-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
 MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
 TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
 VEwPQ7Zxz7n83Ra6oB3FJK6euhtH4AmXLj2obUNg9R8dtQNBhJC++Zg+m9Acu5UN
 rxFplZO/jXI9K5LVJUeWjw==

<SEC-DOCUMENT>0000891092-05-001964.txt : 20051017
<SEC-HEADER>0000891092-05-001964.hdr.sgml : 20051017
<ACCEPTANCE-DATETIME>20051017171040
ACCESSION NUMBER:		0000891092-05-001964
CONFORMED SUBMISSION TYPE:	497
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20051017
DATE AS OF CHANGE:		20051017
EFFECTIVENESS DATE:		20051017

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			MUNIHOLDINGS FUND INC
		CENTRAL INDEX KEY:			0001034665
		IRS NUMBER:				223508039
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		497
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-128066
		FILM NUMBER:		051141412

	BUSINESS ADDRESS:	
		STREET 1:		800 SCUDDERS MILL RD
		STREET 2:		C/O MERRILL LYNCH ASSET MANAGEMENT
		CITY:			PLAINSBORO
		STATE:			NJ
		ZIP:			08536
		BUSINESS PHONE:		6092823087

	MAIL ADDRESS:	
		STREET 1:		MERRILL LYNCH ASSET MANAGEMENT
		STREET 2:		INFO SYSTEMS SECT 2-B PO BOX 9011
		CITY:			PRINCETON
		STATE:			NJ
		ZIP:			08543-9011
</SEC-HEADER>
<DOCUMENT>
<TYPE>497
<SEQUENCE>1
<FILENAME>e22611_497.htm
<DESCRIPTION>FORM 497
<TEXT>
<HTML>
<HEAD>
<TITLE></TITLE>
</HEAD>
<BODY>

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

<!-- MARKER FORMAT-SHEET="Center Head 3 Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4><B>$15,000,000 </B></FONT><BR>
  <FONT FACE="Times New Roman, Times, Serif" SIZE=5><B>MuniHoldings Fund, Inc.
  </B></FONT><BR>
  <FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>Auction Market
Preferred Stock (&#147;AMPS&#148;) <BR>600 Shares, Series C <BR>Liquidation Preference $25,000 per Share</B></FONT></P>

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



<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MuniHoldings
Fund, Inc. is a non-diversified, closed-end fund. The investment objective of the Fund is
to provide shareholders with current income exempt from Federal income taxes. The Fund
seeks to achieve its investment objective by investing, as a fundamental policy, at least
80% of an aggregate of the Fund&#146;s net assets (including proceeds from the issuance
of preferred stock) and the proceeds of any borrowings for investment purposes, in a
portfolio of municipal obligations 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 expects to invest at
least 75% of its total assets in municipal obligations that are rated investment grade
or, if unrated, are considered by the Fund&#146;s investment adviser to be of comparable
quality. The Fund may invest up to 25% of its total assets in municipal obligations that
are rated below investment grade (commonly known as &#147;junk&#148; bonds) or, if
unrated, are considered by the Fund&#146;s investment adviser to possess similar credit
characteristics. The Fund invests primarily in long term municipal obligations. The Fund
may invest in certain tax exempt securities classified as &#147;private activity bonds,&#148; as
discussed within, that may subject certain investors in the Fund to an alternative
minimum tax. There can be no assurance that the Fund&#146;s investment objective will be
realized. </FONT></P>

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


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><font face="Times New Roman, Times, Serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Investing
  in the AMPS involves certain risks that are described in the &#147;Risk Factors
  and Special Considerations&#148; section beginning on page 10 of this prospectus.
  The minimum purchase amount for the AMPS is $25,000.</B> </font> </P>


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



<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
  <TR VALIGN=Bottom>
    <TH>&nbsp;</TH>
    <TH colspan="2"><FONT SIZE=1>Per Share</FONT>
      <HR WIDTH=60% SIZE=1 COLOR=BLACK noshade>
    </TH>
    <TH>&nbsp;</TH>
    <TH colspan="2"><FONT SIZE=1>Total</FONT>
      <HR WIDTH=60% SIZE=1 COLOR=BLACK noshade>
    </TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD WIDTH=58% ALIGN=LEFT><font size="2">Public offering price</font></TD>
    <TD WIDTH=12% ALIGN=RIGHT><font size="2">$25,000&nbsp;</font></TD>
    <TD WIDTH=5% ALIGN=RIGHT>&nbsp;</TD>
    <TD WIDTH=4% ALIGN=RIGHT>&nbsp;</TD>
    <TD WIDTH=16% ALIGN=RIGHT><font size="2">$15,000,000&nbsp;</font></TD>
    <TD WIDTH=5% ALIGN=RIGHT><font size="1"></font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="2">Underwriting discount</font></TD>
    <TD ALIGN=RIGHT><font size="2">$250&nbsp;</font></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><font size="2">$150,000&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1"></font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="2">Proceeds, before expenses, to the Fund (1)</font></TD>
    <TD ALIGN=RIGHT><font size="2">$24,750&nbsp;</font></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><font size="2">$14,850,000&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1"></font></TD>
  </TR>
</TABLE>

<TABLE WIDTH=600 align="center" cellpadding="0" cellspacing="0">
  <TR>
    <TD WIDTH=4% ALIGN=left VALIGN=top><font size="1"> <font size="2">(1) </font></font></TD>
    <TD WIDTH=96% colspan="2"><font size="2">&nbsp;The estimated offering expenses
      payable by the Fund are $135,000.</font></TD>
  </TR>
</TABLE>



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

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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  AMPS will be ready for delivery in book-entry form through The Depository Trust
  Company on or about October 19, 2005. </FONT></P>

<!-- MARKER FORMAT-SHEET="Cutoff rule centered" FSL="Workstation" -->
<HR SIZE=1 noshade ALIGN=CENTER WIDTH=150>
<div align="center"><FONT FACE="Times New Roman, Times, Serif" SIZE=4><B>Merrill
  Lynch &amp; Co. </B></FONT>
  <!-- MARKER FORMAT-SHEET="Cutoff rule centered" FSL="Workstation" -->
</div>
<HR SIZE=1 noshade ALIGN=CENTER WIDTH=150>
<!-- MARKER FORMAT-SHEET="Center no bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The date of
  this prospectus is October 17, 2005. </FONT></P>


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



<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 12; page: 12" -->



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


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
prospectus contains information you should know before investing, including information
about risks. Please read it before you invest and keep it for future reference. The Fund&#146;s
statement of additional information dated October 17, 2005 contains further information about the
Fund and is incorporated by reference (legally considered to be part of this prospectus)
and the table of contents of the statement of additional information appears on page 49
of this prospectus. A copy of the statement of additional information and copies of the
Fund&#146;s semi-annual and annual reports may be obtained without charge by writing to
the Fund at its address at 800 Scudders Mill Road, Plainsboro, New Jersey 08536, or by
calling the Fund at (800) 543-6217. Copies of the Fund&#146;s semi-annual and annual
reports may also be obtained without charge at mutualfunds.ml.com. The statement of
additional information is not available at this website due to the relatively short
offering period for the AMPS and the time involved in posting it. In addition, you may
request other information about the Fund or make stockholder inquiries by calling the
Fund toll-free at (800) 543-6217. In addition, the Securities and Exchange Commission
maintains a Web site (http://sec.gov) that contains the statement of additional
information, material incorporated by reference and other information regarding
registrants that file electronically with the Securities and Exchange Commission. </FONT></P>


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



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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 13; page: 13" -->



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





<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
  <TR VALIGN=Bottom>
    <TH>&nbsp;</TH>
    <TH><FONT SIZE=1>Page</FONT>
      <HR WIDTH=85% SIZE=1 COLOR=BLACK noshade></TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD WIDTH=95% ALIGN=LEFT><FONT SIZE=2>Prospectus Summary</FONT></TD>
    <TD WIDTH=5% ALIGN=RIGHT><FONT SIZE=2>4&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Risk Factors and Special Considerations</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>10&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Financial Highlights</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>14&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>The Fund</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>15&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Use of Proceeds</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>15&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Capitalization</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>16&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Portfolio Composition</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>16&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Investment Objective and Policies</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>16&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Other Investment Policies</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>25&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Description of Amps</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>28&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>The Auction</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>33&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Rating Agency Guidelines</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>41&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Investment Advisory and Management Arrangements</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>42&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Taxes</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>43&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Description of Capital Stock</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>44&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Custodian</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>46&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Underwriting</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>47&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Transfer Agent, Dividend Disbursing Agent and
      Registrar</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>47&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Accounting Services Provider</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>47&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Legal Matters</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>47&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Independent Registered Public Accounting Firm
      and Experts</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>48&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Additional Information</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>48&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Table of Contents of Statement of Additional Information</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>49&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Glossary</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>50&nbsp;</FONT></TD>
  </TR>
</TABLE>
<!-- MARKER FORMAT-SHEET="Cutoff rule centered" FSL="Workstation" -->
<HR SIZE=1 noshade ALIGN=CENTER WIDTH=150>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>&nbsp;&nbsp;&nbsp;
  Information about the Fund can be reviewed and copied at the Securities and
  Exchange Commission&#146;s Public Reference Room in Washington, D.C. Call 1-202-551-8090
  for information on the operation of the public reference room. This information
  is also available on the Securities and Exchange Commission&#146;s Internet
  site at http://www.sec.gov and copies may be obtained upon payment of a duplicating
  fee by writing to the Public Reference Section of the Securities and Exchange
  Commission, Washington, D.C. 20549-0102. </b></font></p>

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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You
should rely only on the information contained in this prospectus. We have not, and the
underwriter has not, authorized any other person to provide you with different
information. If anyone provides you with different or inconsistent information, you
should not rely on it. We are not, and the underwriter is not, making an offer to sell
these securities in any jurisdiction where the offer or sale is not permitted. You should
assume that the information appearing in this prospectus is accurate only as of the date
on the front cover of this prospectus. Our business, financial condition, results of
operations and prospects may have changed since that date. </FONT></P>



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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 14; page: 14" -->


<!-- MARKER FORMAT-SHEET="1 pt rule no space" FSL="Workstation" -->
<HR SIZE=1 noshade WIDTH=100% ALIGN=LEFT>



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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>This
summary is qualified in its entirety by reference to the detailed information included in
this prospectus and the statement of additional information.</I> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Hang Large" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>The Fund</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>MuniHoldings Fund, Inc. is a non-diversified, closed-end
management investment company. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Large" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>The Offering</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Fund is offering a total of                                         600 shares of
Auction Market Preferred                                         Stock, Series C, 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
                                        Series C AMPS are being offered by
                                        Merrill Lynch, Pierce, Fenner &amp;                                        Smith
Incorporated (&#147;Merrill                                         Lynch&#148;), as
underwriter. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Large (summary pgs)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>                                        &nbsp; </B></FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Series
C AMPS will be shares of                                         preferred stock of the
Fund that entitle                                         their holders to receive cash
dividends                                         at an annual rate that may vary for the
                                        successive dividend periods. In general,
                                        except as described below, each dividend
                                        period following the initial dividend
                                        period will be seven days. The
                                        applicable dividend for a particular
                                        dividend period will be determined by an
                                        auction conducted on the business day
                                        next preceding the start of that
                                        dividend period. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Large (summary pgs)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>&nbsp; </B></FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Investors and
potential investors in                                         shares of Series C AMPS
may participate                                         in auctions for the AMPS through
their                                         broker-dealers. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Large (summary pgs)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B> &nbsp;  </B></FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Generally, AMPS
investors will not                                         receive certificates
evidencing                                         ownership of their shares. Ownership
of                                         AMPS will be maintained in book-entry
                                        form by the securities depository (The
                                        Depository Trust Company) or its nominee
                                        for the account of the investor&#146;s
                                        agent member (generally the
                                        investor&#146;s broker-dealer). The
                                        investor&#146;s agent member, in turn,
                                        will maintain records of such
                                        investor&#146;s beneficial ownership of
                                        AMPS. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
    <TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Investment
      <br>
      &nbsp;&nbsp;&nbsp;Objective <BR>
      &nbsp;&nbsp;&nbsp;and Policies</B> </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The investment objective of the Fund is to provide shareholders with
current income exempt from Federal income taxes. The Fund seeks to achieve its investment objective by investing, as a fundamental policy, at
least 80% of an aggregate of the Fund&#146;s net assets (including proceeds from the issuance of 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 (&#147;Municipal Bonds&#148;). In general, the Fund does not intend for its investments to earn a large amount of interest
income that is not exempt from Federal income tax, except that the interest may be includable in taxable income for purposes of
the Federal alternative minimum tax. There can be no assurance that the Fund&#146;s investment objective will be realized. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Large (summary pgs)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B> &nbsp; </B></FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Maturity. </I>The
average maturity of the Fund&#146;s portfolio
securities varies from time to time based upon an
assessment of economic and market
conditions by Fund Asset Management,
L.P., the Fund&#146;s investment adviser
(the &#147;Investment Adviser&#148;).
The Fund intends to invest primarily in
long term Municipal Bonds (that is,
Municipal Bonds with maturities of more
than ten years). However, the Fund also
may invest in intermediate term
Municipal Bonds with remaining
maturities of between three years and
ten years. The Fund also may invest from
time to time in short term Municipal
Bonds with remaining maturities of less
than three years. </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Large (summary pgs)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B> &nbsp;    </B></FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Investment Grade
Municipal Bonds. </I>Under normal market conditions,
the Fund invests at least 75% of its total assets
in a portfolio of Municipal Bonds that
are rated investment grade by one or
more nationally recognized statistical
rating organizations
(&#147;NRSROs&#148;) (Baa or higher by
Moody&#146;s Investors Service, Inc. </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="1 pt rule no space" FSL="Workstation" -->
<HR SIZE=1 noshade WIDTH=100% ALIGN=LEFT>


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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 15; page: 15" -->


<!-- MARKER FORMAT-SHEET="1 pt rule no space" FSL="Workstation" -->
<HR SIZE=1 noshade WIDTH=100% ALIGN=LEFT>


<!-- MARKER FORMAT-SHEET="Para Hang Large (summary pgs)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>      &nbsp;     </B></FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(&#147;Moody&#146;s&#148;)
or BBB or                                         higher by Standard &amp; Poor&#146;s
                                        (&#147;S&amp;P&#148;) or Fitch Ratings
                                        (&#147;Fitch&#148;)) or in unrated bonds
                                        considered by the Investment Adviser, to
                                        be of comparable quality. In assessing
                                        the quality of Municipal Bonds, the
                                        Investment Adviser takes into account
                                        any letters of credit or similar credit
                                        enhancement to which particular
                                        Municipal Bonds are entitled and the
                                        creditworthiness of the financial
                                        institution that provided such credit
                                        enhancement. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Large (summary pgs)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>                     &nbsp; </B></FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>&#147;High
Yield&#148; or &#147;Junk&#148; Bonds. </I>The Fund
may invest up to 25% of its total assets in
high yield Municipal Bonds (commonly
known as &#147;junk&#148; bonds) that
are rated below investment grade by the
NRSROs (Ba or lower by Moody&#146;s or
BB or lower by S&amp;P or Fitch) or are
unrated securities that are considered
by the Investment Adviser to possess
similar credit characteristics. Although
junk bonds generally pay higher rates of
interest than investment grade bonds,
they are high risk investments that may
cause income and principal losses for
the Fund. Junk bonds generally are less
liquid and experience more price
volatility than higher rated debt
securities. The issuers of junk bonds
may have a larger amount of outstanding
debt relative to their assets than
issuers of investment grade bonds. In
the event of an issuer&#146;s
bankruptcy, claims of other creditors
may have priority over the claims of
junk bond holders, leaving few or no
assets available to repay junk bond
holders. Junk bonds may be subject to
greater call and redemption risk than
higher rated debt securities. </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang 20" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
  <TR VALIGN=TOP>
    <TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> &nbsp; </FONT></TD>
    <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Indexed and Inverse
      Floating Rate Securities. </I>The Fund may invest in securities whose potential
      returns are directly related to changes in an underlying index or interest
      rate, known as indexed securities. The return on indexed securities will
      rise when the underlying index or interest rate rises and fall when the
      index or interest rate falls. The Fund may also invest in securities whose
      return is inversely related to changes in an interest rate (inverse floaters).
      In general, income on inverse floaters will decrease when short term interest
      rates increase and increase when short term interest rates decrease. Investments
      in inverse floaters may subject the Fund to the risks of reduced or eliminated
      interest payments and loss of principal. In addition, certain indexed securities
      and inverse floaters may increase or decrease in value at a greater rate
      than the underlying interest rate, which effectively leverages the Fund&#146;s
      investment. As a result, the market value of such securities will generally
      be more volatile than that of fixed rate, tax exempt securities. Both indexed
      securities and inverse floaters are derivative securities and can be considered
      speculative. </FONT> </TD>
  </TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Large (summary pgs)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>                 &nbsp; </B></FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Hedging Transactions.
</I>The Fund may seek to hedge its portfolio against
changes in interest rates using options and
financial futures contracts or swap
transactions. The Fund&#146;s hedging
transactions are designed to reduce
volatility, but come at some cost. For
example, the Fund may try to limit its
risk of loss from a decline in price of
a portfolio security by purchasing a put
option. However, the Fund must pay for
the option, and the price of the
security may not in fact drop. In large
part, the success of the Fund&#146;s
hedging activities depends on its
ability to forecast movements in
securities prices and interest rates.
The Fund is not required to hedge its
portfolio and may choose not to do so.
The Fund cannot guarantee that any
hedging strategies it uses will work. </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Large (summary pgs)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>        &nbsp;          </B></FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Swap Agreements.
</I>The Fund is authorized to enter into swap
agreements, which are over-the-counter contracts
in which one party agrees to make periodic
payments based on the change in the market value
of a specific bond, basket of bonds or
index in return for periodic payments
based on a fixed or variable interest
rate or the change in market value of a
different bond, basket of bonds or
index. Swap agreements may be used to
obtain exposure to a bond or market
without owning or taking physical
custody of securities. </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="1 pt rule no space" FSL="Workstation" -->
<HR SIZE=1 noshade WIDTH=100% ALIGN=LEFT>

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






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

<!-- MARKER FORMAT-SHEET="1 pt rule no space" FSL="Workstation" -->
<HR SIZE=1 noshade WIDTH=100% ALIGN=LEFT>


<!-- MARKER FORMAT-SHEET="Para Hang Large (summary pgs)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>     &nbsp;             </B></FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Tax Considerations.
</I>While exempt-interest dividends are excluded
from gross income for Federal income tax
purposes, they may be subject to the
Federal alternative minimum tax in
certain circumstances. Distributions of
any capital gain or other taxable income
will be taxable to stockholders. The
Fund may not be a suitable investment
for investors subject to the Federal
alternative minimum tax or who would
become subject to such tax by investing
in the Fund. See &#147;Taxes.&#148; </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Large (summary pgs)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Risk Factors </B></FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Set forth below is a summary of the main risks of
investing in the Fund&#146;s Series C AMPS. For a
more detailed description of the main risks
as well as certain other risks
associated with investing in the
Fund&#146;s Series C AMPS, see
&#147;Risk Factors and Special
Considerations.&#148;</I> </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Bullet for Summary pgs" FSL="Workstation" -->
<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=20%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=1%></TD>
    <TD WIDTH=77%><FONT SIZE=2>The
credit ratings of the AMPS could                                             be reduced
or terminated while an                                             investor holds the
AMPS, which could                                             affect liquidity.</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Bullet for Summary pgs" FSL="Workstation" -->
<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=20%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=1%></TD>
    <TD WIDTH=77%><FONT SIZE=2>Neither
broker-dealers nor the Fund                                             are obligated to
purchase shares of                                             AMPS in an auction or
otherwise, nor                                             is the Fund required to redeem
                                            shares of AMPS in the event of a
                                            failed auction.</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Bullet for Summary pgs" FSL="Workstation" -->
<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=20%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=1%></TD>
    <TD WIDTH=77%><FONT SIZE=2>If
sufficient bids do not exist in                                            an auction,
the applicable dividend                                            rate will be the
maximum applicable                                            dividend rate, and in such
event,                                            owners of AMPS wishing to sell will
                                           not be able to sell all, and may not
                                           be able to sell any, AMPS in the
                                           auction. As a result, investors may
                                           not have liquidity of investment.</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Bullet for Summary pgs" FSL="Workstation" -->
<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=20%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=1%></TD>
    <TD WIDTH=77%><FONT SIZE=2>As
a result of bidding by                                            broker-dealers in an
auction for                                            their own account, the dividend
rate                                            that would apply at the auction may
                                           be higher or lower than the rate
                                           that would have prevailed had the
                                           broker-dealer not bid.</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Bullet for Summary pgs" FSL="Workstation" -->
<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=20%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=1%></TD>
    <TD WIDTH=77%><FONT SIZE=2>A
broker-dealer may bid in an                                            auction in order
to prevent what                                            would otherwise be (i) a
failed                                            auction, (ii) an
                                           &#147;all-hold&#148; auction, or
                                           (iii) an applicable dividend rate
                                           that the broker-dealer believes, in
                                           its sole discretion, does not
                                           reflect the market for the AMPS at
                                           the time of the auction.</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Bullet for Summary pgs" FSL="Workstation" -->
<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=20%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=1%></TD>
    <TD WIDTH=77%><FONT SIZE=2>The
relative buying and selling interest of market participants in AMPS and in the auction
rate securities market as a                                            whole will vary
over time, and such variations may be affected by, among other things, news relating to
the issuer, the                                            attractiveness of alternative
investments, the perceived risk of owning the security (whether related to credit,
liquidity                                            or any other risk), the tax
treatment accorded the instruments, the accounting treatment accorded auction rate
securities,                                            including recent clarifications of
U.S. generally accepted principles relating to the treatment of auction rate securities,
                                           reactions to regulatory actions or press
reports, financial reporting cycles and market sentiment generally. Shifts of
                                           demand in response to any one or simultaneous
particular events cannot be predicted and may be short-lived or exist for
                                           longer periods.</FONT></TD></TR></TABLE>


<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=20%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=1%></TD>
    <TD WIDTH=77%><FONT SIZE=2>Merrill
Lynch, Pierce, Fenner &amp; Smith Incorporated (&#147;Merrill Lynch&#148;) has advised
the Fund that it and various other
                                           broker-dealers and other firms that
participate in the auction rate securities market received letters from the staff of
                                           the Securities and Exchange Commission in the
spring of 2004. The letters requested that each of these firms voluntarily
                                           conduct an investigation regarding its
respective practices and procedures in that market. Pursuant to this request,
                                           Merrill Lynch conducted its own voluntary
review and reported its findings to the Securities and Exchange Commission staff.
                                           At the Securities and Exchange Commission staff&#146;s
request, Merrill Lynch, together with certain other broker-dealers and
                                           other firms that participate in the auction
rate securities market, is engaging in discussions with the Securities and
                                           Exchange Commission staff concerning its
inquiry. Neither Merrill Lynch nor the Fund can predict the ultimate outcome of
                                           the inquiry or how that outcome will affect
the market for the AMPS or the auctions.</FONT></TD></TR></TABLE>



<!-- MARKER FORMAT-SHEET="1 pt rule no space" FSL="Workstation" -->
<HR SIZE=1 noshade WIDTH=100% ALIGN=LEFT>



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






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




<!-- MARKER FORMAT-SHEET="1 pt rule no space" FSL="Workstation" -->
<HR SIZE=1 noshade WIDTH=100% ALIGN=LEFT>


<!-- MARKER FORMAT-SHEET="Bullet for Summary pgs" FSL="Workstation" -->
<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=20%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=1%></TD>
    <TD WIDTH=77%><FONT SIZE=2>Broker-dealers
have no obligation to                                            maintain a secondary
trading market                                            in the AMPS outside of auctions
and                                            there can be no assurance that a
                                           secondary market for the AMPS will
                                           develop or, if it does develop, that
                                           it will provide holders with a
                                           liquid trading market. An increase
                                           in the level of interest rates
                                           likely will have an adverse effect
                                           on the secondary market price of the
                                           AMPS, and a selling stockholder may
                                           have to sell AMPS between auctions
                                           at a price per share of less than
                                           $25,000.</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Bullet for Summary pgs" FSL="Workstation" -->
<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=20%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=1%></TD>
    <TD WIDTH=77%><FONT SIZE=2>The
Fund will issue the AMPS only if                                            the AMPS have
received a rating of                                            Aaa from Moody&#146;s and
AAA from                                            S&amp;P. Under certain
                                           circumstances, the Fund may
                                           voluntarily terminate compliance
                                           with Moody&#146;s or S&amp;P
                                           guidelines, or both, in which case
                                           the AMPS may no longer be rated by
                                           Moody&#146;s or S&amp;P, as
                                           applicable, but will be rated by at
                                           least one rating agency.</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Bullet for Summary pgs" FSL="Workstation" -->
<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=20%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=1%></TD>
    <TD WIDTH=77%><FONT SIZE=2>The
Fund issues shares of AMPS,                                            which generally
pay dividends based                                            on short term interest
rates. The                                            Fund generally will purchase
                                           Municipal Bonds that pay interest at
                                           fixed or adjustable rates. If market
                                           interest rates rise, this could
                                           negatively impact the value of the
                                           Fund&#146;s investment portfolio,
                                           reducing the amount of assets
                                           serving as asset coverage for the
                                           AMPS. If the asset coverage becomes
                                           too low, the Fund may be required to
                                           redeem some or all of the shares of
                                           AMPS.</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Bullet for Summary pgs" FSL="Workstation" -->
<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=20%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=1%></TD>
    <TD WIDTH=77%><FONT SIZE=2>The
Fund is registered as a                                            &#147;non-diversified&#148;                                           investment
company, the Fund may                                            invest a greater
percentage of its                                            assets in a single issuer
than a                                            diversified investment company.
                                           Since the Fund may invest a
                                           relatively high percentage of its
                                           assets in a limited number of
                                           issuers, the Fund may be more
                                           exposed to any single economic,
                                           political or regulatory occurrence
                                           than a more widely diversified fund.</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Bullet for Summary pgs" FSL="Workstation" -->
<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=20%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=1%></TD>
    <TD WIDTH=77%><FONT SIZE=2>The
amount of public information                                            available about
Municipal Bonds in                                            the Fund&#146;s portfolio
is                                            generally less than that for
                                           corporate equities or bonds, and the
                                           investment performance of the Fund
                                           may, therefore, be more dependent on
                                           the analytical abilities of the
                                           Investment Adviser than the
                                           performance of a stock fund or
                                           taxable bond fund.</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Bullet for Summary pgs" FSL="Workstation" -->
<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=20%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=1%></TD>
    <TD WIDTH=77%><FONT SIZE=2>The
Fund&#146;s investments in                                            Municipal Bonds are
subject to                                            interest rate and credit risk.
                                           Interest rate risk is the risk that
                                           prices of Municipal Bonds generally
                                           increase when interest rates decline
                                           and decrease when interest rates
                                           increase. Prices of the longer term
                                           securities in which the Fund
                                           primarily invests generally change
                                           more in response to changes in
                                           interest rates than prices of
                                           shorter term securities. Credit risk
                                           is the risk that the issuer will be
                                           unable to pay the interest or
                                           principal when due. Changes in an
                                           issuer&#146;s credit rating or the
                                           market&#146;s perception of an
                                           issuer&#146;s creditworthiness may
                                           affect the value of the Fund&#146;s
                                           investment in that issuer.</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Bullet for Summary pgs" FSL="Workstation" -->
<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=20%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=1%></TD>
    <TD WIDTH=77%><FONT SIZE=2>Investments
in junk bonds entail a                                            higher level of credit
risk (loss of                                            income and/or principal) and a
                                           corresponding greater risk of loss
                                           than investments in investment grade
                                           Municipal Bonds. Municipal Bonds
                                           rated in the lower rating categories
                                           are considered to be predominantly
                                            speculative with respect to capacity
                                            to pay interest and dividend income
                                            and repay principal.</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Large (summary pgs)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
    <TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Investment
      <br>
      &nbsp;&nbsp;&nbsp;Adviser </B></FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Investment Adviser provides                                         investment
advisory and administrative                                         services to the Fund.
For its services,                                         the Fund pays the Investment
Adviser a                                         monthly fee at the annual rate of 0.55%
                                        of the Fund&#146;s average weekly net
                                        assets (including any proceeds from the
                                        issuance of preferred stock). </FONT></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="1 pt rule no space" FSL="Workstation" -->
<HR SIZE=1 noshade WIDTH=100% ALIGN=LEFT>


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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 18; page: 18" -->


<!-- MARKER FORMAT-SHEET="1 pt rule no space" FSL="Workstation" -->
<HR SIZE=1 noshade WIDTH=100% ALIGN=LEFT>



<!-- MARKER FORMAT-SHEET="Para Hang Large (summary pgs)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
    <TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Dividends
      and<BR>
      &nbsp;&nbsp;&nbsp;Dividend <br>
      &nbsp;&nbsp;&nbsp;Periods </B></FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dividends
      on the Series C AMPS will be cumulative from the date the shares are first
      issued and payable at the annualized cash dividend rate for the initial
      dividend period on the initial dividend payment date as follows: </FONT></TD>
</TR>
</TABLE>
<BR>









<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
  <TR VALIGN=Bottom>
    <TH align=center><FONT SIZE=1>AMPS Series</FONT>
      <HR align=center WIDTH=52 SIZE=1 COLOR=BLACK noshade>
    </TH>
    <TH><FONT SIZE=1>Initial <BR>
      Dividend <BR>
      Rate </FONT>
      <HR WIDTH=50 SIZE=1 COLOR=BLACK noshade>
    </TH>
    <TH><FONT SIZE=1>Initial <BR>
      Dividend <BR>
      Period <BR>
      Ending </FONT>
      <HR WIDTH=50 SIZE=1 COLOR=BLACK noshade>
    </TH>
    <TH><FONT SIZE=1>Initial <BR>
      Dividend <BR>
      Payment <BR>
      Date </FONT>
      <HR WIDTH=50 SIZE=1 COLOR=BLACK noshade>
    </TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD WIDTH=37% ALIGN=center><FONT SIZE=2>Series C</FONT></TD>
    <TD WIDTH=22% ALIGN=CENTER><FONT SIZE=2>2.50%</FONT></TD>
    <TD WIDTH=21% ALIGN=CENTER><FONT SIZE=2>October 31, 2005</FONT></TD>
    <TD WIDTH=20% ALIGN=CENTER><FONT SIZE=2>November 1, 2005</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD WIDTH=37% ALIGN=center>&nbsp;</TD>
    <TD WIDTH=22% ALIGN=CENTER>&nbsp;</TD>
    <TD WIDTH=21% ALIGN=CENTER>&nbsp;</TD>
    <TD WIDTH=20% ALIGN=CENTER>&nbsp;</TD>
  </TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Hang Large (summary pgs)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>                                       &nbsp; </B></FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>After the
initial dividend period, each                                         dividend period for
the Series C AMPS                                         will generally consist of seven
days;                                         provided however, that, before any
                                        auction, the Fund may decide, subject to
                                        certain limitations and only if it gives
                                        notice to holders, to declare a special
                                        dividend period of up to five years. </FONT></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Hang Large (summary pgs)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>               &nbsp; </B></FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>After the
initial dividend period, in                                         the case of dividend
periods that are                                         not special dividend periods,
dividends                                         generally will be payable on each
                                        succeeding Tuesday in the case of the
                                        Series C AMPS. </FONT></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Hang Large (summary pgs)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>             &nbsp; </B></FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dividends for
the Series C AMPS will be                                         paid through the
securities depository                                         (The Depository Trust
Company) on each                                         dividend payment date for the
AMPS. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Large (summary pgs)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>                &nbsp; </B></FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For each
subsequent dividend period, the                                         auction agent
(The Bank of New York)                                         will hold an auction to
determine the                                         cash dividend rate on the shares of
                                        Series C AMPS. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Large (summary pgs)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
    <TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Determination
      of<BR>
      &nbsp;&nbsp;&nbsp;Maximum<br>
      &nbsp;&nbsp;&nbsp;Dividend Rates </B></FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Generally,
      the applicable dividend rate for any dividend period for the Series C AMPS
      will not be more than the maximum applicable rate attributable to such shares.
      The maximum applicable rate will be the higher of (A) the applicable percentage
      of the reference rate on the auction date or (B) the applicable spread plus
      the reference rate on the auction date. The reference rate is (A) the higher
      of the applicable LIBOR Rate (as defined in the Glossary) and the Taxable
      Equivalent of the Short Term Municipal Bond Rate (as defined in the Glossary)
      (for a dividend period or special dividend period of 364 or fewer days),
      or (B) the applicable Treasury Index Rate (as defined in the Glossary) (for
      a special dividend period of 365 days or more). The maximum applicable rate
      for the Series C AMPS will depend on the credit rating assigned to the shares,
      the length of the dividend period and whether or not the Fund has given
      notification prior to the auction for the dividend period that any taxable
      income will be included in the dividend on the AMPS for that dividend period.
      The applicable percentage and applicable spread are as follows:</FONT></TD>
</TR>
</TABLE>
<BR>


<TABLE WIDTH=600 BORDER=0 ALIGN=Center CELLPADDING=0 CELLSPACING=0>
  <TR VALIGN=Bottom>
    <TH colspan=2><FONT SIZE=1>Credit Ratings</FONT>
      <HR WIDTH=240 SIZE=1 COLOR=BLACK noshade>
    </TH>
    <TH rowspan="2"><FONT SIZE=1>Applicable <BR>
      Percentage <BR>
      of Reference <BR>
      Rate&#151;No <BR>
      Notification </FONT>
      <HR WIDTH=85% SIZE=1 COLOR=BLACK noshade>
    </TH>
    <TH rowspan="2"><FONT SIZE=1>Applicable <BR>
      Percentage <BR>
      of Reference <BR>
      Rate&#151; <BR>
      Notification </FONT>
      <HR WIDTH=85% SIZE=1 COLOR=BLACK noshade>
    </TH>
    <TH rowspan="2"><FONT SIZE=1>Applicable <BR>
      Spread Over <BR>
      Reference <BR>
      Rate&#151;No <BR>
      Notification </FONT>
      <HR WIDTH=85% SIZE=1 COLOR=BLACK noshade>
    </TH>
    <TH rowspan="2"><FONT SIZE=1>Applicable <BR>
      Spread Over <BR>
      Reference <BR>
      Rate&#151; <BR>
      Notification </FONT>
      <HR WIDTH=85% SIZE=1 COLOR=BLACK noshade>
    </TH>
  </TR>
  <TR VALIGN=Bottom>
    <TH><FONT SIZE=1>Moody&#146;s</FONT>
      <HR WIDTH=85 SIZE=1 COLOR=BLACK noshade>
    </TH>
    <TH><FONT SIZE=1>S&amp;P</FONT>
      <HR WIDTH=85 SIZE=1 COLOR=BLACK noshade>
    </TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=CENTER><FONT SIZE=2>Aaa</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>AAA</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>110%</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>125%</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>1.10%</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>1.25%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=CENTER><FONT SIZE=2>Aa3 to Aa1</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>AA- to AA+</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>125%</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>150%</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>1.25%</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>1.50%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=CENTER><FONT SIZE=2>A3 to A1</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>A- to A+</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>150%</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>200%</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>1.50%</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>2.00%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=CENTER><FONT SIZE=2>Baa3 to Baa1</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>BBB- to BBB+</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>175%</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>250%</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>1.75%</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>2.50%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=CENTER><FONT SIZE=2>Below Baa3</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>Below BBB-</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>200%</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>300%</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>2.00%</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>3.00%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=CENTER>&nbsp;</TD>
    <TD ALIGN=CENTER>&nbsp;</TD>
    <TD ALIGN=CENTER>&nbsp;</TD>
    <TD ALIGN=CENTER>&nbsp;</TD>
    <TD ALIGN=CENTER>&nbsp;</TD>
    <TD ALIGN=CENTER>&nbsp;</TD>
  </TR>
</TABLE>



<!-- MARKER FORMAT-SHEET="Para Hang Large (summary pgs)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
  <TR VALIGN=TOP>
    <TD WIDTH=15%>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD WIDTH=80%>&nbsp;</TD>
  </TR>
  <TR VALIGN=TOP>
    <TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B> &nbsp;
      </B></FONT></TD>
    <TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The applicable
      percentage and the applicable spread as so determined may be subject to
      upward but not downward adjustment in the discretion of the Board of Directors
      of the Fund after consultation with the broker-dealers participating in
      the auction for the AMPS. </FONT></TD>
  </TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Large (summary pgs)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>   &nbsp;          </B></FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>There is
no minimum applicable dividend rate for any dividend period. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Large (summary pgs)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Other AMPS </B></FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Fund has outstanding 4,400                                         shares of two
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  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="1 pt rule no space" FSL="Workstation" -->
<HR SIZE=1 noshade WIDTH=100% ALIGN=LEFT>



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






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


<!-- MARKER FORMAT-SHEET="1 pt rule no space" FSL="Workstation" -->
<HR SIZE=1 noshade WIDTH=100% ALIGN=LEFT>


<!-- MARKER FORMAT-SHEET="Para Hang Large (summary pgs)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>&nbsp; </B></FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$110,000,000 (the
&#147;Other AMPS&#148;). The Other                                         AMPS are as
follows: 2,200 shares of                                         Auction Market Preferred
Stock, Series A                                         and 2,200 shares of Auction
Market                                         Preferred Stock, Series B. The Series C
                                        AMPS offered hereby rank on a parity
                                        with the Other AMPS with respect to
                                        dividends and liquidation preference. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Large (summary pgs)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Asset Maintenance </B></FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Under the Fund&#146;s Articles Supplementary creating the Series C
AMPS (the &#147;Articles Supplementary&#148;), the Fund must maintain: </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Bullet for Summary pgs" FSL="Workstation" -->
<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=20%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=1%></TD>
    <TD WIDTH=77%><FONT SIZE=2>asset
coverage of the AMPS and Other AMPS as required by the rating agencies rating the AMPS,
and</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Bullet for Summary pgs" FSL="Workstation" -->
<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=20%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=1%></TD>
    <TD WIDTH=77%><FONT SIZE=2>asset
coverage of the AMPS and Other AMPS of at least 200% as required by the Investment
Company Act of 1940 (the &#147;1940                                             Act&#148;).</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Large (summary pgs)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
  <TR VALIGN=TOP>
    <TD WIDTH=15%>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD WIDTH=80%>&nbsp;</TD>
  </TR>
  <TR VALIGN=TOP>
    <TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B> &nbsp;
      </B></FONT></TD>
    <TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Fund estimates
      that, based on the composition of its portfolio at April 30, 2005, asset
      coverage of the AMPS and Other AMPS as required by the 1940 Act would be
      approximately 280% immediately after the Fund issues the shares of AMPS
      offered by this prospectus representing approximately 36% of the Fund&#146;s
      capital, or approximately 56% of the Fund&#146;s common stock equity, immediately
      after the issuance of such AMPS. </FONT></TD>
  </TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Large (summary pgs)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
    <TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Mandatory<br>
      &nbsp;&nbsp;&nbsp;Redemption </B></FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If the required asset coverage is not maintained or, when necessary,
restored, the                                         Fund must redeem shares of Series C
AMPS                                         at the price of $25,000 per share plus
                                        accumulated but unpaid dividends thereon
                                        (whether or not earned or declared). The
                                        provisions of the 1940 Act may restrict
                                        the Fund&#146;s ability to make such a
                                        mandatory redemption. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Large (summary pgs)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
    <TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Optional<br>
      &nbsp;&nbsp;&nbsp;Redemption </B></FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Fund may, at its option,                                         choose to redeem all
or some of the                                         shares of AMPS on any dividend
payment                                         date at the price of $25,000 per share,
                                        plus accumulated but unpaid dividends
                                        thereon (whether or not earned or
                                        declared), plus any applicable premium. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Large (summary pgs)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
    <TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Liquidation<br>
      &nbsp;&nbsp;&nbsp;Preference </B></FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The liquidation preference                                         (that is, the amount
the Fund must pay                                         to holders of AMPS if the Fund
is                                         liquidated) of each share of AMPS will
                                        be $25,000, plus an amount equal to
                                        accumulated but unpaid dividends
                                        (whether or not earned or declared). </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Large (summary pgs)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Ratings  </B></FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Series C AMPS will be issued with a rating of Aaa from Moody&#146;s and AAA from S&amp;P. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Large (summary pgs)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Voting Rights </B></FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The 1940 Act requires that the                                         holders of AMPS
and any other preferred                                         stock, including the
Other AMPS, voting                                         as a separate class, have the
right to                                         elect at least two directors at all
                                        times and to elect a majority of the
                                        directors at any time when dividends on
                                        the AMPS or any other preferred stock,
                                        including the Other AMPS, are unpaid for
                                        two full years. The Fund&#146;s Charter,
                                        the 1940 Act and the General Corporation
                                        Laws of the State of Maryland require
                                        holders of AMPS and any other preferred
                                        stock, including the Other AMPS, to vote
                                        as a separate class on certain other
                                        matters. </FONT></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="1 pt rule no space" FSL="Workstation" -->
<HR SIZE=1 noshade WIDTH=100% ALIGN=LEFT>



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





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




<!-- MARKER FORMAT-SHEET="1 pt rule no space" FSL="Workstation" -->
<HR SIZE=1 noshade WIDTH=100% ALIGN=LEFT>



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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>An
investment in the Fund&#146;s AMPS should not constitute a complete investment program.</I> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Set
forth below are the main risks of investing in the Fund&#146;s AMPS.</I> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Investment
Considerations. </I>Investors in Series C AMPS should consider the following factors: </FONT> </P>

<!-- MARKER FORMAT-SHEET="Bullet 10" FSL="Workstation" -->
<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=5%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=3%></TD>
    <TD WIDTH=90%><FONT SIZE=2>The
credit ratings of the AMPS could be reduced or terminated while an investor holds the
AMPS, which could affect liquidity.</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Bullet 10" FSL="Workstation" -->
<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=5%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=3%></TD>
    <TD WIDTH=90%><FONT SIZE=2>Neither
broker-dealers nor the Fund are obligated to purchase shares of AMPS in an auction or
otherwise, nor is the Fund required to redeem shares of             AMPS in the event of
a failed auction.</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Bullet 10" FSL="Workstation" -->
<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=5%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=3%></TD>
    <TD WIDTH=90%><FONT SIZE=2>If
sufficient bids do not exist in an auction, the applicable             dividend rate will
be the maximum applicable dividend rate, and in             such event, owners of AMPS
wishing to sell will not be able to             sell all, and may not be able to sell
any, AMPS in the auction. As             a result, investors may not have liquidity of
investment.</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Bullet 10" FSL="Workstation" -->
<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=5%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=3%></TD>
    <TD WIDTH=90%><FONT SIZE=2>Broker-dealers
may submit orders in auctions for the AMPS for             their own account. If a
broker-dealer submits an order for its own             account in any auction, it may
have knowledge of orders placed             through it in that auction and therefore have
an advantage over             other bidders, but such broker-dealer would not have
knowledge of             orders submitted by other broker-dealers in that auction. As a
            result of bidding by a broker-dealer in an auction, the dividend
            rate that would apply at the auction may be higher or lower than
            the rate that would have prevailed had the broker-dealer not bid.</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Bullet 10" FSL="Workstation" -->
<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=5%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=3%></TD>
    <TD WIDTH=90%><FONT SIZE=2>A
broker-dealer may bid in an auction in order to prevent what             would otherwise
be (i) a failed auction, (ii) an             &#147;all-hold&#148; auction, or (iii) an
applicable dividend rate             that the broker-dealer believes, in its sole
discretion, does not             reflect the market for the AMPS at the time of the
auction. A             broker-dealer may, but is not obligated to, advise owners of AMPS
            that the dividend rate that would apply in an &#147;all-hold&#148;            auction
may be lower than would apply if owners submit bids and             such advice, if
given, may facilitate the submission of bids by             owners that would avoid the
occurrence of an &#147;all-hold&#148;            auction.</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Bullet 10" FSL="Workstation" -->
<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=5%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=3%></TD>
    <TD WIDTH=90%><FONT SIZE=2>The
relative buying and selling interest of market participants in             AMPS and in
the auction rate securities market as a whole will             vary over time, and such
variations may be affected by, among             other things, news relating to the
issuer, the attractiveness of             alternative investments, the perceived risk of
owning the security             (whether related to credit, liquidity or any other risk),
the tax             treatment accorded the instruments, the accounting treatment
            accorded auction rate securities, including recent clarifications
            of U.S. generally accepted principles relating to the treatment of
            auction rate securities, reactions to regulatory actions or press
            reports, financial reporting cycles and market sentiment
            generally. Shifts of demand in response to any one or simultaneous
            particular events cannot be predicted and may be short-lived or
            exist for longer periods.</FONT></TD></TR></TABLE>


<!-- MARKER FORMAT-SHEET="Bullet 10" FSL="Workstation" -->
<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=5%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=3%></TD>
    <TD WIDTH=90%><FONT SIZE=2>Merrill
Lynch has advised the Fund that it and various other             broker-dealers and other
firms that participate in the auction             rate securities market received letters
from the staff of the             Securities and Exchange Commission in the spring of
2004. The             letters requested that each of these firms voluntarily conduct an
            investigation regarding its respective practices and procedures in
            that market. Pursuant to this request, Merrill Lynch conducted its
            own voluntary review and reported its findings to the Securities
            and Exchange Commission staff. At the Securities and Exchange
            Commission staff&#146;s request, Merrill Lynch, together with
            certain other broker-dealers and other firms that participate in
            the auction rate securities market, is engaging in discussions
            with the Securities and Exchange Commission staff concerning its
            inquiry. Neither Merrill Lynch nor the Fund can predict the
            ultimate outcome of the inquiry or how that outcome will affect
            the market for the AMPS or the auctions.</FONT></TD></TR></TABLE>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Secondary
Market. </I>Broker-dealers have no obligation to maintain a secondary trading market in the
AMPS outside of auctions and there can be no assurance that a secondary market for the
AMPS will develop or, if it does develop, that it will provide holders with a liquid
trading market. The AMPS will not be registered on any stock exchange or on any automated
quotation system. An increase in the level of interest rates likely will have an adverse
effect on the secondary market price of the AMPS, and a selling stockholder may have to
sell AMPS between auctions at a price per share of less than $25,000. </FONT> </P>


<!-- MARKER FORMAT-SHEET="1 pt rule no space" FSL="Workstation" -->
<HR SIZE=1 noshade WIDTH=100% ALIGN=LEFT>


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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 21; page: 21" -->


<!-- MARKER FORMAT-SHEET="1 pt rule no space" FSL="Workstation" -->
<HR SIZE=1 noshade WIDTH=100% ALIGN=LEFT>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Rating
Agencies. </I>The Fund will issue the AMPS only if the AMPS have received a rating of Aaa
from Moody&#146;s and AAA from S&amp;P. As a result of such ratings, the Fund will be
subject to guidelines of Moody&#146;s, S&amp;P or another substitute NRSRO that may issue
ratings for its preferred stock. These guidelines may impose asset coverage or portfolio
composition requirements that are more stringent than those imposed by the 1940 Act and
may prohibit or limit the use by the Fund of certain portfolio management techniques or
investments. The Fund does not expect these guidelines to prevent the Investment Adviser
from managing the Fund&#146;s portfolio in accordance with the Fund&#146;s investment
objective and policies. Also, under certain circumstances, the Fund may voluntarily
terminate compliance with Moody&#146;s or S&amp;P&#146;s guidelines, or both, in which
case the AMPS may no longer be rated by Moody&#146;s or S&amp;P, as applicable, but will
be rated by at least one rating agency. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Interest
Rate Risk and AMPS. </I>The Fund issues shares of AMPS, which generally pay dividends based
on short term interest rates. The Fund generally will purchase Municipal Bonds that pay
interest at fixed or adjustable rates. If short term interest rates rise, dividend rates
on the shares of AMPS may rise so that the amount of dividends paid to the holders of
shares of AMPS exceeds the income from the Fund&#146;s portfolio securities. Because
income from the Fund&#146;s entire investment portfolio (not just the portion of the
portfolio purchased with the proceeds of the AMPS offering) is available to pay dividends
on the shares of AMPS, dividend rates on the shares of AMPS would need to greatly exceed
the Fund&#146;s net portfolio income before the Fund&#146;s ability to pay dividends on
the shares of AMPS would be jeopardized. If market interest rates rise, this could
negatively impact the value of the Fund&#146;s investment portfolio, reducing the amount
of assets serving as asset coverage for the AMPS. If the asset coverage becomes too low,
the Fund may be required to redeem some or all of the shares of AMPS. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Non-Diversification.
</I>The Fund is registered as a &#147;non-diversified&#148; investment company. This means
that the Fund may invest a greater percentage of its assets in a single issuer than a
diversified investment company. Since the Fund may invest a relatively high percentage of
its assets in a limited number of issuers, the Fund may be more exposed to any single
economic, political or regulatory occurrence than a more widely diversified fund. Even as
a non-diversified fund, the Fund must still meet the diversification requirements
applicable to regulated investment companies under the Federal income tax laws. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Market
Risk and Selection Risk. </I>Market risk is the risk that the bond market will go down in
value, including the possibility that the market will go down sharply and unpredictably.
Selection risk is the risk that the securities that Fund management selects will
underperform the bond market, the relevant indices, or other funds with similar
investment objectives and investment strategies. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Tax
Exempt Securities Market Risk. </I>The amount of public information available about Municipal
Bonds in the Fund&#146;s portfolio is generally less than that for corporate equities or
bonds, and the investment performance of the Fund may, therefore, be more dependent on
the analytical abilities of the Investment Adviser than the performance of a stock fund
or taxable bond fund. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Interest
Rate and Credit Risk. </I>The Fund invests in Municipal Bonds, which are subject to interest
rate and credit risk. Interest rate risk is the risk that prices of Municipal Bonds
generally increase when interest rates decline and decrease when interest rates increase.
Prices of the longer term securities in which the Fund primarily invests generally change
more in response to interest rate changes than prices of shorter term securities. The Fund&#146;s
use of leverage by the issuance of preferred stock and its investment in inverse floating
obligations, as discussed below, may increase interest rate risk. Because market interest
rates are currently near their lowest levels in many years, there is a greater risk that
the Fund&#146;s portfolio securities 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&#146;s credit rating or the market&#146;s
perception of an issuer&#146;s creditworthiness may affect the value of the Fund&#146;s
investment in that issuer. The degree of credit risk depends on both the financial
condition of the issuer and the terms of the obligation. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Risks
Associated with Non-Investment Grade Securities. </I>Under normal market conditions, the Fund
expects to invest at least 75% of its total assets in Municipal Bonds that are rated
investment grade by Moody&#146;s, S&amp;P or Fitch, 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. The Fund may invest up to 25% of its total assets in high yield
Municipal Bonds that are rated below investment grade or are unrated securities that are
considered by the Investment Adviser to possess similar </FONT> </P>

<!-- MARKER FORMAT-SHEET="1 pt rule no space" FSL="Workstation" -->
<HR SIZE=1 noshade WIDTH=100% ALIGN=LEFT>



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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 22; page: 22" -->



<!-- MARKER FORMAT-SHEET="1 pt rule no space" FSL="Workstation" -->
<HR SIZE=1 noshade WIDTH=100% ALIGN=LEFT>




<!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>credit characteristics. Securities
rated below investment grade, also known as junk bonds, generally entail greater interest
rate and credit risks than investment grade securities. 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. </FONT></P>

<!-- MARKER FORMAT-SHEET="Left Head 2 Italic" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Set forth below are
certain other risks associated with investing in the Fund&#146;s AMPS. </I></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Call
and Redemption Risk. </I>A Municipal Bond&#146;s issuer may call the bond for redemption
before it matures. If this happens to a Municipal Bond that the Fund holds, the Fund may
lose income and may have to invest the proceeds in Municipal Bonds with lower yields. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Rating
Categories. </I>The Fund intends to invest in Municipal Bonds that are rated investment grade
by S&amp;P, Moody&#146;s or Fitch, 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. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Reinvestment
Risk. </I>Reinvestment risk is the risk that income from the Fund&#146;s Municipal Bond
portfolio will decline if and when the Fund invests the proceeds from matured, traded or
called bonds at market interest rates that are below the portfolio&#146;s current
earnings rate. A decline in income could negatively affect the Fund&#146;s yield, return
or the market price of the common stock. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Private
Activity Bonds. </I>The Fund may invest in certain tax exempt securities classified as &#147;private
activity bonds.&#148; These bonds may subject certain investors in the Fund to the
Federal alternative minimum tax. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Liquidity
of Investments. </I>Certain Municipal Bonds in which the Fund invests may lack an established
secondary trading market or may 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. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Portfolio
Strategies. </I>The Fund may engage in various portfolio strategies both to seek to increase
the return of the Fund and to seek to hedge its portfolio against adverse effects from
movements in interest rates and in the securities markets. These portfolio strategies
include the use of derivatives, such as indexed securities, inverse 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&#146;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&#146;s portfolio. The Fund is not
required to use derivatives or other portfolio strategies to seek to increase return or
to seek to hedge its portfolio and may choose not to do so. There can be no assurance
that the Fund&#146;s portfolio strategies will be effective. Some of the derivative
strategies that the Fund may use to seek to increase its return are riskier than its
hedging transactions and have speculative characteristics. Such strategies do not attempt
to limit the Fund&#146;s risk of loss. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>General
Risks Related to Derivatives. </I>Derivatives are financial contracts or instruments whose
value depends on, or is derived from, the value of an underlying asset, reference rate or
index (or relationship between two indices). The Fund may invest in a variety of
derivative instruments for investment purposes, hedging purposes or to seek to increase
its return, such as options, futures contracts and swap agreements. The Fund may use
derivatives as a substitute for taking a position in an underlying security or other
asset and/or as part of a strategy designed to reduce exposure to other risks, such as
interest rate risk. The Fund also may use derivatives to add leverage to the portfolio
and/or to hedge against increases in the Fund&#146;s costs associated with the dividend
payments on the preferred stock, including the AMPS. The Fund also may invest in certain
derivative products that pay tax exempt income interest via a trust or partnership
through which the Fund holds interests in one or more underlying long term municipal
securities. The Fund&#146;s use of derivative instruments involves risks different from,
and possibly greater than, the risks associated with investing directly in securities and
other traditional investments. Derivatives are subject to a number of risks such as
liquidity risk, interest rate risk, credit risk, leverage risk and management risk. They
also involve the risk of mispricing or improper valuation and correlation </FONT> </P>

<!-- MARKER FORMAT-SHEET="1 pt rule no space" FSL="Workstation" -->
<HR SIZE=1 noshade WIDTH=100% ALIGN=LEFT>


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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 23; page: 23" -->




<!-- MARKER FORMAT-SHEET="1 pt rule no space" FSL="Workstation" -->
<HR SIZE=1 noshade WIDTH=100% ALIGN=LEFT>



<!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">risk (<I>i.e.</I>, the risk that changes in
the value of the derivative may not correlate perfectly with the underlying asset, rate
or index). If the Fund invests in a derivative instrument it could lose more than the
principal amount invested. Moreover, derivatives raise certain tax, legal, regulatory and
accounting issues that may not be presented by investments in Municipal Bonds, and there
is some risk that certain issues could be resolved in a manner that could adversely
impact the performance of the Fund and/or the tax exempt nature of the dividends paid by
the Fund. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Also,
suitable derivative transactions may not be available in all circumstances and there can
be no assurance that the Fund will engage in these transactions to reduce exposure to
other risks when that would be beneficial. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Swaps.
</I>Swap agreements are types of derivatives. In order to seek to hedge the value of the Fund&#146;s
portfolio, to hedge against increases in the Fund&#146;s cost associated with the
dividend payments on its outstanding preferred stock, including the AMPS, or to seek to
increase the Fund&#146;s return, the Fund may enter into interest rate or credit default
swap transactions. In interest rate swap transactions, there is a risk that yields will
move in the direction opposite of the direction anticipated by the Fund, which would
cause the Fund to make payments to its counterparty in the transaction that could
adversely affect Fund performance. In addition to the risks applicable to swaps
generally, credit default swap transactions involve special risks because they are
difficult to value, are highly susceptible to liquidity and credit risk, and generally
pay a return to the party that has paid the premium only in the event of an actual
default by the issuer of the underlying obligation (as opposed to a credit downgrade or
other indication of financial difficulty). The Fund is not required to enter into
interest rate or credit default swap transactions for hedging purposes or to enhance its
return and may choose not to do so. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Federal
Taxability Risk. </I>The Fund intends to minimize the payment of taxable income to
stockholders by investing in Municipal Bonds and other tax exempt securities in reliance
on an opinion of bond counsel to the issuer that the interest paid on those securities
will be excludable from gross income for Federal income tax purposes. Such securities,
however, may be determined for Federal income tax purpose to pay, or to have paid,
taxable income subsequent to the Fund&#146;s acquisition of the securities. In that
event, the Internal Revenue Service may demand that the Fund pay taxes on the affected
interest income, and, if the Fund agrees to do so, the Fund&#146;s yield on its common
stock could be adversely affected. A determination that interest on a security held by
the Fund is includable in gross income for Federal income tax purposes retroactively to
its date of issue may, likewise, cause a portion of prior distributions received by
stockholders, including holders of AMPS, to be taxable to those stockholders in the year
of receipt. The Fund will not pay an Additional Dividend (as defined herein) to a holder
of AMPS under these circumstances. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Antitakeover
Provisions. </I>The Fund&#146;s Charter, By-laws and the General Corporation Law of the State
of Maryland include provisions that could limit the ability of other entities or persons
to acquire control of the Fund or to change the composition of its Board of Directors.
Such provisions could limit the ability of stockholders to sell their shares at a premium
over prevailing market prices by discouraging a third party from seeking to obtain
control of the Fund. See &#147;Description of Capital Stock &#151; Certain Provisions of
the Charter and By-laws.&#148; </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Market
Disruption. </I>The terrorist attacks in the United States on September 11, 2001 had a
disruptive effect on the securities markets, some of which were closed for a four-day
period. The continued threat of similar attacks, and related events, including U.S.
military actions in Iraq and continued unrest in the Middle East, have led to increased
short term market volatility and may have long term effects on U.S. and world economies
and markets. Similar disruptions of the financial markets could adversely affect the
market prices of the Fund&#146;s portfolio securities, interest rates, auctions,
secondary trading, ratings, credit risk, inflation and other factors relating to the Fund&#146;s
AMPS. Non-investment grade securities tend to be more volatile than investment grade
fixed income securities so that these events and other market disruptions may have a
greater impact on the prices and volatility of non-investment grade securities than on
investment grade fixed income securities. There can be no assurance that these events and
other market disruptions will not have other material and adverse implications for the
non-investment grade securities markets. </FONT> </P>


<!-- MARKER FORMAT-SHEET="1 pt rule no space" FSL="Workstation" -->
<HR SIZE=1 noshade WIDTH=100% ALIGN=LEFT>



<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
<BR>&nbsp;
<TABLE WIDTH=100%><TR><TD WIDTH=20% ALIGN=left><FONT SIZE=1>&nbsp;</FONT></TD>
    <TD WIDTH=60% ALIGN=center><FONT SIZE="2"> 13</FONT></TD>
    <TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR SIZE=5 noshade WIDTH=100% ALIGN=LEFT>






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 24; page: 24" -->



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


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following Financial Highlights table is intended to help you understand the Fund&#146;s
financial performance for the years 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 April 30, 1998 to April 30, 2005 has
been audited by Ernst &amp; Young <font size=1>LLP</font>, whose report for the fiscal year ended April 30,
2005, along with the financial statements of the Fund, is included in the Fund&#146;s
2005 Annual Report, which is incorporated by reference herein. You may obtain a copy of
the 2005 Annual Report at no cost by calling (800) 543-6217 between 8:30 a.m. and 5:30
p.m. Eastern time on any business day. </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following per share data and ratios have been derived from information provided in the
financial statements. </FONT></P>








<TABLE WIDTH=100% BORDER=0 ALIGN=Center CELLPADDING=0 CELLSPACING=0>
  <TR VALIGN=Bottom>
    <TH COLSPAN=2>&nbsp;</TH>
    <TH COLSPAN=14><FONT SIZE=1>For the Year Ended April 30,</FONT>
      <HR WIDTH=95% SIZE=1 COLOR=BLACK noshade>
    </TH>
    <TH COLSPAN=2 rowspan="2"><FONT SIZE=1>For the Period <br>
      May 2, 1997&#135; <br>
      to April 30, <br>
      1998 </FONT>
      <hr width=85% size=1 color=BLACK noshade>
    </TH>
  </TR>
  <TR VALIGN=Bottom>
    <TH COLSPAN=2>&nbsp;</TH>
    <TH COLSPAN=2><FONT SIZE=1>2005</FONT>
      <HR WIDTH=40 SIZE=1 COLOR=BLACK noshade>
    </TH>
    <TH COLSPAN=2><FONT SIZE=1>2004</FONT>
      <HR WIDTH=40 SIZE=1 COLOR=BLACK noshade>
    </TH>
    <TH COLSPAN=2><FONT SIZE=1>2003</FONT>
      <HR WIDTH=40 SIZE=1 COLOR=BLACK noshade>
    </TH>
    <TH COLSPAN=2><FONT SIZE=1>2002</FONT>
      <HR WIDTH=40 SIZE=1 COLOR=BLACK noshade>
    </TH>
    <TH COLSPAN=2><FONT SIZE=1>2001&#134;&#134;</FONT>
      <HR WIDTH=40 SIZE=1 COLOR=BLACK noshade>
    </TH>
    <TH COLSPAN=2><FONT SIZE=1>2000&#134;&#134;</FONT>
      <HR WIDTH=40 SIZE=1 COLOR=BLACK noshade>
    </TH>
    <TH COLSPAN=2><FONT SIZE=1>1999&#134;&#134;</FONT>
      <HR WIDTH=40 SIZE=1 COLOR=BLACK noshade>
    </TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1"><strong>Per Share Operating Performance</strong></font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">Net asset value, beginning of period</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$15.54</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$15.07</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$14.50</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$13.76</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$13.16</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$16.05</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$16.00</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$15.00</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=top>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">Investment income &#151; net</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">1.20</font></TD>
    <TD ALIGN=LEFT><font size="1">&#134;</font></TD>
    <TD ALIGN=RIGHT><font size="1">1.25</font></TD>
    <TD ALIGN=LEFT><font size="1">&#134;</font></TD>
    <TD ALIGN=RIGHT><font size="1">1.25</font></TD>
    <TD ALIGN=LEFT><font size="1">&#134;</font></TD>
    <TD ALIGN=RIGHT><font size="1">1.17</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">1.10</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">1.18</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">1.24</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">1.21</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">Realized and unrealized gain (loss) &#151; net</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">.84</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">.40</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">.40</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">.66</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">.65</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">(2.66</font></TD>
    <TD ALIGN=LEFT><font size="1">)</font></TD>
    <TD ALIGN=RIGHT><font size="1">.40</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">1.03</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">&nbsp;&nbsp;Less dividends and distributions to Preferred Stock shareholders:</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">&nbsp;&nbsp;Investment income &#151; net</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">(.12</font></TD>
    <TD ALIGN=LEFT><font size="1">)</font></TD>
    <TD ALIGN=RIGHT><font size="1">(.07</font></TD>
    <TD ALIGN=LEFT><font size="1">)</font></TD>
    <TD ALIGN=RIGHT><font size="1">(.10</font></TD>
    <TD ALIGN=LEFT><font size="1">)</font></TD>
    <TD ALIGN=RIGHT><font size="1">(.16</font></TD>
    <TD ALIGN=LEFT><font size="1">)</font></TD>
    <TD ALIGN=RIGHT><font size="1">(.32</font></TD>
    <TD ALIGN=LEFT><font size="1">)</font></TD>
    <TD ALIGN=RIGHT><font size="1">(.26</font></TD>
    <TD ALIGN=LEFT><font size="1">)</font></TD>
    <TD ALIGN=RIGHT><font size="1">(.21</font></TD>
    <TD ALIGN=LEFT><font size="1">)</font></TD>
    <TD ALIGN=RIGHT><font size="1">(.26</font></TD>
    <TD ALIGN=LEFT><font size="1">)</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">&nbsp;&nbsp;Realized gain &#151; net</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">(.09</font></TD>
    <TD ALIGN=LEFT><font size="1">)</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">&nbsp;&nbsp;In excess of realized gain &#151; net</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">(.04</font></TD>
    <TD ALIGN=LEFT><font size="1">)</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">&nbsp;&nbsp;Capital charge resulting from issuance of Preferred Stock</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">(.08</font></TD>
    <TD ALIGN=LEFT><font size="1">)</font></TD>
  </TR>
  <TR VALIGN=top>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">Total from investment operations</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">1.92</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">1.58</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">1.55</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">1.67</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">1.43</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">(1.78</font></TD>
    <TD ALIGN=LEFT><font size="1">)</font></TD>
    <TD ALIGN=RIGHT><font size="1">1.34</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">1.90</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=top>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">Less dividends and distributions to Common Stock shareholders:</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">&nbsp;&nbsp;Investment income &#151; net</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">(1.15</font></TD>
    <TD ALIGN=LEFT><font size="1">)</font></TD>
    <TD ALIGN=RIGHT><font size="1">(1.11</font></TD>
    <TD ALIGN=LEFT><font size="1">)</font></TD>
    <TD ALIGN=RIGHT><font size="1">(.98</font></TD>
    <TD ALIGN=LEFT><font size="1">)</font></TD>
    <TD ALIGN=RIGHT><font size="1">(.93</font></TD>
    <TD ALIGN=LEFT><font size="1">)</font></TD>
    <TD ALIGN=RIGHT><font size="1">(.83</font></TD>
    <TD ALIGN=LEFT><font size="1">)</font></TD>
    <TD ALIGN=RIGHT><font size="1">(.94</font></TD>
    <TD ALIGN=LEFT><font size="1">)</font></TD>
    <TD ALIGN=RIGHT><font size="1">(.97</font></TD>
    <TD ALIGN=LEFT><font size="1">)</font></TD>
    <TD ALIGN=RIGHT><font size="1">(.87</font></TD>
    <TD ALIGN=LEFT><font size="1">)</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">&nbsp;&nbsp;Realized gain &#151; net</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">(.32</font></TD>
    <TD ALIGN=LEFT><font size="1">)</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">&nbsp;&nbsp;In excess of realized gain &#151; net</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">(.17</font></TD>
    <TD ALIGN=LEFT><font size="1">)</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=top>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">Total dividends and distributions to Common Stock shareholders</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">(1.15</font></TD>
    <TD ALIGN=LEFT><font size="1">)</font></TD>
    <TD ALIGN=RIGHT><font size="1">(1.11</font></TD>
    <TD ALIGN=LEFT><font size="1">)</font></TD>
    <TD ALIGN=RIGHT><font size="1">(.98</font></TD>
    <TD ALIGN=LEFT><font size="1">)</font></TD>
    <TD ALIGN=RIGHT><font size="1">(.93</font></TD>
    <TD ALIGN=LEFT><font size="1">)</font></TD>
    <TD ALIGN=RIGHT><font size="1">(.83</font></TD>
    <TD ALIGN=LEFT><font size="1">)</font></TD>
    <TD ALIGN=RIGHT><font size="1">(1.11</font></TD>
    <TD ALIGN=LEFT><font size="1">)</font></TD>
    <TD ALIGN=RIGHT><font size="1">(1.29</font></TD>
    <TD ALIGN=LEFT><font size="1">)</font></TD>
    <TD ALIGN=RIGHT><font size="1">(.87</font></TD>
    <TD ALIGN=LEFT><font size="1">)</font></TD>
  </TR>
  <TR VALIGN=top>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">Capital charge resulting from issuance of Common Stock</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">&#151;</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">(.03</font></TD>
    <TD ALIGN=LEFT><font size="1">)</font></TD>
  </TR>
  <TR VALIGN=top>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">Net asset value, end of period</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$16.31</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$15.54</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$15.07</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$14.50</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$13.76</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$13.16</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$16.05</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$16.00</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=top>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">Market price per share, end of period</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$16.12</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$14.43</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$14.43</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$13.38</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$13.18</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$12.5625</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$15.25</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$14.75</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=top>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>

<TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1"><strong>Total Investment Return*</strong></font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">Based on net asset value per share</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">12.95</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">10.94</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">11.54</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">12.64</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">11.71</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">(10.89</font></TD>
    <TD ALIGN=LEFT><font size="1">%)</font></TD>
    <TD ALIGN=RIGHT><font size="1">8.73</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">12.83</font></TD>
    <TD ALIGN=LEFT><font size="1">%++</font></TD>
  </TR>
  <TR VALIGN=top>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">Based on market price per share</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">20.22</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">7.58</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">15.75</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">8.51</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">12.09</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">(10.47</font></TD>
    <TD ALIGN=LEFT><font size="1">%)</font></TD>
    <TD ALIGN=RIGHT><font size="1">12.06</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">4.01</font></TD>
    <TD ALIGN=LEFT><font size="1">%++</font></TD>
  </TR>
  <TR VALIGN=top>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1"><strong>Ratios Based on Average Net Assets of Common Stock</strong></font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">Total expenses, net of reimbursement**</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">1.13</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">1.14</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">1.18</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">1.21</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">1.27</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">1.16</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">1.09</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">.85</font></TD>
    <TD ALIGN=LEFT><font size="1">%+</font></TD>
  </TR>
  <TR VALIGN=top>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">Total expenses**</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">1.13</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">1.15</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">1.18</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">1.21</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">1.27</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">1.16</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">1.09</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">1.05</font></TD>
    <TD ALIGN=LEFT><font size="1">%+</font></TD>
  </TR>
  <TR VALIGN=top>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">Total investment income &#151; net**</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">7.61</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">7.98</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">8.40</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">8.03</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">8.08</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">8.34</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">7.52</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">7.77</font></TD>
    <TD ALIGN=LEFT><font size="1">%+</font></TD>
  </TR>
  <TR VALIGN=top>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">Amount of dividends to Preferred Stock shareholders</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">.74</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">.45</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">.66</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">1.08</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">2.32</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">1.83</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">1.27</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">1.67</font></TD>
    <TD ALIGN=LEFT><font size="1">%+</font></TD>
  </TR>
  <TR VALIGN=top>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">Investment income &#151; net, to Common Stock shareholders</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">6.87</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">7.53</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">7.74</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">6.95</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">5.76</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">6.51</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">6.25</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">6.10</font></TD>
    <TD ALIGN=LEFT><font size="1">%+</font></TD>
  </TR>
  <TR VALIGN=top>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1"><strong>Ratios Based on Average Net Assets of Preferred Stock</strong></font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">Dividends to Preferred Stock shareholders</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">1.47</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">.88</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">1.23</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">1.96</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">3.97</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">3.27</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">2.58</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">3.60</font></TD>
    <TD ALIGN=LEFT><font size="1">%+</font></TD>
  </TR>
  <TR VALIGN=top>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
  </TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->

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


<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 25; page: 25" -->



<!-- MARKER FORMAT-SHEET="Footnote Right size 2" FSL="Workstation" -->
<TABLE WIDTH=100% BORDER=0 ALIGN=Center CELLPADDING=0 CELLSPACING=0>
  <TR VALIGN=Bottom>
    <TH COLSPAN=2>&nbsp;</TH>
    <TH COLSPAN=14><FONT SIZE=1>For the Year Ended April 30,</FONT>
      <HR WIDTH=95% SIZE=1 COLOR=BLACK noshade>
    </TH>
    <TH COLSPAN=2 rowspan="2"><FONT SIZE=1>For the Period
      May&nbsp;2,&nbsp;1997&#135; <br>
      to April 30, <br>
      1998 </FONT>
      <hr width=85% size=1 color=BLACK noshade>
    </TH>
  </TR>
  <TR VALIGN=Bottom>
    <TH COLSPAN=2>&nbsp;</TH>
    <TH COLSPAN=2><FONT SIZE=1>2005</FONT>
      <HR WIDTH=40 SIZE=1 COLOR=BLACK noshade>
    </TH>
    <TH COLSPAN=2><FONT SIZE=1>2004</FONT>
      <HR WIDTH=40 SIZE=1 COLOR=BLACK noshade>
    </TH>
    <TH COLSPAN=2><FONT SIZE=1>2003</FONT>
      <HR WIDTH=40 SIZE=1 COLOR=BLACK noshade>
    </TH>
    <TH COLSPAN=2><FONT SIZE=1>2002</FONT>
      <HR WIDTH=40 SIZE=1 COLOR=BLACK noshade>
    </TH>
    <TH COLSPAN=2><FONT SIZE=1>2001&#134;&#134;</FONT>
      <HR WIDTH=40 SIZE=1 COLOR=BLACK noshade>
    </TH>
    <TH COLSPAN=2><FONT SIZE=1>2000&#134;&#134;</FONT>
      <HR WIDTH=40 SIZE=1 COLOR=BLACK noshade>
    </TH>
    <TH COLSPAN=2><FONT SIZE=1>1999&#134;&#134;</FONT>
      <HR WIDTH=40 SIZE=1 COLOR=BLACK noshade>
    </TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1"><strong>Supplemental Data</strong></font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">Net assets applicable to Common Stock, end of year (in thousands)</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$225,218</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$214,473</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$207,960</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$200,091</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$189,787</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$181,324</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$221,118</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$219,717</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=top>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;</font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">Preferred Stock outstanding, end of year (in thousands)</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$110,000</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$110,000</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$110,000</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$110,000</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$110,000</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$110,000</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$110,000</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$110,000</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=top>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">Portfolio turnover</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">36.23</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">42.89</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">50.68</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">62.94</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">91.25</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">137.69</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">66.07</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
    <TD ALIGN=RIGHT><font size="1">106.16</font></TD>
    <TD ALIGN=LEFT><font size="1">%</font></TD>
  </TR>
  <TR VALIGN=top>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1"><strong>Leverage</strong></font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">Asset coverage per $1,000</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$3,047</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$2,950</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$2,891</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$2,819</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$2,725</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$2,648</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$3,010</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$2,997</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=top>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">Liquidation preference per share#</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$25,000</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$25,000</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$25,000</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$25,000</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$25,000</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$25,000</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$25,000</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$25,000</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=top>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">Average market value per share##</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$25,000</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$25,000</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$25,000</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$25,000</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$25,000</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$25,000</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$25,000</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$25,000</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=top>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1"><strong>Dividends Per Share on Preferred Stock Outstanding</strong></font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">Series A &#151; Investment income &#151; net</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$366</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$220</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$315</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$492</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$1,016</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$820</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$657</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$810</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=top>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">Series B &#151; Investment income &#151; net</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$365</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$223</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$302</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$490</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$968</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$813</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$642</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$816</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=top>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <hr align="right" width="45" size=1 noshade color=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
  </TR>
</TABLE>


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


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


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


<!-- MARKER FORMAT-SHEET="Footnote Right size 2" FSL="Workstation" -->
<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="2"> &#134;&#134; </FONT></TD><TD WIDTH=2%><FONT SIZE="2">&nbsp;</FONT></TD><TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1"> Certain
prior year amounts have been reclassified to conform to current year presentation.</FONT></TD></TR></TABLE>


<!-- MARKER FORMAT-SHEET="Footnote Right size 2" FSL="Workstation" -->
<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="2">&#134;&#134;&#134; </FONT></TD><TD WIDTH=2%><FONT SIZE="2">&nbsp;</FONT></TD><TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1"> The
Fund&#146;s Preferred Stock was issued on June 5, 1997.</FONT></TD></TR></TABLE>



<!-- MARKER FORMAT-SHEET="Footnote Right size 2" FSL="Workstation" -->
<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="2">  # </FONT></TD><TD WIDTH=2%><FONT SIZE="2">&nbsp;</FONT></TD><TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">Excludes
accrued dividends, if any.</FONT></TD></TR></TABLE>


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



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


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

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



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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MuniHoldings
Fund, Inc. (the &#147;Fund&#148;) is a non-diversified, closed-end fund. The Fund was
incorporated under the laws of the State of Maryland on February 27, 1997, and has
registered under the Investment Company Act of 1940, as amended (&#147;1940 Act&#148;).
The Fund&#146;s principal executive office is located at 800 Scudders Mill Road,
Plainsboro, New Jersey 08536, and its telephone number is (609) 282-2800. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board of Directors of the Fund may at any time consider a merger, consolidation or other
form of reorganization of the Fund with one or more other investment companies advised by
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 &#147;Description of Capital Stock &#151; Certain
Provisions of the Charter and By-Laws.&#148; </FONT></P>


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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
net proceeds of this offering will be approximately $14,715,000 after payment of offering
expenses (estimated to be approximately $135,000) and the deduction of the underwriting
discount. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
net proceeds of the offering will be invested in accordance with the Fund&#146;s
investment objective and policies within approximately three months after completion of
this offering, depending on market conditions and the availability of appropriate
securities. Pending such investment, it is anticipated that the proceeds will be invested
in short term, tax exempt securities. See &#147;Investment Objective and Policies.&#148; </FONT></P>


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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 26; page: 26" -->



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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth the unaudited capitalization of the Fund as of April 30, 2005
and as adjusted to give effect to the issuance of the shares of AMPS offered hereby. </FONT></P>





<TABLE WIDTH=600 BORDER=0 ALIGN=Center CELLPADDING=0 CELLSPACING=0>
  <TR VALIGN=Bottom>
    <TH COLSPAN=2>&nbsp;</TH>
    <TH COLSPAN=2><FONT SIZE=1>Actual</FONT>
      <HR WIDTH=80 SIZE=1 COLOR=BLACK noshade>
    </TH>
    <TH COLSPAN=2><FONT SIZE=1>As Adjusted</FONT>
      <HR WIDTH=80 SIZE=1 COLOR=BLACK noshade>
    </TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD WIDTH=366 ALIGN=LEFT><font size="1">Preferred Stock, par value $.10 per
      share (4,400 shares of Other AMPS authorized, issued <br>
      &nbsp;&nbsp;and outstanding at $25,000 per share liquidation preference,
      plus accumulated but unpaid
      &nbsp;&nbsp;dividends; 5,000 shares of AMPS and Other AMPS authorized issued
      and outstanding,
      &nbsp;&nbsp;as adjusted, at $25,000 per share liquidation preference,
      plus accumulated but unpaid <br>
      &nbsp;&nbsp;dividends)</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$110,000,000</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$125,000,000</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <HR align="right" width="68" SIZE=1 noshade COLOR=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <HR align="right" width="68" SIZE=1 noshade COLOR=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">Common Stock, par value $.10 per share (199,995,600 shares authorized, 13,811,738 shares issued and <br>
      &nbsp;&nbsp;outstanding; 199,995,000 shares authorized, 13,811,738 shares issued and outstanding, as adjusted)</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$&nbsp;&nbsp;&nbsp;&nbsp;1,381,174</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$&nbsp;&nbsp;&nbsp;&nbsp;1,381,174</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">Paid-in capital in excess of par</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">204,410,623</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">204,125,623</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">Undistributed investment income &#151; net</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">4,473,210</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">4,473,210</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">Accumulated realized capital losses &#151; net</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">(3,560,213</font></TD>
    <TD ALIGN=LEFT><font size="1">)</font></TD>
    <TD ALIGN=RIGHT><font size="1">(3,560,213</font></TD>
    <TD ALIGN=LEFT><font size="1">)</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">Unrealized appreciation &#151; net</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">18,513,466</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">18,513,466</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <HR align="right" width="68" SIZE=1 noshade COLOR=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
    <TD ALIGN=RIGHT>
      <HR align="right" width="68" SIZE=1 noshade COLOR=#000000>
    </TD>
    <TD ALIGN=LEFT><font size="1"></font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">Net assets applicable to outstanding common stock</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$225,218,260</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1">$224,933,260</font></TD>
    <TD ALIGN=LEFT><font size="1">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>
      <HR align="right" width="68" SIZE=2 noshade COLOR=#000000>
    </TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>
      <HR align="right" width="68" SIZE=2 noshade COLOR=#000000>
    </TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
</TABLE>




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


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of April 30, 2005, approximately 99.61% of the market value of the Fund&#146;s portfolio
was invested in long term and intermediate term municipal obligations and approximately
0.39% of the market value of the Fund&#146;s portfolio was invested in short term tax
exempt securities. The following table sets forth certain information with respect to the
composition of the Fund&#146;s long term and intermediate term municipal obligations
investment portfolio as of April 30, 2005. </FONT></P>





<TABLE WIDTH=600 BORDER=0 ALIGN=Center CELLPADDING=0 CELLSPACING=0>
  <TR VALIGN=Bottom>
    <TH width="117"><FONT SIZE=1>Moody&#146;s*</FONT>
      <HR WIDTH=45 SIZE=1 COLOR=BLACK noshade>
    </TH>
    <TH width="105"><FONT SIZE=1>S&amp;P*</FONT>
      <HR WIDTH=30 SIZE=1 COLOR=BLACK noshade>
    </TH>
    <TH COLSPAN=3><FONT SIZE=1>Number of <BR>
      Issues </FONT>
      <HR WIDTH=70 SIZE=1 COLOR=BLACK noshade>
    </TH>
    <TH COLSPAN=3><FONT SIZE=1>Value <BR>
      (in thousands) </FONT>
      <HR WIDTH=85 SIZE=1 COLOR=BLACK noshade>
    </TH>
    <TH COLSPAN=3><FONT SIZE=1>Percent</FONT>
      <HR WIDTH=60 SIZE=1 COLOR=BLACK noshade>
    </TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=CENTER><FONT SIZE=2>Aaa</FONT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>AAA</FONT></TD>
    <TD WIDTH=54 ALIGN=RIGHT>&nbsp;</TD>
    <TD WIDTH=25 ALIGN=RIGHT><FONT SIZE=2>23</FONT></TD>
    <TD WIDTH=55 ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=33 ALIGN=RIGHT>&nbsp;</TD>
    <TD WIDTH=53 ALIGN=RIGHT><FONT SIZE=2>$83,144</FONT></TD>
    <TD WIDTH=29 ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=43 ALIGN=RIGHT>&nbsp;</TD>
    <TD WIDTH=43 ALIGN=RIGHT><FONT SIZE=2>25.15</FONT></TD>
    <TD WIDTH=43 ALIGN=LEFT><FONT SIZE=2>%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=CENTER><FONT SIZE=2>Aa</FONT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>AA</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>7</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>23,927</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>7.24</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=CENTER><FONT SIZE=2>A</FONT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>A</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>19</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>69,186</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>20.93</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=CENTER><FONT SIZE=2>Baa</FONT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>BBB</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>28</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>68,933</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>20.85</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=CENTER><FONT SIZE=2>Ba</FONT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>BB</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>9</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>14,517</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>4.39</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=CENTER><FONT SIZE=2>B</FONT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>B</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>6</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>8,991</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>2.72</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=CENTER><FONT SIZE=2>Caa</FONT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>CCC</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>3</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>4,700</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>1.42</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=CENTER><FONT SIZE=2>NR**</FONT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>NR**</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>27</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>57,201</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>17.30</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>
      <HR noshade COLOR=#000000 SIZE=1>
    </TD>
    <TD></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>
      <HR noshade COLOR=#000000 SIZE=1>
    </TD>
    <TD></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>
      <HR noshade COLOR=#000000 SIZE=1>
    </TD>
    <TD></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=CENTER><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=CENTER>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>122</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>$330,599</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>100.00</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>%</FONT></TD>
  </TR>
  <TR>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>
      <HR noshade COLOR=#000000 SIZE=2>
    </TD>
    <TD></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>
      <HR noshade COLOR=#000000 SIZE=2>
    </TD>
    <TD></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>
      <HR noshade COLOR=#000000 SIZE=2>
    </TD>
    <TD></TD>
  </TR>
</TABLE>




<!-- MARKER FORMAT-SHEET="Cutoff rule Footnote" FSL="Workstation" -->
<HR SIZE=1 noshade ALIGN=left  WIDTH=75>
<!-- MARKER FORMAT-SHEET="Footnote Right size 2" FSL="Workstation" -->
<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="2"> * </FONT></TD><TD WIDTH=2%><FONT SIZE="2">&nbsp;</FONT></TD><TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">Ratings:
Using the higher of Moody&#146;s or S&amp;P ratings on the Fund&#146;s investments. Moody&#146;s
rating categories may be modified further by a 1, 2 or 3 in Aa, A, Baa,       Ba, B and
Caa ratings. S&amp;P rating categories may be modified further by a plus (+) or minus (-)
in AA, A, BBB, BB, B and CCC ratings.</FONT></TD></TR></TABLE>



<!-- MARKER FORMAT-SHEET="Footnote Right size 2" FSL="Workstation" -->
<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="2">** </FONT></TD><TD WIDTH=2%><FONT SIZE="2">&nbsp;</FONT></TD><TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">Not
Rated.</FONT></TD></TR></TABLE>




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

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


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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 27; page: 27" -->



<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund may invest in certain tax exempt securities classified as &#147;private activity
bonds&#148; (or industrial development bonds, under pre-1986 law) (&#147;PABs&#148;) (in
general, bonds that benefit non-governmental entities) that may subject certain investors
in the Fund to an alternative minimum tax. See &#147;Taxes.&#148; The percentage of the
Fund&#146;s total assets invested in PABs will vary from time to time. The Fund 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. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
normal market conditions, the Fund expects to invest at least 75% of its total assets in
a portfolio of Municipal Bonds that are commonly referred to as &#147;investment grade&#148; securities,
which are obligations rated at the time of purchase within the four highest quality
ratings as determined by either Moody&#146;s Investors Service, Inc. (&#147;Moody&#146;s&#148;)
(currently Aaa, Aa, A and Baa), Standard &amp; Poor&#146;s (&#147;S&amp;P&#148;)
(currently AAA, AA, A and BBB) or Fitch Ratings (&#147;Fitch&#148;) (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&amp;P, MIG-1 through MIG-3 for Moody&#146;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&amp;P, Prime-1 through Prime-3 for Moody&#146;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&amp;P; Baa, MIG-3 and Prime-3 for Moody&#146;s and BBB
and F-3 for Fitch), while considered &#147;investment grade,&#148; 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 nature of any letters of credit or similar credit enhancement to
which particular Municipal Bonds are entitled and the creditworthiness of the financial
institution that provided such credit enhancement. See Appendix A &#151; &#147;Description
of Municipal Bond Ratings&#148; to the statement of additional information. If unrated,
such securities will possess creditworthiness comparable, in the opinion of the
Investment Adviser, to other obligations in which the Fund may invest. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund also may invest up to 25% of its total assets in Municipal Bonds that are rated
below Baa by Moody&#146;s or below BBB by S&amp;P or Fitch or, if unrated, are considered
by the Investment Adviser to possess similar credit characteristics. Such securities,
sometimes referred to as &#147;high yield&#148; or &#147;junk&#148; bonds, are
predominantly speculative with respect to the capacity to pay interest and repay
principal in accordance with the terms of the security and generally involve a greater
volatility of price than securities in higher rating categories. The Fund does not intend
to purchase Municipal Bonds that are in default or which the Investment Adviser believes
will soon be in default. Below investment grade securities and comparable unrated
securities involve substantial risk of loss, are considered speculative with respect to
the issuer&#146;s ability to pay interest and any required redemption or principal
payments and are susceptible to default or decline in market value due to adverse
economic and business developments. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
percentage and ratings limitations on securities in which the Fund may invest apply at
the time of making an investment and shall not be considered violated if an investment
rating is subsequently downgraded to a rating that would have precluded the Fund&#146;s
initial investment in such security. In the event that the Fund disposes of a portfolio
security subsequent to its being downgraded, the Fund may experience a greater risk of
loss than if such security had been sold prior to such downgrade. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
net asset value of the shares of common stock of a closed-end investment company, such as
the Fund, which invests primarily in fixed income securities, changes as the general
levels of interest rates fluctuate. When interest rates decline, the value of a fixed
income portfolio can be expected to rise. Conversely, when interest rates rise, the value
of a fixed income portfolio can be expected to decline. Prices of longer term securities
in which the Fund primarily invests generally fluctuate more in response to interest rate
changes than do shorter term securities. These changes in net asset value are likely to
be greater in the case of a fund having a leveraged capital structure, such as the Fund. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund intends to invest primarily in long term Municipal Bonds with maturities of more
than ten years. However, the Fund also may invest in intermediate term Municipal Bonds
with maturities of between three years and ten years. The Fund also may invest from time
to time in short term Municipal Bonds with maturities of less than three years. The
average maturity of the Fund&#146;s portfolio securities will vary based upon the
Investment Adviser&#146;s assessment of economic and market conditions. As of April 30,
2005, the weighted average maturity of the Fund&#146;s portfolio was approximately 19.87
years. </FONT></P>


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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 28; page: 28" -->



<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
temporary periods or to provide liquidity, the Fund has the authority to invest as much
as 20% of its total assets in tax exempt and taxable money market obligations with a
maturity of one year or less (such short term obligations being referred to herein as
&#147;Temporary Investments&#148;). In addition, the Fund reserves the right as a
defensive measure to invest temporarily a greater portion of its assets in Temporary
Investments, when, in the opinion of the Investment Adviser, prevailing market or
financial conditions warrant. Taxable money market obligations will yield taxable income.
The Fund also may invest in variable rate demand obligations (&#147;VRDOs&#148;) and
VRDOs in the form of participation interests (&#147;Participating VRDOs&#148;) in
variable rate tax exempt obligations held by a financial institution. See &#147;Other
Investment Policies &#151; Temporary Investments.&#148; The Fund&#146;s hedging
strategies, which are described in more detail under &#147;Hedging Transactions &#151; Financial
Futures Transactions and Options,&#148; are not fundamental policies and may be modified
by the Board of Directors of the Fund without the approval of the Fund&#146;s
stockholders. The Fund is also authorized to invest in indexed and inverse floating rate
obligations for hedging purposes and to seek to enhance return. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund may invest in securities not issued by or on behalf of a state or territory or by an
agency or instrumentality thereof, if the Fund receives an opinion of counsel to the
issuer that such securities pay interest that is excludable from gross income for Federal
income tax purposes (&#147;Non-Municipal Tax Exempt Securities&#148;). Non-Municipal Tax
Exempt Securities could include trust certificates, partnership interests or other
instruments evidencing interest in one or more long term municipal securities.
Non-Municipal Tax Exempt Securities also may include securities issued by other
investment companies that invest in Municipal Bonds, to the extent such investments are
permitted by the Fund&#146;s investment restrictions and applicable law. Non-Municipal
Tax Exempt Securities are subject to the same risks associated with an investment in
Municipal Bonds as well as many of the risks associated with investments in derivatives.
While the Fund receives opinions of legal counsel to the effect that the income from the
Non-Municipal Tax Exempt Securities in which the Fund invests is excludable from gross
income for Federal income tax purposes to the same extent as the underlying municipal
securities, the Internal Revenue Service (&#147;IRS&#148;) has not issued a ruling on
this subject. Were the IRS to issue an adverse ruling or take an adverse position with
respect to the taxation of these types of securities, there is a risk that the interest
paid on such securities would be deemed taxable at the Federal level. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund ordinarily does not intend to realize significant investment income not exempt from
Federal income tax. From time to time, the Fund may realize taxable capital gains. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Federal
tax legislation has limited the types and volume of bonds the interest on which qualifies
for a Federal income tax exemption. As a result, this legislation and legislation that
may be enacted in the future may affect the availability of Municipal Bonds for
investment by the Fund. </FONT></P>


<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Risk Factors and
Special Considerations Relating to Municipal Bonds </B></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
risks and special considerations involved in investment in Municipal Bonds vary with the
types of instruments being acquired. Investments in Non-Municipal Tax Exempt Securities
may present similar risks, depending on the particular product. Certain instruments in
which the Fund may invest may be characterized as derivative instruments. See &#147;&#151; Description
of Municipal Bonds&#148; and &#147;&#151; Hedging Transactions &#151; Financial Futures
Transactions and Options.&#148; </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
value of Municipal Bonds generally may be affected by uncertainties in the municipal
markets as a result of legislation or litigation, including legislation or litigation
that changes the taxation of Municipal Bonds or the rights of Municipal Bond holders in
the event of a bankruptcy. Municipal bankruptcies are rare, and certain provisions of the
U.S. Bankruptcy Code governing such bankruptcies are unclear. Further, the application of
state law to Municipal Bond issuers could produce varying results among the states or
among Municipal Bond issuers within a state. These uncertainties could have a significant
impact on the prices of the Municipal Bonds in which the Fund invests. </FONT></P>


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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set
forth below is a detailed description of the Municipal Bonds and Temporary Investments in
which the Fund may invest. Information with respect to ratings assigned to tax exempt
obligations that the Fund may purchase is set forth in Appendix A &#151; &#147;Description
of Municipal Bond Ratings&#148; to the statement of additional information. Obligations
are included within the term Municipal Bonds if the interest paid thereon is excluded
from gross income for Federal income tax purposes in the opinion of bond counsel to the
issuer. </FONT></P>


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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 29; page: 29" -->



<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Municipal
Bonds include debt obligations issued to obtain funds for various public purposes,
including the construction of a wide range of public facilities, refunding of outstanding
obligations and obtaining funds for general operating expenses and loans to other public
institutions and facilities. In addition, certain types of bonds are issued by or on
behalf of public authorities to finance various privately owned or operated facilities,
including certain facilities for the local furnishing of electric energy or gas, sewage
facilities, solid waste disposal facilities and other specialized facilities. Other types
of 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 &#147;general
obligation&#148; and &#147;revenue&#148; bonds, which latter category includes PABs. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund has not established any limit on the percentage of its portfolio that may be
invested in PABs. The Fund may not be a suitable investment for investors who are already
subject to the Federal alternative minimum tax or who would become subject to the Federal
alternative minimum tax as a result of an investment in the Fund&#146;s common stock. See
&#147;Taxes.&#148; </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>General
  Obligation Bonds. </I>General obligation bonds are secured by the issuer&#146;s
  pledge of its faith, credit and taxing power for the payment of principal and
  interest. The taxing power of any governmental entity may be limited, however,
  by provisions of its state constitution or laws, and an entity&#146;s creditworthiness
  will depend on many factors, including potential erosion of its tax base due
  to population declines, natural disasters, declines in the state&#146;s industrial
  base or inability to attract new industries, economic limits on the ability
  to tax without eroding the tax base, state legislative proposals or voter initiatives
  to limit <i>ad valorem</i> real property taxes and the extent to which the entity
  relies on Federal or state aid, access to capital markets or other factors beyond
  the state&#146;s or entity&#146;s control. Accordingly, the capacity of the
  issuer of a general obligation bond as to the timely payment of interest and
  the repayment of principal when due is affected by the issuer&#146;s maintenance
  of its tax base. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Revenue
Bonds. </I>Revenue bonds are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a special excise
tax or other specific revenue sources such as payments from the user of the facility
being financed. Accordingly, the timely payment of interest and the repayment of
principal in accordance with the terms of the revenue or special obligation bond is a
function of the economic viability of such facility or such revenue source. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>PABs.
</I>The Fund may purchase PABs. PABs are, in most cases, tax exempt securities issued by
states, municipalities or public authorities to provide funds, usually through a loan or
lease arrangement, to a private entity for the purpose of financing construction or
improvement of a facility to be used by the entity. Such bonds are secured primarily by
revenues derived from loan repayments or lease payments due from the entity which may or
may not be guaranteed by a parent company or otherwise secured. PABs generally are not
secured by a pledge of the taxing power of the issuer of such bonds. Therefore, an
investor should be aware that repayment of such bonds generally depends on the revenues
of a private entity and be aware of the risks that such an investment may entail.
Continued ability of an entity to generate sufficient revenues for the payment of
principal and interest on such bonds will be affected by many factors including the size
of the entity, capital structure, demand for its products or services, competition,
general economic conditions, government regulation and the entity&#146;s dependence on
revenues for the operation of the particular facility being financed. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Moral
Obligation Bonds. </I>The Fund also may invest in &#147;moral obligation&#148; bonds, which
are normally issued by special purpose public authorities. If an issuer of moral
obligation bonds is unable to meet its obligations, the repayment of such bonds becomes a
moral commitment but not a legal obligation of the state or municipality in question. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Municipal
Lease Obligations. </I>Also included within the general category of Municipal Bonds are
certificates of participation (&#147;COPs&#148;) issued by government authorities or
entities to finance the acquisition or construction of equipment, land and/or facilities.
COPs represent participations in a lease, an installment purchase contract or a
conditional sales contract (hereinafter collectively called &#147;lease obligations&#148;)
relating to such equipment, land or facilities. Although lease obligations do not
constitute general obligations of the issuer for which the issuer&#146;s unlimited taxing
power is pledged, a lease obligation is frequently backed by the issuer&#146;s covenant
to budget for, </FONT> </P>


<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
<BR>&nbsp;
<TABLE WIDTH=100%><TR><TD WIDTH=20% ALIGN=left><FONT SIZE=1>&nbsp;</FONT></TD>
    <TD WIDTH=60% ALIGN=center><FONT SIZE="2"> 19</FONT></TD>
    <TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR SIZE=5 noshade WIDTH=100% ALIGN=LEFT>






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 30; page: 30" -->



<!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>appropriate and make the payments
due under the lease obligation. However, certain lease obligations contain &#147;non-appropriation&#148; clauses
which provide that the issuer has no obligation to make lease or installment purchase
payments in future years unless money is appropriated for such purpose on a yearly basis.
Although &#147;non-appropriation&#148; lease obligations are secured by the leased
property, disposition of the property in the event of foreclosure might prove difficult
and the value of the property may be insufficient to issue lease obligations. Certain
investments in lease obligations may be illiquid. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Indexed
and Inverse Floating Rate Securities. </I>The Fund may invest in Municipal Bonds (and
Non-Municipal Tax Exempt Securities) that yield a return based on a particular index of
value or interest rates. For example, the Fund may invest in Municipal Bonds that pay
interest based on an index of Municipal Bond interest rates. The principal amount payable
upon maturity of certain Municipal Bonds also may be based on the value of the index. To
the extent the Fund invests in these types of Municipal Bonds, the Fund&#146;s return on
such Municipal Bonds will be subject to risk with respect to the value of the particular
index. Interest and principal payable on the Municipal Bonds may also be based on
relative changes among particular indices. Also, the Fund may invest in so-called &#147;inverse
floating obligations&#148; or &#147;residual interest bonds&#148; on which the interest
rates vary inversely with a short term floating rate (which may be reset periodically by
a dutch auction, a remarketing agent, or by reference to a short term tax exempt interest
rate index). The Fund may purchase synthetically created inverse floating rate bonds
evidenced by custodial or trust receipts. Generally, income on inverse floating rate
bonds will decrease when short term interest rates increase, and will increase when short
term interest rates decrease. Such securities have the effect of providing a degree of
investment leverage, since they may increase or decrease in value in response to changes,
as an illustration, in market interest rates at a rate which is a multiple (typically
two) of the rate at which fixed rate long term tax exempt securities increase or decrease
in response to such changes. As a result, the market values of such securities will
generally be more volatile than the market values of fixed rate tax exempt securities. To
seek to limit the volatility of these securities, the Fund may purchase inverse floating
obligations with shorter-term maturities or which contain limitations on the extent to
which the interest rate may vary. Certain investments in such obligations may be illiquid. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>When
Issued Securities, Delayed Delivery Securities and Forward Commitments. </I>The Fund may
purchase or sell securities that it is entitled to receive on a when issued basis. The
Fund may also purchase or sell securities on a delayed delivery basis. The Fund may also
purchase or sell securities through a forward commitment. These transactions involve the
purchase or sale of securities by the Fund at an established price with payment and
delivery taking place in the future. The purchase will be recorded on the date the Fund
enters into the commitment and the value of the securities will thereafter be reflected
in the Fund&#146;s net asset value. The Fund enters into these transactions to obtain
what is considered an advantageous price to the Fund at the time of entering into the
transaction. The Fund has not established any limit on the percentage of its assets that
may be committed in connection with these transactions. When the Fund purchases
securities in these transactions, the Fund segregates liquid securities in an amount
equal to the amount of its purchase commitments. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There
can be no assurance that a security purchased on a when issued basis will be issued or
that a security purchased or sold through a forward commitment will be delivered. A
default by a counterparty may result in the Fund missing the opportunity of obtaining a
price considered to be advantageous. The value of securities in these transactions on the
delivery date may be more or less than the Fund&#146;s purchase price. The Fund may bear
the risk of a decline in the value of the security in these transactions and may not
benefit from an appreciation in the value of the security during the commitment period. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Call
Rights. </I>The Fund may purchase a Municipal Bond issuer&#146;s right to call all or a
portion of such Municipal Bond for mandatory tender for purchase (a &#147;Call Right&#148;).
A holder of a Call Right may exercise such right to require a mandatory tender for the
purchase of related Municipal Bonds, subject to certain conditions. A Call Right that is
not exercised prior to maturity of the related Municipal Bond will expire without value.
The economic effect of holding both the Call Right and the related Municipal Bond is
identical to holding a Municipal Bond as a non-callable security. Certain investments in
such obligations may be illiquid. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;High
Yield&#148; or &#147;Junk&#148; Bonds. </I>The Fund may invest up to 25% of its total assets
in high yield Municipal Bonds that are rated below Baa by Moody&#146;s or below BBB by S&amp;P
or Fitch or are unrated securities that are considered by the Investment Adviser to
possess similar credit characteristics. See Appendix A &#147;Description of Municipal
Bond Ratings&#148; to the statement of additional information for additional information
regarding ratings </FONT> </P>


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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 31; page: 31" -->




<!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>of Municipal Bonds. Junk bonds are
debt securities that are rated below investment grade by the major rating agencies or are
unrated securities that are considered by the Investment Adviser to possess similar
credit characteristics. Although junk bonds generally pay higher rates of interest than
investment grade bonds, they are high risk investments that may cause income and
principal losses for the Fund. The major risks in junk bond investments include the
following:  </FONT></P>

<!-- MARKER FORMAT-SHEET="Bullet 10" FSL="Workstation" -->
<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=5%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=3%></TD>
    <TD WIDTH=90%><FONT SIZE=2>Junk
bonds may be issued by less creditworthy issuers. These             securities are
vulnerable to adverse changes in the issuer&#146;s             industry and to general
economic conditions. Issuers of junk bonds             may be unable to meet their
interest or principal payment             obligations because of an economic downturn,
specific issuer             developments or the unavailability of additional financing.</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Bullet 10" FSL="Workstation" -->
<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=5%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=3%></TD>
    <TD WIDTH=90%><FONT SIZE=2>The
issuers of junk bonds may have a larger amount of outstanding             debt relative
to their assets than issuers of investment grade             bonds. If the issuer
experiences financial difficulties, it may be             unable to meet its debt
obligations. The issuer&#146;s ability to             pay its debt obligations also may
be lessened by specific issuer             developments, or the unavailability of
additional financing.</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Bullet 10" FSL="Workstation" -->
<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=5%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=3%></TD>
    <TD WIDTH=90%><FONT SIZE=2>Junk
bonds are frequently ranked junior to claims by other             creditors. If the
issuer cannot meet its obligations, the senior             obligations are generally paid
off before the junior obligations.</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Bullet 10" FSL="Workstation" -->
<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=5%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=3%></TD>
    <TD WIDTH=90%><FONT SIZE=2>Junk
bonds frequently have call or redemption features that permit             an issuer to
repurchase the security from the Fund before it             matures. If an issuer redeems
the junk bonds, the Fund may have to             invest the proceeds in bonds with lower
yields and may lose             income.</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Bullet 10" FSL="Workstation" -->
<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=5%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=3%></TD>
    <TD WIDTH=90%><FONT SIZE=2>Prices
of junk bonds are subject to extreme price fluctuations.             Negative economic
developments may have a greater impact on the             prices of junk bonds than on
other higher rated fixed income             securities.</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Bullet 10" FSL="Workstation" -->
<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=5%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=3%></TD>
    <TD WIDTH=90%><FONT SIZE=2>Junk
bonds may be less liquid than higher rated fixed income             securities even under
normal economic conditions. There are fewer             dealers in the junk bond market,
and there may be significant             differences in the prices quoted for junk bonds
by the dealers.             Because they are less liquid, judgment may play a greater
role in             valuing certain of the Fund&#146;s portfolio securities than in
            the case of securities trading in a more liquid market.</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund may incur expenses to the extent necessary to seek recovery upon default or to
negotiate new terms with a defaulting issuer. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Yields.
</I>Yields on Municipal Bonds are dependent on a variety of factors, including the general
condition of the money market and of the municipal bond market, the size of a particular
offering, the financial condition of the issuer, the maturity of the obligation and the
rating of the issue. The ability of the Fund to achieve its investment objective is also
dependent on the continuing ability of the issuers of the securities in which the Fund
invests to meet their obligations for the payment of interest and principal when due.
There are variations in the risks involved in holding Municipal Bonds, both within a
particular classification and between classifications, depending on numerous factors.
Furthermore, the rights of owners of Municipal Bonds and the obligations of the issuer of
such Municipal Bonds may be subject to applicable bankruptcy, insolvency and similar laws
and court decisions affecting the rights of creditors generally and to general equitable
principles, which may limit the enforcement of certain remedies. </FONT> </P>


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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund may hedge all or a portion of its portfolio investments against fluctuations in
interest rates through the use of options and certain financial futures contracts and
options thereon. While the Fund&#146;s use of hedging strategies is intended to reduce
the volatility of the net asset value of the Fund&#146;s shares of common stock, the net
asset value of the Fund&#146;s shares of common stock will fluctuate. No assurance can be
given that the Fund&#146;s hedging transactions will be effective. The Fund only may
engage in hedging activities from time to time and may not necessarily be engaging in
hedging activities when movements in interest rates occur. The Fund has no obligation to
enter into hedging transactions and may choose not to do so. Furthermore, for so long as
the AMPS are rated by Moody&#146;s and S&amp;P, the Fund&#146;s use of options and
certain financial futures and options thereon will be subject to the limitations
described under &#147;Rating Agency Guidelines.&#148; </FONT></P>


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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 32; page: 32" -->



<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Financial
Futures Transactions and Options. </I>The Fund is authorized to purchase and sell certain
exchange traded financial futures contracts (&#147;financial futures contracts&#148;) in
order to hedge its investments in Municipal Bonds against declines in value, and to hedge
against increases in the cost of securities it intends to purchase or to seek to enhance
the Fund&#146;s return. However, any transactions involving financial futures or options
(including puts and calls associated therewith) will be in accordance with the Fund&#146;s
investment policies and limitations. A financial futures contract obligates the seller of
a contract to deliver and the purchaser of a contract to take delivery of the type of
financial instrument covered by the contract, or in the case of index-based futures
contracts to make and accept a cash settlement, at a specific future time for a specified
price. To hedge its portfolio, the Fund may take an investment position in a futures
contract which will move in the opposite direction from the portfolio position being
hedged. A sale of financial futures contracts may provide a hedge against a decline in
the value of portfolio securities because such depreciation may be offset, in whole or in
part, by an increase in the value of the position in the financial futures contracts. A
purchase of financial futures contracts may provide a hedge against an increase in the
cost of securities intended to be purchased because such appreciation may be offset, in
whole or in part, by an increase in the value of the position in the futures contracts. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Distributions,
if any, of net long term capital gains from certain transactions in futures or options
are taxable at long term capital gains rates for Federal income tax purposes. See &#147;Taxes.&#148; </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Futures
Contracts. </I>A futures contract is an agreement between two parties to buy and sell a
security or, in the case of an index-based futures contract, to make and accept a cash
settlement for a set price on a future date. A majority of transactions in futures
contracts, however, do not result in the actual delivery of the underlying instrument or
cash settlement, but are settled through liquidation, <I>i.e.</I>, by entering into an
offsetting transaction. Futures contracts have been designed by boards of trade which
have been designated &#147;contracts markets&#148; by the Commodity Futures Trading
Commission (&#147;CFTC&#148;). </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
purchase or sale of a futures contract differs from the purchase or sale of a security in
that no price or premium is paid or received. Instead, an amount of cash or securities
acceptable to the broker and the relevant contract market, which varies, but is generally
about 5% of the contract amount, must be deposited with the broker. This amount is known
as &#147;initial margin&#148;and represents a &#147;good faith&#148; deposit assuring the
performance of both the purchaser and seller under the futures contract. Subsequent
payments to and from the broker, called &#147;variation margin,&#148; are required to be
made on a daily basis as the price of the futures contract fluctuates making the long and
short positions in the futures contract more or less valuable, a process known as &#147;marking
to the market.&#148; At any time prior to the settlement date of the futures contract,
the position may be closed out by taking an opposite position that will operate to
terminate the position in the futures contract. A final determination of variation margin
is then made, additional cash is required to be paid to or released by the broker and the
purchaser realizes a loss or gain. In addition, a nominal commission is paid on each
completed sale transaction. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund deals in financial futures contracts based on a long term municipal bond index
developed by the Chicago Board of Trade (&#147;CBT&#148;) and The Bond Buyer (the &#147;Municipal
Bond Index&#148;). The Municipal Bond Index is comprised of 40 tax exempt municipal
revenue and general obligation bonds. Each bond included in the Municipal Bond Index must
be rated A or higher by Moody&#146;s or S&amp;P and must have a remaining maturity of 19
years or more. Twice a month new issues satisfying the eligibility requirements are added
to, and an equal number of old issues are deleted from, the Municipal Bond Index. The
value of the Municipal Bond Index is computed daily according to a formula based on the
price of each bond in the Municipal Bond Index, as evaluated by six dealer-to-dealer
brokers. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Municipal Bond Index futures contract is traded only on the CBT. Like other contract
markets, the CBT assures performance under futures contracts through a clearing
corporation, a nonprofit organization managed by the exchange membership which is also
responsible for handling daily accounting of deposits or withdrawals of margin. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund may also purchase and sell financial futures contracts on U.S. Government securities
as a hedge against adverse changes in interest rates as described below. With respect to
U.S. Government securities, currently there are financial futures contracts based on long
term U.S. Treasury bonds, U.S. Treasury notes, Government National Mortgage Association (&#147;GNMA&#148;)
Certificates and three-month U.S. Treasury bills. The Fund may purchase and write call
and put options on futures contracts on U.S. Government securities and purchase and sell
Municipal Bond Index futures contracts in connection with its hedging strategies. </FONT></P>


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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 33; page: 33" -->



<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund also may engage in other futures contracts transactions such as futures contracts on
other municipal bond indices that may become available if the Investment Adviser should
determine that there is normally a sufficient correlation between the prices of such
futures contracts and the Municipal Bonds in which the Fund invests to make such hedging
appropriate. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Futures
Strategies. </I>The Fund may sell a financial futures contract (<I>i.e.</I>, assume a short
position) in anticipation of a decline in the value of its investments in Municipal Bonds
resulting from an increase in interest rates or otherwise. The risk of decline could be
reduced without employing futures as a hedge by selling such Municipal Bonds and either
reinvesting the proceeds in securities with shorter maturities or by holding assets in
cash. This strategy, however, entails increased transaction costs in the form of dealer
spreads and typically would reduce the average yield of the Fund&#146;s portfolio
securities as a result of the shortening of maturities. The sale of futures contracts
provides an alternative means of hedging against declines in the value of its investments
in Municipal Bonds. As such values decline, the value of the Fund&#146;s positions in the
futures contracts will tend to increase, thus offsetting all or a portion of the
depreciation in the market value of the Fund&#146;s Municipal Bond investments that are
being hedged. While the Fund will incur commission expenses in selling and closing out
futures positions, commissions on futures transactions are lower than transaction costs
incurred in the purchase and sale of Municipal Bonds. In addition, the ability of the
Fund to trade in the standardized contracts available in the futures markets may offer a
more effective defensive position than a program to reduce the average maturity of the
portfolio securities due to the unique and varied credit and technical characteristics of
the municipal debt instruments available to the Fund. Employing futures as a hedge also
may permit the Fund to assume a defensive posture without reducing the yield on its
investments beyond any amounts required to engage in futures trading. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When
the Fund intends to purchase Municipal Bonds, the Fund may purchase futures contracts as
a hedge against any increase in the cost of such Municipal Bonds resulting from a
decrease in interest rates or otherwise, that may occur before such purchases can be
effected. Subject to the degree of correlation between the Municipal Bonds and the
futures contracts, subsequent increases in the cost of Municipal Bonds should be
reflected in the value of the futures held by the Fund. As such purchases are made, an
equivalent amount of futures contracts will be closed out. Due to changing market
conditions and interest rate forecasts, however, a futures position may be terminated
without a corresponding purchase of portfolio securities. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Call
Options on Futures Contracts. </I>The Fund may also purchase and sell exchange traded call
and put options on financial futures contracts. The purchase of a call option on a
futures contract is analogous to the purchase of a call option on an individual security.
Depending on the pricing of the option compared to either the futures contract upon which
it is based or the price of the underlying debt securities, it may or may not be less
risky than ownership of the futures contract or underlying debt securities. Like the
purchase of a futures contract, the Fund will purchase a call option on a futures
contract to hedge against a market advance when the Fund is not fully invested. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
writing of a call option on a futures contract constitutes a partial hedge against
declining prices of the securities which are deliverable upon exercise of the futures
contract. If the futures price at expiration is below the exercise price, the Fund will
retain the full amount of the option premium which provides a partial hedge against any
decline that may have occurred in the Fund&#146;s portfolio holdings. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Put
Options on Futures Contracts. </I>The purchase of a put option on a futures contract is
analogous to the purchase of a protective put option on portfolio securities. The Fund
will purchase a put option on a futures contract to hedge the Fund&#146;s portfolio
against the risk of rising interest rates. </FONT> </P>



<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
writing of a put option on a futures contract constitutes a partial hedge against
increasing prices of the securities which are deliverable upon exercise of the futures
contract. If the futures price at expiration is higher than the exercise price, the Fund
will retain the full amount of the option premium which provides a partial hedge against
any increase in the price of Municipal Bonds which the Fund intends to purchase.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
writer of an option on a futures contract is required to deposit initial and variation
margin pursuant to requirements similar to those applicable to futures contracts.
Premiums received from the writing of an option will be included in initial margin. The
writing of an option on a futures contract involves risks similar to those relating to
futures contracts. </FONT></P>

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


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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 34; page: 34" -->




<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
regulations of the CFTC, the futures trading activity described herein will not result in
the Fund being deemed a &#147;commodity pool&#148; and the Fund need not be operated by a
person registered with the CFTC as a &#147;commodity pool operator.&#148; </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When
the Fund purchases a futures contract, or writes a put option or purchases a call option
thereon, an amount of cash, cash equivalents (<I>e.g.</I>, high grade commercial paper and daily
tender adjustable notes) or liquid securities will be segregated so that the amount so
segregated, plus the amount of initial and variation margin held in the account of its
broker, equals the market value of the futures contracts, thereby ensuring that the use
of such futures contract is unleveraged. It is not anticipated that transactions in
futures contracts will have the effect of increasing portfolio turnover. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Risk
Factors in Futures Transactions and Options. </I>Investment in futures contracts involves the
risk of imperfect correlation between movements in the price of the futures contract and
the price of the security being hedged. The hedge will not be fully effective when there
is imperfect correlation between the movements in the prices of two financial
instruments. For example, if the price of the futures contract moves more or less than
the price of the hedged security, the Fund will experience either a loss or gain on the
futures contract which is not completely offset by movements in the price of the hedged
securities. To compensate for imperfect correlations, the Fund may purchase or sell
futures contracts in a greater dollar amount than the hedged securities if the volatility
of the hedged securities is historically greater than the volatility of the futures
contracts. Conversely, the Fund may purchase or sell fewer futures contracts if the
volatility of the price of the hedged securities is historically less than that of the
futures contracts. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
particular municipal bonds comprising the index underlying the Municipal Bond Index
financial futures contract may vary from the bonds held by the Fund. As a result, the Fund&#146;s
ability to hedge effectively all or a portion of the value of its Municipal Bonds through
the use of such financial futures contracts will depend in part on the degree to which
price movements in the index underlying the financial futures contract correlate with the
price movements of the Municipal Bonds held by the Fund. The correlation may be affected
by disparities in the average maturity, ratings, geographical mix or structure of the Fund&#146;s
investments as compared to those comprising the Municipal Bond Index and general economic
or political factors. In addition, the correlation between movements in the value of the
Municipal Bond Index may be subject to change over time as additions to and deletions
from the Municipal Bond Index alter its structure. The correlation between futures
contracts on U.S. Government securities and the Municipal Bonds held by the Fund may be
adversely affected by similar factors and the risk of imperfect correlation between
movements in the prices of such futures contracts and the prices of Municipal Bonds held
by the Fund may be greater. Municipal Bond Index futures contracts were approved for
trading in 1986. Trading in such futures contracts may tend to be less liquid than
trading in other futures contracts. The trading of futures contracts also is subject to
certain market risks, such as inadequate trading activity, which could at times make it
difficult or impossible to liquidate existing positions. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund expects to liquidate a majority of the futures contracts it enters into through
offsetting transactions on the applicable contract market. There can be no assurance,
however, that a liquid secondary market will exist for any particular futures contract at
any specific time. Thus, it may not be possible to close out a futures position. In the
event of adverse price movements, the Fund would continue to be required to make daily
cash payments of variation margin. In such situations, if the Fund has insufficient cash,
it may be required to sell portfolio securities to meet daily variation margin
requirements at a time when it may be disadvantageous to do so. The inability to close
out futures positions also could have an adverse impact on the Fund&#146;s ability to
hedge effectively its investments in Municipal Bonds. The liquidity of a secondary market
in a futures contract may be adversely affected by &#147;daily price fluctuation limits&#148; established
by commodity exchanges which limit the amount of fluctuation in a futures contract price
during a single trading day. Once the daily limit has been reached in the contract, no
trades may be entered into at a price beyond the limit, thus preventing the liquidation
of open futures positions. Prices have in the past moved beyond the daily limit on a
number of consecutive trading days. The Fund will enter into a futures position only if,
in the judgment of the Investment Adviser, there appears to be an actively traded
secondary market for such futures contracts. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
successful use of transactions in futures and related options also depends on the ability
of the Investment Adviser to forecast correctly the direction and extent of interest rate
movements within a given time frame. To the extent interest rates remain stable during
the period in which a futures contract or option is held by the Fund or </FONT></P>


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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 35; page: 35" -->




<!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>such rates move in a direction
opposite to that anticipated, the Fund may realize a loss on the hedging transaction
which is not fully or partially offset by an increase in the value of portfolio
securities. As a result, the Fund&#146;s total return for such period may be less than if
it had not engaged in the hedging transaction. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because
of low initial margin deposits made upon the opening of a futures position, futures
transactions involve substantial leverage. As a result, relatively small movements in the
price of the futures contracts can result in substantial unrealized gains or losses.
There is also the risk of loss by the Fund of margin deposits in the event of bankruptcy
of a broker with whom the Fund has an open position in a financial futures contract.
Because the Fund will engage in the purchase and sale of futures contracts for hedging
purposes or to seek to enhance the Fund&#146;s return, any losses incurred in connection
therewith should, if the hedging strategy is successful, be offset in whole or in part by
increases in the value of securities held by the Fund or decreases in the price of
securities the Fund intends to acquire. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
amount of risk the Fund assumes when it purchases an option on a futures contract is the
premium paid for the option plus related transaction costs. In addition to the
correlation risks discussed above, the purchase of an option on a futures contract also
entails the risk that changes in the value of the underlying futures contract will not be
fully reflected in the value of the option purchased. </FONT></P>


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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund has adopted certain other policies as set forth below. </FONT></P>


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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund may invest in short term tax exempt and taxable securities subject to the
limitations set forth above. The tax exempt money market securities may include municipal
notes, municipal commercial paper, municipal bonds with a remaining maturity of less than
one year, variable rate demand notes and participations therein. Municipal notes include
tax anticipation notes, bond anticipation notes, revenue anticipation notes and grant
anticipation notes. Anticipation notes are sold as interim financing in anticipation of
tax collection, bond sales, government grants or revenue receipts. Municipal commercial
paper refers to short term unsecured promissory notes generally issued to finance short
term credit needs. The taxable money market securities in which the Fund may invest as
Temporary Investments consist of U.S. Government securities, U.S. Government agency
securities, domestic bank or savings institution certificates of deposit and bankers&#146; acceptances,
short term corporate debt securities such as commercial paper and repurchase agreements.
These Temporary Investments must have a stated maturity not in excess of one year from
the date of purchase. The Fund may not invest in any security issued by a commercial bank
or a savings institution unless the bank or institution is organized and operating in the
United States, has total assets of at least one billion dollars and is a member of the
Federal Deposit Insurance Corporation (&#147;FDIC&#148;), except that up to 10% of total
assets may be invested in certificates of deposit of smaller institutions if such
certificates are fully insured by the FDIC. </FONT></P>


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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
order to seek to hedge the value of the Fund against interest rate fluctuations, to hedge
against increases in the Fund&#146;s costs associated with the dividend payments on any
preferred stock, including the AMPS, or to seek to increase the Fund&#146;s return, the
Fund may enter into interest rate swap transactions such as Municipal Market Data AAA
Cash Curve swaps (&#147;MMD Swaps&#148;) or Bond Market Association Municipal Swap Index
swaps (&#147;BMA Swaps&#148;). To the extent that the Fund enters into these
transactions, the Fund expects to do so primarily to preserve a return or spread on a
particular investment or portion of its portfolio as a duration management technique or
to protect against any increase in the price of securities the Fund anticipates
purchasing at a later date. The Fund may enter into these transactions primarily as a
hedge or for duration or risk management rather than as a speculative investment.
However, the Fund also may invest in MMD Swaps and BMA Swaps to seek to enhance return or
gain or to increase the Fund&#146;s yield, for example, during periods of steep interest
rate yield curves (<I>i.e.</I>, wide differences between short term and long term interest
rates). </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund may purchase and sell BMA Swaps in the BMA swap market. In a BMA Swap, the Fund
exchanges with another party their respective commitments to pay or receive interest
(<I>e.g.</I>, an exchange of fixed rate payments for floating rate payments linked to the Bond
Market Association Municipal Swap Index). Because </FONT> </P>


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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 36; page: 36" -->





<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">the
underlying index is a tax exempt index, BMA Swaps may reduce cross-market risks incurred
by the Fund and increase the Fund&#146;s ability to hedge effectively. BMA Swaps are
typically quoted for the entire yield curve, beginning with a seven day floating rate
index out to 30 years. The duration of a BMA Swap is approximately equal to the duration
of a fixed rate Municipal Bond with the same attributes as the swap (<I>e.g.</I>, coupon,
maturity, call feature). </FONT> </P>

<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><font face="Times New Roman, Times, serif" size="2">The
  Fund also may purchase and sell MMD Swaps, also known as MMD rate locks. An
  MMD Swap permits the Fund to lock in a specified municipal interest rate for
  a portion of its portfolio to preserve a return on a particular investment or
  a portion of its portfolio as a duration management technique or to protect
  against any increase in the price of securities to be purchased at a later date.
  By using an MMD Swap, the Fund can create a synthetic long or short position,
  allowing the Fund to select the most attractive part of the yield curve. An
  MMD Swap is a contract between the Fund and an MMD Swap provider pursuant to
  which the parties agree to make payments to each other on a notional amount,
  contingent upon whether the Municipal Market Data AAA General Obligation Scale
  is above or below a specified level on the expiration date of the contract.
  For example, if the Fund buys an MMD Swap and the Municipal Market Data AAA
  General Obligation Scale is below the specified level on the expiration date,
  the counterparty to the contract will make a payment to the Fund equal to the
  specified level minus the actual level, multiplied by the notional amount of
  the contract. If the Municipal Market Data AAA General Obligation Scale is above
  the specified level on the expiration date, the Fund will make a payment to
  the counterparty equal to the actual level minus the specified level, multiplied
  by the notional amount of the contract. </font></p>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
connection with investments in BMA and MMD Swaps, there is a risk that municipal yields
will move in the opposite direction than anticipated by the Fund, which would cause the
Fund to make payments to its counterparty in the transaction that could adversely affect
the Fund&#146;s performance. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund has no obligation to enter into BMA or MMD Swaps and may not do so. The net amount
of the excess, if any, of the Fund&#146;s obligations over its entitlements with respect
to each interest rate swap will be accrued on a daily basis, and the Fund will segregate
liquid securities having an aggregate net asset value at least equal to the accrued
excess. </FONT></P>


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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund may enter into credit default swap agreements for hedging purposes or to seek to
increase its return. The credit default swap agreement may have as reference obligations
one or more securities that are not currently held by the Fund. The protection &#147;buyer&#148; in
a credit default contract may be obligated to pay the protection &#147;seller&#148; an
upfront or a periodic stream of payments over the term of the contract provided that no
credit event on a reference obligation has occurred. If a credit event occurs, the seller
generally must pay the buyer the &#147;par value&#148; (full notional value) of the swap
in exchange for an equal face amount of deliverable obligations of the reference entity
described in the swap, or the seller may be required to deliver the related net cash
amount, if the swap is cash settled. The Fund may be either the buyer or seller in the
transaction. If the Fund is a buyer and no credit event occurs, the Fund may recover
nothing if the swap is held through its termination date. However, if a credit event
occurs, the buyer generally may elect to receive the full notional value of the swap in
exchange for an equal face amount of deliverable obligations of the reference entity
whose value may have significantly decreased. As a seller, the Fund generally receives an
upfront payment or a fixed rate of income throughout the term of the swap, which
typically is between six months and three years, provided that there is no credit event.
If a credit event occurs, generally the seller must pay the buyer the full notional value
of the swap in exchange for an equal face amount of deliverable obligations of the
reference entity whose value may have significantly decreased. As the seller, the Fund
would effectively add leverage to its portfolio because, in addition to its total net
assets, the Fund would be subject to investment exposure on the notional amount of the
swap. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Credit
default swap agreements involve greater risks than if the Fund had invested in the
reference obligation directly since, in addition to general market risks, credit default
swaps are subject to illiquidity risk, counterparty risk and credit risks. The Fund will
enter into credit default swap agreements only with counterparties who are rated
investment grade quality by at least one nationally recognized statistical rating
organization at the time of entering into such transaction or whose creditworthiness is
believed by the Investment Adviser to be equivalent to such rating. A buyer generally
also will lose its investment and recover nothing should no credit event occur and the
swap is held to its termination date. If a credit event were to occur, the value of any
deliverable obligation  </FONT></P>


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







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





<!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>received by the seller, coupled with
the upfront or periodic payments previously received, may be less than the full notional
value it pays to the buyer, resulting in a loss of value to the seller. The Fund&#146;s
obligations under a credit default swap agreement will be accrued daily (offset against
any amounts owing to the Fund). The Fund will at all times segregate with its custodian
in connection with each such transaction liquid securities or cash with a value at least
equal to the Fund&#146;s exposure (any accrued but unpaid net amounts owed by the Fund to
any counterparty), on a marked-to-market basis (as calculated pursuant to requirements of
the Securities and Exchange Commission). Such segregation will ensure that the Fund has
assets available to satisfy its obligations with respect to the transaction and will
avoid any potential leveraging of the Fund&#146;s portfolio. Such segregation will not
limit the Fund&#146;s exposure to loss. </FONT></P>


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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;VRDOs
are tax exempt obligations that contain a floating or variable interest rate adjustment
formula and right of demand on the part of the holder thereof to receive payment of the
unpaid principal balance plus accrued interest upon a short notice period not to exceed
seven days. There is, however, the possibility that because of default or insolvency the
demand feature of VRDOs and Participating VRDOs may not be honored. The interest rates
are adjustable at intervals (ranging from daily to up to one year) to some prevailing
market rate for similar investments, such adjustment formula being calculated to maintain
the market value of the VRDOs, at approximately the par value of the VRDOs on the
adjustment date. The adjustments typically are based upon the Public Securities
Association Index or some other appropriate interest rate adjustment index. The Fund may
invest in all types of tax exempt instruments currently outstanding or to be issued in
the future which satisfy its short term maturity and quality standards. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Participating
VRDOs provide the Fund with a specified undivided interest (up to 100%) of the underlying
obligation and the right to demand payment of the unpaid principal balance plus accrued
interest on the Participating VRDOs from the financial institution upon a specified
number of days&#146; notice, not to exceed seven days. In addition, the Participating
VRDO is backed by an irrevocable letter of credit or guaranty of the financial
institution. The Fund would have an undivided interest in the underlying obligation and
thus participate on the same basis as the financial institution in such obligation except
that the financial institution typically retains fees out of the interest paid on the
obligation for servicing the obligation, providing the letter of credit and issuing the
repurchase commitment. The Fund has been advised by its counsel that the Fund should be
entitled to treat the income received on Participating VRDOs as interest from tax exempt
obligations as long as the Fund does not invest more than 20% of its total assets in such
investments and certain other conditions are met. It is contemplated that the Fund will
not invest more than 20% of its assets in Participating VRDOs. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;VRDOs
that contain an unconditional right of demand to receive payment of the unpaid principal
balance plus accrued interest on a notice period exceeding seven days may be deemed to be
illiquid securities. The Directors may adopt guidelines and delegate to the Investment
Adviser the daily function of determining and monitoring liquidity of such VRDOs. The
Directors, however, will retain sufficient oversight and will be ultimately responsible
for such determinations. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Temporary Investments, VRDOs and Participating VRDOs in which the Fund may invest will be
in the following rating categories at the time of purchase: MIG-1/VMIG-1 through
MIG-3/VMIG-3 for notes and VRDOs and Prime-1 through Prime-3 for commercial paper (as
determined by Moody&#146;s), SP-1 through SP-2 for notes and A-1 through A-3 for VRDOs
and commercial paper (as determined by S&amp;P), or F-1 through F-3 for notes, VRDOs and
commercial paper (as determined by Fitch). Temporary Investments, if not rated, must be
of comparable quality in the opinion of the Investment Adviser. In addition, the Fund
reserves the right to invest temporarily a greater portion of its assets in Temporary
Investments for defensive purposes, when, in the judgment of the Investment Adviser,
market conditions warrant. </FONT></P>


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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund may invest in securities pursuant to repurchase agreements. Repurchase agreements
may be entered into only with a member bank of the Federal Reserve System or a primary
dealer or an affiliate thereof, in U.S. Government securities. Under such agreements, the
bank or primary dealer or an affiliate thereof agrees, upon entering into the contract,
to repurchase the security at a mutually agreed upon time and price, thereby determining
the yield during the term of the agreement. This results in a fixed rate of return
insulated from market  </FONT></P>

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






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



<!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>fluctuations during such period. In
repurchase agreements, the prices at which the trades are conducted do not reflect
accrued interest on the underlying obligations. Such agreements usually cover short
periods, such as under one week. Repurchase agreements may be construed to be
collateralized loans by the purchaser to the seller secured by the securities transferred
to the purchaser. In a repurchase agreement, the Fund will require the seller to provide
additional collateral if the market value of the securities falls below the repurchase
price at any time during the term of the repurchase agreement. In the event of default by
the seller under a repurchase agreement construed to be a collateralized loan, the
underlying securities are not owned by the Fund but only constitute collateral for the
seller&#146;s obligation to pay the repurchase price. Therefore, the Fund may suffer time
delays and incur costs or possible losses in connection with the disposition of the
collateral. In the event of a default under such a repurchase agreement, instead of the
contractual fixed rate of return, the rate of return to the Fund shall be dependent upon
intervening fluctuations of the market value of such security and the accrued interest on
the security. In such event, the Fund would have rights against the seller for breach of
contract with respect to any losses arising from market fluctuations following the
failure of the seller to perform. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
  general, for Federal income tax purposes, repurchase agreements are treated
  as collateralized loans secured by the securities &#147;sold.&#148; Therefore,
  amounts earned under such agreements will not be considered tax exempt interest.
  The treatment of purchase and sales contracts is less certain. </FONT></P>


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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Fund is authorized to borrow money in amounts of up to 5% of the value of its
  total assets at the time of such borrowings; provided, however, that the Fund
  is authorized to borrow moneys in amounts of up to 33<font size="1"><sup>1</sup></font>/<font size="1">3</font>%
  of the value of its total assets at the time of such borrowings to finance the
  repurchase of its own common stock pursuant to tender offers or otherwise to
  redeem or repurchase shares of preferred stock. Borrowings by the Fund (commonly
  known, as with the issuance of preferred stock, as &#147;leveraging&#148;) create
  an opportunity for greater total return since, for example, the Fund will not
  be required to sell portfolio securities to repurchase or redeem shares but,
  at the same time, increase exposure to capital risk. In addition, borrowed funds
  are subject to interest costs that may offset or exceed the return earned on
  the borrowed funds. </FONT></P>


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

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


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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Series C AMPS will be shares of preferred stock that entitle their holders to receive
dividends when, as and if declared by the Board of Directors, out of funds legally
available therefor, at a rate per annum that may vary for the successive Dividend
Periods. After the Initial Dividend Period, each Subsequent Dividend Period for the
Series C 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 of up to five years (a &#147;Special
Dividend Period&#148;). The Applicable Rate for a particular Dividend Period will be
determined by an Auction conducted on the Business Day before the start of such Dividend
Period. Beneficial Owners and Potential Beneficial Owners of shares of AMPS may
participate in Auctions therefor, although, except in the case of a Special Dividend
Period of more than 28 days, Beneficial Owners desiring to continue to hold all of their
shares of AMPS regardless of the Applicable Rate resulting from Auctions need not
participate. For an explanation of Auctions and the method of determining the Applicable
Rate, see &#147;The Auction&#148; herein and in the statement of additional information. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund has outstanding 4,400 shares of two 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 $110,000,000 (the &#147;Other
AMPS&#148;). The Other AMPS are as follows: 2,200 shares of Auction Market Preferred
Stock, Series A and 2,200 shares of Auction Market Preferred Stock, Series B. The Series
C AMPS offered hereby rank on a parity with the Other AMPS with respect to dividends and
liquidation preference. The terms of the shares of Other AMPS are substantially the same
as the terms of the shares of AMPS described below. </FONT></P>


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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 39; page: 39" -->

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </FONT></P>


<font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font><font size="2">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&#146;s Charter and Articles Supplementary of the AMPS,
including the provisions thereof establishing the AMPS. The Fund&#146;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. </font><!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Dividends </B></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>General.
</I>The holders of shares of AMPS will be entitled to receive, when, as and if declared by
the Board of Directors of the Fund, out of funds legally available therefor, cumulative
cash dividends on their shares, at the Applicable Rate determined as set forth below
under &#147;Determination of Dividend Rate,&#148; payable on the respective dates set
forth below. Dividends on the shares of AMPS so declared and payable shall be paid (i) in
preference to and in priority over any dividends so declared and payable on the Fund&#146;s
common stock, and (ii) to the extent permitted under the Code, and to the extent
available, out of net tax exempt income earned on the Fund&#146;s investments. Generally,
dividends on shares of AMPS, to the extent that they are derived from interest paid on
Municipal Bonds, will be exempt from Federal income taxes, subject to possible
application of the alternative minimum tax. See &#147;Taxes.&#148; </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dividends
on the shares of AMPS will accumulate from the date on which the Fund originally issues
the shares of AMPS (the &#147;Date of Original Issue&#148;) and will be payable on the
dates described below. Dividends on shares of AMPS with respect to the Initial Dividend
Period shall be payable on the Initial Dividend Payment Date. Following the Initial
Dividend Payment Date for the AMPS, dividends on the AMPS will be payable, at the option
of the Fund, either (i) with respect to any 7-Day Dividend Period and any Short Term
Dividend Period of 35 or fewer days, on the day next succeeding the last day thereof or
(ii) with respect to any Short Term Dividend Period of more than 35 days and with respect
to any Long Term Dividend Period, monthly on the first Business Day of each calendar
month during such Short Term Dividend Period or Long Term Dividend Period and on the day
next succeeding the last day thereof (each such date referred to in clause (i) or (ii)
being referred to herein as a &#147;Normal Dividend Payment Date&#148;), except that if
such Normal Dividend Payment Date is not a Business Day, the Dividend Payment Date shall
be the first Business Day next succeeding such Normal Dividend Payment Date. Thus,
following the Initial Dividend Payment Date for AMPS, dividends generally will be payable
(in the case of Dividend Periods which are not Special Dividend Periods) on each
succeeding Tuesday in the case of the Series C AMPS. Although any particular Dividend
Payment Date may not occur on the originally scheduled date because of the exceptions
discussed above, the next succeeding Dividend Payment Date, subject to such exceptions,
will occur on the next following originally scheduled date. If for any reason a Dividend
Payment Date cannot be fixed as described above, then the Board of Directors shall fix
the Dividend Payment Date. The Board of Directors by resolution prior to authorization of
a dividend by the Board of Directors may change a Dividend Payment Date if such change
does not adversely affect the contract rights of the holders of shares of AMPS set forth
in the Charter. The Initial Dividend Period, 7-Day Dividend Periods and Special Dividend
Periods are hereinafter sometimes referred to as &#147;Dividend Periods.&#148; Each
dividend payment date determined as provided above is hereinafter referred to as a &#147;Dividend
Payment Date.&#148; </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior
to each Dividend Payment Date, the Fund is required to deposit with the Auction Agent
sufficient funds for the payment of declared dividends. The Fund does not intend to
establish any reserves for the payment of dividends. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
dividend will be paid to the record holder of the AMPS, which holder is expected to be
the nominee of the Securities Depository. See &#147;The Auction &#151; Securities
Depository.&#148; The Securities Depository will credit the accounts of the Agent Members
of the Existing Holders in accordance with the Securities Depository&#146;s normal
procedures which provide for payment in same-day funds. The Agent Member of an Existing
Holder will be responsible for holding or disbursing such payments on the applicable
Dividend Payment Date to such Existing Holder in accordance with the instructions of such
Existing Holder. Dividends in arrears for any past Dividend Period may be declared and
paid at any time, without reference to any regular Dividend Payment Date, to the nominee
of the Securities Depository. Any dividend payment made on shares of AMPS first shall be
credited against the earliest declared but unpaid dividends accumulated with respect to
such shares. </FONT></P>


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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 40; page: 40" -->



<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders
of shares of AMPS will not be entitled to any dividends, whether payable in cash,
property or stock, in excess of full cumulative dividends except as described below under
&#147;&#151; Additional Dividends&#148; in this prospectus and under &#147;Description of
AMPS &#151; Dividends &#151; Non-Payment Period; Late Charge&#148; in the statement of
additional information. No interest will be payable in respect of any dividend payment or
payments on the shares of AMPS that may be in arrears. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
amount of cash dividends per share of the AMPS payable (if declared) on the Initial
Dividend Payment Date, and on each Dividend Payment Date of each 7-Day Dividend Period
and each Short Term Dividend Period, shall be computed by multiplying the Applicable Rate
for such Dividend Period by a fraction, the numerator of which will be the number of days
in such Dividend Period or part thereof that such share was outstanding and for which
dividends are payable on such Dividend Payment Date and the denominator of which will be
365, multiplying the amount so obtained by $25,000, and rounding the amount so obtained
to the nearest cent. During any Long Term Dividend Period, the amount of cash dividends
per share of AMPS payable (if declared) on any Dividend Payment Date shall be computed by
multiplying the Applicable Rate for such Dividend Period by a fraction, the numerator of
which will be such number of days in such part of such Dividend Period that such share
was outstanding and for which dividends are payable on such Dividend Payment Date and the
denominator of which will be 360, multiplying the amount so obtained by $25,000, and
rounding the amount so obtained to the nearest cent. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Notification
  of Dividend Period. </I>With respect to each Dividend Period that is a Special
  Dividend Period, the Fund, at its sole option and to the extent permitted by
  law, by telephonic and written notice (a &#147;Request for Special Dividend
  Period&#148;) to the Auction Agent and to each Broker-Dealer, may request that
  the next succeeding Dividend Period for the AMPS will be a number of days (other
  than seven), evenly divisible by seven, and not fewer than seven nor more than
  364 in the case of a Short Term Dividend Period or one whole year or more but
  not greater than five years in the case of a Long Term Dividend Period, specified
  in such notice, provided that the Fund may not give a Request for Special Dividend
  Period (and any such request shall be null and void) unless, for any Auction
  occurring after the initial Auction, Sufficient Clearing Bids were made in the
  last occurring Auction and unless full cumulative dividends and any amounts
  due with respect to redemptions, and any Additional Dividends payable prior
  to such date have been paid in full. Such Request for Special Dividend Period,
  in the case of a Short Term Dividend Period, shall be given on or prior to the
  second Business Day but not more than seven Business Days prior to an Auction
  Date for the AMPS and, in the case of a Long Term Dividend Period, shall be
  given on or prior to the second Business Day but not more than 28 days prior
  to an Auction Date for the AMPS. Upon receiving such Request for Special Dividend
  Period, the Broker-Dealers jointly shall determine whether, given the factors
  set forth below, it is advisable that the Fund issue a Notice of Special Dividend
  Period for the AMPS as contemplated by such Request for Special Dividend Period
  and the Optional Redemption Price of the AMPS during such Special Dividend Period
  and the Specific Redemption Provisions and shall give the Fund written notice
  (a &#147;Response&#148;) of such determination by no later than the second Business
  Day prior to such Auction Date. In the event the Response indicates that it
  is advisable that the Fund give a notice of a Special Dividend Period for the
  AMPS, the Fund, by no later than the second Business Day prior to such Auction
  Date may give a notice (a &#147;Notice of Special Dividend Period&#148;) to
  the Auction Agent, the Securities Depository and each Broker-Dealer. See &#147;Description
  of AMPS &#151; Dividends &#151; Notification of Dividend Period&#148; in the
  statement of additional information for a detailed description of these procedures.
  </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Determination
of Dividend Rate. </I>The dividend rate on shares of the AMPS during the period from and
including the Date of Original Issue for the Series C AMPS to but excluding the Initial
Dividend Payment Date (the &#147;Initial Dividend Period&#148;) with respect to the
Series C AMPS will be the rate per annum set forth above under &#147;Prospectus Summary
&#151; Dividends and Dividend Periods.&#148; Commencing on the Initial Dividend Payment
Date for the Series C AMPS, the Applicable Rate on the Series C 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 the AMPS is
referred to herein as a &#147;Dividend Period.&#148; Cash dividends shall be calculated
as set forth above under &#147;Dividends &#151; General.&#148; </FONT> </P>


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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 41; page: 41" -->



<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Restrictions
on Dividends and Other Payments. </I>Under the 1940 Act, the Fund may not declare dividends
or make other distributions on shares of common stock or purchase any such shares if, at
the time of the declaration, distribution or purchase, as applicable (and after giving
effect thereto), asset coverage (as defined in the 1940 Act) with respect to the
outstanding shares of AMPS (and Other AMPS) would be less than 200% (or such other
percentage as in the future may be required by law). The Fund estimates that, based on
the composition of its portfolio at April 30, 2005, asset coverage with respect to shares
of AMPS would be approximately 280% representing approximately 36% of the Fund&#146;s
capital and 56% of the Fund&#146;s common stock equity immediately after the issuance of
the shares of AMPS offered hereby. Under the Code, the Fund, among other things, must
distribute at least 90% of its investment company taxable income each year in order to
maintain its qualification for tax treatment as a regulated investment company. The
foregoing limitations on dividends, distributions and purchases under certain
circumstances may impair the Fund&#146;s ability to maintain such qualification. See
&#147;Taxes&#148; in the statement of additional information. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
any failure to pay dividends on shares of AMPS for two years or more, the holders of the
shares of AMPS will acquire certain additional voting rights. See &#147;Voting Rights&#148; below.
Such rights shall be the exclusive remedy of the holders of shares of AMPS upon any
failure to pay dividends on shares of the Fund. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Additional
Dividends. </I>If the Fund retroactively allocates any net capital gain or other income
subject to regular Federal income taxes to shares of AMPS without having given advance
notice thereof to the Auction Agent as described under &#147;The Auction &#151; Auction
Procedures &#151; Auction Date; Advance Notice of Allocation of Taxable Income; Inclusion
of Taxable Income in Dividends&#148; below, which may only happen when such allocation is
made as a result of the redemption of all or a portion of the outstanding shares of AMPS
or the liquidation of the Fund (the amount of such allocation referred to herein as a
&#147;Retroactive Taxable Allocation&#148;), the Fund, within 90 days (and generally
within 60 days) after the end of the Fund&#146;s fiscal year for which a Retroactive
Taxable Allocation is made, will provide notice thereof to the Auction Agent and to each
holder of shares (initially Cede as nominee of the Securities Depository) during such
fiscal year at such holder&#146;s address as the same appears or last appeared on the
stock books of the Fund. The Fund, within 30 days after such notice is given to the
Auction Agent, will pay to the Auction Agent (who then will distribute to such holders of
shares of AMPS), out of funds legally available therefor, an amount equal to the
aggregate Additional Dividend (as defined below) with respect to all Retroactive Taxable
Allocations made to such holders during the fiscal year in question. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An
&#147;Additional Dividend&#148; means payment to a present or former holder of shares of
AMPS of an amount which, when taken together with the aggregate amount of Retroactive
Taxable Allocations made to such holder with respect to the fiscal year in question,
would cause such holder&#146;s dividends in dollars (after Federal income tax
consequences) from the aggregate of both the Retroactive Taxable Allocations and the
Additional Dividend to be equal to the dollar amount of the dividends which would have
been received by such holder if the amount of the aggregate Retroactive Taxable
Allocations had been excludable from the gross income of such holder. Such Additional
Dividend shall be calculated (i) without consideration being given to the time value of
money; (ii) assuming that no holder of shares of AMPS is subject to the Federal
alternative minimum tax with respect to dividends received from the Fund; and (iii)
assuming that each Retroactive Taxable Allocation would be taxable in the hands of each
holder of shares of AMPS at the greater of: (a) the maximum marginal regular Federal
individual income tax rate applicable to ordinary income or capital gains depending on
the taxable character of the distribution (including any surtax); or (b) the maximum
marginal regular Federal corporate income tax rate applicable to ordinary income or
capital gains depending on the taxable character of the distribution (disregarding in
both (a) and (b) the effect of any state or local taxes and the phase out of, or
provision limiting, personal exemptions, itemized deductions, or the benefit of lower tax
brackets). Although the Fund generally intends to designate any Additional Dividend as an
exempt-interest dividend to the extent permitted by applicable law, it is possible that
all or a portion of any Additional Dividend will be taxable to the recipient thereof. See
&#147;Taxes&#148; in the statement of additional information. The Fund will not pay a
further Additional Dividend with respect to any taxable portion of an Additional Dividend. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the Fund does not give advance notice of the amount of taxable income to be included in a
dividend on shares of AMPS in the related Auction, the Fund may include such taxable
income in a dividend on shares of AMPS if it increases the dividend by an additional
amount calculated as if such income were a Retroactive Taxable Allocation and the
additional amount were an Additional Dividend and notifies the Auction Agent of such  </FONT></P>


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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 42; page: 42" -->



<!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>inclusion at least five Business
  Days prior to the applicable Dividend Payment Date. See &#147;The Auction &#151;
  Auction Procedures &#151; Auction Date; Advance Notice of Allocation of Taxable
  Income; Inclusion of Taxable Income in Dividends&#148; below. </FONT></P>


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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund will be required to satisfy two separate asset maintenance requirements under the
terms of the Articles Supplementary. These requirements are summarized below. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>1940
Act AMPS Asset Coverage. </I>The Fund will be required under the Articles Supplementary to
maintain, with respect to shares of AMPS, as of the last Business Day of each month in
which any shares of AMPS are outstanding, asset coverage of at least 200% with respect to
senior securities that are stock, including the shares of AMPS and Other AMPS (or such
other asset coverage as in the future may be specified in or under the 1940 Act as the
minimum asset coverage for senior securities that are stock of a closed-end investment
company as a condition of paying dividends on its common stock) (&#147;1940 Act AMPS
Asset Coverage&#148;). If the Fund fails to maintain 1940 Act AMPS Asset Coverage and
such failure is not cured as of the last Business Day of the following month (the &#147;1940
Act Cure Date&#148;), the Fund will be required under certain circumstances to redeem
certain of the shares of AMPS. See &#147;Redemption&#148; below. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based
upon the composition of the Fund&#146;s portfolio at April 30, 2005, the 1940 Act AMPS
Asset Coverage immediately following the issuance of AMPS offered hereby (after giving
effect to the deduction of the underwriting discount and offering expenses for the shares
of AMPS) will be computed as follows: </FONT></P>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
  <TR VALIGN=middle>
    <TD WIDTH=62% rowspan="4" ALIGN=CENTER><FONT SIZE=2>Value of Fund assets less
      liabilities</FONT><FONT SIZE=2><br>
      not constituting senior securities</FONT><FONT SIZE=2><br>
      </FONT>
      <hr size="1" noshade>
      <FONT SIZE=2>Senior securities representing indebtedness plus<br>
      </FONT><FONT SIZE=2>liquidation value of the shares of AMPS</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=3% rowspan="4" ALIGN=CENTER><FONT SIZE=2>=</FONT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=15% rowspan="4" ALIGN=CENTER><FONT SIZE=2>$349,933,260<br>
      </FONT>
      <hr size="1" noshade>
      <FONT SIZE=2>$125,000,000</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=3% rowspan="4" ALIGN=CENTER><FONT SIZE=2>=</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=3% rowspan="4" ALIGN=CENTER><FONT SIZE=2>280%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
  </TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>AMPS
Basic Maintenance Amount. </I>So long as shares of AMPS are outstanding, the Fund will be
required under the Articles Supplementary to maintain as of the last Business Day of each
week (a &#147;Valuation Date&#148;) Moody&#146;s Eligible Assets and S&amp;P Eligible
Assets each having in the aggregate a Discounted Value at least equal to the AMPS Basic
Maintenance Amount. The AMPS Basic Maintenance Amount includes the sum of (i) the
aggregate liquidation value of AMPS and Other AMPS then outstanding and (ii) certain
accrued and projected payment obligations of the Fund. See &#147;Description of AMPS
&#151; Asset Maintenance &#151; AMPS Basic Maintenance Amount&#148; in the statement of
additional information. If the Fund fails to meet such requirement as of any Valuation
Date and such failure is not cured on or before the sixth Business Day after such
Valuation Date (the &#147;AMPS Basic Maintenance Cure Date&#148;), the Fund will be
required under certain circumstances to redeem certain of the shares of AMPS. Upon any
failure to maintain the required Discounted Value, the Fund will use its best efforts to
alter the composition of its portfolio to reattain a Discounted Value at least equal to
the AMPS Basic Maintenance Amount on or prior to the AMPS Basic Maintenance Cure Date.
See &#147;Redemption&#148;herein and in the statement of additional information. </FONT> </P>


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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Optional
Redemption. </I>To the extent permitted under the 1940 Act and under Maryland law, upon
giving a Notice of Redemption, as provided in the statement of additional information,
the Fund, at its option, may redeem shares of AMPS, in whole or in part, out of funds
legally available therefor, at the Optional Redemption Price per share on any Dividend
Payment Date; provided that no share of AMPS may be redeemed at the option of the Fund
during (a) the Initial Dividend Period with respect to such share or (b) a Non-Call
Period to which such share is subject. &#147;Optional Redemption Price&#148; means
$25,000 per share of AMPS plus an amount equal to accumulated but unpaid dividends
(whether or not earned or declared) to the date fixed for redemption plus any applicable
redemption premium, if any, attributable to the designation of a Premium Call Period. In
addition, holders of AMPS may be entitled to receive Additional Dividends in the event of
redemption of such AMPS to the extent provided herein. See &#147;Dividends &#151; Additional
Dividends.&#148; The Fund has the authority to redeem the AMPS for any reason and may
redeem all or part of the outstanding shares of AMPS if it anticipates that the Fund&#146;s
leveraged capital structure will result in a lower rate of return to holders of common
stock for any significant period of time than that obtainable if the common stock were
unleveraged.  </FONT> </P>


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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 43; page: 43" -->



<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Mandatory
Redemption. </I>The Fund will be required to redeem, out of funds legally available therefor,
at the Mandatory Redemption Price per share, shares of AMPS to the extent permitted under
the 1940 Act and Maryland law, on a date fixed by the Board of Directors, if the Fund
fails to maintain Moody&#146;s Eligible Assets and S&amp;P Eligible Assets each with an
aggregate Discounted Value equal to or greater than the AMPS Basic Maintenance Amount or
to satisfy the 1940 Act AMPS Asset Coverage and such failure is not cured on or before
the AMPS Basic Maintenance Cure Date or the 1940 Act Cure Date (herein collectively
referred to as a &#147;Cure Date&#148;), as the case may be. &#147;Mandatory Redemption
Price&#148; means $25,000 per share of AMPS plus an amount equal to accumulated but
unpaid dividends (whether or not earned or declared) to the date fixed for redemption. In
addition, holders of AMPS may be entitled to receive Additional Dividends in the event of
redemption of such AMPS to the extent provided herein. See &#147;Dividends &#151; Additional
Dividends.&#148; </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
  a discussion of the allocation procedures to be used if fewer than all of the
  outstanding shares of AMPS are to be redeemed and for a discussion of other
  redemption procedures, see &#147;Description of AMPS &#151; Redemption&#148;
  in the statement of additional information. </FONT></P>


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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
any liquidation, dissolution or winding up of the Fund, whether voluntary or involuntary,
the holders of shares of AMPS will be entitled to receive, out of the assets of the Fund
available for distribution to stockholders, before any distribution or payment is made
upon any shares of common stock or any other capital stock of the Fund ranking junior in
right of payment upon liquidation of AMPS, $25,000 per share together with the amount of
any dividends accumulated but unpaid (whether or not earned or declared) thereon to the
date of distribution, and after such payment the holders of AMPS will be entitled to no
other payments except for Additional Dividends. If such assets of the Fund shall be
insufficient to make the full liquidation payment on the outstanding shares of AMPS and
liquidation payments on any other outstanding class or series of preferred stock of the
Fund ranking on a parity with the AMPS as to payment upon liquidation, including the
Other AMPS, then such assets will be distributed among the holders of such shares of AMPS
and the holders of shares of such other class or series, including the Other AMPS,
ratably in proportion to the respective preferential amounts to which they are entitled.
After payment of the full amount of liquidation distribution to which they are entitled,
the holders of AMPS will not be entitled to any further participation in any distribution
of assets by the Fund. A consolidation, merger or share exchange of the Fund with or into
any other entity or entities or a sale, whether for cash, shares of stock, securities or
properties, of all or substantially all or any part of the assets of the Fund shall not
be deemed or construed to be a liquidation, dissolution or winding up of the Fund. </FONT></P>


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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
as otherwise indicated in this prospectus and the statement of additional information and
except as otherwise required by applicable law, holders of shares of AMPS will be
entitled to one vote per share on each matter submitted to a vote of stockholders of the
Fund and will vote together with holders of shares of Other AMPS and holders of shares of
common stock as a single class. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
1940 Act and the Articles Supplementary require that the holders of preferred stock,
including the AMPS and Other AMPS, voting as a separate class, have the rights to elect
two of the Fund&#146;s Directors at all times and to elect a majority of the Directors at
any time that two full years&#146;dividends on the AMPS (and Other AMPS) are unpaid. The
holders of AMPS (and Other AMPS) will vote as a separate class or classes on certain
other matters as required under the Articles Supplementary, the 1940 Act and Maryland
law. In addition, the Series C AMPS (and Other AMPS) may vote as a separate series under
certain circumstances. See &#147;Description of AMPS &#151; Voting Rights&#148;in the
statement of additional information. </FONT></P>


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

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

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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders
of the shares of the Series C AMPS will be entitled to receive cumulative cash dividends
on their shares when, as and if declared by the Board of Directors of the Fund, out of
funds legally available therefor, on </FONT></P>


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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 44; page: 44" -->






<!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the Initial Dividend Payment Date
with respect to the Initial Dividend Period and, thereafter, on each Dividend Payment
Date with respect to a Subsequent Dividend Period (generally a period of seven days,
subject to certain exceptions set forth under &#147;Description of AMPS &#151; Dividends
&#151; General&#148;) at the rate per annum equal to the Applicable Rate for each such
Dividend Period. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
provisions of the Articles Supplementary establishing the terms of the Series C AMPS
offered hereby will provide that the Applicable Rate for the shares of AMPS for each
Dividend Period after the Initial Dividend Period therefor will be equal to the rate per
annum that the Auction Agent advises has resulted on the Business Day preceding the first
day of such Dividend Period due to implementation of the auction procedures set forth in
the Articles Supplementary (the &#147;Auction Procedures&#148;) in which persons
determine to hold or offer to purchase or sell shares of AMPS. The Auction Procedures are
attached as Appendix C to the statement of additional information. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
periodic operation of such procedures with respect to the shares of AMPS is referred to
hereinafter as an &#147;Auction.&#148; If, however, the Fund should fail to pay or duly
provide for the full amount of any dividend on shares of AMPS or the redemption price of
shares of AMPS called for redemption, the Applicable Rate for shares of AMPS will be
determined as set forth under &#147;Description of AMPS &#151; Dividends &#151; Non-Payment
Period; Late Charge&#148; in the statement of additional information. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Auction
Agent Agreement. </I>The Fund has entered into an agreement with The Bank of New York
(together with any successor bank or trust company or other entity entering into a
similar agreement with this Fund, the &#147;Auction Agent&#148;) (the &#147;Auction Agent
Agreement&#148;), which provides, among other things, that the Auction Agent will follow
the Auction Procedures for the purpose of determining the Applicable Rate for the AMPS.
The Fund will pay the Auction Agent compensation for its services under the Auction Agent
Agreement. </FONT> </P>


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


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Securities
Depository. </I>The Depository Trust Company initially will act as the Securities Depository
for the Agent Members with respect to the shares of Series C AMPS. One or more registered
certificates for all of the shares of the Series C AMPS initially will be registered in
the name of Cede, as nominee of the Securities Depository. The certificate will bear a
legend to the effect that such certificate is issued subject to the provisions
restricting transfers of shares of AMPS to which it relates contained in the Articles
Supplementary. Cede initially will be the holder of record of all shares of AMPS, and
Beneficial Owners will not be entitled to receive certificates representing their
ownership interest in such shares. The Securities Depository will maintain lists of its
participants and will maintain the positions (ownership interests) of shares of AMPS held
by each Agent Member, whether as the Beneficial Owner thereof for its own account or as
nominee for the Beneficial Owner thereof. Payments made by the Fund to holders of AMPS
will be duly made by making payments to the nominee of the Securities Depository. </FONT> </P>


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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following is a brief discussion of the procedures to be used in conducting Auctions. This
summary is qualified by reference to the Auction Procedures set forth in Appendix C to
the statement of additional information. The Settlement Procedures to be used with
respect to Auctions are set forth in Appendix B to the statement of additional
information. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Auction
Date; Advance Notice of Allocation of Taxable Income; Inclusion of Taxable Income in
Dividends. </I>An Auction to determine the Applicable Rate for the shares of the Series C
AMPS offered hereby for each Dividend Period (other than the Initial Dividend Period
therefor) will be held on the first Business Day (as hereinafter defined) preceding the
first day of such Dividend Period, which first day is also a Dividend Payment Date for
the preceding Dividend Period (the date of each Auction being referred to herein as an
&#147;Auction Date&#148;). &#147;Business Day&#148; means a day on which The New York
Stock Exchange (the &#147;NYSE&#148;) is open for trading and which is not a Saturday,
Sunday or other day on which banks in the City of New York are authorized or obligated </FONT> </P>



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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 45; page: 45" -->




<!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>by law to close. Auctions for shares
of the Series C AMPS for Dividend Periods after the Initial Dividend Period normally will
be held every Monday after the preceding Dividend Payment Date, and each subsequent
Dividend Period normally will begin on the following Tuesday (also a Dividend Payment
Date). The Auction Date and the first day of the related Dividend Period (both of which
must be Business Days) need not be consecutive calendar days. For example, in most cases,
if the Monday that normally would be an Auction Date for the Series C AMPS is not a
Business Day, then such Auction Date will be the preceding Friday and the first day of
the related Dividend Period will continue to be the following Tuesday. See &#147;Description
of AMPS &#151; Dividends&#148; for information concerning the circumstances under which a
Dividend Payment Date may fall on a date other than the days specified above, which may
affect the Auction Date. </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
as noted below, whenever the Fund intends to include any net capital gain or other income
subject to regular Federal income taxes in any dividend on shares of AMPS, the Fund will
notify the Auction Agent of the amount to be so included at least five Business Days
prior to the Auction Date on which the Applicable Rate for such dividend is to be
established. Whenever the Auction Agent receives such notice from the Fund, in turn it
will notify each Broker-Dealer, who, on or prior to such Auction Date, in accordance with
its Broker-Dealer Agreement, will notify its customers who are Beneficial Owners and
Potential Beneficial Owners believed to be interested in submitting an Order in the
Auction to be held on such Auction Date. The Fund also may include such income in a
dividend on shares of AMPS without giving advance notice thereof if it increases the
dividend by an additional amount calculated as if such income were a Retroactive Taxable
Allocation and the additional amount were an Additional Dividend; provided that the Fund
will notify the Auction Agent of the additional amounts to be included in such dividend
at least five Business Days prior to the applicable Dividend Payment Date. See &#147;Description
of AMPS &#151; Dividends &#151; Additional Dividends&#148; above. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Orders
by Beneficial Owners, Potential Beneficial Owners, Existing Holders and Potential
Holders. </I>On or prior to each Auction Date: </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)
each Beneficial Owner may submit to its Broker-Dealer by telephone a: </FONT>
</TD>
</TR>
</TABLE>
<BR>

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

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

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

<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)
Broker-Dealers will contact customers who are Potential         Beneficial Owners of
shares of AMPS to determine whether such Potential         Beneficial Owners desire to
submit Bids indicating the number of shares         of AMPS which they offer to purchase
provided that the Applicable Rate         for the next Dividend Period for such shares is
not less than the rates         per annum specified in such Bids. </FONT>
</TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
communication by a Beneficial Owner or Potential Beneficial Owner to a Broker-Dealer and
the communication by a Broker-Dealer, whether or not acting for its own account, to the
Auction Agent of the foregoing information is hereinafter referred to as an &#147;Order&#148; and
collectively as &#147;Orders.&#148; A Beneficial Owner or a Potential Beneficial Owner
placing an Order, including a Broker-Dealer acting in such capacity for its own account,
is hereinafter referred to as a &#147;Bidder&#148; and collectively as &#147;Bidders.&#148; Any
Order submitted by a Beneficial Owner or a Potential Beneficial Owner to its
Broker-Dealer, or by a Broker-Dealer to the Auction Agent, prior to the Submission
Deadline on any Auction Date shall be irrevocable. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
an Auction, a Beneficial Owner may submit different types of Orders with respect to
shares of AMPS then held by such Beneficial Owner, as well as Bids for additional shares
of AMPS. For information concerning the priority given to different types of Orders
placed by Beneficial Owners, see &#147;Submission of Orders by Broker-Dealers to Auction
Agent&#148; below. </FONT></P>


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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 46; page: 46" -->



<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Maximum Applicable Rate for shares of AMPS will be the higher of (A) the Applicable
Percentage of the Reference Rate or (B) the Applicable Spread plus the Reference Rate.
The Auction Agent will round each applicable Maximum Applicable Rate to the nearest
one-thousandth (0.001) of one percent per annum, with any such number ending in five
ten-thousandths of one percent being rounded upwards to the nearest one-thousandth
(0.001) of one percent. The Auction Agent will not round the applicable Reference Rate as
part of its calculation of the Maximum Applicable Rate. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Maximum Applicable Rate for shares of AMPS will depend on the credit rating or ratings
assigned to such shares. The Applicable Percentage and the Applicable Spread will be
determined based on (i) the lower of the credit rating or ratings assigned on such date
to such shares by Moody&#146;s and S&amp;P (or if Moody&#146;s or S&amp;P or both shall
not make such rating available, the equivalent of either or both of such ratings by a
Substitute Rating Agency or two Substitute Rating Agencies or, in the event that only one
such rating shall be available, such rating) and (ii) whether the Fund has provided
notification to the Auction Agent prior to the Auction establishing the Applicable Rate
for any dividend that net capital gain or other taxable income will be included in such
dividend on shares of AMPS as follows: </FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
  <TR VALIGN=Bottom>
    <TH colspan=2><FONT SIZE=1>Credit Ratings</FONT> <HR WIDTH=220 SIZE=1 COLOR=BLACK noshade></TH>
    <TH rowspan="2"><FONT SIZE=1>Applicable <BR>
      Percentage <BR>
      of Reference <BR>
      Rate&#151;No <BR>
      Notification </FONT> <HR WIDTH=85% SIZE=1 COLOR=BLACK noshade></TH>
    <TH rowspan="2"><FONT SIZE=1>Applicable <BR>
      Percentage <BR>
      of Reference <BR>
      Rate&#151; <BR>
      Notification </FONT> <HR WIDTH=85% SIZE=1 COLOR=BLACK noshade></TH>
    <TH rowspan="2"><FONT SIZE=1>Applicable <BR>
      Spread Over <BR>
      Reference <BR>
      Rate&#151;No <BR>
      Notification </FONT> <HR WIDTH=85% SIZE=1 COLOR=BLACK noshade></TH>
    <TH rowspan="2"><FONT SIZE=1>Applicable <BR>
      Spread Over <BR>
      Reference <BR>
      Rate&#151; <BR>
      Notification </FONT> <HR WIDTH=85% SIZE=1 COLOR=BLACK noshade></TH>
  </TR>
  <TR VALIGN=Bottom>
    <TH><FONT SIZE=1>Moody&#146;s</FONT> <HR WIDTH=60 SIZE=1 COLOR=BLACK noshade></TH>
    <TH><FONT SIZE=1>S&amp;P</FONT> <HR WIDTH=60 SIZE=1 COLOR=BLACK noshade></TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD WIDTH=26% ALIGN=CENTER><FONT SIZE=2>Aaa</FONT></TD>
    <TD WIDTH=26% ALIGN=CENTER><FONT SIZE=2>AAA</FONT></TD>
    <TD WIDTH=12% ALIGN=CENTER><FONT SIZE=2>110%</FONT></TD>
    <TD WIDTH=12% ALIGN=CENTER><FONT SIZE=2>125%</FONT></TD>
    <TD WIDTH=13% ALIGN=CENTER><FONT SIZE=2>1.10%</FONT></TD>
    <TD WIDTH=11% ALIGN=CENTER><FONT SIZE=2>1.25%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=CENTER><FONT SIZE=2>Aa3 to Aa1</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>AA- to AA+</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>125%</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>150%</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>1.25%</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>1.50%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=CENTER><FONT SIZE=2>A3 to A1</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>A- to A+</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>150%</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>200%</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>1.50%</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>2.00%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=CENTER><FONT SIZE=2>Baa3 to Baa1</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>BBB- to BBB+</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>175%</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>250%</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>1.75%</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>2.50%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=CENTER><FONT SIZE=2>Below Baa3</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>Below BBB-</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>200%</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>300%</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>2.00%</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>3.00%</FONT></TD>
  </TR>
</TABLE>



<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There
is no minimum Applicable Rate in respect of any Dividend Period. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Applicable Percentage and the Applicable Spread as so determined may be further subject
to upward but not downward adjustment in the discretion of the Board of Directors of the
Fund after consultation with the Broker-Dealers, provided that immediately following any
such increase, the Fund would be in compliance with the AMPS Basic Maintenance Amount.
The Fund will take all reasonable action necessary to enable either S&amp;P or Moody&#146;s,
or both to provide a rating for the AMPS, subject to the Fund&#146;s ability to terminate
compliance with the rating agency guidelines as discussed under &#147;Rating Agency
Guidelines.&#148; If either S&amp;P or Moody&#146;s, or both, shall not make such a
rating available, and subject to the Fund&#146;s ability to terminate compliance with the
rating agency guidelines discussed under &#147;Rating Agency Guidelines,&#148; Merrill
Lynch or its affiliates and successors, after obtaining the Fund&#146;s approval, will
select another NRSRO (a &#147;Substitute Rating Agency&#148;) or two other NRSROs (&#147;Substitute
Rating Agencies&#148;) to act as a Substitute Rating Agency or Substitute Rating
Agencies, as the case may be. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
Bid by a Beneficial Owner specifying a rate per annum higher than the Maximum Applicable
Rate will be treated as a Sell Order, and any Bid by a Potential Beneficial Owner
specifying a rate per annum higher than the Maximum Applicable Rate will not be
considered. See &#147;Determination of Sufficient Clearing Bids, Winning Bid Rate and
Applicable Rate&#148; and &#147;Acceptance and Rejection of Submitted Bids and Submitted
Sell Orders and Allocation of Shares.&#148; </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Neither
the Fund nor the Auction Agent will be responsible for a Broker-Dealer&#146;s failure to
comply with the foregoing. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
Broker-Dealer also may hold AMPS in its own account as a Beneficial Owner. A
Broker-Dealer thus may submit Orders to the Auction Agent as a Beneficial Owner or a
Potential Beneficial Owner and therefore participate in an Auction as an Existing Holder
or Potential Holder on behalf of both itself and its customers. Any Order placed with the
Auction Agent by a Broker-Dealer as or on behalf of a Beneficial Owner or a Potential
Beneficial Owner will be treated in the same manner as an Order placed with a
Broker-Dealer by a Beneficial Owner or a Potential Beneficial Owner. Similarly, any
failure by a Broker-Dealer to submit to the Auction Agent an Order in respect of any AMPS
held by it or its customers who are Beneficial Owners will be treated in the same manner
as a Beneficial Owner&#146;s failure to submit to its Broker-Dealer an Order in respect
of AMPS held by it, as described in the next paragraph. Inasmuch as a Broker-Dealer
participates in an Auction as an Existing Holder or a Potential Holder only to represent
the interests of a Beneficial Owner or Potential Beneficial Owner,  </FONT></P>


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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 47; page: 47" -->






<!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>whether it be its customers or
itself, all discussion herein relating to the consequences of an Auction for Existing
Holders and Potential Holders also applies to the underlying beneficial ownership
interests represented thereby. For information concerning the priority given to different
types of Orders placed by Existing Holders, see &#147;Submission of Orders by
Broker-Dealers to Auction Agent.&#148; Each purchase or sale in an Auction will be
settled on the Business Day next succeeding the Auction Date at a price per share equal
to $25,000. See &#147;Notification of Results; Settlement&#148;below. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
one or more Orders covering in the aggregate all of the outstanding shares of AMPS held
by a Beneficial Owner are not submitted to the Auction Agent prior to the Submission
Deadline, either because a Broker-Dealer failed to contact such Beneficial Owner or
otherwise, the Auction Agent shall deem a Hold Order (in the case of an Auction relating
to a Dividend Period which is not a Special Dividend Period of more than 28 days) and a
Sell Order (in the case of an Auction relating to a Special Dividend Period of more than
28 days) to have been submitted on behalf of such Beneficial Owner covering the number of
outstanding shares of AMPS held by such Beneficial Owner and not subject to Orders
submitted to the Auction Agent. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
all of the outstanding shares of AMPS are subject to Submitted Hold Orders, the Dividend
Period next succeeding the Auction automatically shall be the same length as the
immediately preceding Dividend Period, and the Applicable Rate for the next Dividend
Period for all shares of AMPS will be 60% of the Reference Rate on the date of the
applicable Auction (or 90% of such rate if the Fund has provided notification to the
Auction Agent prior to the Auction establishing the Applicable Rate for any dividend that
net capital gain or other taxable income will be included in such dividend on shares of
AMPS). </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
the purposes of an Auction, shares of AMPS for which the Fund shall have given notice of
redemption and deposited moneys therefor with the Auction Agent in trust or segregated in
an account at the Fund&#146;s custodian bank for the benefit of holders of AMPS to be
redeemed and for payment to the Auction Agent, as set forth under &#147;Description of
AMPS &#151; Redemption&#148; in the statement of additional information, will not be
considered as outstanding and will not be included in such Auction. Pursuant to the
Articles Supplementary of the Fund, the Fund will be prohibited from reissuing and its
affiliates (other than Merrill Lynch) will be prohibited from transferring (other than to
the Fund) any shares of AMPS they may acquire. Neither the Fund nor any affiliate of the
Fund may submit an Order in any Auction, except that an affiliate of the Fund that is a
Broker-Dealer (<I>i.e.</I>, Merrill Lynch) may submit an Order. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Submission
of Orders by Broker-Dealers to Auction Agent. </I>Prior to 1:00 p.m., Eastern time, on each
Auction Date, or such other time on the Auction Date as may be specified by the Auction
Agent (the &#147;Submission Deadline&#148;), each Broker-Dealer will submit to the
Auction Agent in writing or through a mutually acceptable electronic means all Orders
obtained by it for the Auction to be conducted on such Auction Date, designating itself
(unless otherwise permitted by the Fund) as the Existing Holder or Potential Holder in
respect of the shares of AMPS subject to such Orders. Any Order submitted by a Beneficial
Owner or a Potential Beneficial Owner to its Broker-Dealer, or by a Broker-Dealer to the
Auction Agent, prior to the Submission Deadline on any Auction Date, shall be irrevocable. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the rate per annum specified in any Bid contains more than three figures to the right of
the decimal point, the Auction Agent will round such rate per annum up to the next
highest one-thousandth (.001) of 1%. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
one or more Orders of an Existing Holder are submitted to the Auction Agent and such
Orders cover in the aggregate more than the number of outstanding shares of AMPS held by
such Existing Holder, such Orders will be considered valid in the following order of
priority: </FONT></P>

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

<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)
any Bids will be considered valid, in the ascending order of         their respective
rates per annum if more than one Bid is submitted by         such Existing Holder, up to
and including the excess of the number of         outstanding shares of AMPS held by such
Existing Holder over the number         of outstanding shares of AMPS  </FONT>
</TD>
</TR>
</TABLE>
<BR>


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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 48; page: 48" -->



<!-- MARKER FORMAT-SHEET="Para Flush 05" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">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 <I>pro rata </I>so that such Bids, in the aggregate, cover exactly such
remaining number of outstanding shares); and the number of outstanding
shares, if any, subject to Bids not valid under this clause (b) shall be
treated as the subject of a Bid by a Potential Holder; and </FONT> </TD>
</TR>
</TABLE>
<BR>

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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
more than one Bid of any Potential Holder is submitted in any Auction, each Bid submitted
in such Auction will be considered a separate Bid with the rate per annum and number of
shares of AMPS therein specified. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Determination
of Sufficient Clearing Bids, Winning Bid Rate and Applicable Rate. </I>Not earlier than the
Submission Deadline for each Auction, the Auction Agent will assemble all Orders
submitted or deemed submitted to it by the Broker-Dealers (each such &#147;Hold Order,&#148; &#147;Bid&#148; or
&#147;Sell Order&#148; as submitted or deemed submitted by a Broker-Dealer hereinafter
being referred to as a &#147;Submitted Hold Order,&#148; a &#147;Submitted Bid&#148; or a
&#147;Submitted Sell Order,&#148; as the case may be, or as a &#147;Submitted Order&#148;)
and will determine the excess of the number of outstanding shares of AMPS over the number
of outstanding shares of AMPS subject to Submitted Hold Orders (such excess being
referred to as the &#147;Available AMPS&#148;) and whether Sufficient Clearing Bids have
been made in such Auction. Sufficient Clearing Bids will have been made if the number of
outstanding shares of AMPS that are the subject of Submitted Bids of Potential Holders
with rates per annum not higher than the Maximum Applicable Rate equals or exceeds the
number of outstanding shares that are the subject of Submitted Sell Orders (including the
number of shares subject to Bids of Existing Holders specifying rates per annum higher
than the Maximum Applicable Rate). </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
Sufficient Clearing Bids have been made, the Auction Agent will determine the lowest rate
per annum specified in the Submitted Bids (the &#147;Winning Bid Rate&#148;) which would
result in the number of shares subject to Submitted Bids specifying such rate per annum
or a lower rate per annum being at least equal to the Available AMPS. If Sufficient
Clearing Bids have been made, the Winning Bid Rate will be the Applicable Rate for the
next Dividend Period for all shares of AMPS then outstanding. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
Sufficient Clearing Bids have not been made (other than because all outstanding shares of
AMPS are the subject of Submitted Hold Orders), the Dividend Period next following the
Auction automatically will be a 7-Day Dividend Period in the case of the Series C AMPS,
and the Applicable Rate for such Dividend Period will be equal to the Maximum Applicable
Rate. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
Sufficient Clearing Bids have not been made, Beneficial Owners that have Submitted Sell
Orders will not be able to sell in the Auction all, and may not be able to sell any,
shares of AMPS subject to such Submitted Sell Orders. See &#147;Acceptance and Rejection
of Submitted Bids and Submitted Sell Orders and Allocation of Shares.&#148; Thus, under
some circumstances, Beneficial Owners may not have liquidity of investment. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Acceptance
and Rejection of Submitted Bids and Submitted Sell Orders and Allocation of Shares. </I>Based
on the determinations described under &#147;Determination of Sufficient Clearing Bids,
Winning Bid Rate and Applicable Rate&#148; and subject to the discretion of the Auction
Agent to round as described below, Submitted Bids and Submitted Sell Orders will be
accepted or rejected in the order of priority set forth in the Auction Procedures with
the result that Existing Holders and Potential Holders of AMPS will sell, continue to
hold and/or purchase shares of AMPS as set forth below. Existing Holders that submit or
are deemed to have submitted Hold Orders will continue to hold the shares of AMPS subject
to such Hold Orders. </FONT> </P>


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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 49; page: 49" -->



<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
Sufficient Clearing Bids have been made: </FONT></P>

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

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

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

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

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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
Sufficient Clearing Bids have not been made (other than because all outstanding shares of
AMPS are the subject of Submitted Hold Orders): </FONT></P>

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

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

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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
as a result of the Auction Procedures described above any Existing Holder would be
entitled or required to sell, or any Potential Holder would be entitled or required to
purchase, a fraction of a share of AMPS, the Auction Agent, in such manner as, in its
sole discretion, it shall determine, will round up or down the number of shares of AMPS
being sold or purchased on such Auction Date so that each share sold or purchased by each
Existing Holder or Potential Holder will be a whole share of AMPS. If any Potential
Holder would be entitled or required to purchase less than a whole share of AMPS, the
Auction Agent, in such manner as, in its sole discretion, it shall determine, will
allocate shares of AMPS for purchase among Potential Holders so that only whole shares of
AMPS are purchased by any such Potential Holder, even if such allocation results in one
or more of such Potential Holders not purchasing any shares of AMPS. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Notification
of Results; Settlement. </I>The Auction Agent will advise each Broker-Dealer who submitted a
Bid or Sell Order in an Auction whether such Bid or Sell Order was accepted or rejected
in whole or in part and of the Applicable Rate for the next Dividend Period for the
related shares of AMPS by telephone at approximately 3:00 p.m., Eastern time, on the
Auction Date for such Auction. Each such Broker-Dealer that submitted an Order for the
account of a customer then will advise such customer whether such Bid or Sell Order was
accepted or rejected, will confirm purchases and sales with each customer purchasing or
selling shares of AMPS as a result of the Auction and will advise each customer
purchasing or selling shares of AMPS to give instructions to its Agent Member of the
Securities Depository to pay the purchase price against delivery of such shares or to
deliver such shares against payment therefor as appropriate. If a customer selling shares
of AMPS as a result of an Auction shall fail to instruct its Agent Member to deliver such
shares, the Broker-Dealer that submitted such customer&#146;s </FONT> </P>


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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 50; page: 50" -->




<!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Bid or Sell Order will instruct such
Agent Member to deliver such shares against payment therefor. Each Broker-Dealer that
submitted a Hold Order in an Auction on behalf of a customer also will advise such
customer of the Applicable Rate for the next Dividend Period for the AMPS. The Auction
Agent will record each transfer of shares of AMPS on the record book of Existing Holders
to be maintained by the Auction Agent. In accordance with the Securities Depository&#146;s
normal procedures, on the day after each Auction Date, the transactions described above
will be executed through the Securities Depository, and the accounts of the respective
Agent Members at the Securities Depository will be debited and credited as necessary to
effect the purchases and sales of shares of AMPS as determined in such Auction.
Purchasers will make payment through their Agent Members in same-day funds to the
Securities Depository against delivery through their Agent Members; the Securities
Depository will make payment in accordance with its normal procedures, which now provide
for payment in same-day funds. If the procedures of the Securities Depository applicable
to AMPS shall be changed to provide for payment in next-day funds, then purchasers may be
required to make payment in next day funds. If any Existing Holder selling shares of AMPS
in an Auction fails to deliver such shares, the Broker-Dealer of any person that was to
have purchased shares of AMPS in such Auction may deliver to such person a number of
whole shares of AMPS that is less than the number of shares that otherwise was to be
purchased by such person. In such event, the number of shares of AMPS to be so delivered
will be determined by such Broker-Dealer. Delivery of such lesser number of shares will
constitute good delivery. Each Broker-Dealer Agreement also will provide that neither the
Fund nor the Auction Agent will have responsibility or liability with respect to the
failure of a Potential Beneficial Owner, Beneficial Owner or their respective Agent
Members to deliver shares of AMPS or to pay for shares of AMPS purchased or sold pursuant
to an Auction or otherwise. </FONT></P>


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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>General.
</I>The Broker-Dealer Agreements provide that a Broker-Dealer may submit Orders in Auctions
for its own account, unless the Fund notifies all Broker-Dealers that they no longer may
do so; provided that Broker-Dealers may continue to submit Hold Orders and Sell Orders.
If a Broker-Dealer submits an Order for its own account in any Auction of the AMPS, it
may have knowledge of Orders placed through it in that Auction and therefore have an
advantage over other Bidders, but such Broker-Dealer would not have knowledge of Orders
submitted by other Broker-Dealers in that Auction. As a result of bidding by a
Broker-Dealer in an Auction, the Applicable Rate may be higher or lower than the rate
that would have prevailed had the Broker-Dealer not Bid. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
Broker-Dealer may also Bid in an Auction in order to prevent what would otherwise be (i)
a failed Auction, (ii) an &#147;all-hold&#148; Auction, or (iii) an Applicable Rate that
the Broker-Dealer believes, in its sole discretion, does not reflect the market for the
AMPS at the time of the Auction. A Broker-Dealer may, but is not obligated to, advise
Beneficial Owners of AMPS that the Applicable Rate that would apply in an &#147;all-hold&#148; Auction
(<I>i.e.</I>, all of the outstanding AMPS are subject to Submitted Hold Orders) may be lower
than would apply if Beneficial Owners submit Bids and such advice, if given, may
facilitate the submission of Bids by Beneficial Owners that would avoid the occurrence of
an &#147;all-hold&#148; Auction. </FONT> </P>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Commission
Inquiries. </I>Merrill Lynch has advised the Fund that it and various other broker-dealers
and other firms that participate in the auction rate securities market received letters
from the staff of the Securities and Exchange Commission in the spring of 2004. The
letters requested that each of these firms voluntarily conduct an investigation regarding
its respective practices and procedures in that market. Pursuant to this request, Merrill
Lynch conducted its own voluntary review and reported its findings to the Commission
staff. At the Commission staff&#146;s request, Merrill Lynch, together with certain other
broker-dealers and other firms that participate in the auction rate securities market, is
engaging in discussions with the Commission staff concerning its inquiry. Neither Merrill
Lynch nor the Fund can predict the ultimate outcome of the inquiry or how that outcome
will affect the market for the AMPS or the auctions. </FONT> </P>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Fees.
</I>The Auction Agent after each Auction will pay a service charge from funds provided by the
Fund to each Broker-Dealer on the basis of the purchase price of shares of AMPS placed by
such Broker-Dealer at such Auction. The service charge (i) for any 7-Day Dividend Period
shall be payable at the annual rate of 0.25% of the purchase price of the shares of AMPS
placed by such Broker-Dealer in any such Auction and (ii) for any Special Dividend Period
shall be determined by mutual consent of the Fund and any such Broker-Dealer or
Broker-Dealers and shall be based upon a selling concession that would be applicable to
an underwriting of fixed or variable rate preferred shares with a similar final maturity
or variable rate dividend period, respectively, at the </FONT> </P>

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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 51; page: 51" -->




<!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>commencement of the Dividend Period
with respect to such Auction. For the purposes of the preceding sentence, shares of AMPS
will be placed by a Broker-Dealer if such shares were (i) the subject of Hold Orders
deemed to have been made by Beneficial Owners that were acquired by such Beneficial
Owners through such Broker-Dealer or (ii) the subject of the following Orders submitted
by such Broker-Dealer: (A) a Submitted Bid of a Beneficial Owner that resulted in such
Beneficial Owner continuing to hold such shares as a result of the Auction, (B) a
Submitted Bid of a Potential Beneficial Owner that resulted in such Potential Beneficial
Owner purchasing such shares as a result of the Auction or (C) a Submitted Hold Order. A
Broker-Dealer may share a portion of any such fees with non-participating broker-dealers
that submit Orders to the Broker-Dealer for an Auction that are placed by that
Broker-Dealer in such Auction. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Secondary
Trading Market. </I>Broker-Dealers have no obligation to maintain a secondary trading market
in the AMPS outside of Auctions and there can be no assurance that a secondary market for
the AMPS will develop or, if it does develop, that it will provide holders with a liquid
trading market (<I>i.e.</I>, trading will depend on the presence of willing buyers and sellers
and the trading price is subject to variables to be determined at the time of the trade
by the Broker-Dealers). The AMPS will not be registered on any stock exchange or on any
automated quotation system. An increase in the level of interest rates, particularly
during any Long Term Dividend Period, likely will have an adverse effect on the secondary
market price of the AMPS, and a selling stockholder may sell AMPS between Auctions at a
price per share of less than $25,000. </FONT> </P>


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

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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund currently intends that, so long as shares of AMPS are outstanding and the AMPS are
rated by Moody&#146;s and S&amp;P, the composition of its portfolio will reflect
guidelines established by Moody&#146;s and S&amp;P in connection with the Fund&#146;s
receipt of a rating for such shares on or prior to their Date of Original Issue of at
least Aaa from Moody&#146;s and AAA from S&amp;P. Moody&#146;s and S&amp;P, which are
NRSROs, issue ratings for various securities reflecting the perceived creditworthiness of
such securities. The Board of Directors of the Fund, however, may determine that it is
not in the best interest of the Fund to continue to comply with the guidelines of Moody&#146;s
or S&amp;P (described below). If the Fund voluntarily terminates compliance with Moody&#146;s
or S&amp;P guidelines, the Fund will no longer be required to maintain a Moody&#146;s
Discounted Value or a S&amp;P Discounted Value, as applicable, at least equal to the AMPS
Basic Maintenance Amount. If the Fund voluntarily terminates compliance with Moody&#146;s
or S&amp;P guidelines, or both, at the time of termination, it must continue to be rated
by at least one NRSRO. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
guidelines described below have been developed by Moody&#146;s and S&amp;P in connection
with issuances of asset-backed and similar securities, including debt obligations and
variable rate preferred stock, generally on a case-by-case basis through discussions with
the issuers of these securities. The guidelines are designed to ensure that assets
underlying outstanding debt or preferred stock will be varied sufficiently and will be of
sufficient quality and amount to justify investment-grade ratings. The guidelines do not
have the force of law but have been adopted by the Fund in order to satisfy current
requirements necessary for Moody&#146;s and S&amp;P to issue the above-described ratings
for shares of AMPS, which ratings generally are relied upon by institutional investors in
purchasing such securities. The guidelines provide a set of tests for portfolio
composition and asset coverage that supplement (and in some cases are more restrictive
than) the applicable requirements under the 1940 Act. See &#147;Description of AMPS &#151; Asset
Maintenance&#148; herein and in the statement of additional information. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund intends to maintain a Discounted Value for its portfolio at least equal to the AMPS
Basic Maintenance Amount. Moody&#146;s and S&amp;P each has established separate
guidelines for determining Discounted Value. To the extent any particular portfolio
holding does not satisfy the applicable rating agency&#146;s guidelines, all or a portion
of such holding&#146;s value will not be included in the calculation of Discounted Value
(as defined by such rating agency). The Moody&#146;s and S&amp;P guidelines do not impose
any limitations on the percentage of Fund assets that may be invested in holdings not
eligible for inclusion in the calculation of the Discounted Value of the Fund&#146;s
portfolio. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
any failure to maintain the required Discounted Value, the Fund will seek to alter the
composition of its portfolio to reattain a Discounted Value at least equal to the AMPS
Basic Maintenance Amount on or prior to the AMPS Basic Maintenance Cure Date, thereby
incurring additional transaction costs and possible losses and/or  </FONT></P>



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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 52; page: 52" -->






<!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>gains on dispositions of portfolio
securities. To the extent any such failure is not cured in a timely manner, shares of
AMPS will be subject to redemption. See &#147;Description of AMPS &#151; Asset Maintenance&#148; and
&#147;Description of AMPS &#151; Redemption&#148; herein and in the statement of
additional information. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund may, but is not required to, adopt any modifications to these guidelines that
hereafter may be established by Moody&#146;s or S&amp;P. Failure to adopt any such
modifications, however, may result in a change in the ratings described above or a
withdrawal of ratings altogether. In addition, any rating agency providing a rating for
the shares of AMPS, at any time, may change or withdraw any such rating. As set forth in
the Articles Supplementary, the Board of Directors, without stockholder approval, may
modify certain definitions or restrictions that have been adopted by the Fund pursuant to
the rating agency guidelines, provided the Board of Directors has obtained written
confirmation from Moody&#146;s and S&amp;P that any such change would not impair the
ratings then assigned by Moody&#146;s and S&amp;P to the AMPS. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
described by Moody&#146;s and S&amp;P, a preferred stock rating is an assessment of the
capacity and willingness of an issuer to pay preferred stock obligations. The ratings on
the AMPS are not recommendations to purchase, hold or sell shares of AMPS, inasmuch as
the ratings do not comment as to market price or suitability for a particular investor,
nor do the rating agency guidelines described above address the likelihood that a holder
of shares of AMPS will be able to sell such shares in an Auction. The ratings are based
on current information furnished to Moody&#146;s and S&amp;P by the Fund and the
Investment Adviser and information obtained from other sources. The ratings may be
changed, suspended or withdrawn as a result of changes in, or the unavailability of, such
information. The common stock has not been rated by a nationally recognized statistical
rating organization. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
additional information concerning the Moody&#146;s and S&amp;P ratings guidelines, see
&#147;Rating Agency Guidelines&#148; in the statement of additional information. </FONT></P>


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

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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Investment Advisory Agreement provides that, subject to the oversight of the Fund&#146;s
Board of Directors, the Investment Adviser is responsible for the actual management of
the Fund&#146;s portfolio. The responsibility for making decisions to buy, sell or hold a
particular security rests with the Investment Adviser, subject to oversight by the Board
of Directors. </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
portfolio manager primarily responsible for the Fund&#146;s day-to-day management is
Robert A. DiMella. Mr. DiMella has been a portfolio manager with MLIM since 1997, was a
Vice President of MLIM from 1997 to 2001, was a Director (Tax-Exempt Fund Management) of
MLIM from 2002 to 2004, has been a Managing Director of MLIM since 2004 and has 15 years
of experience investing in Municipal Bonds as a portfolio manager on behalf of registered
investment companies. He has been the portfolio manager and a Vice President of the Fund
since 1999. The Fund&#146;s portfolio manager will consider analyses from various
sources, make the necessary investment decisions, and place orders for transactions
accordingly. The statement of additional information provides additional information
about the Fund&#146;s portfolio manager&#146;s compensation, other accounts managed by
the portfolio manager, and the portfolio manager&#146;s ownership of securities of the
Fund. </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
its services, the Fund pays the Investment Adviser a monthly fee at the annual rate of
0.55% of the Fund&#146;s average weekly net assets (&#147;average weekly net assets&#148; means
the average weekly value of the total assets of the Fund, including the 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  </FONT></P>


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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 53; page: 53" -->



<!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>each month on the basis of the
average net assets of the Fund for each week during the month. The assets for each weekly
period are determined by averaging the net assets at the last business day of a week with
the net assets at the last business day of the prior week. The liquidation preference of
any outstanding preferred stock (other than accumulated dividends) is not considered a
liability in determining the Fund&#146;s average daily net assets. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Investment Advisory Agreement obligates the Investment Adviser to provide investment
advisory services and to pay all compensation of and furnish office space for officers
and employees of the Fund connected with investment and economic research, trading and
investment management of the Fund, as well as the compensation of all Directors of the
Fund who are affiliated persons of the Investment Adviser or any of its affiliates. The
Fund pays all other expenses incurred in the operation of the Fund, including, among
other things, expenses for legal and auditing services, taxes, costs of preparing,
printing and mailing proxies, listing fees, stock certificates and stockholder reports,
charges of the custodian and the transfer agent, dividend disbursing agent and registrar,
Securities and Exchange Commission fees, fees and expenses of non-interested Directors,
accounting and pricing costs, insurance, interest, brokerage costs, litigation and other
extraordinary or non-recurring expenses, mailing and other expenses properly payable by
the Fund. Certain accounting services are provided to the Fund by State Street Bank and
Trust Company (&#147;State Street&#148;) pursuant to an agreement between State Street
and the Fund. The Fund will pay the costs of these services. In addition, the Fund will
reimburse the Investment Adviser for certain additional accounting services. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
a discussion of the basis for the Board of Directors&#146; most recent approval of the
Fund&#146;s Investment Advisory Agreement, see the Fund&#146;s annual shareholder report
for the period ended April 30, 2005. </FONT></P>


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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
the extent derived from Municipal Bond interest income, dividends on the AMPS will be
excludable from gross income for Federal income tax purposes in the hands of holders of
such AMPS, subject to the possible application of the Federal alternative minimum tax and
any state or local income taxes. Interest income from other investments may produce
taxable dividends. The Fund is required to allocate net capital gain and other taxable
income, if any, proportionately among the common stock and the AMPS and Other AMPS in
accordance with the current position of the IRS described under the heading &#147;Taxes&#148; in
the statement of additional information. The Fund may notify the Auction Agent of the
amount of any net capital gain or other anticipated taxable income to be included in any
dividend on the AMPS prior to the Auction establishing the Applicable Dividend Rate for
such dividend. The Auction Agent will in turn notify holders of the AMPS and prospective
purchasers. The Fund also may include such income in a dividend on shares of AMPS without
giving advance notice thereof if it increases the dividend by an additional amount
calculated as if such income were a Retroactive Taxable Allocation and the additional
amount were an Additional Dividend. See &#147;The Auction &#151; Auction Procedures &#151; Auction
Date; Advance Notice of Allocation of Taxable Income; Inclusion of Taxable Income in
Dividends.&#148;The amount of taxable income allocable to the AMPS will depend upon the
amount of such income realized by the Fund and cannot be determined with certainty prior
to the end of the Fund&#146;s fiscal year, but it is not generally expected to be
significant. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
  the Fund makes a Retroactive Taxable Allocation, it will pay Additional Dividends
  to holders of AMPS who are subject to the Retroactive Taxable Allocation. See
  &#147;Description of AMPS &#151; Dividends &#151; Additional Dividends.&#148;
  The Federal income tax consequences of Additional Dividends under existing law
  are uncertain. The Fund intends to treat a holder as receiving a dividend distribution
  in the amount of any Additional Dividend only as and when such Additional Dividend
  is paid. An Additional Dividend generally will be designated by the Fund as
  an exempt-interest dividend except as otherwise required by applicable law.
  However, the IRS may assert that all or part of an Additional Dividend is a
  taxable dividend either in the taxable year for which the Retroactive Taxable
  Allocation is made or in the taxable year in which the Additional Dividend is
  paid. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Generally
within 60 days after the end of the Fund&#146;s taxable year, the Fund will tell you the
amount of exempt-interest dividends and capital gain dividends you received during that
year. Capital gain dividends are taxable as long-term capital gains to you regardless of
how long you have held your shares. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund will only purchase a Municipal Bond or Non-Municipal Tax Exempt Security if it is
accompanied by an opinion of counsel to the issuer, which is delivered on the date of
issuance of the security, that the interest paid on such security is excludable from
gross income for Federal income tax purposes (<I>i.e.</I>, &#147;tax exempt&#148;). To the </FONT> </P>


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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 54; page: 54" -->





<!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>extent that the dividends
distributed by the Fund are from interest income that is excludable from gross income for
Federal income tax purposes, they are exempt from Federal income tax. There is a
possibility that events occurring after the date of issuance of a security, or after the
Fund&#146;s acquisition of a security, may result in a determination that the interest on
that security is, in fact, includable in gross income for Federal income tax purposes
retroactively to its date of issue. Such a determination may cause a portion of prior
distributions received by stockholders, including holders of AMPS, to be taxable to those
stockholders in the year of receipt. The Fund will not pay an Additional Dividend to a
holder of AMPS under these circumstances. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because
the Fund may from time to time invest a substantial portion of its portfolio in Municipal
Bonds bearing income that could increase an AMPS holder&#146;s tax liability under the
Federal alternative minimum tax, the Fund would not ordinarily be a suitable investment
for investors who are subject to the alternative minimum tax. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
at any time when AMPS are outstanding the Fund does not meet the asset coverage
requirements of the 1940 Act, the Fund will be required to suspend distributions to
holders of common stock until the asset coverage is restored. See &#147;Description of
AMPS &#151; Dividends &#151; Restrictions on Dividends and Other Payments&#148; herein
and in the statement of additional information. This may prevent the Fund from meeting
certain distribution requirements for qualification as a RIC. Upon any failure to meet
the asset coverage requirements of the 1940 Act, the Fund, in its sole discretion, may,
and under certain circumstances will be required to, redeem AMPS in order to maintain or
restore the requisite asset coverage and avoid the adverse consequences to the Fund and
its stockholders of failing to qualify as a RIC. See &#147;Description of AMPS &#151; Redemption&#148; herein
and in the statement of additional information. There can be no assurance, however, that
any such action would achieve such objectives. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By
law, your dividends and redemption proceeds will be subject to a withholding tax if you
have not provided a tax identification number or social security number or if the number
you have provided is incorrect. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
section summarizes some of the consequences of an investment in the Fund under current
Federal income tax laws. It is not a substitute for personal tax advice. Stockholders are
urged to consult their tax advisers regarding the applicability of any state or local
taxes and with specific questions regarding Federal taxes. </FONT></P>


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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund is authorized to 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 4,400 shares of unissued common stock as
Other AMPS and reclassified 600 shares of unissued common stock as AMPS, which are being
offered hereby. See &#147;Description of AMPS&#148; herein and in the statement of
additional information. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table shows the amount of (i) capital stock authorized, (ii) capital stock held
by the Fund for its own account and (iii) capital stock outstanding for each class of
authorized securities of the Fund as of April 30, 2005. </FONT></P>






<TABLE WIDTH=600 BORDER=0 ALIGN=Center CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=Bottom>
     <TH align=left><FONT SIZE=1>Title of Class</FONT><HR align="left" WIDTH=55 SIZE=1 noshade COLOR=BLACK></TH>
     <TH><FONT SIZE=1>Amount Authorized</FONT><HR WIDTH=85% SIZE=1 COLOR=BLACK noshade></TH>
     <TH><FONT SIZE=1>Amount Held by Fund <BR>
for its own Account </FONT><HR WIDTH=85% SIZE=1 COLOR=BLACK noshade></TH>
     <TH><FONT SIZE=1>Amount Outstanding <BR>
(Exclusive of Amount <BR>
Held by Fund for <BR>
its own Account) </FONT><HR WIDTH=85% SIZE=1 COLOR=BLACK noshade></TH></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT SIZE=2>Common Stock</FONT></TD>
     <TD ALIGN=CENTER><FONT SIZE=2>199,995,600</FONT></TD>
     <TD ALIGN=CENTER><FONT SIZE=2>- 0 -</FONT></TD>
     <TD ALIGN=CENTER><FONT SIZE=2>13,811,738</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT SIZE=2>Auction Market Preferred Stock</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;&nbsp;Series A AMPS</FONT></TD>
     <TD ALIGN=CENTER><FONT SIZE=2>2,200</FONT></TD>
     <TD ALIGN=CENTER><FONT SIZE=2>- 0 -</FONT></TD>
     <TD ALIGN=CENTER><FONT SIZE=2>2,200</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;&nbsp;Series B AMPS</FONT></TD>
     <TD ALIGN=CENTER><FONT SIZE=2>2,200</FONT></TD>
     <TD ALIGN=CENTER><FONT SIZE=2>- 0 -</FONT></TD>
     <TD ALIGN=CENTER><FONT SIZE=2>2,200</FONT></TD></TR>
</TABLE>



<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund will send unaudited reports at least semi-annually and audited annual financial
statements to all of its stockholders. </FONT></P>


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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 55; page: 55" -->




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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders
of common stock are entitled to share equally in dividends declared by the Board of
Directors payable to holders of common stock and in the net assets of the Fund available
for distribution to holders of common stock after payment of the preferential amounts
payable to holders of any outstanding preferred stock. Neither holders of common stock
nor holders of preferred stock have pre-emptive or conversion rights and shares of common
stock are not redeemable. The outstanding shares of common stock are fully paid and
non-assessable. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders
  of common stock are entitled to one vote for each share held and will vote with
  the holders of any outstanding shares of AMPS or other preferred stock, including
  the Other AMPS, on each matter submitted to a vote of holders of common stock,
  except as described under &#147;Description of AMPS &#151; Voting Rights&#148;
  herein and in the statement of additional information. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stockholders
are entitled to one vote for each share held. The shares of common stock, AMPS, Other
AMPS and any other preferred stock do not have cumulative voting rights, which means that
the holders of more than 50% of the shares of common stock, AMPS, Other AMPS and any
other preferred stock voting for the election of Directors can elect all of the Directors
standing for election by holders, and, in such event, the holders of the remaining shares
of common stock, AMPS, Other AMPS and any other preferred stock will not be able to elect
any of such Directors. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;So
long as any shares of the Fund&#146;s preferred stock are outstanding, including the AMPS
and Other AMPS, holders of common stock will not be entitled to receive any net income of
or other distributions from the Fund unless all accumulated dividends on preferred stock
have been paid, and unless asset coverage (as defined in the 1940 Act) with respect to
preferred stock would be at least 200% after giving effect to such distributions. See
&#147;Description of AMPS &#151; Dividends &#151; Restrictions on Dividends and Other
Payments&#148; herein and in the statement of additional information. </FONT></P>


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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund has issued an aggregate of 4,400 shares of Other AMPS. Under the Articles
Supplementary for the AMPS, the Fund is authorized to issue an aggregate of 600
additional shares of AMPS. The terms of the shares of Other AMPS are substantially the
same as the terms of the shares of AMPS. See &#147;Description of AMPS.&#148; Under the
1940 Act, the Fund is permitted to have outstanding more than one series of preferred
stock as long as no single series has priority over another series as to the distribution
of assets of the Fund or the payment of dividends. Neither holders of common stock nor
holders of preferred stock have pre-emptive rights to purchase any shares of AMPS, Other
AMPS or any other preferred stock that might be issued. It is anticipated that the net
asset value per share of the AMPS will equal its original purchase price per share plus
accumulated dividends per share. </FONT></P>

<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Certain Provisions of
the Charter and By-laws </B></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Fund&#146;s Charter includes provisions that could have the effect of limiting
  the ability of other entities or persons to acquire control of the Fund or to
  change the composition of its Board of Directors and could have the effect of
  depriving common stockholders of an opportunity to sell their shares at a premium
  over prevailing market prices by discouraging a third party from seeking to
  obtain control of the Fund. A Director may be removed from office with or without
  cause by vote of the holders of at least 66<sup><font size="1">2</font></sup>/<font size="1">3</font>%
  of the shares entitled to vote in an election to fill that directorship. A director
  elected by all of the holders of capital stock may be removed only by action
  of such holders, and a director elected by the holders of AMPS and any other
  preferred stock may be removed only by action of the holders of AMPS and any
  other preferred stock. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, the Charter requires the favorable vote of the holders of at
least 66<font size=1><sup>2</sup></font>/<font size=1>3</font>% of
the Fund&#146;s shares to approve, adopt or authorize the following: </FONT></P>

<!-- MARKER FORMAT-SHEET="Bullet 10" FSL="Workstation" -->
<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=5%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=3%></TD>
    <TD WIDTH=90%><FONT SIZE=2>a
merger or consolidation or statutory share exchange of the Fund with any other
corporation;</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Bullet 10" FSL="Workstation" -->
<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=5%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=3%></TD>
    <TD WIDTH=90%><FONT SIZE=2>a
sale of all or substantially all of the Fund&#146;s assets (other than in the regular
course of the Fund&#146;s investment activities); or</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Bullet 10" FSL="Workstation" -->
<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=5%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=3%></TD>
    <TD WIDTH=90%><FONT SIZE=2>a
liquidation or dissolution of the Fund;</FONT></TD></TR></TABLE>


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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 57; page: 57" -->



<!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>unless such action has been
approved, adopted or authorized by the affirmative vote of at least two-thirds of the
total number of Directors fixed in accordance with the By-laws, in which case the
affirmative vote of a majority of the Fund&#146;s shares of capital stock is required.
The approval, adoption or authorization of the foregoing also requires the favorable vote
of a majority of the Fund&#146;s outstanding shares (as defined in the 1940 Act) of
preferred stock, including the AMPS and Other AMPS, then entitled to be voted, voting as
a separate class. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, conversion of the Fund to an open-end investment company would require an
amendment to the Fund&#146;s Charter. The amendment would have to be declared advisable
by the Board of Directors prior to its submission to stockholders. Such an amendment
would require the favorable vote of the holders of at least 66<font size=1><sup>2</sup></font>/<font size=1>3</font>% of the Fund&#146;s
outstanding shares of capital stock (including the AMPS, the Other AMPS and any other
preferred stock) entitled to be voted on the matter, voting as a single class (or a
majority of such shares if the amendment was previously approved, adopted or authorized
by at least two-thirds of the total number of Directors fixed in accordance with the
By-laws), and the affirmative vote of a majority of outstanding shares (as defined in the
1940 Act) of preferred stock of the Fund (including the AMPS and the Other AMPS), voting
as a separate class. Such a vote also would satisfy a separate requirement in the 1940
Act that the change be approved by the stockholders. Stockholders of an open-end
investment company may require the company to redeem their shares of common stock at any
time (except in certain circumstances as authorized by or under the 1940 Act) at their
net asset value, less such redemption charge, if any, as might be in effect at the time
of a redemption. If the Fund is converted to an open-end investment company, it could be
required to liquidate portfolio securities to meet requests for redemption, and the
common stock would no longer be listed on a stock exchange. Conversion to an open-end
investment company would also require redemption of all outstanding shares of preferred
stock (including the AMPS and Other AMPS) and would require changes in certain of the Fund&#146;s
investment policies and restrictions, such as those relating to the issuance of senior
securities, the borrowing of money and the purchase of illiquid securities. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Charter and By-laws provide that the Board of Directors has the power, to 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<font size=1><sup>2</sup></font>/<font size=1>3</font>% of shares of capital stock of the
Fund can be amended or repealed except by the vote of such required number of shares. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board of Directors has determined that the 66<font size=1><sup>2</sup></font>/<font size=1>3</font>% voting requirements described above,
which are greater than the minimum requirements under Maryland law or the 1940 Act, are
in the best interests of stockholders generally. Reference should be made to the Charter
on file with the Securities and Exchange Commission for the full text of these provisions. </FONT></P>


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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund&#146;s securities and cash are held under a custodian agreement with The Bank of New
York, 1010 Church Street, New York, New York 10286. </FONT></P>



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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 58; page: 58" -->




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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Merrill
Lynch, Pierce, Fenner &amp; Smith Incorporated (the &#147;Underwriter&#148;) has agreed,
subject to the terms and conditions contained in a purchase agreement with the Fund and
the Investment Adviser, to purchase from the Fund all of the shares of AMPS offered
hereby. The Underwriter has agreed to purchase all such shares if any are purchased. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund and the Investment Adviser have agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as amended, or to
contribute to payments the Underwriter may be required to make in respect of those
liabilities. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Underwriter is offering the shares, subject to prior sale, when, as and if issued to and
accepted by them, subject to approval of legal matters by its counsel, including the
validity of the shares, and other conditions contained in the purchase agreement, such as
the receipt by the Underwriter of officer&#146;s certificates and legal opinions. The
Underwriter reserves the right to withdraw, cancel or modify offers to the public and to
reject orders in whole or in part. </FONT></P>


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


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Underwriter has advised the Fund that it proposes initially to offer the shares of AMPS
to the public at the initial public offering price on the cover page of this prospectus
and to dealers at that price less a concession not in excess of $137.50 per share. There
is a sales charge or underwriting discount of $250 per share, which is equal to 1% of the
initial public offering price per share. After the initial public offering, the public
offering price and concession may be changed. Investors must pay for any AMPS purchased
in the offering on or before October 19, 2005. </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
expenses of the offering, excluding underwriting discount, are estimated at $135,000 and
are payable by the Fund. </FONT></P>


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

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

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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
address of the Underwriter is 4 World Financial Center, New York, New York 10080. </FONT></P>


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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
transfer agent, dividend disbursing agent and registrar for the Fund&#146;s shares of
AMPS, Other AMPS and common stock is The Bank of New York, 101 Barclay Street, New York,
New York 10286. </FONT></P>


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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;State
Street Bank and Trust Company, 500 College Road East, Princeton, New Jersey 08540,
provides certain accounting services for the Fund. </FONT></P>


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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain
legal matters in connection with the AMPS offered hereby are passed on for the Fund and
the Underwriter by Sidley Austin Brown &amp; Wood <font size=1>LLP</font>, New York, New York 10019. </FONT></P>




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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 59; page: 59" -->




<!-- MARKER FORMAT-SHEET="Center Head 2-Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM AND EXPERTS </B></FONT></P>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ernst
&amp; Young <font size=1>LLP</font> is the Fund&#146;s independent registered public accounting firm. The
audited financial statements of the Fund and certain of the information appearing under
the caption &#147;Financial Highlights&#148;included in this prospectus have been audited
by Ernst &amp; Young <font size=1>LLP</font>, for the periods indicated in its report with respect thereto,
and are included in reliance upon such report and upon the authority of such firm as
experts in accounting and auditing. Ernst &amp; Young <font size=1>LLP</font> has an office at Two Commerce
Square, 2001 Market Street, Philadelphia, Pennsylvania 19103-7096. </FONT></P>



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


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


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additional
information regarding the Fund is contained in the Registration Statement on Form N-2,
including amendments, exhibits and schedules thereto, relating to such shares filed by
the Fund with the Commission in Washington, D.C. This prospectus does not contain all of
the information set forth in the Registration Statement, including any amendments,
exhibits and schedules thereto. For further information with respect to the Fund and the
shares offered hereby, reference is made to the Registration Statement. Statements
contained in this prospectus as to the contents of any contract or other document
referred to are not necessarily complete and in each instance reference is made to the
copy of such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such reference. A copy
of the Registration Statement may be inspected without charge at the Commission&#146;s
principal office in Washington, D.C., and copies of all or any part thereof may be
obtained from the Commission upon the payment of certain fees prescribed by the
Commission. </FONT></P>


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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 60; page: 60" -->



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


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>

    <TH>&nbsp;</TH>
     <TH><FONT SIZE=1>Page</FONT><HR WIDTH=85% SIZE=1 COLOR=BLACK noshade></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=94% ALIGN=LEFT><FONT SIZE=2>Investment Objective and Policies</FONT></TD>
     <TD WIDTH=6% ALIGN=RIGHT><FONT SIZE=2>3&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT SIZE=2>Investment Restrictions</FONT></TD>
     <TD ALIGN=RIGHT><FONT SIZE=2>3&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT SIZE=2>Description of AMPS</FONT></TD>
     <TD ALIGN=RIGHT><FONT SIZE=2>4&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT SIZE=2>The Auction</FONT></TD>
     <TD ALIGN=RIGHT><FONT SIZE=2>12&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT SIZE=2>Rating Agency Guidelines</FONT></TD>
     <TD ALIGN=RIGHT><FONT SIZE=2>13&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT SIZE=2>Directors and Officers</FONT></TD>
     <TD ALIGN=RIGHT><FONT SIZE=2>20&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT SIZE=2>Investment Advisory and Management Arrangements</FONT></TD>
     <TD ALIGN=RIGHT><FONT SIZE=2>24&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT SIZE=2>Portfolio Transactions</FONT></TD>
     <TD ALIGN=RIGHT><FONT SIZE=2>30&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT SIZE=2>Taxes</FONT></TD>
     <TD ALIGN=RIGHT><FONT SIZE=2>32&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT SIZE=2>Conflicts of Interest</FONT></TD>
     <TD ALIGN=RIGHT><FONT SIZE=2>37&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT SIZE=2>Net Asset Value</FONT></TD>
     <TD ALIGN=RIGHT><FONT SIZE=2>39&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT SIZE=2>Financial Statements</FONT></TD>
     <TD ALIGN=RIGHT><FONT SIZE=2>39&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT SIZE=2>APPENDIX A Description of Municipal Bond Ratings</FONT></TD>
     <TD ALIGN=RIGHT><FONT SIZE=2>A-1</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT SIZE=2>APPENDIX B Settlement Procedures</FONT></TD>
     <TD ALIGN=RIGHT><FONT SIZE=2>B-1</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT SIZE=2>APPENDIX C Auction Procedures</FONT></TD>
     <TD ALIGN=RIGHT><FONT SIZE=2>C-1</FONT></TD></TR>
</TABLE>


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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 61; page: 61" -->




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


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


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Agent
Member&#148; </I>means the member of the Securities Depository that will act on behalf of a
Beneficial Owner of one or more shares of AMPS or on behalf of a Potential Beneficial
Owner. </FONT> </P>

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


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

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

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


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Anticipation
Notes&#148; </I>shall mean the following Municipal Bonds: revenue anticipation notes, tax
anticipation notes, tax and revenue anticipation notes, grant anticipation notes and bond
anticipation notes. </FONT> </P>


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


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Applicable
Rate&#148; </I>means the rate per annum at which cash dividends are payable on shares of AMPS
for any Dividend Period. </FONT> </P>


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


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Articles
Supplementary&#148; </I>means the Articles Supplementary of the Fund specifying the powers,
preferences and rights of the shares of the AMPS. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Auction&#148; </I>means
a periodic operation of the Auction Procedures. </FONT> </P>

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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Auction
Agent Agreement&#148; </I>means the agreement entered into between the Fund and the Auction
Agent which provides, among other things, that the Auction Agent will follow the Auction
Procedures for the purpose of determining the Applicable Rate. </FONT> </P>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Auction
Date&#148; </I>has the meaning set forth on page 34 of this prospectus. </FONT> </P>


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


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


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


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

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


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Board
of Directors&#148; </I>or <I>&#147;Board&#148; </I>means the Board of Directors of the Fund. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Broker-Dealer&#148; </I>means
any broker-dealer, or other entity permitted by law to perform the functions required of
a Broker-Dealer in the Auction Procedures, that has been selected by the Fund and has
entered into a Broker-Dealer Agreement with the Auction Agent that remains effective. </FONT> </P>


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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 62; page: 62" -->



<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Broker-Dealer
Agreement&#148; </I>means an agreement entered into between the Auction Agent and a
Broker-Dealer, including Merrill Lynch, Pierce, Fenner &amp; Smith Incorporated, pursuant
to which such Broker-Dealer agrees to follow the Auction Procedures. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Business
Day&#148; </I>means a day on which the New York Stock Exchange is open for trading and which
is not a Saturday, Sunday or other day on which banks in The City of New York are
authorized or obligated by law to close. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Cede&#148; </I>means
Cede &amp; Co., the nominee of DTC, and in whose name the shares of AMPS initially will
be registered. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Charter&#148; </I>means
the Articles of Incorporation, as amended and supplemented (including the Articles
Supplementary and the Other AMPS Articles Supplementary), of the Fund. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Code&#148; </I>means
the Internal Revenue Code of 1986, as amended. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Common
stock&#148; </I>means the common stock, par value $.10 per share, of the Fund. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Date
of Original Issue&#148; </I>means, with respect to each share of AMPS, the date on which such
share first is issued by the Fund. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Deposit
Securities&#148; </I>means cash and Municipal Bonds rated at least A2 (having a remaining
maturity of 12 months or less), P-1, VMIG-1 or MIG-1 by Moody&#146;s or A (having a
remaining maturity of 12 months or less), A-1+ or SP-1+ by S&amp;P or A (having a
remaining maturity of 12 months or less) or F-1+ by Fitch. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Discount
Factor&#148; </I>means a Moody&#146;s Discount Factor or an S&amp;P Discount Factor, as the
case may be. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Discounted
Value&#148; </I>means (i) with respect to an S&amp;P Eligible Asset, the quotient of the fair
market value thereof divided by the applicable S&amp;P Discount Factor and (ii) with
respect to a Moody&#146;s Eligible Asset, the lower of par and the quotient of the fair
market value thereof divided by the applicable Moody&#146;s Discount Factor. </FONT> </P>


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

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


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;DTC&#148; </I>means
The Depository Trust Company. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Eligible
Assets&#148; </I>means Moody&#146;s Eligible Assets or S&amp;P Eligible Assets, as the case
may be. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Existing
Holder&#148; </I>means a Broker-Dealer or any such other person as may be permitted by the
Fund that is listed as the holder of record of shares of AMPS in the records of the
Auction Agent. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Fitch&#148; </I>means
Fitch Ratings or its successors. </FONT> </P>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Forward
Commitment&#148; </I>has the meaning set forth on page 19 of the statement of additional
information. </FONT> </P>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Fund&#148; </I>means
MuniHoldings Fund, Inc., a Maryland corporation that is the issuer of the AMPS. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;High
Yield Municipal Bonds&#148; </I>means (a) with respect to Moody&#146;s (1) Municipal Bonds
rated Ba1 to B3 by Moody&#146;s, (2) Municipal Bonds not rated by Moody&#146;s, but rated
BB+ to B- by S&amp;P or Fitch, and (3) Municipal Bonds not explicitly rated by Moody&#146;s,
S&amp;P or Fitch, but rated at least the equivalent of B3 internally by the Investment
Adviser, provided that Moody&#146;s reviews and achieves sufficient comfort with the
Investment Adviser&#146;s internal credit rating processes, and (b) with respect to S&amp;P
(1) Municipal Bonds not rated by S&amp;P but rated equivalent to BBB+ or lower by another
NRSRO and (2) Municipal Bonds rated BB+ or lower by S&amp;P. </FONT> </P>


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


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Initial
Dividend Payment Date&#148; </I>means the first Dividend Payment Date for the Series C AMPS. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Initial
Dividend Period&#148; </I>means the period from and including the Date of Original Issue to
but excluding the Initial Dividend Payment Date for the Series C AMPS. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Initial
Margin&#148; </I>means the amount of cash or securities deposited with a broker as a margin
payment at the time of purchase or sale of a financial futures contract. </FONT> </P>


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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 63; page: 63" -->



<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Inverse
Floaters&#148; </I>means trust certificates or other instruments evidencing interests in one
or more Municipal Bonds that qualify as (i) S&amp;P Eligible Assets the interest rates on
which are adjusted at short term intervals on a basis that is inverse to the simultaneous
readjustment of the interest rates on corresponding floating rate trust certificates or
other instruments issued by the same issuer, provided that the ratio of the aggregate
dollar amount of floating rate instruments to inverse floating rate instruments issued by
the same issuer does not exceed one to one at their time of original issuance unless the
floating rate instrument has only one reset remaining until maturity or (ii) Moody&#146;s
Eligible Assets the interest rates on which are adjusted at short term intervals on a
basis that is inverse to the simultaneous readjustment of the interest rates on
corresponding floating rate trust certificates or other instruments issued by the same
issuer, provided that (a) such Inverse Floaters are rated by Moody&#146;s with the
Investment Adviser having the capability to collapse (or relink) within seven days as a
liquidity enhancement measure, and (b) the issuer of such Inverse Floaters employs a
leverage factor (<I>i.e.</I>, the ratio of underlying capital appreciation bonds or other
instruments to residual long-term derivative instruments) of not more than 2:1. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Investment
Adviser&#148; </I>means Fund Asset Management, L.P. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;IRS&#148; </I>means
the United States Internal Revenue Service. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;LIBOR
Dealer&#148; </I>means Merrill Lynch, Pierce, Fenner &amp; Smith Incorporated and such other
dealer or dealers as the Fund from time to time may appoint or, in lieu thereof, their
respective affiliates and successors. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;LIBOR
Rate,&#148; </I>on any Auction Date, means (i) the rate for deposits in U.S. dollars for the
designated Dividend Period, which appears on display page 3750 of Moneyline&#146;s
Telerate Service (&#147;Telerate Page 3750&#148;) (or such other page as may replace that
page on that service, or such other service as may be selected by the LIBOR Dealer or its
successors that are LIBOR Dealers) as of 11:00 a.m., London time, on the day that is the
London Business Day preceding the Auction Date (the &#147;LIBOR Determination Date&#148;),
or (ii) if such rate does not appear on Telerate Page 3750 or such other page as may
replace such Telerate Page 3750, (A) the LIBOR Dealer shall determine the arithmetic mean
of the offered quotations of the Reference Banks to leading banks in the London interbank
market for deposits in U.S. dollars for the designated Dividend Period in an amount
determined by such LIBOR Dealer by reference to requests for quotations as of
approximately 11:00 a.m. (London time) on such date made by such LIBOR Dealer to the
Reference Banks, (B) if at least two of the Reference Banks provide such quotations,
LIBOR Rate shall equal such arithmetic mean of such quotations, (C) if only one or none
of the Reference Banks provide such quotations, LIBOR Rate shall be deemed to be the
arithmetic mean of the offered quotations that leading banks in The City of New York
selected by the LIBOR Dealer (after obtaining the Fund&#146;s approval) are quoting on
the relevant LIBOR Determination Date for deposits in U.S. dollars for the designated
Dividend Period in an amount determined by the LIBOR Dealer (after obtaining the Fund&#146;s
approval) that is representative of a single transaction in such market at such time by
reference to the principal London offices of leading banks in the London interbank
market; provided, however, that if one of the LIBOR Dealers does not quote a rate
required to determine the LIBOR Rate, the LIBOR Rate will be determined on the basis of
the quotation or quotations furnished by any Substitute LIBOR Dealer or Substitute LIBOR
Dealers selected by the Fund to provide such rate or rates not being supplied by the
LIBOR Dealer; provided further, that if the LIBOR Dealer and Substitute LIBOR Dealers are
required but unable to determine a rate in accordance with at least one of the procedures
provided above, the LIBOR Rate shall be the LIBOR Rate as determined on the previous
Auction Date. If the number of Dividend Period days shall be (i) 7 or more but fewer than
21 days, such rate shall be the seven-day LIBOR rate; (ii) 21 or more but fewer than 49
days, such rate shall be the one-month LIBOR rate; (iii) 49 or more but fewer than 77
days, such rate shall be the two-month LIBOR rate; (iv) 77 or more but fewer than 112
days, such rate shall be the three-month LIBOR rate; (v) 112 or more but fewer than 140
days, such rate shall be the four-month LIBOR rate; (vi) 140 or more but fewer than 168
days, such rate shall be the five-month LIBOR rate; (vii) 168 or more but fewer than 189
days, such rate shall be the six-month LIBOR rate; (viii) 189 or more but fewer than 217
days, such rate shall be the seven-month LIBOR rate; (ix) 217 or more but fewer than 252
days, such rate shall be the eight-month LIBOR rate; (x) 252 or more but fewer than 287
days, such rate shall be the nine-month LIBOR rate; (xi) 287 or more but fewer than 315
days, such rate shall be the ten-month LIBOR rate; (xii) 315 or more but fewer than 343
days, such rate shall be the eleven-month LIBOR rate; and (xiii) 343 or more but fewer
than 365 days, such rate shall be the twelve-month LIBOR rate. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;London
Business Day&#148; </I>means any day on which commercial banks are generally open for
business in London. </FONT> </P>

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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 64; page: 64" -->




<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Long
Term Dividend Period&#148; </I>means a Special Dividend Period consisting of a specified
period of one whole year or more but not greater than five years. </FONT> </P>


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


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Marginal
Tax Rate&#148; </I>means the maximum marginal regular Federal individual income tax rate
applicable to ordinary income or the maximum marginal regular Federal corporate income
tax rate, whichever is greater. </FONT> </P>


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


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Moody&#146;s&#148; </I>means
Moody&#146;s Investors Service, Inc. or its successors. </FONT> </P>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Moody&#146;s
Discount Factor&#148; </I>has the meaning set forth on pages 15 to 16 of the statement of
additional information. </FONT> </P>

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

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


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Moody&#146;s
Volatility Factor&#148; </I>means 272% as long as there has been no increase enacted to the
Marginal Tax Rate. If such an increase is enacted but not yet implemented, the Moody&#146;s
Volatility Factor shall be as follows: </FONT> </P>



<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=400>
  <TR VALIGN=Bottom>

    <TH align="left"><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% Change in <BR>
      Marginal Tax Rate </FONT>
      <hr width=85 size=1 color=BLACK noshade align="left">
    </TH>
     <TH><FONT SIZE=1>Moody&#146;s Volatility <BR>
Factor </FONT><HR WIDTH=85% SIZE=1 COLOR=BLACK noshade></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=88% ALIGN=LEFT><FONT SIZE=2>less than or equal to 5%</FONT></TD>
     <TD WIDTH=12% ALIGN=center><FONT SIZE=2>292%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT SIZE=2>>5% but &lt; 10% </FONT></TD>
     <TD ALIGN=center><FONT SIZE=2>313%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT SIZE=2>>10% but &lt; 15% </FONT></TD>
     <TD ALIGN=center><FONT SIZE=2>338%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT SIZE=2>>15% but &lt; 20% </FONT></TD>
     <TD ALIGN=center><FONT SIZE=2>364%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT SIZE=2>>20% but &lt; 25% </FONT></TD>
     <TD ALIGN=center><FONT SIZE=2>396%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT SIZE=2>>25% but &lt; 30% </FONT></TD>
     <TD ALIGN=center><FONT SIZE=2>432%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT SIZE=2>>30% but &lt; 35% </FONT></TD>
     <TD ALIGN=center><FONT SIZE=2>472%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT SIZE=2>>35% but &lt; 40% </FONT></TD>
     <TD ALIGN=center><FONT SIZE=2>520%</FONT></TD></TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding
the foregoing, the Moody&#146;s Volatility Factor may mean such other potential dividend
rate increase factor as Moody&#146;s advises the Fund in writing is applicable. </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Municipal
Bonds&#148; </I>has the meaning set forth on page 16 of this prospectus. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Municipal
Index&#148; </I>has the meaning set forth on page 14 of the statement of additional
information. </FONT> </P>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;1940
Act&#148; </I>means the Investment Company Act of 1940, as amended from time to time. </FONT> </P>


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

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


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Non-Call
Period&#148; </I>has the meaning set forth under &#147;Specific Redemption Provisions&#148; below. </FONT> </P>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Non-Payment
Period&#148; </I>has the meaning set forth on pages 6 to 7 of the statement of additional
information. </FONT> </P>

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

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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Notice
of Revocation&#148; </I>has the meaning set forth on page 6 of the statement of additional
information. </FONT> </P>

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


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;NRSRO&#148; </I>means
any nationally recognized statistical rating organization, as that term is used in Rule
15a3-1 under the Securities and Exchange Act of 1934, as amended, or any successor
provisions. </FONT> </P>


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

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



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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 65; page: 65" -->



<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Other
AMPS&#148; </I>means the Auction Market Preferred Stock, Series A and the Auction Market
Preferred Stock, Series B, each with a liquidation preference of $25,000 per share plus
an amount equal to accumulated but unpaid dividends thereon (whether or not earned or
declared) of the Fund. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Other
AMPS Articles Supplementary&#148; </I>means the Articles Supplementary, as amended and
supplemented, of the Fund specifying the powers, preferences and rights of the shares of
the Other AMPS. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Potential
Beneficial Owner&#148; </I>means a customer of a Broker-Dealer or a Broker-Dealer that is not
a Beneficial Owner of shares of AMPS but that wishes to purchase such shares, or that is
a Beneficial Owner that wishes to purchase additional shares of AMPS. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Potential
Holder&#148; </I>means any Broker-Dealer or any such other person as may be permitted by the
Fund, including any Existing Holder, who may be interested in acquiring shares of AMPS
(or, in the case of an Existing Holder, additional shares of AMPS). </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Preferred
stock&#148; </I>means preferred stock of the Fund and includes the AMPS. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Premium
Call Period&#148; </I>has the meaning set forth under &#147;Specific Redemption Provisions&#148; below. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Receivables
for Municipal Bonds Sold&#148; </I>for Moody&#146;s has the meaning set forth under the
definition of Moody&#146;s Discount Factor, and for S&amp;P has the meaning set forth
under the definition of S&amp;P Discount Factor. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Reference
Banks&#148; </I>means four major banks in the London interbank market selected by Merrill
Lynch, Pierce, Fenner &amp; Smith Incorporated or its affiliates or successors or such
other party as the Fund may from time to time appoint. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Reference
Rate&#148; </I>means: (i) with respect to a Dividend Period having 364 or fewer days, the
higher of the applicable LIBOR Rate and the Taxable Equivalent of the Short Term
Municipal Bond Rate, or (ii) with respect to any Dividend Period having 365 or more days,
the applicable Treasury Index Rate. </FONT> </P>


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

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

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


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Rule
2a-7 Money Market Funds&#148; </I>means investment companies registered under the 1940 Act
that comply with the requirements of Rule 2a-7 thereunder. </FONT> </P>

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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;S&amp;P&#148; </I>means
Standard &amp; Poor&#146;s or its successors. </FONT> </P>


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

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

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


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;S&amp;P
Volatility Factor&#148; </I>means 277% or such other potential dividend rate increase factor
as S&amp;P advises the Fund in writing is applicable. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Securities
Depository&#148; </I>means The Depository Trust Company and its successors and assigns or any
successor securities depository selected by the Fund that agrees to follow the procedures
required to be followed by such securities depository in connection with shares of AMPS. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Sell
Order&#148; </I>has the meaning specified in Subsection 10(b)(i) of the Auction Procedures. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;7-Day
Dividend Period&#148; </I>means a Dividend Period consisting of seven days. </FONT> </P>


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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 66; page: 66" -->



<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Short
Term Dividend Period&#148; </I>means a Special Dividend Period consisting of a specified
number of days (other than seven) evenly divisible by seven, and not fewer than seven
days nor more than 364 days. </FONT> </P>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Special
Dividend Period&#148; </I>has the meaning set forth on page 28 of this prospectus. </FONT> </P>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Specific
Redemption Provisions&#148; </I>means, with respect to a Special Dividend Period, either, or
any combination of, (i) a period (a &#147;Non-Call Period&#148;) determined by the Board
of Directors of the Fund, after consultation with the Auction Agent and the
Broker-Dealers, during which the shares of AMPS subject to such Dividend Period shall not
be subject to redemption at the option of the Fund and (ii) a period (a &#147;Premium
Call Period&#148;), consisting of a number of whole years and determined by the Board of
Directors of the Fund, after consultation with the Auction Agent and the Broker-Dealers,
during each year of which the shares of AMPS subject to such Dividend Period shall be
redeemable at the Fund&#146;s option at a price per share equal to $25,000 plus
accumulated but unpaid dividends plus a premium expressed as a percentage of $25,000, as
determined by the Board of Directors of the Fund after consultation with the Auction
Agent and the Broker-Dealers. </FONT> </P>


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

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

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

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

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


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Subsequent
Dividend Period&#148; </I>means each Dividend Period after the Initial Dividend Period. </FONT> </P>

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


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


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Taxable
Equivalent of the Short Term Municipal Bond Rate&#148; </I>on any date means 90 of the
quotient of (A) the per annum rate expressed on an interest equivalent basis equal to the
Kenny S&amp;P 30-day High Grade Index (the &#147;Kenny Index&#148;) or any successor
index, made available for the Business Day immediately preceding such date but in any
event not later than 8:30 a.m., Eastern time, on such date by Kenny Information Systems
Inc. or any successor thereto, based upon 30-day yield evaluations at par of bonds the
interest on which is excludable for regular Federal income tax purposes under the Code of
&#147;high grade&#148; component issuers selected by Kenny Information Systems Inc. or
any such successor from time to time in its discretion, which component issuers shall
include, without limitation, issuers of general obligation bonds but shall exclude any
bonds the interest on which constitutes an item of tax preference under Section 57(a)(5)
of the Code, or successor provisions, for purposes of the &#147;alternative minimum tax,&#148;divided
by (B) 1.00 minus the Marginal Tax Rate (expressed as a decimal); provided, however, that
if the Kenny Index is not made so available by 8:30 a.m., Eastern time, on such date by
Kenny Information Systems Inc. or any successor, the Taxable Equivalent of the Short Term
Municipal Bond Rate shall mean the quotient of (A) the per annum rate expressed on an
interest equivalent basis equal to the most recent Kenny Index so made available for any
preceding Business Day, divided by (B) 1.00 minus the Marginal Tax Rate (expressed as a
decimal). The Fund may not utilize a successor index to the Kenny Index unless Moody&#146;s
and S&amp;P provide the Fund with written confirmation that the use of such successor
index will not adversely affect the then-current respective Moody&#146;s and S&amp;P
ratings of the AMPS. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Treasury
Bonds&#148; </I>means U.S. Treasury Bonds or Notes. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Treasury
Index Rate&#148; </I>means the average yield to maturity for actively traded marketable fixed
interest rate U.S. Treasury Securities having the same number of 30-day periods to
maturity as the length of the applicable Dividend Period, determined, to the extent
necessary, by linear interpolation based upon the yield for such securities having the
next shorter and next longer number of 30-day periods to maturity treating all Dividend
Periods with a length greater than the longest maturity for such securities as having a
length equal to such longest maturity, in all cases based upon data set forth in the most
recent weekly statistical release published by the Board of Governors of the Federal
Reserve System (currently in H.15(519)); provided, however, if the most recent such </FONT> </P>


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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 67; page: 67" -->




<!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>statistical release shall not have
been published during the 15 days preceding the date of computation, the foregoing
computations shall be based upon the average of comparable data as quoted to the Fund by
at least three recognized dealers in U.S. Government Securities selected by the Fund. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;U.S.
Treasury Securities&#148; </I>means direct obligations of the United States Treasury that are
entitled to the full faith and credit of the United States government. </FONT> </P>


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


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Variation
Margin&#148; </I>means, in connection with an outstanding futures contract owned or sold by
the Fund, the amount of cash or securities paid to or received from a broker (subsequent
to the Initial Margin payment) from time to time as the price of such futures contract
fluctuates. </FONT> </P>


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



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






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 68; page: 68" -->



<!-- MARKER FORMAT-SHEET="Scotch Rule TOP" FSL="Workstation" -->
<HR ALIGN=LEFT WIDTH=100% SIZE=4 noshade>
<HR ALIGN=LEFT WIDTH=100% SIZE=1 noshade>


<!-- MARKER FORMAT-SHEET="Center Head 3 Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4><B>$15,000,000 </B></FONT></P>

<!-- MARKER FORMAT-SHEET="Center Head 3 Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=5><B>MuniHoldings Fund,
Inc. </B></FONT></P>

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





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


<!-- MARKER FORMAT-SHEET="Center Head 3 Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4><B>Merrill Lynch &amp; Co. </B></FONT></P>

<!-- MARKER FORMAT-SHEET="Center no bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>October 17, 2005 </b></FONT></P>

<!-- MARKER FORMAT-SHEET="Scotch Rule BOTTOM" FSL="Workstation" -->
<HR ALIGN=LEFT WIDTH=100% SIZE=1 noshade>
<HR ALIGN=LEFT WIDTH=100% SIZE=4 noshade>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 69; page: 69" -->


<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<p align=left><font face="Times New Roman, Times, Serif" size=2><b><u>STATEMENT
  OF ADDITIONAL INFORMATION </u></b></font></p>
<p align=center><font face="Times New Roman, Times, Serif" size=3><b><font size="5">$15,000,000</font><font size="4">
  </font> </b></font></p>
<p align=center><font face="Times New Roman, Times, Serif" size=6><b>MuniHoldings
  Fund, Inc. </b></font></p>


<p align=center><font face="Times New Roman, Times, Serif" size=3><b>Auction Market
  Preferred Stock (&#147;AMPS&#148;) <br>
  600 Shares, Series C <br>
  Liquidation Preference $25,000 per Share </b></font></p>


<!-- MARKER FORMAT-SHEET="Cutoff rule centered" FSL="Workstation" -->
<hr align=center width=150 noshade size=1>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MuniHoldings
  Fund, Inc. (the &#147;Fund&#148;) is a non-diversified, closed-end fund. The
  investment objective of the Fund is to provide shareholders with current income
  exempt from Federal income taxes. The Fund seeks to achieve its investment objective
  by investing, as a fundamental policy, at least 80% of an aggregate of the Fund&#146;s
  net assets (including proceeds from the issuance of 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 expects to
  invest at least 75% of its total assets in municipal obligations that are rated
  investment grade or, if u are considered by the Fund&#146;s investment adviser
  to be of comparable quality. The Fund may invest up to 25% of its total assets
  in high yield municipal obligations that are rated below investment grade (commonly
  known as &#147;junk bonds&#148;) or, if unrated, are considered by the Fund&#146;s
  investment adviser to possess similar credit characteristics. The Fund invests
  primarily in long term municipal obligations. The Fund may invest in certain
  tax exempt securities classified as &#147;private activity bonds,&#148; as discussed
  within, that may subject certain investors in the Fund to an alternative minimum
  tax. There can be no assurance that the Fund&#146;s investment objective will
  be realized. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain
  capitalized terms not otherwise defined in this statement of additional information
  have the meaning provided in the Glossary included as part of the prospectus.
  </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
  statement of additional information is not a prospectus, but should be read
  in conjunction with the prospectus of the Fund, which has been filed with the
  Securities and Exchange Commission (the &#147;Commission&#148;) and can be obtained,
  without charge, by calling (800) 543-6217. The prospectus is incorporated by
  reference into this statement of additional information, and this statement
  of additional information is incorporated by reference into the prospectus.
  </font></p>
<!-- MARKER FORMAT-SHEET="Cutoff rule centered" FSL="Workstation" -->
<hr align=center width=150 noshade size=1>
<!-- MARKER FORMAT-SHEET="Center Head 3 Bold" FSL="Workstation" -->
<p align=center><font face="Times New Roman, Times, Serif" size=3><b><font size="5">Merrill
  Lynch &amp; Co. </font></b></font></p>
<!-- MARKER FORMAT-SHEET="Cutoff rule centered" FSL="Workstation" -->
<hr align=center width=150 noshade size=1>
<!-- MARKER FORMAT-SHEET="Center Head 2-Bold" FSL="Workstation" -->
<p align=center><font face="Times New Roman, Times, Serif" size=2>The date of
  this statement of additional information is October 17, 2005. </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --><br>
&nbsp;
<table width="100%">
  <tr>
    <td align=left width="20%"><font size=1>&nbsp;</font></td>
    <td align=center width="60%">&nbsp;</td>
    <td align=right width="20%"><font size=1>&nbsp;</font></td>
  </tr>
</table>
<hr align=left width="100%" noshade size=5>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 6; page: 6" -->
<p align=center><font face="Times New Roman, Times, Serif" size=2><b>TABLE OF
  CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION </b></font></p>
<table cellspacing=0 cellpadding=0 width=600 align=center border=0>
  <tr valign=bottom>
    <td width=553>
      <p>&nbsp;</p>
    </td>
    <td width=14>
      <p>&nbsp;</p>
    </td>
    <td align=right width=33>
      <p align=center><font size=1><b>Page</b></font>
      <hr align=center width="100%" noshade size=1>
    </td>
  </tr>
  <tr valign=bottom>
    <td width=553>
      <p><font size=2>Investment Objective and Policies</font></p>
    </td>
    <td width=14>
      <p>&nbsp;</p>
    </td>
    <td align=right width=33>
      <p><font size=2>3</font></p>
    </td>
  </tr>
  <tr valign=bottom>
    <td width=553>
      <p><font size=2>Investment Restrictions</font></p>
    </td>
    <td width=14>
      <p>&nbsp;</p>
    </td>
    <td align=right width=33>
      <p><font size=2>3</font></p>
    </td>
  </tr>
  <tr valign=bottom>
    <td width=553>
      <p><font size=2>Description of AMPS</font></p>
    </td>
    <td width=14>
      <p>&nbsp;</p>
    </td>
    <td align=right width=33>
      <p><font size=2>4</font></p>
    </td>
  </tr>
  <tr valign=bottom>
    <td width=553>
      <p><font size=2>The Auction</font></p>
    </td>
    <td width=14>
      <p>&nbsp;</p>
    </td>
    <td align=right width=33>
      <p><font size=2>12</font></p>
    </td>
  </tr>
  <tr valign=bottom>
    <td width=553>
      <p><font size=2>Rating Agency Guidelines</font></p>
    </td>
    <td width=14>
      <p>&nbsp;</p>
    </td>
    <td align=right width=33>
      <p><font size=2>13</font></p>
    </td>
  </tr>
  <tr valign=bottom>
    <td width=553>
      <p><font size=2>Directors and Officers</font></p>
    </td>
    <td width=14>
      <p>&nbsp;</p>
    </td>
    <td align=right width=33>
      <p><font size=2>20</font></p>
    </td>
  </tr>
  <tr valign=bottom>
    <td width=553>
      <p><font size=2>Investment Advisory and Management Arrangements</font></p>
    </td>
    <td width=14>
      <p>&nbsp;</p>
    </td>
    <td align=right width=33>
      <p><font size=2>24</font></p>
    </td>
  </tr>
  <tr valign=bottom>
    <td width=553>
      <p><font size=2>Portfolio Transactions</font></p>
    </td>
    <td width=14>
      <p>&nbsp;</p>
    </td>
    <td align=right width=33>
      <p><font size=2>30</font></p>
    </td>
  </tr>
  <tr valign=bottom>
    <td width=553>
      <p><font size=2>Taxes</font></p>
    </td>
    <td width=14>
      <p>&nbsp;</p>
    </td>
    <td align=right width=33>
      <p><font size=2>32</font></p>
    </td>
  </tr>
  <tr valign=bottom>
    <td width=553>
      <p><font size=2>Conflicts of Interest</font></p>
    </td>
    <td width=14>
      <p>&nbsp;</p>
    </td>
    <td align=right width=33>
      <p><font size=2>37</font></p>
    </td>
  </tr>
  <tr valign=bottom>
    <td width=553>
      <p><font size=2>Net Asset Value</font></p>
    </td>
    <td width=14>
      <p>&nbsp;</p>
    </td>
    <td align=right width=33>
      <p><font size=2>39</font></p>
    </td>
  </tr>
  <tr valign=bottom>
    <td width=553>
      <p><font size=2>Financial Statements</font></p>
    </td>
    <td width=14>
      <p>&nbsp;</p>
    </td>
    <td align=right width=33>
      <p><font size=2>39</font></p>
    </td>
  </tr>
  <tr valign=bottom>
    <td width=553>
      <p><font size=2>Appendix A&nbsp;Description of Municipal Bond Ratings</font></p>
    </td>
    <td width=14>
      <p>&nbsp;</p>
    </td>
    <td align=right width=33>
      <p><font size=2>A-1</font></p>
    </td>
  </tr>
  <tr valign=bottom>
    <td width=553>
      <p><font size=2>Appendix B&nbsp;Settlement Procedures</font></p>
    </td>
    <td width=14>
      <p>&nbsp;</p>
    </td>
    <td align=right width=33>
      <p><font size=2>B-1</font></p>
    </td>
  </tr>
  <tr valign=bottom>
    <td width=553>
      <p><font size=2>Appendix C&nbsp;Auction Procedures</font></p>
    </td>
    <td width=14>
      <p>&nbsp;</p>
    </td>
    <td align=right width=33>
      <p><font size=2>C-1</font></p>
    </td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Cutoff rule centered" FSL="Workstation" -->
<hr align=center width=150 noshade size=1>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --><br>
&nbsp;
<table width="100%">
  <tr>
    <td align=left width="20%"><font size=1>&nbsp;</font></td>
    <td align=center width="60%"><font size=2>2</font></td>
    <td align=right width="20%"><font size=1>&nbsp;</font></td>
  </tr>
</table>
<hr align=left width="100%" noshade size=5>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 7; page: 7" -->
<p align=center><font face="Times New Roman, Times, Serif" size=2><b>INVESTMENT
  OBJECTIVE AND POLICIES </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Fund&#146;s investment objective is to provide shareholders with current income
  exempt from Federal income taxes. The Fund seeks to achieve its investment objective
  by investing, as a fundamental policy, at least 80% of an aggregate of the Fund&#146;s
  net assets (including proceeds from the issuance of preferred stock) and the
  proceeds of any borrowings for investment purposes, in a portfolio of municipal
  obligations issued by or on behalf of states, territories and possessions of
  the United States and their political subdivisions, agencies or instrumentalities,
  each of which pays interest that, in the opinion of bond counsel to the issuer,
  is excludable from gross income for Federal income tax purposes (except that
  the interest may be includable in taxable income for purposes of the Federal
  alternative minimum tax) (&#147;Municipal Bonds&#148;). The Fund&#146;s investment
  objective and its policy of inve of an aggregate of the Fund&#146;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). There can be no
  assurance that the Fund&#146;s investment objective will be realized. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reference
  is made to &#147;Investment Objective and Policies&#148; and &#147;Other Investment
  Policies&#148; in the prospectus for information regarding other types of securities
  that the Fund may invest in to achieve its objective. </font></p>
<!-- MARKER FORMAT-SHEET="Center Head 2-Bold" FSL="Workstation" -->
<p align=center><font face="Times New Roman, Times, Serif" size=2><b>INVESTMENT
  RESTRICTIONS </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  The following are fundamental investment restrictions of the Fund and may not
  be changed without the approval of the holders of a majority of the Fund&#146;s
  outstanding shares of common stock and outstanding shares of AMPS, Other AMPS
  and any other preferred stock, voting together as a single class, and a majority
  of the outstanding shares of AMPS, Other AMPS and any other preferred stock,
  voting as a separate class (which for this purpose and under the 1940 Act means
  the lesser of (i) 67% of the shares of each class of capital stock represented
  at a meeting at which more than 50% of the outstanding shares of each class
  of capital stock are represented or (ii) more than 50% of the outstanding shares
  of each class of capital stock). The Fund may not: </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.
      Make investments for the purpose of exercising control or management. </font>
    </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.
      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 interest therein, and the Fund may purchase and
      sell financial futures contracts and options thereon. </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.
      Issue senior securities or borrow money except as permitted by Section 18
      of the 1940 Act. </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.
      Underwrite securities of other issuers except insofar as the Fund may be
      deemed an underwriter under the Securities Act of 1933, as amended, in selling
      portfolio securities. </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.
      Make loans to other persons, except that the Fund may purchase Municipal
      Bonds and other debt securities in accordance with is investment objective,
      policies and limitations. </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.
      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. </font>
    </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
  purposes of investment restriction (6) above, the exception for states, municipalities
  and their political subdivisions applies only to tax exempt securities issued
  by such entities. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additional
  investment restrictions adopted by the Fund, which may be changed by the Board
  of Directors without shareholder approval, provide that the Fund may not: </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.
      Purchase securities of other investment companies, except to the extent
      that such purchases are permitted by applicable law. Applicable law currently
      generally prohibits the Fund from purchasing the securities of other investment
      companies except if immediately thereafter not more than (i) 3% of the total
      outstanding voting stock of such company is owned by the Fund, (ii) 5% of
      the Fund&#146;s total assets, taken at market value, would be invested in
      any one such company, (iii) 10% of the Fund&#146;s total assets, taken at</font>
    </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> 3</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 8; page: 8" --> <!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<p>&nbsp;</p>
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2> market value,
      would be invested in such securities, and (iv) the Fund, together with other
      investment companies having the same investment adviser and companies controlled
      by such companies, owns not more than 10% of the total outstanding stock
      of any one closed-end investment company. </font> </td>
  </tr>
</table>
<br>
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.
      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
      (3) above or except as may be necessary in connection with transactions
      in financial futures contracts and options thereon. </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.
      Purchase any securities on margin, except that the Fund may obtain such
      short-term credit as may be necessary for the clearance of purchases and
      sales of portfolio securities (the deposit or payment by the Fund of initial
      or variation margin in connection with financial futures contracts and options
      thereon is not considered the purchase of a security on margin). </font>
    </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.
      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
      and may purchase and sell Call Rights to require mandatory tender for the
      purchase of related Municipal Bonds. </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
  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 percentages resulting from changing values will not be considered
  a violation. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Fund is classified as non-diversified within the meaning of the 1940 Act, which
  means that the Fund is not limited by the 1940 Act in the proportion of its
  assets that it may invest in securities of a single issuer. As a non-diversified
  fund, the Fund&#146;s investments are limited, however, in order to allow the
  Fund to continue to qualify as a regulated investment company under the Internal
  Revenue Code of 1986, as amended (the &#147;Code&#148;). See &#147;Taxes.&#148;
  To qualify, the Fund complies with certain requirements, including limiting
  its investments so that at the close of each quarter of the taxable year (i)
  not more than 25% of the market value of the Fund&#146;s total assets will be
  invested in the securities of a single issuer or in qualified publicly traded
  partnerships as defined in the Code and (ii) with respect to 50% of the market
  value of its total assets, not more than 5% of the market value of its total
  assets will be invested in the securities of a single issuer and the Fund will
  not own more than 10% of the outstanding voting securities of a single issuer.
  For purposes of this restriction, the Fund will regard each state and each political
  subdivision, agency or instrumentality of such state and each multi-state agency
  of which such state is a member and each public authority which issues securities
  on behalf of a private entity as a separate issuer, except that if the security
  is backed only by the assets and revenues of a non-government entity then the
  entity with the ultimate responsibility for the payment of interest and principal
  may be regarded as the sole issuer. These tax-related limitations may be changed
  by the Board of Directors of the Fund to the extent necessary to comply with
  changes in the Federal tax requirements. A fund that elects to be classified
  as &#147;diversified&#148; under the 1940 Act must satisfy the foregoing 5%
  and 10% requirements with respect to 75% of its total assets. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Investment Adviser of the Fund and Merrill Lynch, Pierce, Fenner &amp; Smith
  Incorporated (&#147;Merrill Lynch&#148;) are owned and controlled by Merrill
  Lynch &amp;Co., Inc. (&#147;ML &amp; Co.&#148;). Because of the affiliation
  of Merrill Lynch with the Investment Adviser, the Fund is prohibited from engaging
  in certain transactions involving Merrill Lynch except pursuant to an exemptive
  order or otherwise in compliance with the provisions of the 1940 Act and the
  rules and regulations thereunder. Included among such restricted transactions
  will be purchases from or sales to Merrill Lynch of securities in transactions
  in which it acts as principal. See &#147;Portfolio Transactions&#148; in this
  statement of additional information. </font></p>
<!-- MARKER FORMAT-SHEET="Center Head 2-Bold" FSL="Workstation" -->
<p align=CENTER><font face="Times New Roman, Times, Serif" size=2><b>DESCRIPTION
  OF AMPS </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Certain
  of the capitalized terms used herein not otherwise defined in this statement
  of additional information have the meaning provided in the Glossary at the back
  of the prospectus. </i></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Series C AMPS will be shares of preferred stock that entitle their holders to
  receive dividends when, as and if declared by the Board of Directors, out of
  funds legally available therefor, at a rate per annum that may vary for the
  successive Dividend Periods. After the Initial Dividend Period, each Subsequent
  Dividend Period for the Series C AMPS generally will be a 7-Day Dividend Period;
  provided however, that prior to any Auction, the </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> 4</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 9; page: 9" --> <!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>Fund may elect, subject to
  certain limitations described herein, upon giving notice to holders thereof,
  a Special Dividend Period. The Applicable Rate for a particular Dividend Period
  will be determined by an Auction conducted on the Business Day before the start
  of such Dividend Period. Beneficial Owners and Potential Beneficial Owners of
  shares of AMPS may participate in Auctions therefor, although, except in the
  case of a Special Dividend Period of more than 28 days, Beneficial Owners desiring
  to continue to hold all of their shares of AMPS regardless of the Applicable
  Rate resulting from Auctions need not participate. For an explanation of Auctions
  and the method of determining the Applicable Rate, see Appendix C &#151; &#147;Auction
  Procedures.&#148; </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
  as otherwise required by law or unless there is no Securities Depository, all
  outstanding shares of the AMPS will be represented by one or more certificates
  registered in the name of the nominee of the Securities Depository (initially
  expected to be Cede), and no person acquiring shares of AMPS will be entitled
  to receive a certificate representing such shares. See Appendix C &#151; &#147;Auction
  Procedures.&#148; As a result, the nominee of the Securities Depository is expected
  to be the sole holder of record of the shares of AMPS. Accordingly, each purchaser
  of AMPS must rely on (i) the procedures of the Securities Depository and, if
  such purchaser is not a member of the Securities Depository, such purchaser&#146;s
  Agent Member, to receive dividends, distributions and notices and to exercise
  voting rights (if and when applicable) and (ii) the records of the Securities
  Depository and, if such purchaser is not a member of the Securities Depository,
  such purchaser&#146;s Agent Member, to evidence its beneficial ownership of
  shares of AMPS. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When
  issued and sold, the shares of AMPS will have a liquidation preference of $25,000
  per share plus an amount equal to accumulated but unpaid dividends (whether
  or not earned or declared) and will be fully paid and non-assessable. See &#147;Description
  of AMPS &#151; Liquidation Rights&#148; in the prospectus. The shares of AMPS
  will not be convertible into shares of common stock or other capital stock of
  the Fund, and the holders thereof will have no preemptive rights. The AMPS will
  not be subject to any sinking fund but will be subject to redemption at the
  option of the Fund at the Optional Redemption Price on any Dividend Payment
  Date (except during the Initial Dividend Period and during a Non-Call Period)
  and, under certain circumstances, will be subject to mandatory redemption by
  the Fund at the Mandatory Redemption Price stated in the prospectus. See &#147;Description
  of AMPS &#151; Redemption&#148; in the prospectus. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Fund also has outstanding two 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 C AMPS offered hereby rank on a parity with the Other
  AMPS with respect to dividends and liquidation preference. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
  addition 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&#146;s instructions, and will not be responsible
  for any evaluation or verification of any matters certified to it. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
  in an Auction, the Fund will have the right (to the extent permitted by applicable
  law) to purchase or otherwise acquire any shares of AMPS so long as the Fund
  is current in the payment of dividends on AMPS and on any other capital stock
  of the Fund ranking on a parity with the AMPS, including the Other AMPS, with
  respect to the payment of dividends or upon liquidation. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  following supplements the description of the terms of the shares of AMPS set
  forth in the prospectus. This description does not purport to be complete and
  is subject to and qualified in its entirety by reference to the Fund&#146;s
  Charter and Articles Supplementary, including the provisions thereof establishing
  the AMPS. The Fund&#146;s Charter and the form of Articles Supplementary establishing
  the terms of the AMPS have been filed as exhibits to the Registration Statement
  of which this statement of additional information is a part. </font></p>
<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Dividends </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>General</i>.
  The holders of shares of the Series C 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 </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> 5</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 10; page: 10" --> <!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>extent permitted under the
  Code and to the extent available, out of net tax exempt income earned on the
  Fund&#146;s investments. Generally, dividends on shares of AMPS, to the extent
  that they are derived from interest paid on Municipal Bonds, will be exempt
  from Federal income taxes, subject to possible application of the alternative
  minimum tax. See &#147;Taxes.&#148; </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  <i>Notification of Dividend Period</i>. In determining whether the Fund should
  issue a Notice of Special Dividend for AMPS, the Broker-Dealers will consider
  (i) existing short term and long term market rates and indices of such short
  term and long term rates, (ii) existing market supply and demand for short term
  and long term securities, (iii) existing yield curves for short term and long
  term securities comparable to the AMPS, (iv) industry and financial conditions
  that may affect the AMPS, (v) the investment objective of the Fund, and (vi)
  the Dividend Periods and dividend rates at which current and potential beneficial
  holders of the AMPS would remain or become beneficial holders. If the Broker-Dealers
  shall not give the Fund a Response by such second Business Day or if the Response
  states that given the factors set forth above it is not advisable that the Fund
  give a Notice of Special Dividend Period for the AMPS, the Fund may not give
  a Notice of Special Dividend Period in respect of such Request for Special Dividend
  Period. In the event the Response indicates that it is advisable that the Fund
  give a Notice of Special Dividend Period for the AMPS, the Fund, by no later
  than the second Business Day prior to such Auction Date, may give a notice (a
  &#147;Notice of Special Dividend Period&#148;) to the Auction Agent, the Securities
  Depository and each Broker-Dealer, which notice will specify (i) the duration
  of the Special Dividend Period, (ii) the Optional Redemption Price as specified
  in the related Response, and (iii) the Specific Redemption Provisions, if any,
  as specified in the related Response. The Fund also shall provide a copy of
  such Notice of Special Dividend Period to Moody&#146;s and S&amp;P. The Fund
  shall not give a Notice of Special Dividend Period, and, if such Notice of Special
  Dividend Period shall have been given already, shall give telephonic and written
  notice of its revocation (a &#147;Notice of Revocation&#148;) to the Auction
  Agent, each Broker-Dealer, and the Securities Depository on or prior to the
  Business Day prior to the relevant Auction Date if (x) either the 1940 Act AMPS
  Asset Coverage is not satisfied or the Fund shall fail to maintain S&amp;P Eligible
  Assets and Moody&#146;s Eligible Assets each with an aggregate Discounted Value
  at least equal to the AMPS Basic Maintenance Amount, in each case on the Valuation
  Date immediately preceding the Business Day prior to the relevant Auction Date
  on an actual basis and on a pro forma basis giving effect to the proposed Special
  Dividend Period (using as a pro forma dividend rate with respect to such Special
  Dividend Period the dividend rate which the Broker-Dealers shall advise the
  Fund is an approximately equal rate for securities similar to the AMPS with
  an equal dividend period), (y) sufficient funds for the payment of dividends
  payable on the immediately succeeding Dividend Payment Date have not been segregated
  in an account at the Fund&#146;s custodian bank or on the books of the Fund
  by the close of business on the third Business Day preceding the related Auction
  Date or (z) the Broker-Dealers jointly advise the Fund that, after consideration
  of the factors listed above, they have concluded that it is advisable to give
  a Notice of Revocation. The Fund also shall provide a copy of such Notice of
  Revocation to Moody&#146;s and S&amp;P. If the Fund is prohibited from giving
  a Notice of Special Dividend Period as a result of the factors enumerated in
  clause (x), (y) or (z) above or if the Fund gives a Notice of Revocation with
  respect to a Notice of Special Dividend Period, the next succeeding Dividend
  Period will be a 7-Day Dividend Period. In addition, in the event Sufficient
  Clearing Bids are not made in any Auction or an Auction is not held for any
  reason, the next succeeding Dividend Period will be a 7-Day Dividend Period,
  and the Fund may not again give a Notice of Special Dividend Period (and any
  such attempted notice shall be null and void) until Sufficient Clearing Bids
  have been made in an Auction with respect to a 7-Day Dividend Period. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Non-Payment
  Period; Late Charge</i>. A Non-Payment Period will commence if the Fund fails
  to (i) declare, prior to the close of business on the second Business Day preceding
  any Dividend Payment Date, for payment on or (to the extent permitted as described
  below) within three Business Days after such Dividend Payment Date to the persons
  who held such shares as of 12:00 noon, Eastern time, on the Business Day preceding
  such Dividend Payment Date, the full amount of any dividend on shares of AMPS
  payable on such Dividend Payment Date or (ii) deposit, irrevocably in trust,
  in same-day funds, with the Auction Agent by 12:00 noon, Eastern time, (A) on
  such Dividend Payment Date the full amount of any cash dividend on such shares
  (if declared) payable on such 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 </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> 6</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 11; page: 11" --> <!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>shall have been so deposited
  or otherwise shall have been made available to the applicable holders in same-day
  funds, provided that a Non-Payment Period for AMPS will not end unless the Fund
  shall have given at least five days&#146; but no more than 30 days&#146; written
  notice of such deposit or availability to the Auction Agent, the Securities
  Depository and all holders of shares of AMPS. Notwithstanding the foregoing,
  the failure by the Fund to deposit funds as provided for by clause (ii) (A)
  or (ii) (B) above within three Business Days after any Dividend Payment Date
  or redemption date, as the case may be, in each case to the extent contemplated
  below, shall not constitute a &#147;Non-Payment Period.&#148; </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Applicable Rate for each Dividend Period for shares of AMPS, commencing during
  a Non-Payment Period, will be equal to the Non-Payment Period Rate; and each
  Dividend Period commencing after the first day of, and during, a Non-Payment
  Period shall be a 7-Day Dividend Period. Any dividend on shares of AMPS due
  on any Dividend Payment Date for such shares (if, prior to the close of business
  on the second Business Day preceding such Dividend Payment Date, the Fund has
  declared such dividend payable on such Dividend Payment Date to the persons
  who held such shares as of 12:00 noon, Eastern time, on the Business Day preceding
  such Dividend Payment Date) or redemption price with respect to such shares
  not paid to such persons when due may be paid to such persons in the same form
  of funds by 12:00 noon, Eastern time, on any of the first three Business Days
  after such Dividend Payment Date or due date, as the case may be, provided that
  such amount is accompanied by a late charge calculated for such period of non-payment
  at the Non-Payment Period Rate applied to the amount of such non-payment based
  on the actual number of days comprising such period divided by 365. In the case
  of a willful failure of the Fund to pay a dividend on a Dividend Payment Date
  or to redeem any shares of AMPS on the date set for such redemption, the preceding
  sentence shall not apply and the Applicable Rate for the Dividend Period commencing
  during the Non-Payment Period resulting from such failure shall be the Non-Payment
  Period Rate. For the purposes of the foregoing, payment to a person in same-day
  funds on any Business Day at any time will be considered equivalent to payment
  to that person in New York Clearing House (next-day) funds at the same time
  on the preceding Business Day, and any payment made after 12:00 noon, Eastern
  time, on any Business Day shall be considered to have been made instead in the
  same form of funds and to the same person before 12:00 noon, Eastern time, on
  the next Business Day. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Non-Payment Period Rate initially will be 200% of the applicable Reference Rate
  (or 300% of such rate if the Fund has provided notification to the Auction Agent
  prior to the Auction establishing the Applicable Rate for any dividend that
  net capital gain or other taxable income will be included in such dividend on
  shares of AMPS), provided that the Board of Directors of the Fund shall have
  the authority to adjust, modify, alter or change from time to time by resolution
  or otherwise the initial Non-Payment Period Rate if the Board of Directors of
  the Fund determines and Moody&#146;s and S&amp;P (and any Substitute Rating
  Agency or Substitute Rating Agencies, as the case may be, in lieu of Moody&#146;s
  or S&amp;P, or both, in the event either or both of such parties shall not rate
  the AMPS) advise the Fund in writing that such adjustment, modification, alteration
  or change will not adversely affect their then current ratings on the AMPS.
  </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Restrictions
  on Dividends and Other Payments</i>. For so long as any shares of AMPS are outstanding,
  the Fund will not declare, pay or set apart for payment any dividend or other
  distribution (other than a dividend or distribution paid in shares of, or options,
  warrants or rights to subscribe for or purchase, common stock or other stock,
  if any, ranking junior to shares of AMPS as to dividends or upon liquidation)
  in respect of common stock or any other stock of the Fund ranking junior to
  or on a parity with shares of AMPS as to dividends or upon liquidation, or call
  for redemption, redeem, purchase or otherwise acquire for consideration any
  shares of common stock or any other such junior stock (except by conversion
  into or exchange for stock of the Fund ranking junior to AMPS as to dividends
  and upon liquidation) or any such parity stock (except by conversion into or
  exchange for stock of the Fund ranking junior to or on a parity with AMPS as
  to dividends and upon liquidation), unless (A) immediately after such transaction,
  the Fund would have S&amp;P Eligible Assets and Moody&#146;s Eligible Assets
  each with an aggregate Discounted Value equal to or greater than the AMPS Basic
  Maintenance Amount, and the 1940 Act AMPS Asset Coverage (see &#147;Asset Maintenance&#148;
  and &#147;Redemption&#148; below) would be satisfied, (B) full cumulative dividends
  on shares of AMPS and shares of the Other AMPS due on or prior to the date of
  the transaction have been declared and paid or shall have been declared and
  sufficient funds for the payment thereof deposited with the Auction Agent, (C)
  any Additional Dividend required to be paid on or before the date of such declaration
  or payment has been paid, and (D) the Fund has redeemed the full number of shares
  of AMPS required to be redeemed by any provision for mandatory redemption contained
  in the Articles Supplementary. </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> 7</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 12; page: 12" --> <!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Asset Maintenance
  </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>1940
  Act AMPS Asset Coverage</i>. The Fund will be required under the Articles Supplementary
  to maintain, with respect to shares of AMPS, as of the last Business Day of
  each month in which any shares of AMPS are outstanding, asset coverage of at
  least 200% with respect to senior securities that are stock, including the shares
  of AMPS and Other AMPS (or such other asset coverage as in the future may be
  specified in or under the 1940 Act as the minimum asset coverage for senior
  securities that are stock of a closed-end investment company as a condition
  of paying dividends on its common stock) (&#147;1940 Act AMPS Asset Coverage&#148;).
  If the Fund fails to maintain 1940 Act AMPS Asset Coverage and such failure
  is not cured as of the last Business Day of the following month (the &#147;1940
  Act Cure Date&#148;), the Fund will be required under certain circumstances
  to redeem certain of the shares of AMPS. See &#147;Description of AMPS &#151;
  Redemption&#148; in the prospectus and &#147;&#151; Redemption&#148; below.
  </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>AMPS
  Basic Maintenance Amount</i>. So long as shares of AMPS are outstanding, the
  Fund will be required under the Articles Supplementary as of the last Business
  Day of each week (a &#147;Valuation Date&#148;) to maintain S&amp;P Eligible
  Assets and Moody&#146;s Eligible Assets each having in the aggregate a Discounted
  Value at least equal to the AMPS Basic Maintenance Amount. If the Fund fails
  to meet such requirement as of any Valuation Date and such failure is not cured
  on or before the sixth Business Day after such Valuation Date (the &#147;AMPS
  Basic Maintenance Cure Date&#148;), the Fund will be required under certain
  circumstances to redeem certain of the shares of AMPS. See &#147;Description
  of AMPS &#151; Redemption&#148; in the prospectus and &#147;&#151; Redemption&#148;
  below. Upon any failure to maintain the required Discounted Value, the Fund
  will use its best efforts to alter the composition of its portfolio to reattain
  a Discounted Value at least equal to the AMPS Basic Maintenance Amount on or
  prior to the AMPS Basic Maintenance Cure Date. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  AMPS Basic Maintenance Amount as of any Valuation Date, means the dollar amount
  equal to (i) the sum of (A) the product of the number of shares of AMPS and
  Other AMPS outstanding on such Valuation Date multiplied by the sum of $25,000
  and any applicable redemption premium attributable to the designation of a Premium
  Call Period; (B) the aggregate amount of cash dividends (whether or not earned
  or declared) that will have accumulated for the AMPS and Other AMPS outstanding
  to (but not including) the end of the current Dividend Period for the AMPS that
  follows such Valuation Date in the event the then current Dividend Period will
  end within 49 calendar days of such Valuation Date or through the 49th day after
  such Valuation Date in the event the then current Dividend Period will not end
  within 49 calendar days of such Valuation Date; (C) in the event the then current
  Dividend Period will end within 49 calendar days of such Valuation Date, the
  aggregate amount of cash dividends that would accumulate at the Maximum Applicable
  Rate applicable to a Dividend Period of 28 or fewer days on any shares of AMPS
  and Other AMPS outstanding from the end of such Dividend Period through the
  49th day after such Valuation Date, multiplied by the larger of the Moody&#146;s
  Volatility Factor and the S&amp;P Volatility Factor, determined from time to
  time by Moody&#146;s and S&amp;P, respectively (except that if such Valuation
  Date occurs during a Non-Payment Period, the cash dividend for purposes of calculation
  would accumulate at the then current Non-Payment Period Rate); (D) the amount
  of anticipated expenses of the Fund for the 90 days subsequent to such Valuation
  Date; (E) the amount of current outstanding balances of any indebtedness that
  is senior to the AMPS, plus interest actually accrued together with 30 days&#146;
  additional interest on the current outstanding balances calculated at the current
  rate; (F) the amount of the Fund&#146;s maximum potential Additional Dividend
  liability as of such Valuation Date; and (G) any current liabilities as of such
  Valuation Date to the extent not reflected in any of (i)(A) through (i)(F) (including,
  without limitation, and immediately upon determination, any amounts due and
  payable by the Fund for portfolio securities purchased as of such Valuation
  Date and any liabilities incurred for the purpose of clearing securities transactions)
  less (ii) either (A) the Discounted Value of any of the Fund&#146;s assets,
  or (B) the face value of any of the Fund&#146;s assets if such assets mature
  prior to or on the date of redemption of AMPS or payment of a liability and
  are either securities issued or guaranteed by the United States Government or
  Deposit Securities, in both cases irrevocably deposited by the Fund for the
  payment of the amount needed to redeem shares of AMPS subject to redemption
  or to satisfy any of (i)(B) through (i)(G). </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Discount Factors and guidelines for determining the market value of the Fund&#146;s
  portfolio holdings have been based on criteria established in connection with
  rating the AMPS. These factors include, but are not limited to, the sensitivity
  of the market value of the relevant asset to changes in interest rates, the
  liquidity and depth of the market for the relevant asset, the credit quality
  of the relevant asset (for example, the lower the rating of a debt obligation,
  the higher the related discount factor) and the frequency with which the relevant
  asset is marked to market. In no event shall the Discounted Value of any asset
  of the Fund exceed its unpaid principal balance or </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> 8</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 13; page: 13" --> <!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>face amount as of the date
  of calculation. The Discount Factor relating to any asset of the Fund and the
  AMPS Basic Maintenance Amount, the assets eligible for inclusion in the calculation
  of the Discounted Value of the Fund&#146;s portfolio and certain definitions
  and methods of calculation relating thereto may be changed from time to time
  by the Fund, without stockholder approval, but only in the event the Fund receives
  written confirmation from S&amp;P, Moody&#146;s and any Substitute Rating Agency
  that any such changes would not impair the rating then assigned to the shares
  of AMPS by S&amp;P or Moody&#146;s or any Substitute Rating Agency. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
  or before the seventh Business Day in the case of Moody&#146;s and the next
  Business Day in the case of S&amp;P after a Valuation Date on which the Fund
  fails to maintain S&amp;P Eligible Assets and Moody&#146;s Eligible Assets each
  with an aggregate Discounted Value equal to or greater than the AMPS Basic Maintenance
  Amount, the Fund is required to (i) deliver to Moody&#146;s a report with respect
  to the calculation of the AMPS Basic Maintenance Amount, the value of its portfolio
  holdings and the net asset value and market price of the Fund&#146;s common
  stock as of the date of such failure (an &#147;AMPS Basic Maintenance Report&#148;)
  and (ii) send S&amp;P an electronic notification of such failure. The Fund also
  will deliver an AMPS Basic Maintenance Report as of the 25th day of each month
  (or if such day is not a Business Day, as of the next succeeding Business Day)
  or as of the last Business Day of the month in which the Fund&#146;s fiscal
  year ends on or before the seventh Business Day after such day. Within ten Business
  Days after delivery of such report relating to the month in which the Fund&#146;s
  fiscal year ends, the Fund will deliver a letter prepared by the Fund&#146;s
  independent accountants regarding the accuracy of the calculations made by the
  Fund in such AMPS Basic Maintenance Report. If any such letter prepared by the
  Fund&#146;s independent accountants shows that an error was made in the AMPS
  Basic Maintenance Report, the calculation or determination made by the Fund&#146;s
  independent accountants will be conclusive and binding on the Fund. The Fund
  will also (i) provide Moody&#146;s with an AMPS Basic Maintenance Report and
  (ii) send S&amp;P an electronic notification, as of each Valuation Date on or
  before the seventh Business Day in the case of Moody&#146;s and the next Business
  Day in the case of S&amp;P after such date when the Discounted Value of Moody&#146;s
  Eligible Assets or S&amp;P Eligible Assets, as the case may be, fails to exceed
  the AMPS Basic Maintenance Amount by 10% or more. Also, on or before 5:00 p.m.,
  Eastern time, on the first Business Day after shares of common stock are repurchased
  by the Fund, the Fund will complete and deliver to Moody&#146;s an AMPS Basic
  Maintenance Report as of the close of business on such date that common stock
  is repurchased. </font></p>
<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Redemption
  </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Mandatory
  Redemption</i>. The number of shares of AMPS to be redeemed will be equal to
  the lesser of (a) the minimum number of shares of AMPS the redemption of which,
  if deemed to have occurred immediately prior to the opening of business on the
  Cure Date, together with all other shares of the preferred stock subject to
  redemption or retirement, would result in the Fund having S&amp;P Eligible Assets
  and Moody&#146;s Eligible Assets each with an aggregate Discounted Value equal
  to or greater than the AMPS Basic Maintenance Amount or satisfaction of the
  1940 Act AMPS Asset Coverage, as the case may be, on such Cure Date (provided
  that, if there is no such minimum number of shares the redemption of which would
  have such result, all shares of AMPS then outstanding will be redeemed), and
  (b) the maximum number of shares of AMPS, together with all other shares of
  preferred stock subject to redemption or retirement, that can be redeemed out
  of funds expected to be legally available therefor on such redemption date.
  In determining the number of shares of AMPS required to be redeemed in accordance
  with the foregoing, the Fund shall allocate the number required to be redeemed
  which would result in the Fund having S&amp;P Eligible Assets and Moody&#146;s
  Eligible Assets each with an aggregate Discounted Value equal to or greater
  than the AMPS Basic Maintenance Amount or satisfaction of the 1940 Act AMPS
  Asset Coverage, as the case may be, pro rata among shares of AMPS, Other AMPS
  and other preferred stock subject to redemption pursuant to provisions similar
  to those set forth below; provided that, shares of AMPS which may not be redeemed
  at the option of the Fund due to the designation of a Non-Call Period applicable
  to such shares (A) will be subject to mandatory redemption only to the extent
  that other shares are not available to satisfy the number of shares required
  to be redeemed and (B) will be selected for redemption in an ascending order
  of outstanding number of days in the Non-Call Period (with shares with the lowest
  number of days to be redeemed first) and by lot in the event of shares having
  an equal number of days in such Non-Call Period. The Fund is required to effect
  such a mandatory redemption on a Business Day which is not later than 30 days
  after such Cure Date, except that if the Fund does not have funds legally available
  for the redemption of all of the required number of shares of AMPS and shares
  of other preferred stock which are subject to mandatory redemption or the Fund
  otherwise is </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> 9</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 14; page: 14" --> <!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>unable to effect such redemption
  on a Business Day which is on or prior to 30 days after such Cure Date, the
  Fund will redeem those shares of AMPS that it was unable to redeem on the earliest
  practicable date on which it is able to effect such redemption out of funds
  legally available therefor. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Notice
  of Redemption</i>. If shares of AMPS are to be redeemed, a notice of redemption
  will be mailed to each record holder of such shares of AMPS (initially Cede
  as nominee of the Securities Depository) and to the Auction Agent not less than
  17 nor more than 60 days prior to the date fixed for the redemption thereof.
  Each notice of redemption will include a statement setting forth: (i) the redemption
  date, (ii) the redemption price, (iii) the aggregate number of shares of AMPS
  to be redeemed, (iv) the place or places where shares of AMPS are to be surrendered
  for payment of the redemption price, (v) a statement that dividends on the shares
  to be redeemed will cease to accumulate on such redemption date (except that
  holders may be entitled to Additional Dividends) and (vi) the provision of the
  Articles Supplementary pursuant to which such shares are being redeemed. The
  notice also will be published in the eastern and national editions of <i>The
  Wall Street Journa</i>l. No defect in the notice of redemption or in the mailing
  or publication thereof will affect the validity of the redemption proceedings,
  except as required by applicable law. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
  the event that less than all of the outstanding shares of AMPS are to be redeemed,
  the shares to be redeemed will be selected by lot or such other method as the
  Fund shall deem fair and equitable, and the results thereof will be communicated
  to the Auction Agent. The Auction Agent will give notice to the Securities Depository,
  whose nominee will be the record holder of all shares of AMPS, and the Securities
  Depository will determine the number of shares to be redeemed from the account
  of the Agent Member of each Existing Holder. Each Agent Member will determine
  the number of shares to be redeemed from the account of each Existing Holder
  for which it acts as agent. An Agent Member may select for redemption shares
  from the accounts of some Existing Holders without selecting for redemption
  any shares from the accounts of other Existing Holders. Notwithstanding the
  foregoing, if neither the Securities Depository nor its nominee is the record
  holder of all of the shares of AMPS, the particular shares to be redeemed shall
  be selected by the Fund by lot or by such other method as the Fund shall deem
  fair and equitable. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
  the Fund gives notice of redemption, and concurrently or thereafter deposits
  in trust with the Auction Agent, or segregates in an account at the Fund&#146;s
  custodian bank for the benefit of the holders of the AMPS to be redeemed and
  for payment to the Auction Agent, Deposit Securities (with a right of substitution)
  having an aggregate Discounted Value equal to the redemption payment for the
  shares of AMPS as to which notice of redemption has been given, with irrevocable
  instructions and authority to pay the redemption price to the record holders
  thereof, then upon the date of such deposit or, if no such deposit is made,
  upon such date fixed for redemption (unless the Fund shall default in making
  payment of the redemption price), all rights of the holders of such shares called
  for redemption will cease and terminate, except the right of such holders to
  receive the redemption price in respect thereof and any Additional Dividends,
  but without interest, and such shares no longer will be deemed to be outstanding.
  The Fund will be entitled to receive, from time to time, the interest, if any,
  earned on such Deposit Securities deposited with the Auction Agent, and the
  holders of any shares so redeemed will have no claim to any such interest. Any
  funds so deposited which are unclaimed at the end of one year from such redemption
  date will be repaid, upon demand, to the Fund, after which the holders of the
  shares of AMPS so called for redemption may look only to the Fund for payment
  thereof. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;So
  long as any shares of AMPS are held of record by the nominee of the Securities
  Depository (initially Cede), the redemption price for such shares will be paid
  on the redemption date to the nominee of the Securities Depository. The Securities
  Depository&#146;s normal procedures now provide for it to distribute the amount
  of the redemption price to Agent Members who, in turn, are expected to distribute
  such funds to the persons for whom they are acting as agent. Notwithstanding
  the provisions for redemption described above, no shares of AMPS shall be subject
  to optional redemption (i) unless all dividends in arrears on the outstanding
  shares of AMPS, and all capital stock of the Fund ranking on a parity with the
  AMPS with respect to the payment of dividends or upon liquidation, including
  the Other AMPS, have been or are being contemporaneously paid or declared and
  set aside for payment and (ii) if redemption thereof would result in the Fund&#146;s
  failure to maintain Moody&#146;s Eligible Assets or S&amp;P Eligible Assets
  with an aggregate Discounted Value equal to or greater than the AMPS Basic Maintenance
  Amount. </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> 10</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 15; page: 15" --> <!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Voting Rights
  </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
  connection with the election of the Fund&#146;s directors, holders of shares
  of AMPS, Other AMPS and any other preferred stock, voting separately as a single
  class, shall be entitled at all times to elect two of the Fund&#146;s directors,
  and the remaining directors will be elected by holders of shares of common stock
  and shares of AMPS, Other AMPS and any other preferred stock, voting together
  as a single class. In addition, if at any time dividends on outstanding shares
  of AMPS shall be unpaid in an amount equal to at least two full years&#146;
  dividends thereon or if at any time holders of any shares of preferred stock,
  including Other AMPS, are entitled, together with the holders of AMPS, to elect
  a majority of the directors of the Fund under the 1940 Act, then the number
  of directors constituting the Board of Directors automatically shall be increased
  by the smallest number that, when added to the two directors elected exclusively
  by the holders of shares of AMPS, Other AMPS and any other preferred stock as
  described above, would constitute a majority of the Board of Directors as so
  increased by such smallest number, and at a special meeting of stockholders
  which will be called and held as soon as practicable, and at all subsequent
  meetings at which directors are to be elected, the holders of shares of AMPS,
  Other AMPS and any other preferred stock, voting as a separate class, will be
  entitled to elect the smallest number of additional directors that, together
  with the two directors that such holders in any event will be entitled to elect,
  constitutes a majority of the total number of directors of the Fund as so increased.
  The terms of office of the persons who are directors at the time of that election
  will continue. If the Fund thereafter shall pay, or declare and set apart for
  payment in full, all dividends payable on all outstanding shares of AMPS and
  any other preferred stock, including Other AMPS, for all past Dividend Periods,
  the additional voting rights of the holders of shares of AMPS and any other
  preferred stock, including Other AMPS, as described above shall cease, and the
  terms of office of all of the additional directors elected by the holders of
  shares of AMPS, Other AMPS and any other preferred stock (but not of the directors
  with respect to whose election the holders of common stock were entitled to
  vote or the two directors the holders of shares of AMPS, Other AMPS and any
  other preferred stock have the right to elect in any event) will terminate automatically.
  </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  affirmative vote of a majority of the votes entitled to be cast by holders of
  outstanding shares of AMPS and any other preferred stock, including Other AMPS,
  voting as a separate class, will be required to (i) authorize, create or issue
  any class or series of stock ranking prior to the AMPS or any other series of
  preferred stock with respect to the payment of dividends or the distribution
  of assets on dissolution, liquidation or winding up the affairs of the Fund,
  or (ii) amend, alter or repeal the provisions of the Charter, whether by merger,
  consolidation or otherwise, so as to adversely affect any of the contract rights
  expressly set forth in the Charter of holders of shares of AMPS or any other
  preferred stock. To the extent permitted under the 1940 Act, in the event shares
  of more than one series of preferred stock are outstanding, the Fund shall not
  approve any of the actions set forth in clause (i) or (ii) which adversely affects
  the contract rights expressly set forth in the Charter of a holder of shares
  of AMPS differently than those of a holder of shares of any other series of
  preferred stock without the affirmative vote of at least a majority of votes
  entitled to be cast by holders of the shares of AMPS adversely affected and
  outstanding at such time (voting separately as a class). The Board of Directors,
  however, without stockholder approval, may amend, alter or repeal any or all
  of the various rating agency guidelines described herein in the event the Fund
  receives confirmation from the rating agencies that any such amendment, alteration
  or repeal would not impair the ratings then assigned to shares of AMPS. Furthermore,
  the Board of Directors, without stockholder approval, may terminate compliance
  with the Moody&#146;s or S&amp;P guidelines as discussed under &#147;Rating
  Agency Guidelines&#148; in the prospectus. Unless a higher percentage is provided
  for under &#147;Description of Capital Stock &#151; Certain Provisions of the
  Charter and By-laws&#148; in the prospectus, the affirmative vote of the holders
  of a majority of the outstanding shares of preferred stock (as defined under
  &#147;Investment Restrictions&#148;), including AMPS and Other AMPS, entitled
  to be cast, voting as a separate class, will be required to approve any plan
  of reorganization (including bankruptcy proceedings) adversely affecting such
  shares or any action requiring a vote of security holders under Section 13(a)
  of the 1940 Act including, among other things, changes in the Fund&#146;s investment
  objective or changes in the investment policies and restrictions described as
  fundamental policies in the prospectus and under &#147;Investment Restrictions.&#148;
  So long as any shares of AMPS are outstanding, the affirmative vote of the holders
  of a majority of the outstanding shares of preferred stock (as defined under
  &#147;Investment Restrictions&#148;), including AMPS and Other AMPS, voting
  together as a single class, will be required to approve any voluntary application
  by the Fund for relief under Federal bankruptcy law or any similar application
  under state law for so long as the Fund is solvent and does not foresee becoming
  insolvent. The class vote of holders of shares of AMPS, Other AMPS and any other
  preferred stock described above in each case will </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> 11</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 16; page: 16" --> <!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>be in addition to a separate
  vote of the requisite percentage of shares of common stock and shares of AMPS,
  Other AMPS and any other preferred stock, voting together as a single class,
  necessary to authorize the action in question. An increase in the number of
  authorized shares of preferred stock pursuant to the Charter or the issuance
  of additional shares of any series of preferred stock (including AMPS and Other
  AMPS) pursuant to the Charter shall not in and of itself be considered to adversely
  affect the contract rights of the holders of the AMPS. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding
  the foregoing, and except as otherwise required by the 1940 Act, (i) holders
  of outstanding shares of the AMPS will be entitled as a series, to the exclusion
  of the holders of all other securities, including other preferred stock, common
  stock and other classes of capital stock of the Fund, to vote on matters affecting
  the AMPS that do not materially adversely affect any of the contract rights
  of holders of such other securities, including other preferred stock, common
  stock and other classes of capital stock, as expressly set forth in the Charter,
  and (ii) holders of outstanding shares of AMPS will not be entitled to vote
  on matters affecting any other preferred stock that do not materially adversely
  affect any of the contract rights of holders of the AMPS, as expressly set forth
  in the Charter. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  foregoing voting provisions will not apply to any shares of AMPS if, at or prior
  to the time when the act with respect to which such vote otherwise would be
  required shall be effected, such shares shall have been (i) redeemed or (ii)
  called for redemption and sufficient funds shall have been deposited in trust
  to effect such redemption. </font></p>
<!-- MARKER FORMAT-SHEET="Center Head 2-Bold" FSL="Workstation" -->
<p align=CENTER><font face="Times New Roman, Times, Serif" size=2><b>THE AUCTION
  </b></font></p>
<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Auction Agent
  Agreement </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Auction Agent will act as agent for the Fund in connection with Auctions. In
  the absence of bad faith or negligence on its part, the Auction Agent will not
  be liable for any action taken, suffered or omitted, or for any error of judgment
  made, by it in the performance of its duties under the Auction Agent Agreement,
  and will not be liable for any error of judgment made in good faith unless the
  Auction Agent shall have been negligent in ascertaining, or failing to ascertain,
  the pertinent facts. Pursuant to the Auction Agent Agreement, the Fund is required
  to indemnify the Auction Agent for certain losses and liabilities incurred by
  the Auction Agent without negligence or bad faith on its part in connection
  with the performance of its duties under such agreement. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Auction Agent may terminate the Auction Agent Agreement upon notice to the Fund,
  which termination may be no earlier than 60 days following delivery of such
  notice. If the Auction Agent resigns, the Fund will use its best efforts to
  enter into an agreement with a successor Auction Agent containing substantially
  the same terms and conditions as the Auction Agent Agreement. The Fund may terminate
  the Auction Agent Agreement at any time, provided that prior to such termination
  the Fund shall have entered into such an agreement with respect thereto with
  a successor Auction Agent. </font></p>
<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Broker-Dealer
  Agreements </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Auctions require the participation of one or more broker-dealers. A Broker-Dealer
  Agreement may be terminated by the Auction Agent or a Broker-Dealer on five
  days&#146; notice to the other party, provided that the Broker-Dealer Agreement
  with Merrill Lynch may not be terminated without the prior written consent of
  the Fund, which consent may not be unreasonably withheld. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
  the fiscal years ended April 30, 2005, 2004 and 2003, Merrill Lynch, an affiliate
  of the Investment Adviser, earned $168,937, $145,785 and $175,133, respectively,
  pursuant to its Broker-Dealer Agreement with the Fund. </font></p>
<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Auction Procedures
  </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Auction Procedures are set forth in Appendix C. The Settlement Procedures to
  be used with respect to Auctions are set forth in Appendix B. </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> 12</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 17; page: 17" --> <!-- MARKER FORMAT-SHEET="Center Head 2-Bold" FSL="Workstation" -->
<p align=CENTER><font face="Times New Roman, Times, Serif" size=2><b>RATING AGENCY
  GUIDELINES </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;S&amp;P
  AAA Rating Guidelines The Discounted Value of the Fund&#146;s S&amp;P Eligible
  Assets is calculated on each Valuation Date. See &#147;Description of AMPS &#151;
  Asset Maintenance &#151; AMPS Basic Maintenance Amount.&#148; S&amp;P Eligible
  Assets include cash, Receivables for Municipal Bonds Sold (as defined below),
  Rule 2a-7 Money Market Funds and Municipal Bonds eligible for consideration
  under S&amp;P&#146;s current guidelines. For purposes of calculating the Discounted
  Value of the Fund&#146;s portfolio under current S&amp;P guidelines, the fair
  market value of Municipal Bonds eligible for consideration under such guidelines
  must be discounted by the applicable S&amp;P Discount Factor set forth in the
  table below. The Discounted Value of a Municipal Bond eligible for consideration
  under S&amp;P guidelines is the fair market value thereof divided by the S&amp;P
  Discount Factor. The S&amp;P Discount Factor used to discount a particular Municipal
  Bond will be determined by reference to the rating by S&amp;P, Moody&#146;s
  or Fitch on such Municipal Bond; provided, however, for purposes of determining
  the S&amp;P Discount Factor applicable to Municipal Bonds not rated by S&amp;P,
  the Municipal Bonds will carry an S&amp;P rating one full rating category lower
  than the S&amp;P rating category that is the equivalent of the rating category
  in which such Municipal Bond is placed by a NRSRO, in accordance with the table
  set forth below: </font></p>
<table border=0 cellspacing=0 cellpadding=0 width="600">
  <tr align="center">
    <td valign=top colspan="8">
      <p align=center><b><font size="1">S&amp;P&#146;s Rating Category (1)</font></b>
      <hr noshade align="center" size="1" width="97%">
    </td>
  </tr>
  <tr align="center">
    <td valign=top>
      <p><b><font size="1">AAA*(2)</font></b>
      <hr noshade align="center" size="1" width="70%">
    </td>
    <td valign=top>
      <p><b><font size="1">AA*</font></b>
      <hr noshade align="center" size="1" width="70%">
    </td>
    <td valign=top>
      <p><b><font size="1">A*</font></b>
      <hr noshade align="center" size="1" width="70%">
    </td>
    <td valign=top>
      <p><b><font size="1">BBB*</font></b>
      <hr noshade align="center" size="1" width="70%">
    </td>
    <td valign=top>
      <p><b><font size="1">BB*</font></b>
      <hr noshade align="center" size="1" width="70%">
    </td>
    <td valign=top>
      <p><b><font size="1">B*</font></b>
      <hr noshade align="center" size="1" width="70%">
    </td>
    <td valign=top>
      <p><b><font size="1">CCC*</font></b>
      <hr noshade align="center" size="1" width="70%">
    </td>
    <td valign=top>
      <p><b><font size="1">NR**</font></b>
      <hr noshade align="center" size="1" width="70%">
    </td>
  </tr>
  <tr align="center">
    <td valign=top>
      <p><font size="2">144.75%</font></p>
    </td>
    <td valign=top>
      <p><font size="2">147.75%</font></p>
    </td>
    <td valign=top>
      <p><font size="2">150.75%</font></p>
    </td>
    <td valign=top>
      <p><font size="2">153.75%</font></p>
    </td>
    <td valign=top>
      <p><font size="2">175.11%</font></p>
    </td>
    <td valign=top>
      <p><font size="2">195.11%</font></p>
    </td>
    <td valign=top>
      <p><font size="2">215.11%</font></p>
    </td>
    <td valign=top>
      <p><font size="2">220.00%</font></p>
    </td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Cutoff rule Footnote" FSL="Workstation" -->
<hr size=1 noshade align=left  width=75>
<!-- MARKER FORMAT-SHEET="Footnote Right" FSL="Workstation" -->
<table width=100%>
  <tr>
    <td width=4% align=right valign=top><font size="1"> * </font></td>
    <td width=2%>&nbsp;</td>
    <td width=94% align=left valign=top><font size="1">S&amp;P rating.</font></td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Footnote Right" FSL="Workstation" -->
<table width=100%>
  <tr>
    <td width=4% align=right valign=top><font size="1">** </font></td>
    <td width=2%>&nbsp;</td>
    <td width=94% align=left valign=top><font size="1">Not rated.</font></td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Footnote Right" FSL="Workstation" -->
<table width=100%>
  <tr>
    <td width=4% align=right valign=top><font size="1">(1) </font></td>
    <td width=2%>&nbsp;</td>
    <td width=94% align=left valign=top> <font size="1">For Municipal Bonds of
      any one issuer rated at least BBB- by S&amp;P, or if not rated by S&amp;P,
      rated at least A- by another NRSRO, 2% is added to the applicable S&amp;P
      Discount Factor for every 1% by which the fair market value of such Municipal
      Bonds exceeds 5% of the aggregate fair market value of the S&amp;P Eligible
      Assets, but in no event greater than 10%; or for any percentage over 5%
      add 10 percentage points to the applicable S&amp;P Discount Factor.</font></td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Footnote Right" FSL="Workstation" -->
<table width=100%>
  <tr>
    <td width=4% align=right valign=top><font size="1">(2) </font></td>
    <td width=2%>&nbsp;</td>
    <td width=94% align=left valign=top><font size="1">For zero coupon Municipal
      Bonds, the S&amp;P Discount Factor is 441.80%.</font></td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding
  the foregoing, (i) the S&amp;P Discount Factor for short-term Municipal Bonds
  will be 115%, so long as such Municipal Bonds are rated A-1+ or SP-1+ by S&amp;P
  and mature or have a demand feature exercisable in 30 days or less, or 120%
  so long as such Municipal Bonds are rated A-1 or SP-1 by S&amp;P and mature
  or have a demand feature exercisable in 30 days or less, or 125% if such Municipal
  Bonds are not rated by S&amp;P but are rated VMIG-1, P-1 or MIG-1 by Moody&#146;s
  or F-1+ by Fitch; provided, however, such short-term Municipal Bonds rated by
  Moody&#146;s or Fitch but not rated by S&amp;P having a demand feature exercisable
  in 30 days or less must be backed by a letter of credit, liquidity facility
  or guarantee from a bank or other financial institution having a short-term
  rating of at least A-1+ from S&amp;P; and further provided that such short-term
  Municipal Bonds rated by Moody&#146;s or Fitch but not rated by S&amp;P may
  comprise no more than 50% of short-term Municipal Bonds that qualify as S&amp;P
  Eligible Assets, (ii) the S&amp;P Discount Factor for Rule 2a-7 Money Market
  Funds will be 110%, (iii) the S&amp;P Discount Factor for Receivables for Municipal
  Bonds Sold that are due in more than five Business Days from such Valuation
  Date will be the S&amp;P Discount Factor applicable to the Municipal Bonds sold
  and (iv) no S&amp;P Discount Factor will be applied to cash or to Receivables
  for Municipal Bonds Sold if such receivables are due within five Business Days
  of such Valuation Date. &#147;Receivables for Municipal Bonds Sold,&#148; for
  purposes of calculating S&amp;P Eligible Assets as of any Valuation Date, means
  the book value of receivables for Municipal Bonds sold as of or prior to such
  Valuation Date. For purposes of the foregoing, Anticipation Notes rated SP-1
  or, if not rated by S&amp;P, rated VMIG-1 by Moody&#146;s or F-1+ by Fitch,
  which do not mature or have a demand feature exercisable in 30 days and which
  do not have a long-term rating, shall be considered to be short-term Municipal
  Bonds. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  S&amp;P guidelines require certain minimum issue size and impose other requirements
  for purposes of determining S&amp;P Eligible Assets. In order to be considered
  S&amp;P Eligible Assets, Municipal Bonds must: </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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);
      </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)
      except for zero coupon Municipal Bonds rated AAA by S&amp;P that mature
      in 30 years or less, be interest bearing and pay interest at least semi-annually;
      </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> 13</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 18; page: 18" --> <!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;
      &nbsp;&nbsp;&nbsp;&nbsp;(iii) be payable with respect to principal and interest
      in U.S. dollars; (a) not be subject to a covered call or covered put option
      written by the Fund; (b) except for Inverse Floaters, not be part of a private
      placement; and</font> </td>
  </tr>
</table>
<br>
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;
      &nbsp;&nbsp;&nbsp;&nbsp;(iv) except for Inverse Floaters and legally defeased
      bonds that are secured by securities issued or guaranteed by the United
      States Government, be part of an issue with an original issue size of at
      least $10 million or, if of an issue with an original issue size below $10
      million, is rated at least AA or higher by S&amp;P. </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding
  the foregoing: </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
      Municipal Bonds issued by issuers in any one state or territory will be
      considered S&amp;P Eligible Assets only to the extent the fair market value
      of such Municipal Bonds does not exceed 25% of the aggregate fair market
      value of S&amp;P Eligible Assets; </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)
      Municipal Bonds which are escrow bonds or defeased bonds may compose up
      to 100% of the aggregate fair market value of S&amp;P Eligible Assets if
      such Bonds initially are assigned a rating by S&amp;P in accordance with
      S&amp;P&#146;slegal defeasance criteria or rerated by S&amp;P as economic
      defeased escrow bonds and assigned an AAA rating. Municipal Bonds may be
      rated as escrow bonds by another NRSRO or rerated as an escrow bond and
      assigned the equivalent of an S&amp;P AAA rating, provided that such equivalent
      rated Bonds are limited to 50% of the aggregate fair market value of S&amp;P
      Eligible Assets and are deemed to have an AA S&amp;P rating for purposes
      of determining the S&amp;P Discount Factor applicable to such Municipal
      Bonds. The limitations on Municipal Bonds in clause (i) above and clauses
      (iii) and (iv) below are not applicable to escrow bonds; </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)
      Municipal Bonds which are not rated by any NRSRO may comprise no more than
      10% of S&amp;P Eligible Assets; </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)
      Municipal Bonds rated at least BBB- by S&amp;P, or if not rated by S&amp;P,
      rated at least A- by another NRSRO, of any one issuer or guarantor (excluding
      bond insurers) will be considered S&amp;P Eligible Assets only to the extent
      the fair market value of such Municipal Bonds does not exceed 10% of the
      aggregate fair market value of the S&amp;P Eligible Assets, High Yield Municipal
      Bonds of any issuer may comprise no more than 5% of S&amp;P Eligible Assets,
      and Municipal Bonds of any one issuer which are not rated by any NRSRO will
      be considered S&amp;P Eligible Assets only to the extent the fair market
      value of such Municipal Bonds does not exceed 5% of the aggregate fair market
      value of the S&amp;P Eligible Assets. In the aggregate, the maximum issuer
      exposure is limited to 10% of the S&amp;P Eligible Assets; and </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)
      Municipal Bonds not rated by S&amp;P but rated by another NRSRO will be
      included in S&amp;P Eligible Assets only to the extent the fair market value
      of such Municipal Bonds does not exceed 50% of the aggregate fair market
      value of the S&amp;P Eligible Assets. </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
  discussed in the prospectus, the Fund may engage in options or futures transactions.
  For so long as any shares of AMPS are rated by S&amp;P, the Fund will not purchase
  or sell financial futures contracts, write, purchase or sell options on financial
  futures contracts or write put options (except covered put options) or call
  options (except covered call options) on portfolio securities unless it receives
  written confirmation from S&amp;P that engaging in such transactions will not
  impair the ratings then assigned to the shares of AMPS by S&amp;P, except that
  the Fund may purchase or sell financial futures contracts based on the Bond
  Buyer Municipal Bond Index (the &#147;Municipal Index&#148;) or Treasury Bonds
  and write, purchase or sell put and call options on such contracts (collectively,
  &#147;S&amp;P Hedging Transactions&#148;), subject to the following limitations:
  </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
      the Fund will not engage in any S&amp;P Hedging Transaction based on the
      Municipal Index (other than transactions that terminate a financial futures
      contract or option held by the Fund by the Fund&#146;s taking an opposite
      position thereto (&#147;Closing Transactions&#148;)), that would cause the
      Fund at the time of such transaction to own or have sold the least of (A)
      more than 1,000 outstanding financial futures contracts based on the Municipal
      Index, (B) outstanding financial futures contracts based on the Municipal
      Index exceeding in number 25% of the quotient of the fair market value of
      the Fund&#146;s total assets divided by $1,000 or (C) outstanding financial
      futures contracts based on the Municipal Index exceeding in number 10% of
      the average number of daily traded financial futures contracts based on
      the Municipal Index in the 30 days preceding the time of effecting such
      transaction as reported by <i>The Wall Street Journal</i>; </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)
      the Fund will not engage in any S&amp;P Hedging Transaction based on Treasury
      Bonds (other than Closing Transactions) that would cause the Fund at the
      time of such transaction to own or have sold the </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> 14</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 19; page: 19" --> <!-- MARKER FORMAT-SHEET="Para Flush 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2> lesser of
      (A) outstanding financial futures contracts based on Treasury Bonds exceeding
      in number 50% of the quotient of the fair market value of the Fund&#146;s
      total assets divided by $100,000 ($200,000 in the case of the two-year United
      States Treasury Note) or (B) outstanding financial futures contracts based
      on Treasury Bonds exceeding in number 10% of the average number of daily
      traded financial futures contracts based on Treasury Bonds in the 30 days
      preceding the time of effecting such transaction as reported by<i> The Wall
      Street Journal</i>; </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)
      the Fund will engage in Closing Transactions to close out any outstanding
      financial futures contract that the Fund owns or has sold or any outstanding
      option thereon owned by the Fund in the event (A) the Fund does not have
      S&amp;P Eligible Assets with an aggregate Discounted Value equal to or greater
      than the AMPS Basic Maintenance Amount on two consecutive Valuation Dates
      and (B) the Fund is required to pay Variation Margin on the second such
      Valuation Date; </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)
      the Fund will engage in a Closing Transaction to close out any outstanding
      financial futures contract or option thereon in the month prior to the delivery
      month under the terms of such financial futures contract or option thereon
      unless the Fund holds the securities deliverable under such terms; and </font>
    </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)
      when the Fund writes a financial futures contract or an option thereon,
      it will either maintain an amount of cash, cash equivalents or liquid assets
      in a segregated account with the Fund&#146;s custodian, so that the amount
      so segregated plus the amount of Initial Margin and Variation Margin held
      in the account of or on behalf of the Fund&#146;s broker with respect to
      such financial futures contract or option equals the fair market value of
      the financial futures contract or option, or, in the event the Fund writes
      a financial futures contract or option thereon that requires delivery of
      an underlying security, it shall hold such underlying security in its portfolio.
      </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
  purposes of determining whether the Fund has S&amp;P Eligible Assets with a
  Discounted Value that equals or exceeds the AMPS Basic Maintenance Amount, the
  Discounted Value of cash or securities held for the payment of Initial Margin
  or Variation Margin shall be zero and the aggregate Discounted Value of S&amp;P
  Eligible Assets shall be reduced by an amount equal to (i) 30% of the aggregate
  settlement value, as marked to market, of any outstanding financial futures
  contracts based on the Municipal Index that are owned by the Fund plus (ii)
  25% of the aggregate settlement value, as marked to market, of any outstanding
  financial futures contracts based on Treasury Bonds which contracts are owned
  by the Fund. </font></p>
<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Moody&#146;s
  Aaa Rating Guidelines </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Discounted Value of the Fund&#146;s Moody&#146;s Eligible Assets is calculated
  on each Valuation Date. See &#147;Description of AMPS &#151; Asset Maintenance
  &#151; AMPS Basic Maintenance Amount.&#148; Moody&#146;s Eligible Assets include
  cash, Receivables for Municipal Bonds Sold (as defined below), Rule 2a-7 Money
  Market Funds and Municipal Bonds eligible for consideration under Moody&#146;s
  guidelines. For purposes of calculating the Discounted Value of the Fund&#146;s
  portfolio under current Moody&#146;s guidelines, the fair market value of Municipal
  Bonds eligible for consideration under such guidelines must be discounted by
  the applicable Moody&#146;s Discount Factor set forth in the table below. The
  Discounted Value of a Municipal Bond eligible for consideration under Moody&#146;s
  guidelines is the lower of par and the quotient of the fair market value thereof
  divided by the Moody&#146;s Discount Factor. The Moody&#146;s Discount Factor
  used to discount a particular Municipal Bond will be determined by reference
  to the rating by Moody&#146;s, S&amp;P or Fitch on such Municipal Bond, in accordance
  with the tables set forth below: </font></p>
<table border=0 cellspacing=0 cellpadding=0 width="600" align="center">
  <tr align="center">
    <td valign=top colspan="5">
      <p><font size="1"><b>Moody&#146;s Rating Category (1)</b> </font>
      <hr noshade align="center" size="1" width="88%">
    </td>
  </tr>
  <tr align="center">
    <td width=113 valign=top>
      <p><font size="1"><b>Aaa</b> </font>
      <hr noshade align="center" size="1" width="30%">
    </td>
    <td width=127 valign=top>
      <p><font size="1"><b>Aa</b> </font>
      <hr noshade align="center" size="1" width="30%">
    </td>
    <td width=120 valign=top>
      <p><font size="1"><b>A</b> </font>
      <hr noshade align="center" size="1" width="30%">
    </td>
    <td width=119 valign=top>
      <p><font size="1"><b>Baa</b> </font>
      <hr noshade align="center" size="1" width="30%">
    </td>
    <td width=121 valign=top>
      <p><font size="1"><b>Other (2)</b> </font>
      <hr noshade align="center" size="1" width="40%">
    </td>
  </tr>
  <tr align="center">
    <td width=113 valign=top>
      <p><font size="2">151% </font></p>
    </td>
    <td width=127 valign=top>
      <p><font size="2">159% </font></p>
    </td>
    <td width=120 valign=top>
      <p><font size="2">160% </font></p>
    </td>
    <td width=119 valign=top>
      <p><font size="2">173% </font></p>
    </td>
    <td width=121 valign=top>
      <p><font size="2">225% </font></p>
    </td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Cutoff rule Footnote" FSL="Workstation" -->
<hr size=1 noshade align=left  width=75>
<!-- MARKER FORMAT-SHEET="Footnote Left" FSL="Workstation" -->
<table width=100%>
  <tr>
    <td width=4% align=left valign=top><font size="1">(1) </font></td>
    <td width=2%>&nbsp;</td>
    <td width=94% align=left valign=top><font size="1">Ratings assigned by S&amp;P
      or Fitch are generally accepted by Moody&#146;s at face value. However,
      adjustments to face value may be made to particular categories of credits
      for which the S&amp;P and/or Fitch rating does not seem to approximate a
      Moody&#146;s rating equivalent. Split rated securities assigned by S&amp;P
      and Fitch will be accepted at the lower of the two ratings.</font></td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Footnote Left" FSL="Workstation" -->
<table width=100%>
  <tr>
    <td width=4% align=left valign=top><font size="1">(2) </font></td>
    <td width=2%>&nbsp;</td>
    <td width=94% align=left valign=top><font size="1">Municipal Bonds rated Ba1
      to B3 by Moody&#146;s or, if not rated by Moody&#146;s, rated BB+ to B-
      by S&amp;P or Fitch. In addition, Municipal Bonds not explicitly rated by
      Moody&#146;s, S&amp;P or Fitch, but rated at least the equivalent of B3
      internally by the Investment Adviser, provided that Moody&#146;s reviews
      and achieves sufficient comfort with the Investment Adviser&#146;s internal
      credit rating processes, will be included under &#147;Other&#148; in the
      table. Unless conclusions regarding liquidity risk as well as estimates
      of both the probability and severity of default for the Fund&#146;s assets
      can be derived from other sources as well as combined with a number of sources
      as presented by the Fund to Moody&#146;s, unrated Municipal Bonds which
      are rated at least the equivalent of B3 by the Investment Adviser internally
      are limited to 10% of Moody&#146;s Eligible Assets.</font></td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> 15</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 20; page: 20" -->
<table cellspacing=0 cellpadding=0 width="600" align="center">
  <tr align="center">
    <td width=600 valign=top colspan="2">
      <p align="center"><font size="1"><b>Moody&#146;s Rating Category </b> </font>
      <hr noshade align="center" size="1" width="68%">
    </td>
  </tr>
  <tr align="center">
    <td width=300 valign=top>
      <p><font size="1"><b>MIG-1, VMIG-1, P-1 (1)</b> </font>
      <hr noshade align="center" size="1" width="75%">
    </td>
    <td width=300 valign=top>
      <p><font size="1"><b>MIG-1, VMIG-1, P-1 (2)</b> </font>
      <hr noshade align="center" size="1" width="75%">
    </td>
  </tr>
  <tr align="center">
    <td width=300 valign=top>
      <p><font size="2">100% </font></p>
    </td>
    <td width=300 valign=top>
      <p><font size="2">136% </font></p>
    </td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Cutoff rule Footnote" FSL="Workstation" -->
<hr size=1 noshade align=left  width=75>
<!-- MARKER FORMAT-SHEET="Footnote Left" FSL="Workstation" -->
<table width=100%>
  <tr>
    <td width=4% align=left valign=top><font size="1">(1) </font></td>
    <td width=2%>&nbsp;</td>
    <td width=94% align=left valign=top><font size="1">Moody&#146;s rated Municipal
      Bonds that have a maturity less than or equal to 49 days and Municipal Bonds
      not rated by Moody&#146;s but rated the equivalent to MIG-1, VMIG-1, or
      P-1 by S&amp;P or Fitch that have a maturity less than or equal to 49 days.</font></td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Footnote Left" FSL="Workstation" -->
<table width=100%>
  <tr>
    <td width=4% align=left valign=top><font size="1">(2) </font></td>
    <td width=2%>&nbsp;</td>
    <td width=94% align=left valign=top><font size="1">Moody&#146;s rated Municipal
      Bonds that have a maturity greater than 49 days and Municipal Bonds not
      rated by Moody&#146;s but rated the equivalent to MIG-1, VMIG-1, or P-1
      by S&amp;P or Fitch that have a maturity greater than 49 days.</font></td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding
  the foregoing, no Moody&#146;s Discount Factor will be applied to cash or to
  Receivables for Municipal Bonds Sold that are due within five Business Days
  of such Valuation Date. The Moody&#146;s Discount Factor for Receivables for
  Municipal Bonds Sold that are due within six and 30 Business Days of such Valuation
  Date will be the Moody&#146;s Discount Factor applicable to the Municipal Bonds
  sold. &#147;Receivables for Municipal Bonds Sold,&#148; for purposes of calculating
  Moody&#146;s Eligible Assets as of any Valuation Date, means the book value
  of receivables for Municipal Bonds sold as of or prior to such Valuation Date
  if such receivables are due within 30 Business Days of such Valuation Date.
  </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Moody&#146;s Discount Factor for Inverse Floaters shall be the product of (x)
  the percentage determined by reference to the rating on the security underlying
  such Inverse Floaters multiplied by (y) 1.25. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Moody&#146;s Discount Factor for Rule 2a-7 Money Market Funds shall be 110%.
  </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Moody&#146;s guidelines impose certain requirements as to minimum issue size,
  issuer diversification and geographical concentration, as well as other requirements
  for purposes of determining whether Municipal Bonds constitute Moody&#146;s
  Eligible Assets, as set forth in the table on the following page: </font></p>
<table cellspacing=0 cellpadding=0 width="600" align="center">
  <tr valign="bottom" align="center">
    <td>
      <p><font size="1"><b>Rating</b> </font>
      <hr noshade align="center" size="1" width="50%">
    </td>
    <td>
      <p><font size="1"><b>Minimum Issue Size <br>
        ($ Millions)</b> </font>
      <hr noshade align="center" size="1" width="65%">
    </td>
    <td>
      <p><font size="1"><b>Maximum Underlying Obligor <br>
        (%) (1)</b> </font>
      <hr noshade align="center" size="1" width="65%">
    </td>
    <td>
      <p><font size="1"><b>Maximum State <br>
        Allowed (%) (1) (3)</b> </font>
      <hr noshade align="center" size="1" width="65%">
    </td>
  </tr>
  <tr valign="bottom" align="center">
    <td>
      <p><font size="2">Aaa </font></p>
    </td>
    <td>
      <p><font size="2">* </font></p>
    </td>
    <td>
      <p><font size="2">100 </font></p>
    </td>
    <td>
      <p><font size="2">100 </font></p>
    </td>
  </tr>
  <tr valign="bottom" align="center">
    <td>
      <p><font size="2">Aa </font></p>
    </td>
    <td>
      <p><font size="2">10 </font></p>
    </td>
    <td>
      <p><font size="2">20 </font></p>
    </td>
    <td>
      <p><font size="2">60 </font></p>
    </td>
  </tr>
  <tr valign="bottom" align="center">
    <td>
      <p><font size="2">A </font></p>
    </td>
    <td>
      <p><font size="2">10 </font></p>
    </td>
    <td>
      <p><font size="2">10 </font></p>
    </td>
    <td>
      <p><font size="2">40 </font></p>
    </td>
  </tr>
  <tr valign="bottom" align="center">
    <td>
      <p><font size="2">Baa </font></p>
    </td>
    <td>
      <p><font size="2">10 </font></p>
    </td>
    <td>
      <p><font size="2">6 </font></p>
    </td>
    <td>
      <p><font size="2">20 </font></p>
    </td>
  </tr>
  <tr valign="bottom" align="center">
    <td>
      <p><font size="2">Ba </font></p>
    </td>
    <td>
      <p><font size="2">10 </font></p>
    </td>
    <td>
      <p><font size="2">4 </font></p>
    </td>
    <td>
      <p><font size="2">12 </font></p>
    </td>
  </tr>
  <tr valign="bottom" align="center">
    <td>
      <p><font size="2">B </font></p>
    </td>
    <td>
      <p><font size="2">10 </font></p>
    </td>
    <td>
      <p><font size="2">3 </font></p>
    </td>
    <td>
      <p><font size="2">12 </font></p>
    </td>
  </tr>
  <tr valign="bottom" align="center">
    <td>
      <p><font size="2">Other (2) </font></p>
    </td>
    <td>
      <p><font size="2">10 </font></p>
    </td>
    <td>
      <p><font size="2">2 </font></p>
    </td>
    <td>
      <p><font size="2">12 </font></p>
    </td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Cutoff rule Footnote" FSL="Workstation" -->
<hr size=1 noshade align=left  width=75>
<!-- MARKER FORMAT-SHEET="Footnote Right" FSL="Workstation" -->
<table width=100%>
  <tr>
    <td width=4% align=right valign=top><font size="1"> * </font></td>
    <td width=2%>&nbsp;</td>
    <td width=94% align=left valign=top><font size="1">Not applicable.</font></td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Footnote Right" FSL="Workstation" -->
<table width=100%>
  <tr>
    <td width=4% align=right valign=top><font size="1">(1) </font></td>
    <td width=2%>&nbsp;</td>
    <td width=94% align=left valign=top><font size="1">The referenced percentages
      represent maximum cumulative totals for the related rating category and
      each lower rating category.</font></td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Footnote Right" FSL="Workstation" -->
<table width=100%>
  <tr>
    <td width=4% align=right valign=top><font size="1">(2) </font></td>
    <td width=2%>&nbsp;</td>
    <td width=94% align=left valign=top><font size="1">Municipal Bonds not rated
      by Moody&#146;s, S&amp;P or Fitch, but rated at least the equivalent of
      B3 internally by the Investment Adviser.</font></td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Footnote Right" FSL="Workstation" -->
<table width=100%>
  <tr>
    <td width=4% align=right valign=top><font size="1">(3) </font></td>
    <td width=2%>&nbsp;</td>
    <td width=94% align=left valign=top><font size="1">Territorial bonds (other
      than those issued by Puerto Rico and counted collectively) are each limited
      to 10% of Moody&#146;s Eligible Assets. For diversification purposes, Puerto
      Rico will be treated as a state.</font></td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
  purposes of the maximum underlying obligor requirement described above, any
  Municipal Bond backed by the guaranty, letter of credit or insurance issued
  by a third party will be deemed to be issued by such third party if the issuance
  of such third party credit is the sole determinant of the rating on such Bond.
  </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current
  Moody&#146;s guidelines also require that Municipal Bonds constituting Moody&#146;s
  Eligible Assets pay interest in cash, are publicly rated B3 or higher by Moody&#146;s
  or, if not rated by Moody&#146;s, but rated by S&amp;P or Fitch, are publicly
  rated at least B- by S&amp;P or Fitch, or if not explicitly rated by Moody&#146;s,
  S&amp;P or Fitch, be rated at least the equivalent of B3 internally by the Investment
  Adviser, provided that Moody&#146;s reviews and achieves sufficient comfort
  with the Investment Adviser&#146;s internal credit rating processes, not have
  suspended ratings by Moody&#146;s, if an Inverse Floater, be explicitly rated
  by Moody&#146;s, and be part of an issue of Municipal Bonds of at least $10,000,000
  (except for issues rated Aaa by Moody&#146;s, as provided in the chart above).
  </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When
  the Fund sells a Municipal Bond and agrees to repurchase it at a future date,
  the Discounted Value of such Municipal Bond will constitute a Moody&#146;s Eligible
  Asset and the amount the Fund is required to pay upon repurchase of such Bond
  will count as a liability for purposes of calculating the AMPS Basic Maintenance
  Amount. For so long as the AMPS are rated by Moody&#146;s, the Fund will not
  enter into any such reverse repurchase </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> 16</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 21; page: 21" --> <!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>agreements unless it has
  received written confirmation from Moody&#146;s that such transactions would
  not impair the rating then assigned the AMPS by Moody&#146;s. When the Fund
  purchases a Municipal Bond and agrees to sell it at a future date to another
  party, cash receivable by the Fund thereby will constitute a Moody&#146;s Eligible
  Asset if the long-term debt of such other party is rated at least A2 by Moody&#146;s
  and such agreement has a term of 30 days or less; otherwise the Discounted Value
  of such Bond will constitute a Moody&#146;s Eligible Asset. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;High
  Yield Municipal Bonds may comprise no more than 20% of Moody&#146;s Eligible
  Assets. Unless conclusions regarding liquidity risk as well as estimates of
  both the probability and severity of default for the Fund&#146;s assets can
  be derived from other sources as well as combined with a number of sources as
  presented by the Fund to Moody&#146;s, unrated High Yield Municipal Bonds which
  are rated at least the equivalent of B3 by the Investment Adviser internally
  are limited to 10% of Moody&#146;s Eligible Assets. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inverse
  Floaters, including primary market and secondary market residual interest bonds,
  may constitute no more than 10% of Moody&#146;s Eligible Assets. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding
  the foregoing, an asset will not be considered a Moody&#146;s Eligible Asset
  if it is (i) held in a margin account, (ii) subject to any material lien, mortgage,
  pledge, security interest or security agreement of any kind, (iii) held for
  the purchase of a security pursuant to a Forward Commitment or (iv) irrevocably
  deposited by the Fund for the payment of dividends or redemption. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
  so long as shares of AMPS are rated by Moody&#146;s, in managing the Fund&#146;s
  portfolio, the Investment Adviser will not alter the composition of the Fund&#146;s
  portfolio if, in the reasonable belief of the Investment Adviser, the effect
  of any such alteration would be to cause the Fund to have Moody&#146;s Eligible
  Assets with an aggregate Discounted Value, as of the immediately preceding Valuation
  Date, less than the AMPS Basic Maintenance Amount as of such Valuation Date;
  provided, however, that in the event that, as of the immediately preceding Valuation
  Date, the aggregate Discounted Value of Moody&#146;s Eligible Assets exceeded
  the AMPS Basic Maintenance Amount by 5% or less, the Investment Adviser will
  not alter the composition of the Fund&#146;s portfolio in a manner reasonably
  expected to reduce the aggregate Discounted Value of Moody&#146;s Eligible Assets
  unless the Fund shall have confirmed that, after giving effect to such alteration,
  the aggregate Discounted Value of Moody&#146;s Eligible Assets would exceed
  the AMPS Basic Maintenance Amount. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
  so long as any shares of AMPS are rated by Moody&#146;s, the Fund will not engage
  in Bond Market Association Municipal Swap Index swap transactions (&#147;BMA
  swap transactions&#148;), buy or sell financial futures contracts, write, purchase
  or sell call options on financial futures contracts or purchase put options
  on financial futures contracts or write call options (except covered call options)
  on portfolio securities unless it receives written confirmation from Moody&#146;s
  that engaging in such transactions would not impair the ratings then assigned
  to the shares of AMPS by Moody&#146;s, except that the Fund may engage in BMA
  swap transactions, purchase or sell exchange-traded financial futures contracts
  based on any index approved by Moody&#146;s or Treasury Bonds, and purchase,
  write or sell exchange-traded put options on such financial futures contracts,
  and purchase, write or sell exchange-traded call options on such financial futures
  contracts (collectively, &#147;Moody&#146;s Hedging Transactions&#148;), subject
  to the following limitations: </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
      the Fund will not engage in any Moody&#146;s Hedging Transaction based on
      the Municipal Index (other than Closing Transactions) that would cause the
      Fund at the time of such transaction to own or have sold (A) outstanding
      financial futures contracts based on the Municipal Index exceeding in number
      10% of the average number of daily traded financial futures contracts based
      on the Municipal Index in the 30 days preceding the time of effecting such
      transaction as reported by <i>The Wall Street Journal</i> or (B) outstanding
      financial futures contracts based on the Municipal Index having a fair market
      value exceeding 50% of the fair market value of all Municipal Bonds constituting
      Moody&#146;s Eligible Assets owned by the Fund (other than Moody&#146;s
      Eligible Assets already subject to a Moody&#146;s Hedging Transaction);
      </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)
      the Fund will not engage in any Moody&#146;s Hedging Transaction based on
      Treasury Bonds (other than Closing Transactions) that would cause the Fund
      at the time of such transaction to own or have sold (A) outstanding financial
      futures contracts based on Treasury Bonds having an aggregate fair market
      value exceeding 40% of the aggregate fair market value of Moody&#146;s Eligible
      Assets owned by the Fund and rated Aa by Moody&#146;s (or, if not rated
      by Moody&#146;s but rated by S&amp;P, rated AAA by S&amp;P) or (B) outstanding
      financial futures contracts based on Treasury Bonds having an aggregate
      fair market value exceeding 80% of the aggregate fair market value of all
      Municipal Bonds constituting Moody&#146;s Eligible Assets owned by </font>
    </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> 17</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 22; page: 22" --> <!-- MARKER FORMAT-SHEET="Para Flush 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2> the Fund
      (other than Moody&#146;s Eligible Assets already subject to a Moody&#146;s
      Hedging Transaction) and rated Baa or A by Moody&#146;s (or, if not rated
      by Moody&#146;s but rated by S&amp;P, rated A or AA by S&amp;P) (for purposes
      of the foregoing clauses (i) and (ii), the Fund shall be deemed to own the
      number of financial futures contracts that underlie any outstanding options
      written by the Fund); </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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<i> The Wall Street Journal</i>
      is less than 5,000; </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)
      the Fund will engage in a Closing Transaction to close out any outstanding
      financial futures contract by no later than the fifth Business Day of the
      month in which such contract expires and will engage in a Closing Transaction
      to close out any outstanding option on a financial futures contract by no
      later than the first Business Day of the month in which such option expires;
      </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)
      the Fund will engage in Moody&#146;s Hedging Transactions only with respect
      to financial futures contracts or options thereon having the next settlement
      date or the settlement date immediately thereafter; </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)
      the Fund (A) will not engage in options and futures transactions for leveraging
      or speculative purposes, except that the Fund may engage in an option or
      futures transaction so long as the combination of the Fund&#146;s non-derivative
      positions, together with the relevant option or futures transaction, produces
      a synthetic investment position, or the same economic result, that could
      be achieved by an investment, consistent with the Fund&#146;s investment
      objective and policies, in a security that is not an option or futures transaction,
      subject to the Investment Adviser periodically demonstrating to Moody&#146;s
      that said economic results are achieved, and (B) will not write any call
      options or sell any financial futures contracts for the purpose of hedging
      the anticipated purchase of an asset prior to completion of such purchase;
      </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii)
      the Fund will not enter into an option or futures transaction unless, after
      giving effect thereto, the Fund would continue to have Moody&#146;s Eligible
      Assets with an aggregate Discounted Value equal to or greater than the AMPS
      Basic Maintenance Amount; and </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii)
      the Fund will not engage in BMA swap transactions with respect to more than
      20% of the Fund&#146;s net assets; provided that the Fund&#146;s use of
      futures will proportionately decrease as the Fund&#146;s use of BMA swap
      transactions increases, and vice-versa. </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
  purposes of determining whether the Fund has Moody&#146;s Eligible Assets with
  an aggregate Discounted Value that equals or exceeds the AMPS Basic Maintenance
  Amount, the Discounted Value of Moody&#146;s Eligible Assets that the Fund is
  obligated to deliver or receive pursuant to an outstanding futures contract
  or option shall be as follows: (i) assets subject to call options written by
  the Fund that are either exchange-traded and &#147;readily reversible&#148;
  or that expire within 49 days after the date as of which such valuation is made
  shall be valued at the lesser of (A) Discounted Value and (B) the exercise price
  of the call option written by the Fund; (ii) assets subject to call options
  written by the Fund not meeting the requirements of clause (i) of this sentence
  shall have no value; (iii) assets subject to put options written by the Fund
  shall be valued at the lesser of (A) the exercise price and (B) the Discounted
  Value of the subject security; (iv) futures contracts shall be valued at the
  lesser of (A) settlement price and (B) the Discounted Value of the subject security,
  provided that, if a contract matures within 49 days after the date as of which
  such valuation is made, where the Fund is the seller the contract may be valued
  at the settlement price and where the Fund is the buyer the contract may be
  valued at the Discounted Value of the subject securities; and (v) where delivery
  may be made to the Fund with any security of a class of securities, the Fund
  shall assume that it will take delivery of the security with the lowest Discounted
  Value. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
  purposes of determining whether the Fund has Moody&#146;s Eligible Assets with
  an aggregate Discounted Value that equals or exceeds the AMPS Basic Maintenance
  Amount, the following amounts shall be subtracted from the aggregate Discounted
  Value of the Moody&#146;s Eligible Assets held by the Fund: (i) 10% of the exercise
  price of a written call option; (ii) the exercise price of any written put option;
  (iii) where the Fund is the seller under a financial futures contract, 10% of
  the settlement price of the financial futures contract; (iv) where the Fund
  is the purchaser under a financial futures contract, the settlement price of
  assets purchased under such financial futures contract; (v) the settlement price
  of the underlying financial futures contract if the Fund writes put options
  on a financial futures contract; and (vi) 105% of the fair market value of the
  underlying financial futures contracts if the Fund writes call options on a
  financial futures contract and does not own the underlying contract. </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> 18</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 23; page: 23" --> <!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
  so long as any shares of AMPS are rated by Moody&#146;s, the Fund will not enter
  into any contract to purchase securities for a fixed price at a future date
  beyond customary settlement time (other than such contracts that constitute
  Moody&#146;s Hedging Transactions), except that the Fund may enter into such
  contracts to purchase newly-issued securities on the date such securities are
  issued (&#147;Forward Commitments&#148;), subject to the following limitations:
  </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
      the Fund will maintain in a segregated account with its custodian cash,
      cash equivalents or short-term, fixed-income securities rated P-1, MIG-1
      or VMIG-1 by Moody&#146;s and maturing prior to the date of the Forward
      Commitment with a fair market value that equals or exceeds the amount of
      the Fund&#146;s obligations under any Forward Commitments to which it is
      from time to time a party or long-term, fixed income securities with a Discounted
      Value that equals or exceeds the amount of the Fund&#146;s obligations under
      any Forward Commitment to which it is from time to time a party, and </font>
    </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)
      the Fund will not enter into a Forward Commitment unless, after giving effect
      thereto, the Fund would continue to have Moody&#146;s Eligible Assets with
      an aggregate Discounted Value equal to or greater than the AMPS Basic Maintenance
      Amount. </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
  purposes of determining whether the Fund has Moody&#146;s Eligible Assets with
  an aggregate Discounted Value that equals or exceeds the AMPS Basic Maintenance
  Amount, the Discounted Value of all Forward Commitments to which the Fund is
  a party and of all securities deliverable to the Fund pursuant to such Forward
  Commitments shall be zero. </font></p>
<!-- MARKER FORMAT-SHEET="Cutoff rule centered" FSL="Workstation" -->
<hr size=1 noshade align=CENTER width=150>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
  so long as shares of AMPS are rated by S&amp;P or Moody&#146;s, the Fund, unless
  it has received written confirmation from S&amp;P and/or Moody&#146;s, as the
  case may be, that such action would not impair the ratings then assigned to
  the AMPS by S&amp;P and/or Moody&#146;s, as the case may be, will not (i) borrow
  money except for the purpose of clearing transactions in portfolio securities
  (which borrowings under any circumstances shall be limited to the lesser of
  $10 million and an amount equal to 5% of the fair market value of the Fund&#146;s
  assets at the time of such borrowings and which borrowings shall be repaid within
  60 days and not be extended or renewed and shall not cause the aggregate Discounted
  Value of Moody&#146;s Eligible Assets and S&amp;P Eligible Assets to be less
  than the AMPS Basic Maintenance Amount), (ii) engage in short sales of securities,
  (iii) lend any securities, (iv) issue any class or series of stock ranking prior
  to or on a parity with the AMPS with respect to the payment of dividends or
  the distribution of assets upon dissolution, liquidation or winding up of the
  Fund, (v) reissue any securities previously purchased or redeemed by the Fund,
  (vi) merge or consolidate into or with any other corporation or entity, (vii)
  change the Fund&#146;s pricing service or (viii) engage in reverse repurchase
  agreements. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
  as long as the AMPS are rated by S&amp;P, the Fund will not, unless it has received
  written confirmation from S&amp;P that such action would not impair the rating
  then assigned to the shares of AMPS by S&amp;P, engage in interest rate swaps,
  caps and floors, except that the Fund may, without obtaining the written consent
  described above, engage in swaps, caps and floors if: (i) the counterparty to
  the swap transaction has a short-term rating of A-1 or, if the counterparty
  does not have a short-term rating, the counterparty&#146;s senior unsecured
  long-term debt rating is A- or higher, (ii) the original aggregate notional
  amount of the interest rate swap transaction or transactions is not to be greater
  than the liquidation preference of the AMPS, (iii) the interest rate swap transaction
  will be marked-to-market weekly by the swap counterparty, (iv) if the Fund fails
  to maintain an aggregate discounted value at least equal to the AMPS Basic Maintenance
  Amount on two consecutive Valuation Dates then the agreement shall terminate
  immediately, (v) for the purpose of calculating the Discounted Value of S&amp;P
  Eligible Assets, 90% of any positive mark-to-market valuation of the Fund&#146;s
  rights will be S&amp;P Eligible Assets, 100% of any negative mark-to-market
  valuation of the Fund&#146;s rights will be included in the calculation of the
  AMPS Basic Maintenance Amount, and (vi) the Fund must maintain liquid assets
  with a value at least equal to the net amount of the excess, if any, of the
  Fund&#146;s obligations over its entitlement with respect to each swap. For
  caps/floors, the Fund must maintain liquid assets with a value at least equal
  to the Fund&#146;s obligations with respect to such caps or floors. </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> 19</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 24; page: 24" --> <!-- MARKER FORMAT-SHEET="Center Head 2-Bold" FSL="Workstation" -->
<p align=CENTER><font face="Times New Roman, Times, Serif" size=2><b>DIRECTORS
  AND OFFICERS </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Directors of the Fund consist of seven individuals, six of whom are not &#147;interested
  persons&#148; of the Fund as defined in the 1940 Act (the &#147;non-interested
  Directors&#148; or &#147;independent Directors&#148;). The Directors are responsible
  for the oversight of the operations of the Fund and perform the various duties
  imposed on the directors of investment companies by the 1940 Act. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
  non-interested Director is a member of the Fund&#146;s Audit Committee (the
  &#147;Audit Committee&#148;). The principal responsibilities of the Audit Committee
  are the appointment, compensation, retention and oversight of the Fund&#146;s
  independent registered public accounting firm, including the resolution of disagreements
  regarding financial reporting between Fund management and such independent registered
  public accounting firm. The Audit Committee&#146;s responsibilities include,
  without limitation, to (i) review with the independent registered public accounting
  firm the arrangements for and scope of annual and special audits and any other
  services provided by the independent registered public accounting firm to the
  Fund; (ii) review with the independent registered public accounting firm any
  audit problems or difficulties encountered during or relating to the conduct
  of the audit; (iii) ensure that the independent registered public accounting
  firm submits on a periodic basis a formal written statement with respect to
  their independence, discuss with the independent registered public accounting
  firm any relationships or services that may impact the objectivity and independence
  of the Fund&#146;s independent registered public accounting firm; and (iv) consider
  information and comments of the independent registered public accounting firm
  with respect to the Fund&#146;s accounting and financial reporting policies,
  procedures and internal control over financial reporting and Fund management&#146;s
  responses thereto. The Board of Directors of the Fund has adopted a written
  charter for the Audit Committee. The Audit Committee has retained independent
  legal counsel to assist it in connection with these duties. The Audit Committee
  met four times during the Fund&#146;s fiscal year ended April 30, 2005. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cynthia
  A. Montgomery and Edward D. Zinbarg are the members of the Fund&#146;s Nominating
  Committee (the &#147;Nominating Committee&#148;). The principal responsibilities
  of the Nominating Committee are to identify individuals qualified to serve as
  non-interested Directors of the Fund and to recommend its nominees for consideration
  by the full Board. While the Nominating Committee is solely responsible for
  the selection and nomination of the Fund&#146;s non-interested Directors, the
  Nominating Committee may consider nominations for the office of the Director
  made by Fund stockholders 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 met once during the Fund&#146;s fiscal
  year ended April 30, 2005. </font></p>
<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Biographical
  Information </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain
  biographical and other information relating to the non-interested Directors
  of the Fund is set forth below, including their ages, their principal occupations
  for at least the last five years, the length of time served, the total number
  of portfolios overseen in the complex of funds advised by the Investment Adviser,
  Merrill Lynch Investment Managers, L.P. (&#147;MLIM&#148;) or their affiliates
  (&#147;MLIM/FAM-advised funds&#148;) and other public directorships. </font></p>
<table border=0 cellspacing=0 cellpadding=0 width="100%">
  <tr valign="bottom" align="center">
    <td width=146>
      <p align="center"><font size="1"><b>Name, Address* and <br>
        Age of Director</b> </font>
      <hr noshade align="center" size="1" width="100%">
    </td>
    <td width=10>
      <p align="center"><font size="1"><b>&nbsp;</b> </font></p>
    </td>
    <td width=91>
      <p align="center"><font size="1"><b>Position(s) <br>
        Held with <br>
        the Fund</b> </font>
      <hr noshade align="center" size="1" width="100%">
    </td>
    <td width=13>
      <p align="center"><font size="1"><b>&nbsp;</b> </font></p>
    </td>
    <td width=98>
      <p align="center"><font size="1"><b>Term of <br>
        Office** and <br>
        Length of <br>
        Time Served</b> </font>
      <hr noshade align="center" size="1" width="100%">
    </td>
    <td width=12>
      <p align="center"><font size="1"><b>&nbsp;</b> </font></p>
    </td>
    <td width=318>
      <p align="center"><font size="1"><b>Principal Occupation(s) <br>
        During Past Five Years</b> </font>
      <hr noshade align="center" size="1" width="100%">
    </td>
    <td width=9>
      <p align="center"><font size="1"><b>&nbsp;</b> </font></p>
    </td>
    <td width=119>
      <p align="center"><font size="1"><b>Number of <br>
        MLIM/FAM- <br>
        Advised Funds <br>
        and Portfolios <br>
        Overseen</b> </font>
      <hr noshade align="center" size="1" width="100%">
    </td>
    <td width=10>
      <p align="center"><font size="1"><b>&nbsp;</b> </font></p>
    </td>
    <td width=146>
      <p align="center"><font size="1"><b>Public <br>
        Directorships</b> </font>
      <hr noshade align="center" size="1" width="100%">
    </td>
  </tr>
  <tr>
    <td valign=top width=146>
      <p><font size="1">Ronald W. Forbes (64)*** </font></p>
    </td>
    <td valign=top width=10>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=91>
      <p><font size="1">Director and Chairman </font></p>
    </td>
    <td valign=top width=13>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=98>
      <p><font size="1">Director since 1993; Chairman since 2004 </font></p>
    </td>
    <td valign=top width=12>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=318>
      <p><font size="1">Professor Emeritus of Finance, School of Business, State
        University of New York at Albany since 2000 and Professor thereof from
        1989 to 2000; International Consultant, Urban Institute, Washington, D.C.
        from 1995 to 1999. </font></p>
    </td>
    <td valign=top width=9>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=119>
      <p><font size="1">48 registered investment companies consisting of <br>
        51 portfolios </font></p>
    </td>
    <td valign=top width=10>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=146>
      <p><font size="1">None </font></p>
    </td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Fund Name Center (Pro)" FSL="Workstation" -->
<p>&nbsp;</p><table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> 20</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 24; page: 24" -->
<p align=CENTER>&nbsp;</p>
<table border=0 cellspacing=0 cellpadding=0 width="100%">
  <tr valign="bottom" align="center">
    <td width=146>
      <p align="center"><font size="1"><b>Name, Address* and <br>
        Age of Director</b> </font>
      <hr noshade align="center" size="1" width="100%">
    </td>
    <td width=10>
      <p align="center"><font size="1"><b>&nbsp;</b> </font></p>
    </td>
    <td width=91>
      <p align="center"><font size="1"><b>Position(s) <br>
        Held with <br>
        the Fund</b> </font>
      <hr noshade align="center" size="1" width="100%">
    </td>
    <td width=13>
      <p align="center"><font size="1"><b>&nbsp;</b> </font></p>
    </td>
    <td width=98>
      <p align="center"><font size="1"><b>Term of <br>
        Office** and <br>
        Length of <br>
        Time Served</b> </font>
      <hr noshade align="center" size="1" width="100%">
    </td>
    <td width=12>
      <p align="center"><font size="1"><b>&nbsp;</b> </font></p>
    </td>
    <td width=318>
      <p align="center"><font size="1"><b>Principal Occupation(s) <br>
        During Past Five Years</b> </font>
      <hr noshade align="center" size="1" width="100%">
    </td>
    <td width=9>
      <p align="center"><font size="1"><b>&nbsp;</b> </font></p>
    </td>
    <td width=119>
      <p align="center"><font size="1"><b>Number of <br>
        MLIM/FAM- <br>
        Advised Funds <br>
        and Portfolios <br>
        Overseen</b> </font>
      <hr noshade align="center" size="1" width="100%">
    </td>
    <td width=10>
      <p align="center"><font size="1"><b>&nbsp;</b> </font></p>
    </td>
    <td width=146>
      <p align="center"><font size="1"><b>Public <br>
        Directorships</b> </font>
      <hr noshade align="center" size="1" width="100%">
    </td>
  </tr>
  <tr>
    <td valign=top width=146>
      <p><font size="1">Cynthia A. Montgomery (52)**** </font></p>
    </td>
    <td valign=top width=10>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=91>
      <p><font size="1">Director </font></p>
    </td>
    <td valign=top width=13>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=98>
      <p><font size="1">Director since 1993 </font></p>
    </td>
    <td valign=top width=12>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=318>
      <p><font size="1">Professor, Harvard Business School since 1989; Associate
        Professor, J.L. Kellogg Graduate School of Management, Northwestern University
        from 1985 to 1989; Associate Professor, Graduate School of Business Administration,
        University of Michigan from 1979 to 1985; Director, Harvard Business School
        of Publishing since 2005. </font></p>
    </td>
    <td valign=top width=9>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=119>
      <p><font size="1">48 registered investment companies consisting of <br>
        51 portfolios </font></p>
    </td>
    <td valign=top width=10>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=146>
      <p><font size="1">Newell Rubber-maid Inc. (manufacturing) </font></p>
    </td>
  </tr>
  <tr>
    <td valign=top width=146>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=10>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=91>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=13>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=98>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=12>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=318>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=9>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=119>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=10>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=146>
      <p><font size="1">&nbsp; </font></p>
    </td>
  </tr>
  <tr>
    <td valign=top width=146>
      <p><font size="1">Jean Margo Reid (59) </font></p>
    </td>
    <td valign=top width=10>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=91>
      <p><font size="1">Director </font></p>
    </td>
    <td valign=top width=13>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=98>
      <p><font size="1">Director since 2004 </font></p>
    </td>
    <td valign=top width=12>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=318>
      <p><font size="1">Self-employed consultant since 2001; Counsel of Alliance
        Capital Management (investment adviser) in 2000; General Counsel, Director
        and Secretary of Sanford C. Bernstein &amp; Co., Inc. (investment adviser/broker-dealer)
        from 1997 to 2000; Secretary, Sanford C. Bernstein, Inc. from 1994 to
        2000; Director and Secretary of SCB, Inc. since 1998; Director and Secretary
        of SCB Partners, Inc. since 2000; and Director of Covenant House from
        2001 to 2004. </font></p>
    </td>
    <td valign=top width=9>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=119>
      <p><font size="1">48 registered investment companies consisting of <br>
        51 portfolios </font></p>
    </td>
    <td valign=top width=10>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=146>
      <p><font size="1">None </font></p>
    </td>
  </tr>
  <tr>
    <td valign=top width=146>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=10>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=91>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=13>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=98>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=12>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=318>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=9>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=119>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=10>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=146>
      <p><font size="1">&nbsp; </font></p>
    </td>
  </tr>
  <tr>
    <td valign=top width=146>
      <p><font size="1">Roscoe S. Suddarth (69) </font></p>
    </td>
    <td valign=top width=10>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=91>
      <p><font size="1">Director </font></p>
    </td>
    <td valign=top width=13>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=98>
      <p><font size="1">Director since 2000 </font></p>
    </td>
    <td valign=top width=12>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=318>
      <p><font size="1">President, Middle East Institute, from 1995 to 2001; Foreign
        Service Officer, United States Foreign Service, from 1961 to 1995; Career
        Minister from 1989 to 1995; Deputy Inspector General, U.S. Department
        of State, from 1991 to 1994; U.S. Ambassador to the Hashemite Kingdom
        of Jordan, from 1987 to 1990. </font></p>
    </td>
    <td valign=top width=9>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=119>
      <p><font size="1">48 registered investment companies consisting of <br>
        51 portfolios </font></p>
    </td>
    <td valign=top width=10>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=146>
      <p><font size="1">None </font></p>
    </td>
  </tr>
  <tr>
    <td valign=top width=146>
      <p><font size="2">&nbsp; </font></p>
    </td>
    <td valign=top width=10>
      <p><font size="2">&nbsp; </font></p>
    </td>
    <td valign=top width=91>
      <p><font size="2">&nbsp; </font></p>
    </td>
    <td valign=top width=13>
      <p><font size="2">&nbsp; </font></p>
    </td>
    <td valign=top width=98>
      <p><font size="2">&nbsp; </font></p>
    </td>
    <td valign=top width=12>
      <p><font size="2">&nbsp; </font></p>
    </td>
    <td valign=top width=318>
      <p><font size="2">&nbsp; </font></p>
    </td>
    <td valign=top width=9>
      <p><font size="2">&nbsp; </font></p>
    </td>
    <td valign=top width=119>
      <p><font size="2">&nbsp; </font></p>
    </td>
    <td valign=top width=10>
      <p><font size="2">&nbsp; </font></p>
    </td>
    <td valign=top width=146>
      <p><font size="2">&nbsp; </font></p>
    </td>
  </tr>
  <tr>
    <td valign=top width=146>
      <p><font size="1">Richard R. West (67) </font></p>
    </td>
    <td valign=top width=10>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=91>
      <p><font size="1">Director </font></p>
    </td>
    <td valign=top width=13>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=98>
      <p><font size="1">Director since 1993 </font></p>
    </td>
    <td valign=top width=12>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=318>
      <p><font size="1">Professor of Finance from 1984 to 1995, Dean from 1984
        to 1993 and since 1995 Dean Emeritus of New York University&#146;s Leonard
        N. Stern School of Business Administration. </font></p>
    </td>
    <td valign=top width=9>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=119>
      <p><font size="1">48 registered investment companies consisting of <br>
        51 portfolios </font></p>
    </td>
    <td valign=top width=10>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=146>
      <p><font size="1">Bowne &amp; Co., Inc. (financial printers); Vornado Realty
        Trust (real estate company); Alexander&#146;s, Inc. (real estate company)
        </font></p>
    </td>
  </tr>
  <tr>
    <td valign=top width=146>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=10>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=91>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=13>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=98>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=12>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=318>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=9>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=119>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=10>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=146>
      <p><font size="1">&nbsp; </font></p>
    </td>
  </tr>
  <tr>
    <td valign=top width=146>
      <p><font size="1">Edward D. Zinbarg (70) </font></p>
    </td>
    <td valign=top width=10>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=91>
      <p><font size="1">Director </font></p>
    </td>
    <td valign=top width=13>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=98>
      <p><font size="1">Director since 2000 </font></p>
    </td>
    <td valign=top width=12>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=318>
      <p><font size="1">Self-employed financial consultant since 1994; Executive
        Vice President of the Prudential Insurance Company of America from 1988
        to 1994; Former Director of Prudential Reinsurance Company and former
        Trustee of the Prudential Foundation. </font></p>
    </td>
    <td valign=top width=9>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=119>
      <p><font size="1">48 registered investment companies consisting of <br>
        51 portfolios </font></p>
    </td>
    <td valign=top width=10>
      <p><font size="1">&nbsp; </font></p>
    </td>
    <td valign=top width=146>
      <p><font size="1">None </font></p>
    </td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Cutoff rule Footnote" FSL="Workstation" -->
<hr size=1 noshade align=left  width=75>
<!-- MARKER FORMAT-SHEET="Footnote Right" FSL="Workstation" -->
<table width=100%>
  <tr>
    <td width=4% align=right valign=top><font size="1"> * </font></td>
    <td width=2%>&nbsp;</td>
    <td width=94% align=left valign=top><font size="1">The address of each non-interested
      Director is P.O. Box 9095, Princeton, New Jersey 08543-9095. </font></td>
  </tr>
</table>
<table width=100%>
  <tr>
    <td width=4% align=right valign=top><font size="1">** </font></td>
    <td width=2%>&nbsp;</td>
    <td width=94% align=left valign=top><font size="1">Each Director serves until
      his or her successor is elected and qualified, until December 31 of the
      year in which he or she turns 72, or until his or her death, resignation,
      or removal as provided in the Fund&#146;s by-laws or charter or by statute.</font></td>
  </tr>
</table>
<table width=100%>
  <tr>
    <td width=4% align=right valign=top><font size="1"> *** </font></td>
    <td width=2%>&nbsp;</td>
    <td width=94% align=left valign=top><font size="1">Chairman of the Board and
      Audit Committee.</font></td>
  </tr>
</table>
<table width=100%>
  <tr>
    <td width=4% align=right valign=top><font size="1"> ****</font></td>
    <td width=2%>&nbsp;</td>
    <td width=94% align=left valign=top><font size="1"> Chairman of the Nominating
      Committee.</font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain
  biographical and other information relating to the Director who is an &#147;interested
  person&#148; of the Fund as defined in the 1940 Act (the &#147;interested Director&#148;)
  and the other officers of the Fund is set forth below, including their ages,
  their principal occupations for at least the last five years, the length of
  time served, the total number of portfolios overseen in MLIM/FAM-advised funds
  and public directorships held. </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> 21</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 26; page: 26" -->
<table border=0 cellspacing=0 cellpadding=0 width="100%">
  <tr valign="bottom" align="center">
    <td width=12%>
      <p align="center"><b><font size="1">Name, Address* and Age </font></b>
      <hr noshade align="center" size="1">
    </td>
    <td width=1%>
      <p align="center">&nbsp;</p>
    </td>
    <td width=9%>
      <p align="center"><b><font size="1">Position(s) <br>
        Held with the <br>
        Fund </font></b>
      <hr noshade align="center" size="1">
    </td>
    <td width=1%>
      <p align="center">&nbsp;</p>
    </td>
    <td width=9%>
      <p align="center"><b><font size="1">Term of Office <br>
        and Length of <br>
        Time Served** </font></b>
      <hr noshade align="center" size="1">
    </td>
    <td width=1%>
      <p align="center">&nbsp;</p>
    </td>
    <td width=37%>
      <p align="center"><b><font size="1">Principal Occupation(s) <br>
        During Past Five Years </font></b>
      <hr noshade align="center" size="1">
    </td>
    <td width=1%>
      <p align="center">&nbsp;</p>
    </td>
    <td width=15%>
      <p align="center"><b><font size="1">Number of <br>
        MLIM/FAM- <br>
        Advised Funds <br>
        and Portfolios <br>
        Overseen </font></b>
      <hr noshade align="center" size="1">
    </td>
    <td width=1%>
      <p align="center">&nbsp;</p>
    </td>
    <td width=13%>
      <p align="center"><b><font size="1">Public <br>
        Directorships </font></b>
      <hr noshade align="center" size="1">
    </td>
  </tr>
  <tr>
    <td valign=top width=12%>
      <p><font size="1">Robert C. Doll, Jr. (50)*** </font></p>
    </td>
    <td valign=top width=1%>
      <p>&nbsp;</p>
    </td>
    <td valign=top width=9%>
      <p><font size="1">Director and President </font></p>
    </td>
    <td valign=top width=1%>
      <p>&nbsp;</p>
    </td>
    <td valign=top width=9%>
      <p><font size="1">Director and President**** since 2005 </font></p>
    </td>
    <td valign=top width=1%>
      <p>&nbsp;</p>
    </td>
    <td valign=top width=37%>
      <p><font size="1">President of MLIM/FAM advised funds since 2005; President
        of MLIM and FAM since 2001; Co-Head (Americas Region) of FAM and MLIM
        (which terms as used herein include their corporate predecessors) from
        2000 to 2001 and Senior Vice President thereof from 1999 to 2001; President
        and Director of Princeton Services, Inc. (&#147;Princeton Services&#148;)
        since 2001; President of Princeton Administrators L.P. since 2001; Chief
        Investment Officer of Oppenheimer Funds, Inc. in 1999 and Executive Vice
        President thereof from 1991 to 1999. </font></p>
    </td>
    <td valign=top width=1%>
      <p>&nbsp;</p>
    </td>
    <td valign=top width=15%>
      <p><font size="1">125 registered investment companies consisting of <br>
        169 portfolios </font></p>
    </td>
    <td valign=top width=1%>
      <p>&nbsp;</p>
    </td>
    <td valign=top width=13%>
      <p><font size="1">None </font></p>
    </td>
  </tr>
  <tr>
    <td valign=top width=12%><font size="1"></font></td>
    <td valign=top width=1%><font size="1"></font></td>
    <td valign=top width=9%><font size="1"></font></td>
    <td valign=top width=1%><font size="1"></font></td>
    <td valign=top width=9%><font size="1"></font></td>
    <td valign=top width=1%><font size="1"></font></td>
    <td valign=top width=37%><font size="1"></font></td>
    <td valign=top width=1%><font size="1"></font></td>
    <td valign=top width=15%><font size="1"></font></td>
    <td valign=top width=1%><font size="1"></font></td>
    <td valign=top width=13%><font size="1"></font></td>
  </tr>
  <tr>
    <td valign=top width=12%>
      <p><font size="1">Donald C. Burke (45) </font></p>
    </td>
    <td valign=top width=1%>
      <p>&nbsp;</p>
    </td>
    <td valign=top width=9%>
      <p><font size="1">Vice President and Treasurer </font></p>
    </td>
    <td valign=top width=1%>
      <p>&nbsp;</p>
    </td>
    <td valign=top width=9%>
      <p><font size="1">Vice President and Treasurer since 1997 </font></p>
    </td>
    <td valign=top width=1%>
      <p>&nbsp;</p>
    </td>
    <td valign=top width=37%>
      <p><font size="1">First Vice President of MLIM and FAM since 1997 and Treasurer
        thereof since 1999; Senior Vice President, Director and Treasurer of Princeton
        Services since 1999; Vice President of FAMD since 1999; Vice President
        of MLIM and FAM from 1990 to 1997; Director of Taxation of MLIM since
        1990. </font></p>
    </td>
    <td valign=top width=1%>
      <p>&nbsp;</p>
    </td>
    <td valign=top width=15%>
      <p><font size="1">131 registered investment companies consisting of <br>
        175 portfolios </font></p>
    </td>
    <td valign=top width=1%>
      <p>&nbsp;</p>
    </td>
    <td valign=top width=13%>
      <p><font size="1">None </font></p>
    </td>
  </tr>
  <tr>
    <td valign=top width=12%><font size="1"></font></td>
    <td valign=top width=1%><font size="1"></font></td>
    <td valign=top width=9%><font size="1"></font></td>
    <td valign=top width=1%><font size="1"></font></td>
    <td valign=top width=9%><font size="1"></font></td>
    <td valign=top width=1%><font size="1"></font></td>
    <td valign=top width=37%><font size="1"></font></td>
    <td valign=top width=1%><font size="1"></font></td>
    <td valign=top width=15%><font size="1"></font></td>
    <td valign=top width=1%><font size="1"></font></td>
    <td valign=top width=13%><font size="1"></font></td>
  </tr>
  <tr>
    <td valign=top width=12%>
      <p><font size="1">Kenneth A. Jacob (54) </font></p>
    </td>
    <td valign=top width=1%>
      <p>&nbsp;</p>
    </td>
    <td valign=top width=9%>
      <p><font size="1">Senior Vice President </font></p>
    </td>
    <td valign=top width=1%>
      <p>&nbsp;</p>
    </td>
    <td valign=top width=9%>
      <p><font size="1">Senior Vice President since 2002 </font></p>
    </td>
    <td valign=top width=1%>
      <p>&nbsp;</p>
    </td>
    <td valign=top width=37%>
      <p><font size="1">Managing Director of MLIM since 2000; First Vice President
        of MLIM from 1997 to 2000; Vice President of MLIM from 1984 to 1997. </font></p>
    </td>
    <td valign=top width=1%>
      <p>&nbsp;</p>
    </td>
    <td valign=top width=15%>
      <p><font size="1">38 registered investment companies consisting of <br>
        50 portfolios </font></p>
    </td>
    <td valign=top width=1%>
      <p>&nbsp;</p>
    </td>
    <td valign=top width=13%>
      <p><font size="1">None </font></p>
    </td>
  </tr>
  <tr>
    <td valign=top width=12%><font size="1"></font></td>
    <td valign=top width=1%><font size="1"></font></td>
    <td valign=top width=9%><font size="1"></font></td>
    <td valign=top width=1%><font size="1"></font></td>
    <td valign=top width=9%><font size="1"></font></td>
    <td valign=top width=1%><font size="1"></font></td>
    <td valign=top width=37%><font size="1"></font></td>
    <td valign=top width=1%><font size="1"></font></td>
    <td valign=top width=15%><font size="1"></font></td>
    <td valign=top width=1%><font size="1"></font></td>
    <td valign=top width=13%><font size="1"></font></td>
  </tr>
  <tr>
    <td valign=top width=12%>
      <p><font size="1">John M. Loffredo (41) </font></p>
    </td>
    <td valign=top width=1%>
      <p>&nbsp;</p>
    </td>
    <td valign=top width=9%>
      <p><font size="1">Senior Vice President </font></p>
    </td>
    <td valign=top width=1%>
      <p>&nbsp;</p>
    </td>
    <td valign=top width=9%>
      <p><font size="1">Senior Vice President since 2002 </font></p>
    </td>
    <td valign=top width=1%>
      <p>&nbsp;</p>
    </td>
    <td valign=top width=37%>
      <p><font size="1">Managing Director of MLIM since 2000; First Vice President
        of MLIM from 1997 to 2000; Vice President of MLIM from 1991 to 1997; Portfolio
        Manager with MLIM and FAM since 1997. </font></p>
    </td>
    <td valign=top width=1%>
      <p>&nbsp;</p>
    </td>
    <td valign=top width=15%>
      <p><font size="1">39 registered investment companies consisting of <br>
        51 portfolios </font></p>
    </td>
    <td valign=top width=1%>
      <p>&nbsp;</p>
    </td>
    <td valign=top width=13%>
      <p><font size="1">None </font></p>
    </td>
  </tr>
  <tr>
    <td valign=top width=12%><font size="1"></font></td>
    <td valign=top width=1%><font size="1"></font></td>
    <td valign=top width=9%><font size="1"></font></td>
    <td valign=top width=1%><font size="1"></font></td>
    <td valign=top width=9%><font size="1"></font></td>
    <td valign=top width=1%><font size="1"></font></td>
    <td valign=top width=37%><font size="1"></font></td>
    <td valign=top width=1%><font size="1"></font></td>
    <td valign=top width=15%><font size="1"></font></td>
    <td valign=top width=1%><font size="1"></font></td>
    <td valign=top width=13%><font size="1"></font></td>
  </tr>
  <tr>
    <td valign=top width=12%>
      <p><font size="1">Robert A. DiMella (38) </font></p>
    </td>
    <td valign=top width=1%>
      <p>&nbsp;</p>
    </td>
    <td valign=top width=9%>
      <p><font size="1">Vice President and Portfolio Manager </font></p>
    </td>
    <td valign=top width=1%>
      <p>&nbsp;</p>
    </td>
    <td valign=top width=9%>
      <p><font size="1">Vice President and Portfolio Manager since 1999 </font></p>
    </td>
    <td valign=top width=1%>
      <p>&nbsp;</p>
    </td>
    <td valign=top width=37%>
      <p><font size="1">Managing Director of MLIM since 2004; Director (Tax-Exempt
        Fund Management ) of MLIM from 2002 to 2004; Vice President of MLIM from
        1996 to 2001. </font></p>
    </td>
    <td valign=top width=1%>
      <p>&nbsp;</p>
    </td>
    <td valign=top width=15%>
      <p><font size="1">6 registered investment companies consisting of <br>
        5 portfolios </font></p>
    </td>
    <td valign=top width=1%>
      <p>&nbsp;</p>
    </td>
    <td valign=top width=13%>
      <p><font size="1">None </font></p>
    </td>
  </tr>
  <tr>
    <td valign=top width=12%><font size="1"></font></td>
    <td valign=top width=1%><font size="1"></font></td>
    <td valign=top width=9%><font size="1"></font></td>
    <td valign=top width=1%><font size="1"></font></td>
    <td valign=top width=9%><font size="1"></font></td>
    <td valign=top width=1%><font size="1"></font></td>
    <td valign=top width=37%><font size="1"></font></td>
    <td valign=top width=1%><font size="1"></font></td>
    <td valign=top width=15%><font size="1"></font></td>
    <td valign=top width=1%><font size="1"></font></td>
    <td valign=top width=13%><font size="1"></font></td>
  </tr>
  <tr>
    <td valign=top width=12%>
      <p><font size="1">Jeffrey Hiller (53) </font></p>
    </td>
    <td valign=top width=1%>
      <p>&nbsp;</p>
    </td>
    <td valign=top width=9%>
      <p><font size="1">Chief Compliance Officer </font></p>
    </td>
    <td valign=top width=1%>
      <p>&nbsp;</p>
    </td>
    <td valign=top width=9%>
      <p><font size="1">Chief Compliance Officer since 2004 </font></p>
    </td>
    <td valign=top width=1%>
      <p>&nbsp;</p>
    </td>
    <td valign=top width=37%>
      <p><font size="1">Chief Compliance Officer of the MLIM/FAM-advised funds
        since 2004; First Vice President and Chief Compliance Officer of MLIM
        since 2004; Chief Compliance Officer of the IQ Funds since 2004; Global
        Director of Compliance at Morgan Stanley Investment Management from 2002
        to 2004; Managing Director and Global Director of Compliance at Citigroup
        Asset Management from 2000 to 2002; Chief Compliance Officer at Soros
        Fund Management in 2000; Chief Compliance Officer at Prudential Financial
        from 1995 to 2000; Senior Counsel in the Securities and Exchange Commission&#146;s
        Division of Enforcement in Washington, D.C. from 1990 to 1995. </font></p>
    </td>
    <td valign=top width=1%>
      <p>&nbsp;</p>
    </td>
    <td valign=top width=15%>
      <p><font size="1">132 registered investment companies consisting of <br>
        176 portfolios </font></p>
    </td>
    <td valign=top width=1%>
      <p>&nbsp;</p>
    </td>
    <td valign=top width=13%>
      <p><font size="1">None </font></p>
    </td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> 22</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 27; page: 27" -->
<table border=0 cellspacing=0 cellpadding=0 width="100%">
  <tr valign="bottom" align="center">
    <td width=12%>
      <p align="center"><b><font size="1">Name, Address* and Age </font></b>
      <hr noshade align="center" size="1">
    </td>
    <td width=1%>
      <p align="center">&nbsp;</p>
    </td>
    <td width=9%>
      <p align="center"><b><font size="1">Position(s) <br>
        Held with the <br>
        Fund </font></b>
      <hr noshade align="center" size="1">
    </td>
    <td width=1%>
      <p align="center">&nbsp;</p>
    </td>
    <td width=9%>
      <p align="center"><b><font size="1">Term of Office and&nbsp;Length&nbsp;of
        <br>
        Time Served** </font></b>
      <hr noshade align="center" size="1">
    </td>
    <td width=1%>
      <p align="center">&nbsp;</p>
    </td>
    <td width=37%>
      <p align="center"><b><font size="1">Principal Occupation(s) <br>
        During Past Five Years </font></b>
      <hr noshade align="center" size="1">
    </td>
    <td width=1%>
      <p align="center">&nbsp;</p>
    </td>
    <td width=15%>
      <p align="center"><b><font size="1">Number of <br>
        MLIM/FAM- <br>
        Advised Funds <br>
        and Portfolios <br>
        Overseen </font></b>
      <hr noshade align="center" size="1">
    </td>
    <td width=1%>
      <p align="center">&nbsp;</p>
    </td>
    <td width=13%>
      <p align="center"><b><font size="1">Public <br>
        Directorships </font></b>
      <hr noshade align="center" size="1">
    </td>
  </tr>
  <tr>
    <td valign=top width=12%>
      <p><font size="1">Alice A. Pellegrino (45) </font></p>
    </td>
    <td valign=top width=1%>
      <p>&nbsp;</p>
    </td>
    <td valign=top width=9%>
      <p><font size="1">Secretary </font></p>
    </td>
    <td valign=top width=1%>
      <p>&nbsp;</p>
    </td>
    <td valign=top width=9%>
      <p><font size="1">Secretary since 2004 </font></p>
    </td>
    <td valign=top width=1%>
      <p>&nbsp;</p>
    </td>
    <td valign=top width=37%>
      <p><font size="1">Director (Legal Advisory) of MLIM since 2002; Vice President
        of MLIM from 1999 to 2002; Attorney associated with MLIM since 1997; Secretary
        of FAM, MLIM, FAMD and Princeton Services since 2004. </font></p>
    </td>
    <td valign=top width=1%>
      <p>&nbsp;</p>
    </td>
    <td valign=top width=15%>
      <p><font size="1">126 registered investment companies consisting of <br>
        170 portfolios </font></p>
    </td>
    <td valign=top width=1%>
      <p>&nbsp;</p>
    </td>
    <td valign=top width=13%>
      <p><font size="1">None </font></p>
    </td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Cutoff rule Footnote" FSL="Workstation" -->
<hr size=1 noshade align=left  width=75>
<!-- MARKER FORMAT-SHEET="Footnote Right" FSL="Workstation" -->
<table width=100%>
  <tr>
    <td width=4% align=right valign=top><font size="1"> * </font></td>
    <td width=2%>&nbsp;</td>
    <td width=94% align=left valign=top><font size="1">The address of each officer
      listed is P.O. Box 9011, Princeton, New Jersey 08543-9011. </font></td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Footnote Right" FSL="Workstation" -->
<table width=100%>
  <tr>
    <td width=4% align=right valign=top><font size="1">** </font></td>
    <td width=2%>&nbsp;</td>
    <td width=94% align=left valign=top><font size="1">Elected by and serves at
      the pleasure of the Board of Directors of the Fund.</font></td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Footnote Right" FSL="Workstation" -->
<table width=100%>
  <tr>
    <td width=4% align=right valign=top><font size="1"> *** </font></td>
    <td width=2%>&nbsp;</td>
    <td width=94% align=left valign=top><font size="1">Mr. Doll is an &#147;interested
      person,&#148; as defined in the 1940 Act, of the Fund based on his positions
      with FAM, MLIM and Princeton Services, Inc.</font></td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Footnote Right" FSL="Workstation" -->
<table width=100%>
  <tr>
    <td width=4% align=right valign=top><font size="1">**** </font></td>
    <td width=2%>&nbsp;</td>
    <td width=94% align=left valign=top><font size="1">As a Director, Mr. Doll
      serves until his successor is elected and qualified or until December 31
      of the year in which he turns 72, or until his death, resignation, or removal
      as provided in the Fund&#146;s by-laws or charter or by statute.</font></td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
  connection with the election of the Fund&#146;s Directors, holders of shares
  of AMPS, Other AMPS and other preferred stock, voting as a separate class, are
  entitled to elect two of the Fund&#146;s Directors, and the remaining Directors
  are elected by all holders of capital stock, voting as a single class. Mr. Forbes
  and Mr. West are the Directors elected by holders of preferred stock. See &#147;Description
  of AMPS &#151; Voting Rights.&#148; </font></p>
<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Share Ownership
  </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Information
  relating to each Director&#146;s share ownership in the Fund and in all registered
  funds in the Merrill Lynch family of funds that are overseen by the respective
  Director (&#147;Supervised Merrill Lynch Funds&#148;) as of December 31, 2004
  is set forth in the chart below. </font></p>
<table border=0 cellspacing=0 cellpadding=0 width="600" align="center">
  <tr valign="bottom">
    <td>
      <p><b><font size="1">Name </font></b>
      <hr noshade align="left" size="1" width="12%">
    </td>
    <td align="center">
      <p>&nbsp;</p>
    </td>
    <td align="center">
      <p><b><font size="1">Aggregate Dollar Range <br>
        of Equity in the Fund </font></b>
      <hr noshade align="center" size="1" width="70%">
    </td>
    <td align="center">
      <p><b><font size="1">Aggregate Dollar Range <br>
        of Securities in Supervised <br>
        Merrill Lynch Funds </font></b>
      <hr noshade align="center" size="1" width="70%">
    </td>
  </tr>
  <tr valign="bottom">
    <td>
      <p><font size="2"><i>Interested Director:</i> </font></p>
    </td>
    <td>
      <p>&nbsp;</p>
    </td>
    <td align="center">
      <p>&nbsp;</p>
    </td>
    <td align="center">
      <p>&nbsp;</p>
    </td>
  </tr>
  <tr valign="bottom">
    <td>
      <p><font size="2">&nbsp;&nbsp;Robert C. Doll, Jr. </font></p>
    </td>
    <td>
      <p>&nbsp;</p>
    </td>
    <td align="center">
      <p><font size="2">None </font></p>
    </td>
    <td align="center">
      <p><font size="2">Over $100,000 </font></p>
    </td>
  </tr>
  <tr valign="bottom">
    <td>
      <p><font size="2"><i>Non-interested Directors:</i> </font></p>
    </td>
    <td>
      <p>&nbsp;</p>
    </td>
    <td align="center">
      <p>&nbsp;</p>
    </td>
    <td align="center">
      <p>&nbsp;</p>
    </td>
  </tr>
  <tr valign="bottom">
    <td>
      <p><font size="2">&nbsp;&nbsp;Ronald W. Forbes </font></p>
    </td>
    <td>
      <p>&nbsp;</p>
    </td>
    <td align="center">
      <p><font size="2">$10,001 - $50,000 </font></p>
    </td>
    <td align="center">
      <p><font size="2">Over $100,000 </font></p>
    </td>
  </tr>
  <tr valign="bottom">
    <td>
      <p><font size="2">&nbsp;&nbsp;Cynthia A. Montgomery </font></p>
    </td>
    <td>
      <p>&nbsp;</p>
    </td>
    <td align="center">
      <p><font size="2">None </font></p>
    </td>
    <td align="center">
      <p><font size="2">Over $100,000 </font></p>
    </td>
  </tr>
  <tr valign="bottom">
    <td>
      <p><font size="2">&nbsp;&nbsp;Jean Margo Reid** </font></p>
    </td>
    <td>
      <p>&nbsp;</p>
    </td>
    <td align="center">
      <p><font size="2">None </font></p>
    </td>
    <td align="center">
      <p><font size="2">Over $100,000 </font></p>
    </td>
  </tr>
  <tr valign="bottom">
    <td>
      <p><font size="2">&nbsp;&nbsp;Roscoe S. Suddarth </font></p>
    </td>
    <td>
      <p>&nbsp;</p>
    </td>
    <td align="center">
      <p><font size="2">None </font></p>
    </td>
    <td align="center">
      <p><font size="2">Over $100,000 </font></p>
    </td>
  </tr>
  <tr valign="bottom">
    <td>
      <p><font size="2">&nbsp;&nbsp;Richard R. West </font></p>
    </td>
    <td>
      <p>&nbsp;</p>
    </td>
    <td align="center">
      <p><font size="2">None </font></p>
    </td>
    <td align="center">
      <p><font size="2">Over $100,000 </font></p>
    </td>
  </tr>
  <tr valign="bottom">
    <td>
      <p><font size="2">&nbsp;&nbsp;Edward D. Zinbarg </font></p>
    </td>
    <td>
      <p>&nbsp;</p>
    </td>
    <td align="center">
      <p><font size="2">None </font></p>
    </td>
    <td align="center">
      <p><font size="2">Over $100,000 </font></p>
    </td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Cutoff rule Footnote" FSL="Workstation" -->
<hr size=1 noshade align=left  width=75>
<!-- MARKER FORMAT-SHEET="Footnote Right" FSL="Workstation" -->
<table width=100%>
  <tr>
    <td width=4% align=right valign=top><font size="1"> * </font></td>
    <td width=2%>&nbsp;</td>
    <td width=94% align=left valign=top><font size="1">For the number of MLIM/FAM
      advised funds from which each Director receives compensation, see the table
      above under &#147;&#151; Biographical Information.&#148; </font></td>
  </tr>
</table>
<table width=100%>
  <tr>
    <td width=4% align=right valign=top><font size="1"> **</font></td>
    <td width=2%>&nbsp;</td>
    <td width=94% align=left valign=top><font size="1"> Ms. Reid was elected a
      Director of the Fund and a Director of certain other MLIM/FAM advised funds
      on August 19, 2004.</font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
  of the date of this statement of additional information, except for Mr. Forbes
  who owns common stock of the Fund as noted above, none of the Directors and
  officers of the Fund owned any outstanding shares of common stock or Other AMPS
  of the Fund. As of the date of this statement of additional information, none
  of the non-interested Directors of the Fund or their immediate family members
  owned beneficially or of record any securities in ML &amp; Co. </font></p>
<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Compensation
  of Directors </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
  to its investment advisory agreement with the Fund (the &#147;Investment Advisory
  Agreement&#148;), the Investment Adviser pays all compensation to all officers
  of the Fund and all Directors of the Fund who are affiliates with ML &amp; Co.
  or its subsidiaries as well as such Directors&#146; actual out-of-pocket expenses
  relating to attendance at meetings. </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> 23</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 28; page: 28" --> <!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Fund pays each non-interested Director a combined fee of $3,800 per year for
  services on the Board and the Audit Committee plus a fee of $150 for each in-person
  Board meeting attended and $150 for each in-person Audit Committee meeting attended,
  together with such Director&#146;s out-of-pocket expenses relating to attendance
  at such meetings. The Chairman of the Fund&#146;s Audit Committee receives an
  additional annual fee of $1,429. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  following table shows the compensation earned by the non-interested Directors
  for the Fund&#146;s fiscal year ended April 30, 2005 and the aggregate compensation
  paid to them from all MLIM/FAM-advised funds for the calendar year ended December
  31, 2004. </font></p>
<table border=0 cellspacing=0 cellpadding=0 width="600" align="center">
  <tr valign="bottom">
    <td>
      <p><font size="1"><b>Name of Director</b> </font>
      <hr noshade align="left" size="1" width="35%">
    </td>
    <td>
      <p>&nbsp;</p>
    </td>
    <td align="center">
      <p><font size="1"><b>Compensation <br>
        from Fund</b> </font>
      <hr noshade align="center" size="1" width="60%">
    </td>
    <td align="center">
      <p><font size="1"><b>Pension <br>
        Retirement <br>
        Benefits Accrued <br>
        as Part of <br>
        Fund Expense </b></font>
      <hr noshade align="center" size="1" width="65%">
    </td>
    <td align="center">
      <p><font size="1"><b>Aggregate <br>
        Compensation <br>
        From Fund and <br>
        other FAM/MLIM- <br>
        Advised Funds** </b></font>
      <hr noshade align="center" size="1" width="65%">
    </td>
  </tr>
  <tr valign="bottom">
    <td>
      <p><font size="2">Ronald W. Forbes* </font></p>
    </td>
    <td>
      <p>&nbsp;</p>
    </td>
    <td align="center">
      <p><font size="2">$6,107 </font></p>
    </td>
    <td align="center">
      <p><font size="2">None </font></p>
    </td>
    <td align="center">
      <p><font size="2">$284,833 </font></p>
    </td>
  </tr>
  <tr valign="bottom">
    <td>
      <p><font size="2">Cynthia A. Montgomery </font></p>
    </td>
    <td>
      <p>&nbsp;</p>
    </td>
    <td align="center">
      <p><font size="2">$5,000 </font></p>
    </td>
    <td align="center">
      <p><font size="2">None </font></p>
    </td>
    <td align="center">
      <p><font size="2">$248,833 </font></p>
    </td>
  </tr>
  <tr valign="bottom">
    <td>
      <p><font size="2">Jean Margo Reid*** </font></p>
    </td>
    <td>
      <p>&nbsp;</p>
    </td>
    <td align="center">
      <p><font size="2">$3,133 </font></p>
    </td>
    <td align="center">
      <p><font size="2">None </font></p>
    </td>
    <td align="center">
      <p><font size="2">$142,733 </font></p>
    </td>
  </tr>
  <tr valign="bottom">
    <td>
      <p><font size="2">Roscoe S. Suddarth </font></p>
    </td>
    <td>
      <p>&nbsp;</p>
    </td>
    <td align="center">
      <p><font size="2">$5,000 </font></p>
    </td>
    <td align="center">
      <p><font size="2">None </font></p>
    </td>
    <td align="center">
      <p><font size="2">$248,833 </font></p>
    </td>
  </tr>
  <tr valign="bottom">
    <td>
      <p><font size="2">Richard R. West </font></p>
    </td>
    <td>
      <p>&nbsp;</p>
    </td>
    <td align="center">
      <p><font size="2">$5,000 </font></p>
    </td>
    <td align="center">
      <p><font size="2">None </font></p>
    </td>
    <td align="center">
      <p><font size="2">$248,833 </font></p>
    </td>
  </tr>
  <tr valign="bottom">
    <td>
      <p><font size="2">Edward D. Zinbarg </font></p>
    </td>
    <td>
      <p>&nbsp;</p>
    </td>
    <td align="center">
      <p><font size="2">$5,000 </font></p>
    </td>
    <td align="center">
      <p><font size="2">None </font></p>
    </td>
    <td align="center">
      <p><font size="2">$248,833 </font></p>
    </td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Cutoff rule Footnote" FSL="Workstation" -->
<hr size=1 noshade align=left  width=75>
<!-- MARKER FORMAT-SHEET="Footnote Right" FSL="Workstation" -->
<table width=100%>
  <tr>
    <td width=4% align=right valign=top><font size="1"> * </font></td>
    <td width=2%>&nbsp;</td>
    <td width=94% align=left valign=top><font size="1">Chairman of the Audit Committee.</font></td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Footnote Right" FSL="Workstation" -->
<table width=100%>
  <tr>
    <td width=4% align=right valign=top><font size="1"> ** </font></td>
    <td width=2%>&nbsp;</td>
    <td width=94% align=left valign=top><font size="1">For the number of MLIM/FAM-advised
      funds from which each Director received compensation see table above under
      &#147;&#151; Biographical Information.&#148;</font></td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Footnote Right" FSL="Workstation" -->
<table width=100%>
  <tr>
    <td width=4% align=right valign=top><font size="1">*** </font></td>
    <td width=2%>&nbsp;</td>
    <td width=94% align=left valign=top><font size="1">Ms. Reid was elected a
      Director of the Fund and a Director of certain other MLIM/FAM-advised funds
      on August 19, 2004.</font></td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
  to its investment advisory agreement with the Fund (the &#147;Investment Advisory
  Agreement&#148;), the Investment Adviser pays all compensation to all officers
  of the Fund and all Directors of the Fund who are affiliated with ML &amp; Co.
  or its subsidiaries. </font></p>
<!-- MARKER FORMAT-SHEET="Center Head 2-Bold" FSL="Workstation" -->
<p align=CENTER><font face="Times New Roman, Times, Serif" size=2><b>INVESTMENT
  ADVISORY AND MANAGEMENT ARRANGEMENTS </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Investment Adviser, which is owned and controlled by ML &amp; Co., a financial
  services holding company and the parent of Merrill Lynch, provides the Fund
  with investment advisory and administrative services. The Investment Adviser
  acts as the investment adviser to more than 50 registered investment companies
  and offers investment advisory services to individuals and institutional accounts.
  As of June 30, 2005, the Investment Adviser and its affiliates, including MLIM,
  had a total of approximately $474 billion in investment company and other portfolio
  assets under management, including approximately $221 billion in fixed income
  assets. This amount includes assets managed by certain affiliates of the Investment
  Adviser. The Investment Adviser is a limited partnership, the partners of which
  are ML &amp; Co. and Princeton Services. The principal business address of the
  Investment Adviser is 800 Scudders Mill Road, Plainsboro, New Jersey 08536.
  </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Investment Advisory Agreement provides that, subject to the oversight of the
  Fund&#146;s Board of Directors, the Investment Adviser is responsible for the
  actual management of the Fund&#146;s portfolio. The responsibility for making
  decisions to buy, sell or hold a particular security rests with the Investment
  Adviser, subject to oversight by the Board of Directors. </font></p>
 <!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  portfolio manager primarily responsible for the Fund&#146;s day to day management
  is Robert A. DiMella. Mr. DiMella has been a portfolio manager with MLIM since
  1997, was a Vice President of MLIM from 1997 to 2001, was a Director (Tax-Exempt
  Fund Management) of MLIM from 2002 to 2004, has been a Managing Director of
  MLIM sine 2004 and has 15 years of experience investing in Municipal Bonds as
  a portfolio manager on behalf of registered investment companies. He has been
  the portfolio manager and a Vice President of the Fund since 1999. The Fund&#146;s
  portfolio manager will consider analyses from various sources, make the necessary
  investment decisions, and place orders for transactions accordingly. </font></p>
 <!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
  its services, the Fund pays the Investment Adviser a monthly fee at the annual
  rate of 0.50% of the Fund&#146;s average weekly net assets (&#147;average weekly
  net assets&#148; means the average weekly value of the total assets of the Fund,
  including the 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 </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> 24</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 29; page: 29" --> <!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>each month on the basis of
  the average net assets of the Fund for each week during the month. The assets
  for each weekly period are determined by averaging the net assets at the last
  business day of a week with the net assets at the last business day of the prior
  week. The liquidation preference of any outstanding preferred stock (other than
  accumulated dividends) is not considered a liability in determining the Fund&#146;s
  average weekly net assets. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
  the fiscal years ended April 30, 2005, 2004 and 2003, the fees paid by the Fund
  to the Investment Adviser pursuant to the Investment Advisory Agreement were
  $1,805,447, $1,795,371 and $1,732,165, respectively. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
  the fiscal years ended April 30, 2005, 2004 and 2003, the Investment Adviser
  reimbursed the Fund $1,971, $5,817 and $2,403, respectively. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Investment Advisory Agreement obligates the Investment Adviser to provide investment
  advisory services and to pay all compensation of and furnish office space for
  officers and employees of the Fund connected with investment and economic research,
  trading and investment management of the Fund, as well as the compensation of
  all Directors of the Fund who are affiliated persons of the Investment Adviser
  or any of its affiliates. The Fund pays all other expenses incurred in the operation
  of the Fund, including, among other things, expenses for legal and auditing
  services, taxes, costs of preparing, printing and mailing proxies, listing fees,
  stock certificates and stockholder reports, charges of the custodian and the
  transfer agent, dividend disbursing agent and registrar, Commission fees, fees
  and expenses of non-interested Directors, accounting and pricing costs, insurance,
  interest, brokerage costs, litigation and other extraordinary or non-recurring
  expenses, mailing and other expenses properly payable by the Fund. Certain accounting
  services are provided to the Fund by State Street Bank and Trust Company (&#147;State
  Street&#148;) pursuant to an agreement between State Street and the Fund. The
  Fund will pay the costs of these services. In addition, the Fund will reimburse
  the Investment Adviser for certain additional accounting services. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  table below shows the amounts paid by the Fund to State Street and to the Investment
  Adviser for accounting services for the years indicated: </font></p>
<table border=0 cellspacing=0 cellpadding=0 width=600 align="center">
  <tr valign="bottom">
    <td width="185">
      <p><b><font size="1">Fiscal Year Ended: </font></b>
      <hr noshade align="left" size="1" width="45%">
    </td>
    <td width="10">
      <p>&nbsp;</p>
    </td>
    <td align="center" width="151">
      <p><b><font size="1">Paid by the Fund <br>
        to State Street </font></b>
      <hr noshade align="center" size="1" width="50%">
    </td>
    <td align="center" width="254">
      <p><b><font size="1">Paid by the Fund <br>
        to the Investment Adviser </font></b>
      <hr noshade align="center" size="1" width="50%">
    </td>
  </tr>
  <tr valign="bottom">
    <td width="185">
      <p><font face="Times" size="2">2005 </font></p>
    </td>
    <td width="10">
      <p>&nbsp;</p>
    </td>
    <td align="center" width="151">
      <p><font face="Times" size="2">$114,307 </font></p>
    </td>
    <td align="center" width="254">
      <p><font face="Times" size="2">$7,141 </font></p>
    </td>
  </tr>
  <tr valign="bottom">
    <td width="185">
      <p><font face="Times" size="2">2004 </font></p>
    </td>
    <td width="10">
      <p>&nbsp;</p>
    </td>
    <td align="center" width="151">
      <p><font face="Times" size="2">$111,192 </font></p>
    </td>
    <td align="center" width="254">
      <p><font face="Times" size="2">$6,487 </font></p>
    </td>
  </tr>
  <tr valign="bottom">
    <td width="185">
      <p><font face="Times" size="2">2003 </font></p>
    </td>
    <td width="10">
      <p>&nbsp;</p>
    </td>
    <td align="center" width="151">
      <p><font face="Times" size="2">$108,995 </font></p>
    </td>
    <td align="center" width="254">
      <p><font face="Times" size="2">$7,342 </font></p>
    </td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless
  earlier terminated as described below, the Investment Advisory Agreement will
  remain in effect from year to year if approved annually (a) by the Board of
  Directors of the Fund or by a majority of the outstanding shares of the Fund
  and (b) by a majority of the Directors who are not parties to such contract
  or interested persons (as defined in the 1940 Act) of any such party. Such contract
  is not assignable and may be terminated without penalty on 60 days&#146; written
  notice at the option of either party thereto or by the vote of the stockholders
  of the Fund. The Board of Directors most recently approved the Investment Advisory
  Agreement at its meeting on November 10, 2004. </font></p>
<!-- MARKER FORMAT-SHEET="Center Head 2-Bold" FSL="Workstation" -->
<p align=left><font face="Times New Roman, Times, Serif" size=2><b>Portfolio Manager
  Information </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Fund is managed by Robert A. DiMella. </font></p>
<!-- MARKER FORMAT-SHEET="Left Head 2 Bold Italic" FSL="Workstation" -->
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b><i>Other Funds
  and Accounts Managed by Portfolio Manager as of April 30, 2005 </i></b></font></p>
<table border=0 cellspacing=0 cellpadding=0 width="100%">
  <tr valign="bottom">
    <td valign="top">&nbsp;</td>
    <td align="center">
      <div align="center"></div>
    </td>
    <td align="center" colspan="3">
      <p align="center"><font size="2"><b>Number&nbsp;of&nbsp;Other&nbsp;Accounts&nbsp;Managed
        <br>
        and Assets by Account Type</b> </font>
      <hr noshade align="center" size="1" width="90%">
    </td>
    <td align="center" colspan="2">
      <p align="center"><font size="2"><b>Number&nbsp;of&nbsp;Accounts&nbsp;and&nbsp;Assets&nbsp;for&nbsp;Which
        <br>
        Advisory Fee is Performance-Based</b> </font>
      <hr noshade align="center" size="1" width="90%">
    </td>
  </tr>
  <tr valign="bottom">
    <td valign="top">
      <p><font size="2"><b>Name of Investment <br>
        &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Adviser and <br>
        &nbsp;Portfolio Manager<br>
        </b></font>
      <hr noshade align="left" size="1" width="50%">
    </td>
    <td align="center">
      <p align="center"><font size="2"><b>Registered <br>
        Investment <br>
        Companies</b> </font>
      <hr noshade align="center" size="1" width="80%">
    </td>
    <td align="center">
      <p align="center"><font size="2"><b>Other&nbsp;Pooled <br>
        Investment <br>
        Vehicles</b> </font>
      <hr noshade align="center" size="1" width="80%">
    </td>
    <td align="center">
      <p align="center"><font size="2"><b>Other <br>
        accounts</b> </font>
      <hr noshade align="center" size="1" width="80%">
    </td>
    <td align="center">
      <p align="center"><font size="2"><b>Registered <br>
        Investment <br>
        Companies</b> </font>
      <hr noshade align="center" size="1" width="80%">
    </td>
    <td align="center">
      <p align="center"><font size="2"><b>Other&nbsp;Pooled <br>
        Investment <br>
        Vehicles</b> </font>
      <hr noshade align="center" size="1" width="80%">
    </td>
    <td align="center">
      <p align="center"><font size="2"><b>Other <br>
        accounts</b> </font>
      <hr noshade align="center" size="1" width="80%">
    </td>
  </tr>
  <tr valign="bottom">
    <td>
      <p><font size="2">Fund Asset Management, L.P. </font>
      <hr noshade align="left" size="1" width="40%">
    </td>
    <td align="center">
      <p align="center">&nbsp;</p>
    </td>
    <td align="center">
      <p align="center">&nbsp;</p>
    </td>
    <td align="center">
      <p align="center">&nbsp;</p>
    </td>
    <td align="center">
      <p align="center">&nbsp;</p>
    </td>
    <td align="center">
      <p align="center">&nbsp;</p>
    </td>
    <td align="center">
      <p align="center">&nbsp;</p>
    </td>
  </tr>
  <tr valign="bottom">
    <td>
      <p><font size="2">Robert A. DiMella </font></p>
    </td>
    <td align="center">
      <p align="center"><font size="2">6 </font></p>
    </td>
    <td align="center">
      <p align="center"><font size="2">1 </font></p>
    </td>
    <td align="center">
      <p align="center"><font size="2">0</font></p>
    </td>
    <td align="center">
      <p align="center"><font size="2">0 </font></p>
    </td>
    <td align="center">
      <p align="center"><font size="2">1 </font><font size="2"> </font></p>
    </td>
    <td align="center">
      <p align="center"><font size="2">0 </font></p>
    </td>
  </tr>
  <tr valign="bottom">
    <td>
      <p>&nbsp;</p>
    </td>
    <td align="center">
      <p align="center"><font size="2">$3,352,270,824 </font></p>
    </td>
    <td align="center">
      <p align="center"><font size="2">$19,638,081 </font></p>
    </td>
    <td align="center">
      <p align="center">&nbsp;</p>
    </td>
    <td align="center">
      <p align="center">&nbsp;</p>
    </td>
    <td align="center">
      <p align="center"><font size="2">$19,638,081 </font></p>
    </td>
    <td align="center">
      <p align="center">&nbsp;</p>
    </td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <p><br>
&nbsp;
</p><table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> 25</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 30; page: 30" --> <!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Fund
  Ownership</i> </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  following table sets forth the dollar range of equity securities of the Fund
  beneficially owned by the portfolio manager(s) as of the date of this prospectus.
  </font></p>
<table border=0 cellspacing=0 cellpadding=0 width="600" align="center">
  <tr valign="bottom" align="center">
    <td>
      <p><b><font size="2">Portfolio Manager</font></b>
      <hr noshade align="center" size="1" width="35%">
    </td>
    <td>
      <p><b><font size="2">Dollar Range</font></b>
      <hr noshade align="center" size="1" width="35%">
    </td>
  </tr>
  <tr valign="bottom" align="center">
    <td>
      <p><font size="2">Robert A. DiMella</font></p>
    </td>
    <td>
      <p><font size="2">$10,000 - $50,000</font></p>
    </td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Left Head 2 Bold Italic" FSL="Workstation" -->
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b><i>Portfolio
  Manager Compensation </i></b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Portfolio
  Manager Compensation </i></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Portfolio Manager Compensation Program of MLIM and its affiliates, including
  the Investment Adviser, is critical to MLIM&#146;s ability to attract and retain
  the most talented asset management professionals. This program ensures that
  compensation is aligned with maximizing investment returns and it provides a
  competitive pay opportunity for competitive performance. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Compensation
  Program</i> </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  elements of total compensation for MLIM and its affiliates portfolio managers
  are a fixed base salary, annual performance-based cash and stock compensation
  (cash and stock bonus) and other benefits. MLIM has balanced these components
  of pay to provide portfolio managers with a powerful incentive to achieve consistently
  superior investment performance. By design, portfolio manager compensation levels
  fluctuate &#151; both up and down &#151; with the relative investment performance
  of the portfolios that they manage. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Base
  Salary</i> </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
  the MLIM approach, like that of many asset management firms, base salaries represent
  a relatively small portion of a portfolio manager&#146;s total compensation.
  This approach serves to enhance the motivational value of the performance-based
  (and therefore variable) compensation elements of the compensation program.
  </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Performance-Based
  Compensation</i> </font></p>
 <!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MLIM
  believes that the best interests of investors are served by recruiting and retaining
  exceptional asset management talent and managing their compensation within a
  consistent and disciplined framework that emphasizes pay for performance in
  the context of an intensely competitive market for talent. To that end, MLIM
  and its affiliates portfolio manager incentive compensation is based on a formulaic
  compensation program. MLIM&#146;s formulaic portfolio manager compensation program
  includes: investment performance relative to a subset of general closed-end,
  leveraged, municipal debt funds over 1-, 3- and 5-year performance periods and
  a measure of operational efficiency. Portfolio managers are compensated based
  on the pre-tax performance of the products they manage. If a portfolio manager&#146;s
  tenure is less than 5 years, performance periods will reflect time in position.
  Portfolio managers are compensated based on products they manage. A discretionary
  element of portfolio manager compensation may include consideration of: financial
  results, expense control, profit margins, strategic planning and implementation,
  quality of client service, market share, corporate reputation, capital allocation,
  compliance and risk control, leadership, workforce diversity, supervision, technology
  and innovation. MLIM and its affiliates also consider the extent to which individuals
  exemplify and foster ML &amp; Co.&#146;s principles of client focus, respect
  for the individual, teamwork, responsible citizenship and integrity. All factors
  are considered collectively by MLIM management. </font></p>
 <!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Cash
  Bonus</i> </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Performance-based
  compensation is distributed to portfolio managers in a combination of cash and
  stock. Typically, the cash bonus, when combined with base salary, represents
  more than 60% of total compensation for portfolio managers. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Stock
  Bonus</i> </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
  portion of the dollar value of the total annual performance-based bonus is paid
  in restricted shares of ML &amp; Co. stock. Paying a portion of annual bonuses
  in stock puts compensation earned by a portfolio manager for a given year &#147;at
  risk&#148; based on the company&#146;s ability to sustain and improve its performance
  over future </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> 26</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 31; page: 31" --> <!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>periods. The ultimate value
  of stock bonuses is dependent on future ML &amp; Co. stock price performance.
  As such, the stock bonus aligns each portfolio manager&#146;s financial interests
  with those of the ML &amp; Co. shareholders and encourages a balance between
  short-term goals and long-term strategic objectives. Management strongly believes
  that providing a significant portion of competitive performance-based compensation
  in stock is in the best interests of investors and shareholders. This approach
  ensures that portfolio managers participate as shareholders in both the &#147;downside
  risk&#148; and &#147;upside opportunity&#148; of the company&#146;s performance.
  Portfolio managers therefore have a direct incentive to protect ML &amp; Co.&#146;s
  reputation for integrity. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Other
  Compensation Programs</i> </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Portfolio
  managers who meet relative investment performance and financial management objectives
  during a performance year are eligible to participate in a deferred cash program.
  Awards under this program are in the form of deferred cash that may be benchmarked
  to a menu of MLIM mutual funds (including their own fund) during a five-year
  vesting period. The deferred cash program aligns the interests of participating
  portfolio managers with the investment results of MLIM products and promotes
  continuity of successful portfolio management teams. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Other
  Benefits</i> </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Portfolio
  managers are also eligible to participate in broad-based plans offered generally
  to employees of ML &amp; Co. and its affiliates, including broad-based retirement,
  401(k), health, and other employee benefit plans. </font></p>
<!-- MARKER FORMAT-SHEET="Left Head 2 Bold Italic" FSL="Workstation" -->
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b><i>Potential
  Material Conflicts of Interest </i></b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Real,
  potential or apparent conflicts of interest may arise when a portfolio manager
  has day-to-day portfolio management responsibilities with respect to more than
  one fund or account, including the following: </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain
  investments may be appropriate for the Fund and also for other clients advised
  by the Investment. Adviser and its affiliates, including other client accounts
  managed by the Fund&#146;s portfolio management team. Investment decisions for
  the Fund and other clients are made with a view to achieving their respective
  investment objectives and after consideration of such factors as their current
  holdings, availability of cash for investment and the size of their investments
  generally. Frequently, a particular security may be bought or sold for only
  one client or in different amounts and at different times for more than one
  but less than all clients. Likewise, because clients of the Investment Adviser
  and its affiliates may have differing investment strategies, a particular security
  may be bought for one or more clients when one or more other clients are selling
  the security. The investment results for the Fund may differ from the results
  achieved by other clients of the Investment Adviser and its affiliates and results
  among clients may differ. In addition, purchases or sales of the same security
  may be made for two or more clients on the same day. In such event, such transactions
  will be allocated among the clients in a manner believed by the Investment Adviser
  and its affiliates to be equitable to each. The Investment Adviser will not
  determine allocations based on whether it receives a performance based fee from
  the client. In some cases, the allocation procedure could have an adverse effect
  on the price or amount of the securities purchased or sold by the Fund. Purchase
  and sale orders for the Fund may be combined with those of other clients of
  the Investment Adviser and its affiliates in the interest of achieving the most
  favorable net results to the Fund. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
  the extent that the Fund&#146;s portfolio management team has responsibilities
  for managing accounts in addition to the Fund, a portfolio manager will need
  to divide his time and attention among relevant accounts. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
  some cases, a real, potential or apparent conflict may also arise where (i)
  the Investment Adviser may have an incentive, such as a performance based fee,
  in managing one account and not with respect to other accounts it manages or
  (ii) where a member of the Fund&#146;s portfolio management team owns an interest
  in one fund or account he or she manages and not another. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2><b><i>Code of Ethics</i></b><i>
  </i></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Fund&#146;s Board of Directors approved a Code of Ethics under Rule 17j-1 of
  the 1940 Act that covers the Fund and the Investment Adviser. The Code of Ethics
  establishes procedures for personal investing and restricts certain transactions.
  Employees subject to the Code of Ethics may invest in securities for their personal
  investment accounts, including securities that may be purchased or held by the
  Fund. </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> 27</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 32; page: 32" --> <!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Proxy Voting
  Policies and Procedures </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Fund&#146;s Board of Directors has delegated to the Investment Adviser authority
  to vote all proxies relating to the Fund&#146;s portfolio securities. The Investment
  Adviser has adopted policies and procedures (&#147;Proxy Voting Procedures&#148;)
  with respect to the voting of proxies related to the portfolio securities held
  in the account of one or more of its clients, including the Fund. Pursuant to
  these Proxy Voting Procedures, the Investment Adviser&#146;s primary objective
  when voting proxies is to make proxy voting decisions solely in the best interests
  of the Fund and its stockholders, and to act in a manner that the Investment
  Adviser believes is most likely to enhance the economic value of the securities
  held by the Fund. The Proxy Voting Procedures are designed to ensure that the
  Investment Adviser considers the interests of its clients, including the Fund,
  and not the interests of the Investment Adviser, when voting proxies and that
  real (or perceived) material conflicts that may arise between the Investment
  Adviser&#146;s interest and those of the Investment Adviser&#146;s clients are
  properly addressed and resolved. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
  order to implement the Proxy Voting Procedures, the Investment Adviser has formed
  a Proxy Voting Committee (the &#147;Proxy Committee&#148;). The Proxy Committee
  is comprised of the Investment Adviser&#146;s Chief Investment Officer (the
  &#147;CIO&#148;), one or more other senior investment professionals appointed
  by the CIO, portfolio managers and investment analysts appointed by the CIO
  and any other personnel the CIO deems appropriate. The Proxy Committee will
  also include two non-voting representatives from the Investment Adviser&#146;s
  Legal department appointed by the Investment Adviser&#146;s General Counsel.
  The Proxy Committee&#146;s membership shall be limited to full-time employees
  of the Investment Adviser. No person with any investment banking, trading, retail
  brokerage or research responsibilities for the Investment Adviser&#146;s affiliates
  may serve as a member of the Proxy Committee or participate in its decision
  making (except to the extent such person is asked by the Proxy Committee to
  present information to the Proxy Committee, on the same basis as other interested
  knowledgeable parties not affiliated with the Investment Adviser might be asked
  to do so). The Proxy Committee determines how to vote the proxies of all clients,
  including the Fund, that have delegated proxy voting authority to the Investment
  Adviser and seeks to ensure that all votes are consistent with the best interests
  of those clients and are free from unwarranted and inappropriate influences.
  The Proxy Committee establishes general proxy voting policies for the Investment
  Adviser and is responsible for determining how those policies are applied to
  specific proxy votes, in light of each issuer&#146;s unique structure, management,
  strategic options and, in certain circumstances, probable economic and other
  anticipated consequences of alternate actions. In so doing, the Proxy Committee
  may determine to vote a particular proxy in a manner contrary to its generally
  stated policies. In addition, the Proxy Committee will be responsible for ensuring
  that all reporting and recordkeeping requirements related to proxy voting are
  fulfilled. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Proxy Committee may determine that the subject matter of a recurring proxy issue
  is not suitable for general voting policies and requires a case-by-case determination.
  In such cases, the Proxy Committee may elect not to adopt a specific voting
  policy applicable to that issue. The Investment Adviser believes that certain
  proxy voting issues require investment analysis &#151; such as approval of mergers
  and other significant corporate transactions &#151; akin to investment decisions,
  and are, therefore, not suitable for general guidelines. The Proxy Committee
  may elect to adopt a common position for the Investment Adviser on certain proxy
  votes that are akin to investment decisions, or determine to permit the portfolio
  manager to make individual decisions on how best to maximize economic value
  for the Fund (similar to normal buy/sell investment decisions made by such portfolio
  managers). While it is expected that the Investment Adviser will generally seek
  to vote proxies over which the Investment Adviser exercises voting authority
  in a uniform manner for all the Investment Adviser&#146;s clients, the Proxy
  Committee, in conjunction with the Fund&#146;s portfolio manager, may determine
  that the Fund&#146;s specific circumstances require that its proxies be voted
  differently. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
  assist the Investment Adviser in voting proxies, the Proxy Committee has retained
  Institutional Shareholder Services (&#147;ISS&#148;). ISS is an independent
  adviser that specializes in providing a variety of fiduciary-level proxy related
  services to institutional investment managers, plan sponsors, custodians, consultants,
  and other institutional investors. The services provided to the Investment Adviser
  by ISS include in-depth research, voting recommendations (although the Investment
  Adviser is not obligated to follow such recommendations), vote execution, and
  recordkeeping. ISS will also assist the Fund in fulfilling its reporting and
  recordkeeping obligations under the 1940 Act. </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> 28</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 33; page: 33" --> <!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Investment Adviser&#146;s Proxy Voting Procedures also address special circumstances
  that can arise in connection with proxy voting. For instance, under the Proxy
  Voting Procedures, the Investment Adviser generally will not seek to vote proxies
  related to portfolio securities that are on loan, although it may do so under
  circumstances. In addition, the Investment Adviser will vote proxies related
  to securities of foreign issuers only on a best efforts basis and may elect
  not to vote at all in certain countries where the Proxy Committee determines
  that the costs associated with voting generally outweigh the benefits. The Proxy
  Committee may at any time override these general policies if it determines that
  such action is in the best interests of the Fund. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From
  time to time, the Investment Adviser may be required to vote proxies in respect
  of an issuer where an affiliate of the Investment Adviser (each, an &#147;Affiliate&#148;),
  or a money management or other client of the Investment Adviser, including investment
  companies for which the Investment Adviser provides investment advisory, administrative
  and/or other services (each, a &#147;Client&#148;) is involved. The Proxy Voting
  Procedures and the Investment Adviser&#146;s adherence to those procedures are
  designed to address such conflicts of interest. The Proxy Committee intends
  to strictly adhere to the Proxy Voting Procedures in all proxy matters, including
  matters involving Affiliates and Clients. If, however, an issue representing
  a non-routine matter that is material to an Affiliate or a widely known Client
  is involved such that the Proxy Committee does not reasonably believe it is
  able to follow its guidelines (or if the particular proxy matter is not addressed
  by the guidelines) and vote impartially, the Proxy Committee may, in its discretion
  for the purposes of ensuring that an independent determination is reached, retain
  an independent fiduciary to advise the Proxy Committee on how to vote or to
  cast votes on behalf of the Investment Adviser&#146;s clients. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
  the event that the Proxy Committee determines not to retain an independent fiduciary,
  or it does not follow the advice of such an independent fiduciary, the Proxy
  Committee may pass the voting power to a subcommittee, appointed by the CIO
  (with advice from the Secretary of the Proxy Committee), consisting solely of
  Committee members selected by the CIO. The CIO shall appoint to the subcommittee,
  where appropriate, only persons whose job responsibilities do not include contact
  with the Client and whose job evaluations would not be affected by the Investment
  Adviser&#146;s relationship with the Client (or failure to retain such relationship).
  The subcommittee shall determine whether and how to vote all proxies on behalf
  of the Investment Adviser&#146;s clients or, if the proxy matter is, in their
  judgment, akin to an investment decision, to defer to the applicable portfolio
  managers, provided that, if the subcommittee determines to alter the Investment
  Adviser&#146;s normal voting guidelines or, on matters where the Investment
  Adviser&#146;s policy is case-by-case, does not follow the voting recommendation
  of any proxy voting service or other independent fiduciary that may be retained
  to provide research or advice to the Investment Adviser on that matter, no proxies
  relating to the Client may be voted unless the Secretary, or in the Secretary&#146;s
  absence, the Assistant Secretary of the Proxy Committee concurs that the subcommittee&#146;s
  determination is consistent with the Investment Adviser&#146;s fiduciary duties.
  </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
  addition to the general principles outlined above, the Investment Adviser has
  adopted voting guidelines with respect to certain recurring proxy issues that
  are not expected to involve unusual circumstances. These policies are guidelines
  only, and the Investment Adviser may elect to vote differently from the recommendation
  set forth in a voting guideline if the Proxy Committee determines that it is
  in the Fund&#146;s best interest to do so. In addition, the guidelines may be
  reviewed at any time upon the request of a 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. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Investment Adviser has adopted specific voting guidelines with respect to the
  following proxy issues: </font></p>
<!-- MARKER FORMAT-SHEET="Bullet 10" FSL="Workstation" -->
<table width=100%>
  <tr>
    <td width=5%></td>
    <td width=2% valign=top><font size=3>&#149;</font></td>
    <td width=3%></td>
    <td width=90%><font size=2>Proposals related to the composition of the board
      of directors of issuers other than investment companies. As a general matter,
      the Proxy Committee believes that a company&#146;s board of directors (rather
      than stockholders) is most likely to have access to important, nonpublic
      information regarding a company&#146;s business and prospects, and is therefore
      best-positioned to set corporate policy and oversee management. The Proxy
      Committee, therefore, believes that the foundation of good corporate governance
      is the election of qualified, independent corporate directors who are likely
      to diligently represent the interests of stockholders and oversee management
      of the corporation in a manner that will seek to maximize stockholder value
      over time. In individual cases, the Proxy Committee may look at a nominee&#146;s
      number of other directorships, history of representing stockholder interests
      as a director of other companies or other factors, to the extent the Proxy
      Committee deems relevant.</font></td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> 29</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 34; page: 34" --> <!-- MARKER FORMAT-SHEET="Bullet 10" FSL="Workstation" -->
<table width=100%>
  <tr>
    <td width=5%></td>
    <td width=2% valign=top><font size=3>&#149;</font></td>
    <td width=3%></td>
    <td width=90%><font size=2>Proposals related to the selection of an issuer&#146;s
      independent auditors. As a general matter, the Proxy Committee believes
      that corporate auditors have a responsibility to represent the interests
      of stockholders and provide an independent view on the propriety of financial
      reporting decisions of corporate management. While the Proxy Committee will
      generally defer to a corporation&#146;s choice of auditor, in individual
      cases, the Proxy Committee may look at an auditors&#146; history of representing
      stockholder interests as auditor of other companies, to the extent the Proxy
      Committee deems relevant.</font></td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Bullet 10" FSL="Workstation" -->
<table width=100%>
  <tr>
    <td width=5%></td>
    <td width=2% valign=top><font size=3>&#149;</font></td>
    <td width=3%></td>
    <td width=90%><font size=2>Proposals related to management compensation and
      employee benefits. As a general matter, the Proxy Committee favors disclosure
      of an issuer&#146;s compensation and benefit policies and opposes excessive
      compensation, but believes that compensation matters are normally best determined
      by an issuer&#146;s board of directors, rather than stockholders. Proposals
      to &#147;micro-manage&#148; an issuer&#146;s compensation practices or to
      set arbitrary restrictions on compensation or benefits will, therefore,
      generally not be supported.</font></td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Bullet 10" FSL="Workstation" -->
<table width=100%>
  <tr>
    <td width=5%></td>
    <td width=2% valign=top><font size=3>&#149;</font></td>
    <td width=3%></td>
    <td width=90%><font size=2>Proposals related to requests, principally from
      management, for approval of amendments that would alter an issuer&#146;s
      capital structure. As a general matter, the Proxy Committee will support
      requests that enhance the rights of common stockholders and oppose requests
      that appear to be unreasonably dilutive.</font></td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Bullet 10" FSL="Workstation" -->
<table width=100%>
  <tr>
    <td width=5%></td>
    <td width=2% valign=top><font size=3>&#149;</font></td>
    <td width=3%></td>
    <td width=90%><font size=2>Proposals related to requests for approval of amendments
      to an issuer&#146;s charter or by-laws. As a general matter, the Proxy Committee
      opposes poison pill provisions.</font></td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Bullet 10" FSL="Workstation" -->
<table width=100%>
  <tr>
    <td width=5%></td>
    <td width=2% valign=top><font size=3>&#149;</font></td>
    <td width=3%></td>
    <td width=90%><font size=2>Routine proposals related to requests regarding
      the formalities of corporate meetings.</font></td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Bullet 10" FSL="Workstation" -->
<table width=100%>
  <tr>
    <td width=5%></td>
    <td width=2% valign=top><font size=3>&#149;</font></td>
    <td width=3%></td>
    <td width=90%><font size=2>Proposals related to proxy issues associated solely
      with holdings of investment company shares. As with other types of companies,
      the Proxy Committee believes that a fund&#146;s board of directors (rather
      than its stockholders) is best-positioned to set fund policy and oversee
      management. However, the Proxy Committee opposes granting boards of directors
      authority over certain matters, such as changes to a fund&#146;s investment
      objective, that the Investment Company Act envisions will be approved directly
      by stockholders.</font></td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Bullet 10" FSL="Workstation" -->
<table width=100%>
  <tr>
    <td width=5%></td>
    <td width=2% valign=top><font size=3>&#149;</font></td>
    <td width=3%></td>
    <td width=90%><font size=2>Proposals related to limiting corporate conduct
      in some manner that relates to the stockholder&#146;s environmental or social
      concerns. The Proxy Committee generally believes that annual stockholder
      meetings are inappropriate forums for discussion of larger social issues,
      and opposes stockholder resolutions &#147;micro-managing&#148; corporate
      conduct or requesting release of information that would not help a stockholder
      evaluate an investment in the corporation as an economic matter. While the
      Proxy Committee is generally supportive of proposals to require corporate
      disclosure of matters that seem relevant and material to the economic interests
      of stockholders, the Proxy Committee is generally not supportive of proposals
      to require disclosure of corporate matters for other purposes.</font></td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Information
  about how the Fund voted proxies relating to securities held by the Fund&#146;s
  portfolio during he most recent 12 month period ended June 30 is available without
  charge (i) at www.mutualfunds.ml.com and (ii) the Security and Exchange Commission&#146;s
  website at www.sec.gov. </font></p>
<!-- MARKER FORMAT-SHEET="Center Head 2-Bold" FSL="Workstation" -->
<p align=CENTER><font face="Times New Roman, Times, Serif" size=2><b>PORTFOLIO
  TRANSACTIONS </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject
  to policies established by the Board of Directors, the Investment Adviser is
  primarily responsible for the execution of the Fund&#146;s portfolio transactions
  and the allocation of brokerage. The Fund has no obligation to deal with any
  dealer or group of dealers in the execution of transactions in portfolio securities
  of the Fund. Where possible, the Fund deals directly with the dealers who make
  a market in the securities involved except in those circumstances where better
  prices and execution are available elsewhere. It is the policy of the Fund to
  obtain the best results in conducting portfolio transactions for the Fund, taking
  into account such factors as price (including the applicable dealer spread or
  commission), the size, type and difficulty of the transaction involved, the
  firm&#146;s general execution and operations facilities and the firm&#146;s
  risk in positioning the securities involved. The cost of portfolio securities
  transactions of the Fund primarily consists of dealer or underwriter spreads
  and brokerage commissions. While reasonable competitive spreads or commissions
  are sought, the Fund will not necessarily be paying the lowest spread or commission
  available on any particular transaction. </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> 30</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 35; page: 35" --> <!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject
  to obtaining the best net results, dealers who provide supplemental investment
  research (such as quantitative and modeling information assessments and statistical
  data and provide other similar services) to the Investment Adviser may receive
  orders for transactions by the Fund. Information so received will be in addition
  to and not in lieu of the 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. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Fund invests in securities traded in the over-the-counter markets, and the Fund
  intends to deal directly with dealers who make markets in the securities involved,
  except in those circumstances where better execution is available elsewhere.
  Under the 1940 Act, except as permitted by exemptive order, persons affiliated
  with the Fund, including Merrill Lynch, are prohibited from dealing with the
  Fund as principal in the purchase and sale of securities. Since transactions
  in the over-the-counter market usually involve transactions with dealers acting
  as principals for their own accounts, the Fund does not deal with Merrill Lynch
  and its affiliates in connection with such principal transactions except that,
  pursuant to exemptive orders obtained by the Investment Adviser, the Fund may
  engage in principal transactions with Merrill Lynch in high quality, short term,
  tax exempt securities. See &#147;Investment Restrictions.&#148; However, affiliated
  persons of the Fund, including Merrill Lynch, may serve as its brokers in certain
  over-the-counter transactions conducted on an agency basis. In addition, the
  Fund has received an exemptive order, under which it may purchase investment
  grade Municipal Bonds through group orders from an underwriting syndicate of
  which Merrill Lynch is a member subject to conditions set forth in such order
  (the &#147;Group Order Exemptive Order&#148;). A group order is an order for
  securities held in an underwriting syndicate for the account of all members
  of the syndicate, and in proportion to their respective participation in the
  syndicate. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Fund also may purchase tax exempt debt instruments in individually negotiated
  transactions with the issuers. Because an active trading market may not exist
  for such securities, the prices that the Fund may pay for these securities or
  receive on their resale may be lower than that for similar securities with a
  more liquid market. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain
  court decisions have raised questions as to the extent to which investment companies
  should seek exemptions under the 1940 Act in order to seek to recapture underwriting
  and dealer spreads from affiliated entities. The Fund&#146;s Board of Directors
  has considered all factors deemed relevant and has made a determination not
  to seek such recapture at this time. The Fund&#146;s Board of Directors will
  reconsider this matter from time to time. </font></p>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
  the fiscal year ended April 30, 2005, the Fund paid $1,500 in brokerage commissions,
  all of which was paid to Merrill Lynch. For the fiscal years ended April 30,
  2004 and 2003, the Fund paid no brokerage commissions. </font></p>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Securities
  held by the Fund may also be held by, or be appropriate investments for, other
  funds or investment advisory clients for which the Investment Adviser or its
  affiliates act as an adviser. Because of different investment objectives or
  other factors, a particular security may be bought for an advisory client when
  other clients are selling the same security. If purchases or sales of securities
  by the Investment Adviser for the Fund or other funds for which it acts as investment
  adviser or for other advisory clients arise for consideration at or about the
  same time, transactions in such securities will be made, insofar as feasible,
  for the respective funds and clients in a manner deemed equitable to all. Transactions
  effected by the Investment Adviser (or its affiliates) on behalf of more than
  one of its clients during the same period may increase the demand for securities
  being purchased or the supply of securities being sold, causing an adverse effect
  on price. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section
  11(a) of the Securities Exchange Act of 1934 generally prohibits members of
  the U.S. national securities exchanges from executing exchange transactions
  for their affiliates and institutional accounts that they manage unless the
  member (i) has obtained prior express authorization from the account to effect
  such transactions, (ii) at least annually furnishes the account with a statement
  setting forth the aggregate compensation received by the member in effecting
  such transactions, and (iii) complies with any rules the Commission has prescribed
  with respect to the requirements of clauses (i) and (ii). To the extent Section
  11(a) would apply to Merrill Lynch acting as a broker for the Fund in any of
  its portfolio transactions executed on any such securities exchange of which
  it is a member, appropriate consents have been obtained from the Fund and annual
  statements as to aggregate compensation will be provided to the Fund. </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> 31</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 36; page: 36" --> <!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Portfolio Turnover
  </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Generally,
  the Fund does not purchase securities for short term trading profits. However,
  the Fund may dispose of securities without regard to the time they have been
  held when such actions, for defensive or other reasons, appear advisable to
  the Investment Adviser. While it is not possible to predict turnover rates with
  any certainty, at present it is anticipated that the Fund&#146;s annual portfolio
  turnover rate, under normal circumstances, should be less than 100%. (The portfolio
  turnover rate is calculated by dividing the lesser of purchases or sales of
  portfolio securities for the particular fiscal year by the monthly average of
  the value of the portfolio securities owned by the Fund during the particular
  fiscal year. For purposes of determining this rate, all securities whose maturities
  at the time of acquisition are one year or less are excluded.) A high portfolio
  turnover rate results in greater transaction costs, which are borne directly
  by the Fund and may have certain tax consequences for stockholders. </font></p>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
  the fiscal years ended April 30, 2005, 2004 and 2003, the Fund&#146;s portfolio
  turnover rates were 36.23%, 42.89% and 50.68%, respectively. </font></p>
 <!-- MARKER FORMAT-SHEET="Center Head 2-Bold" FSL="Workstation" -->
<p align=CENTER><font face="Times New Roman, Times, Serif" size=2><b>TAXES </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Fund has elected to qualify for the special tax treatment afforded regulated
  investment companies (&#147;RICs&#148;) under the Internal Revenue Code of 1986,
  as amended (the &#147;Code&#148;). As long as it so qualifies, in any taxable
  year in which it distributes at least 90% of its taxable net income and 90%
  of its tax exempt net income (see below), the Fund (but not its stockholders)
  will not be subject to Federal income tax to the extent that it distributes
  its net investment income and net realized capital gains. The Fund intends to
  distribute substantially all of such income. If, in any taxable year, the Fund
  fails to qualify as a RIC under the Code, it would be taxed in the same manner
  as an ordinary corporation and all distributions from earnings and profits (as
  determined under U.S. Federal income tax principles) to its stockholders would
  be taxable as ordinary dividend income eligible for the maximum 15% tax rate
  for non-corporate shareholders and the dividends-received deduction for corporate
  shareholders. However, the Fund&#146;s distributions derived from income on
  tax exempt obligations, as defined herein, would no longer qualify for treatment
  as exempt interest. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  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 April 30 year-end, plus certain undistributed amounts from
  previous years. The required distributions, however, are based only on the taxable
  income of a RIC. The excise tax, therefore, generally will not apply to the
  tax exempt income of a RIC, such as the Fund, that pays exempt-interest dividends.
  </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Internal Revenue Service (the &#147;IRS&#148;), in a revenue ruling, held that
  certain auction rate preferred stock would be treated as stock for Federal income
  tax purposes. The terms of the AMPS are substantially similar, but not identical,
  to the auction rate preferred stock discussed in the revenue ruling, and in
  the opinion of Sidley Austin Brown &amp; Wood <font size="1">LLP</font>, counsel
  to the Fund, the shares of AMPS will constitute stock of the Fund and distributions
  with respect to shares of AMPS (other than distributions in redemption of shares
  of AMPS subject to Section 302(b) of the Code) will constitute dividends to
  the extent of the Fund&#146;s current and accumulated earnings and profits as
  calculated for Federal income tax purposes. Nevertheless, it is possible that
  the IRS might take a contrary position, asserting, for example, that the shares
  of AMPS constitute debt of the Fund. If this position were upheld, the discussion
  of the treatment of distributions below would not apply. Instead, distributions
  by the Fund to holders of shares of AMPS would constitute taxable interest income,
  whether or not they exceeded the earnings and profits of the Fund, would be
  included in full in the income of the recipient and would be taxed as ordinary
  income. Counsel believes that such a position, if asserted by the IRS, would
  be unlikely to prevail. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Fund will only purchase a Municipal Bond or Non-Municipal Tax-Exempt Security
  if it is accompanied by an opinion of counsel to the issuer, which is delivered
  on the date of issuance of the security, that the interest paid on such security
  is excludable from gross income for Federal income tax purposes (<i>i.e.</i>,
  &#147;tax-exempt&#148;). The Fund intends to qualify to pay &#147;exempt-interest
  dividends&#148; as defined in Section 852(b)(5) of the Code. Under such section
  if, at the close of each quarter of its taxable year, at least 50% of the value
  of its total assets consists of obligations that pay interest which is excludable
  from gross income for Federal income tax purposes (&#147;tax exempt obligations&#148;)
  under Section 103(a) of the Code (relating generally to obligations of a state
  or local governmental unit), the Fund shall be qualified to pay exempt-interest
  dividends to its stockholders. </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> 32</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 37; page: 37" --> <!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>Exempt-interest dividends
  are dividends or any part thereof paid by the Fund that are attributable to
  interest on tax exempt obligations and designated by the Fund as exempt-interest
  dividends in a written notice mailed to the Fund&#146;s stockholders within
  60 days after the close of its taxable year. To the extent that the dividends
  distributed to the Fund&#146;s stockholders are derived from interest income
  exempt from tax under Code Section 103(a) and are properly designated as exempt-interest
  dividends, they will be excludable from a stockholder&#146;s gross income for
  Federal tax purposes. Exempt-interest dividends are included, however, in determining
  the portion, if any, of a person&#146;s social security and railroad retirement
  benefits subject to Federal income taxes. Each stockholder is advised to consult
  a tax adviser with respect to whether exempt-interest dividends retain the exclusion
  under Code Section 103(a) if such stockholder would be treated as a &#147;substantial
  user&#148; or &#147;related person&#148; under Code Section 147(a) with respect
  to property financed with the proceeds of an issue of PABs, if any, held by
  the Fund. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
  the extent that the Fund&#146;s distributions are derived from interest on its
  taxable investments or from an excess of net short-term capital gains over net
  long-term capital losses (&#147;ordinary income dividends&#148;), such distributions
  generally are considered ordinary income for Federal income tax purposes. Distributions
  by the Fund, whether from exempt-interest income, ordinary income or capital
  gains, are not eligible for the dividends received deduction allowed to corporations
  under the Code or the reduced tax rates available to non-corporate shareholders.
  Distributions, if any, from an excess of net long-term capital gains over net
  short-term capital losses derived from the sale of securities or from certain
  transactions in futures, or options and swaps (&#147;capital gain dividends&#148;)
  are taxable as long-term capital gains for Federal income tax purposes, regardless
  of the length of time the stockholder has owned Fund shares. Generally not later
  than 60 days after the close of its taxable year, the Fund will provide its
  stockholders with a written notice designating the amounts of any exempt-interest
  dividends and capital gain dividends. If the Fund pays a dividend in January
  which was declared in the previous October, November or December to stockholders
  of record on a specified date in one of such months, then such dividend will
  be treated for tax purposes as being paid by the Fund and received by its stockholders
  on December 31 of the year in which such dividend was declared. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
  or a portion of the Fund&#146;s gain from the sale or redemption of tax exempt
  obligations purchased at a market discount will be treated for Federal income
  tax purposes as ordinary income rather than capital gain. This rule may increase
  the amount of ordinary income dividends received by stockholders. Distributions
  in excess of the Fund&#146;s earnings and profits will first reduce the adjusted
  tax basis of a holder&#146;s shares and, after such adjusted tax basis is reduced
  to zero, will constitute capital gains to such holder (assuming the shares are
  held as a capital asset). The sale or exchange of AMPS could result in capital
  gain or loss to holders of AMPS who hold their shares as capital assets. Generally,
  a stockholder&#146;s gain or loss will be long-term capital gain or loss if
  the shares have been held for more than one year. Any loss upon the sale or
  exchange of Fund shares held for six months or less will be disallowed to the
  extent of any exempt-interest dividends received by the stockholder. In addition,
  any such loss that is not disallowed under the rule stated above will be treated
  as long-term capital loss to the extent of any capital gain dividends received
  by the stockholder. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
  you borrow money to buy the Fund&#146;s AMPS, you may not be permitted to deduct
  the interest on that loan. Under Federal income tax rules, the Fund&#146;s AMPS
  may be treated as having been bought with borrowed money even if the purchase
  cannot be traced directly to borrowed money. Stockholders should consult their
  own tax advisers regarding the impact of an investment in AMPS upon the deductibility
  of interest payable by the stockholder. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  IRS has taken the position in a revenue ruling that if a RIC has two or more
  classes of shares, it may designate distributions made to each class in any
  year as consisting of no more than such class&#146;s proportionate share of
  particular types of income, including exempt-interest income and net long-term
  capital gains. A class&#146;s proportionate share of a particular type of income
  is determined according to the percentage of total dividends paid by the RIC
  during such year that was paid to such class. Thus, the Fund is required to
  allocate a portion of its net capital gain and other taxable income to the shares
  of AMPS and Other AMPS of each series. Accordingly, the Fund intends to designate
  dividends paid to the Series C AMPS and Other AMPS as tax exempt interest, capital
  gains or other taxable income, as applicable, in proportion to each series&#146;
  share of total dividends paid during the year. The Fund may notify the Auction
  Agent of the amount of any net capital gain and other taxable income to be included
  in any dividend on shares of AMPS prior to the Auction establishing the Applicable
  Rate for such dividend. The Fund also may include such income in a dividend
  on shares of AMPS without giving advance notice thereof if it increases the
  dividend by an additional amount calculated as if such income were a Retroactive
  </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> 33</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 38; page: 38" --> <!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>Taxable Allocation and the
  additional amount were an Additional Dividend, provided that the Fund will notify
  the Auction Agent of the additional amounts to be included in such dividend
  prior to the applicable Dividend Payment Date. See &#147;The Auction &#151;
  Auction Procedures &#151; Auction Date; Advance Notice of Allocation of Taxable
  Income; Inclusion of Taxable Income in Dividends&#148; in the prospectus. Except
  for the portion of any dividend that it informs the Auction Agent will be treated
  as capital gains or other taxable income, the Fund anticipates that the dividends
  paid on the shares of AMPS will constitute exempt-interest dividends. The amount
  of net capital gain and ordinary income allocable to shares of AMPS (the &#147;taxable
  distribution&#148;) will depend upon the amount of such gains and income realized
  by the Fund and the total dividends paid by the Fund on shares of common stock
  and shares of the series of AMPS during a taxable year, but the taxable distribution
  generally is not expected to be significant. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
  the Fund makes a Retroactive Taxable Allocation, it will pay Additional Dividends
  to holders of AMPS who are subject to the Retroactive Taxable Allocation. See
  &#147;Description of AMPS &#151; Dividends &#151; Additional Dividends&#148;
  in the prospectus. The Federal income tax consequences of Additional Dividends
  under existing law are uncertain. The Fund intends to treat a holder as receiving
  a dividend distribution in the amount of any Additional Dividend only as and
  when such Additional Dividend is paid. An Additional Dividend generally will
  be designated by the Fund as an exempt-interest dividend except as otherwise
  required by applicable law. However, the IRS may assert that all or part of
  an Additional Dividend is a taxable dividend either in the taxable year for
  which the Retroactive Taxable Allocation is made or in the taxable year in which
  the Additional Dividend is paid. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
  the opinion of Sidley Austin Brown &amp; Wood <font size="1">LLP</font>, counsel
  to the Fund, under current law the manner in which the Fund intends to allocate
  items of tax exempt income, net capital gain and other taxable income among
  shares of common stock and shares of AMPS will be respected for Federal income
  tax purposes. However, the tax treatment of Additional Dividends may affect
  the Fund&#146;s calculation of each class&#146;s allocable share of capital
  gains and other taxable income. In addition, there is currently no direct guidance
  from the IRS or other sources specifically addressing whether the Fund&#146;s
  method for allocating tax exempt income, net capital gain and other taxable
  income, if any, among shares of common stock and shares of the AMPS will be
  respected for Federal income tax purposes, and it is possible that the IRS could
  disagree with counsel&#146;s opinion and attempt to reallocate the Fund&#146;s
  net capital gain or other taxable income. In the event of a reallocation, some
  of the dividends identified by the Fund as exempt-interest dividends to holders
  of shares of AMPS may be recharacterized as additional capital gains or other
  taxable income. In the event of such recharacterization, the Fund would not
  be required to make payments to such stockholders to offset the tax effect of
  such reallocation. In addition, a reallocation may cause the Fund to be liable
  for income tax and excise tax on any reallocated taxable income. Sidley Austin
  Brown &amp; Wood <font size="1">LLP</font> has advised the Fund that, in its
  opinion, if the IRS were to challenge in court the Fund&#146;s allocations of
  income and gain, the IRS would be unlikely to prevail. A holder should be aware,
  however, that the opinion of Sidley Austin Brown &amp; Wood <font size="1">LLP</font>
  represents only its best legal judgment and is not binding on the IRS or the
  courts. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Code subjects interest received on certain otherwise tax exempt securities to
  a Federal alternative minimum tax. The Federal alternative minimum tax applies
  to interest received on PABs issued after August 7, 1986. PABs are bonds that,
  although tax exempt, are used for purposes other than those performed by governmental
  units and that benefit non-governmental entities (<i>e.g</i>., bonds used for
  industrial development or housing purposes). Income received on such bonds is
  classified as an item of &#147;tax preference,&#148; which could subject certain
  investors in such bonds, including stockholders of the Fund, to an increased
  Federal alternative minimum tax. The Fund intends to purchase such PABs and
  will report to stockholders at the close of the calendar year-end the portion
  of its dividends declared during the year which constitutes an item of tax preference
  for Federal alternative minimum tax purposes. The Code further provides that
  corporations are subject to a Federal alternative minimum tax based, in part,
  on certain differences between taxable income as adjusted for other tax preferences
  and the corporation&#146;s &#147;adjusted current earnings,&#148; which more
  closely reflect a corporation&#146;s economic income. Because an exempt-interest
  dividend paid by the Fund will be included in adjusted current earnings, a corporate
  stockholder may be required to pay a Federal alternative minimum tax on exempt-interest
  dividends paid by the Fund. </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> 34</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 39; page: 39" --> <!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Fund may invest in instruments the return on which includes nontraditional features
  such as indexed principal or interest payments (&#147;nontraditional instruments&#148;).
  These instruments may be subject to special tax rules under which the Fund may
  be required to accrue and distribute income before amounts due under the obligations
  are paid. In addition, it is possible that all or a portion of the interest
  payments on such nontraditional instruments could be recharacterized as taxable
  ordinary income. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Fund may engage in interest rate and credit default swaps. The Federal income
  tax rules governing the taxation of swaps are not entirely clear and may require
  the Fund to treat payments received under such arrangements as ordinary income
  and to amortize payments under certain circumstances. Because payments received
  by the Fund in connection with swap transactions will be taxable rather than
  tax exempt, they may result in increased taxable distributions to stockholders.
  </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain
  transactions entered into by the Fund are subject to complex Federal income
  tax provisions that may, among other things, (a) affect the character of gains
  and losses realized, (b) disallow, suspend or otherwise limit the allowance
  of certain losses or deductions, and (c) accelerate the recognition of income.
  Operation of these tax rules could, therefore, affect the character, amount
  and timing of distributions and result in increased taxable distributions to
  stockholders. Special tax rules also will require the Fund to mark-to-market
  certain types of positions in its portfolio (<i>i.e.</i>, treat them as sold
  on the last day of the taxable year), and may result in the recognition of income
  without a corresponding receipt of cash. The Fund intends to monitor its transactions,
  make appropriate tax elections and make appropriate entries in its books and
  records to lessen the effect of these tax rules and avoid any possible disqualification
  for the special treatment afforded RICs under the Code. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Fund&#146;s ability to distribute dividends exempt from Federal income tax depends
  on the exclusion from gross income of the interest income that it receives on
  the securities in which it invests. The Fund will only purchase Municipal Bonds
  and Non-Municipal Tax-Exempt Securities if they are accompanied by an opinion
  of counsel to the issuer, which is delivered on the date of issuance of that
  security, that interest on such securities is excludable from gross income for
  Federal income tax purposes (the &#147;tax exemption opinion&#148;). </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Events
  occurring after the date of issuance of the Municipal Bonds and Non-Municipal
  Tax Exempt Securities in which the Fund invests, however, may cause the interest
  on such securities to be includable in gross income for Federal income tax purposes.
  For example, the Code establishes certain requirements, such as restrictions
  as to the investment of the proceeds of the issue, limitations as to the use
  of proceeds of such issue and the property financed by such proceeds, and the
  payment of certain excess earnings to the Federal government, that must be met
  after the issuance of securities for interest on such securities to remain excludable
  from gross income for Federal income tax purposes. The issuers and the conduit
  borrowers of the Municipal Bonds or Non-Municipal Tax Exempt Securities generally
  covenant to comply with such requirements, and the tax exemption opinion generally
  assumes continuing compliance with such requirements. Failure to comply with
  these continuing requirements, however, may cause the interest on such securities
  to be includable in gross income for Federal income tax purposes retroactive
  to their date of issue. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
  addition, the 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&#146;s acquisition of such security, the IRS may demand
  that the Fund pay taxes on the affected interest income. If the Fund agrees
  to do so, the Fund&#146;s yield on its common stock could be adversely affected.
  A determination that interest on a security held by the Fund is includable in
  gross income for Federal income tax purposes retroactively to its date of issue
  may, likewise, cause a portion of prior distributions received by stockholders,
  including holders of AMPS, to be taxable to those stockholders in the year of
  receipt. The Fund will not pay an Additional Dividend to a holder of AMPS under
  these circumstances. </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> 35</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 40; page: 40" --> <!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
  at any time when shares of AMPS are outstanding the Fund does not meet the asset
  coverage requirements of the 1940 Act, the Fund will be required to suspend
  distributions to holders of common stock until the asset coverage is restored.
  See &#147;Description of AMPS &#151; Dividends &#151; Restrictions on Dividends
  and Other Payments&#148; and in the prospectus. This may prevent the Fund from
  distributing at least 90% of its net income, and may, therefore, jeopardize
  the Fund&#146;s qualification for taxation as a RIC. If the Fund were to fail
  to qualify as a RIC, some or all of the distributions paid by the Fund would
  be fully taxable for Federal income tax purposes. Upon any failure to meet the
  asset coverage requirements of the 1940 Act, the Fund, in its sole discretion,
  may, and under certain circumstances will be required to, redeem shares of AMPS
  in order to maintain or restore the requisite asset coverage and avoid the adverse
  consequences to the Fund and its stockholders of failing to qualify as a RIC.
  See &#147;Description of AMPS &#151; Redemption&#148; herein and in the prospectus.
  There can be no assurance, however, that any such action would achieve such
  objectives. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
  noted above, the Fund must distribute annually at least 90% of its net taxable
  and tax exempt interest income. A distribution will only be counted for this
  purpose if it qualifies for the dividends paid deduction under the Code. Additional
  preferred stock that the Fund has authority to issue may raise an issue as to
  whether distributions on such preferred stock are &#147;preferential&#148; under
  the Code and therefore not eligible for the dividends paid deduction. The Fund
  intends to issue preferred stock that counsel advises will not result in the
  payment of a preferential dividend. If the Fund ultimately relies on a legal
  opinion with regard to such preferred stock, there is no assurance that the
  IRS would agree that dividends on the preferred stock are not preferential.
  If the IRS successfully disallowed the dividends paid deduction for dividends
  on the preferred stock, the Fund could lose the benefit of the special treatment
  afforded RICs under the Code. In this case, dividends paid by the Fund would
  not be exempt from Federal income taxes. Additionally, the Fund would be subject
  to Federal income tax, including the alternative minimum tax. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
  certain Code provisions, some stockholders may be subject to a withholding tax
  on ordinary income dividends, capital gain dividends and redemption payments
  (&#147;backup withholding&#148;). Backup withholding may also be required on
  distributions paid by the Fund, unless it reasonably estimates that at least
  95% of its distributions during the taxable year are comprised of exempt-interest
  dividends. Generally, stockholders subject to backup withholding will be those
  for whom no certified taxpayer identification number is on file with the Fund
  or who, to the Fund&#146;s knowledge, have furnished an incorrect number. When
  establishing an account, an investor must certify under penalty of perjury that
  such number is correct and that such investor is not otherwise subject to backup
  withholding. Backup withholding is not an additional tax. Any amount withheld
  generally may be allowed as a refund or a credit against a stockholder&#146;s
  Federal income tax liability, provided that the required information is timely
  forwarded to the IRS. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Fund is generally not an appropriate investment for retirement plans, other
  entities that are not subject to tax and foreign stockholders. </font></p>
<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>State and Local
  Taxes </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  exemption from Federal income tax for exempt-interest dividends does not necessarily
  result in an exemption for such dividends under the income or other tax laws
  of any state or local taxing authority. Stockholders are advised to consult
  their own tax advisers concerning state and local matters. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
  some states, the portion of any exempt-interest dividend that is derived from
  interest received by a RIC on its holdings of that state&#146;s securities and
  its political subdivisions and instrumentalities is exempt from that state&#146;s
  income tax. Therefore, the Fund will report annually to its stockholders the
  percentage of interest income earned by the Fund during the preceding year on
  tax exempt obligations indicating, on a state-by-state basis, the source of
  such income. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  foregoing is a general and abbreviated summary of the applicable provisions
  of the Code and Treasury Regulations presently in effect. For the complete provisions,
  reference should be made to the pertinent Code sections and the Treasury Regulations
  promulgated thereunder. The Code and the Treasury Regulations are subject to
  change by legislative, judicial or administrative action either prospectively
  or retroactively. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stockholders
  are urged to consult their tax advisers regarding specific questions as to Federal,
  state, local or foreign taxes. </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> 36</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 41; page: 41" --> <!-- MARKER FORMAT-SHEET="Center Head 2-Bold" FSL="Workstation" -->
<p align=CENTER><font face="Times New Roman, Times, Serif" size=2><b>CONFLICTS
  OF INTEREST </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  investment activities of the Investment Adviser, Merrill Lynch and other affiliates
  of Merrill Lynch for their own accounts and other accounts they manage may give
  rise to conflicts of interest that could disadvantage the Fund and its stockholders.
  The Investment Adviser has adopted written policies and procedures that, collectively,
  address investment activities of, and other arrangements involving, the Investment
  Adviser that may give rise to such conflicts of interest. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Merrill
  Lynch, as a diversified global financial services firm, is involved with a broad
  spectrum of financial services and asset management activities. Certain of Merrill
  Lynch&#146;s affiliates that are not service providers to the Fund engage in
  a broad range of activities over which the Investment Adviser has no control
  or ability to exercise oversight. Although there are no formal written policies
  and procedures that cover all potential or actual conflicts of interest, Merrill
  Lynch has established a number of committees and related policies and procedures
  that are designed to identify, analyze and/or resolve such conflicts of interest.
  No assurance can be given that Merrill Lynch will be able to identify each conflict
  of interest or that each identified conflict of interest will be resolved in
  favor of the Fund. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Merrill
  Lynch and its affiliates, including, without limitation, the Investment Adviser
  and its advisory affiliates may have proprietary interests in, and may manage
  or advise with respect to, accounts or funds (including separate accounts and
  other funds and collective investment vehicles) that have investment objectives
  similar to those of the Fund and/or that engage in transactions in the same
  types of securities and instruments as the Fund. Merrill Lynch and its affiliates
  are also major participants in, among others, the options, swaps, and equities
  markets, in each case both on a proprietary basis and for the accounts of customers.
  As such, Merrill Lynch and its affiliates are actively engaged in transactions
  in the same securities and instruments in which the Fund invests. Such activities
  could affect the prices and availability of the securities and instruments in
  which the Fund invests, which could have an adverse impact on the Fund&#146;s
  performance. Such transactions, particularly in respect of most proprietary
  accounts or customer accounts, will be executed independently of the Fund&#146;s
  transactions and thus at prices or rates that may be more or less favorable
  than those obtained by the Fund. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  results of the Fund&#146;s investment activities may differ significantly from
  the results achieved by the Investment Adviser and its affiliates for its proprietary
  accounts or other accounts (including investment companies or collective investment
  vehicles) managed or advised by the Investment Adviser. It is possible that
  the Investment Adviser and its affiliates and such other accounts will achieve
  investment results that are substantially more or less favorable than the results
  achieved by the Fund. Moreover, it is possible that the Fund will sustain losses
  during periods in which the Investment Adviser and its affiliates achieve significant
  profits on their trading for proprietary or other accounts. The opposite result
  is also possible. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From
  time to time, the Fund&#146;s activities may also be restricted because of regulatory
  restrictions applicable to Merrill Lynch and its affiliates, and/or their internal
  policies designed to comply with such restrictions. As a result, there may be
  periods, for example, when the Investment Adviser, and/or its affiliates, will
  not initiate or recommend certain types of transactions in certain securities
  or instruments with respect to which the Investment Adviser and/or its affiliates
  are performing services or when position limits have been reached. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
  connection with its management of the Fund, the Investment Adviser may have
  access to certain fundamental analysis and proprietary technical models developed
  by Merrill Lynch. The Investment Adviser will not be under any obligation, however,
  to effect transactions on behalf of the Fund in accordance with such analysis
  and models. In addition, neither Merrill Lynch nor any of its affiliates will
  have any obligation to make available any information regarding their proprietary
  activities or strategies, or the activities or strategies used for other accounts
  managed by them, for the benefit of the management of the Fund and it is not
  anticipated that the Investment Adviser will have access to such information
  for the purpose of managing the Fund. The proprietary activities or portfolio
  strategies of Merrill Lynch and its affiliates or the activities or strategies
  used for accounts managed by them or other customer accounts could conflict
  with the transactions and strategies employed by the Investment Adviser in managing
  the Fund. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
  addition, certain principals and certain employees of the Investment Adviser
  are also principals or employees of Merrill Lynch or its affiliated entities.
  As a result, the performance by these principals and employees of their obligations
  to such other entities may be a consideration of which investors in the Fund
  should be aware. </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> 37</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 42; page: 42" --> <!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Investment Adviser may enter into transactions and invest in securities and
  instruments on behalf of the Fund in which customers of Merrill Lynch (or, to
  the extent permitted by the SEC, Merrill Lynch) serve as the counterparty, principal
  or issuer. In such cases, such party&#146;s interests in the transaction will
  be adverse to the interests of the Fund, and such party may have no incentive
  to assure that the Fund obtains the best possible prices or terms in connection
  with the transactions. In addition, the purchase, holding and sale of such investments
  by the Fund may enhance the profitability of Merrill Lynch. Merrill Lynch and
  its affiliates may also create, write or issue derivative instruments for customers
  of Merrill Lynch or its affiliates, the underlying securities or instruments
  of which may be those in which the Fund invests or which may be based on the
  performance of the Fund. The Fund may, subject to applicable law, purchase investments
  that are the subject of an underwriting or other distribution by Merrill Lynch
  or its affiliates and may also enter into transactions with other clients of
  Merrill Lynch or its affiliates where such other clients have interests adverse
  to those of the Fund. At times, these activities may cause departments of Merrill
  Lynch or its affiliates to give advice to clients that may cause these clients
  to take actions adverse to the interests of the Fund. To the extent affiliated
  transactions are permitted, the Fund will deal with Merrill Lynch and its affiliates
  on an arms-length basis. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Fund will be required to establish business relationships with its counterparties
  based on the Fund&#146;s own credit standing. Neither Merrill Lynch nor its
  affiliates will have any obligation to allow their credit to be used in connection
  with the Fund&#146;s establishment of its business relationships, nor is it
  expected that the Fund&#146;s counterparties will rely on the credit of Merrill
  Lynch or any of its affiliates in evaluating the Fund&#146;s creditworthiness.
  </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It
  is also possible that, from time to time, Merrill Lynch or any of its affiliates,
  may, although they are not required to, purchase, hold or sell shares of the
  Fund. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It
  is possible that the Fund may invest in securities of companies with which Merrill
  Lynch has or is trying to develop investment banking relationships as well as
  securities of entities in which Merrill Lynch makes a market. The Fund also
  may invest in securities of companies that Merrill Lynch provides or may someday
  provide research coverage. Such investments could cause conflicts between the
  interests of the Fund and the interests of other Merrill Lynch clients. In providing
  services to the Fund, the Investment Adviser is not permitted to obtain or use
  material non-public information acquired by any division, department or affiliate
  of Merrill Lynch in the course of these activities. In addition, from time to
  time, Merrill Lynch&#146;s activities may limit the Fund&#146;s flexibility
  in purchases and sales of securities. When Merrill Lynch is engaged in an underwriting
  or other distribution of securities of an entity, the Investment Adviser may
  be prohibited from purchasing or recommending the purchase of certain securities
  of that entity for the Fund. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Investment Adviser, its affiliates, and its directors, officers and employees,
  may buy and sell securities or other investments for their own accounts, and
  may have conflicts of interest with respect to investments made on behalf of
  the Fund. As a result of differing trading and investment strategies or constraints,
  positions may be taken by directors, officers and employees and affiliates of
  the Investment Adviser that are the same, different from or made at different
  times than positions taken for the Fund. To lessen the possibility that the
  Fund will be adversely affected by this personal trading, each of the Fund and
  the Investment Adviser has adopted a Code of Ethics in compliance with Section
  17(j) of the 1940 Act that restricts securities trading in the personal accounts
  of investment professionals and others who normally come into possession of
  information regarding the Fund&#146;s portfolio transactions. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Investment Adviser and its affiliates will not purchase securities or other
  property from, or sell securities or other property to, the Fund, except that
  the Fund may, in accordance with rules adopted under the 1940 Act, engage in
  transactions with accounts that are affiliated with the Fund as a result of
  common officers, directors, or investment advisers. These transactions would
  be effected in circumstances in which the Investment Adviser determined that
  it would be appropriate for the Fund to purchase and another client to sell,
  or the Fund to sell and another client to purchase, the same security or instrument
  on the same day. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Present
  and future activities of Merrill Lynch and its affiliates, including of the
  Investment Adviser, in addition to those described in this section, may give
  rise to additional conflicts of interest. </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> 38</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 43; page: 43" --> <!-- MARKER FORMAT-SHEET="Center Head 2-Bold" FSL="Workstation" -->
<p align=CENTER><font face="Times New Roman, Times, Serif" size=2><b>NET ASSET
  VALUE </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
  asset value per share of common stock is determined Monday through Friday as
  of the close of business on the NYSE (generally, the NYSE closes at 4:00 p.m.,
  Eastern time), on each business day during which the NYSE is open for trading.
  For purposes of determining the net asset value of a share of common stock,
  the value of the securities held by the Fund plus any cash or other assets (including
  interest accrued but not yet received) minus all liabilities (including accrued
  expenses) and the aggregate liquidation value of any outstanding shares of preferred
  stock is divided by the total number of shares of common stock outstanding at
  such time. Expenses, including the fees payable to the Investment Adviser, are
  accrued daily. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Municipal Bonds and other portfolio securities in which the Fund invests are
  traded primarily in over-the-counter (&#147;OTC&#148;) municipal bond and money
  markets and are valued at the last available bid price for long positions and
  at the last available ask price for short positions in the OTC market or on
  the basis of yield equivalents as obtained from one or more dealers or pricing
  services approved by the Directors. One bond is the &#147;yield equivalent&#148;
  of another bond when, taking into account market price, maturity, coupon rate,
  credit rating and ultimate return of principal, both bonds will theoretically
  produce an equivalent return to the bondholder. Financial futures contracts
  and options thereon, which are traded on exchanges, are valued at their settlement
  prices as of the close of such exchanges. Short-term investments with a remaining
  maturity of 60 days or less are valued on an amortized cost basis, which approximates
  market value, unless the Investment Adviser believes that this method no longer
  produces fair valuations. Repurchase agreements will be valued at cost plus
  accrued interest. The value of swaps, including interest rate swaps, caps and
  floors, will be determined by obtaining dealer quotations. Repurchase agreements
  will be valued at cost plus accrued interest. Securities and assets for which
  market quotations are not readily available are valued at fair value as determined
  in good faith by or under the direction of the Directors, including valuations
  furnished by a pricing service retained by the Fund, which may use a matrix
  system for valuations. The procedures of the pricing service and its valuations
  are reviewed by the officers of the Fund under the general supervision of the
  Directors. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Fund 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 <i>Barron&#146;s</i>, the Monday edition
  of <i>The Wall Street Journal</i> and the Monday and Saturday editions of <i>The
  New York Times</i>. </font></p>
<!-- MARKER FORMAT-SHEET="Center Head 2-Bold" FSL="Workstation" -->
<p align=CENTER><font face="Times New Roman, Times, Serif" size=2><b>FINANCIAL
  STATEMENTS </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Fund&#146;s audited financial statements for the fiscal year ended April 30,
  2005, together with the report of Ernst &amp; Young <font size="1">LLP</font>
  thereon, are incorporated in this statement of additional information by reference
  to its 2005 Annual Report. You may request a copy of the 2005 Annual Report
  at no charge by calling (800) 543-6217 between 8:30 a.m. and 5:30 p.m. Eastern
  time on any business day. </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> 39</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 44; page: 44" -->
<p align=CENTER><font face="Times New Roman, Times, Serif" size=2><b>APPENDIX
  A </b></font></p>
<!-- MARKER FORMAT-SHEET="Center Head 2-Bold" FSL="Workstation" -->
<p align=CENTER><font face="Times New Roman, Times, Serif" size=2><b>DESCRIPTION
  OF MUNICIPAL BOND RATINGS </b></font></p>
<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Description
  of Moody&#146;s Municipal Bond Ratings </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>Aaa </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Issuers or
      issues rated Aaa demonstrate the strongest creditworthiness relative to
      other US municipal or tax-exempt issuers or issues. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>Aa </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Issuers or
      issues rated Aa demonstrate very strong creditworthiness relative to other
      US municipal or tax-exempt issuers or issues. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>A </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Issuers or
      issues rated A present above-average creditworthiness relative to other
      US municipal or tax-exempt issuers or issues. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>Baa </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Issuers or
      issues rated Baa represent average creditworthiness relative to other US
      municipal or tax- exempt issuers or issues. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>Ba </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Issuers or
      issues rated Ba demonstrate below-average creditworthiness relative to other
      US municipal or tax-exempt issuers or issues. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>B </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Issuers or
      issues rated B demonstrate weak creditworthiness relative to other US municipal
      or tax- exempt issuers or issues. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>Caa </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Issuers or
      issues rated Caa demonstrate very weak creditworthiness relative to other
      US municipal or tax-exempt issuers or issues. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>Ca </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Issuers or
      issues rated Ca demonstrate extremely weak creditworthiness relative to
      other US municipal or tax-exempt issuers or issues. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>C </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Issuers or
      issues rated C demonstrate the weakest creditworthiness relative to other
      US municipal or tax-exempt issuers or issues. </font></td>
  </tr>
</table>
<p><font face="Times New Roman, Times, Serif" size=2><i>Note</i>: Moody&#146;s
  applies numerical modifiers 1, 2, and 3 in each generic rating classification
  from Aa through Caa. The modifier 1 indicates that the obligation ranks in the
  higher end of its generic rating category; the modifier 2 indicates a mid-range
  ranking; and the modifier 3 indicates a ranking in the lower end of that generic
  rating category. </font></p>
<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Description
  of Moody&#146;s Municipal Short-Term Debt Ratings </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>MIG 1 </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>This designation
      denotes superior credit quality. Excellent protection is afforded by established
      cash flows, highly reliable liquidity support, or demonstrated broad-based
      access to the market for refinancing. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>MIG 2 </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>This designation
      denotes strong credit quality. Margins of protection are ample, although
      not as large as in the preceding group. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>MIG 3 </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>This designation
      denotes acceptable credit quality. Liquidity and cash-flow protection may
      be narrow, and market access for refinancing is likely to be less well-established.
      </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>SG </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>This designation
      denotes speculative-grade credit quality. Debt instruments in this category
      may lack sufficient margins of protection. </font></td>
  </tr>
</table>
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Description
  of Moody&#146;s U.S. Municipal Demand Obligation Ratings </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
  the case of variable rate demand obligations (VRDOs), a two-component rating
  is assigned; a long or short-term debt rating and a demand obligation rating.
  The first element represents Moody&#146;s evaluation of the degree of risk associated
  with scheduled principal and interest payments. The second element represents
  Moody&#146;s evaluation of the degree of risk associated with the ability to
  receive purchase price upon demand (&#147;demand feature&#148;), using a variation
  of the MIG rating scale, the Variable Municipal Investment Grade or VMIG rating.
  </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When
  either the long- or short-term aspect of a VRDO is not rated, that piece is
  designated NR, <i>e.g.,</i> Aaa/NR or NR/VMIG 1. </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> A-1</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 2; page: 2" --> <!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;VMIG
  rating expirations are a function of each issue&#146;s specific structural or
  credit features. </font></p>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>VMIG 1 </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>This designation
      denotes superior credit quality. Excellent protection is afforded by the
      superior short-term credit strength of the liquidity provider and structural
      and legal protections that ensure the timely payment of purchase price upon
      demand. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>VMIG 2 </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>This designation
      denotes strong credit quality. Good protection is afforded by the strong
      short-term credit strength of the liquidity provider and structural and
      legal protections that ensure the timely payment of purchase price upon
      demand. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>VMIG 3 </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>This designation
      denotes acceptable credit quality. Adequate protection is afforded by the
      satisfactory short-term credit strength of the liquidity provider and structural
      and legal protections that ensure the timely payment of purchase price upon
      demand. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>SG </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>This designation
      denotes speculative-grade credit quality. Demand features rated in this
      category may be supported by a liquidity provider that does not have an
      investment grade short-term rating or may lack the structural and/or legal
      protections necessary to ensure the timely payment of purchase price upon
      demand. </font></td>
  </tr>
</table>
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Description
  of Moody&#146;s Short-Term Ratings </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Moody&#146;s
  Commercial Paper ratings are opinions of the ability of issuers to honor short-term
  financial obligations not having an original maturity in excess of thirteen
  months. Moody&#146;s employs the following three designations, all judged to
  be investment grade, to indicate the relative repayment capacity of rated issuers:
  </font></p>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>P-1 </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Issuers (or
      supporting institutions) rated Prime-1 have a superior ability to repay
      short-term debt obligations. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>P-2 </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Issuers (or
      supporting institutions) rated Prime-2 have a strong ability to repay short-term
      debt obligations. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>P-3 </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Issuers (or
      supporting institutions) rated Prime-3 have an acceptable ability to repay
      short-term obligations. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>NP </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Issuers (or
      supporting institutions) rated Not Prime do not fall within any of the Prime
      rating categories. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Description
  of Standard &amp; Poor&#146;s, a Division of The McGraw-Hill Companies, Inc.
  (&#147;Standard &amp; Poor&#146;s&#148;), Debt Ratings </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
  Standard &amp; Poor&#146;s issue credit rating is a current opinion of the creditworthiness
  of an obligor with respect to a specific financial obligation, a specific class
  of financial obligations or a specific program. It takes into consideration
  the creditworthiness of guarantors, insurers, or other forms of credit enhancement
  on the obligation. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  issue credit rating is not a recommendation to purchase, sell or hold a financial
  obligation, inasmuch as it does not comment as to market price or suitability
  for a particular investor. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  issue credit ratings are based on current information furnished by the obligors
  or obtained by Standard &amp; Poor&#146;s from other sources Standard &amp;
  Poor&#146;s considers reliable. Standard &amp; Poor&#146;s does not perform
  an audit in connection with any rating and may, on occasion, rely on unaudited
  financial information. The ratings may be changed, suspended, or withdrawn as
  a result of changes in, or unavailability of, such information, or based on
  other circumstances. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  issue credit ratings are based, in varying degrees, on the following considerations:
  </font></p>
<!-- MARKER FORMAT-SHEET="Para Hang 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>I. </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Likelihood
      of payment&#151;capacity and willingness of the obligor as to the timely
      payment of interest and repayment of principal in accordance with the terms
      of the obligation; </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>II. </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Nature of
      and provisions of the obligation; </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>III. </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Protection
      afforded to, and relative position of, the obligation in the event of bankruptcy,
      reorganization or other arrangement under the laws of bankruptcy and other
      laws affecting creditors&#146; rights. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> A-2</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 3; page: 3" --> <!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Long Term Issue
  Credit Ratings </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>AAA </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>An obligation
      rated &#147;AAA&#148; has the highest rating assigned by Standard &amp;
      Poor&#146;s. Capacity to meet its financial commitment on the obligation
      is extremely strong. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>AA </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>An obligation
      rated &#147;AA&#148; differs from the highest rated issues only in small
      degree. The Obligor&#146;s capacity to meet its financial commitment on
      the obligation is very strong. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>A </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>An obligation
      rated &#147;A&#148; is somewhat more susceptible to the adverse effects
      of changes in circumstances and economic conditions than debt in higher-rated
      categories. However, the obligor&#146;s capacity to meet its financial commitment
      on the obligation is still strong. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>BBB </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>An obligation
      rated &#147;BBB&#148; exhibits adequate protection parameters. However,
      adverse economic conditions or changing circumstances are more likely to
      lead to a weakened capacity of the obligor to meet its financial commitment
      on the obligation. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>BB <br>
      B <br>
      CCC <br>
      CC <br>
      C </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>An obligation
      rated &#147;BB,&#148; &#147;B,&#148; &#147;CCC,&#148; &#147;CC&#148; and
      &#147;C&#148; are regarded as having significant speculative characteristics.
      &#147;BB&#148; indicates the least degree of speculation and &#147;C&#148;
      the highest degree of speculation. While such debt will likely have some
      quality and protective characteristics, these may be outweighed by large
      uncertainties or major risk exposures to adverse conditions. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>D </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>An obligation
      rated &#147;D&#148; is in payment default. The &#147;D&#148; rating category
      is used when payments on an obligation are not made on the date due even
      if the applicable grace period has not expired, unless Standard &amp; Poor&#146;s
      believes that such payments will be made during such grace period. The &#147;D&#148;
      rating also will be used upon the filing of a bankruptcy petition or the
      taking of similar action if payments on an obligation are jeopardized. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>c </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>The &#145;c&#146;
      subscript is used to provide additional information to investors that the
      bank may terminate its obligation to purchase tendered bonds if the long
      term credit rating of the issuer is below an investment-grade level and/or
      the issuer&#146;s bonds are deemed taxable. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>p </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>The letter
      &#145;p&#146; indicates that the rating is provisional. A provisional rating
      assumes the successful completion of the project financed by the debt being
      rated and indicates that payment of debt service requirements is largely
      or entirely dependent upon the successful, timely completion of the project.
      This rating, however, while addressing credit quality subsequent to the
      completion of the project, makes no comment on the likelihood of or the
      risk of default upon failure of such completion. The investor should exercise
      his own judgment with respect to such likelihood and risk. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>* </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Continuance
      of the ratings is contingent upon Standard &amp; Poor&#146;s receipt of
      an executed copy of the escrow agreement or closing documentation confirming
      investments and cash flows. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>r </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>This symbol
      is attached to the ratings of instruments with significant noncredit risks.
      It highlights risks to principal or volatility of expected returns which
      are not addressed in the credit rating. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>N.R. </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>This indicates
      that no rating has been requested, that there is insufficient information
      on which to base a rating, or that Standard &amp; Poor&#146;s does not rate
      a particular obligation as a matter of policy. </font></td>
  </tr>
</table>
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Plus</i>
  (+) or <i>Minus</i> (&#150;): The ratings from &#147;AA&#148; to &#147;CCC&#148;
  may be modified by the addition of a plus or minus sign to show relative standing
  within the major rating categories. </font></p>
<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Description
  of Standard &amp; Poor&#146;s Short-Term Issue Credit Ratings </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
  Standard &amp; Poor&#146;s short-term issue credit rating is a current assessment
  of the likelihood of timely payment of debt having an original maturity of no
  more than three years. Ratings are graded into several categories, ranging from
  &#147;A-1&#148; for the highest-quality obligations to &#147;D&#148; for the
  lowest. These categories are as follows: </font></p>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>A-1 </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>A short-term
      obligation rated &#147;A-1&#148; is rated in the highest category by Standard
      &amp; Poor&#146;s. The obligor&#146;s capacity to meet its financial commitment
      on the obligation is strong. Within this category, certain obligations are
      designated with a plus sign (+). This indicates that the obligor&#146;s
      capacity to meet its financial commitment on these obligations is extremely
      strong. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> A-3</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 4; page: 4" --> <!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>A-2 </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>A short-term
      obligation rated &#147;A-2&#148; is somewhat more susceptible to the adverse
      effects of changes in circumstances and economic conditions than obligations
      in higher rating categories. However, the obligor&#146;s capacity to meet
      its financial commitment on the obligation is satisfactory. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>A-3 </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>A short-term
      obligation rated &#147;A-3&#148; exhibits adequate protection parameters.
      However, adverse economic conditions or changing circumstances are more
      likely to lead to a weakened capacity of the obligor to meet its financial
      commitment on the obligation. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>B </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>A short-term
      obligation rated &#147;B&#148; is regarded as having significant speculative
      characteristics. The obligor currently has the capacity to meet its financial
      commitment on the obligation; however, it faces major ongoing uncertainties
      which could lead to the obligor&#146;s inadequate capacity to meet its financial
      commitment on the obligation. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>C </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>A short-term
      obligation rated &#147;C&#148; is currently vulnerable to nonpayment and
      is dependent upon favorable business, financial and economic conditions
      for the obligor to meet its financial commitment on the obligation. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>D </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>A short-term
      obligation rated &#147;D&#148; is in payment default. The &#147;D&#148;
      rating category is used when interest payments or principal payments are
      not made on the date due even if the applicable grace period has not expired,
      unless Standard &amp; Poor&#146;s believes that such payments will be made
      during such grace period. The &#147;D&#148; rating will also be used upon
      the filing of a bankruptcy petition or the taking of a similar action if
      payments on an obligation are jeopardized. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>c </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>The &#147;c&#148;
      subscript is used to provide additional information to investors that the
      bank may terminate its obligation to purchase tendered bonds if the long
      term credit rating of the issuer is below an investment-grade level and/or
      the issuer&#146;s bonds are deemed taxable. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>p </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>The letter
      &#147;p&#148; indicates that the rating is provisional. A provisional rating
      assumes the successful completion of the project financed by the debt being
      rated and indicates that payment of debt service requirements is largely
      or entirely dependent upon the successful, timely completion of the project.
      This rating, however, while addressing credit quality subsequent to completion
      of the project, makes no comment on the likelihood of or the risk of default
      upon failure of such completion. The investor should exercise his own judgment
      with respect to such likelihood and risk. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>* </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Continuance
      of the ratings is contingent upon Standard &amp; Poor&#146;s receipt of
      an executed copy of the escrow agreement or closing. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>r </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>The &#147;r&#148;
      highlights derivative, hybrid, and certain other obligations that Standard
      &amp; Poor&#146;s believes may experience high volatility or high variability
      in expected returns as a result of noncredit risks. Examples of such obligations
      are securities with principal or interest return indexed to equities, commodities,
      or currencies; certain swaps and options, and interest-only and principal-only
      mortgage securities. The absence of an &#147;r&#148; symbol should not be
      taken as an indication that an obligation will exhibit no volatility or
      variability in total return. </font></td>
  </tr>
</table>
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
  short-term issue credit rating is not a recommendation to purchase or sell a
  security. The ratings are based on current information furnished to Standard
  &amp; Poor&#146;s by the issuer or obtained by Standard &amp; Poor&#146;s from
  other sources it considers reliable. The ratings may be changed, suspended,
  or withdrawn as a result of changes in, or unavailability of, such information.
  </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
  Standard &amp; Poor&#146;s note rating reflects the liquidity factors and market
  access risks unique to notes. Notes due in three years or less will likely receive
  a note rating. Notes maturing beyond three years will most likely receive a
  long term debt rating. The following criteria will be used in making that assessment.
  </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;Amortization
  schedule&#151;the larger the final maturity relative to other maturities, the
  more likely it will be treated as a note. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;Source
  of payment&#151;the more dependent the issue is on the market for its refinancing,
  the more likely it will be treated as a note. </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> A-4</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 5; page: 5" --> <!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Note
  rating symbols are as follows: </font></p>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>SP-1 </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Strong capacity
      to pay principal and interest. An issue determined to possess a very strong
      capacity to pay debt service is given a plus (+) designation. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>SP-2 </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Satisfactory
      capacity to pay principal and interest with some vulnerability to adverse
      financial and economic changes over the term of the notes. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>SP-3 </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Speculative
      capacity to pay principal and interest. </font></td>
  </tr>
</table>
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Description
  of Fitch Ratings&#146; (&#147;Fitch&#148;) Investment Grade Bond Ratings </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fitch
  investment grade bond ratings provide a guide to investors in determining the
  credit risk associated with a particular security. The rating represents Fitch&#146;s
  assessment of the issuer&#146;s ability to meet the obligations of a specific
  debt issue or class of debt in a timely manner. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  rating takes into consideration special features of the issue, its relationship
  to other obligations of the issuer, the current and prospective financial condition
  and operating performance of the issuer and any guarantor, as well as the economic
  and political environment that might affect the issuer&#146;s future financial
  strength and credit quality. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fitch
  ratings do not reflect any credit enhancement that may be provided by insurance
  policies or financial guarantees unless otherwise indicated. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bonds
  carrying the same rating are of similar but not necessarily identical credit
  quality since the rating categories do not fully reflect small differences in
  the degrees of credit risk. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fitch
  ratings are not recommendations to buy, sell, or hold any security. Ratings
  do not comment on the adequacy of market price, the suitability of any security
  for a particular investor, or the tax exempt nature or taxability of payments
  made in respect of any security. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fitch
  ratings are based on information obtained from issuers, other obligors, underwriters,
  their experts, and other sources Fitch believes to be reliable. Fitch does not
  audit or verify the truth or accuracy of such information. Ratings may be changed,
  suspended, or withdrawn as a result of changes in, or the unavailability of,
  information or for other reasons. </font></p>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>AAA </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Bonds considered
      to be investment grade and of the highest credit quality. The obligor has
      an exceptionally strong ability to pay interest and repay principal, which
      is unlikely to be affected by reasonably foreseeable events. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>AA </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Bonds considered
      to be investment grade and of very high credit quality. The obligor&#146;s
      ability to pay interest and repay principal is very strong, although not
      quite as strong as bonds rated &#147;AAA.&#148; Because bonds rated in the
      &#147;AAA&#148; and &#147;AA&#148; categories are not significantly vulnerable
      to foreseeable future developments, short term debt of these issuers is
      generally rated &#147;F-1+.&#148; </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>A </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Bonds considered
      to be investment grade and of high credit quality. The obligor&#146;s ability
      to pay interest and repay principal is considered to be strong, but may
      be more vulnerable to adverse changes in economic conditions and circumstances
      than bonds with higher ratings. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>BBB </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Bonds considered
      to be investment grade and of satisfactory-credit quality. The obligor&#146;s
      ability to pay interest and repay principal is considered to be adequate.
      Adverse changes in economic conditions and circumstances, however, are more
      likely to have adverse impact on these bonds, and therefore impair timely
      payment. The likelihood that the ratings of these bonds will fall below
      investment grade is higher than for bonds with higher ratings. </font></td>
  </tr>
</table>
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Plus</i>
  (+) or <i>Minus</i> (&#150;): Plus and minus signs are used with a rating symbol
  to indicate the relative position of a credit within the rating category. Plus
  and minus signs, however, are not used in the &#147;AAA&#148; category. </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> A-5</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 6; page: 6" --> <!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Description
  of Fitch&#146;s Speculative Grade Bond Ratings </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fitch
  speculative grade bond ratings provide a guide to investors in determining the
  credit risk associated with a particular security. The ratings (&#147;BB&#148;
  to &#147;C&#148;) represent Fitch&#146;s assessment of the likelihood of timely
  payment of principal and interest in accordance with the terms of obligation
  for bond issues not in default. For defaulted bonds, the rating (&#147;DDD&#148;
  to &#147;D&#148;) is an assessment of the ultimate recovery value through reorganization
  or liquidation. The rating takes into consideration special features of the
  issue, its relationship to other obligations of the issuer, the current and
  prospective financial condition and operating performance of the issuer and
  any guarantor, as well as the economic and political environment that might
  affect the issuer&#146;s future financial strength. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bonds
  that have the rating are of similar but not necessarily identical credit quality
  since rating categories cannot fully reflect the differences in degrees of credit
  risk. </font></p>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>BB </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Bonds are
      considered speculative. The obligor&#146;s ability to pay interest and repay
      principal may be affected over time by adverse economic changes. However,
      business and financial alternatives can be identified which could assist
      the obligor in satisfying its debt service requirements. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>B </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Bonds are
      considered highly speculative. While bonds in this class are currently meeting
      debt service requirements, the probability of continued timely payment of
      principal and interest reflects the obligor&#146;s limited margin of safety
      and the need for reasonable business and economic activity throughout the
      life of the issue. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>CCC </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Bonds have
      certain identifiable characteristics which, if not remedied, may lead to
      default. The ability to meet obligations requires an advantageous business
      and economic environment. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>CC </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Bonds are
      minimally protected. Default in payment of interest and/or principal seems
      probable over time. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>C </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Bonds are
      in imminent default in payment of interest or principal. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>D <br>
      DD <br>
      DDD </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Bonds are
      in default on interest and/or principal payments. Such bonds are extremely
      speculative and should be valued on the basis of their ultimate recovery
      value in liquidation or reorganization of the obligor. &#147;DDD&#148; represents
      the highest potential for recovery on these bonds, and &#147;D&#148; represents
      the lowest potential for recovery. </font></td>
  </tr>
</table>
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Plus</i>
  (+) or <i>Minus</i> (&#150;): Plus and minus signs are used with a rating symbol
  to indicate the relative position of a credit within the rating category. Plus
  and minus signs, however, are not used in the &#147;DDD,&#148; &#147;DD,&#148;
  or &#147;D&#148; categories. </font></p>
<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Description
  of Fitch&#146;s Short Term Ratings </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fitch&#146;s
  short term ratings apply to debt obligations that are payable on demand or have
  original maturities of up to three years, including commercial paper, certificates
  of deposit, medium-term notes, and investment notes. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  short term rating places greater emphasis than a long term rating on the existence
  of liquidity necessary to meet the issuer&#146;s obligations in a timely manner.
  </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fitch
  short term ratings are as follows: </font></p>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>F-1+ </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Exceptionally
      Strong Credit Quality. Issues assigned this rating are regarded as having
      the strongest degree of assurance for timely payment. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>F-1 </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Very Strong
      Credit Quality. Issues assigned this rating reflect an assurance of timely
      payment only slightly less in degree than issues rated &#147;F-1+.&#148;
      </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>F-2 </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Good Credit
      Quality. Issues assigned this rating have a satisfactory degree of assurance
      for timely payment, but the margin of safety is not as great as for issues
      assigned &#147;F-1+&#148; and &#147;F-1&#148; ratings. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>F-3 </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Fair Credit
      Quality. Issues assigned this rating have characteristics suggesting that
      the degree of assurance for timely payment is adequate; however, near-term
      adverse changes could cause these securities to be rated below investment
      grade. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> A-6</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 7; page: 7" --> <!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>F-S </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Weak Credit
      Quality. Issues assigned this rating have characteristics suggesting a minimal
      degree of assurance for timely payment and are vulnerable to near-term adverse
      changes in financial and economic conditions. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>D </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Default. Issues
      assigned this rating are in actual or imminent payment default. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>LOC </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>The symbol
      &#147;LOC&#148; indicates that the rating is based on a letter of credit
      issued by a commercial bank. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>NR </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Indicates
      that Fitch does not rate the specific issue. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>Conditional
      </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>A conditional
      rating is premised on the successful completion of a project or the occurrence
      of a specific event. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>Suspended
      </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>A rating is
      suspended when Fitch deems the amount of information available from the
      issuer to be inadequate for rating purposes. </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>Withdrawn
      </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>A rating will
      be withdrawn when an issue matures or is called or refinanced and, at Fitch&#146;s
      discretion, when an issuer fails to furnish proper and timely information.
      </font></td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Hang 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>FitchAlert
      </font></td>
    <td><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>Ratings are
      placed on FitchAlert to notify investors of an occurrence that is likely
      to result in a rating change and the likely direction of such change. These
      are designated as &#147;Positive,&#148; indicating a potential upgrade,
      &#147;Negative,&#148; for potential downgrade, or &#147;Evolving,&#148;
      where ratings may be raised or lowered. FitchAlert is relatively short term,
      and should be resolved within 12 months. </font></td>
  </tr>
</table>
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Ratings
  Outlook</i>: An outlook is used to describe the most likely direction of any
  rating change over the intermediate term. It is described as &#147;Positive&#148;or
  &#147;Negative.&#148; The absence of a designation indicates a stable outlook.
  </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> A-7</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 8; page: 8" --> <!-- MARKER FORMAT-SHEET="Center Head 2-Bold" FSL="Workstation" -->
<p align=CENTER><font face="Times New Roman, Times, Serif" size=2><b>APPENDIX
  B </b></font></p>
<!-- MARKER FORMAT-SHEET="Center Head 2-Bold" FSL="Workstation" -->
<p align=CENTER><font face="Times New Roman, Times, Serif" size=2><b>SETTLEMENT
  PROCEDURES </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  following summary of Settlement Procedures sets forth the procedures expected
  to be followed in connection with the settlement of each Auction and will be
  incorporated by reference in the Auction Agent Agreement and each Broker-Dealer
  Agreement. Nothing contained in this Appendix B constitutes a representation
  by the Fund that in each Auction each party referred to herein actually will
  perform the procedures described herein to be performed by such party. Capitalized
  terms used herein shall have the respective meanings specified in the Glossary
  in the prospectus or this Appendix B hereto, as the case may be. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)
      On each Auction Date, the Auction Agent shall notify by telephone or through
      the Auction Agent&#146;s Processing System the Broker-Dealers that participated
      in the Auction held on such Auction Date and submitted an Order on behalf
      of any Beneficial Owner or Potential Beneficial Owner of: </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
      the Applicable Rate fixed for the next succeeding Dividend Period; </font>
    </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)
      whether Sufficient Clearing Bids existed for the determination of the Applicable
      Rate; </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)
      if such Broker-Dealer (a &#147;Seller&#146;s Broker-Dealer&#148;) submitted
      a Bid or a Sell Order on behalf of a Beneficial Owner, the number of shares,
      if any, of AMPS to be sold by such Beneficial Owner; </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)
      if such Broker-Dealer (a &#147;Buyer&#146;s Broker-Dealer&#148;) submitted
      a Bid on behalf of a Potential Beneficial Owner, the number of shares, if
      any, of AMPS to be purchased by such Potential Beneficial Owner; </font>
    </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)
      if the aggregate number of shares of AMPS to be sold by all Beneficial Owners
      on whose behalf such Broker-Dealer submitted a Bid or a Sell Order exceeds
      the aggregate number of shares of AMPS to be purchased by all Potential
      Beneficial Owners on whose behalf such Broker-Dealer submitted a Bid, the
      name or names of one or more Buyer&#146;s Broker-Dealers (and the name of
      the Agent Member, if any, of each such Buyer&#146;s Broker-Dealer) acting
      for one or more purchasers of such excess number of shares of AMPS and the
      number of such shares to be purchased from one or more Beneficial Owners
      on whose behalf such Broker-Dealer acted by one or more Potential Beneficial
      Owners on whose behalf each of such Buyer&#146;s Broker-Dealers acted; </font>
    </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)
      if the aggregate number of shares of AMPS to be purchased by all Potential
      Beneficial Owners on whose behalf such Broker-Dealer submitted a Bid exceeds
      the aggregate number of shares of AMPS to be sold by all Beneficial Owners
      on whose behalf such Broker-Dealer submitted a Bid or a Sell Order, the
      name or names of one or more Seller&#146;s Broker-Dealers (and the name
      of the Agent Member, if any, of each such Seller&#146;s Broker-Dealer) acting
      for one or more sellers of such excess number of shares of AMPS and the
      number of such shares to be sold to one or more Potential Beneficial Owners
      on whose behalf such Broker-Dealer acted by one or more Beneficial Owners
      on whose behalf each of such Seller&#146;s Broker-Dealers acted; and </font>
    </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii)
      the Auction Date of the next succeeding Auction with respect to the AMPS.
      </font> </td>
  </tr>
</table>
<br>
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)
      On each Auction Date, each Broker-Dealer that submitted an Order on behalf
      of any Beneficial Owner or Potential Beneficial&nbsp;Owner&nbsp;shall: </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
      in the case of a Broker-Dealer that is a Buyer&#146;s Broker-Dealer, instruct
      each Potential Beneficial Owner on whose behalf such Broker-Dealer submitted
      a Bid that was accepted, in whole or in part, to instruct such Potential
      Beneficial Owner&#146;s Agent Member to pay to such Broker-Dealer (or its
      Agent Member) through the Securities Depository the amount necessary to
      purchase the number of shares of AMPS to be purchased pursuant to such Bid
      against receipt of such shares and advise such Potential Beneficial Owner
      of the Applicable Rate for the next succeeding Dividend Period; </font>
    </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)
      in the case of a Broker-Dealer that is a Seller&#146;s Broker-Dealer, instruct
      each Beneficial Owner on whose behalf such Broker-Dealer submitted a Sell
      Order that was accepted, in whole or in part, or a Bid that was accepted,
      in whole or in part, to instruct such Beneficial Owner&#146;s Agent Member
      to deliver to such Broker-Dealer (or its Agent Member) through the Securities
      Depository the number of shares of AMPS to be sold pursuant to such Order
      against payment therefor and advise any such Beneficial Owner that will
      continue to hold shares of AMPS of the Applicable Rate for the next succeeding
      Dividend Period; </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> B-1</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 9; page: 9" --> <!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)
      advise each Beneficial Owner on whose behalf such Broker-Dealer submitted
      a Hold Order of the Applicable Rate for the next succeeding Dividend Period;
      </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)
      advise each Beneficial Owner on whose behalf such Broker-Dealer submitted
      an Order of the Auction Date for the next succeeding Auction; and </font>
    </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)
      advise each Potential Beneficial Owner on whose behalf such Broker-Dealer
      submitted a Bid that was accepted, in whole or in part, of the Auction Date
      for the next succeeding Auction. </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)
      On the basis of the information provided to it pursuant to (a) above, each
      Broker-Dealer that submitted a Bid or a Sell Order on behalf of a Potential
      Beneficial Owner or a Beneficial Owner shall, in such manner and at such
      time or times as in its sole discretion it may determine, allocate any funds
      received by it pursuant to (b)(i) above and any shares of AMPS received
      by it pursuant to (b)(ii) above among the Potential Beneficial Owners, if
      any, on whose behalf such Broker-Dealer submitted Bids, the Beneficial Owners,
      if any, on whose behalf such Broker-Dealer submitted Bids that were accepted
      or Sell Orders, and any Broker-Dealer or Broker-Dealers identified to it
      by the Auction Agent pursuant to (a)(v) or (a)(vi) above. </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)
      On each Auction Date: </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
      each Potential Beneficial Owner and Beneficial Owner shall instruct its
      Agent Member as provided in (b)(i) or (ii) above, as the case may be; </font>
    </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)
      each Seller&#146;s Broker-Dealer which is not an Agent Member of the Securities
      Depository shall instruct its Agent Member to (A) pay through the Securities
      Depository to the Agent Member of the Beneficial Owner delivering shares
      to such Broker-Dealer pursuant to (b)(ii) above the amount necessary to
      purchase such shares against receipt of such shares, and (B) deliver such
      shares through the Securities Depository to a Buyer&#146;s Broker-Dealer
      (or its Agent Member) identified to such Seller&#146;s Broker-Dealer pursuant
      to (a)(v) above against payment therefor; and </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)
      each Buyer&#146;s Broker-Dealer which is not an Agent Member of the Securities
      Depository shall instruct its Agent Member to (A) pay through the Securities
      Depository to a Seller&#146;s Broker-Dealer (or its Agent Member) identified
      pursuant to (a)(vi) above the amount necessary to purchase the shares to
      be purchased pursuant to (b)(i) above against receipt of such shares, and
      (B) deliver such shares through the Securities Depository to the Agent Member
      of the purchaser thereof against payment therefor. </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)
      On the day after the Auction Date: </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
      each Bidder&#146;s Agent Member referred to in (d)(i) above shall instruct
      the Securities Depository to execute the transactions described in (b)(i)
      or (ii) above, and the Securities Depository shall execute such transactions;
      </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)
      each Seller&#146;s Broker-Dealer or its Agent Member shall instruct the
      Securities Depository to execute the transactions described in (d)(ii) above,
      and the Securities Depository shall execute such transactions; and </font>
    </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)
      each Buyer&#146;s Broker-Dealer or its Agent Member shall instruct the Securities
      Depository to execute the transactions described in (d)(iii) above, and
      the Securities Depository shall execute such transactions. </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)
      If a Beneficial Owner selling shares of AMPS in an Auction fails to deliver
      such shares (by authorized book-entry), a Broker-Dealer may deliver to the
      Potential Beneficial Owner on behalf of which it submitted a Bid that was
      accepted a number of whole shares of AMPS that is less than the number of
      shares that otherwise was to be purchased by such Potential Beneficial Owner.
      In such event, the number of shares of AMPS to be so delivered shall be
      determined solely by such Broker-Dealer. Delivery of such lesser number
      of shares shall constitute good delivery. Notwithstanding the foregoing
      terms of this paragraph (f), any delivery or non-delivery of shares which
      shall represent any departure from the results of an Auction, as determined
      by the Auction Agent, shall be of no effect unless and until the Auction
      Agent shall have been notified of such delivery or non-delivery in accordance
      with the provisions of the Auction Agent Agreement and the Broker-Dealer
      Agreements. </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> B-2</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 10; page: 10" --> <!-- MARKER FORMAT-SHEET="Center Head 2-Bold" FSL="Workstation" -->
<p align=CENTER><font face="Times New Roman, Times, Serif" size=2><b>APPENDIX
  C </b></font></p>
<!-- MARKER FORMAT-SHEET="Center Head 2-Bold" FSL="Workstation" -->
<p align=CENTER><font face="Times New Roman, Times, Serif" size=2><b>AUCTION PROCEDURES
  </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  following procedures will be set forth in provisions of the Articles Supplementary
  relating to the AMPS, and will be incorporated by reference in the Auction Agent
  Agreement and each Broker-Dealer Agreement. The terms not defined below are
  defined in the prospectus or in the Glossary in the prospectus. Nothing contained
  in this Appendix C constitutes a representation by the Fund that in each Auction
  each party referred to herein actually will perform the procedures described
  herein to be performed by such party. </font></p>
<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Paragraph 10(a)
  Certain Definitions. </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
  used in this Paragraph 10, the following terms shall have the following meanings,
  unless the context otherwise requires: </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
      &#147;AMPS&#148; shall mean the shares of AMPS being auctioned pursuant
      to this Paragraph 10. </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)
      &#147;Auction Date&#148; shall mean the first Business Day preceding the
      first day of a Dividend Period. </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)
      &#147;Available AMPS&#148; shall have the meaning specified in Paragraph
      10(d)(i) below. </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)
      &#147;Bid&#148; shall have the meaning specified in Paragraph 10(b)(i) below.
      </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)
      &#147;Bidder&#148; shall have the meaning specified in Paragraph 10(b)(i)
      below. </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)
      &#147;Hold Order&#148; shall have the meaning specified in Paragraph 10(b)(i)
      below. </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii)
      &#147;Maximum Applicable Rate&#148; for any Dividend Period will be the
      higher of the Applicable Percentage of the Reference Rate or the Applicable
      Spread plus the Reference Rate. The Applicable Percentage and the Applicable
      Spread will be determined based on (i) the lower of the credit rating or
      ratings assigned on such date to such shares by Moody&#146;s and S&amp;P
      (or if Moody&#146;s or S&amp;P or both shall not make such rating available,
      the equivalent of either or both of such ratings by a Substitute Rating
      Agency or two Substitute Rating Agencies or, in the event that only one
      such rating shall be available, such rating) and (ii) whether the Fund has
      provided notification to the Auction Agent prior to the Auction establishing
      the Applicable Rate for any dividend that net capital gains or other taxable
      income will be included in such dividend on shares of AMPS as follows: </font>
    </td>
  </tr>
</table>
<br>
<table cellpadding=0 cellspacing=0 border=0 width=600 align="center">
  <tr valign=Bottom>
    <th colspan="2"><font size=1>Credit Ratings </font>
      <hr width=90% size=1 noshade>
    </th>
    <th rowspan="2" width="13%"><font size=1>Applicable <br>
      Percentage <br>
      of Reference <br>
      Rate&#151;No <br>
      Notification </font>
      <hr width=90% size=1 noshade>
    </th>
    <th rowspan="2" width="17%"><font size=1>Applicable <br>
      Percentage <br>
      of Reference <br>
      Rate&#151;Notification </font>
      <hr width=90% size=1 noshade>
    </th>
    <th rowspan="2" width="13%"><font size=1>Applicable <br>
      Spread Over <br>
      Reference Rate&#151;
      No&nbsp;Notification </font>
      <hr width=90% size=1 noshade>
    </th>
    <th rowspan="2" width="13%"><font size=1>Applicable <br>
      Spread Over <br>
      Reference <br>
      Rate&#151; <br>
      Notification </font>
      <hr width=90% size=1 noshade>
    </th>
  </tr>
  <tr valign=Bottom>
    <th width="22%"><font size=1>Moody&#146;s </font>
      <hr width=80% size=1 noshade>
    </th>
    <th width="22%"><font size=1>S&amp;P </font>
      <hr width=80% size=1 noshade>
    </th>
  </tr>
  <tr valign=Bottom>
    <td width=22% align=center><font size=2>Aaa</font></td>
    <td width=22% align=center><font size=2>AAA</font></td>
    <td width=13% align=CENTER><font size=2>110%</font></td>
    <td width=17% align=CENTER><font size=2>125%</font></td>
    <td width=13% align=CENTER><font size=2>1.10%</font></td>
    <td align=CENTER width=13%><font size=2>1.25%</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=center width="22%"><font size=2>Aa3 to Aa1</font></td>
    <td align=center width="22%"><font size=2>AA- to AA+</font></td>
    <td align=CENTER width="13%"><font size=2>125%</font></td>
    <td align=CENTER width="17%"><font size=2>150%</font></td>
    <td align=CENTER width="13%"><font size=2>1.25%</font></td>
    <td align=CENTER width="13%"><font size=2>1.50%</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=center width="22%"><font size=2>A3 to A1</font></td>
    <td align=center width="22%"><font size=2>A- to A+</font></td>
    <td align=CENTER width="13%"><font size=2>150%</font></td>
    <td align=CENTER width="17%"><font size=2>200%</font></td>
    <td align=CENTER width="13%"><font size=2>1.50%</font></td>
    <td align=CENTER width="13%"><font size=2>2.00%</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=center width="22%"><font size=2>Baa3 to Baa1</font></td>
    <td align=center width="22%"><font size=2>BBB- to BBB+</font></td>
    <td align=CENTER width="13%"><font size=2>175%</font></td>
    <td align=CENTER width="17%"><font size=2>250%</font></td>
    <td align=CENTER width="13%"><font size=2>1.75%</font></td>
    <td align=CENTER width="13%"><font size=2>2.50%</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=center width="22%"><font size=2>Below Baa3</font></td>
    <td align=center width="22%"><font size=2>Below BBB-</font></td>
    <td align=CENTER width="13%"><font size=2>200%</font></td>
    <td align=CENTER width="17%"><font size=2>300%</font></td>
    <td align=CENTER width="13%"><font size=2>2.00%</font></td>
    <td align=CENTER width="13%"><font size=2>3.00%</font></td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Applicable Percentage and the Applicable Spread as so determined may be further
  subject to upward but not downward adjustment in the discretion of the Board
  of Directors of the Fund after consultation with the Broker-Dealers, provided
  that immediately following any such increase the Fund would be in compliance
  with the AMPS Basic Maintenance Amount. Subject to the provisions of paragraph
  12 of the Articles Supplementary entitled &#147;Termination of Rating Agency
  Provisions,&#148; the Fund shall take all reasonable action necessary to enable
  S&amp;P and Moody&#146;s to provide a rating for the AMPS. If either S&amp;P
  or Moody&#146;s shall not make such a rating available or if neither S&amp;P
  nor Moody&#146;s shall make such a rating available, subject to the provisions
  of paragraph 12 of the Articles Supplementary entitled &#147;Termination of
  Rating Agency Provisions,&#148;Merrill Lynch, Pierce, Fenner &amp; Smith Incorporated
  or its affiliates and successors, after obtaining the Fund&#146;s approval,
  shall select a NRSRO or two NRSROs to act as a Substitute Rating Agency or Substitute
  Rating Agencies, as the case may be. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii)
      &#147;Order&#148; shall have the meaning specified in Paragraph 10(b)(i)
      below. </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ix)
      &#147;Sell Order&#148; shall have the meaning specified in Paragraph 10(b)(i)
      below. </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> C-1</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 11; page: 11" --> <!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x)
      &#147;Submission Deadline&#148; shall mean 1:00 p.m., Eastern time, on any
      Auction Date or such other time on any Auction Date as may be specified
      by the Auction Agent from time to time as the time by which each Broker-Dealer
      must submit to the Auction Agent in writing all Orders obtained by it for
      the Auction to be conducted on such Auction Date. </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xi)
      &#147;Submitted Bid&#148; shall have the meaning specified in Paragraph
      10(d)(i) below. </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xii)
      &#147;Submitted Hold Order&#148; shall have the meaning specified in Paragraph
      10(d)(i) below. </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xiii)
      &#147;Submitted Order&#148; shall have the meaning specified in Paragraph
      10(d)(i) below. </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xiv)
      &#147;Submitted Sell Order&#148; shall have the meaning specified in Paragraph
      10(d)(i) below. </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xv)
      &#147;Sufficient Clearing Bids&#148; shall have the meaning specified in
      Paragraph 10(d)(i) below. </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xvi)
      &#147;Winning Bid Rate&#148; shall have the meaning specified in Paragraph
      10(d)(i) below. </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Paragraph 10(b)
  Orders by Beneficial Owners, Potential Beneficial Owners, Existing Holders And
  Potential Holders. </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
  Unless otherwise permitted by the Fund, Beneficial Owners and Potential Beneficial
  Owners may only participate in Auctions through their Broker-Dealers. Broker-Dealers
  will submit the Orders of their respective customers who are Beneficial Owners
  and Potential Beneficial Owners to the Auction Agent, designating themselves
  as Existing Holders in respect of shares subject to Orders submitted or deemed
  submitted to them by Beneficial Owners and as Potential Holders in respect of
  shares subject to Orders submitted to them by Potential Beneficial Owners. A
  Broker-Dealer may also hold shares of AMPS in its own account as a Beneficial
  Owner. A Broker-Dealer may thus submit Orders to the Auction Agent as a Beneficial
  Owner or a Potential Beneficial Owner and therefore participate in an Auction
  as an Existing Holder or Potential Holder on behalf of both itself and its customers.
  On or prior to the Submission Deadline on each Auction Date: </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)
      each Beneficial Owner may submit to its Broker-Dealer information as to:
      </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)
      the number of outstanding shares, if any, of AMPS held by such Beneficial
      Owner which such Beneficial Owner desires to continue to hold without regard
      to the Applicable Rate for the next succeeding Dividend Period; </font>
    </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)
      the number of outstanding shares, if any, of AMPS held by such Beneficial
      Owner which such Beneficial Owner desires to continue to hold, provided
      that the Applicable Rate for the next succeeding Dividend Period shall not
      be less than the rate per annum specified by such Beneficial Owner; and/or
      </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)
      the number of outstanding shares, if any, of AMPS held by such Beneficial
      Owner which such Beneficial Owner offers to sell without regard to the Applicable
      Rate for the next succeeding Dividend Period; and </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)
      each Broker-Dealer, using a list of Potential Beneficial Owners that shall
      be maintained in good faith for the purpose of conducting a competitive
      Auction, shall contact Potential Beneficial Owners, including Persons that
      are not Beneficial Owners, on such list to determine the number of outstanding
      shares, if any, of AMPS which each such Potential Beneficial Owner offers
      to purchase, provided that the Applicable Rate for the next succeeding Dividend
      Period shall not be less than the rate per annum specified by such Potential
      Beneficial Owner. </font> </td>
  </tr>
</table>
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
  the purposes hereof, the communication by a Beneficial Owner or Potential Beneficial
  Owner to a Broker-Dealer, or the communication by a Broker-Dealer acting for
  its own account to the Auction Agent, of information referred to in clause (A)
  or (B) of this Paragraph 10(b)(i) is hereinafter referred to as an &#147;Order&#148;
  and each Beneficial Owner and each Potential Beneficial Owner placing an Order,
  including a Broker-Dealer acting in such capacity for its own account, is hereinafter
  referred to as a &#147;Bidder&#148;; an Order containing the information referred
  to in clause (A)(1) of this Paragraph 10(b)(i) is hereinafter referred to as
  a &#147;Hold Order&#148;; an Order containing the information referred to in
  clause (A)(2) or (B) of this Paragraph 10(b)(i) is hereinafter referred to as
  a &#147;Bid&#148;; and an Order containing the information referred to in clause
  (A)(3) of this Paragraph 10(b)(i) is hereinafter referred to as a &#147;Sell
  Order.&#148; Inasmuch as a Broker-Dealer participates in an Auction as an Existing
  </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> C-2</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 12; page: 12" --> <!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>Holder or a Potential Holder
  only to represent the interests of a Beneficial Owner or Potential Beneficial
  Owner, whether it be its customers or itself, all discussion herein relating
  to the consequences of an Auction for Existing Holders and Potential Holders
  also applies to the underlying beneficial ownership interests represented. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)
      (A) A Bid by an Existing Holder shall constitute an irrevocable offer to
      sell: </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)
      the number of outstanding shares of AMPS specified in such Bid if the Applicable
      Rate determined on such Auction Date shall be less than the rate per annum
      specified in such Bid; or </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)
      such number or a lesser number of outstanding shares of AMPS to be determined
      as set forth in Paragraph 10(e)(i)(D) if the Applicable Rate determined
      on such Auction Date shall be equal to the rate per annum specified therein;
      or </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)
      a lesser number of outstanding shares of AMPS to be determined as set forth
      in Paragraph 10(e)(ii)(C) if such specified rate per annum shall be higher
      than the Maximum Applicable Rate and Sufficient Clearing Bids do not exist.
      </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)
      A Sell Order by an Existing Holder shall constitute an irrevocable offer
      to sell: </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)
      the number of outstanding shares of AMPS specified in such Sell Order, or
      </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)
      such number or a lesser number of outstanding shares of AMPS to be determined
      as set forth in Paragraph 10(e)(ii)(C) if Sufficient Clearing Bids do not
      exist. </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)
      A Bid by a Potential Holder shall constitute an irrevocable offer to purchase:
      </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)
      the number of outstanding shares of AMPS specified in such Bid if the Applicable
      Rate determined on such Auction Date shall be higher than the rate per annum
      specified in such Bid; or </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)
      such number or a lesser number of outstanding shares of AMPS to be determined
      as set forth in Paragraph 10(e)(i)(E) if the Applicable Rate determined
      on such Auction Date shall be equal to the rate per annum specified therein.
      </font> </td>
  </tr>
</table>
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Paragraph 10(c)
  Submission of Orders by Broker-Dealers to Auction Agent. </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
  Each Broker-Dealer shall submit in writing or through a mutually acceptable
  electronic means to the Auction Agent prior to the Submission Deadline on each
  Auction Date all Orders obtained by such Broker-Dealer, designating itself (unless
  otherwise permitted by the Fund) as an Existing Holder in respect of shares
  subject to Orders submitted or deemed submitted to it by Beneficial Owners and
  as a Potential Holder in respect of shares subject to Orders submitted to it
  by Potential Beneficial Owners, and specifying with respect to each Order: </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)
      the name of the Bidder placing such Order (which shall be the Broker-Dealer
      unless otherwise permitted by the Fund); </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)
      the aggregate number of outstanding shares of AMPS that are the subject
      of such Order; </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)
      to the extent that such Bidder is an Existing Holder </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)
      the number of outstanding shares, if any, of AMPS subject to any Hold Order
      placed by such Existing Holder; </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)
      the number of outstanding shares, if any, of AMPS subject to any Bid placed
      by such Existing Holder and the rate per annum specified in such Bid; and
      </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)
      the number of outstanding shares, if any, of AMPS subject to any Sell Order
      placed by such Existing Holder; and </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D)
      to the extent such Bidder is a Potential Holder, the rate per annum specified
      in such Potential Holder&#146;s Bid. </font> </td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)
  If any rate per annum specified in any Bid contains more than three figures
  to the right of the decimal point, the Auction Agent shall round such rate up
  to the next highest one-thousandth (.001) of 1%. </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> C-3</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 13; page: 13" --> <!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)
  If an Order or Orders covering all of the outstanding shares of AMPS held by
  an Existing Holder are not submitted to the Auction Agent prior to the Submission
  Deadline, the Auction Agent shall deem a Hold Order (in the case of an Auction
  relating to a Dividend Period which is not a Special Dividend Period of more
  than 28 days) and a Sell Order (in the case of an Auction relating to a Special
  Dividend Period of more than 28 days) to have been submitted on behalf of such
  Existing Holder covering the number of outstanding shares of AMPS held by such
  Existing Holder and not subject to Orders submitted to the Auction Agent. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)
  If one or more Orders on behalf of an Existing Holder covering in the aggregate
  more than the number of outstanding shares of AMPS held by such Existing Holder
  are submitted to the Auction Agent, such Orders shall be considered valid as
  follows and in the following order of priority: </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)
      any Hold Order submitted on behalf of such Existing Holder shall be considered
      valid up to and including the number of outstanding shares of AMPS held
      by such Existing Holder; provided that if more than one Hold Order is submitted
      on behalf of such Existing Holder and the number of shares of AMPS subject
      to such Hold Orders exceeds the number of outstanding shares of AMPS held
      by such Existing Holder, the number of shares of AMPS subject to each of
      such Hold Orders shall be reduced pro rata so that such Hold Orders, in
      the aggregate, cover exactly the number of outstanding shares of AMPS held
      by such Existing Holder; </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)
      any Bids submitted on behalf of such Existing Holder shall be considered
      valid, in the ascending order of their respective rates per annum if more
      than one Bid is submitted on behalf of such Existing Holder, up to and including
      the excess of the number of outstanding shares of AMPS held by such Existing
      Holder over the number of shares of AMPS subject to any Hold Order referred
      to in Paragraph 10(c)(iv)(A) above (and if more than one Bid submitted on
      behalf of such Existing Holder specifies the same rate per annum and together
      they cover more than the remaining number of shares that can be the subject
      of valid Bids after application of Paragraph 10(c)(iv)(A) above and of the
      foregoing portion of this Paragraph 10(c)(iv)(B) to any Bid or Bids specifying
      a lower rate or rates per annum, the number of shares subject to each of
      such Bids shall be reduced pro rata so that such Bids, in the aggregate,
      cover exactly such remaining number of shares); and the number of shares,
      if any, subject to Bids not valid under this Paragraph 10(c)(iv)(B) shall
      be treated as the subject of a Bid by a Potential Holder; and </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)
      any Sell Order shall be considered valid up to and including the excess
      of the number of outstanding shares of AMPS held by such Existing Holder
      over the number of shares of AMPS subject to Hold Orders referred to in
      Paragraph 10(c)(iv)(A) and Bids referred to in Paragraph 10(c)(iv)(B); provided
      that if more than one Sell Order is submitted on behalf of any Existing
      Holder and the number of shares of AMPS subject to such Sell Orders is greater
      than such excess, the number of shares of AMPS subject to each of such Sell
      Orders shall be reduced pro rata so that such Sell Orders, in the aggregate,
      cover exactly the number of shares of AMPS equal to such excess. </font>
    </td>
  </tr>
</table>
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)
  If more than one Bid is submitted on behalf of any Potential Holder, each Bid
  submitted shall be a separate Bid with the rate per annum and number of shares
  of AMPS therein specified. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)
  Any Order submitted by a Beneficial Owner or a Potential Beneficial Owner to
  its Broker-Dealer, or by a Broker-Dealer to the Auction Agent, prior to the
  Submission Deadline on any Auction Date shall be irrevocable. </font></p>
<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Paragraph 10(d)
  Determination of Sufficient Clearing Bids, Winning Bid Rate and Applicable Rate.
  </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
  Not earlier than the Submission Deadline on each Auction Date, the Auction Agent
  shall assemble all Orders submitted or deemed submitted to it by the Broker-Dealers
  (each such Order as submitted or deemed submitted by a Broker-Dealer being hereinafter
  referred to individually as a &#147;Submitted Hold Order,&#148; a &#147;Submitted
  Bid&#148; or a &#147;Submitted Sell Order,&#148; as the case may be, or as a
  &#147;Submitted Order&#148;) and shall determine: </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)
      the excess of the total number of outstanding shares of AMPS over the number
      of outstanding shares of AMPS that are the subject of Submitted Hold Orders
      (such excess being hereinafter referred to as the &#147;Available AMPS&#148;);
      </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)
      from the Submitted Orders whether the number of outstanding shares of AMPS
      that are the subject of Submitted Bids by Potential Holders specifying one
      or more rates per annum equal to or lower than the Maximum Applicable Rate
      exceeds or is equal to the sum of: </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> C-4</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 14; page: 14" --> <!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)
      the number of outstanding shares of AMPS that are the subject of Submitted
      Bids by Existing Holders specifying one or more rates per annum higher than
      the Maximum Applicable Rate, and </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)
      the number of outstanding shares of AMPS that are subject to Submitted Sell
      Orders (if such excess or such equality exists (other than because the number
      of outstanding shares of AMPS in clauses (1) and (2) above are each zero
      because all of the outstanding shares of AMPS are the subject of Submitted
      Hold Orders), such Submitted Bids by Potential Holders hereinafter being
      referred to collectively as &#147;Sufficient Clearing Bids&#148;); and </font>
    </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)
      if Sufficient Clearing Bids exist, the lowest rate per annum specified in
      the Submitted Bids (the &#147;Winning Bid Rate&#148;) that if: </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)
      each Submitted Bid from Existing Holders specifying the Winning Bid Rate
      and all other submitted Bids from Existing Holders specifying lower rates
      per annum were rejected, thus entitling such Existing Holders to continue
      to hold the shares of AMPS that are the subject of such Submitted Bids,
      and </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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, </font>
    </td>
  </tr>
</table>
<p><font face="Times New Roman, Times, Serif" size=2>would result in the number
  of shares subject to all Submitted Bids specifying the Winning Bid Rate or a
  lower rate per annum being at least equal to the Available AMPS. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)
  Promptly after the Auction Agent has made the determinations pursuant to Paragraph
  10(d)(i), the Auction Agent shall advise the Fund of the Maximum Applicable
  Rate and, based on such determinations, the Applicable Rate for the next succeeding
  Dividend Period as follows: </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)
      if Sufficient Clearing Bids exist, that the Applicable Rate for the next
      succeeding Dividend Period shall be equal to the Winning Bid Rate; </font>
    </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)
      if Sufficient Clearing Bids do not exist (other than because all of the
      outstanding shares of AMPS are the subject of Submitted Hold Orders), that
      the Applicable Rate for the next succeeding Dividend Period shall be equal
      to the Maximum Applicable Rate; or </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)
      if all of the outstanding shares of AMPS are the subject of Submitted Hold
      Orders, the Dividend Period next succeeding the Auction automatically shall
      be the same length as the immediately preceding Dividend Period and the
      Applicable Rate for the next succeeding Dividend Period shall be equal to
      60% of the Reference Rate (or 90% of such rate if the Fund has provided
      notification to the Auction Agent prior to establishing the Applicable Rate
      for any dividend that net capital gain or other taxable income will be included
      in such dividend on shares of AMPS) on the date of the Auction. </font>
    </td>
  </tr>
</table>
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Paragraph 10(e)
  Acceptance and Rejection of Submitted Bids and Submitted Sell Orders and Allocation
  of Shares. </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based
  on the determinations made pursuant to Paragraph 10(d)(i), the Submitted Bids
  and Submitted Sell Orders shall be accepted or rejected and the Auction Agent
  shall take such other action as set forth below: </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
      If Sufficient Clearing Bids have been made, subject to the provisions of
      Paragraph 10(e)(iii) and Paragraph 10(e)(iv), Submitted Bids and Submitted
      Sell Orders shall be accepted or rejected in the following order of priority
      and all other Submitted Bids shall be rejected: </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)
      the Submitted Sell Orders of Existing Holders shall be accepted and the
      Submitted Bid of each of the Existing Holders specifying any rate per annum
      that is higher than the Winning Bid Rate shall be accepted, thus requiring
      each such Existing Holder to sell the outstanding shares of AMPS that are
      the subject of such Submitted Sell Order or Submitted Bid; </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)
      the Submitted Bid of each of the Existing Holders specifying any rate per
      annum that is lower than the Winning Bid Rate shall be rejected, thus entitling
      each such Existing Holder to continue to hold the outstanding shares of
      AMPS that are the subject of such Submitted Bid; </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> C-5</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 15; page: 15" --> <!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)
      the Submitted Bid of each of the Potential Holders specifying any rate per
      annum that is lower than the Winning Bid Rate shall be accepted; </font>
    </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D)
      the Submitted Bid of each of the Existing Holders specifying a rate per
      annum that is equal to the Winning Bid Rate shall be rejected, thus entitling
      each such Existing Holder to continue to hold the outstanding shares of
      AMPS that are the subject of such Submitted Bid, unless the number of outstanding
      shares of AMPS subject to all such Submitted Bids shall be greater than
      the number of outstanding shares of AMPS (&#147;Remaining Shares&#148;)
      equal to the excess of the Available AMPS over the number of outstanding
      shares of AMPS subject to Submitted Bids described in Paragraph 10(e)(i)(B)
      and Paragraph 10(e)(i)(C), in which event the Submitted Bids of each such
      Existing Holder shall be accepted, and each such Existing Holder shall be
      required to sell outstanding shares of AMPS, but only in an amount equal
      to the difference between (1) the number of outstanding shares of AMPS then
      held by such Existing Holder subject to such Submitted Bid and (2) the number
      of shares of AMPS obtained by multiplying (x) the number of Remaining Shares
      by (y) a fraction the numerator of which shall be the number of outstanding
      shares of AMPS held by such Existing Holder subject to such Submitted Bid
      and the denominator of which shall be the sum of the numbers of outstanding
      shares of AMPS subject to such Submitted Bids made by all such Existing
      Holders that specified a rate per annum equal to the Winning Bid Rate; and
      </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(E)
      the Submitted Bid of each of the Potential Holders specifying a rate per
      annum that is equal to the Winning Bid Rate shall be accepted but only in
      an amount equal to the number of outstanding shares of AMPS obtained by
      multiplying (x) the difference between the Available AMPS and the number
      of outstanding shares of AMPS subject to Submitted Bids described in Paragraph
      10(e)(i)(B), Paragraph 10(e)(i)(C) and Paragraph 10(e)(i)(D) by (y) a fraction
      the numerator of which shall be the number of outstanding shares of AMPS
      subject to such Submitted Bid and the denominator of which shall be the
      sum of the number of outstanding shares of AMPS subject to such Submitted
      Bids made by all such Potential Holders that specified rates per annum equal
      to the Winning Bid Rate. </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)
      If Sufficient Clearing Bids have not been made (other than because all of
      the outstanding shares of AMPS are subject to Submitted Hold Orders), subject
      to the provisions of Paragraph 10(e)(iii), Submitted Orders shall be accepted
      or rejected as follows in the following order of priority and all other
      Submitted Bids shall be rejected: </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)
      the Submitted Bid of each Existing Holder specifying any rate per annum
      that is equal to or lower than the Maximum Applicable Rate shall be rejected,
      thus entitling such Existing Holder to continue to hold the outstanding
      shares of AMPS that are the subject of such Submitted Bid; </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)
      the Submitted Bid of each Potential Holder specifying any rate per annum
      that is equal to or lower than the Maximum Applicable Rate shall be accepted,
      thus requiring such Potential Holder to purchase the outstanding shares
      of AMPS that are the subject of such Submitted Bid; and </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)
      the Submitted Bids of each Existing Holder specifying any rate per annum
      that is higher than the Maximum Applicable Rate shall be accepted and the
      Submitted Sell Orders of each Existing Holder shall be accepted, in both
      cases only in an amount equal to the difference between (1) the number of
      outstanding shares of AMPS then held by such Existing Holder subject to
      such Submitted Bid or Submitted Sell Order and (2) the number of shares
      of AMPS obtained by multiplying (x) the difference between the Available
      AMPS and the aggregate number of outstanding shares of AMPS subject to Submitted
      Bids described in Paragraph 10(e)(ii)(A) and Paragraph 10(e)(ii)(B) by (y)
      a fraction the numerator of which shall be the number of outstanding shares
      of AMPS held by such Existing Holder subject to such Submitted Bid or Submitted
      Sell Order and the denominator of which shall be the number of outstanding
      shares of AMPS subject to all such Submitted Bids and Submitted Sell Orders.
      </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)
      If, as a result of the procedures described in Paragraph 10(e)(i) or Paragraph
      10(e)(ii), any Existing Holder would be entitled or required to sell, or
      any Potential Holder would be entitled or required to purchase, a fraction
      of a share of AMPS on any Auction Date, the Auction Agent shall, in such
      manner as in its sole discretion it shall determine, round up or down the
      number of shares of AMPS to be purchased or sold by any Existing Holder
      or Potential Holder on such Auction Date so that each outstanding share
      of AMPS purchased or sold by each Existing Holder or Potential Holder on
      such Auction Date shall be a whole share of AMPS. </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> C-6</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 16; page: 16" --> <!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)
      If, as a result of the procedures described in Paragraph 10(e)(i), any Potential
      Holder would be entitled or required to purchase less than a whole share
      of AMPS on any Auction Date, the Auction Agent, in such manner as in its
      sole discretion it shall determine, shall allocate shares of AMPS for purchase
      among Potential Holders so that only whole shares of AMPS are purchased
      on such Auction Date by any Potential Holder, even if such allocation results
      in one or more of such Potential Holders not purchasing any shares of AMPS
      on such Auction Date. </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)
      Based on the results of each Auction, the Auction Agent shall determine,
      with respect to each Broker-Dealer that submitted Bids or Sell Orders on
      behalf of Existing Holders or Potential Holders, the aggregate number of
      the outstanding shares of AMPS to be purchased and the aggregate number
      of outstanding shares of AMPS to be sold by such Potential Holders and Existing
      Holders and, to the extent that such aggregate number of outstanding shares
      to be purchased and such aggregate number of outstanding shares to be sold
      differ, the Auction Agent shall determine to which other Broker-Dealer or
      Broker-Dealers acting for one or more purchasers such Broker-Dealer shall
      deliver, or from which other Broker-Dealer or Broker-Dealers acting for
      one or more sellers such Broker-Dealer shall receive, as the case may be,
      outstanding shares of AMPS. </font> </td>
  </tr>
</table>
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Paragraph 10(f)
  Miscellaneous. </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Fund may interpret the provisions of this Paragraph 10 to resolve any inconsistency
  or ambiguity, remedy any formal defect or make any other change or modification
  that does not substantially adversely affect the rights of Beneficial Owners
  of AMPS. A Beneficial Owner or an Existing Holder (A) may sell, transfer or
  otherwise dispose of shares of AMPS only pursuant to a Bid or Sell Order in
  accordance with the procedures described in this Paragraph 10 or to or through
  a Broker-Dealer, provided that in the case of all transfers other than pursuant
  to Auctions such Beneficial Owner or Existing Holder, its Broker-Dealer, if
  applicable, or its Agent Member advises the Auction Agent of such transfer and
  (B) except as otherwise required by law, shall have the ownership of the shares
  of AMPS held by it maintained in book entry form by the Securities Depository
  in the account of its Agent Member, which in turn will maintain records of such
  Beneficial Owner&#146;s beneficial ownership. Neither the Fund nor any affiliate
  (other than Merrill Lynch, Pierce, Fenner &amp; Smith Incorporated) shall submit
  an Order in any Auction. Any Beneficial Owner that is an affiliate (other than
  Merrill Lynch, Pierce, Fenner &amp; Smith Incorporated) shall not sell, transfer
  or otherwise dispose of shares of AMPS to any person other than the Fund. All
  of the outstanding shares of AMPS of a series shall be represented by a single
  certificate registered in the name of the nominee of the Securities Depository
  unless otherwise required by law or unless there is no Securities Depository.
  If there is no Securities Depository, at the Fund&#146;s option and upon its
  receipt of such documents as it deems appropriate, any shares of AMPS may be
  registered in the Stock Register in the name of the Beneficial Owner thereof
  and such Beneficial Owner thereupon will be entitled to receive certificates
  therefor and required to deliver certificates thereof or upon transfer or exchange
  thereof. </font></p>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> C-7</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>



</BODY>
</HTML>
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
