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<SEC-DOCUMENT>0000905148-04-002818.txt : 20040618
<SEC-HEADER>0000905148-04-002818.hdr.sgml : 20040618
<ACCEPTANCE-DATETIME>20040617175505
ACCESSION NUMBER:		0000905148-04-002818
CONFORMED SUBMISSION TYPE:	N-2
PUBLIC DOCUMENT COUNT:		16
FILED AS OF DATE:		20040618

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			MUNIYIELD INSURED FUND INC
		CENTRAL INDEX KEY:			0000883412
		IRS NUMBER:				223165131
		STATE OF INCORPORATION:			NJ
		FISCAL YEAR END:			1031

	FILING VALUES:
		FORM TYPE:		N-2
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-116604
		FILM NUMBER:		04869518

	BUSINESS ADDRESS:	
		STREET 1:		800 SCUDDERS MILL ROAD
		CITY:			PLAINSBORO
		STATE:			NJ
		ZIP:			08530
		BUSINESS PHONE:		6092822800

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			MUNIYIELD INSURED FUND INC
		CENTRAL INDEX KEY:			0000883412
		IRS NUMBER:				223165131
		STATE OF INCORPORATION:			NJ
		FISCAL YEAR END:			1031

	FILING VALUES:
		FORM TYPE:		N-2
		SEC ACT:		1940 Act
		SEC FILE NUMBER:	811-06540
		FILM NUMBER:		04869519

	BUSINESS ADDRESS:	
		STREET 1:		800 SCUDDERS MILL ROAD
		CITY:			PLAINSBORO
		STATE:			NJ
		ZIP:			08530
		BUSINESS PHONE:		6092822800
</SEC-HEADER>
<DOCUMENT>
<TYPE>N-2
<SEQUENCE>1
<FILENAME>efc4-1163_5547610formn2.txt
<TEXT>


     As filed with the Securities and Exchange Commission on June 18, 2004

                                           Securities Act File No. 333-
                                     Investment Company Act File No. 811-21348
==============================================================================
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                                  ----------
                                   FORM N-2
          REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933       [X]
                        Pre-Effective Amendment No.                     [ ]
                       Post-Effective Amendment No.                     [ ]
                                    and/or
                       REGISTRATION STATEMENT UNDER THE
                      INVESTMENT COMPANY ACT OF 1940                    [X]
                              Amendment No. 6                           [X]
                       (Check appropriate box or boxes)
                                  ----------

                         MUNIYIELD INSURED FUND, INC.
              (Exact Name of Registrant as Specified in Charter)
                                  ----------

             800 Scudders Mill Road, Plainsboro, New Jersey 08536
                   (Address of Principal Executive Offices)


      (Registrant's Telephone Number, Including Area Code) (609) 282-2800
                                  ----------

                                Terry K. Glenn
                         MuniYield Insured Fund, Inc.
             800 Scudders Mill Road, Plainsboro, New Jersey 08536
       Mailing Address: P.O. Box 9011, Princeton, New Jersey 08543-9011
                    (Name and Address of Agent for Service)
                                  ----------
                                  Copies to:
        Andrew J. Donohue, Esq.                       Frank P. Bruno, Esq.
      FUND ASSET MANAGEMENT, L.P.               SIDLEY AUSTIN BROWN & WOOD LLP
             P.O. Box 9011                            787 Seventh Avenue
    Princeton, New Jersey 08543-9011             New York, New York 10020-6018
                                  ----------

     Approximate date of proposed public offering: As soon as practicable
after the effective date of this Registration Statement.

     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 "Securities Act"), other than securities offered only
in connection with dividend or interest reinvestment plans, check the
following box. [_]

                                  ----------

<TABLE>
<CAPTION>

                                  CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
- -----------------------------------------------------------------------------------------------------------------------------------

                                                                     Proposed Maximum       Proposed Maximum        Amount of
            Title of Securities                 Amount being        Offering Price Per     Aggregate Offering    Registration Fee
             Being Registered                  Registered (1)            Unit (1)               Price (1)              (2)
- -----------------------------------------------------------------------------------------------------------------------------------

<S>                                            <C>                       <C>                 <C>                    <C>
Auction Market Preferred Stock...........       5,200 shares              $25,000             $130,000,000           $16,471
- -----------------------------------------------------------------------------------------------------------------------------------

</TABLE>

(1) Estimated solely for the purpose of calculating the registration fee.
(2) Transmitted prior to the filing date to the designated lockbox of the
Securities and Exchange Commission at Mellon Bank in Pittsburgh, PA.

     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.


<PAGE>


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.

                             Subject to Completion
                  Preliminary Prospectus dated June 18, 2004
PROSPECTUS
                                 $130,000,000
                         MuniYield Insured Fund, Inc.
                    Auction Market Preferred Stock ("AMPS")

                            2,600 Shares, Series H
                            2,600 Shares, Series I
                   Liquidation Preference $25,000 Per Share
                                  ----------

     MuniYield Insured Fund, Inc. is a non-diversified, closed-end fund. The
investment objective of the Fund is to provide common stockholders 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 objective by investing, as a fundamental policy, at
least 80% of an aggregate of the Fund's net assets (including proceeds from
the issuance of any preferred stock) and the proceeds 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). Under normal market conditions, the Fund invests primarily in long term
municipal obligations that are rated investment grade or, if unrated, are
considered by the Fund's investment adviser to be of comparable quality. Under
normal market conditions and after the investment period following this
offering (not expected to exceed three months), the Fund will invest, as a
non-fundamental policy, at least 80% of an aggregate of the Fund's net assets
(including proceeds from the issuance of any preferred stock) and the proceeds
of any borrowings for investment purposes, in municipal obligations that are
covered by insurance guaranteeing the timely payment of principal at maturity
and interest when due. The Fund may invest in certain tax exempt securities
classified as "private activity bonds," as discussed within, that may subject
certain investors in the Fund to an alternative minimum tax. There can be no
assurance that the Fund's investment objective will be realized.

     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's statement of additional information, dated
     , 2004, 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. You may request a free copy by writing or calling the Fund at
(800) 543-6217.

     Certain capitalized terms used herein not otherwise defined in this
prospectus have the meaning provided in the Glossary at the back of this
prospectus.

     Investing in the AMPS involves certain risks that are described in the
"Risk Factors and Special Considerations" section beginning on page 8 of this
prospectus. The minimum purchase amount for the AMPS is $25,000.

                                  ----------

<TABLE>
<CAPTION>

                                                                                Per Share             Total
                                                                         -------------------    ---------------
<S>                                                                             <C>             <C>
     Public offering price.............................................          $25,000         $130,000,000
     Underwriting discount.............................................             $250           $1,300,000
     Proceeds, before expenses, to the Fund (1)........................          $24,750         $128,700,000

</TABLE>

     (1) The estimated offering expenses payable by the Fund are $215,000.

     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.

     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.

     One certificate for each series of AMPS will be ready for delivery to the
nominee of The Depository Trust Company on or about               , 2004.


<PAGE>


                                ---------------
                              Merrill Lynch & Co.
                                ---------------

            The date of this prospectus is                 , 2004.



                                       2
<PAGE>


<TABLE>
<CAPTION>

                                                  TABLE OF CONTENTS

                                                                                                                Page
                                                                                                                ----

<S>                                                                                                            <C>
PROSPECTUS SUMMARY................................................................................................4
RISK FACTORS AND SPECIAL CONSIDERATIONS...........................................................................8
FINANCIAL HIGHLIGHTS.............................................................................................12
THE FUND.........................................................................................................13
USE OF PROCEEDS..................................................................................................14
CAPITALIZATION...................................................................................................14
PORTFOLIO COMPOSITION............................................................................................14
INVESTMENT OBJECTIVE AND POLICIES................................................................................15
OTHER INVESTMENT POLICIES........................................................................................24
DESCRIPTION OF AMPS..............................................................................................27
THE AUCTION......................................................................................................33
RATING AGENCY GUIDELINES.........................................................................................40
INVESTMENT ADVISORY AND MANAGEMENT ARRANGEMENTS..................................................................41
TAXES............................................................................................................42
DESCRIPTION OF CAPITAL STOCK.....................................................................................43
CUSTODIAN........................................................................................................46
UNDERWRITING.....................................................................................................47
TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND REGISTRAR..........................................................47
ACCOUNTING SERVICES PROVIDER.....................................................................................47
LEGAL OPINIONS...................................................................................................48
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND EXPERTS........................................................48
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION.........................................................46
GLOSSARY.........................................................................................................50

</TABLE>

                                  ----------
     Information about the Fund can be reviewed and copied at the SEC's Public
Reference Room in Washington, D.C. Call 1-202-942-8090 for information on the
operation of the public reference room. This information is also available on
the SEC'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
SEC, Washington, D.C. 20549-0102.

                                  ----------
     You should rely only on the information contained in this prospectus. We
have not, and the underwriters have 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
underwriters are 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.


                                       3
<PAGE>


                              PROSPECTUS SUMMARY

     This summary is qualified in its entirety by reference to the detailed
information included in this prospectus and the statement of additional
information.

The Fund                     MuniYield Insured Fund, Inc. is a
                             non-diversified, closed-end management investment
                             company.

The Offering                 The Fund is offering a total of 2,600 shares of
                             Auction Market Preferred Stock, Series H and
                             2,600 shares of Auction Market Preferred Stock,
                             Series I, each 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 & Smith Incorporated ("Merrill
                             Lynch"), as underwriter.

                             The AMPS of each series 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 for each series. In general, except as
                             described below, each dividend period for each
                             series of AMPS 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.

                             Investors and potential investors in shares of
                             AMPS of each series may participate in auctions
                             for the AMPS through their broker-dealers.

                             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's agent member (generally
                             the investor's broker-dealer). The investor's
                             agent member, in turn, will maintain records of
                             such investor's beneficial ownership of AMPS.

Investment Objective         The investment objective of the Fund is to
and Policies                 provide common stockholders 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 objective by investing,
                             as a fundamental policy, at least 80% of an
                             aggregate of the Fund's net assets (including
                             proceeds from the issuance of any 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 ("Municipal Bonds").
                             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's investment objective
                             will be realized.

                             Municipal Bond Insurance. Under normal market
                             conditions and after the investment period
                             following the offering (not expected to exceed
                             three months), the Fund will invest, as a
                             non-fundamental policy, at least 80% of an
                             aggregate of the Fund's net assets (including
                             proceeds from the issuance of any preferred
                             stock) and the proceeds of any borrowings for
                             investment purposes, in Municipal Bonds that are
                             covered by insurance guaranteeing the timely
                             payment of principal at maturity and interest
                             when due.

                             Investment Grade Municipal Bonds. Under normal
                             market conditions, the Fund will invest primarily
                             in a portfolio of long term Municipal Bonds that
                             are rated investment grade by one or more
                             nationally recognized statistical rating agencies
                             or in unrated bonds


                                       4
<PAGE>


                             considered by Fund Asset Management, L.P., the
                             Fund's investment adviser (the "Investment
                             Adviser"), to be of comparable quality.

                             Indexed and Inverse Floating Rate Securities. 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'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.

                             Hedging Transactions. The Fund may seek to hedge
                             its portfolio against changes in interest rates
                             using options and financial futures contracts or
                             swap transactions. The Fund'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'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.

                             Swap Agreements. 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.

                             Tax Considerations. 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
                             "Taxes."

Investment Adviser           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's average weekly net assets
                             (including any proceeds from the issuance of
                             preferred stock).

Dividends and                Dividends on each series of AMPS will be
Dividend Periods             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:


                                       5
<PAGE>


<TABLE>
<CAPTION>

                                                                               Initial                Initial
                                                          Initial             Dividend                Dividend
                                                          Dividend             Period                 Payment
                                 AMPS Series                Rate               Ending                   Date
                        ---------------------------     ------------  -------------------------  --------------------
                         <S>                                   <C>            <C>                   <C>
                         Series H..................             %                       , 2004                , 2004
                         Series I..................             %                       , 2004                , 2004

</TABLE>

                             After the initial dividend period, each dividend
                             period for each series of 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.

                             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 Friday in the case of the Series
                             H AMPS and each succeeding Monday in the case of
                             the Series I AMPS.

                             Dividends for each series of AMPS will be paid
                             through the securities depository (The Depository
                             Trust Company) on each dividend payment date for
                             each series of AMPS.

                             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 each series of AMPS.

Determination of             Generally, the applicable dividend rate for any
Maximum Dividend             dividend period for each series of AMPS will not
Rates                        be more than the maximum applicable rate
                             attributable to such shares. The maximum
                             applicable rate for each series of 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
                             each series of 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:


<TABLE>
<CAPTION>

                                                              Applicable         Applicable        Applicable         Applicable
                               Credit Ratings                 Percentage         Percentage        Spread Over       Spread Over
                     ------------------------------------
                                                             of Reference       of Reference        Reference         Reference
                                                               Rate--No            Rate--            Rate--No           Rate--
                         Moody's                S&P          Notification       Notification      Notification       Notification
                     ----------------    ----------------  ----------------   ----------------  ----------------   ----------------
                       <S>                <C>                    <C>                <C>               <C>               <C>
                           Aaa                  AAA              110%               125%              1.10%             1.25%
                        Aa3 to Aa1          AA- to AA+           125%               150%              1.25%             1.50%
                         A3 to A1            A- to A+            150%               200%              1.50%             2.00%
                       Baa3 to Baa1        BBB- to BBB+          175%               250%              1.75%             2.50%
                        Below Baa3          Below BBB-           200%               300%              2.00%             3.00%

</TABLE>

                             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.

                             There is no minimum applicable dividend rate for
                             any dividend period.


                                       6
<PAGE>



Other AMPS                   The Fund has outstanding 17,600 shares of seven
                             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
                             $440,000,000 (the "Other AMPS"). The Other AMPS
                             are as follows: 2,200 shares of Auction Market
                             Preferred Stock, Series A; 2,200 shares of
                             Auction Market Preferred Stock, Series B; 2,200
                             shares of Auction Market Preferred Stock, Series
                             C; 2,200 shares of Auction Market Preferred
                             Stock, Series D; 4,000 shares of Auction Market
                             Preferred Stock, Series E; 2,400 shares of
                             Auction Market Preferred Stock, Series F; and
                             2,400 shares of Auction Market Preferred Stock,
                             Series G. The Series H AMPS and the Series I AMPS
                             offered hereby rank on a parity with the Other
                             AMPS with respect to dividends and liquidation
                             preference.

Asset Maintenance            Under the Fund's Articles Supplementary creating
                             the series of AMPS (the "Articles
                             Supplementary"), the Fund must maintain:

                             o    asset coverage of the AMPS and Other AMPS as
                                  required by the rating agencies rating the
                                  AMPS, and

                             o    asset coverage of the AMPS and Other AMPS of
                                  at least 200% as required by the Investment
                                  Company Act of 1940 (the "1940 Act").

                             The Fund estimates that, based on the composition
                             of its portfolio at April 30, 2004, as adjusted
                             to give effect to the issuance of 5,204,029
                             shares of its common stock in exchange for the
                             acquisition of substantially all of the assets
                             and the assumption of all of the liabilities of
                             MuniInsured Fund, Inc. on June 7, 2004, asset
                             coverage of the AMPS and Other AMPS as required
                             by the 1940 Act would be approximately 277%
                             immediately after the Fund issues the shares of
                             AMPS offered by this prospectus representing
                             approximately 36% of the Fund's capital, or
                             approximately 56% of the Fund's common stock
                             equity, immediately after the issuance of such
                             AMPS.

Mandatory                    If the required asset coverage is not maintained
Redemption                   or, when necessary, restored, the Fund must
                             redeem shares of 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's ability to make such a mandatory
                             redemption.

Optional Redemption          The Fund may, at its option, choose to redeem all
                             or a portion of the shares of AMPS of each series
                             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.

Liquidation                  The liquidation preference (that is, the amount
Preference                   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).

Ratings                      The AMPS will be issued with a rating of Aaa from
                             Moody's Investors Service, Inc. ("Moody's") and
                             AAA from Standard & Poor's ("S&P").

Voting Rights                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'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.


                                       7
<PAGE>


                    RISK FACTORS AND SPECIAL CONSIDERATIONS

     An investment in the Fund's AMPS should not constitute a complete
investment program.

     Investment Considerations. Investors in AMPS should consider the
following factors:

     o    The credit ratings of the AMPS could be reduced or terminated while
          an investor holds the AMPS.

     o    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.

     o    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.

     Secondary Market. The broker-dealers intend to maintain a secondary
trading market in the AMPS outside of auctions; however, they have no
obligation to do so 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.

     Rating Agencies. The Fund will issue the AMPS only if the AMPS have
received a rating of Aaa from Moody's and AAA from S&P. As a result of such
ratings the Fund will be subject to guidelines of Moody's, S&P or another
substitute nationally recognized statistical ratings organizations 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's portfolio in accordance with the Fund's investment objective and
policies. Also, under certain circumstances, the Fund may voluntarily
terminate compliance with Moody's or S&P's guidelines, or both, in which case
the AMPS may no longer be rated by Moody's or S&P, as applicable, but will be
rated by at least one rating agency.

     Municipal Bond Insurance. The Fund will be subject to certain investment
restrictions imposed by guidelines of the insurance companies that issue
insurance on the Municipal Bonds in the Fund's portfolio. The Fund does not
expect these guidelines to prevent the investment adviser from managing the
Fund's portfolio in accordance with the Fund's investment objective and
policies.

     Interest Rate Risk and AMPS. 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's portfolio securities. Because income from
the Fund'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's net portfolio income before the Fund'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's
investment portfolio, reducing the amount of assets serving as asset coverage
for the AMPS.

     Non-Diversification. The Fund is registered as a "non-diversified"
investment company. This means that the Fund may invest a greater percentage
of its assets in a single issuer than a diversified investment company. Since
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


                                       8
<PAGE>


non-diversified fund, the Fund must still meet the diversification
requirements applicable to regulated investment companies under the Federal
income tax laws.

     Market Risk and Selection Risk. 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
relevant indices, or other funds with similar investment objectives and
investment strategies.

     Tax Exempt Securities Market Risk. The amount of public information
available about Municipal Bonds in the Fund'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.

     Interest Rate and Credit Risk. 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'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's portfolio will decline in value if interest rates
increase in the future. Credit risk is the risk that the issuer will be unable
to pay the interest or principal when due. Changes in an issuer's credit
rating or the market's perception of an issuer's creditworthiness may affect
the value of the Fund's investment in that issuer. The degree of credit risk
depends on both the financial condition of the issuer and the terms of the
obligation.

     Call and Redemption Risk. A Municipal Bond'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.

     Rating Categories. The Fund intends to invest in Municipal Bonds that are
rated investment grade by S&P, Moody's or Fitch Ratings, or in unrated
Municipal Bonds that are considered by the Investment Adviser to possess
similar credit characteristics. Obligations rated in the lowest investment
grade category may have certain speculative characteristics. For example,
their prices are more volatile, economic downturns and financial setbacks may
affect their prices more negatively, and their trading market may be more
limited.

     Reinvestment Risk. Reinvestment risk is the risk that income from the
Fund'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's current earnings rate. A decline in income could
negatively affect the Fund's yield, return or the market price of the common
stock.

     Private Activity Bonds. The Fund may invest in certain tax exempt
securities classified as "private activity bonds." These bonds may subject
certain investors in the Fund to the Federal alternative minimum tax.

     Liquidity of Investments. Certain Municipal Bonds in which the Fund
invests may lack an established secondary trading market or be 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.

     Portfolio Strategies. 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 floating rate 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's performance could suffer. Certain of
these strategies, such as investments in inverse floating rate securities and
credit default swaps, may provide investment leverage to the Fund's portfolio.
The Fund is not required to use derivatives or other portfolio strategies to
seek to increase return or


                                       9
<PAGE>


to seek to hedge its portfolio and may choose not to do so. There can be no
assurance that the Fund'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's risk of loss.

     General Risks Related to Derivatives. 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'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'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, the
risk of ambiguous documentation and management risk. They also involve the
risk of mispricing or improper valuation and correlation risk (i.e., 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.

     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.

     Swaps. Swap agreements are types of derivatives. In order to seek to
hedge the value of the Fund's portfolio, to hedge against increases in the
Fund's cost associated with the interest payments on its outstanding
borrowings or to seek to increase the Fund's return, the Fund may enter into
interest rate, credit default or total return 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 actual default by the issuer of the underlying obligation (as
opposed to a credit downgrade or other indication of financial difficulty).
Total return swap transactions involve the risks that the counterparty will
default on its payment obligation to the Fund in the transaction and that the
Fund will not be able to meet its obligation to the counterparty in the
transaction. The Fund is not required to enter into interest rate, credit
default or total return swap transactions for hedging purposes or to enhance
its return and may choose not to do so.

     Taxability Risk. 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 to
pay, or to have paid, taxable income subsequent to the Fund'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'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. If a security
acquired based on reliance on such an opinion of counsel is subsequently
determined to pay interest that is includable in gross income for Federal
income tax purposes, the Fund will dispose of that security as soon as
reasonably practicable.


                                      10
<PAGE>


     Antitakeover Provisions. The Fund'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.

     Market Disruption. 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's portfolio securities, interest rates,
auctions, secondary trading, ratings, credit risk, inflation and other factors
relating to the Fund's AMPS.



                                      11
<PAGE>


                             FINANCIAL HIGHLIGHTS

     The following Financial Highlights table is intended to help you
understand the Fund'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, 1994 to October 31, 2003
has been audited by _______________ whose report for the fiscal year ended
October 31, 2003, along with the financial statements of the Fund, is included
in the Fund's 2003 Annual Report, which is incorporated by reference herein.
The information with respect to the six months ended April 30, 2004 is
unaudited and is included in the Fund's 2004 Semi-Annual Report, which is
incorporated by reference herein. You may obtain a copy of the 2003 Annual
Report and the 2004 Semi-Annual Report at no cost by calling (800) 221-7210
between 8:30 a.m. and 5:30 p.m. Eastern time on any business day.

     The following per share data and ratios have been derived from
information provided in the financial statements.


<TABLE>
<CAPTION>

                                         For the Six
                                            Months
                                            Ended
                                          April 30,                          For the Year Ended October 31,
                                                          ------------------------------------------------------------
                                             2004
                                         (unaudited)         2003           2002          2001++          2000++
                                         -------------    ------------   -----------    -----------     ------------
<S>                                           <C>             <C>           <C>            <C>              <C>
Increase (Decrease) in Net Asset Value:
Per Share Operating Performance
  Net asset value, beginning of period         $15.36          $15.15        $15.18         $14.16           $13.64
                                         -------------    ------------   -----------    -----------     ------------
  Investment income-- net                         .52++          1.08++        1.07           1.08             1.09
  Realized and unrealized gain (loss) an
    investments-- net                            (.30)            .16          (.04)          1.05              .57
  Dividends and distributions to
    Preferred Stock shareholders:
    Investment income-- net                      (.03)           (.08)         (.11)          (.23)            (.29)
    Realized gain on investments-- net             --              --            --+            --               --
    In excess of realized gain on
    investments-- net                              --              --            --             --               --
                                         -------------    ------------   -----------    -----------     ------------
  Total from investment operations                .19            1.16           .92           1.90             1.37
                                         -------------    ------------   -----------    -----------     ------------
  Less dividends and distributions to
    Common Stock shareholders:
    Investment income-- net                      (.48)           (.95)         (.95)          (.88)            (.85)
    Realized gain on investments-- net             --              --            --+            --               --
    In excess of realized gain on
      investments-- net                            --              --            --             --               --
                                         -------------    ------------   -----------    -----------     ------------
  Total dividends and distributions to
    Common Stock shareholders:                   (.48)           (.95)         (.95)          (.88)            (.85)
                                         -------------    ------------   -----------    -----------     ------------
  Capital charge resulting from the
    issuance of Common Stock                       --              --            --             --               --
                                         -------------    ------------   -----------    -----------     ------------
  Effect of Preferred Stock activity++++
    Dividends and distributions to
     Preferred Stock shareholders:
    Investment income-- net                        --              --            --             --               --
    Realized gain on investments--
     net                                           --              --            --             --               --
    In excess of realized gain on
    investments-- net                              --              --            --             --               --
  Total effect of Preferred Stock
    activity                                       --              --            --             --               --
                                         -------------    ------------   -----------    -----------     ------------
  Net asset value, end of period               $15.07          $15.36        $15.15         $15.18           $14.16
                                         =============    ============   ===========    ===========     ============
  Market price per share, end of period        $13.81          $14.51        $14.31         $15.06           $12.75
                                         =============    ============   ===========    ===========     ============
Total Investment Return*
  Based on market price per share             (1.69)%##          8.19%         1.42%         25.49%            5.94%
                                         =============    ============   ===========    ===========     ============
  Based on net asset value per share            1.35%##          8.18%         6.52%         13.89%           11.06%
                                         =============    ============   ===========    ===========     ============
Ratios Based on Average Net
  Assets of Common Stock
  Total expenses, net of reimbursement**         .93%#            .94%          .97%           .98%             .99%
                                         =============    ============   ===========    ===========     ============
  Total expenses**                               .93%#            .95%          .97%           .98%             .99%
                                         =============    ============   ===========    ===========     ============
  Total investment income-- net**               6.71%#           6.99%         7.16%          7.34%            7.92%
                                         =============    ============   ===========    ===========     ============
  Amount of dividends to Preferred
    Stock shareholders                           .42%#            .49%          .73%          1.59%            2.13%
                                         =============    ============   ===========    ===========     ============
  Investment income-- net, to Common
    Stock shareholders                          6.29%#           6.50%         6.43%          5.75%            5.79%
                                         =============    ============   ===========    ===========     ============

[TABLE CONTINUED]
<CAPTION>

                                                                 For the Year Ended October 31,
                                         -----------------------------------------------------------------------------------
                                             1999++            1998            1997              1996\           1995

                                          --------------    -----------    --------------     ------------    -----------
<S>                                             <C>            <C>               <C>              <C>            <C>
Increase (Decrease) in Net Asset Value:
Per Share Operating Performance
  Net asset value, beginning of period           $16.28         $15.84            $15.52           $15.46         $13.85
                                          --------------    -----------    --------------     ------------    -----------
  Investment income-- net                          1.10           1.15              1.15             1.18           1.20
  Realized and unrealized gain (loss) an
    investments-- net                             (2.14)           .62               .54              .15           1.66
  Dividends and distributions to
    Preferred Stock shareholders:
    Investment income-- net                        (.19)            --                --               --             --
    Realized gain on investments-- net               --+            --                --               --             --
    In excess of realized gain on
    investments-- net                              (.06)            --                --               --             --
                                          --------------    -----------    --------------     ------------    -----------
  Total from investment operations                (1.29)          1.77              1.69             1.33           2.86
                                          --------------    -----------    --------------     ------------    -----------
  Less dividends and distributions to
    Common Stock shareholders:
    Investment income-- net                        (.90)          (.88)             (.92)            (.91)          (.92)
    Realized gain on investments-- net             (.02)          (.16)             (.15)            (.09)            --***
    In excess of realized gain on
      investments-- net                            (.43)            --                --               --           (.04)
                                          --------------    -----------    --------------     ------------    -----------
  Total dividends and distributions to
    Common Stock shareholders:                    (1.35)         (1.04)            (1.07)           (1.00)          (.96)
                                          --------------    -----------    --------------     ------------    -----------
  Capital charge resulting from the
    issuance of Common Stock                         --             --              (.01)              --             --
                                          --------------    -----------    --------------     ------------    -----------
  Effect of Preferred Stock activity++++
    Dividends and distributions to
     Preferred Stock shareholders:
    Investment income-- net                          --           (.21)            (.25)             (.24)          (.28)
    Realized gain on investments--
     net                                             --           (.08)            (.04)             (.03)            --***
    In excess of realized gain on
    investments-- net                                --             --                --               --           (.01)
  Total effect of Preferred Stock
    activity                                         --           (.29)             (.29)            (.27)          (.29)
                                          --------------    -----------    --------------     ------------    -----------
  Net asset value, end of period                 $13.64         $16.28            $15.84           $15.52         $15.46
                                          ==============    ===========    ==============     ============    ===========
  Market price per share, end of period         $12.875         $16.00          $14.8125           $14.00        $13.625
                                          ==============    ===========    ==============     ============    ===========
Total Investment Return*
  Based on market price per share                (12.04%)        15.55%            13.92%           10.30%         26.09%
                                          ==============    ===========    ==============     ============    ===========
  Based on net asset value per share              (8.42%)         9.95%             9.89%            7.76%         20.09%
                                          ==============    ===========    ==============     ============    ===========
Ratios Based on Average Net
  Assets of Common Stock
  Total expenses, net of reimbursement**            .94%            --                --               --             --
                                          ==============    ===========    ==============     ============    ===========
  Total expenses**                                  .94%            --                --               --             --
                                          ==============    ===========    ==============     ============    ===========
  Total investment income-- net**                  7.26%            --                --               --             --
                                          ==============    ===========    ==============     ============    ===========
  Amount of dividends to Preferred
    Stock shareholders                             1.27%            --                --               --             --
                                          ==============    ===========    ==============     ============    ===========
  Investment income-- net, to Common
    Stock shareholders                             5.99%            --                --               --             --
                                          ==============    ===========    ==============     ============    ===========

[TABLE CONTINUED]
<CAPTION>

                                            1994

                                           --------
<S>                                        <C>
Increase (Decrease) in Net Asset Value:
Per Share Operating Performance
  Net asset value, beginning of period      $16.76
                                           --------
  Investment income-- net                     1.20
  Realized and unrealized gain (loss) an
    investments-- net                        (2.66)
  Dividends and distributions to
    Preferred Stock shareholders:
    Investment income-- net                     --
    Realized gain on investments-- net          --
    In excess of realized gain on
    investments-- net                           --
                                           --------
  Total from investment operations           (1.46)
                                           --------
  Less dividends and distributions to
    Common Stock shareholders:
    Investment income-- net                   (.98)
    Realized gain on investments-- net        (.26)
    In excess of realized gain on
      investments-- net                         --
                                           --------
  Total dividends and distributions to
    Common Stock shareholders:               (1.24)
                                           --------
  Capital charge resulting from the
    issuance of Common Stock                    --
                                           --------
  Effect of Preferred Stock activity++++
    Dividends and distributions to
     Preferred Stock shareholders:
    Investment income-- net                   (.17)
    Realized gain on investments--
     net                                      (.04)
    In excess of realized gain on
    investments-- net                           --
  Total effect of Preferred Stock
    activity                                  (.21)
                                           --------
  Net asset value, end of period            $13.85
                                           ========
  Market price per share, end of period    $11.625
                                           ========
Total Investment Return*
  Based on market price per share           (20.23%)
                                           ========
  Based on net asset value per share         (9.98%)
                                           ========
Ratios Based on Average Net
  Assets of Common Stock
  Total expenses, net of reimbursement**        --
                                           ========
  Total expenses**                              --
                                           ========
  Total investment income-- net**               --
                                           ========
  Amount of dividends to Preferred
    Stock shareholders                          --
                                           ========
  Investment income-- net, to Common
    Stock shareholders                          --
                                           ========


                                                 (continued on following page)

</TABLE>


                                      12
<PAGE>


(continued from prior page)

<TABLE>
<CAPTION>

                                         For the Six
                                            Months
                                            Ended
                                          April 30,                    For the Year Ended October 31,
                                                          ------------------------------------------------------------
                                             2004
                                         (unaudited)         2003           2002          2001++          2000++
                                         -------------    ------------   -----------    -----------     ------------
<S>                                         <C>             <C>           <C>            <C>              <C>
Ratios Based on Average Net Assets
  of Common & Preferred Stock**
  Total expenses, net of reimbursement           .64%#            .64%          .66%           .66%             .65%
                                         =============    ============   ===========    ===========     ============
  Total expenses                                 .64%#            .65%          .66%           .66%             .65%
                                         =============    ============                  ===========     ============
  Total investment income-- net                 4.62%#           4.78%         4.86%          4.95%            5.22%
                                         =============    ============                  ===========     ============
Ratios Based on Average Net
  Assets of Preferred Stock
  Dividends to Preferred Stock
    shareholders                                 .93%#           1.06%         1.53%          3.30%            4.11%
                                         =============    ============   ===========    ===========     ============
Supplemental Data
  Net assets applicable to Common
    Stock, end of period (in thousands)      $935,637        $953,662      $940,852       $940,359         $877,390
                                         =============    ============   ===========    ===========     ============
  Preferred Stock outstanding, end
    of period (in thousands)                 $440,000        $440,000      $440,000       $440,000         $440,000
                                         =============    ============   ===========    ===========     ============
  Portfolio turnover                           57.48%          114.05%        97.34%         99.00%          107.11%
                                         =============    ============   ===========    ===========     ============
Leverage:
Asset coverage per $1,000                      $3,126          $3,167        $3,138         $3,137           $2,994
                                         =============    ============   ===========    ===========     ============
Dividends Per Share on Preferred
  Stock Outstanding+++
Series A - Investment income-- net               $114            $270          $364           $833           $1,051
                                         =============    ============   ===========    ===========     ============
Series B - Investment income-- net               $116            $273          $364           $842           $1,051
                                         =============    ============   ===========    ===========     ============
Series C - Investment income-- net               $109            $268          $360           $849           $1,063
                                         =============    ============   ===========    ===========     ============
Series D - Investment income-- net               $120            $247          $348           $825             $986
                                         =============    ============   ===========    ===========     ============
Series E - Investment income-- net               $118            $240          $352           $790           $1,048
                                         =============    ============   ===========    ===========     ============
Series F - Investment income-- net               $108            $274          $359           $860           $1,010
                                         =============    ============   ===========    ===========     ============
Series G - Investment income-- net               $122            $304          $545           $799             $992
                                         =============    ============   ===========    ===========     ============

[TABLE CONTINUED]
<CAPTION>

                                                         For the Year Ended October 31,
                                        -----------------------------------------------------------------------------------
                                            1999++            1998            1997              1996\           1995

                                         --------------    -----------    --------------     ------------    -----------
<S>                                          <C>            <C>               <C>              <C>            <C>
Ratios Based on Average Net Assets
  of Common & Preferred Stock**
  Total expenses, net of reimbursement             .64%            --                --               --             --
                                         ==============    ===========    ==============     ============    ===========
  Total expenses                                   .64%           .63%              .63%             .64%           .65%
                                         ==============    ===========    ==============     ============    ===========
  Total investment income-- net                   4.95%          4.94%             5.17%            5.22%          5.55%
                                         ==============    ===========    ==============     ============    ===========
Ratios Based on Average Net
  Assets of Preferred Stock
  Dividends to Preferred Stock
    shareholders                                  2.72%            --                --               --             --
                                         ==============    ===========    ==============     ============    ===========
Supplemental Data
  Net assets applicable to Common
    Stock, end of period (in thousands)       $844,944       $998,819          $971,614         $701,473       $698,512
                                         ==============    ===========    ==============     ============    ===========
  Preferred Stock outstanding, end
    of period (in thousands)                  $440,000       $440,000          $440,000         $320,000       $320,000
                                         ==============    ===========    ==============     ============    ===========
  Portfolio turnover                            121.88%        112.78%            98.91%          100.49%         59.71%
                                         ==============    ===========    ==============     ============    ===========
Leverage:
Asset coverage per $1,000                       $2,920         $3,270            $3,208           $3,192         $3,183
                                         ==============    ===========    ==============     ============    ===========
Dividends Per Share on Preferred
  Stock Outstanding+++
Series A - Investment income-- net                $745           $676              $808             $832         $1,043
                                         ==============    ===========    ==============     ============    ===========
Series B - Investment income-- net                $675           $737              $813             $835         $1,043
                                         ==============    ===========    ==============     ============    ===========
Series C - Investment income-- net                $752           $673              $812             $841         $1,042
                                         ==============    ===========    ==============     ============    ===========
Series D - Investment income-- net                $637           $728              $789             $865           $950
                                         ==============    ===========    ==============     ============    ===========
Series E - Investment income-- net                $640           $726              $797             $842           $933
                                         ==============    ===========    ==============     ============    ===========
Series F - Investment income-- net                $664           $750              $706               --             --
                                         ==============    ===========    ==============     ============    ===========
Series G - Investment income-- net                $661           $728              $675               --             --
                                         ==============    ===========    ==============     ============    ===========

[TABLE CONTINUED]
<CAPTION>

                                           1994

                                          --------
<S>                                      <C>
Ratios Based on Average Net Assets
  of Common & Preferred Stock**
  Total expenses, net of reimbursement         --
                                          ========
  Total expenses                              .66%
                                          ========
  Total investment income-- net              5.35%
                                          ========
Ratios Based on Average Net
  Assets of Preferred Stock
  Dividends to Preferred Stock
    shareholders                               --
                                          ========
Supplemental Data
  Net assets applicable to Common
    Stock, end of period (in thousands)   $625,630
                                          ========
  Preferred Stock outstanding, end
    of period (in thousands)              $320,000
                                          ========
  Portfolio turnover                        45.71%
                                          ========
Leverage:
Asset coverage per $1,000                  $2,955
                                          ========
Dividends Per Share on Preferred
  Stock Outstanding+++
Series A - Investment income-- net         $1,184
                                          ========
Series B - Investment income-- net         $1,090
                                          ========
Series C - Investment income-- net         $1,278
                                          ========
Series D - Investment income-- net         $1,144
                                          ========
Series E - Investment income-- net         $1,282
                                          ========
Series F - Investment income-- net             --
                                          ========
Series G - Investment income-- net             --
                                          ========

</TABLE>

- -----------------
     *    Total investment returns based on market value, which can be
          significantly greater or lesser than the net asset value, may result
          in substantially different returns. Total investment returns exclude
          the effects of sales charges.
    **    Do not reflect the effect of dividends to Preferred Stock
          shareholders.
   ***    Amount is less than $.01 per share.
     +    Amount is less than $(.01) per share.
    ++    Certain prior year amounts have been reclassified to conform to
          current year presentation.
   +++    Dividends per share have been adjusted to reflect a two-for-one
          stock split that occurred on December 1, 1994.
  ++++    The Fund's Preferred Stock was issued on May 22, 1992 (Series A, B,
          C, D and E) and January 27, 1997 (Series F and G).
    ++    Based on average shares outstanding.
     #    Annualized.
    ##    Aggregate total investment return.

                                   THE FUND

     MuniYield Insured Fund, Inc. (the "Fund") is a non-diversified,
closed-end fund. The Fund was incorporated under the laws of the State of
Maryland on January 13, 1992, and has registered under the Investment Company
Act of 1940, as amended. The Fund's principal office is located at 800
Scudders Mill Road, Plainsboro, New Jersey 08536, and its telephone number is
(609) 282-2800.

     On June 7, 2004, the Fund issued 5,204,029 shares of common stock with an
aggregate net asset value of $76,288,852 in exchange for the acquisition of
substantially all of the assets and the assumption of all of the liabilities
of MuniInsured Fund, Inc. (the "MuniInsured Acquisition"), which was also
advised by Fund Asset Management, L.P. (the "Investment Adviser").

     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 the Investment Adviser 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 "Description of Capital Stock--Certain Provisions of the Charter and
By-laws."


                                      13
<PAGE>


                                USE OF PROCEEDS

     The net proceeds of this offering will be approximately $128,485,000
after payment of offering expenses (estimated to be approximately $215,000)
and the deduction of the underwriting discount.

     The net proceeds of the offering will be invested in accordance with the
Fund'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 "Investment Objective and Policies."

                                CAPITALIZATION

     The following table sets forth the unaudited capitalization of the Fund
as of April 30, 2004 and as adjusted to give effect to the issuance of shares
of common stock in the MuniInsured Acquisition and the issuance of the shares
of AMPS offered hereby.

<TABLE>
<CAPTION>

                                                                                    Actual              As Adjusted
                                                                                --------------     ----------------
<S>                                                                             <C>                <C>
Preferred stock (17,600 shares of Other AMPS issued and outstanding at $25,000
     per share liquidation preference, plus accumulated but unpaid dividends;
     22,800 shares of AMPS and Other AMPS issued and outstanding, as adjusted,
     at $25,000 per share liquidation
     preference, plus accumulated but unpaid dividends) ......................   $440,011,736         $570,011,736
                                                                               ===============     ================
Common Stock, par value $.10 per share (199,982,400 shares authorized,
     62,099,095 shares issued and outstanding; 199,977,200 shares
     authorized, 67,303,124* shares issued and outstanding, as adjusted) .....      6,209,910            6,730,313
   Paid-in capital in excess of par value.....................................    869,788,780          943,114,506
   Undistributed investment income--net.......................................     15,108,316           14,954,368
   Accumulated realized capital losses on investments--net....................     (2,453,868)          (3,564,573)
   Unrealized appreciation on investments--net................................     46,983,991           49,176,367
                                                                                --------------      ---------------
   Net assets applicable to outstanding common stock..........................   $935,637,129       $1,010,410,981
                                                                                ==============      ===============

</TABLE>

- ----------
*    On June 7, 2004, the Fund issued an additional 5,204,029 shares of common
     stock in connection with the MuniInsured Acquisition.

                             PORTFOLIO COMPOSITION

     As of April 30, 2004, approximately 92.53% of the market value of the
Fund's portfolio was invested in long term municipal obligations and
approximately 7.47% of the market value of the Fund'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's long term municipal
obligation investment portfolio as of April 30, 2004.

<TABLE>
<CAPTION>
                                                                 Number of            Value
      Moody's*             Fitch*               S&P*              Issues          (in thousands)         Percent
     ----------           --------             ------          ------------      ----------------       ---------
        <S>                  <C>                <C>                 <C>            <C>                     <C>
        Aaa                  AAA                AAA                 148            $1,154,320              87.44%
         Aa                  AA                  AA                   7                23,754               1.80%
         A                    A                  A                    8                38,990               2.95%
        Baa                  BBB                BBB                  13               103,132               7.81%
                                                               ------------      ----------------       ---------
Total................................................               176            $1,320,196               100%
                                                               ============      ================       =========

</TABLE>

- ----------
*    Ratings: Using the higher of Moody's, S&P or Fitch Ratings ("Fitch")
     ratings on the Fund's investments. See "Schedule of Investments." Moody's
     rating categories may be modified further by a 1, 2 or 3 in Aa, A, Baa,
     Ba, B and Caa ratings. S&P rating categories may be modified further by a
     plus (+) or minus (-) in AA, A, BBB, BB, B and CCC ratings. Fitch rating
     categories may be modified further by a plus (+) or minus (-) in AA, A,
     BBB, BB, B and CCC.


                                      14
<PAGE>


                       INVESTMENT OBJECTIVE AND POLICIES

     The Fund's investment objective is to provide common stockholders 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 objective by investing at least 80% of an aggregate
of the Fund's net assets (including proceeds from the issuance of any
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)
("Municipal Bonds"). The Fund's investment objective and its policy of
investing at least 80% of an aggregate of the Fund's net assets (including
proceeds from the issuance of any preferred stock) and the proceeds of any
borrowings for investment purposes, in Municipal Bonds are fundamental
policies that may not be changed without the approval of a majority of the
outstanding voting securities of the Fund (as defined in the 1940 Act). Under
normal market conditions and after the investment period following the
offering (not expected to exceed three months), the Fund will invest as a
non-fundamental policy, at least 80% of an aggregate of the Fund's net assets
(including proceeds from the issuance of any preferred stock) and the proceeds
of any borrowings for investment purposes, in Municipal Bonds that are covered
by insurance guaranteeing the timely payment of principal at maturity and
interest when due. This is a non-fundamental policy and may be changed by the
Fund's Board of Directors without stockholder approval; provided that
stockholders are given at least 60 days' prior notice of any change as
required by the 1940 Act. There can be no assurance that the Fund's investment
objective will be realized.

     The Fund may invest in certain tax exempt securities classified as
"private activity bonds" (or industrial development bonds, under pre-1986 law)
("PABs") (in general, bonds that benefit non-governmental entities) that may
subject certain investors in the Fund to an alternative minimum tax. See
"Taxes." The percentage of the Fund's total assets invested in PABs will vary
from time to time. The Fund also will not invest more than 25% of its total
assets (taken at market value at the time of each investment) in Municipal
Bonds whose issuers are located in the same state.

     Under normal market conditions, the Fund expects to invest primarily in a
portfolio of long term Municipal Bonds that are commonly referred to as
"investment grade" securities, which are obligations rated at the time of
purchase within the four highest quality ratings as determined by either
Moody's Investors Service, Inc. ("Moody's") (currently Aaa, Aa, A and Baa),
Standard & Poor's ("S&P") (currently AAA, AA, A and BBB) or Fitch Ratings
("Fitch") (currently AAA, AA, A and BBB). In the case of short term notes, the
investment grade rating categories are SP-1+ through SP-2 for S&P, MIG-1
through MIG-3 for Moody's and F-1+ through F-3 for Fitch. In the case of tax
exempt commercial paper, the investment grade rating categories are A-1+
through A-3 for S&P, Prime-1 through Prime-3 for Moody's and F-1+ through F-3
for Fitch. Obligations ranked in the lowest investment grade rating category
(BBB, SP-2 and A-3 for S&P; Baa, MIG-3 and Prime-3 for Moody's and BBB and F-3
for Fitch), while considered "investment grade," may have certain speculative
characteristics. There may be sub-categories or 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 Municipal Bond insurance as well as
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 which provided such Municipal Bond insurance or credit
enhancement. Consequently, if Municipal Bonds are covered by insurance
policies issued by insurers whose claims-paying ability is rated AAA by S&P or
Fitch or Aaa by Moody's, the Investment Adviser may consider such Municipal
Bonds to be equivalent to AAA- or Aaa- rated securities, as the case may be,
even though such Municipal Bonds would generally be assigned a lower rating if
the rating were based primarily upon the credit characteristics of the issuers
without regard to the insurance feature. The insured Municipal Bonds must also
comply with the standards applied by the insurance carriers in determining
eligibility for Municipal Bond insurance. See Appendix A--"Ratings of
Municipal Bonds" and Appendix B--"Municipal Bond Insurance" 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.

     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


                                      15
<PAGE>


rating that would have precluded the Fund'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.

     The average maturity of the Fund's portfolio securities will vary based
upon the Investment Adviser's assessment of economic and market conditions.
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 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.

     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 "Temporary Investments"). 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 ("VRDOs") and VRDOs in the form of
participation interests ("Participating VRDOs") in variable rate tax exempt
obligations held by a financial institution. See "Other Investment Policies --
Temporary Investments." The Fund's hedging strategies, which are described in
more detail under "Hedging Transactions -- Financial Futures Transactions and
Options," are not fundamental policies and may be modified by the Board of
Directors of the Fund without the approval of the Fund'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.

     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 ("Non-Municipal
Tax Exempt Securities"). 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'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 ("IRS") 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.

     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.

      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.

Municipal Bond Insurance

     Under normal circumstances, the Fund will invest at least 80% its assets
in Municipal Bonds either (i) insured under an insurance policy obtained by
the issuer thereof or any other party, or (ii) insured under an insurance
policy purchased by the Fund. The Fund will seek to limit its investments to
Municipal Bonds insured under insurance policies issued by insurance carriers
that have total admitted assets (unaudited) of at least $75,000,000 and
capital and surplus (unaudited) of at least $50,000,000 and insurance
claims-paying ability ratings of AAA from S&P or Fitch, or Aaa from Moody's.
There can be no assurance that insurance from insurance carriers meeting these


                                      16
<PAGE>


criteria will be available. See Appendix B to the statement of additional
information for a brief description of insurance claims-paying ability ratings
of S&P, Moody's and Fitch. Currently, it is anticipated that a majority of the
insured Municipal Bonds in the Fund's portfolio will be insured by the
following insurance companies which satisfy the foregoing criteria: Ambac
Assurance Corporation, Financial Guaranty Insurance Company, Financial
Security Assurance and MBIA Insurance Corporation. The Fund also may purchase
Municipal Bonds covered by insurance issued by any other insurance company
that satisfies the foregoing criteria. A majority of insured Municipal Bonds
held by the Fund will be insured under policies obtained by parties other than
the Fund.

     The Fund may purchase, but has no obligation to purchase, separate
insurance policies (the "Policies") from insurance companies meeting the
criteria set forth above that guarantee payment of principal and interest when
due on specified eligible Municipal Bonds that it purchases. A Municipal Bond
will be eligible for coverage if it meets certain requirements of the
insurance company set forth in a Policy. In the event interest or principal of
an insured Municipal Bond is not paid when due, the insurer will be obligated
under its Policy to make such payment not later than 30 days after it has been
notified by, and provided with documentation from, the Fund that such
nonpayment has occurred.

     The Policies will be effective only as to insured Municipal Bonds
beneficially owned by a Fund. In the event of a sale of any Municipal Bonds
held by a Fund, the issuer of the relevant Policy will be liable only for
those payments of interest and principal that are then due and owing. The
Policies will not guarantee the market value of an insured Municipal Bond or
the value of the shares of a Fund.

     The insurer will not have the right to withdraw coverage on securities
insured by its Policies and held by a Fund so long as such securities remain
in the Fund's portfolio. In addition, the insurer may not cancel its Policies
for any reason except failure to pay premiums when due. The Board of Directors
of the Fund reserves the right to terminate any of the Policies if it
determines that the benefits to the Fund of having its portfolio insured under
such Policy are not justified by the expense involved.

     The premiums for the Policies are paid by the Fund and the yield on its
portfolio is reduced thereby. The Investment Adviser estimates that the cost
of the annual premiums for the Policies of the Fund currently range from
approximately .05 of 1% to .40 of 1% of the principal amount of the Municipal
Bonds covered by such Policies. The estimate is based on the expected
composition of the Fund's portfolio of Municipal Bonds. Additional information
regarding the Policies is set forth in Exhibit B to the statement of
additional information. In instances in which a Fund purchases Municipal Bonds
insured under policies obtained by parties other than the Fund, the Fund does
not pay the premiums for such policies; rather, the cost of such policies may
be reflected in the purchase price of the Municipal Bonds.

     It is the intention of the Investment Adviser to retain any insured
securities that are in default or in significant risk of default and to place
a value on the insurance, which ordinarily will be the difference between the
market value of the defaulted security and the market value of similar
securities that are not in default. In certain circumstances, however, the
Investment Adviser may determine that an alternate value for the insurance,
such as the difference between the market value of the defaulted security and
its par value, is more appropriate. The Investment Adviser's ability to manage
the portfolio of the Fund may be limited to the extent it holds defaulted
securities for which market quotations are not generally available, which may
limit its ability in certain circumstances to purchase other Municipal Bonds.
See "Net Asset Value" in the statement of additional information for a more
complete description of the Fund's method of valuing securities for which
market quotations are not generally available.

     No assurance can be given that insurance with the terms and issued by
insurance carriers meeting the criteria described above will continue to be
available to the Fund. In the event the Board of Directors of the Fund
determines that such insurance is unavailable or that the cost of such
insurance outweighs the benefits to the Fund, the Fund may modify the criteria
for insurance carriers or the terms of the insurance, or may discontinue its
policy of maintaining insurance for all or any of the Municipal Bonds held in
the Fund's portfolio. Although the Investment Adviser periodically reviews the
financial condition of each insurer, there can be no assurance that the
insurers will be able to honor their obligations under all circumstances.

     Municipal Bond insurance reduces financial or credit risk (i.e., the
possibility that the owners of the insured Municipal Bonds will not receive
timely scheduled payments of principal or interest). However, the insured


                                      17
<PAGE>


Municipal Bonds are subject to market risk (i.e., fluctuations in market value
as a result of changes in prevailing interest rates and other market
conditions). See Appendix B--"Municipal Bond Insurance" to the statement of
additional information.

Risk Factors and Special Considerations Relating to Municipal Bonds

     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 "-- Description of Municipal
Bonds" and "-- Hedging Transactions -- Financial Futures Transactions and
Options."

     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.

Description of Municipal Bonds

     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 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.

     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 PABs, 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
"general obligation" and "revenue" bonds, which latter category includes PABs.

     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's common stock. See "Taxes."

     General Obligation Bonds. General obligation bonds are secured by the
issuer'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's creditworthiness will depend on many factors, including potential
erosion of its tax base due to population declines, natural disasters,
declines in the state'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's or
entity'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's maintenance of its tax base.


                                      18
<PAGE>


     Revenue Bonds. 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.

     PABs. 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's dependence on revenues for
the operation of the particular facility being financed.

     Moral Obligation Bonds. The Fund also may invest in "moral obligation"
bonds, which are normally issued by special purpose public authorities. If an
issuer of moral obligation bonds is unable to meet its obligations, the
repayment of such bonds becomes a moral commitment but not a legal obligation
of the state or municipality in question.

     Municipal Lease Obligations. Also included within the general category of
Municipal Bonds are certificates of participation ("COPs") 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 "lease obligations") relating to such
equipment, land or facilities. Although lease obligations do not constitute
general obligations of the issuer for which the issuer's unlimited taxing
power is pledged, a lease obligation is frequently backed by the issuer's
covenant to budget for, appropriate and make the payments due under the lease
obligation. However, certain lease obligations contain "non-appropriation"
clauses which provide that the issuer has no obligation to make lease or
installment purchase payments in future years unless money is appropriated for
such purpose on a yearly basis. Although "non-appropriation" lease obligations
are secured by the 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.

     Indexed and Inverse Floating Rate Securities. 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'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 "inverse floating obligations" or "residual interest
bonds" 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.


                                      19
<PAGE>


     When Issued Securities, Delayed Delivery Securities and Forward
Commitments. 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'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.

     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'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.

     Call Rights. The Fund may purchase a Municipal Bond issuer's right to
call all or a portion of such Municipal Bond for mandatory tender for purchase
(a "Call Right"). A holder of a Call Right may exercise such right to require
a mandatory tender for the purchase of related 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.

     Yields. 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 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.

Hedging Transactions

     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's use of
hedging strategies is intended to reduce the volatility of the net asset value
of the Fund's shares of common stock, the net asset value of the Fund's shares
of common stock will fluctuate. No assurance can be given that the Fund'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's and S&P, the Fund's use of
options and certain financial futures and options thereon will be subject to
the limitations described under "Rating Agency Guidelines."

     Financial Futures Transactions and Options. The Fund is authorized to
purchase and sell certain exchange traded financial futures contracts
("financial futures contracts") 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's return.
However, any transactions involving financial futures or options (including
puts and calls associated therewith) will be in accordance with the Fund'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


                                      20
<PAGE>


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.

     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 "Taxes."

     Futures Contracts. 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.e., by entering into an offsetting transaction.
Futures contracts have been designed by boards of trade which have been
designated "contracts markets" by the Commodity Futures Trading Commission
("CFTC").

     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 "initial
margin" and represents a "good faith" deposit assuring the performance of both
the purchaser and seller under the futures contract. Subsequent payments to
and from the broker, called "variation margin," 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 "marking to the market." 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.

     The Fund deals in financial futures contracts based on a long term
municipal bond index developed by the Chicago Board of Trade ("CBT") and The
Bond Buyer (the "Municipal Bond Index"). 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's or
S&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.

     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.

     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 ("GNMA") 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.

     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.

     Futures Strategies. The Fund may sell a financial futures contract (i.e.,
assume a short position) in anticipation of a decline in the value of its
investments in Municipal Bonds resulting from an increase in interest


                                      21
<PAGE>


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'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'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'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.

     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.

     Call Options on Futures Contracts. 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.

     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's portfolio holdings.

     Put Options on Futures Contracts. 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's portfolio against the risk of rising interest
rates.

     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.

     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.

     Under regulations of the CFTC, the futures trading activity described
herein will not result in the Fund being deemed a "commodity pool" and the
Fund need not be operated by a person registered with the CFTC as a "commodity
pool operator."

     When the Fund purchases a futures contract, or writes a put option or
purchases a call option thereon, an amount of cash, cash equivalents (e.g.,
high grade commercial paper and daily tender adjustable notes) or liquid


                                      22
<PAGE>


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.

     Risk Factors in Futures Transactions and Options. 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 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.

     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'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'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.

     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'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
"daily price fluctuation limits" 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.

     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's total return for such period
may be less than if it had not engaged in the hedging transaction.

     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


                                      23
<PAGE>


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'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.

     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.

                           OTHER INVESTMENT POLICIES

The Fund has adopted certain other policies as set forth below.

Temporary Investments

     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'
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 ("FDIC"), 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.

Interest Rate Swap Transactions

     In order to seek to hedge the value of the Fund against interest rate
fluctuations, to hedge against increases in the Fund's costs associated with
the dividend payments on any preferred stock, including the AMPS, or to seek
to increase the Fund's return, the Fund may enter into interest rate swap
transactions such as Municipal Market Data AAA Cash Curve swaps ("MMD Swaps")
or Bond Market Association Municipal Swap Index swaps ("BMA Swaps"). 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's yield, for example, during periods of steep
interest rate yield curves (i.e., wide differences between short term and long
term interest rates).

     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 (e.g., 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'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 (e.g., coupon, maturity, call
feature).


                                      24
<PAGE>


     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.

     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's performance.

     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'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.

Credit Default Swap Agreements

     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 "buyer" in a credit default
contract may be obligated to pay the protection "seller" 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 "par value" (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 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.

     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'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'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 Commission). Such segregation will ensure


                                      25
<PAGE>


that the Fund has assets available to satisfy its obligations with respect to
the transaction and will avoid any potential leveraging of the Fund's
portfolio. Such segregation will not limit the Fund's exposure to loss.

VRDOs and Participating VRDOs

     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.

     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' 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.

     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.

     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's), SP-1 through
SP-2 for notes and A-1 through A-3 for VRDOs and commercial paper (as
determined by S&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.

Repurchase Agreements

     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 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


                                      26
<PAGE>


collateralized loan, the underlying securities are not owned by the Fund but
only constitute collateral for the seller'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.

     In general, for Federal income tax purposes, repurchase agreements are
treated as collateralized loans secured by the securities "sold." Therefore,
amounts earned under such agreements will not be considered tax exempt
interest. The treatment of purchase and sales contracts is less certain.

Borrowings

     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 1/3% 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, or for temporary,
extraordinary or emergency purposes, including the payment of dividends and
the settlement of securities transactions which otherwise, might require
untimely dispositions of portfolio securities. Borrowings by the Fund
(commonly known, as with the issuance of preferred stock, as "leveraging")
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.

                              DESCRIPTION OF AMPS

     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.

General

     The AMPS of each series 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 for each such series. After the
Initial Dividend Period, each Subsequent Dividend Period for each series of
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 "The Auction" herein
and in the statement of additional information.

     The Fund has outstanding 17,600 shares of seven 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 $440,000,000 (the "Other AMPS"). The Other AMPS are
as follows: 2,200 shares of Auction Market Preferred Stock, Series A; 2,200
shares of Auction Market Preferred Stock, Series B; 2,200 shares of Auction
Market Preferred Stock, Series C; 2,200 shares of Auction Market Preferred
Stock, Series D; 4,000 shares of Auction Market Preferred Stock, Series E;
2,400 shares of Auction Market Preferred Stock, Series F; and 2,400 shares of
Auction Market Preferred Stock, Series G. The Series H AMPS and the Series I
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.


                                      27
<PAGE>


     The following is a brief description of the terms of the shares of AMPS.
This description does not purport to be complete and is subject to and
qualified in its entirety by reference to the Fund's Charter and Articles
Supplementary of the AMPS, including the provisions thereof establishing the
AMPS. The Fund's Charter and the form of Articles Supplementary of the AMPS
establishing the terms of the AMPS have been filed as exhibits to the
Registration Statement of which this prospectus is a part.

Dividends

     General. 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 "Determination of Dividend
Rate," 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'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'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
"Taxes."

     Dividends on the shares of AMPS will accumulate from the date on which
the Fund originally issues the shares of AMPS (the "Date of Original Issue")
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 "Normal
Dividend Payment Date"), 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 Friday in the case of the Series H AMPS and each succeeding Monday
in the case of the Series I 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 "Dividend Periods."
Each dividend payment date determined as provided above is hereinafter
referred to as a "Dividend Payment Date."

     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.

     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 "The
Auction--Securities Depository." The Securities Depository will credit the
accounts of the Agent Members of the Existing Holders in accordance with the
Securities Depository'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.


                                      28
<PAGE>


     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 "--Additional Dividends" in this prospectus
and under "Description of AMPS--Dividends--Non-Payment Period; Late Charge" in
the statement of additional information. No interest will be payable in
respect of any dividend payment or payments on the shares of AMPS which may be
in arrears.

     The amount of cash dividends per share of any series of 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.

     Notification of Dividend Period. 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 "Request for
Special Dividend Period") to the Auction Agent and to each Broker-Dealer, may
request that the next succeeding Dividend Period for a series of 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 a series
of 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 series of 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 "Response") 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 series of AMPS, the Fund, by no later than the second
Business Day prior to such Auction Date may give a notice (a "Notice of
Special Dividend Period") to the Auction Agent, the Securities Depository and
each Broker-Dealer. See "Description of AMPS--Dividends--Notification of
Dividend Period" in the statement of additional information for a detailed
description of these procedures.

     Determination of Dividend Rate. The dividend rate on shares of the AMPS
during the period from and including the Date of Original Issue for each
series of AMPS to but excluding the Initial Dividend Payment Date (the
"Initial Dividend Period") with respect to each series of AMPS will be the
rate per annum set forth above under "Prospectus Summary--Dividends and
Dividend Periods." Commencing on the Initial Dividend Payment Date for each
series of AMPS, the Applicable Rate on each series of 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 "Dividend Period." Cash dividends shall be calculated as set forth above
under "Dividends--General."

     Restrictions on Dividends and Other Payments. 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,


                                      29
<PAGE>


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, 2004, and adjusted to
give effect to the MuniInsured Acquisition, asset coverage with respect to
shares of AMPS would be approximately 277% representing approximately 36% of
the Fund's capital and 56% of the Fund'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's ability to maintain such qualification. See "Taxes" in the
statement of additional information.

     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 "Voting Rights" 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.

     Additional Dividends. 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 "The Auction--Auction Procedures--Auction Date; Advance Notice of
Allocation of Taxable Income; Inclusion of Taxable Income in Dividends" 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
"Retroactive Taxable Allocation"), the Fund, within 90 days (and generally
within 60 days) after the end of the Fund'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'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.

     An "Additional Dividend" 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'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 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 "Taxes" 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.

     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 "The
Auction--Auction Procedures--Auction Date; Advance Notice of Allocation of
Taxable Income; Inclusion of Taxable Income in Dividends" below.


                                      30
<PAGE>


Asset Maintenance

     The Fund will be required to satisfy two separate asset maintenance
requirements under the terms of the Articles Supplementary. These requirements
are summarized below.

     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 which 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 which are stock of a closed-end
investment company as a condition of paying dividends on its common stock)
("1940 Act AMPS Asset Coverage"). 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 "1940 Act Cure Date"), the Fund will be required
under certain circumstances to redeem certain of the shares of AMPS. See
"Redemption" below.

     Based upon the composition of the Fund's portfolio at April 30, 2004 and
adjusted to give effect to the MuniInsured Acquisition, 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:

<TABLE>
<CAPTION>

<S>                                                                        <C>                              <C>
                Value of Fund assets less
              liabilities not constituting
                    senior securities                          =            $1,580,422,717         =         277%
- --------------------------------------------------------              -----------------------
                    Senior securities                                        $570,011,736
                representing indebtedness
              plus liquidation value of the
                     shares of AMPS

</TABLE>

     AMPS Basic Maintenance Amount. 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 "Valuation Date") Moody's Eligible
Assets and S&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 "Description of AMPS--Asset
Maintenance--AMPS Basic Maintenance Amount" 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 "AMPS Basic Maintenance Cure Date"), 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 "Redemption" herein and in
the statement of additional information.

Redemption

     Optional Redemption. 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 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 series of shares or (b) a Non-Call Period
to which such share is subject. "Optional Redemption Price" means $25,000 per
share of AMPS plus an amount equal to accumulated but unpaid dividends
(whether or not earned or declared) to the date fixed for redemption 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 "Dividends--Additional Dividends." 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's leveraged


                                      31
<PAGE>


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.

     Mandatory Redemption. 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's
Eligible Assets and S&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 "Cure Date"), as the case may be. "Mandatory
Redemption Price" means $25,000 per share of AMPS plus an amount equal to
accumulated but unpaid dividends (whether or not earned or declared) to the
date fixed for redemption. 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 "Dividends--Additional Dividends."

     For a discussion of the allocation procedures to be used if fewer than
all of the outstanding AMPS of any series are to be redeemed and for a
discussion of other redemption procedures, see "Description of
AMPS--Redemption" in the statement of additional information.

Liquidation Rights

     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 each outstanding series 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.

Voting Rights

     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 Other AMPS and holders of shares of common stock as
a single class.

     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's Directors at all times and
to elect a majority of the Directors at any time that two full years'
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 other matters
as required under the Articles Supplementary, the 1940 Act and Maryland law.
In addition, each series of AMPS (and Other AMPS) may vote as a separate
series under certain circumstances. See "Description of AMPS--Voting Rights"
in the statement of additional information.


                                      32
<PAGE>


                                  THE AUCTION

General

     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.

     Holders of the shares of AMPS of each series 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 for each series of AMPS,
subject to certain exceptions set forth under "Description of
AMPS--Dividends--General") at the rate per annum equal to the Applicable Rate
for each such Dividend Period.

     The provisions of the Articles Supplementary establishing the terms of
the shares of AMPS offered hereby will provide that the Applicable Rate for
each series 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 "Auction Procedures") in which persons determine
to hold or offer to purchase or sell shares of AMPS of such series. The
Auction Procedures are attached as Appendix C to the statement of additional
information.

     Each periodic operation of such procedures with respect to the shares of
AMPS is referred to hereinafter as an "Auction." If, however, the Fund should
fail to pay or duly provide for the full amount of any dividend on shares of
AMPS of any series or the redemption price of shares of AMPS of such series
called for redemption, the Applicable Rate for shares of AMPS will be
determined as set forth under "Description of AMPS--Dividends--Non-Payment
Period; Late Charge" in the statement of additional information.

     Auction Agent Agreement. 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 "Auction Agent")
(the "Auction Agent Agreement"), 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.

     Broker-Dealer Agreements. The Auction Agent has entered into agreements
with Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and
more than fifteen other broker-dealers and may enter into similar agreements
(collectively, the "Broker-Dealer Agreements") with one or more other
broker-dealers (collectively, the "Broker-Dealers") 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 & Co., Inc.

     Securities Depository. The Depository Trust Company initially will act as
the Securities Depository for the Agent Members with respect to the shares of
AMPS of each series. One or more registered certificates for all of the shares
of each series of 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 of the series 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.


                                      33
<PAGE>


Auction Procedures

     The following is a brief discussion of the procedures to be used in
conducting Auctions. Separate auctions will be conducted for each series of
AMPS. This summary is qualified by reference to the Auction Procedures set
forth in Appendix D to the statement of additional information. The Settlement
Procedures to be used with respect to Auctions are set forth in Appendix C to
the statement of additional information.

     Auction Date; Advance Notice of Allocation of Taxable Income; Inclusion
of Taxable Income in Dividends. An Auction to determine the Applicable Rate
for the shares of each series of 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
"Auction Date"). "Business Day" means a day on which the New York Stock
Exchange (the "NYSE") 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 Series H AMPS for Dividend
Periods after the Initial Dividend Period normally will be held every Thursday
after the preceding Dividend Payment Date, and each subsequent Dividend Period
normally will begin on the following Friday (also a Dividend Payment Date).
Auctions for shares of Series I 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 any series of AMPS (both of
which must be Business Days) need not be consecutive calendar days. For
example, in most cases, if the Thursday that normally would be an Auction Date
for Series H AMPS is not a Business Day, then such Auction Date will be the
preceding Wednesday and the first day of the related Dividend Period will
continue to be the following Friday. See "Description of AMPS -- Dividends"
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.

     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
"Description of AMPS--Dividends--Additional Dividends" above.

     Orders by Beneficial Owners, Potential Beneficial Owners, Existing
Holders and Potential Holders. On or prior to each Auction Date:

          (a) each Beneficial Owner may submit to its Broker-Dealer by
     telephone a:

               (i) Hold Order -- 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;

               (ii) Bid -- 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

               (iii) Sell Order -- 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


                                      34
<PAGE>


          (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.

     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 "Order" and collectively as "Orders." 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 "Bidder" and collectively as "Bidders." 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.

     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
"Submission of Orders by Broker-Dealers to Auction Agent" below.

     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.

     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's and S&P (or
if Moody's or S&P or both shall not make such rating available, the equivalent
of either or both of such ratings by a Substitute Rating Agency or two
Substitute Rating 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:

<TABLE>
<CAPTION>

                                           Applicable         Applicable        Applicable         Applicable
            Credit Ratings                 Percentage         Percentage        Spread Over       Spread Over
            --------------
                                           of Reference       of Reference        Reference         Reference
                                           Rate--No             Rate--           Rate--No            Rate--
      Moody's                S&P          Notification       Notification      Notification       Notification
  ----------------    ----------------  ----------------   ----------------  ----------------   ----------------
<S>                   <C>                 <C>                   <C>                <C>               <C>
        Aaa                  AAA                110%               125%               1.10%               1.25%
     Aa3 to Aa1          AA- to AA+             125%               150%               1.25%               1.50%
      A3 to A1            A- to A+              150%               200%               1.50%               2.00%
    Baa3 to Baa1        BBB- to BBB+            175%               250%               1.75%               2.50%
     Below Baa3          Below BBB-             200%               300%               2.00%               3.00%

</TABLE>

There is no minimum Applicable Rate in respect of any Dividend Period.

     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&P or Moody's, or both to
provide a rating for the AMPS, subject to the Fund's ability to terminate
compliance with the rating agency guidelines as discussed under "Rating Agency
Guidelines." If either S&P or Moody's, or both, shall not make such a rating
available, and subject to the Fund's ability to terminate compliance with the
rating agency guidelines discussed under "Rating Agency Guidelines," Merrill
Lynch or its affiliates and successors, after


                                      35
<PAGE>


obtaining the Fund's approval, will select another NRSRO (a "Substitute Rating
Agency") or two other NRSROs ("Substitute Rating Agencies") to act as a
Substitute Rating Agency or Substitute Rating Agencies, as the case may be.

     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 "Determination of Sufficient
Clearing Bids, Winning Bid Rate and Applicable Rate" and "Acceptance and
Rejection of Submitted Bids and Submitted Sell Orders and Allocation of
Shares."

     Neither the Fund nor the Auction Agent will be responsible for a
Broker-Dealer's failure to comply with the foregoing.

     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'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
"Submission of Orders by Broker-Dealers to Auction Agent." 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 "Notification of
Results; Settlement" below.

     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.

     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 of such
series 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).

     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's custodian bank for
the benefit of holders of such series of AMPS to be redeemed and for payment
to the Auction Agent, as set forth under "Description of AMPS -- Redemption"
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.e., Merrill Lynch) may
submit an Order.

     Submission of Orders by Broker-Dealers to Auction Agent. Prior to 1:00
p.m., New York City time, on each Auction Date, or such other time on the
Auction Date as may be specified by the Auction Agent (the


                                      36
<PAGE>


"Submission Deadline"), 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.

     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%.

     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:

          (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;

          (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

          (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.

     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.

     Determination of Sufficient Clearing Bids, Winning Bid Rate and
Applicable Rate. 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 "Hold Order," "Bid" or "Sell Order" as
submitted or deemed submitted by a Broker-Dealer hereinafter being referred to
as a "Submitted Hold Order," a "Submitted Bid" or a "Submitted Sell Order," as
the case may be, or as a "Submitted Order") 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
"Available AMPS") 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).


                                      37
<PAGE>


     If Sufficient Clearing Bids have been made, the Auction Agent will
determine the lowest rate per annum specified in the Submitted Bids (the
"Winning Bid Rate") 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.

     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 each series of AMPS, and the Applicable Rate
for such Dividend Period will be equal to the Maximum Applicable Rate.

     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 "Acceptance and Rejection of Submitted Bids and Submitted Sell
Orders and Allocation of Shares." Thus, under some circumstances, Beneficial
Owners may not have liquidity of investment.

     Acceptance and Rejection of Submitted Bids and Submitted Sell Orders and
Allocation of Shares. Based on the determinations described under
"Determination of Sufficient Clearing Bids, Winning Bid Rate and Applicable
Rate" 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.

     If Sufficient Clearing Bids have been made:

          (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;

          (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;

          (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;

          (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

          (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.

     If Sufficient Clearing Bids have not been made (other than because all
outstanding shares of AMPS are the subject of Submitted Hold Orders):

          (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;


                                      38
<PAGE>


          (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

          (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.

     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 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.

     Notification of Results; Settlement. 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'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'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.

Broker-Dealers

     General. 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 any series of AMPS, it may have
knowledge of Orders placed through it in that Auction


                                      39
<PAGE>


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.

     Fees. 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.

     Secondary Trading Market. The Broker-Dealers intend to maintain a
secondary trading market in the AMPS outside of Auctions; however, they have
no obligation to do so 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.e., 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.

                           RATING AGENCY GUIDELINES

     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.

     The Fund currently intends that, so long as shares of AMPS are
outstanding and the AMPS are rated by Moody's and S&P, the composition of its
portfolio will reflect guidelines established by Moody's and S&P in connection
with the Fund's receipt of a rating for such shares on or prior to their Date
of Original Issue of at least Aaa from Moody's and AAA from S&P. Moody's and
S&P, which are 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's or S&P (described below).
If the Fund voluntarily terminates compliance with Moody's or S&P guidelines,
the Fund will no longer be required to maintain a Moody's Discounted Value or
a S&P Discounted Value, as applicable, at least equal to the AMPS Basic
Maintenance Amount. If the Fund voluntarily terminates compliance with Moody's
or S&P guidelines, or both, at the time of termination, it must continue to be
rated by at least one NRSRO.

     The guidelines described below have been developed by Moody's and S&P in
connection with issuances of asset-backed and similar securities, including
debt obligations and variable rate preferred 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's and S&P to issue the
above-described ratings for shares of AMPS, which ratings generally are relied
upon by institutional investors in purchasing such securities. The guidelines
provide a set of tests for portfolio composition and asset coverage that
supplement (and in some cases are more restrictive than) the applicable
requirements under the 1940 Act. See "Description of AMPS -- Asset
Maintenance" herein and in the statement of additional information.

     The Fund intends to maintain a Discounted Value for its portfolio at
least equal to the AMPS Basic Maintenance Amount. Moody's and S&P each has
established separate guidelines for determining Discounted


                                      40
<PAGE>


Value. To the extent any particular portfolio holding does not satisfy the
applicable rating agency's guidelines, all or a portion of such holding's
value will not be included in the calculation of Discounted Value (as defined
by such rating agency). The Moody's and S&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's portfolio.

     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 "Description of AMPS -- Asset Maintenance"
and "Description of AMPS -- Redemption" herein and in the statement of
additional information.

     The Fund may, but is not required to, adopt any modifications to these
guidelines that hereafter may be established by Moody's or S&P. Failure to
adopt any such modifications, however, may result in a change in the ratings
described above or a withdrawal of 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's and S&P that any such change would not impair the
ratings then assigned by Moody's and S&P to the AMPS.

     As described by Moody's and S&P, a preferred stock rating is an
assessment of the capacity and willingness of an issuer to pay preferred stock
obligations. The ratings 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's and S&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.

     For additional information concerning the Moody's and S&P ratings
guidelines, see "Rating Agency Guidelines" in the statement of additional
information.

                INVESTMENT ADVISORY AND MANAGEMENT ARRANGEMENTS

     The Investment Adviser, which is owned and controlled by Merrill Lynch &
Co. Inc. ("ML & 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
100 registered investment companies and offers investment advisory services to
individuals and institutional accounts. As of May 2004, the Investment Adviser
and its affiliates, including Merrill Lynch Investment Managers, L.P.
("MLIM"), had a total of approximately $491 billion in investment company and
other portfolio assets under management, including approximately $253 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 & Co. and Princeton Services. The
principal business address of the Investment Adviser is 800 Scudders Mill
Road, Plainsboro, New Jersey 08536.

     The Investment Advisory Agreement provides that, subject to the direction
of the Fund's Board of Directors, the Investment Adviser is responsible for
the actual management of the Fund's portfolio. The responsibility for making
decisions to buy, sell or hold a particular security rests with the Investment
Adviser, subject to review by the Board of Directors.

     The portfolio manager primarily responsible for the Fund's day-to-day
management is William R. Bock. William R. Bock has been a Vice President of
MLIM since 1989 and has 11 years of experience investing in Municipal Bonds.
The Fund's portfolio manager will consider analyses from various sources, make
the necessary investment decisions, and place orders for transactions
accordingly.


                                      41
<PAGE>


     For its services, the Fund pays the Investment Adviser a monthly fee at
the annual rate of 0.50% of the Fund's average weekly net assets ("average
weekly net assets" means the average weekly value of the total assets of the
Fund, including the 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's
average daily net assets.

     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
("State Street") 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.

                                     TAXES


     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 each series of AMPS and Other AMPS
in accordance with the current position of the IRS described under the heading
"Taxes" 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 "The Auction -- Auction
Procedures -- Auction Date; Advance Notice of Allocation of Taxable Income;
Inclusion of Taxable Income in Dividends." The amount of taxable income
allocable to each series of 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's fiscal year, but it is not generally expected to be significant.

     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 "Description of AMPS - Dividends - Additional
Dividends." 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.

     Generally within 60 days after the end of the Fund'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.


                                      42
<PAGE>


         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 relevant income tax
purposes (i.e., "tax exempt"). 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 a Fund'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.

     Because the Fund may from time to time invest a substantial portion of
its portfolio in Municipal Bonds bearing income which could increase an AMPS
holder'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.

     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 "Description of AMPS -- Dividends -- Restrictions on Dividends and Other
Payments" 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 "Description of
AMPS -- Redemption" herein and in the statement of additional information.
There can be no assurance, however, that any such action would achieve such
objectives.

     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.

     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.

                         DESCRIPTION OF CAPITAL STOCK

     The Fund is authorized to issue 200,000,000 shares of capital stock, par
value $.10 per share, all of which shares initially were classified as common
stock. 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 17,600 shares of
unissued common stock as Other AMPS and has reclassified 5,200 shares of
unissued common stock as AMPS, which are being offered hereby. See
"Description of AMPS" herein and in the statement of additional information.

     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
June 7, 2004.



                                      43
<PAGE>


<TABLE>
<CAPTION>

                                                                                                          Amount
                                                                                                        Outstanding
                                                                                                      (Exclusive Of
                                                                                     Amount Held       Amount Held
                                                                                     By Fund For       By Fund For
                                                                    Amount             Its Own           Its Own
Title of Class                                                    Authorized          Account)           Account)
- ----------------------------------------------------------      --------------     --------------    ---------------
<S>                                                              <C>                     <C>           <C>
Common Stock............................................          199,982,400           - 0 -           67,303,124
Auction Market Preferred Stock
   Series A AMPS........................................             2,200              - 0 -             2,200
   Series B AMPS........................................             2,200              - 0 -             2,200
   Series C AMPS........................................             2,200              - 0 -             2,200
   Series D AMPS........................................             2,200              - 0 -             2,200
   Series E AMPS........................................             4,000              - 0 -             4,000
   Series F AMPS........................................             2,400              - 0 -             2,400
   Series G AMPS........................................             2,400              - 0 -             2,400

</TABLE>

     The Fund will send unaudited reports at least semi-annually and audited
annual financial statements to all of its stockholders.

Common Stock

     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.

     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 "Description of AMPS --
Voting Rights" herein and in the statement of additional information.

     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.

     So long as any shares of the Fund'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
"Description of AMPS -- Dividends -- Restrictions on Dividends and Other
Payments" herein and in the statement of additional information."

Preferred Stock

     Under the Other AMPS Articles Supplementary, the Fund is authorized to
issue an aggregate of 17,600 shares of Other AMPS. Under the Articles
Supplementary for the AMPS, the Fund is authorized to issue an aggregate of
5,200 shares of AMPS. The terms of the shares of Other AMPS are substantially
the same as the terms of the shares of AMPS. See "Description of AMPS." 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


                                      44
<PAGE>


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.

Certain Provisions of the Charter and By-laws

     The Fund'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 2/3% 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 AMPS and any other
preferred stock.

     In addition, the Charter requires the favorable vote of the holders of at
least 66 2/3% of the Fund's shares to approve, adopt or authorize the
following:

     o    a merger or consolidation or statutory share exchange of the Fund
          with any other corporation;

     o    a sale of all or substantially all of the Fund's assets (other than
          in the regular course of the Fund's investment activities); or

     o    a liquidation or dissolution of the Fund;

unless such action has been approved, adopted or authorized by the affirmative
vote of at least two-thirds of the total number of Directors fixed in
accordance with the By-laws, in which case the affirmative vote of a majority
of the Fund's shares of capital stock is required. Following any issuance of
preferred stock by the Fund, it is anticipated that the approval, adoption or
authorization of the foregoing also would require the favorable vote of a
majority of the Fund's shares of preferred stock, including the AMPS, then
entitled to be voted, voting as a separate class.

     In addition, conversion of the Fund to an open-end investment company
would require an amendment to the Fund'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 2/3% of the Fund's outstanding shares of capital stock
(including the AMPS, 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 two-thirds of
the total number of Directors fixed in accordance with the By-laws), and,
assuming preferred stock is issued, 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 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 Other AMPS) and would require changes in certain of the Fund's
investment policies and restrictions, such as those relating to the issuance
of senior securities, the borrowing of money and the purchase of illiquid
securities.

     The Charter and By-laws provide that the Board of Directors has the
power, to the exclusion of stockholders, to make, alter or repeal any of the
By-laws (except for any By-law specified not to be amended 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 2/3% of shares of capital stock of the Fund, can be
amended or repealed except by the vote of such required number of shares.


                                      45
<PAGE>


     The Board of Directors has determined that the 66 2/3% 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 Commission
for the full text of these provisions.

                                   CUSTODIAN

     The Fund's securities and cash are held under a custodian agreement with
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110.



                                      46
<PAGE>


                                 UNDERWRITING

     Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Underwriter")
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.

     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.

     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'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.

Commissions and Discounts

     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 , 2004.

     The expenses of the offering, excluding underwriting discount, are
estimated at $215,000 and are payable by the Fund.

Other Relationships

     Merrill Lynch acts in Auctions as a Broker-Dealer as set forth under "The
Auction -- General -- Broker-Dealer Agreements" and will be entitled to fees
for services as a Broker-Dealer as set forth under "The Auction --
Broker-Dealers." Merrill Lynch also may provide information to be used in
ascertaining the Reference Rate.

     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
"Portfolio Transactions" in the statement of additional information. Merrill
Lynch is an affiliate of the Investment Adviser. See "Investment Restrictions"
and "Portfolio Transactions" in the statement of additional information.

     The address of the Underwriter is 4 World Financial Center, New York, New
York 10080.

            TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND REGISTRAR

         The transfer agent, dividend disbursing agent and registrar for the
Fund's shares of AMPS and Other AMPS is The Bank of New York, 100 Church
Street, New York, New York 10286. The transfer agent, dividend disbursing
agent and registrar for the Fund's shares of common stock is Equiserve Trust
Company, N.A., 150 Royall Street, Canton, Massachusetts 02021.
                         ACCOUNTING SERVICES PROVIDER

     State Street Bank and Trust Company, 500 College Road East, Princeton,
New Jersey 08540, provides certain accounting services for the Fund.


                                      47
<PAGE>


                                LEGAL OPINIONS

     Certain legal matters in connection with the AMPS offered hereby are
passed on for the Fund and the Underwriter by Sidley Austin Brown & Wood LLP,
New York, New York 10020.

           INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND EXPERTS

     ________________ is the Fund's independent registered public accounting
firm. The audited financial statements of the Fund and certain of the
information appearing under the caption "Financial Highlights" included in this
prospectus have been audited by _______________ 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.
________________ has an office at ______________________________.

                            ADDITIONAL INFORMATION

     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 Commission.
Any such reports and other information, including the Fund's Code of Ethics,
can be inspected and copied at the public reference facilities of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549. Information on the operation of such public reference facilities
may be obtained by calling the Commission at 1-202-942-8090. Copies of such
materials can be obtained from the public reference section of the Commission
by writing at 450 Fifth Street, N.W., 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.

     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'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.



                                      48
<PAGE>


<TABLE>
<CAPTION>

                              TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION

                                                                                                               Page
                                                                                                               ----

<S>                                                                                                           <C>
Investment Objective and Policies.................................................................................3
Investment Restrictions...........................................................................................3
Description of AMPS...............................................................................................5
The Auction......................................................................................................12
Rating Agency Guidelines.........................................................................................13
Directors and Officers...........................................................................................21
Investment Advisory and Management Arrangements..................................................................27
Portfolio Transactions...........................................................................................32
Taxes............................................................................................................34
Net Asset Value..................................................................................................39
Financial Statements.............................................................................................40
APPENDIX A  Ratings of Municipal Bonds..........................................................................A-1
APPENDIX B  Municipal Bond Insurance............................................................................B-1
APPENDIX C  Settlement Procedures...............................................................................C-1
APPENDIX D  Auction Procedures..................................................................................D-1

</TABLE>



                                                        49
<PAGE>


                                   GLOSSARY

     "Additional Dividend" has the meaning set forth on page [26] of this
prospectus.

     "Agent Member" 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.

     "AMPS" means, as the case may be, the Auction Market Preferred Stock,
Series H; or the Auction Market Preferred Stock, Series I; each 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.

     "AMPS Basic Maintenance Amount" has the meaning set forth on page [27] of
this prospectus.

     "AMPS Basic Maintenance Cure Date" has the meaning set forth on page [27]
of this prospectus.

     "AMPS Basic Maintenance Report" has the meaning set forth on page [10] of
the statement of additional information.

     "Anticipation Notes" shall mean the following Municipal Bonds: revenue
anticipation notes, tax anticipation notes, tax and revenue anticipation
notes, grant anticipation notes and bond anticipation notes.

     "Applicable Percentage" has the meaning set forth on page [31] of this
prospectus.

     "Applicable Rate" means the rate per annum at which cash dividends are
payable on shares of AMPS for any Dividend Period.

     "Applicable Spread" has the meaning set forth on page [31] of this
prospectus.

     "Articles Supplementary" means the Articles Supplementary of the Fund
specifying the powers, preferences and rights of the shares of the AMPS.

     "Auction" means a periodic operation of the Auction Procedures.

     "Auction Agent" 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.

     "Auction Agent Agreement" 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.

     "Auction Date" has the meaning set forth on page [30] of this prospectus.

     "Auction Procedures" means the procedures for conducting Auctions set
forth in Appendix D to the statement of additional information.

     "Available AMPS" has the meaning set forth on page [33] of this
prospectus.

     "Beneficial Owner" means a customer of a Broker-Dealer who is listed on
the records of that Broker- Dealer (or if applicable, the Auction Agent) as a
holder of shares of AMPS or a Broker-Dealer that holds AMPS for its own
account.

     "Bid" has the meaning set forth on page [33] of this prospectus.


                                      50
<PAGE>


     "Bidder" has the meaning set forth on page [31] of this prospectus.

     "Board of Directors" or "Board" means the Board of Directors of the Fund.

     "Broker-Dealer" 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.

     "Broker-Dealer Agreement" means an agreement entered into between the
Auction Agent and a Broker- Dealer, including Merrill Lynch, Pierce, Fenner &
Smith Incorporated, pursuant to which such Broker-Dealer agrees to follow the
Auction Procedures.

     "Business Day" 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.

     "Cede" means Cede & Co., the nominee of DTC, and in whose name the shares
of AMPS initially will be registered.

     "Charter" means the Articles of Incorporation, as amended and
supplemented (including the Articles Supplementary and the Other AMPS Articles
Supplementary), of the Fund.

     "Code" means the Internal Revenue Code of 1986, as amended.

     "Common stock" means the common stock, par value $.10 per share, of the
Fund.

     "Date of Original Issue" means, with respect to each share of AMPS, the
date on which such share first is issued by the Fund.

     "Deposit Securities" 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's or A (having a remaining maturity of 12 months or less), A-1+ or SP-1+
by S&P or A (having a remaining maturity of 12 months or less), F-1+ by Fitch.

     "Discount Factor" means a Moody's Discount Factor or an S&P Discount
Factor, as the case may be.

     "Discounted Value" means (i) with respect to an S&P Eligible Asset, the
quotient of the fair market value thereof divided by the applicable S&P
Discount Factor and (ii) with respect to a Moody's Eligible Asset, the lower
of par and the quotient of the fair market value thereof divided by the
applicable Moody's Discount Factor.

     "Dividend Payment Date" has the meaning set forth on page [25] of this
prospectus.

     "Dividend Period" has the meaning set forth on page [25] of this
prospectus.

     "DTC" means The Depository Trust Company.

     "Eligible Assets" means Moody's Eligible Assets or S&P Eligible Assets,
as the case may be.

     "Existing Holder" 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.

     "Fitch" means Fitch Ratings or its successors.

     "Forward Commitment" has the meaning set forth on page [20] of the
statement of additional information.

     "Fund" means MuniYield Insured Fund, Inc., a Maryland corporation that is
the issuer of the AMPS.


                                      51
<PAGE>


     "High Yield Municipal Bonds" means (a) with respect to Moody's (1)
Municipal Bonds rated Ba1 to B3 by Moody's, (2) Municipal Bonds not rated by
Moody's, but rated BB+ to B- by S&P or Fitch, and (3) Municipal Bonds not
explicitly rated by Moody's, S&P or Fitch, but rated at least the equivalent
of B3 internally by the Investment Adviser, provided that Moody's reviews and
achieves sufficient comfort with the Investment Adviser's internal credit
rating processes, and (b) with respect to S&P (1) Municipal Bonds not rated by
S&P but rated equivalent to BBB or lower by another NRSRO and (2) Municipal
Bonds rated BB+ or lower by S&P.

     "Hold Order" has the meaning set forth on page [30] of this prospectus.

     "Initial Dividend Payment Date" means the first Dividend Payment Date for
each series of AMPS.

     "Initial Dividend Period" means the period from and including the Date of
Original Issue to but excluding the Initial Dividend Payment Date for each
series of the AMPS.

     "Initial Margin" means the amount of cash or securities deposited with a
broker as a margin payment at the time of purchase or sale of a financial
futures contract.

     "Inverse Floaters" means trust certificates or other instruments
evidencing interests in one or more Municipal Bonds that qualify as (i) S&P
Eligible Assets the interest rates on which are adjusted at short term
intervals on a basis that is inverse to the simultaneous readjustment of the
interest rates on corresponding floating rate trust certificates or other
instruments issued by the same issuer, provided that the ratio of the
aggregate dollar amount of floating rate instruments to inverse floating rate
instruments issued by the same issuer does not 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'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'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.e., the ratio of underlying capital appreciation
bonds or other instruments to residual long-term derivative instruments) of
not more than 2:1.

     "Investment Adviser" means Fund Asset Management, L.P.

     "IRS" means the United States Internal Revenue Service.

     "LIBOR Dealer" means Merrill Lynch, Pierce, Fenner & 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.

     "LIBOR Rate," 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's Telerate Service ("Telerate Page 3750") (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 "LIBOR Determination Date"), 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'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'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


                                      52
<PAGE>


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) more than 21 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.

     "London Business Day" means any day on which commercial banks are
generally open for business in London.

     "Long Term Dividend Period" means a Special Dividend Period consisting of
a specified period of one whole year or more but not greater than five years.

     "Mandatory Redemption Price" has the meaning set forth on page [28] of
this prospectus.

     "Marginal Tax Rate" means the maximum marginal regular Federal individual
income tax rate applicable to ordinary income or the maximum marginal regular
Federal corporate income tax rate, whichever is greater.

     "Maximum Applicable Rate" has the meaning set forth on page [31] of this
prospectus.

     "Moody's" means Moody's Investors Service, Inc. or its successors.

     "Moody's Discount Factor" has the meaning set forth on pages [16 to 17]
of the statement of additional information.

     "Moody's Eligible Assets" has the meaning set forth on pages [17 to 18]
of the statement of additional information.

     "Moody's Hedging Transactions" has the meaning set forth on page [18] of
the statement of additional information.

     "Moody's Volatility Factor" means 272% as long as there has been no
increase enacted to the Marginal Tax Rate. If such an increase is enacted but
not yet implemented, the Moody's Volatility Factor shall be as follows:

<TABLE>
<CAPTION>

                % Change in                                                                     Moody's Volatility
                Marginal Tax Rate                                                                     Factor
                --------------------------------------------------------------------------      ------------------
<S>                                                                                                   <C>
                <=5%.....................................................................             292%
                >5%  but < = 10%.........................................................             313%
                >10% but < = 15%........................................................              338%
                >15% but < = 20%........................................................              364%
                >20% but < = 25%........................................................              396%
                >25% but < = 30%........................................................              432%
                >30% but < = 35%........................................................              472%
                >35% but < = 40%........................................................              520%

</TABLE>

     Notwithstanding the foregoing, the Moody's Volatility Factor may mean
such other potential dividend rate increase factor as Moody's advises the Fund
in writing is applicable.


                                      53
<PAGE>


     "Municipal Bonds" has the meaning set forth on page [12] of this
prospectus.

     "Municipal Index" has the meaning set forth on page [15] of the statement
of additional information.

     "1940 Act" means the Investment Company Act of 1940, as amended from time
to time.

     "1940 Act AMPS Asset Coverage" has the meaning set forth on page [27] of
this prospectus.

     "1940 Act Cure Date" has the meaning set forth on page [27] of this
prospectus.

     "Non-Call Period" has the meaning set forth under "Specific Redemption
Provisions" below.

     "Non-Payment Period" has the meaning set forth on page [8] of the
statement of additional information.

     "Non-Payment Period Rate" has the meaning set forth on page [8] of the
statement of additional information.

     "Normal Dividend Payment Date" has the meaning set forth on page [24] of
this prospectus.

     "Notice of Revocation" has the meaning set forth on page [7] of the
statement of additional information.

     "Notice of Special Dividend Period" has the meaning set forth on page
[26] of this prospectus.

     "NRSRO" 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.

     "Optional Redemption Price" has the meaning set forth on page [28] of
this prospectus.

     "Order" has the meaning set forth on page [31] of this prospectus.

     "Other AMPS" means the Auction Market Preferred Stock, Series A; the
Auction Market Preferred Stock, Series B; the Auction Market Preferred Stock,
Series C; the Auction Market Preferred Stock, Series D; the Auction Market
Preferred Stock, Series E; the Auction Market Preferred Stock, Series F; and
the Auction Market Preferred Stock, Series G, 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.

     "Other AMPS Articles Supplementary" means the Articles Supplementary, as
amended and supplemented, of the Fund specifying the powers, preferences and
rights of the shares of the Other AMPS.

     "Policy" means an insurance policy purchased by the Fund which guarantees
the payment of principal and interest on specified Municipal Bonds during the
period in which such Municipal Bonds are owned by the Fund; provided, however,
that, as long as the AMPS are rated by Moody's and S&P, the Fund will not
obtain any Policy unless Moody's and S&P advise the Fund in writing that the
purchase of such Policy will not adversely affect their then-current rating on
the AMPS.

     "Potential Beneficial Owner" 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.

     "Potential Holder" 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).

     "Preferred stock" means preferred stock of the Fund and includes the
AMPS.


                                      54
<PAGE>


     "Premium Call Period" has the meaning set forth under "Specific
Redemption Provisions" below.

     "Receivables for Municipal Bonds Sold" for Moody's has the meaning set
forth under the definition of Moody's Discount Factor, and for S&P has the
meaning set forth under the definition of S&P Discount Factor.

     "Reference Banks" means four major banks in the London interbank market
selected by Merrill Lynch, Pierce, Fenner & Smith Incorporated or its
affiliates or successors or such other party as the Fund may from time to time
appoint.

     "Reference Rate" 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.

     "Request for Special Dividend Period" has the meaning set forth on page
[25] of this prospectus.

     "Response" has the meaning set forth on page [26] of this prospectus.

     "Retroactive Taxable Allocation" has the meaning set forth on page [26]
of this prospectus.

     "Rule 2a-7 Money Market Funds" means investment companies registered
under the 1940 Act that comply with the requirements of Rule 2a-7 thereunder.

     "Series H AMPS" means the Auction Market Preferred Stock, Series H, 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.

     "Series I AMPS" means the Auction Market Preferred Stock, Series I, 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.

     "S&P" means Standard & Poor's or its successors.

     "S&P Discount Factor" has the meaning set forth on pages [14 to 15]of the
statement of additional information.

     "S&P Eligible Assets" has the meaning set forth on pages [15 to 16] of
the statement of additional information.

     "S&P Hedging Transactions" has the meaning set forth on page [15] of the
statement of additional information.

     "S&P Volatility Factor" means 277% or such other potential dividend rate
increase factor as S&P advises the Fund in writing is applicable.

     "Securities Depository" 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.

     "Sell Order" has the meaning specified in Subsection 10(b)(i) of the
Auction Procedures.

     "7-Day Dividend Period" means a Dividend Period consisting of seven days.

     "Short Term Dividend Period" means a Special Dividend Period consisting
of a specified number of days (other than seven) evenly divisible by seven,
and not fewer than seven days nor more than 364 days.


                                      55
<PAGE>


     "Special Dividend Period" has the meaning set forth on page [24] of this
prospectus.

     "Specific Redemption Provisions" means, with respect to a Special
Dividend Period, either, or any combination of, (i) a period (a "Non-Call
Period") determined by the Board of 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 "Premium Call Period"), 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'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.

     "Submission Deadline" has the meaning set forth on page [32[ of this
prospectus.

     "Submitted Bid" has the meaning set forth on page [33] of this
prospectus.

     "Submitted Hold Order" has the meaning set forth on page [33] of this
prospectus.

     "Submitted Order" has the meaning set forth on page [33] of this
prospectus.

     "Submitted Sell Order" has the meaning set forth on page [33] of this
prospectus.

     "Subsequent Dividend Period" means each Dividend Period after the Initial
Dividend Period.

     "Substitute Rating Agency" and "Substitute Rating Agencies" shall mean an
NRSRO or two NRSROs, respectively, selected by Merrill Lynch, Pierce, Fenner &
Smith Incorporated, or its respective affiliates and successors, after
obtaining the Fund'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.

     "Sufficient Clearing Bids" has the meaning set forth on page [33] of this
prospectus.

     "Taxable Equivalent of the Short Term Municipal Bond Rate" on any date
means 90% of the quotient of (A) the per annum rate expressed on an interest
equivalent basis equal to the Kenny S&P 30-day High Grade Index (the "Kenny
Index") or any successor index, made available for the Business Day
immediately preceding such date but in any event not later than 8:30 A.M., New
York City time, on such date by Kenny Information Systems Inc. or any
successor thereto, based upon 30-day yield evaluations at par of bonds the
interest on which is excludable for regular Federal income tax purposes under
the Code of "high grade" component issuers selected by Kenny Information
Systems Inc. or any such successor from time to time in its discretion, which
component issuers shall include, without limitation, issuers of general
obligation bonds but shall exclude any bonds the interest on which constitutes
an item of tax preference under Section 57(a)(5) of the Code, or successor
provisions, for purposes of the "alternative minimum tax," divided by (B) 1.00
minus the Marginal Tax Rate (expressed as a decimal); provided, however, that
if the Kenny Index is not made so available by 8:30 A.M., New York City time,
on such date by Kenny Information Systems Inc. or any successor, the Taxable
Equivalent of the Short Term Municipal Bond Rate shall mean the quotient of
(A) the per annum rate expressed on an interest equivalent basis equal to the
most recent Kenny Index so made available for any preceding Business Day,
divided by (B) 1.00 minus the Marginal Tax Rate (expressed as a decimal). The
Fund may not utilize a successor index to the Kenny Index unless Moody's and
S&P provide the Fund with written confirmation that the use of such successor
index will not adversely affect the then-current respective Moody's and S&P
ratings of the AMPS.

     "Treasury Bonds" means U.S. Treasury Bonds or Notes.

     "Treasury Index Rate" 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


                                      56
<PAGE>


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 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.

     "U.S. Treasury Securities" means direct obligations of the United States
Treasury that are entitled to the full faith and credit of the United States
government.

     "Valuation Date" has the meaning set forth on page [27] of this
prospectus.

     "Variation Margin" 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.

     "Winning Bid Rate" has the meaning set forth on page [33] of this
prospectus.



                                      57
<PAGE>


==============================================================================



                                 $130,000,000


                         MuniYield Insured Fund, Inc.


                    Auction Market Preferred Stock ("AMPS")
                            2,600 Shares, Series H
                            2,600 Shares, Series I
                   Liquidation Preference $25,000 Per Share



                          --------------------------
                                  PROSPECTUS
                          --------------------------







                              Merrill Lynch & Co.







                                      , 2004                  CODE #  -0804

==============================================================================


<PAGE>


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 a prospectus.

                             Subject to Completion
      Preliminary Statement of Additional Information Dated June 18, 2004



STATEMENT OF ADDITIONAL INFORMATION
- -----------------------------------


                                 $130,000,000

                         MuniYield Insured Fund, Inc.

                    Auction Market Preferred Stock ("AMPS")

                            2,600 Shares, Series H
                            2,600 Shares, Series I

                   Liquidation Preference $25,000 Per Share

                                  ----------

     MuniYield Insured Fund, Inc. (the "Fund") is a non-diversified,
closed-end fund. The investment objective of the Fund is to provide common
stockholders 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 objective by investing, as a
fundamental policy, at least 80% of an aggregate of the Fund's net assets
(including proceeds from the issuance of any preferred stock), and the
proceeds 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 purposes
(except that the interest may be includable in taxable income for purposes of
the Federal alternative minimum tax). Under normal market conditions, the Fund
invests primarily in long term municipal obligations that are rated investment
grade or, if unrated, are considered by the Fund's investment adviser to be of
comparable quality. Under normal market conditions and after the investment
period following this offering (not expected to exceed three months), the Fund
will invest, as a non-fundamental policy, at least 80% of an aggregate of the
Fund's net assets (including proceeds from the issuance of any preferred
stock), and the proceeds of any borrowings for investment purposes, in
municipal obligations that are covered by insurance guaranteeing the timely
payment of principal at maturity and interest when due. The Fund may invest in
certain tax exempt securities classified as "private activity bonds" that may
subject certain investors in the Fund to an alternative minimum tax. There can
be no assurance that the Fund's investment objective will be realized.

     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.

     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 "Commission") 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.

                                  ----------

                              Merrill Lynch & Co.
                                  ----------

   The date of this statement of additional information is           , 2004.


<PAGE>


<TABLE>
<CAPTION>

                              TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION

                                                                                                               Page
                                                                                                               ----

<S>                                                                                                            <C>
Investment Objective and Policies.................................................................................3
Investment Restrictions...........................................................................................3
Description of AMPS...............................................................................................5
The Auction......................................................................................................12
Rating Agency Guidelines.........................................................................................13
Directors and Officers...........................................................................................21
Investment Advisory and Management Arrangements..................................................................27
Portfolio Transactions...........................................................................................32
Taxes  ..........................................................................................................34
Net Asset Value..................................................................................................39
Financial Statements.............................................................................................40
APPENDIX A  Ratings of Municipal Bonds..........................................................................A-1
APPENDIX B  Municipal Bond Insurance............................................................................B-1
APPENDIX C  Settlement Procedures...............................................................................C-1
APPENDIX D  Auction Procedures..................................................................................D-1

</TABLE>



                                                         2
<PAGE>


                       INVESTMENT OBJECTIVE AND POLICIES

     The Fund's investment objective is to provide common stockholders 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 objective by investing at least 80% of an aggregate
of the Fund's net assets (including proceeds from the issuance of any
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)
("Municipal Bonds"). The Fund's investment objective and its policy of
investing at least 80% of an aggregate of the Fund's net assets (including
proceeds from the issuance of any preferred stock) and the proceeds of any
borrowings for investment purposes, in Municipal Bonds are fundamental
policies that may not be changed without the approval of a majority of the
outstanding voting securities of the Fund (as defined in the 1940 Act). Under
normal market conditions and after the investment period following the
offering (expected not to exceed three months), the Fund will invest at least
80% of an aggregate of the Fund's net assets (including proceeds from the
issuance of any preferred stock) and the proceeds of any borrowings for
investment purposes, in Municipal Bonds that are covered by insurance
guaranteeing the timely payment of principal at maturity and interest when
due. This is a non-fundamental policy and may be changed by the Fund's Board
of Directors provided that stockholders are provided with at least 60 days'
prior notice of any change as required by the 1940 Act. There can be no
assurance that the Fund's investment objective will be realized.

     Reference is made to "Investment Objective and Policies" and "Other
Investment Policies" in the prospectus for information regarding other types
of securities that the Fund may invest in to achieve its objective.

                            INVESTMENT RESTRICTIONS

     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'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 the
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:

          1. Make investments for the purpose of exercising control or
     management.

          2. Purchase securities of other investment companies, except in
     connection with a merger, consolidation, acquisition or reorganization,
     or by purchase in the open market of securities of closed-end investment
     companies and only if immediately thereafter no more than 10% of the
     Fund's total assets would be invested in such securities.

          3. Purchase or sell real estate, real estate limited partnerships,
     commodities or commodity contracts; provided that the Fund may invest in
     securities secured by real estate or interests therein or issued by
     companies that invest in real estate or interests therein and the Fund
     may purchase and sell financial futures contracts and options thereon.

          4. Issue senior securities other than preferred stock or borrow in
     excess of 5% of its total assets taken at market value; provided,
     however, that the Fund is authorized to borrow moneys in excess of 5% of
     the value of its total assets for the purpose of repurchasing shares of
     common stock or redeeming shares of preferred stock.

          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.


                                       3
<PAGE>


          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 limitation.

          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 or initial or variation margin in connection with financial
     futures contracts and options thereon is not considered the purchase of a
     security on margin).

          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.

          9. Invest more than 25% of its total assets (taken at market value
     at the time of each investment) in securities of issuers in a single
     industry; provided that, for purposes of this restriction, states
     municipalities and their political subdivisions are not considered to be
     part of any industry.

     For purposes of fundamental investment restriction (9), the exception for
states, municipalities and their political subdivisions applies only to tax
exempt securities issued by such entities.

     Additional investment restrictions adopted by the Fund, which may be
changed by the Board of Directors without stockholder approval, provide that
the Fund may not:

          a. 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.

          b. Change its policy of investing, under normal market conditions,
     at least 80% of the Fund's net assets (including assets acquired from the
     sale of preferred stock), plus the amount of any borrowings for
     investment purposes, in Municipal Bonds that are covered by insurance
     guaranteeing the timely payment of principal at maturity and interest
     when due, unless the Fund provides stockholders with at least 60 days'
     prior written notice of such change.

     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.

     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'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 "Code"). See
"Taxes." 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's total assets will
be invested in the securities of a single issuer and (ii) with respect to 50%
of the market value of its total assets, not more than 5% of the market value
of its total assets will be invested in the securities 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 "diversified" under the
1940 Act must satisfy the foregoing 5% and 10% requirements with respect to
75% of its total assets.


                                       4
<PAGE>


     The Investment Adviser of the Fund and Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch") are owned and controlled by Merrill Lynch
& Co., Inc. ("ML & Co."). Because of the affiliation of Merrill Lynch with 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 "Portfolio Transactions."

                              DESCRIPTION OF AMPS

     Certain of the capitalized terms used herein not otherwise defined in
this statement of additional information have the meaning provided in the
Glossary at the back of the prospectus.

     The AMPS of each series 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 for each such series. After the
Initial Dividend Period, each Subsequent Dividend Period for each series of
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 D "Auction
Procedures."

     Except as otherwise required by law or unless there is no Securities
Depository, all outstanding shares of each series of 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 D "Auction Procedures." 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'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's
Agent Member, to evidence its beneficial ownership of shares of AMPS.

     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 "Description of AMPS -- Liquidation Rights" 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. Each series of 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 for such series (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 "Description of AMPS
- -- Redemption" in the prospectus.

     The Fund also has outstanding seven 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 H AMPS and the Series I AMPS
offered hereby rank on a parity with the Other AMPS with respect to dividends
and liquidation preference.

     In addition to serving as the Auction Agent in connection with the
Auction Procedures described in the prospectus, The Bank of New York also
serves as 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's
instructions, and will not be responsible for any evaluation or verification
of any matters certified to it.


                                       5
<PAGE>


     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.

     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's Charter and Articles Supplementary, including the provisions thereof
establishing the AMPS. The Fund'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.

Dividends

     General. The holders of shares of each series 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. 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'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 "Taxes."

     Notification of Dividend Period. In determining whether the Fund should
issue a Notice of Special Dividend for a series of 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 which 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 series of 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 series of AMPS, the Fund, by no later than
the second Business Day prior to such Auction Date, may give a notice (a
"Notice of Special Dividend Period") to the Auction Agent, the Securities
Depository and each Broker-Dealer, which notice will specify (i) the duration
of the Special Dividend Period, (ii) the Optional Redemption Price as
specified in the related Response and (iii) the Specific Redemption
Provisions, if any, as specified in the related Response. The Fund also shall
provide a copy of such Notice of Special Dividend Period to Moody's and S&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 "Notice of Revocation") to
the Auction Agent, each Broker-Dealer, and the Securities Depository on or
prior to the Business Day prior to the relevant Auction Date if (x) either the
1940 Act AMPS Asset Coverage is not satisfied or the Fund shall fail to
maintain S&P Eligible Assets and Moody's Eligible Assets each with an
aggregate Discounted Value at least equal to the AMPS Basic Maintenance
Amount, in each case on 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'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's and S&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 for any series of AMPS, the next
succeeding Dividend Period will be a 7-Day Dividend Period. In addition, in
the event Sufficient Clearing Bids are not made in any Auction or an Auction
is not held for any reason, the next succeeding Dividend Period will


                                       6
<PAGE>


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.

     Non-Payment Period; Late Charge. 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,
New York City 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 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 any series of AMPS will not end unless the Fund shall have given at least
five days' but no more than 30 days' written notice of such deposit or
availability to the Auction Agent, the Securities Depository and all holders
of shares of AMPS of such series. 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 "Non-Payment Period."

     The Applicable Rate for each Dividend Period for shares of AMPS of any
series, 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 in
the case of each series of AMPS. 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.

     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's and S&P (and any
Substitute Rating Agency or Substitute Rating Agencies, as the case may be, in
lieu of Moody's or S&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.

     Restrictions on Dividends and Other Payments. 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


                                       7
<PAGE>


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&P Eligible Assets and Moody's Eligible Assets each with an aggregate
Discounted Value equal to or greater than the AMPS Basic Maintenance Amount,
and the 1940 Act AMPS Asset Coverage (see "Asset Maintenance" and "Redemption"
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 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.

Asset Maintenance

     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 which 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 which are stock of a closed-end
investment company as a condition of paying dividends on its common stock)
("1940 Act AMPS Asset Coverage"). 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 "1940 Act Cure Date"), the Fund will be required
under certain circumstances to redeem certain of the shares of AMPS. See
"Description of AMPS -- Redemption" in the prospectus and "-- Redemption"
below.

     AMPS Basic Maintenance Amount. 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 "Valuation Date") to maintain S&P Eligible Assets
and Moody'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 "AMPS Basic
Maintenance Cure Date"), the Fund will be required under certain circumstances
to redeem certain of the shares of AMPS. See "Description of AMPS --
Redemption" in the prospectus and "-- Redemption" 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.

     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
each share of AMPS and Other AMPS outstanding to (but not including) the end
of the current Dividend Period for each series of AMPS that follows such
Valuation Date in the event the then current Dividend Period for each series
of AMPS 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's Volatility Factor and the S&P
Volatility Factor, determined from time to time by Moody's and S&P,
respectively (except that if such Valuation Date occurs during a Non-Payment
Period, the cash dividend for purposes of calculation would accumulate at the
then current Non-Payment Period Rate); (D) the amount of anticipated expenses
of the Fund for the 90 days subsequent to such Valuation Date (including any
premiums payable with respect to a Policy); (E) the amount of current
outstanding balances of any indebtedness which is


                                       8
<PAGE>


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'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's 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's assets, or (B) the face value of any of the Fund'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). For Moody's and S&P,
the Fund shall include as a liability an amount calculated semi-annually equal
to 150% of the estimated cost of obtaining other insurance guaranteeing the
timely payment of interest on a Moody's Eligible Asset or an S&P Eligible
Asset and principal thereof to maturity with respect to Moody's Eligible
Assets and S&P Eligible Assets that (i) are covered by a Policy which provides
the Fund with the option to obtain such other insurance and (ii) are
discounted by a Moody's Discount Factor or an S&P Discount Factor determined
by reference to the insurance claims-paying ability rating of the issuer of
such Policy.

     The Discount Factors and guidelines for determining the market value of
the Fund'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'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&P, Moody's and any Substitute Rating Agency that any such changes would not
impair the ratings then assigned to the shares of AMPS by S&P or Moody's or
any Substitute Rating Agency.

     On or before the seventh Business Day after a Valuation Date on which the
Fund fails to maintain S&P Eligible Assets and Moody's Eligible Assets each
with an aggregate Discounted Value equal to or greater than the AMPS Basic
Maintenance Amount, the Fund is required to deliver to Moody's and S&P, as the
case may be, 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's common stock as of the date of such
failure (an "AMPS Basic Maintenance Report"). 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'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 Fund's fiscal year end, the Fund will
deliver a letter prepared by the Fund'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's independent accountants
shows that an error was made in the AMPS Basic Maintenance Report, the
calculation or determination made by the Fund's independent accountants will
be conclusive and binding on the Fund. The Fund will also provide Moody's and
S&P with an AMPS Basic Maintenance Report as of each Valuation Date on or
before the seventh Business Day after such date when the Discounted Value of
Moody's Eligible Assets or S&P Eligible Assets, as the case may be, fails to
exceed the AMPS Basic Maintenance Amount by 25% 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 S&P
and Moody's an AMPS Basic Maintenance Report as of the close of business on
such date that common stock is repurchased.

Redemption

     Mandatory Redemption. 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&P
Eligible Assets and Moody's Eligible Assets each with an


                                       9
<PAGE>


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&P Eligible Assets and Moody's Eligible Assets each with an aggregate
Discounted Value equal to or greater than the AMPS Basic Maintenance Amount or
satisfaction of the 1940 Act AMPS Asset Coverage, as the case may be, pro rata
among shares of 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 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 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 which are subject to mandatory redemption or the Fund otherwise is
unable to effect such redemption on or prior to 30 days after such Cure Date,
the Fund will redeem those shares of AMPS which it was unable to redeem on the
earliest practicable date on which it is able to effect such redemption.

     Notice of Redemption. If shares of AMPS of any series are to be redeemed,
a notice of redemption will be mailed to each record holder of such series 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 of such series to be redeemed, (iv) the
place or places where shares of AMPS of such series are to be surrendered for
payment of the redemption price, (v) a statement that dividends on the shares
to be redeemed will cease to accumulate on such redemption date and (vi) the
provision of the Articles Supplementary pursuant to which such shares are
being redeemed. The notice also will be published in 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.

     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 such
series, 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.

     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's custodian bank for the benefit of the holders of such series of 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 notice thereof, 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


                                      10
<PAGE>


demand, to the Fund, after which the holders of the shares of AMPS of such
series so called for redemption may look only to the Fund for payment thereof.

     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'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 aside for payment and
(ii) if redemption thereof would result in the Fund's failure to maintain
Moody's Eligible Assets or S&P Eligible Assets with an aggregate Discounted
Value equal to or greater than the AMPS Basic Maintenance Amount.

Voting Rights

     In connection with the election of the Fund's directors, holders of
shares of AMPS, Other AMPS and any other preferred stock, voting as a separate
class, shall be entitled at all times to elect two of the Fund'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' 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 which
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.

     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
AMPS 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 a series of AMPS differently
than those of a holder of shares of any other series of AMPS without the
affirmative vote of at least a majority of votes entitled to be cast by
holders of the shares of AMPS of each series adversely affected and
outstanding at such time (each such adversely affected series 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's or S&P guidelines as discussed under "Rating Agency Guidelines" in the
prospectus. Unless a higher percentage is provided for under


                                      11
<PAGE>


"Description of Capital Stock -- Certain Provisions of the Charter and
By-laws" in the prospectus, the affirmative vote of the holders of a majority
of the outstanding shares of preferred stock (as defined under "Investment
Restrictions"), 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's investment objective
or changes in the investment policies and restrictions described as
fundamental policies in the prospectus and under "Investment Restrictions." 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 "Investment Restrictions"), 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) pursuant to the Charter shall not in and of itself be
considered to adversely affect the contract rights of the holders of the AMPS.

     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.

     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.

                                  THE AUCTION

Auction Agent Agreement

     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.

     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.

Broker-Dealer Agreements

     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' notice to the other party, provided that the


                                      12
<PAGE>


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.

     For the six months ended April 30, 2004 and the fiscal years ended
October 31, 2003, 2002 and 2001, Merrill Lynch, an affiliate of the Investment
Adviser, earned $232,155, $441,515, $414,712 and $727,356, respectively,
pursuant to its Broker-Dealer Agreement with the Fund.

Auction Procedures

     The Auction Procedures are set forth in Appendix C. The Settlement
Procedures to be used with respect to Auctions are set forth in Appendix D.

                           RATING AGENCY GUIDELINES

S&P AAA Rating Guidelines

     The Discounted Value of the Fund's S&P Eligible Assets is calculated on
each Valuation Date. See "Description of AMPS -- Asset Maintenance -- AMPS
Basic Maintenance Amount." S&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&P's current guidelines. For
purposes of calculating the Discounted Value of the Fund's portfolio under
current S&P guidelines, the fair market value of Municipal Bonds eligible for
consideration under such guidelines must be discounted by the applicable S&P
Discount Factor set forth in the table below. The Discounted Value of a
Municipal Bond eligible for consideration under S&P guidelines is the fair
market value thereof divided by the S&P Discount Factor. The S&P Discount
Factor used to discount a particular Municipal Bond will be determined by
reference (a) to the rating by S&P, Moody's or Fitch on such Municipal Bond or
(b) in the event the Municipal Bond is insured under a Policy and the terms of
the Policy permit the Fund, at its option, to obtain other permanent insurance
guaranteeing the timely payment of interest on such Municipal Bond and
principal thereof at maturity, the S&P, Moody's or Fitch insurance
claims-paying ability rating of the issuer of the Policy or (c) in the event
the Municipal Bond is insured under an insurance policy that guarantees the
timely payment of interest on such Municipal Bond and principal thereof at
maturity, the S&P, Moody's or Fitch insurance claims-paying ability rating of
the issuer of the insurance policy; provided, however, for purposes of
determining the S&P Discount Factor applicable to Municipal Bonds or issuers
not rated by S&P, the Municipal Bonds or issuer will carry an S&P rating one
full rating category lower than the S&P rating category that is the equivalent
of the rating category in which such Municipal Bond or issuer is placed by a
NRSRO, in accordance with the table set forth below:

<TABLE>
<CAPTION>

                                              S&P's Rating Category(1)
- -------------------------------------------------------------------------------------------------------------------
     AAA*             AA*            A*           BBB*           BB*            B*            CCC*           NR**
   ---------       ---------     ---------      ---------     ---------      ---------      ---------     ----------
    <S>             <C>           <C>            <C>           <C>            <C>            <C>           <C>
    145.43%         148.43%       151.43%        154.43%       175.11%        195.11%        215.11%       220.00%

</TABLE>
- ----------
*    S&P rating.
**   Not Rated.
(1)  For Municipal Bonds of any one issuer rated at least BBB by S&P, or if
     not rated by S&P, rated at least A by another NRSRO, 2% is added to the
     applicable S&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&P Eligible Assets, but in no event greater than 10%; or
     for any percentage over 5% add 10 percentage points to the applicable S&P
     Discount Factor.

     Notwithstanding the foregoing, (i) the S&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&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&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&P but are rated VMIG-1, P-1 or MIG-1
by Moody's or F-1+ by Fitch; provided, however, such short-term Municipal
Bonds rated by Moody's or Fitch but not rated by S&P having a demand feature
exercisable in 30 days or less must be backed by a letter of credit, liquidity
facility or guarantee from a bank or other financial institution having a
short-term rating of at least A-1+ from S&P and further provided that such
short-term Municipal Bonds rated by Moody's or Fitch but not rated by S&P may
comprise no more than 50% of short-term Municipal Bonds that qualify as S&P
Eligible


                                      13
<PAGE>


Assets, (ii) the S&P Discount Factor for Rule 2a-7 Money Market Funds will be
110%, (iii) the S&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&P Discount Factor applicable to the Municipal Bonds sold and (iv) no S&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. "Receivables for Municipal Bonds Sold," for purposes of calculating S&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&P, rated
VMIG-1 by Moody's or F-1+ by Fitch, which do not mature or have a demand
feature exercisable in 30 days and which do not have a long-term rating, shall
be considered to be short-term Municipal Bonds.

     The S&P guidelines require certain minimum issue size and impose other
requirements for purposes of determining S&P Eligible Assets. In order to be
considered S&P Eligible Assets, Municipal Bonds must:

          (i) 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);

          (ii) except for zero coupon Municipal Bonds rated AAA by S&P that
     mature in 30 years or less, be interest bearing and pay interest at least
     semi-annually;

          (iii) be payable with respect to principal and interest in U.S.
     dollars;

          (iv) not be subject to a covered call or covered put option written
     by the Fund;

          (v) except for Inverse Floaters, not be part of a private placement;
     and

          (vi) 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&P.

     Notwithstanding the foregoing:

          (i) Municipal Bonds issued by issuers in any one state or territory
     will be considered S&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&P Eligible Assets;

          (ii) Municipal Bonds which are escrow bonds or defeased bonds may
     compose up to 100% of the aggregate fair market value of S&P Eligible
     Assets if such Bonds initially are assigned a rating by S&P in accordance
     with S&P's legal defeasance criteria or rerated by S&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&P AAA rating, provided that such
     equivalent rated Bonds are limited to 50% of the aggregate fair market
     value of S&P Eligible Assets and are deemed to have an AA S&P rating for
     purposes of determining the S&P Discount Factor applicable to such
     Municipal Bonds. The limitations on Municipal Bonds in clause (i) above
     and clauses (iii) and (iv) below are not applicable to escrow bonds;

          (iii) Municipal Bonds which are not rated by any NRSRO may comprise
     no more than 10% of S&P Eligible Assets;

          (iv) Municipal Bonds rated at least BBB by S&P, or if not rated by
     S&P, rated at least A by another NRSRO, of any one issuer or guarantor
     (excluding bond insurers) will be considered S&P Eligible Assets only to
     the extent the fair market value of such Municipal Bonds does not exceed
     10% of the


                                      14
<PAGE>


     aggregate fair market value of the S&P Eligible Assets, High Yield
     Municipal Bonds of any issuer may comprise no more than 5% of S&P
     Eligible Assets, and Municipal Bonds of any one issuer which are not
     rated by any NRSRO will be considered S&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&P Eligible Assets. In the
     aggregate, the maximum issuer exposure is limited to 10% of the S&P
     Eligible Assets; and

          (v) Municipal Bonds not rated by S&P but rated by another NRSRO will
     be included in S&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&P Eligible Assets.

     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&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&P that engaging in
such transactions will not impair the ratings then assigned to the shares of
AMPS by S&P, except that the Fund may purchase or sell financial futures
contracts based on the Bond Buyer Municipal Bond Index (the "Municipal Index")
or Treasury Bonds and write, purchase or sell put and call options on such
contracts (collectively "S&P Hedging Transactions"), subject to the following
limitations:

          (i) the Fund will not engage in any S&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's taking an
     opposite position thereto ("Closing Transactions")), 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'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 The Wall Street
     Journal;

          (ii) the Fund will not engage in any S&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'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 The Wall Street Journal;

          (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&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;

          (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

          (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'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'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.


                                      15
<PAGE>


     For purposes of determining whether the Fund has S&P Eligible Assets with
a Discounted Value that equals or exceeds the AMPS Basic Maintenance Amount,
the Discounted Value of cash or securities held for the payment of Initial
Margin or Variation Margin shall be zero and the aggregate Discounted Value of
S&P Eligible Assets shall be reduced by an amount equal to (i) 30% of the
aggregate settlement value, as marked to market, of any outstanding 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.

Moody's Aaa Rating Guidelines

     The Discounted Value of the Fund's Moody's Eligible Assets is calculated
on each Valuation Date. See "Description of AMPS -- Asset Maintenance -- AMPS
Basic Maintenance Amount". Moody'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's guidelines. For
purposes of calculating the Discounted Value of the Fund's portfolio under
current Moody's guidelines, the fair market value of Municipal Bonds eligible
for consideration under such guidelines must be discounted by the applicable
Moody's Discount Factor set forth in the table below. The Discounted Value of
a Municipal Bond eligible for consideration under Moody's guidelines is the
lower of par and the quotient of the fair market value thereof divided by the
Moody's Discount Factor. The Moody's Discount Factor used to discount a
particular Municipal Bond will be determined by reference to (a) the rating by
Moody's, S&P or Fitch on such Municipal Bond or (b) in the event the Moody's
Eligible Asset is insured under a Policy and the terms of the Policy permit
the Fund, at its option, to obtain other insurance guaranteeing the timely
payment of interest on such Moody's Eligible Asset and principal thereof at
maturity, the Moody's, S&P or Fitch insurance claims-paying ability rating of
the issuer of the Policy or (c) in the event the Moody's Eligible Asset is
insured under an insurance policy that guarantees the timely payment of
interest on such Moody's Eligible Asset and principal thereof at maturity, the
Moody's, S&P or Fitch insurance claims-paying ability rating of the issuer of
the insurance policy, in accordance with the tables set forth below:

<TABLE>
<CAPTION>

                                             Moody's Rating Category(1)
- -------------------------------------------------------------------------------------------------------------------
           Aaa                      Aa                    A                   Baa               Other (2)
- ------------------------    -----------------   ---------------------  ----------------     -----------------------
          <S>                      <C>                  <C>                  <C>                  <C>
          151%                     159%                 168%                 202%                  220%

</TABLE>

- ----------
(1) Ratings assigned by S&P or Fitch are generally accepted by Moody's at face
value. However, adjustments to face value may be made to particular categories
of credits for which the S&P and/or Fitch rating does not seem to approximate
a Moody's rating equivalent. Split rated securities assigned by S&P and Fitch
will be accepted at the lower of the two ratings.
(2) Municipal Bonds rated Ba1 to B3 by Moody's or, if not rated by Moody's,
rated BB+ to B- by S&P or Fitch. In addition, Municipal Bonds not explicitly
rated by Moody's, S&P or Fitch, but rated at least the equivalent of B3
internally by the Investment Adviser, provided that Moody's reviews and
achieves sufficient comfort with the Investment Adviser's internal credit
rating processes, will be included under "Other" in the table. Unless
conclusions regarding liquidity risk as well as estimates of both the
probability and severity of default for the Fund's assets can be derived from
other sources as well as combined with a number of sources as presented by the
Fund to Moody's, unrated Municipal Bonds which are rated at least the
equivalent of B3 by the Investment Adviser internally are limited to 10% of
Moody's Eligible Assets.

<TABLE>
<CAPTION>

                                              Moody's Rating Category
- -------------------------------------------------------------------------------------------------------------------
                         MIG-1, VMIG-1, P-1(1)                          MIG-1, VMIG-1, P-1(2)
- -------------------------------------------------------   ---------------------------------------------------------
                                  <S>                                           <C>
                                  100%                                          136%

</TABLE>

- ----------
(1)  Moody's rated Municipal Bonds that have a maturity less than or equal to
     49 days and Municipal Bonds not rated by Moody's but rated the equivalent
     to MIG-1, VMIG-1, or P-1 by S&P or Fitch that have a maturity less than
     or equal to 49 days.
(2)  Moody's rated Municipal Bonds that have a maturity greater than 49 days
     and Municipal Bonds not rated by Moody's but rated the equivalent to
     MIG-1, VMIG-1, or P-1 by S&P or Fitch that have a maturity greater than
     49 days.

; provided, however, in the event a Moody's Discount Factor applicable to a
Moody's Eligible Asset is determined by reference to an insurance
claims-paying ability rating in accordance with clause (b) or (c), such
Moody's Discount Factor shall be increased by an amount equal to 50% of the
difference between (i) the percentage set forth in the foregoing table under
the applicable rating category and (ii) the percentage set forth in the
foregoing table under the rating category which is one category lower than the
applicable rating category.


                                      16
<PAGE>


     Notwithstanding the foregoing, no Moody'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'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's Discount Factor applicable to
the Municipal Bonds sold. "Receivables for Municipal Bonds Sold," for purposes
of calculating Moody'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.

     The Moody'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.

     The Moody's Discount Factor for Rule 2a-7 Money Market Funds shall be
110%.

     The Moody'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's Eligible Assets, as set forth in the table below:



                                      17
<PAGE>


<TABLE>
<CAPTION>

                                    Minimum Issue Size       Maximum Underlying Obligor      Maximum State Allowed
            Rating                     ($ Millions)                    ($)(1)                      (%)(1)(3)
- -----------------------------     ----------------------   ------------------------------  -------------------------
            <S>                             <C>                          <C>                          <C>
             Aaa                             *                           100                          100
              Aa                            10                           20                           60
              A                             10                           10                           40
             Baa                            10                            6                           20
              Ba                            10                            4                           12
              B                             10                            3                           12
          Other (2)                         10                            2                           12

</TABLE>

- ----------
*    Not applicable.
(1)  The referenced percentages represent maximum cumulative totals for the
     related rating category and each lower rating category.
(2)  Municipal Bonds not rated by Moody's, S&P or Fitch, but rated at least
     the equivalent of B3 internally by the Investment Adviser.
(3)  Territorial bonds (other than those issued by Puerto Rico and counted
     collectively) are each limited to 10% of Moody's Eligible Assets. For
     diversification purposes, Puerto Rico will be treated as a state. N/A Not
     applicable.

     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.

     Current Moody's guidelines also require that Municipal Bonds constituting
Moody's Eligible Assets pay interest in cash, are publicly rated B3 or higher
by Moody's or, if not rated by Moody's, but rated by S&P or Fitch, are
publicly rated at least B- by S&P or Fitch, or if not explicitly rated by
Moody's, S&P or Fitch, be rated at least the equivalent of B3 internally by
the Investment Adviser, provided that Moody's reviews and achieves sufficient
comfort with the Investment Adviser's internal credit rating processes, not
have suspended ratings by Moody's, if an Inverse Floater be explicitly rated
by Moody's, and be part of an issue of Municipal Bonds of at least $10,000,000
(except for issues rated Aaa by Moody's, as provided in the chart above).

     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'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's, the Fund will not enter into any such reverse repurchase agreements
unless it has received written confirmation from Moody's that such
transactions would not impair the ratings then assigned the AMPS by Moody's.
When the 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's Eligible Asset if the long-term debt of such other party is rated at
least A2 by Moody's and such agreement has a term of 30 days or less;
otherwise the Discounted Value of such Bond will constitute a Moody's Eligible
Asset.

     High Yield Municipal Bonds may comprise no more than 20% of Moody's
Eligible Assets. Unless conclusions regarding liquidity risk as well as
estimates of both the probability and severity of default for the Fund's
assets can be derived from other sources as well as combined with a number of
sources as presented by the Fund to Moody'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's Eligible Assets.

     Inverse Floaters, including primary market and secondary market residual
interest bonds, may constitute no more than 10% of Moody's Eligible Assets.

     Notwithstanding the foregoing, an asset will not be considered a Moody's
Eligible Asset if it is (i) held in a margin account, (ii) subject to any
material lien, mortgage, pledge, security interest or security agreement of
any kind, (iii) held for the purchase of a security pursuant to a Forward
Commitment or (iv) irrevocably deposited by the Fund for the payment of
dividends or redemption.

     For so long as shares of AMPS are rated by Moody's, in managing the
Fund's portfolio, the Investment Adviser will not alter the composition of the
Fund'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's
Eligible Assets with an aggregate


                                      18
<PAGE>


Discounted Value, as of the immediately preceding Valuation Date, less than
the AMPS Basic Maintenance Amount as of such Valuation Date; provided,
however, that in the event that, as of the immediately preceding Valuation
Date, the aggregate Discounted Value of Moody's Eligible Assets exceeded the
AMPS Basic Maintenance Amount by 5% or less, the Investment Adviser will not
alter the composition of the Fund's portfolio in a manner reasonably expected
to reduce the aggregate Discounted Value of Moody's Eligible Assets unless the
Fund shall have confirmed that, after giving effect to such alteration, the
aggregate Discounted Value of Moody's Eligible Assets would exceed the AMPS
Basic Maintenance Amount.

     For so long as any shares of AMPS are rated by Moody's, the Fund will not
engage in Bond Market Association Municipal Swap Index swap transactions ("BMA
swap transactions"), 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's that engaging in such transactions would not impair the ratings then
assigned to the shares of AMPS by Moody's, except that the Fund may engage in
BMA swap transactions, purchase or sell exchange-traded financial futures
contracts based on the Municipal Index or Treasury Bonds, and 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, "Moody's Hedging Transactions"), subject to the
following limitations:

          (i) the Fund will not engage in any Moody'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 fair market value exceeding 50% of the fair market
     value of all Municipal Bonds constituting Moody's Eligible Assets owned
     by the Fund (other than Moody's Eligible Assets already subject to a
     Moody's Hedging Transaction);

          (ii) the Fund will not engage in any Moody'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's Eligible Assets owned by the Fund and rated Aa by
     Moody's (or, if not rated by Moody's but rated by S&P, rated AAA by S&P)
     or (B) outstanding 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's Eligible Assets
     owned by the Fund (other than Moody's Eligible Assets already subject to
     a Moody's Hedging Transaction) and rated Baa or A by Moody's (or, if not
     rated by Moody's but rated by S&P, rated A or AA by S&P) (for purposes of
     the foregoing clauses (i) and (ii), the Fund shall be deemed to own the
     number of financial futures contracts that underlie any outstanding
     options written by the Fund);

          (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;

          (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;

          (v) the Fund will engage in Moody's Hedging Transactions only with
     respect to financial futures contracts or options thereon having the next
     settlement date or the settlement date immediately thereafter;

          (vi) the Fund (A) will not engage in options and futures
     transactions for leveraging or speculative purposes, except that an
     option or futures transaction so long as the combination of the Fund's
     non-derivative positions, together with the relevant option or futures
     transaction, produces a synthetic


                                      19
<PAGE>


     investment position, or the same economic result, that could be achieved
     by an investment, consistent with the Fund'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'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;

          (vii) the Fund will not enter into an option or futures transaction
     unless, after giving effect thereto, the Fund would continue to have
     Moody's Eligible Assets with an aggregate Discounted Value equal to or
     greater than the AMPS Basic Maintenance Amount; and

          (viii) the Fund will not engage in BMA swap transactions with
     respect to more than 20% of the Fund's net assets; provided that the
     Fund's use of futures will proportionately decrease as the Fund's use of
     BMA swap transactions increases, and vice-versa.

     For purposes of determining whether the Fund has Moody's Eligible Assets
with an aggregate Discounted Value that equals or exceeds the AMPS Basic
Maintenance Amount, the Discounted Value of Moody's Eligible Assets that the
Fund is obligated to deliver or receive pursuant to an outstanding futures
contract or option shall be as follows: (i) assets subject to call options
written by the Fund that are either exchange-traded and "readily reversible"
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.

     For purposes of determining whether the Fund has Moody's Eligible Assets
with an aggregate Discounted Value that equals or exceeds the AMPS Basic
Maintenance Amount, the following amounts shall be subtracted from the
aggregate Discounted Value of the Moody's Eligible Assets held by the 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.

     For so long as any shares of AMPS are rated by Moody'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's Hedging Transactions), except that the Fund may enter into
such contracts to purchase newly-issued securities on the date such securities
are issued ("Forward Commitments"), subject to the following limitations:

          (i) the 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'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'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's obligations under any Forward Commitment to which it is from
     time to time a party, and

          (ii) the Fund will not enter into a Forward Commitment unless, after
     giving effect thereto, the Fund would continue to have Moody's Eligible
     Assets with an aggregate Discounted Value equal to or greater than the
     AMPS Basic Maintenance Amount.


                                      20
<PAGE>


     For purposes of determining whether the Fund has Moody's Eligible Assets
with an aggregate Discounted Value that equals or exceeds the AMPS Basic
Maintenance Amount, the Discounted Value of all Forward Commitments to which
the Fund is a party and of all securities deliverable to the Fund pursuant to
such Forward Commitments shall be zero.

                                  ----------

     For so long as shares of AMPS are rated by S&P or Moody's, the Fund,
unless it has received written confirmation from S&P and/or Moody's, as the
case may be, that such action would not impair the ratings then assigned to
the AMPS by S&P and/or Moody'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's
assets at the time of such borrowings and which borrowings shall be repaid
within 60 days and not be extended or renewed and shall not cause the
aggregate Discounted Value of Moody's Eligible Assets and S&P Eligible Assets
to be less than the AMPS Basic Maintenance Amount), (ii) engage in short sales
of securities, (iii) lend any securities, (iv) issue any class or series of
stock ranking prior to or on a parity with the AMPS with respect to the
payment of 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's pricing service or (viii)
engage in reverse repurchase agreements.

     For as long as the AMPS are rated by S&P, the Fund will not, unless it
has received written confirmation from S&P that such action would not impair
the rating then assigned to the shares of AMPS by S&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'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&P Eligible Assets, 90% of any
positive mark-to-market valuation of the Fund's rights will be S&P Eligible
Assets, 100% of any negative mark-to-market valuation of the Fund'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'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's obligations with
respect to such caps or floors.

                            DIRECTORS AND OFFICERS

     The Directors of the Fund consist of eight individuals, seven of whom are
not "interested persons" of the Fund as defined in the 1940 Act (the
"non-interested Directors"). The Directors are responsible for the overall
supervision of the operations of the Fund and perform the various duties
imposed on the directors of investment companies by the 1940 Act.

     Each non-interested Director is a member of the Fund's Audit Committee
(the "Audit Committee"). The principal responsibilities of the Audit Committee
are the appointment, compensation and oversight of the Fund's independent
accountants, including the resolution of disagreements regarding financial
reporting between Fund management and such independent accountants. The Audit
Committee's responsibilities include, without limitation, to (i) review with
the independent accountants the arrangements for and scope of annual and
special audits and any other services provided by the independent accountants
to the Fund; (ii) discuss with the independent accountants certain matters
relating to the Fund's financial statements, including any adjustment to such
financial statements recommended by such independent accountants or any other
results of any audit; (iii) ensure that the independent accountants submit on
a periodic basis a formal written statement with respect to their
independence, discuss with the independent accountants any relationships or
services disclosed in the statement that may impact the objectivity and
independence of the Fund's independent accountants and recommend that the
Board of Directors take appropriate action in response thereto to satisfy
itself of the independent accountants' independence; and (iv) consider the
comments of the independent accountants with respect to the quality and
adequacy of the Fund's


                                      21
<PAGE>


accounting and financial reporting policies and practices and internal
controls and Fund management's responses thereto. The Board of Directors of
the Fund has adopted a written charter for the Audit Committee. The Committee
has retained independent legal counsel to assist it in connection with these
duties. The Audit Committee met three times during the Fund's fiscal year
ended October 31, 2003.

     Each non-interested Director is also a member of the Board's Nominating
Committee (the "Nominating Committee"). 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's non-interested
Directors, the Nominating Committee may consider nominations for the office of
the Director made by Fund stockholders 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 is newly
formed and did not meet during the Fund's fiscal year ended October 31, 2003.

Biographical Information

     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 and its affiliate, Merrill Lynch Investment
Managers, L.P. ("MLIM") ("MLIM/FAM-advised funds") and other public
directorships.


<TABLE>
<CAPTION>

                                                                                   Number of
                                     Term of                                    MLIM/FAM-Advised
                  Position(s)     Office** and                                     Funds and
Name, Address*   Held with the   Length of Time      Principal Occupation(s)      Portfolios            Public
    and Age          Fund            Served          During Past Five Years        Overseen         Directorships
- --------------- --------------- ----------------  ---------------------------- ------------------ -----------------
<S>             <C>            <C>                <C>                          <C>                <C>
James H.         Director       Director           Director, The China          39 registered      None
Bodurtha (60)                   since 2002         Business Group, Inc. since   investment
                                                   1996 and Executive Vice      companies
                                                   President thereof from       consisting of
                                                   consisting of 1996 to 2003;  56 portfolios
                                                   Chairman of 56 portfolios
                                                   the Board, Berkshire
                                                   Holding Corporation since
                                                   1980; Partner, Squire,
                                                   Sanders & Dempsey from 1980
                                                   to 1993.

Joe Grills       Director       Director since     Member of the Committee of   39 registered      Kimco Realty
(69)                            1994               Investment of Employee       investment         Corporation
                                                   Benefit Assets of the        companies
                                                   Association of Financial
                                                   Professionals ("CIEBA")
                                                   since 1986; Member of
                                                   CIEBA's Executive
                                                   Committee since 1988 and
                                                   its Chairman from 1991 to
                                                   1992; Assistant Treasurer
                                                   of International Business
                                                   Machines Corporation
                                                   ("IBM") 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 Management
                                                   Company since 1992 and
                                                   Vice Chairman thereof
                                                   since 1998; Director,
                                                   LaSalle Street Fund from
                                                   1995 to 2001; Director,                 (continued on next page)


                                                        22
<PAGE>


                                                                                   Number of
                                     Term of                                    MLIM/FAM-Advised
                  Position(s)     Office** and                                     Funds and
Name, Address*   Held with the   Length of Time      Principal Occupation(s)      Portfolios            Public
    and Age          Fund            Served          During Past Five Years        Overseen         Directorships
- --------------- --------------- ----------------  ---------------------------- ------------------ -----------------
                                                   Kimco Realty Corporation
                                                   since 1997; Member of the
                                                   Investment Advisory
                                                   Committee of the Virginia
                                                   Retirement System since
                                                   1998 and Vice Chairman
                                                   thereof since 2002;
                                                   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.


Herbert I.       Director       Director           John M. Olin Professor of    39 registered      None
London (65)                     since 2002         Humanities, New York         investment
                                                   University since 1993 and    companies
                                                   Professor thereof since      consisting of
                                                   1980; President, Hudson      56 portfolios
                                                   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.

Andre F.         Director       Director since     Harvard Business School:     39 registered      None
Perold (52)                     2002               George Gund Professor of     investment
                                                   Finance and Banking since    companies
                                                   2000; Senior Associate       consisting of
                                                   Dean, Director of Faculty    56 portfolios
                                                   Recruiting since 2001;
                                                   Finance Area Chair from
                                                   1996 to 2001; Sylvan C.
                                                   Coleman Professor of
                                                   Financial Management from
                                                   1993 to 2000; Director,
                                                   Genbel Securities Limited
                                                   and Gensec Bank from 1999
                                                   to 2003; Director,
                                                   Stockback, Inc. from 2000
                                                   to 2002; Director, Sanlam
                                                   Limited from 2001 to 2003;
                                                   Trustee, Commonfund from
                                                   1989 to 2001; Director,
                                                   Sanlam Investment
                                                   Management from 1999 to
                                                   2001; Director,
                                                   Bulldogresearch.com from
                                                   2000 to 2001; Director,
                                                   Quantec Limited from 1991
                                                   to 1999; Director and
                                                   Chairman of the Board of
                                                   UNX Inc. since 2003.                    (continued on next page)


                                                        23
<PAGE>


                                                                                   Number of
                                     Term of                                    MLIM/FAM-Advised
                  Position(s)     Office** and                                     Funds and
Name, Address*   Held with the   Length of Time      Principal Occupation(s)      Portfolios            Public
    and Age          Fund            Served          During Past Five Years        Overseen         Directorships
- --------------- --------------- ----------------  ---------------------------- ------------------ -----------------
Roberta Cooper   Director       Director since     Shareholder, Modrall,        39 registered      None
Ramo (61)                       2002               Sperling, Roehl, Harris &    investment
                                                   Sisk, P.A. since 1993;       companies
                                                   President, American Bar      consisting of
                                                   Association from 1995 to     56 portfolios
                                                   1996 and Member of the
                                                   Board of Governors thereof
                                                   from 1994 to 1997;
                                                   Shareholder, Poole, Kelly
                                                   & 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.

Robert S.        Director       Director since     Principal of STI             39 registered      None
Salomon, Jr.                    1996               Management (investment       investment
(67)                                               adviser) since 1994;         companies
                                                   Chairman and CEO of          consisting of
                                                   Salomon Brothers Asset       56 portfolios
                                                   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.

Stephen B.       Director       Director since     Chairman of Fernwood         40 registered      None
Swensrud (70)                   1992               Associates (investment       investment
                                                   adviser) since 1996;         companies
                                                   Principal, Fernwood          consisting of
                                                   Associates (financial        57 portfolios
                                                   consultants) since 1975;
                                                   Chairman of R.P.P.
                                                   Corporation (manufacturing
                                                   company) since 1978;
                                                   Director of International
                                                   Mobile Communications,
                                                   Incorporated
                                                   (telecommunications
                                                   company) since 1998.

</TABLE>

- ----------
*    The address of each non-interested Director is P.O. Box 9095, Princeton,
     New Jersey 08543-9095.
**   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's By-laws,
     Charter or by statute.

     Certain biographical and other information relating to the Director who
is an "interested person" of the Fund as defined in the 1940 Act (the
"interested Director") 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.


                                                        24
<PAGE>


<TABLE>
<CAPTION>

                                                                                   Number of
                                     Term of                                    MLIM/FAM-Advised
                  Position(s)     Office+ and                                      Funds and
Name, Address*   Held with the   Length of Time      Principal Occupation(s)      Portfolios            Public
    and Age          Fund            Served          During Past Five Years        Overseen         Directorships
- --------------- --------------- ----------------  ---------------------------- ------------------ -----------------
<S>             <C>            <C>                <C>                          <C>                <C>
Terry K. Glenn   President      President and      President of the             126 registered     None
(63)***          and Director   Director ****      MLIM/FAM-advised funds       investment
                                since 1999         since 1999; Chairman         companies
                                                   (Americas Region) of MLIM    consisting of
                                                   from 2000 to 2002;           161 portfolios
                                                   Executive Vice President
                                                   of MLIM and the Investment
                                                   Adviser (which terms as
                                                   used herein include their
                                                   corporate predecessors)
                                                   from 1983 to 2002;
                                                   President of FAM
                                                   Distributors, Inc. ("FAMD"
                                                   or the "Distributor") from
                                                   1986 to 2002 and Director
                                                   thereof from 1991 to 2002;
                                                   Executive Vice President
                                                   and Director of Princeton
                                                   Services, Inc. ("Princeton
                                                   Services") from 1993 to
                                                   2002; President of
                                                   Princeton Administrators,
                                                   L.P. from 1988 to 2002;
                                                   Director of Financial Data
                                                   Services, Inc. from 1985
                                                   to 2002.

Donald C.        Vice           Vice President     First Vice President of      125 registered     None
Burke (43)       President      since 1994 and     MLIM and the Investment      investment
                 and Treasurer  Treasurer since    Adviser since 1997 and       companies
                                1999               Treasurer thereof since      consisting of
                                                   1999; Senior Vice            160 portfolios
                                                   President and Treasurer of
                                                   Princeton Services since
                                                   1999; Vice President of
                                                   FAMD since 1999; Vice
                                                   President of MLIM and the
                                                   Investment Adviser from
                                                   1990 to 1997; Director of
                                                   Taxation of MLIM since
                                                   1990.

William R.       Vice           Vice President     Vice President of MLIM       5 registered       None
Bock (68)        President      since 1993         since 1989.                  investment
                                                                                companies
                                                                                consisting of
                                                                                5 portfolios

Kenneth A.       Senior Vice    Senior Vice        Managing Director of MLIM    39 registered      None
Jacob (53)       President      President since    since 2000; First Vice       investment
                                2002               President of MLIM from       companies
                                                   1997 to 2000; Vice           consisting of
                                                   President of MLIM from       51 portfolios
                                                   1984 to 1997.

John M.          Senior Vice    Senior Vice        Managing Director of MLIM    39 registered      None
Loffredo (40)    President      President since    since 2000; First Vice       investment
                                2002               President of MLIM from       companies
                                                   1997 to 2000; Vice           consisting of
                                                   President of MLIM from       51 portfolios
                                                   1991 to 1997; Portfolio
                                                   Manager of the Investment
                                                   Adviser and MLIM since
                                                   1997.
                                                                                           (continued on next page)


                                                        25
<PAGE>


                                                                                   Number of
                                     Term of                                    MLIM/FAM-Advised
                  Position(s)     Office+ and                                      Funds and
Name, Address*   Held with the   Length of Time      Principal Occupation(s)      Portfolios            Public
    and Age          Fund            Served          During Past Five Years        Overseen         Directorships
- --------------- --------------- ----------------  ---------------------------- ------------------ -----------------
Phillip S.       Secretary      Secretary since    First Vice President of      125 registered     None
Gillespie (40)                  2004               MLIM since 2001; Director    investment
- ---------------                                    of MLIM from 2000 to 2001;   companies
                                                   Vice President of MLIM       consisting of
                                                   from 1999 to 2000;           160 portfolios
                                                   Attorney associated with
                                                   MLIM since 1998; Assistant
                                                   General Counsel of
                                                   Chancellor LGT Asset
                                                   Management, Inc. from 1997
                                                   to 1998.

</TABLE>

- ----------
*    The address of each officer listed is P.O. Box 9011, Princeton, New
     Jersey 08543-9011.
**   Elected by and serves at the pleasure of the Board of Directors of the
     Fund.
***  Mr. Glenn is an "interested person," as defined in the 1940 Act, of the
     Fund based on his former positions with the Investment Adviser, MLIM,
     FAMD, Princeton Services, and Princeton Administrators, L.P.
**** As a Director, Mr. Glenn 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's by-laws,
     charter or by statute.

     In connection with the election of the Fund'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's Directors, and the remaining
Directors are elected by all holders of capital stock, voting as a single
class. Mr. Salomon and Mr. Bodurtha are the Directors elected by holders of
preferred stock. See "Description of AMPS-Voting Rights."

Share Ownership

     Information relating to each Director'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 ("Supervised Merrill Lynch Funds") as of December
31, 2003 is set forth in the chart below.

<TABLE>
<CAPTION>

                                                                                              Aggregate Dollar Range
                                                                                                 of Securities in
                                                                    Aggregate Dollar Range      Supervised Merrill
Name                                                                of Equity in the Fund          Lynch Funds*
- --------------------------------------------------------------     ------------------------  ------------------------
<S>                                                                        <C>                  <C>
Interested Director:
     Terry K. Glenn..........................................                None                 Over $100,000
Non-interested Directors:
     James H. Bodurtha.......................................                None                 Over $100,000
     Joe Grills..............................................                None                 Over $100,000
     Herbert I. London.......................................                None                 Over $100,000
     Andre F Perold..........................................                None                      None
     Roberta Cooper Ramo.....................................                None                50,001-$100,000
     Robert S. Salomon, Jr...................................                None                      None
     Stephen B. Swensrud.....................................                None                      None

</TABLE>

- ----------
*    For the number of MLIM/FAM-advised funds from which each Director
     receives compensation, see the table above under "-- Biographical
     Information."

     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 nor
any of their immediate family members owned beneficially or of record any
securities in ML & Co.

Compensation of Directors

     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


                                      26
<PAGE>


FAM/MLIM-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 $25,000, 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.

     The following table sets forth the estimated compensation to be paid by
the Fund to the non-interested Directors projected through the end of the
Fund's first full fiscal year and the aggregate compensation paid to them from
all registered MLIM/FAM-advised funds for the calendar year ended December 31,
2003.

<TABLE>
<CAPTION>

                                                                          Pension or                        Aggregate
                                                                          Retirement                      Compensation
                                                                           Benefits        Estimate       From Fund and
                                                                          Accrued as        Annual            other
                                               Position   Compensation   Part of Fund   Benefits Upon       MLIM/FAM-
              Name of Director                with Fund     From Fund      Expense        Retirement     Advised Funds**
- -------------------------------------------  ----------- -------------- -------------- ---------------  -----------------
<S>                                           <C>        <C>                <C>             <C>            <C>
     James H. Bodurtha*.....................   Director   $3,600             None            None           $183,219
     Joe Grills*............................   Director   $3,600             None            None           $182,219
     Herbert I. London......................   Director   $2,800             None            None           $163,219
     Andre F Perold.........................   Director   $2,800             None            None           $162,219
     Roberta Cooper Ramo....................   Director   $2,800             None            None           $163,219
     Robert S. Salomon, Jr..................   Director   $2,800             None            None           $168,219


</TABLE>

- ----------
*   Co-Chairman of the Audit Committee.
**  For the number of MLIM/FAM-advised funds from which each Director
    received compensation see table above under "--Biographical Information."

     Pursuant to its investment advisory agreement with the Fund (the
"Investment Advisory Agreement"), the Investment Adviser pays all compensation
to all officers of the Fund and all Directors of the Fund who are affiliated
with ML & Co. or its subsidiaries.

                INVESTMENT ADVISORY AND MANAGEMENT ARRANGEMENTS

     The Investment Adviser, which is owned and controlled by ML & 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 100 registered investment
companies and offers investment advisory services to individuals and
institutional accounts. As of May 2004, the Investment Adviser and its
affiliates, including MLIM, had a total of approximately $491 billion in
investment company and other portfolio assets under management, including
approximately $253 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 & Co. and
Princeton Services. The principal business address of the Investment Adviser
is 800 Scudders Mill Road, Plainsboro, New Jersey 08536.

     The Investment Advisory Agreement provides that, subject to the direction
of the Fund's Board of Directors, the Investment Adviser is responsible for
the actual management of the Fund's portfolio. The responsibility for making
decisions to buy, sell or hold a particular security rests with the Investment
Adviser, subject to review by the Board of Directors.

     The portfolio manager primarily responsible for the Fund's day-to-day
management is William R. Bock. William R. Bock has been a Vice President of
MLIM since 1989 and has 11 years of experience investing in Municipal Bonds.
The Fund's portfolio manager will consider analyses from various sources, make
the necessary investment decisions, and place orders for transactions
accordingly.

     For its services, the Fund pays the Investment Adviser a monthly fee at
the annual rate of 0.50% of the Fund's average weekly net assets ("average
weekly net assets" means the average weekly value of the total assets of


                                      27
<PAGE>


the Fund, including the 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's
average daily net assets.

     For the six months ended April 30, 2004 and the fiscal years ended
October 31, 2003, 2002 and 2001, the fees paid by the Fund to the Investment
Adviser pursuant to the Investment Advisory Agreement were $3,515,844,
$7,001,333, $6,842,401 and $6,777,547, respectively.

     For the six months ended April 30, 2004, and the fiscal years ended
October 31, 2003, 2002 and 2001, the Investment Adviser reimbursed the Fund
$131, $33,171, $18,726, and $0, respectively.

     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
("State Street") 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.

     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:

<TABLE>
<CAPTION>
                                                  Paid by the Fund        Paid by the Fund to the
     Period                                       to State Street         Investment Adviser
     ------                                       ---------------         ------------------

<S>                                                    <C>                     <C>
     Six months ended April 30, 2004..........          $163,791                $15,536

     Fiscal year ended 2003......................       $314,092                $32,712

     Fiscal year ended 2002......................       $321,681                $37,893

     Fiscal year ended 2001......................       $313,440                $70,199

</TABLE>

     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' written notice at the option of either party thereto or by the vote of
the stockholders of the Fund.

     In connection with the Board of Directors' consideration of the
Investment Advisory Agreement, the Board compared the Fund's fee rate for
advisory and administrative services and the Fund's historical performance to
certain comparable funds and reviewed information derived from a number of
sources and covering a range of issues. The Board of Directors considered the
compensation paid to the Investment Adviser and the services


                                      28
<PAGE>


provided to the Fund by the Investment Adviser under the Investment Advisory
Agreement, as well as other services provided by the Investment Adviser and
its affiliates under other agreements, and the personnel who will provide
these services. In addition to the investment advisory services provided to
the Fund, the Investment Adviser and its affiliates provide administrative
services, stockholder services, oversight of fund accounting, marketing
services, assistance in meeting legal and regulatory requirements, and other
services necessary for the operation of the Fund. The Fund's Board of
Directors also considered the direct and indirect benefits to the Investment
Adviser from its relationship with the Fund. Based on their experience as
Directors of the Fund and as directors of other MLIM/FAM-advised funds, the
Board of Directors concluded that the services provided in all areas were of a
high quality and that the Fund benefits and would continue to benefit from
those services.

     In reviewing the Investment Advisory Agreement, the Board focused on the
experience, resources and strengths of the Investment Adviser and its
affiliates in managing investment companies that invest in Municipal Bonds,
including a number of other MLIM/FAM-advised leveraged closed end funds that
have investment objectives and strategies substantially similar to those of
the Fund. The Board also considered the Investment Adviser's experience in
managing funds that use leverage through the issuance of preferred stock. The
Board concluded that the Investment Adviser has a high level of expertise in
managing the types of investments used by the Fund and in managing leverage,
and concluded that the Fund benefits from that expertise. The Directors, based
on their experience as directors of other investment companies managed by the
Investment Adviser and its affiliates as well as of the Fund, also focused on
the quality of the Investment Adviser's compliance and administrative staff.
The Board noted that, in addition to the analysts and compliance personnel
dedicated to the tax-exempt fixed income management group, the Investment
Adviser has a separate administrative, legal and compliance staff to ensure a
high level of quality in the compliance and administrative services provided
to the Fund.

     In connection with its consideration of the Investment Advisory
Agreement, the Board of Directors also reviewed the compliance and
administrative services provided to the Fund by the Investment Adviser,
including its oversight of the Fund's day to day operations and its oversight
of Fund accounting. The Investment Adviser and its affiliates provide
compliance and administrative services to the Fund and all the
MLIM/FAM-advised funds, as well as to a number of third party fund groups. The
Board of Directors concluded, based on their experience as Directors, that,
historically, the compliance and administrative services provided by the
Investment Adviser and its affiliates were of a high quality and that the Fund
has benefited from these services.

     In reviewing the Investment Advisory Agreement, the Board of Directors
placed significant emphasis on the Fund's fee rate for advisory and
administrative services and the Fund's historical performance as compared to
those of comparable leveraged, closed-end funds that are managed by other
investment advisers that invest primarily in municipal obligations as provided
by Lipper Inc. In particular, the Board of Directors noted that the Fund had
the third lowest contractual advisory fee rate at a common asset level (equal
to the median of the group) among five comparable funds. The Board of
Directors also found that the Fund had the third lowest fee rate for advisory
and administrative services as a percentage of total assets at a common asset
level and the third lowest fee rate for advisory and administrative services
as a percentage of assets attributable to common stock at a common asset level
including leverage (equal to the median of the group). The Board also noted
that the Fund's historical performance was equal to the median in a comparison
to all closed-end leveraged insured municipal debt funds regardless of asset
size or distribution channel. The Board of Directors concluded that the
advisory fee rate was reasonable in relation to the services provided by the
Investment Adviser to the Fund as well as the costs incurred and benefits to
be gained by the Investment Adviser and its affiliates in providing such
services.

     The Board of Directors considered whether there should be changes in the
advisory fee rate or structure in order to enable the Fund to participate in
any economies of scale that the Investment Adviser may experience as a result
of growth in the Fund's assets. The Fund's Board of Directors also reviewed
materials supplied by counsel that were prepared for use by the Board of
Directors in fulfilling its duties under the 1940 Act.

     Based on the information reviewed and the discussions, the Board of
Directors, including a majority of the non-interested Directors, concluded
that it was satisfied with the nature and quality of the services to be
provided by the Investment Adviser to the Fund and that the advisory fee rate
was reasonable in relation to such services. The non-interested Directors were
represented by independent counsel who assisted them in their deliberations.


                                      29
<PAGE>


Code of Ethics

     The Fund'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.

Proxy Voting Policies and Procedures

     The Fund's Board of Directors has delegated to the Investment Adviser
authority to vote all proxies relating to the Fund's portfolio securities. The
Investment Adviser has adopted policies and procedures ("Proxy Voting
Procedures") 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'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's interest and those of the Investment
Adviser's clients are properly addressed and resolved.

     In order to implement the Proxy Voting Procedures, the Investment Adviser
has formed a Proxy Voting Committee (the "Committee"). The Committee is
comprised of the Investment Adviser's Chief Investment Officer (the "CIO"),
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 Committee will also include two
non-voting representatives from the Investment Adviser's Legal department
appointed by the Investment Adviser's General Counsel. The Committee'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's affiliates may serve as a member
of the Committee or participate in its decision making (except to the extent
such person is asked by the Committee to present information to the Committee,
on the same basis as other interested knowledgeable parties not affiliated
with the Investment Adviser might be asked to do so). The 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 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's unique structure, management, strategic options and, in
certain circumstances, probable economic and other anticipated consequences of
alternate actions. In so doing, the Committee may determine to vote a
particular proxy in a manner contrary to its generally stated policies. In
addition, the Committee will be responsible for ensuring that all reporting
and recordkeeping requirements related to proxy voting are fulfilled.

     The 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 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 -- such as approval of
mergers and other significant corporate transactions -- akin to investment
decisions, and are, therefore, not suitable for general guidelines. The
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's clients, the Committee, in conjunction with the Fund's
portfolio manager, may determine that the Fund's specific circumstances
require that its proxies be voted differently.

     To assist the Investment Adviser in voting proxies, the Committee has
retained Institutional Shareholder Services ("ISS"). 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 institutional


                                      30
<PAGE>


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.

     The Investment Adviser'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 Committee determines that the costs associated with voting generally
outweigh the benefits. The Committee may at any time override these general
policies if it determines that such action is in the best interests of the
Fund.

     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
"Affiliate"), or a money management or other client of the Investment Adviser
(each, a "Client") is involved. The Proxy Voting Procedures and the Investment
Adviser's adherence to those procedures are designed to address such conflicts
of interest. The 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
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 Committee may, in its discretion for the purposes of ensuring
that an independent determination is reached, retain an independent fiduciary
to advise the Committee on how to vote or to cast votes on behalf of the
Investment Adviser's clients.

     In the event that the Committee determines not to retain an independent
fiduciary, or it does not follow the advice of such an independent fiduciary,
the powers of the Committee shall pass to a subcommittee, appointed by the CIO
(with advice from the Secretary of the Committee), consisting solely of
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'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'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's normal voting guidelines or, on
matters where the Investment Adviser'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's absence, the Assistant Secretary of the
Committee concurs that the subcommittee's determination is consistent with the
Investment Adviser's fiduciary duties.

     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 Committee
determines that it is in the Fund's best interest to do so. In addition, the
guidelines may be reviewed at any time upon the request of a Committee member
and may be amended or deleted upon the vote of a majority of Committee members
present at a Committee meeting at which there is a quorum.

     The Investment Adviser has adopted specific voting guidelines with
respect to the following proxy issues:

     o    Proposals related to the composition of the Board of Directors of
          issuers other than investment companies. As a general matter, the
          Committee believes that a company's Board of Directors (rather than
          stockholders) is most likely to have access to important, nonpublic
          information regarding a company's business and prospects, and is
          therefore best-positioned to set corporate policy and oversee
          management. The Committee, therefore, believes that the foundation
          of good corporate governance is the election of qualified,
          independent corporate directors who are 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 Committee may look at a
          nominee's


                                      31
<PAGE>


          history of representing stockholder interests as a director of other
          companies or other factors, to the extent the Committee deems
          relevant.

     o    Proposals related to the selection of an issuer's independent
          auditors. As a general matter, the 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
          Committee will generally defer to a corporation's choice of auditor,
          in individual cases, the Committee may look at an auditors' history
          of representing stockholder interests as auditor of other companies,
          to the extent the Committee deems relevant.

     o    Proposals related to management compensation and employee benefits.
          As a general matter, the Committee favors disclosure of an issuer's
          compensation and benefit policies and opposes excessive
          compensation, but believes that compensation matters are normally
          best determined by an issuer's board of directors, rather than
          stockholders. Proposals to "micro-manage" an issuer's compensation
          practices or to set arbitrary restrictions on compensation or
          benefits will, therefore, generally not be supported.

     o    Proposals related to requests, principally from management, for
          approval of amendments that would alter an issuer's capital
          structure. As a general matter, the Committee will support requests
          that enhance the rights of common stockholders and oppose requests
          that appear to be unreasonably dilutive.

     o    Proposals related to requests for approval of amendments to an
          issuer's charter or by-laws. As a general matter, the Committee
          opposes poison pill provisions.

     o    Routine proposals related to requests regarding the formalities of
          corporate meetings.

     o    Proposals related to proxy issues associated solely with holdings of
          investment company shares. As with other types of companies, the
          Committee believes that a fund's Board of Directors (rather than its
          stockholders) is best-positioned to set fund policy and oversee
          management. However, the Committee opposes granting Boards of
          Directors authority over certain matters, such as changes to a
          fund's investment objective, that the Investment Company Act
          envisions will be approved directly by stockholders.

     o    Proposals related to limiting corporate conduct in some manner that
          relates to the stockholder's environmental or social concerns. The
          Committee generally believes that annual stockholder meetings are
          inappropriate forums for discussion of larger social issues, and
          opposes stockholder resolutions "micro-managing" 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 Committee is generally supportive of proposals to
          require corporate disclosure of matters that seem relevant and
          material to the economic interests of stockholders, the Committee is
          generally not supportive of proposals to require disclosure of
          corporate matters for other purposes.

                            PORTFOLIO TRANSACTIONS

     Subject to policies established by the Board of Directors, the Investment
Adviser is primarily responsible for the execution of the Fund'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's general execution and
operations facilities and the firm'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.


                                      32
<PAGE>


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.

     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
services 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.

     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
"Investment Restrictions." 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 "Group
Order Exemptive Order"). 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.

     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.

     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'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's
Board of Directors will reconsider this matter from time to time.

     The Fund has received an exemptive order from the Commission permitting
it to lend portfolio securities to Merrill Lynch or its affiliates. Pursuant
to that order, the Fund also has retained an affiliated entity of the
Investment Adviser as the securities lending agent for a fee, including a fee
based on a share of the returns on investment of cash collateral. That entity
may, on behalf of the Fund, invest cash collateral received by the Fund for
such loans, among other things, in a private investment company managed by
that entity or in registered money market funds advised by the Investment
Adviser or its affiliates.

     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 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.

     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,


                                      33
<PAGE>


(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.

Portfolio Turnover

     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'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.

     For the six months ended April 30, 2004 and the fiscal years ended
October 31, 2003, 2002 and 2001, the Fund's portfolio turnover rates were
57.48%, 114.05%, 97.34% and 99.00%, respectively.

                                     TAXES

     The Fund has elected to qualify for the special tax treatment afforded
regulated investment companies ("RICs") under the Internal Revenue Code of
1986, as amended (the "Code"). 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's distributions derived from income
on tax exempt obligations, as defined herein, would no longer qualify for
treatment as exempt interest.

     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.

     The Internal Revenue Service (the "IRS"), 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 & Wood LLP, 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's current and accumulated earnings and
profits as calculated for Federal income tax purposes. Nevertheless, it is
possible that the IRS might take a 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.


                                      34
<PAGE>


     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 relevant income tax purposes
(i.e., "tax-exempt"). The Fund intends to qualify to pay "exempt-interest
dividends" as defined in Section 852(b)(5) of the Code. Under such section if,
at the close of each quarter of its taxable year, at least 50% of the value of
its total assets consists of obligations that pay interest which is excludable
from gross income for Federal income tax purposes ("tax exempt obligations")
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's
stockholders within 60 days after the close of its taxable year. To the extent
that the dividends distributed to the Fund'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's gross income for Federal tax purposes. Exempt-interest dividends
are included, however, in determining the portion, if any, of a person'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 "substantial user" or
"related person" under Code Section 147(a) with respect to property financed
with the proceeds of an issue of "industrial development bonds" or "private
activity bonds," if any, held by the Fund.

     To the extent that the Fund's distributions are derived from interest on
its taxable investments or from an excess of net short-term capital gains over
net long-term capital losses ("ordinary income dividends"), such distributions
are considered 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 pursuant to recent legislation. Distributions, if
any, from an excess of net long-term capital gains over net short-term capital
losses derived from the sale of securities or from certain transactions in
futures or options ("capital gain dividends") are taxable as long-term capital
gains for Federal income tax purposes, regardless of the length of time the
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.

     All or a portion of the Fund'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's earnings and profits will first reduce
the adjusted tax basis of a holder's shares and, after such adjusted tax basis
is reduced to zero, will constitute capital gains to such holder (assuming the
shares are held as a capital asset). 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'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.

     If you borrow money to buy the Fund's AMPS, you may not be permitted to
deduct the interest on that loan. Under Federal income tax rules, the Fund'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.

     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's proportionate share of
particular types of income, including exempt-interest income and net long-term
capital gains. A class's


                                      35
<PAGE>


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
each series of AMPS and Other AMPS as tax exempt interest, capital gains or
other taxable income, as applicable, in proportion to each series' 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 "The Auction -- Auction Procedures -- Auction Date;
Advance Notice of Allocation of Taxable Income; Inclusion of Taxable Income in
Dividends" 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 "taxable distribution") 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.

     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 "Description of AMPS -- Dividends -- Additional
Dividends" 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.

     In the opinion of Sidley Austin Brown & Wood LLP, 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 the series of AMPS will be respected for Federal
income tax purposes. However, the tax treatment of Additional Dividends may
affect the Fund's calculation of each class'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'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 series of AMPS
will be respected for Federal income tax purposes, and it is possible that the
IRS could disagree with counsel's opinion and attempt to reallocate the Fund'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 & Wood LLP has advised the Fund that, in its opinion, if
the IRS were to challenge in court the Fund'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 & Wood LLP represents only its best legal
judgment and is not binding on the IRS or the courts.

     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 which, although tax exempt, are used for purposes other than
those performed by governmental units and which benefit non-governmental
entities (e.g., bonds used for industrial development or housing purposes).
Income received on such bonds is classified as an item of "tax preference,"
which could subject 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


                                      36
<PAGE>


the corporation's "adjusted current earnings", which more closely reflect a
corporation'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.

     The Fund may invest in instruments the return on which includes
nontraditional features such as indexed principal or interest payments
("nontraditional instruments"). These instruments may be subject to special
tax rules under which 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.

     The Fund may engage in interest rate swaps. The Federal income tax rules
governing the taxation of interest rate 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.

     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.e.,
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.

     The Fund'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 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 "tax exemption opinion").

     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.

     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 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'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'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,


                                      37
<PAGE>


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.

     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 "Description of AMPS -- Dividends -- Restrictions on Dividends
and Other Payments" and in the prospectus. This may prevent the Fund from
distributing at least 90% of its net income, and may, therefore, jeopardize
the Fund'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 "Description of AMPS -- Redemption" herein and in the
prospectus. There can be no assurance, however, that any such action would
achieve such objectives.

     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
"preferential" 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.

     Under certain Code provisions, some stockholders may be subject to a
withholding tax on ordinary income dividends, capital gain dividends and
redemption payments ("backup withholding"). 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'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 shareholder's Federal income tax liability.

     The Fund is generally not an appropriate investment for retirement plans,
other entities that are not subject to tax and foreign stockholders.

State and Local Taxes

     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.

     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's
securities and its political subdivisions and instrumentalities is exempt from
that state'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.

     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.


                                      38
<PAGE>


     Stockholders are urged to consult their tax advisers regarding specific
questions as to Federal, state, local or foreign taxes.

                                NET ASSET VALUE

     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.

     The Municipal Bonds in which the Fund invests are traded primarily in the
over-the-counter markets. In determining net asset value, the Fund uses the
valuations of portfolio securities furnished by a pricing service approved by
the Board of Directors. The pricing service typically values portfolio
securities at the bid price or the yield equivalent when quotations are
readily available. Municipal Bonds for which quotations are not readily
available are valued at fair market value on a consistent basis as determined
by the pricing service using a matrix system to determine valuations. The
procedures of the pricing service and its valuations are reviewed by the
officers of the Fund under the general supervision of the Board of Directors.
The Board of Directors has determined in good faith that the use of a pricing
service is a fair method of determining the valuation of portfolio securities.
Positions in futures contracts and interest rate swaps are valued at closing
prices for such contracts established by the exchange or dealer market on
which they are traded, or if market quotations are not readily available, are
valued at fair value on a consistent basis using methods approved in good
faith by the Board of Directors.

     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's,
the Monday edition of The Wall Street Journal and the Monday and Saturday
editions of The New York Times.

     The value of interest rate swaps, caps and floors is determined in
accordance with a formula and then confirmed periodically by obtaining a bank
quotation. Positions in options are valued at the last sale price on the
market where any such option is principally traded. Positions in futures
contracts are valued at closing prices for such contracts established by the
exchange on which they are traded. Obligations with remaining maturities of 60
days or less are valued at amortized cost unless this method no longer
produces fair valuations. Repurchase agreements are valued at cost plus
accrued interest.



                                      39
<PAGE>


                             FINANCIAL STATEMENTS

     The Fund's audited financial statements for the fiscal year ended October
31, 2003, together with the report of __________________ thereon, are
incorporated in this statement of additional information by reference to its
2003 Annual Report. The Fund's unaudited financial statements for the six
months ended April 30, 2004 are incorporated in this statement of additional
information by reference to its 2004 Semi-Annual Report. You may request a
copy of the Annual Report and the Semi-Annual Report at no charge by calling
(800) 221-7210 between 8:30 a.m. and 5:30 p.m. Eastern time on any business
day.



                                      40
<PAGE>


                                  APPENDIX A

                          RATINGS OF MUNICIPAL BONDS

Description of Moody's Investors Service, Inc.'s ("Moody's") Municipal Bond
Ratings

Aaa                      Bonds which are rated Aaa are judged to be of the
                         best quality. They carry the smallest degree of
                         investment risk and are generally referred to as
                         "gilt edged." Interest payments are protected by a
                         large or by an exceptionally stable margin and
                         principal is secure. While the various protective
                         elements are likely to change, such changes as can be
                         visualized are most unlikely to impair the
                         fundamentally strong position of such issues.

Aa                       Bonds which are rated Aa are judged to be of high
                         quality by all standards. Together with the Aaa group
                         they comprise what are generally known as high-grade
                         bonds. They are rated lower than the best bonds
                         because margins of protection may not be as large as
                         in Aaa securities or fluctuation of protective
                         elements may be of greater amplitude or there may be
                         other elements present which make the long term risk
                         in Aa-rated bonds appear somewhat larger than those
                         securities rated Aaa.

A                        Bonds which are rated A possess many favorable
                         investment attributes and are to be considered as
                         upper-medium-grade-obligations. Factors giving
                         security to principal and interest are considered
                         adequate, but elements may be present which suggest a
                         susceptibility to impairment some time in the future.

Baa                      Bonds which are rated Baa are considered as
                         medium-grade obligations (i.e., they are neither
                         highly protected nor poorly secured). Interest
                         payments and principal security appear adequate for
                         the present, but certain protective elements may be
                         lacking or may be characteristically unreliable over
                         any great length of time. Such bonds lack outstanding
                         investment characteristics and in fact have
                         speculative characteristics as well.

Ba                       Bonds which are rated Ba are judged to have
                         speculative elements; their future cannot be
                         considered as well-assured. Often the protection of
                         interest and principal payments may be very moderate,
                         and thereby not well safeguarded during both good and
                         bad times over the future. Uncertainty of position
                         characterizes bonds in this class.

B                        Bonds which are rated B generally lack
                         characteristics of the desirable investment.
                         Assurance of interest and principal payments or of
                         maintenance of other terms of the contract over any
                         long period of time may be small.

Caa                      Bonds which are rated Caa are of poor standing. Such
                         issues may be in default or there may be present
                         elements of danger with respect to principal or
                         interest.

Ca                       Bonds which are rated Ca represent obligations which
                         are speculative in a high degree. Such issues are
                         often in default or have other marked shortcomings.

C                        Bonds which are rated C are the lowest rated class of
                         bonds, and issues so rated can be regarded as having
                         extremely poor prospects of ever attaining any real
                         investment standing.

     Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's
believes possess the strongest investment attributes are designated by the
symbols Aa1, A1, Baa1, Ba1 and B1.

     Short term Notes: The three ratings of Moody's for short term notes are
MIG 1/VMIG 1, MIG 2/VMIG 2, and MIG 3/VMIG 3; MIG 1/VMIG 1 denotes "best
quality, enjoying strong protection from established cash flows"; MIG 2/VMIG 2
denotes "high quality" with "ample margins of protection"; MIG 3/VMIG 3
instruments are of "favorable quality... but... lacking the undeniable
strength of the preceding grades."


                                     A-1
<PAGE>


Description of Moody's Commercial Paper Ratings

     Moody's Commercial Paper ratings are opinions of the ability of issuers
to honor senior financial obligations and contracts. Such obligations
generally have an original maturity not exceeding one year, unless explicitly
noted. Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated issuers:

     Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
leading market positions in well established industries; high rates of return
on funds employed; conservative capitalization structures with moderate
reliance on debt and ample asset protection; broad margins in earning coverage
of fixed financial charges and high internal cash generation; and well
established access to a range of financial markets and assured sources of
alternate liquidity.

     Issuers rated Prime-2 (or supporting institutions) have a strong ability
to repay senior short term debt obligations. This will normally be evidenced
by many of the characteristics cited above, but to a lesser degree. Earnings
trends and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected
by external conditions. Ample alternate liquidity is maintained.

     Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short term promissory obligations. The effect
of industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level
of debt protection measurements and may require relatively high financial
leverage. Adequate alternate liquidity is maintained.

     Issuers rated Not Prime do not fall within any of the Prime rating
categories.

Description of Standard & Poor's ("Standard & Poor's") Municipal Debt Ratings

     A Standard & Poor's municipal debt 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.

     The debt rating is not a recommendation to purchase, sell or hold a
financial obligation, inasmuch as it does not comment as to market price or
suitability for a particular investor.

     The ratings are based on current information furnished by the obligors or
obtained by Standard & Poor's from other sources Standard & Poor's considers
reliable. Standard & Poor's does not perform an audit in connection with any
rating and may, on occasion, rely on unaudited financial information. The
ratings may be changed, suspended, or withdrawn as a result of changes in, or
unavailability of, such information, or based on circumstances.

     The ratings are based, in varying degrees, on the following
considerations:

     I.   Likelihood of payment--capacity and willingness of the obligor as to
the timely payment of interest and repayment of principal in accordance with
the terms of the obligation;

     II.  Nature of and provisions of the obligation;

     III. Protection afforded to, and relative position of, the obligation in
the event of bankruptcy, reorganization or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.

AAA                   An obligation rated "AAA" has the highest rating
                      assigned by Standard & Poor's. The obligor's capacity to
                      meet its financial commitment on the obligation is
                      extremely strong.

AA                    An obligation rated "AA" differs from the highest rated
                      issues only in small degree. The


                                     A-2
<PAGE>


                      obligor's capacity to meet its financial commitment on
                      the obligation is very strong.

A                     An obligation rated "A" is somewhat more susceptible to
                      the adverse effects of changes in circumstances and
                      economic conditions than debt in higher-rated
                      categories. However, the obligor's capacity to meet its
                      financial commitment on the obligation is still strong.

BBB                   An obligation rated "BBB" exhibits adequate protection
                      parameters. However, adverse economic conditions or
                      changing circumstances are more likely to lead to a
                      weakened capacity of the obligor to meet its financial
                      commitment on the obligation.

     Obligations rated "BB," "B," "CCC," "CC" and "C" are regarded as having
significant speculative characteristics. "BB" indicates the least degree of
speculation and "C" the highest. 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.

BB                   An obligation rated "BB" is less vulnerable to nonpayment
                     than other speculative issues. However, it faces major
                     ongoing uncertainties or exposure to adverse business,
                     financial, or economic conditions which could lead to the
                     obligor's inadequate capacity to meet its financial
                     commitment on the obligation.

B                    An obligation rated "B" is more vulnerable to nonpayment
                     than obligations rated "BB", but the obligor currently
                     has the capacity to meet its financial commitment on the
                     obligation. Adverse business, financial, or economic
                     conditions will likely impair the obligor's capacity or
                     willingness to meet its financial commitment on the
                     obligation.

CCC                  An obligation rated "CCC" 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. In the
                     event of adverse business, financial, or economic
                     conditions, the obligor is not likely to have the
                     capacity to meet its financial commitment on the
                     obligation.

CC                   An obligation rated "CC" is currently highly vulnerable
                     to nonpayment.

C                    A subordinated debt or preferred stock obligation rated
                     "C" is CURRENTLY HIGHLY VULNERABLE to nonpayment. The "C"
                     rating may be used to cover a situation where a
                     bankruptcy petition has been filed or similar action
                     taken, but payments on this obligation are being
                     continued. A "C" also will be assigned to a preferred
                     stock issue in arrears on dividends or sinking fund
                     payments, but that is currently paying.

D                    An obligation rated "D" is in payment default. The "D"
                     rating category is used when payments on an obligation
                     are not made on the date due even if the applicable grace
                     period has not expired, unless Standard & Poor's believes
                     that such payments will be made during such grace period.
                     The "D" rating also will be used upon the filing of a
                     bankruptcy petition or the taking of a similar action if
                     payments on an obligation are jeopardized.

     Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within the
major rating categories.

Description of Standard & Poor's Commercial Paper Ratings

     A Standard & Poor's commercial paper rating is a current assessment of
the likelihood of timely payment of debt having an original maturity of no
more than 365 days. Ratings are graded into several categories, ranging from
"A-1" for the highest-quality obligations to "D" for the lowest. These
categories are as follows:


                                     A-3
<PAGE>


A-1                  This designation indicates that the degree of safety
                     regarding timely payment is strong. Those issues
                     determined to possess extremely strong safety
                     characteristics are denoted with a plus sign (+)
                     designation.

A-2                  Capacity for timely payment on issues with this
                     designation is satisfactory. However, the relative degree
                     of safety is not as high as for issues designated "A-1."

A-3                  Issues carrying this designation have an adequate
                     capacity for timely payment. They are, however, more
                     vulnerable to the adverse effects of changes in
                     circumstances than obligations carrying the higher
                     designations.

B                    Issues rated "B" are regarded as having only speculative
                     capacity for timely payment.

C                    This rating is assigned to short term debt obligations
                     with a doubtful capacity for payment.

D                    Debt rated "D" is in payment default. The "D" rating
                     category is used when interest payments of principal
                     payments are not made on the date due, even if the
                     applicable grace period has not expired, unless Standard
                     & Poor's believes such payments will be made during such
                     grace period.

     A commercial paper rating is not a recommendation to purchase or sell a
security. The ratings are based on current information furnished to Standard &
Poor's by the issuer or obtained by Standard & Poor's from other sources it
considers reliable. The ratings may be changed, suspended, or withdrawn as a
result of changes in, or unavailability of, such information.

     A Standard & Poor'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.

     --Amortization schedule--the larger the final maturity relative to other
     maturities, the more likely it will be treated as a note.

     --Source of payment--the more dependent the issue is on the market for
     its refinancing, the more likely it will be treated as a note.

     Note rating symbols are as follows:

SP-1                  Strong capacity to pay principal and interest. An issue
                      determined to possess a very strong capacity to pay debt
                      service is given a plus (+) designation.

SP-2                  Satisfactory capacity to pay principal and interest with
                      some vulnerability to adverse financial and economic
                      changes over the term of the notes.

Description of Fitch Ratings ("Fitch") Investment Grade Bond Ratings

     Fitch investment grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The rating
represents Fitch's assessment of the issuer's ability to meet the obligations
of a specific debt issue or class of debt in a timely manner.

     The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the
issuer's future financial strength and credit quality.


                                     A-4
<PAGE>


     Fitch ratings do not reflect any credit enhancement that may be provided
by insurance policies or financial guarantees unless otherwise indicated.

     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.

     Fitch ratings are not recommendations to buy, sell, or hold any security.
Ratings do not comment on the adequacy of market price, the suitability of any
security for a particular investor, or the tax exempt nature or taxability of
payments made in respect of any security.

     Fitch ratings are based on information obtained from issuers, other
obligors, underwriters, their experts, and other sources Fitch believes to be
reliable. Fitch does not audit or verify the truth or accuracy of such
information. Ratings may be changed, suspended, or withdrawn as a result of
changes in, or the unavailability of, information or for other reasons.

AAA                   Bonds considered to be investment grade and of the
                      highest credit quality. The obligor has an exceptionally
                      strong ability to pay interest and repay principal,
                      which is unlikely to be affected by reasonably
                      foreseeable events.

AA                    Bonds considered to be investment grade and of very high
                      credit quality. The obligor's ability to pay interest
                      and repay principal is very strong, although not quite
                      as strong as bonds rated "AAA." Because bonds rated in
                      the "AAA" and "AA" categories are not significantly
                      vulnerable to foreseeable future developments, short
                      term debt of these issuers is generally rated "F-1+."

A                     Bonds considered to be investment grade and of high
                      credit quality. The obligor's ability to pay interest
                      and repay principal is considered to be strong, but may
                      be more vulnerable to adverse changes in economic
                      conditions and circumstances than bonds with higher
                      ratings.

BBB                   Bonds considered to be investment grade and of
                      satisfactory-credit quality. The obligor's ability to
                      pay interest and repay principal is considered to be
                      adequate. Adverse changes in economic conditions and
                      circumstances, however, are more likely to have 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.

     Plus (+) or Minus (-): Plus and minus signs are used with a rating symbol
to indicate the relative position of a credit within the rating category. Plus
and minus signs, however, are not used in the "AAA" category.

NR Indicates that Fitch does not rate the specific issue.

Conditional             A conditional rating is premised on the successful
                        completion of a project or the occurrence of a
                        specific event.

Suspended               A rating is suspended when Fitch deems the amount of
                        information available from the issuer to be inadequate
                        for rating purposes.

Withdrawn               A rating will be withdrawn when an issue matures or is
                        called or refinanced and, at Fitch's discretion, when
                        an issuer fails to furnish proper and timely
                        information.

FitchAlert              Ratings are placed on FitchAlert to notify investors
                        of an occurrence that is likely to result in a rating
                        change and the likely direction of such change. These
                        are designated as "Positive," indicating a potential
                        upgrade, "Negative," for potential downgrade, or
                        "Evolving," where ratings may be raised or lowered.
                        FitchAlert is relatively short term, and should be
                        resolved within 12 months.


                                     A-5
<PAGE>


     Ratings Outlook: An outlook is used to describe the most likely direction
of any rating change over the intermediate term. It is described as "Positive"
or "Negative." The absence of a designation indicates a stable outlook.

Description of Fitch's Speculative Grade Bond Ratings

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

     Bonds that have the rating are of similar but not necessarily identical
credit quality since rating categories cannot fully reflect the differences in
degrees of credit risk.

BB                   Bonds are considered speculative. The obligor's ability
                     to pay interest and repay principal may be affected over
                     time by adverse economic changes. However, business and
                     financial alternatives can be identified which could
                     assist the obligor in satisfying its debt service
                     requirements.

B                    Bonds are considered highly speculative. While bonds in
                     this class are currently meeting debt service
                     requirements, the probability of continued timely payment
                     of principal and interest reflects the obligor's limited
                     margin of safety and the need for reasonable business and
                     economic activity throughout the life of the issue.

CCC                  Bonds have certain identifiable characteristics which, if
                     not remedied, may lead to default. The ability to meet
                     obligations requires an advantageous business and
                     economic environment.

CC                   Bonds are minimally protected. Default in payment of
                     interest and/or principal seems probable over time.

C                    Bonds are in imminent default in payment of interest or
                     principal.

DDD,                 Bonds are in default on interest and/or principal
DD,                  payments. Such bonds are extremely speculative and should
and D                be valued on the basis and of their ultimate recovery
Default              value in liquidation or reorganization of the obligor.
                     "DDD" represents the highest potential for recovery on
                     these bonds, and "D" represents the lowest potential for
                     recovery.






     Plus (+) or Minus (-): Plus and minus signs are used with a rating symbol
to indicate the relative position of a credit within the rating category. Plus
and minus signs, however, are not used in the "DDD," "DD," or "D" categories.

Description of Fitch's Short Term Ratings

     Fitch's short term ratings apply to debt obligations that are payable on
demand or have original maturities of up to three years, including commercial
paper, certificates of deposit, medium term notes, and municipal and
investment notes.

     The short term rating places greater emphasis than a long term rating on
the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.

     Fitch short term ratings are as follows:


                                     A-6
<PAGE>


F-1+                  Exceptionally Strong Credit Quality. Issues assigned
                      this rating are regarded as having the strongest degree
                      of assurance for timely payment.

F-1                   Very Strong Credit Quality. Issues assigned this rating
                      reflect an assurance of timely payment only slightly
                      less in degree than issues rated "F-1+."

F-2                   Good Credit Quality. Issues assigned this rating have a
                      satisfactory degree of assurance for timely payment, but
                      the margin of safety is not as great as for issues
                      assigned "F-1+" and "F-1" ratings.

F-3                   Fair Credit Quality. Issues assigned this rating have
                      characteristics suggesting that the degree of assurance
                      for timely payment is adequate; however, near-term
                      adverse changes could cause these securities to be rated
                      below investment grade.

F-S                   Weak Credit Quality. Issues assigned this rating have
                      characteristics suggesting a minimal degree of assurance
                      for timely payment and are vulnerable to near-term
                      adverse changes in financial and economic conditions.

D                     Default. Issues assigned this rating are in actual or
                      imminent payment default.

LOC                   The symbol "LOC" indicates that the rating is based on a
                      letter of credit issued by a commercial bank.



                                     A-7
<PAGE>


                                  APPENDIX B

                           MUNICIPAL BOND INSURANCE


     Set forth below is further information with respect to the insurance
policies (the "Policies") that MuniYield Insured Fund, Inc. (the "Fund") may
obtain from several insurance companies with respect to insured Municipal
Bonds held by the Fund. The Fund has no obligation to obtain any such
Policies, and the terms of any Policies actually obtained may vary
significantly from the terms discussed below.

     In determining eligibility for insurance, insurance companies will apply
their own standards. These standards correspond generally to the standards
such companies normally use in establishing the insurability of new issues of
Municipal Bonds and are not necessarily the criteria that would be used in
regard to the purchase of such bonds by the Fund. The Policies do not insure
(i) municipal securities ineligible for insurance and (ii) municipal
securities no longer owned by the Fund.

     The Policies do not guarantee the market value of the insured Municipal
Bonds or the value of the shares of the Fund. In addition, if the provider of
an original issuance insurance policy is unable to meet its obligations under
such policy or if the rating assigned to the insurance claims-paying ability
of any such insurer deteriorates, the insurance company will not have any
obligation to insure any issue held by the Fund that is adversely affected by
either of the above described events. In addition to the payment of premium,
the policies may require that the Fund notify the insurance company as to all
Municipal Bonds in a Fund's portfolio and permit the insurance company to
audit their records. The insurance premiums will be payable monthly by a Fund
in accordance with a premium schedule to be furnished by the insurance company
at the time the Policies are issued. Premiums are based upon the amounts
covered and the composition of the portfolio.

     The Fund will seek to utilize insurance companies that have insurance
claims-paying ability ratings of AAA from Standard & Poor's ("S&P") or Fitch
Ratings ("Fitch") or Aaa from Moody's Investors Service, Inc. ("Moody's"). No
assurance can be given, however, that insurance from insurance carriers
meeting these criteria will be at all times available.

     An S&P insurance claims-paying ability rating is an assessment of an
operating insurance company's financial capacity to meet obligations under an
insurance policy in accordance with the terms. An insurer with an insurance
claims-paying ability rating of AAA has the highest rating assigned by S&P.
Capacity to honor insurance contracts is considered by S&P to be extremely
strong and highly likely to remain so over a long period of time. A Fitch
insurance claims-paying ability rating provides an assessment of an insurance
company's financial strength and, therefore, its ability to pay policy and
contract claims under the terms indicated. An insurer with an insurance
claims-paying ability rating of AAA has the highest rating assigned by Fitch.
The ability to pay claims is adjudged by Fitch to be extremely strong for
insurance companies with this highest rating. In the opinion of Fitch,
foreseeable business and economic risk factors should not have any material
adverse impact on the ability of these insurers to pay claims. In Fitch's
opinion, profitability, overall balance sheet strength, capitalization and
liquidity are all at very secure levels and are unlikely to be affected by
potential adverse underwriting, investment or cyclical events. A Moody's
insurance claims-paying ability rating is an opinion of the ability of an
insurance company to repay punctually senior policyholder obligations and
claims. An insurer with an insurance claims-paying ability rating of Aaa is
considered by Moody's to be of the best quality. In the opinion of Moody's,
the policy obligations of an insurance company with an insurance claims-paying
ability rating of Aaa carry the smallest degree of credit risk and, while the
financial strength of these companies is likely to change, such changes as can
be visualized are most unlikely to impair the company's fundamentally strong
position.

     An insurance claims-paying ability rating of S&P, Fitch or Moody's does
not constitute an opinion on any specific contract in that such an opinion can
only be rendered upon the review of the specific insurance contract.
Furthermore, an insurance claims-paying ability rating does not take into
account deductibles, surrender or cancellation penalties or the timeliness of
payment; nor does it address the ability of a company to meet nonpolicy
obligations (i.e., debt contracts).


                                     B-1
<PAGE>


     The assignment of ratings by S&P, Fitch or Moody's to debt issues that
are fully or partially supported by insurance policies, contracts or
guarantees is a separate process from the determination of claims-paying
ability ratings. The likelihood of a timely flow of funds from the insurer to
the trustee for the bondholders is a key element in the rating determination
for such debt issues.



                                     B-2
<PAGE>


                                  APPENDIX C

                             SETTLEMENT PROCEDURES

     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 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. Capitalized terms used herein shall have the respective meanings
specified in the Glossary in the prospectus or this Appendix C hereto, as the
case may be.

     (a) On each Auction Date, the Auction Agent shall notify by telephone or
through the Auction Agent'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:

          (i) the Applicable Rate fixed for the next succeeding Dividend
     Period;

          (ii) whether Sufficient Clearing Bids existed for the determination
     of the Applicable Rate;

          (iii) if such Broker-Dealer (a "Seller's Broker-Dealer") 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;

          (iv) if such Broker-Dealer (a "Buyer's Broker-Dealer") 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;

          (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's Broker-Dealers
     (and the name of the Agent Member, if any, of each such Buyer'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's
     Broker-Dealers acted;

          (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's
     Broker-Dealers (and the name of the Agent Member, if any, of each such
     Seller'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's Broker-Dealers acted; and

          (vii) the Auction Date of the next succeeding Auction with respect
     to the AMPS.

     (b) On each Auction Date, each Broker-Dealer that submitted an Order on
behalf of any Beneficial Owner or Potential Beneficial Owner shall:

          (i) in the case of a Broker-Dealer that is a Buyer'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'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;


                                     C-1
<PAGE>


          (ii) in the case of a Broker-Dealer that is a Seller'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's Agent Member to deliver to such Broker-Dealer (or its
     Agent Member) through the Securities Depository the number of shares of
     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;

          (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;

          (iv) advise each Beneficial Owner on whose behalf such Broker-Dealer
     submitted an Order of the Auction Date for the next succeeding Auction;
     and

          (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.

     (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.

     (d) On each Auction Date:

          (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;

          (ii) each Seller'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's Broker-Dealer (or its Agent Member) identified to such Seller's
     Broker-Dealer pursuant to (a)(v) above against payment therefor; and

          (iii) each Buyer'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'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.

     (e) On the day after the Auction Date:

          (i) each Bidder'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;

          (ii) each Seller'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


                                     C-2
<PAGE>


          (iii) each Buyer'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.

     (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.



                                     C-3
<PAGE>


                                  APPENDIX D

                              AUCTION PROCEDURES

     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 D 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.

Paragraph 10(a) Certain Definitions.

     As used in this Paragraph 10, the following terms shall have the
following meanings, unless the context otherwise requires:

          (i) "AMPS" shall mean the shares of AMPS being auctioned pursuant to
     this Paragraph 10.

          (ii) "Auction Date" shall mean the first Business Day preceding the
     first day of a Dividend Period.

          (iii) "Available AMPS" shall have the meaning specified in Paragraph
     10(d)(i) below.

          (iv) "Bid" shall have the meaning specified in Paragraph 10(b)(i)
     below.

          (v) "Bidder" shall have the meaning specified in Paragraph 10(b)(i)
     below.

          (vi) "Hold Order" shall have the meaning specified in Paragraph
     10(b)(i) below.

          (vii) "Maximum Applicable Rate" 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 the lower of the credit
     rating or ratings assigned on such date to such shares by Moody's and S&P
     (or if Moody's or S&P or both shall not make such rating available, the
     equivalent of either or both of such ratings by a Substitute Rating
     Agency or two Substitute Rating Agencies or, in the event that only one
     such rating shall be available, such rating) as follows:

<TABLE>
<CAPTION>

                                                              Applicable         Applicable        Applicable         Applicable
                               Credit Ratings                 Percentage         Percentage        Spread Over       Spread Over
                     ------------------------------------
                                                             of Reference       of Reference        Reference         Reference
                                                               Rate--No            Rate--            Rate--No           Rate--
                         Moody's                S&P          Notification       Notification      Notification       Notification
                     ----------------    ----------------  ----------------   ----------------  ----------------   ----------------
                       <S>                 <C>                   <C>                <C>               <C>               <C>
                           Aaa                  AAA              110%               125%              1.10%             1.25%
                        Aa3 to Aa1          AA- to AA+           125%               150%              1.25%             1.50%
                         A3 to A1            A- to A+            150%               200%              1.50%             2.00%
                       Baa3 to Baa1        BBB- to BBB+          175%               250%              1.75%             2.50%
                        Below Baa3          Below BBB-           200%               300%              2.00%             3.00%

</TABLE>

     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 "Termination of Rating
Agency Provisions," the Fund shall take all reasonable action necessary to
enable S&P and Moody's to provide a rating for the AMPS. If either S&P or
Moody's shall not make such a rating available or if neither S&P nor Moody's
shall make such a rating available, subject to the provisions of paragraph 12
of the Articles Supplementary entitled "Termination of Rating Agency
Provisions," Merrill Lynch, Pierce, Fenner & Smith


                                     D-1
<PAGE>


Incorporated or its affiliates and successors, after obtaining the Fund'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.

          (viii) "Order" shall have the meaning specified in Paragraph
     10(b)(i) below.

          (ix) "Sell Order" shall have the meaning specified in Paragraph
     10(b)(i) below.

          (x) "Submission Deadline" shall mean 1:00 p.m., New York City time,
     on any Auction Date or such other time on any Auction Date as may be
     specified by the Auction Agent from time to time as the time by which
     each Broker-Dealer must submit to the Auction Agent in writing all Orders
     obtained by it for the Auction to be conducted on such Auction Date.

          (xi) "Submitted Bid" shall have the meaning specified in Paragraph
     10(d)(i) below.

          (xii) "Submitted Hold Order" shall have the meaning specified in
     Paragraph 10(d)(i) below.

          (xiii) "Submitted Order" shall have the meaning specified in
     Paragraph 10(d)(i) below.

          (xiv) "Submitted Sell Order" shall have the meaning specified in
     Paragraph 10(d)(i) below.

          (xv) "Sufficient Clearing Bids" shall have the meaning specified in
     Paragraph 10(d)(i) below.

          (xvi) "Winning Bid Rate" shall have the meaning specified in
     Paragraph 10(d)(i) below.

Paragraph 10(b) Orders by Beneficial Owners, Potential Beneficial Owners,
Existing Holders And Potential Holders.

     (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:

          (A) each Beneficial Owner may submit to its Broker-Dealer
     information as to:

               (1) the number of outstanding shares, if any, of AMPS held by
          such Beneficial Owner which such Beneficial Owner desires to
          continue to hold without regard to the Applicable Rate for the next
          succeeding Dividend Period;

               (2) the number of outstanding shares, if any, of AMPS held by
          such Beneficial Owner which such Beneficial Owner desires to
          continue to hold, provided that the Applicable Rate for the next
          succeeding Dividend Period shall not be less than the rate per annum
          specified by such Beneficial Owner; and/or

               (3) the number of outstanding shares, if any, of AMPS held by
          such Beneficial Owner which such Beneficial Owner offers to sell
          without regard to the Applicable Rate for the next succeeding
          Dividend Period; and

          (B) each Broker-Dealer, using a list of Potential Beneficial Owners
     that shall be maintained in good faith for the purpose of conducting a
     competitive Auction, shall contact Potential Beneficial Owners, including
     Persons that are not Beneficial Owners, on such list to determine the
     number of


                                     D-2
<PAGE>


     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.

     For the purposes hereof, the communication by a Beneficial Owner or
Potential Beneficial Owner to a Broker-Dealer, or the communication by a
Broker-Dealer acting for its own account to the Auction Agent, of information
referred to in clause (A) or (B) of this Paragraph 10(b)(i) is hereinafter
referred to as an "Order" and each Beneficial Owner and each Potential
Beneficial Owner placing an Order, including a Broker-Dealer acting in such
capacity for its own account, is hereinafter referred to as a "Bidder"; an
Order containing the information referred to in clause (A)(1) of this
Paragraph 10(b)(i) is hereinafter referred to as a "Hold Order"; an Order
containing the information referred to in clause (A)(2) or (B) of this
Paragraph 10(b)(i) is hereinafter referred to as a "Bid"; and an Order
containing the information referred to in clause (A)(3) of this Paragraph
10(b)(i) is hereinafter referred to as a "Sell Order." Inasmuch as a
Broker-Dealer participates in an Auction as an Existing Holder or a Potential
Holder only to represent the interests of a Beneficial Owner or Potential
Beneficial Owner, whether it be its customers or itself, all discussion herein
relating to the consequences of an Auction for Existing Holders and Potential
Holders also applies to the underlying beneficial ownership interests
represented.

          (ii) (A) A Bid by an Existing Holder shall constitute an irrevocable
     offer to sell:

               (1) the number of outstanding 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

               (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

               (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.

          (B) A Sell Order by an Existing Holder shall constitute an
     irrevocable offer to sell:

               (1) the number of outstanding shares of AMPS specified in such
          Sell Order, or

               (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.

          (C) A Bid by a Potential Holder shall constitute an irrevocable
     offer to purchase:

               (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

               (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.

Paragraph 10(c) Submission of Orders by Broker-Dealers to Auction Agent.

     (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:


                                     D-3
<PAGE>


          (A) the name of the Bidder placing such Order (which shall be the
     Broker-Dealer unless otherwise permitted by the Fund);

          (B) the aggregate number of outstanding shares of AMPS that are the
     subject of such Order;

          (C) to the extent that such Bidder is an Existing Holder

               (1) the number of outstanding shares, if any, of AMPS subject
          to any Hold Order placed by such Existing Holder;

               (2) the number of outstanding shares, if any, of AMPS subject
          to any Bid placed by such Existing Holder and the rate per annum
          specified in such Bid; and

               (3) the number of outstanding shares, if any, of AMPS subject
          to any Sell Order placed by such Existing Holder; and

          (D) to the extent such Bidder is a Potential Holder, the rate per
     annum specified in such Potential Holder's Bid.

     (ii) If any rate per annum specified in any Bid contains more than three
figures to the right of the decimal point, the Auction Agent shall round such
rate up to the next highest one-thousandth (.001) of 1%.

     (iii) If an Order or Orders covering all of the outstanding 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.

     (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:

          (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;

          (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

          (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


                                     D-4
<PAGE>


     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.

     (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.

     (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.

Paragraph 10(d) Determination of Sufficient Clearing Bids, Winning Bid Rate
and Applicable Rate.

     (i) Not earlier than the Submission Deadline on each Auction Date, the
Auction Agent shall assemble all Orders submitted or deemed submitted to it by
the Broker-Dealers (each such Order as submitted or deemed submitted by a
Broker-Dealer being hereinafter referred to individually as a "Submitted Hold
Order," a "Submitted Bid" or a "Submitted Sell Order," as the case may be, or
as a "Submitted Order") and shall determine:

          (A) the excess of the total number of outstanding 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
     "Available AMPS");

          (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:

               (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

               (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 "Sufficient Clearing Bids"); and

          (C) if Sufficient Clearing Bids exist, the lowest rate per annum
     specified in the Submitted Bids (the "Winning Bid Rate") that if:

               (1) each Submitted Bid from Existing Holders specifying the
          Winning Bid Rate and all other submitted Bids from Existing Holders
          specifying lower rates per annum were rejected, thus entitling such
          Existing Holders to continue to hold the shares of AMPS that are the
          subject of such Submitted Bids, and

               (2) each Submitted Bid from Potential Holders specifying the
          Winning Bid Rate and all other Submitted Bids from Potential Holders
          specifying lower rates per annum were accepted, thus entitling the
          Potential Holders to purchase the 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.


                                     D-5
<PAGE>


     (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:

          (A) if Sufficient Clearing Bids exist, that the Applicable Rate for
     the next succeeding Dividend Period shall be equal to the Winning Bid
     Rate;

          (B) if Sufficient Clearing Bids do not exist (other than because all
     of the outstanding 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

          (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.

Paragraph 10(e) Acceptance and Rejection of Submitted Bids and Submitted Sell
Orders and Allocation of Shares.

     Based on the determinations made pursuant to Paragraph 10(d)(i), the
Submitted Bids and Submitted Sell Orders shall be accepted or rejected and the
Auction Agent shall take such other action as set forth below:

     (i) If Sufficient Clearing Bids have been made, subject to the provisions
of Paragraph 10(e)(iii) and Paragraph 10(e)(iv), Submitted Bids and Submitted
Sell Orders shall be accepted or rejected in the following order of priority
and all other Submitted Bids shall be rejected:

          (A) the Submitted Sell Orders of Existing Holders shall be accepted
     and the Submitted Bid of each of the Existing Holders specifying any rate
     per annum that is higher than the Winning Bid Rate shall be accepted,
     thus requiring each such Existing Holder to sell the outstanding shares
     of AMPS that are the subject of such Submitted Sell Order or Submitted
     Bid;

          (B) the Submitted Bid of each of the Existing Holders specifying any
     rate per annum that is lower than the Winning Bid Rate shall be rejected,
     thus entitling each such Existing Holder to continue to hold the
     outstanding shares of AMPS that are the subject of such Submitted Bid;

          (C) the Submitted Bid of each of the Potential Holders specifying
     any rate per annum that is lower than the Winning Bid Rate shall be
     accepted;

          (D) the Submitted Bid of each of the Existing Holders specifying a
     rate per annum that is equal to the Winning Bid Rate shall be rejected,
     thus entitling each such Existing Holder to continue to hold the
     outstanding 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 ("Remaining Shares") 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


                                     D-6
<PAGE>


          (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.

     (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:

          (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;

          (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

          (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.

     (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.

     (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.

     (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.


                                     D-7
<PAGE>


Paragraph 10(f) Miscellaneous.

     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's beneficial ownership. Neither
the Fund nor any affiliate (other than Merrill Lynch, Pierce, Fenner & Smith
Incorporated) shall submit an Order in any Auction. Any Beneficial Owner that
is an affiliate (other than Merrill Lynch, Pierce, Fenner & 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'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.


                                     D-8
<PAGE>


                           PART C. OTHER INFORMATION

Item 24.   Financial Statements And Exhibits.

(1)        Financial Statements

Part A:
           Financial Highlights for the six months ended April 30, 2003 and
           each of the fiscal years in the ten-year period ended October 31,
           2003.

Part B:
           Schedule of Investments of the Fund as of October 31, 2003.*
           Statement of Net Assets of the Fund as of October 31, 2003.*
           Statement of Operations of the Fund for the fiscal year ended
           October 31, 2003.*
           Statements of Changes in Net Assets of the Fund for the fiscal
           years ended October 31, 2002 and 2003.*
           Financial Highlights of the Fund for each of the fiscal years in
           the five-year period ended October 31, 2003.*
           Report of Independent Auditors.*
           Schedule of Investments of the Fund as of April 30, 2004.**
           Statement of Net Assets of the Fund as of April 30, 2004.**
           Statement of Operations of the Fund for the six months ended April
           30, 2004.**
           Statements of Changes in Net Assets of the Fund for the six months
           ended April 30, 2004.**
           Financial Highlights of the Fund for the six months ended April 30,
           2004 and each of the fiscal years in the five-year period ended
           October 31, 2003.**

*   Incorporated by reference to the Registrant's Annual Report to
    Shareholders for the fiscal year ended October 31, 2003 filed with the
    Securities and Exchange Commission ("Commission") on January 6, 2003
    pursuant to Rule 30b2-1 under the Investment Company Act of 1940, as
    amended ("1940 Act").

**  Incorporated by reference to the Registrant's Semi-Annual Report to
    Shareholders for the six month period ended April 30, 2004 filed with the
    Commission on June [30], 2004 pursuant to Rule 30b2-1 under the 1940 Act.

Exhibits          Description
- --------          -----------
(a)(1)            Articles of Incorporation of the Registrant.
(a)(2)            Articles of Amendment to the Articles of Incorporation of
                  the Registrant.
(a)(3)            Articles of Transfer.
(a)(4)            Articles Supplementary creating the Series A, Series B,
                  Series C, Series D and Series E of Auction Market Preferred
                  Stock ("AMPS") of the Registrant.
(a)(5)            Articles of Amendment to the Articles Supplementary, dated
                  November 30, 1994.
(a)(6)            Articles of Amendment to the Articles Supplementary, dated
                  November 30, 1994.
(a)(7)            Form of Articles Supplementary creating the Series F and
                  Series G AMPS of the Registrant.(a)
(a)(8)            Articles of Amendment to the Articles Supplementary, dated
                  March 26, 2004.(b)
(a)(9)            Form of Articles Supplementary creating two series of AMPS.
(b)               By-laws of the Registrant.
(c)               Not applicable.
(d)(1)            Portions of the Articles of Incorporation, By-laws and
                  Articles Supplementary of the Registrant defining the rights
                  of holders of shares of the Registrant.(c)
(d)(2)            Form of specimen certificate for the AMPS of the Registrant.
(e)               Form of Automatic Dividend Reinvestment Plan.
(f)               Not applicable.
(g)               Form of Investment Advisory Agreement between the Registrant
                  and Fund Asset Management, L.P. ("FAM" or the "Investment
                  Adviser").
(h)(1)            Form of Purchase Agreement between the Registrant and
                  Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
                  Lynch") relating to the AMPS.
(h)(2)            Form of Merrill Lynch Standard Dealer Agreement.(d)
(i)               Not applicable.
(j)               Form of Custodian Agreement between the Registrant and State
                  Street Bank and Trust Company ("State Street").(e)


                                     C-1
<PAGE>


(k)(l)            Form of Registrar, Transfer Agency, Dividend Disbursing
                  Agency and Shareholder Servicing Agency Agreement between
                  the Registrant, EquiServe Trust and EquiServe, L.P.(f)
(k)(2)            Form of Agreement of Resignation, Appointment and Acceptance
                  among the Registrant, IBJ Whitehall Banks Trust Company and
                  The Bank of New York.(f)
(k)(3)            Form of Administrative Services Agreement between the
                  Registrant and State Street.(g)
(k)(4)            Form of Auction Agent Agreement between the Registrant and
                  The Bank of New York.
(k)(5)            Form of Broker-Dealer Agreement.
(k)(6)            Form of Letter of Representations.
(l)               Opinion and Consent of Sidley Austin Brown & Wood LLP.*
(m)               Not applicable.
(n)               Consent of                         , independent auditors
                  for the Registrant.*
(o)               Not applicable.
(p)               Not applicable.
(q)               Not applicable.
(r)               Code of Ethics.(h)


- -----------------
(a)    Filed with the Securities and Exchange Commission (the "Commission") on
       August 21, 1996 as an exhibit to Pre-Effective Amendment No. 1 to the
       Registrant's Registration Statement on Form N-14 (File No. 333-07823).
(b)    Filed with the Commission on May 14, 2004 as an exhibit to
       Post-Effective Amendment No. 2 to the Registrant's Registration
       Statement on Form N-14 (File No. 333-113433).
(c)    Reference is made to Article V, Article VI (sections 2, 3, 4, 5 and 6),
       Article VII, Article VIII, Article X, Article XI, Article XII and
       Article XIII of the Registrant's Articles of Incorporation, filed as
       Exhibit 1(a) hereto; to Article II, Article III (sections 1, 2, 3, 5
       and 17), Article VI, Article VII, Article XII, Article XIII and Article
       XIV of the Registrant's By-Laws filed as Exhibit (b) hereto; and to the
       Articles Supplementary and Articles of Amendment filed as Exhibit
       (a)(4), (a)(5), (a)(6), (a)(7), (a)(8) and (a)(9).
(d)    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, Inc. (File No. 333-102712), filed on March 25, 2003.
(e)    Incorporated by reference to Exhibit 7 to Post-Effective No. 10 to the
       Registration Statement on Form N-1A of Merrill Lynch Maryland Municipal
       Bond Fund of Merrill Lynch Multi-State Municipal Series Trust (File No.
       33-49873), filed on October 30, 2001.
(f)    Incorporated by reference to an exhibit to the Registration Statement
       on Form N-14 of MuniYield Fund, Inc. (File No. 333-65242), filed on
       September 14, 2001.
(g)    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.
(h)    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.

* To be provided by amendment.

Item 25.   Marketing Arrangements.

     See Exhibits (h)(1) and (2).

Item 26.   Other Expenses of Issuance and Distribution.

     The following table sets forth the estimated expenses to be incurred in
connection with the offering described in this Registration Statement:

Registration fees                                                 $16,471
Printing (other than stock certificates)                          $21,250
Legal fees and expenses                                           $75,000
Accounting fees and expenses                                      $ 6,000
Rating Agency Fees                                                $91,000
Miscellaneous                                                     $ 5,279
                                                               ---------------
Total                                                            $215,000

- ------------------------------

Item 27.   Persons Controlled by or Under Common Control with Registrant.


                                     C-2
<PAGE>


     The Registrant is not controlled by, or under common control with, any
person.

Item 28.   Number of Holders of Securities.

Title of Class                                        Number of Record Holders
                                                         At           , 2004
- -----------------------------------------------       ------------------------
Common Stock, $.10 par value
Preferred Stock, $.10 par value                                            1

Item 29.   Indemnification.

     Reference is made to Section 2-418 of the General Corporation Law of the
State of Maryland, Article V of the Registrant's Articles of Incorporation,
Article VI of the Registrant's By-laws and Section 6 of the Purchase
Agreement, which provide for indemnification.

     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.

     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.

     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.

     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 "1933 Act") against certain types of civil
liabilities arising in connection with the Registration Statement or
Prospectus and Statement of Additional Information.

     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


                                     C-3
<PAGE>


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.



                                     C-4
<PAGE>


Item 30.   Business and Other Connections of The Investment Adviser.

     FAM (the "Investment Adviser"), acts as the investment adviser for a
number of affiliated open-end and closed-end registered investment companies.

     Merrill Lynch Investment Managers, L.P. ("MLIM"), 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.

     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.

     The address of the Investment Adviser, MLIM, Princeton Services, Inc.
("Princeton Services") and Princeton Administrators, L.P. ("Princeton
Administrators") is also P.O. Box 9011, Princeton, New Jersey 08543-9011. The
address of Merrill Lynch and Merrill Lynch & Co., Inc. ("ML & Co.") is World
Financial Center, North Tower, 250 Vesey Street, New York, New York 10080. The
address of the Fund's transfer agent, The Bank of New York (the "Transfer
Agent"), is 100 Church Street, New York, New York 10286.

     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.

<TABLE>
<CAPTION>

                                                                                Other Substantial Business,
                                                                                   Profession, Vocation
           Name                     Position(s) with Investment Adviser               Or Employment
- -------------------------------  --------------------------------------------  --------------------------------------

<S>                                     <C>                                    <C>
ML & Co.                                 Limited Partner                        Financial Services Holding Company;
                                                                                Limited Partner of MLIM

Princeton Services                       General Partner                        General Partner of MLIM

Robert C. Doll, Jr.                      President                              President of MLIM; President of
                                                                                Princeton Services; Chief Investment
                                                                                Officer of OppenheimerFunds, Inc. in
                                                                                1999 and Executive Vice President
                                                                                thereof from 1991 to 1999

Donald C. Burke                          First Vice President and Treasurer;    First Vice President, Treasurer and
                                         Director of Taxation of MLIM           Director of Taxation of MLIM; Senior
                                                                                Vice President and Treasurer of
                                                                                Princeton Services; Vice President
                                                                                of FAMD

Andrew J. Donohue                        General Counsel                        General Counsel of MLIM and
                                                                                Princeton Services

</TABLE>

Item 31.   Location of Account and Records.

     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,


                                      C-5
<PAGE>


Plainsboro, New Jersey 08536), its Investment Adviser (800 Scudders Mill Road,
Plainsboro, New Jersey 08536), its custodian, State Street (225 Franklin
Street, Boston, Massachusetts 02110), its Transfer Agent (100 Church Street,
New York, New York 10286), and its accounting services provider, State Street
(500 College Road East, Princeton, New Jersey 08540).

Item 32.   Management Services.

     Not applicable.

Item 33.   Undertakings.

     (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.

     (2)  Not applicable.

     (3)  Not applicable.

     (4)  Not applicable.

     (5)  The Registrant undertakes that:

          (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.

          (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.

          (c)  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 requet, any statement of additional
     information.


                                     C-6
<PAGE>


                                  SIGNATURES

         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, and State of New
Jersey, on the 18th day of June, 2004.

                                         MUNIYIELD INSURED FUND, INC.
                                         (Registrant)

                                         By: /s/ Donald C. Burke
                                             ---------------------------------
                                             (Donald C. Burke, Vice President
                                             and Treasurer)

         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.

<TABLE>
<CAPTION>

                          Signature                                         Title                                Date
                          ---------                                         -----                                ----

<S>                                                            <C>                                             <C>
                          Terry K. Glenn*                       President (Principal Executive
      -------------------------------------------------
                      (TERRY K. GLENN)                              Officer) and Director

                         Donald C. Burke*                        Vice President and Treasurer
     --------------------------------------------------
                      (DONALD C. BURKE)                            (Principal Financial and
                                                                     Accounting Officer)

                       James H. Bodurtha*                                  Director
     --------------------------------------------------
                     (JAMES H. BODURTHA)


                         Joe Grills*                                       Director
      ------------------------------------------------
                        (JOE GRILLS)


                       Herbert I. London*                                  Director
     --------------------------------------------------
                     (HERBERT I. LONDON)


                         Andre F. Perold*                                  Director
     ----------------------------------------------------
                      (ANDRE F. PEROLD)


                        Roberta C. Ramo*                                   Director
      -------------------------------------------------
                      (ROBERTA C. RAMO)


                       Robert S. Salomon, Jr.*                             Director
      --------------------------------------------------
                  (ROBERT S. SALOMON, JR.)


                                                              C-7
<PAGE>


                      Stephen B. Swensrud*                                 Director
       -----------------------------------------------
                    (STEPHEN B. SWENSRUD)


                  *By: /s/ Donald C. Burke                                                                        June 18, 2004
                       --------------------
             (Donald C. Burke, Attorney-in-Fact)

</TABLE>


                                                              C-8
<PAGE>


                               POWER OF ATTORNEY


     The undersigned, Terry K. Glenn, Donald C. Burke, James H. Bodurtha, Joe
Grills, Herbert I. London, Andre F. Perold, Roberta Cooper Ramo, Robert S.
Salomon, Jr. and Stephen B. Swensrud, the Directors/Trustees and the Officers
of each of the registered investment companies listed below, hereby authorize
Terry K. Glenn, Andrew J. Donohue, Donald C. Burke, Robert C. Doll, Jr. and
Phillip S. Gillespie or any of them, as attorney-in-fact, to sign on his or
her behalf in the capacities indicated any Registration Statement or amendment
thereto (including post-effective amendments) for each of the following
registered investment companies and to file the same, with all exhibits
thereto, with the Securities and Exchange Commission: Apex Municipal Fund,
Inc.; Corporate High Yield Fund, Inc.; Corporate High Yield Fund III, Inc.;
Corporate High Yield Fund V, Inc.; Corporate High Yield Fund VI, Inc.; Fund
Asset Management Master Trust; Master Focus Twenty Trust; Master Large Cap
Series Trust; Mercury Funds II; Merrill Lynch California Municipal Series
Trust; Merrill Lynch Focus Value Fund, Inc.; Merrill Lynch Fundamental Growth
Fund, Inc.; Merrill Lynch Investment Managers Funds, Inc.; Merrill Lynch Large
Cap Series Funds, Inc.; Merrill Lynch Multi-State Municipal Series Trust;
Merrill Lynch Retirement Reserves Money Fund of Merrill Lynch Retirement
Series Trust; Merrill Lynch Short Term U.S. Government Fund, Inc.; Merrill
Lynch U.S. Government Mortgage Fund; Merrill Lynch Variable Series Funds,
Inc.; Merrill Lynch World Income Fund, Inc.; MuniAssets Fund, Inc.;
MuniEnhanced Fund, Inc.; MuniHoldings California Insured Fund, Inc.;
MuniHoldings Insured Fund II, Inc.; MuniInsured Fund, Inc; MuniYield Arizona
Fund, Inc.; MuniYield California Fund, Inc.; MuniYield California Insured
Fund, Inc.; MuniYield Florida Fund; MuniYield Fund, Inc.; MuniYield Insured
Fund, Inc.; MuniYield Michigan Insured Fund II, Inc.; MuniYield New Jersey
Fund, Inc.; MuniYield New York Insured Fund, Inc.; MuniYield Quality Fund,
Inc.; MuniYield Quality Fund II, Inc.; Summit Cash Reserves Fund of Financial
Institutions Series Trust; and The Asset Program, Inc.

Dated:  February 18, 2004

<TABLE>
<CAPTION>

<S>                                                                                 <C>
                            /s/ Terry K. Glenn                                                 /s/ Donald C. Burke
     -----------------------------------------------------------------             -------------------------------------------
                               Terry K. Glenn                                                    Donald C. Burke
                       (President/Principal Executive                                 (Vice President/Treasurer/Principal
                         Officer/Director/Trustee)                                      Financial and Accounting Officer)


                             /s/ James H. Bodurtha                                              /s/ Joe Grills
       -------------------------------------------------------------               -------------------------------------------
                             James H. Bodurtha                                                    Joe Grills
                             (Director/Trustee)                                               (Director/Trustee)


                            /s/ Herbert I. London                                             /s/ Andre F. Perold
      ---------------------------------------------------------------              -------------------------------------------
                             Herbert I. London                                                  Andre F. Perold
                             (Director/Trustee)                                                (Director/Trustee)


                            /s/ Roberta Cooper Ramo                                      /s/ Robert S. Salomon, Jr.
          ----------------------------------------------------------                -------------------------------------------
                               Roberta Cooper Ramo                                                Robert S. Salomon, Jr.
                              (Director/Trustee)                                                 (Director/Trustee)


                              /s/ Stephen B. Swensrud
                            Stephen B. Swensrud
                             (Director/Trustee)

</TABLE>


                                                              C-9
<PAGE>


Exhibit Index

(a)(1)            Articles of Incorporation of the Registrant.
(a)(2)            Articles of Amendment to the Articles of Incorporation of
                  the Registrant.
(a)(3)            Articles of Transfer.
(a)(4)            Articles Supplementary creating the Series A, Series B,
                  Series C, Series D and Series E of Auction Market Preferred
                  Stock ("AMPS") of the Registrant.
(a)(5)            Articles of Amendment to the Articles Supplementary, dated
                  November 30, 1994.
(a)(6)            Articles of Amendment to the Articles Supplementary, dated
                  November 30, 1994.
(a)(8)            Articles of Amendment to the Articles Supplementary, dated
                  March 26, 2004.
(a)(9)            Form of Articles Supplementary creating two series of AMPS.
(b)               By-laws of the Registrant.
(d)(2)            Form of specimen certificate for the AMPS of the Registrant.
(e)               Form of Automatic Dividend Reinvestment Plan.
(g)(1)            Form of Investment Advisory Agreement between the Registrant
                  and Fund Asset Management, L.P.
(h)(1)            Form of Purchase Agreement between the Registrant and
                  Merrill Lynch, Pierce, Fenner & Smith Incorporated relating
                  to the AMPS.
(k)(4)            Form of Auction Agent Agreement between the Registrant and
                  The Bank of New York.
(k)(5)            Form of Broker-Dealer Agreement.
(k)(6)            Form of Letter of Representations.



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2A.1
<SEQUENCE>2
<FILENAME>efc4-1163_5550630ex992a1.txt
<TEXT>
                                                                EXHIBIT (a)(1)



                           ARTICLES OF INCORPORATION

                                      OF

                            MUNIINTEREST FUND, INC.

                                  ARTICLE I

     THE UNDERSIGNED, LAURA C. SUTTON, whose post-office address is One World
Trade Center, New York, New York 10048-0557, being at least eighteen (18)
years of age, does hereby act as an incorporator, under and by virtue of the
General Laws of the State of Maryland authorizing the formation of
corporations and with the intention of forming a corporation.

                                  ARTICLE II

                                     NAME
                                     ----

     The name of the corporation is MUNIINTEREST FUND, INC. (the
"Corporation").

                                  ARTICLE III

                              PURPOSES AND POWERS
                              -------------------

     The purpose or purposes for which the Corporation is formed is to act as
a closed-end, management investment company under the federal Investment
Company Act of 1940, as amended, and to exercise and enjoy all of the powers,
rights and privileges granted to, or conferred upon, corporations by the
General Laws of the State of Maryland now or hereafter in force.

                                  ARTICLE IV

                         PRINCIPAL OFFICE AND RESIDENT
                         -----------------------------

     The post-office address of the principal office of the Corporation in the
State of Maryland is c/o The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202. The

<PAGE>

name of the resident agent of the Corporation in this State is The Corporation
Trust Incorporated, a corporation of this State, and the post-office address
of the resident agent is The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202.

                                   ARTICLE V

                                 CAPITAL STOCK
                                 -------------

     (1) The total number of shares of capital stock which the Corporation
shall have the authority to issue in Two Hundred Million (200,0000,000)
shares, all of one class called Common Stock, of the par value of Ten Cents
($0.10) per share and of the aggregate par value of Twenty Million Dollars
($20,000,000).

     (2) The Board of Directors may 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.

     (3) Unless otherwise expressly provided in the charter of the
Corporation, including any Articles Supplementary creating any class or series
of capital stock, the holders of each class or series of capital stock shall
be entitled to dividends and distributions in such amounts and at such times
as may be determined by the Board of Directors, and the dividends and
distributions paid with respect to the various classes or series of capital
stock may vary among such classes and series.


                                      2
<PAGE>


     (4) Unless otherwise expressly provided in the charter of the
Corporation, including any Articles Supplementary creating any class or series
of capital stock, on each matter submitted to a vote of stockholders, each
holder of a share of capital stock of the Corporation shall be entitled to one
vote for each share standing in such holder's name on the books of the
Corporation, irrespective of the class or series thereof, and all shares of
all classes and series shall vote together as a single class; provided,
however, that as to any matter with respect to which a separate voice of any
class or series is required by the Investment Company Act of 1940, as amended,
and in effect from time to time, or any rules, regulations or orders issued
thereunder, or by the Maryland General Corporation Law, such requirement as to
a separate vote by that class or series shall apply in lieu of a general vote
of all classes and series as described above.

     (5) Notwithstanding any provision of the Maryland General Corporation Law
requiring a greater proportion than a majority of the votes of all classes or
series of capital stock of the Corporation (or of any class or series entitled
to vote thereon as a separate class or series) to take or authorize any
action, the Corporation is hereby authorized (subject to the requirements of
the Investment Company Act of 1940, as amended, and in effect from time to
time, and any rules, regulations and orders issued thereunder) to take such
action upon the concurrence of a majority of the aggregate number of shares of
capital stock of the Corporation entitled to vote thereon (or a majority of
the aggregate number of shares of a class or series entitled to vote thereon
as a separate class or series).

     (6) Unless otherwise expressly provided in the charter of the
Corporation, including any Articles Supplementary creating any class or series
of capital stock, in the event of any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, the holders of all
classes and series of capital stock of the Corporation shall be entitled,
after


                                      3
<PAGE>


payment or provision for payment of the debts and other liabilities of the
Corporation, to share ratably in the remaining net assets of the Corporation.

     (7) Any fractional shares shall carry proportionately all the rights of a
whole share, excepting any right to receive a certificate evidencing such
fractional share, but including, without limitation, the right to vote and the
right to receive dividends.

     (8) All persons who shall acquire stock in the Corporation shall acquire
the same subject to the provisions of the charter and By-Laws of the
Corporation. As used in the charter of the Corporation, the terms "charter"
and "Articles of Incorporation" shall mean and include the Articles of
Incorporation of the Corporation as amended, supplemented and restated from
time to time by Articles of Amendment, Articles Supplementary, Articles of
Restatement or otherwise.

                                  ARTICLE VI

                     PROVISIONS FOR DEFINING, LIMITING AND
                       REGULATING CERTAIN POWERS OF THE
                       CORPORATION AND OF THE DIRECTORS
                               AND STOCKHOLDERS
                               ----------------

     (1) The number of directors of the Corporation shall be three (3), which
number may be changed pursuant to the By-Laws of the Corporation but shall
never be less than three (3). The names of the directors who shall act until
the first annual meeting or until their successors are duly elected and
qualify are:

                              Philip L. Kirstein
                                Mark B. Goldfus
                            Michael J. Hennewinkel

     (2) The Board of Directors of the Corporation is hereby empowered to
authorize the issuance from time to time of shares of capital stock, whether
now or hereafter authorized, for such consideration as the Board of Directors
may deem advisable, subject to such limitations as


                                      4
<PAGE>


may be set forth in these Articles of Incorporation or in the By-laws of the
Corporation or in the General Laws of the State of Maryland.

     (3) Each director and each officer of the Corporation shall be
indemnified by the Corporation to the full extent permitted by the General
Laws of the State of Maryland, subject to the requirements of the Investment
Company Act of 1940, as amended. No amendment of these Articles of
Incorporation or repeal of any provision hereof shall limit or eliminate the
benefits provided to directors and officers under this provision in connection
with any act or omission that occurred prior to such amendment or repeal.

     (4) To the fullest extent permitted by the General Laws of the State of
Maryland, subject to the requirements of the Investment Company Act of 1940,
as amended, no director or officer of the Corporation shall be personally
liable to the Corporation or its security holders for money damages. No
amendment of these Articles of Incorporation or repeal of any provision hereof
shall limit or eliminate the benefits provided to directors and officers under
this provision in connection with any act or omission that occurred prior to
such amendment or repeal.

     (5) The Board of Directors of the Corporation may make, alter or repeal
from time to time any of the By-Laws of the Corporation except any particular
By-Law which is specified as not subject to alteration or repeal by the Board
of Directors, subject to the requirements of the Investment Company Act of
1940, as amended.

     (6) A director elected by the holders of capital stock may be removed
(with or without cause), but only action taken by the holders of at least
sixty-six and two-thirds percent (66 2/3%) of the shares of capital stock then
entitled to vote in an election to fill that directorship.


                                      5
<PAGE>


                                 ARTICLE VII

                          DENIAL OF PREEMPTIVE RIGHTS
                          ---------------------------

     No shareholder of the Corporation shall by reason of his holding shares
of capital stock have any preemptive or preferential right to purchase or
subscribe to any shares of capital stock of the Corporation, now or hereafter
to be authorized, or any notes, debentures, bonds or other securities
convertible into shares of capital stock, now or hereafter to be authorized,
whether or not the issuance of any such shares, or notes, debentures, bonds or
other securities would adversely affect the dividend or voting rights of such
shareholder; and the Board of Directors may issue shares of any class of the
Corporation, or any notes, debentures, bonds, other securities convertible
into shares of any class, either whole or in part, to the existing
shareholders.

                                 ARTICLE VIII

                             DETERMINATION BINDING
                             ---------------------

     Any determination made in good faith, so far as accounting matters are
involved, in accordance with accepted accounting practice by or pursuant to
the direction of the Board of Directors, as to the amount of assets,
obligations or liabilities of the Corporation, as to the amount of net income
of the Corporation from dividends and interest for any period or amounts at
any time legally available for the payment of dividends, as to the amount of
any reserves or charges set up and the propriety thereof, as to the time of or
purpose for creating reserves or as to the use, alteration or cancellation of
any reserves or charges (whether or not any obligation or liability for which
such reserves or charges shall have been created, shall have been paid or
discharged or shall be then or thereafter required to be paid or discharged),
as to the price of any security owned by the Corporation or as to any other
matters relating to the issuance, sale,


                                      6
<PAGE>


redemption or other acquisition or disposition of securities or shares of
capital stock of the Corporation, and any reasonable determination made in
good faith by the Board of Directors as to whether any transaction constitutes
a purchase of securities on "margin," a sale of securities "short," or an
underwriting of the sale of, or a participation in any underwriting or selling
group in connection with the public distribution of, any securities, shall be
final and conclusive, and shall be binding upon the Corporation and all
holders of its capital stock, past, present and future, and shares of the
capital stock of the Corporation are issued and sold on the condition and
understanding, evidenced by the purchase of shares of capital stock or
acceptance of share certificates, that any and all such determinations shall
be binding as aforesaid. No provision of these Articles of Incorporation shall
be effective to (a) require a waiver of compliance with any provision of the
Securities Act of 1933, as amended, or the Investment Company Act of 1940, as
amended, or of any valid rule, regulation or order of the Securities and
Exchange Commission thereunder or (b) protect or purport to protect any
director or officer of the Corporation against any liability to the
Corporation or its security holders to which he 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 office.

                                  ARTICLE IX

                              PERPETUAL EXISTENCE
                              -------------------

     The duration the Corporation shall be perpetual.

                                  ARTICLE X

                       PRIVATE PROPERTY OF STOCKHOLDERS
                       --------------------------------

     The private property of shareholders shall not be subject to the payment
of corporate debts to any extent whatsoever.


                                      7
<PAGE>


                                  ARTICLE XI

                        CONVERSION TO OPEN-END COMPANY
                        ------------------------------

     Notwithstanding any other provisions of these Articles of Incorporation
or the By-Laws of the Corporation, a favorable vote of the holders of at least
sixty-six and two-thirds percent (66 2/3%) of the outstanding shares of
capital stock of the Corporation entitled to be voted on the matter shall be
required to approve, adopt or authorize an amendment to these Articles of
Incorporation of the Corporation that makes the Common Stock a "redeemable
security" (as that term is defined in section 2(a)(32) of the Investment
Company Act of 1940, as amended) unless such action has previously 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 of the
Corporation, in which case the affirmative vote of the holders of a majority
of the outstanding shares of capital stock of the Corporation entitled to vote
thereon shall be required.

                                  ARTICLE XII

                      MERGER, SALE OF ASSETS, LIQUIDATION
                      -----------------------------------

     Notwithstanding any other provisions of these Articles of Incorporation
or the By-Laws of the Corporation, a favorable vote of the holders of at least
sixty-six and two-thirds percent (66 2/3%) of the outstanding shares of
capital stock of the Corporation entitled to be voted on the matter shall be
required to approve, adopt or authorize (i) a merger or consolidation or
statutory share exchange of the Corporation with any other corporation, (ii) a
sale of all or substantially all of the assets of the Corporation (other than
in the regular course of its investment activities), or (iii) a liquidation or
dissolution of the Corporation, unless such action has previously 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 of the
Corporation, in which case the


                                      8
<PAGE>


affirmative vote of the holders of a majority of the outstanding shares of
capital stock of the Corporation entitled to vote thereon shall be required.

                                 ARTICLE XIII

                                   AMENDMENT
                                   ---------

     The Corporation reserves the right to amend, alter, change or repeal any
provision contained in these Articles of Incorporation, in the manner now or
hereafter prescribed by statute, including any amendment which alters the
contract rights, as expressly set forth in the charter, of any outstanding
stock and substantially adversely affects the stockholders' rights and all
rights conferred upon stockholders herein are granted subject to this
reservation. Notwithstanding any other provisions of these Articles of
Incorporation or the By-Laws of the Corporation (and notwithstanding the fact
that a lesser percentage may be specified by law, these Articles of
Incorporation or the By-Laws of the Corporation) the amendment or repeal of
Section (5) of Article V, Section (1), Section (3), Section (4), Section (5)
and Section (6) of Article VI, Article IX, Article X, Article XI, Article XII,
or this Article XIII, of these Articles of Incorporation shall require the
affirmative vote of the holders of at least sixty-six and two-thirds percent
(66 2/3%) of the outstanding shares of capital stock of the Corporation
entitled to be voted on the matter.


                                      9
<PAGE>


     IN WITNESS WHEREOF, the undersigned incorporator of MuniInterest Fund,
Inc. hereby executes the foregoing Articles of Incorporation and acknowledges
the same to be her act and further acknowledges that, to the best of her
knowledge, the matters and facts set forth therein are true in all material
respects under the penalties of perjury.


Dated the 9th day
of January 1992.

                                    /s/ Laura C. Sutton
                                  ---------------------------------
                                  Laura C. Sutton


                                      10

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2A.2
<SEQUENCE>3
<FILENAME>efc4-1163_5550630ex992a2.txt
<TEXT>
                                                                EXHIBIT (a)(2)



                            MUNIINTEREST FUND, INC.

                             ARTICLES OF AMENDMENT


     MuniInterest Fund, Inc., a Maryland corporation having its principal
office in Baltimore, Maryland (hereinafter called the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of Maryland,
that:

     FIRST: The charter of the Corporation as hereby amended by striking out
Article II of the Articles of Incorporation and inserting in lieu thereof the
following:

                                  "Article II

                                     NAME


     The name of the Corporation is MuniYield Insured Fund, Inc."

     SECOND: The Board of Directors of the Corporation at a meeting held on
January 15, 1992 duly adopted a resolution in which was set forth the
foregoing amendment to the charter.

     THIRD: The remaining Articles of the charter shall remain in full force
and effect.

     FOURTH: The amendment of the charter of the Corporation as hereinabove
set forth has been duly advised, approved and adopted by the board of
directors of the Corporation there being no stock outstanding or subscribed
for at the time of approval.

     FIFTH: The authorized capital stock of the Corporation has not been
increased by these Articles of Amendment.


<PAGE>


     IN WITNESS WHEREOF, the officers of MuniInterest Fund, Inc. who executed
on behalf of said corporation these Articles of Amendment hereby acknowledge,
in the name and on behalf of said corporation, these Articles of Amendment to
be the corporate act of said corporation and further certify, under the
penalties of perjury, that, to the best of their knowledge, information and
belief, the matters and facts set forth therein with respect to the approval
thereof are true in all material respects, all on this 10th day of January,
1992.


                                    MuniInterest Fund, Inc.


                                    /s/ Marc B. Goldfus
                                    -----------------------------------
                                              Mark B. Goldfus,
                                                  Treasurer

Attest:

  /s/ Michael J. Hennewinkel
- --------------------------------------------
        Michael J. Hennewinkel,
              Secretary


                                      2

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2A.3
<SEQUENCE>4
<FILENAME>efc4-1163_5550622ex992a3.txt
<TEXT>
                                                                EXHIBIT (a)(3)



                             ARTICLES OF TRANSFER
         FROM MUNIYIELD INSURED FUND II, INC., A MARYLAND CORPORATION
            TO MUNIYIELD INSURED FUND, INC., A MARYLAND CORPORATION



         THESE ARTICLES OF TRANSFER are made and entered into as of the 21st
day of January, 1997, by and between MuniYield Insured Fund II, Inc., a
Maryland corporation (the "Transferor"), and MuniYield Insured Fund, Inc., a
Maryland corporation (the "Transferee").

     FIRST: The Transferor agrees to convey and transfer all of its assets to
the Transferee as hereinafter set forth.

     SECOND: (a) The Transferor was incorporated under the laws of the State
of Maryland.

             (b) The Transferee was incorporated under the laws of the State
of Maryland.

     THIRD: The name, address and principal place of business of the
Transferee is MuniYield Insured Fund, Inc., 800 Scudders Mill Road,
Plainsboro, New Jersey 08536.

     FOURTH: The Transferor and the Transferee maintain their principal office
in the State of Maryland in Baltimore City. Neither the Transferor nor the
Transferee owns an interest in land in the State of Maryland.

     FIFTH: The nature of the consideration to be paid by the Transferee for
the conveyance and transfer of all of the assets of the Transferor shall be
full shares of the Transferee's Common Stock and Auction Market Preferred
Stock, Series F and Series G, of an aggregate net asset value or liquidation
preference, as the case may be, equal (to the nearest one ten-thousandth of
one cent) to the value of the assets of the Transferor acquired, reduced by
the


<PAGE>


amount of liabilities assumed by the Transferee, both determined as of 4:15
P.M. on January 24, 1997.

     SIXTH: The terms and conditions of the transactions set forth in these
Articles of Transfer have been advised, authorized and approved by the
Transferor in the manner and by the vote required by its Articles of
Incorporation and the laws of the State of Maryland at a meeting of the Board
of Directors of the Transferor held on May 3, 1996, and by the subsequent
approval of the stockholders of the Transferor at a meeting of the
stockholders scheduled to be held on September 30, 1996, and ultimately
adjourned and held on November 14, 1996 at 11:00 A.M.

     SEVENTH: The terms and conditions of the transaction set forth in these
Articles of Transfer have been advised, authorized and approved by the
Transferee in the manner and by the vote required by its Articles of
Incorporation and the laws of the State of Maryland at a meeting of the Board
of Directors of the Transferee held on June 18, 1996, and by the subsequent
approval of the stockholders of the Transferee at a meeting of the
stockholders scheduled to be held on September 30, 1996, and ultimately
adjourned and held on November 14, 1996 at 10:45 A.M.

     EIGHTH: These Articles of Transfer shall be effective at the very
beginning of the day on January 27, 1997.


                                      2
<PAGE>


     IN WITNESS WHEREOF, each party to these Articles of Transfer has caused
these Articles to be signed and acknowledged in its name and on its behalf by
its Vice President and attested by its Secretary, on the day and year first
above written, and each such signatory hereby acknowledges the same to be the
act and deed of such corporation, and that to the best of his knowledge,
information and belief, all matters and facts stated herein are true in all
material respects.



ATTEST:                             MUNIYIELD INSURED FUND II, INC.



/s/ Mark B. Goldfus                 By:  /s/ Kenneth A. Jacob
- -----------------------------            ----------------------------------
Mark B. Goldfus                          Name:   Kenneth A. Jacob
Secretary                                Title:  Vice President




ATTEST:                             MUNIYIELD INSURED FUND, INC.



/s/ Mark B. Goldfus                 By:  /s/ Kenneth A. Jacob
- -----------------------------            ----------------------------------
Mark B. Goldfus                          Name:   Kenneth A. Jacob
Secretary                                Title:  Vice President


                                      3

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2A.4
<SEQUENCE>5
<FILENAME>efc4-1163_5550627ex992a4.txt
<TEXT>
                                                                EXHIBIT (a)(4)



                         MUNIYIELD INSURED FUND, INC.

                Articles Supplementary creating five series of

                       Auction Market Preferred Stock(R)

     MuniYield Insured Fund, Inc., a Maryland corporation having its principal
Maryland office in the City of Baltimore (the "Corporation"), certifies to the
State Department of Assessments and Taxation of Maryland that:

     FIRST: Pursuant to authority expressly vested in the Board of Directors
of the Corporation by article fifth of its Charter, the Board of Directors has
reclassified 6,400 authorized and unissued shares of common stock of the
Corporation as preferred stock of the Corporation and has authorized the
issuance of five series of preferred stock, par value $.10 per share,
liquidation preference $50,000 per share plus an amount equal to accumulated
but unpaid dividends (whether or not earned or declared) thereon, to be
designated respectively: Auction Market Preferred Stock, Series A; Auction
Market Preferred Stock, Series B; Auction Market Preferred Stock, Series C;
Auction Market Preferred Stock, Series D; and Auction Market Preferred Stock,
Series E.

     SECOND: The preferences, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption, of the
shares of each such series of preferred stock are as follows:








- ---------------
(R) Registered trademark of Merrill Lynch & Co., Inc.




                                      2



<PAGE>



                                  DESIGNATION

     SERIES A: A series of 1,100 shares of preferred stock, par value $.10 per
share, liquidation preferences $50,000 per share plus an amount equal to
accumulated but unpaid dividends (whether or not earned or declared) thereon,
is hereby designated "Auction Market Preferred Stock, Series A." Each share of
Auction Market Preferred Stock, Series A (sometimes referred to herein as
"Series A AMPS") shall be issued on May 22, 1992; have an Initial Dividend
Rate equal to 3.500% per annum; have an Initial Dividend Payment Date of June
4, 1992; and have such other preferences, voting powers, limitation as to
dividends, qualifications and terms and conditions of redemption as are set
forth in these Articles Supplementary. The Auction Market Preferred Stock,
Series A shall constitute a separate series of preferred stock of the
Corporation, and each share of Auction Market Preferred Stock, Series A shall
be identical.

     SERIES B: A series of 1,100 shares of preferred stock, par value $.10 per
share, liquidation preference $50,000 per share plus an amount equal to
accumulated but unpaid dividends (whether or not earned or declared) thereon,
is hereby designated "Auction Market Preferred Stock, Series B." Each share of
Auction Market Preferred Stock, Series B (sometimes referred to herein as
"Series B AMPS") shall be issued on May 22, 1992; have an Initial Dividend
Rate equal to 3.500% per annum; have an Initial Dividend Payment Date of June
11, 1992; and have such other preferences, voting powers, limitations as to
dividends, qualifications and terms and conditions of redemption as are set
forth in these Articles Supplementary. The Auction Market Preferred Stock,
Series B shall constitute a separate series of preferred stock of the
Corporation, and each share of Auction Market Preferred Stock, Series B shall
be identical.

     SERIES C: A series of 1,100 shares of preferred stock, par value of $.10
per share, liquidation preference $50,000 per share plus an amount equal to
accumulated but unpaid dividends (whether or not earned or declared) thereon,
is hereby designated "Auction Market



                                      3



<PAGE>



Preferred Stock, Series C." Each share of Auction Market Preferred Stock,
Series C (sometimes referred to herein as "Series C AMPS") shall be issued on
May 22, 1992; have an Initial Dividend Rate equal to 3.450% per annum; have an
Initial Dividend Payment Date of June 18, 1992; and have such other
preferences, voting powers, limitations as to dividends, qualifications and
terms and conditions of redemption as are set forth in these Articles
Supplementary. The Auction Market Preferred Stock, Series C shall constitute a
separate series of preferred stock of the Corporation, and each share of
Auction Market Preferred Stock, Series C shall be identical.

     SERIES D: A series of 1,100 shares of preferred stock, par value $.10 per
share, liquidation preference $50,000 per share plus an amount equal to
accumulated but unpaid dividends (whether or not earned or declared) thereon,
is hereby designated "Auction Market Preferred Stock, Series D." Each share of
Auction Market Preferred Stock, Series D (sometimes referred to herein as
"Series D AMPS") shall be issued May 22, 1992; have an Initial Dividend Rate
equal to 3.400% per annum; have an Initial Dividend Payment Date of June 25,
1992; and have such other preferences, voting powers, limitations as to
dividends, qualifications and terms and conditions of redemption as are set
forth in these Articles Supplementary. The Auction Market Preferred Stock,
Series D shall constitute a separate series of preferred stock of the
Corporation, and each share of Auction Market Preferred Stock, Series D shall
be identical.

     SERIES E: A series of 2,000 shares of preferred stock, par value $.10 per
share, liquidation preferences $50,000 per share plus an amount equal to
accumulated but unpaid dividends (whether or not earned or declared) thereon,
is hereby designated "Auction Market Preferred Stock, Series E." Each share of
Auction Market Preferred Stock, Series E (sometimes referred to herein as
"Series E AMPS") shall be issued on May 22, 1992; have an Initial Dividend
Rate equal to 3.625% per annum; have an Initial Dividend Payment Date of May
28,



                                      4



<PAGE>



1992; and have such other preferences, voting powers, limitations as to
dividends, qualifications and terms and conditions of redemption as are set
forth in these Articles Supplementary. The Auction Market Preferred Stock,
Series E shall constitute a separate series of preferred stock of the
Corporation, and each share of Auction Market Preferred Stock, Series E shall
be identical.

     1. Definitions. (a) Unless the context or use indicates another or
different meaning or intent, in these Articles Supplementary the following
terms have the following meanings, whether used in the singular or plural:

     "'AA' Composite Commercial Paper Rate," on any date of determination,
means (i) the Interest Equivalent of the rate on commercial paper placed on
behalf of issuers whose corporate bonds are rated "AA" by S&P or "Aa" by
Moody's or the equivalent of such rating by another nationally recognized
rating agency, as such rate is made available on a discount basis or otherwise
by the Federal Reserve Bank of New York for the Business Day immediately
preceding such date, or (ii) in the event that the Federal Reserve Bank of New
York does not make available such a rate, the arithmetic average of the
Interest Equivalent of the rate on commercial paper placed on behalf of such
issuers, as quoted on a discount basis or otherwise by Merrill Lynch, Pierce,
Fenner & Smith Incorporated or its successors that are Commercial Paper
Dealers, to the Auction Agent for the close of business on the Business Day
immediately preceding such date. If one of the Commercial Paper Dealers does
not quote a rate required to determine the "AA" Composite Commercial Paper
Rate, the "AA" Composite Commercial Paper Rate will be determined on the basis
of the quotation or quotations furnished by any Substitute Commercial Paper
Dealer or Substitute Commercial Paper Dealers selected by the Corporation to
provide such rate or rates not being supplied by the Commercial Paper Dealer.
If the number of Dividend Period Days shall be (i) 7 or more but fewer than 49
days, such rate shall



                                      5



<PAGE>



be the Interest Equivalent of the 30-day rate on such commercial paper; (ii)
49 or more but fewer than 70 days, such rate shall be the Interest Equivalent
of the 60-day rate on such commercial paper; (iii) 70 or more days but fewer
than 85 days, such rate shall be the arithmetic average of the Interest
Equivalent on the 60-day and 90-day rates on such commercial paper; (iv) 85 or
more days but fewer than 99 days, such rate shall be the Interest Equivalent
of the 90-day rate on such commercial paper; (v) 99 or more days but fewer
than 120 days, such rate shall be the arithmetic average of the Internet
Equivalent of the 90-day and 120-day rates on such commercial paper; (vi) 120
or more days but fewer than 141 days, such rate shall be the Interest
Equivalent of the 120-day rate on such commercial paper; (vii) 141 or more
days but fewer than 162 days, such rate shall be the arithmetic average of the
Interest Equivalent of the 120-day and 180-day rates on such commercial paper;
and (viii) 162 or more days but fewer than 183 days, such rate shall be the
Interest Equivalent of the 180-day rate on such commercial paper.

     "Accountant's Confirmation" has the meaning set forth in paragraph 7(c)
of these Articles Supplementary.

     "Additional Dividend" has the meaning set forth in paragraph 2(e) of
these Articles Supplementary.

     "Adviser" means the Corporation's investment adviser which initially
shall be Fund Asset Management, Inc.

     "Affiliate" means any Person, other than Merrill Lynch, Pierce, Fenner &
Smith Incorporated or its successors, known to the Auction Agent to be
controlled by, in control of, or under common control with, the Corporation.



                                      6



<PAGE>



     "Agent Member" means a member of the Securities Depository that will act
on behalf of an Existing Holder of one or more shares of AMPS or a Potential
Holder that is identified as such in such holder's Purchaser's Letter.

     "AMPS" means as the case may be, the Auction Market Preferred Stock,
Series A; Auction Market Preferred Stock, Series B; Auction Market Preferred
Stock, Series C; Auction Market Preferred Stock, Series D; or Auction Market
Preferred Stock, Series E of the Corporation.

     "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 of each series and Other AMPS Outstanding on such Valuation Date
multiplied by the sum of (a) $50,000 and (b) any applicable redemption premium
attributable to the designation of a Premium Call Period; (B) the aggregate
amount of cash dividends (whether or not earned or declared) that will have
accumulated for each share of AMPS and Other AMPS Outstanding, in each case,
to (but not including) the end of the current Dividend Period for each series
of AMPS that follows such Valuation Date; (C) the aggregate amount of cash
dividends that would accumulate at the then current Maximum Applicable Rate 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's Volatility Factor and the S&P Volatility Factor
(currently 304%) determined from time to time by Moody's and S&P,
respectively, (except that if such Valuation Date occurs during a Non-Payment
Period, the cash dividend for purposes of calculation would accumulate at the
then current Non-Payment Period Rate); (D) the amount of anticipated expenses
of the Corporation for the 90 days subsequent to such Valuation Date
(including any premiums payable with respect to a Policy); (E) the amount of
the Corporation's Maximum



                                      7



<PAGE>



Potential Additional Dividend Liability as of such Valuation Date; and (F) any
current liabilities as of such Valuation Date to the extent not reflected in
any of (i)(A) through (i)(E) (including, without limitation, and immediately
upon determination, any amounts due and payable by the Corporation pursuant to
repurchase agreements and any payables for Municipal Bonds purchased as of
such Valuation Date) less (ii) the sum of (A) the lesser of (1) the aggregate
of (a) the book value of receivables for Municipal Bonds sold as of or prior
to such Valuation Date if such receivables are due within five Business Days
of such Valuation Date, and if the trades which generated such receivables are
(x) settled through clearing house firms with respect to which the Corporation
has received prior written authorization from Moody's or (y) with
counterparties having a Moody's long-term debt rating of at least Baa3, and
(b) the Discounted Value of Municipal Bonds sold as of or prior to such
Valuation Date which generated receivables calculated using the Moody's
Discount Factor applicable to such Municipal Bonds, if such receivables are
due within five Business Days of such Valuation Date but do not comply with
either of conditions (x) or (y) of the preceding clause (a) and (2) the
Discounted Value of such Municipal Bonds calculated using the higher of the
S&P Discount Factor and the Moody's Discount Factor applicable to such
Municipal Bonds and (B) the Discounted Value of any of the Corporation's
assets irrevocably deposited by the Corporation for the payment of the amount
needed to redeem shares of AMPS subject to redemption or any of (i)(B) through
(i)(F). For Moody's, the Corporation shall include as a liability an amount
calculated semi-annually equal to 150% of the estimated cost of obtaining
other insurance guaranteeing the timely payment of interest on a Moody's
Eligible Asset and principal thereof to maturity with respect to Moody's
Eligible Assets that (i) are covered by a Policy which provides the
Corporation with the option to



                                      8



<PAGE>



obtain such other insurance and (ii) are discounted by a Moody's Discount
Factor determined by reference to the insurance claims-paying ability rating
of the issuer of such Policy.

     "AMPS Basic Maintenance Cure Date," with respect to the failure by the
Corporation to satisfy the AMPS Basic Maintenance Amount (as required by
paragraph 7(a) of these Articles Supplementary) as of a given Valuation Date,
means the sixth Business Day following such Valuation Date.

     "AMPS Basic Maintenance Report" means a report signed by or any of the
President, Treasurer, any Senior Vice President or any Vice President of the
Corporation which sets forth, as of the related Valuation Date, the assets of
the Corporation, the Market Value and the Discounted Value thereof (seriatim
and in aggregate), and the AMPS Basic Maintenance Amount.

     "Anticipation Notes" shall mean the following Municipal Bonds: revenue
anticipation notes, tax anticipation notes, tax and revenue anticipation
notes, grant anticipation notes and bond anticipation notes.

     "Applicable Percentage" has the meaning set forth in paragraph 11(a)(vii)
of these Articles Supplementary.

     "Applicable Rate" means the rate per annum at which cash dividends are
payable on the AMPS or Other AMPS, as the case may be, for any Dividend
Period.

     "Auction" means a periodic operation of the Auction Procedures.

     "Auction Agent" means IBJ Schroder Bank & Trust Company unless and until
another commercial bank, trust company or other financial institution
appointed by a resolution of the Board of Directors of the Corporation or a
duly authorized committee thereof enters into an agreement with the
Corporation to follow the Auction Procedures for the purpose of determining



                                      9



<PAGE>



the Applicable Rate and to act as transfer agent, registrar, dividend
disbursing agent and redemption agent for the AMPS and Other AMPS.

     "Auction Procedures" means the procedures for conducting Auctions set
forth in paragraph 11 of these Articles Supplementary.

     "Broker-Dealer" means any broker-dealer, or other entity permitted by law
to perform the functions required of a Broker-Dealer in paragraph 11 of these
Articles Supplementary, that has been selected by the Corporation and has
entered into a Broker-Dealer Agreement with the Auction Agent that remains
effective.

     "Broker-Dealer Agreement" means an agreement between the Auction Agent
and a Broker-Dealer pursuant to which such Broker-Dealer agrees to follow the
procedures specified in paragraph 11 of these Articles Supplementary.

     "Business Day" means a day on which the New York Stock Exchange, Inc. is
open for trading and which is not a Saturday, Sunday or other day on which
banks in The City of New York are authorized or obligated by law to close.

     "Charter" means the Articles of Incorporation, as amended and
supplemented (including these Articles Supplementary), of the Corporation on
file in the State Department of Assessments and Taxation of Maryland.

     "Code" means the Internal Revenue Code of 1986, as amended.

     "Commercial Paper Dealers" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated and such other commercial paper dealer or dealers as the
Corporation may from time to time appoint, or, in lieu of any thereof, their
respective affiliates or successors.

     "Common Stock" means the common stock, par value $.10 per share, of the
Corporation.

     "Corporation" means MuniYield Insured Fund, Inc., a Maryland corporation.



                                      10



<PAGE>



     "Date of Original Issue" means, with respect to any share of AMPS or
Other AMPS, the date on which the Corporation originally issues such share.

     "Deposit Securities" means cash and Municipal Bonds rated at least AAA,
A-1+ or SP-1+ by S&P.

     "Discounted Value" means (i) with respect to an S&P Eligible Asset, the
quotient of the Market Value thereof divided by the applicable S&P Discount
Factor and (ii) with respect to a Moody's Eligible Asset, the lower of par and
the quotient of the Market Value thereof divided by the applicable Moody's
Discount Factor.

     "Dividend Coverage Amount," as of any Valuation Date, means (A)(i) the
aggregate amount of cash dividends that will accumulate on all shares of
Outstanding AMPS and Other AMPS, in each case to (but not including) the next
Dividend Payment Date therefor for each series of AMPS that follows such
Valuation Date plus (ii) the aggregate amount of all liabilities existing on
such Valuation Date which are payable on or prior to such next Dividend
Payment Date less (B)(i) the combined Market Value of Deposit Securities
irrevocably deposited with the Auction Agent for the payment of cash dividends
on all shares of AMPS and Other AMPS, (ii) the book value of receivables for
Municipal Bonds sold as of or prior to such Valuation Date, if such
receivables are due within five Business Days of such Valuation Date and in
any event on or prior to such next Dividend Payment Date, and (iii) interest
on Municipal Bonds which is scheduled to be paid on or prior to the next
Dividend Payment Date.

     "Dividend Coverage Assets," as of any Valuation Date, means, in the case
of shares of AMPS and Other AMPS, Deposit Securities with maturity or tender
payment dates not later in each case than the Dividend Payment Date therefor
that follows such Valuation Date.



                                      11



<PAGE>



     "Dividend Payment Date," with respect to AMPS, has the meaning set forth
in paragraph 2(b)(i) of these Articles Supplementary and, with respect to
Other AMPS, has the equivalent meaning.

     "Dividend Period" means the Initial Dividend Period, any 7-day Dividend
Period, any 28-day Dividend Period and any Special Dividend Period.

     "Existing Holder" means a Person who has signed a Purchaser's Letter and
is listed as the holder of record of shares of AMPS in the Stock Books.

     "Forward Commitment" has the meaning set forth in paragraph 9(c) of these
Articles Supplementary.

     "Holder" means a Person identified as a holder of record of shares of
AMPS in the Stock Register.

     "Independent Accountant" means a nationally recognized accountant, or
firm of accountants, that is, with respect to the Corporation, an independent
public accountant or firm of independent public accountant under the
Securities Act of 1933, as amended.

     "Initial Dividend Payment Date" means the Initial Dividend Payment Date
specified herein with respect to each series of AMPS or Other AMPS, as the
case may be.

     "Initial Dividend period," with respect to each series of AMPS, has the
meaning set forth in paragraph 2(c)(i) of these Articles Supplementary and,
with respect to Other AMPS, has the equivalent meaning.

     "Initial Dividend Rate," with respect to each series of AMPS, means the
rate per annum specified herein applicable to the Initial Dividend Period for
such series of AMPS and, with respect to Other AMPS, has the equivalent
meaning.



                                      12



<PAGE>



     "Initial Margin" means the amount of cash or securities deposited with a
broker as a margin payment at the time of purchase or sale of a futures
contract.

     "Interest Equivalent" means a yield on a 360-day basis of a discount
basis security which is equal to the yield on an equivalent interest-bearing
security.

     "Long Term Dividend Period" means a Special Dividend Period consisting of
a specified period of one whole year or more but not greater than five years.

     "Mandatory Redemption Price" means $50,000 per share of AMPS plus an
amount equal to accumulated but unpaid dividends (whether or not earned or
declared) to the date fixed for redemption and excluding Additional Dividends.

     "Marginal Tax Rate" means the maximum marginal regular Federal individual
income tax rate applicable to ordinary income or the maximum marginal regular
Federal corporate income tax rate, whichever is greater.

     "Market Value" of any asset of the Corporation shall be the market value
thereof determined by the Pricing Service. Market Value of any asset shall
include any interest accrued thereon. The Pricing Service shall value
portfolio securities at the quoted bid prices or the mean between the quoted
bid and asked price or the yield equivalent when quotations are not readily
available. Securities for which quotations are not readily available shall be
valued at a fair value as determined by the Pricing Service using methods
which include consideration of: yields or prices of municipal bonds of
comparable quality, type of issue, coupon, maturity and rating; indications as
to value from dealers; and general market conditions. The Pricing Service may
employ electronic data processing techniques and/or a matrix system to
determine valuations. In the event the Pricing Service is unable to value a
security, the security shall be valued at the lower of two dealer bids
obtained by the Corporation from dealers who are members of the



                                      13



<PAGE>



National Association of Securities Dealers, Inc. and who make a market in the
security, at least one of which shall be in writing. Futures contracts and
options are valued at closing prices for such instruments established by the
exchange or board of trade on which they are traded, or if market quotations
are not readily available, are valued at fair value on a consistent basis
using methods determined in good faith by the Board of Directors.

     "Maximum Applicable Rate," with respect to AMPS, has the meaning set
forth in paragraph 11(a)(vii) of these Articles Supplementary and, with
respect to Other AMPS, has the equivalent meaning.

     "Maximum Potential Additional Dividend Liability," as of any Valuation
Date, means the aggregate amount of Additional Dividends that would be due if
the Corporation were to make Retroactive Taxable Allocations, with respect to
any fiscal year, estimated based upon dividends paid and the amount of
undistributed realized net capital gains and other taxable income earned by
the Corporation, as of the end of the calendar month immediately preceding
such Valuation Date and assuming such Additional Dividends are fully taxable.

     "Minimum Liquidity Level" means, as of any Valuation Date, an aggregate
Market Value of the Corporation's Dividend Coverage Assets not less than the
Dividend Coverage Amount.

     "Moody's" means Moody's Investors Service or its successors.

     "Moody's Discount Factor" means, for purposes of determining the
Discounted Value of any Municipal Bond which constitutes a Moody's Eligible
Asset, the percentage determined by reference to (a)(i) the rating by Moody's
or S&P on such Bond or (ii) in the event the Moody's Eligible Asset is insured
under a Policy and the terms of the Policy permit the Corporation, at its
option, to obtain other insurance guaranteeing the timely payment of interest
on such Moody's Eligible Asset and principal thereof to maturity, the Moody's
insurance claims-paying ability



                                      14



<PAGE>



rating of the issuer of the Policy or (iii) in the event the Moody's Eligible
Asset is insured under an insurance policy which guarantees the timely payment
of interest on such Moody's Eligible Asset and principal thereof to maturity,
the Moody's insurance claims-paying ability rating of the issuer of the
insurance policy (provided that for purposes of clauses (ii) and (iii) if the
insurance claims-paying ability of an issuer of a Policy or insurance policy
is not rated by Moody's but is rated by S&P, such issuer shall be deemed to
have a Moody's insurance claims-paying ability rating which is one full
category lower than the S&P insurance claims-paying ability rating) and (b)
the Moody's Exposure Period, in accordance with the table set forth below:

<TABLE>
<CAPTION>

                                                                            Rating Category
                                                               ------------------------------------------
         Moody's Exposure Period              Aaa*      Aa*       A*      Baa*     Other**    VMIG-1***     SP-1+***
         -----------------------              ----      ---       --      ----     -------    ---------     --------
<S>                                           <C>      <C>       <C>       <C>       <C>        <C>          <C>
7 weeks or less.........................      151%     159%      168%     202%       229%       136%         148%
8 weeks or less but
greater than seven weeks................      154      164       173      205        235        137          149
9 weeks or less but
greater than eight weeks................      158      169       179      209        242        138          150
- -------------------
*        Moody's rating
**       Municipal Bonds not rated by Moody's but rated BBB-, BBB or BBB+ by S&P.
***      Municipal Bonds rated MIG-1 or VHIG-1 or, if not rated by Moody's,
         rated SP-1+ by S&P which do not mature or have a demand feature at
         par exercisable within the Moody's Exposure Period and which do not
         have a long-term rating. For the purposes of the definition of
         Moody's Eligible Assets, these securities will have an assumed rating
         of "A" by Moody's
</TABLE>

; provided, however, in the event a Moody's Discount Factor applicable to a
Moody's Eligible Asset is determined by reference to an insurance
claims-paying ability rating in accordance with clause (a)(ii) or (a)(iii),
such Moody's Discount Factor shall be increased by an amount equal to 50% of
the difference between (a) the percentage set forth in the foregoing table
under the applicable rating category and (b) the percentage set forth in the
foregoing table under the rating category which is one category lower than the
applicable rating category.

     Notwithstanding the foregoing, (i) no Moody's Discount Factor will be
applied to short-term Municipal Bonds so long as such Municipal Bonds are
rated at least MIG-1, VMIG-1 or P-1 by Moody's and mature or have a demand
feature at par exercisable within the Moody's Exposure Period, and the Moody's
Discount Factor for such Bonds will be 125% if such Bonds



                                      15



<PAGE>



are not rated by Moody's but are rated A-1+ or SP-1+ or AA by S&P and mature
or have a demand feature at par exercisable within the Moody's Exposure
Period, and (ii) no Moody's Discount Factor will be applied to cash or to
Receivables for Municipal Bonds Sold. "Receivables for Municipal Bonds Sold,"
for purposes of calculating Moody's Eligible Assets as of any Valuation Date,
means no more than the aggregate of the following: (i) the book value of
receivables for Municipal Bonds sold as of or prior to such Valuation Date if
such receivables are due within give Business Days of such Valuation Date, and
if the trades which generated such receivables are (x) settled through
clearing house firms with respect to which the Corporation has received prior
written authorization from Moody's or (y) with counterparties having a Moody's
long-term debt rating of at least Baa3; and (ii) the Moody's Discounted Value
of Municipal Bonds sold as of or prior to such Valuation Date which generated
receivables, if such receivables are due within five Business Days of such
Valuation Date but do not comply with either of conditions (x) or (y) of the
preceding clause (i).

     "Moody's Eligible Asset" means cash, Receivables for Municipal Bonds sold
(as defined for purposes of calculating Moody's Eligible Assets) or a
Municipal Bond that (i) pays interest in cash, (ii) is publicly rated Baa or
higher by Moody's or, if not rated by Moody's but rated by S&P, is rated at
least BBB- by S&P (provided that, for purposes of determining the Moody's
Discount Factor applicable to any such S&P-rated Municipal Bond, such
Municipal Bond (excluding any short-term Municipal Bond) will be deemed to
have a Moody's rating which is one full existing category lower than its S&P
rating), (iii) does not have its Moody's rating suspended by Moody's; and (iv)
is part of an issue of Municipal Bonds of at least $10,000,000. In addition,
Municipal Bonds in the Corporation's portfolio must be within the following
diversification requirements in order to be included within Moody's Eligible
Assets:



                                      16



<PAGE>



<TABLE>
<CAPTION>

                                           Minimum                      Maximum                      Maximum
                                          Issue Size                   Underlying               State or Territory
            Rating                       ($ Millions)                Obligor (%)(1)            Concentration (%)(1)
- -------------------------------  ----------------------------  -------------------------  -----------------------------
<S>                                         <C>                          <C>                          <C>
Aaa                                         10                           100                          100
Aa                                          10                           20                           60
A                                           10                           10                           40
Baa                                         10                            6                           20
Other(2)                                    10                            4                           12
</TABLE>
- ----------------
(1) The referenced percentages represent maximum cumulative totals for the
related rating category and each lower rating category.
(2) Municipal Bonds not rated by Moody's but rated BBB-, BBB or BBB+ by S&P.

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.

     When the Corporation sells a Municipal Bond and agrees to repurchase it
at a future date, the Discounted Value of such Bond will constitute a Moody's
Eligible Asset and the amount the Corporation is required to pay upon
repurchase of such Bond will count as a liability for purposes of calculating
the AMPS Basic Maintenance Amount. When the Corporation purchases a Municipal
Bond and agrees to sell it at a future date to another party, cash receivable
by the Corporation thereby will constitute a Moody's Eligible Asset if the
long-term debt of such other party is rated at least A2 by Moody's and such
agreement has a term of 30 days or less; otherwise the Discounted Value of
such Bond will constitute a Moody's Eligible Asset.

     Notwithstanding the foregoing, an asset will not be considered a Moody's
Eligible Asset if it is (i) held in a margin account; (ii) subject to any
material lien, mortgage, pledge, security interest or security agreement of
any kind, (iii) held for the purchase of a security pursuant to a Forward
Commitment or (iv) irrevocably deposited by the Corporation for the payment of
dividends or redemption.



                                      17



<PAGE>



     "Moody's Exposure Period" means a period that is the same length or
longer than the number of days used in calculating the cash dividend component
of the AMPS Basic Maintenance Amount and shall initially be the period
commencing on and including a given Valuation Date and ending 48 days
thereafter.

     "Moody's Hedging Transaction" has the meaning set forth in paragraph 9(b)
of these Articles Supplementary.

     "Moody's Volatility Factor" means 272% as long as there has been no
increase enacted to the Marginal Tax Rate. It such an increase is enacted but
not yet implemented, the Moody's Volatility Factor shall be as follows:

                 % Change in               Moody's Volatility
              Marginal Tax Rate                  Factor
           -------------------------  ---------------------------
                     5%                            292%
                    10                             313
                    15                             338
                    20                             364
                    25                             396
                    30                             432
                    35                             472
                    40                             520

Notwithstanding the foregoing, the Moody's Volatility Factor may mean such
other potential dividend rate increase factor as Moody's advises the
Corporation in writing is applicable.

     "Municipal Bonds" means "Municipal Bonds" as defined in the Corporation's
Registration Statement on Form N-2 (File No. 33-46025) on file with the
Securities and Exchange Commission, as such Registration Statement may be
amended from time to time, as well as short-term municipal obligations.

     "Municipal Index" has the meaning set forth in paragraph 9(a) of these
Articles Supplementary.

     "1940 Act" means the Investment Company Act of 1940, as amended from time
to time.



                                      18



<PAGE>



     "1940 Act AMPS Asset Coverage" means asset coverage, as defined in
section 18(h) of the 1940 Act, of at least 200% with respect to all
outstanding senior securities of the Corporation which are stock, including
all outstanding shares of AMPS and Other AMPS (or such other asset coverage as
may in the future be specified in or under the 1940 Act as the minimum asset
coverage for senior securities which are stock of a closed-end investment
company as a condition of paying dividends on its common stock).

     "1940 Act Cure Date," with respect to the failure by the Corporation to
maintain the 1940 Act AMPS Asset Coverage (as required by paragraph 6 of these
Articles Supplementary) as of the last Business Day of each month, means the
last Business Day of the following month.

     "Non-Call Period" has the meaning set forth under the definition of
"Specific Redemption Provisions".

     "Non-Payment Period" means, with respect to each series of AMPS, any
period commencing on and including the day on which the Corporation shall fail
to (i) declare, prior to the close of business on the second Business Day
preceding any Dividend Payment Date, for payment on or (to the extent
permitted by paragraph 2(c)(i) of these Articles Supplementary) within three
Business Days after such Dividend Payment Date to the Holders as of 12:00
noon, New York City time, on the Business Day preceding such Dividend Payment
Date, the full amount of any dividend on 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, New York City time, (A) on such
Dividend Payment Date the full amount of any cash dividend on such shares
payable (if declared) on such Dividend Payment Date or (B) on any redemption
date for any 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,



                                      19



<PAGE>



and ending on and including the Business Day on which, by 12:00 noon, New York
City time, all unpaid cash dividends and unpaid redemption prices shall have
been so deposited or shall have otherwise been made available to Holders in
same-day funds; provided that, a Non-Payment Period shall not end unless the
Corporation shall have given at least five day's but no more than 30 days'
written notice of such deposit or availability to the Auction Agent, all
Existing Holders (at their addresses appearing in the Stock Books) and the
Securities Depository. Notwithstanding the foregoing, the failure by the
Corporation to deposit funds as provided for by clauses (ii)(A) or (ii)(B)
above within three Business Days after any Dividend Payment Date or redemption
date, as the case may be, in each case to the extent contemplated by paragraph
2(c)(i) of these Articles Supplementary, shall not constitute a "Non-Payment
Period."

     "Non-Payment Period Rate" means, initially, 200% of the applicable
Reference Rate (or 275% of such rate if the Corporation has provided
notification to the Auction Agent prior to the Auction establishing the
Applicable Rate for any dividend pursuant to paragraph 2(f) hereof that net
capital gains or other taxable income will be included in such dividend on
shares of AMPS), provided that the Board of Directors of the Corporation shall
have the authority to adjust, modify, alter or change from time to time the
initial Non-Payment Period Rate if the Board of Directors of the Corporation
determines and Moody's and S&P (and any Substitute Rating Agency in lieu of
Moody's or S&P in the event either of such parties shall not rate the AMPS)
advise the Corporation in writing that such adjustment, modification,
alteration or change will not adversely affect their then-current ratings on
the AMPS.

     "Normal Dividend Payment Date" has the meaning set forth in paragraph
2(b)(1) of these Articles Supplementary.



                                      20



<PAGE>



     "Notice of Redemption" means any notice with respect to the redemption of
shares of AMPS pursuant to paragraph 4 of these Articles Supplementary.

     "Notice of Revocation" has the meaning set forth in paragraph 2(c)(iii)
of these Articles Supplementary.

     "Notice of Special Dividend Period" has the meaning set forth in
paragraph 2(c)(iii) of these Articles Supplementary.

     "Optional Redemption Price" means $50,000 per share plus an amount equal
to accumulated but unpaid dividends (whether or not earned or declared) to the
date fixed for redemption and excluding Additional Dividends plus any
applicable redemption premium attributable to the designation of a Premium
Call Period.

     "Other AMPS" means the auction rate preferred stock of the Corporation,
other than the AMPS.

     "Outstanding" means, as of any date (i) with respect to AMPS, shares of
AMPS theretofore issued by the Corporation except, without duplication, (A)
any shares of AMPS theretofore cancelled or delivered to the Auction Agent for
cancellation, or redeemed by the Corporation, or as to which a Notice of
Redemption shall have been given and moneys shall have been deposited in trust
by the Corporation pursuant to paragraph 4(c) and (B) any shares of AMPS as to
which the Corporation or any Affiliate thereof shall be an Existing Holder,
provided that shares of AMPS held by an Affiliate shall be deemed outstanding
for purposes of calculating the AMPS Basic Maintenance Amount and (ii) with
respect to shares of other Preferred Stock, has the equivalent meaning.

     "Parity Stock" means the AMPS and each other outstanding series of
Preferred Stock the holders of which, together with the holders of the AMPS,
shall be entitled to the receipt of



                                      21



<PAGE>



dividends or of amounts distributable upon liquidation, dissolution or winding
up, as the case may be, in proportion to the full respective preferential
amounts to which they are entitled, without preference or priority one over
the other.

     "Person" means and includes an individual, a partnership, a corporation,
a trust, an unincorporated association, a joint venture or other entity or a
government or any agency or political subdivision thereof.

     "Policy" means an insurance policy purchased by the Corporation which
guarantees the payment of principal and interest on specified Municipal Bonds
during the period in which such Municipal Bonds are owned by the Corporation;
provided, however, that the Corporation will not obtain any policy unless
Moody's and S&P advise the Corporation in writing that the purchase of such
Policy will not adversely affect their then-current rating of the AMPS.

     "Potential Holder" means any Person, including any Existing Holder, (A)
who shall have executed a Purchaser's Letter and (B) who may be interested in
acquiring shares of AMPS (or, in the case of an Existing Holder, additional
shares of AMPS).

     "Preferred Stock" means the preferred stock, par value $.10 per share, of
the Corporation, and includes AMPS and other AMPS.

     "Premium Call Period" has the meaning set forth under the definition of
"Specific Redemption Provisions".

     "Pricing Service" means J.J. Kenny or any pricing service designated by
the Board of Directors of the Corporation provided the Corporation obtains
written assurance from S&P and Moody's that such designation will not impair
the rating then assigned by S&P and Moody's to the AMPS.



                                      22



<PAGE>



     "Purchaser's Letter" means a letter addressed to the Corporation, the
Auction Agent and a Broker-Dealer in which a Person agrees, among other
things, to offer to purchase, purchase, offer to sell and/or sell shares of
AMPS as set forth in paragraph 11 of these Articles Supplementary.

     "Quarterly Valuation Date" means the twenty-first day of the last month
of each fiscal quarter of the Corporation (or, if such day is not a Business
Day, the next succeeding Business Day) in each fiscal year of the Corporation,
commencing July 31, 1992.

     "Receivables for Municipal Bonds Sold" has the meaning set forth under
the definition of S&P Discount Factor.

     "Reference Rate" means: (i) with respect to a Dividend Period or a Short
Term Dividend Period having 28 or fewer days, the higher of the applicable
"AA" Composite Commercial Paper Rate and the Taxable Equivalent of the
Short-Term Municipal Bond Rate, (ii) with respect to any Short Term Dividend
Period having more than 28 but fewer than 183 days, the applicable "AA"
Composite Commercial Paper Rate, (iii) with respect to any Short Term Dividend
Period having 183 or more but fewer than 364 days, the applicable U.S.
Treasury Bill Rate and (iv) with respect to any Long Term Dividend Period, the
applicable U.S. Treasury Note Rate.

     "Request for Special Dividend Period" has the meaning set forth in
paragraph 2(c)(iii) of these Articles Supplementary.

     "Response" has the meaning set forth in paragraph 2(c)(iii) of these
Articles Supplementary.

     "Retroactive Taxable Allocation" has the meaning set forth in paragraph
2(e) of these Articles Supplementary.



                                      23



<PAGE>



     "Right," with respect to AMPS, has the meaning set forth in paragraph
2(e) of these Articles Supplementary and, with respect to Other AMPS, has the
equivalent meaning.


     "S&P" means Standard & Poor's Corporation or its successors.

     "S&P Discount Factor" means, for purposes of determining the Discounted
Value of any Municipal Bond which constitutes an S&P Eligible Asset, the
percentage determined by reference to (a)(i) the rating by S&P or Moody's on
such Bond or (ii) in the event the Municipal Bond is insured under a Policy
and the terms of the Policy permit the Corporation, at its option, to obtain
other permanent insurance guaranteeing the timely payment of interest on such
Municipal Bond and principal thereof to maturity, the S&P insurance
claims-paying ability rating of the issuer of the Policy or (iii) in the event
the Municipal Bond is insured under an insurance policy which guarantees the
timely payment of interest on such Municipal Bond and principal thereof to
maturity, the S&P insurance claims-paying ability rating of the issuer of the
insurance policy and (b) the S&P Exposure Period, in accordance with the
tables set forth below:


                                           Rating Category
                                           ---------------

      S&P Exposure Period       AAA*       AA*        A*         BBB*
      -------------------       ----       ---        --         ----
40 Business Days                190%       195%       210%       250%
22 Business Days                170        175        190        230
10 Business Days                155        160        175        215
7 Business Days                 150        155        170        210
3 Business Days                 130        135        150        190

- ---------------------
* SP rating.

     Notwithstanding the foregoing, (i) the S&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&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&P but are rated
VMIG-1, P-1 or MIG-1 by Moody's; provided, however, such short-term Municipal
Bonds rated by Moody's but not rated by S&P having a



                                      24



<PAGE>



demand feature exercisable in 30 days or less must be backed by a letter of
credit, liquidity facility or guarantee from a bank or other financial
institution having a short-term rating of at least A-1+ from S&P ; and further
provided that such short-term Municipal Bonds rated by Moody's but not rated
by S&P may comprise no more than 50% of short-term Municipal Bonds that
qualify as S&P Eligible Assets and (ii) no S&P Discount Factor will be applied
to cash or to Receivables for Municipal Bonds Sold. "Receivables for Municipal
Bonds Sold," for purposes of calculating S&P'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 five
Business Days of such Valuation Date. For purposes of the foregoing,
Anticipation Notes rated SP-1+ or, if not rated by S&P, rated VMIG-1 by
Moody's, which need not mature or have a deemed feature exercisable in 30 days
and which do not have a long-term rating, shall be considered to be short-term
Municipal Bonds.

     "S&P Eligible Asset" means cash or a Municipal Bond that (i) is issued by
any of the 50 states, the 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), (ii) is interest bearing and pays
interest at least semi-annually; (iii) is payable with respect to principal
and interest in United States Dollars; (iv) is publicly rated BBB or higher by
S&P or, except in the case of Anticipation Notes that are grant anticipation
notes or bond anticipation notes which must be rated by S&P to be included in
S&P Eligible Assets, if not rated by S&P but rated by Moody's, is rated at
least A by Moody's (provided that such Moody's-rated Municipal Bonds will be
included in S&P Eligible Assets only to the extent the Market



                                      25



<PAGE>



Value of such Municipal Bonds does not exceed 50% of the aggregate Market
Value of the S&P Eligible Assets; and further provided that, for purposes of
determining the S&P Discount Factor applicable to any such Moody's-rated
Municipal Bond, such Municipal Bond will be deemed to have an S&P rating which
is one full rating category lower than its Moody's rating); (v) is not subject
to a covered call or covered put option written by the Corporation; (vi) is
not part of a private placement of Municipal Bonds; and (vii) is part of an
issue of Municipal Bonds with an original issue size of at least $20 million
or, if of an issue with an original issue size below $20 million (but in no
event below $10 million), is issued by an issuer with a total of at least $50
million of securities outstanding. Notwithstanding the foregoing:

          (1) Municipal Bonds of any one issuer or guarantor (excluding bond
     insurers) will be considered S&P Eligible Assets only to the extent the
     Market Value of such Municipal Bonds does not exceed 10% of the Aggregate
     Market Value of the S&P Eligible Assets, provided that 2% is added to the
     applicable S&P Discount Factor for every 1% by which the Market Value of
     such Municipal Bonds exceeds 5% of the aggregate Market Value of the S&P
     Eligible Assets;

          (2) Municipal Bonds issued by issuers in any one state or territory
     will be considered S&P Eligible Assets only to the extent the Market
     Value of such Municipal Bonds does not exceed 20% of the aggregate Market
     Value of S&P Eligible Assets.

     "S&P Exposure Period" means the maximum period of time following a
Valuation Date, including the Valuation Date and the AMPS Basic Maintenance
Cure Date, that the Corporation has under these Articles Supplementary to cure
any failure to maintain, as of such Valuation Date, the Discounted Value for
its portfolio at least equal to the AMPS Basic Maintenance Amount (as
described in paragraph 7(a) of these Articles Supplementary).



                                      26



<PAGE>



     "S&P Hedging Transactions" has the meaning set forth in paragraph 9(a) of
these Articles Supplementary.

     "S&P Volatility Factor" means 304% or such other potential dividend rate
increase factor as S&P advises the Corporation in writing is applicable.

     "Securities Depository" means The Depository Trust Company or any
successor company or other entities elected by the Corporation as securities
depository for the shares of AMPS that agrees to follow the procedures
required to be followed by such securities depository in connection with the
shares of AMPS.

     "Service" means the United States Internal Revenue Service.

     "7-Day Dividend Period" means, with respect to Series E AMPS, a Dividend
Period consisting of seven days.

     "Short Term Dividend Period" means a Special Dividend Period consisting
of a specified number of days (other than 28 in the case of Series A AMPS,
Series B AMPS, Series C AMPS and Series D AMPS and other than seven in the
case of Series E AMPS), evenly divisible by seven and not fewer than seven or
more than 364.

     "Special Dividend Period" means a Dividend Period consisting of (i) a
specified number of days (other than 28 in the case of Series A AMPS, Series B
AMPS, Series C AMPS and Series D AMPS and other than seven in the case of
Series E AMPS), evenly divisible by seven, and not fewer than seven nor more
than 364 or (ii) a specified number of whole years not greater than five years
(in each case subject to adjustment as provided in paragraph 2(b)(i)).

     "Specific Redemption Provisions" means, with respect to a Special
Dividend Period either, or any combination of, (i) a period (a "Non-Call
Period") determined by the Board of Directors of the Corporation, after
consultation with the Auction Agent and the Broker-Dealers,



                                      27



<PAGE>



during which the shares of AMPS subject to such Dividend Period shall not be
subject to redemption at the option of the Corporation and (ii) a period (a
"Premium Call Period"), consisting of a number of whole years and determined
by the Board of Directors of the Corporation, 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 Corporation's
option at a price per share equal to $50,000 plus accumulated but unpaid
dividends plus a premium expressed as a percentage of $50,000 as determined by
the Board of Directors of the Corporation after consultation with the Auction
Agent and the Broker-Dealers.

     "Stock Books" means the books maintained by the Auction Agent setting
forth at all times a current list, as determined by the Auction Agent, of
Existing Holders of the AMPS.

     "Stock Register" means the register of Holders maintained on behalf of
the Corporation by the Auction Agent in its capacity as transfer agent and
registrar for the AMPS.

     "Subsequent Dividend Period," with respect to AMPS, has the meaning set
forth in paragraph 2(c)(i) of these Articles Supplementary and, with respect
to Other AMPS, has the equivalent meaning.

     "Substitute Commercial Paper Dealers" means such Substitute Commercial
Paper Dealer or Dealers as the Corporation may from time to time appoint or,
in lieu of any thereof, their respective affiliates or successors.

     "Substitute Rating Agency" and "Substitute Rating Agencies" mean a
nationally recognized statistical rating organization or two nationally
recognized statistical rating organizations, respectively, selected by Merrill
Lynch, Pierce, Fenner & Smith Incorporated or its affiliates and successors,
after consultation with the Corporation, to act as the substitute rating



                                      28



<PAGE>



agency or substitute rating agencies, as the case may be, to determine the
credit ratings of the shares of AMPS.

     "Taxable Equivalent of the Short-Term Municipal Bond Rate" on any date
means 90% of the quotient of (A) the per annum rate expressed on an interest
equivalent basis equal to the Kenny S&P 30 day High Grade Index or any
successor index (the "Kenny Index"), made available for the Business Day
immediately preceding such date but in any event not later than 8:30 A.M., New
York City time, on such date by Kenny Information Systems Inc. or any
successor thereto, based upon 30-day yield evaluations at par of bonds the
interest on which is excludable for regular Federal income tax purposes under
the Code of "high grade" component issuers selected by Kenny Information
Systems Inc. or any such successor from time to time in its discretion, which
component issuers shall include, without limitation, issuers of general
obligation bonds but shall exclude any bonds the interest on which constitutes
an item of tax preference under Section __(a)(5) of the Code, or successor
provisions, for purposes of the alternative minimum tax," divided by (B) 1.00
minus the Marginal Tax Rate (expressed as a decimal); provided, however, that
if the Kenny Index is not made so available by 8:30 A.M., New York City time,
on such date by Kenny Information Systems Inc. or any successor, the Taxable
Equivalent of the Short-Term Municipal Bond Rate shall mean the quotient of
(A) the per annum rate expressed on an interest equivalent basis equal to the
most recent Kenny Index so made available for any preceding Business Day,
divided by (B) 1.00 minus the Marginal Tax Rate (expressed as a decimal).

     "Treasury Bonds" has the meaning set forth in paragraph 9(a) of these
Articles Supplementary.



                                      29



<PAGE>



     "28-day Dividend Period" means with respect to Series A AMPS, Series B
AMPS, Series C AMPS and Series D AMPS a Dividend Period consisting of 28 days.

     "U.S. Treasury Bill Rate" on any date means (i) the Interest Equivalent
of the rate on the actively traded Treasury Bill with a maturity most nearly
comparable to the length of the related Dividend Period, as such rate is made
available on a discount basis or otherwise by the Federal Reserve Bank of New
York in its Composite 3:30 P.M. Quotations for U.S. Government Securities
report for such Business Day, or (ii) if such yield as so calculated is not
available, the Alternate Treasury Bill Rate on such date. "Alternate Treasury
Bill Rate" on any date means the Interest Equivalent of the yield as
calculated by reference to the arithmetic average of the bid price quotations
of the actively traded Treasury Bill with a maturity most nearly comparable to
the length of the related Dividend Period, as determined by the bid price
quotations as of any time on the Business Day immediately preceding such date,
obtained from at least three recognized primary U.S. Government securities
dealers selected by the Auction Agent.

     "U.S. Treasury Note Rate" on any date means (1) the yield as calculated
by reference to the bid price quotation of the actively traded, current coupon
Treasury Note with a maturity most nearly comparable to the length of the
related Dividend Period, as such bid price quotation is published on the
Business Day immediately preceding such date by the Federal Reserve Bank of
New York in its Composite 3:30 P.M. Quotations for U.S. Government Securities
report for such Business Day, or (ii) if such yield as so calculated is not
available, the Alternate Treasury Note Rate on such date. "Alternate Treasury
Note Rate" on any date means the yield as calculated by reference to the
arithmetic average of the bid price quotations of the actively traded, current
coupon Treasury Note with a maturity most nearly comparable to the length of
the related Dividend Period, as determined by the bid price quotations as of
any time on the





                                      30



<PAGE>



Business Day immediately preceding such date, obtained from at least three
recognised primary U.S. Government securities dealers selected by the Auction
Agent.

     "Valuation Date" means, for purposes of determining whether the
Corporation is maintaining the AMPS Basic Maintenance Amount and the Minimum
Liquidity Level, each Business Day commencing with the Date of Original Issue.

     "Variation Margin" means, in connection with an outstanding futures
contract owned or sold by the Corporation, the amount of cash or securities
paid to or received from a broker (subsequent to the Initial Margin payment)
from time to time as the price of such futures contract fluctuates.

     (b) The foregoing definitions of Accountant's Confirmation, AMPS Basic
Maintenance Amount, AMPS Basic Maintenance Cure Date, AMPS Basic Maintenance
Report, Deposit Securities, Discounted Value, Dividend Coverage Amount,
Dividend Coverage Assets, Independent Accountants, Initial Margin, Market
Value, Minimum Liquidity Level, Moody's Discount Factor, Moody's Eligible
Asset, Moody's Exposure Period, Moody's Hedging Transactions, Moody's
Volatility Factor, S&P Discount Factor, S&P Eligible Asset, S&P Exposure
Period, S&P Hedging Transactions, S&P Volatility Factor, Valuation Date and
Variation Margin have been determined by the Board of Directors of the
Corporation in order to obtain a "aaa" rating from Moody's and a AAA rating
from S&P on the AMPS on their Date of Original Issue; and the Board of
Directors of the Corporation shall have the authority to adjust, modify, alter
or change from time to time the foregoing definitions and the restrictions and
guidelines set forth thereunder if Moody's and S&P or any Substitute Rating
Agency advises the Corporation in writing that such adjustment, modification,
alteration or change will not adversely affect their then-current ratings on
the AMPS.



                                      31



<PAGE>



     2. Dividends. (a) The Holders shall be entitled to receive, when, as and
if declared by the Board of Directors of the Corporation, out of funds legally
available therefor, cumulative dividends each consisting of (i) cash at the
Applicable Rate and (ii) a Right to receive cash as set forth in paragraph
2(e) below, and no more, 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 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 Corporation's
investments. To the extent permitted under the Code, dividends on shares of
AMPS will be designated as exempt-interest dividends. For the purposes of this
section, the term "net tax-exempt income" shall exclude capital gains of the
Corporation.

     (b) (i) Cash dividends on shares of AMPS shall accumulate from the Date
of Original Issue and shall be payable, when, as and if declared by the Board
of Directors, out of funds legally available therefor, commencing on the
Initial Dividend Payment Date with respect to each series of AMPS. Following
the Initial Dividend Payment Date for each series of AMPS, dividends on such
series of AMPS will be payable, at the option of the Corporation, either (i)
with respect to any 7-Day Dividend Period, any 28-day Dividend Period and any
Short Term Dividend Period of 35 or fewer days on the day next succeeding the
last day thereof, (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 day of each calendar month during such Short Term Dividend Period or
Long Term Dividend Period and on the day next succeeding the last day thereof
(each such date referred to in clause (i) or (ii) being herein referred to as
a "Normal Dividend Payment Date"), except that (i) if such Normal Dividend
Payment Date is not a Business Day, then the Dividend Payment Date shall be
the next succeeding date if both such



                                      32



<PAGE>



dates following the Normal Dividend Payment Date are Business Days, or (ii) if
the date following such Normal Dividend Payment Date is not a Business Day,
then the Dividend Payment Date will be the date next preceding such Normal
Dividend Payment Date if both such date and such Normal Dividend Payment Date
are Business Days or (iii) if such Normal Dividend Payment Date and either the
preceding date or the succeeding date are not Business Days, then the Dividend
Payment Date shall be the first Business Day next preceding such Normal
Dividend Payment Date that is next succeeded by a Business Day. 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 exception, 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 Initial Dividend Period, 7-day Dividend Periods, 28-day
Dividend Periods and Special Dividend Periods are hereinafter sometimes
referred to as Dividend Periods. Each dividend payment date determined as
provided above is hereinafter referred to as a "Dividend Payment Date."

          (ii) Each dividend shall be paid to the Holders as they appear in
     the Stock Register as of 12:00 noon, New York City time, on the Business
     Day preceding the Dividend Payment Date. Dividends in arrears for any
     past Dividend Period may be declared and paid at any time, without
     reference to any regular Dividend Payment Date, to the Holders as they
     appear on the Stock Register on a date, not exceeding 15 days prior to
     the payment date therefor, as may be fixed by the Board of Directors of
     the Corporation.



                                      33



<PAGE>



     (c) (i) During the period from and including the Date of Original Issue
to but excluding the Initial Dividend Payment Date (the "Initial Dividend
Period"), the Applicable Rate shall be the Initial Dividend Rate. Commencing
on the Initial Dividend Payment Date, the Applicable Rate for each subsequent
dividend period (hereinafter referred to as a "Subsequent Dividend Period"),
which Subsequent Dividend Period shall commence on and include a Dividend
Payment Date and shall end on and include the calendar day prior to the next
Dividend Payment Date, shall be equal to the rate per annum that results form
implementation of the Auction Procedures.

     The Applicable Dividend Rate for each Dividend Period commencing during a
Non-Payment Period shall be equal to the Non-Payment Period Rate; and each
Dividend Period, commencing after the first day of, and during, a Non-Payment
Period shall be a 28-day Dividend Period in the case of Series A AMPS, Series
B AMPS , Series C AMPS and Series D AMPS and a 7-Day Dividend Period in the
case of Series E AMPS, provided that if the preceding Dividend Period for
Series A AMPS, Series B AMPS, Series C AMPS and Series D AMPS is a Special
Dividend Period of less than 28 days, the Dividend Period commencing during a
Non-Payment Period will be the same length as such preceding Dividend Period.
Except in the case of the willful failure of the Corporation to pay a Dividend
on a Dividend Payment Date or to redeem any shares of AMPS on the date set for
such redemption, any amount of any dividend due on any Dividend Payment Date
(if, prior to the close of business on the second Business Day preceding such
Dividend Payment Date, the Corporation has declared such dividend payable on
such Dividend Payment Date to the Holders of such shares of AMPS as of 12:00
noon, New York City time, on the Business Day preceding such Dividend Payment
Date) or redemption price with respect to any shares of AMPS not paid to such
Holders when due may be paid to such



                                      34



<PAGE>



Holders in the same form of funds by 12:00 noon, New York City time, on any of
the first three Business Days after such Dividend Payment Date or due date, as
the case may be, provided that, such amount is accompanied by a late charge
calculated for such period of non-payment at the Non-Payment Period Rate
applied to the amount of such non-payment based on the actual number of days
comprising such period divided by 365. In the case of willful failure of the
Corporation 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 Dividend Rate for the Dividend Period
commencing during the Non-Payment Period resulting from such failure shall be
the Non-Payment Period Rate. For the purposes of the foregoing, payment to a
person in same-day funds on any Business Day at any time shall be considered
equivalent to payment to such person in New York Clearing house (next-day)
funds at the same time on the preceding Business Day, and any payment made
after 12:00 noon, New York City time, on any Business Day shall be considered
to have been made instead in the same form of funds and to the same person
before 12:00 noon, New York City time, on the next Business Day.

          (ii) The amount of cash dividends per share of AMPS payable (if
     declared) on each Dividend Payment Date of each 7-Day Dividend Period,
     28-day Dividend Period and 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 such share was outstanding and the denominator of which
     will be 365, multiplying the amount so obtained by $50,000, and rounding
     the amount so obtained to the nearest cent. During any Long Term Dividend
     Period, the amount of dividends per share payable on any Dividend Payment
     Date shall be computed on the basis of a year consisting of twelve 30-day
     months.



                                      35



<PAGE>



          (iii) With respect to each Dividend Period that is a Special
     Dividend Period, the Corporation may, at its sole option and to the
     extent permitted by law, by telephonic and written notice (a "Request for
     Special Dividend Period") to the Auction Agent and to each Broker-Dealer,
     request that the next succeeding Dividend Period for a series of AMPS be
     a number of days (other than 28 in the case of Series A AMPS, Series B
     AMPS, Series C AMPS and Series D AMPS and other than seven in the case of
     Series E AMPS), evenly divisible by seven, and not fewer than seven or
     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 for any Auction
     occurring after the initial Auction, the Corporation may not give a
     Request for Special Dividend Period of greater than 28 days (and any such
     request shall be null and void) unless the Corporation has received
     written confirmation from Moody's and S&P that such action would not
     impair the ratings then assigned to the AMPS by Moody's and S&P and
     unless Sufficient Clearing Bids were made in the last occurring Auction
     and unless full cumulative dividends, any amounts due with respect to
     redemptions, and any Additional Dividends payable prior to such date have
     been paid in full. Such Request for Special Dividend Period, in the case
     of Short Term Dividend Period, shall be given on or prior to the fourth
     Business Day but not more than seven Business Days prior to an Auction
     Date for a series of AMPS and, in the case of a Long Term Dividend
     Period, shall be given on or prior to the 14th day but not more than 28
     days prior to an Auction Date for the AMPS. Upon receiving such Request
     for Special Dividend Period, the Broker-Dealer(s) shall jointly determine
     whether, given the factors set forth below, it is advisable that the
     Corporation issue a Notice of Special Dividend



                                      36



<PAGE>



     Period for the series of 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 Corporation and the Auction Agent written notice (a "Response")
     of such determination by no later than the third Business Day prior to
     such Auction Date. In making such determination the Broker-Dealer(s) will
     consider (1) existing short-term and long-term market rates and indices
     of such short-term and long-term rates, (2) existing market supply and
     demand for short-term and long-term securities, (3) existing yield curves
     for short-term and long-term securities comparable to the AMPS, (4)
     industry and financial conditions which may affect the AMPS, (5) the
     investment objective of the Corporation, and (6) the Dividend Periods and
     dividend rates at which current and potential beneficial holders of the
     AMPS would remain or become beneficial holders. If the Broker-Dealer(s)
     shall not give the Corporation and the Auction Agent a Response by such
     third Business Day or if the Response states that given the factors set
     forth above it is not advisable that the Corporation give a Notice of
     Special Dividend Period for the series of AMPS, the Corporation 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 Corporation give a Notice of Special Dividend Period
     for the series of AMPS, the Corporation may by no later than the second
     Business Day prior to such Auction Date give a notice (a "Notice of
     Special Dividend Period") to the Auction Agent, the Securities Depository
     and each Broker-Dealer which notices 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



                                      37



<PAGE>



     Response. The Corporation shall not give a Notice of Special Dividend
     Period and, if the Corporation has given a Notice of Special Dividend
     Period, the Corporation is required to give telephonic and written notice
     (a "Notice of Revocation") to the Auction Agent, each Broker-Dealer, and
     the Securities Depository on or prior to the Business Day prior to the
     relevant Auction Date if (x) either the 1940 Act AMPS Asset Coverage is
     not satisfied or the Corporation shall fail to maintain S&P Eligible
     Assets and Moody's Eligible Assets each with an aggregate Discounted
     Value at least equal to the AMPS Basic Maintenance Amount, in each case
     on each of the two Valuation Dates immediately preceding the Business Day
     prior to the relevant Auction Date on an actual basis and on a pro forma
     basis giving effect to the proposed Special Dividend Period (using as a
     pro forma dividend rate with respect to such Special Dividend Period the
     dividend rate which the Broker-Dealers shall advise the Corporation is an
     approximately equal rate for securities similar to the AMPS with an equal
     dividend period), provided that, in calculating the aggregate Discounted
     Value of Moody's Eligible Assets for this purpose, the Moody's Collateral
     Period shall be deemed to be one week longer, (y) sufficient funds for
     the payment of dividends payable on the immediately succeeding Dividend
     Payment Date have not been irrevocably deposited with the Auction Agent
     by the close of business on the third Business Day preceding the related
     Auction Date or (z) the Broker-Dealer(s) jointly advise the Corporation
     that after consideration of the factors listed above they have concluded
     that it is advisable to give a Notice of Revocation. If the Corporation
     is prohibited from giving a Notice of Special Dividend Period as a result
     of any of the factors enumerated in clause (x), (y) or (z) of the prior
     sentence or if the Corporation gives a Notice of Revocation with respect
     to a Notice of Special Dividend Period for any



                                      38



<PAGE>

     series of AMPS, the next succeeding Dividend Period for that series will
     be a 28-day Dividend Period in the case of Series A AMPS, Series B AMPS,
     Series C AMPS and Series D AMPS, and a 7-Day Dividend Period in the case
     of Series E AMPS, provided that if the then current Dividend Period for
     Series A AMPS, Series B AMPS, Series C AMPS or Series D AMPS is a Special
     Dividend Period of less than 28 days, the next succeeding Dividend Period
     for such series of AMPS will be the same length as such current Dividend
     Period. In addition, in the event Sufficient Clearing Bids are not made
     in the applicable Auction or such Auction is not held for any reason,
     such next succeeding Dividend Period will be a 28-day Dividend Period (in
     the case of Series A AMPS, Series B AMPS, Series C AMPS and Series D
     AMPS) or a 7-Day Dividend Period (in the case of Series E AMPS) and the
     Corporation may not again give a Notice of Special Dividend Period for
     the AMPS (and any such attempted notice shall be null and void) until
     Sufficient Clearing Bids have been made in an Auction with respect to a
     28-day Dividend Period (in the case of Series A AMPS, Series B AMPS,
     Series C AMPS and Series D AMPS) or a 7-Day Dividend Period (in the case
     of Series E AMPS).

     (d) (i) Holders shall not be entitled to any dividends, whether payable
in cash, property or stock, in excess of full cumulative dividends and
applicable late charge, as herein provided, on the shares of AMPS (except for
Additional Dividends as provided in paragraph 2(e) hereof). Except for the
late charge payable pursuant to paragraph 2(c)(i) hereof, no interest, or sum
of money in lieu of interest, shall be payable in respect of any dividend
payment on the shares of AMPS that may be in arrears.

     (ii) For so long as any share of AMPS is Outstanding, the Corporation
shall not declare, pay or set apart for payment any dividend or other
distribution (other than a



                                      39



<PAGE>



     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 the shares of AMPS as to dividends or upon liquidation)
     in respect of the Common Stock or any other stock of the Corporation
     ranking junior to or on a parity with the shares of AMPS as to dividends
     or upon liquidation, or call for redemption, redeem, purchase or
     otherwise acquire for consideration any shares of the Common Stock or any
     other such junior stock (except by conversion into or exchange for stock
     of the Corporation ranking junior to the shares of AMPS as to dividends
     and upon liquidation) or any other such Parity Stock (except by
     conversion into or exchange for stock of the Corporation ranking junior
     to or on a parity with the shares of AMPS as to dividends and upon
     liquidation), unless (A) immediately after such transaction, the
     Corporation shall have S&P Eligible Assets and Moody's Eligible Assets
     each with an aggregate Discounted Value equal to or greater than the AMPS
     Basic Maintenance Amount and the Corporation shall maintain the 1940 Act
     AMPS Asset Coverage, (B) full cumulative dividends on shares of AMPS and
     shares of Other AMPS due on or prior to the date of the transaction have
     been declared and paid or shall have been declared and sufficient funds
     for the payment thereof deposited with the Auction Agent, (C) any
     additional Dividend required to be paid under paragraph 2(e) below on or
     before the date of such declaration or payment has been paid and (D) the
     Corporation has redeemed the full number of shares of AMPS required to be
     redeemed by any provision for mandatory redemption contained herein.

     (e) Each dividend shall consist of (i) cash at the Applicable Dividend
Rate and (ii) an uncertificated right (a "Right") to receive an Additional
Dividend (as defined below). Each Right shall thereafter be independent of the
Share or Shares of AMPS on which the dividend was



                                      40



<PAGE>



paid. The Corporation shall cause to be maintained a record of each Right
received by the respective Holders. A Right may not be transferred other than
by operation of law. If the Corporation retroactively allocates any net
capital gains or other taxable income to shares of AMPS without having given
advance notice thereof to the Auction Agent as described in paragraph 2(f)
hereof solely by reason of the fact that such allocation is made as a result
of the redemption of all or a portion of the outstanding shares of AMPS or the
liquidation of the Corporation (the amount of such allocation referred to
herein as a "Retroactive Taxable Allocation"), the Corporation will, within 90
days (and generally within 60 days) after the end of the Corporation's fiscal
year for which a Retroactive Taxable Allocation is made, provide notice
thereof to the Auction Agent and to each holder of a Right applicable to such
shares of AMPS (initially Cede & Co. as nominee of the Depository Trust
Company) during such fiscal year at such holder's address as the same appears
or last appeared on the stock books of the Corporation. The Corporation will,
within 30 days after such notice is given to the Auction Agent, pay to the
Auction Agent (who will then distribute to such holders of Rights), out of
funds legally available therefor, an amount equal to the aggregate Additional
Dividend with respect to all Retroactive Taxable Allocations made to such
holders during the fiscal year in question.

     An "Additional Dividend" means payment to a present or former holder of
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's dividends in dollars
from the aggregate of both the Retroactive Taxable Allocations and the
Additional Dividend to be equal to the dollar amount of the dividends which
would have been received by such holder if the amount of the aggregate
Retroactive Taxable Allocations would have been excludable from the gross
income of such holder. Such Additional



                                      41



<PAGE>



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 Corporation; and (iii) assuming that each Retroactive Taxable Allocation
would be taxable in the hands of each holder of shares of AMPS at the Marginal
Tax Rate in affect during the fiscal year in question.

     (f) Except as provided below, whenever the Corporation intends to include
___ net capital gains or other taxable income in any dividend on shares of
AMPS, the Corporation will notify the Auction Agent of the amount to be so
included at least five Business Days prior to the Auction Date on which the
Applicable Rate for such dividend is to be established. The Corporation may
also include such income in a dividend on shares of a series of AMPS without
giving advance notice thereof if it increases the dividend by an additional
amount calculated as if such income was a Retroactive Taxable Allocation and
the additional amount was an Additional Dividend.

     (g) No fractional shares of AMPS shall be issued.

     3. Liquidation Rights. Upon liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the Holders shall be entitled
to receive, out of the assets of the Corporation available for distribution to
shareholders, before any distribution or payment is made upon any Common Stock
or any other capital stock ranking junior in right of payment upon liquidation
to the AMPS, the sum of $50,000 per share plus accumulated but unpaid
dividends (whether or not earned or declared) thereon to date of distribution,
and after such payment the holders of AMPS will be entitled to no other
payments other than Additional Dividends as provided in paragraph 2(e) hereof.
If upon any liquidation, dissolution or winding up of the Corporation, the
amounts payable with respect to the AMPS and any other Outstanding



                                      42



<PAGE>



class or series of Preferred Stock of the Corporation ranking on a parity with
the AMPS as to payment upon liquidation are not paid in full, the Holders and
the holders of such other class or series will share ratably in any such
distribution of assets in proportion to the respective preferential amounts to
which they are entitled. After payment of the full amount of the liquidating
distribution to which they are entitled, the Holders will not be entitled to
any further participation in any distribution of assets by the Corporation
except for any Additional Dividends. A consolidation, merger or statutory
share exchange of the Corporation with or into any other corporation or entity
or a sale, whether for cash, shares of stock, securities or properties, of all
or substantially all or any part of the Assets of the Corporation shall not be
deemed or construed to so a liquidation, dissolution or winding up of the
Corporation.

     4. Redemption. (a) Shares of AMPS shall be redeemable by the Corporation
as provided below:

          (i) To the extent permitted under the 1940 Act and Maryland law,
     upon giving a Notice of Redemption, the Corporation 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 share, on any
     Dividend Payment Date; provided that no share of AMPS may be redeemed at
     the option of the Corporation during a Non-Call Period to which such
     share is subject. In addition, holders of AMPS which are redeemed shall
     be entitled to receive Additional Dividends to the extent provided
     herein. The Corporation may not give a Notice of Redemption relating to
     an optional redemption as described in this paragraph 4(a)(i) unless, at
     the time of giving such Notice of Redemption, the Corporation has
     available Deposit Securities with maturity or tender dates not later than
     the day preceding the applicable redemption date and having a value not
     less than the



                                      43



<PAGE>



     amount due to Holders by reason of the redemption of their shares of AMPS
     on such redemption date.

          (ii) The Corporation shall 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 Corporation fails to maintain S&P
     Eligible Assets and Moody's Eligible Assets each with an aggregate
     Discounted Value equal to or greater than the AMPS Basic Maintenance
     Amount as provided in paragraph 7(a) or to satisfy the 1940 Act AMPS
     Asset Coverage as provided in paragraph 6 and such failure is not cured
     on or before the AMPS Basic Maintenance Cure Date or the 1940 Act Cure
     Date (herein respectively referred to as a "Cure Date"), as the case may
     be. In addition, holders of AMPS so redeemed shall be entitled to receive
     Additional Dividends to the extent provided herein. The number of shares
     of AMPS to be redeemed shall be equal to the lesser of (i) 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 al shares of other Preferred Stock subject to redemption or
     retirement, would result in the Corporation having S&P Eligible Assets
     and Moody's Eligible Assets each with an aggregate Discounted Value equal
     to or greater than the AMPS Basic Maintenance Amount or satisfaction of
     the 1940 Act AMPS Assets Coverage, as the case may be, on such Cure Date
     (provided that, if there is no such minimum number of AMPS and shares of
     other Preferred Stock the redemption of which would have such result, all
     shares of AMPS and shares of other Preferred Stock then Outstanding shall
     be redeemed), and (ii) the maximum number of shares of AMPS, together
     with all shares of other Preferred Stock subject to redemption



                                      44



<PAGE>



     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 Corporation shall allocate the number required to be redeemed which
     would result in the Corporation having S&P Eligible Assets and Moody's
     Eligible Assets each with an aggregate Discounted Value equal to or
     greater than the AMPS Basic Maintenance Amount or satisfaction of the
     1940 Act AMPS Assets Coverage, as the case may be, pro rata among shares
     of AMPS of all series, other AMPS of all series, other AMPS and other
     Preferred Stock subject to redemption pursuant to provisions similar to
     those contained in this paragraph 4(a)(ii); provided that, shares of AMPS
     which may not be redeemed at the option of the Corporation due to the
     designation of a Non-Call Period applicable to such shares (A) will be
     subject to mandatory redemption only to the extent that other shares are
     not available to satisfy the number of shares required to be redeemed and
     (B) will be selected for redemption in an ascending order of outstanding
     number of days in the Non-Call Period (with shares with the lowest number
     of days to be redeemed first) and by lot in the event of shares having an
     equal number of days in such Non-Call Period. The Corporation shall
     effect such redemption on a Business Day which is not later than 35 days
     after such Cure Date, except that if the Corporation 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 Corporation otherwise is unable to effect
     such redemption on or prior to 35 days after such Cure Date, the
     Corporation shall redeem those shares of AMPS which it is unable to
     redeem on the earliest practicable date on which it is able to effect
     such redemption out of funds legally available therefor.



                                      45



<PAGE>



     (b) Notwithstanding any other provision of this paragraph 4, no shares of
AMPS may be redeemed pursuant to paragraph 4(a)(i) of these Articles
Supplementary (i) unless all dividends in arrears on all remaining outstanding
shares of Parity Stock shall have been or are being contemporaneously paid or
declared and set apart for payment and (ii) if redemption thereof would result
in the Corporations' failure to maintain Moody's Eligible Assets with an
aggregate Discounted Value equal to or greater than the AMPS Basic Maintenance
Amount. In the event that less than all the outstanding shares of a series of
AMPS are to be redeemed and there is more than one Holder, the shares of that
series of AMPS to be redeemed shall be selected by lot or such other method as
the Corporation shall deem fair and equitable.

     (c) Whenever shares of AMPS are to be redeemed, the Corporation, not less
than 20 nor more than 30 days prior to the date fixed for redemption, shall
mail a notice ("Notice of Redemption") by first-class mail, postage prepaid,
to each Holder of shares of AMPS to be redeemed and to the Auction Agent. The
Corporation shall cause the Notice of Redemption to also be published in the
eastern and national editions of The Wall Street Journal. The Notice of
Redemption shall set forth (i) the redemption date, (ii) the amount of the
redemption price, (iii) the aggregate number of shares of AMPS of such series
to be redeemed, (iv) the place or places where shares of AMPS of such series
are to be surrendered for payment of the redemption price, (v) a statement
that dividends on the shares to the redeemed shall cease to accumulate on such
redemption date (except that holders may be entitled to Additional Dividends)
and (vi) the provision of these Articles Supplementary pursuant to which such
shares are being redeemed. No defect in the Notice of Redemption or in the
mailing or publication thereof shall affect the validity of the redemption
proceedings, except as required by applicable law.



                                      46



<PAGE>



     If the Notice of Redemption shall have been given as aforesaid and,
concurrently or thereafter, the Corporation shall have deposited in trust with
the Auction Agent a cash amount equal to the redemption payment for the shares
of AMPS as to which such Notice of Redemption has been given with irrevocable
instructions and authority to pay the redemption price to the Holders of such
shares, then upon the date of such deposit or, if no such deposit is made,
then upon such date fixed for redemption (unless the Corporation shall default
in making the redemption payment), all rights of the Holders of such shares as
shareholders of the Corporation by reason of the ownership of such shares will
cease and terminate (except their right to receive the redemption price in
respect thereof and any Additional Dividends, but without interest), and such
shares shall no longer be deemed outstanding. The Corporation shall be
entitled to receive, from time to time, from the Auction Agent the interest,
if any, on such moneys deposited with it and the Holders of any shares so
redeemed shall have no claim to any of such interest. In case the Holder of
any shares, so called for redemption shall not claim the redemption payment
for his shares within one year after the date of redemption, the Auction Agent
shall, upon demand, pay over to the Corporation such amount remaining on
deposit and the Auction Agent shall thereupon be relieved of all
responsibility to the Holder of such shares called for redemption and such
Holder thereafter shall look only to the Corporation for the redemption
payment.

     5. Voting Rights. (a) General. Except as otherwise provided in the
Charter or By-Laws, each Holder of shares of AMPS shall be entitled to one
vote for each share held on each share held on each matter submitted to a vote
of shareholders of the Corporation, and the holders of outstanding shares of
Preferred Stock, including AMPS, and of shares of Common Stock shall vote
together as a single class; provided that, at any meeting of the shareholders
of the Corporation held for the election of directors, the holders of
outstanding shares of Preferred



                                      47



<PAGE>



Stock, including AMPS, shall be entitled, as a class, to the exclusion of the
holders of all other securities and classes of capital stock of the
Corporation, to elect two directors of the Corporation. Subject to paragraph
5(b) hereof, the holders of outstanding shares of capital stock of the
Corporation, including the holders of outstanding shares of Preferred Stock,
including AMPS, voting as a single class, shall elect the balance of the
directors.

     (b) Right to Elect Majority of Board of Directors. During any period in
which an one or more of the conditions described below shall exist (such
period being referred to herein as a "Voting Period"), the number of directors
constituting the Board of Directors shall be automatically increased by the
smallest number that, when added to the two directors elected exclusively by
the holders of shares of Preferred Stock, would constitute a majority of the
Board of Directors as so increased by such smallest number; and the holders of
shares of Preferred Stock shall be entitled, voting separately as one class
(to the exclusion of the holders of all other securities and classes of
capital stock of the Corporation), to elect such smallest number of additional
directors, together with the two directors that such holders are in any event
entitled to elect. A Voting Period shall commence.

          (i) if at any time accumulated dividends (whether or not earned or
     declared, and whether or not funds are then legally available in an
     amount sufficient therefor) on the outstanding shares of AMPS equal to at
     least two full years' dividends shall be due and unpaid and sufficient
     cash or specified securities shall not have deposited with the Auction
     Agent for the payment of such accumulated dividends; or

          (ii) if at any time holders of any other shares of Preferred Stock
     are entitled to elect a majority of the directors of the Corporation
     under the 1940 Act.



                                      48



<PAGE>



     Upon the termination of a Voting Period, the voting rights described in
this paragraph 5(b) shall cease, subject always, however, to the reverting of
such voting rights in the Holders upon the further occurrences of any of the
events described in this paragraph 5(b).

     (c) Right to Vote with Respect to Certain Other Matters. So long as any
shares of AMPS outstanding, the Corporation shall not, without the affirmative
vote of the holders of a majority of the shares of Preferred Stock Outstanding
at the time, voting separately as one class: (i) authorize, create or issue,
or increase the authorized or issued amount of, any class or series of stock
ranking prior to or on a parity with any series of Preferred Stock with
respect to payment of dividends or the distribution of assets on liquidation,
or increase the authorized amount of AMPS or any other Preferred Stock, 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 AMPS are outstanding, the Corporation
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 a series of AMPS differently than those of a Holder of
shares of any other series of AMPS without the affirmative vote of the holders
of at least a majority of the shares of AMPS of each series adversely affected
and outstanding at such time (each such adversely affected series voting
separately as a class). The Corporation shall notify Moody's and S&P ten
Business Days prior to any such vote described in clause (i) or (ii). Unless a
higher percentage is provided for under the Charter, the affirmative vote of
the holders of a majority of the outstanding shares of Preferred Stock,
including AMPS, voting together as a single class, will be required to approve
any plan of reorganization (including bankruptcy proceedings) adversely
affecting such shares or



                                      49



<PAGE>



any action requiring a vote of security holders under Section 13(a) of the
1940 Act. The class vote of holders of shares of Preferred Stock, including
AMPS, described above will in each case be in addition to a separate vote of
the requisite percentage of shares of Common Stock and shares of Preferred
Stock, including AMPS, voting together as a single class necessary to
authorize the action in question.

     (d) Voting Procedures.

          (i) As soon as practicable after the accrual of any right of the
     holders of shares of Preferred Stock to elect additional directors as
     described in paragraph 5(b) above, the Corporation shall call a special
     meeting of such holders and instruct the Auction Agent to mail a notice
     of such special meeting to such holders, such meeting to be held not less
     than 10 nor more than 20 days after the date of mailing of such notice.
     If the Corporation fails to send such notice to the Auction Agent or if
     the Corporation does not call such a special meeting, it may be called by
     any such holder on like notice. The record date for determining the
     holders entitled to notice of and to vote at such special meeting shall
     be the close of business of the fifth Business Day preceding the day on
     which such notice is mailed. At any such special meeting and at each
     meeting held during a Voting Period, such Holders, voting together as a
     class (to the exclusion of the holders of all other securities and
     classes of capital stock of the Corporation), shall be entitled to elect
     the number of directors prescribed in paragraph 5(b) above. At any such
     meeting or adjournment thereof in the absence of a quorum, a majority of
     such holders present in person or by proxy shall have the power to
     adjourn the meeting without notice, other than by an announcement at the
     meeting, to a date not more than 120 days after the original record date.



                                      50



<PAGE>



          (ii) For purposes of determining any rights of the Holders to vote
     on any matter or the number of shares required to constitute a quorum,
     whether such right is created by these Articles Supplementary, by the
     other provisions of the Charter, by statute or otherwise, a share of AMPS
     which is not Outstanding shall not be counted.

          (iii) The terms of office of all persons who are directors of the
     Corporation at the time of a special meeting of Holders and holders of
     other Preferred Stock to elect directors shall continue, notwithstanding
     the election at such meeting by the Holders and such other holders of the
     number of directors that they are entitled to elect, and the persons so
     elected by the Holders and such other holders, together with the two
     incumbent directors elected by the Holders and such other holders of
     Preferred Stock and the remaining incumbent directors elected by the
     holders of the Common Stock and Preferred Stock, shall constitute the
     duly elected directors of the Corporation.

          (iv) Simultaneously with the expiration of a Voting Period, the
     terms of office of the additional directors elected by the Holders and
     holders of other Preferred Stock pursuant to paragraph 5(b) above shall
     terminate, the remaining directors shall constitute the directors of the
     Corporation and the voting rights of the Holders and such other holders
     to elect additional directors pursuant to paragraph 5(b) above shall
     cease, subject to the provisions of the last sentence of paragraph
     5(b)(ii).

     (e) Exclusive Remedy. Unless otherwise required by law, the Holders of
shares of AMPS shall not have any rights or preferences other than those
specifically set forth herein. The Holders of shares of AMPS shall have not
preemptive rights or rights to cumulative voting. In the event that the
Corporation fails to pay any dividends on the shares of AMPS, the exclusive



                                      51




<PAGE>



remedy of the Holders shall be the right to vote for directors pursuant to the
provisions of this paragraph 5.

     (f) Notification to S&P and Moody's. In the event a vote of Holders of
AMPS is required pursuant to the provisions of Section 13(a) of the 1940 Act,
the Corporation shall, not later than ten Business Days prior to the date on
which such vote is to be taken, notify S&P and Moody's that such vote is to be
taken and the nature of the action with respect to which such vote is to be
taken and, not later than ten Business Days after the date on which such vote
is taken, notify S&P and Moody's of the result of such vote.

     6. 1940 Act AMPS Asset Coverage. The Corporation shall maintain, as of
the last Business Day of each month in which any shares of AMPS is
outstanding, the 1940 Act AMPS Asset Coverage.

     7. AMPS Basic Maintenance Amount. (a) The Corporation shall maintain, on
each Valuation Date, and shall verify to its satisfaction that it is
maintaining on such Valuation Date, (i) S&P Eligible Assets having an
aggregate Discounted Value equal to or greater than the AMPS Basic Maintenance
Amount and (ii) Moody's Eligible Assets having an aggregate Discounted Value
equal to or greater than the AMPS Basic Maintenance Amount. Upon any failure
to maintain the required Discounted Value, the Corporation will use its best
efforts to alter the composition of its portfolio to reattain the AMPS Basic
Maintenance Amount on or prior to the AMPS Basic Maintenance Cure Date.

     (b) On or before 5:00 P.M., New York City time, on the third Business Day
after a Valuation Date on which the Corporation fails to satisfy the AMPS
Basic Maintenance Amount, the Corporation shall complete and deliver to the
Auction Agent, and Moody's and S&P, as the case may be, a complete AMPS Basic
Maintenance Report as of the date of such failure, which



                                      52



<PAGE>



will be deemed to have been delivered to the Auction Agent if the Auction
Agent receives a copy or telecopy, telex or other electronic transcription
thereof and on the same day the Corporation mails to the Auction Agent for
delivery on the next Business Day the complete AMPS Basic Maintenance Report.
The Corporation will deliver an AMPS Basic Maintenance Report to the Auction
Agent and Moody's and S&P, as the case may be, on or before 5:00 p.m., New
York City time, on the third Business Day after a Valuation Date on which the
Corporation cures its failures to maintain Moody's Eligible Assets or S&P
Eligible Assets, as the case may be, with an aggregate Discounted Value equal
to or greater than the AMPS Basic Maintenance Amounts or on which the
Corporation fails to maintain Moody's Eligible Assets with an aggregate
Discounted Value which exceeds that AMPS Basic Maintenance Amount by 5% or
more. The Corporation will also deliver an AMPS Basic Maintenance Report to
the Auction Agent, Moody's and S&P as of each Quarterly Valuation Date on or
before the third Business Day after such date. Whenever the Corporation
delivers an AMPS Basic Maintenance Report to S&P pursuant to this paragraph
7(b), it shall also deliver a Certificate of Minimum Liquidity to S&P and the
Auction Agent. A failure by the Corporation to deliver an AMPS Basic
Maintenance Report under this paragraph 7(b) shall be deemed to be delivery of
an AMPS Basic Maintenance Report indicating the Discounted Value for S&P
Eligible Assets and Moody's Eligible Assets of the Corporation is less than
the AMPS Basic Maintenance Amount, as of the relevant Valuation Date.

     (c) Within ten Business Days after the date of delivery of an AMPS Basic
Maintenance Report and a Certificate of Minimum Liquidity in accordance with
paragraph 7(b) above relating to a Quarterly Valuation Date, the Independent
Accountant will confirm in writing to the Auction Agent, S&P and Moody's (i)
the mathematical accuracy of the calculations



                                      53



<PAGE>



reflected in such Report (and in any other AMPS Basic Maintenance Report,
randomly selected by the Independent Accountant, that was delivered by the
Corporation during the quarter ending on such Quarterly Valuation Date) and
(with respect to S&P only while S&P is rating the AMPS) such Certificate, (ii)
that, in such Report (and in such randomly selected Report), the Corporation
correctly determined the assets of the Corporation which constitute S&P
Eligible Assets or Moody's Eligible Assets, as the case may be, at such
Quarterly Valuation Date in accordance with these Articles Supplementary,
(iii) that, in such Report (and in such randomly selected Report), the
Corporation determined whether the Corporation had, at such Quarterly
Valuation Date (and at the Valuation Date addressed in such randomly-selected
Report) in accordance with these Articles Supplementary, S&P Eligible Assets
of an aggregate Discounted Value at least equal to the AMPS Basic Maintenance
amount and Moody's Eligible Assets of an aggregate Discounted Value at least
equal to the Basic Maintenance Amount, (iv) that (with respect to S&P only) in
such Certificate, the Corporation determined the Minimum Liquidity Level and
the Corporation's Deposit Securities in accordance with these Articles
Supplementary, including maturity or tender date, (v) with respect to the S&P
rating on Municipal Bonds, the issuer name, issue size and coupon rate listed
in such Report and (with respect to S&P only) such Certificate, that the
Independent Accountant has requested that S&P verify such information and the
Independent Accountant shall provide a listing in its letter of any
differences, (vi) with respect to the Moody's ratings on Municipal Bonds, the
issuer name, issue size and coupon rate listed in such Report and (with
respect to S&P only) such Certificate, that such information has been verified
by Moody's (in the event such information is not verified by Moody's, the
Independent Accountant will inquire of Moody's what such information is, and
provide a listing of Moody's what such information is, and provide a listing
in its letter of any differences), (vii)



                                      54



<PAGE>



with respect to the bid or mean price (or such alternative permissible factor
used in calculating the Market Value) provided by the custodian of the
Corporation's assets to the Corporation for purposes of valuing securities in
the Corporation's portfolio, the Independent Accountant has traced the price
used in such Report and (with respect to S&P only) such Certificate to the bid
or mean price listed in such Report and (with respect to S&P only) such
Certificate as provided to the Corporation and verified that such information
agrees (in the event such information does not agree, the Independent
Accountant will provide a listing in its letter of such differences) and
(viii) with respect to such confirmation to Moody's, that the Corporation has
satisfied the requirements of paragraph 9(b) of these Articles Supplementary
(such confirmation is herein called the "Accountant's Confirmation").

     (d) Within ten Business Days after the date of delivery to the Auction
Agent, S&P and Moody's of an AMPS Basic Maintenance Report in accordance with
paragraph 7(b) above relating to any Valuation Date on which the Corporation
failed to maintain S&P Eligible Assets with an aggregate Discounted Value and
Moody's Eligible Assets with an aggregate Discounted Value equal to or greater
than the AMPS Basic Maintenance Amount, and relating to the AMPS Basic
Maintenance Cure Date with respect to such failure, the Independent Accountant
will provide to the Auction Agent, S&P and Moody's an Accountant's
Confirmation as to such AMPS Basic Maintenance Report.

     (e) If any Accountant's Confirmation delivered pursuant to subparagraph
(c) or (d) of this paragraph 7 shows that an error was made in the AMPS Basic
Maintenance Report for a particular Valuation Date for which such Accountant's
Confirmation as required to be delivered, or shows that a lower aggregate
Discounted Value for the aggregate of all S&P Eligible Assets or Moody's
Eligible Assets, as the case may be, of the Corporation was determined by the



                                      55



<PAGE>



Independent Accountant, the calculation or determination made by such
Independent Accountant shall be final and conclusive and shall be binding on
the Corporation, and the Corporation shall accordingly amend and deliver the
AMPS Basic Maintenance Report to the Auction Agent, S&P and Moody's promptly
following receipt by the Corporation of such Accountant's Confirmation.

     (f) On or before 5:00 p.m., New York City time, on the first Business Day
after the Date of Original Issue of the shares of AMPS, the Corporation will
complete and deliver to S&P and Moody's an AMPS Basic Maintenance Report as of
the close of business on such Date of Original Issue. Within five Business
Days of such Date or Original Issue, the Independent Accountant will confirm
in writing to S&P and Moody's (i) the mathematical accuracy of the
calculations reflected in such Report and (ii) that the aggregate Discounted
Value of S&P Eligible Assets and the aggregate Discounted Value of Moody's
Eligible Assets reflected thereon equals or exceeds the AMPS Basic Maintenance
Amount reflected thereon. Also, on or before 5:00 p.m., New York City time, on
the first Business Day after shares of Common Stock are repurchased by the
Corporation, the Corporation will complete and deliver to S&P and Moody's an
AMPS Basic Maintenance Report as of the close of business on such date that
Common Stock is repurchased.

     (g) For so long as shares of AMPS are rated by Moody's, in managing the
Corporation's portfolio, the adviser will not alter the composition of the
Corporation's portfolio if, in the reasonable belief of the adviser, the
effect of any such alteration would be to cause the Corporation to have
Moody's Eligible Assets with an aggregate Discounted Value, as of the
immediately preceding Valuation date, less than the AMPS Basic Maintenance
Amount as of such Valuation Date, 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



                                      56



<PAGE>



aggregate Discounted Value of Moody's Eligible Assets exceeded the AMPS Basic
Maintenance Amount by five percent or less, the adviser will not alter the
composition of the Corporation's portfolio in a manner reasonably expected to
reduce the aggregate Discounted Value of Moody's Eligible Assets unless the
Corporation shall have confirmed that, after giving effect to such alteration,
the aggregate Discounted Value of Moody's Eligible Assets would exceed the
AMPS Basic Maintenance Amount.

     8. Minimum Liquidity Level. (a) For so long as any shares of AMPS are
rated by S&P, the Corporation shall be required to have, as of each Valuation
Date, Dividend Coverage Assets having in the aggregate a Market Value not less
than the Dividend Coverage Amount.

     (b) As of each Valuation Date as long as any shares of AMPS are rated by
S&P, the Corporation shall determine (i) the Market Value of the Dividend
Coverage Assets owned by the Corporation as of that Valuation Date, (ii) the
Dividend Coverage Amount on that Valuation Date, and (iii) whether the Minimum
Liquidity Level is met as of that Valuation Date. The calculations of the
Dividend Coverage Assets, the Dividend Coverage Amount and whether the Minimum
Liquidity Level is met shall be set forth in a certificate (a "Certificate of
Minimum Liquidity") dated as of the Valuation Date. The AMPS Basic Maintenance
Report and the Certificate of Minimum Liquidity may be combined in one
certificate. The Corporation shall cause the Certificate of Minimum Liquidity
to be delivered to S&P not later than the close of business on the third
Business Day after the Valuation Date applicable to such Certificate pursuant
to paragraph 7(b). The Minimum Liquidity Level shall be deemed to be met as of
any date of determination if the Corporation has timely delivered a
Certificate of Minimum Liquidity relating to such date which states that the
same has been met and which is not manifestly inaccurate. In the event that a
Certificate of Minimum Liquidity is not delivered to S&P when



                                      57



<PAGE>



required, the Minimum Liquidity Level shall be deemed not to have been met as
of the applicable date.

     (c) If the Minimum Liquidity Level is not met as of any Valuation Date,
then the Corporation shall purchase or otherwise acquired Dividend Coverage
Assets to the extent necessary so that the Minimum Liquidity Level is met as
of the fifth Business Day following such Valuation Date. The Corporation
shall, by such fifth Business Day, provide to S&P a Certificate of Minimum
Liquidity setting forth the calculations of the Dividend Coverage Assets and
the Dividend Coverage Amount and showing that the Minimum Liquidity Level is
met as of such fifth Business Day together with a report of the custodian of
the Corporation's assets confirming the amount of the Corporation's Dividend
Coverage Assets as of such fifth Business Day.

     9. Certain Other Restrictions.

     (a) For so long as any shares of AMPS are rated by S&P, the Corporation
will not purchase or sell futures contracts, writs, purchase or sell options
on futures contracts or write put options (except covered put options) or call
options (except covered call options) on portfolio securities unless it
receives written confirmation from S&P that engaging in such transactions will
not impair the ratings then assigned to the shares of AMPS by S&P, except that
the Corporation may purchase or sell futures contracts based on the Bond Buyer
Municipal Bond Index (the "Municipal Index") or United States Treasury Bonds
with remaining maturities of ten years or more ("Treasury Bonds") and write,
purchase or sell put and call options on such contracts (collectively "S&P
Hedging Transactions"), subject to the following limitations:

          (i) the Corporation will not engage in any S&P Hedging Transaction
     based on the Municipal Index (other than transactions which terminate a
     futures contract or



                                      58



<PAGE>



     option held by the Corporation by the Corporation's taking an opposite
     position thereto ("Closing Transactions")), which would cause the
     Corporation at the time of such transaction to own or have sold the least
     of (A) more than 1,000 outstanding futures contracts based on the
     Municipal Index, (B) outstanding futures contracts based on the Municipal
     Index exceeding in number 25% of the quotient of the Market Value of the
     Corporation's total assets divided by $100,000 or (C) outstanding futures
     contracts based on the Municipal Index exceeding in number 10% of the
     average number of daily traded futures contracts based on the Municipal
     Index in the thirty days preceding the time of effecting such transaction
     as reported by The Wall Street Journal;

          (ii) the Corporation will not engage in any S&P Hedging Transaction
     based on Treasury Bonds (other than Closing Transactions) which would
     cause the Corporation at the time of such transaction to own or have sold
     the lesser of (A) outstanding futures contracts based on Treasury Bonds
     and on the Municipal Index exceeding in number 25% of the quotient of the
     Market Value of the Corporation's total assets divided by $100,000 or (B)
     outstanding futures contracts based on Treasury Bonds exceeding in number
     10% of the average number of daily traded futures contracts based on
     Treasury Bonds in the thirty days preceding the time of effecting such
     transaction as reported by The Wall Street Journal;

          (iii) the Corporation will engage in Closing Transactions to close
     out any outstanding futures contract which the Corporation owns or has
     sold or any outstanding option thereon owned by the Corporation in the
     event (A) the Corporation does not have S&P Eligible Assets with an
     aggregate Discounted Value equal to or greater than the



                                      59



<PAGE>



     AMPS Basic Maintenance Amount on two consecutive Valuation Dates and (B)
     the Corporation is required to pay Variation Margin on the second such
     Valuation Date;

          (iv) the Corporation will engage in a Closing Transaction to close
     out any outstanding futures contract or option thereon in the month prior
     to the delivery month under the terms of such futures contract or option
     thereon unless the Corporation holds the securities deliverable under
     such terms; and

          (v) when the Corporation writes a futures contract or option
     thereon, it will either maintain an amount of cash, cash equivalents or
     short-term, fixed-income securities in a segregated account with the
     Corporation'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 Corporation's broker with respect to such futures contract
     or option equals the Market Value of the futures contract or option, or,
     in the event the Corporation writes a futures contract or option thereon
     which requires delivery of an underlying security, it shall hold such
     underlying security in its portfolio.

     For purposes of determining whether the Corporation has S&P Eligible
Assets with a Discounted Value that equals or exceeds the AMPS Basic
Maintenance Amount, the Discounted Value of cash or securities held for the
payment of Initial Margin or Variation Margin shall be zero and the aggregate
Discounted Value of S&P Eligible Assets shall be reduced by an amount equal to
(i) 30% of the aggregate settlement value, as marked to market, of any
outstanding futures contracts based on the Municipal Index which are owned by
the Corporation plus (ii) 25% of the aggregate settlement value, as marked to
market, of any outstanding futures contracts based on Treasury Bonds which
contracts are owned by the Corporation.



                                      60



<PAGE>



     (b) For so long as any shares of AMPS are rated by Moody's, the
Corporation will not buy or sell futures contracts, write, purchase or sell
call options on futures contracts or purchase put options on futures contracts
or write call options (except covered call options) on portfolio securities
unless it receives written confirmation from Moody's that engaging in such
transactions would not impair the ratings then assigned to the shares of AMPS
by Moody's, except that the Corporation may purchase or sell exchanged-traded
futures contracts based on the Municipal Index or Treasury Bonds and purchase,
write or sell exchanged-traded put options on such futures contracts and
purchase, write or sell exchanged-traded call options on such futures
contracts (collectively "Moody's Hedging Transactions"), subject to the
following limitations:

          (i) the Corporation will not engage in any Moody's Hedging
     Transaction based on the Municipal Index (other than Closing
     Transactions) which would cause the Corporation at the time of such
     transaction to own or have sold (A) outstanding futures contracts based
     on the Municipal Index exceeding in number 10% of the average number of
     daily traded futures contracts based on the Municipal Index in the thirty
     days preceding the time of effecting such transaction as reported by The
     Wall Street Journal or (B) outstanding futures contracts based on the
     Municipal Index having a Market Value exceeding the Market Value of all
     Moody's Eligible Assets owned by the Corporation (other than Moody's
     Eligible Assets already subject to a Moody's Hedging Transaction);

          (ii) the Corporation will not engage in any Moody's Hedging
     Transaction based on Treasury Bonds (other than Closing Transactions)
     which would cause the Corporation at the time of such transaction to own
     or have sold (A) outstanding futures contracts based on Treasury Bonds
     having an aggregate Market Value exceeding 40% of the aggregate Market
     Value of Moody's Eligible Assets owned by the Corporation and



                                      61



<PAGE>



     rated Aa by Moody's (or, if not rated by Moody's but rated by S&P, rated
     AAA by S&P) or (B) outstanding futures contracts based on Treasury Bonds
     having an aggregate Market Value exceeding 80% of the aggregate Market
     Value of all Moody's Eligible Assets owned by the Corporation (other than
     Moody's Eligible Assets already subject to a Moody's Hedging Transaction)
     and rated Baa or A by Moody's (or, if not rated by Moody's but rated by
     S&P, rated A or AA by S&P) (for purposes of the foregoing clauses (i) and
     (ii), the Corporation shall be deemed to own the number of futures
     contracts that underlie any outstanding options written by the
     Corporation);

          (iii) the Corporation will engage in Closing Transactions to close
     out any outstanding futures contract based on the Municipal Index if the
     amount of open interest in the Municipal Index as reported by The Wall
     Street Journal is less than 5,000;

          (iv) the Corporation will engage in a Closing Transaction to close
     out any outstanding futures contract by no later than the fifth Business
     Day of the month in which such contract expires and will engage in a
     Closing Transaction to close out any outstanding option on a futures
     contract by no later than the first Business Day of the month in which
     such option expires;

          (v) the Corporation will engaged in Moody's Hedging Transactions
     only with respect to futures contracts or options thereon having the next
     settlement date or the settlement date immediately thereafter;

          (vi) in the event the Corporation writes a futures contract or
     option thereon which requires delivery of an underlying security, it
     shall hold such underlying security in its portfolio;



                                      62



<PAGE>



          (vii) the Corporation will not engage in options and futures
     transactions for leveraging or speculative purposes and will not write
     any call options or sell any futures contracts for the purposes of
     hedging the anticipated purchase of an asset prior to completion of such
     purchase; and

          (viii) the Corporation will not enter into an option or futures
     transaction unless, after giving effect thereto, the Corporation would
     continue to have Moody's Eligible Assets with an aggregate Discounted
     Value equal to or greater than the AMPS Basic Maintenance Amount.

     For purposes of determining whether the Corporation has Moody's Eligible
Assets with an aggregate Discounted Value that equals or exceeds the AMPS
Basic Maintenance amount, the Discounted Value of Moody's Eligible Assets
which the Corporation is obligated to deliver or receive pursuant to an
outstanding futures contract or option shall be as follows: (i) assets subject
to call options written by the Corporation which are either exchange-traded
and "readily reversible" or which expire within 49 days after the date as of
which such valuation is made shall be valued at the lesser of (a) Discounted
Value and (b) the exercise price of the call option written by the
Corporation; (ii) assets subject to call options written by the Corporation
not meeting the requirements of clause (i) of this sentence shall have no
value; (iii) assets subject to put options written by the Corporation 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 Corporation is the seller the contract be
valued at the settlement price and where the Corporation is the buyer the
contract may be valued at the Discounted Value of the subject securities and
(v)



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<PAGE>



where delivery may be made to the Corporation with any security of a class of
securities, the Corporation shall assume that it will take delivery of the
security with the lowest Discounted Value.

     For purposes of determining whether the Corporation has Moody's Eligible
Assets with an aggregate Discounted Value that equals or exceeds the AMPS
Basic Maintenance amount, the following amounts shall be subtracted from the
aggregate Discounted Value of the Moody's Eligible Assets held by the
Corporation: (i) 10% of the exercise price of a written call option; (ii) the
exercise price of any written put option; (iii) where the Corporation is the
seller under a futures contract, 10% of the settlement price of the futures
contract; (iv) where the Corporation is the purchaser under a futures
contract, the settlement price of assets purchased under such futures
contract; (v) the settlement price of the underlying futures contract if the
Corporation writes put options on a futures contract; and (vi) 105% of the
Market Value of the underlying futures contracts if the Corporation writes
call options on a futures contract and does not own the underlying contract.

     (c) For so long as any shares of AMPS are rated by Moody's, the
Corporation will not enter into any contract to purchase securities for a
fixed price at a future date beyond customary settlement time (other than such
contracts that constitute Moody's Hedging Transactions that are permitted
under paragraph 9(b) of these Article Supplementary), except that the
Corporation may enter into such contracts to purchase newly-issued securities
on the date such securities are issued ("Forward Commitments"), subject to the
following limitations:

          (i) the Corporation 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's and maturing prior to the date of
     the Forward Commitment with a Market



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<PAGE>



     Value that equals or exceeds the amount of the Corporation'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 Corporation's obligations under any Forward
     Commitment to which it is from time to time a party; and

          (ii) the Corporation will not enter into a Forward Commitment
     unless, after giving effect thereto the Corporation would continue to
     have Moody's Eligible Assets with an aggregate Discounted Value equal to
     or greater than the AMPS Basic Maintenance Account.

     For purposes of determining whether the Corporation has Moody's Eligible
Assets with an aggregate Discounted Value that equals or exceeds the AMPS
Basic Maintenance Amount, the Discounted Value of all Forward Commitments to
which the Corporation is a party and of all securities deliverable to the
Corporation pursuant to such Forward Commitments shall be zero.

     (d) For so long as shares of AMPS are rated by S&P or Moody's, the
Corporation will not, unless it has received written confirmation from S&P
and/or Moody's, as the case may be, that such action would not impair the
ratings then assigned to shares of AMPS by S&P and/or Moody's, as the case may
be, (i) borrow money except for the purpose of clearing transactions in
portfolio securities (which borrowings shall under any circumstances be
limited to the lesser of $10 million and an amount equal to 5% of the Market
Value of the Corporation's assets at the time of such borrowings), (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 dividends or the distribution of assets upon dissolution,
liquidation or winding up of the Corporation, (v) reissue any AMPS previously
purchased or redeemed by the Corporation,



                                      65



<PAGE>



(vi) merger or consolidate into or with any other corporation or entity, (vii)
change the Pricing Service or (viii) engage in reverse repurchase agreements.

     10. Notice. All notices or communications, unless otherwise specified in
the By-Laws of the Corporation or these Articles Supplementary, shall be
sufficiently given if in writing and delivered in person or mailed by
first-class mail, postage prepaid. Notice shall be deemed given on the earlier
of the date received or the date seven days after which such notice is mailed.

     11. Auction Procedures. (a) Certain definitions. As used in this
paragraph 11, the following terms shall have the following meanings, unless
the context otherwise requires:

          (i) "AMPS" means the shares of AMPS being auctioned pursuant to this
     paragraph 11.

          (ii) "Auction Date" means the first Business Day preceding the first
     day of a Dividend Period.

          (iii) "Available AMPS" has the meaning specified in paragraph
     11(d)(i) below.

          (iv) "Bid" has the meaning specified in paragraph 11(b)(i) below.

          (v) "Bidder" has the meaning specified in paragraph 11(b)(i) below.

          (vi) "Hold Order" has the meaning specified in paragraph 11(b)(i)
     below.

          (vii) "Maximum Applicable Rate" for any Divided Period will be the
     Applicable Percentage of the Reference Rate. The Applicable Percentage
     will be determined based on (i) the lower of the credit rating or ratings
     assigned on such date to such shares by Moody's and S&P (or if Moody's or
     S&P or both shall not make such rating available, the equivalent of
     either or both of such ratings by a Substitute Rating Agency or two
     Substitute Rating Agencies or, in the event that only on such rating
     shall be available, such rating) and (ii) whether the Corporation has
     provided notification to the



                                      66



<PAGE>



     Auction Agent prior to the Auction establishing the Applicable Rate for
     any dividend pursuant to paragraph 2(f) hereof that net capital gains or
     other taxable income will be included in such dividend on shares of AMPS
     as follows:


                                             Applicable         Applicable
           Credit Ratings                  Percentage of       Percentage of
- -------------------------------------     Reference Rate -    Reference Rate -
      Moody's              S&P            No Notification      Notification
- ------------------  -----------------    ------------------  -----------------
"aa3" or higher     AA- or higher                 110%              150%
"a3" to "a1"        A- to A+                      125%              160%
"baa3" to "baa1"    BBB- to BBB+                  150%              250%
Below "baa3"        Below BBB-                    200%              275%

     The Corporation shall take all reasonable action necessary to enable S&P
and Moody's to provide a rating for each series of AMPS. If either S&P or
Moody's shall not make such a rating available, or neither S&P nor Moody's
shall make such a rating available, Merrill Lynch, Pierce, Fenner & Smith
Incorporated or its affiliates and successors, after consultation with the
Corporation, shall select a nationally recognized statistical rating
organization or two nationally recognized statistical rating organizations to
act as a Substitute Rating Agency or Substitute Rating Agencies, as the case
may be.

          (viii) "Order" has the meaning specified in paragraph 11(b)(i)
     below.

          (ix) "Sell Order" has the meaning specified in paragraph 11(b)(i)
     below.

          (x) "Submission Deadline" means 1:00 P.M., New York City time, on
     any Auction Date or such other time on any Auction Date as may be
     specified by the Auction Agent from time to time as the time by which
     each Broker-Dealer must submit to the Auction Agent in writing all orders
     obtained by it for the Auction to be conducted on such Auction Date.

          (xi) "Submitted Bid" has the meaning specified in paragraph 11(d)(i)
     below.



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<PAGE>



          (xii) "Submitted Hold Order: has the meaning specified in paragraph
     11(d)(i) below.

          (xiii) "Submitted Order" has the meaning specified in paragraph
     11(d)(i) below.

          (xiv) "Submitted Sell Order" has the meaning specified in paragraph
     11(d)(i) below.

          (xv) "Sufficient Clearing Bids" has the meaning specified in
     paragraph 11(d)(i) below.

          (xvi) "Winning Bid Rate" has the meaning specified in paragraph
     11(d)(i) below.

     (b) Orders by Existing Holders and Potential Holders.

          (i) On or prior to the Submission Deadline on each Auction Date:

               (A) each Existing Holder may submit to a Broker-Dealer
          information as to:

                    (1) the number of Outstanding shares, if any, of AMPS held
               by such Existing Holder which such Existing Holder desires to
               continue to hold without regard to the Applicable Rate for the
               next succeeding Dividend Period;

                    (2) the number of Outstanding shares, if any, of AMPS held
               by such Existing Holder which such Existing Holder 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 Existing Holder; and/or



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<PAGE>



                    (3) the number of Outstanding shares, if any, of AMPS held
               by such Existing Holder which such Existing Holder offers to
               sell without regard to the Applicable Rate for the next
               succeeding Divided Period; and

          (B) each Broker-Dealer, using a list of Potential Holders that shall
     be maintained in good faith for the purpose of conducting a competitive
     Auction, shall contact Potential Holders, including Persons that are not
     Existing Holders, on such list to determine that number of Outstanding
     shares, if any, of AMPS which each such Potential Holder offers to
     purchase, provided that the Applicable Rate for the next succeeding
     Divided Period shall not be less than the rate per annum specified in
     such Potential Holder.

     For the purposes hereof, the communication to a Broker-Dealer of
information referred to in clause (A) or (B) of this paragraph 11(b)(i) is
hereinafter referred to as an "Order" and each Existing Holder and each
Potential Holder placing an Order is hereinafter referred to as a "Bidder"; an
Order containing the information referred to in clause of this paragraph
11(b)(i) is hereinafter referred to as a "Hold Order"; an Order containing the
information referred to in clause (A)(2) or (B) of this paragraph 11(b)(i) is
hereinafter referred to as a "Bid"; and an order containing the information
referred to in clause (A)(3) of this paragraph 11(b)(i) is hereinafter
referred to as a "Sell Order".

          (ii) (A) A Bid by an Existing Holder shall constitute an irrevocable
     offer to sell:

                    (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



                                      69



<PAGE>



                    (2) such number or a lesser number of Outstanding shares
               of AMPS to be determined as set forth in paragraph 11(e)(i)(D)
               of the Applicable Rate determined on such Auction Date shall be
               equal to the rate per annum specified therein; or

                    (3) a lesser number of Outstanding shares of AMPS to be
               determined as set forth in paragraph 11(e)(ii)(C) if such
               specified rate per annum shall be higher than the Maximum
               Applicable Rate and Sufficient Clearing Bids do not exist.

               (B) A Sell Order by Existing Holder shall constitute an
          irrevocable offer to sell:

                    (1) the number of Outstanding shares of AMPS specified in
               such Sell Order; or

                    (2) such number or a lesser number of Outstanding shares
               of AMPS to be determined as set forth in paragraph 11(e)(ii)(C)
               if Sufficient Clearing Bids do not exist.

               (C) A Bid by a Potential Holder shall constitute an irrevocable
          offer to purchase:

                    (1) the number of Outstanding 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

                    (2) such number or a lesser number of Outstanding shares
               of AMPS to be determined as set forth in paragraph 11(e)(i)(E)
               if the



                                      70



<PAGE>



               Applicable Rate determined on such Auction Date shall be equal
               to the rate per annum specified therein.

     (c) Submission of Orders by Broker-Dealers to Auction Agent.

          (i) Each Broker-Dealer shall submit in writing or through the
     Auction Agent's Auction Processing System to the Auction Agent prior to
     the Submission Deadline on each Auction Date all Orders obtained by such
     Broker-Dealer and specifying with respect to each Order:

               (A) the name of the Bidder placing such Order;

               (B) the aggregate number of Outstanding shares of AMPS that are
          the subject of such Order;

               (C) to the extent that such Bidder is an Existing Holder:

                    (1) the number of Outstanding shares, if any, of AMPS
               subject to any Hold Order placed by such Existing Holder;

                    (2) the number of Outstanding shares, if any, of AMPS
               subject to any Bid placed by such Existing Holder and the rate
               per annum specified in such Bid; and

                    (3) the number of Outstanding shares, if any, of AMPS
               subject to any Sell Order placed by such Existing Holder; and

               (D) to the extent such Bidder is a Potential Holder, the rate
          per annum specified in such Potential Holder's Bid.

          (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%.



                                      71



<PAGE>



          (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) and a Sell Order (in the case of an
     Auction relating to a Special Dividend Period) 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.

          (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 Order
     shall be considered valid as follows and in the following order of
     priority:

               (A) any Holder 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 Exiting Holder, the number of shares of AMPS subject to each of
          such Holder Orders shall 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;

               (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 on Bid is submitted on behalf of such
          Existing Holder, up to and



                                      72



<PAGE>



          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 11(c)(iv)(A)
          above (an 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 11(c)(iv)(A) above and of
          the foregoing portion of this paragraph 11(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 11(c)(iv)(B) shall be treated as the
          subject of a Bid by a Potential Holder; and

               (C) any Sell Order shall be considered valid up to and
          including the excess of the number of Outstanding shares of AMPS
          held by such Existing Holder over the number of shares of AMPS
          subject to Hold Orders referred to in paragraph 11(c)(iv)(A) and
          Bids referred to in paragraph 11(c)(iv)(B); provided that if more
          than on Sell Order is submitted on behalf of any Existing Holder and
          the number of shares of AMPS 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.



                                      73



<PAGE>



          (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 specified.

     (d) Determination of Sufficient Clearing Bids, Winning Bid Rate and
Applicable Rate.

          (i) Not earlier than the Submission Deadline on each Auction Date,
     the Auction Agent shall assemble all Orders submitted or deemed submitted
     to it by the Broker-Dealers (each such Order as submitted or deemed
     submitted by a Broker-Dealer being hereinafter referred to individually
     as a "Submitted Hold Order", a "Submitted Bid" or a "Submitted Sell
     Order", as the case may be, or as a "Submitted Order") and shall
     determine:

               (A) the excess of the total number of Outstanding 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 "Available AMPS");

               (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:

                    (1) the number of Outstanding shares of AMPS that are the
               subject of Submitted Bids by Existing Holders specifying one or
               more rats per annum higher than the Maximum Applicable Rate,
               and

                    (2) the number of Outstanding shares of AMPS that are
               subject to Submitted Sell Orders (if such excess or such
               equality exists (other than



                                      74



<PAGE>



               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 being hereinafter referred
               to collectively as "Sufficient Clearing Bids"); and

               (C) if Sufficient Clearing Bids exist, the lowest rate per
          annum specified in the Submitted bids (the "Winning Bid Rate) that
          if:

                    (1) each Submitted Bid from Existing Holders specifying
               the Winning Bid Rate and all other Submitted Bids from Existing
               Holders specifying lower rates per annum were rejected, thus
               entitling such Existing Holders to continue to hold the shares
               of AMPS that are the subject of such Submitted Bids, and

                    (2) each Submitted Bid from Potential Holders specifying
               the Winning Bid Rate and all other Submitted Bids from
               Potential Holders specifying lower rates per annum were
               accepted, thus entitling the Potential Holders to purchase the
               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.

          (ii) Promptly after the Auction Agent has made the determinations
     pursuant to paragraph 11(d)(i), the Auction Agent shall advise the
     Corporation of the Maximum Applicable Rate and, based on such
     determinations, the Applicable Rate for the next succeeding Dividend
     Period as follows:



                                      75



<PAGE>



               (A) if Sufficient Clearing Bids exist, that the Applicable Rate
          for the next succeeding Dividend Period shall be equal to the
          Winning Bid Rate;

               (B) if Sufficient Clearing Bids do not exist (other than
          because all of the Outstanding 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

               (C) if all of the Outstanding shares of AMPS are the subject of
          Submitted Hold Orders, that the dividend Period next succeeding the
          Auction shall automatically be the same length as the immediately
          preceding Dividend Period and the Applicable Rate for the next
          succeeding Dividend Period shall be equal to 59% of the Reference
          Rate (or 90% of such rate if the Corporation has provided
          notification to the Auction Agent prior to the Auction establishing
          the Applicable Rate for any dividend pursuant to paragraph 2(f)
          hereof that net capital gains or other ____________ income will be
          included in such dividend on shares of AMPS) on the date of the
          Auction.

     (e) Acceptance and Rejection of Submitted Bids and Submitted Sell Orders
and Allocation of Shares. Based on the determinations made pursuant to
paragraph 11(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:

          (i) If Sufficient Clearing Bids have been made, subject to the
     provisions of paragraph 11(e)(iii) and paragraph 11(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:



                                      76



<PAGE>



               (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;

               (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;

               (C) the Submitted Bid of each of the Potential Holders
          specifying any rate per annum that is lower than the Winning Bid
          Rate shall be accepted;

               (D) the Submitted Bid of each of the Existing Holders
          specifying a rate per annum that is equal to the Winning Bid Rate
          shall be rejected, thus entitling each such Existing Holder to
          continue to hold the Outstanding 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 ("Remaining Shares") equal to
          the excess of the Available AMPS over the number of Outstanding
          shares of AMPS subject to Submitted Bids described in paragraph
          11(e)(i)(B) and paragraph 11(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



                                      77



<PAGE>



          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

               (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
          11(e)(i)(B), paragraph 11(e)(i)(C) and paragraph 11(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.

          (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 11(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:



                                      78



<PAGE>



               (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;

               (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

               (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
          differences 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 11(e)(ii)(A) and paragraph 11(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.

          (iii) If, as a result of the procedures described in paragraph
     11(e)(i) or paragraph 11(e)(ii), any Existing Holder would be entitled or
     required to sell, or any



                                      79



<PAGE>



     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.

          (iv) If, as a result of the procedures described in paragraph
     11(e)(i), any Potential Holder would be entitled or required to purchase
     less than a whole share of AMPS on any Auction Date, the Auction Agent
     shall, in such manner as in its sole discretion it shall determine,
     allocate 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.

          (v) Based on the results of each Auction, the Auction Agent shall
     determine, with respect to each Broker-Dealer that submitted Bids or Sell
     Orders on behalf of Existing Holders or Potential Holders, the aggregate
     number of Outstanding shares of AMPS to be purchased and the aggregate
     number of the 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



                                      80



<PAGE>



     more sellers such Broker-Dealer shall receive, as the case may be,
     Outstanding shares of AMPS.

     (f) Miscellaneous. The Corporation may interpret the provisions of this
paragraph 11 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 Existing Holders of AMPS. 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 11 or to or through a Broker-Dealer or to a Person that has
delivered a signed copy of a Purchaser's Letter to the Auction Agent, provided
that in the case of all transfers other than pursuant to Auctions such
Existing Holder, its Broker-Dealer 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 Existing Holder's beneficial ownership. Neither
the Corporation nor any affiliate shall submit an Order in any Auction. Any
Existing Holder than is an Affiliate shall not sell, transfer or otherwise
dispose of shares of AMPS to any Person other than the Corporation. All of the
Outstanding shares of AMPS 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 Corporation'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 Existing Holder thereof
and such Existing Holder thereupon will be entitled to receive certificates
therefor and required to deliver certificates therefor upon transfer or
exchange thereof.



                                      81



<PAGE>

     12. Securities Depository; Stock Certificates. (a) If there is a
Securities Depository, one certificate for all of the shares of Series A AMPS,
one certificate for all of the shares of Series B AMPS, one certificate for
all of the shares of Series C AMPS, one certificate for all of the shares of
Series D AMPS and one certificate for all of the shares of Series E AMPS shall
be issued to the Securities Depository and registered in the name of the
Securities Depository or its nominee. Additional certificates may be issued as
necessary to represent shares of AMPS. All such certificates shall bear a
legend to the effect that such certificates are issued subject to the
provisions restricting the transfer of shares of AMPS contained in these
Articles Supplementary and Each Purchaser's Letter. Unless the Corporation
shall have elected, during a Non-Payment Period, to waive this requirement,
the Corporation will also issue stop-transfer instructions to the Auction
Agent for the shares of AMPS. Except as provided in paragraph (b) below, the
Securities Depository or its nominee will be the Holder, and no Existing
Holder shall receive certificates representing its ownership interest in such
shares.

     (b) If the Applicable Rate applicable to all shares of AMPS of a series
shall be the Non-Payment Period Rate or there is no Securities Depository, the
Corporation may at its option issue one or more new certificates with respect
to such shares (without the legend referred to in paragraph 12(a)) registered
in the names of the Existing Holders or their nominees and rescind the
stop-transfer instructions referred to in paragraph 12(a) with respect to such
shares.



                                      82



<PAGE>



     IN WITNESS WHEREOF, MuniYield Insured Fund, Inc. has caused these
presents to be signed in its name and on its behalf by duly authorized
officer, and its corporate seal to be hereunto affixed and attested by its
Secretary, and the said officers of the Corporation further acknowledge said
instrument to be the corporate act of the Corporation, and state under the
penalties of perjury that to the best of their knowledge, information and
belief the matters and facts herein set forth with respect to approval are
true in all material respects, all on May 18, 1992.

                                      MuniYield Insured Fund, Inc.


                                      By /s/ Kenneth A. Jacob
                                        --------------------------------------
                                         Name:   Kenneth A. Jacob
                                         Title:  Vice President

Attest:

    /s/ Mark Goldfus
- ----------------------------------------
       Mark Goldfus
        Secretary



                                      83

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2A.5
<SEQUENCE>6
<FILENAME>efc4-1163_5550125ex992a5.txt
<TEXT>
                                                                EXHIBIT (a)(5)



                         MUNIYIELD INSURED FUND, INC.
                Articles Supplementary creating five series of

                        Auction Market Preferred Stock*

     MUNIYIELD INSURED FUND, INC., a Maryland corporation having its principal
Maryland office in the City of Baltimore (the "Corporation"), certifies to the
Maryland State Department of Assessments and Taxation that:

     FIRST: Pursuant to authority expressly vested in the Board of Directors
of the Corporation by Article FIFTH of its Charter, the Board of Directors has
reclassified 6,400 authorized and unissued shares of common stock of the
Corporation as additional preferred stock of the Corporation and has
authorized the issuance of preferred stock, par value $.10 per share,
liquidation preference $50,000 per share plus an amount equal to accumulated
but unpaid dividends (whether or not earned or declared) thereon, to be
designated Auction Market Preferred Stock.

     SECOND: The preferences, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption, of the
shares of such preferred stock shall be identical to the 6,400 shares of
Auction Market Preferred Stock previously reclassified and authorized by the
Board of Directors pursuant to Articles Supplementary dated May 18, 1992 and
filed on May 19, 1992 with the Maryland State Department of Assessments and
Taxation. Accordingly, these Articles Supplementary hereby incorporate by
reference such previously filed Articles Supplementary beginning with the
section entitled "DESIGNATION" and continuing until the end of the final
section entitled "Securities Depository; Stock Certificates," with the
following exception:


<PAGE>


     At page 2, in the section entitled "DESIGNATION," strike out the date
"May 22, 1992" and insert in lieu thereof the date "Dec. 1, 1994";

     IN WITNESS WHEREOF, MUNIYIELD INSURED FUND, INC. has caused these
presents to be signed in its name and on its behalf by a duly authorized
officer, and attested by its Secretary, and the said officers of the
Corporation further acknowledge said instrument to be the corporate act of the
Corporation, and state under the penalties of perjury that to the best of
their knowledge, information and belief the matters and facts herein set forth
with respect to approval are true in all material respects, all on Nov. 30,
1994.

                                    MUNIYELD INSURED FUND, INC.



                                    By:  /s/ Vincent R. Giordano
                                         -----------------------------------
                                         Name:   Vincent R. Giordano
                                         Title:  Senior Vice President

Attest:

/s/ Mark B. Goldfus
- -------------------------------
Name:  Mark B. Goldfus
Its:   Secretary


- ------------------------------------------------------------------------------
* Registered trademark of Merrill Lynch & Co., Inc.


                                      2

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2A.6
<SEQUENCE>7
<FILENAME>efc4-1163_5550624ex992a6.txt
<TEXT>
                                                                EXHIBIT (a)(6)



                         MUNIYIELD INSURED FUND, INC.

           Articles of Amendment to Articles Supplementary creating

               five series of Auction Market Preferred Stock(R)


     MUNIYIELD INSURED FUND, INC., a Maryland corporation having its principal
Maryland office in the City of Baltimore (the "Corporation"), certifies to the
Maryland State Department of Assessments and Taxation that:

     FIRST: The Articles Supplementary, filed on May 19, 1992, and the
Articles Supplementary, filed on December 1, 1994, each creating 6,400 shares
of Auction Market Preferred Stock of the Corporation (collectively, the
"Articles Supplementary"), are hereby amended by these Articles of Amendment
as follows:

     In each instance in which "$.10" appears, delete "$.10" and substitute
"$.05" therefor;

     In each instance in which "$50,000" appears, delete "$50,000" and
substitute "$25,000" therefor.

     SECOND: The foregoing amendment to the Articles Supplementary has been
effected in the manner and by the vote required by the Corporation's Charter
and the laws of Maryland. Pursuant to Section 2-603 of the code, the amendment
of the Articles Supplementary as hereinabove set forth has been duly advised,
approved and adopted by a majority of the entire Board of Directors of the
Corporation, there being no stock entitled to be voted on the Charter
amendment outstanding or subscribed for at the time of approval.

     THIRD: Except as amended hereby, the Charter shall remain in full force
and effect.

     FOURTH: The authorized capital stock of the Corporation has not been
increased by these Articles of Amendment.

- ---------------------
(R) Registered trademark of Merrill Lynch & Co., Inc.


<PAGE>


     FIFTH: These Articles of Amendment shall be effective comtemporaneously
with the acceptance for recording or filing by the Maryland State Department
of Assessments and Taxation of the Corporation's Articles supplementary dated
November 30, 1994.

     The Senior Vice President acknowledges these Articles of Amendment to be
the corporate act of the Corporation and states that to the best of his
knowledge, information and belief the matters and facts set forth in these
Articles with respect to the authorization and approval of the amendment of
the Corporation's Articles Supplementary are true in all material respects,
and that this statement is made under the penalties of perjury.

     IN WITNESS WHEREOF, MUNIYIELD INSURED FUND, INC. has caused these
Articles to be signed in its name and on its behalf by its Senior Vice
President, a duly authorized officer of the Corporation, and attested by its
Secretary as of November 30, 1994.


                                    MUNIYIELD INSURED FUND, INC.




                                    By:  /s/ Vincent R. Giordano
                                         ---------------------------------
                                         Name:   Vincent R. Giordano
                                         Title:  Senior Vice President


Attest:

/s/ Mark B. Goldfus
- ----------------------------------
Name:  Mark B. Goldfus
Its:   Secretary


                                      2

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2A.9
<SEQUENCE>8
<FILENAME>efc4-1163_5540214ex992a9.txt
<TEXT>
                                                                EXHIBIT (a)(9)



                         MUNIYIELD INSURED FUND, INC.

                 Articles Supplementary creating two series of

                        Auction Market Preferred Stock


     MUNIYIELD INSURED FUND, INC., a Maryland corporation having its principal
Maryland office in the City of Baltimore (the "Corporation"), certifies to the
State Department of Assessments and Taxation of Maryland that:

     FIRST: Pursuant to authority expressly vested in the Board of Directors
of the Corporation by article fifth of its Charter, the Board of Directors has
reclassified 5,200 authorized and unissued shares of common stock of the
Corporation as preferred stock of the Corporation and has authorized the
issuance of two series of preferred stock, par value $.10 per share,
liquidation preference $25,000 per share plus an amount equal to accumulated
but unpaid dividends (whether or not earned or declared) thereon, to be
designated respectively:

     Auction Market Preferred Stock, Series H; and Auction Market Preferred
Stock, Series I.

     SECOND: The preferences, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption, of the
shares of each such series of preferred stock are as follows:

                                  DESIGNATION

     Series H: A series of 2,600 shares of preferred stock, par value $.10 per
share, liquidation preference $25,000 per share plus an amount equal to
accumulated but unpaid dividends (whether or not earned or declared) thereon,
is hereby designated "Auction Market Preferred Stock, Series H." Each share of
Auction Market Preferred Stock, Series H (sometimes referred to herein as
"Series H AMPS") shall be issued on a date to be determined by the Board of
Directors of the Corporation or pursuant to their delegated authority; have an
Initial Dividend


<PAGE>


Rate and an Initial Dividend Payment Date as shall be determined in advance of
the issuance thereof by the Board of Directors of the Corporation or pursuant
to their delegated authority; and have such other preferences, voting powers,
limitations as to dividends, qualifications and terms and conditions of
redemption as are set forth in these Articles Supplementary. The Auction
Market Preferred Stock, Series H shall constitute a separate series of
preferred stock of the Corporation, and each share of Auction Market Preferred
Stock, Series H shall be identical.

     Series I: A series of 2,600 shares of preferred stock, par value $.10 per
share, liquidation preference $25,000 per share plus an amount equal to
accumulated but unpaid dividends (whether or not earned or declared) thereon,
is hereby designated "Auction Market Preferred Stock, Series I." Each share of
Auction Market Preferred Stock, Series I (sometimes referred to herein as
"Series I AMPS") shall be issued on a date to be determined by the Board of
Directors of the Corporation or pursuant to their delegated authority; have an
Initial Dividend Rate and an Initial Dividend Payment Date as shall be
determined in advance of the issuance thereof by the Board of Directors of the
Corporation or pursuant to their delegated authority; and have such other
preferences, voting powers, limitations as to dividends, qualifications and
terms and conditions of redemption as are set forth in these Articles
Supplementary. The Auction Market Preferred Stock, Series I shall constitute a
separate series of preferred stock of the Corporation, and each share of
Auction Market Preferred Stock, Series I shall be identical.


                                      2
<PAGE>


     1. Definitions.

     (a) Unless the context or use indicates another or different meaning or
intent, in these Articles Supplementary the following terms have the following
meanings, whether used in the singular or plural:

     "Accountant's Confirmation" has the meaning set forth in paragraph 7(c)
of these Articles Supplementary.

     "Additional Dividend" has the meaning set forth in paragraph 2(e) of
these Articles Supplementary.

     "Adviser" means the Corporation's investment adviser which initially
shall be Fund Asset Management, L.P.

     "Affiliate" means any Person, other than Merrill Lynch, Pierce, Fenner &
Smith Incorporated or its successors, known to the Auction Agent to be
controlled by, in control of, or under common control with, the Corporation.

     "Agent Member" means a member of the Securities Depository that will act
on behalf of a Beneficial Owner of one or more shares of AMPS or a Potential
Beneficial Owner.

     "AMPS" means, as the case may be, the Auction Market Preferred Stock,
Series H; or the Auction Market Preferred Stock, Series I.

     "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 of each series and Other AMPS Outstanding on such Valuation Date
multiplied by the sum of (a) $25,000 and (b) any applicable redemption premium
attributable to the designation of a Premium Call Period; (B) the aggregate
amount of cash dividends (whether or not earned or declared) that will have
accumulated for each share of AMPS and Other AMPS Outstanding, in each case,
to (but not


                                      3
<PAGE>


including) the end of the current Dividend Period for each series of AMPS that
follows such Valuation Date in the event the then current Dividend Period for
each series of AMPS 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's Volatility Factor and the S&P
Volatility Factor, determined from time to time by Moody's and S&P,
respectively (except that if such Valuation Date occurs during a Non-Payment
Period, the cash dividend for purposes of calculation would accumulate at the
then current Non-Payment Period Rate); (D) the amount of anticipated expenses
of the Corporation for the 90 days subsequent to such Valuation Date
(including any premiums payable with respect to a Policy); (E) the amount of
current outstanding balances of any indebtedness which 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 Corporation'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 Corporation 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 Corporation's assets, or (B) the face value of any of the Corporation's
assets if such assets mature prior to or on


                                      4
<PAGE>


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 Corporation 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). For Moody's and S&P, the Corporation
shall include as a liability an amount calculated semi-annually equal to 150%
of the estimated cost of obtaining other insurance guaranteeing the timely
payment of interest on a Moody's Eligible Asset or an S&P Eligible Asset and
principal thereof to maturity with respect to Moody's Eligible Assets and S&P
Eligible Assets that (i) are covered by a Policy which provides the
Corporation with the option to obtain such other insurance and (ii) are
discounted by a Moody's Discount Factor or an S&P Discount Factor determined
by reference to the insurance claims-paying ability rating of the issuer of
such Policy.

     "AMPS Basic Maintenance Cure Date," with respect to the failure by the
Corporation to satisfy the AMPS Basic Maintenance Amount (as required by
paragraph 7(a) of these Articles Supplementary) as of a given Valuation Date,
means the sixth Business Day following such Valuation Date.

     "AMPS Basic Maintenance Report" means a report signed by any of the
President, Treasurer, any Senior Vice President or any Vice President of the
Corporation which sets forth, as of the related Valuation Date, the assets of
the Corporation, the Market Value and the Discounted Value thereof (seriatim
and in aggregate), the AMPS Basic Maintenance Amount and the net asset value
and market trading price per share of Common Stock.

     "Anticipation Notes" shall mean the following Municipal Bonds: revenue
anticipation notes, tax anticipation notes, tax and revenue anticipation
notes, grant anticipation notes and bond anticipation notes.


                                      5
<PAGE>


     "Applicable Percentage" has the meaning set forth in paragraph 10(a)(vii)
of these Articles Supplementary.

     "Applicable Rate" means the rate per annum at which cash dividends are
payable on the AMPS or Other AMPS, as the case may be, for any Dividend
Period.

     "Applicable Spread" has the meaning set forth in paragraph 10(a)(vii) of
these Articles Supplementary.

     "Auction" means a periodic operation of the Auction Procedures.

     "Auction Agent" 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 Corporation or a duly authorized
committee thereof enters into an agreement with the Corporation to follow the
Auction Procedures for the purpose of determining the Applicable Rate and to
act as transfer agent, registrar, dividend disbursing agent and redemption
agent for the AMPS and Other AMPS.

     "Auction Date" has the meaning set forth in paragraph 10(a)(ii) of these
Articles Supplementary.

     "Auction Procedures" means the procedures for conducting Auctions set
forth in paragraph 10 of these Articles Supplementary.

     "Beneficial Owner" means a customer of a Broker-Dealer who is listed on
the records of that Broker-Dealer (or, if applicable, the Auction Agent) as a
holder of shares of AMPS or a Broker-Dealer that holds AMPS for its own
account.

     "Broker-Dealer" means any broker-dealer, or other entity permitted by law
to perform the functions required of a Broker-Dealer in paragraph 10 of these
Articles Supplementary, that has


                                      6
<PAGE>


been selected by the Corporation and has entered into a Broker-Dealer
Agreement with the Auction Agent that remains effective.

     "Broker-Dealer Agreement" means an agreement between the Auction Agent
and a Broker-Dealer pursuant to which such Broker-Dealer agrees to follow the
procedures specified in paragraph 10 of these Articles Supplementary.

     "Business Day" means a day on which the New York Stock Exchange, Inc. is
open for trading and which is not a Saturday, Sunday or other day on which
banks in The City of New York are authorized or obligated by law to close.

     "Charter" means the Articles of Incorporation, as amended and
supplemented (including these Articles Supplementary), of the Corporation on
file in the State Department of Assessments and Taxation of Maryland.

     "Code" means the Internal Revenue Code of 1986, as amended.

     "Common Stock" means the common stock, par value $.10 per share, of the
Corporation.

     "Corporation" means MuniYield Insured Fund, Inc., a Maryland corporation.

     "Date of Original Issue" means, with respect to any share of AMPS or
Other AMPS, the date on which the Corporation originally issues such share.

     "Deposit Securities" 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's or A (having a remaining maturity of 12 months or less), A-1+ or SP-1+
by S&P or A (having a remaining maturity of 12 months or less) or F-1+ by
Fitch.

     "Discounted Value" means (i) with respect to an S&P Eligible Asset, the
quotient of the Market Value thereof divided by the applicable S&P Discount
Factor and (ii) with respect to a


                                      7
<PAGE>


Moody's Eligible Asset, the lower of par and the quotient of the Market Value
thereof divided by the applicable Moody's Discount Factor.

     "Dividend Payment Date," with respect to AMPS, has the meaning set forth
in paragraph 2(b)(i) of these Articles Supplementary and, with respect to
Other AMPS, has the equivalent meaning.

     "Dividend Period" means the Initial Dividend Period, any 7-Day Dividend
Period and any Special Dividend Period.

     "Existing Holder" means a Broker-Dealer or any such other Person as may
be permitted by the Corporation that is listed as the holder of record of
shares of AMPS in the Stock Books.

     "Fitch" means Fitch Ratings or its successors.

     "Forward Commitment" has the meaning set forth in paragraph 8(c) of these
Articles Supplementary.

     "High Yield Municipal Bonds" means (a) with respect to Moody's (1)
Municipal Bonds rated Ba1 to B3 by Moody's, (2) Municipal Bonds not rated by
Moody's, but rated BB+ to B- by S&P or Fitch, and (3) Municipal Bonds not
explicitly rated by Moody's, S&P or Fitch, but rated at least the equivalent
of B3 internally by the Adviser, provided that Moody's reviews and achieves
sufficient comfort with the Adviser's internal credit rating processes, and
(b) with respect to S&P (1) Municipal Bonds not rated by S&P but rated
equivalent to BBB or lower by another NRSRO and (2) Municipal Bonds rated BB+
or lower by S&P.

     "Holder" means a Person identified as a holder of record of shares of
AMPS in the Stock Register.


                                      8
<PAGE>


     "Independent Accountant" means a nationally recognized accountant, or
firm of accountants, that is, with respect to the Corporation, an independent
public accountant or firm of independent public accountants under the
Securities Act of 1933, as amended.

     "Initial Dividend Payment Date" means the Initial Dividend Payment Date
as determined by the Board of Directors of the Corporation with respect to
each series of AMPS or Other AMPS, as the case may be.

     "Initial Dividend Period," with respect to each series of AMPS, has the
meaning set forth in paragraph 2(c)(i) of these Articles Supplementary and,
with respect to Other AMPS, has the equivalent meaning.

     "Initial Dividend Rate," with respect to each series of AMPS, means the
rate per annum applicable to the Initial Dividend Period for such series of
AMPS and, with respect to Other AMPS, has the equivalent meaning.

     "Initial Margin" means the amount of cash or securities deposited with a
broker as a margin payment at the time of purchase or sale of a futures
contract.

     "Inverse Floaters" means trust certificates or other instruments
evidencing interests in one or more Municipal Bonds that qualify as (i) S&P
Eligible Assets the interest rates on which are adjusted at short term
intervals on a basis that is inverse to the simultaneous readjustment of the
interest rates on corresponding floating rate trust certificates or other
instruments issued by the same issuer, provided that the ratio of the
aggregate dollar amount of floating rate instruments to inverse floating rate
instruments issued by the same issuer does not 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'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


                                      9
<PAGE>


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's with the Adviser having the capability to collapse (or relink)
within seven (7) days as a liquidity enhancement measure, and (b) the issuer
of such Inverse Floaters employs a leverage factor (i.e., the ratio of
underlying capital appreciation bonds or other instruments to residual
long-term derivative instruments) of not more than 2:1.

     "LIBOR Dealer" means Merrill Lynch, Pierce, Fenner & Smith Incorporated
and such other dealer or dealers as the Corporation from time to time may
appoint or, in lieu thereof, their respective affiliates and successors.

     "LIBOR Rate," 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's Telerate Service ("Telerate Page 3750") (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 "LIBOR Determination Date"), 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


                                      10
<PAGE>


arithmetic mean of the offered quotations that leading banks in The City of
New York selected by the LIBOR Dealer (after obtaining the Corporation'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 Corporation'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
Corporation 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) more than 21 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


                                      11
<PAGE>


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.

     "London Business Day" means any day on which commercial banks are
generally open for business in London.

     "Long Term Dividend Period" means a Special Dividend Period consisting of
a specified period of one whole year or more but not greater than five years.

     "Mandatory Redemption Price" means $25,000 per share of AMPS plus an
amount equal to accumulated but unpaid dividends (whether or not earned or
declared) to the date fixed for redemption and excluding Additional Dividends.

     "Marginal Tax Rate" means the maximum marginal regular Federal individual
income tax rate applicable to ordinary income or the maximum marginal regular
Federal corporate income tax rate, whichever is greater.

     "Market Value" of any asset of the Corporation shall be the market value
thereof determined by the Pricing Service. Market Value of any asset shall
include any interest accrued thereon. The Pricing Service shall value
portfolio securities at the quoted bid prices or the mean between the quoted
bid and asked price or the yield equivalent when quotations are not readily
available. Securities for which quotations are not readily available shall be
valued at fair value as determined by the Pricing Service using methods which
include consideration of: yields or prices of municipal bonds of comparable
quality, type of issue, coupon, maturity and rating; indications as to value
from dealers; and general market conditions. The Pricing Service may employ
electronic data processing techniques and/or a matrix system to determine
valuations. In the event the Pricing Service is unable to value a security,
the security shall be valued at the lower of two dealer bids obtained by the
Corporation from dealers who are


                                      12
<PAGE>


members of the National Association of Securities Dealers, Inc. and who make a
market in the security, at least one of which shall be in writing. Futures
contracts and options are valued at closing prices for such instruments
established by the exchange or board of trade on which they are traded, or if
market quotations are not readily available, are valued at fair value on a
consistent basis using methods determined in good faith by the Board of
Directors.

     "Maximum Applicable Rate," with respect to AMPS, has the meaning set
forth in paragraph 10(a)(vii) of these Articles Supplementary and, with
respect to Other AMPS, has the equivalent meaning.

     "Maximum Potential Additional Dividend Liability," as of any Valuation
Date, means the aggregate amount of Additional Dividends that would be due if
the Corporation were to make Retroactive Taxable Allocations, with respect to
any fiscal year, estimated based upon dividends paid and the amount of
undistributed realized net capital gains and other taxable income earned by
the Corporation, as of the end of the calendar month immediately preceding
such Valuation Date and assuming such Additional Dividends are fully taxable.

     "Moody's" means Moody's Investors Service, Inc. or its successors.

     "Moody's Discount Factor" means, for purposes of determining the
Discounted Value of any Municipal Bond which constitutes a Moody's Eligible
Asset, the percentage determined by reference to (a) the rating by Moody's,
S&P or Fitch on such Municipal Bond or (b) in the event the Moody's Eligible
Asset is insured under a Policy and the terms of the Policy permit the
Corporation, at its option, to obtain other insurance guaranteeing the timely
payment of interest on such Moody's Eligible Asset and principal thereof to
maturity, the Moody's, S&P or Fitch insurance claims-paying ability rating of
the issuer of the Policy or (c) in the event the Moody's Eligible Asset is
insured under an insurance policy which guarantees the timely payment of


                                      13
<PAGE>


interest on such Moody's Eligible Asset and principal thereof to maturity, the
Moody's, S&P or Fitch insurance claims-paying ability rating of the issuer of
the insurance policy, in accordance with the tables (for the applicable
Moody's Exposure Period) set forth below:


          --------------------------------------------------------
                        Moody's Rating Category (1)
          ----------- ---------- --------- --------- -------------
             Aaa         Aa         A        Baa      Other (2)
          ----------- ---------- --------- --------- -------------
             151%       159%       168%      202%        220%
          ----------- ---------- --------- --------- -------------

Footnotes:

(1)  Ratings assigned by S&P or Fitch are generally accepted by Moody's at
     face value. However, adjustments to face value may be made to particular
     categories of credits for which the S&P and/or Fitch rating does not seem
     to approximate a Moody's rating equivalent. Split rated securities
     assigned by S&P and Fitch will be accepted at the lower of the two
     ratings.
(2)  Municipal Bonds rated Ba1 to B3 by Moody's or, if not rated by Moody's,
     rated BB+ to B- by S&P or Fitch. In addition, Municipal Bonds not
     explicitly rated by Moody's, S&P or Fitch, but rated at least the
     equivalent of B3 internally by the Adviser, provided that Moody's reviews
     and achieves sufficient comfort with the Adviser's internal credit rating
     processes, will be included under "Other" in the table. Unless
     conclusions regarding liquidity risk as well as estimates of both the
     probability and severity of default for the Corporation's assets can be
     derived from other sources as well as combined with a number of sources
     as presented by the Corporation to Moody's, unrated Municipal Bonds which
     are rated at least the equivalent of B3 by the Adviser internally are
     limited to 10% of Moody's Eligible Assets.


           ----------------------------------------------------
                         Moody's Rating Category
           --------------------------- ------------------------
             MIG-1, VMIG-1, P-1 (1)    MIG-1, VMIG-1, P-1 (2)
           --------------------------- ------------------------
                      100%                      136%
           --------------------------- ------------------------

Footnotes:
(1)  Moody's rated Municipal Bonds that have a maturity less than or equal to
     49 days and Municipal Bonds not rated by Moody's but rated the equivalent
     to MIG-1, VMIG-1, or P-1 by S&P or Fitch that have a maturity less than
     or equal to 49 days.
(2)  Moody's rated Municipal Bonds that have a maturity greater than 49 days
     and Municipal Bonds not rated by Moody's but rated the equivalent to
     MIG-1, VMIG-1, or P-1 by S&P or Fitch that have a maturity greater than
     49 days.

; provided, however, in the event a Moody's Discount Factor applicable to a
Moody's Eligible Asset is determined by reference to an insurance
claims-paying ability rating in accordance with clause (b) or (c), such
Moody's Discount Factor shall be increased by an amount equal to 50% of the
difference between (i) the percentage set forth in the foregoing table under
the applicable rating category and (ii) the percentage set forth in the
foregoing table under the rating category which is one category lower than the
applicable rating category.

     Notwithstanding the foregoing, no Moody'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


                                      14
<PAGE>


Date. The Moody'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's Discount Factor applicable to the Municipal Bonds sold.
"Receivables for Municipal Bonds Sold," for purposes of calculating Moody'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.

     The Moody'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.

     The Moody's Discount Factor for Rule 2a-7 Money Market Funds shall be
110%.

     "Moody's Eligible Asset" means cash, Receivables for Municipal Bonds
Sold, Rule 2a-7 Money Market Funds or a Municipal Bond that (i) pays interest
in cash, (ii) is publicly rated B3 or higher by Moody's or, if not rated by
Moody's, but rated by S&P or Fitch, is publicly rated at least B- by S&P or
Fitch, or if not explicitly rated by Moody's, S&P or Fitch, be rated at least
the equivalent of B3 internally by the Adviser, provided that Moody's reviews
and achieves sufficient comfort with the Adviser's internal credit rating
processes, (iii) does not have its Moody's rating suspended by Moody's, (iv)
if an Inverse Floater, is explicitly rated by Moody's, and (v) is part of an
issue of Municipal Bonds of at least $10,000,000 (except for issues rated Aaa
by Moody's, as provided in the chart below). In addition, Municipal Bonds in
the Corporation's portfolio must be within the following diversification
requirements in order to be included within Moody's Eligible Assets:

<TABLE>
<CAPTION>

                                                   Minimum                Maximum                 Maximum State
                                                 Issue Size              Underlying                  Allowed
Rating                                          ($ Millions)          Obligor (%) (1)              (%) (1)(3)
- ------------------------------------------     ----------------    -----------------------    ----------------------


                                      15
<PAGE>


<S>                                                  <C>                    <C>                        <C>
Aaa...............................                    *                     100                        100
Aa................................                   10                      20                        60
A.................................                   10                      10                        40
Baa...............................                   10                      6                         20
Ba................................                   10                      4                         12
B ................................                   10                      3                         12
Other (2).........................                   10                      2                         12
- ---------------------
(1)    The referenced percentages represent maximum cumulative totals for the
       related rating category and each lower rating category.
(2)    Municipal Bonds not rated by Moody's, S&P or Fitch, but rated at least the equivalent of B3 internally by
       the Adviser.
(3)    Territorial bonds (other than those issued by Puerto Rico and counted
       collectively) are each limited to 10% of Moody's Eligible Assets. For
       diversification purposes, Puerto Rico will be treated as a state.
*N/A   Not applicable.

</TABLE>


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.

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

     High Yield Municipal Bonds may comprise no more than 20% of Moody's
Eligible Assets. Unless conclusions regarding liquidity risk as well as
estimates of both the probability


                                      16
<PAGE>


and severity of default for the Corporation's assets can be derived from other
sources as well as combined with a number of sources as presented by the
Corporation to Moody's, unrated High Yield Municipal Bonds which are rated at
least the equivalent of B3 by the Adviser internally are limited to 10% of
Moody's Eligible Assets.

     Inverse Floaters, including primary market and secondary market residual
interest bonds, may constitute no more than 10% of Moody's Eligible Assets.

     Notwithstanding the foregoing, an asset will not be considered a Moody's
Eligible Asset if it is (i) held in a margin account, (ii) subject to any
material lien, mortgage, pledge, security interest or security agreement of
any kind, (iii) held for the purchase of a security pursuant to a Forward
Commitment or (iv) irrevocably deposited by the Corporation for the payment of
dividends or redemption.

     "Moody's Exposure Period" means the period commencing on a given
Valuation Date and ending 49 days thereafter.

     "Moody's Hedging Transactions" has the meaning set forth in paragraph
8(b) of these Articles Supplementary.

     "Moody's Volatility Factor" means 272% as long as there has been no
increase enacted to the Marginal Tax Rate. If such an increase is enacted but
not yet implemented, the Moody's Volatility Factor shall be as follows:


                                      17
<PAGE>


                          % Change in                       Moody's Volatility
                       Marginal Tax Rate                           Factor
                       -----------------                    ------------------

                             <=5%                                    292%
                         >5% but <=10%                               313%
                        >10% but <=15%                               338%
                        >15% but <=20%                               364%
                        >20% but <=25%                               396%
                        >25% but <=30%                               432%
                        >30% but <=35%                               472%
                        >35% but <=40%                               520%

     Notwithstanding the foregoing, the Moody's Volatility Factor may mean
such other potential dividend rate increase factor as Moody's advises the
Corporation in writing is applicable.

     "Municipal Bonds" means "Municipal Bonds" as defined in the Corporation's
Registration Statement on Form N-2 (File No. 333-_____) relating to the AMPS
on file with the Securities and Exchange Commission, as such Registration
Statement may be amended from time to time, as well as short-term municipal
obligations, High Yield Municipal Bonds and Inverse Floaters.

     "Municipal Index" has the meaning set forth in paragraph 8(a) of these
Articles Supplementary.

     "1940 Act" means the Investment Company Act of 1940, as amended from time
to time.

     "1940 Act AMPS Asset Coverage" means asset coverage, as defined in
section 18(h) of the 1940 Act, of at least 200% with respect to all
outstanding senior securities of the Corporation which are stock, including
all outstanding shares of AMPS and Other AMPS (or such other asset coverage as
may in the future be specified in or under the 1940 Act as the minimum asset
coverage for senior securities which are stock of a closed-end investment
company as a condition of paying dividends on its common stock).


                                      18
<PAGE>


     "1940 Act Cure Date," with respect to the failure by the Corporation to
maintain the 1940 Act AMPS Asset Coverage (as required by paragraph 6 of these
Articles Supplementary) as of the last Business Day of each month, means the
last Business Day of the following month.

     "Non-Call Period" has the meaning set forth under the definition of
"Specific Redemption Provisions".

     "Non-Payment Period" means, with respect to each series of AMPS, any
period commencing on and including the day on which the Corporation shall fail
to (i) declare, prior to the close of business on the second Business Day
preceding any Dividend Payment Date, for payment on or (to the extent
permitted by paragraph 2(c)(i) of these Articles Supplementary) within three
Business Days after such Dividend Payment Date to the Holders as of 12:00
noon, New York City time, on the Business Day preceding such Dividend Payment
Date, the full amount of any dividend on 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, New York City time, (A) on such
Dividend Payment Date the full amount of any cash dividend on such shares
payable (if declared) on such Dividend Payment Date or (B) on any redemption
date for any 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, and ending on and including the Business
Day on which, by 12:00 noon, New York City time, all unpaid cash dividends and
unpaid redemption prices shall have been so deposited or shall have otherwise
been made available to Holders in same-day funds; provided that, a Non-Payment
Period shall not end unless the Corporation shall have given at least five
days' but no more than 30 days' written notice of such deposit or availability
to the Auction Agent, all Existing Holders (at their addresses appearing in
the Stock Books) and the Securities Depository.


                                      19
<PAGE>


Notwithstanding the foregoing, the failure by the Corporation to deposit funds
as provided for by clauses (ii)(A) or (ii)(B) above within three Business Days
after any Dividend Payment Date or redemption date, as the case may be, in
each case to the extent contemplated by paragraph 2(c)(i) of these Articles
Supplementary, shall not constitute a "Non-Payment Period."

     "Non-Payment Period Rate" means, initially, 200% of the applicable
Reference Rate (or 300% of such rate if the Corporation has provided
notification to the Auction Agent prior to the Auction establishing the
Applicable Rate for any dividend pursuant to paragraph 2(f) hereof that net
capital gains or other taxable income will be included in such dividend on
shares of AMPS), provided that the Board of Directors of the Corporation shall
have the authority to adjust, modify, alter or change from time to time the
initial Non-Payment Period Rate if the Board of Directors of the Corporation
determines and Moody's and S&P (and any Substitute Rating Agency or Substitute
Rating Agencies, as the case may be, in lieu of Moody's or S&P, or both, in
the event either or both of such parties shall not rate the AMPS) advise the
Corporation in writing that such adjustment, modification, alteration or
change will not adversely affect their then current ratings on the AMPS.

     "Normal Dividend Payment Date" has the meaning set forth in paragraph
2(b)(i) of these Articles Supplementary.

     "Notice of Redemption" means any notice with respect to the redemption of
shares of AMPS pursuant to paragraph 4 of these Articles Supplementary.

     "Notice of Revocation" has the meaning set forth in paragraph 2(c)(iii)
of these Articles Supplementary.

     "Notice of Special Dividend Period" has the meaning set forth in
paragraph 2(c)(iii) of these Articles Supplementary.


                                      20
<PAGE>


     "NRSRO" means any nationally recognized statistical rating organization,
as that term is used in Rule 15a3-1 under the Securities Exchange Act of 1934,
as amended, or any successor provisions.

     "Optional Redemption Price" means $25,000 per share plus an amount equal
to accumulated but unpaid dividends (whether or not earned or declared) to the
date fixed for redemption and excluding Additional Dividends plus any
applicable redemption premium attributable to the designation of a Premium
Call Period.

     "Other AMPS" means the auction rate preferred stock of the Corporation,
other than the AMPS.

     "Outstanding" means, as of any date (i) with respect to AMPS, shares of
AMPS theretofore issued by the Corporation except, without duplication, (A)
any shares of AMPS theretofore cancelled or delivered to the Auction Agent for
cancellation, or redeemed by the Corporation, or as to which a Notice of
Redemption shall have been given and Deposit Securities shall have been
deposited in trust or segregated by the Corporation pursuant to paragraph 4(c)
and (B) any shares of AMPS as to which the Corporation or any Affiliate
thereof shall be a Beneficial Owner, provided that shares of AMPS held by an
Affiliate shall be deemed outstanding for purposes of calculating the AMPS
Basic Maintenance Amount and (ii) with respect to shares of other Preferred
Stock, has the equivalent meaning.

     "Parity Stock" means the AMPS and each other outstanding series of
Preferred Stock the holders of which, together with the holders of the AMPS,
shall be entitled to the receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in proportion to
the full respective preferential amounts to which they are entitled, without
preference or priority one over the other.


                                      21
<PAGE>


     "Person" means and includes an individual, a partnership, a corporation,
a trust, an unincorporated association, a joint venture or other entity or a
government or any agency or political subdivision thereof.

     "Policy" means an insurance policy purchased by the Corporation which
guarantees the payment of principal and interest on specified Municipal Bonds
during the period in which such Municipal Bonds are owned by the Corporation;
provided, however, that, as long as the AMPS are rated by Moody's and S&P, the
Corporation will not obtain any Policy unless Moody's and S&P advise the
Corporation in writing that the purchase of such Policy will not adversely
affect their then-current rating on the AMPS.

     "Potential Beneficial Owner" 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.

     "Potential Holder" means any Broker-Dealer or any such other Person as
may be permitted by the Corporation, 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).

     "Preferred Stock" means the preferred stock of the Corporation, and
includes AMPS and Other AMPS.

     "Premium Call Period" has the meaning set forth under the definition of
"Specific Redemption Provisions."

     "Pricing Service" means J.J. Kenny or any pricing service designated by
the Board of Directors of the Corporation provided the Corporation obtains
written assurance from S&P and Moody's that such designation will not impair
the rating then assigned by S&P and Moody's to the AMPS.


                                      22
<PAGE>


     "Receivables for Municipal Bonds Sold" for Moody's has the meaning set
forth under the definition of Moody's Discount Factor, and for S&P has the
meaning set forth under the definition of S&P Discount Factor.

     "Reference Banks" means four major banks in the London interbank market
selected by Merrill Lynch, Pierce, Fenner & Smith Incorporated or its
affiliates or successors or such other party as the Corporation may from time
to time appoint.

     "Reference Rate" 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.

     "Request for Special Dividend Period" has the meaning set forth in
paragraph 2(c)(iii) of these Articles Supplementary.

     "Response" has the meaning set forth in paragraph 2(c)(iii) of these
Articles Supplementary.

     "Retroactive Taxable Allocation" has the meaning set forth in paragraph
2(e) of these Articles Supplementary.

     "Right" with respect to each series of AMPS, has the meaning set forth in
paragraph 2(e) of these Articles Supplementary and, with respect to Other
AMPS, has the equivalent meaning.

     "Rule 2a-7 Money Market Funds" means investment companies registered
under the 1940 Act that comply with the requirements of Rule 2a-7 thereunder.

     "S&P" means Standard & Poor's or its successors.

     "S&P Discount Factor" means, for purposes of determining the Discounted
Value of any Municipal Bond which constitutes an S&P Eligible Asset, the
percentage determined by


                                      23
<PAGE>


reference (a) to the rating by S&P, Moody's or Fitch on such Municipal Bond or
(b) in the event the Municipal Bond is insured under a Policy and the terms of
the Policy permit the Corporation, at its option, to obtain other permanent
insurance guaranteeing the timely payment of interest on such Municipal Bond
and principal thereof to maturity, the S&P, Moody's or Fitch insurance
claims-paying ability rating of the issuer of the Policy or (c) in the event
the Municipal Bond is insured under an insurance policy which guarantees the
timely payment of interest on such Municipal Bond and principal thereof to
maturity, the S&P, Moody's or Fitch insurance claims-paying ability rating of
the issuer of the insurance policy; provided, however, for purposes of
determining the S&P Discount Factor applicable to Municipal Bonds or issuers
not rated by S&P, the Municipal Bonds or issuers will carry an S&P rating one
full rating category lower than the S&P rating category that is the equivalent
of the rating category in which such Municipal Bond or issuer is placed by a
NRSRO, in accordance with the table (for the applicable S&P Exposure Period)
set forth below:


- ------------------------------------------------------------------------------
                          S&P's Rating Category (1)
- --------- --------- --------- --------- -------- --------- --------- ---------
   AAA*      AA*        A*       BBB*      BB*        B*      CCC*       NR
- --------- --------- --------- --------- -------- --------- --------- ---------
 144.75%   147.75%   150.75%   153.75%   175.11%   195.11%   215.11%   220.00%
- --------- --------- --------- --------- -------- --------- --------- ---------

- ---------------
* S&P rating.
(1)  For Municipal Bonds of any one issuer rated at least BBB by S&P, or if
     not rated by S&P, rated at least A by another NRSRO, 2% is added to the
     applicable S&P Discount Factor for every 1% by which the Market Value of
     such Municipal Bonds exceeds 5% of the aggregate Market Value of the S&P
     Eligible Assets, but in no event greater than 10%; or for any percentage
     over 5% add 10 percentage points to the applicable S&P Discount Factor.

     Notwithstanding the foregoing, (i) the S&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&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&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&P but are rated VMIG-1, P-1 or MIG-1
by Moody's or F-1+ by Fitch; provided, however, such short-term Municipal


                                      24
<PAGE>


Bonds rated by Moody's or Fitch but not rated by S&P having a demand feature
exercisable in 30 days or less must be backed by a letter of credit, liquidity
facility or guarantee from a bank or other financial institution having a
short-term rating of at least A-1+ from S&P; and further provided that such
short-term Municipal Bonds rated by Moody's or Fitch but not rated by S&P may
comprise no more than 50% of short-term Municipal Bonds that qualify as S&P
Eligible Assets, (ii) the S&P Discount Factor for Rule 2a-7 Money Market Funds
will be 110%, (iii) the S&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&P Discount Factor applicable to the Municipal Bonds sold,
and (iv) no S&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. "Receivables for Municipal Bonds Sold," for purposes of
calculating S&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&P, rated VMIG-1 by Moody's or F-1+ by Fitch, which do not mature or have
a demand feature exercisable in 30 days and which do not have a long-term
rating, shall be considered to be short-term Municipal Bonds.

     "S&P Eligible Asset" means cash, Receivables for Municipal Bonds Sold,
Rule 2a-7 Money Market Funds or a Municipal Bond that (i) is 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), (ii) except for zero
coupon Municipal Bonds rated AAA by S&P that mature in 30 years or less, is
interest bearing and pays interest at least semi-annually; (iii) is payable
with


                                      25
<PAGE>


respect to principal and interest in United States Dollars; (iv) is not
subject to a covered call or covered put option written by the Corporation;
(v) except for Inverse Floaters, is not part of a private placement; and (vi)
except for Inverse Floaters and legally defeased bonds that are secured by
securities issued or guaranteed by the United States Government, is part of an
issue of Municipal Bonds with an original issue size of at least $10 million
or, if of an issue with an original issue size below $10 million, is rated at
least AA or higher by S&P. Notwithstanding the foregoing:

          (1) Municipal Bonds issued by issuers in any one state or territory
     will be considered S&P Eligible Assets only to the extent the Market
     Value of such Municipal Bonds does not exceed 25% of the aggregate Market
     Value of S&P Eligible Assets;

          (2) Municipal Bonds which are escrow bonds or defeased bonds may
     compose up to 100% of the aggregate Market Value of S&P Eligible Assets
     if such Bonds initially are assigned a rating by S&P in accordance with
     S&P's legal defeasance criteria or rerated by S&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&P AAA rating, provided that such equivalent rated
     Bonds are limited to 50% of the aggregate Market Value of S&P Eligible
     Assets and are deemed to have an AA S&P rating for purposes of
     determining the S&P Discount Factor applicable to such Municipal Bonds.
     The limitations on Municipal Bonds in clause (1) above and clauses (3)
     and (4) below are not applicable to escrow bonds;

          (3) Municipal Bonds which are not rated by any NRSRO may comprise no
     more than 10% of S&P Eligible Assets;


                                      26
<PAGE>


          (4) Municipal Bonds rated at least BBB by S&P, or if not rated by
     S&P, rated at least A by another NRSRO, of any one issuer or guarantor
     (excluding bond insurers) will be considered S&P Eligible Assets only to
     the extent the Market Value of such Municipal Bonds does not exceed 10%
     of the aggregate Market Value of the S&P Eligible Assets, High Yield
     Municipal Bonds of any issuer may comprise no more than 5% of S&P
     Eligible Assets, and Municipal Bonds of any one issuer which are not
     rated by any NRSRO will be considered S&P Eligible Assets only to the
     extent the Market Value of such Municipal Bonds does not exceed 5% of the
     aggregate Market Value of the S&P Eligible Assets. In the aggregate, the
     maximum issuer exposure is limited to 10% of the S&P Eligible Assets; and

          (5) Municipal Bonds not rated by S&P but rated by another NRSRO will
     be included in S&P Eligible Assets only to the extent the Market Value of
     such Municipal Bonds does not exceed 50% of the aggregate Market Value of
     the S&P Eligible Assets.

     "S&P Exposure Period" means the sum of (i) that number of days from the
last Valuation Date on which the Corporation's Discounted Value of S&P
Eligible Assets were greater than the AMPS Basic Maintenance Amount to the
Valuation Date on which the Corporation's Discounted Value of S&P Eligible
Assets failed to exceed the AMPS Basic Maintenance Amount, (ii) the maximum
number of days following a Valuation Date that the Corporation has under these
Articles Supplementary to cure any failure to maintain a Discounted Value of
S&P Eligible Assets at least equal to the AMPS Basic Maintenance Amount, and
(iii) the maximum number of days the Corporation has to effect a mandatory
redemption under Section 4(a)(ii) of these Articles Supplementary.


                                      27
<PAGE>


     "S&P Hedging Transactions" has the meaning set forth in paragraph 8(a) of
these Articles Supplementary.

     "S&P Volatility Factor" means 277% or such other potential dividend rate
increase factor as S&P advises the Corporation in writing is applicable.

     "Securities Depository" means The Depository Trust Company or any
successor company or other entities elected by the Corporation as securities
depository for the shares of AMPS that agrees to follow the procedures
required to be followed by such securities depository in connection with the
shares of AMPS.

     "Service" means the United States Internal Revenue Service.

     "7-Day Dividend Period" means a Dividend Period consisting of seven days.

     "Short Term Dividend Period" means a Special Dividend Period consisting
of a specified number of days (other than seven), evenly divisible by seven
and not fewer than seven nor more than 364.

     "Special Dividend Period" means a Dividend Period consisting of (i) a
specified number of days (other than seven), evenly divisible by seven and not
fewer than seven nor more than 364 or (ii) a specified period of one whole
year or more but not greater than five years (in each case subject to
adjustment as provided in paragraph 2(b)(i)).

     "Specific Redemption Provisions" means, with respect to a Special
Dividend Period either, or any combination of, (i) a period (a "Non-Call
Period") determined by the Board of Directors of the Corporation, 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 Corporation and (ii) a period (a "Premium Call
Period"), consisting of a number of whole years and determined by the Board of
Directors of the


                                      28
<PAGE>


Corporation, 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 Corporation'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
Corporation after consultation with the Auction Agent and the Broker-Dealers.

     "Stock Books" means the books maintained by the Auction Agent setting
forth at all times a current list, as determined by the Auction Agent, of
Existing Holders of the AMPS.

     "Stock Register" means the register of Holders maintained on behalf of
the Corporation by the Auction Agent in its capacity as transfer agent and
registrar for the AMPS.

     "Subsequent Dividend Period," with respect to AMPS, has the meaning set
forth in paragraph 2(c)(i) of these Articles Supplementary and, with respect
to Other AMPS, has the equivalent meaning.

     "Substitute LIBOR Dealers" means such Substitute LIBOR Dealer or Dealers
as the Corporation may from time to time appoint or, in lieu of any thereof,
their respective affiliates or successors.

     "Substitute Rating Agency" and "Substitute Rating Agencies" mean a NRSRO
or two NRSROs, respectively, selected by Merrill Lynch, Pierce, Fenner & Smith
Incorporated or its affiliates and successors, after obtaining the
Corporation's approval, to act as the substitute rating agency or substitute
rating agencies, as the case may be, to determine the credit ratings of the
shares of AMPS.

     "Taxable Equivalent of the Short-Term Municipal Bond Rate" on any date
means 90% of the quotient of (A) the per annum rate expressed on an interest
equivalent basis equal to the Kenny S&P 30 day High Grade Index (the "Kenny
Index") or any successor index, made


                                      29
<PAGE>


available for the Business Day immediately preceding such date but in any
event not later than 8:30 A.M., New York City time, on such date by Kenny
Information Systems Inc. or any successor thereto, based upon 30-day yield
evaluations at par of bonds the interest on which is excludable for regular
Federal income tax purposes under the Code of "high grade" component issuers
selected by Kenny Information Systems Inc. or any such successor from time to
time in its discretion, which component issuers shall include, without
limitation, issuers of general obligation bonds but shall exclude any bonds
the interest on which constitutes an item of tax preference under Section
57(a)(5) of the Code, or successor provisions, for purposes of the
"alternative minimum tax," divided by (B) 1.00 minus the Marginal Tax Rate
(expressed as a decimal); provided, however, that if the Kenny Index is not
made so available by 8:30 A.M., New York City time, on such date by Kenny
Information Systems Inc. or any successor, the Taxable Equivalent of the
Short-Term Municipal Bond Rate shall mean the quotient of (A) the per annum
rate expressed on an interest equivalent basis equal to the most recent Kenny
Index so made available for any preceding Business Day, divided by (B) 1.00
minus the Marginal Tax Rate (expressed as a decimal). The Corporation may not
utilize a successor index to the Kenny Index unless Moody's and S&P provide
the Corporation with written confirmation that the use of such successor index
will not adversely affect the then-current respective Moody's and S&P ratings
of the AMPS.

     "Treasury Bonds" means U.S. Treasury Bonds or Notes.

     "Treasury Index Rate" 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


                                      30
<PAGE>


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 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 Corporation by at least three recognized dealers in U.S. Government
Securities selected by the Corporation.

     "U.S. Treasury Securities" means direct obligations of the United States
Treasury that are entitled to the full faith and credit of the United States
government.

     "Valuation Date" means, for purposes of determining whether the
Corporation is maintaining the AMPS Basic Maintenance Amount, the last
Business Day of each week commencing with the Date of Original Issue;
provided, however, that the first Valuation Date may occur on any date
established by the Corporation; provided, however, that such date shall not be
more than one week from the Date of Original Issue.

     "Variation Margin" means, in connection with an outstanding futures
contract owned or sold by the Corporation, the amount of cash or securities
paid to or received from a broker (subsequent to the Initial Margin payment)
from time to time as the price of such futures contract fluctuates.

     (b) The foregoing definitions of Accountant's Confirmation, AMPS Basic
Maintenance Amount, AMPS Basic Maintenance Cure Date, AMPS Basic Maintenance
Report, Deposit Securities, Discounted Value, High Yield Municipal Bonds,
Independent Accountant, Initial Margin, Inverse Floaters, Market Value,
Maximum Potential Additional Dividend Liability,


                                      31
<PAGE>


Moody's Discount Factor, Moody's Eligible Asset, Moody's Exposure Period,
Moody's Hedging Transactions, Moody's Volatility Factor, Policy, S&P Discount
Factor, S&P Eligible Asset, S&P Exposure Period, S&P Hedging Transactions, S&P
Volatility Factor, Valuation Date and Variation Margin have been determined by
the Board of Directors of the Corporation in order to obtain a Aaa rating from
Moody's and a AAA rating from S&P on each series of AMPS on their Date of
Original Issue; and the Board of Directors of the Corporation shall have the
authority, without shareholder approval, to amend, alter or repeal from time
to time by resolution or otherwise the foregoing definitions and the
restrictions and guidelines if Moody's and S&P or any Substitute Rating Agency
advises the Corporation in writing that such amendment, alteration or repeal
will not materially affect the then current rating of such series of AMPS.
Furthermore, if the Board of Directors determines as provided in paragraph 12
hereto not to continue to comply with the provisions of paragraphs 7 and 8
hereof with respect to Moody's, and any other provisions hereof with respect
to obtaining and maintaining a rating on the AMPS from Moody's, and/or
paragraphs 7 and 8 hereof with respect to S&P, and any other provisions hereof
with respect to obtaining and maintaining a rating on the AMPS from S&P, then
such definitions listed in this paragraph, unless the context requires
otherwise, shall have no meaning in these Articles Supplementary for the AMPS.

     2. Dividends.

     (a) The Holders shall be entitled to receive, when, as and if declared by
the Board of Directors of the Corporation, out of funds legally available
therefor, cumulative dividends each consisting of (i) cash at the Applicable
Rate, (ii) a Right to receive cash as set forth in paragraph 2(e) below, and
(iii) any additional amounts as set forth in paragraph 2(f) below, and no
more, payable on the Dividend Payment Date set forth below. Dividends on the
shares of AMPS so


                                      32
<PAGE>


declared and payable shall be paid (i) in preference to and in priority over
any dividends 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 Corporation's investments. To the extent permitted under
the Code, dividends on shares of AMPS will be designated as exempt-interest
dividends. For the purposes of this section, the term "net tax-exempt income"
shall exclude capital gains of the Corporation.

     (b) (i) Cash dividends on shares of AMPS shall accumulate from the Date
of Original Issue and shall be payable, when, as and if declared by the Board
of Directors, out of funds legally available therefor, commencing on the
Initial Dividend Payment Date with respect to each series of AMPS. Following
the Initial Dividend Payment Date for each series of AMPS, dividends on each
series of AMPS will be payable, at the option of the Corporation, either (i)
with respect to any 7-Day Dividend Period and any Short Term Dividend Period
of 35 or fewer days, on the day next succeeding the last day thereof, or (ii)
with respect to any Short Term Dividend Period of more than 35 days and with
respect to any Long Term Dividend Period, monthly on the first Business Day of
each calendar month during such Short Term Dividend Period or Long Term
Dividend Period and on the day next succeeding the last day thereof (each such
date referred to in clause (i) or (ii) being herein referred to as a "Normal
Dividend Payment Date"), except that if such Normal Dividend Payment Date is
not a Business Day, then the Dividend Payment Date shall be the first Business
Day next succeeding such Normal Dividend Payment Date. Although any particular
Dividend Payment Date may not occur on the originally scheduled date because
of the exception discussed above, the next succeeding Dividend Payment Date,
subject to such exception, 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


                                      33
<PAGE>


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 Dividend Periods. Each dividend
payment date determined as provided above is hereinafter referred to as a
"Dividend Payment Date."

          (ii) Each dividend shall be paid to the Holders as they appear in
     the Stock Register as of 12:00 noon, New York City time, on the Business
     Day preceding the Dividend Payment Date. Dividends in arrears for any
     past Dividend Period may be declared and paid at any time, without
     reference to any regular Dividend Payment Date, to the Holders as they
     appear on the Stock Register on a date, not exceeding 15 days prior to
     the payment date therefor, as may be fixed by the Board of Directors of
     the Corporation.

     (c) (i) During the period from and including the Date of Original Issue
to but excluding the Initial Dividend Payment Date for each series of AMPS
(the "Initial Dividend Period"), the Applicable Rate shall be the Initial
Dividend Rate. Commencing on the Initial Dividend Payment Date for each series
of AMPS, the Applicable Rate for each subsequent dividend period (hereinafter
referred to as a "Subsequent Dividend Period"), which Subsequent Dividend
Period shall commence on and include a Dividend Payment Date and shall end on
and include the calendar day prior to the next Dividend Payment Date (or last
Dividend Payment Date in a Dividend Period if there is more than one Dividend
Payment Date), shall be equal to the rate per annum that results from
implementation of the Auction Procedures.


                                      34
<PAGE>


     The Applicable Rate for each Dividend Period commencing during a
Non-Payment Period shall be equal to the Non-Payment Period Rate; and each
Dividend Period, commencing after the first day of, and during, a Non-Payment
Period shall be a 7-Day Dividend Period in the case of each series of AMPS.
Except in the case of the willful failure of the Corporation to pay a dividend
on a Dividend Payment Date or to redeem any shares of AMPS on the date set for
such redemption, any amount of any dividend due on any Dividend Payment Date
(if, prior to the close of business on the second Business Day preceding such
Dividend Payment Date, the Corporation has declared such dividend payable on
such Dividend Payment Date to the Holders of such shares of AMPS as of 12:00
noon, New York City time, on the Business Day preceding such Dividend Payment
Date) or redemption price with respect to any shares of AMPS not paid to such
Holders when due may be paid to such Holders in the same form of funds by
12:00 noon, New York City time, on any of the first three Business Days after
such Dividend Payment Date or due date, as the case may be, provided that,
such amount is accompanied by a late charge calculated for such period of
non-payment at the Non-Payment Period Rate applied to the amount of such
non-payment based on the actual number of days comprising such period divided
by 365. In the case of a willful failure of the Corporation 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 shall be considered equivalent to payment to such
person in New York Clearing House (next day) funds at the same time on the
preceding Business Day, and any payment made after 12:00 noon, New York City
time, on any Business Day shall be considered to have been


                                      35
<PAGE>


made instead in the same form of funds and to the same person before 12:00
noon, New York City time, on the next Business Day.

          (ii) The amount of cash dividends per share of any series of 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 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
     Dates and the denominator of which will be 360, multiplying the amount so
     obtained by $25,000, and rounding the amount so obtained to the nearest
     cent.

          (iii) With respect to each Dividend Period that is a Special
     Dividend Period, the Corporation may, at its sole option and to the
     extent permitted by law, by telephonic and written notice (a "Request for
     Special Dividend Period") to the Auction Agent and to each Broker-Dealer,
     request that the next succeeding Dividend Period for a series of AMPS be
     a number of days (other than seven), evenly divisible by seven and not
     fewer than seven nor more than 364 in the case of a Short Term Dividend
     Period or one whole year or more but not greater than five years in the
     case of a Long Term Dividend Period,


                                      36
<PAGE>


     specified in such notice, provided that the Corporation 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, 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 a series of AMPS and, in the case of a Long Term Dividend
     Period, shall be given on or prior to the second Business Day but not
     more than 28 days prior to an Auction Date for the AMPS. Upon receiving
     such Request for Special Dividend Period, the Broker-Dealer(s) shall
     jointly determine whether, given the factors set forth below, it is
     advisable that the Corporation issue a Notice of Special Dividend Period
     for the series of 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 Corporation written notice (a "Response") of such determination
     by no later than the second Business Day prior to such Auction Date. In
     making such determination the Broker-Dealer(s) will consider (1) existing
     short-term and long-term market rates and indices of such short-term and
     long-term rates, (2) existing market supply and demand for short-term and
     long-term securities, (3) existing yield curves for short-term and
     long-term securities comparable to the AMPS, (4) industry and financial
     conditions which may affect the AMPS, (5) the investment objective of the
     Corporation, and (6) the Dividend Periods and dividend rates at which
     current and potential beneficial holders of the AMPS would


                                      37
<PAGE>


     remain or become beneficial holders. If the Broker-Dealer(s) shall not
     give the Corporation 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 Corporation give a Notice of Special Dividend Period
     for the series of AMPS, the Corporation 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
     Corporation give a Notice of Special Dividend Period for the series of
     AMPS, the Corporation may by no later than the second Business Day prior
     to such Auction Date give a notice (a "Notice of Special Dividend
     Period") to the Auction Agent, the Securities Depository and each
     Broker-Dealer which notice will specify (i) the duration of the Special
     Dividend Period, (ii) the Optional Redemption Price as specified in the
     related Response and (iii) the Specific Redemption Provisions, if any, as
     specified in the related Response. The Corporation also shall provide a
     copy of such Notice of Special Dividend Period to Moody's and S&P. The
     Corporation shall not give a Notice of Special Dividend Period and, if
     the Corporation has given a Notice of Special Dividend Period, the
     Corporation is required to give telephonic and written notice of its
     revocation (a "Notice of Revocation") to the Auction Agent, each
     Broker-Dealer, and the Securities Depository on or prior to the Business
     Day prior to the relevant Auction Date if (x) either the 1940 Act AMPS
     Asset Coverage is not satisfied or the Corporation shall fail to maintain
     S&P Eligible Assets and Moody's Eligible Assets each with an aggregate
     Discounted Value at least equal to the AMPS Basic Maintenance Amount, in
     each case on 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


                                      38
<PAGE>


     forma dividend rate with respect to such Special Dividend Period the
     dividend rate which the Broker-Dealers shall advise the Corporation is an
     approximately equal rate for securities similar to the AMPS with an equal
     dividend period), provided that, in calculating the aggregate Discounted
     Value of Moody's Eligible Assets for this purpose, the Moody's Exposure
     Period shall be deemed to be one week longer, (y) sufficient funds for
     the payment of dividends payable on the immediately succeeding Dividend
     Payment Date have not been segregated in an account at the Corporation's
     custodian bank or on the books of the Corporation by the close of
     business on the third Business Day preceding the related Auction Date or
     (z) the Broker-Dealer(s) jointly advise the Corporation that after
     consideration of the factors listed above they have concluded that it is
     advisable to give a Notice of Revocation. The Corporation also shall
     provide a copy of such Notice of Revocation to Moody's and S&P. If the
     Corporation is prohibited from giving a Notice of Special Dividend Period
     as a result of any of the factors enumerated in clause (x), (y) or (z)
     above or if the Corporation gives a Notice of Revocation with respect to
     a Notice of Special Dividend Period for any series of AMPS, the next
     succeeding Dividend Period will be a 7-Day Dividend Period. In addition,
     in the event Sufficient Clearing Bids are not made in the applicable
     Auction or such Auction is not held for any reason, such next succeeding
     Dividend Period will be a 7-Day Dividend Period and the Corporation may
     not again give a Notice of Special Dividend Period for a series of AMPS
     (and any such attempted notice shall be null and void) until Sufficient
     Clearing Bids have been made in an Auction with respect to a 7-Day
     Dividend Period.

     (d) (i) Holders shall not be entitled to any dividends, whether payable
in cash, property or stock, in excess of full cumulative dividends and
applicable late charges, as herein provided,


                                      39
<PAGE>


on the shares of AMPS (except for Additional Dividends as provided in
paragraph 2(e) hereof and additional payments as provided in paragraph 2(f)
hereof). Except for the late charge payable pursuant to paragraph 2(c)(i)
hereof, no interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend payment on the shares of AMPS that may be in arrears.

          (ii) For so long as any share of AMPS is Outstanding, the
     Corporation shall not declare, pay or set apart for payment any dividend
     or other distribution (other than a dividend or distribution paid in
     shares of, or options, warrants or rights to subscribe for or purchase,
     Common Stock or other stock, if any, ranking junior to the shares of AMPS
     as to dividends or upon liquidation) in respect of the Common Stock or
     any other stock of the Corporation ranking junior to or on a parity with
     the shares of AMPS as to dividends or upon liquidation, or call for
     redemption, redeem, purchase or otherwise acquire for consideration any
     shares of the Common Stock or any other such junior stock (except by
     conversion into or exchange for stock of the Corporation ranking junior
     to the shares of AMPS as to dividends and upon liquidation) or any other
     such Parity Stock (except by conversion into or exchange for stock of the
     Corporation ranking junior to or on a parity with the shares of AMPS as
     to dividends and upon liquidation), unless (A) immediately after such
     transaction, the Corporation shall have S&P Eligible Assets and Moody's
     Eligible Assets each with an aggregate Discounted Value equal to or
     greater than the AMPS Basic Maintenance Amount and the Corporation shall
     maintain the 1940 Act AMPS Asset Coverage, (B) full cumulative dividends
     on shares of AMPS and shares of Other AMPS due on or prior to the date of
     the transaction have been declared and paid or shall have been declared
     and sufficient funds for the payment thereof deposited with the


                                      40
<PAGE>


     Auction Agent, (C) any Additional Dividend required to be paid under
     paragraph 2(e) below on or before the date of such declaration or payment
     has been paid and (D) the Corporation has redeemed the full number of
     shares of AMPS required to be redeemed by any provision for mandatory
     redemption contained in Section 4(a)(ii).

     (e) Each dividend shall consist of (i) cash at the Applicable Rate, (ii)
an uncertificated right (a "Right") to receive an Additional Dividend (as
defined below), and (iii) any additional amounts as set forth in paragraph
2(f) below. Each Right shall thereafter be independent of the share or shares
of AMPS on which the dividend was paid. The Corporation shall cause to be
maintained a record of each Right received by the respective Holders. A Right
may not be transferred other than by operation of law. If the Corporation
retroactively allocates any net capital gains 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 in paragraph 2(f) hereof
solely by reason of the fact that such allocation is made as a result of the
redemption of all or a portion of the outstanding shares of AMPS or the
liquidation of the Corporation (the amount of such allocation referred to
herein as a "Retroactive Taxable Allocation"), the Corporation will, within 90
days (and generally within 60 days) after the end of the Corporation's fiscal
year for which a Retroactive Taxable Allocation is made, provide notice
thereof to the Auction Agent and to each holder of a Right applicable to such
shares of AMPS (initially Cede & Co. as nominee of The Depository Trust
Company) during such fiscal year at such holder's address as the same appears
or last appeared on the Stock Books of the Corporation. The Corporation will,
within 30 days after such notice is given to the Auction Agent, pay to the
Auction Agent (who will then distribute to such holders of Rights), out of
funds legally available therefor, an amount equal to


                                      41
<PAGE>


the aggregate Additional Dividend with respect to all Retroactive Taxable
Allocations made to such holders during the fiscal year in question.

     An "Additional Dividend" means payment to a present or former holder of
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'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
Corporation; 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:
(x) the maximum marginal regular Federal individual income tax rate applicable
to ordinary income or capital gains depending on the taxable character of the
distribution (including any surtax); or (y) the maximum marginal regular
Federal corporate income tax rate applicable to ordinary income or capital
gains depending on the taxable character of the distribution (disregarding in
both (x) and (y) 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).

     (f) Except as provided below, whenever the Corporation intends to include
any net capital gains or other income subject to regular Federal income taxes
in any dividend on shares of AMPS, the Corporation will notify the Auction
Agent of the amount to be so included at least


                                      42
<PAGE>


five Business Days prior to the Auction Date on which the Applicable Rate for
such dividend is to be established. The Corporation may also include such
income in a dividend on shares of a series of AMPS without giving advance
notice thereof if it increases the dividend by an additional amount calculated
as if such income was a Retroactive Taxable Allocation and the additional
amount was an Additional Dividend, provided that the Corporation will notify
the Auction Agent of the additional amounts to be included in such dividend at
least five Business Days prior to the applicable Dividend Payment Date.

     (g) No fractional shares of AMPS shall be issued.

     3. Liquidation Rights. Upon any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the Holders shall be
entitled to receive, out of the assets of the Corporation available for
distribution to shareholders, before any distribution or payment is made upon
any Common Stock or any other capital stock ranking junior in right of payment
upon liquidation to the AMPS, the sum of $25,000 per share plus accumulated
but unpaid dividends (whether or not earned or declared) thereon to the date
of distribution, and after such payment the Holders will be entitled to no
other payments other than Additional Dividends as provided in paragraph 2(e)
hereof. If upon any liquidation, dissolution or winding up of the Corporation,
the amounts payable with respect to the AMPS and any other Outstanding class
or series of Preferred Stock of the Corporation ranking on a parity with the
AMPS as to payment upon liquidation are not paid in full, the Holders and the
holders of such other class or series will share ratably in any such
distribution of assets in proportion to the respective preferential amounts to
which they are entitled. After payment of the full amount of the liquidating
distribution to which they are entitled, the Holders will not be entitled to
any further participation in any distribution of assets by the Corporation
except for any Additional Dividends. A


                                      43
<PAGE>


consolidation, merger or statutory share exchange of the Corporation with or
into any other corporation or entity or a sale, whether for cash, shares of
stock, securities or properties, of all or substantially all or any part of
the assets of the Corporation shall not be deemed or construed to be a
liquidation, dissolution or winding up of the Corporation.

     4. Redemption.

     (a) Shares of AMPS shall be redeemable by the Corporation as provided
below:

          (i) Optional Redemption. To the extent permitted under the 1940 Act
     and Maryland law, upon giving a Notice of Redemption, the Corporation 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 share,
     on any Dividend Payment Date; provided that no share of AMPS may be
     redeemed at the option of the Corporation during (A) the Initial Dividend
     Period with respect to a series of shares or (B) a Non-Call Period to
     which such share is subject. In addition, holders of AMPS which are
     redeemed shall be entitled to receive Additional Dividends to the extent
     provided herein. The Corporation may not give a Notice of Redemption
     relating to an optional redemption as described in this paragraph 4(a)(i)
     unless, at the time of giving such Notice of Redemption, the Corporation
     has available Deposit Securities with maturity or tender dates not later
     than the day preceding the applicable redemption date and having a value
     not less than the amount due to Holders by reason of the redemption of
     their shares of AMPS on such redemption date.

          (ii) Mandatory Redemption. The Corporation shall 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


                                      44
<PAGE>


     Directors, if the Corporation fails to maintain S&P Eligible Assets and
     Moody's Eligible Assets each with an aggregate Discounted Value equal to
     or greater than the AMPS Basic Maintenance Amount as provided in
     paragraph 7(a) or to satisfy the 1940 Act AMPS Asset Coverage as provided
     in paragraph 6 and such failure is not cured on or before the AMPS Basic
     Maintenance Cure Date or the 1940 Act Cure Date (herein collectively
     referred to as a "Cure Date"), as the case may be. In addition, holders
     of AMPS so redeemed shall be entitled to receive Additional Dividends to
     the extent provided herein. The number of shares of AMPS to be redeemed
     shall be equal to the lesser of (i) 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 shares of
     other Preferred Stock subject to redemption or retirement, would result
     in the Corporation having S&P Eligible Assets and Moody's Eligible Assets
     each with an aggregate Discounted Value equal to or greater than the AMPS
     Basic Maintenance Amount or satisfaction of the 1940 Act AMPS Asset
     Coverage, as the case may be, on such Cure Date (provided that, if there
     is no such minimum number of shares of AMPS and shares of other Preferred
     Stock the redemption of which would have such result, all shares of AMPS
     and shares of other Preferred Stock then Outstanding shall be redeemed),
     and (ii) the maximum number of shares of AMPS, together with all shares
     of other 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 Corporation shall
     allocate the number required to be redeemed which would result in the
     Corporation having S&P Eligible Assets and Moody's Eligible Assets


                                      45
<PAGE>


     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 of all
     series, Other AMPS and other Preferred Stock subject to redemption
     pursuant to provisions similar to those contained in this paragraph
     4(a)(ii); provided that, shares of AMPS which may not be redeemed at the
     option of the Corporation due to the designation of a Non-Call Period
     applicable to such shares (A) will be subject to mandatory redemption
     only to the extent that other shares are not available to satisfy the
     number of shares required to be redeemed and (B) will be selected for
     redemption in an ascending order of outstanding number of days in the
     Non-Call Period (with shares with the lowest number of days to be
     redeemed first) and by lot in the event of shares having an equal number
     of days in such Non-Call Period. The Corporation shall effect such
     redemption on a Business Day which is not later than 30 days after such
     Cure Date, except that if the Corporation 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 Corporation otherwise is unable to effect such
     redemption on or prior to 30 days after such Cure Date, the Corporation
     shall redeem those shares of AMPS which it is unable to redeem on the
     earliest practicable date on which it is able to effect such redemption
     out of funds legally available therefor.

     (b) No Redemption Under Certain Circumstances. Notwithstanding any other
provision of this paragraph 4, no shares of AMPS may be redeemed pursuant to
paragraph 4(a)(i) of these Articles Supplementary (i) unless all dividends in
arrears on all remaining outstanding shares of Parity Stock shall have been or
are being contemporaneously paid or declared and set


                                      46
<PAGE>


apart for payment and (ii) if redemption thereof would result in the
Corporation's failure to maintain Moody's Eligible Assets or S&P Eligible
Assets with an aggregate Discounted Value equal to or greater than the AMPS
Basic Maintenance Amount. In the event that less than all the outstanding
shares of a series of AMPS are to be redeemed and there is more than one
Holder, the shares of that series of AMPS to be redeemed shall be selected by
lot or such other method as the Corporation shall deem fair and equitable.

     (c) Notice of Redemption. Whenever shares of AMPS are to be redeemed, the
Corporation, not less than 17 nor more than 60 days prior to the date fixed
for redemption, shall mail a notice ("Notice of Redemption") by first-class
mail, postage prepaid, to each Holder of shares of AMPS to be redeemed and to
the Auction Agent. The Corporation shall cause the Notice of Redemption to
also be published in the eastern and national editions of The Wall Street
Journal. The Notice of Redemption shall set forth (i) the redemption date,
(ii) the amount of the redemption price, (iii) the aggregate number of shares
of AMPS of such series to be redeemed, (iv) the place or places where shares
of AMPS of such series are to be surrendered for payment of the redemption
price, (v) a statement that dividends on the shares to be redeemed shall cease
to accumulate on such redemption date (except that holders may be entitled to
Additional Dividends) and (vi) the provision of these Articles Supplementary
pursuant to which such shares are being redeemed. No defect in the Notice of
Redemption or in the mailing or publication thereof shall affect the validity
of the redemption proceedings, except as required by applicable law.

     If the Notice of Redemption shall have been given as aforesaid and,
concurrently or thereafter, the Corporation shall have deposited in trust with
the Auction Agent, or segregated in an account at the Corporation's custodian
bank for the benefit of the Holders of such series of


                                      47
<PAGE>


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 such Notice of
Redemption has been given with irrevocable instructions and authority to pay
the redemption price to the Holders of such shares, then upon the date of such
deposit or, if no such deposit is made, then upon such date fixed for
redemption (unless the Corporation shall default in making the redemption
payment), all rights of the Holders of such shares as shareholders of the
Corporation by reason of the ownership of such shares will cease and terminate
(except their right to receive the redemption price in respect thereof and any
Additional Dividends, but without interest), and such shares shall no longer
be deemed outstanding. The Corporation shall be entitled to receive, from time
to time, from the Auction Agent the interest, if any, on such Deposit
Securities deposited with it and the Holders of any shares so redeemed shall
have no claim to any of such interest. In case the Holder of any shares so
called for redemption shall not claim the redemption payment for his shares
within one year after the date of redemption, the Auction Agent shall, upon
demand, pay over to the Corporation such amount remaining on deposit and the
Auction Agent shall thereupon be relieved of all responsibility to the Holder
of such shares called for redemption and such Holder thereafter shall look
only to the Corporation for the redemption payment.

     5. Voting Rights.

     (a) General. Except as otherwise provided in the Charter or By-laws, each
Holder of shares of AMPS shall be entitled to one vote for each share held on
each matter submitted to a vote of shareholders of the Corporation, and the
holders of outstanding shares of Preferred Stock, including AMPS, and of
shares of Common Stock shall vote together as a single class; provided that,
at any meeting of the shareholders of the Corporation held for the election of
directors, the


                                      48
<PAGE>


holders of outstanding shares of Preferred Stock, including AMPS, shall be
entitled, as a class, to the exclusion of the holders of all other securities
and classes of capital stock of the Corporation, to elect two directors of the
Corporation. Subject to paragraph 5(b) hereof, the holders of outstanding
shares of capital stock of the Corporation, including the holders of
outstanding shares of Preferred Stock, including AMPS, voting as a single
class, shall elect the balance of the directors.

     (b) Right to Elect Majority of Board of Directors. During any period in
which any one or more of the conditions described below shall exist (such
period being referred to herein as a "Voting Period"), the number of directors
constituting the Board of Directors shall be automatically increased by the
smallest number that, when added to the two directors elected exclusively by
the holders of shares of Preferred Stock, would constitute a majority of the
Board of Directors as so increased by such smallest number; and the holders of
shares of Preferred Stock shall be entitled, voting separately as one class
(to the exclusion of the holders of all other securities and classes of
capital stock of the Corporation), to elect such smallest number of additional
directors, together with the two directors that such holders are in any event
entitled to elect. A Voting Period shall commence:

          (i) if at any time accumulated dividends (whether or not earned or
     declared, and whether or not funds are then legally available in an
     amount sufficient therefor) on the outstanding shares of AMPS equal to at
     least two full years' dividends shall be due and unpaid and sufficient
     cash or specified securities shall not have been deposited with the
     Auction Agent for the payment of such accumulated dividends; or

          (ii) if at any time holders of any other shares of Preferred Stock
     are entitled to elect a majority of the directors of the Corporation
     under the 1940 Act.


                                      49
<PAGE>


     Upon the termination of a Voting Period, the voting rights described in
this paragraph 5(b) shall cease, subject always, however, to the reverting of
such voting rights in the Holders upon the further occurrence of any of the
events described in this paragraph 5(b).

     (c) Right to Vote with Respect to Certain Other Matters. So long as any
shares of AMPS are outstanding, the Corporation shall not, without the
affirmative vote of the holders of a majority of the shares of Preferred Stock
Outstanding at the time, voting separately as one class: (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 payment of dividends or the
distribution of assets on dissolution, liquidation or winding up the affairs
of the Corporation, 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
AMPS are outstanding, the Corporation 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 a series of AMPS
differently than those of a Holder of shares of any other series of AMPS
without the affirmative vote of the holders of at least a majority of the
shares of AMPS of each series adversely affected and outstanding at such time
(each such adversely affected series voting separately as a class). The
Corporation shall notify Moody's and S&P ten Business Days prior to any such
vote described in clause (i) or (ii). Unless a higher percentage is provided
for under the Charter, the affirmative vote of the holders of a majority of
the outstanding shares of Preferred Stock, including AMPS, voting together as
a single class, will be required to approve any plan of reorganization
(including bankruptcy proceedings) adversely affecting such shares or any
action requiring a vote of security holders


                                      50
<PAGE>


under Section 13(a) of the 1940 Act. So long as any shares of the AMPS are
outstanding, the affirmative vote of the holders of a majority of the
outstanding shares of Preferred Stock, including AMPS, voting together as a
single class, will be required to approve any voluntary application by the
Corporation for relief under Federal bankruptcy law or any similar application
under state law for so long as the Corporation is solvent and does not foresee
becoming insolvent. For purposes of the two preceding sentences, the phrase
"vote of the holders of a majority of the outstanding shares of Preferred
Stock" shall have the meaning set forth in the 1940 Act. The class vote of
holders of shares of Preferred Stock, including AMPS, described above will in
each case be in addition to a separate vote of the requisite percentage of
shares of Common Stock and shares of Preferred Stock, including AMPS, 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.

     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
Corporation, 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.


                                      51
<PAGE>


     (d) Voting Procedures.

          (i) As soon as practicable after the accrual of any right of the
     holders of shares of Preferred Stock to elect additional directors as
     described in paragraph 5(b) above, the Corporation shall call a special
     meeting of such holders and instruct the Auction Agent to mail a notice
     of such special meeting to such holders, such meeting to be held not less
     than 10 nor more than 20 days after the date of mailing of such notice.
     If the Corporation fails to send such notice to the Auction Agent or if
     the Corporation does not call such a special meeting, it may be called by
     any such holder on like notice. The record date for determining the
     holders entitled to notice of and to vote at such special meeting shall
     be the close of business on the fifth Business Day preceding the day on
     which such notice is mailed. At any such special meeting and at each
     meeting held during a Voting Period, such Holders, voting together as a
     class (to the exclusion of the holders of all other securities and
     classes of capital stock of the Corporation), shall be entitled to elect
     the number of directors prescribed in paragraph 5(b) above. At any such
     meeting or adjournment thereof in the absence of a quorum, a majority of
     such holders present in person or by proxy shall have the power to
     adjourn the meeting without notice, other than by an announcement at the
     meeting, to a date not more than 120 days after the original record date.

          (ii) For purposes of determining any rights of the Holders to vote
     on any matter or the number of shares required to constitute a quorum,
     whether such right is created by these Articles Supplementary, by the
     other provisions of the Charter, by statute or otherwise, a share of AMPS
     which is not Outstanding shall not be counted.


                                      52
<PAGE>


          (iii) The terms of office of all persons who are directors of the
     Corporation at the time of a special meeting of Holders and holders of
     other Preferred Stock to elect directors shall continue, notwithstanding
     the election at such meeting by the Holders and such other holders of the
     number of directors that they are entitled to elect, and the persons so
     elected by the Holders and such other holders, together with the two
     incumbent directors elected by the Holders and such other holders of
     Preferred Stock and the remaining incumbent directors elected by the
     holders of the Common Stock and Preferred Stock, shall constitute the
     duly elected directors of the Corporation.

          (iv) Simultaneously with the expiration of a Voting Period, the
     terms of office of the additional directors elected by the Holders and
     holders of other Preferred Stock pursuant to paragraph 5(b) above shall
     terminate, the remaining directors shall constitute the directors of the
     Corporation and the voting rights of the Holders and such other holders
     to elect additional directors pursuant to paragraph 5(b) above shall
     cease, subject to the provisions of the last sentence of paragraph 5(b).

     (e) Exclusive Remedy. Unless otherwise required by law, the Holders of
shares of AMPS shall not have any rights or preferences other than those
specifically set forth herein. The Holders of shares of AMPS shall have no
preemptive rights or rights to cumulative voting. In the event that the
Corporation fails to pay any dividends on the shares of AMPS, the exclusive
remedy of the Holders shall be the right to vote for directors pursuant to the
provisions of this paragraph 5.

     (f) Notification to S&P and Moody's. In the event a vote of Holders of
AMPS is required pursuant to the provisions of Section 13(a) of the 1940 Act,
the Corporation shall, not later than ten Business Days prior to the date on
which such vote is to be taken, notify S&P and


                                      53
<PAGE>


Moody's that such vote is to be taken and the nature of the action with
respect to which such vote is to be taken and, not later than ten Business
Days after the date on which such vote is taken, notify S&P and Moody's of the
result of such vote.

     6. 1940 Act AMPS Asset Coverage. The Corporation shall maintain, as of
the last Business Day of each month in which any share of AMPS is outstanding,
the 1940 Act AMPS Asset Coverage.

     7. AMPS Basic Maintenance Amount.

     (a) The Corporation shall maintain, on each Valuation Date, and shall
verify to its satisfaction that it is maintaining on such Valuation Date, (i)
S&P Eligible Assets having an aggregate Discounted Value equal to or greater
than the AMPS Basic Maintenance Amount and (ii) Moody's Eligible Assets having
an aggregate Discounted Value equal to or greater than the AMPS Basic
Maintenance Amount. Upon any failure to maintain the required Discounted
Value, the Corporation will use its best efforts to alter the composition of
its portfolio to reattain a Discounted Value at least equal to the AMPS Basic
Maintenance Amount on or prior to the AMPS Basic Maintenance Cure Date.

     (b) On or before 5:00 p.m., New York City time, on the seventh Business
Day after a Valuation Date on which the Corporation fails to satisfy the AMPS
Basic Maintenance Amount, the Corporation shall complete and deliver to
Moody's and S&P, as the case may be, a complete AMPS Basic Maintenance Report
as of the date of such failure. The Corporation will deliver an AMPS Basic
Maintenance Report to Moody's and S&P, as the case may be, on or before 5:00
p.m., New York City time, on the seventh Business Day after a Valuation Date
on which the Corporation cures its failure to maintain Moody's Eligible Assets
or S&P Eligible Assets, as the case may be, with an aggregate Discounted Value
equal to or greater than the AMPS Basic


                                      54
<PAGE>


Maintenance Amount and on which the Corporation fails to maintain Moody's
Eligible Assets or S&P Eligible Assets, as the case may be, with an aggregate
Discounted Value which exceeds the AMPS Basic Maintenance Amount by 25% or
more. The Corporation will also deliver an AMPS Basic Maintenance Report to
Moody's and S&P 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 Corporation's fiscal year ends on or
before the seventh Business Day after such date. The Corporation shall also
provide Moody's and S&P with an AMPS Basic Maintenance Report when
specifically requested by either Moody's or S&P. A failure by the Corporation
to deliver an AMPS Basic Maintenance Report under this paragraph 7(b) shall be
deemed to be delivery of an AMPS Basic Maintenance Report indicating the
Discounted Value for S&P Eligible Assets and Moody's Eligible Assets of the
Corporation is less than the AMPS Basic Maintenance Amount, as of the relevant
Valuation Date.

     (c) Within ten Business Days after the date of delivery of an AMPS Basic
Maintenance Report in accordance with paragraph 7(b) above relating to the
Corporation's fiscal year end, the Independent Accountant will confirm in
writing to S&P and Moody's (i) the mathematical accuracy of the calculations
reflected in such Report, (ii) that, in such Report, the Corporation correctly
determined the assets of the Corporation which constitute S&P Eligible Assets
or Moody's Eligible Assets, as the case may be, at its fiscal year end in
accordance with these Articles Supplementary, and (iii) that, in such Report,
the Corporation determined whether the Corporation had, at its fiscal year end
in accordance with these Articles Supplementary, S&P Eligible Assets of an
aggregate Discounted Value at least equal to the AMPS Basic Maintenance Amount
and Moody's Eligible Assets of an aggregate Discounted Value at least equal to
the


                                      55
<PAGE>


AMPS Basic Maintenance Amount (such confirmation is herein called the
"Accountant's Confirmation").

     (d) Within ten Business Days after the date of delivery to S&P and
Moody's of an AMPS Basic Maintenance Report in accordance with paragraph 7(b)
above relating to any Valuation Date on which the Corporation failed to
maintain S&P Eligible Assets with an aggregate Discounted Value and Moody's
Eligible Assets with an aggregate Discounted Value equal to or greater than
the AMPS Basic Maintenance Amount, and relating to the AMPS Basic Maintenance
Cure Date with respect to such failure, the Independent Accountant will
provide to S&P and Moody's an Accountant's Confirmation as to such AMPS Basic
Maintenance Report.

     (e) If any Accountant's Confirmation delivered pursuant to subparagraph
(c) or (d) of this paragraph 7 shows that an error was made in the AMPS Basic
Maintenance Report for a particular date for which such Accountant's
Confirmation as required to be delivered, or shows that a lower aggregate
Discounted Value for the aggregate of all S&P Eligible Assets or Moody's
Eligible Assets, as the case may be, of the Corporation was determined by the
Independent Accountant, the calculation or determination made by such
Independent Accountant shall be final and conclusive and shall be binding on
the Corporation, and the Corporation shall accordingly amend and deliver the
AMPS Basic Maintenance Report to S&P and Moody's promptly following receipt by
the Corporation of such Accountant's Confirmation.

     (f) On or before 5:00 p.m., New York City time, on the first Business Day
after the Date of Original Issue of the shares of AMPS, the Corporation will
complete and deliver to S&P and Moody's an AMPS Basic Maintenance Report as of
the close of business on such Date of Original Issue. Within five Business
Days of such Date of Original Issue, the Independent Accountant will confirm
in writing to S&P and Moody's (i) the mathematical accuracy of the


                                      56
<PAGE>


calculations reflected in such Report and (ii) that the aggregate Discounted
Value of S&P Eligible Assets and the aggregate Discounted Value of Moody's
Eligible Assets reflected thereon equals or exceeds the AMPS Basic Maintenance
Amount reflected thereon. Also, on or before 5:00 p.m., New York City time, on
the first Business Day after shares of Common Stock are repurchased by the
Corporation, the Corporation will complete and deliver to S&P and Moody's an
AMPS Basic Maintenance Report as of the close of business on such date that
Common Stock is repurchased.

     (g) For so long as shares of AMPS are rated by Moody's, in managing the
Corporation's portfolio, the Adviser will not alter the composition of the
Corporation's portfolio if, in the reasonable belief of the Adviser, the
effect of any such alteration would be to cause the Corporation to have
Moody's Eligible Assets with an aggregate Discounted Value, as of the
immediately preceding Valuation Date, less than the AMPS Basic Maintenance
Amount as of such Valuation Date; provided, however, that in the event that,
as of the immediately preceding Valuation Date, the aggregate Discounted Value
of Moody's Eligible Assets exceeded the AMPS Basic Maintenance Amount by five
percent or less, the Adviser will not alter the composition of the
Corporation's portfolio in a manner reasonably expected to reduce the
aggregate Discounted Value of Moody's Eligible Assets unless the Corporation
shall have confirmed that, after giving effect to such alteration, the
aggregate Discounted Value of Moody's Eligible Assets would exceed the AMPS
Basic Maintenance Amount.

     8. Certain Other Restrictions and Requirements.

     (a) For so long as any shares of AMPS are rated by S&P, the Corporation
will not purchase or sell futures contracts, write, purchase or sell options
on futures contracts or write put options (except covered put options) or call
options (except covered call options) on portfolio


                                      57
<PAGE>


securities unless it receives written confirmation from S&P that engaging in
such transactions will not impair the ratings then assigned to the shares of
AMPS by S&P, except that the Corporation may purchase or sell futures
contracts based on the Bond Buyer Municipal Bond Index (the "Municipal Index")
or Treasury Bonds and write, purchase or sell put and call options on such
contracts (collectively, "S&P Hedging Transactions"), subject to the following
limitations:

          (i) the Corporation will not engage in any S&P Hedging Transaction
     based on the Municipal Index (other than transactions which terminate a
     futures contract or option held by the Corporation by the Corporation's
     taking an opposite position thereto ("Closing Transactions")), which
     would cause the Corporation at the time of such transaction to own or
     have sold the least of (A) more than 1,000 outstanding futures contracts
     based on the Municipal Index, (B) outstanding futures contracts based on
     the Municipal Index exceeding in number 25% of the quotient of the Market
     Value of the Corporation's total assets divided by $1,000 or (C)
     outstanding futures contracts based on the Municipal Index exceeding in
     number 10% of the average number of daily traded futures contracts based
     on the Municipal Index in the 30 days preceding the time of effecting
     such transaction as reported by The Wall Street Journal;

          (ii) the Corporation will not engage in any S&P Hedging Transaction
     based on Treasury Bonds (other than Closing Transactions) which would
     cause the Corporation at the time of such transaction to own or have sold
     the lesser of (A) outstanding futures contracts based on Treasury Bonds
     exceeding in number 50% of the quotient of the Market Value of the
     Corporation's total assets divided by $100,000 ($200,000 in the case of
     the two-year United States Treasury Note) or (B) outstanding futures
     contracts based


                                      58
<PAGE>


     on Treasury Bonds exceeding in number 10% of the average number of daily
     traded futures contracts based on Treasury Bonds in the 30 days preceding
     the time of effecting such transaction as reported by The Wall Street
     Journal;

          (iii) the Corporation will engage in Closing Transactions to close
     out any outstanding futures contract which the Corporation owns or has
     sold or any outstanding option thereon owned by the Corporation in the
     event (A) the Corporation does not have S&P Eligible Assets with an
     aggregate Discounted Value equal to or greater than the AMPS Basic
     Maintenance Amount on two consecutive Valuation Dates and (B) the
     Corporation is required to pay Variation Margin on the second such
     Valuation Date;

          (iv) the Corporation will engage in a Closing Transaction to close
     out any outstanding futures contract or option thereon in the month prior
     to the delivery month under the terms of such futures contract or option
     thereon unless the Corporation holds the securities deliverable under
     such terms; and

          (v) when the Corporation writes a futures contract or option
     thereon, it will either maintain an amount of cash, cash equivalents or
     liquid assets in a segregated account with the Corporation'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 Corporation's
     broker with respect to such futures contract or option equals the Market
     Value of the futures contract or option, or, in the event the Corporation
     writes a futures contract or option thereon which requires delivery of an
     underlying security, it shall hold such underlying security in its
     portfolio.

     For purposes of determining whether the Corporation has S&P Eligible
Assets with a Discounted Value that equals or exceeds the AMPS Basic
Maintenance Amount, the Discounted


                                      59
<PAGE>


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&P
Eligible Assets shall be reduced by an amount equal to (i) 30% of the
aggregate settlement value, as marked to market, of any outstanding futures
contracts based on the Municipal Index which are owned by the Corporation plus
(ii) 25% of the aggregate settlement value, as marked to market, of any
outstanding futures contracts based on Treasury Bonds which contracts are
owned by the Corporation.

     (b) For so long as any shares of AMPS are rated by Moody's, the
Corporation will not engage in Bond Market Association Municipal Swap Index
swap transactions ("BMA swap transactions"), buy or sell futures contracts,
write, purchase or sell call options on futures contracts or purchase put
options on futures contracts or write call options (except covered call
options) on portfolio securities unless it receives written confirmation from
Moody's that engaging in such transactions would not impair the ratings then
assigned to the shares of AMPS by Moody's, except that the Corporation may
engage in BMA swap transactions, purchase or sell exchange-traded futures
contracts based on any index approved by Moody's or Treasury Bonds and
purchase, write or sell exchange-traded put options on such futures contracts,
any index approved by Moody's or Treasury Bonds, and purchase, write or sell
exchange-traded call options on such futures contracts, any index approved by
Moody's or Treasury Bonds (collectively, "Moody's Hedging Transactions"),
subject to the following limitations:

          (i) the Corporation will not engage in any Moody's Hedging
     Transaction based on the Municipal Index (other than Closing
     Transactions) which would cause the Corporation at the time of such
     transaction to own or have sold (A) outstanding futures contracts based
     on the Municipal Index exceeding in number 10% of the average number of
     daily traded futures contracts based on the Municipal Index in the 30
     days preceding


                                      60
<PAGE>


     the time of effecting such transaction as reported by The Wall Street
     Journal or (B) outstanding futures contracts based on the Municipal Index
     having a Market Value exceeding 50% of the Market Value of all Municipal
     Bonds constituting Moody's Eligible Assets owned by the Corporation
     (other than Moody's Eligible Assets already subject to a Moody's Hedging
     Transaction);

          (ii) the Corporation will not engage in any Moody's Hedging
     Transaction based on Treasury Bonds (other than Closing Transactions)
     which would cause the Corporation at the time of such transaction to own
     or have sold (A) outstanding futures contracts based on Treasury Bonds
     having an aggregate Market Value exceeding 40% of the aggregate Market
     Value of Moody's Eligible Assets owned by the Corporation and rated Aa by
     Moody's (or, if not rated by Moody's but rated by S&P, rated AAA by S&P)
     or (B) outstanding futures contracts based on Treasury Bonds having an
     aggregate Market Value exceeding 80% of the aggregate Market Value of all
     Municipal Bonds constituting Moody's Eligible Assets owned by the
     Corporation (other than Moody's Eligible Assets already subject to a
     Moody's Hedging Transaction) and rated Baa or A by Moody's (or, if not
     rated by Moody's but rated by S&P, rated A or AA by S&P) (for purposes of
     the foregoing clauses (i) and (ii), the Corporation shall be deemed to
     own the number of futures contracts that underlie any outstanding options
     written by the Corporation);

          (iii) the Corporation will engage in Closing Transactions to close
     out any outstanding futures contract based on the Municipal Index if the
     amount of open interest in the Municipal Index as reported by The Wall
     Street Journal is less than 5,000;

          (iv) the Corporation will engage in a Closing Transaction to close
     out any outstanding futures contract by no later than the fifth Business
     Day of the month in which


                                      61
<PAGE>


     such contract expires and will engage in a Closing Transaction to close
     out any outstanding option on a futures contract by no later than the
     first Business Day of the month in which such option expires;

          (v) the Corporation will engage in Moody's Hedging Transactions only
     with respect to futures contracts or options thereon having the next
     settlement date or the settlement date immediately thereafter;

          (vi) the Corporation (A) will not engage in options and futures
     transactions for leveraging or speculative purposes, except that the
     Corporation may engage in an option or futures transaction so long as the
     combination of the Corporation'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 Corporation's investment objective
     and policies, in a security that is not an option or futures transaction,
     subject to the Adviser periodically demonstrating to Moody's that said
     economic results are achieved, and (B) will not write any call options or
     sell any futures contracts for the purpose of hedging the anticipated
     purchase of an asset prior to completion of such purchase;

          (vii) the Corporation will not enter into an option or futures
     transaction unless, after giving effect thereto, the Corporation would
     continue to have Moody's Eligible Assets with an aggregate Discounted
     Value equal to or greater than the AMPS Basic Maintenance Amount; and

          (viii) the Corporation will not engage in BMA swap transactions with
     respect to more than 20% of the Corporation's net assets; provided that
     the Corporation's use of


                                      62
<PAGE>


     futures will proportionately decrease as the Corporation's use of BMA
     swap transactions increases, and vice-versa.


     For purposes of determining whether the Corporation has Moody's Eligible
Assets with an aggregate Discounted Value that equals or exceeds the AMPS
Basic Maintenance Amount, the Discounted Value of Moody's Eligible Assets
which the Corporation is obligated to deliver or receive pursuant to an
outstanding futures contract or option shall be as follows: (i) assets subject
to call options written by the Corporation which are either exchange-traded
and "readily reversible" or which expire within 49 days after the date as of
which such valuation is made shall be valued at the lesser of (a) Discounted
Value and (b) the exercise price of the call option written by the
Corporation; (ii) assets subject to call options written by the Corporation
not meeting the requirements of clause (i) of this sentence shall have no
value; (iii) assets subject to put options written by the Corporation 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 Corporation is the seller the contract may
be valued at the settlement price and where the Corporation 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 Corporation with any security of a class
of securities, the Corporation shall assume that it will take delivery of the
security with the lowest Discounted Value.

     For purposes of determining whether the Corporation has Moody's Eligible
Assets with an aggregate Discounted Value that equals or exceeds the AMPS
Basic Maintenance Amount, the following amounts shall be subtracted from the
aggregate Discounted Value of the Moody's


                                      63
<PAGE>


Eligible Assets held by the Corporation: (i) 10% of the exercise price of a
written call option; (ii) the exercise price of any written put option; (iii)
where the Corporation is the seller under a futures contract, 10% of the
settlement price of the futures contract; (iv) where the Corporation is the
purchaser under a futures contract, the settlement price of assets purchased
under such futures contract; (v) the settlement price of the underlying
futures contract if the Corporation writes put options on a futures contract;
and (vi) 105% of the Market Value of the underlying futures contracts if the
Corporation writes call options on a futures contract and does not own the
underlying contract.

     (c) For so long as any shares of AMPS are rated by Moody's, the
Corporation will not enter into any contract to purchase securities for a
fixed price at a future date beyond customary settlement time (other than such
contracts that constitute Moody's Hedging Transactions that are permitted
under paragraph 8(b) of these Articles Supplementary), except that the
Corporation may enter into such contracts to purchase newly-issued securities
on the date such securities are issued ("Forward Commitments"), subject to the
following limitations:

          (i) the Corporation 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's and maturing prior to the date of
     the Forward Commitment with a Market Value that equals or exceeds the
     amount of the Corporation'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 Corporation's obligations under any Forward Commitment to which it is
     from time to time a party; and


                                      64
<PAGE>


          (ii) the Corporation will not enter into a Forward Commitment
     unless, after giving effect thereto, the Corporation would continue to
     have Moody's Eligible Assets with an aggregate Discounted Value equal to
     or greater than the AMPS Basic Maintenance Amount.

     (d) For purposes of determining whether the Corporation has Moody's
Eligible Assets with an aggregate Discounted Value that equals or exceeds the
AMPS Basic Maintenance Amount, the Discounted Value of all Forward Commitments
to which the Corporation is a party and of all securities deliverable to the
Corporation pursuant to such Forward Commitments shall be zero.

     (e) For so long as shares of AMPS are rated by S&P or Moody's, the
Corporation will not, unless it has received written confirmation from S&P
and/or Moody's, as the case may be, that such action would not impair the
ratings then assigned to shares of AMPS by S&P and/or Moody's, as the case may
be, (i) borrow money except for the purpose of clearing transactions in
portfolio securities (which borrowings shall under any circumstances be
limited to the lesser of $10 million and an amount equal to 5% of the Market
Value of the Corporation's assets at the time of such borrowings and which
borrowings shall be repaid within 60 days and not be extended or renewed and
shall not cause the aggregate Discounted Value of Moody's Eligible Assets and
S&P Eligible Assets to be less than the AMPS Basic Maintenance Amount), (ii)
engage in short sales of securities, (iii) lend any securities, (iv) issue any
class or series of stock ranking prior to or on a parity with the AMPS with
respect to the payment of dividends or the distribution of assets upon
dissolution, liquidation or winding up of the Corporation, (v) reissue any
AMPS previously purchased or redeemed by the Corporation, (vi) merge or
consolidate into


                                      65
<PAGE>


or with any other corporation or entity, (vii) change the Pricing Service or
(viii) engage in reverse repurchase agreements.

     (f) For as long as the AMPS are rated by S&P, the Corporation will not,
unless it has received written confirmation from S&P that such action would
not impair the rating then assigned to the shares of AMPS by S&P, engage in
interest rate swaps, caps and floors, except that the Corporation 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'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 Corporation 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&P
Eligible Assets, 90% of any positive mark-to-market valuation of the
Corporation's rights will be S&P Eligible Assets, 100% of any negative
mark-to-market valuation of the Corporation's rights will be included in the
calculation of the AMPS Basic Maintenance Amount, and (vi) the Corporation
must maintain liquid assets with a value at least equal to the net amount of
the excess, if any, of the Corporation's obligations over its entitlement with
respect to each swap. For caps/floors, the Corporation must maintain liquid
assets with a value at least equal to the Corporation's obligations with
respect to such caps or floors.

     (g) For so long as shares of AMPS are rated by S&P or Moody's, as the
case may be, the Corporation agrees to provide S&P and/or Moody's with the
following, unless the Corporation


                                      66
<PAGE>


has received written confirmation from S&P and/or Moody's, as the case may be,
that the provision of such information is no longer required and that the
current rating then assigned to the shares of AMPS by S&P and/or Moody's, as
the case may be, would not be impaired: a notification letter at least 30 days
prior to any material change in the Charter; a copy of the AMPS Basic
Maintenance Report prepared by the Corporation in accordance with these
Articles Supplementary; and a notice upon the occurrence of any of the
following events: (i) any failure by the Corporation to declare or pay any
dividends on the AMPS or successfully remarket the AMPS; (ii) any mandatory or
optional redemption of the AMPS effected by the Corporation; (iii) any
assumption of control of the Board of Directors of the Corporation by the
holders of the AMPS; (iv) a general unavailability of dealer quotes on the
assets of the Corporation; (v) any material auditor discrepancies on
valuations; (vi) the occurrence of any Special Dividend Period; (vii) any
change in the Maximum Applicable Rate or the Reference Rate; (viii) the
acquisition by any person of beneficial ownership of more than 5% of the
Corporation's voting stock (inclusive of Common Stock and Preferred Stock);
(ix) the occurrence of any change in Internal Revenue Service rules with
respect to the payment of Additional Dividends; (x) any change in the Pricing
Service employed by the Corporation; (xi) any change in the Adviser; (xii) any
increase of greater than 40% to the maximum marginal Federal income tax rate
applicable to individuals or corporations; and (xiii) the maximum marginal
Federal income tax rate applicable to individuals or corporations is increased
to a rate in excess of 50%.

     (h) For so long as shares of AMPS are rated by S&P or Moody's, the
Corporation shall provide S&P and/or Moody's with a copy of the Corporation's
annual audited financial statements as soon as practicable after such annual
audited financial statements have been made available to the Corporation's
stockholders.


                                      67
<PAGE>


     9. Notice. All notices or communications, unless otherwise specified in
the By-laws of the Corporation or these Articles Supplementary, shall be
sufficiently given if in writing and delivered in person or mailed by
first-class mail, postage prepaid. Notice shall be deemed given on the earlier
of the date received or the date seven days after which such notice is mailed.

     10. Auction Procedures.

     (a) Certain definitions. As used in this paragraph 10, the following
terms shall have the following meanings, unless the context otherwise
requires:

          (i) "AMPS" means the shares of AMPS being auctioned pursuant to this
     paragraph 10.

          (ii) "Auction Date" means the first Business Day preceding the first
     day of a Dividend Period.

          (iii) "Available AMPS" has the meaning specified in paragraph
     10(d)(i) below.

          (iv) "Bid" has the meaning specified in paragraph 10(b)(i) below.

          (v) "Bidder" has the meaning specified in paragraph 10(b)(i) below.

          (vi) "Hold Order" has the meaning specified in paragraph 10(b)(i)
     below.

          (vii) "Maximum Applicable Rate" for any Dividend Period will be the
     higher of the Applicable Percentage of the Reference Rate or the
     Applicable Spread plus the Reference Rate. The Applicable Percentage and
     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's and S&P
     (or if Moody's or S&P or both shall not make such rating available, the
     equivalent of either or both of such ratings by a Substitute Rating
     Agency or two Substitute Rating Agencies or, in the event that only one
     such rating shall be available, such rating) and (ii) whether the
     Corporation has provided notification to the


                                      68
<PAGE>


     Auction Agent prior to the Auction establishing the Applicable Rate for
     any dividend pursuant to paragraph 2(f) hereof that net capital gains or
     other taxable income will be included in such dividend on shares of AMPS
     as follows:


<TABLE>
<CAPTION>

                                                 Applicable      Applicable       Applicable      Applicable
                                                 Percentage of   Percentage of    Spread over     Spread over
                                                 Reference       Reference        Reference       Reference
                     Credit Ratings              Rate - No       Rate -           Rate - No       Rate -
       ----------------------------------------
            Moody's                  S&P         Notification    Notification     Notification    Notification
       ------------------    ------------------  ------------    ------------     ------------    ------------

<S>      <C>                   <C>                   <C>             <C>             <C>             <C>
              Aaa                    AAA              110%            125%            1.10%           1.25%
           Aa3 to Aa1            AA- to AA+           125%            150%            1.25%           1.50%
            A3 to A1              A- to A+            150%            200%            1.50%           2.00%
          Baa3 to Baa1          BBB- to BBB+          175%            250%            1.75%           2.50%
           Below Baa3            Below BBB-           200%            300%            2.00%           3.00%

</TABLE>

     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 Corporation after consultation with the
Broker-Dealers, provided that immediately following any such increase the
Corporation would be in compliance with the AMPS Basic Maintenance Amount.
Subject to the provisions of paragraph 12, the Corporation shall take all
reasonable action necessary to enable S&P and Moody's to provide a rating for
each series of AMPS. If either S&P or Moody's shall not make such a rating
available, or neither S&P nor Moody's shall make such a rating available,
subject to the provisions of paragraph 12, Merrill Lynch, Pierce, Fenner &
Smith Incorporated or its affiliates and successors, after obtaining the
Corporation'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.

          (viii) "Order" has the meaning specified in paragraph 10(b)(i)
     below.

          (ix) "Sell Order" has the meaning specified in paragraph 10(b)(i)
     below.

          (x) "Submission Deadline" means 1:00 P.M., New York City time, on
     any Auction Date or such other time on any Auction Date as may be
     specified by the Auction


                                      69
<PAGE>


     Agent from time to time as the time by which each Broker-Dealer must
     submit to the Auction Agent in writing all Orders obtained by it for the
     Auction to be conducted on such Auction Date.

          (xi) "Submitted Bid" has the meaning specified in paragraph 10(d)(i)
     below.

          (xii) "Submitted Hold Order" has the meaning specified in paragraph
     10(d)(i) below.

          (xiii) "Submitted Order" has the meaning specified in paragraph
     10(d)(i) below.

          (xiv) "Submitted Sell Order" has the meaning specified in paragraph
     10(d)(i) below.

          (xv) "Sufficient Clearing Bids" has the meaning specified in
     paragraph 10(d)(i) below.

          (xvi) "Winning Bid Rate" has the meaning specified in paragraph
     10(d)(i) below.

     (b) Orders by Beneficial Owners, Potential Beneficial Owners, Existing
Holders and Potential Holders. (i) Unless otherwise permitted by the
Corporation, 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


                                      70
<PAGE>


Auction as an Existing Holder or Potential Holder on behalf of both itself and
its customers. On or prior to the Submission Deadline on each Auction Date:

               (A) each Beneficial Owner may submit to its Broker-Dealer
          information as to:

                    (1) the number of Outstanding shares, if any, of AMPS held
               by such Beneficial Owner which such Beneficial Owner desires to
               continue to hold without regard to the Applicable Rate for the
               next succeeding Dividend Period;

                    (2) the number of Outstanding shares, if any, of AMPS held
               by such Beneficial Owner which such Beneficial Owner desires to
               continue to hold, provided that the Applicable Rate for the
               next succeeding Dividend Period shall not be less than the rate
               per annum specified by such Beneficial Owner; and/or

                    (3) the number of Outstanding shares, if any, of AMPS held
               by such Beneficial Owner which such Beneficial Owner offers to
               sell without regard to the Applicable Rate for the next
               succeeding Dividend Period; and

               (B) each Broker-Dealer, using a list of Potential Beneficial
          Owners that shall be maintained in good faith for the purpose of
          conducting a competitive Auction, shall contact Potential Beneficial
          Owners, including Persons that are not Beneficial Owners, on such
          list to determine the number of Outstanding shares, if any, of AMPS
          which each such Potential Beneficial Owner offers to purchase,


                                      71
<PAGE>


          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.

     For the purposes hereof, the communication by a Beneficial Owner or
Potential Beneficial Owner to a Broker-Dealer, or the communication by a
Broker-Dealer acting for its own account to the Auction Agent, of information
referred to in clause (A) or (B) of this paragraph 10(b)(i) is hereinafter
referred to as an "Order" and each Beneficial Owner and each Potential
Beneficial Owner placing an Order, including a Broker-Dealer acting in such
capacity for its own account, is hereinafter referred to as a "Bidder"; an
Order containing the information referred to in clause (A)(1) of this
paragraph 10(b)(i) is hereinafter referred to as a "Hold Order"; an Order
containing the information referred to in clause (A)(2) or (B) of this
paragraph 10(b)(i) is hereinafter referred to as a "Bid"; and an Order
containing the information referred to in clause (A)(3) of this paragraph
10(b)(i) is hereinafter referred to as a "Sell Order". Inasmuch as a
Broker-Dealer participates in an Auction as an Existing Holder or a Potential
Holder only to represent the interests of a Beneficial Owner or Potential
Beneficial Owner, whether it be its customers or itself, all discussion herein
relating to the consequences of an Auction for Existing Holders and Potential
Holders also applies to the underlying beneficial ownership interests
represented.

          (ii) A Bid by an Existing Holder shall constitute an irrevocable
     offer to sell:

                    (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

                    (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


                                      72
<PAGE>


               Applicable Rate determined on such Auction Date shall be equal
               to the rate per annum specified therein; or

                    (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.

               (B) A Sell Order by an Existing Holder shall constitute an
          irrevocable offer to sell:

                    (1) the number of Outstanding shares of AMPS specified in
               such Sell Order; or

                    (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.

               (C) A Bid by a Potential Holder shall constitute an irrevocable
          offer to purchase:

                    (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

                    (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.

     (c) Submission of Orders by Broker-Dealers to Auction Agent.


                                      73
<PAGE>


          (i) Each Broker-Dealer shall submit in writing or through 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 Corporation) as an
     Existing Holder in respect of shares subject to Orders submitted or
     deemed submitted to it by Beneficial Owners and as a Potential Holder in
     respect of shares subject to Orders submitted to it by Potential
     Beneficial Owners, and specifying with respect to each Order:

               (A) the name of the Bidder placing such Order (which shall be
          the Broker-Dealer unless otherwise permitted by the Corporation);

               (B) the aggregate number of Outstanding shares of AMPS that are
          the subject of such Order;

               (C) to the extent that such Bidder is an Existing Holder:

                    (1) the number of Outstanding shares, if any, of AMPS
               subject to any Hold Order placed by such Existing Holder;

                    (2) the number of Outstanding shares, if any, of AMPS
               subject to any Bid placed by such Existing Holder and the rate
               per annum specified in such Bid; and

                    (3) the number of Outstanding shares, if any, of AMPS
               subject to any Sell Order placed by such Existing Holder; and

               (D) to the extent such Bidder is a Potential Holder, the rate
          per annum specified in such Potential Holder's Bid.


                                      74
<PAGE>


          (ii) If any rate per annum specified in any Bid contains more than
     three figures to the right of the decimal point, the Auction Agent shall
     round such rate up to the next highest one-thousandth (.001) of 1%.

          (iii) If an Order or Orders covering all of the Outstanding 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.

          (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 Order
     shall be considered valid as follows and in the following order of
     priority:

               (A) any Hold Order submitted on behalf of such Existing Holder
          shall be considered valid up to and including the number of
          Outstanding 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


                                      75
<PAGE>


          aggregate, will cover exactly the number of Outstanding shares of
          AMPS held by such Existing Holder;

               (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

               (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


                                      76
<PAGE>


          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.

          (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.

          (vi) Any Order submitted by a Beneficial Owner as a Potential
     Beneficial Owner to its Broker-Dealer, or by a Broker-Dealer to the
     Auction Agent, prior to the Submission Deadline on any Auction Date shall
     be irrevocable.

     (d) Determination of Sufficient Clearing Bids, Winning Bid Rate and
Applicable Rate. (i) Not earlier than the Submission Deadline on each Auction
Date, the Auction Agent shall assemble all Orders submitted or deemed
submitted to it by the Broker-Dealers (each such Order as submitted or deemed
submitted by a Broker-Dealer being hereinafter referred to individually as a
"Submitted Hold Order", a "Submitted Bid" or a "Submitted Sell Order", as the
case may be, or as a "Submitted Order") and shall determine:

               (A) the excess of the total number of Outstanding 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 "Available AMPS");

               (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:


                                      77
<PAGE>


                    (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

                    (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 clause (1) above and this clause (2) are each
               zero because all of the Outstanding shares of AMPS are the
               subject of Submitted Hold Orders), such Submitted Bids by
               Potential Holders being hereinafter referred to collectively as
               "Sufficient Clearing Bids"); and

               (C) if Sufficient Clearing Bids exist, the lowest rate per
          annum specified in the Submitted Bids (the "Winning Bid Rate") that
          if:

                    (1) each Submitted Bid from Existing Holders specifying
               the Winning Bid Rate and all other Submitted Bids from Existing
               Holders specifying lower rates per annum were rejected, thus
               entitling such Existing Holders to continue to hold the shares
               of AMPS that are the subject of such Submitted Bids, and

                    (2) each Submitted Bid from Potential Holders specifying
               the Winning Bid Rate and all other Submitted Bids from
               Potential Holders specifying lower rates per annum were
               accepted, thus entitling the Potential Holders to purchase the
               shares of AMPS that are the subject of such Submitted Bids,


                                      78
<PAGE>


     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.

          (ii) Promptly after the Auction Agent has made the determinations
     pursuant to paragraph 10(d)(i), the Auction Agent shall advise the
     Corporation of the Maximum Applicable Rate and, based on such
     determinations, the Applicable Rate for the next succeeding Dividend
     Period as follows:

               (A) if Sufficient Clearing Bids exist, that the Applicable Rate
          for the next succeeding Dividend Period shall be equal to the
          Winning Bid Rate;

               (B) if Sufficient Clearing Bids do not exist (other than
          because all of the Outstanding 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

               (C) if all of the Outstanding shares of AMPS are the subject of
          Submitted Hold Orders, the Dividend Period next succeeding the
          Auction shall automatically be the same length as the immediately
          preceding Dividend Period and the Applicable Rate for the next
          succeeding Dividend Period shall be equal to 60% of the Reference
          Rate (or 90% of such rate if the Corporation has provided
          notification to the Auction Agent prior to the Auction establishing
          the Applicable Rate for any dividend pursuant to paragraph 2(f)
          hereof that net capital gains or other taxable income will be
          included in such dividend on shares of AMPS) on the date of the
          Auction.

     (e) Acceptance and Rejection of Submitted Bids and Submitted Sell Orders
and Allocation of Shares.


                                      79
<PAGE>


     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:

          (i) If Sufficient Clearing Bids have been made, subject to the
     provisions of paragraph 10(e)(iii) and paragraph 10(e)(iv), Submitted
     Bids and Submitted Sell Orders shall be accepted or rejected in the
     following order of priority and all other Submitted Bids shall be
     rejected:

               (A) the Submitted Sell Orders of Existing Holders shall be
          accepted and the Submitted Bid of each of the Existing Holders
          specifying any rate per annum that is higher than the Winning Bid
          Rate shall be accepted, thus requiring each such Existing Holder to
          sell the Outstanding shares of AMPS that are the subject of such
          Submitted Sell Order or Submitted Bid;

               (B) the Submitted Bid of each of the Existing Holders
          specifying any rate per annum that is lower than the Winning Bid
          Rate shall be rejected, thus entitling each such Existing Holder to
          continue to hold the Outstanding shares of AMPS that are the subject
          of such Submitted Bid;

               (C) the Submitted Bid of each of the Potential Holders
          specifying any rate per annum that is lower than the Winning Bid
          Rate shall be accepted;

               (D) the Submitted Bid of each of the Existing Holders
          specifying a rate per annum that is equal to the Winning Bid Rate
          shall be rejected, thus entitling each such Existing Holder to
          continue to hold the Outstanding 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


                                      80
<PAGE>


          number of Outstanding shares of AMPS ("Remaining Shares") 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 number 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

               (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


                                      81
<PAGE>


          all such Potential Holders that specified rates per annum equal to
          the Winning Bid Rate.

          (ii) If Sufficient Clearing Bids have not been made (other than
     because all of the Outstanding 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:

               (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;

               (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

               (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


                                      82
<PAGE>


          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.

               (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.

               (iv) If, as a result of the procedures described in paragraph
          10(e)(i), any Potential Holder would be entitled or required to
          purchase less than a whole share of AMPS on any Auction Date, the
          Auction Agent shall, in such manner as in its sole discretion it
          shall determine, allocate 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.

               (v) Based on the results of each Auction, the Auction Agent
          shall determine, with respect to each Broker-Dealer that submitted
          Bids or Sell Orders on behalf of Existing Holders or Potential
          Holders, the aggregate number of Outstanding shares of AMPS to be
          purchased and the aggregate number of the Outstanding shares of AMPS
          to be sold by


                                      83
<PAGE>


          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.

     (f) Miscellaneous. The Corporation 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's beneficial ownership. Neither the Corporation nor any Affiliate, other
than an Affiliate that is a Broker-Dealer, shall submit an Order in any
Auction. Any Beneficial Owner that is an Affiliate shall not sell, transfer or
otherwise dispose of shares of AMPS to any Person other than the Corporation.
All of the Outstanding shares of a series of AMPS 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 Corporation's


                                      84
<PAGE>


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 therefor
upon transfer or exchange thereof.

     11. Securities Depository; Stock Certificates.

     (a) If there is a Securities Depository, one certificate for all of the
shares of AMPS of each series shall be issued to the Securities Depository and
registered in the name of the Securities Depository or its nominee. Additional
certificates may be issued as necessary to represent shares of AMPS. All such
certificates shall bear a legend to the effect that such certificates are
issued subject to the provisions restricting the transfer of shares of AMPS
contained in these Articles Supplementary. Unless the Corporation shall have
elected, during a Non-Payment Period, to waive this requirement, the
Corporation will also issue stop-transfer instructions to the Auction Agent
for the shares of AMPS. Except as provided in paragraph (b) below, the
Securities Depository or its nominee will be the Holder, and no Beneficial
Owner shall receive certificates representing its ownership interest in such
shares.

     (b) If the Applicable Rate applicable to all shares of AMPS of a series
shall be the Non-Payment Period Rate or there is no Securities Depository, the
Corporation may at its option issue one or more new certificates with respect
to such shares (without the legend referred to in paragraph 11(a)) registered
in the names of the Beneficial Owners or their nominees and rescind the
stop-transfer instructions referred to in paragraph 11(a) with respect to such
shares.

     12. Termination of Rating Agency Provisions.

     (a) The Board of Directors may determine that it is not in the best
interests of the Corporation to continue to comply with the provisions of
paragraphs 7 and 8 hereof with respect


                                      85
<PAGE>


to Moody's, and any other provisions hereof with respect to obtaining and
maintaining a rating on the AMPS from Moody's (together, the "Moody's
Provisions"), and paragraphs 7 and 8 hereof with respect to S&P, and any other
provisions hereof with respect to obtaining and maintaining a rating on the
AMPS from S&P (together, the "S&P Provisions"), in which case the Corporation
will no longer be required to comply with any of the Moody's Provisions or the
S&P Provisions, as the case may be, provided that (i) the Corporation has
given the Auction Agent, the Broker-Dealers, Moody's or S&P and Holders of the
AMPS at least 45 calendar days written notice of such termination of
compliance, (ii) the Corporation is in compliance with the Moody's Provisions
and the S&P Provisions, as the case may be, at the time the notice required in
clause (i) hereof is given and at the time of the termination of compliance
with the Moody's Provisions or the S&P Provisions, and (iii) the AMPS continue
to be rated by at least one NRSRO at the time of the termination of compliance
with the Moody's Provisions or the S&P Provisions, as the case may be.

     (b) On the date that the notice is given in paragraph 12(a) above and on
the date that compliance with the Moody's Provisions and/or the S&P
Provisions, as the case may be, is terminated, the Corporation shall provide
the Auction Agent and Moody's or S&P, as applicable, with an officers'
certificate as to the compliance with the provisions of paragraph 12(a)
hereof, and the Moody's Provisions and/or the S&P Provisions, as applicable,
on such later date and thereafter shall have no force or effect.


                                      86
<PAGE>


     IN WITNESS WHEREOF, MUNIYIELD INSURED FUND, INC. has caused these
Articles Supplementary to be signed in its name and on its behalf by its Vice
President, and attested by its Secretary, on the _____ day of _____, 2004.

                                             MUNIYIELD INSURED FUND, INC.



                                             By:
                                                ------------------------------
                                                Name:
                                                Title:

Attest:




- --------------------------------
Name:
Title:   Secretary


     THE UNDERSIGNED, Vice President of MUNIYIELD INSURED FUND, INC. (the
"Corporation"), who executed on behalf of the Corporation the foregoing
Articles Supplementary, of which this certificate is made a part, hereby
acknowledges, in the name and on behalf of the Corporation, the foregoing
Articles Supplementary to be the corporate act of the Corporation and, as to
all matters and facts required to be verified under oath, further certifies
that, to the best of his knowledge, information and belief, these matters and
facts contained herein are true in all material respects and that this
statement is made under the penalties for perjury.





                                             By:
                                                ------------------------------
                                                Name:
                                                Title:



                                      87


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2B
<SEQUENCE>9
<FILENAME>efc4-1163_5549969ex992b.txt
<TEXT>
                                                                   EXHIBIT (b)



                                    BY-LAWS

                                      OF

                         MUNIYIELD INSURED FUND, INC.

                                  ARTICLE I

                                    Offices

     Section 1. Principal Office. The principal office of the Corporation
shall be in the City of Baltimore, State of Maryland.


     Section 2. Principal Executive Office. The principal executive office of
the Corporation shall be at 800 Scudders Mill Road, Plainsboro, New Jersey
08536.

     Section 3. Other Offices. The Corporation may have such other offices in
such places as the Board of Directors may from time to time determine.

                                  ARTICLE II

                           Meetings of Stockholders

     Section 1. Annual Meeting. The annual meeting of the stockholders of the
Corporation for the election of directors and for the transaction of such
other business as may properly be brought before the meeting shall be held on
such day in May of each year as shall be designated annually by the Board of
Directors.

     Section 2. Special Meetings. Special meetings of the stockholders, unless
otherwise provided by law or by the Charter, may be called for any purpose or
purposes by a majority of the Board of Directors, the President, or on the
written request of the holders of the outstanding shares of capital stock of
the Corporation entitled to vote at such meeting to the extent permitted by
Maryland law.



<PAGE>



     Section 3. Place of Meetings. The annual meeting and any special meeting
of the stockholders shall be held at such place within the United States as
the Board of Directors may from time to time determine.

     Section 4. Notice of Meetings; Waiver of Notice. Notice of the place,
date and time of the holding of each annual and special meeting of the
stockholders and the purpose or purposes of each special meeting shall be
given personally or by mail, not less than ten nor more than ninety days
before the date of such meeting, to each stockholder entitled to vote at such
meeting and to each other stockholder entitled to notice of the meeting.
Notice by mail shall be deemed to be duly given when deposited in the United
States mail addressed to the stockholder at his address as it appears on the
records of the Corporation, with postage thereon prepaid.

     Notice of any meeting of stockholders shall be deemed waived by any
stockholder who shall attend such meeting in person or by proxy, or who shall,
either before or after the meeting, submit a signed waiver of notice which is
filed with the records of the meeting. When a meeting is adjourned to another
time and place, unless the Board of Directors, after the adjournment, shall
fix a new record date for an adjourned meeting, or the adjournment is for more
than one hundred and twenty days after the original record date, notice of
such adjourned meeting need not be given if the time and place to which the
meeting shall be adjourned were announced at the meeting at which the
adjournment is taken.

     Section 5. Quorum. At all meetings of the stockholders, the holders of a
majority of the shares of stock of the Corporation entitled to vote at the
meeting, present in person or by proxy, shall constitute a quorum for the
transaction of any business, except as otherwise provided by statute or by the
Charter. In the absence of a quorum no business may be transacted, except that
the holders of a majority of the shares of stock present in person or by proxy
and entitled to



                                      2



<PAGE>



vote may adjourn the meeting from time to time, without notice other than
announcement thereat except as otherwise required by these By-Laws, until the
holders of the requisite amount of shares of stock shall be so present. At any
such adjourned meeting at which a quorum may be present any business may be
transacted which might have been transacted at the meeting as originally
called. The absence from any meeting, in person or by proxy, of holders of the
number of shares of stock of the Corporation in excess of a majority thereof
which may be required by the laws of the State of Maryland, the Investment
Company Act of 1940, as amended, or other applicable statute, the Charter, or
these By-Laws, for action upon any given matter shall not prevent action at
such meeting upon any other matter or matters which may properly come before
the meeting, if there shall be present thereat, in person or by proxy, holders
of the number of shares of stock of the Corporation required for action in
respect of such other matter or matters.

     Section 6. Organization. At each meeting of the stockholders, the
Chairman of the Board (if one has been designated by the Board), or in his
absence or inability to act, the President, or in the absence or inability to
act of the Chairman of the Board and the President, a Vice President, shall
act as chairman of the meeting. The Secretary, or in his absence or inability
to act, any person appointed by the chairman of the meeting, shall act as
secretary of the meeting and keep the minutes thereof.

     Section 7. Order of Business. The order of business at all meetings of
the stockholders shall be as determined by the chairman of the meeting.

     Section 8. Voting. Except as otherwise provided by statute or the
Charter, each holder of record of shares of stock of the Corporation having
voting power shall be entitled at each meeting of the stockholders to one vote
for every share of such stock standing in his name



                                      3



<PAGE>

on the record of stockholders of the Corporation as of the record date
determined pursuant to Section 9 of this Article or if such record date shall
not have been so fixed, then at the later of (i) the close of business on the
day on which notice of the meeting is mailed or (ii) the thirtieth day before
the meeting.

     Each stockholder entitled to vote at any meeting of stockholders may
authorize another person or persons to act for him by a proxy signed by such
stockholder or his attorney-in-fact. No proxy shall be valid after the
expiration of eleven months from the date thereof, unless otherwise provided
in the proxy. Every proxy shall be revocable at the pleasure of the
stockholder executing it, except in those cases where such proxy states that
it is irrevocable and where an irrevocable proxy is permitted by law. Except
as otherwise provided by statute, the Charter or these By-Laws, any corporate
action to be taken by vote of the stockholders shall be authorized by a
majority of the total votes cast at a meeting of stockholders by the holders
of shares present in person or represented by proxy and entitled to vote on
such action.

     If a vote shall be taken on any question other than the election of
directors, which shall be by written ballot, then unless required by statute
or these By-Laws, or determined by the chairman of the meeting to be
advisable, any such vote need not be by ballot. On a vote by ballot, each
ballot shall be signed by the stockholder voting, or by his proxy, if there be
such proxy, and shall state the number of shares voted.

     Section 9. Fixing of Record Date. The Board of Directors may set a record
date for the purpose of determining stockholders entitled to vote at any
meeting of the stockholders. The record date, which may not be prior to the
close of business on the day the record date is fixed, shall be not more than
ninety nor less than ten days before the date of the meeting of the



                                      4



<PAGE>



stockholders. All persons who were holders of record of shares at such time,
and not others, shall be entitled to vote at such meeting and any adjournment
thereof.

     Section 10. Inspectors. The Board may, in advance of any meeting of
stockholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If the inspectors shall not be so appointed or if any of
them shall fail to appear or act, the chairman of the meeting may, and on the
request of any stockholder entitled to vote thereat shall, appoint inspectors.
Each inspector, before entering upon the discharge of his duties, shall take
and sign an oath to execute faithfully the duties of inspector at such meeting
with strict impartiality and according to the best of his ability. The
inspectors shall determine the number of shares outstanding and the voting
powers of each, the number of shares represented at the meeting, the existence
of a quorum, the validity and effect of proxies, and shall receive votes,
ballots or consents, hear and determine all challenges and questions arising
in connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all stockholders. On request of the chairman
of the meeting or any stockholder entitled to vote thereat, the inspectors
shall make a report in writing of any challenge, request or matter determined
by them and shall execute a certificate of any fact found by them. No director
or candidate for the office of director shall act as inspector of an election
of directors. Inspectors need not be stockholders.

     Section 11. Consent of Stockholders in Lieu of Meeting. Except as
otherwise provided by statute or the Charter, any action required to be taken
at any annual or special meeting of stockholders, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if the following
are filed with the records of stockholders meetings: (i) a unanimous written



                                      5



<PAGE>



consent which sets forth the action and is signed by each stockholder entitled
to vote on the matter and (ii) a written waiver of any right to dissent signed
by each stockholder entitled to notice of the meeting but not entitled to vote
thereat.

                                 ARTICLE III

                              Board of Directors

     Section 1. General Powers. Except as otherwise provided in the Charter,
the business and affairs of the Corporation shall be managed under the
direction of the Board of Directors. All powers of the Corporation may be
exercised by or under authority of the Board of Directors except as conferred
on or reserved to the stockholders by law or by the charter or these By-Laws.

     Section 2. Number of Directors. The number of directors shall be fixed
from time to time by resolution of the Board of Directors adopted by a
majority of the Directors then in office; provided, however, that the number
of directors shall in no event be less than three nor more than fifteen. Any
vacancy created by an increase in Directors may be filled in accordance with
Section 6 of this Article III. No reduction in the number of directors shall
have the effect of removing any director from office prior to the expiration
of his term unless such director is specifically removed pursuant to Section 5
of this Article III at the time of such decrease. Directors need not be
stockholders. As long as any preferred stock of the Corporation is
outstanding, the number of Directors shall be not less than five.

     Section 3. Election and Term of Directors. Directors shall be elected
annually, by written ballot at the annual meeting of stockholders, or a
special meeting held for that purpose. The term of office of each director
shall be from the time of his election and qualification until the annual
election of directors next succeeding his election and until his successor
shall have



                                      6



<PAGE>



been elected and shall have qualified, or until his death, or until he shall
have resigned, or have been removed as hereinafter provided in these By-Laws,
or as otherwise provided by statute or the Charter.

     Section 4. Resignation. A director of the Corporation may resign at any
time by giving written notice of his resignation to the Board or the Chairman
of the Board or the President or the Secretary. Any such resignation shall
take effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt; and,
unless otherwise specified therein, the acceptance of such resignation shall
not be necessary to make it effective.

     Section 5. Removal of Directors. Any director of the Corporation may be
removed (with or without cause) by the stockholders by a vote of sixty-six and
two-thirds percent (662/3%) of the outstanding shares of capital stock then
entitled to vote in the election of such director.

     Section 6. Vacancies. Subject to the provisions of the Investment Company
Act of 1940, as amended, any vacancies in the Board, whether arising from
death, resignation, removal, an increase in the number of directors or any
other cause, shall be filled by a vote of the Board of Directors in accordance
with the Charter.

     Section 7. Place of Meetings. Meetings of the Board may be held at such
place as the Board may from time to time determine or as shall be specified in
the notice of such meeting.

     Section 8. Regular Meeting. Regular meetings of the Board may be held
without notice at such time and place as may be determined by the Board of
Directors.

     Section 9. Special Meetings. Special meetings of the Board may be called
by two or more directors of the Corporation or by the Chairman of the Board or
the President.



                                      7



<PAGE>



     Section 10. Telephone Meetings. Members of the Board of Directors or of
any committee thereof may participate in a meeting by means of a conference
telephone or similar communications equipment if all persons participating in
the meeting can hear each other at the same time. Subject to the provisions of
the Investment Company Act of 1940, as amended, participation in a meeting by
these means constitutes presence in person at the meeting.

     Section 11. Notice of Special Meetings. Notice of each special meeting of
the Board shall be given by the Secretary as hereinafter provided, in which
notice shall be stated the time and place of the meeting. Notice of each such
meeting shall be delivered to each director, either personally or by telephone
or any standard form of telecommunication, at least twenty-four hours before
the time at which such meeting is to be held, or by first-class mail, postage
prepaid, addressed to him at his residence or usual place of business, at
least three days before the day on which such meeting is to be held.

     Section 12. Waiver of Notice of Meetings. Notice of any special meeting
need not be given to any director who shall, either before or after the
meeting, sign a written waiver of notice which is filed with the records of
the meeting or who shall attend such meeting. Except as otherwise specifically
required by these By-Laws, a notice or waiver or notice of any meeting need
not state the purposes of such meeting.

     Section 13. Quorum and voting. One-third, but not less than two, of the
members of the entire Board shall be present in person at any meeting of the
Board in order to constitute a quorum for the transaction of business at such
meeting, and except as otherwise expressly required by statute, the Charter,
these By-Laws, the Investment Company Act of 1940, as amended, or other
applicable statute, the act of a majority of the directors present at any
meeting at which a quorum is present shall be the act of the Board. In the
absence of a quorum at any



                                      8



<PAGE>



meeting of the Board, a majority of the directors present thereat may adjourn
such meeting to another time and place until a quorum shall be present
thereat. Notice of the time and place of any such adjourned meeting shall be
given to the directors who were not present at the time of the adjournment
and, unless such time and place were announced at the meeting at which the
adjournment was taken, to the other directors. At any adjourned meeting at
which a quorum is present, any business may be transacted which might have
been transacted at the meeting as originally called.

     Section 14. Organization. The Board may, by resolution adopted by a
majority of the entire Board, designate a Chairman of the Board, who shall
preside at each meeting of the Board. In the absence or inability of the
Chairman of the Board to preside at a meeting, the President or, in his
absence of inability to act, another director chosen by a majority of the
directors present, shall act as chairman of the meeting and preside thereat.
The Secretary (or, in his absence or inability to act, any person appointed by
the Chairman) shall act as secretary of the meeting and keep the minutes
thereof.

     Section 15. Written consent of Directors in Lieu of a Meeting. Subject to
the provisions of the Investment Company Act of 1940, as amended, any action
required or permitted to be taken at any meeting of the Board of Directors or
of any committee thereof may be taken without a meeting if all members of the
Board or committee, as the case may be, consent thereto in writing, and the
writings or writing are filed with the minutes of the proceedings of the Board
or committee.

     Section 16. Compensation. Directors may receive compensation for services
to the Corporation in their capacities as directors or otherwise in such
manner and in such amounts as may be fixed from time to time by the Board.



                                      9



<PAGE>



     Section 17. Investment Policies. It shall be the duty of the Board of
Directors to direct that the purchase, sale, retention and disposal of
portfolio securities and the other investment practices of the Corporation are
at all times consistent with the investment policies and restrictions with
respect to securities investments and otherwise of the Corporation, as recited
in the Prospectus of the Corporation included in the registration statement of
the Corporation relating to the initial public offering of its capital stock,
as filed with the Securities and Exchange Commission (or as such investment
policies and restrictions may be modified by the Board of Directors, or, if
required, by majority vote of the stockholders of the Corporation in
accordance with the Investment Company Act of 1940, as amended) and as
required by the Investment Company Act of 1940, as amended. The Board however,
may delegate the duty of management of the assets and the administration of
its day to day operations to an individual or corporate management company
and/or investment adviser pursuant to a written contract or contracts which
have obtained the requisite approvals, including the requisite approvals of
renewals thereof, of the Board of Directors and/or the stockholders of the
Corporation in accordance with the provisions of the Investment Company Act of
1940, as amended.

                                  ARTICLE IV

                                  Committees

     Section 1. Executive Committee. The Board may, by resolution adopted by a
majority of the entire board, designate an Executive Committee consisting of
two or more of the directors of the Corporation, which committee shall have
and may exercise all the powers and authority of the Board with respect to all
matters other than:

     (a) the submission to stockholders of any action requiring authorization
of stockholders pursuant to statute or the Charter;



                                      10



<PAGE>



     (b) the filling of vacancies on the Board of Directors;

     (c) the fixing of compensation of the directors for serving on the Board
or on any committee of the Board, including the Executive Committee;

     (d) the approval or termination of any contract with an investment
adviser or principal underwriter, as such terms are defined in the Investment
Company Act of 1940, as amended, or the taking of any other action required to
be taken by the Board of Directors by the Investment Company Act of 1940, as
amended;

     (e) the amendment or repeal of these By-Laws or the adoption of new
By-Laws;

     (f) the amendment or repeal of any resolution of the Board which by its
terms may be amended or repealed only by the Board;

     (g) the declaration of dividends and the issuance of capital stock of the
Corporation; and

     (h) the approval of any merger or share exchange which does not require
stockholder approval.

     The Executive Committee shall keep written minutes of its proceedings and
shall report such minutes to the Board. All such proceedings shall be subject
to revision or alteration by the Board; provided, however, that third parties
shall not be prejudiced by such revision or alteration.

     Section 2. Other Committees of the Board. The Board of Directors may from
time to time, by resolution adopted by a majority of the whole Board,
designate one or more other committees of the Board, each such committee to
consist of two or more directors and to have such powers and duties as the
Board of Directors may, by resolution, prescribe.



                                      11



<PAGE>



     Section 3. General. One-third, but not less than two, of the members of
any committee shall be present in person at any meeting of such committee in
order to constitute a quorum for the transaction of business at such meeting,
and the act of a majority present shall be the act of such committee. The
Board may designate a chairman of any committee and such chairman or any two
members of any committee may fix the time and place of its meetings unless the
Board shall otherwise provide. In the absence or disqualification of any
member of any committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to
act at the meeting in the place of any such absent or disqualified member. The
Board shall have the power at any time to change the membership of any
committee, to fill all vacancies, to designate alternate members to replace
any absent or disqualified member, or to dissolve any such committee. Nothing
herein shall be deemed to prevent the Board from appointing one or more
committees consisting in whole or in part of persons who are not directors of
the Corporation; provided, however, that no such committee shall have or may
exercise any authority or power of the Board in the management of the business
or affairs of the Corporation.

                                  ARTICLE V

                        Officers, Agents and Employees

     Section 1. Number of Qualifications. The officers of the Corporation
shall be a President, who shall be a director of the Corporation, a secretary
and a Treasurer, each of whom shall be elected by the Board of Directors. The
Board of Directors may elect or appoint one or more Vice Presidents and may
also appoint such other officers, agents and employees as it may deem
necessary or proper. Any two or more offices may be held by the same person,
except the



                                      12



<PAGE>



offices of President and Vice President, but no officer shall execute,
acknowledge or verify any instrument in more than one capacity. Such officers
shall be elected by the Board of Directors each year at its first meeting held
after the annual meeting of stockholders, each to hold office until the next
meeting of the stockholders and until his successor shall have been duly
elected and shall have qualified, or until his death, or until he shall have
resigned, or have been removed, as hereinafter provided in these By-Laws. The
Board may from time to time elect, or delegate to the President the power to
appoint, such officers (including one or more Assistant Vice Presidents, one
or more Assistant Treasurers and one or more Assistant Secretaries) and such
agents, as may be necessary or desirable for the business of the Corporation.
Such officers and agents shall have such duties and shall hold their offices
for such terms as may be prescribed by the Board or by the appointing
authority.

     Section 2. Resignations. Any officer of the Corporation may resign at any
time by giving written notice of resignation to the Board, the Chairman of the
Board, President or the Secretary. Any such resignation shall take effect at
the time specified therein or, if the time when it shall become effective
shall not be specified therein, immediately upon its receipt; and, unless
otherwise specified therein, the acceptance of such resignation shall be
necessary to make it effective.

     Section 3. Removal of Officer, Agent or Employee. Any officer, agent or
employee of the Corporation may be removed by the Board of Directors with or
without cause at any time, and the Board may delegate such power of removal as
to agents and employees not elected or appointed by the Board of Directors.
Such removal shall be without prejudice to such person's contract rights, if
any, but the appointment of any person as an officer, agent or employee of the
Corporation shall not of itself create contract rights.



                                      13
<PAGE>



     Section 4. Vacancies. A vacancy in any office, whether arising from
death, resignation, removal or any other cause, may be filled for the
unexpired portion of the term of the office which shall be vacant, in the
manner prescribed in these By-Laws for the regular election or appointment to
such office.

     Section 5. Compensation. The compensation of the officers of the
Corporation shall be fixed by the Board of Directors, but this power may be
delegated to any officer in respect of other officers under his control.

     Section 6. Bonds or other Security. If required by the Board, any
officer, agent or employee of the Corporation shall give a bond or other
security for the faithful performance of his duties, in such amount and with
such surety or sureties as the Board may require.

     Section 7. President. The President shall be the chief executive officer
of the Corporation. In the absence of the Chairman of the Board (or if there
be none), he shall preside at all meetings of the stockholders and of the
Board of Directors. He shall have, subject to the control of the Board of
Directors, general charge of the business and affairs of the Corporation. He
may employ and discharge employees and agents of the Corporation, except such
as shall be appointed by the Board, and he may delegate these powers.

     Section 8. Vice President. Each Vice President shall have such powers and
perform such duties as the Board of Directors or the President may from time
to time prescribe.

     Section 9. Treasurer. The Treasurer shall:

     (a) have charge and custody of, and be responsible for, all the funds and
securities of the Corporation, except those which the Corporation has placed
in the custody of a bank or trust company or member of a national securities
exchange (as that term is defined in the Securities Exchange Act of 1934, as
amended) pursuant to a written agreement designating such bank or



                                      14



<PAGE>



trust company or member of a national securities exchange as custodian of the
property of the Corporation;

     (b) keep full and accurate accounts of receipts and disbursements in
books belonging to the Corporation;

     (c) cause all moneys and other valuables to be deposited to the credit of
the Corporation;

     (d) receive, and give receipts for, moneys due and payable, to the
Corporation from any source whatsoever;

     (e) disburse the funds of the Corporation and supervise the investment of
its funds as ordered or authorized by the Board, taking proper vouchers
therefor; and

     (f) in general, perform all the duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him by
the Board or the President.

     Section 10. Secretary. The Secretary shall:

     (a) keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of the Board, the committees of the Board
and the stockholders;

     (b) see that all notices are duly given in accordance with the provisions
of these By-Laws and as required by law;

     (c) be custodian of the records and the seal of the Corporation and affix
and attest the seal to all stock certificates of the Corporation (unless the
seal of the Corporation on such certificates shall be a facsimile, as
hereinafter provided) and affix and attest the seal to all other documents to
be executed on behalf of the Corporation under its seal;

     (d) see that the books, reports, statements, certificates and other
documents and records required by law to be kept and filed are properly kept
and filed; and



                                      15



<PAGE>



     (e) in general, perform all the duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the Board or the President.

     Section 11. Delegation of Duties. In case of the absence of any officer
of the Corporation, or for any other reason that the Board may deem
sufficient, the Board may confer for the time being the powers or duties, or
any of them, of such officer upon any other officer or upon any director.

                                  ARTICLE VI

                                Indemnification

     Each officer and director of the Corporation shall be indemnified by the
Corporation to the full extent permitted under the General Laws of the State
of Maryland, except that such indemnity shall not protect any such person
against any liability to the Corporation 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 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 office, the decision by the Corporation
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 the
directors who are neither "interested persons," as defined in Section 2(a)(19)
of the Investment Company Act of 1940, as amended, nor parties to the
proceeding ("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 office.



                                      16



<PAGE>



     Each officer and director of the Corporation claiming indemnification
within the scope of this Article VI shall be entitled to advances from the
Corporation for payment of the reasonable expenses incurred by him in
connection with proceedings to which he is a party in the manner and to the
full extent permitted under the General Laws of the State of Maryland;
provided, however, that the person seeking indemnification shall provide to
the Corporation a written affirmation of his good faith belief that the
standard of conduct necessary for indemnification by the Corporation has been
met and a written undertaking to repay any such advance, if it should
ultimately 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: (a) the person seeking indemnification shall provide a security in form
and amount acceptable to the Corporation for his undertaking; (b) the
Corporation is insured against losses arising by reason of the advance; (c) 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 Corporation 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.

     The Corporation may purchase insurance on behalf of an officer or
director protecting such person to the full extent permitted under the General
Laws of the State of Maryland, from liability arising from his activities as
officer or director of the Corporation. The Corporation, however, may not
purchase insurance on behalf of any officer or director of the Corporation
that protects or purports to protect such person from liability to the
Corporation 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
office.



                                      17



<PAGE>



     The Corporation may indemnify or purchase insurance to the extent
provided in this Article VI on behalf of an employee or agent who is not an
officer or director of the Corporation.

                                 ARTICLE VII

                                 Capital Stock

     Section 1. Stock Certificates. Each holder of stock of the Corporation
shall be entitled upon request to have a certificate or certificates, in such
form as shall be approved by the Board, representing the number of shares of
stock of the Corporation owned by him, provided, however, that certificates
for fractional shares will not be delivered in any case. The certificates
representing shares of stock shall be signed by or in the name of the
Corporation by the President or a Vice President and by the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer and sealed with
the seal of the Corporation. Any or all of the signatures or the seal on the
certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate shall be issued, it may be issued by the Corporation
with the same effect as if such officer, transfer agent or registrar were
still in office at the date of issue.

     Section 2. Books of Account and Record of Stockholders. There shall be
kept at the principal executive office of the Corporation correct and complete
books and records of account of all the business and transactions of the
Corporation. There shall be made available upon request of any stockholder, in
accordance with Maryland law, a record containing the number of shares of
stock issued during a specified period not to exceed twelve months and the
consideration received by the Corporation for each such share.



                                      18



<PAGE>



     Section 3. Transfers of Shares. Transfers of shares of stock of the
Corporation shall be made on the stock records of the Corporation only by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary or with a transfer agent
or transfer clerk, and on surrender of the certificate or certificates, if
issued, for such shares properly endorsed or accompanied by a duly executed
stock transfer power and the payment of all taxes thereon. Except as otherwise
provided by law, the Corporation shall be entitled to recognize the exclusive
right of a person in whose name any share or shares stand on the record of
stockholders as the owner of such share or shares for all purposes, including,
without limitation, the rights to receive dividends or other distributions,
and to vote as such owner, and the Corporation shall not be bound to recognize
any equitable or legal claim to or interest in any such share or shares on the
part of any other person.

     Section 4. Regulations. The Board may make such additional rules and
regulations, not inconsistent with these By-Laws, as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation. It may appoint, or authorize any officer or officers
to appoint, one or more transfer agents or one or more transfer clerks and one
or more registrars and may require all certificates for shares of stock to
bear the signature or signatures of any of them.

     Section 5. Lost, Destroyed or Mutilated Certificates. The holder of any
certificates representing shares of stock of the Corporation shall immediately
notify the Corporation of any loss, destruction or mutilation of such
certificate, and the Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it which the owner thereof
shall allege to have been lost or destroyed or which shall have been
mutilated, and the Board may, in its discretion, require such owner or his
legal representatives to give to the Corporation a bond in



                                      19



<PAGE>



such sum, limited or unlimited, and in such form and with such surety or
sureties, as the Board in its absolute discretion shall determine, to
indemnify the Corporation against any claim that may be made against it on
account of the alleged loss or destruction of any such certificate, or
issuance of a new certificate. Anything herein to the contrary
notwithstanding, the Board, in its absolute discretion, may refuse to issue
any such new certificate, except pursuant to legal proceedings under the laws
of the State of Maryland.

     Section 6. Fixing of a Record Date for Dividends and Distributions. The
Board may fix, in advance, a date not more than ninety days preceding the date
fixed for the payment of any dividend or the making of any distribution or the
allotment of rights to subscribe for securities of the Corporation, or for the
delivery of evidences of rights or evidences of interests arising out of any
change, conversion or exchange of common stock or other securities, as the
record date for the determination of the stockholders entitled to receive any
such dividend, distribution, allotment, rights or interests, and in such case
only the stockholders of record at the time so fixed shall be entitled to
receive such dividend, distribution, allotment, rights or interests.

     Section 7. Information to Stockholders and Others. Any stockholder of the
Corporation or his agent may inspect and copy during usual business hours the
Corporation's By-Laws, minutes of the proceedings of its stockholders, annual
statements of its affairs, and voting trust agreements on file at its
principal office.

                                 ARTICLE VIII

                                     Seal

     The seal of the Corporation shall be circular in form and shall bear, in
addition to any other emblem or device approved by the Board of Directors, the
name of the Corporation, the



                                      20



<PAGE>



year of its incorporation and the words "Corporate Seal" and "Maryland". Said
seal may be used by causing it or a facsimile thereof to be impressed or
affixed or in any other manner reproduced.

                                  ARTICLE IX

                                  Fiscal Year

     Unless otherwise determined by the Board, the fiscal year of the
Corporation shall end on the 31st day of October.

                                  ARTICLE X

                          Depositories and Custodians

     Section 1. Depositories. The funds of the Corporation shall be deposited
with such banks or other depositories as the Board of Directors of the
Corporation may from time to time determine.

     Section 2. Custodians. All securities and other investments shall be
deposited in the safekeeping of such banks or other companies as the Board of
Directors of the Corporation may from time to time determine. Every
arrangement entered into with any bank or other company for the safekeeping of
the securities and investments of the Corporation shall contain provisions
complying with the Investment company Act of 1940, as amended, and the general
rules and regulations thereunder.

                                  ARTICLE XI

                           Execution of Instruments

     Section 1. Checks, Notes, Drafts, etc. Checks, notes, drafts,
acceptances, bills of exchange and other orders or obligations for the payment
of money shall be signed by such



                                      21



<PAGE>



officer or officers or person or persons as the Board of Directors by
resolution shall from time to time designate.

     Section 2. Sale or Transfer of Securities. Stock certificates, bonds or
other securities at any time owned by the Corporation may be held on behalf of
the Corporation or sold, transferred or otherwise disposed of subject to any
limits imposed by these By-Laws and pursuant to authorization by the Board
and, when so authorized to be held on behalf of the Corporation or sold,
transferred or otherwise disposed of, may be transferred from the name of the
Corporation by the signature of the President or a Vice President or the
Treasurer or pursuant to any procedure approved by the Board of Directors,
subject to applicable law.

                                  ARTICLE XII

                        Independent Public Accountants

     The firm of independent public accountants which shall sign or certify
the financial statements of the Corporation which are filed with the
Securities and Exchange Commission shall be selected annually by the Board of
Directors and ratified by the stockholders in accordance with the provisions
of the Investment Company Act of 1940, as amended.

                                 ARTICLE XIII

                               Annual Statement

     The books of account of the Corporation shall be examined by an
independent firm of public accountants at the close of each annual period of
the Corporation and at such other times as may be directed by the Board. A
report to the stockholders based upon each such examination shall be mailed to
each stockholder of record of the Corporation on such date with respect to
each report as may be determined by the Board, at his address as the same
appears on the books of the Corporation. Such annual statement shall also be
available at the annual meeting of



                                      22



<PAGE>

stockholders and be placed on file at the Corporation's principal office in
the state of Maryland. Each such report shall show the assets and liabilities
of the Corporation as of the close of the annual or quarterly period covered
by the report and the securities in which the funds of the Corporation were
then invested. Such report shall also show the Corporation's income and
expenses for the period from the end of the Corporation's preceding fiscal
year to the close of the annual or quarterly period covered by the report and
any other information required by the Investment Company Act of 1940, as
amended, and shall set forth such other matters as the Board or such firm of
independent public accountants shall determine.

                                 ARTICLE XIV

                                  Amendments

     These By-Laws or any of them may be amended, altered or repealed at any
regular meeting of the stockholders or at any special meeting of the
stockholders by a favorable vote of the holders of at least sixty-six and
two-thirds percent (662/3%) of the outstanding shares of capital stock of the
Corporation entitled to be voted on the matter, provided that notice of the
proposed amendment, alteration or repeal be contained in the notice of such
special meeting. These By-Laws may also be amended, altered or repealed by the
affirmative vote of a majority of the Board of Directors at any regular or
special meeting of the Board of Directors, except any particular By-Law which
is specified as not subject to alteration or repeal by the Board of Directors,
subject to the requirements of the Investment Company Act of 1940, as amended.



                                      23

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2D.2
<SEQUENCE>10
<FILENAME>efc4-1163_5560873ex992d2.txt
<TEXT>
                                                                EXHIBIT (d)(2)


                    Auction Market Preferred Stock, Series

NUMBER 1                                                                SHARES

                         MUNIYIELD INSURED FUND, INC.

INCORPORATED UNDER THE LAWS                               SEE REVERSE FOR
OF THE STATE OF MARYLAND                                  CERTAIN DEFINITIONS

THIS CERTIFICATE IS TRANSFERABLE IN NEW YORK, NY                CUSIP #

THIS CERTIFIES THAT

                                  CEDE & CO.

IS THE OWNER OF

FULLY PAID AND NON-ASSESSABLE SHARES OF AUCTION MARKET PREFERRED STOCK, PAR
VALUE $.10 PER SHARE, LIQUIDATION PREFERENCE $25,000 PER SHARE PLUS AN AMOUNT
EQUAL TO ACCUMULATED BUT UNPAID DIVIDENDS THEREON (WHETHER OR NOT EARNED OR
DECLARED) OF

                         MUNIYIELD INSURED FUND, INC.

TRANSFERABLE ON THE BOOKS OF SAID CORPORATION IN PERSON OR BY DULY AUTHORIZED
ATTORNEY UPON SURRENDER OF THIS CERTIFICATE PROPERLY ENDORSED.

THIS CERTIFICATE IS NOT VALID UNTIL COUNTERSIGNED BY THE TRANSFER AGENT AND
REGISTERED BY THE REGISTRAR.

IN WITNESS WHEREOF, MUNIYIELD INSURED FUND, INC. HAS CAUSED ITS CORPORATE SEAL
TO BE HERETO AFFIXED AND THIS CERTIFICATE TO BE EXECUTED IN ITS NAME AND
BEHALF BY ITS DULY AUTHORIZED OFFICERS.

Dated:                      , 2004

Countersigned and Registered:

THE BANK OF NEW YORK                   _______________________________________
(New York)    Transfer Agent


By:________________________________    _______________________________________
        Authorized Signature

<PAGE>

THE TRANSFER OF THE SHARES OF AUCTION MARKET PREFERRED STOCK REPRESENTED
HEREBY IS SUBJECT TO THE RESTRICTIONS CONTAINED IN THE CORPORATION'S CHARTER.
THE CORPORATION WILL FURNISH INFORMATION ABOUT SUCH RESTRICTIONS TO ANY
STOCKHOLDER, WITHOUT CHARGE, UPON REQUEST TO THE SECRETARY OF THE CORPORATION.

                         MUNIYIELD INSURED FUND, INC.

     A full statement of the designations and any preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of the shares of each
class and series of stock which the Corporation is authorized to issue and the
differences in the relative rights and preferences between the shares of each
class and series to the extent that they have been set, and the authority of
the Board of Directors to set the relative rights and preferences of
subsequent classes and series, will be furnished by the Corporation to any
stockholder, without charge, upon request to the Secretary of the Corporation
at its principal office.

     The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

<TABLE>
<CAPTION>
<S>                                            <C>
TEN COM--as tenants in common                  UNIF GIFT MIN ACT-- ______ Custodian
                                                                   (Cust)          (Minor)
TEN ENT--as tenants by the entireties
JT TEN-- as joint tenants with right                 under Uniform Gifts to Minors Act
         of survivorship and not as tenants                                           (State)
         in common
</TABLE>

     Additional abbreviations also may be used though not in the above list.

For value received, ____________________ hereby sell, assign and transfer unto

______________________________________________________________________________

Please insert social securities or other identifying number of assignee

_____________________________________________________________

_____________________________________________________________

______________________________________________________________________________
(Please Print or Typewrite Name and Address, Including Zip Code, of Assignee)

______________________________________________________________________________

______________________________________________________________________________

<PAGE>

_____________________________________________________________________shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint ______________________ Attorney to transfer
the said stock on the books of the within named Corporation with full power of
substitution in the premises.

Dated: _________________________

                              ________________________________________________
                     NOTICE:  The Signature to this assignment must correspond
                              with the name as written upon the face of the
                              Certificate in every particular, without
                              alteration or enlargement or any change
                              whatsoever.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2E
<SEQUENCE>11
<FILENAME>efc4-1163_5550617ex992e.txt
<TEXT>
                                                                   EXHIBIT (e)



                         MUNIYIELD INSURED FUND, INC.

                            TERMS AND CONDITIONS OF
                     AUTOMATIC DIVIDEND REINVESTMENT PLAN

     1. Appointment of Agent. You, ____________, will act as Agent for me, and
will open an account for me under the Dividend Reinvestment Plan (the "Plan")
in the same name as my present shares of common stock, par value $.10 per
share ("Common Stock"), of MUNIYIELD INSURED FUND, INC. (the "Fund") are
registered, and will automatically put into effect for me the dividend
reinvestment option of the Plan as of the first record date for a dividend or
capital gains distribution (collectively referred to herein as a "dividend"),
payable at the election of shareholders in cash or shares of Common Stock.

     2. Dividends Payable in Common Stock. My participation in the Plan
constitutes an election by me to receive dividends in shares of Common Stock
whenever the Fund declares a dividend. In such event, the dividend amount
shall automatically be made payable to me entirely in shares of Common Stock
which shall be acquired by the Agent for my account, depending upon the
circumstances described in paragraph 3, either (i) through receipt of
additional shares of unissued but authorized shares of Common Stock from the
Fund ("newly issued shares") as described in paragraph 6 or (ii) by purchase
of outstanding shares of Common Stock on the open market ("open-market
purchases") as described in paragraph 7.

     3. Determination of Whether Newly-Issued Shares or Open Market Purchases.
If on the payment date for the dividend (the "valuation date"), the net asset
value per share of the Common Stock, as defined in paragraph 8, is equal to or
less than the market price per share of the Common Stock, as defined in
paragraph 8, plus estimated brokerage commissions (such condition being
referred to herein as "market premium"), the Agent shall invest the dividend
amount in newly issued shares on my behalf as described in paragraph 6. If on
the valuation date, the net asset value per share is greater than the market
value (such condition being referred to herein as "market discount"), the
Agent shall invest the dividend amount in shares acquired on my behalf in
open-market purchases as described in paragraph 7.

     4. Purchase Period for Open-Market Purchases. In the event of a market
discount on the valuation date, the Agent shall have until the last business
day before the next ex-dividend date with respect to the shares of Common
Stock or in no event more than 30 days after the valuation date (the "last
purchase date") to invest the dividend amount in shares acquired in
open-market purchases except where temporary curtailment or suspension of
purchases is necessary to comply with applicable provisions of federal
securities laws.

     5. Failure to Complete Open-Market Purchases During Purchase Period. If
the Agent is unable to invest the full dividend amount in open-market
purchases during the purchase period because the market discount has shifted
to a market premium or otherwise, the Agent will invest the uninvested portion
of the dividend amount in newly issued shares at the close of business on the
last purchase date as described in paragraph 4; except that the Agent may not
acquire newly issued shares after the valuation date under the foregoing
circumstances unless it has received a legal opinion that registration of such
shares is not required under the Securities Act of 1933 or unless the shares
to be issued are registered under such Act.



<PAGE>



     6. Acquisition of Newly-Issued Shares. In the event that all or part of
the dividend amount is to be invested in newly issued shares, you shall
automatically receive such newly-issued shares of Common Stock, including
fractions, for my account, and the number of additional newly-issued shares of
Common Stock to be credited to my account shall be determined by dividing the
dollar amount of the dividend on my shares to be invested in newly-issued
shares by the net asset value per share of Common Stock on the date the shares
are issued (the valuation date in the case of an initial market premium or the
last purchase date in case the Agent is unable to complete open-market
purchases during the purchase period); provided, that the maximum discount
from the then current market price per share on the date of issuance shall not
exceed 5%.

     7. Manner of Making Open-Market Purchases. In the event that the dividend
amount is to be invested in shares of Common Stock acquired in open-market
purchases, you shall apply the amount of such dividend on my shares (less my
pro rata share of brokerage commissions incurred with respect to your
open-market purchases) to the purchase on the open-market of shares of the
Common Stock for my account. Open-market purchases may be made on any
securities exchange where the Common Stock is traded, in the over-the-counter
market or in negotiated transactions and may be on such terms as to price,
delivery and otherwise as you shall determine. My funds held by you uninvested
will not bear interest, and it is understood that, in any event, you shall
have no liability in connection with any inability to purchase shares within
30 days after the initial date of such purchase as herein provided, or with
the timing of any purchases affected. You shall have no responsibility as to
the value of the Common Stock acquired for my account. For the purposes of
cash investments you may commingle my funds with those of other shareholders
of the Fund for whom you similarly act as Agent, and the average price
(including brokerage commissions) of all shares purchased by you as Agent in
the open market shall be the price per share allocable to me in connection
with open-market purchases.

     8. Meaning of Market Price and Net Asset Value. For all purposes of the
Plan: (a) the market price of the Common Stock on a particular date shall be
the last sales price on the New York Stock Exchange (the "Exchange") on that
date, or, if there is no sale on the Exchange on that date, then the mean
between the closing bid and asked quotations for such stock on the Exchange on
such date and (b) net asset value per share of the Common Stock on a
particular date shall be as determined by or on behalf of the Fund.

     9. Registration of Shares Acquired Pursuant to the Plan. You may hold my
shares of Common Stock acquired pursuant to the Plan, together with the shares
of other shareholders of the Fund acquired pursuant to the Plan, in
noncertificated form in your name or that of your nominee. You will forward to
me any proxy solicitation material and will vote any shares so held for me
only in accordance with the proxy returned by me to the Fund. Upon my written
request, you will deliver to me, without charge, a certificate or certificates
for the full shares held by you for my account.

     10. Confirmations. You will confirm to me each acquisition made for my
account as soon as practicable but not later than 60 days after the date
thereof.



                                      2



<PAGE>



     11. Fractional Interests. Although I may from time to time have an
undivided fractional interest (computed to three decimal places) in a share of
the Fund, no certificates for a fractional share will be issued. However,
dividends and distributions on fractional shares will be credited to my
account. In the event of termination of my account under the Plan, you will
adjust for any such undivided fractional interest in cash at the market value
of the Fund's shares at the time of termination less the pro rata expense of
any sale required to make such an adjustment.

     12. Stock Dividends or Share Purchase Rights. Any stock dividends or
split shares distributed by the Fund on shares held by you for me will be
credited to my account. In the event that the Fund makes available to its
shareholders rights to purchase additional shares or other securities, the
shares held for me under the Plan will be added to other shares held by me in
calculating the number of rights to be issued to me.

     13. Service Fee. Your service fee for handling capital gains
distributions or income dividends will be paid by the Fund. I will be charged
for my pro rata share of brokerage commissions on all open market purchases.

     14. Termination of Account. I may terminate my account under the Plan by
notifying you in writing. Such termination will be effective immediately if my
notice is received by you not less than ten days prior to any dividend or
distribution record date; otherwise such termination will be effective on the
first trading day after the payment date for such dividend or distribution
with respect to any subsequent dividend or distribution. The Plan may be
terminated by you or the Fund upon notice in writing mailed to me at least 90
days prior to any record date for the payment of any dividend or distribution
by the Fund. Upon any termination you will cause a certificate or certificates
for the full shares held for me under the Plan and cash adjustment for any
fraction to be delivered to me without charge. If I elect by notice to you in
writing in advance of such termination to have you sell part or all of my
shares and remit the proceeds to me, you are authorized to deduct brokerage
commissions for this transaction from the proceeds.

     15. Amendment of Plan. These terms and conditions may be amended or
supplemented by you or the Fund at any time or times but, except when
necessary or appropriate to comply with applicable law or the rules or
policies of the Securities and Exchange Commission or any other regulatory
authority, only by mailing to me appropriate written notice at least 90 days
prior to the effective date thereof. The amendment or supplement shall be
deemed to be accepted by me unless, prior to the effective date, thereof, you
receive written notice of the termination of my account under the Plan. Any
such amendment may include an appointment by you in your place and stead of a
successor Agent under these terms and conditions, with full power and
authority to perform all or any of the acts to be performed by the Agent under
these terms and conditions. Upon any such appointment of an Agent for the
purpose of receiving dividends and distributions, the Fund will be authorized
to pay to such successor Agent, for my account, all dividends and
distributions payable on Common Stock of the Fund held in my name or under the
Plan for retention or application by such successor Agent as provided in these
terms and conditions.

     16. Extent of Responsibility of Agent. You shall at all times act in good
faith and agree to use your best efforts within reasonable limits to insure
the accuracy of all services



                                      3



<PAGE>



performed under this Agreement and to comply with applicable law, but assume
no responsibility and shall not be liable for loss or damage due to errors
unless such error is caused by your negligence, bad faith, or will willful
misconduct or that of your employees.

     17. Governing Law. These terms and conditions shall be governed by the
laws of the State of New York without regard to its conflicts of laws
provisions.



                                      4

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2G.1
<SEQUENCE>12
<FILENAME>efc4-1163_5549971ex992g1.txt
<TEXT>
                                                                EXHIBIT (g)(1)



                         INVESTMENT ADVISORY AGREEMENT

     AGREEMENT made this 10th day of March, 1992, by and between MUNIYIELD
INSURED FUND, INC., a Maryland corporation (hereinafter referred to as the
"Fund"), and FUND ASSET MANAGEMENT, INC., a Delaware corporation (hereinafter
referred to as the "Investment Adviser").

                             W I T N E S S E T H :
                             - - - - - - - - - -

     WHEREAS, the Fund is engaged in business as a closed-end management
investment company registered under the Investment Company Act of 1940, as
amended (hereinafter referred to as the "Investment Company Act"); and

     WHEREAS, the Investment Adviser is engaged principally in rendering
management and investment advisory services and is registered as an investment
adviser under the Investment Adviser's Act of 1940; and

     WHEREAS, the Fund desires to retain the Investment Adviser to provide
management and investment advisory services to the Fund in the manner and on
the terms hereinafter set forth; and

     WHEREAS, the Investment Adviser is willing to provide management and
investment advisory services to the Fund on the terms and conditions
hereinafter set forth;

     NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Fund and the Investment Adviser hereby agree as
follows:

                                   ARTICLE I
                                   ---------

                       Duties of the Investment Adviser
                       --------------------------------

     The Fund hereby employs the Investment Adviser to act as a manager and
investment adviser of the Fund and to furnish, or arrange for affiliates to
furnish, the management and investment advisory services described below,
subject to the policies of, review by and overall control of the Board of
Directors of the Fund, for the period and on the terms and conditions set
forth in this Agreement. The Investment Adviser hereby accepts such employment
and agrees during such period, at its own expense, to render, or arrange for
the rendering of, such services


<PAGE>


and to assume the obligations herein set forth for the compensation provided
for herein. The Investment Adviser and its affiliates shall for all purposes
herein be deemed to be independent contractors and shall, unless otherwise
expressly provided or authorized, have no authority to act for or represent
the Fund in any way or otherwise be deemed agents of the Fund.

     (a) Investment Advisory Services. The Investment Adviser shall perform
(or arrange for the performance by affiliates of) the management and
administrative services necessary for the operation of the Fund including
administering shareholder accounts and handling shareholder relations. The
Investment Adviser shall provide the Fund with office space, facilities,
equipment and necessary personnel and such other services as the Investment
Adviser, subject to review by the Board of Directors, shall from time to time
determine to be necessary or useful to perform its obligations under this
Agreement. The Investment Adviser shall also, on behalf of the Fund, conduct
relations with custodians, depositories, transfer agents, pricing agents,
dividend disbursing agents, other shareholder servicing agents, accountants,
attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers,
banks and such other persons in any such other capacity deemed to be necessary
or desirable. The Investment Adviser shall generally monitor the Fund's
compliance with investment policies and restrictions as set forth in filings
made by the Fund under the Federal securities laws. The Investment Adviser
shall make reports to the Board of Directors of its performance of obligations
hereunder and furnish advice and recommendations with respect to such other
aspects of the business and affairs of the Fund as it shall determine to be
desirable.

     (b) Investment Advisory Services. The Investment Adviser shall provide
(or arrange for affiliates to provide) the Fund with such investment research,
advice and supervision as the latter may from time to time consider necessary
for the proper supervision of the assets of the Fund, shall furnish
continuously an investment program for the Fund and shall determine from time
to time which securities shall be purchased, sold or exchanged and what
portion of the assets of the Fund shall be held in the various securities in
which the Fund invests, options, futures, options on futures or cash, subject
always to the restrictions of the Articles of Incorporation and By-Laws of the
Fund, as amended from time to time, the provisions of the Investment Company
Act and the statements relating to the Fund's investment objectives,
investment policies and investment restrictions as the same are set forth in
filings made by the


                                       2
<PAGE>


Fund under the Federal securities laws. The Investment Adviser shall make
decisions for the Fund as to foreign currency matters and make determinations
as to foreign exchange contracts, foreign currency options, foreign currency
futures and related options on foreign currency futures. The Investment
Adviser shall make decisions for the Fund as to the manner in which voting
rights, rights to consent to corporate action and any other rights pertaining
to the Fund's portfolio securities shall be exercised. Should the Directors at
any time, however, make any definite determination as to investment policy and
notify the Investment Adviser thereof in writing, the Investment Adviser shall
be bound by such determination for the period, if any, specified in such
notice or until similarly notified that such determination has been revoked.
The Investment Adviser shall take, on behalf of the Fund, all actions which it
deems necessary to implement the investment policies determined as provided
above, and in particular to place all orders for the purchase or sale of
portfolio securities for the Fund's account with brokers or dealers selected
by it, and to that end, the Investment Adviser is authorized as the agent of
the Fund to give instructions to the Custodian of the Fund as to deliveries of
securities and payments of cash for the account of the Fund. In connection
with the selection of such brokers or dealers and the placing of such orders
with respect to assets of the Fund, the Investment Adviser is directed at all
times to seek to obtain execution and prices within the policy guidelines
determined by the Board of Directors and set forth in filings made by the Fund
under the Federal securities laws. Subject to this requirement and the
provisions of the Investment Company Act, the Securities Exchange Act of 1934,
as amended, and other applicable provisions of law, the Investment Adviser may
select brokers or dealers with which it or the Fund is affiliated.

                                  ARTICLE II
                                  ----------

                      Allocation of Charges and Expenses
                      ----------------------------------

     (a) The Investment Adviser. The Investment Adviser assumes and shall pay
for maintaining the staff and personnel necessary to perform its obligations
under this Agreement, and shall at its own expense, provide the office space,
facilities, equipment and necessary personnel which it is obligated to provide
under Article I hereof, and shall pay all compensation of officers of the Fund
and all Directors of the Fund who are affiliated persons of the Investment
Adviser.


                                       3
<PAGE>


     (b) The Fund. The Fund assumes and shall pay or cause to be paid all
other expenses of the Fund including, without limitation: taxes, expenses for
legal and auditing services, costs of printing proxies, stock certificates,
shareholder reports, prospectuses, charges of the custodian, any sub-custodian
and transfer agent, expenses of portfolio transactions, Securities and
Exchange Commission fees, expenses of registering the shares under Federal,
state and foreign laws, fees and actual out-of-pocket expenses of Directors
who are not affiliated persons of the investment Adviser, accounting and
pricing costs (including the daily calculation of the net asset value),
insurance, interest, brokerage costs, litigation and other extraordinary or
non-recurring expenses, and other expenses properly payable by the Fund. It is
also understood that the Fund will reimburse the Investment Adviser for its
costs in providing accounting services to the Fund.

                                  ARTICLE III
                                  -----------

                    Compensation of the Investment Adviser
                    --------------------------------------

     (a) Investment Advisory Fee. For the services rendered, the facilities
furnished and expenses assumed by the Investment Adviser, the Fund shall pay
to the Investment Adviser at the end of each calendar month a fee based upon
the average weekly value of the net assets of the Fund at the annual rate of
0.50 of 1.0% (0.50%) of the average weekly net assets of the Fund (i.e., the
average weekly value of the total assets of the Fund, minus the sum of accrued
liabilities of the Fund and accumulated dividends on shares of outstanding
preferred stock), commencing on the day following effectiveness hereof. 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's
average weekly net assets. If this Agreement becomes effective subsequent to
the first day of a month or shall terminate before the last day of a month,
compensation for that part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculation of the fee as set forth
above. Subject to the provisions of subsection (b) hereof, payment of the
Investment Adviser's compensation for the preceding month shall be made as
promptly as possible after completion of the computations contemplated by
subsection (b) hereof. During any period when


                                       4
<PAGE>


the determination of net asset value is suspended by the Board of Directors,
the average net asset value of a share for the last week prior to such
suspension shall for this purpose be deemed to be the net asset value at the
close of each succeeding week until it is again determined.

     (b) Expense Limitations. In the event the operating expenses of the Fund,
including amounts payable to the Investment Adviser pursuant to subsection (a)
hereof, for any fiscal year ending on a date on which this Agreement is in
effect exceed the expense limitations applicable to the Fund imposed by
applicable state securities laws or regulations thereunder, as such
limitations may be raised or lowered from time to time, the Investment Adviser
shall reduce its management and investment advisory fee by the extent of such
excess and, if required pursuant to any such laws or regulations, will
reimburse the Fund in the amount of such excess; provided, however, to the
extent permitted by law, there shall be excluded from such expenses the amount
of any interest, taxes, brokerage fees and commissions and extraordinary
expenses (including but not limited to legal claims and liabilities and
litigation costs and any indemnification related thereto) paid or payable by
the Fund. Whenever the expenses of the Fund exceed a pro rata portion of the
applicable annual expense limitations, the estimated amount of reimbursement
under such limitations shall be applicable as an offset against the monthly
payment of the fee due to the Investment Adviser. Should two or more such
expenses limitations be applicable as at the end of the last business day of
the month, that expense limitation which results in the largest reduction in
the Investment Adviser's fee shall be applicable.

                                  ARTICLE IV
                                  ----------

               Limitation of Liability of the Investment Adviser
               -------------------------------------------------

     The Investment Adviser shall not be liable for any error of judgment or
mistake of law or for any loss arising out of any investment or for any act or
omission in the management of the Fund, except for willful misfeasance, bad
faith or gross negligence in the performance of its duties, or by reason of
reckless disregard of its obligations and duties hereunder. As used in this
Article IV, the term "Investment Adviser" shall include any affiliates of the
Investment Adviser performing services for the Fund contemplated hereby and
directors, officers and employees of the Investment Adviser and such
affiliates.


                                       5
<PAGE>


                                   ARTICLE V
                                   ---------

                     Activities of the Investment Adviser
                     ------------------------------------

     The services of the Investment Adviser to the Fund are not to be deemed
to be exclusive: the Investment Adviser and any person controlled by or under
common control with the Investment Adviser (for purposes of this Article V
referred to as "affiliates") are free to render services to others. It is
understood that Directors, officers, employees and shareholders of the Fund
are or may become interested in the Investment Adviser and its affiliates, as
directors, officers, employees, partners and shareholders or otherwise, and
that directors, officers, employees, partners and shareholders of the
Investment Adviser and its affiliates are or may become similarly interested
in the Fund, and that the Investment Adviser and directors, officers,
employees, partners and shareholders of its affiliates may become interested
in the Fund as shareholder or otherwise.

                                  ARTICLE VI
                                  ----------

                  Duration and Termination of this Agreement
                  ------------------------------------------

     This Agreement shall become effective as of the date first above written
and shall remain in force until ________________________ and thereafter, but
only so long as such continuance is specifically approved at least annually by
(i) the Board of Directors of the Fund, or by the vote of a majority of the
outstanding voting securities of the Fund, and (ii) a majority of those
Directors who are not parties to this Agreement or interested persons of any
such party cast in person at a meeting called for the purpose of voting on
such approval.

     This Agreement may he terminated at any time, without the payment of any
penalty, by the Board of Directors or by vote of a majority of the outstanding
voting securities of the Fund, or by the Investment Adviser, on sixty days'
written notice to the other party. This Agreement shall automatically
terminate in the event of its assignment.

                                  ARTICLE VII
                                  -----------

                         Amendments of this Agreement
                         ----------------------------

     This Agreement may be amended by the parties only if such amendment is
specifically approved by (i) the vote of a majority of outstanding voting
securities of the Fund, and (ii) a


                                       6
<PAGE>


majority of those Directors who are not parties to this Agreement or
interested persons of any such party cast in person at a meeting called for
the purpose of voting on such approval.

                                 ARTICLE VIII
                                 ------------

                         Definitions of Certain Terms
                         ----------------------------

     The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act and the Rules and Regulations thereunder, subject, however, to
such exemptions as may be granted by the Securities and Exchange Commission
under said Act.

                                  ARTICLE IX
                                  ----------

                                 Governing Law
                                 -------------

     This Agreement shall be construed in accordance with laws of the State of
New York and the applicable provisions of the Investment Company Act. To the
extent that the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.

     IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.

                                       MUNIYIELD INSURED FUND, INC.



                                       By_____________________________________
                                                 (Authorized Signatory)



                                       FUND ASSET MANAGEMENT, INC.



                                       By_____________________________________
                                                 (Authorized Signatory)



                                       7
<PAGE>



                  SUPPLEMENT TO INVESTMENT ADVISORY AGREEMENT
                                     WITH
                             FUND ASSET MANAGEMENT

     As of January 1, 1994 Fund Asset Management was reorganized as a limited
     partnership, formally known as Fund Asset Management, L.P. ("FAM"). The
     general partner of FAM is Princeton Services, Inc. and the limited
     partners are Fund Asset Management, Inc. and Merrill Lynch & Co. Inc.
     Pursuant to Rule 202(a)(1)-1 under the Investment Advisers Act of 1940
     and Rule 2a-6 under the Investment Company Act of 1940 such
     reorganization did not constitute an assignment of this investment
     advisory agreement since it did not involve a change of control or
     management of the investment adviser. Pursuant to the requirements of
     Section 205 of the Investment Advisers Act of 1940, however, Fund Asset
     Management hereby supplements this investment advisory agreement by
     undertaking to advise you of any change in the membership of the
     partnership within a reasonable time after any such change occurs.



                                      By:_____________________________________

     Dated: January 3, 1994



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2H.1
<SEQUENCE>13
<FILENAME>efc4-1163_5549300ex992h1.txt
<TEXT>
                                                                EXHIBIT (h)(1)



==============================================================================


                         MUNIYIELD INSURED FUND, INC.


                           (a Maryland corporation)


                                 $130,000,000
                        Auction Market Preferred Stock


                            2,600 Shares, Series H

                            2,600 Shares, Series I

                  (Liquidation Preference $25,000 Per Share)


                              PURCHASE AGREEMENT



                          Dated:              , 2004



==============================================================================


                                       i
<PAGE>


<TABLE>
<CAPTION>
                                                TABLE OF CONTENTS

                                                                                                            Page
<S>        <C>                                                                                           <C>
SECTION 1.  Representations and Warranties...................................................................3

   (a)  Representations and Warranties by the Fund and the Adviser...........................................3

   (b)  Additional Representations of the Adviser............................................................9

   (c)  Officers' Certificates..............................................................................10

SECTION 2.  Sale and Delivery to the Underwriter; Closing...................................................11

   (a)  Purchase Price......................................................................................11

   (b)  Payment.............................................................................................11

   (c)  Denominations; Registration.........................................................................11

SECTION 3.  Covenants of the Fund...........................................................................11

   (a)  Compliance with Securities Regulations and Commission Requests......................................11

   (b)  Filing of Amendments................................................................................12

   (c)  Delivery of Registration Statements.................................................................12

   (d)  Delivery of Prospectus..............................................................................12

   (e)  Continued Compliance with Securities Laws...........................................................12

   (f)  Blue Sky Qualifications.............................................................................13

   (g)  Rule 158............................................................................................13

   (h)  Use of Proceeds.....................................................................................13

   (i)  Subchapter M........................................................................................13

   (j)  Restrictions on Sale of Shares......................................................................13

   (k)  Reporting Requirements..............................................................................14

   (l)  Rule 462(b) Registration Statement..................................................................14

   (m) No Manipulation of Market for the Shares.............................................................14

SECTION 4.  Covenants of the Underwriter....................................................................14

SECTION 5.  Payment of Expenses.............................................................................14

   (a)  Expenses............................................................................................14

   (b)  Termination of Agreement............................................................................15

SECTION 6.  Conditions of Underwriter's Obligations.........................................................15

   (a)  Effectiveness of Registration Statement.............................................................15

   (b)  Opinion of Counsel for the Fund and the Underwriter.................................................15


                                                        i
<PAGE>




                                                Table of Contents
                                                   (continued)
                                                                                                          Page
                                                                                                          ----

   (c)  Opinion of Senior Attorney of the Adviser...........................................................15

   (d)  Officers' Certificates..............................................................................15

   (e)  Accountant's Comfort Letter.........................................................................16

   (f)  Bring-down Comfort Letter...........................................................................16

   (g)  Ratings Letters.....................................................................................16

   (h) Asset Coverage.......................................................................................16

   (i)  Additional Documents................................................................................16

   (j)  Termination of Agreement............................................................................16

SECTION 7.  Indemnification.................................................................................17

   (a)  Indemnification of the Underwriter..................................................................17

   (b)  Indemnification of Fund, Adviser, General Partner, and Directors and Officers.......................18

   (c)  Actions against Parties, Notification...............................................................18

   (d)  Settlement without Consent if Failure to Reimburse..................................................19

SECTION 8.  Contribution....................................................................................19

SECTION 9.  Representations, Warranties and Agreements to Survive Delivery..................................20

SECTION 10.  Termination of Agreement.......................................................................20

   (a)  Termination; General................................................................................20

   (b)  Liabilities.........................................................................................21

SECTION 11.  Notices........................................................................................21

SECTION 12.  Parties........................................................................................21

SECTION 13.  Governing Law and Time.........................................................................21

SECTION 14.  Effect of Headings.............................................................................21

</TABLE>


                                                       ii
<PAGE>

EXHIBITS
Exhibit A    -    Form of Opinion of Fund's Counsel
Exhibit B    -    Form of Opinion of Senior Attorney of the Investment Adviser
Exhibit C    -    Form of Accountant's Comfort Letter


                                     iii
<PAGE>


                         MUNIYIELD INSURED FUND, INC.
                           (a Maryland corporation)

                                 $130,000,000
                        Auction Market Preferred Stock


                            2,600 Shares, Series H

                            2,600 Shares, Series I


                  (Liquidation Preference $25,000 Per Share)

                              PURCHASE AGREEMENT

                                                                        , 2004

MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
            Incorporated
4 World Financial Center
New York, New York  10080

Ladies and Gentlemen:

     MuniYield Insured Fund, Inc., a Maryland corporation (the "Fund"), and
Fund Asset Management, L.P., a Delaware limited partnership (the "Adviser"),
each confirms its agreement with Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated (the "Underwriter" or "Merrill Lynch"), with
respect to the issue and sale by the Fund and the purchase by the Underwriter
of 2,600 shares of Auction Market Preferred Stock, Series H ("Series H AMPS"),
and 2,600 shares of Auction Market Preferred Stock, Series I ("Series I
AMPS"), each with a par value of $.10 per share and a liquidation preference
$25,000 per share plus an amount equal to accumulated but unpaid dividends
thereon (whether or not earned or declared), of the Fund (together, the
"Shares").

     The Fund understands that the Underwriter proposes to make a public
offering of the Shares as soon as the Underwriter deems advisable after this
Agreement has been executed and delivered.

     The Fund has filed with the Securities and Exchange Commission (the
"Commission") a notification on Form N-8A of registration of the Fund as an
investment company under the Investment Company Act of 1940, as amended (the
"Investment Company Act"), and a registration statement on Form N-2 (Nos. 333-
, 811-21348), including the related preliminary prospectus and preliminary
statement of additional information, for the registration of the Shares under
the Securities Act of 1933, as amended (the "1933 Act"), the Investment
Company Act, and the rules and regulations of the Commission under the 1933
Act and the


<PAGE>


Investment Company Act (together, the "Rules and Regulations"), and has filed
such amendments to such registration statement on Form N-2, if any, and such
amended preliminary prospectuses and preliminary statements of additional
information as may have been required to the date hereof. Promptly after
execution and delivery of this Agreement, the Fund will either (i) prepare and
file a prospectus and statement of additional information in accordance with
the provisions of paragraph (c) of Rule 497 ("Rule 497(c)") of the rules and
regulations of the Commission under the 1933 Act (the "1933 Act Regulations")
or a certificate in accordance with the provisions of paragraph (j) of Rule
497 ("Rule 497(j)") of the 1933 Act Regulations, (ii) prepare and file a
prospectus and statement of additional information in accordance with the
provisions of Rule 430A ("Rule 430A") of the 1933 Act Regulations and
paragraph (h) of Rule 497 ("Rule 497(h)") of the 1933 Act Regulations, or
(iii) if the Fund has elected to rely upon Rule 434 ("Rule 434") of the 1933
Act Regulations, prepare and file a term sheet (a "Term Sheet") in accordance
with the provisions of Rule 434 and Rule 497(h). The information included in
any such prospectus and statement of additional information or in any such
Term Sheet, as the case may be, that was omitted from such registration
statement at the time it became effective but that is deemed to be part of
such registration statement at the time it became effective (a) pursuant to
paragraph (b) of Rule 430A is referred to as "Rule 430A Information" or (b)
pursuant to paragraph (d) of Rule 434 is referred to as "Rule 434
Information." Each prospectus and statement of additional information used
before such registration statement became effective, and any prospectus and
statement of additional information that omitted, as applicable, the Rule 430A
Information or the Rule 434 Information, that was used after such
effectiveness and prior to the execution and delivery of this Agreement, is
herein called a "preliminary prospectus/statement." Such registration
statement, including the exhibits thereto and schedules thereto, if any, at
the time it became effective and including the Rule 430A Information and the
Rule 434 Information, as applicable, is herein called the "Registration
Statement." Any registration statement filed pursuant to Rule 462(b) of the
1933 Act Regulations is herein referred to as the "Rule 462(b) Registration
Statement," and after such filing the term "Registration Statement" shall
include the Rule 462(b) Registration Statement. The final prospectus and final
statement of additional information in the form first furnished to the
Underwriter for use in connection with the offering of the Shares is herein
called the "Prospectus." If Rule 434 is relied on, the term "Prospectus" shall
refer to the preliminary prospectus/statement dated _________ ___, 2004,
together with the applicable Term Sheet and all references in this Agreement
to the date of such Prospectus shall mean the date of the applicable Term
Sheet. For purposes of this Agreement, all references to the Registration
Statement, any preliminary prospectus/statement, the Prospectus, or any Term
Sheet or any amendment or supplement to any of the foregoing shall be deemed
to include the copy filed with the Commission pursuant to its Electronic Data
Gathering, Analysis and Retrieval system ("EDGAR").

     All references in this Agreement to financial statements and schedules
and other information which is "contained," "included" or "stated" in the
Registration Statement, any preliminary prospectus/statement, or the
Prospectus (or other references of like import) shall be deemed to mean and
include all such financial statements and schedules and other information
which is incorporated by reference in the Registration Statement, any
preliminary prospectus or the Prospectus as the case may be; and all
references in this Agreement to amendments or supplements to the Registration
Statement, any preliminary prospectus or the Prospectus shall be deemed to
mean and include the filing of any document under the Securities Exchange Act
of


                                       2
<PAGE>


1934, as amended (the "1934 Act"), which is incorporated by reference in the
Registration Statement, such preliminary prospectus/statement, or the
Prospectus, as the case may be.

     SECTION 1.  Representations and Warranties.

     (a) Representations and Warranties by the Fund and the Adviser. The Fund
and the Adviser each severally represents and warrants to the Underwriter as
of the date hereof, as of the Closing Time referred to in Section 2(c) hereof
and as of the Date of Delivery (if any) referred to in Section 2(b) hereof,
and agrees with the Underwriter, as follows:

         (i) Compliance with Registration Requirements. The Fund meets the
     requirements for use of Form N-2 under the 1933 Act. Each of the
     Registration Statement and any Rule 462(b) Registration Statement has
     become effective under the 1933 Act and no stop order suspending the
     effectiveness of the Registration Statement or any Rule 462(b)
     Registration Statement has been issued under the 1933 Act and no
     proceedings for that purpose have been instituted or are pending or, to
     the knowledge of the Fund or the Adviser, are contemplated by the
     Commission, and any request on the part of the Commission for additional
     information has been complied with. If required, the Fund has received
     any orders exempting the Fund from any provisions of the Investment
     Company Act.

         At the respective times the Registration Statement, any Rule 462(b)
     Registration Statement and any post-effective amendments thereto became
     effective and at the Closing Time the Registration Statement, the Rule
     462(b) Registration Statement and any amendments or supplements thereto
     complied and will comply in all material respects with the requirements
     of the 1933 Act, the Investment Company Act and the Rules and Regulations
     and did not and will not contain an untrue statement of a material fact
     or omit to state a material fact required to be stated therein or
     necessary to make the statements therein not misleading. Neither the
     Prospectus, nor any amendments or supplements thereto, at the time the
     Prospectus or any amendments or supplements thereto were issued and at
     the Closing Time included or will include an untrue statement of a
     material fact or omitted or will omit to state a material fact necessary
     in order to make the statements therein, in the light of the
     circumstances under which they were made, not misleading. The
     representations and warranties in this subsection shall not apply to
     statements in or omissions from the Registration Statement or the
     Prospectus made in reliance upon and in conformity with information
     furnished to the Fund in writing by the Underwriter expressly for use in
     the Registration Statement or in the Prospectus. If Rule 434 is used, the
     Fund will comply with the requirements of Rule 434 and the Prospectus
     shall not be "materially different," as such term is used in Rule 434,
     from the prospectus included in the Registration Statement at the time it
     became effective.

         Each preliminary prospectus/statement and the prospectus and
     statement of additional information filed as part of the Registration
     Statement as originally filed or as part of any amendment thereto, or
     filed pursuant to Rule 497(c) or Rule 497(h) under the 1933 Act, complied
     when so filed in all material respects with the Rules and Regulations and
     each preliminary prospectus/statement and the Prospectus delivered to the


                                       3
<PAGE>


     Underwriter for use in connection with this offering was identical to the
     electronically transmitted copies thereof filed with the Commission
     pursuant to EDGAR, except to the extent permitted by Regulation S-T.

         If a Rule 462(b) Registration Statement is required in connection
     with the offering and sale of the Shares, the Fund has complied or will
     comply with the requirement of Rule 111, under the 1933 Act Regulations
     relating to the payment of filing fees thereof.

         (ii) Independent Accountants. The accountants who certified the
     financial statements and supporting schedules, if any, included or
     incorporated by reference in the Registration Statement are independent
     public accountants as required by the 1933 Act and the Rules and
     Regulations.

         (iii) Financial Statements. The financial statements, included or
     incorporated by reference in the Registration Statement and Prospectus,
     together with the related schedules and notes, present fairly the
     financial position of the Fund at the date indicated and said statements
     have been prepared in conformity with generally accepted accounting
     principles ("GAAP") applied on a consistent basis throughout the period
     involved. The supporting schedules, if any, included or incorporated by
     reference in the Registration Statement present fairly, in accordance
     with GAAP, the information required to be stated therein. The information
     in the Prospectus under the headings "Financial Highlights,"
     "Capitalization," "Portfolio Composition" and "Description of Capital
     Stock" has been fairly presented.

         (iv) No Material Adverse Change in Business. Since the respective
     dates as of which information is given in the Registration Statement and
     in the Prospectus, except as otherwise stated therein, (A) there has been
     no material adverse change in the condition, financial or otherwise, or
     in the earnings, business affairs or business prospects of the Fund,
     whether or not arising in the ordinary course of business (a "Material
     Adverse Effect"), (B) there have been no transactions entered into by the
     Fund, other than those in the ordinary course of business, which are
     material with respect to the Fund and (C) except for regular monthly
     dividends on the outstanding shares of common stock, par value $.10 per
     share (the "Common Stock"), of the Fund and periodic distributions on the
     outstanding shares of Auction Market Preferred Stock, with a liquidation
     preference of $25,000 per share (the "Outstanding AMPS"), of the Fund
     pursuant to the terms of the Outstanding AMPS, and special year end
     distributions on the Common Stock and Outstanding AMPS related to the
     Fund's qualification as a regulated investment company under Subchapter M
     of the Internal Revenue Code of 1986, as amended ("Subchapter M of the
     Code"), there has been no dividend or distribution of any kind declared,
     paid or made by the Fund on any class of its capital stock.

         (v) Good Standing of the Fund. The Fund has been duly organized and
     is validly existing as a corporation in good standing under the laws of
     the State of Maryland and has corporate power and authority to own, lease
     and operate its properties and to conduct its business as described in
     the Prospectus and to enter into and perform its obligations under this
     Agreement; and the Fund is duly qualified as a foreign corporation to
     transact business and is in good standing in each jurisdiction in which
     such


                                       4
<PAGE>


     qualification is required, whether by reason of the ownership or leasing
     of property or the conduct of business, except where the failure so to
     qualify or to be in good standing would not result in a Material Adverse
     Effect.

         (vi) Subsidiaries. The Fund has no subsidiaries.

         (vii) Officers and Directors. No person is serving or acting as an
     officer, director or investment adviser of the Fund except in accordance
     with the provisions of the Investment Company Act and the Rules and
     Regulations and the Investment Advisers Act of 1940, as amended (the
     "Advisers Act"), and the rules and regulations of the Commission
     promulgated under the Advisers Act (the "Advisers Act Rules and
     Regulations"). Except as disclosed in the Registration Statement and the
     Prospectus (or any amendment or supplement to either of them), no
     director of the Fund is an "interested person" (as defined in the
     Investment Company Act) of the Fund or an "affiliated person" (as defined
     in the Investment Company Act) of the Underwriter.

         (viii) Capitalization. The authorized, issued and outstanding capital
     stock of the Fund is as set forth in the Prospectus under the caption
     "Description of Capital Stock." All issued and outstanding shares of
     Common Stock and Outstanding AMPS have been duly authorized and validly
     issued and are fully paid and non-assessable, except as provided for in
     the Fund's charter, and have been offered and sold or exchanged by the
     Fund in compliance with all applicable laws (including without
     limitation, federal and state securities laws); none of the outstanding
     shares of Common Stock or Outstanding AMPS of the Fund was issued in
     violation of the preemptive or other similar rights of any securityholder
     of the Fund.

         (ix) Investment Company Act. The Fund is registered with the
     Commission under the Investment Company Act as a closed-end,
     non-diversified, management investment company, and no order of
     suspension or revocation of such registration has been issued or
     proceedings therefor initiated, to the knowledge of the Fund and the
     Adviser, or threatened by the Commission.

         (x) Authorization of Agreement. This Agreement has been duly
     authorized, executed and delivered by the Fund.

         (xi) Authorization and Description of Shares. The Shares to be
     purchased by the Underwriter from the Fund have been duly authorized for
     issuance and sale to the Underwriter pursuant to this Agreement, and,
     when issued and delivered by the Fund pursuant to this Agreement against
     payment of the consideration set forth in this Agreement will be validly
     issued, fully paid and non-assessable; the Shares conform to all
     statements relating thereto contained in the Prospectus and such
     description conforms to the rights set forth in the instruments defining
     the same; no holder of the Shares will be subject to personal liability
     by reason of being such a holder; and the issuance of the Shares is not
     subject to the preemptive or other similar rights of any securityholder
     of the Fund.


                                       5
<PAGE>


         (xii) Absence of Defaults and Conflicts. The Fund is not in violation
     of its charter or by-laws or in default in the performance or observance
     of any obligation, agreement, covenant or condition contained in any
     material contract, indenture, mortgage, deed of trust, loan or credit
     agreement, note, lease or other agreement or instrument to which the Fund
     is a party or by which it or its properties may be bound, or to which any
     of the property or assets of the Fund is subject (collectively,
     "Agreements and Instruments"), except for such defaults that would not
     result in a Material Adverse Effect; and the execution, delivery and
     performance of this Agreement, the Investment Advisory Agreement, the
     Custody Agreement, the Auction Agent Agreement and the Letter of
     Representations referred to in the Registration Statement (as used
     herein, the "Advisory Agreement", the "Custody Agreement," the "Auction
     Agreement" and the "Letter of Representations," respectively) and the
     consummation of the transactions contemplated in this Agreement and in
     the Registration Statement (including the issuance and sale of the Shares
     and the use of the proceeds from the sale of the Shares as described in
     the Prospectus under the caption "Use of Proceeds") and compliance by the
     Fund with its obligations under this Agreement have been duly authorized
     by all necessary corporate action and do not and will not, whether with
     or without the giving of notice or passage of time or both, conflict with
     or constitute a breach of, or a default or Repayment Event (as defined
     below) under, or result in the creation or imposition of any lien, charge
     or encumbrance upon any property or assets of the Fund pursuant to the
     Agreements and Instruments (except for such conflicts, breaches or
     defaults or liens, charges or encumbrances that would not result in a
     Material Adverse Effect), nor will such action result in any violation of
     the provisions of the charter or the by-laws of the Fund, or any
     applicable law, statute, rule, regulation, judgment, order, writ or
     decree of any government, government instrumentality or court, domestic
     or foreign, having jurisdiction over the Fund or any of its assets,
     properties or operations. As used herein, a "Repayment Event" means any
     event or condition which gives the holder of any note, debenture or other
     evidence of indebtedness (or any person acting on such holder's behalf)
     the right to require the repurchase, redemption or repayment of all or a
     portion of such indebtedness by the Fund.

         (xiii) Authorization of Agreements. Each of this Agreement, the
     Advisory Agreement and the Custody Agreement has been duly authorized,
     executed and delivered by the Fund, and each complies with all applicable
     provisions of the Investment Company Act. Each of the Auction Agreement
     and the Letter of Representations has been duly authorized for execution
     and delivery by the Fund and, when executed and delivered by the Fund,
     will constitute a valid and binding obligation of the Fund, enforceable
     in accordance with its terms, subject, as to enforcement, to bankruptcy,
     insolvency, reorganization or other laws relating to or affecting
     creditors' rights and to general equitable principles.

         (xiv) Absence of Proceedings. There is no action, suit, proceeding,
     inquiry or investigation before or brought by any court or governmental
     agency or body, domestic or foreign, now pending, or, to the knowledge of
     the Fund or the Adviser, threatened against or affecting the Fund, which
     is required to be disclosed in the Registration Statement (other than as
     disclosed therein), or which might reasonably be expected to result in a
     Material Adverse Effect, or which might reasonably be expected to
     materially


                                       6
<PAGE>


     and adversely affect the properties or assets of the Fund or the
     consummation of the transactions contemplated in this Agreement or the
     performance by the Fund of its obligations hereunder; the aggregate of
     all pending legal or governmental proceedings to which the Fund is a
     party or of which any of its respective property or assets is the subject
     which are not described in the Registration Statement, including ordinary
     routine litigation incidental to the business, could not reasonably be
     expected to result in a Material Adverse Effect.

         (xv) Subchapter M Compliance. The Fund intends to, and will, direct
     the investment of the proceeds of the offering described in the
     Registration Statement in such a manner as to comply with the
     requirements of Subchapter M of the Code, and intends to qualify as a
     regulated investment company under Subchapter M of the Code.

         (xvi) Distribution of Offering Materials. The Fund has not
     distributed and, prior to the later to occur of (A) the Closing Time and
     (B) completion of the distribution of the Shares, will not distribute any
     offering material in connection with the offering and sale of the Shares
     other than the Registration Statement, a preliminary prospectus, the
     Prospectus or other materials, if any, permitted by the 1933 Act or the
     Investment Company Act or the Rules and Regulations.

         (xvii) Accounting Controls. The Fund maintains a system of internal
     accounting controls sufficient to provide reasonable assurances that (A)
     transactions are executed in accordance with management's general or
     specific authorization and with the applicable requirements of the
     Investment Company Act, the Rules and Regulations and the Code; (B)
     transactions are recorded as necessary to permit preparation of financial
     statements in conformity with generally accepted accounting principles
     and to maintain accountability for assets and to maintain compliance with
     the books and records requirements under the Investment Company Act and
     the Rules and Regulations; (C) access to assets is permitted only in
     accordance with the management's general or specific authorization; and
     (D) the recorded accountability for assets is compared with existing
     assets at reasonable intervals and appropriate action is taken with
     respect to any differences.

         (xviii) Absence of Undisclosed Payments. To the Fund's knowledge,
     neither the Fund nor any employee or agent of the Fund has made any
     payment of funds of the Fund or received or retained any funds, which
     payment, receipt or retention of funds is of a character required to be
     disclosed in the Prospectus.

         (xix) Material Agreements. This Agreement, the Advisory Agreement,
     the Custody Agreement and the Auction Agent Agreement have each been duly
     authorized by all requisite action on the part of the Fund and executed
     and delivered by the Fund, as of the dates noted therein, and each
     complies with all applicable provisions of the Investment Company Act in
     all material respects. Assuming due authorization, execution and delivery
     by the other parties thereto with respect to the Advisory Agreement, the
     Custody Agreement and the Auction Agent Agreement, each of the Advisory
     Agreement, the Custody Agreement and the Auction Agent Agreement
     constitutes a valid and binding agreement of the Fund, enforceable in
     accordance with its terms, except as affected by bankruptcy, insolvency,
     fraudulent conveyance, reorganization, moratorium and other


                                       7
<PAGE>


     similar laws relating to or affecting creditors' rights generally,
     general equitable principles (whether considered in a proceeding in
     equity or at law) and an implied covenant of good faith and fair dealing
     and except as rights to indemnification or contribution thereunder may be
     limited by federal or state laws.

         (xx) Registration Rights. There are no persons with registration
     rights or other similar rights to have any securities registered pursuant
     to the Registration Statement or otherwise registered by the Fund under
     the 1933 Act.

         (xxi) Accuracy of Exhibits. There are no contracts or documents which
     are required to be described in the Registration Statement or the
     Prospectus or to be filed as exhibits thereto by the 1933 Act, the
     Investment Company Act or the Rules and Regulations which have not been
     so described and filed as required.

         (xxii) Possession of Intellectual Property. The Fund owns or
     possesses, has the right to use or can acquire on reasonable terms,
     adequate patents, patent rights, licenses, inventions, copyrights,
     know-how (including trade secrets and other unpatented and/or
     unpatentable proprietary or confidential information, systems or
     procedures), trademarks, service marks, trade names or other intellectual
     property (collectively, "Intellectual Property") necessary to carry on
     the business now operated by the Fund, and the Fund has not received any
     notice or is not otherwise aware of any infringement of or conflict with
     asserted rights of others with respect to any Intellectual Property or of
     any facts or circumstances which would render any Intellectual Property
     invalid or inadequate to protect the interest of the Fund therein, and
     which infringement or conflict (if the subject of any unfavorable
     decision, ruling or finding) or invalidity or inadequacy, singly or in
     the aggregate, would result in a Material Adverse Effect.

         (xxiii) Absence of Further Requirements. No filing with, or
     authorization, approval, consent, license, order, registration,
     qualification or decree of, any court or governmental authority or agency
     is necessary or required for the performance by the Fund of its
     obligations hereunder, in connection with the offering, issuance or sale
     of the Shares under this Agreement or the consummation of the
     transactions contemplated by this Agreement, except such as have been
     already obtained or as may be required under the 1933 Act, the 1934 Act
     or the Investment Company Act or the Rules and Regulations and foreign or
     state securities laws or under the rules of the NASD (formerly, the
     National Association of Securities Dealers, Inc.).

         (xxiv) Possession of Licenses and Permits. The Fund possesses such
     permits, licenses, approvals, consents and other authorizations
     (collectively, "Governmental Licenses") issued by the appropriate
     federal, state, local or foreign regulatory agencies or bodies necessary
     to conduct the business now operated by it; the Fund is in compliance
     with the terms and conditions of all such Governmental Licenses, except
     where the failure so to comply would not, singly or in the aggregate,
     have a Material Adverse Effect; all of the Governmental Licenses are
     valid and in full force and effect, except when the invalidity of such
     Governmental Licenses or the failure of such Governmental Licenses to be
     in full force and effect would not have a Material Adverse Effect; and
     the Fund has not received any notice of proceedings relating to the
     revocation or


                                       8
<PAGE>


     modification of any such Governmental Licenses which, singly or in the
     aggregate, if the subject of an unfavorable decision, ruling or finding,
     would result in a Material Adverse Effect.

         (xxv) NYSE Listing. The Fund's shares of Common Stock are duly listed
     on the New York Stock Exchange ("NYSE").

         (xxvi) Ratings. The Shares have been, or prior to the Closing Date
     will be, assigned a rating of Aaa by Moody's Investors Service, Inc.
     ("Moody's") and AAA by Standard & Poor's ("S&P").

         (xxvii) Leverage. The Fund has no liability for borrowed money,
     including under any reverse repurchase agreement.

     (b) Additional Representations of the Adviser. The Adviser represents and
warrants to the Underwriter as of the date hereof and as of the Representation
Date as follows:

         (i) Organization and Authority of Adviser. The Adviser has been duly
     organized as a limited partnership under the laws of the State of
     Delaware, with power and authority to conduct its business as described
     in the Registration Statement and the Prospectus.

         (ii) Investment Advisers Act. The Adviser is duly registered as an
     investment adviser under the Investment Advisers Act of 1940, as amended
     (the "Investment Advisers Act"), and is not prohibited by the Investment
     Advisers Act or the Investment Company Act, or the rules and regulations
     under such acts, from acting under the Advisory Agreement for the Fund as
     contemplated by the Registration Statement and the Prospectus.

         (iii) Description of Adviser. The description of the Adviser in the
     Registration Statement and the Prospectus (and any amendment or
     supplement to either of them) complied and complies in all material
     respects with the provisions of the 1933 Act, the Investment Company Act,
     the Advisers Act, the Rules and Regulations and the Advisers Act Rules
     and Regulations and is true and correct and does not contain any untrue
     statement of a material fact or omit to state any material fact required
     to be stated therein or necessary in order to make the statements
     therein, in light of the circumstances under which they were made, not
     misleading.

         (iv) Capitalization. The Adviser has the financial resources
     available to it necessary for the performance of its services and
     obligations as contemplated in the Registration Statement, the
     Prospectus, this Agreement and under the Advisory Agreement.

         (v) Authorization of Agreements. This Agreement has been duly
     authorized, executed and delivered by the Adviser; the Advisory Agreement
     has been duly authorized, executed and delivered by the Adviser, and
     constitutes a valid and binding obligation of the Adviser, enforceable in
     accordance with its terms, subject, as to enforcement, to bankruptcy,
     insolvency, reorganization or other laws relating to or


                                       9
<PAGE>


     affecting creditors' rights and to general equitable principles; and
     neither the execution and delivery of this Agreement or the Advisory
     Agreement, nor the performance by the Adviser of its obligations
     hereunder or thereunder will conflict with, or result in a breach of any
     of the terms and provisions of, or constitute, with or without the giving
     of notice or the lapse of time or both, a default under, any agreement or
     instrument to which the Adviser is a party or by which it is bound, the
     certificate of formation, the operating agreement, or other
     organizational documents of the Adviser, or the Adviser's knowledge by
     any law, order, decree, rule or regulation applicable to it of any
     jurisdiction, court, federal or state regulatory body, administrative
     agency or other governmental body, stock exchange or securities
     association having jurisdiction over the Adviser or its respective
     properties or operations; and no consent, approval, authorization or
     order of any court or governmental authority or agency is required for
     the consummation by the Adviser of the transactions contemplated by this
     Agreement and the Advisory Agreement, except as have been obtained or may
     be required under the 1933 Act, the Investment Company Act, the 1934 Act
     or state securities laws.

         (vi) No Material Adverse Change. Since the respective dates as of
     which information is given in the Registration Statement and the
     Prospectus, except as otherwise stated therein, there has not occurred
     any event which should reasonably be expected to have a material adverse
     effect on the ability of the Adviser to perform its respective
     obligations under this Agreement and the Advisory Agreement.

         (vii) Absence of Proceedings. There is no action, suit, proceeding,
     inquiry or investigation before or brought by any court or governmental
     agency or body, domestic or foreign, now pending, or, to the knowledge of
     the Adviser, threatened against or affecting the Adviser or any
     "affiliated person" of the Adviser (as such term is defined in the
     Investment Company Act) or any partners, trustees, officers or employees
     of the foregoing, whether or not arising in the ordinary course of
     business, which might reasonably be expected to result in any material
     adverse change in the condition, financial or otherwise, or earnings,
     business affairs or business prospects of the Adviser, materially and
     adversely affect the properties or assets of the Adviser or materially
     impair or adversely affect the ability of the Adviser to function as an
     investment adviser or perform its obligations under the Advisory
     Agreement, or which is required to be disclosed in the Registration
     Statement and the Prospectus.

         (viii) Absence of Violation or Default. The Adviser is not in
     violation of its certificate of formation, its operating agreement or
     other organizational documents or in default under any agreement,
     indenture or instrument, where such violation or default would reasonably
     be expected to have a Material Adverse Effect on the Adviser's ability to
     function as an investment adviser or perform its obligations under the
     Advisory Agreement.

     (c) Officers' Certificates. Any certificate signed by any officer of the
Fund or any officer of the Adviser delivered to the Underwriter or to counsel
for the Fund and the Underwriter shall be deemed a representation and warranty
by the Fund or the Adviser, as the case may be, to the Underwriter as to the
matters covered thereby.


                                      10
<PAGE>


     SECTION 2.  Sale and Delivery to the Underwriter; Closing.

     (a) Purchase Price. On the basis of the representations and warranties
herein contained, and subject to the terms and conditions herein set forth,
the Fund agrees to sell to the Underwriter and the Underwriter agrees to
purchase from the Fund the Shares at the price per share set forth in Schedule
A.

     (b) Payment. Payment of the purchase price for, and delivery of
certificates for, the Shares shall be made at the offices of Sidley Austin
Brown & Wood LLP, 787 Seventh Avenue, New York, New York 10019, or at such
other place as shall be agreed upon by the Underwriter and the Fund, at 9:00
A.M. (Eastern time) on the third (fourth, if the pricing occurs after 4:30
P.M. (Eastern time) on any given day) business day following the date hereof,
or such other time not later than ten business days after such date as shall
be agreed upon by the Underwriter and the Fund (such time and date of payment
and delivery herein being referred to as "Closing Time").

     Payment shall be made to the Fund by wire transfer of immediately
available funds to a bank account designated by the Fund, against delivery to
the Underwriter of certificates for the Shares to be purchased by it.

     (c) Denominations; Registration. The Shares shall be represented by
certificates registered in the name of Cede & Co., as nominee for The
Depository Trust Company. The certificates for the Shares will be made
available for examination by the Underwriter not later than 10:00 A.M. on the
last business day prior to Closing Time.

     SECTION 3.  Covenants of the Fund.  The Fund covenants with the
Underwriter as follows:

     (a) Compliance with Securities Regulations and Commission Requests. The
Fund, subject to Section 3(b), will comply with the requirements of Rule 430A
or Rule 434, as applicable, and will notify the Underwriter immediately, and
confirm the notice in writing, (i) if any post-effective amendment to the
Registration Statement shall have become effective, or any supplement to the
Prospectus or any amended Prospectus shall have been filed, (ii) of the
receipt of any comments from the Commission, (iii) of any request by the
Commission for any amendment to the Registration Statement or any amendment or
supplement to the Prospectus or for additional information, (iv) of the
issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or of any order preventing or suspending the use of
any preliminary prospectus/statement, or of the suspension of the
qualification of the Shares for offering or sale in any jurisdiction, or of
the initiation or threatening of any proceedings for any of such purposes, and
(v) of the issuance by the Commission of an order of suspension or revocation
of the notification on Form N-8A of registration of the Fund as an investment
company under the Investment Company Act or the initiation of any proceeding
for that purpose. The Fund will make every reasonable effort to prevent the
issuance of any stop order described in subsection (iv) hereunder or any order
of suspension or revocation described in subsection (v) hereunder and, if any
such stop order or order of suspension or revocation is issued, to obtain the
lifting thereof at the earliest possible moment. The Fund will promptly effect
the filings necessary pursuant to Rule 497(c), Rule 497(j) or Rule 497(h) and
will take such steps as it


                                      11
<PAGE>


deems necessary to ascertain promptly whether the certificate transmitted for
filing under Rule 497(j) or the form of prospectus and statement of additional
information transmitted for filing under Rule 497(c) or Rule 497(h) was
received for filing by the Commission and, in the event that it was not, it
will promptly file such certificate or prospectus and statement of additional
information.

     (b) Filing of Amendments. The Fund will give the Underwriter notice of
its intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment or filing under Rule 462(b)), any Term
Sheet or any amendment, supplement or revision to either the prospectus or
statement of additional information included in the Registration Statement at
the time it became effective or to the Prospectus, whether pursuant to the
Investment Company Act, the 1933 Act, or otherwise, and will furnish the
Underwriter with copies of any such documents a reasonable amount of time
prior to such proposed filing or use, as the case may be, and will not file or
use any such document to which the Underwriter or counsel to the Underwriter
and the Fund shall object.

     (c) Delivery of Registration Statements. The Fund has furnished or will
deliver to the Underwriter and counsel to the Underwriter and the Fund,
without charge, signed copies of the notification of registration on Form N-8A
and Registration Statement as originally filed and of each amendment thereto,
(including exhibits filed therewith, or incorporated by reference therein) and
signed copies of all consents and certificates of experts, and will also
deliver to the Underwriter a conformed copy, without charge, of the
Registration Statement as originally filed and of each amendment thereto
(without exhibits) for the Underwriter. The copies of the Registration
Statement and each amendment thereto furnished to the Underwriter will be
identical to the electronically transmitted copies thereof filed with the
Commission pursuant to EDGAR, except to the extent permitted by Regulation
S-T.

     (d) Delivery of Prospectus. The Fund has delivered to the Underwriter,
without charge, as many copies of each preliminary prospectus/statement as the
Underwriter reasonably requested, and the Fund hereby consents to the use of
such copies for purposes permitted by the 1933 Act. The Fund will furnish to
the Underwriter, without charge, during the period when the Prospectus is
required to be delivered under the 1933 Act, such number of copies of the
Prospectus (as amended or supplemented) as the Underwriter may reasonably
request. The Prospectus and any amendments or supplements thereto furnished to
the Underwriter will be identical to the electronically transmitted copies
thereof field with the Commission pursuant to EDGAR, except to the extent
permitted by Regulation S-T.

     (e) Continued Compliance with Securities Laws. The Fund will comply with
the 1933 Act, the Investment Company Act and the Rules and Regulations so as
to permit the completion of the distribution of the Shares as contemplated in
this Agreement and in the Prospectus. If at any time when a prospectus is
required by the 1933 Act to be delivered in connection with sales of the
Shares, any event shall occur or condition shall exist as a result of which it
is necessary, in the opinion of counsel to the Underwriter and the Fund, to
amend the Registration Statement or amend or supplement any Prospectus in
order that the Prospectus will not include any untrue statements of material
fact or omit to state a material fact necessary in order to make the
statements therein not misleading in the light of the circumstances existing
at the time it is delivered to a purchaser, or if it shall be necessary, in
the opinion of such counsel,


                                      12
<PAGE>


at any such time to amend the Registration Statement or amend or supplement
any Prospectus in order to comply with the requirements of the 1933 Act or the
1933 Act Regulations, the Fund will promptly prepare and file with the
Commission, subject to Section 3(b), such amendment or supplement as may be
necessary to correct such statement or omission or to make the Registration
Statement or the Prospectus comply with such requirements, and the Fund will
furnish to the Underwriter such number of copies of such amendment or
supplement as the Underwriter may reasonably request.

     (f) Blue Sky Qualifications. The Fund will use its best efforts, in
cooperation with the Underwriter, to qualify the Shares for offering and sale
under the applicable securities laws of such states and other jurisdictions as
the Underwriter may designate and to maintain such qualifications in effect
for a period of not less than one year from the later of the effective date of
the Registration Statement and any Rule 462(b) Registration Statement;
provided, however, that the Fund shall not be obligated to file any general
consent to service of process or to qualify as a foreign corporation or as a
dealer in securities in any jurisdiction in which it is not so qualified or to
subject itself to taxation in respect of doing business in any jurisdiction in
which it is not otherwise so subject. In each jurisdiction in which the Shares
have been so qualified, the Fund will file such statements and reports as may
be required by the laws of such jurisdiction to continue such qualification in
effect for a period of not less than one year from the effective date of the
Registration Statement and any Rule 462(b) Registration Statement.

     (g) Rule 158. The Fund will timely file such reports pursuant to the 1933
Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the purposes
of, and to provide the benefits contemplated by, the last paragraph of Section
11(a) of the 1933 Act.

     (h) Use of Proceeds. The Fund will use the net proceeds received by it
from the sale of the Shares in the manner specified in the Prospectus under
"Use of Proceeds."

     (i) Subchapter M. The Fund will use its best efforts to maintain its
qualification as a regulated investment company under Subchapter M of the
Code.

     (j) Restrictions on Sale of Shares. During a period of 180 days from the
date of the Prospectus, the Fund will not, without the prior written consent
of Merrill Lynch, (i) directly or indirectly offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase or otherwise transfer
or dispose of any senior security of the Fund, as defined in Section 18 of the
Investment Company Act, or file any registration statement under the 1933 Act
with respect to any of the foregoing or (ii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of senior securities,
whether any such swap or transaction described in clause (i) or (ii) above is
to be settled by delivery of senior securities, in cash or otherwise. The
foregoing sentence shall not apply to (A) the Shares to be sold hereunder or
(B) transactions as contemplated in the Registration Statement where the Fund
has segregated cash, cash equivalents or liquid securities at the Fund's
custodian having a market value at all times at least equal to the amount of
such senior securities.


                                      13
<PAGE>



     (k) Reporting Requirements. The Fund, during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934 Act,
will file all documents required to be filed with the Commission pursuant to
the Investment Company Act and the 1934 Act within the time periods required
by the Investment Company Act and the Rules and Regulations and the 1934 Act
and the rules and regulations of the Commission thereunder, respectively.

     (l) Rule 462(b) Registration Statement. If the Fund elects to rely upon
Rule 462(b), the Fund shall file a Rule 462(b) Registration Statement with the
Commission in compliance with Rule 462(b) by 10:00 P.M., Washington, D.C.
time, on the date of this Agreement, and the Fund shall at the time of filing
either pay to the Commission the filing fee for the Rule 462(b) Registration
Statement or give irrevocable instructions for the payment of such fee
pursuant to Rule 111(b) under the 1933 Act.

     (m) No Manipulation of Market for the Shares. The Fund will not (a) take,
directly or indirectly, any action designed to cause or to result in, or that
might reasonably be expected to constitute, the stabilization or manipulation
of the price of any security of the Fund to facilitate the sale or resale of
the Shares, and (b) until the Closing Date (i) sell, bid for or purchase the
Shares or pay any person (other than the Underwriter) any compensation for
soliciting purchases of the Shares or (ii) pay or agree to pay to any person
any compensation for soliciting another to purchase any other securities of
the Fund (other than payments to broker-dealers in connection with the
auctiors of the Outstanding AMPS).

     SECTION 4. Covenants of the Underwriter. The Underwriter covenants and
agrees with the Fund that no later than the second business day succeeding
Closing Time, it will provide the Fund and the Auction Agent (as defined in
the Prospectus) with a listing of Existing Holders (as defined in the
Prospectus) of Shares, the number of shares held by each such Existing Holder
and the number of Shares it is holding as Underwriter as of the date of such
notice.

     SECTION 5.  Payment of Expenses.

     (a) Expenses. The Fund will pay all expenses incident to the performance
of its obligations under this Agreement, including (i) the preparation,
printing and filing of the Registration Statement (including financial
statements and exhibits) as originally filed and of each amendment thereto,
(ii) the preparation, printing and delivery to the Underwriter of this
Agreement and such other documents as may be required in connection with the
offering, purchase, sale, issuance or delivery of the Shares, (iii) the
preparation, issuance and delivery of the certificates for the Shares to the
Underwriter, including any stock or other transfer taxes and any stamp or
other duties payable upon the sale, issuance or delivery of the Shares to the
Underwriter, (iv) the fees and disbursements of the Fund's counsel,
accountants and other advisors, (v) the qualification of the Shares under the
securities laws in accordance with the provisions of Section 3(f) hereof,
including filing fees and the reasonable fees and disbursements of counsel to
the Underwriter and the Fund in connection therewith, (vi) the printing and
delivery to the Underwriter of copies of each preliminary
prospectus/statement, any Term Sheets and of the Prospectus and any amendments
or supplements thereto, (vii) the fees and expenses of any transfer agent or
registrar for the Shares, and (viii) the fees charged by rating agencies
rating the Shares.


                                      14
<PAGE>


     (b) Termination of Agreement. If this Agreement is terminated by the
Underwriter in accordance with the provisions of Section 6 or Section 10(a)(i)
hereof, the Fund or the Adviser shall reimburse, or arrange for an affiliate
to reimburse, the Underwriter for all of its out-of-pocket expenses, including
the reasonable fees and disbursements of counsel to the Fund and the
Underwriter.

     SECTION 6. Conditions of Underwriter's Obligations. The obligations of
the Underwriter hereunder are subject to the accuracy of the representations
and warranties of the Fund and the Adviser contained in Section 1 hereof, or
in the certificates of any officer of the Fund and the Adviser delivered
pursuant to the provisions hereof, to the performance by the Fund and the
Adviser of their respective covenants and obligations hereunder, and to the
following further conditions:

     (a) Effectiveness of Registration Statement. The Registration Statement
including any Rule 462(b) Registration Statement has become effective and at
Closing Time no stop order suspending the effectiveness of the Registration
Statement shall have been issued under the 1933 Act or proceedings therefor
initiated or threatened by the Commission and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of counsel to the Underwriter and the Fund. Either (i)
a certificate has been filed with the Commission in accordance with Rule
497(j) or a prospectus and statement of additional information have been filed
with the Commission in accordance with Rule 497(c), or (ii) a prospectus and
statement of additional information containing the Rule 430A Information shall
have been filed with the Commission in accordance with Rule 497(h) (or a
post-effective amendment providing such information shall have been filed and
declared effective in accordance with the requirements of Rule 430A) or, if
the Fund has elected to rely upon Rule 434, a Term Sheet shall have been filed
with the Commission in accordance with Rule 497(h).

     (b) Opinion of Counsel for the Fund and the Underwriter. At Closing Time,
the Underwriter shall have received the favorable opinion, dated as of Closing
Time, of Sidley Austin Brown & Wood LLP, counsel to the Fund and the
Underwriter, to the effect set forth in Exhibit A hereto.

     (c) Opinion of Senior Attorney of the Adviser. At Closing Time, the
Underwriter shall have received the favorable opinion, dated as of Closing
Time, of Andrew I. Donohue, Esq., General Counsel of the Adviser, or another
senior attorney of the Adviser, in form and substance satisfactory to counsel
to the Underwriter, to the effect set forth in Exhibit B hereto and to such
further effect as counsel to the Underwriter may reasonably request.

     (d) Officers' Certificates. At Closing Time, there shall not have been,
since the date hereof or since the respective dates as of which information is
given in the Prospectus, any material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Fund, whether or not arising in the ordinary course of
business, and the Underwriter shall have received (A) a certificate of the
President or a Vice President of the Fund, dated as of Closing Time, to the
effect that (i) there has been no such material adverse change, (ii) the
representations and warranties in Section 1(a) hereof are true and correct
with the same force and effect as though expressly made at and as of Closing
Time, (iii) the Fund has complied with all agreements and satisfied all
conditions on its part to be


                                      15
<PAGE>


performed or satisfied at or prior to Closing Time, and (iv) no stop order
suspending the effectiveness of the Registration Statement has been issued and
no proceedings for that purpose have been instituted or are pending or are
contemplated by the Commission and (B) a certificate of the President or a
Vice President of the Adviser, dated as of Closing Time, to the effect that
(i) the representations and warranties in Sections 1(a) and 1(b) hereof are
true and correct with the same force and effect as though expressly made at
and as of Closing Time, and (ii) the Adviser has complied with all agreements
and satisfied all conditions on its part to be performed or satisfied at or
prior to Closing Time.

     (e) Accountant's Comfort Letter. At the time of the execution of this
Agreement, the Underwriter shall have received from Ernst & Young LLP a
letter, dated such date, in form and substance satisfactory to the Underwriter
containing statements and information of the type ordinarily included in
accountants' "comfort letters" to underwriters with respect to the financial
statements and certain financial information contained in the Registration
Statement and the Prospectus, to the effect set forth in Exhibit C hereto and
to such further effect as counsel to the Underwriter may reasonably request.

     (f) Bring-down Comfort Letter. At Closing Time, the Underwriter shall
have received from Ernst & Young LLP a letter, dated as of Closing Time, to
the effect that they reaffirm the statements made in the letter, furnished
pursuant to subsection (e) of this Section, except that the "specified date"
referred to shall be a date not more than three business days prior to Closing
Time.

     (g) Ratings Letters. Subsequent to the execution and delivery of this
Agreement and prior to Closing Time, there shall not have occurred any
downgrading, nor shall any notice have been given of (i) any intended or
potential downgrading or (ii) any review or possible change that indicates
anything other than a stable outlook, in the rating accorded any securities of
or guaranteed by the Fund by any "nationally recognized statistical rating
organization," as such term is defined for purposes of Rule 436(g)(2) under
the 1933 Act; and at Closing Time, S&P and Moody's shall have confirmed by
letter that the Shares have been rated AAA and Aaa, respectively, by such
agencies.

     (h) Asset Coverage. As of the Closing Date and assuming the receipt of
the net proceeds from the sale of the Shares, the 1940 Act AMPS Asset Coverage
and the AMPS Basic Maintenance Amount (each as defined in the Fund's Charter)
each will be met.

     (i) Additional Documents. At Closing Time, counsel to the Fund and the
Underwriter shall have been furnished with such documents and opinions as it
may reasonably require for the purpose of enabling it to pass upon the
issuance and sale of the Shares as herein contemplated, or in order to
evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Fund in connection with the issuance and sale of the Shares as
herein contemplated shall be reasonably satisfactory in form and substance to
the Underwriter and counsel to the Fund and the Underwriter.

     (j) Termination of Agreement. If any condition specified in this Section
shall not have been fulfilled when and as required to be fulfilled, this
Agreement, may be terminated by


                                      16
<PAGE>


the Underwriter by notice to the Fund at any time at or prior to Closing Time
and such termination shall be without liability of any party to any other
party except as provided in Section 5 and except that Sections 1, 7, 8 and 9
shall survive any such termination and remain in full force and effect.

     SECTION 7.  Indemnification.

     (a) Indemnification of the Underwriter. (1) The Fund and the Adviser
jointly and severally agree to indemnify and hold harmless the Underwriter and
each person, if any, who controls the Underwriter within the meaning of
Section 15 of the 1933 Act or Section 25 of the 1934 Act and any director,
officer, employee or affiliate thereof as follows:

         (i) against any and all loss, liability, claim, damage and expense
     whatsoever, as incurred, arising out of any untrue statement or alleged
     untrue statement of a material fact contained in the Registration
     Statement (or any amendment thereto), including the Rule 430A Information
     and the Rule 434 Information, if applicable, or the omission or alleged
     omission therefrom of a material fact required to be stated therein or
     necessary to make the statements therein not misleading or arising out of
     any untrue statement or alleged untrue statement of a material fact
     included in any preliminary prospectus/statement or the Prospectus (or
     any amendment or supplement thereto), or the omission or alleged omission
     therefrom of a material fact necessary in order to make the statements
     therein, in the light of the circumstances under which they were made,
     not misleading;

         (ii) against any and all loss, liability, claim, damage and expense
     whatsoever, as incurred, to the extent of the aggregate amount paid in
     settlement of any litigation, or any investigation or proceeding by any
     governmental agency or body, commenced or threatened, or of any claim
     whatsoever based upon any such untrue statement or omission, provided
     that (subject to Section 7(d) below) any such settlement is effected with
     the written consent of the indemnifying party; and

         (iii) against any and all expense whatsoever, as incurred (including
     the fees and disbursements of counsel chosen by the Underwriter)
     reasonably incurred in investigating, preparing or defending against any
     litigation, or any investigation or proceeding by any governmental agency
     or body, commenced or threatened, or any claim whatsoever based upon any
     such untrue statement or omission, or any such alleged untrue statement
     or omission, to the extent that any such expense is not paid under (i) or
     (ii) above;

provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Fund by the
Underwriter expressly for use in the Registration Statement (or any amendment
thereto), including the Rule 430A Information and the Rule 434 Information, if
applicable, or any preliminary prospectus/statement or the Prospectus (or any
amendment or supplement thereto).


                                      17
<PAGE>

     (b) Indemnification of Fund, Adviser, General Partner, and Directors and
Officers. The Underwriter agrees to indemnify and hold harmless the Fund, the
Adviser, the directors of the Fund, the general partner of the Adviser, each
of the Fund's officers who signed the Registration Statement, and each person,
if any, who controls the Fund or the Adviser within the meaning of Section 15
of the 1933 Act or Section 20 of the 1934 Act, against any and all loss,
liability, claim, damage and expense described in the indemnity contained in
subsection (a) of this Section, as incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions, made in
the Registration Statement (or any amendment thereto) including the Rule 430A
Information and the Rule 434 Information, if applicable, or in any preliminary
prospectus/statement or the Prospectus (or any amendment or supplement
thereto) in reliance upon and in conformity with written information furnished
to the Fund by the Underwriter expressly for use in the Registration Statement
(or any amendment thereto), or any preliminary prospectus/statement or the
Prospectus (or any amendment or supplement thereto).

     (c) Actions against Parties, Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party
of any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve
such indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve
it from any liability which it may have otherwise than on account of this
indemnity agreement. In the case of parties indemnified pursuant to Section
7(a) above, counsel to the indemnified parties shall be selected by the
Underwriter, and, in the case of parties indemnified pursuant to Section 7(b)
above, counsel to the indemnified parties shall be selected by the Fund and
the Adviser. An indemnifying party may participate at its own expense in the
defense of any such action; provided, however, that counsel to the
indemnifying party shall not (except with the consent of the indemnified
party) also be counsel to the indemnified party. In no event shall the
indemnifying parties be liable for the fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. No indemnifying party shall, without the
prior written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever in respect of which indemnification or
contribution could be sought under this Section 7 or Section 8 hereof (whether
or not the indemnified parties are actual or potential parties thereto),
unless such settlement, compromise or consent (i) includes an unconditional
release of each indemnified party from all liability arising out of such
litigation, investigation, proceeding or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.


                                      18
<PAGE>


     (d) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated
by Section 7(a)(ii) effected without its written consent if (i) such
settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party
shall have received notice of the terms of such settlement at least 30 days
prior to such settlement being entered into and (iii) such indemnifying party
shall not have reimbursed such indemnified party in accordance with such
request prior to the date of such settlement.

     SECTION 8.  Contribution. If the indemnification provided for in Section
7 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Fund and the
Adviser on the one hand and the Underwriter on the other hand from the
offering of the Shares pursuant to this Agreement or (ii) if the allocation
provided by clause (i) is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Fund and the Adviser on
the one hand and of the Underwriter on the other hand in connection with the
statements or omissions which resulted in such losses, liabilities, claims,
damages or expenses, as well as any other relevant equitable considerations.

     The relative benefits received by the Fund and the Adviser on the one
hand and the Underwriter on the other hand in connection with the offering of
the Shares pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Shares pursuant to this Agreement (before deducting expenses) received by the
Fund, and the total underwriting commission received by the Underwriter, in
each case as set forth on the cover of the Prospectus, or, if Rule 434 is
used, the corresponding location on the Term Sheet, bear to the aggregate
initial public offering price of the Shares as set forth on such cover.

     The relative fault of the Fund and the Adviser on the one hand and the
Underwriter on the other hand shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to
information supplied by the Fund and the Adviser or by the Underwriter and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.

     The Fund, the Adviser and the Underwriter agree that it would not be just
and equitable if contribution pursuant to this Section 8 were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to above in this Section 8.
The aggregate amount of losses, liabilities, claims, damages and expenses
incurred by an indemnified party and referred to above in this Section 7 shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by


                                      19
<PAGE>


any governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue or alleged untrue statement or omission
or alleged omission.

     Notwithstanding the provisions of this Section 8, the Underwriter shall
not be required to contribute any amount in excess of the amount by which the
total price at which the Shares underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which the
Underwriter has otherwise been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission.

     No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.

     For purposes of this Section 8, each person, if any, who controls the
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as the Underwriter,
and each director of the Fund and the Adviser, respectively, each officer of
the Fund who signed the Registration Statement and each person, if any, who
controls the Fund and the Adviser within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act, shall have the same rights to contribution
as the Fund and the Adviser.

     SECTION 9.  Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Fund or of the Adviser
submitted pursuant hereto, shall remain operative and in full force and
effect, regardless of any investigation made by or on behalf of the
Underwriter or controlling person, or by or on behalf of the Fund or the
Adviser and shall survive delivery of the Shares to the Underwriter.

     SECTION 10.  Termination of Agreement.

     (a) Termination; General. The Underwriter may terminate this Agreement by
notice to the Fund, at any time at or prior to Closing Time (i) if there has
been, since the time of execution of this Agreement or since the respective
dates as of which information is given in the Prospectus, any material adverse
change in the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Fund or the Adviser, whether or not
arising in the ordinary course of business, or (ii) if there has occurred any
material adverse change in the financial markets in the United States or the
international financial markets, any outbreak of hostilities or escalation
thereof or other calamity or crisis or any change or development involving a
prospective change in national or international political, financial or
economic conditions, in each case the effect of which is such as to make it,
in the judgment of the Underwriter, impracticable or inadvisable to market the
Shares or to enforce contracts for the sale of the Shares, or (iii) if trading
in any securities of the Fund has been suspended or materially limited by the
Commission or the New York Stock Exchange or such other national securities
exchange upon which the Fund's securities trade, or if trading generally on
the New York Stock Exchange or the American Stock Exchange or in the Nasdaq
National Market System has been suspended or materially limited, or minimum or
maximum prices for trading have been fixed, or maximum ranges for prices for
securities have been required, by any of said


                                      20
<PAGE>


exchanges or by such system or by order of the Commission, the NASD or any
other governmental authority, or a material disruption has occurred in
commercial banking or securities settlement or clearance services in the
United States or (iv) if a banking moratorium has been declared by either
Federal or New York authorities.

     (b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 5 hereof, and provided further that
Sections 1, 7, 8 and 9 shall survive such termination and remain in full force
and effect.

     SECTION 11.  Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriter shall be directed to Merrill Lynch & Co. Inc., Merrill Lynch,
Pierce, Fenner & Smith Incorporated at 4 World Financial Center, New York, New
York 10080, Attention: Equity Capital Markets; notices to the Fund and the
Adviser shall be directed to 800 Scudders Mill Road, Plainsboro, New Jersey
08536, Attention: Donald C. Burke.

     SECTION 12.  Parties. This Agreement shall inure to the benefit of and be
binding upon the Underwriter, the Fund, the Adviser and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Underwriter, the Fund, the Adviser and their respective successors and the
controlling persons and officers, directors and general partner referred to in
Sections 7 and 8 and their heirs and legal representatives, any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
provision herein contained. This Agreement and all conditions and provisions
hereof are intended to be for the sole and exclusive benefit of the
Underwriter, the Fund and the Adviser and their respective successors, and
said controlling persons and officers and directors and their heirs and legal
representatives, and for the benefit of no other person, firm or corporation.
No purchaser of Shares from the Underwriter shall be deemed to be a successor
merely by reason of such purchase.

     SECTION 13.  GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.

     SECTION 14.  Effect of Headings. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.



                                      21
<PAGE>


     If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Fund a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the Underwriter and the Fund and the Adviser in accordance with its
terms.

                                          Very truly yours,

                                          MUNIYIELD INSURED FUND, INC.

                                          By: ________________________________
                                              Authorized Officer

                                          FUND ASSET MANAGEMENT, L.P.

                                          By: PRINCETON SERVICES, INC.,
                                              General Partner

                                          By: ________________________________
                                              Authorized Officer


CONFIRMED AND ACCEPTED,
   as of the date first above written:

MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
            INCORPORATED

By: ________________________________
     Authorized Signatory



                                      22
<PAGE>


                                  SCHEDULE A
                                  ----------



                         MUNIYIELD INSURED FUND, INC.
                           (a Maryland corporation)

                                 $130,000,000


                        Auction Market Preferred Stock

                            2,600 Shares, Series H

                            2,600 Shares, Series I



                  (Liquidation Preference $25,000 per share)


     1.   The initial public offering price per share for the Shares,
determined as provided in Section 2 hereof shall be $25,000 plus accumulated
dividends, if any, from the date of original issue.

     2.   The purchase price per share for the Shares to be paid by the
Underwriter shall be $24,750 plus accumulated dividends, if any, from the date
of original issue, being an amount equal to the initial public offering price
set forth above less $250 per share.

     3.   The dividend rate for the Series H AMPS for the initial dividend
period ending [          , 2004] shall be [    ]%, and the dividend rate for
the Series I AMPS for the initial dividend period ending [          , 2004]
shall be [    ]%.



                                      23
<PAGE>


                                                                     Exhibit A



                       FORM OF OPINION OF FUND'S COUNSEL
                          TO BE DELIVERED PURSUANT TO
                                 SECTION 6(b)


1.   The Fund has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Maryland.

2.   The Fund has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectus and to
enter into and perform its obligations under the Purchase Agreement.

3.   The Fund is duly qualified as a foreign corporation to transact business
and is in good standing in each jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or to be in good
standing would not result in a material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Fund, whether or not arising in the ordinary course of
business (a "Material Adverse Effect").

4.   The authorized, issued and outstanding capital stock of the Fund is as
set forth in the Prospectus under the caption "Description of Capital Stock."
The outstanding shares of Common Stock of the Fund and the Outstanding AMPS
have been duly authorized and validly issued and are fully paid and
nonassessable.

5.   The Shares to be purchased by the Underwriter from the Fund have been
duly authorized for issuance and sale to the Underwriter pursuant to the
Purchase Agreement and, when issued and delivered by the Fund pursuant to the
Purchase Agreement against payment of the consideration set forth in the
Purchase Agreement, will be validly issued and fully paid and non-assessable
and no holder of the Shares is or will be subject to personal liability by
reason of being such a holder.

6.   The issuance of the Shares is not subject to the preemptive or other
similar rights of any securityholder of the Fund.

7.   To the best of our knowledge, the Fund does not have any subsidiaries.

8.   The Purchase Agreement has been duly authorized, executed and delivered
by the Fund and complies with all applicable provisions of the Investment
Company Act.

9.   The Registration Statement, including any Rule 462(b) Registration
Statement, has been declared effective under the 1933 Act; any required filing
of the certificate pursuant to Rule 497(j) or the Prospectus pursuant to Rule
497(c) or Rule 497(h), as the case may be, has been made in the manner and
within the time period required by Rule 497(j), Rule 497(c) or Rule


                                      A-1
<PAGE>


497(h), as the case may be; and, to the best of our knowledge, no stop order
suspending the effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no proceedings
for that purpose have been instituted or are pending or threatened by the
Commission.

10.  The Registration Statement, including any Rule 462(b) Registration
Statement, the Rule 430A Information and the Rule 434 Information, as
applicable, the Prospectus, and each amendment or supplement to the
Registration Statement and the Prospectus, as of their respective effective or
issue dates (other than the financial statements and supporting schedules
included or incorporated by reference therein or omitted therefrom, as to
which we need express no opinion) complied as to form in all material respects
with the requirements of the 1933 Act, the Investment Company Act and the
Rules and Regulations.

11.  The form of certificate(s) used to evidence each of the Shares complies
in all material respects with all applicable statutory requirements and with
any applicable requirements of the charter and by-laws of the Fund. To the
best of our knowledge, there is not pending or threatened any action, suit,
proceeding, inquiry or investigation, to which the Fund is a party, or to
which the property of the Fund is subject, before or brought by any court or
governmental agency or body, domestic or foreign, which might reasonably be
expected to result in a Material Adverse Effect, or which might reasonably be
expected to materially and adversely affect the properties or assets thereof
or the consummation of the transactions contemplated in the Purchase Agreement
or the performance by the Fund of its obligations thereunder, other than those
disclosed in the Prospectus.

12.  The information in the Prospectus under "Description of AMPS,"
"Description of Capital Stock," and "Taxes" and in the Registration Statement
under Item 29, to the extent that it constitutes matters of law, summaries of
legal matters, the Fund's charter and bylaws or legal proceedings, or legal
conclusions, has been reviewed by us and is correct in all material respects.

13.  To the best of our knowledge, there are no statutes or regulations that
are required to be described in the Prospectus that are not described as
required.

14.  All descriptions in the Prospectus of contracts and other documents to
which the Fund is a party are accurate in all material respects; to the best
of our knowledge, there are no franchises, contracts, indentures, mortgages,
loan agreements, notes, leases or other instruments of the Fund required to be
described or referred to in the Registration Statement or to be filed as
exhibits thereto other than those described or referred to therein or filed or
incorporated by reference as exhibits thereto, and the descriptions thereof or
references thereto are correct in all material respects.

15.  To the best of our knowledge, the Fund is not in violation of its charter
or by-laws and no default by the Fund exists in the due performance or
observance of any material obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan agreement, note, lease or
other agreement or instrument that is described or referred to in the
Registration Statement or the Prospectus or filed or incorporated by reference
as an exhibit to the Registration Statement.


                                      A-2
<PAGE>


16.  No filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any court or governmental authority
or agency, domestic or foreign (other than under the 1933 Act, the 1934 Act,
the Investment Company Act, the Rules and Regulations, which have been
obtained, or as may be required under the securities or blue sky laws of the
various states, as to which we need express no opinion) is necessary or
required in connection with the due authorization, execution and delivery of
the Purchase Agreement, the Advisory Agreement, the Custody Agreement, the
Auction Agreement and the Letter of Representations or for the offering,
issuance, sale or delivery of the Shares.

17.  The Advisory Agreement and the Custody Agreement have each been duly
authorized and approved by the Fund and comply as to form in all material
respects with all applicable provisions of the Investment Company Act, and
each has been duly executed by the Fund.

18.  Each of the Auction Agent Agreement and the Letter of Representations has
been duly authorized, executed and delivered by the Fund, and each constitutes
a valid and binding obligation of the Fund, enforceable in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization
or other laws relating to or affecting creditors' rights and to general
equitable principles.

19.  The Fund is registered with the Commission under the Investment Company
Act as a closed-end, non-diversified management investment company, and all
required action has been taken by the Fund under the 1933 Act, the Investment
Company Act and the Rules and Regulations to make the public offering and
consummate the sale of the Shares pursuant to the Purchase Agreement; the
provisions of the charter and the by-laws of the Fund comply as to form in all
material respects with the requirements of the Investment Company Act; and, to
the best of our knowledge and information, no order of suspension or
revocation of such registration under the Investment Company Act, pursuant to
Section 8(e) of the Investment Company Act, has been issued or proceedings
therefor initiated or threatened by the Commission.

20.  The execution, delivery and performance of the Purchase Agreement and the
consummation of the transactions contemplated in the Purchase Agreement and in
the Registration Statement (including the issuance and sale of the Shares, and
the use of the proceeds from the sale of the Shares as described in the
Prospectus under the caption "Use of Proceeds") and compliance by the Fund
with its obligations under the Purchase Agreement do not and will not, whether
with or without the giving of notice or lapse of time or both, conflict with
or constitute a breach of, or default or Repayment Event (as defined in
Section 1(a)(xi) of the Purchase Agreement) under or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of
the Fund pursuant to any contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, lease or any other agreement or instrument, known to
us, to which the Fund is a party or by which it may be bound, or to which any
of the property or assets of the Fund is subject (except for such conflicts,
breaches or defaults or liens, charges or encumbrances that would not have a
Material Adverse Effect), nor will such action result in any violation of the
provisions of the charter or by-laws of the Fund, or any applicable law,
statute, rule, regulation, judgment, order, writ or decree, known to us, of
any


                                     A-3
<PAGE>


government, government instrumentality or court, domestic or foreign, having
jurisdiction over the Fund or any of its properties, assets or operations.

     Nothing has come to our attention that has caused us to believe that the
Registration Statement or any amendment thereto, including the Rule 430A
Information and Rule 434 Information (if applicable), (except for financial
statements and schedules and other financial data included or incorporated by
reference therein or omitted therefrom, as to which we need make no
statement), at the time such Registration Statement or any such amendment
became effective, contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading or that the Prospectus or any amendment
or supplement thereto (except for financial statements and schedules and other
financial data included or incorporated by reference therein or omitted
therefrom, as to which we need make no statement), at the time the Prospectus
was issued, at the time any such amended or supplemented prospectus was issued
or at the Closing Time, included or includes an untrue statement of a material
fact or omitted or omits to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading.

     In rendering such opinion, such counsel may rely as to matters of fact
(but not as to legal conclusions), to the extent they deem proper, on
certificates and written statements of responsible officers of and accountants
for the Fund and the Adviser and public officials. Such opinion shall not
state that it is to be governed or qualified by, or that it is otherwise
subject to, any treatise, written policy or other document relating to legal
opinions, including, without limitation, the Legal Opinion Accord of the ABA
Section of Business Law (1991).



                                     A-4
<PAGE>


                                                                     Exhibit B

           FORM OF OPINION OF THE GENERAL COUNSEL OR SENIOR ATTORNEY
                   OF THE INVESTMENT ADVISER TO BE DELIVERED
                           PURSUANT TO SECTION 6(c)

     (1)  The Adviser has been duly organized as a limited partnership under
the laws of the State of Delaware, with power and authority to conduct its
business as described in the Registration Statement and in the Prospectus.

     (2)  The Adviser is duly registered as an investment adviser under the
Investment Advisers Act and is not prohibited by the Investment Advisers Act
or the Investment Company Act, or the rules and regulations under such Acts,
from acting under the Advisory Agreement for the Fund as contemplated by the
Prospectus.

     (3)  This Agreement and the Advisory Agreement have been duly authorized,
executed and delivered by the Adviser, and the Advisory Agreement constitutes
a valid and binding obligation of the Adviser, enforceable in accordance with
its terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization or other laws relating to or affecting creditors' rights and to
general equity principles; and, to the best of his knowledge and information,
neither the execution and delivery of this Agreement or the Advisory Agreement
nor the performance by the Adviser of its obligations hereunder or thereunder
will conflict with, or result in a breach of, any of the terms and provisions
of, or constitute, with or without the giving of notice or the lapse of time
or both, a default under, any agreement or instrument to which the Adviser is
a party or by which the Adviser is bound, or any law, order, rule or
regulation applicable to the Adviser of any jurisdiction, court, Federal or
state regulatory body, administrative agency or other governmental body, stock
exchange or securities association having jurisdiction over the Adviser or its
properties or operations.

     (4)  To the best of his knowledge and information, the description of the
Adviser in the Registration Statement and in the Prospectus does not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading.


                                      B-1
<PAGE>


                                                                     Exhibit C

                             FORM OF ACCOUNTANTS'
                    COMFORT LETTER PURSUANT TO SECTION 6(e)

     (1)  We are independent public accountants with respect to the Fund
within the meaning of the 1933 Act, Investment Company Act and the applicable
rules and regulations thereunder adopted by the Commission;

     (2)  In our opinion the financial statements audited by us and included
or incorporated by reference in the Registration Statement and the Prospectus
comply as to form in all material respects with the applicable accounting
requirements of the 1933 Act, the Investment Company Act and the related rules
and regulations adopted by the Commission;

     Such accountants shall also state that they have performed specified
procedures, not constituting an audit, including a reading of the latest
available interim financial statements of the Fund, a reading of the minute
books of the Fund, made inquiries of officials of the Fund responsible for
financial accounting matters and such other inquiries and procedures as may be
specified in such letter, and on the basis of such inquiries and procedures
nothing came to their attention that caused them to believe that (A) the
unaudited financial statements included or incorporated by reference in the
Registration Statement do not comply as to form in all material respects with
the applicable accounting requirements of the 1933 Act, the Investment Company
Act and of the Rules and Regulations applicable to unaudited interim financial
statements included or incorporated by reference in registration statements or
are not in conformity with generally accepted accounting principles applied on
a basis substantially consistent with that of the audited financial statements
included or incorporated by reference in the Registration Statement, and (B)
during the period from the date of the unaudited financial statements included
or incorporated by reference in the Registration Statement to a specified date
not more than three days prior to the date of the Purchase Agreement, there
was any change in the capital stock or net assets of the Fund (other than by
reason of the issuance of shares of common stock in connection with the Fund's
dividend reinvestment plan, as specified in such letter) or any increase in
the long-term debt of the Fund, as compared with amounts shown on the
unaudited financial statements included or incorporated by reference in the
Registration Statement, except for changes which the Registration Statement
discloses have occurred or may occur; and in addition, they have performed
other specified procedures, not constituting an audit, with respect to certain
amounts, percentages, numerical data, financial information and financial
statements appearing in the Registration Statement, which previously have been
specified by such accountants and which shall be specified in such letter, and
have compared certain of such items with, and have found such items to be in
agreement with, the accounting and financial records of the Fund.


                                      C-1


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2K.4
<SEQUENCE>14
<FILENAME>efc4-1163_5535530ex992k4.txt
<TEXT>
                                                                EXHIBIT (k)(4)



       =================================================================

                            AUCTION AGENT AGREEMENT

                                    between

                         MUNIYIELD INSURED FUND, INC.

                                      and

                             THE BANK OF NEW YORK

                       Dated as of ___________ __, 2004

                                  Relating to

                        AUCTION MARKET PREFERRED STOCK

                                   ("AMPS"),

                             Series H and Series I

                                      of

                         MUNIYIELD INSURED FUND, INC.


       =================================================================


<PAGE>


     THIS AUCTION AGENT AGREEMENT, dated as of ________ ___, 2004, is between
MUNIYIELD INSURED FUND, INC. , a Maryland corporation (the "Company"), and THE
BANK OF NEW YORK, a New York banking corporation.

     The Company proposes to duly authorize and issue 2,600 shares of Auction
Market Preferred Stock, Series H ("Series H AMPS") and 2,600 shares of Auction
Market Preferred Stock, Series I ("Series I AMPS"), both 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 (whether or not earned or
declared), pursuant to the Company's Articles Supplementary (as defined
below). The Series H AMPS and Series I AMPS are sometimes referred to together
herein as the "AMPS." A separate Auction (as defined below) will be conducted
for each series of AMPS. The Company desires that The Bank of New York perform
certain duties as agent in connection with each Auction of shares of AMPS (in
such capacity, the "Auction Agent"), and as the transfer agent, registrar,
dividend disbursing agent and redemption agent with respect to the shares of
AMPS (in such capacity, the "Paying Agent"), upon the terms and conditions of
this Agreement, and the Company hereby appoints The Bank of New York as said
Auction Agent and Paying Agent in accordance with those terms and conditions
(hereinafter generally referred to as the "Auction Agent," except in Sections
3 and 4 below).

     NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the Company and the Auction Agent agree as follows:

I.   DEFINITIONS AND RULES OF CONSTRUCTION.

     1.1. Terms Defined by Reference to Articles Supplementary.

Capitalized terms not defined herein shall have the respective meanings
specified in the Articles Supplementary.

     1.2. Terms Defined Herein.

As used herein and in the Settlement Procedures (as defined below), the
following terms shall have the following meanings, unless the context
otherwise requires:

          (a) "Affiliate" shall mean any Person, other than Merrill Lynch,
          Pierce, Fenner & Smith Incorporated, made known to the Auction Agent
          to be controlled by, in control of, or under common control with,
          the Company or its successors.

          (b) "Agent Member" of any Person shall mean such Person's agent
          member of the Securities Depository that will act on behalf of a
          Bidder.

          (c) "Articles Supplementary" shall mean the Articles Supplementary
          of the Company, establishing the powers, preferences and rights of
          the AMPS, filed on __________ ___, 2004 with the state of Maryland.

          (d) "Auction" shall have the meaning specified in Section 2.1
          hereof.


                                       2
<PAGE>


          (e) "Auction Procedures" shall mean the Auction Procedures that are
          set forth in Paragraph 10 of the Articles Supplementary.

          (f) "Authorized Officer" shall mean each Vice President, Assistant
          Vice President, and Assistant Treasurer of the Auction Agent
          assigned to the Dealing and Trading Group of its Corporate Trust
          Department, and every other officer or employee of the Auction Agent
          designated as an "Authorized Officer" for purposes hereof in a
          written communication to the Company.

          (g) "Broker-Dealer Agreement" shall mean each agreement between the
          Auction Agent and a Broker-Dealer substantially in the form attached
          hereto as Exhibit A.

          (h) "Company Officer" shall mean the Chairman and Chief Executive
          Officer, the President, each Vice President (whether or not
          designated by a number or word or words added before or after the
          title "Vice President"), the Secretary, the Treasurer, each
          Assistant Secretary and each Assistant Treasurer of the Company and
          every other officer or employee of the Company designated as a
          "Company Officer" for purposes hereof in a written notice from the
          Company to the Auction Agent.

          (i) "Holder" shall be a holder of record of one or more shares of
          AMPS, listed as such in the stock register maintained by the Paying
          Agent pursuant to Section 4.6 hereof.

          (j) "Settlement Procedures" shall mean the Settlement Procedures
          attached as Exhibit A to the Broker-Dealer Agreement.

     1.3. Rules of Construction.

Unless the context or use indicates another or different meaning or intent,
the following rules shall apply to the construction of this Agreement:

          (a) Words importing the singular number shall include the plural
          number and vice versa.

          (b) The captions and headings herein are solely for convenience of
          reference and shall not constitute a part of this Agreement nor
          shall they affect its meaning, construction or effect.

          (c) The words "hereof," "herein," "hereto," and other words of
          similar import refer to this Agreement as a whole.

          (d) All references herein to a particular time of day shall be to
          New York City time.


                                       3
<PAGE>


II.  THE AUCTION.

     2.1. Purpose; Incorporation by Reference of Auction
          Procedures andSettlement Procedures.

          (a) The Articles Supplementary provide that the Applicable Rate on
          shares of Series H AMPS and Series I AMPS, as the case may be, for
          each Dividend Period therefor after the Initial Dividend Period
          shall be the rate per annum that a commercial bank, trust company or
          other financial institution appointed by the Company advises results
          from implementation of the Auction Procedures. The Board of
          Directors of the Company has adopted a resolution appointing The
          Bank of New York as Auction Agent for purposes of the Auction
          Procedures. The Auction Agent hereby accepts such appointment and
          agrees that, on each Auction Date, it shall follow the procedures
          set forth in this Section 2 and the Auction Procedures for the
          purpose of determining the Applicable Rate for the AMPS for the next
          Dividend Period therefor. Each periodic operation of such procedures
          is hereinafter referred to as an "Auction."

          (b) All of the provisions contained in the Auction Procedures and in
          the Settlement Procedures are incorporated herein by reference in
          their entirety and shall be deemed to be a part hereof to the same
          extent as if such provisions were set forth fully herein. In the
          case of any conflict between the terms of any document incorporated
          herein by reference and the terms hereof, the Auction Agent is,
          subject to its obligations as set forth in Section 6.1, authorized
          to perform its duties according to the terms hereof, and shall have
          no liability for so doing.

     2.2. Preparation for Each Auction; Maintenance
          of Registry of Existing Holders.

          (a) As of the date hereof, the Company shall provide the Auction
          Agent with a list of the Broker-Dealers and shall cause to be
          delivered to the Auction Agent for execution by the Auction Agent a
          Broker-Dealer Agreement signed by each such Broker-Dealer. The
          Auction Agent shall keep a list of Broker-Dealers with whom it has
          signed such Broker-Dealer Agreements, and shall endeavor to keep
          such list current and accurate and shall indicate thereon, or on a
          separate list, the identity of each Existing Holder, if any, whose
          most recent Order was submitted by a Broker-Dealer on such list and
          resulted in such Existing Holder continuing to hold or purchasing
          shares of AMPS. Not later than five Business Days prior to any
          Auction Date for which any change in such list of Broker-Dealers is
          to be effective, the Company shall notify the Auction Agent in
          writing of such change and, if any such change is the addition of a
          Broker-Dealer to such list, the Company shall cause to be delivered
          to the Auction Agent for execution by the Auction Agent a
          Broker-Dealer Agreement signed by such Broker-Dealer. The Auction
          Agent shall have entered into a Broker-Dealer Agreement with each
          Broker-Dealer prior to the participation of any such Broker-Dealer
          in any Auction.


                                       4
<PAGE>


          (b) In the event that the Auction Date for any Auction shall be
          changed after the Auction Agent shall have given the notice referred
          to in clause (vii) of Paragraph (a) of the Settlement Procedures,
          the Auction Agent, by such means as the Auction Agent deems
          practicable, shall give notice of such change to the Broker-Dealers
          not later than the earlier of 9:15 A.M. on the new Auction Date or
          9:15 A.M. on the old Auction Date.

          (c) The provisions contained in paragraph 2 of the Articles
          Supplementary concerning Special Dividend Periods and the
          notification of a Special Dividend Period will be followed by the
          Company and, to the extent applicable, the Auction Agent, and the
          provisions contained therein are incorporated herein by reference in
          their entirety and shall be deemed to be a part of this Agreement to
          the same extent as if such provisions were set forth fully herein.

          (d) (i) On each Auction Date, the Auction Agent shall determine the
          Reference Rate and the Maximum Applicable Rate. If the rate obtained
          by the Auction Agent is not quoted on an interest or discount basis,
          the Auction Agent shall convert the quoted rate to an interest rate
          after consultation with the Company as to the method of such
          conversion. Not later than 9:30 A.M. on each Auction Date, the
          Auction Agent shall notify the Company and the Broker-Dealers of the
          Reference Rate so determined and of the Maximum Applicable Rate.

               (ii) If the Reference Rate is the applicable LIBOR Rate and
          such rate is to be based on rates supplied by LIBOR Dealers and one
          or more of the LIBOR Dealers shall not provide a quotation for the
          determination of the applicable LIBOR Rate, the Auction Agent
          promptly shall notify the Company so that the Company can determine
          whether to select a Substitute LIBOR Dealer or Substitute LIBOR
          Dealers to provide the quotation or quotations not being supplied by
          any LIBOR Dealer or LIBOR Dealers. The Company promptly shall advise
          the Auction Agent of any such selection. If the Company does not
          select any such Substitute LIBOR Dealer or Substitute LIBOR Dealers,
          then the rates shall be supplied by the remaining LIBOR Dealer or
          LIBOR Dealers.

               (iii) If, after the date of this Agreement, there is any change
          in the prevailing rating of AMPS by either of the rating agencies
          (or Substitute Rating Agency or successor rating agency) referred to
          in the definition of the Maximum Applicable Rate, subject to the
          provisions of paragraph 12 of the Articles Supplementary, thereby
          resulting in any change in the corresponding applicable percentage
          or corresponding applicable spread for the AMPS, as set forth in
          said definition (the "Percentage or Spread"), the Company shall
          notify the Auction Agent in writing of such change in the Percentage
          or Spread prior to 9:00 A.M. on the Auction Date for AMPS next
          succeeding such change. The Percentage for the AMPS on the date of
          this Agreement is as specified in paragraph 10(a)(vii) of the
          Articles Supplementary. The Auction Agent shall be entitled to rely
          on the last Percentage or Spread of which it has received notice
          from the Company (or, in the absence of such notice, the Percentage
          or Spread set forth in the preceding


                                       5
<PAGE>


          sentence) in determining the Maximum Applicable Rate as set forth in
          Section 2.2(d)(i) hereof.

          (e) The Auction Agent shall maintain by series a current registry of
          the Existing Holders of the shares of each series of AMPS for
          purposes of each Auction. The Company shall use its best efforts to
          provide or cause to be provided to the Auction Agent within ten
          Business Days following the date of the Closing a list of the
          initial Existing Holders of each series of AMPS, and the
          Broker-Dealer of each such Existing Holder through which such
          Existing Holder purchased such shares. The Auction Agent may rely
          upon, as evidence of the identities of the Existing Holders, such
          list, the results of each Auction and notices from any Existing
          Holder, the Agent Member of any Existing Holder or the Broker-Dealer
          of any Existing Holder with respect to such Existing Holder's
          transfer of any shares of AMPS to another Person.

          (f) In the event of any partial redemption of any series of AMPS,
          upon notice by the Company to the Auction Agent of such partial
          redemption, the Auction Agent promptly shall request the Securities
          Depository to notify the Auction Agent of the identities of the
          Agent Members (and the respective numbers of shares) from the
          accounts of which shares have been called for redemption and the
          person or department at such Agent Member to contact regarding such
          redemption, and at least two Business Days prior to the Auction
          preceding the date of redemption with respect to shares of such
          series of AMPS being partially redeemed, the Auction Agent shall
          request each Agent Member so identified to disclose to the Auction
          Agent (upon selection by such Agent Member of the Existing Holders
          whose shares are to be redeemed) the number of shares of such series
          of AMPS of each such Existing Holder, if any, to be redeemed by the
          Company, provided that the Auction Agent has been furnished with the
          name and telephone number of a person or department at such Agent
          Member from which it is to request such information. In the absence
          of receiving any such information with respect to an Existing
          Holder, from such Existing Holder's Agent Member or otherwise, the
          Auction Agent may continue to treat such Existing Holder as having
          ownership of the number of shares of such series of AMPS shown in
          the Auction Agent's registry of Existing Holders.

               (i) The Auction Agent shall register a transfer of the
          ownership of shares of a series of AMPS from an Existing Holder to
          another Existing Holder, or to another Person if permitted by the
          Company, only if (A) such transfer is made pursuant to an Auction or
          (B) if such transfer is made other than pursuant to an Auction, the
          Auction Agent has been notified of such transfer in writing in a
          notice substantially in the form of Exhibit C to the Broker-Dealer
          Agreements, by such Existing Holder or by the Agent Member of such
          Existing Holder. The Auction Agent is not required to accept any
          notice of transfer delivered for an Auction unless it is received by
          the Auction Agent by 3:00 P.M. on the Business Day next preceding
          the applicable Auction Date. The Auction Agent shall rescind a
          transfer made on the registry of the Existing Holders of any shares
          of AMPS if the Auction Agent has been notified in writing, in a
          notice substantially


                                       6
<PAGE>


          in the form of Exhibit D to the Broker-Dealer Agreement, by the
          Agent Member or the Broker-Dealer of any Person that (i) purchased
          any shares of AMPS and the seller failed to deliver such shares or
          (ii) sold any shares of AMPS and the purchaser failed to make
          payment to such Person upon delivery to the purchaser of such
          shares.

          (g) The Auction Agent may, but shall not be obligated, to request
          that the Broker-Dealers, as set forth in Section 3.2(c) of the
          Broker-Dealer Agreements, provide the Auction Agent with a list of
          their respective customers that such Broker-Dealers believe are
          Beneficial Owners of shares of any series of AMPS. The Auction Agent
          shall keep confidential any such information and shall not disclose
          any such information so provided to any Person other than the
          relevant Broker-Dealer and the Company; provided, however, that the
          Auction Agent reserves the right and is authorized to disclose any
          such information if (i) it is ordered to do so by a court of
          competent jurisdiction or a regulatory body, judicial or
          quasi-judicial agency or authority having the authority to compel
          such disclosure, (ii) it is advised by its counsel that its failure
          to do so would be unlawful or (iii) failure to do so would expose
          the Auction Agent to loss, liability, claim, damage or expense for
          which it has not received indemnity or security satisfactory to it.

     2.3. Auction Schedule.

     The Auction Agent shall conduct Auctions in accordance with the schedule
set forth below. Such schedule may be changed by the Auction Agent with the
consent of the Company, which consent shall not be withheld unreasonably. The
Auction Agent shall give notice of any such change to each Broker-Dealer. Such
notice shall be received prior to the first Auction Date on which any such
change shall be effective.

                        Time                           Event
                        ----                           -----

         By 9:30 A.M.                  Auction Agent advises the Company and
                                       the Broker-Dealers of the Reference
                                       Rate and the Maximum Applicable Rate as
                                       set forth in Section 2.2(d)(i) hereof.

         9:30 A.M. - 1:00 P.M.         Auction Agent assembles information
                                       communicated to it by Broker-Dealers as
                                       provided in Paragraph 10(c)(i) of the
                                       Articles Supplementary. Submission
                                       deadline is 1:00 P.M.

         Not earlier than 1:00 P.M.    Auction Agent makes determinations
                                       pursuant to Paragraph 10(d)(i) of the
                                       Articles Supplementary.

         By approximately 3:00 P.M.    Auction Agent advises the Company of
                                       the results of the Auction as provided
                                       in Paragraph 10(d)(ii) of the Articles
                                       Supplementary.

                                       Submitted Bids and Submitted Sell
                                       Orders are accepted and rejected in
                                       whole or in part and shares of AMPS


                                       7
<PAGE>


                                       allocated as provided in Paragraph
                                       10(e) of the Articles Supplementary.

                                       Auction Agent gives notice of the
                                       Auction results as set forth in Section
                                       2.4 hereof.

     2.4. Notice of Auction Results.

     On each Auction Date, the Auction Agent shall notify Broker-Dealers of
the results of the Auction held on such date by telephone or other mutually
acceptable electronic means as set forth in Paragraph (a) of the Settlement
Procedures.

     2.5. Broker-Dealers.

          (a) Not later than 12:00 noon on each Auction Date, the Company
          shall pay to the Auction Agent in Federal Funds or similar same-day
          funds an amount in cash equal to (i) in the case of any Auction Date
          immediately preceding a 7-Day Dividend Period, the product of (A) a
          fraction the numerator of which is the number of days in such
          Dividend Period (calculated by counting the first day of such
          Dividend Period but excluding the last day thereof) and the
          denominator of which is 360, times (B) 1/4 of 1%, times (C) $25,000
          times (D) the sum of the aggregate number of Outstanding shares of
          the series of AMPS for which the Auction is conducted and (ii) in
          the case of any Special Dividend Period, the amount determined by
          mutual consent of the Company and the Broker-Dealers pursuant to
          Section 3.5 of the Broker-Dealer Agreements. The Auction Agent shall
          apply such moneys as set forth in Section 3.5 of the Broker-Dealer
          Agreements and shall thereafter remit to the Company any remaining
          funds paid to the Auction Agent pursuant to this Section 2.5(a).

          (b) The Company may designate an Affiliate or Merrill Lynch, Pierce,
          Fenner & Smith Incorporated to act as a Broker-Dealer.

          (c) The Auction Agent shall terminate any Broker-Dealer Agreement as
          set forth therein if so directed by the Company.

          (d) Subject to Section 2.5(b) hereof, the Auction Agent from time to
          time shall enter into such Broker-Dealer Agreements as the Company
          shall request.

          (e) Subject to Section 2.2(a), the Auction Agent shall maintain a
          list of Broker-Dealers.

     2.6. Ownership of Shares of AMPS and Submission of Bids
          by the Company and its Affiliates.

     Neither the Company nor any Affiliate of the Company may submit any Sell
Order or Bid, directly or indirectly, in any Auction, except that an Affiliate
of the Company that is a Broker-Dealer may submit a Sell Order or Bid on
behalf of a Beneficial Owner or a Potential Beneficial Owner. The Company
shall notify the Auction Agent if the Company or, to the best


                                       8
<PAGE>


of the Company's knowledge, any Affiliate of the Company becomes a Beneficial
Owner of any shares of AMPS. Any shares of a series of AMPS redeemed,
purchased or otherwise acquired (i) by the Company shall not be reissued,
except in accordance with the requirements of the Securities Act of 1933, as
amended, or (ii) by its Affiliates shall not be transferred (other than to the
Company). The Auction Agent shall have no duty or liability with respect to
enforcement of this Section 2.6.

     2.7. Access to and Maintenance of Auction Records.

     The Auction Agent shall afford to the Company, its agents, independent
public accountants and counsel, access at reasonable times during normal
business hours to review and make extracts or copies (at the Company's sole
cost and expense) of all books, records, documents and other information
concerning the conduct and results of Auctions, provided that any such agent,
accountant or counsel shall furnish the Auction Agent with a letter from the
Company requesting that the Auction Agent afford such person access. The
Auction Agent shall maintain records relating to any Auction for a period of
two years after such Auction (unless requested by the Company to maintain such
records for such longer period not in excess of four years, then for such
longer period which shall not be in excess of four years), and such records,
in reasonable detail, shall accurately and fairly reflect the actions taken by
the Auction Agent hereunder. The Company agrees to keep confidential any
information regarding the customers of any Broker-Dealer received from the
Auction Agent in connection with this Agreement or any Auction, and shall not
disclose such information or permit the disclosure of such information without
the prior written consent of the applicable Broker-Dealer to anyone except
such agent, accountant or counsel engaged to audit or review the results of
Auctions as permitted by this Section 2.7, provided that the Company reserves
the right to disclose any such information if it is advised by its counsel
that its failure to do so would (i) be unlawful or (ii) expose it to
liability, unless the Broker-Dealer shall have offered indemnification
satisfactory to the Company. Any such agent, accountant or counsel, before
having access to such information, shall agree to keep such information
confidential and not to disclose such information or permit disclosure of such
information without the prior written consent of the applicable Broker-Dealer,
provided that such agent, accountant or counsel may reserve the right to
disclose any such information if it is advised by its counsel that its failure
to do so would (i) be unlawful or (ii) expose it to liability, unless the
Broker-Dealer shall have offered indemnification satisfactory to such agent,
accountant or counsel. The Auction Agent shall have no liability in connection
with allowing access to the Company's books, records, documents and other
information pursuant to the terms of this Section 2.7 to the Company, its
agents, independent public accountants and counsel.

III. THE AUCTION AGENT AS PAYING AGENT.

     3.1. The Paying Agent.

     The Board of Directors of the Company has adopted a resolution appointing
The Bank of New York as transfer agent, registrar, dividend disbursing agent
and redemption agent for the Company in connection with any shares of AMPS (in
such capacity, the "Paying Agent"). The Paying Agent hereby accepts such
appointment and agrees to act in accordance with its standard procedures and
the provisions of the Articles Supplementary which are specified herein with
respect to the shares of AMPS and as set forth in this Section 3.


                                       9
<PAGE>


     3.2. The Company's Notices to the Paying Agent.

     Whenever any shares of AMPS are to be redeemed, the Company promptly
shall deliver to the Paying Agent a Notice of Redemption upon the terms set
forth in Section 4(c) of the Articles Supplementary, which will be mailed by
the Company to each Holder at least five Business Days prior to the date such
Notice of Redemption is required to be mailed pursuant to the Articles
Supplementary. The Paying Agent shall have no responsibility to confirm or
verify the accuracy of any such Notice.

     3.3. The Company to Provide Funds for Dividends and Redemptions.

          (a) Not later than noon on each Dividend Payment Date, the Company
          shall deposit with the Paying Agent an aggregate amount of Federal
          Funds or similar same-day funds equal to the declared dividends to
          be paid to Holders on such Dividend Payment Date, and shall give the
          Paying Agent irrevocable instructions to apply such funds to the
          payment of such dividends on such Dividend Payment Date.

          (b) If the Company shall give a Notice of Redemption, then by noon
          of the date fixed for redemption, the Company shall deposit in trust
          with the Paying Agent an aggregate amount of Federal Funds or
          similar same-day funds sufficient to redeem such shares of AMPS
          called for redemption and shall give the Paying Agent irrevocable
          instructions and authority to pay the redemption price to the
          Holders of shares of AMPS called for redemption upon surrender of
          the certificate or certificates therefor.

     3.4. Disbursing Dividends and Redemption Price.

     After receipt of the Federal Funds or similar same-day funds and
instructions from the Company described in Sections 3.3(a) and (b) above, the
Paying Agent shall pay to the Holders (or former Holders) entitled thereto (i)
on each corresponding Dividend Payment Date, dividends on the shares of AMPS
and (ii) on any date fixed for redemption, the redemption price of any shares
of AMPS called for redemption. The amount of dividends for any Dividend Period
to be paid by the Paying Agent to Holders will be determined by the Company as
set forth in Paragraph 2 of the Articles Supplementary. The redemption price
to be paid by the Paying Agent to the Holders of any shares of AMPS called for
redemption will be determined as set forth in Paragraph 4 of the Articles
Supplementary. The Company shall notify the Paying Agent in writing of a
decision to redeem any shares of AMPS on or prior to the date specified in
Section 3.2 above, and such notice by the Company to the Paying Agent shall
contain the information required to be stated in a Notice of Redemption
required to be mailed by the Company to such Holders. The Paying Agent shall
have no duty to determine the redemption price and may rely on the amount
thereof set forth in a Notice of Redemption.


                                      10
<PAGE>


IV.  THE PAYING AGENT AS TRANSFER AGENT AND REGISTRAR.

     4.1. Original Issue of Stock Certificates.

     On the Date of Original Issue for any share of AMPS, one certificate for
each series of AMPS shall be issued by the Company and registered in the name
of Cede & Co., as nominee of the Securities Depository, and countersigned by
the Paying Agent. The Company will give the Auction Agent prior written notice
and instruction as to the issuance and redemption of AMPS.

     4.2. Registration of Transfer or Exchange of Shares.

     Except as provided in this Section 4.2, the shares of each series of AMPS
shall be registered solely in the name of the Securities Depository or its
nominee. If the Securities Depository shall give notice of its intention to
resign as such, and if the Company shall not have selected a substitute
Securities Depository acceptable to the Paying Agent prior to such
resignation, then upon such resignation, the shares of each series of AMPS, at
the Company's request, may be registered for transfer or exchange, and new
certificates thereupon shall be issued in the name of the designated
transferee or transferees, upon surrender of the old certificate in form
deemed by the Paying Agent properly endorsed for transfer with (a) all
necessary endorsers' signatures guaranteed in such manner and form as the
Paying Agent may require by a guarantor reasonably believed by the Paying
Agent to be responsible, (b) such assurances as the Paying Agent shall deem
necessary or appropriate to evidence the genuineness and effectiveness of each
necessary endorsement and (c) satisfactory evidence of compliance with all
applicable laws relating to the collection of taxes in connection with any
registration of transfer or exchange or funds necessary for the payment of
such taxes.

     4.3. Removal of Legend.

     Any request for removal of a legend indicating a restriction on transfer
from a certificate evidencing shares of a series of AMPS shall be accompanied
by an opinion of counsel stating that such legend may be removed and such
shares may be transferred free of the restriction described in such legend,
said opinion to be delivered under cover of a letter from a Company Officer
authorizing the Paying Agent to remove the legend on the basis of said
opinion.

     4.4. Lost, Stolen or Destroyed Stock Certificates.

     The Paying Agent shall issue and register replacement certificates for
certificates represented to have been lost, stolen or destroyed, upon the
fulfillment of such requirements as shall be deemed appropriate by the Company
and by the Paying Agent, subject at all times to provisions of law, the
By-Laws of the Company governing such matters and resolutions adopted by the
Company with respect to lost, stolen or destroyed securities. The Paying Agent
may issue new certificates in exchange for and upon the cancellation of
mutilated certificates. Any request by the Company to the Paying Agent to
issue a replacement or new certificate pursuant to this Section 4.4 shall be
deemed to be a representation and warranty by the Company to the Paying Agent
that such issuance will comply with provisions of applicable law and the
By-Laws and resolutions of the Company.


                                      11
<PAGE>


     4.5. Disposition of Canceled Certificates; Record Retention.

     The Paying Agent shall retain stock certificates which have been canceled
in transfer or in exchange and accompanying documentation in accordance with
applicable rules and regulations of the Securities and Exchange Commission for
two calendar years from the date of such cancellation. The Paying Agent, upon
written request by the Company, shall afford to the Company, its agents and
counsel access at reasonable times during normal business hours to review and
make extracts or copies (at the Company's sole cost and expense) of such
certificates and accompanying documentation. Upon request by the Company at
any time during this two-year period, the Paying Agent shall deliver to the
Company the canceled certificates and accompanying documentation. The Company,
at its expense, shall retain such records for a minimum additional period of
four calendar years from the date of delivery of the records to the Company
and shall make such records available during this period at any time, or from
time to time, for reasonable periodic, special, or other examinations by
representatives of the Securities and Exchange Commission. The Company also
shall undertake to furnish to the Securities and Exchange Commission, upon
demand, either at their principal office or at any regional office, complete,
correct and current hard copies of any and all such records.

     4.6. Stock Register.

     The Paying Agent shall maintain the stock register, which shall contain a
list of the Holders, the number of shares held by each Holder and the address
of each Holder. The Paying Agent shall record in the stock register any change
of address of a Holder upon notice by such Holder. In case of any written
request or demand for the inspection of the stock register or any other books
of the Company in the possession of the Paying Agent, the Paying Agent will
notify the Company and secure instructions as to permitting or refusing such
inspection; provided, however, that the Auction Agent reserves the right and
is authorized to permit such inspection if (i) it is ordered to do so by a
court of competent jurisdiction or a regulatory body, judicial or
quasi-judicial agency or authority having the authority to compel such
disclosure, (ii) it is advised by its counsel that its failure to do so would
be unlawful or (iii) failure to do so would expose the Auction Agent to loss,
liability, claim, damage or expense for which it has not received indemnity or
security satisfactory to it.

     4.7. Return of Funds.

     Any funds deposited with the Paying Agent by the Company for any reason
under this Agreement, including for the payment of dividends or the redemption
of shares of any series of AMPS, that remain with the Paying Agent after 12
months shall be repaid to the Company upon written request by the Company.



                                      12
<PAGE>


V.   REPRESENTATIONS AND WARRANTIES.

     5.1. Representations and Warranties of the Company.

     The Company represents and warrants to the Auction Agent that:

               (i) the Company is duly organized and is validly existing as a
          corporation in good standing under the laws of the State of
          Maryland, and has full power to execute and deliver this Agreement
          and to authorize, create and issue the shares of each series of
          AMPS;

               (ii) the Company is registered with the Securities and Exchange
          Commission under the Investment Company Act of 1940, as amended, as
          a closed-end, diversified, management investment company;

               (iii) this Agreement has been duly and validly authorized,
          executed and delivered by the Company and constitutes the legal,
          valid and binding obligation of the Company, enforceable against the
          Company in accordance with its terms, subject as to such
          enforceability to bankruptcy, insolvency, reorganization and other
          laws of general applicability relating to or affecting creditors'
          rights and to general equitable principles;

               (iv) the forms of the certificates evidencing the shares of
          each series of AMPS comply with all applicable laws of the State of
          Maryland;

               (v) the shares of each series of AMPS have been duly and
          validly authorized by the Company and, upon completion of the
          initial sale of the shares of such series of AMPS and receipt of
          payment therefor, will be validly issued, fully paid and
          nonassessable;

               (vi) at the time of the offering of the shares of each series
          of AMPS, the shares offered will be registered under the Securities
          Act of 1933, as amended, and no further action by or before any
          governmental body or authority of the United States or of any state
          thereof is required in connection with the execution and delivery of
          this Agreement or will be required in connection with the issuance
          of the shares of each series of AMPS, except such action as required
          by applicable state securities or insurance laws, all of which
          action will have been taken;

               (vii) the execution and delivery of this Agreement and the
          issuance and delivery of the shares of each series of AMPS do not
          and will not conflict with, violate, or result in a breach of, the
          terms, conditions or provisions of, or constitute a default under,
          the Charter or the By-Laws of the Company, any law or regulation
          applicable to the Company, any order or decree of any court or
          public authority having jurisdiction over the Company, or any
          mortgage, indenture, contract, agreement or undertaking to which the
          Company is a party or by which it is bound; and


                                      13
<PAGE>


               (viii) no taxes are payable upon or in respect of the execution
          of this Agreement or will be payable upon or in respect of the
          issuance of the shares of each series of AMPS.

     5.2. Representations and Warranties of the Auction Agent.

     The Auction Agent represents and warrants to the Company that the Auction
Agent is duly organized and is validly existing as a banking corporation in
good standing under the laws of the State of New York, and has the corporate
power to enter into and perform its obligations under this Agreement.

VI.  THE AUCTION AGENT.

     6.1. Duties and Responsibilities.

          (a) The Auction Agent is acting solely as agent for the Company
          hereunder and owes no fiduciary duties to any Person except as
          specifically provided by this Agreement. The Auction Agent owes no
          duties to any person other than the Company by reason of this
          Agreement.

          (b) The Auction Agent undertakes to perform such duties and only
          such duties as are set forth specifically in this Agreement, and no
          implied covenants or obligations shall be read into this Agreement
          against the Auction Agent.

          (c) In the absence of willful misconduct or negligence on its part,
          the Auction Agent shall not be liable for any action taken, suffered
          or omitted by it or for any error of judgment made by it in the
          performance of its duties under this Agreement. The Auction Agent
          shall not be liable for any error of judgment made in the absence of
          willful misconduct unless the Auction Agent shall have been
          negligent in ascertaining (or failing to ascertain) the pertinent
          facts.

          (d) The Auction Agent shall not be responsible or liable for any
          failure or delay in the performance of its obligations under this
          Agreement arising out of or caused, directly or indirectly, by
          circumstances beyond its reasonable control, including, without
          limitation, acts of God; earthquakes; fires, floods; wars; civil or
          military disturbances; sabotage; acts of terrorism; epidemics;
          riots; interruptions, loss or malfunctions of utilities; computer
          (hardware or software) or communications services; accidents; labor
          disputes; acts of civil or military authority or governmental
          actions; it being understood that the Auction Agent shall use
          reasonable efforts which are consistent with accepted practices in
          the banking industry to resume performance as soon as practicable
          under the circumstances. In no event shall the Auction Agent be
          responsible or liable for special, indirect or consequential loss or
          damage of any kind whatsoever (including, but not limited to, loss
          of profit), even if the Auction Agent has been advised of the
          likelihood of such loss or damage and regardless of the form of
          action.


                                      14
<PAGE>


     6.2. Rights of the Auction Agent.

          (a) The Auction Agent may rely upon, and shall be protected in
          acting or refraining from acting upon, any communication authorized
          hereby and any written instruction, notice, request, direction,
          consent, report, certificate, share certificate or other instrument,
          paper or document reasonably believed by it to be genuine. The
          Auction Agent shall not be liable for acting upon any telephone
          communication authorized hereby which the Auction Agent believes in
          good faith to have been given by the Company or by a Broker-Dealer.
          The Auction Agent may record telephone communications with the
          Company or with the Broker-Dealers or with both.

          (b) The Auction Agent may consult with counsel of its choice, and
          the written advice of such counsel shall be full and complete
          authorization and protection in respect of any action taken,
          suffered or omitted by it hereunder in good faith and in reliance
          thereon.

          (c) The Auction Agent shall not be required to advance, expend or
          risk its own funds or otherwise incur or become exposed to financial
          liability in the performance of its duties hereunder. The Auction
          Agent shall be under no liability for interest on any money received
          by it hereunder except as otherwise agreed in writing with the
          Company.

          (d) The Auction Agent may perform its duties and exercise its rights
          hereunder either directly or by or through agents or attorneys.

     6.3. Auction Agent's Disclaimer.

     The Auction Agent makes no representation as to the validity or the
adequacy of this Agreement, the Broker-Dealer Agreements or the AMPS.

     6.4. Compensation, Expenses and Indemnification.

          (a) The Company shall pay to the Auction Agent reasonable
          compensation for all services rendered by it under this Agreement
          and under the Broker-Dealer Agreements as shall be agreed by the
          Auction Agent and the Company from time to time as shall be set
          forth in a separate writing signed by the Company and the Auction
          Agent, subject to adjustments if the AMPS no longer are held of
          record by the Securities Depository or its nominee or if there shall
          be such other change as shall increase materially the Auction
          Agent's obligations hereunder or under the Broker-Dealer Agreements.

          (b) The Company shall reimburse the Auction Agent upon its request
          for all reasonable expenses, disbursements and advances incurred or
          made by the Auction Agent in accordance with any provision of this
          Agreement and of the Broker-Dealer Agreements (including the
          reasonable compensation, expenses and disbursements of its agents
          and counsel), except any expense, disbursement or advance
          attributable to its negligence or willful misconduct.


                                      15
<PAGE>


          (c) The Company shall indemnify the Auction Agent for, and hold it
          harmless against, any loss, liability or expense incurred without
          negligence or willful misconduct on its part arising out of or in
          connection with its agency under this Agreement and under the
          Broker-Dealer Agreements, including the costs and expenses of
          defending itself against any claim of liability in connection with
          its exercise or performance of any of its duties hereunder and
          thereunder, except such as may result from its negligence or willful
          misconduct.

VII. MISCELLANEOUS.

     7.1. Term of Agreement.

          (a) The term of this Agreement is unlimited unless it shall be
          terminated as provided in this Section 7.1. The Company may
          terminate this Agreement at any time by so notifying the Auction
          Agent, provided that if any AMPS remain outstanding the Company
          shall have entered into an agreement in substantially the form of
          this Agreement with a successor auction agent. The Auction Agent may
          terminate this Agreement upon prior notice to the Company on the
          date specified in such notice, which date shall be no earlier than
          60 days after delivery of such notice. If the Auction Agent resigns
          while any shares of AMPS remain outstanding, the Company shall use
          its best efforts to enter into an agreement with a successor auction
          agent containing substantially the same terms and conditions as this
          Agreement.

          (b) Except as otherwise provided in this Section 7.1(b), the
          respective rights and duties of the Company and the Auction Agent
          under this Agreement shall cease upon termination of this Agreement.
          The Company's representations, warranties, covenants and obligations
          to the Auction Agent under Sections 5 and 6.4 hereof shall survive
          the termination hereof. Upon termination of this Agreement, the
          Auction Agent shall (i) resign as Auction Agent under the
          Broker-Dealer Agreements, (ii) at the Company's request, deliver
          promptly to the Company copies of all books and records maintained
          by it in connection with its duties hereunder, and (iii) at the
          request of the Company, transfer promptly to the Company or to any
          successor auction agent any funds deposited by the Company with the
          Auction Agent (whether in its capacity as Auction Agent or as Paying
          Agent) pursuant to this Agreement which have not been distributed
          previously by the Auction Agent in accordance with this Agreement.

          (c) If the AMPS shall no longer settle through an electronic book
          entry system, the Auction Agent (but not necessarily the Paying
          Agent) shall cease to perform its duties hereunder, and under any
          Broker-Dealer Agreement.

     7.2. Communications.

     Except for (i) communications authorized to be made by telephone pursuant
to this Agreement or the Auction Procedures and (ii) communications in
connection with Auctions (other than those expressly required to be in
writing), all notices, requests and other


                                      16
<PAGE>


communications to any party hereunder shall be in writing (including telecopy
or similar writing) and shall be given to such party at its address or
telecopier number set forth below:

         If to the Company,          MUNIYIELD INSURED FUND, INC.
         addressed to:               800 Scudders Mill Road
                                     Plainsboro, New Jersey 08536

                                     Attention:  Treasurer
                                     Telephone No.: (609) 282-2800
                                     Telecopier No.: (609) 282-3472

         If to the Auction           The Bank of New York
         Agent, addressed to:        Corporate Trust-Dealing and Trading Group
                                     101 Barclay Street, 7W
                                     New York, New York 10286

                                     Attention: Auction Desk
                                     Telephone No.: (212) 815-3450
                                     Telecopier No.: (212) 815-3440

or such other address or telecopier number as such party hereafter may specify
for such purpose by notice to the other party. Each such notice, request or
communication shall be effective when delivered at the address specified
herein. Communications shall be given on behalf of the Company by a Company
Officer and on behalf of the Auction Agent by an Authorized Officer.

     7.3. Entire Agreement.

     This Agreement contains the entire agreement between the parties relating
to the subject matter hereof, and there are no other representations,
endorsements, promises, agreements or understandings, oral, written or
inferred, between the parties relating to the subject matter hereof, except
for agreements relating to the compensation of the Auction Agent.

     7.4. Benefits.

     Nothing herein, express or implied, shall give to any Person, other than
the Company, the Auction Agent and their respective successors and assigns,
any benefit of any legal or equitable right, remedy or claim hereunder.

     7.5. Amendment; Waiver.

          (a) This Agreement shall not be deemed or construed to be modified,
          amended, rescinded, canceled or waived, in whole or in part, except
          by a written instrument signed by a duly authorized representative
          of the party to be charged. The Company shall notify the Auction
          Agent of any change in the Articles Supplementary prior to the
          effective date of any such change. If any such change in the
          Articles Supplementary materially increases the Auction Agent's
          obligations hereunder, the Company shall obtain the written consent
          to the Auction Agent prior to the effective date of such change.


                                      17
<PAGE>



          (b) Failure of either party hereto to exercise any right or remedy
          hereunder in the event of a breach hereof by the other party shall
          not constitute a waiver of any such right or remedy with respect to
          any subsequent breach.

     7.6. Successors and Assigns.

     This Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the respective successors and permitted assigns of each of the
Company and the Auction Agent. This Agreement may not be assigned by either
party hereto absent the prior written consent of the other party, which
consent shall not be withheld unreasonably.

     7.7. Severability.

     If any clause, provision or section hereof shall be ruled invalid or
unenforceable by any court of competent jurisdiction, the invalidity or
unenforceability of such clause, provision or section shall not affect any of
the remaining clauses, provisions or sections hereof.

     7.8. Execution in Counterparts.

     This Agreement may be executed in several counterparts, each of which
shall be an original and all of which shall constitute but one and the same
instrument.

     7.9. Governing Law.

     This Agreement shall be governed by and construed in accordance with the
laws of the State of New York applicable to agreements made and to be
performed in said State.


                                      18
<PAGE>


     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the date first above written.

                                            MUNIYIELD INSURED FUND, INC.



                                            By: ______________________________
                                                Name:  John Burger
                                                Title:    Vice President



                                            THE BANK OF NEW YORK



                                            By: ______________________________
                                                Name:
                                                Title:



                                      19


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2K.5
<SEQUENCE>15
<FILENAME>efc4-1163_5536490ex992k5.txt
<TEXT>
                                                                EXHIBIT (k)(5)



==============================================================================



                        MASTER BROKER-DEALER AGREEMENT


                                    between


                             THE BANK OF NEW YORK


                                      and


                     -------------------------------------


                       Dated as of __________ ____, 2004



                                  Relating to

                        AUCTION MARKET PREFERRED STOCK

                                      and

                        AUCTION MARKET PREFERRED SHARES

                                      of

                     FUND ASSET MANAGEMENT, L.P. ADVISED /
                MERRILL LYNCH INVESTMENT MANAGERS, L.P. ADVISED

                           MUNICIPAL BOND FUNDS AND
                                 TAXABLE FUNDS


==============================================================================



<PAGE>


     BROKER-DEALER AGREEMENT dated as of ___________ ___, 2004 between The
Bank of New York, a New York banking corporation (the "Auction Agent") (not in
its individual capacity but solely as agent of the registered investment
companies, which are either Maryland corporations or Massachusetts business
trusts, listed in Exhibit A hereto, as the same may be amended from time to
time (individually, a "Fund" and together, the "Funds," unless indicated
otherwise), pursuant to authority granted to it in the various Auction Agent
Agreements between each of the Funds and the Auction Agent (the "Auction Agent
Agreements")), and ______________ (together with its successors and assigns
hereinafter referred to as "BD").

     The Funds have duly authorized and issued in different series shares of
Auction Market Preferred Shares, in the case of Massachusetts business trusts,
or shares of Auction Market Preferred Stock, in the case of Maryland
corporations, all with a par value of $.10 per share, $.05 per share or $.025
per share and a liquidation preference of $25,000 per share plus accumulated
but unpaid dividends (whether or not earned or declared), pursuant to the
Funds' Articles/Certificates (as defined below). The Auction Market Preferred
Shares and the shares of Auction Market Preferred Stock are both referred to
herein as "AMPS."

     The Fund's Articles/Certificates provide that the dividend rate on the
AMPS for the Dividend Period therefor after the Initial Dividend Period shall
be the Applicable Rate therefor, which in general, shall be the rate per annum
that a commercial bank, trust company or other financial institution appointed
by the Funds advises results from implementation of the Auction Procedures (as
defined below). The Boards of Directors/Trustees of the Funds have adopted
resolutions appointing The Bank of New York as Auction Agent for purposes of
the Auction Procedures, and pursuant to Section 2.5(d) of the Auction Agent
Agreements, the Funds have requested and directed the Auction Agent to execute
and deliver this Agreement.

     The Auction Procedures require the participation of one or more
Broker-Dealers.

     NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the Auction Agent and BD agree as follows:

     1. Definitions and Rules of Construction.

     1.1 Terms Defined by Reference to the Articles/Certificates. Capitalized
terms used but not defined herein shall have the respective meanings specified
in the Articles/Certificates of the Funds.

     1.2 Terms Defined Herein. As used herein and in the Settlement Procedures
(as defined below), the following terms shall have the following meanings,
unless the context otherwise requires:

     (a) "Articles/Certificates" shall mean, in the case of the Maryland
corporations, the Articles Supplementary, as amended, of the Funds,
establishing the powers, preferences and rights of the AMPS filed in the
office of the State Department of Assessments and Taxation of Maryland and, in
the case of the Massachusetts business trusts, the Certificates of
Designation, as amended, of the Funds, establishing the powers, preferences
and rights of the AMPS filed in the office of the Secretary of State of The
Commonwealth of Massachusetts.


                                       2
<PAGE>


     (b) "Auction" shall have the meaning specified in Section 3.1 hereof.

     (c) "Auction Procedures" shall mean the Auction Procedures that are set
forth in Paragraph 11 (Municipal Bond Funds) or Paragraph 10 (Taxable Funds)
of the Articles/Certificates.

     (d) "Authorized Officer" shall mean each Vice President, Assistant Vice
President and Assistant Treasurer of the Auction Agent assigned to the Dealing
and Trading Group of its Corporate Trust Department, and every other officer
or employee of the Auction Agent designated as an "Authorized Officer" for
purposes of this Agreement in a written communication to BD.

     (e) "BD Officer" shall mean each officer or employee of BD designated as
a "BD Officer" for purposes of this Agreement in a communication to the
Auction Agent.

     (f) "Broker-Dealer Agreement" shall mean this Agreement and any
substantially similar agreement between the Auction Agent and a Broker-Dealer.

     (g) "Municipal Bond Funds" shall mean the Funds indicated as such in
Exhibit A hereto.

     (h) "Settlement Procedures" shall mean the Settlement Procedures attached
hereto as Exhibit B.

     (i) "Taxable Funds" shall mean the Funds indicated as such in Exhibit A
hereto.

     1.3 Rules of Construction. Unless the context or use indicates another or
a different meaning or intent, the following rules shall apply to the
construction of this Agreement:

     (a) Words importing the singular number shall include the plural number
and vice versa.

     (b) The captions and headings herein are solely for convenience of
reference and shall not constitute a part of this Agreement, nor shall they
affect its meaning, construction or effect.

     (c) The words "hereof," "herein," "hereto," and other words of similar
import refer to this Agreement as a whole.

     (d) All references herein to a particular time of day shall be to New
York City time.

     2. Advance Notice of Allocation of Taxable Income For Municipal Bond
Funds. Except as otherwise provided in paragraph 2(f) of the
Articles/Certificates of the Municipal Bond Funds, whenever a Municipal Bond
Fund intends to include any net capital gains or other income subject to
regular Federal income tax in any dividend on shares of any series of AMPS,
the Municipal Bond 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 a Fund, it will in turn notify BD, who, on or
prior to such Auction Date, will notify its Beneficial Owners and Potential
Beneficial Owners believed to be interested in submitting an Order in the
Auction to be held on such Auction Date. Whenever a Municipal Bond Fund
intends to include any additional


                                       3
<PAGE>


amounts in a dividend as provided in paragraph 2(f) of the
Articles/Certificates, the Fund will notify the Auction Agent of such
additional amounts to be so included in such dividend at least five Business
Days prior to the applicable Dividend Payment Date. Whenever the Auction Agent
receives such notice from a Municipal Bond Fund it will in turn notify the
Securities Depository and BD, who, on or prior to the applicable Dividend
Payment Date, will notify its Beneficial Owners.

     3. The Auction.

     3.1 Purpose; Incorporation by Reference of Auction Procedures and
Settlement Procedures.

     (a) On each Auction Date, the provisions of the Auction Procedures will
be followed by the Auction Agent for the purpose of determining the Applicable
Rate for each series of AMPS, for the next Dividend Period therefor. Each
periodic operation of such procedures is hereinafter referred to as an
"Auction."

     (b) All of the provisions contained in the Auction Procedures and in the
Settlement Procedures are incorporated herein by reference in their entirety
and shall be deemed to be a part of this Agreement to the same extent as if
such provisions were set forth fully herein. In the case of any conflict
between the terms of any document incorporated herein by reference and the
terms hereof, the Auction Agent is, subject to its obligations as set forth in
this Section 3.1, authorized to perform its duties according to the terms
thereof, and shall have no liability for doing so.

     (c) BD agrees to act as, and assumes the obligations of and limitations
and restrictions placed upon, a Broker-Dealer under this Agreement. BD
understands that other Persons meeting the requirements specified in the
definition of "Broker-Dealer" contained in Paragraph 1 of the
Articles/Certificates may execute a Broker-Dealer Agreement and participate as
Broker-Dealers in Auctions.

     (d) BD and other Broker-Dealers may participate in Auctions for their own
accounts. However, a Fund, by notice to BD and all other Broker Dealers, may
prohibit all Broker-Dealers from submitting Bids in Auctions for their own
accounts, provided that Broker-Dealers may continue to submit Hold Orders and
Sell Orders. The Auction Agent shall have no responsibility or liability in
connection with this Section 3.1(d).

     3.2  Preparation for Each Auction.

     (a) Not later than 9:30 A.M. on each Auction Date for the AMPS, the
Auction Agent shall advise BD by telephone of the Reference Rate and the
Maximum Applicable Rate in effect on such Auction Date.

     (b) In the event that the Auction Date for any Auction shall be changed
after the Auction Agent has given the notice referred to in clause (vii) of
paragraph (a) of the Settlement Procedures, the Auction Agent, by such means
as the Auction Agent deems practicable, shall give notice of such change to BD
not later than the earlier of 9:15 A.M. on the new Auction Date


                                       4
<PAGE>


or 9:15 A.M. on the old Auction Date. Thereafter, BD promptly shall notify
customers of BD that BD believes are Beneficial Owners of shares of AMPS of
such change in the Auction Date.

     (c) The Auction Agent from time to time may, but shall not be obligated
to, request BD to provide it with a list of the respective customers BD
believes are Beneficial Owners of shares of each series of AMPS. BD shall
comply with any such request, and the Auction Agent shall keep confidential
any such information, including information received as to the identity of
Bidders in any Auction, and shall not disclose any such information so
provided to any Person other than a Fund; and such information shall not be
used by the Auction Agent or its officers, employees, agents or
representatives for any purpose other than such purposes as are described
herein; provided, however, that the Auction Agent reserves the right and is
authorized to disclose any such information if (i) it is ordered to do so by a
court of competent jurisdiction or a regulatory body, judicial or
quasi-judicial agency or authority having the authority to compel such
disclosure, (ii) it is advised by its counsel that its failure to do so would
be unlawful or (iii) failure to do so would expose the Auction Agent to loss,
liability, claim, damage or expense for which it has not received indemnity or
security satisfactory to it. The Auction Agent shall transmit any list of
customers BD believes are Beneficial Owners of shares of each series of AMPS
and information related thereto only to its officers, employees, agents or
representatives in the Corporate and Agency Group, who need to know such
information for the purposes of acting in accordance with this Agreement, and
the Auction Agent shall prevent the transmission of such information to others
and shall cause its officers, employees, agents and representatives to abide
by the foregoing confidentiality restrictions; provided, however, that the
Auction Agent shall have no responsibility or liability for the actions of any
of its officers, employees, agents or representatives after they have left the
employ of the Auction Agent.

     (d) The provisions contained in paragraph 2 of the Articles/Certificates
concerning the notification of a Special Dividend Period will be followed by
the Auction Agent and BD, and the provisions contained therein are
incorporated herein by reference in their entirety and shall be deemed to be a
part of this Agreement to the same extent as if such provisions were set forth
fully herein.

     3.3  Auction Schedule; Method of Submission of Orders.

     (a) The Funds and the Auction Agent shall conduct Auctions for each
series of AMPS in accordance with the schedule set forth below. Such schedule
may be changed at any time by the Auction Agent with the consent of the Fund,
which consent shall not be withheld unreasonably. The Auction Agent shall give
notice of any such change to BD. Such notice shall be received prior to the
first Auction Date on which any such change shall be effective.

                  Time                                 Event
                  ----                                 -----

By 9:30 A.M.                           Auction Agent advises the Funds and
                                       Broker-Dealers of the Reference Rate
                                       and the Maximum Applicable Rate as set
                                       forth in Section 3.2(a) hereof.


                                       5
<PAGE>


                  Time                                 Event
                  ----                                 -----

9:30 A.M. - 1:00 P.M.                  Auction Agent assembles information
                                       communicated to it by Broker-Dealers as
                                       provided in Paragraph 11(c)(i)
                                       (Municipal Bond Funds) or Paragraph
                                       10(c)(i) (Taxable Funds) of the
                                       Articles/Certificates. Submission
                                       Deadline is 1:00 P.M.

Not earlier than 1:00 P.M.             Auction Agent makes determinations
                                       pursuant to Paragraph 11(d)(i)
                                       (Municipal Bond Funds) or Paragraph
                                       10(d)(i) (Taxable Funds) of the
                                       Articles/Certificates.

By approximately 3:00 P.M.             Auction Agent advises the Funds of the
                                       results of the Auction as provided in
                                       Paragraph 11(d)(ii) (Municipal Bond
                                       Funds) or Paragraph 10(d)(ii) (Taxable
                                       Funds) of the Articles/Certificates.

                                       Submitted Bids and Submitted Sell
                                       Orders are accepted and rejected in
                                       whole or in part and shares of AMPS are
                                       allocated as provided in Paragraph
                                       11(e) (Municipal Bond Funds) or
                                       Paragraph 10(e) (Taxable Funds) of the
                                       Articles/Certificates.

By approximately 10:00 A.M.            Auction Agent gives notice of the
on the next succeeding                 Auction results as set forth in Section
Business Day                           3.4(a) hereof.

     (b) BD agrees to maintain a list of Potential Beneficial Owners and to
contact the Potential Beneficial Owners on such list on or prior to each
Auction Date for the purposes set forth in the Auction Procedures of the
Articles/Certificates.

     (c) BD shall submit Orders to the Auction Agent in writing in
substantially the form attached hereto as Exhibit C. BD shall submit separate
Orders to the Auction Agent for each Potential Beneficial Owner or Beneficial
Owner on whose behalf BD is submitting an Order and shall not net or aggregate
the Orders of Potential Beneficial Owners or Beneficial Owners on whose behalf
BD is submitting Orders.

     (d) BD shall deliver to the Auction Agent (i) a written notice,
substantially in the form attached hereto as Exhibit D, of transfers of shares
of any series of AMPS, made through BD by an Existing Holder to another Person
other than pursuant to an Auction, and (ii) a written notice, substantially in
the form attached hereto as Exhibit E, of the failure of shares of any series
of AMPS to be transferred to or by any Person that purchased or sold shares of
any series of AMPS or through BD pursuant to an Auction. The Auction Agent is
not required to accept any notice delivered pursuant to the terms of the
foregoing sentence with respect to an Auction unless it is received by the
Auction Agent by 3:00 P.M. on the Business Day next preceding the applicable
Auction Date.


                                       6
<PAGE>


     3.4  Notice of Auction Results.

     (a) On each Auction Date, the Auction Agent shall notify BD by telephone
or by other mutually acceptable electronic means as set forth in paragraph (a)
of the Settlement Procedures. On the Business Day next succeeding such Auction
Date, the Auction Agent shall notify BD in writing of the disposition of all
Orders submitted by BD in the Auction held on such Auction Date.

     (b) BD shall notify each Beneficial Owner, Potential Beneficial Owner,
Existing Holder or Potential Holder on whose behalf BD has submitted an Order
as set forth in paragraph (b) of the Settlement Procedures and take such other
action as is required of BD pursuant to the Settlement Procedures.

     If any Beneficial Owner or Existing Holder selling shares of any series
of AMPS in an Auction fails to deliver such shares, the BD of any Person that
was to have purchased shares of such series of AMPS in such Auction may
deliver to such Person a number of whole shares of such series 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 such series of AMPS to be so
delivered shall be determined by such BD. Delivery of such lesser number of
shares shall constitute good delivery. Upon the occurrence of any such failure
to deliver shares, such BD shall deliver to the Auction Agent the notice
required by Section 3.3(d)(ii) hereof. Notwithstanding the foregoing terms of
this Section 3.4(b), any delivery or non-delivery of shares of any series of
AMPS which represents 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 terms of Section 3.3(d) hereof. The Auction Agent shall
have no duty or liability with respect to enforcement of this Section 3.4(b).

     3.5 Service Charge to Be Paid to BD. On the Business Day next succeeding
each Auction Date, the Auction Agent shall pay to BD from moneys received from
the Funds an amount equal to:

     (a) in the case of any Auction Date immediately preceding a 7-Day
Dividend Period or a 28-Day Dividend Period, the product of

          (i) a fraction the numerator of which is the number of days in such
     Dividend Period (calculated by counting the first day of such Dividend
     Period but excluding the last day thereof) and the denominator of which
     is 360, times (ii) 1/4 of 1%, times (iii) $25,000, times (iv) the sum of
     (A) the aggregate number of AMPS placed by BD in the applicable Auction
     that were (x) the subject of a Submitted Bid of a Beneficial Owner
     submitted by BD and continued to be held as a result of such submission
     and (y) the subject of a Submitted Bid of a Potential Beneficial Owner
     submitted by BD and were purchased as a result of such submission plus
     (B) the aggregate number of AMPS subject to valid Hold Orders (determined
     in accordance with the Auction Procedures of the Articles/Certificates)
     submitted to the Auction Agent by BD plus (C) the number of AMPS deemed
     to be subject to Hold Orders by Beneficial Owners pursuant to the Auction
     Procedures of the Articles/Certificates that were acquired by such
     Beneficial Owners through BD and (b) in the case of any Auction Date
     immediately preceding a


                                       7
<PAGE>


     Special Dividend Period, that amount as mutually agreed upon by a Fund
     and BD, based on the 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, at the commencement of
     such Special Dividend Period.

     For purposes of subclause (a)(iv)(C) of the foregoing sentence, if any
Beneficial Owner who acquired shares of any series of AMPS through BD
transfers those shares to another Person other than pursuant to an Auction,
then the Broker-Dealer for the shares so transferred shall continue to be BD,
provided, however, that if the transfer was effected by, or if the transferee
is, a Broker-Dealer other than BD, then such Broker-Dealer shall be the
Broker-Dealer for such shares.

     4. The Auction Agent.

     4.1  Duties and Responsibilities.

     (a) The Auction Agent is acting solely as agent for the Funds hereunder
and owes no fiduciary duties to any other Person by reason of this Agreement.
The Auction Agent owes no duties to any person other than BD and the Fund by
reason of this Agreement.

     (b) The Auction Agent undertakes to perform such duties and only such
duties as are set forth specifically in this Agreement, and no implied
covenants or obligations shall be read into this Agreement against the Auction
Agent.

     (c) In the absence of willful misconduct or negligence on its part, the
Auction Agent shall not be liable for any action taken, suffered or omitted by
it, or for any error of judgment made by it in the performance of its duties
under this Agreement. The Auction Agent shall not be liable for any error of
judgment made in the absence of willful misconduct unless the Auction Agent
shall have been negligent in ascertaining (or failing to ascertain) the
pertinent facts.

     The Auction Agent shall not be responsible or liable for any failure or
delay in the performance of its obligations under this agreement arising out
of or caused, directly or indirectly, by circumstances beyond its reasonable
control, including, without limitation, acts of God; earthquakes; fires;
floods; wars; civil or military disturbances; sabotage; acts of terrorism;
epidemics; riots; interruptions, loss or malfunctions of utilities; computer
(hardware or software) or communications services; accidents; labor disputes;
acts of civil or military authority or governmental actions; it being
understood that the Auction Agent shall use reasonable efforts which are
consistent with accepted practices in the banking industry to resume
performance as soon as practicable under the circumstances. In no event shall
the Auction Agent be responsible or liable for special, indirect or
consequential loss or damage of any kind whatsoever (including, but not
limited to, loss or profit), even if the Auction Agent has been advised of the
likelihood of such loss or damage and regardless of the form of action.

     4.2  Rights of the Auction Agent.

     (a) The Auction Agent conclusively may rely upon, and shall be protected
in acting or refraining from acting upon, any communication authorized by this
Agreement and upon any written instruction, notice, request, direction,
consent, report, certificate, share certificate or other


                                       8
<PAGE>


instrument, paper or document believed by it to be genuine. The Auction Agent
shall not be liable for acting upon any telephone communication authorized by
this Agreement which the Auction Agent believes in good faith to have been
given by the Funds or by BD. The Auction Agent may record telephone
communications with BD.

     (b) The Auction Agent may consult with counsel of its own choice, and the
advice of such counsel shall be full and complete authorization and protection
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.

     (c) The Auction Agent shall not be required to advance, expend or risk
its own funds or otherwise incur or become exposed to financial liability in
the performance of its duties hereunder.

     (d) The Auction Agent may perform its duties and exercise its rights
hereunder either directly or by or through agents or attorneys.

     4.3 Auction Agent's Disclaimer. The Auction Agent makes no representation
as to and shall have no liability with respect to the correctness of the
recitals in, or the validity, accuracy or adequacy of this Agreement, the
Auction Agent Agreement, any offering material used in connection with the
offer and sale of the AMPS or any other agreement or instrument executed in
connection with the transactions contemplated herein or in any thereof. The
Auction Agent shall have no obligation or liability in respect to the
registration or exemption therefrom of the AMPS under federal or state
securities laws in respect of the sufficiency or the conformity of any
transfer of the AMPS pursuant to the terms of the Auction Agent Agreement, any
Broker-Dealer Agreement or any other document contemplated hereby or thereby.

     5. Miscellaneous.

     5.1 Termination. BD may terminate this Agreement at any time upon five
days' prior written notice to the Auction Agent; provided, however, that if BD
is Merrill Lynch, Pierce, Fenner & Smith Incorporated, neither BD nor the
Auction Agent may terminate this Agreement without first obtaining the prior
written consent of a Fund of such termination, which consent shall not be
withheld unreasonably. The Auction Agent shall terminate this Agreement as it
relates to each Fund only pursuant to the prior written instruction of such
Fund.

     5.2 Participant in Securities Depository; Payment of Dividends in
Same-Day Funds.

     (a) BD is, and shall remain for the term of this Agreement, a member of,
or a participant in, the Securities Depository (or an affiliate of such a
member or participant).

     (b) BD represents that it (or if BD does not act as Agent Member, one of
its affiliates) shall make all dividend payments on the AMPS available in
same-day funds on each Dividend Payment Date to customers that use BD (or its
affiliate) as Agent Member.

     5.3 Agent Member. At the date hereof, BD is a participant of the
Securities Depository.

     5.4 Communications. Except for (i) communications authorized to be made
by telephone pursuant to this Agreement or the Auction Procedures and (ii)
communications in


                                       9
<PAGE>


connection with the Auctions (other than those expressly required to be in
writing), all notices, requests and other communications to any party
hereunder shall be in writing (including telecopy or similar writing) and
shall be given to such party, at its address or telecopier number set forth
below:

        If to BD
        addressed:                 ___________________________________________

                                   Attention:
                                   Telecopier No.:
                                   Telephone No.:

        If to the Auction          The Bank of New York
        Agent, addressed:          Corporate Trust - Dealing and Trading Group
                                   101 Barclay  Street, 7W
                                   New York, N.Y. 10286

                                   Attention:  Auction Desk
                                   Telecopier No.:  (212) 815-3450
                                   Fax No:          (212) 815-3440



or such other address or telecopier number as such party hereafter may specify
for such purpose by written notice to the other party. Each such notice,
request or communication shall be effective when delivered at the address
specified herein. Communications shall be given on behalf of BD by a BD
Officer and on behalf of the Auction Agent by an Authorized Officer. BD may
record telephone communications with the Auction Agent.

     5.5 Entire Agreement. This Agreement contains the entire agreement
between the parties relating to the subject matter hereof, and there are no
other representations, endorsements, promises, agreements or understandings,
oral, written or inferred, between the parties relating to the subject matter
hereof.

     5.6 Benefits. Nothing in this Agreement, express or implied, shall give
to any person, other than the Funds, the Auction Agent and BD and their
respective successors and assigns, any benefit of any legal or equitable
right, remedy or claim under this Agreement.

     5.7  Amendment; Waiver.

     (a) This Agreement shall not be deemed or construed to be modified,
amended, rescinded, canceled or waived, in whole or in part, except by a
written instrument signed by a duly authorized representative of the party to
be charged.

     (b) Failure of either party to this Agreement to exercise any right or
remedy hereunder in the event of a breach of this Agreement by the other party
shall not constitute a waiver of any such right or remedy with respect to any
subsequent breach.


                                      10
<PAGE>


     5.8 Successors and Assigns. This Agreement shall be binding upon, inure
to the benefit of, and be enforceable by, the respective successors and
permitted assigns of each of BD and the Auction Agent. This Agreement may not
be assigned by either party hereto absent the prior written consent of the
other party; provided, however, that this Agreement may be assigned by the
Auction Agent to a successor Auction Agent selected by the Funds without the
consent of BD.

     5.9 Severability. If any clause, provision or section of this Agreement
shall be ruled invalid or unenforceable by any court of competent
jurisdiction, the invalidity or unenforceability of such clause, provision or
section shall not affect any remaining clause, provision or section hereof.

     5.10 Execution in Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.

     6. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements
made and to be performed in said State.


                                      11
<PAGE>


     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the date first above written.

                                      THE BANK OF NEW YORK


                                      By:_____________________________________
                                         Name:  Joseph Panepinto
                                         Title:   Vice President



                                      ----------------------------------------


                                      By:_____________________________________
                                         Name:
                                         Title:



                                      12
<PAGE>



                                                                     EXHIBIT A
                                                                     ---------

                                 LIST OF FUNDS
                                 -------------
                          (revised ________ __, 2004)

                  Municipal Bond Funds
                  --------------------

                  MuniEnhanced Fund, Inc.
                  MuniHoldings California Insured Fund, Inc.
                  MuniHoldings Florida Insured Fund
                  MuniHoldings Fund, Inc.
                  MuniHoldings Fund II, Inc.
                  MuniHoldings Insured Fund, Inc.
                  MuniHoldings Insured Fund II, Inc.
                  MuniHoldings New Jersey Insured Fund, Inc.
                  MuniHoldings New York Insured Fund, Inc.
                  Muni Intermediate Duration Fund, Inc.
                  Muni New York Intermediate Duration Fund, Inc.
                  MuniVest Fund, Inc.
                  MuniVest Fund II, Inc.
                  MuniYield Arizona Fund, Inc.
                  MuniYield California Fund, Inc.
                  MuniYield California Insured Fund, Inc.
                  MuniYield Florida Fund
                  MuniYield Florida Insured Fund
                  MuniYield Fund, Inc.
                  MuniYield Insured Fund, Inc.
                  MuniYield Michigan Insured Fund II, Inc.
                  MuniYield New York Insured Fund, Inc.
                  MuniYield New Jersey Fund, Inc.
                  MuniYield New Jersey Insured Fund, Inc.
                  MuniYield Pennsylvania Insured Fund
                  MuniYield Quality Fund, Inc.
                  MuniYield Quality Fund II, Inc.

                  Taxable Funds
                  -------------

                  Preferred and Corporate Income Strategies Fund, Inc.
                  Preferred Income Strategies Fund, Inc.



                                      13
<PAGE>


                                                                     EXHIBIT B
                                                                     ---------

                             SETTLEMENT PROCEDURES




                                      14
<PAGE>


                                                                     EXHIBIT C
                                                                     ---------

                             THE BANK OF NEW YORK
                               AUCTION BID FORM

Submit To:  The Bank of New York               Issue:   [NAME OF FUND]
            Securities Transfer Department     Series: _______________________
            101 Barclay Street, 7W             Auction Date: _________________
            New York, New York  10286
            Attention:  Auction Desk
            Telephone:  (212) 815-3450
            Facsimile:   (212) 815-3440

The undersigned Broker-Dealer submits the following Order on behalf of the
Bidder listed below:

Name of Bidder:  ____________

BENEFICIAL OWNER

Shares now held    ____________        HOLD                       ____________

BID at rate of     ____________        SELL                       ____________

POTENTIAL BENEFICIAL OWNER

# of shares bid    ____________        BID at rate of             ____________

Notes:

(1)  If submitting more than one Bid for one Bidder, use additional Auction
     Bid Forms.

(2)  If one or more Bids covering in the aggregate more than the number of
     outstanding shares held by any Beneficial Owner are submitted, such bid
     shall be considered valid in the order of priority set forth in the
     Auction Procedures on the above issue.

(3)  A Hold or Sell Order may be placed only by a Beneficial Owner covering a
     number of shares not greater than the number of shares currently held.

(4)  Potential Beneficial Owners may make only Bids, each of which must
     specify a rate. If more than one Bid is submitted on behalf of any
     Potential Beneficial Owner, each Bid submitted shall be a separate Bid
     with the rate specified.

(5)  Bids may contain no more than three figures to the right of the decimal
     point (.001 of 1%). Fractions will not be accepted.

NAME OF BROKER-DEALER  ________________________

Authorized Signature  ________________________



                                      15
<PAGE>


                                                                     EXHIBIT D
                                                                     ---------

 (Note: To be used only for transfers made other than pursuant to an Auction)

                                 TRANSFER FORM

     Re:  ____________________________ [NAME OF FUND] Auction Market Preferred
          Stock, Series ___________________ ("AMPS")

     We are (check one):

|_|  the Existing Holder named below;

|_|  the Broker-Dealer for such Existing Holder; or

|_|  the Agent Member for such Existing Holder.

     We hereby notify you that such Existing Holder has transferred

     ______________ shares of Series ______________ AMPS to
     ____________________________.


                                       ---------------------------------------
                                       (Name of Existing Holder)



                                       ---------------------------------------
                                       (Name of Broker-Dealer)



                                       ---------------------------------------
                                       (Name of Agent Member)



                                       By:  ___________________________________
                                       Printed Name:
                                       Title:



                                      16
<PAGE>


                                                                     EXHIBIT E
                                                                     ---------

  (To be used only for failures to deliver AMPS sold pursuant to an Auction)

                        NOTICE OF A FAILURE TO DELIVER

Complete either I or II
- -----------------------

     I.   We are a Broker-Dealer for ____________________ (the "Purchaser"),
          which purchased _________ shares of Auction Market Preferred Stock
          ("AMPS") Series _________, of_____________ [NAME OF FUND] in the
          Auction held on _________________ from the seller of such shares.

    II.   We are a Broker-Dealer for ____________________ (the "Seller"),
          which sold ____________ shares of AMPS Series ___________________
          AMPS of __________ [NAME OF FUND] in the Auction held on
          ______________ to the Purchaser of such shares.

          We hereby notify you that (check one) -

               ____ the Seller failed to deliver such shares to the Purchaser

               ____ the Purchaser failed to make payment to the Seller upon
          delivery of such shares

                                       Name:_________________________________
                                                 (Name of Broker-Dealer)

                                       By:___________________________________
                                               Printed Name:
                                               Title:



                                      17


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2K.6
<SEQUENCE>16
<FILENAME>efc4-1163_5560874ex992k6.txt
<TEXT>
                                                                EXHIBIT (k)(6)

                                [LOGO OMITTED]

- ------------------------------------------------------------------------------

            Book-Enty-Only  Auction-Rate/Money  Market Preferred/
                     and Remarketed Preferred Securities

- ------------------------------------------------------------------------------

                           Letter of Representations
                 [To be Completed by Issuer and Trust Company]

                         MUNIYIELD INSURED FUND, INC.
                 ---------------------------------------------
                               [Name of Issuer]

                             The Bank of New York
                 ---------------------------------------------
                            [Name of Trust Company]

                                                              _________, 2004
                                                               [Date]

Attention:  General Counsel's Office
The Depository Trust Company
55 Water Street 49th Floor
New York, NY  10041-0099

      Re:  MUNIYIELD INSURED FUND, INC.
           -------------------------------------------------------------------
           Issuance of Auction Market Preferred Stock ("AMPS"), Series
           -------------------------------------------------------------------
           H (#      ) and Series I (#      )
           -------------------------------------------------------------------
           [Issue description, including CUSIP number (the "Securities")]

Ladies and Gentlemen:

     This letter sets forth our understanding with respect to certain matters
relating to the Securities. Trust Company shall act as transfer agent,
registrar, dividend disbursing agent, redemption agent or other such agent
with respect to the Securities. The Securities have been issued pursuant to a
prospectus, private placement memorandum, or other such document authorizing
the issuance of the Securities dated           , 2004       (the "Document").
                                     ----------------------
*                              is distributing the Securities through the
- -----------------------------
["Underwriter/Placement Agent"]
Depository Trust Company ("DTC").

* Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated

<PAGE>

     The Depository Trust Company is herein referred to as "DTC".

     To induce DTC to accept the Securities as eligible for deposit at DTC,
and to act in accordance with its Rules with respect to the Securities, Issuer
and Trust Company make the following representations to DTC:

     1. Prior to closing on the Securities on _______, 2004 there shall be
deposited with DTC one or more Security certificates registered in the name of
DTC's nominee, Cede & Co., which represents 100% of the offering value of the
Securities. Said certificate(s) shall remain in DTC's custody as provided in
the Document. If, however, the aggregate principal amount of the Securities
exceeds $400 million, one certificate shall be issued with respect to each
$400 million of principal amount and an additional certificate shall be issued
with respect to any remaining principal amount. Each Security certificate
shall bear the following legend:

          Unless this certificate is presented by an authorized representative
     of The Depository Trust Company, a New York corporation ("DTC"), to
     Issuer or its agent for registration of transfer, exchange, or payment,
     and any certificate issued is registered in the name of Cede & Co. or in
     such other name as is requested by an authorized representative of DTC
     (and any payment is made to Cede & Co. or to such other entity as is
     requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE,
     OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
     WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an
     interest herein.

     2. Issuer: (a) understands that DTC has no obligation to, and will not,
communicate to its participants ("Participants") or to any person having an
interest in the Securities any information contained in the Security
certificate(s); and (b) acknowledges that neither DTC's Participants nor any
person having an interest in the Securities shall be deemed to have notice of
the provisions of the Security certificate(s) by virtue of submission of such
certificate(s) to DTC.

     3. In the event of any solicitation of consents from or voting by holders
of the Securities, Issuer shall establish a record date for such purposes
(with no provision for revocation of consents or votes by subsequent holders)
and shall send notice of such record date to DTC no fewer than 15 calendar
days in advance of such record date. Notices to DTC pursuant to this Paragraph
by telecopy shall be directed to DTC's Reorganization Department, Proxy Unit
at (212) 855-5181 or (212) 855-5182. If the party sending the notice does not
receive a telecopy receipt from DTC confirming that the notice has been
received, such party shall telephone (212) 855-5202. Notices to DTC pursuant
to this Paragraph, by mail or by any other means, shall be sent to:

                    Supervisor, Proxy Unit
                    Reorganization Department
                    The Depository Trust Company
                    55 Water Street 50th Floor
                    New York, NY  10041-0099



                                     -2-
<PAGE>

     4. In the event of a full or partial redemption of the Securities, Issuer
or Trust Company shall send a notice to DTC specifying: (a) the number of
Securities to be redeemed; and (b) the date such notice is to be distributed
to Security holders (the "Publication Date"). Such notice shall be sent to DTC
by a secure means (e.g., legible telecopy, registered or certified mail,
overnight delivery) in a timely manner designed to assure that such notice is
in DTC's possession no later than the close of business on the business day
before or, if possible, two business days before the Publication Date. Issuer
or Trust Company shall forward such notice either in a separate secure
transmission for each CUSIP number or in a secure transmission for multiple
CUSIP numbers (if applicable) which includes a manifest or list of each CUSIP
number submitted in that transmission. (The party sending such notice shall
have a method to verify subsequently the use of such means and the timeliness
of such notice.) The Publication Date shall be no fewer than 30 days nor more
than 60 days prior to the redemption date. Notices to DTC pursuant to this
Paragraph by telecopy shall be directed to DTC's Call Notification Department
at (516) 227-4164 or (516) 227-4190. If the party sending the notice does not
receive a telecopy receipt from DTC confirming that the notice has been
received, such party shall telephone (516) 227-4070. Notices to DTC pursuant
to this Paragraph, by mail or by any other means, shall be sent to:

                    Manager, Call Notification Department
                    The Depository Trust Company
                    711 Stewart Avenue
                    Garden City, NY  11530-4719

     5. In the event of an invitation to tender the Securities (including
mandatory tenders, exchanges, and capital changes), notice by Issuer or Trust
Company to Security holders specifying the terms of the tender and the
Publication Date of such notice shall be sent to DTC by a secure means in the
manner set forth in the preceding Paragraph. Notices to DTC pursuant to this
Paragraph and notices of other corporate actions by telecopy shall be directed
to DTC's Reorganization Department at (212) 855-5488. If the party sending the
notice does not receive a telecopy receipt from DTC confirming that the notice
has been received, such party shall telephone (212) 855-5290. Notices to DTC
pursuant to this Paragraph, by mail or by any other means, shall be sent to:

                    Manager, Reorganization Department
                    Reorganization Window
                    The Depository Trust Company
                    55 Water Street 50th Floor
                    New York, NY  10041-0099

     6. All notices and payment advices sent to DTC shall contain the CUSIP
number of the Securities.

     7. The Document indicates that the dividend rate for the Securities may
vary from time to time. Absent other existing arrangements with DTC, Issuer or
Trust Company shall give DTC notice of each such change in the dividend rate,
on the same day that the new rate is determined, by telephoning DTC's Dividend
Announcement Section at (212) 855-4550, or by telecopy sent to (212) 855-4555.
Such verbal or telecopy notice shall be followed by prompt written
confirmation sent by a secure means (e.g., legible telecopy, registered or
certified mail, overnight delivery) in a timely manner designed to assure that
such notice is in DTC's possession



                                     -3-
<PAGE>

no later than the close of business on the business day before or, if
possible, two business days before the Publication Date. Issuer or Agent shall
forward such notice either in a separate secure transmission for each CUSIP
number or in a secure transmission for multiple CUSIP numbers (if applicable)
which includes a manifest or list of each CUSIP number submitted in that
transmission. (The party sending such notice shall have a method to verify
subsequently the use and timeliness of such notice.) Notices to DTC pursuant
to this Paragraph, by mail or by any other means, shall be sent to:

                    Manager, Announcements
                    Dividend Department
                    The Depository Trust Company
                    55 Water Street 25th Floor
                    New York, NY  10041-0099

     8. The Document indicates that each purchaser of Securities must sign a
purchaser's letter which contains provisions restricting transfer of the
Securities purchased. Issuer and Trust Company acknowledge that as long as
Cede & Co. is the sole record owner of the Securities, Cede & Co. shall be
entitled to all voting rights applicable to the Securities and to receive the
full amount of all dividends, liquidation proceeds, and redemption proceeds
payable with respect to the Securities, even if the credits of Securities to
the DTC accounts of any DTC Participant result from transfers or failures to
transfer in violation of the provisions of the purchaser's letter. Issuer and
Trust Company acknowledge that DTC shall treat any Participant having
Securities credited to its DTC accounts as entitled to the full benefits of
ownership of such Securities. Without limiting the generality of the preceding
sentence, Issuer and Trust Company acknowledge that DTC shall treat any
Participant having Securities credited to its DTC accounts as entitled to
receive dividends, distributions, and voting rights, if any, in respect of
Securities and, subject to Paragraphs 12 and 13, to receive certificates
evidencing Securities if such certificates are to be issued in accordance with
Issuer's certificate of incorporation. (The treatment by DTC of the effects of
the crediting by it of Securities to the accounts of Participants described in
the preceding two sentences shall not affect the rights of Issuer,
participants in auctions relating to the Securities, purchasers, sellers, or
holders of Securities against any Participant.) DTC shall not have any
responsibility to ascertain whether any transfer of Securities is made in
accordance with the provisions of the purchaser's letter.

     9. Issuer or Trust Company shall provide a written notice of dividend
payment and distribution information to DTC as soon as the information is
available. Issuer or Trust Company shall provide this information to DTC
electronically, as previously arranged by Issuer or Trust Company and DTC, as
soon as the information is available. If electronic transmission has not been
arranged, absent any other arrangements between Issuer or Trust Company and
DTC, such information shall be sent by telecopy to DTC's Dividend Department
at (212) 855-4555 or (212) 855-4556, and receipt of such notices shall be
confirmed by telephoning (212) 855-4550. Notices to DTC pursuant to this
Paragraph, by mail or by any other means, shall be addressed as indicated in
Paragraph 7.

     10. Dividend payments and distributions shall be received by Cede & Co.,
as nominee of DTC, or its registered assigns, in same-day funds no later than
2:30 p.m. (Eastern Time) on the payment date. Issuer shall remit by 1:00 p.m.
(Eastern Time) on the payment date, dividend and distribution payments due
Trust Company, or at such earlier time as may be required by Trust Company to
guarantee that DTC shall receive payment in same-day funds no later than



                                     -4-
<PAGE>

2:30 p.m. (Eastern Time) on the payment date. Absent any other arrangements
between Issuer or Trust Company and DTC, such funds shall be wired to the
Dividend Deposit Account number that will be stamped on the signature page
hereof at the time DTC executes this Letter of Representations.

     11. Issuer or Trust Company shall provide DTC, no later than 12:00 noon
(Eastern Time) on each payment date, automated notification of CUSIP-level
detail. If the circumstances prevent the funds paid to DTC from equaling the
dollar amount associated with the detail payments by 12:00 noon (Eastern
Time), Issuer or Trust Company must provide CUSIP-level reconciliation to DTC
no later than 2:30 p.m. (Eastern Time). Reconciliation must be provided by
either automated means or written format. Such reconciliation notice, if sent
by telecopy, shall be directed to DTC's Dividend Department at (212) 855-4633,
and receipt of such reconciliation notice shall be confirmed by telephoning
(212) 855-4430.

     12. Redemption payments shall be received by Cede & Co., as nominee of
DTC, or its registered assigns, in same-day funds no later than 2:30 p.m.
(Eastern Time) on the payment date. Issuer shall remit by 1:00 p.m. (Eastern
Time) on the payment date all such redemption payments due Trust Company, or
at such earlier time as required by Trust Company to guarantee that DTC shall
receive payment in same-day funds no later than 2:30 p.m. (Eastern Time) on
the payment date. Absent any other arrangements between Issuer or Trust
Company and DTC, such funds shall be wired to the Redemption Deposit Account
number that will be stamped on the signature page hereof at the time DTC
executes this Letter of Representations.

     13. Reorganization payments and CUSIP-level detail resulting from
corporate actions (such as tender offers, remarketings, or mergers) shall be
received by Cede & Co., as nominee of DTC, or its registered assigns, in
same-day funds no later than 2:30 p.m. (Eastern Time) on the payment date.
Issuer shall remit by 1:00 p.m. (Eastern Time) on the payment date all such
reorganization payments due Trust Company, or at such earlier time as required
by Trust Company to guarantee that DTC shall receive payment in same-day funds
no later than 2:30 p.m. (Eastern Time) on the payment date. Absent any other
arrangements between Issuer or Trust Company and DTC, such funds shall be
wired to the Reorganization Deposit Account number that will be stamped on the
signature page hereof at the time DTC executes this Letter of Representations.

     14. DTC may direct Issuer or Trust Company to use any other number or
address as the number or address to which notices or payments may be sent.

     15. In the event of a redemption acceleration, or any similar transaction
(e.g., tender made and accepted in response to Issuer's or Trust Company's
invitation) necessitating a reduction in the number of Securities outstanding,
or an advance refunding of part of the Securities outstanding DTC, in its
discretion: (a) may request Issuer or Trust Company to issue and authenticate
a new Security certificate; or (b) may make an appropriate notation on the
Security certificate indicating the date and amount of such reduction in the
number of Securities outstanding, except in the case of final redemption, in
which case the certificate will be presented to Issuer or Trust Company prior
to payment, if required.

     16. In the event that Issuer determines that beneficial owners of
Securities shall be able to obtain certificated Securities, Issuer or Trust
Company shall notify DTC of the



                                     -5-
<PAGE>

availability of certificates. In such event, Issuer or Trust Company shall
issue, transfer, and exchange certificates in appropriate amounts, as required
by DTC and others.

     17. DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to
Issuer or Trust Company (at which time DTC will confirm with Issuer or Trust
Company the aggregate principal amount of Securities outstanding). Under such
circumstances, at DTC's request, Issuer and Trust Company shall cooperate
fully with DTC by taking appropriate action to make available one or more
separate certificates evidencing Securities to any DTC Participant having
Securities credited to its DTC accounts.

     18. Issuer hereby authorizes DTC to provide to Trust Company listings of
Participants' holdings, known as Security Position Listings ("SPLs") with
respect to the Securities from time to time at the request of Trust Company.
Issuer also authorizes DTC, in the event of a partial redemption of
Securities, to provide Trust Company, upon request, with the names of those
Participants whose positions in Securities have been selected for redemption
by DTC. DTC will use its best efforts to notify Trust Company of those
Participants whose positions in Securities have been selected for redemption
by DTC. Issuer authorizes and instructs Trust Company to provide DTC with such
signatures, examples of signatures, and authorizations to act as may be deemed
necessary or appropriate by DTC to permit DTC to discharge its obligations to
its Participants and appropriate regulatory authorities. DTC charges a
customary fee for such SPLs. This authorization, unless revoked by Issuer,
shall continue with respect to the Securities while any Securities are on
deposit at DTC, until and unless Trust Company shall no longer be acting. In
such event, Issuer shall provide DTC with similar evidence, satisfactory to
DTC, of the authorization of any successor thereto so to act. Requests for
SPLs shall be directed to the Proxy Unit of DTC's Reorganization Department at
(212) 855-5181 or (212) 855-5182. Receipt of such requests shall be confirmed
by telephoning (212) 855-5202. Delivery by mail or by any other means, with
respect to such SPL request, shall be directed to the address indicated in
Paragraph 3.

     19. Nothing herein shall be deemed to require Trust Company to advance
funds on behalf of Issuer.

     20. This Letter of Representations may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an
original, but all such counterparts together shall constitute but one and the
same instrument.

     21. This Letter of Representations shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving effect to
principles of conflicts of law.

     22. The sender of each notice delivered to DTC pursuant to this Letter of
Representations is responsible for confirming that such notice was properly
received by DTC.

     23. Issuer recognizes that DTC does not in any way undertake to, and
shall not have any responsibility to, monitor or ascertain the compliance of
any transactions in the Securities with the following, as amended from time to
time: (a) any exemptions from registration under the Securities Act of 1933;
(b) the Investment Company Act of 1940; (c) the Employee Retirement Income
Security Act of 1974; (d) the Internal Revenue Code of 1986; (e) any rules of



                                     -6-
<PAGE>

any self-regulatory organizations (as defined under the Securities Exchange
Act of 1934); or (f) any other local, state, or federal laws or regulations
thereunder.

     24. Issuer and Trust Company shall comply with the applicable
requirements stated in DTC's Operational Arrangements, as they may be amended
from time to time. DTC's Operational Arrangements are posted on DTC's website
at "www.DTC.org."

     25. The following rider(s), attached hereto, are hereby incorporated into
this Letter of Representations:

                                  Schedule A
- ------------------------------------------------------------------------------

                                  Schedule B
- ------------------------------------------------------------------------------

                                  Schedule C
- ------------------------------------------------------------------------------



                                     -7-
<PAGE>

Notes:
- -----

A. If there is a Trust Company (as defined in
this Letter of Representations), Trust Company,
as well as Issuer, must sign this Letter. If
there is no Trust Company, in signing this
Letter Issuer itself undertakes to perform all
of the obligations set forth herein.

B. Schedule B contains statements that DTC
believes accurately describe DTC, the method of
effecting book-entry transfers of securities
distributed through DTC, and certain related
matters.

                                    Very truly yours,


                                    MUNIYIELD INSURED FUND, INC.
                                    ----------------------------
                                               [Issuer]

                                    By:_______________________________________
                                           [Authorized Officer's Signature]

                                    THE BANK OF NEW YORK
                                    ------------------------------------------
                                                   [Trust Company]

                                    By:_______________________________________
                                         [Authorized Officer's Signature]



Received and Accepted:
THE DEPOSITORY TRUST COMPANY



By:_________________________






cc: Underwriter
    Underwriter's Counsel



                                     -8-
<PAGE>

                                                                   SCHEDULE A
                                                                   ----------

       MUNIYIELD INSURED FUND, INC.; Auction Market Preferred Stock, Series H
       ----------------------------------------------------------------------
       and Series I
       ----------------------------------------------------------------------
                                 [Describe Issue]



CUSIP Number                     Share Total                 Value ($Amount)
- ------------                     -----------                 ---------------
Series H (#        )                2,600                       65,000,000
Series I (#       )                 2,600                       65,000,000



                                     -9-
<PAGE>

                                                                    SCHEDULE B
                                                                    ----------

                       SAMPLE OFFERING DOCUMENT LANGUAGE
                      DESCRIBING BOOK-ENTRY-ONLY ISSUANCE
                      -----------------------------------
 (Prepared by DTC--bracketed material may be applicable only to certain issues)

     1. The Depository Trust Company ("DTC"), New York, NY, will act as
securities depository for the securities (the "Securities"). The Securities
will be issued as fully-registered securities registered in the name of Cede &
Co. (DTC's partnership nominee) or such other name as may be requested by an
authorized representative of DTC. One fully-registered Security certificate
will be issued for each issue of the Securities, each in the aggregate
principal amount of such issue, and will be deposited with DTC. [If, however,
the aggregate principal amount of [any] issue exceeds $400 million, one
certificate will be issued with respect to each $400 million of principal
amount and an additional certificate will be issued with respect to any
remaining principal amount of such issue.]

     2. DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934. DTC holds securities that its participants ("Direct
Participants") deposit with DTC. DTC also facilitates the settlement among
Direct Participants of securities transactions, such as transfers and pledges,
in deposited securities through electronic computerized book-entry changes in
Direct Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. Direct Participants include securities
brokers and dealers, banks, trust companies, clearing corporations, and
certain other organizations. DTC is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange LLC, and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others such as securities brokers and
dealers, banks, and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly
("Indirect Participants"). The Rules applicable to DTC and its Direct and
Indirect Participants are on file with the Securities and Exchange Commission.

     3. Purchases of Securities under the DTC system must be made by or
through Direct Participants, which will receive a credit for the Securities on
DTC's records. The ownership interest of each actual purchaser of each
Security ("Beneficial Owner") is in turn to be recorded on the Direct and
Indirect Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchase, but Beneficial Owners are expected to
receive written confirmations providing details of the transaction, as well as
periodic statements of their holdings, from the Direct or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of
ownership interests in the Securities are to be accomplished by entries made
on the books of Direct and Indirect Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in Securities, except in the event that
use of the book-entry system for the Securities is discontinued.

     4. To facilitate subsequent transfers, all Securities deposited by Direct
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. or such other



                                     -10-
<PAGE>

name as may be requested by an authorized representative of DTC. The deposit
of Securities with DTC and their registration in the name of Cede & Co. or
such other nominee do not effect any change in beneficial ownership. DTC has
no knowledge of the actual Beneficial Owners of the Securities; DTC's records
reflect only the identity of the Direct Participants to whose accounts such
Securities are credited, which may or may not be the Beneficial Owners. The
Direct and Indirect Participants will remain responsible for keeping account
of their holdings on behalf of their customers.

     5. Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time. [Beneficial Owners of
Securities may wish to take certain steps to augment transmission to them of
notices of significant events with respect to the Securities, such as
redemptions, tenders, defaults, and proposed amendments to the security
documents. Beneficial Owners of Securities may wish to ascertain that the
nominee holding the Securities for their benefit has agreed to obtain and
transmit notices to Beneficial Owners, or in the alternative, Beneficial
Owners may wish to provide their names and addresses to the registrar and
request that copies of the notices be provided directly to them.]

     [6. Redemption notices shall be sent to DTC. If less than all of the
Securities within an issue are being redeemed, DTC's practice is to determine
by lot the amount of the interest of each Direct Participant in such issue to
be redeemed.]

     7. Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent
or vote with respect to the Securities. Under its usual procedures, DTC mails
an Omnibus Proxy to Issuer as soon as possible after the record date. The
Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Securities are credited on the record date
(identified in a listing attached to the Omnibus Proxy).

     8. Redemption proceeds, distributions, and dividend payments on the
Securities will be made to Cede & Co., or such other nominee as may be
requested by an authorized representative of DTC. DTC's practice is to credit
Direct Participants' accounts, upon DTC's receipt of funds and corresponding
detail information from Issuer or Agent on payable date in accordance with
their respective holdings shown on DTC's records. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers
in bearer form or registered in "street name," and will be the responsibility
of such Participant and not of DTC, Agent, or Issuer, subject to any statutory
or regulatory requirements as may be in effect from time to time. Payment of
redemption proceeds, distributions, and dividends to Cede & Co. (or such other
nominee as may be requested by an authorized representative of DTC) is the
responsibility of Issuer or Agent, disbursement of such payments to Direct
Participants shall be the responsibility of DTC, and disbursement of such
payments to the Beneficial Owners shall be the responsibility of Direct and
Indirect Participants.

     [9. A Beneficial Owner shall give notice to elect to have its Securities
purchased or tendered, through its Participant, to [Tender/Remarketing] Agent,
and shall effect delivery of such Securities by causing the Direct Participant
to transfer the Participant's interest in the Securities, on DTC's records, to
[Tender/Remarketing] Agent. The requirement for physical



                                     -11-
<PAGE>

delivery of Securities in connection with an optional tender or a mandatory
purchase will be deemed satisfied when the ownership rights in the Securities
are transferred by Direct Participants on DTC's records and followed by a
book-entry credit of tendered Securities to [Tender/Remarketing] Agent's DTC
account.]

     10. DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to
Issuer or Agent. Under such circumstances, in the event that a successor
securities depository is not obtained, Security certificates are required to
be printed and delivered.

     11. Issuer may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event,
Security certificates will be printed and delivered.

     12. The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that Issuer believes to be reliable, but
Issuer takes no responsibility for the accuracy thereof.



                                     -12-
<PAGE>

                                                                    SCHEDULE C
                                                                    ----------


                                [LOGO OMITTED]



    Representations for Securities Held with a Custodian on Behalf of DTC--
                to be included in DTC Letter of Representations
                -----------------------------------------------
     The Security certificate(s) shall remain in Agent's(1) custody as a
"Balance Certificate" subject to the provisions of the Balance Certificate
Agreement between Agent and DTC currently in effect.

     On each day on which Agent is open for business and on which it receives
an instruction originated by a DTC participant ("Participant") through DTC's
Deposit/Withdrawal at Custodian ("DWAC") system to increase the Participant's
account by a specified number of shares, units, or obligations (a "Deposit
Instruction"), Agent shall, no later than 6:30 p.m. (Eastern Time) that day,
either approve or cancel the Deposit Instruction through the DWAC system.

     On each day on which Agent is open for business and on which it receives
an instruction originated by a Participant through the DWAC system to decrease
the Participant's account by a specified number of shares, units, or
obligations (a "Withdrawal Instruction"), Agent shall, no later than 6:30 p.m.
(Eastern Time) that day, either approve or cancel the Withdrawal Instruction
through the DWAC system.

     Agent agrees that its approval of a Deposit or Withdrawal Instruction
shall be deemed to be the receipt by DTC of a new reissued or reregistered
certificated security on registration of transfer to the name of Cede & Co.
for the quantity of securities evidenced by the Balance Certificate after the
Deposit or Withdrawal Instruction is effected.

     Agent shall be defined as Depositary, Trustee, Trust Company, Issuing
Agent and/or Paying Agent as such definition applies in the DTC Letter of
Representations to which this rider may be attached.




- --------
(1)   Agent shall be defined as Depositary, Trustee, Trust Company, Issuing
      Agent and/or Paying Agent as such definition applies in the DTC Letter
      of Representations to which this rider may be attached.

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
