td valign=top width=215>&nbsp;</td>
      <td valign=top width=14>&nbsp;</td>
      <td valign=top width=76>&nbsp;</td>
      <td valign=top width=14>&nbsp;</td>
      <td valign=top width=66>&nbsp;</td>
    </tr>
    <tr align="left">
      <td valign=top width=119> <font size="1">Jeffrey Hiller (53)</font></td>
      <td valign=top width=17>&nbsp; </td>
      <td valign=top width=76> <font size="1">Chief Compliance Officer</font></td>
      <td valign=top width=15>&nbsp; </td>
      <td valign=top width=71> <font size="1">Chief Compliance Officer since 2004</font></td>
      <td valign=top width=17>&nbsp; </td>
      <td valign=top width=215> <font size="1">Chief Compliance Officer of the
        MLIM/FAM-advised funds since 2004; First Vice President and Chief Compliance
        Officer of MLIM since 2004; Chief Compliance Officer of the IQ Funds since
        2004; Global Director of Compliance at Morgan Stanley Investment Management
        from 2002 to 2004; Managing Director and Global Director of Compliance
        at Citigroup Asset Management from 2000 to 2002; Chief Compliance Officer
        at Soros Fund Management in 2000; and Chief Compliance Officer at Prudential
        Financial from 1995 to 2000; Senior Counsel in the Securities and Exchange
        Commission&#146;s Division of Enforcement in Washington, D.C. from 1990
        to 1995.</font></td>
      <td valign=top width=14>&nbsp; </td>
      <td valign=top width=76> <font size="1">128 registered investment companies
        consisting of <br>
        167 portfolios</font></td>
      <td valign=top width=14>&nbsp; </td>
      <td valign=top width=66> <font size="1">None</font></td>
    </tr>
  </table>
</div>

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  &nbsp;
<TABLE WIDTH=100%><TR><TD WIDTH=20% ALIGN=left><FONT SIZE=1>&nbsp;</FONT></TD><TD WIDTH=60% ALIGN=center><FONT SIZE="2">
23</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR SIZE=5 noshade WIDTH=100% ALIGN=LEFT>
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<p>

<div align="center">
  <table border=0 cellspacing=0 cellpadding=0 width="700">
    <tr align="center" valign="bottom">
      <td width=119> <b><font size="1">Name, <br>
        Address* <br>
        and Age </font></b>
        <hr size="1" noshade>
      </td>
      <td width=17>&nbsp; </td>
      <td width=76> <b><font size="1">Position(s) <br>
        Held with <br>
        the Fund </font></b>
        <hr size="1" noshade>
      </td>
      <td width=15>&nbsp; </td>
      <td width=71> <b><font size="1">Term of <br>
        Office** and <br>
        Length of <br>
        Time Served </font></b>
        <hr size="1" noshade>
      </td>
      <td width=17>&nbsp; </td>
      <td width=215> <b><font size="1">Principal Occupation(s) <br>
        During the Past Five Years </font></b>
        <hr size="1" noshade>
      </td>
      <td width=14>&nbsp; </td>
      <td width=76> <b><font size="1">Number of <br>
        MLIM/FAM- <br>
        Advised Funds <br>
        and Portfolios <br>
        Overseen </font></b>
        <hr size="1" noshade>
      </td>
      <td width=14>&nbsp; </td>
      <td width=66> <b><font size="1">Public <br>
        Directorships </font></b>
        <hr size="1" noshade>
      </td>
    </tr>
    <tr align="left">
      <td valign=top width=119>&nbsp;</td>
      <td valign=top width=17>&nbsp;</td>
      <td valign=top width=76>&nbsp;</td>
      <td valign=top width=15>&nbsp;</td>
      <td valign=top width=71>&nbsp;</td>
      <td valign=top width=17>&nbsp;</td>
      <td valign=top width=215>&nbsp;</td>
      <td valign=top width=14>&nbsp;</td>
      <td valign=top width=76>&nbsp;</td>
      <td valign=top width=14>&nbsp;</td>
      <td valign=top width=66>&nbsp;</td>
    </tr>
    <tr align="left">
      <td valign=top width=119> <font size="1">Alice A. Pellegrino (45)</font></td>
      <td valign=top width=17>&nbsp; </td>
      <td valign=top width=76> <font size="1">Secretary</font></td>
      <td valign=top width=15>&nbsp; </td>
      <td valign=top width=71> <font size="1">Secretary since 2004</font></td>
      <td valign=top width=17>&nbsp; </td>
      <td valign=top width=215> <font size="1">Director (Legal Advisory) of MLIM
        since 2002; Vice President of MLIM from 1999 to 2002; Attorney associated
        with MLIM since 1997; Secretary of FAM, MLIM, FAMD and Princeton Services
        since 2004.</font></td>
      <td valign=top width=14>&nbsp; </td>
      <td valign=top width=76> <font size="1">125 registered investment companies
        consisting of <br>
        164 portfolios</font></td>
      <td valign=top width=14>&nbsp; </td>
      <td valign=top width=66> <font size="1">None</font></td>
    </tr>
  </table>
</div>

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<HR SIZE=1 noshade ALIGN=left  WIDTH=75>

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<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="1">   * </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">The
address of Mr. Doll and each officer listed is P.O. Box 9011, Princeton, New Jersey
08543-9011.</FONT></TD></TR></TABLE>

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<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="1">  ** </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">Elected
by and serves at the pleasure of the Board of Directors of the Fund.</FONT></TD></TR></TABLE>

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<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="1"> *** </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">Mr.
Doll is an &#147;interested person,&#148; as defined in the 1940 Act,       of the Fund
based on his positions with MLIM, FAM, Princeton Services, and       Princeton
Administrators, L.P.</FONT></TD></TR></TABLE>

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<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="1">**** </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">As
a Director, Mr. Doll serves until his successor is elected and       qualified or until
December 31 of the year in which he turns 72, or until       his death, resignation, or
removal as provided in the Fund&#146;s By-Laws       or Charter.</FONT></TD></TR></TABLE>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
connection with the election of the Fund&#146;s Directors, holders of shares of AMPS,
Other AMPS and other preferred stock, voting as a separate class, are entitled to elect
two of the Fund&#146;s Directors, and the remaining Directors are elected by all holders
of capital stock, voting as a single class. Mr. Bodurtha and Mr. London are the Directors
elected by holders of preferred stock. See &#147;Description of AMPS &#151; Voting Rights.&#148; </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Share Ownership </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Information
relating to each Director&#146;s share ownership in the Fund and in all registered funds
in the Merrill Lynch family of funds that are overseen by the respective Director (&#147;Supervised
Merrill Lynch Funds&#148;) as of December 31, 2004 is set forth in the chart below. </FONT></P>






<div align="center">
  <TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
    <TR VALIGN=Bottom>
      <TH align="left"><FONT SIZE=1>Name </FONT>
        <hr width=35 size="1" noshade align="left">
      </TH>
      <TH><FONT SIZE=1>Aggregate Dollar Range <BR>
        of Equity in the Fund </FONT>
        <hr width=75% size="1" noshade>
      </TH>
      <TH>&nbsp;</TH>
      <TH><FONT SIZE=1>Aggregate Dollar Range <BR>
        of Securities in Supervised <BR>
        Merrill Lynch Funds </FONT>
        <hr width=75% size="1" noshade>
      </TH>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE="2"><I>Interested Director:</I> </FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER>&nbsp;</TD>
      <TD ALIGN=CENTER><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;Robert C. Doll, Jr</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>None</FONT></TD>
      <TD ALIGN=CENTER>&nbsp;&nbsp;</TD>
      <TD ALIGN=CENTER><FONT SIZE=2>Over $100,000</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE="2"><I>Non-interested Directors:</I> </FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;James H. Bodurtha</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>$1-$10,000</FONT></TD>
      <TD ALIGN=CENTER>&nbsp;</TD>
      <TD ALIGN=CENTER><FONT SIZE=2>Over $100,000</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;Kenneth A. Froot**</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>None</FONT></TD>
      <TD ALIGN=CENTER>&nbsp;</TD>
      <TD ALIGN=CENTER><FONT SIZE=2>None</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;Joe Grills</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>None</FONT></TD>
      <TD ALIGN=CENTER>&nbsp;</TD>
      <TD ALIGN=CENTER><FONT SIZE=2>Over $100,000</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;Herbert I. London</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>None</FONT></TD>
      <TD ALIGN=CENTER>&nbsp;</TD>
      <TD ALIGN=CENTER><FONT SIZE=2>Over $100,000</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;Roberta Cooper Ramo</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>None</FONT></TD>
      <TD ALIGN=CENTER>&nbsp;</TD>
      <TD ALIGN=CENTER><FONT SIZE=2>Over $100,000</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;Robert S. Salomon, Jr</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>None</FONT></TD>
      <TD ALIGN=CENTER>&nbsp;</TD>
      <TD ALIGN=CENTER><FONT SIZE=2>Over $100,000</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;Stephen B. Swensrud</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>None</FONT></TD>
      <TD ALIGN=CENTER>&nbsp;</TD>
      <TD ALIGN=CENTER><FONT SIZE=2>$50,001-$100,000</FONT></TD>
    </TR>
  </TABLE>
</div>

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<HR SIZE=1 noshade ALIGN=left  WIDTH=75>


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<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="1"> * </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">For
the number of MLIM/FAM-advised funds from which each Director receives      compensation,
see the table above under &#147;&#151; Biographical      Information.&#148;</FONT></TD></TR></TABLE>


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<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="1">** </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">Mr.
Froot was not a Director of the Fund at December 31, 2004.</FONT></TD></TR></TABLE>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of the date of this statement of additional information none of the Directors and
officers of the Fund owned any outstanding shares of common stock or Other AMPS of the
Fund. As of the date of this statement of additional information, none of the
non-interested Directors of the Fund or their immediate family members owned beneficially
or of record any securities in ML &amp; Co. </FONT></P>

<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Compensation of
Directors </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to its investment advisory agreement with the Fund (the &#147;Investment Advisory
Agreement&#148;), the Investment Adviser pays all compensation of officers and employees
of the Fund as well as the fees of all Directors of the Fund who are affiliated persons
of ML &amp; Co. or its subsidiaries as well as such Directors&#146; actual out-of-pocket
expenses relating to attendance at meetings. </FONT></P>





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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund pays fees to each non-interested Director for service to the Fund. Each
non-interested Director receives an aggregate annual retainer of $125,000 for his or her
services to MLIM/FAM-advised funds, including the Fund. The portion of the annual
retainer allocated to each MLIM/FAM-advised fund is determined quarterly based on the
relative net assets of each fund. In addition, each non-interested Director receives a
fee per in-person Board meeting attended and per in-person Audit Committee meeting
attended. The annual per meeting fees paid to each non-interested Director aggregate
$100,000 for all MLIM/FAM-advised funds for which that Director serves and are allocated
equally among those funds. Each Co-Chairman of the Audit Committee receives an additional
annual retainer in the amount of $50,000, which is paid quarterly and allocated to each
MLIM/FAM-advised fund for which such Co-Chairman provides services based on the relative
net assets of each such fund. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth the compensation paid by the Fund to the non-interested
Directors for the Fund&#146;s fiscal year ended October 31, 2004, and the aggregate
compensation paid to them from all registered MLIM/FAM-advised funds for the calendar
year ended December 31, 2004. </FONT></P>








<div align="center">
  <TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
    <TR VALIGN=Bottom>
      <TD WIDTH=48% ALIGN=LEFT><b><font size=1>Name of Director </font> </b>
        <hr width=75 size="1" noshade align="left">
      </TD>
      <TD WIDTH=5% ALIGN=LEFT>&nbsp;</TD>
      <TD WIDTH=14% ALIGN=CENTER><b><font size=1>Compensation <br>
        From Fund </font> </b>
        <hr width=75 size="1" noshade>
      </TD>
      <TD WIDTH=5% ALIGN=LEFT>&nbsp;</TD>
      <TD WIDTH=7% ALIGN=CENTER><b><font size=1>Pension or <br>
        Retirement <br>
        Benefits Accrued <br>
        as Part of <br>
        Fund Expense </font> </b>
        <hr width=75 size="1" noshade>
      </TD>
      <TD WIDTH=5% ALIGN=LEFT>&nbsp;</TD>
      <TD WIDTH=14% ALIGN=CENTER><b><font size=1>Aggregate <br>
        Compensation <br>
        From Fund and <br>
        other MLIM/FAM- <br>
        Advised Funds*** </font> </b>
        <hr width=75 size="1" noshade>
      </TD>
      <TD WIDTH=2% ALIGN=LEFT>&nbsp;</TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD WIDTH=48% ALIGN=LEFT><FONT SIZE=2>James H. Bodurtha*</FONT></TD>
      <TD WIDTH=5% ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD WIDTH=14% ALIGN=CENTER><FONT SIZE=2>$ 4,549</FONT></TD>
      <TD WIDTH=5% ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD WIDTH=7% ALIGN=CENTER><FONT SIZE=2>None</FONT></TD>
      <TD WIDTH=5% ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD WIDTH=14% ALIGN=CENTER><FONT SIZE=2>$250,000</FONT></TD>
      <TD WIDTH=2% ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>Kenneth A. Froot**</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>-0-</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>None</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>-0-</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>Joe Grills*</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>$ 4,549</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>None</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>$250,000</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>Herbert I. London</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>$ 4,086</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>None</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>$225,000</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>Andr&#233; Perold****</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>$ 3,494</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>None</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>$168,750</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>Roberta Cooper Ramo</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>$ 4,086</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>None</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>$225,000</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>Robert S. Salomon, Jr</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>$ 4,086</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>None</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>$225,000</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>Stephen B. Swensrud</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>$ 4,086</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>None</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>$231,000</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR>
      <TD COLSPAN=2></TD>
      <TD COLSPAN=2></TD>
      <TD COLSPAN=2></TD>
      <TD COLSPAN=2></TD>
    </TR>
  </TABLE>
</div>

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<HR SIZE=1 noshade ALIGN=left  WIDTH=75>

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<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="1">   * </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">Co-Chair
of the Audit Committee.</FONT></TD></TR></TABLE>

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<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="1">  ** </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">Mr.
Froot was elected as a Director of the Fund and certain other  MLIM/FAM-advised funds
effective on June 3, 2005. </FONT></TD></TR></TABLE>

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<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="1">*** </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">For
the number of  MLIM/FAM-advised funds from which each Director received compensation see
table  above under &#147;&#151; Biographical Information.&#148;</FONT></TD></TR></TABLE>

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<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="1">**** </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">Mr.
Perold resigned as a director effective October 1, 2004.</FONT></TD></TR></TABLE>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>INVESTMENT ADVISORY
AND MANAGEMENT ARRANGEMENTS </B></FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Investment Adviser, which is owned and controlled by ML &amp; Co., a financial services
holding company and the parent of Merrill Lynch, provides the Fund with investment
advisory and administrative services. The Investment Adviser acts as the investment
adviser to more than 50 registered investment companies and offers investment advisory
services to individuals and institutional accounts. As of June 30, 2005, the Investment
Adviser and its affiliates, including MLIM, had a total of approximately $474 billion in
investment company and other portfolio assets under management, including approximately
$221 billion in fixed income assets. This amount includes assets managed by certain
affiliates of the Investment Adviser. The Investment Adviser is a limited partnership,
the partners of which are ML &amp; Co. and Princeton Services. The principal business
address of the Investment Adviser is 800 Scudders Mill Road, Plainsboro, New Jersey 08536. </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Investment Advisory Agreement provides that, subject to the oversight of the Fund&#146;s
Board of Directors, the Investment Adviser is responsible for the actual management of
the Fund&#146;s portfolio. The responsibility for making decisions to buy, sell or hold a
particular security rests with the Investment Adviser, subject to oversight by the Board
of Directors. </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
portfolio manager primarily responsible for the Fund&#146;s day-to-day management is
Michael A. Kalinoski. Mr. Kalinoski has been a portfolio manager and Vice President of
MLIM since 1999 and has 12 years of experience investing in Municipal Bonds, including
six years as a portfolio manager on behalf of registered investment companies. He has
been a Vice President and portfolio manager of the Fund since 2000. The Fund&#146;s
portfolio manager will consider analyses from various sources, make the necessary
investment decisions, and place orders for transactions accordingly. </FONT></P>





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25</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR SIZE=5 noshade WIDTH=100% ALIGN=LEFT>






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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
its services, the Fund pays the Investment Adviser a monthly fee at the annual rate of
0.50% of the Fund&#146;s average weekly net assets (&#147;average weekly net assets&#148; means
the average weekly value of the total assets of the Fund, including the amount obtained
from leverage and any proceeds from the issuance of preferred stock, minus the sum of (i)
accrued liabilities of the Fund, (ii) any accrued and unpaid interest on outstanding
borrowings and (iii) accumulated dividends on shares of preferred stock). For purposes of
this calculation, average weekly net assets is determined at the end of each month on the
basis of the average net assets of the Fund for each week during the month. The assets
for each weekly period are determined by averaging the net assets at the last business
day of a week with the net assets at the last business day of the prior week. It is
understood that the liquidation preference of any outstanding preferred stock (other than
accumulated dividends) is not considered a liability in determining the Fund&#146;s
average weekly net assets. </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
the six months ended April 30, 2005 and the fiscal years ended October 31, 2004, 2003,
and 2002, the fees paid by the Fund to the Investment Adviser pursuant to the Investment
Advisory Agreement were $1,667,534, $3,325,764, $3,361,696 and $3,286,243, respectively. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
the six months ended April 30, 2005 and the fiscal years ended October 31, 2004, 2003 and
2002, the Investment Adviser reimbursed the Fund $3,488, $17,365, $11,698 and $3,065,
respectively. </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Investment Advisory Agreement obligates the Investment Adviser to provide investment
advisory services and to pay all compensation of and furnish office space for officers
and employees of the Fund connected with investment and economic research, trading and
investment management of the Fund, as well as the compensation of all Directors of the
Fund who are affiliated persons of the Investment Adviser or any of its affiliates. The
Fund pays all other expenses incurred in the operation of the Fund, including, among
other things, expenses for legal and auditing services, taxes, costs of preparing,
printing and mailing proxies, listing fees, stock certificates and stockholder reports,
charges of the custodian and the transfer agent, dividend disbursing agent and registrar,
Commission fees, fees and expenses of non-interested Directors, accounting and pricing
costs, insurance, interest, brokerage costs, litigation and other extraordinary or
non-recurring expenses, mailing and other expenses properly payable by the Fund. Certain
accounting services are provided to the Fund by State Street Bank and Trust Company (&#147;State
Street&#148;) pursuant to an agreement between State Street and the Fund. The Fund will
pay the costs of these services. In addition, the Fund will reimburse the Investment
Adviser for certain additional accounting services. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  table below shows the amounts paid by the Fund to State Street and to the Investment
  Adviser for accounting services for the periods indicated: </FONT></P>
<div align="center">
  <TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
    <TR VALIGN=Bottom>
      <TH align="left"><FONT SIZE=1>Period: </FONT>
        <hr width=35 size="1" noshade align="left">
      </TH>
      <TH><FONT SIZE=1>Paid by the Fund <BR>
        to State Street </FONT>
        <hr width=75 size="1" noshade>
      </TH>
      <TH>&nbsp;</TH>
      <TH><FONT SIZE=1>Paid by the <BR>
        Fund to the <BR>
        Investment Adviser </FONT>
        <hr width=95 size="1" noshade>
      </TH>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>Six months ended April 30, 2005</FONT></TD>
      <TD ALIGN=center><FONT SIZE=2>$&nbsp;&nbsp;99,921</FONT></TD>
      <TD ALIGN=center>&nbsp;&nbsp;</TD>
      <TD ALIGN=center><FONT SIZE=2>$&nbsp;&nbsp;6,997</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>Fiscal year ended October 31, 2004</FONT></TD>
      <TD ALIGN=center><FONT SIZE=2>$195,747</FONT></TD>
      <TD ALIGN=center>&nbsp;</TD>
      <TD ALIGN=center><FONT SIZE=2>$13,351</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>Fiscal year ended October 31, 2003</FONT></TD>
      <TD ALIGN=center><FONT SIZE=2>$194,303</FONT></TD>
      <TD ALIGN=center>&nbsp;</TD>
      <TD ALIGN=center><FONT SIZE=2>$15,771</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>Fiscal year ended October 31, 2002</FONT></TD>
      <TD ALIGN=center><FONT SIZE=2>$193,134</FONT></TD>
      <TD ALIGN=center>&nbsp;</TD>
      <TD ALIGN=center><FONT SIZE=2>$23,178</FONT></TD>
    </TR>
  </TABLE>
</div>
<p>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless
earlier terminated as described below, the Investment Advisory Agreement will remain in
effect from year to year if approved annually (a) by the Board of Directors of the Fund
or by a majority of the outstanding shares of the Fund and (b) by a majority of the
Directors who are not parties to such contract or interested persons (as defined in the
1940 Act) of any such party. Such contract is not assignable and may be terminated
without penalty on 60 days&#146; written notice at the option of either party thereto or
by the vote of the stockholders of the Fund. The Board of Directors most recently
approved the Investment Advisory Agreement at its meeting on August 10, 2005. </FONT></P>


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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Activities of and
Composition of the Board of Directors </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
but one member of the Board of Directors is an independent Director whose only
affiliation with the Investment Adviser or other Merrill Lynch affiliates is as a
Director of the Fund and certain other funds advised by the Investment Adviser or its
affiliates. The Co-Chairmen of the Board are also independent Directors. New Director
nominees are chosen as nominees by a Nominating Committee of independent Directors. All
independent Directors also are members of the Board&#146;s Audit Committee and the
independent Directors meet in executive session at each in-person Board meeting. The
Board and the Audit Committee meet in person for at least two days  </FONT></P>







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<BR>&nbsp;
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26</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR SIZE=5 noshade WIDTH=100% ALIGN=LEFT>






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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>each quarter and conduct other
in-person and telephone meetings throughout the year, some of which are formal Board
meetings, and some of which are informational meetings. The independent counsel to the
independent Directors attend all in-person Board and Audit Committee meetings and other
meetings at the independent Directors&#146;request. </FONT></P>

<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Investment Advisory
Agreement &#151; Matters Considered by the Board </B></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Every
year, the Board of Directors considers approval of the Fund&#146;s Investment Advisory
Agreement and throughout each year, reviews and evaluates the performance of and services
provided by the Investment Adviser. The Board assesses the nature, scope and quality of
the services provided to the Fund by the personnel of the Investment Adviser and its
affiliates, including administrative services, shareholder services, oversight of fund
accounting, marketing services and assistance in meeting legal and regulatory
requirements. The Board also receives and assesses information regarding the services
provided to the Fund by certain unaffiliated service providers. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
various times throughout the year, the Board also considers a range of information in
connection with its oversight of the services provided by the Investment Adviser and its
affiliates. Among the matters considered are: (a) fees (in addition to management fees)
paid to the Investment Adviser and its affiliates by the Fund, including fees associated
with the Fund&#146;s auction market preferred stock; (b) Fund operating expenses paid to
third parties; (c) the resources devoted to and compliance reports relating to the Fund&#146;s
investment objective, policies and restrictions, and its compliance with its Code of
Ethics and the Investment Adviser&#146;s compliance policies and procedures; and (d) the
nature, cost and character of non-investment management services provided by the
Investment Adviser and its affiliates. </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board believes that the Investment Adviser is one of the most experienced global asset
management firms and considers the overall quality of services provided by the Investment
Adviser to be of high quality. The Board also believes that the Investment Adviser is
financially sound and well managed, and notes that the Investment Adviser is affiliated
with one of America&#146;s largest financial firms. The Board believes that, for many of
the Fund&#146;s stockholders, the investment decision involved the selection of the
Investment Adviser as the investment adviser to the Fund. The Board works closely with
the Investment Adviser in overseeing the Investment Adviser&#146;s efforts to achieve
good performance. As part of this effort, the Board discusses portfolio manager
effectiveness and, when performance is not satisfactory, discusses with the Investment
Adviser taking steps such as changing investment personnel. </FONT></P>


<!-- MARKER FORMAT-SHEET="Left Head 2 Bold Italic" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Annual
Consideration of Approval by the Board of Directors </I></B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the period prior to the Board meeting to consider renewal of the Investment Advisory
Agreement, the Board requests and receives materials specifically relating to the Fund&#146;s
Investment Advisory Agreement. These materials include (a) information compiled by Lipper
Inc. (&#147;Lipper&#148;) on the fees and expenses and the investment performance of the
Fund as compared to a comparable group of funds as classified by Lipper; (b) information
comparing the Fund&#146;s market price with its net asset value per share; (c) a
discussion by the Fund&#146;s portfolio management team of investment strategies used by
the Fund during its most recent fiscal year; and (d) information on the profitability to
the Investment Adviser and its affiliates of the Investment Advisory Agreement and other
relationships with the Fund. The Board also considers other matters it deems important to
the approval process such as services related to the valuation and pricing of Fund
portfolio holdings, information relating to the status of the Fund&#146;s managed
dividend program, the Fund&#146;s portfolio turnover statistics, and direct and indirect
benefits to the Investment Adviser and its affiliates from their relationship with the
Fund. </FONT></P>

<!-- MARKER FORMAT-SHEET="Left Head 2 Bold Italic" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Certain Specific
Renewal Data </I></B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
connection with the most recent renewal of the Fund&#146;s Investment Advisory Agreement,
the independent Directors&#146; and Board&#146;s review included the following: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>The
Investment Adviser&#146;s Services and Fund Performance. </I>The Board reviewed the nature,
extent and quality of services provided by the Investment Adviser, including the
investment advisory services and the resulting performance of the Fund. The Board focused
primarily on the Investment Adviser&#146;s investment advisory services and the Fund&#146;s
investment performance, having concluded that the other services provided to the Fund by
the </FONT> </P>







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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Investment Adviser were
satisfactory. The Board compared Fund performance &#151;both including and excluding the
effects of the Fund&#146;s fees and expenses &#151;to the performance of a comparable
group of funds, and the performance of a relevant index or combination of indexes. While
the Board reviews performance data at least quarterly, consistent with the Investment
Adviser&#146;s investment goals, the Board attaches primary importance to performance
over relatively long periods of time, typically three to five years. The Board noted that
the Fund&#146;s performance within the group after fees and expenses ranked in the third
quintile for each of the one year and three year periods, and in the second quintile for
the five year period ended May 31, 2005. The Board concluded that the Fund&#146;s
performance, considered in the context of the other services provided by the Investment
Adviser, supported the continuation of the Investment Advisory Agreement. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>The
Investment Adviser&#146;s Personnel and Investment Process. </I>The Board reviews at least
annually the Fund&#146;s investment objectives and strategies. The Board discusses with
senior management of the Investment Adviser responsible for investment operations and the
senior management of the Investment Adviser&#146;s municipal investing group the
strategies being used to achieve the stated objectives. Among other things, the Board
considers the size, background and experience of the Investment Adviser&#146;s investment
staff, its use of technology, and the Investment Adviser&#146;s approach to training and
retaining portfolio managers and other research, advisory and management personnel. The
Board also reviews the Investment Adviser&#146;s compensation policies and practices with
respect to the Fund&#146;s portfolio manager. The Board noted that the Investment Adviser
has over twenty-five years experience investing in the types of investments used by the
Fund and that Mr. Kalinoski, the Fund&#146;s portfolio manager, has over ten years&#146; experience
investing in tax exempt fixed income securities. The Board noted that the Investment
Adviser and the portfolio manager have a high level of expertise in managing the types of
investments used by the Fund and concluded that the Fund benefits, and should continue to
benefit, from that expertise; moreover the Investment Adviser and its investment staff
have extensive experience in analyzing and managing the types of investments used by the
Fund. The Board concluded that the Fund benefits from that expertise. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Management
Fees and Other Expenses. </I>The Board reviews the Fund&#146;s contractual management fee
rate and actual management fee rate (including applicable fee waivers) as a percentage of
total assets at common asset levels &#151; the actual rate includes advisory and
administrative service fees and the effects of any fee waivers &#151; compared to the
other funds in its Lipper category. The Board considers information regarding fee waivers
provided by such other funds. It also compares the Fund&#146;s total expenses to those of
other, comparable funds. The Board did not consider the services provided to and the fees
charged by the Investment Adviser to other types of clients with similar investment
mandates because the Investment Adviser advised the Board that it had no comparable
investment mandates from its institutional clients. The Board noted that the Fund&#146;s
contractual and actual management fee rates, as well as the Fund&#146;s total expenses,
were lower than the median fees and expenses charged by its peer group. The Board has
concluded that the Fund&#146;s management fee and fee rate and overall expense ratio are
reasonable compared to those of other, comparable funds. </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Profitability.
</I>The Board of Directors considers the cost of the services provided to the Fund by the
Investment Adviser, and the Investment Adviser&#146;s and its affiliates&#146; profits
relating to the management of the Fund and the MLIM/FAM-advised funds. As part of its
analysis, the Board reviewed the Investment Adviser&#146;s methodology in allocating its
costs to the management of the Fund and concluded that there was a reasonable basis for
the allocation. The Board believes the Investment Adviser&#146;s profits are reasonable
in relation to the nature and quality of services provided. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Economies
of Scale. </I>The Board considered whether there have been economies of scale in respect of
the management of the MLIM/FAM-advised funds, whether the MLIM/FAM-advised funds
(including the Fund) have appropriately benefited from any economies of scale, and
whether there is potential for realization of any further economies of scale. The Board
considered economies of scale to the extent applicable to the Fund&#146;s closed end
structure and determined that no changes were currently necessary. </FONT> </P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Conclusion </B></FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After
the independent Directors deliberated in executive session, the entire Board, including
all of the independent Directors, approved the renewal of the existing Investment
Advisory Agreement, concluding that the advisory fee rate was reasonable in relation to
the services provided and that a contract renewal was in the best interests of the
stockholders. </FONT></P>









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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Portfolio Manager
Information </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund is managed by Michael A. Kalinoski. </FONT></P>


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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Other Funds and
Accounts Managed by Portfolio Manager as of October 31, 2004 </I></B></FONT></P>




<div align="center">
  <TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=640>
    <TR VALIGN=Bottom>
      <TH>&nbsp;</TH>
      <TH>&nbsp;</TH>
      <TH colspan="5"><font size=1>Number of Other Accounts Managed <br>
        and Assets by Account Type </font>
        <hr width=100% size="1" noshade>
      </TH>
      <TH>&nbsp;</TH>
      <TH colspan="5"><font size=1>Number of Accounts and Assets for Which <br>
        Advisory Fee is Performance-Based </font>
        <hr width=95% size="1" noshade>
      </TH>
    </TR>
    <TR VALIGN=Bottom>
      <TH><FONT SIZE=1>Name of Investment <BR>
        Adviser and <BR>
        Portfolio Manager </FONT>
        <hr width=100% size="1" noshade>
      </TH>
      <TH>&nbsp;</TH>
      <TH><FONT SIZE=1>Registered <BR>
        Investment <BR>
        Companies </FONT>
        <hr width=100% size="1" noshade>
      </TH>
      <TH>&nbsp;</TH>
      <TH><FONT SIZE=1>Other Pooled <BR>
        Investment <BR>
        Vehicles </FONT>
        <hr width=100% size="1" noshade>
      </TH>
      <TH>&nbsp;</TH>
      <TH><FONT SIZE=1>Other <BR>
        accounts </FONT>
        <hr width=100% size="1" noshade>
      </TH>
      <TH>&nbsp;</TH>
      <TH><FONT SIZE=1>Registered <BR>
        Investment <BR>
        Companies </FONT>
        <hr width=100% size="1" noshade>
      </TH>
      <TH>&nbsp;</TH>
      <TH><FONT SIZE=1>Other Pooled <BR>
        Investment <BR>
        Vehicles </FONT>
        <hr width=100% size="1" noshade>
      </TH>
      <TH>&nbsp;</TH>
      <TH><FONT SIZE=1>Other <BR>
        accounts </FONT>
        <hr width=100% size="1" noshade>
      </TH>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>Fund Asset Management L.P.</FONT></TD>
      <TD ALIGN=LEFT>&nbsp;&nbsp;</TD>
      <TD ALIGN=center><FONT SIZE=2>4</FONT></TD>
      <TD ALIGN=center>&nbsp;&nbsp;</TD>
      <TD ALIGN=center><FONT SIZE=2>0</FONT></TD>
      <TD ALIGN=center>&nbsp;&nbsp;</TD>
      <TD ALIGN=center><FONT SIZE=2>0</FONT></TD>
      <TD ALIGN=center>&nbsp;&nbsp;</TD>
      <TD ALIGN=center><FONT SIZE=2>0</FONT></TD>
      <TD ALIGN=center>&nbsp;&nbsp;</TD>
      <TD ALIGN=center><FONT SIZE=2>0</FONT></TD>
      <TD ALIGN=center>&nbsp;&nbsp;</TD>
      <TD ALIGN=center><FONT SIZE=2>0</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>Michael A. Kalinoski</FONT></TD>
      <TD ALIGN=LEFT>&nbsp;</TD>
      <TD ALIGN=center><FONT SIZE=2>$1,758,638,428</FONT></TD>
      <TD ALIGN=center>&nbsp;</TD>
      <TD ALIGN=center>&nbsp;</TD>
      <TD ALIGN=center>&nbsp;</TD>
      <TD ALIGN=center>&nbsp;</TD>
      <TD ALIGN=center>&nbsp;</TD>
      <TD ALIGN=center>&nbsp;</TD>
      <TD ALIGN=center>&nbsp;</TD>
      <TD ALIGN=center>&nbsp;</TD>
      <TD ALIGN=center>&nbsp;</TD>
      <TD ALIGN=center>&nbsp;</TD>
    </TR>
  </TABLE>
</div>

<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fund
Ownership </I></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth the dollar range of equity securities of the Fund beneficially
owned by the portfolio manager(s) as of the date of this prospectus. </FONT></P>




<div align="center">
  <TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=500>

    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">Portfolio Manager</font>
        <hr width=125 size="1" noshade align="left">
      </TD>
      <TD ALIGN=CENTER><font size=2>Dollar Range</font>
        <hr width=80 size="1" noshade>
      </TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>Michael A. Kalinoski</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>None</FONT></TD>
    </TR>
  </TABLE>
</div>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Portfolio Manager
Compensation </I></B></FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Portfolio
Manager Compensation </I></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Portfolio Manager Compensation Program of MLIM and its affiliates, including the
Investment Adviser, is critical to MLIM&#146;s ability to attract and retain the most
talented asset management professionals. This program ensures that compensation is
aligned with maximizing investment returns and it provides a competitive pay opportunity
for competitive performance. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Compensation
Program</I> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
elements of total compensation for MLIM and its affiliates portfolio managers are a fixed
base salary, annual performance-based cash and stock compensation (cash and stock bonus)
and other benefits. MLIM has balanced these components of pay to provide portfolio
managers with a powerful incentive to achieve consistently superior investment
performance. By design, portfolio manager compensation levels fluctuate &#151; both up
and down &#151; with the relative investment performance of the portfolios that they
manage. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Base
Salary</I> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the MLIM approach, like that of many asset management firms, base salaries represent a
relatively small portion of a portfolio manager&#146;s total compensation. This approach
serves to enhance the motivational value of the performance-based (and therefore
variable) compensation elements of the compensation program. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Performance-Based
Compensation</I> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MLIM
believes that the best interests of investors are served by recruiting and retaining
exceptional asset management talent and managing their compensation within a consistent
and disciplined framework that emphasizes pay for performance in the context of an
intensely competitive market for talent. To that end, MLIM and its affiliates portfolio
manager incentive compensation is based on a formulaic compensation program. MLIM&#146;s
formulaic portfolio manager compensation program includes: investment performance
relative to a subset of general closed-end, leveraged, municipal debt funds over 1-, 3-
and 5-year performance periods and a measure of operational efficiency. If a portfolio
manager&#146;s tenure is less than 5 years, performance periods will reflect time in
position. Portfolio managers are compensated based on products they manage. A
discretionary element of portfolio manager compensation may include consideration of:
financial results, expense control, profit margins, strategic planning and
implementation, quality of client service, market share, corporate reputation, capital
allocation, compliance and risk control, leadership, workforce diversity, supervision,
technology and innovation. MLIM and its affiliates also consider the extent to which
individuals exemplify and foster ML &amp; Co.&#146;s principles of client focus, respect
for the individual, teamwork, responsible citizenship and integrity. All factors are
considered collectively by MLIM management. </FONT></P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Cash
Bonus</I> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Performance-based
compensation is distributed to portfolio managers in a combination of cash and stock.
Typically, the cash bonus, when combined with base salary, represents more than 60% of
total compensation for portfolio managers. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Stock
Bonus</I> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
portion of the dollar value of the total annual performance-based bonus is paid in
restricted shares of ML &amp; Co. stock. Paying a portion of annual bonuses in stock puts
compensation earned by a portfolio manager for a given year &#147;at risk&#148; based on
the company&#146;s ability to sustain and improve its performance over future periods.
The ultimate value of stock bonuses is dependent on future ML &amp; Co. stock price
performance. As such, the stock bonus aligns each portfolio manager&#146;s financial
interests with those of the ML &amp; Co. shareholders and encourages a balance between
short-term goals and long-term strategic objectives. Management strongly believes that
providing a significant portion of competitive performance-based compensation in stock is
in the best interests of investors and shareholders. This approach ensures that portfolio
managers participate as shareholders in both the &#147;downside risk&#148; and &#147;upside
opportunity&#148; of the company&#146;s performance. Portfolio managers therefore have a
direct incentive to protect ML &amp;Co.&#146;s reputation for integrity. </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Other
Compensation Programs</I> </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Portfolio
managers who meet relative investment performance and financial management objectives
during a performance year are eligible to participate in a deferred cash program. Awards
under this program are in the form of deferred cash that may be benchmarked to a menu of
MLIM mutual funds (including their own fund) during a five-year vesting period. The
deferred cash program aligns the interests of participating portfolio managers with the
investment results of MLIM products and promotes continuity of successful portfolio
management teams. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Other
Benefits</I> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Portfolio
managers are also eligible to participate in broad-based plans offered generally to
employees of ML &amp; Co. and its affiliates, including broad-based retirement, 401(k),
health, and other employee benefit plans. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Potential Material
Conflicts of Interest </I></B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Real,
potential or apparent conflicts of interest may arise when a portfolio manager has
day-to-day portfolio management responsibilities with respect to more than one fund or
account, including the following: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain
investments may be appropriate for the Fund and also for other clients advised by the
Investment. Adviser and its affiliates, including other client accounts managed by the
Fund&#146;s portfolio management team. Investment decisions for the Fund and other
clients are made with a view to achieving their respective investment objectives and
after consideration of such factors as their current holdings, availability of cash for
investment and the size of their investments generally. Frequently, a particular security
may be bought or sold for only one client or in different amounts and at different times
for more than one but less than all clients. Likewise, because clients of the Investment
Adviser and its affiliates may have differing investment strategies, a particular
security may be bought for one or more clients when one or more other clients are selling
the security. The investment results for the Fund may differ from the results achieved by
other clients of the Investment Adviser and its affiliates and results among clients may
differ. In addition, purchases or sales of the same security may be made for two or more
clients on the same day. In such event, such transactions will be allocated among the
clients in a manner believed by the Investment Adviser and its affiliates to be equitable
to each. The Investment Adviser will not determine allocations based on whether it
receives a performance based fee from the client. In some cases, the allocation procedure
could have an adverse effect on the price or amount of the securities purchased or sold
by the Fund. Purchase and sale orders for the Fund may be combined with those of other
clients of the Investment Adviser and its affiliates in the interest of achieving the
most favorable net results to the Fund. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
the extent that the Fund&#146;s portfolio management team has responsibilities for
managing accounts in addition to the Fund, a portfolio manager will need to divide his
time and attention among relevant accounts. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
some cases, a real, potential or apparent conflict may also arise where (i) the
Investment Adviser may have an incentive, such as a performance based fee, in managing
one account and not with respect to other accounts it manages or (ii) where a member of
the Fund&#146;s portfolio management team owns an interest in one fund or account he or
she manages and not another. </FONT></P>




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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Code of Ethics </B></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund&#146;s Board of Directors approved a Code of Ethics under Rule 17j-1 of the 1940 Act
that covers the Fund and the Investment Adviser. The Code of Ethics establishes
procedures for personal investing and restricts certain transactions. Employees subject
to the Code of Ethics may invest in securities for their personal investment accounts,
including securities that may be purchased or held by the Fund. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Proxy Voting Policies
and Procedures </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund&#146;s Board of Directors has delegated to the Investment Adviser authority to vote
all proxies relating to the Fund&#146;s portfolio securities. The Investment Adviser has
adopted policies and procedures (&#147;Proxy Voting Procedures&#148;) with respect to the
voting of proxies related to the portfolio securities held in the account of one or more
of its clients, including the Fund. Pursuant to these Proxy Voting Procedures, the
Investment Adviser&#146;s primary objective when voting proxies is to make proxy voting
decisions solely in the best interests of the Fund and its stockholders, and to act in a
manner that the Investment Adviser believes is most likely to enhance the economic value
of the securities held by the Fund. The Proxy Voting Procedures are designed to ensure
that the Investment Adviser considers the interests of its clients, including the Fund,
and not the interests of the Investment Adviser, when voting proxies and that real (or
perceived) material conflicts that may arise between the Investment Adviser&#146;s
interest and those of the Investment Adviser&#146;s clients are properly addressed and
resolved. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
order to implement the Proxy Voting Procedures, the Investment Adviser has formed a Proxy
Voting Committee (the &#147;Proxy Committee&#148;). The Proxy Committee is comprised of
the Investment Adviser&#146;s Chief Investment Officer (the &#147;CIO&#148;), one or more
other senior investment professionals appointed by the CIO, portfolio managers and
investment analysts appointed by the CIO and any other personnel the CIO deems
appropriate. The Proxy Committee will also include two non-voting representatives from
the Investment Adviser&#146;s Legal department appointed by the Investment Adviser&#146;s
General Counsel. The Proxy Committee&#146;s membership shall be limited to full-time
employees of the Investment Adviser. No person with any investment banking, trading,
retail brokerage or research responsibilities for the Investment Adviser&#146;s
affiliates may serve as a member of the Proxy Committee or participate in its decision
making (except to the extent such person is asked by the Proxy Committee to present
information to the Proxy Committee, on the same basis as other interested knowledgeable
parties not affiliated with the Investment Adviser might be asked to do so). The Proxy
Committee determines how to vote the proxies of all clients, including the Fund, that
have delegated proxy voting authority to the Investment Adviser and seeks to ensure that
all votes are consistent with the best interests of those clients and are free from
unwarranted and inappropriate influences. The Proxy Committee establishes general proxy
voting policies for the Investment Adviser and is responsible for determining how those
policies are applied to specific proxy votes, in light of each issuer&#146;s unique
structure, management, strategic options and, in certain circumstances, probable economic
and other anticipated consequences of alternate actions. In so doing, the Proxy Committee
may determine to vote a particular proxy in a manner contrary to its generally stated
policies. In addition, the Proxy Committee will be responsible for ensuring that all
reporting and recordkeeping requirements related to proxy voting are fulfilled. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Proxy Committee may determine that the subject matter of a recurring proxy issue is not
suitable for general voting policies and requires a case-by-case determination. In such
cases, the Proxy Committee may elect not to adopt a specific voting policy applicable to
that issue. The Investment Adviser believes that certain proxy voting issues require
investment analysis &#151; such as approval of mergers and other significant corporate
transactions &#151; akin to investment decisions, and are, therefore, not suitable for
general guidelines. The Proxy Committee may elect to adopt a common position for the
Investment Adviser on certain proxy votes that are akin to investment decisions, or
determine to permit the portfolio manager to make individual decisions on how best to
maximize economic value for the Fund (similar to normal buy/sell investment decisions
made by such portfolio managers). While it is expected that the Investment Adviser will
generally seek to vote proxies over which the Investment Adviser exercises voting
authority in a uniform manner for all the Investment Adviser&#146;s clients, the Proxy
Committee, in conjunction with the Fund&#146;s portfolio manager, may determine that the
Fund&#146;s specific circumstances require that its proxies be voted differently. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
assist the Investment Adviser in voting proxies, the Proxy Committee has retained
Institutional Shareholder Services (&#147;ISS&#148;). ISS is an independent adviser that
specializes in providing a variety of fiduciary-level proxy-related services to
institutional investment managers, plan sponsors, custodians, consultants, and other  </FONT></P>





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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>institutional investors. The
services provided to the Investment Adviser by ISS include in-depth research, voting
recommendations (although the Investment Adviser is not obligated to follow such
recommendations), vote execution, and recordkeeping. ISS will also assist the Fund in
fulfilling its reporting and recordkeeping obligations under the 1940 Act. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Investment Adviser&#146;s Proxy Voting Procedures also address special circumstances that
can arise in connection with proxy voting. For instance, under the Proxy Voting
Procedures, the Investment Adviser generally will not seek to vote proxies related to
portfolio securities that are on loan, although it may do so under certain circumstances.
In addition, the Investment Adviser will vote proxies related to securities of foreign
issuers only on a best efforts basis and may elect not to vote at all in certain
countries where the Proxy Committee determines that the costs associated with voting
generally outweigh the benefits. The Proxy Committee may at any time override these
general policies if it determines that such action is in the best interests of the Fund. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From
time to time, the Investment Adviser may be required to vote proxies in respect of an
issuer where an affiliate of the Investment Adviser (each, an &#147;Affiliate&#148;), or
a money management or other client of the Investment Adviser, including investment
companies for which the Investment Adviser provides investment advisory, administrative
and/or other services (each, a &#147;Client&#148;) is involved. The Proxy Voting
Procedures and the Investment Adviser&#146;s adherence to those procedures are designed
to address such conflicts of interest. The Proxy Committee intends to strictly adhere to
the Proxy Voting Procedures in all proxy matters, including matters involving Affiliates
and Clients. If, however, an issue representing a non-routine matter that is material to
an Affiliate or a widely known Client is involved such that the Proxy Committee does not
reasonably believe it is able to follow its guidelines (or if the particular proxy matter
is not addressed by the guidelines) and vote impartially, the Proxy Committee may, in its
discretion for the purposes of ensuring that an independent determination is reached,
retain an independent fiduciary to advise the Proxy Committee on how to vote or to cast
votes on behalf of the Investment Adviser&#146;s clients. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the event that the Proxy Committee determines not to retain an independent fiduciary, or
it does not follow the advice of such an independent fiduciary, the Proxy Committee may
pass the voting power to a subcommittee appointed by the CIO (with advice from the
Secretary of the Proxy Committee), consisting solely of Proxy Committee members selected
by the CIO. The CIO shall appoint to the subcommittee, where appropriate, only persons
whose job responsibilities do not include contact with the Client and whose job
evaluations would not be affected by the Investment Adviser&#146;s relationship with the
Client (or failure to retain such relationship). The subcommittee shall determine whether
and how to vote all proxies on behalf of the Investment Adviser&#146;s clients or, if the
proxy matter is, in their judgment, akin to an investment decision, to defer to the
applicable portfolio managers, provided that, if the subcommittee determines to alter the
Investment Adviser&#146;s normal voting guidelines or, on matters where the Investment
Adviser&#146;s policy is case-by-case, does not follow the voting recommendation of any
proxy voting service or other independent fiduciary that may be retained to provide
research or advice to the Investment Adviser on that matter, no proxies relating to the
Client may be voted unless the Secretary, or in the Secretary&#146;s absence, the
Assistant Secretary of the Proxy Committee concurs that the subcommittee&#146;s
determination is consistent with the Investment Adviser&#146;s fiduciary duties. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition to the general principles outlined above, the Investment Adviser has adopted
voting guidelines with respect to certain recurring proxy issues that are not expected to
involve unusual circumstances. These policies are guidelines only, and the Investment
Adviser may elect to vote differently from the recommendation set forth in a voting
guideline if the Proxy Committee determines that it is in the Fund&#146;s best interest
to do so. In addition, the guidelines may be reviewed at any time upon the request of a
Proxy Committee member and may be amended or deleted upon the vote of a majority of Proxy
Committee members present at a Proxy Committee meeting at which there is a quorum. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Investment Adviser has adopted specific voting guidelines with respect to the following
proxy issues: </FONT></P>

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    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=3%></TD>
    <TD WIDTH=90%><FONT SIZE=2>Proposals
related to the composition of the board of directors of issuers other than investment
companies. As a general                matter, the Proxy Committee believes that a company&#146;s
board of directors (rather than stockholders) is most likely to                have
access to important, nonpublic information regarding a company&#146;s business and
prospects, and is therefore                best-positioned to set corporate policy and
oversee management. The Proxy Committee, therefore, believes that the
               foundation of good corporate governance is the election of qualified,
independent corporate directors who are </FONT></TD></TR></TABLE>




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    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&nbsp;</FONT></TD>
    <TD WIDTH=3%></TD>
    <TD WIDTH=90%><FONT SIZE=2>likely
to                diligently represent the interests of stockholders and oversee
management of the corporation in a manner that will seek                to maximize
stockholder value over time. In individual cases, the Proxy Committee may look at a
nominee&#146;s number of                other directorships, history of representing
stockholder interests as a director of other companies or other factors,
               to the extent the Proxy Committee deems relevant.</FONT></TD></TR></TABLE>

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    <TD WIDTH=5%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=3%></TD>
    <TD WIDTH=90%><FONT SIZE=2>Proposals
related to the selection of an issuer&#146;s                independent auditors. As a
general matter, the Proxy Committee                believes that corporate auditors have
a responsibility to                represent the interests of stockholders and provide an
               independent view on the propriety of financial reporting
               decisions of corporate management. While the Proxy Committee will
               generally defer to a corporation&#146;s choice of auditor, in
               individual cases, the Proxy Committee may look at an
               auditors&#146; history of representing stockholder interests as
               auditor of other companies, to the extent the Proxy Committee
               deems relevant.</FONT></TD></TR></TABLE>

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    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=3%></TD>
    <TD WIDTH=90%><FONT SIZE=2>Proposals
related to management compensation and employee                benefits. As a general
matter, the Proxy Committee favors                disclosure of an issuer&#146;s
compensation and benefit policies                and opposes excessive compensation, but
believes that                compensation matters are normally best determined by an
               issuer&#146;s board of directors, rather than stockholders.
               Proposals to &#147;micro-manage&#148; an issuer&#146;s
               compensation practices or to set arbitrary restrictions on
               compensation or benefits will, therefore, generally not be
               supported.</FONT></TD></TR></TABLE>

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    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=3%></TD>
    <TD WIDTH=90%><FONT SIZE=2>Proposals
related to requests, principally from management, for                approval of
amendments that would alter an issuer&#146;s capital                structure. As a
general matter, the Proxy Committee will support                requests that enhance the
rights of common stockholders and                oppose requests that appear to be
unreasonably dilutive.</FONT></TD></TR></TABLE>

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    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=3%></TD>
    <TD WIDTH=90%><FONT SIZE=2>Proposals
related to requests for approval of amendments to an                issuer&#146;s charter
or by-laws. As a general matter, the Proxy                Committee opposes poison pill
provisions.</FONT></TD></TR></TABLE>

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    <TD WIDTH=5%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=3%></TD>
    <TD WIDTH=90%><FONT SIZE=2>Routine
proposals related to requests regarding the formalities of corporate meetings.</FONT></TD></TR></TABLE>

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    <TD WIDTH=5%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=3%></TD>
    <TD WIDTH=90%><FONT SIZE=2>Proposals
related to proxy issues associated solely with holdings                of investment
company shares. As with other types of companies,                the Proxy Committee
believes that a fund&#146;s board of                directors (rather than its
stockholders) is best-positioned to                set fund policy and oversee
management. However, the Proxy                Committee opposes granting boards of
directors authority over                certain matters, such as changes to a fund&#146;s
investment                objective, that the Investment Company Act envisions will be
               approved directly by stockholders.</FONT></TD></TR></TABLE>

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    <TD WIDTH=5%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=3%></TD>
    <TD WIDTH=90%><FONT SIZE=2>Proposals
related to limiting corporate conduct in some manner                that relates to the
stockholder&#146;s environmental or social                concerns. The Proxy Committee
generally believes that annual                stockholder meetings are inappropriate
forums for discussion of                larger social issues, and opposes stockholder
resolutions                &#147;micro-managing&#148; corporate conduct or requesting
               release of information that would not help a stockholder evaluate
               an investment in the corporation as an economic matter. While the
               Proxy Committee is generally supportive of proposals to require
               corporate disclosure of matters that seem relevant and material
               to the economic interests of stockholders, the Proxy Committee is
               generally not supportive of proposals to require disclosure of
               corporate matters for other purposes.</FONT></TD></TR></TABLE>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Information
about how the Fund voted proxies relating to securities held by the Fund&#146;s portfolio
during the most recent 12 month period ended June 30 is available without charge (i) at
www.mutualfunds.ml.com, and (ii) the Commission&#146;s website at www.sec.gov. </FONT></P>



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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>PORTFOLIO
TRANSACTIONS </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject
to policies established by the Board of Directors, the Investment Adviser is primarily
responsible for the execution of the Fund&#146;s portfolio transactions and the
allocation of brokerage. The Fund has no obligation to deal with any dealer or group of
dealers in the execution of transactions in portfolio securities of the Fund. Where
possible, the Fund deals directly with the dealers who make a market in the securities
involved except in those circumstances where better prices and execution are available
elsewhere. It is the policy of the Fund to obtain the best results in conducting
portfolio transactions for the Fund, taking into account such factors as price (including
the applicable dealer spread or commission), the size, type and difficulty of the
transaction involved, the firm&#146;s general execution and operations facilities and the
firm&#146;s risk in positioning the securities involved. The cost of portfolio securities
transactions of the Fund primarily consists of dealer or underwriter spreads and
brokerage commissions. While reasonable competitive spreads or commissions are sought,
the Fund will not necessarily be paying the lowest spread or commission available on any
particular transaction. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject
to obtaining the best net results, dealers who provide supplemental investment research
(such as quantitative and modeling information assessments and statistical data and
provide other similar services) to the Investment Adviser may receive orders for
transactions by the Fund. Information so received will be in addition to and not in lieu
of the sraervices required to be performed by the Investment Adviser under the Investment
Advisory Agreement and the expense of the Investment Adviser will not necessarily be
reduced as a result of the receipt of such supplemental information. Supplemental
investment research obtained from such dealers might be used by the Investment Adviser in
servicing all of its accounts and such research might not be used by the Investment
Adviser in connection with the Fund. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund invests in securities traded in the over-the-counter markets, and the Fund intends
to deal directly with dealers who make markets in the securities involved, except in
those circumstances where better execution is available elsewhere. Under the 1940 Act,
except as permitted by exemptive order, persons affiliated with the Fund, including
Merrill Lynch, are prohibited from dealing with the Fund as principal in the purchase and
sale of securities. Since transactions in the over-the-counter market usually involve
transactions with dealers acting as principals for their own accounts, the Fund does not
deal with Merrill Lynch and its affiliates in connection with such principal transactions
except that, pursuant to exemptive orders obtained by the Investment Adviser, the Fund
may engage in principal transactions with Merrill Lynch in high quality, short term, tax
exempt securities. See &#147;Investment Restrictions.&#148; However, affiliated persons
of the Fund, including Merrill Lynch, may serve as its brokers in certain
over-the-counter transactions conducted on an agency basis. In addition, the Fund has
received an exemptive order, under which it may purchase investment grade Municipal Bonds
through group orders from an underwriting syndicate of which Merrill Lynch is a member
subject to conditions set forth in such order (the &#147;Group Order Exemptive Order&#148;).
A group order is an order for securities held in an underwriting syndicate for the
account of all members of the syndicate, and in proportion to their respective
participation in the syndicate. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund also may purchase tax exempt debt instruments in individually negotiated
transactions with the issuers. Because an active trading market may not exist for such
securities, the prices that the Fund may pay for these securities or receive on their
resale may be lower than that for similar securities with a more liquid market. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain
court decisions have raised questions as to the extent to which investment companies
should seek exemptions under the 1940 Act in order to seek to recapture underwriting and
dealer spreads from affiliated entities. The Fund&#146;s Board of Directors has
considered all factors deemed relevant and has made a determination not to seek such
recapture at this time. The Fund&#146;s Board of Directors will reconsider this matter
from time to time. </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
the six months ended April 30, 2005 and the fiscal years ended October 31, 2004, 2003 and
2002, the aggregate amount of brokerage commissions paid by the Fund was $0, $0, $21,450
and $26,520, respectively. No brokerage commissions were paid to Merrill Lynch or its
affiliates during these periods. </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Securities
held by the Fund may also be held by, or be appropriate investments for, other funds or
investment advisory clients for which the Investment Adviser or its affiliates act as an
adviser. Because of different investment objectives or other factors, a particular
security may be bought for an advisory client when other clients are selling the same
security. If purchases or sales of securities by the Investment Adviser for the Fund or
other funds for which it acts as investment adviser or for other advisory clients arise
for consideration at or about the same time, transactions in such securities will be
made, insofar as feasible, for the respective funds and clients  </FONT></P>






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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>in a manner deemed equitable to all.
Transactions effected by the Investment Adviser (or its affiliates) on behalf of more
than one of its clients during the same period may increase the demand for securities
being purchased or the supply of securities being sold, causing an adverse effect on
price. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section
11(a) of the Securities Exchange Act of 1934 generally prohibits members of the U.S.
national securities exchanges from executing exchange transactions for their affiliates
and institutional accounts that they manage unless the member (i) has obtained prior
express authorization from the account to effect such transactions, (ii) at least
annually furnishes the account with a statement setting forth the aggregate compensation
received by the member in effecting such transactions, and (iii) complies with any rules
the Commission has prescribed with respect to the requirements of clauses (i) and (ii).
To the extent Section 11(a) would apply to Merrill Lynch acting as a broker for the Fund
in any of its portfolio transactions executed on any such securities exchange of which it
is a member, appropriate consents have been obtained from the Fund and annual statements
as to aggregate compensation will be provided to the Fund. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Portfolio Turnover </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Generally,
the Fund does not purchase securities for short term trading profits. However, the Fund
may dispose of securities without regard to the time they have been held when such
actions, for defensive or other reasons, appear advisable to the Investment Adviser.
While it is not possible to predict turnover rates with any certainty, at present it is
anticipated that the Fund&#146;s annual portfolio turnover rate, under normal
circumstances, should be less than 100%. (The portfolio turnover rate is calculated by
dividing the lesser of purchases or sales of portfolio securities for the particular
fiscal year by the monthly average of the value of the portfolio securities owned by the
Fund during the particular fiscal year. For purposes of determining this rate, all
securities whose maturities at the time of acquisition are one year or less are
excluded.) A high portfolio turnover rate results in greater transaction costs, which are
borne directly by the Fund and may have certain tax consequences for stockholders. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
the six months ended April 30, 2005 and the fiscal years ended October 31, 2004 and 2003,
the Fund&#146;s portfolio turnover rates were 14.76%, 32.87% and 33.92%, respectively. </FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>TAXES </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund has elected to qualify for the special tax treatment afforded regulated investment
companies (&#147;RICs&#148;) under the Internal Revenue Code of 1986, as amended (the
&#147;Code&#148;). As long as it so qualifies, in any taxable year in which it
distributes at least 90% of its taxable net income and 90% of its tax exempt net income
(see below), the Fund (but not its stockholders) will not be subject to Federal income
tax to the extent that it distributes its net investment income and net realized capital
gains. The Fund intends to distribute substantially all of such income. If, in any
taxable year, the Fund fails to qualify as a RIC under the Code, it would be taxed in the
same manner as an ordinary corporation and all distributions from earnings and profits
(as determined under U.S. Federal income tax principles) to its stockholders would be
taxable as ordinary dividend income eligible for the maximum 15% tax rate for
non-corporate shareholders and the dividends-received deduction for corporate
shareholders. However, the Fund&#146;s distributions derived from income on tax exempt
obligations, as defined herein, would no longer qualify for treatment as exempt interest. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Code requires a RIC to pay a nondeductible 4% excise tax to the extent the RIC does not
distribute, during each calendar year, 98% of its ordinary income, determined on a
calendar year basis, and 98% of its capital gains, determined, in general, on an October
31 year-end, plus certain undistributed amounts from previous years. The required
distributions, however, are based only on the taxable income of a RIC. The excise tax,
therefore, generally will not apply to the tax exempt income of a RIC, such as the Fund,
that pays exempt-interest dividends. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Internal Revenue Service (the &#147;IRS&#148;), in a revenue ruling, held that
  certain auction rate preferred stock would be treated as stock for Federal income
  tax purposes. The terms of the AMPS are substantially similar, but not identical,
  to the auction rate preferred stock discussed in the revenue ruling, and in
  the opinion of Sidley Austin Brown &amp; Wood <font size="1">LLP</font>, counsel
  to the Fund, the shares of AMPS will constitute stock of the Fund and distributions
  with respect to shares of AMPS (other than distributions in redemption of shares
  of AMPS subject to Section 302(b) of the Code) will constitute dividends to
  the extent of the Fund&#146;s current and accumulated earnings and profits as
  calculated for Federal income tax purposes. Nevertheless, it is possible that
  the IRS might take a </FONT></P>






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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>contrary position, asserting, for
example, that the shares of AMPS constitute debt of the Fund. If this position were
upheld, the discussion of the treatment of distributions below would not apply. Instead,
distributions by the Fund to holders of shares of AMPS would constitute taxable interest
income, whether or not they exceeded the earnings and profits of the Fund, would be
included in full in the income of the recipient and would be taxed as ordinary income.
Counsel believes that such a position, if asserted by the IRS, would be unlikely to
prevail. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Fund will only purchase a Municipal Bond or Non-Municipal Tax-Exempt Security
  if it is accompanied by an opinion of counsel to the issuer, which is delivered
  on the date of issuance of the security, that the interest paid on such security
  is excludable from gross income for Federal income tax purposes (<i>i.e., </i>
  &#147;tax-exempt&#148;). The Fund intends to qualify to pay &#147;exempt-interest
  dividends&#148; as defined in Section 852(b)(5) of the Code. Under such section
  if, at the close of each quarter of its taxable year, at least 50% of the value
  of its total assets consists of obligations that pay interest which is excludable
  from gross income for Federal income tax purposes (&#147;tax exempt obligations&#148;)
  under Section 103(a) of the Code (relating generally to obligations of a state
  or local governmental unit), the Fund shall be qualified to pay exempt-interest
  dividends to its stockholders. Exempt-interest dividends are dividends or any
  part thereof paid by the Fund that are attributable to interest on tax exempt
  obligations and designated by the Fund as exempt-interest dividends in a written
  notice mailed to the Fund&#146;s stockholders within 60 days after the close
  of its taxable year. To the extent that the dividends distributed to the Fund&#146;s
  stockholders are derived from interest income exempt from tax under Code Section
  103(a) and are properly designated as exempt-interest dividends, they will be
  excludable from a stockholder&#146;s gross income for Federal tax purposes.
  Exempt-interest dividends are included, however, in determining the portion,
  if any, of a person&#146;s social security and railroad retirement benefits
  subject to Federal income taxes. Each stockholder is advised to consult a tax
  adviser with respect to whether exempt-interest dividends retain the exclusion
  under Code Section 103(a) if such stockholder would be treated as a &#147;substantial
  user&#148; or &#147;related person&#148; under Code Section 147(a) with respect
  to property financed with the proceeds of an issue of PABs, if any, held by
  the Fund. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
the extent that the Fund&#146;s distributions are derived from interest on its taxable
investments or from an excess of net short-term capital gains over net long-term capital
losses (&#147;ordinary income dividends&#148;), such distributions generally are
considered ordinary income for Federal income tax purposes. Distributions by the Fund,
whether from exempt-interest income, ordinary income or capital gains, are not eligible
for the dividends received deduction allowed to corporations under the Code or the
reduced tax rates available to non-corporate shareholders. Distributions, if any, from an
excess of net long-term capital gains over net short-term capital losses derived from the
sale of securities or from certain transactions in futures, or options and swaps (&#147;capital
gain dividends&#148;) are taxable as long-term capital gains for Federal income tax
purposes, regardless of the length of time the stockholder has owned Fund shares.
Generally not later than 60 days after the close of its taxable year, the Fund will
provide its stockholders with a written notice designating the amounts of any
exempt-interest dividends and capital gain dividends. If the Fund pays a dividend in
January which was declared in the previous October, November or December to stockholders
of record on a specified date in one of such months, then such dividend will be treated
for tax purposes as being paid by the Fund and received by its stockholders on December
31 of the year in which such dividend was declared. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
or a portion of the Fund&#146;s gain from the sale or redemption of tax exempt
obligations purchased at a market discount will be treated for Federal income tax
purposes as ordinary income rather than capital gain. This rule may increase the amount
of ordinary income dividends received by stockholders. Distributions in excess of the Fund&#146;s
earnings and profits will first reduce the adjusted tax basis of a holder&#146;s shares
and, after such adjusted tax basis is reduced to zero, will constitute capital gains to
such holder (assuming the shares are held as a capital asset). The sale or exchange of
AMPS could result in capital gain or loss to holders of AMPS who hold their shares as
capital assets. Generally, a stockholder&#146;s gain or loss will be long-term capital
gain or loss if the shares have been held for more than one year. Any loss upon the sale
or exchange of Fund shares held for six months or less will be disallowed to the extent
of any exempt-interest dividends received by the stockholder. In addition, any such loss
that is not disallowed under the rule stated above will be treated as long-term capital
loss to the extent of any capital gain dividends received by the stockholder. </FONT></P>





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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
you borrow money to buy the Fund&#146;s AMPS, you may not be permitted to deduct the
interest on that loan. Under Federal income tax rules, the Fund&#146;s AMPS may be
treated as having been bought with borrowed money even if the purchase cannot be traced
directly to borrowed money. Stockholders should consult their own tax advisers regarding
the impact of an investment in AMPS upon the deductibility of interest payable by the
stockholder. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
IRS has taken the position in a revenue ruling that if a RIC has two or more classes of
shares, it may designate distributions made to each class in any year as consisting of no
more than such class&#146;s proportionate share of particular types of income, including
exempt-interest income and net long-term capital gains. A class&#146;s proportionate
share of a particular type of income is determined according to the percentage of total
dividends paid by the RIC during such year that was paid to such class. Thus, the Fund is
required to allocate a portion of its net capital gain and other taxable income to the
shares of AMPS and Other AMPS of each series. Accordingly, the Fund intends to designate
dividends paid to the Series E AMPS and Other AMPS as tax exempt interest, capital gains
or other taxable income, as applicable, in proportion to each series&#146; share of total
dividends paid during the year. The Fund may notify the Auction Agent of the amount of
any net capital gain and other taxable income to be included in any dividend on shares of
AMPS prior to the Auction establishing the Applicable Rate for such dividend. The Fund
also may include such income in a dividend on shares of AMPS without giving advance
notice thereof if it increases the dividend by an additional amount calculated as if such
income were a Retroactive Taxable Allocation and the additional amount were an Additional
Dividend, provided that the Fund will notify the Auction Agent of the additional amounts
to be included in such dividend prior to the applicable Dividend Payment Date. See &#147;The
Auction &#151; Auction Procedures &#151; Auction Date; Advance Notice of Allocation of
Taxable Income; Inclusion of Taxable Income in Dividends&#148; in the prospectus. Except
for the portion of any dividend that it informs the Auction Agent will be treated as
capital gains or other taxable income, the Fund anticipates that the dividends paid on
the shares of AMPS will constitute exempt-interest dividends. The amount of net capital
gain and ordinary income allocable to shares of AMPS (the &#147;taxable distribution&#148;)
will depend upon the amount of such gains and income realized by the Fund and the total
dividends paid by the Fund on shares of common stock and shares of the series of AMPS
during a taxable year, but the taxable distribution generally is not expected to be
significant. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the Fund makes a Retroactive Taxable Allocation, it will pay Additional Dividends to
holders of AMPS who are subject to the Retroactive Taxable Allocation. See &#147;Description
of AMPS &#151; Dividends &#151; Additional Dividends&#148; in the prospectus. The Federal
income tax consequences of Additional Dividends under existing law are uncertain. The
Fund intends to treat a holder as receiving a dividend distribution in the amount of any
Additional Dividend only as and when such Additional Dividend is paid. An Additional
Dividend generally will be designated by the Fund as an exempt-interest dividend except
as otherwise required by applicable law. However, the IRS may assert that all or part of
an Additional Dividend is a taxable dividend either in the taxable year for which the
Retroactive Taxable Allocation is made or in the taxable year in which the Additional
Dividend is paid. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
  the opinion of Sidley Austin Brown &amp; Wood <font size="1">LLP</font>, counsel
  to the Fund, under current law the manner in which the Fund intends to allocate
  items of tax exempt income, net capital gain and other taxable income among
  shares of common stock and shares of AMPS will be respected for Federal income
  tax purposes. However, the tax treatment of Additional Dividends may affect
  the Fund&#146;s calculation of each class&#146;s allocable share of capital
  gains and other taxable income. In addition, there is currently no direct guidance
  from the IRS or other sources specifically addressing whether the Fund&#146;s
  method for allocating tax exempt income, net capital gain and other taxable
  income, if any, among shares of common stock and shares of the AMPS will be
  respected for Federal income tax purposes, and it is possible that the IRS could
  disagree with counsel&#146;s opinion and attempt to reallocate the Fund&#146;s
  net capital gain or other taxable income. In the event of a reallocation, some
  of the dividends identified by the Fund as exempt-interest dividends to holders
  of shares of AMPS may be recharacterized as additional capital gains or other
  taxable income. In the event of such recharacterization, the Fund would not
  be required to make payments to such stockholders to offset the tax effect of
  such reallocation. In addition, a reallocation may cause the Fund to be liable
  for income tax and excise tax on any reallocated taxable income. Sidley Austin
  Brown &amp; Wood <font size="1">LLP</font> has advised the Fund that, in its
  opinion, if the IRS were to challenge in court the Fund&#146;s allocations of
  income and gain, the IRS would be unlikely to prevail. A holder should be aware,
  however, that the opinion of Sidley Austin Brown &amp; Wood <font size="1">LLP</font>
  represents only its best legal judgment and is not binding on the IRS or the
  courts. </FONT></P>







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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Code subjects interest received on certain otherwise tax exempt securities to
  a Federal alternative minimum tax. The Federal alternative minimum tax applies
  to interest received on PABs issued after August 7, 1986. PABs are bonds that,
  although tax exempt, are used for purposes other than those performed by governmental
  units and that benefit non-governmental entities (<i>e.g., </i>bonds used for
  industrial development or housing purposes). Income received on such bonds is
  classified as an item of &#147;tax preference,&#148;which could subject certain
  investors in such bonds, including stockholders of the Fund, to an increased
  Federal alternative minimum tax. The Fund intends to purchase such PABs and
  will report to stockholders at the close of the calendar year-end the portion
  of its dividends declared during the year which constitutes an item of tax preference
  for Federal alternative minimum tax purposes. The Code further provides that
  corporations are subject to a Federal alternative minimum tax based, in part,
  on certain differences between taxable income as adjusted for other tax preferences
  and the corporation&#146;s &#147;adjusted current earnings,&#148; which more
  closely reflect a corporation&#146;s economic income. Because an exempt-interest
  dividend paid by the Fund will be included in adjusted current earnings, a corporate
  stockholder may be required to pay a Federal alternative minimum tax on exempt-interest
  dividends paid by the Fund. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund may invest in instruments the return on which includes nontraditional features such
as indexed principal or interest payments (&#147;nontraditional instruments&#148;). These
instruments may be subject to special tax rules under which the Fund may be required to
accrue and distribute income before amounts due under the obligations are paid. In
addition, it is possible that all or a portion of the interest payments on such
nontraditional instruments could be recharacterized as taxable ordinary income. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund may engage in interest rate and credit default swaps. The Federal income tax rules
governing the taxation of swaps are not entirely clear and may require the Fund to treat
payments received under such arrangements as ordinary income and to amortize payments
under certain circumstances. Because payments received by the Fund in connection with
swap transactions will be taxable rather than tax exempt, they may result in increased
taxable distributions to stockholders. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain
  transactions entered into by the Fund are subject to complex Federal income
  tax provisions that may, among other things, (a) affect the character of gains
  and losses realized, (b) disallow, suspend or otherwise limit the allowance
  of certain losses or deductions, and (c) accelerate the recognition of income.
  Operation of these tax rules could, therefore, affect the character, amount
  and timing of distributions and result in increased taxable distributions to
  stockholders. Special tax rules also will require the Fund to mark-to-market
  certain types of positions in its portfolio (<i>i.e., </i>treat them as sold
  on the last day of the taxable year), and may result in the recognition of income
  without a corresponding receipt of cash. The Fund intends to monitor its transactions,
  make appropriate tax elections and make appropriate entries in its books and
  records to lessen the effect of these tax rules and avoid any possible disqualification
  for the special treatment afforded RICs under the Code. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund&#146;s ability to distribute dividends exempt from Federal income tax depends on the
exclusion from gross income of the interest income that it receives on the securities in
which it invests. The Fund will only purchase Municipal Bonds and Non-Municipal Tax
Exempt Securities if they are accompanied by an opinion of counsel to the issuer, which
is delivered on the date of issuance of that security, that interest on such securities
is excludable from gross income for Federal income tax purposes (the &#147;tax exemption
opinion&#148;). </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Events
occurring after the date of issuance of the Municipal Bonds and Non-Municipal Tax Exempt
Securities in which the Fund invests, however, may cause the interest on such securities
to be includable in gross income for Federal income tax purposes. For example, the Code
establishes certain requirements, such as restrictions as to the investment of the
proceeds of the issue, limitations as to the use of proceeds of such issue and the
property financed by such proceeds, and the payment of certain excess earnings to the
Federal government, that must be met after the issuance of securities for interest on
such securities to remain excludable from gross income for Federal income tax purposes.
The issuers and the conduit borrowers of the Municipal Bonds or Non-Municipal Tax Exempt
Securities generally covenant to comply with such requirements, and the tax exemption
opinion generally assumes continuing compliance with such requirements. Failure to comply
with these continuing requirements, however, may cause the interest on such securities to
be includable in gross income for Federal income tax purposes retroactive to their date
of issue. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, the IRS has an ongoing enforcement program that involves the audit of tax
exempt bonds to determine whether an issue of bonds satisfies all of the requirements
that must be met for interest on such bonds to be excludable from gross income for
Federal income tax purposes. From time to time, some of the securities  </FONT></P>






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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>held by the Fund may be the subject
of such an audit by the IRS, and the IRS may determine that the interest on such
securities is includable in gross income for Federal income tax purposes, either because
the IRS has taken a legal position adverse to the conclusion reached by counsel to the
issuer in the tax exemption opinion or as a result of an action taken or not taken after
the date of issue of such obligation. If a Municipal Bond or Non- Municipal Tax Exempt
Security in which the Fund invests is determined to pay taxable interest subsequent to
the Fund&#146;s acquisition of such security, the IRS may demand that the Fund pay taxes
on the affected interest income. If the Fund agrees to do so, the Fund&#146;s yield on
its common stock could be adversely affected. A determination that interest on a security
held by the Fund is includable in gross income for Federal income tax purposes
retroactively to its date of issue may, likewise, cause a portion of prior distributions
received by stockholders, including holders of AMPS, to be taxable to those stockholders
in the year of receipt. The Fund will not pay an Additional Dividend to a holder of AMPS
under these circumstances. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
at any time when shares of AMPS are outstanding the Fund does not meet the asset coverage
requirements of the 1940 Act, the Fund will be required to suspend distributions to
holders of common stock until the asset coverage is restored. See &#147;Description of
AMPS &#151; Dividends &#151; Restrictions on Dividends and Other Payments&#148; and in
the prospectus. This may prevent the Fund from distributing at least 90% of its net
income, and may, therefore, jeopardize the Fund&#146;s qualification for taxation as a
RIC. If the Fund were to fail to qualify as a RIC, some or all of the distributions paid
by the Fund would be fully taxable for Federal income tax purposes. Upon any failure to
meet the asset coverage requirements of the 1940 Act, the Fund, in its sole discretion,
may, and under certain circumstances will be required to, redeem shares of AMPS in order
to maintain or restore the requisite asset coverage and avoid the adverse consequences to
the Fund and its stockholders of failing to qualify as a RIC. See &#147;Description of
AMPS &#151; Redemption&#148; herein and in the prospectus. There can be no assurance,
however, that any such action would achieve such objectives. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
noted above, the Fund must distribute annually at least 90% of its net taxable and tax
exempt interest income. A distribution will only be counted for this purpose if it
qualifies for the dividends paid deduction under the Code. Additional preferred stock
that the Fund has authority to issue may raise an issue as to whether distributions on
such preferred stock are &#147;preferential&#148; under the Code and therefore not
eligible for the dividends paid deduction. The Fund intends to issue preferred stock that
counsel advises will not result in the payment of a preferential dividend. If the Fund
ultimately relies on a legal opinion with regard to such preferred stock, there is no
assurance that the IRS would agree that dividends on the preferred stock are not
preferential. If the IRS successfully disallowed the dividends paid deduction for
dividends on the preferred stock, the Fund could lose the benefit of the special
treatment afforded RICs under the Code. In this case, dividends paid by the Fund would
not be exempt from Federal income taxes. Additionally, the Fund would be subject to
Federal income tax, including the alternative minimum tax. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
certain Code provisions, some stockholders may be subject to a withholding tax on
ordinary income dividends, capital gain dividends and redemption payments (&#147;backup
withholding&#148;). Backup withholding may also be required on distributions paid by the
Fund, unless it reasonably estimates that at least 95% of its distributions during the
taxable year are comprised of exempt-interest dividends. Generally, stockholders subject
to backup withholding will be those for whom no certified taxpayer identification number
is on file with the Fund or who, to the Fund&#146;s knowledge, have furnished an
incorrect number. When establishing an account, an investor must certify under penalty of
perjury that such number is correct and that such investor is not otherwise subject to
backup withholding. Backup withholding is not an additional tax. Any amount withheld
generally may be allowed as a refund or a credit against a stockholder&#146;s Federal
income tax liability, provided that the required information is timely forwarded to the
IRS. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund is generally not an appropriate investment for retirement plans, other entities that
are not subject to tax and foreign stockholders. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>State and Local Taxes </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
exemption from Federal income tax for exempt-interest dividends does not necessarily
result in an exemption for such dividends under the income or other tax laws of any state
or local taxing authority. Stockholders are advised to consult their own tax advisers
concerning state and local matters. </FONT></P>






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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
some states, the portion of any exempt-interest dividend that is derived from interest
received by a RIC on its holdings of that state&#146;s securities and its political
subdivisions and instrumentalities is exempt from that state&#146;s income tax.
Therefore, the Fund will report annually to its stockholders the percentage of interest
income earned by the Fund during the preceding year on tax exempt obligations indicating,
on a state-by-state basis, the source of such income. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
foregoing is a general and abbreviated summary of the applicable provisions of the Code
and Treasury Regulations presently in effect. For the complete provisions, reference
should be made to the pertinent Code sections and the Treasury Regulations promulgated
thereunder. The Code and the Treasury Regulations are subject to change by legislative,
judicial or administrative action either prospectively or retroactively. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stockholders
are urged to consult their tax advisers regarding specific questions as to Federal,
state, local or foreign taxes. </FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>CONFLICTS OF INTEREST </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
investment activities of the Investment Adviser, Merrill Lynch and other affiliates of
Merrill Lynch for their own accounts and other accounts they manage may give rise to
conflicts of interest that could disadvantage the Fund and its stockholders. The
Investment Adviser has adopted written policies and procedures that, collectively,
address investment activities of, and other arrangements involving, the Investment
Adviser that may give rise to such conflicts of interest. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Merrill
Lynch, as a diversified global financial services firm, is involved with a broad spectrum
of financial services and asset management activities. Certain of Merrill Lynch&#146;s
affiliates that are not service providers to the Fund engage in a broad range of
activities over which the Investment Adviser has no control or ability to exercise
oversight. Although there are no formal written policies and procedures that cover all
potential or actual conflicts of interest, Merrill Lynch has established a number of
committees and related policies and procedures that are designed to identify, analyze
and/or resolve such conflicts of interest. No assurance can be given that Merrill Lynch
will be able to identify each conflict of interest or that each identified conflict of
interest will be resolved in favor of the Fund. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Merrill
Lynch and its affiliates, including, without limitation, the Investment Adviser and its
advisory affiliates may have proprietary interests in, and may manage or advise with
respect to, accounts or funds (including separate accounts and other funds and collective
investment vehicles) that have investment objectives similar to those of the Fund and/or
that engage in transactions in the same types of securities and instruments as the Fund.
Merrill Lynch and its affiliates are also major participants in, among others, the
options, swaps, and equities markets, in each case both on a proprietary basis and for
the accounts of customers. As such, Merrill Lynch and its affiliates are actively engaged
in transactions in the same securities and instruments in which the Fund invests. Such
activities could affect the prices and availability of the securities and instruments in
which the Fund invests, which could have an adverse impact on the Fund&#146;s
performance. Such transactions, particularly in respect of most proprietary accounts or
customer accounts, will be executed independently of the Fund&#146;s transactions and
thus at prices or rates that may be more or less favorable than those obtained by the
Fund. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
results of the Fund&#146;s investment activities may differ significantly from the
results achieved by the Investment Adviser and its affiliates for its proprietary
accounts or other accounts (including investment companies or collective investment
vehicles) managed or advised by the Investment Adviser. It is possible that the
Investment Adviser and its affiliates and such other accounts will achieve investment
results that are substantially more or less favorable than the results achieved by the
Fund. Moreover, it is possible that the Fund will sustain losses during periods in which
the Investment Adviser and its affiliates achieve significant profits on their trading
for proprietary or other accounts. The opposite result is also possible. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From
time to time, the Fund&#146;s activities may also be restricted because of regulatory
restrictions applicable to Merrill Lynch and its affiliates, and/or their internal
policies designed to comply with such restrictions. As a result, there may be periods,
for example, when the Investment Adviser, and/or its affiliates, will not initiate or
recommend certain types of transactions in certain securities or instruments with respect
to which the Investment Adviser and/or its affiliates are performing services or when
position limits have been reached. </FONT></P>





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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
connection with its management of the Fund, the Investment Adviser may have access to
certain fundamental analysis and proprietary technical models developed by Merrill Lynch.
The Investment Adviser will not be under any obligation, however, to effect transactions
on behalf of the Fund in accordance with such analysis and models. In addition, neither
Merrill Lynch nor any of its affiliates will have any obligation to make available any
information regarding their proprietary activities or strategies, or the activities or
strategies used for other accounts managed by them, for the benefit of the management of
the Fund and it is not anticipated that the Investment Adviser will have access to such
information for the purpose of managing the Fund. The proprietary activities or portfolio
strategies of Merrill Lynch and its affiliates or the activities or strategies used for
accounts managed by them or other customer accounts could conflict with the transactions
and strategies employed by the Investment Adviser in managing the Fund. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, certain principals and certain employees of the Investment Adviser are also
principals or employees of Merrill Lynch or its affiliated entities. As a result, the
performance by these principals and employees of their obligations to such other entities
may be a consideration of which investors in the Fund should be aware. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Investment Adviser may enter into transactions and invest in securities and instruments
on behalf of the Fund in which customers of Merrill Lynch (or, to the extent permitted by
the SEC, Merrill Lynch) serve as the counterparty, principal or issuer. In such cases,
such party&#146;s interests in the transaction will be adverse to the interests of the
Fund, and such party may have no incentive to assure that the Fund obtains the best
possible prices or terms in connection with the transactions. In addition, the purchase,
holding and sale of such investments by the Fund may enhance the profitability of Merrill
Lynch. Merrill Lynch and its affiliates may also create, write or issue derivative
instruments for customers of Merrill Lynch or its affiliates, the underlying securities
or instruments of which may be those in which the Fund invests or which may be based on
the performance of the Fund. The Fund may, subject to applicable law, purchase
investments that are the subject of an underwriting or other distribution by Merrill
Lynch or its affiliates and may also enter into transactions with other clients of
Merrill Lynch or its affiliates where such other clients have interests adverse to those
of the Fund. At times, these activities may cause departments of Merrill Lynch or its
affiliates to give advice to clients that may cause these clients to take actions adverse
to the interests of the Fund. To the extent affiliated transactions are permitted, the
Fund will deal with Merrill Lynch and its affiliates on an arms-length basis. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund will be required to establish business relationships with its counterparties based
on the Fund&#146;s own credit standing. Neither Merrill Lynch nor its affiliates will
have any obligation to allow their credit to be used in connection with the Fund&#146;s
establishment of its business relationships, nor is it expected that the Fund&#146;s
counterparties will rely on the credit of Merrill Lynch or any of its affiliates in
evaluating the Fund&#146;s creditworthiness. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It
is also possible that, from time to time, Merrill Lynch or any of its affiliates, may,
although they are not required to, purchase, hold or sell shares of the Fund. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It
is possible that the Fund may invest in securities of companies with which Merrill Lynch
has or is trying to develop investment banking relationships as well as securities of
entities in which Merrill Lynch makes a market. The Fund also may invest in securities of
companies that Merrill Lynch provides or may someday provide research coverage. Such
investments could cause conflicts between the interests of the Fund and the interests of
other Merrill Lynch clients. In providing services to the Fund, the Investment Adviser is
not permitted to obtain or use material non-public information acquired by any division,
department or affiliate of Merrill Lynch in the course of these activities. In addition,
from time to time, Merrill Lynch&#146;s activities may limit the Fund&#146;s flexibility
in purchases and sales of securities. When Merrill Lynch is engaged in an underwriting or
other distribution of securities of an entity, the Investment Adviser may be prohibited
from purchasing or recommending the purchase of certain securities of that entity for the
Fund. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Investment Adviser, its affiliates, and its directors, officers and employees, may buy
and sell securities or other investments for their own accounts, and may have conflicts
of interest with respect to investments made on behalf of the Fund. As a result of
differing trading and investment strategies or constraints, positions may be taken by
directors, officers and employees and affiliates of the Investment Adviser that are the
same, different from or made at different times than positions taken for the Fund. To
lessen the possibility that the Fund will be adversely affected by this personal trading,
each of the Fund and the Investment Adviser has adopted a Code of Ethics in  </FONT></P>





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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>compliance with Section 17(j) of the
1940 Act that restricts securities trading in the personal accounts of investment
professionals and others who normally come into possession of information regarding the
Fund&#146;s portfolio transactions. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Investment Adviser and its affiliates will not purchase securities or other property
from, or sell securities or other property to, the Fund, except that the Fund may, in
accordance with rules adopted under the 1940 Act, engage in transactions with accounts
that are affiliated with the Fund as a result of common officers, directors, or
investment advisers. These transactions would be effected in circumstances in which the
Investment Adviser determined that it would be appropriate for the Fund to purchase and
another client to sell, or the Fund to sell and another client to purchase, the same
security or instrument on the same day. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Present
and future activities of Merrill Lynch and its affiliates, including of the Investment
Adviser, in addition to those described in this section, may give rise to additional
conflicts of interest. </FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>NET ASSET VALUE </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
asset value per share of common stock is determined Monday through Friday as of the close
of business on the NYSE (generally, the NYSE closes at 4:00 p.m., Eastern time), on each
business day during which the NYSE is open for trading. For purposes of determining the
net asset value of a share of common stock, the value of the securities held by the Fund
plus any cash or other assets (including interest accrued but not yet received) minus all
liabilities (including accrued expenses) and the aggregate liquidation value of any
outstanding shares of preferred stock is divided by the total number of shares of common
stock outstanding at such time. Expenses, including the fees payable to the Investment
Adviser, are accrued daily. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Municipal Bonds and other portfolio securities in which the Fund invests are traded
primarily in over-the-counter (&#147;OTC&#148;) municipal bond and money markets and are
valued at the last available bid price for long positions and at the last available ask
price for short positions in the OTC market or on the basis of yield equivalents as
obtained from one or more dealers or pricing services approved by the Directors. One bond
is the &#147;yield equivalent&#148; of another bond when, taking into account market
price, maturity, coupon rate, credit rating and ultimate return of principal, both bonds
will theoretically produce an equivalent return to the bondholder. Financial futures
contracts and options thereon, which are traded on exchanges, are valued at their
settlement prices as of the close of such exchanges. Short-term investments with a
remaining maturity of 60 days or less are valued on an amortized cost basis, which
approximates market value, unless the Investment Adviser believes that this method no
longer produces fair valuations. Repurchase agreements will be valued at cost plus
accrued interest. The value of swaps, including interest rate swaps, caps and floors,
will be determined by obtaining dealer quotations. Repurchase agreements will be valued
at cost plus accrued interest. Securities and assets for which market quotations are not
readily available are valued at fair value as determined in good faith by or under the
direction of the Directors, including valuations furnished by a pricing service retained
by the Fund, which may use a matrix system for valuations. The procedures of the pricing
service and its valuations are reviewed by the officers of the Fund under the general
supervision of the Directors. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund makes available for publication the net asset value of its shares of common stock
determined as of the last business day each week. Currently, the net asset values of
shares of publicly traded closed-end investment companies investing in debt securities
are published in Barron&#146;s, the Monday edition of The Wall Street Journal and the
Monday and Saturday editions of The New York Times. </FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>FINANCIAL STATEMENTS </B></FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Fund&#146;s audited financial statements for the fiscal year ended October 31,
  2004, together with the report of Deloitte &amp; Touche <font size="1">LLP</font>
  thereon, are incorporated in this statement of additional information by reference
  to its 2004 Annual Report. The Fund&#146;s unaudited financial statements for
  the six months ended April 30, 2005 are incorporated in this statement of additional
  information by reference to its 2005 Semi-Annual Report. You may request a copy
  of the Annual Report and the Semi-Annual Report at no charge by calling (800)
  543-6217 between 8:30 a.m. and 5:30 p.m. Eastern time on any business day. </FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>APPENDIX A </B></FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>RATINGS OF MUNICIPAL
BONDS </B></FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>DESCRIPTION OF
MUNICIPAL BOND RATINGS </B></FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Description of Moody&#146;s
Municipal Bond Ratings </B></FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Aaa  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Issuers
or issues rated Aaa demonstrate the strongest creditworthiness relative to other US
municipal or tax-exempt               issuers or issues. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Aa  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Issuers
or issues rated Aa demonstrate very strong creditworthiness relative to other US
municipal or tax-exempt issuers               or issues. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Issuers
or issues rated A present above-average creditworthiness relative to other US municipal
or tax-exempt issuers or               issues. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Baa  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Issuers
or issues rated Baa represent average creditworthiness relative to other US municipal or
tax- exempt issuers or               issues. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Ba  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Issuers
or issues rated Ba demonstrate below-average creditworthiness relative to other US
municipal or tax-exempt               issuers or issues. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>B  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Issuers
or issues rated B demonstrate weak creditworthiness relative to other US   municipal or
tax- exempt issuers or               issues. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Caa  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Issuers
or issues rated Caa demonstrate very weak creditworthiness relative to other US municipal
or tax-exempt issuers               or issues. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Ca  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Issuers
or issues rated Ca demonstrate extremely weak creditworthiness relative to other US
municipal or tax-exempt               issuers or issues. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>C  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Issuers
or issues rated C demonstrate the weakest creditworthiness relative to other US municipal
or tax-exempt issuers               or issues. </FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Note</I>: Moody&#146;s applies numerical
modifiers 1, 2, and 3 in each generic rating classification from Aa through Caa. The
modifier 1 indicates that the obligation ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a
ranking in the lower end of that generic rating category. </FONT> </P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Description of Moody&#146;s
Municipal Short-Term Debt Ratings </B></FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>MIG  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1
This designation denotes superior credit quality. Excellent               protection is
afforded by established cash flows, highly reliable               liquidity support, or
demonstrated broad-based access to the               market for refinancing. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>MIG  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2
        This designation denotes strong credit quality. Margins of protection are ample,
although not as large as in the               preceding group. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>MIG  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3
This designation denotes acceptable credit quality. Liquidity               and cash-flow
protection may be narrow, and market access for               refinancing is likely to be
less well-established. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SG  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This
designation denotes speculative-grade credit quality. Debt instruments in this category
may lack sufficient margins               of protection. </FONT></TD>
</TR>
</TABLE>
<BR>


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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Description of Moody&#146;s
U.S. Municipal Demand Obligation Ratings </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the case of variable rate demand obligations (VRDOs), a two-component rating is assigned;
a long or short-term debt rating and a demand obligation rating. The first element
represents Moody&#146;s evaluation of the degree of risk associated with scheduled
principal and interest payments. The second element represents Moody&#146;s evaluation of
the degree of risk associated with the ability to receive purchase price upon demand (&#147;demand
feature&#148;), using a variation of the MIG rating scale, the Variable Municipal
Investment Grade or VMIG rating. </FONT></P>




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<BR>&nbsp;
<TABLE WIDTH=100%><TR><TD WIDTH=20% ALIGN=left><FONT SIZE=1>&nbsp;</FONT></TD><TD WIDTH=60% ALIGN=center><FONT SIZE="2">
A-1</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR SIZE=5 noshade WIDTH=100% ALIGN=LEFT>







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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When
  either the long- or short-term aspect of a VRDO is not rated, that piece is
  designated NR, <i>e.g., </i>Aaa/NR or NR/VMIG 1. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;VMIG
  rating expirations are a function of each issue&#146;s specific structural or
  credit features. </FONT><BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
  <tr valign=TOP>
    <td width=6%><b><font face="Times New Roman, Times, Serif" size=2>VMIG 1 </font></b></td>
    <td width=94%><font face="Times New Roman, Times, Serif" size=2> This designation
      denotes superior credit quality. Excellent protection is afforded by the
      superior short-term credit strength of the liquidity provider and structural
      and legal protections that ensure the timely payment of purchase price upon
      demand. </font></td>
  </tr>
  <TR VALIGN=TOP>
    <TD WIDTH=6%>&nbsp;</TD>
    <TD WIDTH=94%>&nbsp;</TD>
  </TR>
  <tr valign=TOP>
    <td width=6%><b><font face="Times New Roman, Times, Serif" size=2>VMIG 2 </font></b></td>
    <td width=94%><font face="Times New Roman, Times, Serif" size=2> This designation
      denotes strong credit quality. Good protection is afforded by the strong
      short-term credit strength of the liquidity provider and structural and
      legal protections that ensure the timely payment of purchase price upon
      demand. </font></td>
  </tr>
  <TR VALIGN=TOP>
    <TD WIDTH=6%>&nbsp;</TD>
    <TD WIDTH=94%>&nbsp;</TD>
  </TR>
  <tr valign=TOP>
    <td width=6%><b><font face="Times New Roman, Times, Serif" size=2>VMIG 3 </font></b></td>
    <td width=94%><font face="Times New Roman, Times, Serif" size=2> This designation
      denotes acceptable credit quality. Adequate protection is afforded by the
      satisfactory short-term credit strength of the liquidity provider and structural
      and legal protections that ensure the timely payment of purchase price upon
      demand. </font></td>
  </tr>
  <TR VALIGN=TOP>
    <TD WIDTH=6%>&nbsp;</TD>
    <TD WIDTH=94%>&nbsp;</TD>
  </TR>
  <TR VALIGN=TOP>
    <TD WIDTH=6%><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SG </FONT></b></TD>
    <TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This designation
      denotes speculative-grade credit quality. Demand features rated in this
      category may be supported by a liquidity provider that does not have an
      investment grade short-term rating or may lack the structural and/or legal
      protections necessary to ensure the timely payment of purchase price upon
      demand. </FONT></TD>
  </TR>
</TABLE>
<BR>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Description of Moody&#146;s
Short-Term Ratings </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Moody&#146;s
Commercial Paper ratings are opinions of the ability of issuers to honor short-term
financial obligations not having an original maturity in excess of thirteen months. Moody&#146;s
employs the following three designations, all judged to be investment grade, to indicate
the relative repayment capacity of rated issuers: </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>P-1  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;Issuers
(or supporting institutions) rated Prime-1 have a superior ability to repay short-term
debt obligations.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>P-2  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;Issuers
(or supporting institutions) rated Prime-2 have a strong ability to repay short-term debt
obligations.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>P-3  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;Issuers
(or supporting institutions) rated Prime-3 have an acceptable ability to repay short-term
obligations.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NP  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;Issuers
(or supporting institutions) rated Not Prime do not fall within any of the Prime rating
categories.  </FONT></TD>
</TR>
</TABLE>
<BR>


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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Description of
Standard &amp; Poor&#146;s, a Division of The McGraw-Hill Companies, Inc. (&#147;Standard
&amp; Poor&#146;s&#148;), Debt Ratings </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
Standard &amp; Poor&#146;s issue credit rating is a current opinion of the
creditworthiness of an obligor with respect to a specific financial obligation, a
specific class of financial obligations or a specific program. It takes into
consideration the creditworthiness of guarantors, insurers, or other forms of credit
enhancement on the obligation. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
issue credit rating is not a recommendation to purchase, sell or hold a financial
obligation, inasmuch as it does not comment as to market price or suitability for a
particular investor. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
issue credit ratings are based on current information furnished by the obligors or
obtained by Standard &amp; Poor&#146;s from other sources Standard &amp; Poor&#146;s
considers reliable. Standard &amp; Poor&#146;s does not perform an audit in connection
with any rating and may, on occasion, rely on unaudited financial information. The
ratings may be changed, suspended, or withdrawn as a result of changes in, or
unavailability of, such information, or based on other circumstances. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
issue credit ratings are based, in varying degrees, on the following considerations: </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>      I.  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Likelihood
of payment&#151;capacity and willingness of the obligor as to            the timely
payment of interest and repayment of principal in            accordance with the terms of
the obligation; </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>      II.  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Nature
of and provisions of the obligation; </FONT></TD>
</TR>
</TABLE>
<BR>







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<BR>&nbsp;
<TABLE WIDTH=100%><TR><TD WIDTH=20% ALIGN=left><FONT SIZE=1>&nbsp;</FONT></TD><TD WIDTH=60% ALIGN=center><FONT SIZE="2">
A-2</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR SIZE=5 noshade WIDTH=100% ALIGN=LEFT>









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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>      III.  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Protection
afforded to, and relative position of, the obligation in            the event of
bankruptcy, reorganization or other arrangement under            the laws of bankruptcy
and other laws affecting creditors&#146;           rights. </FONT></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Long Term Issue Credit
Ratings </B></FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>AAA  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>An obligation
      rated &#147;AAA&#148; has the highest rating assigned by Standard &amp;
      Poor&#146;s. Capacity to meet its financial commitment on the obligation
      is extremely strong. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>AA  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>An obligation
      rated &#147;AA&#148; differs from the highest rated issues only in small
      degree. The Obligor&#146;s capacity to meet its financial commitment on
      the obligation is very strong. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>An obligation
      rated &#147;A&#148; is somewhat more susceptible to the adverse effects
      of changes in circumstances and economic conditions than debt in higher-rated
      categories. However, the obligor&#146;s capacity to meet its financial commitment
      on the obligation is still strong. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>BBB  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>An obligation
      rated &#147;BBB&#148; exhibits adequate protection parameters. However,
      adverse economic conditions or changing circumstances are more likely to
      lead to a weakened capacity of the obligor to meet its financial commitment
      on the obligation. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>BB <BR>B <BR>CCC <BR>CC <BR>C  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>An obligation
      rated &#147;BB,&#148; &#147;B,&#148; &#147;CCC,&#148; &#147;CC&#148; and
      &#147;C&#148; are regarded as having significant speculative characteristics.
      &#147;BB&#148; indicates the least degree of speculation and &#147;C&#148;
      the highest degree of speculation. While such debt will likely have some
      quality and protective characteristics, these may be outweighed by large
      uncertainties or major risk exposures to adverse conditions. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>D  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>An obligation
      rated &#147;D&#148; is in payment default. The &#147;D&#148; rating category
      is used when payments on an obligation are not made on the date due even
      if the applicable grace period has not expired, unless Standard &amp; Poor&#146;s
      believes that such payments will be made during such grace period. The &#147;D&#148;
      rating also will be used upon the filing of a bankruptcy petition or the
      taking of similar action if payments on an obligation are jeopardized. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>c  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The &#145;c&#146;
      subscript is used to provide additional information to investors that the
      bank may terminate its obligation to purchase tendered bonds if the long
      term credit rating of the issuer is below an investment-grade level and/or
      the issuer&#146;s bonds are deemed taxable. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>p  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The letter &#145;p&#146;
      indicates that the rating is provisional. A provisional rating assumes the
      successful completion of the project financed by the debt being rated and
      indicates that payment of debt service requirements is largely or entirely
      dependent upon the successful, timely completion of the project. This rating,
      however, while addressing credit quality subsequent to the completion of
      the project, makes no comment on the likelihood of or the risk of default
      upon failure of such completion. The investor should exercise his own judgment
      with respect to such likelihood and risk. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Continuance of
      the ratings is contingent upon Standard &amp; Poor&#146;s receipt of an
      executed copy of the escrow agreement or closing documentation confirming
      investments and cash flows. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>r  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This symbol is
      attached to the ratings of instruments with significant noncredit risks.
      It highlights risks to principal or volatility of expected returns which
      are not addressed in the credit rating. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>N.R.  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This indicates
      that no rating has been requested, that there is insufficient information
      on which to base a rating, or that Standard &amp; Poor&#146;s does not rate
      a particular obligation as a matter of policy. </FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Plus </I>(+) or <I>Minus </I>(-): The ratings
from &#147;AA&#148; to &#147;CCC&#148; may be modified by the addition of a plus or minus
sign to show relative standing within the major rating categories. </FONT> </P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Description of
Standard &amp; Poor&#146;s Short-Term Issue Credit Ratings </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
Standard &amp; Poor&#146;s short-term issue credit rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than three
years. Ratings are graded into several categories, ranging from &#147;A-1&#148; for the
highest-quality obligations to &#147;D&#148; for the lowest. These categories are as
follows: </FONT></P>







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<BR>&nbsp;
<TABLE WIDTH=100%><TR><TD WIDTH=20% ALIGN=left><FONT SIZE=1>&nbsp;</FONT></TD><TD WIDTH=60% ALIGN=center><FONT SIZE="2">
A-3</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR SIZE=5 noshade WIDTH=100% ALIGN=LEFT>







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<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A-1  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A short-term obligation
      rated &#147;A-1&#148; is rated in the highest category by Standard &amp;
      Poor&#146;s. The obligor&#146;s capacity to meet its financial commitment
      on the obligation is strong. Within this category, certain obligations are
      designated with a plus sign (+). This indicates that the obligor&#146;s
      capacity to meet its financial commitment on these obligations is extremely
      strong. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A-2  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A short-term obligation
      rated &#147;A-2&#148; is somewhat more susceptible to the adverse effects
      of changes in circumstances and economic conditions than obligations in
      higher rating categories. However, the obligor&#146;s capacity to meet its
      financial commitment on the obligation is satisfactory. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A-3  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A
short-term obligation rated &#147;A-3&#148; exhibits adequate               protection
parameters. However, adverse economic conditions or               changing circumstances
are more likely to lead to a weakened               capacity of the obligor to meet its
financial commitment on the               obligation.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>B  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A
short-term obligation rated &#147;B&#148; is regarded as having               significant
speculative characteristics. The obligor currently has               the capacity to meet
its financial commitment on the obligation;               however, it faces major ongoing
uncertainties which could lead to               the obligor&#146;s inadequate capacity to
meet its financial               commitment on the obligation.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>C  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A
short-term obligation rated &#147;C&#148; is currently               vulnerable to
nonpayment and is dependent upon favorable business,               financial and economic
conditions for the obligor to meet its               financial commitment on the
obligation.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>D  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A
short-term obligation rated &#147;D&#148; is in payment default.               The &#147;D&#148; rating
category is used when interest payments               or principal payments are not made
on the date due even if the               applicable grace period has not expired, unless
Standard &amp;              Poor&#146;s believes that such payments will be made during
such               grace period. The &#147;D&#148; rating will also be used upon the
              filing of a bankruptcy petition or the taking of a similar action
              if payments on an obligation are jeopardized.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>c  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
&#147;c&#148; subscript is used to provide additional               information to
investors that the bank may terminate its               obligation to purchase tendered
bonds if the long term credit               rating of the issuer is below an
investment-grade level and/or the               issuer&#146;s bonds are deemed taxable.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>p  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
letter &#147;p&#148; indicates that the rating is provisional.               A
provisional rating assumes the successful completion of the               project
financed by the debt being rated and indicates that               payment of debt service
requirements is largely or entirely               dependent upon the successful, timely
completion of the project.               This rating, however, while addressing credit
quality subsequent               to completion of the project, makes no comment on the
likelihood               of or the risk of default upon failure of such completion. The
              investor should exercise his own judgment with respect to such
              likelihood and risk.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>*  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Continuance
of the ratings is contingent upon Standard &amp; Poor&#146;s receipt of an executed copy
of the escrow agreement or               closing.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>r  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
&#147;r&#148; highlights derivative, hybrid, and certain other               obligations
that Standard &amp; Poor&#146;s believes may               experience high volatility or
high variability in expected returns               as a result of noncredit risks.
Examples of such obligations are               securities with principal or interest
return indexed to equities,               commodities, or currencies; certain swaps and
options, and               interest-only and principal-only mortgage securities. The
absence               of an &#147;r&#148; symbol should not be taken as an indication
              that an obligation will exhibit no volatility or variability in
              total return.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
short-term issue credit rating is not a recommendation to purchase or sell a security.
The ratings are based on current information furnished to Standard &amp; Poor&#146;s by
the issuer or obtained by Standard &amp; Poor&#146;s from other sources it considers
reliable. The ratings may be changed, suspended, or withdrawn as a result of changes in,
or unavailability of, such information. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
Standard &amp; Poor&#146;s note rating reflects the liquidity factors and market access
risks unique to notes. Notes due in three years or less will likely receive a note
rating. Notes maturing beyond three years will most likely receive a long term debt
rating. The following criteria will be used in making that assessment. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;Amortization
schedule&#151;the larger the final maturity relative to other maturities, the more likely
it will be treated as a note. </FONT></P>






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A-4</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR SIZE=5 noshade WIDTH=100% ALIGN=LEFT>









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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;Source
of payment&#151;the more dependent the issue is on the market for its refinancing, the
more likely it will be treated as a note. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Note
rating symbols are as follows: </FONT></P>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SP-1  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Strong
capacity to pay principal and interest. An issue determined to possess a very strong
capacity to pay debt service               is given a plus (+) designation.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SP-2  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Satisfactory
capacity to pay principal and interest with some vulnerability to adverse financial and
economic changes               over the term of the notes.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SP-3  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Speculative
capacity to pay principal and interest.  </FONT></TD>
</TR>
</TABLE>
<BR>


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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Description of Fitch
Ratings&#146; (&#147;Fitch&#148;) Investment Grade Bond Ratings </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fitch
investment grade bond ratings provide a guide to investors in determining the credit risk
associated with a particular security. The rating represents Fitch&#146;s assessment of
the issuer&#146;s ability to meet the obligations of a specific debt issue or class of
debt in a timely manner. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
rating takes into consideration special features of the issue, its relationship to other
obligations of the issuer, the current and prospective financial condition and operating
performance of the issuer and any guarantor, as well as the economic and political
environment that might affect the issuer&#146;s future financial strength and credit
quality. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fitch
ratings do not reflect any credit enhancement that may be provided by insurance policies
or financial guarantees unless otherwise indicated. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bonds
carrying the same rating are of similar but not necessarily identical credit quality
since the rating categories do not fully reflect small differences in the degrees of
credit risk. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fitch
ratings are not recommendations to buy, sell, or hold any security. Ratings do not
comment on the adequacy of market price, the suitability of any security for a particular
investor, or the tax exempt nature or taxability of payments made in respect of any
security. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fitch
ratings are based on information obtained from issuers, other obligors, underwriters,
their experts, and other sources Fitch believes to be reliable. Fitch does not audit or
verify the truth or accuracy of such information. Ratings may be changed, suspended, or
withdrawn as a result of changes in, or the unavailability of, information or for other
reasons. </FONT></P>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>AAA  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Bonds
considered to be investment grade and of the highest credit               quality. The
obligor has an exceptionally strong ability to pay               interest and repay
principal, which is unlikely to be affected by               reasonably foreseeable
events.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>AA  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Bonds
considered to be investment grade and of very high credit quality. The obligor&#146;s
ability to pay interest and repay               principal is very strong, although not
quite as strong as bonds               rated &#147;AAA.&#148; Because bonds rated in the
&#147;AAA&#148;              and &#147;AA&#148; categories are not significantly
vulnerable to               foreseeable future developments, short term debt of these
issuers               is generally rated &#147;F-1+.&#148; </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Bonds
considered to be investment grade and of high credit               quality. The obligor&#146;s
ability to pay interest and repay               principal is considered to be strong, but
may be more vulnerable               to adverse changes in economic conditions and
circumstances than               bonds with higher ratings.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>BBB  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Bonds
considered to be investment grade and of satisfactory-credit               quality. The
obligor&#146;s ability to pay interest and repay               principal is considered to
be adequate. Adverse changes in               economic conditions and circumstances,
however, are more likely to               have adverse impact on these bonds, and
therefore impair timely               payment. The likelihood that the ratings of these
bonds will fall               below investment grade is higher than for bonds with higher
              ratings.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Plus </I>(+) or <I>Minus </I>(-): Plus and
minus signs are used with a rating symbol to indicate the relative position of a credit
within the rating category. Plus and minus signs, however, are not used in the &#147;AAA&#148; category. </FONT> </P>





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A-5</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR SIZE=5 noshade WIDTH=100% ALIGN=LEFT>






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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Description of Fitch&#146;s
Speculative Grade Bond Ratings </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fitch
speculative grade bond ratings provide a guide to investors in determining the credit
risk associated with a particular security. The ratings (&#147;BB&#148; to &#147;C&#148;)
represent Fitch&#146;s assessment of the likelihood of timely payment of principal and
interest in accordance with the terms of obligation for bond issues not in default. For
defaulted bonds, the rating (&#147;DDD&#148; to &#147;D&#148;) is an assessment of the
ultimate recovery value through reorganization or liquidation. The rating takes into
consideration special features of the issue, its relationship to other obligations of the
issuer, the current and prospective financial condition and operating performance of the
issuer and any guarantor, as well as the economic and political environment that might
affect the issuer&#146;s future financial strength. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bonds
that have the rating are of similar but not necessarily identical credit quality since
rating categories cannot fully reflect the differences in degrees of credit risk. </FONT></P>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>BB  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Bonds
are considered speculative. The obligor&#146;s ability to               pay interest and
repay principal may be affected over time by               adverse economic changes.
However, business and financial               alternatives can be identified which could
assist the obligor in               satisfying its debt service requirements.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>B  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Bonds
are considered highly speculative. While bonds in this class               are currently
meeting debt service requirements, the probability               of continued timely
payment of principal and interest reflects the               obligor&#146;s limited
margin of safety and the need for               reasonable business and economic activity
throughout the life of               the issue.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CCC  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Bonds
have certain identifiable characteristics which, if not               remedied, may lead
to default. The ability to meet obligations               requires an advantageous
business and economic environment.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CC  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Bonds
are minimally protected. Default in payment of interest and/or principal seems probable
over time.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>C  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Bonds
are in imminent default in payment of interest or principal.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>D <BR>DD <BR>DDD </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Bonds are
in default on interest and/or principal payments. Such bonds are extremely speculative
and            should be valued on the basis of their ultimate recovery value in
liquidation or reorganization of the            obligor. &#147;DDD&#148; represents the
highest potential for recovery on these bonds, and &#147;D&#148; represents the lowest
potential for               recovery.  </FONT></TD>
</TR>
</TABLE>
<BR>




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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Plus </I>(+) or <I>Minus </I>(-): Plus and
minus signs are used with a rating symbol to indicate the relative position of a credit
within the rating category. Plus and minus signs, however, are not used in the &#147;DDD,&#148; &#147;DD,&#148; or
&#147;D&#148; categories. </FONT> </P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Description of Fitch&#146;s
Short Term Ratings </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fitch&#146;s
short term ratings apply to debt obligations that are payable on demand or have original
maturities of up to three years, including commercial paper, certificates of deposit,
medium-term notes, and investment notes. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
short term rating places greater emphasis than a long term rating on the existence of
liquidity necessary to meet the issuer&#146;s obligations in a timely manner. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fitch
short term ratings are as follows: </FONT></P>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-1+  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exceptionally
      Strong Credit Quality. Issues assigned this rating are regarded as having       the
strongest degree of assurance for timely payment.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-1  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Very
Strong       Credit Quality. Issues assigned this rating reflect an assurance of timely
      payment only slightly less in degree than issues rated &#147;F-1+.&#148; </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-2  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Good
Credit       Quality. Issues assigned this rating have a satisfactory degree of assurance
      for timely payment, but the margin of safety is not as great as for issues
      assigned &#147;F-1+&#148; and &#147;F-1&#148; ratings.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-3  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Fair
Credit       Quality. Issues assigned this rating have characteristics suggesting that
      the degree of assurance for timely payment is adequate; however, near-term
      adverse changes could cause these securities to be rated below investment
      grade.  </FONT></TD>
</TR>
</TABLE>
<BR>







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<BR>&nbsp;
<TABLE WIDTH=100%><TR><TD WIDTH=20% ALIGN=left><FONT SIZE=1>&nbsp;</FONT></TD><TD WIDTH=60% ALIGN=center><FONT SIZE="2">
A-6</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR SIZE=5 noshade WIDTH=100% ALIGN=LEFT>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
  <tr valign=TOP>
    <td width=8%><font face="Times New Roman, Times, Serif" size=2>F-S </font></td>
    <td width=89%><font face="Times New Roman, Times, Serif" size=2>Weak Credit
      Quality. Issues assigned this rating have characteristics suggesting a minimal
      degree of assurance for timely payment and are vulnerable to near-term adverse
      changes in financial and economic conditions. </font></td>
  </tr>
  <tr valign=TOP>
    <td width=8%>&nbsp;</td>
    <td width=89%>&nbsp;</td>
  </tr>
  <tr valign=TOP>
    <td width=8%><font face="Times New Roman, Times, Serif" size=2>D </font></td>
    <td width=89%><font face="Times New Roman, Times, Serif" size=2>Default. Issues
      assigned this rating are in actual or imminent payment default. </font></td>
  </tr>
  <tr valign=TOP>
    <td width=8%>&nbsp;</td>
    <td width=89%>&nbsp;</td>
  </tr>
  <tr valign=TOP>
    <td width=8%><font face="Times New Roman, Times, Serif" size=2>LOC </font></td>
    <td width=89%><font face="Times New Roman, Times, Serif" size=2>The symbol
      &#147;LOC&#148; indicates that the rating is based on a letter of credit
      issued by a commercial bank. </font></td>
  </tr>
  <TR VALIGN=TOP>
    <TD WIDTH=8%>&nbsp;</TD>
    <TD WIDTH=89%>&nbsp;</TD>
  </TR>
  <tr valign=TOP>
    <td width=8%><font face="Times New Roman, Times, Serif" size=2>NR </font></td>
    <td width=89%><font face="Times New Roman, Times, Serif" size=2>Indicates
      that Fitch does not rate the specific issue. </font></td>
  </tr>
  <TR VALIGN=TOP>
    <TD WIDTH=8%>&nbsp;</TD>
    <TD WIDTH=89%>&nbsp;</TD>
  </TR>
  <tr valign=TOP>
    <td width=8%><font face="Times New Roman, Times, Serif" size=2>Conditional
      </font></td>
    <td width=89%><font face="Times New Roman, Times, Serif" size=2>A conditional
      rating is premised on the successful completion of a project or the occurrence
      of a specific event. </font></td>
  </tr>
  <TR VALIGN=TOP>
    <TD WIDTH=8%>&nbsp;</TD>
    <TD WIDTH=89%>&nbsp;</TD>
  </TR>
  <TR VALIGN=TOP>
    <td width=8%><font face="Times New Roman, Times, Serif" size=2>Suspended </font></td>
    <td width=89%><font face="Times New Roman, Times, Serif" size=2>A rating is
      suspended when Fitch deems the amount of information available from the
      issuer to be inadequate for rating purposes. </font></td>
  </TR>
  <TR VALIGN=TOP>
    <TD WIDTH=8%>&nbsp;</TD>
    <TD WIDTH=89%>&nbsp;</TD>
  </TR>
  <TR VALIGN=TOP>
    <td width=8%><font face="Times New Roman, Times, Serif" size=2>Withdrawn </font></td>
    <td width=89%><font face="Times New Roman, Times, Serif" size=2>A rating will
      be withdrawn when an issue matures or is called or refinanced and, at Fitch&#146;s
      discretion, when an issuer fails to furnish proper and timely information.
      </font></td>
  </TR>
  <TR VALIGN=TOP>
    <TD WIDTH=8%>&nbsp;</TD>
    <TD WIDTH=89%>&nbsp;</TD>
  </TR>
  <TR VALIGN=TOP>
    <TD WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>FitchAlert
      </FONT></TD>
    <TD WIDTH=89%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Ratings are
      placed on FitchAlert to notify investors of an occurrence that is likely
      to result in a rating change and the likely direction of such change. These
      are designated as &#147;Positive,&#148; indicating a potential upgrade,
      &#147;Negative,&#148; for potential downgrade, or &#147;Evolving,&#148;
      where ratings may be raised or lowered. FitchAlert is relatively short term,
      and should be resolved within 12 months. </FONT></TD>
  </TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Ratings Outlook</I>: An outlook is used
to describe the most likely direction of any rating change over the intermediate term. It
is described as &#147;Positive&#148; or &#147;Negative.&#148; The absence of a
designation indicates a stable outlook. </FONT> </P>








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<BR>&nbsp;
<TABLE WIDTH=100%><TR><TD WIDTH=20% ALIGN=left><FONT SIZE=1>&nbsp;</FONT></TD><TD WIDTH=60% ALIGN=center><FONT SIZE="2">
A-7</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR SIZE=5 noshade WIDTH=100% ALIGN=LEFT>







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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>APPENDIX B </B></FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>SETTLEMENT PROCEDURES </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following summary of Settlement Procedures sets forth the procedures expected to be
followed in connection with the settlement of each Auction and will be incorporated by
reference in the Auction Agent Agreement and each Broker-Dealer Agreement. Nothing
contained in this Appendix B constitutes a representation by the Fund that in each
Auction each party referred to herein actually will perform the procedures described
herein to be performed by such party. Capitalized terms used herein shall have the
respective meanings specified in the Glossary in the prospectus or this Appendix B
hereto, as the case may be. </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)
On each Auction Date, the Auction Agent shall notify by telephone       or through the
Auction Agent&#146;s Processing System the Broker-Dealers       that participated in the
Auction held on such Auction Date and submitted       an Order on behalf of any
Beneficial Owner or Potential Beneficial Owner       of: </FONT>
</TD>
</TR>
</TABLE>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </FONT>
</TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
      the Applicable Rate fixed for the next succeeding Dividend Period;  </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)
&nbsp;whether Sufficient Clearing Bids existed for the            determination of the
Applicable Rate;  </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)
    if such Broker-Dealer (a &#147;Seller&#146;s            Broker-Dealer&#148;)
submitted a Bid or a Sell Order on behalf of a            Beneficial Owner, the number of
shares, if any, of AMPS to be sold by            such Beneficial Owner;  </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)
      ;if such Broker-Dealer (a &#147;Buyer&#146;s            Broker-Dealer&#148;)
submitted a Bid on behalf of a Potential            Beneficial Owner, the number of
shares, if any, of AMPS to be            purchased by such Potential Beneficial Owner;  </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)
      if the aggregate number of shares of AMPS to be sold by all            Beneficial
Owners on whose behalf such Broker-Dealer submitted a Bid            or a Sell Order
exceeds the aggregate number of shares of AMPS to be            purchased by all
Potential Beneficial Owners on whose behalf such            Broker-Dealer submitted a
Bid, the name or names of one or more            Buyer&#146;s Broker-Dealers (and the
name of the Agent Member, if            any, of each such Buyer&#146;s Broker-Dealer)
acting for one or more            purchasers of such excess number of shares of AMPS and
the number of            such shares to be purchased from one or more Beneficial Owners
on            whose behalf such Broker-Dealer acted by one or more Potential
           Beneficial Owners on whose behalf each of such Buyer&#146;s
           Broker-Dealers acted;  </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)
     if the aggregate number of shares of AMPS to be purchased            by all
Potential Beneficial Owners on whose behalf such Broker-Dealer            submitted a Bid
exceeds the aggregate number of shares of AMPS to be            sold by all Beneficial
Owners on whose behalf such Broker-Dealer            submitted a Bid or a Sell Order, the
name or names of one or more            Seller&#146;s Broker-Dealers (and the name of the
Agent Member, if            any, of each such Seller&#146;s Broker-Dealer) acting for one
or more            sellers of such excess number of shares of AMPS and the number of
           such shares to be sold to one or more Potential Beneficial Owners on
           whose behalf such Broker-Dealer acted by one or more Beneficial
           Owners on whose behalf each of such Seller&#146;s Broker-Dealers
           acted; and  </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii)
    the Auction Date of the next succeeding Auction with            respect to the AMPS.  </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)
On each Auction Date, each Broker-Dealer that submitted an Order       on behalf of any
Beneficial Owner or Potential Beneficial Owner shall: </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
in the case of a Broker-Dealer that is a Buyer&#146;s            Broker-Dealer, instruct
each Potential Beneficial Owner on whose            behalf such Broker-Dealer submitted a
Bid that was accepted, in whole            or in part, to instruct such Potential
Beneficial Owner&#146;s Agent            Member to pay to such Broker-Dealer (or its
Agent Member) through the            Securities Depository the amount necessary to
purchase the number of            shares of AMPS to be purchased pursuant to such Bid
against receipt            of such shares and advise such Potential Beneficial Owner of
the            Applicable Rate for the next succeeding Dividend Period; </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)
in the case of a Broker-Dealer that is a Seller&#146;s            Broker-Dealer, instruct
each Beneficial Owner on whose behalf such            Broker-Dealer submitted a Sell
Order that was accepted, in whole or            in part, or a Bid that was accepted, in
whole or in part, to instruct            such Beneficial Owner&#146;s Agent Member to
deliver to such            Broker-Dealer (or its Agent Member) through the Securities
Depository            the number of shares of  </FONT>
</TD>
</TR>
</TABLE>
<BR>




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<BR>&nbsp;
<TABLE WIDTH=100%><TR><TD WIDTH=20% ALIGN=left><FONT SIZE=1>&nbsp;</FONT></TD><TD WIDTH=60% ALIGN=center><FONT SIZE="2">
B-1</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR SIZE=5 noshade WIDTH=100% ALIGN=LEFT>





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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>AMPS
to be sold pursuant to such Order            against payment therefor and advise any such
Beneficial Owner that            will continue to hold shares of AMPS of the Applicable
Rate for the            next succeeding Dividend Period; </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)
advise each Beneficial Owner on whose behalf such            Broker-Dealer submitted a
Hold Order of the Applicable Rate for the            next succeeding Dividend Period; </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)
advise each Beneficial Owner on whose behalf such            Broker-Dealer submitted an
Order of the Auction Date for the next            succeeding Auction; and </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)
advise each Potential Beneficial Owner on whose behalf such            Broker-Dealer
submitted a Bid that was accepted, in whole or in part,            of the Auction Date
for the next succeeding Auction. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)
On the basis of the information provided to it pursuant to (a)       above, each
Broker-Dealer that submitted a Bid or a Sell Order on behalf       of a Potential
Beneficial Owner or a Beneficial Owner shall, in such       manner and at such time or
times as in its sole discretion it may       determine, allocate any funds received by it
pursuant to (b)(i) above and       any shares of AMPS received by it pursuant to (b)(ii)
above among the       Potential Beneficial Owners, if any, on whose behalf such
Broker-Dealer       submitted Bids, the Beneficial Owners, if any, on whose behalf such
      Broker-Dealer submitted Bids that were accepted or Sell Orders, and any
      Broker-Dealer or Broker-Dealers identified to it by the Auction Agent
      pursuant to (a)(v) or (a)(vi) above. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)
On each Auction Date: </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
each Potential Beneficial Owner and Beneficial Owner shall            instruct its Agent
Member as provided in (b)(i) or (ii) above, as the            case may be; </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)
each Seller&#146;s Broker-Dealer which is not an Agent            Member of the
Securities Depository shall instruct its Agent Member            to (A) pay through the
Securities Depository to the Agent Member of            the Beneficial Owner delivering
shares to such Broker-Dealer pursuant            to (b)(ii) above the amount necessary to
purchase such shares against            receipt of such shares, and (B) deliver such
shares through the            Securities Depository to a Buyer&#146;s Broker-Dealer (or
its Agent            Member) identified to such Seller&#146;s Broker-Dealer pursuant to
           (a)(v) above against payment therefor; and </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)
each Buyer&#146;s Broker-Dealer which is not an Agent            Member of the Securities
Depository shall instruct its Agent Member            to (A) pay through the Securities
Depository to a Seller&#146;s            Broker-Dealer (or its Agent Member) identified
pursuant to (a)(vi)            above the amount necessary to purchase the shares to be
purchased            pursuant to (b)(i) above against receipt of such shares, and (B)
           deliver such shares through the Securities Depository to the Agent
           Member of the purchaser thereof against payment therefor. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)
On the day after the Auction Date: </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
each Bidder&#146;s Agent Member referred to in (d)(i) above            shall instruct the
Securities Depository to execute the transactions            described in (b)(i) or (ii)
above, and the Securities Depository            shall execute such transactions; </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)
each Seller&#146;s Broker-Dealer or its Agent Member shall            instruct the
Securities Depository to execute the transactions            described in (d)(ii) above,
and the Securities Depository shall            execute such transactions; and </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)
each Buyer&#146;s Broker-Dealer or its Agent Member shall            instruct the
Securities Depository to execute the transactions            described in (d)(iii) above,
and the Securities Depository shall            execute such transactions. </FONT>
</TD>
</TR>
</TABLE>
<BR>





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<BR>&nbsp;
<TABLE WIDTH=100%><TR><TD WIDTH=20% ALIGN=left><FONT SIZE=1>&nbsp;</FONT></TD><TD WIDTH=60% ALIGN=center><FONT SIZE="2">
B-2</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR SIZE=5 noshade WIDTH=100% ALIGN=LEFT>







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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)
If a Beneficial Owner selling shares of AMPS in an Auction fails       to deliver such
shares (by authorized book-entry), a Broker-Dealer may       deliver to the Potential
Beneficial Owner on behalf of which it submitted       a Bid that was accepted a number
of whole shares of AMPS that is less than       the number of shares that otherwise was
to be purchased by such Potential       Beneficial Owner. In such event, the number of
shares of AMPS to be so       delivered shall be determined solely by such Broker-Dealer.
Delivery of       such lesser number of shares shall constitute good delivery.
      Notwithstanding the foregoing terms of this paragraph (f), any delivery or
      non-delivery of shares which shall represent any departure from the       results
of an Auction, as determined by the Auction Agent, shall be of no       effect unless and
until the Auction Agent shall have been notified of such       delivery or non-delivery
in accordance with the provisions of the Auction       Agent Agreement and the
Broker-Dealer Agreements. </FONT>
</TD>
</TR>
</TABLE>
<BR>





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<BR>&nbsp;
<TABLE WIDTH=100%><TR><TD WIDTH=20% ALIGN=left><FONT SIZE=1>&nbsp;</FONT></TD><TD WIDTH=60% ALIGN=center><FONT SIZE="2">
B-3</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR SIZE=5 noshade WIDTH=100% ALIGN=LEFT>







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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>APPENDIX C </B></FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>AUCTION PROCEDURES </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following procedures will be set forth in provisions of the Articles Supplementary
relating to the AMPS, and will be incorporated by reference in the Auction Agent
Agreement and each Broker-Dealer Agreement. The terms not defined below are defined in
the prospectus or in the Glossary in the prospectus. Nothing contained in this Appendix C
constitutes a representation by the Fund that in each Auction each party referred to
herein actually will perform the procedures described herein to be performed by such
party. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Paragraph
10(a) Certain Definitions. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
used in this Paragraph 10, the following terms shall have the following meanings, unless
the context otherwise requires: </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
&#147;AMPS&#148; shall mean the shares of AMPS being auctioned       pursuant to this
Paragraph 10. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)
&#147;Auction Date&#148; shall mean the first Business Day       preceding the first day
of a Dividend Period. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)
&#147;Available AMPS&#148; shall have the meaning specified in       Paragraph 10(d)(i)
below. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)
&#147;Bid&#148; shall have the meaning specified in Paragraph       10(b)(i) below. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)
&#147;Bidder&#148; shall have the meaning specified in Paragraph       10(b)(i) below. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)
&#147;Hold Order&#148; shall have the meaning specified in       Paragraph 10(b)(i) below. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii)
&#147;Maximum Applicable Rate&#148; for any Dividend Period       will be the higher of
the Applicable Percentage of the Reference Rate or       the Applicable Spread plus the
Reference Rate. The Applicable Percentage       and the Applicable Spread will be
determined based on (i) the lower of the       credit rating or ratings assigned on such
date to such shares by       Moody&#146;s and S&amp;P (or if Moody&#146;s or S&amp;P or
both shall not       make such rating available, the equivalent of either or both of such
      ratings by a Substitute Rating Agency or two Substitute Rating Agencies       or,
in the event that only one such rating shall be available, such       rating) and (ii)
whether the Fund has provided notification to the Auction       Agent prior to the
Auction establishing the Applicable Rate for any       dividend that net capital gains or
other taxable income will be included       in such dividend on shares of AMPS as follows: </FONT>
</TD>
</TR>
</TABLE>
<br>
<div align="center">
  <TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=670>
    <TR VALIGN=top>
      <TH colspan="3" valign="bottom"><font size=1>Credit Ratings </font>
        <hr width=100% size="1" noshade>
      </TH>
      <TH width="12">&nbsp;</TH>
      <TH COLSPAN=2 valign="bottom"><font size=1>Applicable <br>
        Percentage <br>
        of Reference <br>
        Rate&#151;No </font></TH>
      <TH valign="bottom" width="12">&nbsp;</TH>
      <TH COLSPAN=2 valign="bottom"><font size=1>Applicable <br>
        Percentage <br>
        of Reference</font></TH>
      <TH valign="bottom" width="14">&nbsp;</TH>
      <TH COLSPAN=2 valign="bottom"><font size=1>Applicable <br>
        Spread Over <br>
        Reference Rate&#151;</font></TH>
      <TH valign="bottom" width="12">&nbsp;</TH>
      <TH COLSPAN=2 valign="bottom" width="112"><font size=1>Applicable <br>
        Spread Over <br>
        Reference Rate&#151;</font></TH>
    </TR>
    <TR VALIGN=top>
      <TH width="105"><FONT SIZE=1>Moody&#146;s </FONT>
        <hr width=100% size="1" noshade>
      </TH>
      <TH width="12">&nbsp;</TH>
      <TH width="115"><FONT SIZE=1>S&amp;P </FONT>
        <hr width=100% size="1" noshade>
      </TH>
      <TH width="12">&nbsp;</TH>
      <TH COLSPAN=2><FONT SIZE=1>Notification </FONT>
        <hr width=100% size="1" noshade>
      </TH>
      <TH width="12">&nbsp;</TH>
      <TH COLSPAN=2><FONT SIZE=1>Rate&#151;Notification </FONT>
        <hr width=100% size="1" noshade>
      </TH>
      <TH width="14">&nbsp;</TH>
      <TH COLSPAN=2><FONT SIZE=1>No Notification </FONT>
        <hr width=100% size="1" noshade>
      </TH>
      <TH width="12">&nbsp;</TH>
      <TH COLSPAN=2 width="112"><FONT SIZE=1>Notification </FONT>
        <hr width=100% size="1" noshade>
      </TH>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=CENTER width="105"><FONT SIZE=2>Aaa</FONT></TD>
      <TD ALIGN=CENTER width="12">&nbsp;&nbsp;</TD>
      <TD ALIGN=CENTER width="115"><FONT SIZE=2>AAA</FONT></TD>
      <TD ALIGN=CENTER width="12">&nbsp;&nbsp;</TD>
      <TD ALIGN=center colspan="2"><FONT SIZE=2>110</FONT><FONT SIZE=2>%</FONT></TD>
      <TD ALIGN=center width="12">&nbsp;&nbsp;</TD>
      <TD ALIGN=center colspan="2"><FONT SIZE=2>125</FONT><FONT SIZE=2>%</FONT></TD>
      <TD ALIGN=center width="14">&nbsp;&nbsp;</TD>
      <TD ALIGN=center colspan="2"><FONT SIZE=2>1.10</FONT><FONT SIZE=2>%</FONT></TD>
      <TD ALIGN=center width="12">&nbsp;&nbsp;</TD>
      <TD ALIGN=center colspan="2" width="112"><FONT SIZE=2>1.25</FONT><FONT SIZE=2>%</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=CENTER width="105"><FONT SIZE=2>Aa3 to Aa1</FONT></TD>
      <TD ALIGN=CENTER width="12">&nbsp;</TD>
      <TD ALIGN=CENTER width="115"><FONT SIZE=2>AA- to AA+</FONT></TD>
      <TD ALIGN=CENTER width="12">&nbsp;</TD>
      <TD ALIGN=center colspan="2"><FONT SIZE=2>125</FONT><FONT SIZE=2>%</FONT></TD>
      <TD ALIGN=center width="12">&nbsp;</TD>
      <TD ALIGN=center colspan="2"><FONT SIZE=2>150</FONT><FONT SIZE=2>%</FONT></TD>
      <TD ALIGN=center width="14">&nbsp;</TD>
      <TD ALIGN=center colspan="2"><FONT SIZE=2>1.25</FONT><FONT SIZE=2>%</FONT></TD>
      <TD ALIGN=center width="12">&nbsp;</TD>
      <TD ALIGN=center colspan="2" width="112"><FONT SIZE=2>1.50</FONT><FONT SIZE=2>%</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=CENTER width="105"><FONT SIZE=2>A3 to A1</FONT></TD>
      <TD ALIGN=CENTER width="12">&nbsp;</TD>
      <TD ALIGN=CENTER width="115"><FONT SIZE=2>A- to A+</FONT></TD>
      <TD ALIGN=CENTER width="12">&nbsp;</TD>
      <TD ALIGN=center colspan="2"><FONT SIZE=2>150</FONT><FONT SIZE=2>%</FONT></TD>
      <TD ALIGN=center width="12">&nbsp;</TD>
      <TD ALIGN=center colspan="2"><FONT SIZE=2>200</FONT><FONT SIZE=2>%</FONT></TD>
      <TD ALIGN=center width="14">&nbsp;</TD>
      <TD ALIGN=center colspan="2"><FONT SIZE=2>1.50</FONT><FONT SIZE=2>%</FONT></TD>
      <TD ALIGN=center width="12">&nbsp;</TD>
      <TD ALIGN=center colspan="2" width="112"><FONT SIZE=2>2.00</FONT><FONT SIZE=2>%</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=CENTER width="105"><FONT SIZE=2>Baa3 to Baa1</FONT></TD>
      <TD ALIGN=CENTER width="12">&nbsp;</TD>
      <TD ALIGN=CENTER width="115"><FONT SIZE=2>BBB- to BBB+</FONT></TD>
      <TD ALIGN=CENTER width="12">&nbsp;</TD>
      <TD ALIGN=center colspan="2"><FONT SIZE=2>175</FONT><FONT SIZE=2>%</FONT></TD>
      <TD ALIGN=center width="12">&nbsp;</TD>
      <TD ALIGN=center colspan="2"><FONT SIZE=2>250</FONT><FONT SIZE=2>%</FONT></TD>
      <TD ALIGN=center width="14">&nbsp;</TD>
      <TD ALIGN=center colspan="2"><FONT SIZE=2>1.75</FONT><FONT SIZE=2>%</FONT></TD>
      <TD ALIGN=center width="12">&nbsp;</TD>
      <TD ALIGN=center colspan="2" width="112"><FONT SIZE=2>2.50</FONT><FONT SIZE=2>%</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=CENTER width="105"><FONT SIZE=2>Below Baa3</FONT></TD>
      <TD ALIGN=CENTER width="12">&nbsp;</TD>
      <TD ALIGN=CENTER width="115"><FONT SIZE=2>Below BBB-</FONT></TD>
      <TD ALIGN=CENTER width="12">&nbsp;</TD>
      <TD ALIGN=center colspan="2"><FONT SIZE=2>200</FONT><FONT SIZE=2>%</FONT></TD>
      <TD ALIGN=center width="12">&nbsp;</TD>
      <TD ALIGN=center colspan="2"><FONT SIZE=2>300</FONT><FONT SIZE=2>%</FONT></TD>
      <TD ALIGN=center width="14">&nbsp;</TD>
      <TD ALIGN=center colspan="2"><FONT SIZE=2>2.00</FONT><FONT SIZE=2>%</FONT></TD>
      <TD ALIGN=center width="12">&nbsp;</TD>
      <TD ALIGN=center colspan="2" width="112"><FONT SIZE=2>3.00</FONT><FONT SIZE=2>%</FONT></TD>
    </TR>
  </TABLE>
  <br>
</div>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Applicable Percentage and the Applicable Spread as so determined may be further subject
to upward but not downward adjustment in the discretion of the Board of Directors of the
Fund after consultation with the Broker-Dealers, provided that immediately following any
such increase the Fund would be in compliance with the AMPS Basic Maintenance Amount.
Subject to the provisions of paragraph 12 of the Articles Supplementary entitled &#147;Termination
of Rating Agency Provisions,&#148; the Fund shall take all reasonable action necessary to
enable S&amp;P and Moody&#146;s to provide a rating for the AMPS. If either S&amp;P or
Moody&#146;s shall not make such a rating available or if neither S&amp;P nor Moody&#146;s
shall make such a rating available, subject to the provisions of paragraph 12 of the
Articles Supplementary entitled &#147;Termination of Rating Agency Provisions,&#148; Merrill
Lynch, Pierce, Fenner &amp; Smith Incorporated or its affiliates and successors, after
obtaining the Fund&#146;s approval, shall select a NRSRO or two NRSROs to act as a
Substitute Rating Agency or Substitute Rating Agencies, as the case may be. </FONT></P>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii)
&#147;Order&#148; shall have the meaning specified in       Paragraph 10(b)(i) below. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ix)
&#147;Sell Order&#148; shall have the meaning specified in       Paragraph 10(b)(i) below. </FONT>
</TD>
</TR>
</TABLE>
<BR>









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<BR>&nbsp;
<TABLE WIDTH=100%><TR><TD WIDTH=20% ALIGN=left><FONT SIZE=1>&nbsp;</FONT></TD><TD WIDTH=60% ALIGN=center><FONT SIZE="2">
C-1</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR SIZE=5 noshade WIDTH=100% ALIGN=LEFT>






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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x)
&#147;Submission Deadline&#148; shall mean 1:00 p.m., Eastern       time, on any Auction
Date or such other time on any Auction Date as may be       specified by the Auction
Agent from time to time as the time by which each       Broker-Dealer must submit to the
Auction Agent in writing all Orders       obtained by it for the Auction to be conducted
on such Auction Date. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xi)
&#147;Submitted Bid&#148; shall have the meaning specified in       Paragraph 10(d)(i)
below. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xii)
&#147;Submitted Hold Order&#148; shall have the meaning       specified in Paragraph
10(d)(i) below. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xiii)
&#147;Submitted Order&#148; shall have the meaning specified       in Paragraph 10(d)(i)
below. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xiv)
&#147;Submitted Sell Order&#148; shall have the meaning       specified in Paragraph
10(d)(i) below. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xv)
&#147;Sufficient Clearing Bids&#148; shall have the meaning       specified in Paragraph
10(d)(i) below. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xvi)
&#147;Winning Bid Rate&#148; shall have the meaning specified       in Paragraph 10(d)(i)
below. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Paragraph
10(b) Orders by Beneficial Owners, Potential Beneficial Owners, Existing Holders And
Potential Holders. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
Unless otherwise permitted by the Fund, Beneficial Owners and Potential Beneficial Owners
may only participate in Auctions through their Broker-Dealers. Broker-Dealers will submit
the Orders of their respective customers who are Beneficial Owners and Potential
Beneficial Owners to the Auction Agent, designating themselves as Existing Holders in
respect of shares subject to Orders submitted or deemed submitted to them by Beneficial
Owners and as Potential Holders in respect of shares subject to Orders submitted to them
by Potential Beneficial Owners. A Broker-Dealer may also hold shares of AMPS in its own
account as a Beneficial Owner. A Broker-Dealer may thus submit Orders to the Auction
Agent as a Beneficial Owner or a Potential Beneficial Owner and therefore participate in
an Auction as an Existing Holder or Potential Holder on behalf of both itself and its
customers. On or prior to the Submission Deadline on each Auction Date: </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)
each Beneficial Owner may submit to its Broker-Dealer information as to: </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)
the number of outstanding shares, if any, of AMPS held by            such Beneficial
Owner which such Beneficial Owner desires to continue            to hold without regard
to the Applicable Rate for the next succeeding            Dividend Period; </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)
the number of outstanding shares, if any, of AMPS held by            such Beneficial
Owner which such Beneficial Owner desires to continue            to hold, provided that
the Applicable Rate for the next succeeding            Dividend Period shall not be less
than the rate per annum specified            by such Beneficial Owner; and/or </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)
the number of outstanding shares, if any, of AMPS held by            such Beneficial
Owner which such Beneficial Owner offers to sell            without regard to the
Applicable Rate for the next succeeding            Dividend Period; and </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)
each Broker-Dealer, using a list of Potential Beneficial Owners       that shall be
maintained in good faith for the purpose of conducting a       competitive Auction, shall
contact Potential Beneficial Owners, including       Persons that are not Beneficial
Owners, on such list to determine the       number of outstanding shares, if any, of AMPS
which each such Potential       Beneficial Owner offers to purchase, provided that the
Applicable Rate for       the next succeeding Dividend Period shall not be less than the
rate per       annum specified by such Potential Beneficial Owner. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
the purposes hereof, the communication by a Beneficial Owner or Potential Beneficial
Owner to a Broker-Dealer, or the communication by a Broker-Dealer acting for its own
account to the Auction Agent, of information referred to in clause (A) or (B) of this
Paragraph 10(b)(i) is hereinafter referred to as an &#147;Order&#148; and each Beneficial
Owner and each Potential Beneficial Owner placing an Order, including a Broker-Dealer
acting in such capacity for its own account, is hereinafter referred to as a &#147;Bidder&#148;;
an Order containing the information referred to in clause (A)(1) of this Paragraph
10(b)(i) is hereinafter referred to as a &#147;Hold Order&#148;; an Order containing the
information referred to in clause (A)(2) or (B) of this Paragraph 10(b)(i) is hereinafter
referred to as a &#147;Bid&#148;; and an Order containing the information referred to in
clause (A)(3) of this Paragraph 10(b)(i) is hereinafter referred to as a &#147;Sell Order.&#148;Inasmuch
as a Broker-Dealer participates in an Auction as an Existing  </FONT></P>









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C-2</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR SIZE=5 noshade WIDTH=100% ALIGN=LEFT>








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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Holder or a Potential Holder only to
represent the interests of a Beneficial Owner or Potential Beneficial Owner, whether it
be its customers or itself, all discussion herein relating to the consequences of an
Auction for Existing Holders and Potential Holders also applies to the underlying
beneficial ownership interests represented. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)
(A) A Bid by an Existing Holder shall constitute an irrevocable offer to sell: </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)
the number of outstanding shares of AMPS specified in such            Bid if the
Applicable Rate determined on such Auction Date shall be            less than the rate
per annum specified in such Bid; or </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)
such number or a lesser number of outstanding shares of AMPS            to be determined
as set forth in Paragraph 10(e)(i)(D) if the            Applicable Rate determined on
such Auction Date shall be equal to the            rate per annum specified therein; or </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)
a lesser number of outstanding shares of AMPS to be            determined as set forth in
Paragraph 10(e)(ii)(C) if such specified            rate per annum shall be higher than
the Maximum Applicable Rate and            Sufficient Clearing Bids do not exist. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)
A Sell Order by an Existing Holder shall constitute an            irrevocable offer to
sell: </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)
the number of outstanding shares of AMPS specified in such            Sell Order, or </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)
such number or a lesser number of outstanding shares of AMPS            to be determined
as set forth in Paragraph 10(e)(ii)(C) if Sufficient            Clearing Bids do not
exist. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)
A Bid by a Potential Holder shall constitute an irrevocable offer to purchase: </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)
the number of outstanding shares of AMPS specified in such            Bid if the
Applicable Rate determined on such Auction Date shall be            higher than the rate
per annum specified in such Bid; or </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)
such number or a lesser number of outstanding shares of AMPS            to be determined
as set forth in Paragraph 10(e)(i)(E) if the            Applicable Rate determined on
such Auction Date shall be equal to the            rate per annum specified therein. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Paragraph
10(c) Submission of Orders by Broker-Dealers to Auction Agent. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
Each Broker-Dealer shall submit in writing or through a mutually acceptable electronic
means to the Auction Agent prior to the Submission Deadline on each Auction Date all
Orders obtained by such Broker-Dealer, designating itself (unless otherwise permitted by
the Fund) as an Existing Holder in respect of shares subject to Orders submitted or
deemed submitted to it by Beneficial Owners and as a Potential Holder in respect of
shares subject to Orders submitted to it by Potential Beneficial Owners, and specifying
with respect to each Order: </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)
the name of the Bidder placing such Order (which shall be the Broker-Dealer unless
otherwise permitted by the Fund); </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)
the aggregate number of outstanding shares of AMPS that are the subject of such Order; </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)
to the extent that such Bidder is an Existing Holder </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)
the number of outstanding shares, if any, of AMPS subject to any Hold Order placed by
such Existing Holder; </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)
the number of outstanding shares, if any, of AMPS subject to            any Bid placed by
such Existing Holder and the rate per annum            specified in such Bid; and </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)
the number of outstanding shares, if any, of AMPS subject to            any Sell Order
placed by such Existing Holder; and </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D)
to the extent such Bidder is a Potential Holder, the rate per annum specified in such
Potential Holder&#146;s Bid. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)
If any rate per annum specified in any Bid contains more than three figures to the right
of the decimal point, the Auction Agent shall round such rate up to the next highest
one-thousandth (.001) of 1%. </FONT></P>








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C-3</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR SIZE=5 noshade WIDTH=100% ALIGN=LEFT>








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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)
If an Order or Orders covering all of the outstanding shares of AMPS held by an Existing
Holder are not submitted to the Auction Agent prior to the Submission Deadline, the
Auction Agent shall deem a Hold Order (in the case of an Auction relating to a Dividend
Period which is not a Special Dividend Period of more than 28 days) and a Sell Order (in
the case of an Auction relating to a Special Dividend Period of more than 28 days) to
have been submitted on behalf of such Existing Holder covering the number of outstanding
shares of AMPS held by such Existing Holder and not subject to Orders submitted to the
Auction Agent. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)
If one or more Orders on behalf of an Existing Holder covering in the aggregate more than
the number of outstanding shares of AMPS held by such Existing Holder are submitted to
the Auction Agent, such Orders shall be considered valid as follows and in the following
order of priority: </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)
any Hold Order submitted on behalf of such Existing Holder shall       be considered
valid up to and including the number of outstanding shares       of AMPS held by such
Existing Holder; provided that if more than one Hold       Order is submitted on behalf
of such Existing Holder and the number of       shares of AMPS subject to such Hold
Orders exceeds the number of       outstanding shares of AMPS held by such Existing
Holder, the number of       shares of AMPS subject to each of such Hold Orders shall be
reduced pro       rata so that such Hold Orders, in the aggregate, cover exactly the
number       of outstanding shares of AMPS held by such Existing Holder; </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)
any Bids submitted on behalf of such Existing Holder shall be       considered valid, in
the ascending order of their respective rates per       annum if more than one Bid is
submitted on behalf of such Existing Holder,       up to and including the excess of the
number of outstanding shares of AMPS       held by such Existing Holder over the number
of shares of AMPS subject to       any Hold Order referred to in Paragraph 10(c)(iv)(A)
above (and if more       than one Bid submitted on behalf of such Existing Holder
specifies the       same rate per annum and together they cover more than the remaining
number       of shares that can be the subject of valid Bids after application of
      Paragraph 10(c)(iv)(A) above and of the foregoing portion of this       Paragraph
10(c)(iv)(B) to any Bid or Bids specifying a lower rate or rates       per annum, the
number of shares subject to each of such Bids shall be       reduced pro rata so that
such Bids, in the aggregate, cover exactly such       remaining number of shares); and
the number of shares, if any, subject to       Bids not valid under this Paragraph
10(c)(iv)(B) shall be treated as the       subject of a Bid by a Potential Holder; and </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)
any Sell Order shall be considered valid up to and including the       excess of the
number of outstanding shares of AMPS held by such Existing       Holder over the number
of shares of AMPS subject to Hold Orders referred       to in Paragraph 10(c)(iv)(A) and
Bids referred to in Paragraph       10(c)(iv)(B); provided that if more than one Sell
Order is submitted on       behalf of any Existing Holder and the number of shares of
AMPS subject to       such Sell Orders is greater than such excess, the number of shares
of AMPS       subject to each of such Sell Orders shall be reduced pro rata so that such
      Sell Orders, in the aggregate, cover exactly the number of shares of AMPS
      equal to such excess. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)
If more than one Bid is submitted on behalf of any Potential Holder, each Bid submitted
shall be a separate Bid with the rate per annum and number of shares of AMPS therein
specified. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)
Any Order submitted by a Beneficial Owner or a Potential Beneficial Owner to its
Broker-Dealer, or by a Broker-Dealer to the Auction Agent, prior to the Submission
Deadline on any Auction Date shall be irrevocable. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Paragraph
10(d) Determination of Sufficient Clearing Bids, Winning Bid Rate and Applicable Rate.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
Not earlier than the Submission Deadline on each Auction Date, the Auction Agent shall
assemble all Orders submitted or deemed submitted to it by the Broker-Dealers (each such
Order as submitted or deemed submitted by a Broker-Dealer being hereinafter referred to
individually as a &#147;Submitted Hold Order,&#148; a &#147;Submitted Bid&#148; or a
&#147;Submitted Sell Order,&#148; as the case may be, or as a &#147;Submitted Order&#148;)
and shall determine: </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)
the excess of the total number of outstanding shares of AMPS over       the number of
outstanding shares of AMPS that are the subject of Submitted       Hold Orders (such
excess being hereinafter referred to as the       &#147;Available AMPS&#148;); </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)
from the Submitted Orders whether the number of outstanding       shares of AMPS that are
the subject of Submitted Bids by Potential Holders       specifying one or more rates per
annum equal to or lower than the Maximum       Applicable Rate exceeds or is equal to the
sum of: </FONT>
</TD>
</TR>
</TABLE>
<BR>





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<TABLE WIDTH=100%><TR><TD WIDTH=20% ALIGN=left><FONT SIZE=1>&nbsp;</FONT></TD><TD WIDTH=60% ALIGN=center><FONT SIZE="2">
C-4</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR SIZE=5 noshade WIDTH=100% ALIGN=LEFT>






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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)
the number of outstanding shares of AMPS that are the            subject of Submitted
Bids by Existing Holders specifying one or more            rates per annum higher than
the Maximum Applicable Rate, and </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)
the number of outstanding shares of AMPS that are subject to            Submitted Sell
Orders (if such excess or such equality exists (other            than because the number
of outstanding shares of AMPS in clauses (1)            and (2) above are each zero
because all of the outstanding shares of            AMPS are the subject of Submitted
Hold Orders), such Submitted Bids            by Potential Holders hereinafter being
referred to collectively as            &#147;Sufficient Clearing Bids&#148;); and </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)
if Sufficient Clearing Bids exist, the lowest rate per annum       specified in the
Submitted Bids (the &#147;Winning Bid Rate&#148;) that       if: </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)
each Submitted Bid from Existing Holders specifying the            Winning Bid Rate and
all other submitted Bids from Existing Holders            specifying lower rates per
annum were rejected, thus entitling such            Existing Holders to continue to hold
the shares of AMPS that are the            subject of such Submitted Bids, and </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)
each Submitted Bid from Potential Holders specifying the            Winning Bid Rate and
all other Submitted Bids from Potential Holders            specifying lower rates per
annum were accepted, thus entitling the            Potential Holders to purchase the
shares of AMPS that are the subject            of such Submitted Bids, would result in
the number of shares subject            to all Submitted Bids specifying the Winning Bid
Rate or a lower rate            per annum being at least equal to the Available AMPS. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)
Promptly after the Auction Agent has made the determinations pursuant to Paragraph
10(d)(i), the Auction Agent shall advise the Fund of the Maximum Applicable Rate and,
based on such determinations, the Applicable Rate for the next succeeding Dividend Period
as follows: </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)
if Sufficient Clearing Bids exist, that the Applicable Rate for       the next succeeding
Dividend Period shall be equal to the Winning Bid       Rate; </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)
if Sufficient Clearing Bids do not exist (other than because all       of the outstanding
shares of AMPS are the subject of Submitted Hold       Orders), that the Applicable Rate
for the next succeeding Dividend Period       shall be equal to the Maximum Applicable
Rate; or </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)
if all of the outstanding shares of AMPS are the subject of       Submitted Hold Orders,
the Dividend Period next succeeding the Auction       automatically shall be the same
length as the immediately preceding       Dividend Period and the Applicable Rate for the
next succeeding Dividend       Period shall be equal to 60% of the Reference Rate (or 90%
of such rate if       the Fund has provided notification to the Auction Agent prior to
      establishing the Applicable Rate for any dividend that net capital gain or
      other taxable income will be included in such dividend on shares of AMPS)       on
the date of the Auction. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Paragraph
10(e) Acceptance and Rejection of Submitted Bids and Submitted Sell Orders and Allocation
of Shares. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based
on the determinations made pursuant to Paragraph 10(d)(i), the Submitted Bids and
Submitted Sell Orders shall be accepted or rejected and the Auction Agent shall take such
other action as set forth below: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
If Sufficient Clearing Bids have been made, subject to the provisions of Paragraph
10(e)(iii) and Paragraph 10(e)(iv), Submitted Bids and Submitted Sell Orders shall be
accepted or rejected in the following order of priority and all other Submitted Bids
shall be rejected: </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)
the Submitted Sell Orders of Existing Holders shall be accepted       and the Submitted
Bid of each of the Existing Holders specifying any rate       per annum that is higher
than the Winning Bid Rate shall be accepted, thus       requiring each such Existing
Holder to sell the outstanding shares of AMPS       that are the subject of such
Submitted Sell Order or Submitted Bid; </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)
the Submitted Bid of each of the Existing Holders specifying any       rate per annum
that is lower than the Winning Bid Rate shall be rejected,       thus entitling each such
Existing Holder to continue to hold the       outstanding shares of AMPS that are the
subject of such Submitted Bid; </FONT>
</TD>
</TR>
</TABLE>
<BR>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)
the Submitted Bid of each of the Potential Holders specifying any       rate per annum
that is lower than the Winning Bid Rate shall be accepted; </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D)
the Submitted Bid of each of the Existing Holders specifying a       rate per annum that
is equal to the Winning Bid Rate shall be rejected,       thus entitling each such
Existing Holder to continue to hold the       outstanding shares of AMPS that are the
subject of such Submitted Bid,       unless the number of outstanding shares of AMPS
subject to all such       Submitted Bids shall be greater than the number of outstanding
shares of       AMPS (&#147;Remaining Shares&#148;) equal to the excess of the Available
      AMPS over the number of outstanding shares of AMPS subject to Submitted       Bids
described in Paragraph 10(e)(i)(B) and Paragraph 10(e)(i)(C), in       which event the
Submitted Bids of each such Existing Holder shall be       accepted, and each such
Existing Holder shall be required to sell       outstanding shares of AMPS, but only in
an amount equal to the difference       between (1) the number of outstanding shares of
AMPS then held by such       Existing Holder subject to such Submitted Bid and (2) the
number of shares       of AMPS obtained by multiplying (x) the number of Remaining Shares
by (y)       a fraction the numerator of which shall be the number of outstanding
      shares of AMPS held by such Existing Holder subject to such Submitted Bid       and
the denominator of which shall be the sum of the numbers of       outstanding shares of
AMPS subject to such Submitted Bids made by all such       Existing Holders that
specified a rate per annum equal to the Winning Bid       Rate; and </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(E)
the Submitted Bid of each of the Potential Holders specifying a       rate per annum that
is equal to the Winning Bid Rate shall be accepted but       only in an amount equal to
the number of outstanding shares of AMPS       obtained by multiplying (x) the difference
between the Available AMPS and       the number of outstanding shares of AMPS subject to
Submitted Bids       described in Paragraph 10(e)(i)(B), Paragraph 10(e)(i)(C) and
Paragraph       10(e)(i)(D) by (y) a fraction the numerator of which shall be the number
      of outstanding shares of AMPS subject to such Submitted Bid and the
      denominator of which shall be the sum of the number of outstanding shares       of
AMPS subject to such Submitted Bids made by all such Potential Holders       that
specified rates per annum equal to the Winning Bid Rate. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)
If Sufficient Clearing Bids have not been made (other than because all of the outstanding
shares of AMPS are subject to Submitted Hold Orders), subject to the provisions of
Paragraph 10(e)(iii), Submitted Orders shall be accepted or rejected as follows in the
following order of priority and all other Submitted Bids shall be rejected: </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)
the Submitted Bid of each Existing Holder specifying any rate per       annum that is
equal to or lower than the Maximum Applicable Rate shall be       rejected, thus
entitling such Existing Holder to continue to hold the       outstanding shares of AMPS
that are the subject of such Submitted Bid; </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)
the Submitted Bid of each Potential Holder specifying any rate       per annum that is
equal to or lower than the Maximum Applicable Rate shall       be accepted, thus
requiring such Potential Holder to purchase the       outstanding shares of AMPS that are
the subject of such Submitted Bid; and </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)
the Submitted Bids of each Existing Holder specifying any rate       per annum that is
higher than the Maximum Applicable Rate shall be       accepted and the Submitted Sell
Orders of each Existing Holder shall be       accepted, in both cases only in an amount
equal to the difference between       (1) the number of outstanding shares of AMPS then
held by such Existing       Holder subject to such Submitted Bid or Submitted Sell Order
and (2) the       number of shares of AMPS obtained by multiplying (x) the difference
      between the Available AMPS and the aggregate number of outstanding shares       of
AMPS subject to Submitted Bids described in Paragraph 10(e)(ii)(A) and       Paragraph
10(e)(ii)(B) by (y) a fraction the numerator of which shall be       the number of
outstanding shares of AMPS held by such Existing Holder       subject to such Submitted
Bid or Submitted Sell Order and the denominator       of which shall be the number of
outstanding shares of AMPS subject to all       such Submitted Bids and Submitted Sell
Orders. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)
If, as a result of the procedures described in Paragraph 10(e)(i) or Paragraph 10(e)(ii),
any Existing Holder would be entitled or required to sell, or any Potential Holder would
be entitled or required to purchase, a fraction of a share of AMPS on any Auction Date,
the Auction Agent shall, in such manner as in its sole discretion it shall determine,
round up or down the number of shares of AMPS to be purchased or sold by any Existing
Holder or Potential Holder on such Auction Date so that each outstanding share of AMPS
purchased or sold by each Existing Holder or Potential Holder on such Auction Date shall
be a whole share of AMPS. </FONT></P>






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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)
If, as a result of the procedures described in Paragraph 10(e)(i), any Potential Holder
would be entitled or required to purchase less than a whole share of AMPS on any Auction
Date, the Auction Agent, in such manner as in its sole discretion it shall determine,
shall allocate shares of AMPS for purchase among Potential Holders so that only whole
shares of AMPS are purchased on such Auction Date by any Potential Holder, even if such
allocation results in one or more of such Potential Holders not purchasing any shares of
AMPS on such Auction Date. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)
Based on the results of each Auction, the Auction Agent shall determine, with respect to
each Broker-Dealer that submitted Bids or Sell Orders on behalf of Existing Holders or
Potential Holders, the aggregate number of the outstanding shares of AMPS to be purchased
and the aggregate number of outstanding shares of AMPS to be sold by such Potential
Holders and Existing Holders and, to the extent that such aggregate number of outstanding
shares to be purchased and such aggregate number of outstanding shares to be sold differ,
the Auction Agent shall determine to which other Broker-Dealer or Broker-Dealers acting
for one or more purchasers such Broker-Dealer shall deliver, or from which other
Broker-Dealer or Broker-Dealers acting for one or more sellers such Broker-Dealer shall
receive, as the case may be, outstanding shares of AMPS. </FONT></P>

<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Paragraph 10(f)
Miscellaneous. </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund may interpret the provisions of this Paragraph 10 to resolve any inconsistency or
ambiguity, remedy any formal defect or make any other change or modification that does
not substantially adversely affect the rights of Beneficial Owners of AMPS. A Beneficial
Owner or an Existing Holder (A) may sell, transfer or otherwise dispose of shares of AMPS
only pursuant to a Bid or Sell Order in accordance with the procedures described in this
Paragraph 10 or to or through a Broker-Dealer, provided that in the case of all transfers
other than pursuant to Auctions such Beneficial Owner or Existing Holder, its
Broker-Dealer, if applicable, or its Agent Member advises the Auction Agent of such
transfer and (B) except as otherwise required by law, shall have the ownership of the
shares of AMPS held by it maintained in book entry form by the Securities Depository in
the account of its Agent Member, which in turn will maintain records of such Beneficial
Owner&#146;s beneficial ownership. Neither the Fund nor any affiliate (other than Merrill
Lynch, Pierce, Fenner &amp; Smith Incorporated) shall submit an Order in any Auction. Any
Beneficial Owner that is an affiliate (other than Merrill Lynch, Pierce, Fenner &amp; Smith
Incorporated) shall not sell, transfer or otherwise dispose of shares of AMPS to any
person other than the Fund. All of the outstanding shares of AMPS of a series shall be
represented by a single certificate registered in the name of the nominee of the
Securities Depository unless otherwise required by law or unless there is no Securities
Depository. If there is no Securities Depository, at the Fund&#146;s option and upon its
receipt of such documents as it deems appropriate, any shares of AMPS may be registered
in the Stock Register in the name of the Beneficial Owner thereof and such Beneficial
Owner thereupon will be entitled to receive certificates therefor and required to deliver
certificates thereof or upon transfer or exchange thereof. </FONT></P>



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C-7</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR SIZE=5 noshade WIDTH=100% ALIGN=LEFT>






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<!-- MARKER FORMAT-SHEET="Center Head 2-Bold" FSL="Workstation" -->
<p align=CENTER><font face="Times New Roman, Times, Serif" size=2><b>PART C. OTHER
  INFORMATION </b></font></p>
<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Item 25. &nbsp;<i>Financial
  Statements And Exhibits. </i></b></font></p>
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<table border=0 cellspacing=0 cellpadding=0 width="100%">
  <tr>
    <td width=54 valign=top>
      <p><font face="Times New Roman" size="2">(1)</font></p>
    </td>
    <td width=510 valign=top>
      <p><font face="Times New Roman" size="2">Financial Statements</font></p>
    </td>
  </tr>
  <tr>
    <td width=54 valign=top>&nbsp;</td>
    <td width=510 valign=top>&nbsp;</td>
  </tr>
  <tr>
    <td width=54 valign=top>
      <p><font face="Times New Roman" size="2"><b>Part A:</b></font></p>
    </td>
    <td width=510 valign=top>
      <p><font face="Times New Roman" size="2">Financial Highlights for each of
        the fiscal years in the ten-year period ended October 31, 2004 and the
        six months ended April 30, 2005.</font></p>
    </td>
  </tr>
  <tr>
    <td width=54 valign=top>&nbsp;</td>
    <td width=510 valign=top>&nbsp;</td>
  </tr>
  <tr>
    <td width=54 valign=top>
      <p><font face="Times New Roman" size="2"><b>Part B: </b></font></p>
    </td>
    <td width=510 valign=top>
      <p><font face="Times New Roman" size="2">Schedule of Investments of the
        Fund as of October 31, 2004.*</font></p>
    </td>
  </tr>
  <tr>
    <td width=54 valign=top>&nbsp;</td>
    <td width=510 valign=top>&nbsp;</td>
  </tr>
  <tr>
    <td width=54 valign=top>
      <p>&nbsp;</p>
    </td>
    <td width=510 valign=top>
      <p><font face="Times New Roman" size="2">Statement of Net Assets of the
        Fund as of October 31, 2004.*</font></p>
    </td>
  </tr>
  <tr>
    <td width=54 valign=top>&nbsp;</td>
    <td width=510 valign=top>&nbsp;</td>
  </tr>
  <tr>
    <td width=54 valign=top>
      <p>&nbsp;</p>
    </td>
    <td width=510 valign=top>
      <p><font face="Times New Roman" size="2">Statement of Operations of the
        Fund for the fiscal year ended October 31, 2004.*</font></p>
    </td>
  </tr>
  <tr>
    <td width=54 valign=top>&nbsp;</td>
    <td width=510 valign=top>&nbsp;</td>
  </tr>
  <tr>
    <td width=54 valign=top>
      <p>&nbsp;</p>
    </td>
    <td width=510 valign=top>
      <p><font face="Times New Roman" size="2">Statements of Changes in Net Assets
        of the Fund for the fiscal years ended October 31, 2003 and October 31,
        2004.*</font></p>
    </td>
  </tr>
  <tr>
    <td width=54 valign=top>&nbsp;</td>
    <td width=510 valign=top>&nbsp;</td>
  </tr>
  <tr>
    <td width=54 valign=top>
      <p>&nbsp;</p>
    </td>
    <td width=510 valign=top>
      <p><font face="Times New Roman" size="2">Financial Highlights for each of
        the fiscal years in the five-year period ended October 31, 2004.*</font></p>
    </td>
  </tr>
  <tr>
    <td width=54 valign=top>&nbsp;</td>
    <td width=510 valign=top>&nbsp;</td>
  </tr>
  <tr>
    <td width=54 valign=top>
      <p>&nbsp;</p>
    </td>
    <td width=510 valign=top>
      <p><font face="Times New Roman" size="2">Report of Independent Registered
        Public Accounting Firm.*</font></p>
    </td>
  </tr>
  <tr>
    <td width=54 valign=top>&nbsp;</td>
    <td width=510 valign=top>&nbsp;</td>
  </tr>
  <tr>
    <td width=54 valign=top>
      <p>&nbsp;</p>
    </td>
    <td width=510 valign=top>
      <p><font face="Times New Roman" size="2">Statement of Investments of the
        Fund as of April 30, 2005**</font></p>
    </td>
  </tr>
  <tr>
    <td width=54 valign=top>&nbsp;</td>
    <td width=510 valign=top>&nbsp;</td>
  </tr>
  <tr>
    <td width=54 valign=top>
      <p>&nbsp;</p>
    </td>
    <td width=510 valign=top>
      <p><font face="Times New Roman" size="2">Statement of Net Assets of the
        Fund as of April 30, 2005**</font></p>
    </td>
  </tr>
  <tr>
    <td width=54 valign=top>&nbsp;</td>
    <td width=510 valign=top>&nbsp;</td>
  </tr>
  <tr>
    <td width=54 valign=top>
      <p>&nbsp;</p>
    </td>
    <td width=510 valign=top>
      <p><font face="Times New Roman" size="2">Statement of Operations of the
        Fund for the six months ended April 30, 2005**</font></p>
    </td>
  </tr>
  <tr>
    <td width=54 valign=top>&nbsp;</td>
    <td width=510 valign=top>&nbsp;</td>
  </tr>
  <tr>
    <td width=54 valign=top>
      <p>&nbsp;</p>
    </td>
    <td width=510 valign=top>
      <p><font face="Times New Roman" size="2">Statement of Changes in Net Assets
        of the Fund for the six months ended April 30, 2005**</font></p>
    </td>
  </tr>
  <tr>
    <td width=54 valign=top>&nbsp;</td>
    <td width=510 valign=top>&nbsp;</td>
  </tr>
  <tr>
    <td width=54 valign=top>
      <p>&nbsp;</p>
    </td>
    <td width=510 valign=top>
      <p><font face="Times New Roman" size="2">Financial Highlights of the Fund
        for the six months ended April 30, 2005 and each of the fiscal years in
        the five-year period ended October 31, 2005**</font></p>
    </td>
  </tr>
</table>
<hr size=1 noshade align=left  width=75>
<table width=100%>
  <tr>
    <td width=4% align=left valign=top><font size="1">&nbsp;&nbsp;* </font></td>
    <td width=96% colspan="2"><font size="1">Incorporated by reference to the
      Registrant&#146;s Annual Report to Shareholders for the fiscal year ended
      October 31, 2004 filed with the Securities and Exchange Commission (&#147;Commission&#148;)
      on December 28, 2004 pursuant to Rule 30b2-1 under the Investment Company
      Act of 1940, as amended (&#147;1940 Act&#148;). </font></td>
  </tr>
</table>
<table width=100%>
  <tr>
    <td width=4% align=left valign=top><font size="1">** </font></td>
    <td width=96% colspan="2"><font size="1">Incorporated by reference to the
      Registrant&#146;s Semi-Annual Report to Stockholders for the six month period
      ended April 30, 2005 filed with the Commission on June 30, 2005 pursuant
      to Rule 30b2-1 under the 1940 Act.</font></td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> C-1</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 2; page: 2" --> <!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
<p>&nbsp;</p>


<table border=0 cellspacing=0 cellpadding=0 width="100%">
  <tr>
    <td colspan="2">
      <div align="center"><font face="Times New Roman" size="2">Exhibits<br>
        </font> </div>
      <hr noshade size="1" align="center" width="40">
    </td>
    <td width=865 valign=top><font face="Times New Roman" size="2">Description<br>
      </font>
      <hr noshade size="1" align="left" width="65">
    </td>
  </tr>
  <tr>
    <td width=38>
      <p>&nbsp;
    </td>
    <td width=69 valign=top>
      <p><font face="Times New Roman" size="2">(a)(1)</font></p>
    </td>
    <td width=865 valign=top>
      <p><font face="Times New Roman" size="2">Articles of Incorporation of the
        Registrant.(a)</font></p>
    </td>
  </tr>
  <tr>
    <td width=38>
      <p>&nbsp;
    </td>
    <td width=69 valign=top>
      <p><font face="Times New Roman" size="2">(a)(2)</font></p>
    </td>
    <td width=865 valign=top>
      <p><font face="Times New Roman" size="2">Articles Supplementary creating
        Series A, Series B, Series C and Series D Auction Market Preferred Stock
        (the &#147;Other AMPS&#148;).(a)</font></p>
    </td>
  </tr>
  <tr>
    <td width=38>
      <p>&nbsp;
    </td>
    <td width=69 valign=top>
      <p><font face="Times New Roman" size="2">(a)(3)</font></p>
    </td>
    <td width=865 valign=top>
      <p><font face="Times New Roman" size="2">Articles Supplementary creating
        additional shares of the Other AMPS.(a)</font></p>
    </td>
  </tr>
  <tr>
    <td width=38>
      <p>&nbsp;
    </td>
    <td width=69 valign=top>
      <p><font face="Times New Roman" size="2">(a)(4)</font></p>
    </td>
    <td width=865 valign=top>
      <p><font face="Times New Roman" size="2">Articles of Amendment to Articles
        Supplementary creating the Other AMPS.(a)</font></p>
    </td>
  </tr>
  <tr>
    <td width=38>
      <p>&nbsp;
    </td>
    <td width=69 valign=top>
      <p><font face="Times New Roman" size="2">(a)(5)</font></p>
    </td>
    <td width=865 valign=top>
      <p><font face="Times New Roman" size="2">Form of Articles Supplementary
        creating Series E Auction Market Preferred Stock (the &#147;AMPS&#148;).(a)</font></p>
    </td>
  </tr>
  <tr>
    <td width=38>
      <p>&nbsp;
    </td>
    <td width=69 valign=top>
      <p><font face="Times New Roman" size="2">(b)</font></p>
    </td>
    <td width=865 valign=top>
      <p><font face="Times New Roman" size="2">By-laws of the Registrant.(a)</font></p>
    </td>
  </tr>
  <tr>
    <td width=38>
      <p>&nbsp;
    </td>
    <td width=69 valign=top>
      <p><font face="Times New Roman" size="2">(c)</font></p>
    </td>
    <td width=865 valign=top>
      <p><font face="Times New Roman" size="2">Not applicable.</font></p>
    </td>
  </tr>
  <tr>
    <td width=38>
      <p>&nbsp;
    </td>
    <td width=69 valign=top>
      <p><font face="Times New Roman" size="2">(d)(1)</font></p>
    </td>
    <td width=865 valign=top>
      <p><font face="Times New Roman" size="2">Portions of the Articles of Incorporation,
        By-laws and Articles Supplementary of the Registrant defining the rights
        of holders of shares of the Registrant.(b)</font></p>
    </td>
  </tr>
  <tr>
    <td width=38>
      <p>&nbsp;
    </td>
    <td width=69 valign=top>
      <p><font face="Times New Roman" size="2">(d)(2)</font></p>
    </td>
    <td width=865 valign=top>
      <p><font face="Times New Roman" size="2">Form of specimen certificate for
        the AMPS of the Registrant.(a)</font></p>
    </td>
  </tr>
  <tr>
    <td width=38>
      <p>&nbsp;
    </td>
    <td width=69 valign=top>
      <p><font face="Times New Roman" size="2">(e)</font></p>
    </td>
    <td width=865 valign=top>
      <p><font face="Times New Roman" size="2">Form of Automatic Dividend Reinvestment
        Plan.(a)</font></p>
    </td>
  </tr>
  <tr>
    <td width=38>
      <p>&nbsp;
    </td>
    <td width=69 valign=top>
      <p><font face="Times New Roman" size="2">(f)</font></p>
    </td>
    <td width=865 valign=top>
      <p><font face="Times New Roman" size="2">Not applicable.</font></p>
    </td>
  </tr>
  <tr>
    <td width=38>
      <p>&nbsp;
    </td>
    <td width=69 valign=top>
      <p><font face="Times New Roman" size="2">(g)(1)</font></p>
    </td>
    <td width=865 valign=top>
      <p><font face="Times New Roman" size="2">Investment Advisory Agreement between
        the Registrant and Fund Asset Management, L.P. (&#147;FAM&#148; or the
        &#147;Investment Adviser&#148;).(a)</font></p>
    </td>
  </tr>
  <tr>
    <td width=38>
      <p>&nbsp;
    </td>
    <td width=69 valign=top>
      <p><font face="Times New Roman" size="2">(h)(1)</font></p>
    </td>
    <td width=865 valign=top>
      <p><font face="Times New Roman" size="2">Form of Purchase Agreement between
        the Registrant and Merrill Lynch, Pierce, Fenner &amp; Smith Incorporated
        (&#147;Merrill Lynch&#148;) relating to the AMPS.(a)</font></p>
    </td>
  </tr>
  <tr>
    <td width=38>
      <p>&nbsp;
    </td>
    <td width=69 valign=top>
      <p><font face="Times New Roman" size="2">(h)(2)</font></p>
    </td>
    <td width=865 valign=top>
      <p><font face="Times New Roman" size="2">Form of Merrill Lynch Standard
        Dealer Agreement.(c)</font></p>
    </td>
  </tr>
  <tr>
    <td width=38>
      <p>&nbsp;
    </td>
    <td width=69 valign=top>
      <p><font face="Times New Roman" size="2">(i)</font></p>
    </td>
    <td width=865 valign=top>
      <p><font face="Times New Roman" size="2">Not applicable.</font></p>
    </td>
  </tr>
  <tr>
    <td width=38>
      <p>&nbsp;
    </td>
    <td width=69 valign=top>
      <p><font face="Times New Roman" size="2">(j)</font></p>
    </td>
    <td width=865 valign=top>
      <p><font face="Times New Roman" size="2">Form of Custodian Agreement between
        the Registrant and The Bank of New York (&#147;BONY&#148;).(d)</font></p>
    </td>
  </tr>
  <tr>
    <td width=38>
      <p>&nbsp;
    </td>
    <td width=69 valign=top>
      <p><font face="Times New Roman" size="2">(k)(l)</font></p>
    </td>
    <td width=865 valign=top>
      <p><font face="Times New Roman" size="2">Form of Transfer Agency and Service
        Agreement between the Registrant and EquiServe Trust Company, N.A., and
        EquiServe Limited Partnership.(e)</font></p>
    </td>
  </tr>
  <tr>
    <td width=38>
      <p>&nbsp;
    </td>
    <td width=69 valign=top>
      <p><font face="Times New Roman" size="2">(k)(2)</font></p>
    </td>
    <td width=865 valign=top>
      <p><font face="Times New Roman" size="2">Form of Administrative Services
        Agreement between the Registrant and State Street Bank &amp; Trust Company.(f)</font></p>
    </td>
  </tr>
  <tr>
    <td width=38>
      <p>&nbsp;
    </td>
    <td width=69 valign=top>
      <p><font face="Times New Roman" size="2">(k)(3)</font></p>
    </td>
    <td width=865 valign=top>
      <p><font face="Times New Roman" size="2">Form of Auction Agent Agreement
        between the Registrant and The Bank of New York.(a)</font></p>
    </td>
  </tr>
  <tr>
    <td width=38>
      <p>&nbsp;
    </td>
    <td width=69 valign=top>
      <p><font face="Times New Roman" size="2">(k)(4)</font></p>
    </td>
    <td width=865 valign=top>
      <p><font face="Times New Roman" size="2">Form of Broker-Dealer Agreement.(a)</font></p>
    </td>
  </tr>
  <tr>
    <td width=38>
      <p>&nbsp;
    </td>
    <td width=69 valign=top>
      <p><font face="Times New Roman" size="2">(k)(5)</font></p>
    </td>
    <td width=865 valign=top>
      <p><font face="Times New Roman" size="2">Form of Letter of Representations.(a)</font></p>
    </td>
  </tr>
  <tr>
    <td width=38>
      <p>&nbsp;
    </td>
    <td width=69 valign=top>
      <p><font face="Times New Roman" size="2">(l)</font></p>
    </td>
    <td width=865 valign=top>
      <p><font face="Times New Roman" size="2">Opinion and Consent of Sidley Austin
        Brown &amp; Wood <font size="1">LLP</font>.</font></p>
    </td>
  </tr>
  <tr>
    <td width=38>
      <p>&nbsp;
    </td>
    <td width=69 valign=top>
      <p><font face="Times New Roman" size="2">(m)</font></p>
    </td>
    <td width=865 valign=top>
      <p><font face="Times New Roman" size="2">Not applicable.</font></p>
    </td>
  </tr>
  <tr>
    <td width=38>
      <p>&nbsp;
    </td>
    <td width=69 valign=top>
      <p><font face="Times New Roman" size="2">(n)</font></p>
    </td>
    <td width=865 valign=top>
      <p><font face="Times New Roman" size="2">Consent of Deloitte &amp; Touche
        <font size="1">LLP</font>, independent registered public accounting firm
        for the Registrant.</font></p>
    </td>
  </tr>
  <tr>
    <td width=38>
      <p>&nbsp;
    </td>
    <td width=69 valign=top>
      <p><font face="Times New Roman" size="2">(o)</font></p>
    </td>
    <td width=865 valign=top>
      <p><font face="Times New Roman" size="2">Not applicable.</font></p>
    </td>
  </tr>
  <tr>
    <td width=38>
      <p>&nbsp;
    </td>
    <td width=69 valign=top>
      <p><font face="Times New Roman" size="2">(p)</font></p>
    </td>
    <td width=865 valign=top>
      <p><font face="Times New Roman" size="2">Not applicable.</font></p>
    </td>
  </tr>
  <tr>
    <td width=38>
      <p>&nbsp;
    </td>
    <td width=69 valign=top>
      <p><font face="Times New Roman" size="2">(q)</font></p>
    </td>
    <td width=865 valign=top>
      <p><font face="Times New Roman" size="2">Not applicable.</font></p>
    </td>
  </tr>
  <tr>
    <td width=38>
      <p>&nbsp;
    </td>
    <td width=69 valign=top>
      <p><font face="Times New Roman" size="2">(r)</font></p>
    </td>
    <td width=865 valign=top>
      <p><font face="Times New Roman" size="2">Code of Ethics.(g)</font></p>
    </td>
  </tr>
  <tr>
    <td width=38></td>
    <td width=69></td>
    <td width=865></td>
  </tr>
</table>


<p><!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
  &nbsp; </p>
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> C-2</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 2; page: 2" --> <!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
<p><br>
</p>
<hr size=1 noshade align=left  width=75>

<table border=0 cellspacing=0 cellpadding=0 width="100%">
  <tr align="left">
    <td width=4% valign=top><font size="1"> (a) </font></td>
    <td width=96% colspan="2"><font size="1">Filed with the Commission on July
      21, 2005 as an exhibit to the Registrant&#146;s Registration Statement on
      Form N-2 (File No. 333-126755).</font></td>
  </tr>
</table>
<table border=0 cellspacing=0 cellpadding=0 width="100%">
  <tr>
    <td width=4% align=left valign=top><font size="1"> (b) </font></td>
    <td width=96% colspan="2"><font size="1">Reference is made to Article V (sections
      2, 3, 4, 5, 6, 7 and 8), Article VI (sections 3 and 6), Article VII,
      Article IX, Article X, Article XI, Article XII and Article XIII of the Registrant&#146;s Articles
      of Incorporation, filed as Exhibit (a)(1) to this Registration Statement; to
      Article II, Article III (sections 1, 3, 5 and 17), Article VI,
      Article VII, Article XII, Article XIII and Article XIV of
      the Registrant&#146;s By-laws, filed as Exhibit (b) to this Registration
      Statement; and to the Forms of Articles Supplementary and the Forms of Articles
      of Amendment filed as Exhibits (a)(2), (a)(3), (a)(4) and (a)(5) to this
      Registration Statement.</font></td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Footnote Left" FSL="Workstation" -->
<table width=100%>
  <tr>
    <td width=4% align=left valign=top><font size="1"> (c) </font></td>
    <td width=96% colspan="2"><font size="1">Incorporated by reference to Exhibit
      (h)(2) to Pre-Effective Amendment No. 3 to the Registration Statement on
      Form N-2 of Preferred Income Strategies Fund, Inc. (File No. 333-102712),
      filed on March 25, 2003.</font></td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Footnote Left" FSL="Workstation" -->
<table width=100%>
  <tr>
    <td width=4% align=left valign=top><font size="1"> (d) </font></td>
    <td width=96% colspan="2"><font size="1">Incorporated by reference to Exhibit
      7 to Post-Effective Amendment No. 13 to the Registration Statement on Form
      N-1A of The Asset Program, Inc. (File No. 33-53887), filed on March 21,
      2002.</font></td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Footnote Left" FSL="Workstation" -->
<table width=100%>
  <tr>
    <td width=4% align=left valign=top><font size="1"> (e) </font></td>
    <td width=96% colspan="2"><font size="1">Incorporated by reference to Exhibit
      13 to Pre-Effective Amendment No. 2 to the Registration Statement on Form
      N-14 of Corporate High Yield Fund, Inc. (File No. 333-10193) filed on December
      31, 2002.</font></td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Footnote Left" FSL="Workstation" -->
<table width=100%>
  <tr>
    <td width=4% align=left valign=top><font size="1"> (f) </font></td>
    <td width=96% colspan="2"><font size="1">Incorporated by reference to Exhibit
      8(d) to Post-Effective Amendment No. 1 to the Registration Statement on
      Form N-1A of Merrill Lynch Focus Twenty Fund, Inc. (File No. 333-89775)
      filed on March 20, 2001.</font></td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Footnote Left" FSL="Workstation" -->
<table width=100%>
  <tr>
    <td width=4% align=left valign=top><font size="1"> (g) </font></td>
    <td width=96% colspan="2"><font size="1">Incorporated by reference to Exhibit
      15 to Pre-Effective Amendment No. 1 to the Registration Statement on Form
      N-1A of Merrill Lynch Inflation Protected Fund (File No. 333-110936), filed
      on January 22, 2004.</font></td>
  </tr>
</table>

<!-- MARKER FORMAT-SHEET="Footnote Left" FSL="Workstation" --> <!-- MARKER FORMAT-SHEET="Center no bold" FSL="Workstation" -->
<p align=left><font face="Times New Roman, Times, Serif" size=2><b>Item 26. &nbsp;<i>Marketing
  Arrangements. </i></b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See
  Exhibits (h)(1) and (2). </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> C-3</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 4; page: 4" --> <!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Item 27. &nbsp;<i>Other
  Expenses of Issuance and Distribution. </i></b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  following table sets forth the estimated expenses to be incurred in connection
  with the offering described in this Registration Statement: </font></p>

<table border=0 cellspacing=0 cellpadding=0>
  <tr>
    <td width=391 valign=top>
      <p><font face="Times New Roman" size="2">Registration fees</font></p>
    </td>
    <td width=57 valign=top>
      <p align="right"><font face="Times New Roman" size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5,885</font></p>
    </td>
  </tr>
  <tr>
    <td width=391 valign=top>
      <p><font face="Times New Roman" size="2">Printing (other than stock certificates)</font></p>
    </td>
    <td width=57 valign=top>
      <p align="right"><font face="Times New Roman" size="2">17,000</font></p>
    </td>
  </tr>
  <tr>
    <td width=391 valign=top>
      <p><font face="Times New Roman" size="2">Accounting Fees and Expenses</font></p>
    </td>
    <td width=57 valign=top>
      <p align="right"><font face="Times New Roman" size="2">13,390</font></p>
    </td>
  </tr>
  <tr>
    <td width=391 valign=top>
      <p><font face="Times New Roman" size="2">Legal fees and expenses</font></p>
    </td>
    <td width=57 valign=top>
      <p align="right"><font face="Times New Roman" size="2">85,000</font></p>
    </td>
  </tr>
  <tr>
    <td width=391 valign=top>
      <p><font face="Times New Roman" size="2">Rating Agency Fees</font></p>
    </td>
    <td width=57 valign=top>
      <p align="right"><font face="Times New Roman" size="2">25,000</font></p>
    </td>
  </tr>
  <tr>
    <td width=391 valign=top>
      <p><font face="Times New Roman" size="2">Miscellaneous</font></p>
    </td>
    <td width=57 valign=top>
      <p align="right"><font face="Times New Roman" size="2">3,725<br>
        </font>
      <hr noshade size="1" align="right">
    </td>
  </tr>
  <tr>
    <td width=391 valign=top>
      <p><font face="Times New Roman" size="2">Total</font></p>
    </td>
    <td width=57 valign=top>
      <p align="right"><font face="Times New Roman" size="2"> $&nbsp;150,000 </font>
    </td>
  </tr>
  <tr>
    <td width=391 valign=top>&nbsp;</td>
    <td width=57 valign=top>
      <hr noshade size="2" align="right">
    </td>
  </tr>
</table>


<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Item 28.&nbsp;<i>
  Persons Controlled by or Under Common Control with Registrant. </i></b></font></p>
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<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Registrant is not controlled by, or under common control with, any person. </font></p>
<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Item 29. <i>&nbsp;Number
  of Holders of Securities. </i></b></font></p>


<table border=0 cellspacing=0 cellpadding=0 width="100%">
  <tr>
    <td width=505 valign=bottom>
      <p align=center><font face="Times New Roman" size="2"><b>Title of Class</b></font></p>
    </td>
    <td width=133 valign=bottom>
      <p align=center><font face="Times New Roman" size="2"><b>Number of<br>
        Record Holders<br>
        At July 31, 2005</b></font>
    </td>
  </tr>
  <tr>
    <td width=505 valign=bottom>
      <hr size="1" noshade>
    </td>
    <td width=133 valign=bottom>
      <hr size="1" noshade width="100">
    </td>
  </tr>
  <tr>
    <td width=505 valign=bottom>
      <p><font face="Times New Roman" size="2">Common Stock, $.10 par value</font></p>
    </td>
    <td width=133 valign=bottom>
      <p align=center><font size="2">329</font></p>
    </td>
  </tr>
  <tr>
    <td width=505 valign=bottom>
      <p><font face="Times New Roman" size="2">Preferred Stock</font></p>
    </td>
    <td width=133 valign=bottom>
      <p align=center><font face="Times New Roman" size="2">1</font></p>
    </td>
  </tr>
</table>

<br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> C-4</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
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<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Item 30. &nbsp;<i>Indemnification.
  </i> </b></font></p>

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<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reference
  is made to Section 2-418 of the General Corporation Law of the State of Maryland,
  Article VI of the Registrant&#146;s Articles of Incorporation, Article VI of
  the Registrant&#146;s By-laws and Section 6 of the Purchase Agreement, which
  provide for indemnification. </font></p>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Article
  VI of the By-laws provides that each officer and director of the Registrant
  shall be indemnified by the Registrant to the full extent permitted under the
  Maryland General Corporation Law, except that such indemnity shall not protect
  any such person against any liability to the Registrant or any stockholder thereof
  to which such person would otherwise be subject by reason of willful misfeasance,
  bad faith, gross negligence or reckless disregard of the duties involved in
  the conduct of his or her office. Absent a court determination that an officer
  or director seeking indemnification was not liable on the merits or guilty of
  willful misfeasance, bad faith, gross negligence or reckless disregard of the
  duties involved in the conduct of his or her office, the decision by the Registrant
  to indemnify such person must be based upon the reasonable determination of
  independent legal counsel or the vote of a majority of a quorum of non-party
  independent directors, after review of the facts, that such officer or director
  is not guilty of willful misfeasance, bad faith, gross negligence or reckless
  disregard of the duties involved in the conduct of his or her office. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
  officer and director of the Registrant claiming indemnification within the scope
  of Article VI of the By-laws shall be entitled to advances from the Registrant
  for payment of the reasonable expenses incurred by him or her in connection
  with proceedings to which he or she is a party in the manner and to the full
  extent permitted under the Maryland General Corporation Law; provided, however,
  that the person seeking indemnification shall provide to the Registrant a written
  affirmation of his or her good faith belief that the standard of conduct necessary
  for indemnification by the Registrant has been met and a written undertaking
  to repay any such advance, if it ultimately should be determined that the standard
  of conduct has not been met, and provided further that at least one of the following
  additional conditions is met: (i) the person seeking indemnification shall provide
  a security in form and amount acceptable to the Registrant for his or her undertaking;
  (ii) the Registrant is insured against losses arising by reason of the advance;
  or (iii) a majority of a quorum of non-party independent directors, or independent
  legal counsel in a written opinion shall determine, based on a review of facts
  readily available to the Registrant at the time the advance is proposed to be
  made, that there is reason to believe that the person seeking indemnification
  will ultimately be found to be entitled to indemnification. </font></p>
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&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> C-5</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 6; page: 6" --> <!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Registrant may purchase insurance on behalf of an officer or director protecting
  such person to the full extent permitted under the Maryland General Corporation
  Law from liability arising from his or her activities as officer or director
  of the Registrant. The Registrant, however, may not purchase insurance on behalf
  of any officer or director of the Registrant that protects or purports to protect
  such person from liability to the Registrant or to its stockholders to which
  such officer or director would otherwise be subject by reason of willful misfeasance,
  bad faith, gross negligence, or reckless disregard of the duties involved in
  the conduct of his or her office. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
  Section 7 of the Purchase Agreement relating to the securities being offered
  hereby, the Registrant agrees to indemnify Merrill Lynch and each person, if
  any, who controls Merrill Lynch within the meaning of the Securities Act of
  1933 (the &#147;1933 Act&#148;) against certain types of civil liabilities arising
  in connection with the Registration Statement or Prospectus and Statement of
  Additional Information. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insofar
  as indemnification for liabilities arising under the 1933 Act may be provided
  to directors, officers and controlling persons of the Registrant and Merrill
  Lynch, pursuant to the foregoing provisions or otherwise, the Registrant has
  been advised that, in the opinion of the Securities and Exchange Commission,
  such indemnification is against public policy as expressed in the 1933 Act and
  is, therefore, unenforceable. In the event that a claim for indemnification
  against such liabilities (other than the payment by the Registrant of expenses
  incurred or paid by a director, officer or controlling person of the Registrant
  in connection with any successful defense of any action, suit or proceeding)
  is asserted by such director, officer or controlling person in connection with
  the securities being registered, the Registrant will, unless in the opinion
  of its counsel the matter has been settled by controlling precedent, submit
  to a court of appropriate jurisdiction the question whether such indemnification
  by it is against public policy as expressed in the 1933 Act and will be governed
  by the final adjudication of such issue. </font></p>
<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Item 31. &nbsp;<i>Business
  And Other Connections Of The Investment Adviser. </i></b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FAM
  (the &#147;Investment Adviser&#148;), acts as the investment adviser for a number
  of affiliated open-end and closed-end registered investment companies. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Merrill
  Lynch Investment Managers, L.P. (&#147;MLIM&#148;), acts as the investment adviser
  for a number of affiliated open-end and closed-end registered investment companies,
  and also acts as sub-adviser to certain other portfolios. </font></p>
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<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  address of each of these registered investment companies is P.O. Box 9011, Princeton,
  New Jersey 08543-9011, except that the address of Merrill Lynch Funds for Institutions
  Series is One Financial Center, 23rd Floor, Boston, Massachusetts 02111-2665.
  </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  address of the Investment Adviser, MLIM, Princeton Services, Inc. (&#147;Princeton
  Services&#148;) and Princeton Administrators, L.P. (&#147;Princeton Administrators&#148;)
  is also P.O. Box 9011, Princeton, New Jersey 08543-9011. The address of FAM
  Distributors, Inc. (&#147;FAMD&#148;) is P.O. Box 9081, Princeton, New Jersey
  08543-9081. The address of Merrill Lynch and Merrill Lynch &amp; Co., Inc. (&#147;ML
  &amp; Co.&#148;) is World Financial Center, North Tower, 250 Vesey Street, New


  York, New York 10080. </font></p>
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<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set
  forth below is a list of each executive officer and partner of the Investment
  Adviser indicating each business, profession, vocation or employment of a substantial
  nature in which each such person or entity has been engaged for the past two
  years for his, her or its own account or in the capacity of director, officer,
  employee, partner or Director. Mr. Burke is Vice President and Treasurer of
  all or substantially all of the investment companies advised by FAM or its affiliates,
  and Mr. Doll is an officer of one or more of such companies. </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> C-6</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 7; page: 7" --> <!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<br>
<table border=0 cellspacing=0 cellpadding=0 width="100%">
  <tr valign="bottom">
    <td width=168>
      <p align=center><font face="Times New Roman" size="2"><b>Name</b></font></p>

    </td>
    <td width=175>
      <p align=center><font face="Times New Roman" size="2"><b>Position(s) with<br>
        Investment Adviser</b></font></p>

    </td>
    <td width=295>
      <p align=center><font face="Times New Roman" size="2"><b>Other Substantial
        Business,<br>
        Profession, Vocation Or Employment</b></font></p>
    </td>
  </tr>
  <tr>
    <td width=168 valign=top>
      <hr noshade size="1" width="240" align="left">
    </td>
    <td width=175 valign=top>
      <hr noshade size="1" width="250" align="left">
    </td>
    <td width=295 valign=top>
      <hr noshade size="1">
    </td>
  </tr>
  <tr>
    <td width=168 valign=top>
      <p><font face="Times New Roman" size="2">ML &amp; Co.</font></p>
    </td>
    <td width=175 valign=top>
      <p><font face="Times New Roman" size="2">Limited Partner</font></p>
    </td>
    <td width=295 valign=top>
      <p><font face="Times New Roman" size="2">Financial Services Holding Company;
        Limited Partner of MLIM</font></p>
    </td>
  </tr>
  <tr>
    <td width=168 valign=top>&nbsp;</td>
    <td width=175 valign=top>&nbsp;</td>
    <td width=295 valign=top>&nbsp;</td>
  </tr>
  <tr>
    <td width=168 valign=top>
      <p><font face="Times New Roman" size="2">Princeton Services</font></p>
    </td>
    <td width=175 valign=top>
      <p><font face="Times New Roman" size="2">General Partner</font></p>
    </td>
    <td width=295 valign=top>
      <p><font face="Times New Roman" size="2">General Partner of MLIM</font></p>
    </td>
  </tr>
  <tr>
    <td width=168 valign=top>&nbsp;</td>
    <td width=175 valign=top>&nbsp;</td>
    <td width=295 valign=top>&nbsp;</td>
  </tr>
  <tr>
    <td width=168 valign=top>
      <p><font face="Times New Roman" size="2">Robert C. Doll, Jr.</font></p>
    </td>
    <td width=175 valign=top>
      <p><font face="Times New Roman" size="2">President</font></p>
    </td>
    <td width=295 valign=top>
      <p><font face="Times New Roman" size="2">President of MLIM; Co-Head (Americas
        Region) of MLIM from 2000 to 2004; Senior Vice President of MLIM from
        1999 to 2000; Director of Princeton Services; Chief Investment Officer
        of OppenheimerFunds, Inc. in 1999 and Executive Vice President thereof
        from 1991 to 1999</font></p>
    </td>
  </tr>
  <tr>
    <td width=168 valign=top>&nbsp;</td>
    <td width=175 valign=top>&nbsp;</td>
    <td width=295 valign=top>&nbsp;</td>
  </tr>
  <tr>
    <td width=168 valign=top>
      <p><font face="Times New Roman" size="2">Donald C. Burke</font></p>
    </td>
    <td width=175 valign=top>
      <p><font face="Times New Roman" size="2">First Vice President and Treasurer</font></p>
    </td>
    <td width=295 valign=top>
      <p><font face="Times New Roman" size="2">First Vice President and Treasurer
        of MLIM; Senior Vice President, Treasurer and Director of Princeton Services;
        Vice President of FAMD</font></p>
    </td>
  </tr>
  <tr>
    <td width=168 valign=top>&nbsp;</td>
    <td width=175 valign=top>&nbsp;</td>
    <td width=295 valign=top>&nbsp;</td>
  </tr>
  <tr>
    <td width=168 valign=top>
      <p><font face="Times New Roman" size="2">Jeffrey Hiller</font></p>
    </td>
    <td width=175 valign=top>
      <p><font face="Times New Roman" size="2">Chief Compliance Officer</font></p>
    </td>
    <td width=295 valign=top>
      <p><font face="Times New Roman" size="2">Chief Compliance Officer of the
        MLIM/FAM-advised funds; First Vice President and Chief Compliance Officer
        of MLIM; Chief Compliance Officer of the IQ Funds</font></p>
    </td>
  </tr>
  <tr>
    <td width=168 valign=top>&nbsp;</td>
    <td width=175 valign=top>&nbsp;</td>
    <td width=295 valign=top>&nbsp;</td>
  </tr>
  <tr>
    <td width=168 valign=top>
      <p><font face="Times New Roman" size="2">Andrew J. Donohue</font></p>
    </td>
    <td width=175 valign=top>
      <p><font face="Times New Roman" size="2">General Counsel</font></p>
    </td>
    <td width=295 valign=top>
      <p><font face="Times New Roman" size="2">First Vice President and General
        Counsel of MLIM; Senior Vice President and Director of Princeton Services;
        President and Director of FAMD</font></p>
    </td>
  </tr>
  <tr>
    <td width=168 valign=top>&nbsp;</td>
    <td width=175 valign=top>&nbsp;</td>
    <td width=295 valign=top>&nbsp;</td>
  </tr>
  <tr>
    <td width=168 valign=top>
      <p><font face="Times New Roman" size="2">Alice A. Pellegrino</font></p>
    </td>
    <td width=175 valign=top>
      <p><font face="Times New Roman" size="2">Secretary</font></p>
    </td>
    <td width=295 valign=top>
      <p><font face="Times New Roman" size="2">Secretary of MLIM, Princeton Services
        and FAMD</font></p>
    </td>
  </tr>
</table>
<br>
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Item 32. &nbsp;<i>Location
  of Account and Records. </i></b></font></p>
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<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
  accounts, books and other documents required to be maintained by Section 31(a)
  of the 1940 Act, and the Rules promulgated thereunder are maintained at the
  offices of the Registrant (800 Scudders Mill Road, Plainsboro, New Jersey 08536),
  its Investment Adviser (800 Scudders Mill Road, Plainsboro, New Jersey 08536),
  its custodian, The Bank of New York (100 Church Street, New York, New York 10286),
  and its transfer agent, The Bank of New York (101 Barclay Street, New York,
  New York 10286). </font></p>
<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Item 33. &nbsp;<i>Management
  Services. </i></b></font></p>
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<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not
  applicable. </font></p>
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&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> C-7</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 8; page: 8" --> <!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<p align=left><font face="Times New Roman, Times, Serif" size=3><b><font size="2">Item
  34. &nbsp;<i>Undertakings. </i></font> </b></font></p>
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<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)
  The Registrant undertakes to suspend the offering of the shares of preferred
  stock covered hereby until it amends its prospectus contained herein if (1)
  subsequent to the effective date of this Registration Statement, its net asset
  value per share of preferred stock declines more than 10% from its net asset
  value per share of preferred stock as of the effective date of this Registration
  Statement, or (2) its net asset value per share of preferred stock increases
  to an amount greater than its net proceeds as stated in the prospectus contained
  herein. </font></p>
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<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)
  Not applicable. </font></p>
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)
  Not applicable. </font></p>
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4)
  Not applicable </font></p>
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5)
  The Registrant undertakes that: </font></p>
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)
      For purposes of determining any liability under the 1933 Act, the information
      omitted from the form of prospectus filed as part of this Registration Statement
      in reliance upon Rule 430A and contained in the form of prospectus filed
      by the registrant pursuant to Rule 497(h) under the 1933 Act shall be deemed
      to be part of this Registration Statement as of the time it was declared
      effective. </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)
      For the purpose of determining any liability under the 1933 Act, each post-effective
      amendment that contains a form of prospectus shall be deemed to be a new
      registration statement relating to the securities offered therein, and the
      offering of such securities at that time shall be deemed to be the initial
      bona fide offering thereof. </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(6)
  The Registrant undertakes to send by first-class mail or other means designed
  to ensure equally prompt delivery, within two business days of receipt of a
  written or oral request, any statement of additional information. </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> C-8 </font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 9; page: 9" --> <!-- MARKER FORMAT-SHEET="Center Head 2-Bold" FSL="Workstation" -->
<p align=CENTER><font face="Times New Roman, Times, Serif" size=2><b>SIGNATURES
  </b></font></p>



<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
  to the requirements of the Securities Act of 1933 and the Investment Company
  Act of 1940, the Registrant has duly caused this Registration Statement to be
  signed on its behalf by the undersigned, thereunto duly authorized, in the Township
  of Plainsboro, State of New Jersey, on the 14<sup><font size="1">th</font></sup>
  day of September, 2005.</font></p>

<br>
<!-- MARKER FORMAT-SHEET="Para Hang 25-75" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=66%>&nbsp;</td>
    <td colspan="2"><font face="Times New Roman, Times, Serif" size="2">MUNIYIELD
      QUALITY FUND, INC.</font><font face="Times New Roman, Times, Serif" size=2><br>
      (Registrant) </font></td>
  </tr>
  <tr valign=TOP>
    <td width=66%>&nbsp;</td>
    <td width="3%">&nbsp;</td>
    <td width=31%>&nbsp;</td>
  </tr>
  <tr valign=TOP>
    <td width=66%>&nbsp;</td>
    <td width="3%"><font face="Times New Roman, Times, Serif" size=2>By: </font></td>
    <td width=31%>/s/ <font face="Times New Roman, Times, Serif" size=2>D<font size="1">ONALD</font>
      C. B<font size="1">URKE</font></font>
      <hr size="1" noshade align="left" width="175">
    </td>
  </tr>
  <tr valign=TOP>
    <td width=66%><font face="Times New Roman, Times, Serif" size="2"><b> </b>
      </font> </td>
    <td width="3%">&nbsp;</td>
    <td width=31%><font face="Times New Roman, Times, Serif" size="1"><b>Donald
      C. Burke<br>
      Vice President and Treasurer</b></font></td>
  </tr>
</table>

<br>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
  to the requirements of the Securities Act of 1933, this Registration Statement
  has been signed below by the following person in the capacities and on the dates
  indicated. </font></p>

<table border=0 cellspacing=0 cellpadding=0 width="640">
  <tr>
    <td valign=bottom width=279>
      <p align=center><font face="Times New Roman" size="2"><b>Signatures<br>
        </b></font>
      <hr noshade size="1" align="left" width="95%">
    </td>
    <td valign=bottom width=214>
      <p align=center><font face="Times New Roman" size="2"><b>Title<br>
        </b></font>
      <hr noshade size="1" align="left" width="95%">
    </td>
    <td valign=bottom width=147>
      <p align=center><font face="Times New Roman" size="2"><b>Date<br>
        </b></font>
      <hr noshade size="1" align="left" width="95%">
    </td>
  </tr>
  <tr>
    <td valign=top align="center" width=279>
      <p><font face="Times New Roman" size="2">R<font size="1">OBERT</font> C.
        D<font size="1">OLL</font>, J<font size="1">R</font>.*</font>
      <hr noshade size="1" width="150" align="center">
      <font face="Times New Roman" size="1"> <b>(Robert C. Doll,
      Jr.)</b></font> </td>
    <td valign=top width=214>
      <p><font face="Times New Roman" size="2">President (Principal <br>
        Executive Officer) <br>
        and Director</font></p>
      <p><font face="Times New Roman" size="2">&nbsp;</font></p>
    </td>
    <td valign=top width=147>
      <p><font face="Times New Roman" size="2">&nbsp;</font></p>
    </td>
  </tr>
  <tr>
    <td valign=top align="center" width=279>
      <p><font face="Times New Roman" size="2">D<font size="1">ONALD</font> C.
        B<font size="1">URKE</font>*<br>
        </font>
      <hr noshade size="1" width="150" align="center">
      <font face="Times New Roman" size="1"> <b>(Donald C. Burke)</b></font>
    </td>
    <td valign=top width=214>
      <p><font face="Times New Roman" size="2">Vice President and <br>
        Treasurer (Principal <br>
        Financial and <br>
        Accounting Officer)</font></p>
      <p><font face="Times New Roman" size="2">&nbsp;</font></p>
    </td>
    <td valign=top width=147>
      <p><font face="Times New Roman" size="2">&nbsp;</font></p>
    </td>
  </tr>
  <tr>
    <td rowspan=2 valign=top align="center" width=279>
      <p><font face="Times New Roman" size="2">J<font size="1">AMES</font> H.
        B<font size="1">ODURTHA</font>*<br>
        </font>
      <hr noshade size="1" width="150" align="center">
      <font face="Times New Roman" size="1"> <b>(James H. Bodurtha)</b></font>
      <br>
      <br>
    </td>
    <td rowspan=2 valign=top width=214>
      <p><font face="Times New Roman" size="2">Director</font></p>
    </td>
    <td valign=top rowspan="2" width=147>
      <p><font face="Times New Roman" size="2">&nbsp;</font></p>
      <p align=center><font face="Times New Roman" size="2">&nbsp;</font></p>
    </td>
  </tr>
  <tr> </tr>
  <tr>
    <td rowspan=2 valign=top align="center" width=279> <br>
      <hr noshade size="1" width="150" align="center">
      <font face="Times New Roman" size="1"> <b>(Kenneth A. Froot)</b></font><br>
      <br>
    </td>
    <td rowspan=2 valign=top width=214>
      <p><font face="Times New Roman" size="2">Director</font></p>
    </td>
    <td valign=top rowspan="2" width=147>
      <p align=center><font face="Times New Roman" size="2">&nbsp;</font></p>
      <p align=center><font face="Times New Roman" size="2">&nbsp;</font></p>
    </td>
  </tr>
  <tr> </tr>
  <tr>
    <td rowspan=2 valign=top align="center" width=279>
      <p><font face="Times New Roman" size="2">J<font size="1">OE</font> G<font size="1">RILLS</font>*<br>
        </font>
      <hr noshade size="1" width="150" align="center">
      <font face="Times New Roman" size="1"> <b>(Joe Grills)</b></font>
      <br>
      <br>
    </td>
    <td rowspan=2 valign=top width=214>
      <p><font face="Times New Roman" size="2">Director</font></p>
    </td>
    <td valign=top rowspan="2" width=147>
      <p align=center><font face="Times New Roman" size="2">&nbsp;</font></p>
      <p align=center><font face="Times New Roman" size="2">&nbsp;</font></p>
    </td>
  </tr>
  <tr> </tr>
  <tr>
    <td rowspan=2 valign=top align="center" width=279>
      <p><font face="Times New Roman" size="2">H<font size="1">ERBERT</font> I.
        L<font size="1">ONDON</font>*<br>
        </font>
      <hr noshade size="1" width="150" align="center">
      <font face="Times New Roman" size="1"> <b>(Herbert I. London)</b></font>
      <br>
      <br>
    </td>
    <td rowspan=2 valign=top width=214>
      <p><font face="Times New Roman" size="2">Director</font></p>
    </td>
    <td valign=top rowspan="2" width=147>
      <p align=center><font face="Times New Roman" size="2">&nbsp;</font></p>
      <p align=center><font face="Times New Roman" size="2">&nbsp;</font></p>
    </td>
  </tr>
  <tr> </tr>
  <tr>
    <td rowspan=2 valign=top align="center" width=279>
      <p><font face="Times New Roman" size="2">R<font size="1">OBERTA</font> C<font size="1">OOPER</font>
        R<font size="1">AMO</font>*<br>
        </font>
      <hr noshade size="1" width="150" align="center">
      <font face="Times New Roman" size="1"> <b>(Roberta Cooper
      Ramo)</b></font> <br>
      <br>
    </td>
    <td rowspan=2 valign=top width=214>
      <p><font face="Times New Roman" size="2">Director</font></p>
    </td>
    <td valign=top rowspan="2" width=147>
      <p align=center><font face="Times New Roman" size="2">&nbsp;</font></p>
      <p align=center><font face="Times New Roman" size="2">&nbsp;</font></p>
    </td>
  </tr>
  <tr> </tr>
  <tr>
    <td rowspan=2 valign=top align="center" width=279>
      <p><font face="Times New Roman" size="2">R<font size="1">OBERT</font> S.
        S<font size="1">ALOMON</font>, J<font size="1">R</font>.*<br>
        </font>
      <hr noshade size="1" width="150" align="center">
      <font face="Times New Roman" size="1"> <b>(Robert S. Salomon,
      Jr.)</b></font> <br>
      <br>
    </td>
    <td rowspan=2 valign=top width=214>
      <p><font face="Times New Roman" size="2">Director</font></p>
    </td>
    <td valign=top rowspan="2" width=147>
      <p><font face="Times New Roman" size="2">&nbsp;</font></p>
      <p align=center><font face="Times New Roman" size="2">&nbsp;</font></p>
    </td>
  </tr>
  <tr> </tr>
  <tr>
    <td rowspan=2 valign=top align="center" width=279>
      <p><font face="Times New Roman" size="2">S<font size="1">TEPHEN</font> B.
        S<font size="1">WENSRUD</font>*<br>
        </font>
      <hr noshade size="1" width="150" align="center">
      <font face="Times New Roman" size="1"> <b>(Stephen B. Swensrud)</b></font>
      <br>
      <br>
    </td>
    <td rowspan=2 valign=top width=214>
      <p><font face="Times New Roman" size="2">Director</font></p>
    </td>
    <td valign=top rowspan="2" width=147>
      <p><font face="Times New Roman" size="2">&nbsp;</font></p>
      <p align=center><font face="Times New Roman" size="2">&nbsp;</font></p>
    </td>
  </tr>
</table>
<table border="0" width="640" cellpadding="0" cellspacing="0">
  <tr>
    <td width="63"><font face="Times New Roman" size="2">*By</font></td>
    <td width="216"><font size="2">/s/ D<font size="1">ONALD</font> C. B<font size="1">URKE</font></font></td>
    <td width="214">&nbsp;</td>
    <td width="147"><font face="Times New Roman" size="2">September 14, 2005</font></td>
  </tr>
  <tr>
    <td width="63">&nbsp;</td>
    <td width="216">
      <hr noshade size="1" width="150" align="left">
    </td>
    <td width="214">&nbsp;&nbsp;</td>
    <td width="147">&nbsp;</td>
  </tr>
  <tr>
    <td width="63">&nbsp;</td>
    <td width="216"><font face="Times New Roman" size="1"><b>(Donald C. Burke,
      Attorney-in-Fact)</b></font> </td>
    <td width="214">&nbsp;</td>
    <td width="147">&nbsp;</td>
  </tr>
</table>

<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
<p></p>
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> C-9</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 10; page: 10" -->
<!-- MARKER FORMAT-SHEET="Center Head 2-Bold" FSL="Workstation" -->
<p align=CENTER><font face="Times New Roman, Times, Serif" size=2><b>EXHIBIT INDEX
  </b></font></p>

<table border=0 cellspacing=0 cellpadding=0 width="700">
  <tr valign="bottom">
    <td colspan="2" align="center"><font face="Times New Roman" size="2">Exhibits</font>
      <hr size="1" width="55">
    </td>
    <td width=39>&nbsp;</td>
    <td width=592 align="left"><font face="Times New Roman" size="2">Description</font>
      <hr noshade align="left" width="70">
    </td>
  </tr>
  <tr>
    <td width=29>
      <p>&nbsp;
    </td>
    <td valign=top width=40>
      <p><font face="Times New Roman" size="2">(1)</font></p>
    </td>
    <td valign=top width=39 align="center">&#151;</td>
    <td valign=top width=592>
      <p><font face="Times New Roman" size="2">Opinion and Consent of Sidley Austin
        Brown &amp; Wood <font size="1">LLP</font>.</font></p>
    </td>
  </tr>
  <tr>
    <td width=29>&nbsp;</td>
    <td valign=top width=40><font face="Times New Roman" size="2">(n) </font>
    </td>
    <td valign=top width=39 align="center">&#151;</td>
    <td valign=top width=592><font face="Times New Roman" size="2">Consent of
      Deloitte &amp; Touche <font size="1">LLP</font>, independent registered
      public accounting firm for the Registrant.</font></td>
  </tr>
</table>


<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2">  </font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>

<p>&nbsp;</p>
</body>
</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-1
<SEQUENCE>2
<FILENAME>e21115ex_1.txt
<TEXT>
                                                                     Exhibit (1)

                         SIDLEY AUSTIN BROWN & WOOD LLP

BEIJING                        787 SEVENTH AVENUE                  LOS ANGELES
 -----                      NEW YORK, NEW YORK 10019                  -----
BRUSSELS                     TELEPHONE 212 839 5300                 NEW YORK
 -----                       FACSIMILE 212 839 5599                   -----
CHICAGO                          www.sidley.com                  SAN FRANCISCO
 -----                                                                -----
 DALLAS                           FOUNDED 1866                      SHANGHAI
 -----                                                                -----
 GENEVA                                                            SINGAPORE
 -----                                                                -----
HONG KONG                                                             TOKYO
 -----                                                                -----
 LONDON                                                         WASHINGTON, D.C.

                                                              September 14, 2005

MuniYield Quality Fund, Inc.
800 Scudders Mill Road
Plainsboro, New Jersey  08536

Ladies and Gentlemen:

      This opinion is being furnished in connection with the registration by
MuniYield Quality Fund, Inc., a Maryland corporation (the "Fund"), of 2,000
shares of Auction Market Preferred Stock, Series E, with a par value $0.10 per
share, (the "Shares"), under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to the Fund's registration statement on Form N-2, as
amended (the "Registration Statement"), under the Securities Act. The Shares
will be issued pursuant to the Articles Supplementary to be filed with the State
Department of Assessments and Taxation of Maryland.

      As counsel for the Fund, we are familiar with the proceedings taken by it
in connection with the authorization, issuance and sale of the Shares in the
manner referred to in the Registration Statement. In addition, we have examined
and are familiar with the Charter of the Fund, the By-Laws of the Fund, and such
other documents as we have deemed relevant to the matters referred to in this
opinion.

   SIDLEY AUSTIN BROWN & WOOD LLP IS A DELAWARE LIMITED LIABILITY PARTNERSHIP
  PRACTICING IN AFFILIATION WITH OTHER SIDLEY AUSTIN BROWN & WOOD PARTNERSHIPS

<PAGE>

      Based upon the foregoing, we are of the opinion that the Shares, upon
issuance and sale in the manner described in the Registration Statement against
payment of the consideration described therein, will be legally issued, fully
paid and non-assessable shares of preferred stock of the Fund.

      We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name in the Prospectus constituting
a part thereof.

                                              Very truly yours,

                                              /s/ Sidley Austin Brown & Wood LLP


                                       2
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(N)
<SEQUENCE>3
<FILENAME>e21115ex_n.txt
<TEXT>
                                                                     Exhibit (n)

            CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in this Pre-Effective Amendment No.
1 to Registration Statement No. 333-126755 of MuniYield Quality Fund, Inc. (the
"Fund") on Form N-2 of our report dated December 14, 2004, appearing in the
October 31, 2004 Annual Report of the Fund, which is incorporated by reference
in the Statement of Additional Information which is part of this Registration
Statement. We also consent to the reference to us under the captions "Financial
Highlights" and "Independent Registered Public Accounting Firm and Experts" in
the Prospectus, which is also part of this Registration Statement.

/s/ Deloitte & Touche LLP

Princeton, New Jersey
September 13, 2005
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
