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<SEC-DOCUMENT>0000905148-01-500843.txt : 20010718
<SEC-HEADER>0000905148-01-500843.hdr.sgml : 20010718
ACCESSION NUMBER:		0000905148-01-500843
CONFORMED SUBMISSION TYPE:	N-14
PUBLIC DOCUMENT COUNT:		11
FILED AS OF DATE:		20010717

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			MUNIYIELD FUND INC
		CENTRAL INDEX KEY:			0000879361
		STANDARD INDUSTRIAL CLASSIFICATION:	UNKNOWN SIC - 0000 [0000]
		STATE OF INCORPORATION:			NJ
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		N-14
		SEC ACT:		
		SEC FILE NUMBER:	333-65242
		FILM NUMBER:		1682971

	BUSINESS ADDRESS:	
		STREET 1:		800 SCUDDERS MILL RD
		CITY:			PLAINSBORO
		STATE:			NJ
		ZIP:			08543-9011
		BUSINESS PHONE:		6092822800

	MAIL ADDRESS:	
		STREET 1:		PO BOX 9011
		STREET 2:		C/O MERRILL LYNCH ASSET MANAGEMENT
		CITY:			PRINCETON
		STATE:			NJ
		ZIP:			08543-9011
</SEC-HEADER>
<DOCUMENT>
<TYPE>N-14
<SEQUENCE>1
<FILENAME>efc1-0727_817905fmn14.txt
<TEXT>

    As filed with the Securities and Exchange Commission on July 17, 2001
                                          Securities Act File No. 333-________
                                     Investment Company Act File No. 811-06435
==============================================================================
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                             --------------------
                                   FORM N-14
                            REGISTRATION STATEMENT
                                     UNDER
                          THE SECURITIES ACT OF 1933
                             --------------------

/ /                       Pre-Effective Amendment No.
/ /                      Post-Effective Amendment No.
                       (Check appropriate box or boxes)
                             --------------------
                             MuniYield Fund, Inc.
              (Exact Name of Registrant as Specified in Charter)
                             --------------------
                                (609) 282-2800
                       (Area Code and Telephone Number)
                             --------------------
                            800 Scudders Mill Road
                         Plainsboro, New Jersey 08536
                   (Address of Principal Executive Offices:
                    Number, Street, City, State, Zip Code)
                             --------------------
                                Terry K. Glenn
                             MuniYield Fund, Inc.
             800 Scudders Mill Road, Plainsboro, New Jersey 08536
                               Mailing Address:
                P.O. Box 9011, Princeton, New Jersey 08543-9011
                    (Name and Address of Agent for Service)
                             --------------------
                                  Copies to:
    Frank P. Bruno, Esq.                        Michael J. Hennewinkel, Esq.
SIDLEY AUSTIN BROWN & WOOD LLP                   FUND ASSET MANAGEMENT, L.P.
   One World Trade Center                          800 Scudders Mill Road
New York, New York 10048-0557               Plainsboro, New Jersey 08543-9011
                             --------------------

     Approximate Date of Proposed Public Offering: As soon as practicable
after the Registration Statement becomes effective under the Securities Act of
1933.

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

       Calculation of Registration Fee Under the Securities Act of 1933

<TABLE>
<CAPTION>

======================================================= =============== =============== ================ =============
                                                                                           Proposed
                                                                           Proposed         Maximum
                                                                           Maximum         Aggregate     Amount of
                                                         Amount being  Offering Price      Offering     Registration
         Title Of Securities Being Registered           Registered (1)   Per Unit(1)       Price (1)      Fee (3)
- ------------------------------------------------------- --------------- -----------   ---------------- -------------
<S>                                                      <C>            <C>             <C>
Common Stock ($.10 par value)....................          6,356,590       $13.37     $84,987,605.63   $21,246.90
- ------------------------------------------------------- --------------- -----------   ---------------- -------------
Auction Market Preferred Stock, Series F ($.10 par
value)...........................................            1,720        $25,000(2)     $43,000,000      $10,750
======================================================= =============== ============  ================ =============

</TABLE>

(1) Estimated solely for the purpose of calculating the filing fee.

(2) Represents the liquidation preference of a share of preferred stock after
the reorganization.

(3) Paid by wire transfer to the designated lockbox of the Securities and
Exchange Commission in Pittsburgh, Pennsylvania.

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

The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
==============================================================================

<PAGE>

==============================================================================
                  MERRILL LYNCH MUNICIPAL STRATEGY FUND, INC.
                                 P.O. BOX 9011
                       PRINCETON, NEW JERSEY 08543-9011
                             --------------------

                   NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
                        To Be Held on October 24, 2001
                             --------------------

TO THE STOCKHOLDERS OF
     MERRILL LYNCH MUNICIPAL STRATEGY FUND, INC.:

     NOTICE IS HEREBY GIVEN that a special meeting of stockholders (the
"Meeting") of Merrill Lynch Municipal Strategy Fund, Inc. ("Municipal
Strategy") will be held at the offices of Fund Asset Management, L.P., 800
Scudders Mill Road, Plainsboro, New Jersey on Wednesday, October 24, 2001 at
9:30 a.m. Eastern time for the following purposes:

     (1) To approve or disapprove an Agreement and Plan of Reorganization (the
"Agreement and Plan") contemplating (i) the acquisition of substantially all
of the assets and the assumption of substantially all of the liabilities of
Municipal Strategy by MuniYield Fund, Inc. ("MuniYield"), in return solely for
an equal aggregate value of newly issued shares of common stock of MuniYield
and shares of a newly created series of Auction Market Preferred Stock
("AMPS") of MuniYield to be designated Series F, and (ii) the distribution by
Municipal Strategy of the shares of MuniYield common stock to the holders of
common stock of Municipal Strategy (plus cash in lieu of fractional shares)
and the shares of Series F AMPS of MuniYield to the holders of Series A AMPS
of Municipal Strategy. A vote in favor of this proposal also will constitute a
vote in favor of the liquidation and dissolution of Municipal Strategy under
Maryland corporate law and the termination of Municipal Strategy's
registration under the Investment Company Act of 1940, as amended; and

     (2) To transact such other business as properly may come before the
Meeting or any adjournment thereof.

     The Board of Directors of Municipal Strategy has fixed the close of
business on August 27, 2001 as the record date for the determination of
stockholders entitled to notice of, and to vote at, the Meeting or any
adjournment thereof.

     A complete list of the stockholders of Municipal Strategy entitled to
vote at the Meeting will be available and open to the examination of any
stockholder of Municipal Strategy for any purpose germane to the Meeting
during ordinary business hours from and after October 10, 2001, at the offices
of Municipal Strategy, 800 Scudders Mill Road, Plainsboro, New Jersey.

     You are cordially invited to attend the Meeting. Stockholders who do not
expect to attend the Meeting in person are requested to complete, date and
sign the enclosed form of proxy and return it promptly in the envelope
provided for that purpose. If you have been provided with the opportunity on
your proxy card or voting instruction form to provide voting instructions via
telephone or the Internet, please take advantage of these prompt and efficient
voting options. The enclosed proxy is being solicited on behalf of the Board
of Directors of Municipal Strategy.

     If you have any questions regarding the enclosed proxy material or need
assistance in voting your shares of common stock or shares of AMPS, please
contact our proxy solicitor, Georgeson Shareholder Communications Inc., at
1-800-         .

                                            By Order of the Board of Directors,



                                            ALICE A. PELLEGRINO
                                            Secretary
Plainsboro, New Jersey
Dated:  September ___, 2001

<PAGE>


The information in this proxy statement and prospectus is not complete and may
be changed. We may not use this proxy statement and prospectus to sell
securities until the registration statement filed with the Securities and
Exchange Commission is effective. This proxy statement and prospectus is not
an offer to sell these securities and is not soliciting an offer to buy these
securities in any State where the offer or sale is not permitted.


                             SUBJECT TO COMPLETION
        PRELIMINARY PROXY STATEMENT AND PROSPECTUS DATED JULY 17, 2001

                              PROXY STATEMENT OF
                  MERRILL LYNCH MUNICIPAL STRATEGY FUND, INC.
                 FOR USE AT A SPECIAL MEETING OF STOCKHOLDERS
                        To Be Held on October 24, 2001
                              ------------------
                                 PROSPECTUS OF
                             MUNIYIELD FUND, INC.
                P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011
                                (609) 282-2800
                              ------------------

     This Proxy Statement and Prospectus is furnished to you because you are
stockholder of Merrill Lynch Municipal Strategy Fund, Inc. ("Municipal
Strategy"). A special meeting of the stockholders of Municipal Strategy will
be held on October 24, 2001 (the "Meeting") to consider the items listed below
and discussed in greater detail in this Proxy Statement and Prospectus. The
Board of Directors of Municipal Strategy is requesting the stockholders of
Municipal Strategy to submit a proxy to be used at the Meeting to vote the
shares held by the stockholder submitting the proxy.

     Municipal Strategy has outstanding shares of common stock ("Municipal
Strategy Common Stock"), par value $.10 per share, and shares of Auction
Market Preferred Stock ("AMPS"), designated Series A ("Municipal Strategy
Series A AMPS"), with a par value of $.10 per share and a liquidation
preference of $25,000 per share.

     Stockholders are being asked to consider the following proposal:

     1. To approve or disapprove an Agreement and Plan of Reorganization
between Municipal Strategy and MuniYield Fund Inc. ("MuniYield").

     2. To transact such other business as may properly come before the
Meeting thereof.

     The Agreement and Plan of Reorganization that you are being asked to
consider involves a transaction that will be referred to in this Proxy
Statement and Prospectus as the "Reorganization." The Reorganization involves
the combination of two funds into one. The two funds are:

     MuniYield, which will be the surviving fund, and

     Municipal Strategy.

     MuniYield and Municipal Strategy are sometimes referred to herein
collectively as the "Funds" and individually as a "Fund," as the context
requires. The fund resulting from the Reorganization is sometimes referred to
herein as the "Combined Fund."

     In the Reorganization, MuniYield will acquire substantially all of the
assets and liabilities of Municipal Strategy in return for newly issued shares
of common stock of MuniYield ("MuniYield Common Stock") with a par value of
$.10 per share, and shares of a newly created series of AMPS, with a par value
of $.10 per share and a liquidation preference of $25,000 per share, to be
designated Series F ("MuniYield Series F AMPS"). Municipal Strategy will
distribute the MuniYield Common Stock and MuniYield Series F AMPS received in
the Reorganization to its stockholders and will then liquidate and dissolve
under Maryland law and terminate its registration under the Investment Company
Act of 1940, as amended (the "Investment Company Act"). MuniYield will
continue to operate as a registered, non-diversified, closed-end investment
company with the investment objective and policies described in this Proxy
Statement and Prospectus.

                                                    (continued on next page)
                              ------------------
 The Securities and Exchange Commission has not approved or disapproved these
      securities or passed upon the adequacy of this Proxy Statement and
         Prospectus. Any representation to the contrary is a criminal
                                   offense.
                              ------------------
        The date of this Proxy Statement and Prospectus is _____, 2001.

<PAGE>

     In the Reorganization, MuniYield will issue shares of its common stock to
Municipal Strategy based on the value of the assets transferred to MuniYield
by Municipal Strategy. These shares will then be distributed by Municipal
Strategy to its stockholders based on the value of the shares held by each
stockholder just prior to the Reorganization. A holder of Municipal Strategy
Common Stock will receive MuniYield Common Stock (plus cash in lieu of
fractional shares). A holder of Municipal Strategy Series A AMPS will receive
MuniYield Series F AMPS. All references to the Municipal Strategy Common Stock
will include shares of common stock representing Dividend Reinvestment Plan
shares held in the book deposit accounts of holders of Municipal Strategy
Common Stock.

     This Proxy Statement and Prospectus serves as a prospectus of MuniYield
in connection with the issuance of MuniYield Common Stock and MuniYield Series
F AMPS in the Reorganization.

     This Proxy Statement and Prospectus sets forth the information about the
Funds that stockholders of Municipal Strategy should know before considering
the Reorganization and should be retained for future reference. The Board of
Directors of Municipal Strategy authorized the solicitation of proxies in
connection with the Reorganization solely on the basis of this Proxy Statement
and Prospectus and the accompanying documents.

     The address of the principal executive offices of MuniYield and Municipal
Strategy is 800 Scudders Mill Road, Plainsboro, New Jersey 08536, and the
telephone number is 1-609-282-2800.

     The MuniYield Common Stock is listed on the New York Stock Exchange (the
"NYSE") under the symbol "MYD" and may be bought or sold at the then
prevailing market price on each day the NYSE is open for trading. Municipal
Strategy engages in a continuous offering of Municipal Strategy Common Stock
and Municipal Strategy Series A AMPS. Municipal Strategy Common Stock is not
listed on any exchange and no secondary market presently exists for Municipal
Strategy Common Stock, nor is it currently expected that a secondary market
will develop. Municipal Strategy Series A AMPS are not traded on any stock
exchange or automated quotation system. Municipal Strategy Series A AMPS can
be purchased at an auction or through broker-dealers who maintain a secondary
market in the AMPS.

     After the Reorganization, MuniYield Common Stock will continue to be
listed on the NYSE under the symbol "MYD." MuniYield Series F AMPS will not be
traded on any stock exchange or automated quotation system. MuniYield Series F
AMPS will be available for purchase at an auction or through broker-dealers
who maintain a secondary market in the AMPS. Reports, proxy materials and
other information concerning MuniYield may be inspected at the offices of the
NYSE, 20 Broad Street, New York, New York 10005. Reports, proxy materials and
other information concerning Municipal Strategy may be inspected at its
principal executive office.

<PAGE>

<TABLE>
<CAPTION>

                                                  Table of Contents
                                                                                                               Page
                                                                                                               ----
<S>                                                                                                            <C>
INTRODUCTION......................................................................................................1

SUMMARY...........................................................................................................1
     What Will Be the Result of the Reorganization................................................................1
     Reasons for the Reorganization...............................................................................2
     Pro Forma Fee Table..........................................................................................4

RISK FACTORS AND SPECIAL CONSIDERATIONS..........................................................................13
     Trading at a Discount.......................................................................................13
     Secondary Market............................................................................................13
     Non-Diversified Status......................................................................................13
     Interest Rate and Credit Risk...............................................................................14
     High Yield or "Junk Bonds"..................................................................................14
     Private Activity Bonds......................................................................................14
     Rating Agency Guidelines....................................................................................14
     Indexed and Inverse Floating Rate Securities................................................................14
     Options and Futures Transactions............................................................................15
     Antitakeover Provisions.....................................................................................15
     Leverage....................................................................................................15
     Portfolio Management and Other Considerations...............................................................16

COMPARISON OF THE FUNDS..........................................................................................17
     Investment Objective and Policies...........................................................................21
     Description of Municipal Bonds..............................................................................23
     Other Investment Policies...................................................................................24
     Information Regarding Options and Futures Transactions......................................................25
     Investment Restrictions.....................................................................................28
     Rating Agency Guidelines....................................................................................29
     Portfolio Composition.......................................................................................30
     Portfolio Transactions......................................................................................31
     Portfolio Turnover..........................................................................................32
     Net Asset Value.............................................................................................32
     Capital Stock...............................................................................................33
     Certain Provisions of the Charters..........................................................................34
     Management of the Funds.....................................................................................35
     Code of Ethics..............................................................................................38
     Voting Rights...............................................................................................38
     Stockholder Inquiries.......................................................................................39
     Dividends and Distributions.................................................................................39
     Automatic Dividend Reinvestment Plan........................................................................40
     Mutual Fund Investment Option...............................................................................42
     Liquidation Rights of Holders of AMPS.......................................................................42
     Tax Rules Applicable to the Funds and Their Stockholders....................................................43
     Tax Treatment of Options and Futures Transactions...........................................................46

AGREEMENT AND PLAN OF REORGANIZATION.............................................................................46
     General.....................................................................................................46
     Procedure...................................................................................................47
     Terms of the Agreement and Plan of Reorganization...........................................................48
     Potential Benefits to Stockholders as a Result of the Reorganization........................................49
     Surrender and Exchange of Stock Certificates................................................................51
     Tax Consequences of the Reorganization......................................................................52
     Capitalization..............................................................................................54

INFORMATION CONCERNING THE MEETING...............................................................................55
     Solicitation, Revocation and Use of Proxies.................................................................55
     Record Date and Outstanding Shares..........................................................................55
     Security Ownership of Certain Beneficial Owners and Management..............................................55
     Voting Rights and Required Vote.............................................................................55
     Appraisal Rights............................................................................................56

ADDITIONAL INFORMATION...........................................................................................56

CUSTODIAN........................................................................................................57

TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND REGISTRAR..........................................................57

ACCOUNTING SERVICES PROVIDER.....................................................................................57

LEGAL OPINIONS...................................................................................................57

EXPERTS..........................................................................................................58

LEGAL PROCEEDINGS................................................................................................58

STOCKHOLDER PROPOSALS............................................................................................59

INDEX TO FINANCIAL STATEMENTS...................................................................................F-1
APPENDIX I  INFORMATION PERTAINING TO EACH FUND.................................................................I-1
APPENDIX II  AGREEMENT AND PLAN OF REORGANIZATION..............................................................II-1
APPENDIX III  RATINGS OF MUNICIPAL BONDS AND COMMERCIAL PAPER.................................................III-1

</TABLE>

<PAGE>

                                 INTRODUCTION

     This Proxy Statement and Prospectus is furnished in connection with the
solicitation of proxies on behalf of the Board of Directors of Municipal
Strategy for use at the Meeting to be held at the offices of Fund Asset
Management, L.P. ("FAM"), 800 Scudders Mill Road, Plainsboro, New Jersey on
Wednesday, October 24, 2001, at 9:30 a.m., Eastern time. The mailing address
for each of the Funds is P.O. Box 9011, Princeton, New Jersey 08543-9011. The
approximate mailing date of this Proxy Statement and Prospectus is September __,
2001.

     Any person giving a proxy may revoke it at any time prior to its exercise
(1) by executing a superseding proxy, (2) by giving written notice of the
revocation to the Secretary of Municipal Strategy at the address indicated
above, or (3) by voting in person at the Meeting. All properly executed
proxies received prior to the Meeting will be voted at the Meeting in
accordance with the instructions marked thereon or otherwise as provided
therein. Unless instructions to the contrary are marked, properly executed
proxies will be voted "FOR" Item 1 to approve the Agreement and Plan of
Reorganization between MuniYield and Municipal Strategy (the "Agreement and
Plan").

     With respect to Item 1, assuming the required quorum is present at the
Meeting, approval of the Agreement and Plan will require the affirmative vote
of a majority of the outstanding shares of (1) Municipal Strategy Common Stock
and Municipal Strategy Series A AMPS, voting together as a single class, and
(ii) Municipal Strategy Series A AMPS, voting separately as a class. See
"Information Concerning the Meeting."

     The Board of Directors of Municipal Strategy has fixed the close of
business on August 27, 2001 as the record date (the "Record Date") for the
determination of stockholders entitled to notice of and to vote at the Meeting
and at any adjournment thereof. On the Record Date, stockholders of Municipal
Strategy will be entitled to one vote for each share of stock held, with no
shares of stock having cumulative voting rights. As of the Record Date,
Municipal Strategy had outstanding _____ shares of common stock and 1,720
shares of Series A AMPS. To the knowledge of the management of Municipal
Strategy, no person or entity owns beneficially 5% or more of the outstanding
shares of capital stock of Municipal Strategy as of the Record Date.

     The Board of Directors of Municipal Strategy knows of no business other
than that discussed above which will be presented for consideration at the
Meeting. If any other matter is properly presented, it is the intention of the
persons named in the enclosed proxy to vote in accordance with their best
judgment.

     This Proxy Statement and Prospectus serves as a prospectus of MuniYield
under the Securities Act, in connection with the issuance of shares of
MuniYield Common Stock and MuniYield Series F AMPS to Municipal Strategy
pursuant to the terms of the Agreement and Plan.


                                    SUMMARY

     The following is a summary of certain information contained elsewhere in
this Proxy Statement and Prospectus (including documents incorporated by
reference) and is qualified in its entirety by reference to the more complete
information contained in this Proxy Statement and Prospectus and in the
Agreement and Plan attached hereto as Appendix II.

The Reorganization

     At separate meetings of the Boards of Directors of Municipal Strategy and
MuniYield held on June 7, 2001 and June 20, 2001, respectively, each Board
unanimously approved the transaction whereby (i) MuniYield would acquire
substantially all of the assets and would assume substantially all of the
liabilities of Municipal Strategy, (ii) MuniYield would simultaneously issue
to Municipal Strategy shares of MuniYield Common Stock and MuniYield Series F
AMPS, (iii) the shares of MuniYield Common Stock would be subsequently
distributed to the holders of Municipal Strategy Common Stock (plus cash in
lieu of fractional shares), (iv) the shares of MuniYield Series F AMPS would
be subsequently distributed to the holders of Municipal Strategy Series A
AMPS, and (v) Municipal Strategy would be deregistered and dissolved, as
described below.


What Will Be the Result of the Reorganization

     If the Agreement and Plan is approved and the Reorganization is
completed:

     o    MuniYield will acquire substantially all of the assets and assume
          substantially all of the liabilities of Municipal Strategy;

     o    Stockholders of Municipal Strategy will become stockholders of
          MuniYield;

     o    Stockholders of Municipal Strategy Common Stock will receive full
          shares of MuniYield Common Stock (plus cash in lieu of fractional
          shares) equal to the aggregate net asset value of the shares of
          Municipal Strategy Common Stock currently owned by such
          stockholders; and

     o    Stockholders of Municipal Strategy Series A AMPS will receive shares
          of MuniYield Series F AMPS equal to the aggregate liquidation
          preference (and aggregate value) of the Municipal Strategy Series A
          AMPS currently owned by such stockholders.

     The Reorganization will be structured as a tax-free transaction for
federal tax purposes. Neither Fund will recognize gain or loss in the
Reorganization and no stockholder of Municipal Strategy will recognize gain or
loss upon the exchange of his or her shares for MuniYield Common Stock or
MuniYield Series F AMPS, as applicable, in the Reorganization (except to the
extent that a holder of Municipal Strategy Common Stock receives cash
representing an interest in fractional shares of MuniYield Common Stock).
Stockholders should consult their tax advisers regarding the effect of the
Reorganization in light of their individual circumstances.


Reasons for the Reorganization

     The Boards of Directors of Municipal Strategy and MuniYield have approved
the Agreement and Plan. The Board of Directors of Municipal Strategy
recommends that you vote to approve the Agreement and Plan.

Municipal Strategy

     The Board of Directors of Municipal Strategy has determined that
Municipal Strategy common stockholders are likely to benefit from the
Reorganization and believe that it is in the best interests of Municipal
Strategy and its common stockholders.

     In reaching its decision the Board considered a number of factors
including the following:

     o    After the Reorganization, Municipal Strategy common stockholders
          will be invested in a substantially larger non-diversified,
          leveraged, closed-end fund with an investment objective and policies
          substantially similar to Municipal Strategy's investment objective
          and policies. As of May 31, 2001 the net assets of Municpal Strategy
          (including assets attributable to Municipal Strategy Series A AMPS)
          were approximately $119 million. Assuming that the Reorganization
          had taken place on May 31, 2001, the Combined Fund (including assets
          attributable to AMPS) would have had net assets of approximately $875
          million;

     o    After the Reorganization, Municipal Strategy common stockholders
          should experience lower expenses per share, economies of scale and
          greater flexibility in portfolio management;

     o    After the Reorganization, Municipal Strategy common stockholders
          will benefit from the fact that the Combined Fund will not pay the
          administrative fee currently paid by Municipal Strategy;

     o    After the Reorganization, Municipal Strategy common stockholders
          will no longer be subject to the expenses associated with Municipal
          Strategy's required yearly prospectus updates;

     o    After the Reorganization, Municipal Strategy common stockholders
          will no longer be subject to the expenses of conducting quarterly
          tender offers;

     o    After the Reorganization, Municipal Strategy common stockholders
          will no longer be subject to a contingent deferred sales charge
          ("CDSC") upon the sale of shares held for less than three years;

     o    After the Reorganization, Municipal Strategy common stockholders
          will be able to sell their shares on each day that the NYSE is open
          for trading at the market price; the market price may be at a
          discount from or premium above the net asset value of the shares and
          transactions in shares will be subject to brokerage commissions; and

     o    After the Reorganization, subject to certain limitations, the
          stockholders of Municipal Strategy may benefit from the ability of
          the Combined Fund to use the net realized capital losses of each
          Fund to offset future net realized capital gains of the Combined
          Fund, if any. As of May 31, 2001, each Fund had net realized capital
          losses that can, subject to certain limitations, be shared by the
          stockholders of the Combined Fund.

MuniYield

     Although the pro forma total operating expense ratio of the Combined Fund
is not expected to be significantly lower than MuniYield's current operating
expense ratio, MuniYield stockholders will not be adversely affected by the
Reorganization since FAM has agreed to bear all Reorganization expenses
attributable to MuniYield and MuniYield may otherwise benefit from an increase
in the Combined Fund's level of net assets.

     It is not anticipated that the Reorganization will directly benefit the
holders of shares of any series of AMPS of either Fund. However, the
Reorganization will not adversely affect the holders of shares of any series
of AMPS of either Fund. The expenses of the Reorganization will not be borne
by the holders of shares of AMPS of either Fund.

     See "Pro Forma Fee Tables" below and "The Reorganization -- Potential
Benefits to Stockholders as a Result of the Reorganization."

     If all of the requisite approvals are obtained, it is anticipated that
the Reorganization will occur as soon as practicable after such approval,
provided that the Funds have obtained prior to that time a favorable opinion
of counsel concerning the tax consequences of the Reorganization as set forth
in the Agreement and Plan. Under the Agreement and Plan, however, the Board of
Directors of either Fund may cause the Reorganization to be postponed or
abandoned in certain circumstances should such Board determine that it is in
the best interest of the stockholders of that Fund to do so. The Agreement and
Plan may be terminated, and the Reorganization abandoned, whether before or
after approval by the Municipal Strategy stockholders, at any time prior to
the Closing Date (as defined below), (i) by mutual consent of the Boards of
Directors of the Funds, or (ii) by the Board of Directors of either Fund, if
any condition to that Fund's obligations has not been fulfilled or waived by
such Fund's Board of Directors.

<PAGE>

Pro Forma Fee Table

                Fee Table for Common Stockholders of MuniYield,
              Municipal Strategy and the Pro Forma Combined Fund*
                      as of April 30, 2001 (Unaudited)(a)

     This table illustrates, based on average net assets attributable to
common stock, the expenses incurred by each Fund individually and the
estimated pro forma expenses to be incurred by the Combined Fund after the
Reorganization:

<TABLE>
<CAPTION>
                                                                         Actual                       Pro Forma
                                                        ----------------------------------------     -----------
                                                                                                      Combined
                                                           MuniYield        Municipal Strategy          Fund
                                                        --------------  ------------------------      ----------
<S>                                                     <C>             <C>                           <C>
Common Stockholder Transaction Expenses
   Maximum Sales Load (as a percentage of the
     offering price) imposed on purchases of
     common stock..................................         None(b)               None                None(c)
   Dividend  Reinvestment  and Cash Purchase Plan
     Fees.........................................           None                 None                None

   Contingent Deferred Sales Charge                                     3.0% during the first
     (as a percentage of original purchase                              year, decreasing 1.0%
     price or net asset value at the                                    annually thereafter to
     time of repurchase)(d).......................           None     0.0% after the third year        None

   Annual Expenses (as a percentage of average
     net assets attributable to common stock
     for the six months ended April 30, 2001(e))
     Investment Advisory Fees(f)..................           0.75%                0.76%               0.75%
     Other Expenses...............................           0.25%                1.29%(g)            0.24%
                                                             ----                  ----               ----
Total Annual Expenses(h)..........................           1.00%                2.05%               0.99%
                                                             ====                 ====                ====

</TABLE>

- ----------------------
*    The expenses for the Combined Fund represent the estimated annualized
     expenses as of April 30, 2001 assuming MuniYield had acquired the assets
     and assumed the liabilities of Municipal Strategy as of that date.
(a)  No information is presented with respect to AMPS because no Fund's
     operating expenses are, and the expenses of the Reorganization will not
     be, borne by the holders of AMPS of either Fund. Generally, AMPS are sold
     at a fixed liquidation preference of $25,000 per share and investment
     return is set at an auction.
(b)  Shares of common stock purchased in the secondary market may be subject
     to brokerage commissions or other charges.
(c)  No sales load will be charged on the issuance of shares in the
     Reorganization. Shares of common stock are not available for purchase
     from the Combined Fund but may be purchased through a broker-dealer
     subject to individually negotiated commission rates.
(d)  No CDSC will apply to shares of MuniYield Common Stock issued to
     Municipal Strategy in the Reorganization, nor will any CDSC be due on
     shares of Municipal Strategy Common Stock in connection with the
     Reorganization.
(e)  The pro forma annual operating expenses for the Combined Fund are
     projections for a 12-month period.
(f)  Based on average  net  assets  for the six months  ended  April 30,  2001
     of each Fund and the  Combined  Fund (excluding assets attributable to
     AMPS). If assets attributable to AMPS are included, the Investment
     Advisory Fee for each Fund and the Combined Fund would be 0.50% of the
     average net assets.
(g)  Includes the administrative fee paid by Municipal Strategy at the rate of
     0.25% of average daily net assets including the proceeds from the
     issuance of AMPS.
(h)  Based on average net assets (excluding assets attributable to AMPS) for
     the six months ended April 30, 2001 of Municipal Strategy, MuniYield and
     the Combined Fund and excludes FAM's voluntary waiver of a portion of the
     advisory fee and/or reimbursement of certain other expenses with respect
     to Municipal Strategy. Including such fee waiver and/or expense
     reimbursement applicable to Municipal Strategy, the Total Annual Expenses
     for Municipal Strategy would have been 1.90%. If assets attributable to
     AMPS are included, the Total Annual Expenses for MuniYield, Municipal
     Strategy (excluding the advisory fee waiver and/or expense reimbursement
     applicable to Municipal Strategy) and the Combined Fund would be 0.67%,
     1.34% and 0.66%, respectively. If assets attributable to AMPS and the
     above described advisory fee waiver and/or expense reimbursement
     applicable to Municipal Strategy are included, the Total Annual Expenses
     for Municipal Strategy would have been 1.24%. It is not anticipated that
     FAM will waive its advisory fee or reimburse expenses with respect to the
     Combined Fund on an ongoing basis after the Reorganization.

<PAGE>

Examples:

Cumulative Expenses Paid on Shares of Common Stock for the Periods Indicated:

<TABLE>
<CAPTION>

                                                         1 Year          3 Years         5 Years         10 Years
                                                         ------          -------         -------         --------
<S>                                                      <C>             <C>             <C>             <C>
An investor would pay the following expenses on
   a $1,000 investment assuming (1) the
   operating expense ratio for each Fund set
   forth above and (2) a 5% annual return
   throughout the period:

   MuniYield.....................................          $10            $32              $  55            $122
   Municipal Strategy*...........................          $21            $64               $110            $238
   Combined Fund**...............................          $10            $32              $  55            $121

</TABLE>
- -------------------
* Assumes that the investor is not tendering at the end of the period.
** Assumes that the Reorganization had taken place on April 30, 2001.


         The foregoing Fee Table and Examples are intended to assist investors
in understanding the costs and expenses that a MuniYield or Municipal Strategy
stockholder bears directly or indirectly as compared to the costs and expenses
that would be borne by such investors taking into account the Reorganization.
The Examples set forth above assume that all dividends were reinvested and
uses a 5% annual rate of return as mandated by Commission regulations. The
Examples should not be considered a representation of past or future expenses
or annual rates of return. Actual expenses or annual rates of return may be
more or less than those assumed for purposes of the Examples. See "Summary,"
"Comparison of the Funds" and "The Reorganization -- Potential Benefits to
Stockholders as a Result of the Reorganization."

<TABLE>
<CAPTION>
<S>                                                       <C>
MuniYield............................................     MuniYield was incorporated under the laws of the State
                                                          of Maryland on September 20, 1991, and commenced
                                                          operations on November 20, 1991.

                                                          MuniYield currently has outstanding common stock and five
                                                          series of AMPS, designated Series A, Series B, Series C,
                                                          Series D and Series E (collectively, the "MuniYield
                                                          AMPS").

                                                          As of May 31, 2001, MuniYield had net assets (including
                                                          assets attributable to MuniYield AMPS) of approximately
                                                          $756 million.

Municipal Strategy...................................     Municipal Strategy was incorporated under the laws of
                                                          the State of Maryland  on July 13, 1994, and commenced
                                                          operations on November 3, 1995.

                                                          Municipal Strategy has outstanding common stock and one
                                                          series of AMPS, designated Series A.

                                                          As of May 31, 2001, Municipal Strategy had net assets
                                                          (including assets attributable to Municipal Strategy
                                                          Series A AMPS) of approximately $119 million.

Comparison of the Funds..............................     Investment Objectives and Policies. Each Fund is a
                                                          non-diversified, leveraged, closed-end, management
                                                          investment company. The Funds have substantially similar
                                                          investment objectives and policies. Each Fund seeks to
                                                          provide stockholders with as high a level of current
                                                          income exempt from Federal income tax as is consistent
                                                          with its investment policies.

                                                          Each Fund seeks to achieve its investment objective by
                                                          investing primarily in a portfolio of long-term
                                                          investment grade municipal obligations the interest on
                                                          which, in the opinion of bond counsel to the issuer, is
                                                          exempt from Federal income taxes ("Municipal Bonds").
                                                          Under normal circumstances, at least 80% of each Fund's
                                                          total assets will be invested in such municipal
                                                          obligations.

                                                          Investment Grade Municipal Obligations. Each Fund
                                                          generally will invest at least 75% of its total assets in
                                                          Municipal Bonds that are rated investment grade by
                                                          Moody's Investors Service, Inc. ("Moody's"), Standard &
                                                          Poor's ("S&P") or Fitch, Inc. ("Fitch"). See Appendix III
                                                          -- "Ratings of Municipal Bonds and Commercial Paper." The
                                                          Funds may also buy unrated securities that are considered
                                                          by FAM to be of comparable quality.

                                                          High Yield Securities or "Junk" Bonds. Each Fund may
                                                          invest up to 25% of its total assets in Municipal Bonds
                                                          rated in lower, non-investment grade categories by
                                                          Moody's, S&P or Fitch or in comparable unrated bonds. These
                                                          so-called "junk bonds" have the potential to generate high
                                                          current income for shareholders, but also subject each
                                                          Fund and its shareholders to greater credit and overall
                                                          market risk. In addition, these bonds are frequently
                                                          traded only in markets where the number of potential
                                                          purchasers and sellers, if any, is very limited. See
                                                          Appendix III -- "Ratings of Municipal Bonds and Commercial
                                                          Paper."

                                                          Private Activity Bonds. Each Fund may invest in certain
                                                          tax-exempt securities that are classified as "private
                                                          activity bonds" that may subject certain investors to a
                                                          Federal alternative minimum tax.

                                                          Leverage. Each Fund seeks to enhance the yield to its
                                                          common stockholders by issuing AMPS. See "Risk Factors and
                                                          Special Considerations -- Leverage."

                                                          Portfolio Maturity. Each Fund intends to invest primarily
                                                          in long-term Municipal Bonds with maturities of more than
                                                          ten years. As of May 31, 2001, the weighted average
                                                          maturity of the portfolio of MuniYield and Municipal
                                                          Strategy was 19.10 years and 19.11 years, respectively.
                                                          The average maturity of each Fund's portfolio securities,
                                                          and therefore each Fund's portfolio as a whole, will vary
                                                          based upon FAM's assessment of economic and market
                                                          conditions. See "Comparison of the Funds -- Investment
                                                          Objective and Policies."

                                                          Capital Stock. Each Fund has outstanding common stock and
                                                          at least one series of AMPS that are sold principally at
                                                          auction. The voting and dividend rights of holders of
                                                          common stock of each Fund are equivalent.

                                                          As of May 31, 2001, (i) the net asset value per share of
                                                          MuniYield Common Stock was $12.87 and the market price per
                                                          share was $13.47; and (ii) the net asset value per share
                                                          of Municipal Strategy Common Stock was $8.85.

                                                          Each series of AMPS of each Fund has a liquidation
                                                          preference of $25,000 per share plus accumulated but
                                                          unpaid dividends and is sold principally at auction. See
                                                          "Comparison of the Funds -- Capital Stock."

                                                          Auctions generally have been held and will be held every
                                                          seven days for MuniYield Series E AMPS and Municipal
                                                          Strategy Series A AMPS, and every 28 days for Series A, B,
                                                          C and D AMPS of MuniYield.

                                                          The auctions for MuniYield Series F AMPS to be issued in
                                                          the Reorganization will be held every seven days with the
                                                          same auction and payment dates as the Municipal Strategy
                                                          Series A AMPS. See "Comparison of the Funds -- Capital
                                                          Stock" below. The applicable dividend for a particular
                                                          dividend period for each series of AMPS of each Fund will
                                                          be determined by an auction conducted by the auction agent
                                                          on the business day next preceding the start of that
                                                          dividend period. The auction agent for each Fund is The
                                                          Bank of New York ("BONY").

                                                          The following table provides information about the
                                                          dividend rates for each series of AMPS of each Fund as of
                                                          a recent auction date:
</TABLE>

<TABLE>
<CAPTION>

                                                                                       Dividend              Dividend
                                                        Auction Date         Fund       Period     Series      Rate
                                                        ------------         ----       ------     ------      ----
<S>                                                  <C>                 <C>           <C>         <C>       <C>
                                                     July 10, 2001         MuniYield       28 days     A       2.59%
                                                     June 19, 2001         MuniYield       28 days     B       2.85%
                                                     July 3, 2001          MuniYield       28 days     C       2.70%
                                                     July 3, 2001          MuniYield       28 days     D       2.70%
                                                     July 10, 2001         MuniYield        7 days     E       2.60%
                                                     July 11, 2001         Municipal        7 days     A       2.59%
                                                                           Strategy

</TABLE>

<TABLE>
<CAPTION>

<S>                                                       <C>
                                                          Liquidity. MuniYield Common Stock is listed on the NYSE
                                                          and may be bought or sold at market price on each day the
                                                          NYSE is open for trading. On any given day, the market
                                                          price for MuniYield Common Stock on the NYSE may be higher
                                                          or lower than the net asset value of the MuniYield Common
                                                          Stock.

                                                          Municipal Strategy engages in a continuous offering of
                                                          Municipal Strategy Common Stock. Municipal Strategy Common
                                                          Stock is not listed on any exchange and no secondary
                                                          market presently exists for Municipal Strategy Common
                                                          Stock, nor is it currently expected that a secondary
                                                          market will develop. To provide liquidity for stockholders
                                                          of Municipal Strategy, the Fund's Board of Directors
                                                          considers, on a quarterly basis, whether the Fund should
                                                          make a tender offer for its common stock. In a tender
                                                          offer, the Fund repurchases outstanding Municipal Strategy
                                                          Common Stock at the Fund's net asset value (less any
                                                          applicable CDSC) on the last day of the offer.

                                                          Municipal Strategy's Board of Directors is not required to
                                                          authorize the making of a tender offer and there can be no
                                                          assurance that a tender offer will be made during any
                                                          particular quarter. If a tender offer is not made,
                                                          stockholders may be unable to sell their shares. Since the
                                                          inception of Municipal Strategy, however, the Board has
                                                          authorized a tender offer each quarter.

                                                          Contingent Deferred Sales Charge. Stockholders of
                                                          MuniYield do not pay any CDSC because the Fund's common
                                                          stock trades on the NYSE. If common stockholders of
                                                          Municipal Strategy sell their stock back to the Fund
                                                          during a tender offer and they have held those shares for
                                                          less than three years when the tender offer begins, they
                                                          may have to pay a CDSC. This charge varies depending on
                                                          how long a shareholder has owned the tendered shares. The
                                                          amount of the charge is based on how much the shareholder
                                                          paid for the tendered shares or their net asset value,
                                                          whichever amount is less.

                                                          If the Reorganization is consummated, the tender offer of
                                                          Municipal Strategy that concluded on August 20, 2001 will
                                                          have been the final tender offer.

                                                          Portfolio Management. The investment adviser for each Fund
                                                          is FAM. Mr. Roberto W. Roffo currently manages the
                                                          investment portfolio of each Fund and will manage the
                                                          Combined Fund after the Reorganization.

                                                          Advisory and Administrative Fees. FAM is responsible for
                                                          the management of each Fund's investment portfolio and for
                                                          providing administrative services to each Fund.

                                                          Pursuant to a separate investment advisory agreement
                                                          between FAM and each Fund, each Fund pays FAM a monthly
                                                          advisory fee at the annual rate of 0.50% of each Fund's
                                                          average net assets, including proceeds from the issuance
                                                          of AMPS. The fee paid by MuniYield is computed on average
                                                          weekly net assets. In comparison, Municipal Strategy's fee
                                                          is calculated on average daily net assets.

                                                          Municipal Strategy also pays FAM a monthly administrative
                                                          fee at the annual rate of 0.25% of its average daily net
                                                          assets, including proceeds from the issuance of AMPS.
                                                          MuniYield does not pay an administrative fee to FAM and
                                                          the Combined Fund will not pay a separate administrative
                                                          fee to FAM.

                                                          Since the commencement of operations of Municipal Strategy
                                                          to the present, FAM has waived a portion of the advisory
                                                          fee due from Municipal Strategy and/or reimbursed certain
                                                          other expenses. The fee waiver and/or expense
                                                          reimbursement with respect to Municipal Strategy is
                                                          voluntary and may be reduced or discontinued by FAM at any
                                                          time without notice to stockholders. It is not anticipated
                                                          that FAM will waive any portion of its advisory fee and/or
                                                          reimburse expenses with respect to the Combined Fund after
                                                          the Reorganization. See "Comparison of the Funds --
                                                          Management of the Funds."

                                                          Overall Expense Ratio. As stated above, since the
                                                          commencement of operations of Municipal Strategy, FAM has
                                                          voluntarily waived a portion of its advisory fee and/or
                                                          reimbursed certain other expenses with respect to
                                                          Municipal Strategy.

                                                          FAM has not waived fees or reimbursed expenses with
                                                          respect to MuniYield. It is not anticipated that FAM will
                                                          waive its advisory fee and/or reimburse expenses with
                                                          respect to the Combined Fund on an ongoing basis.

                                                          The table below summarizes the total annualized operating
                                                          expense ratio for MuniYield, Municipal Strategy (excluding
                                                          any advisory fee waivers and/or expense reimbursements)
                                                          and the Combined Fund based on their respective average
                                                          net assets (excluding assets attributable to AMPS) for the
                                                          six month period ended April 30, 2001.

                                                                               Average Net Assets
                                                                               (Excluding Assets
                                                                                Attributable to
                                                                               AMPS) for the Six
                                                                                     Month          Total Annualized
                                                                                  Period Ended          Operating
                                                                                 April 30, 2001       Expense Ratio
                                                                               ------------------    ---------------
                                                          MuniYield                $507,503,509            1.00%
                                                          Municipal Strategy       $ 81,220,051            2.05%*
                                                          Combined Fund**          $588,723,560            0.99%

                                                          ---------------
                                                          *   Including fee waivers and/or expense reimbursements
                                                              applicable to Municipal Strategy, the total annualized
                                                              operating expense ratio for Municipal Strategy would have
                                                              been 1.90%.
                                                          **  Assumes that the Reorganization had taken place on
                                                              April 30, 2001.

                                                          The table below summarizes the total annualized operating
                                                          expense ratio for MuniYield, Municipal Strategy (excluding
                                                          any advisory fee waivers and/or expense reimbursements)
                                                          and the Combined Fund based on their respective average
                                                          net assets (including assets attributable to AMPS) for the
                                                          six month period ended April 30, 2001.

                                                                                  Average Net
                                                                                    Assets
                                                                               (Including Assets
                                                                                Attributable to
                                                                                 AMPS) for the
                                                                                   Six Month      Total Annualized
                                                                                 Period Ended        Operating
                                                                                April 30, 2001     Expense Ratio
                                                                                ----------------  ----------------
                                                          MuniYield               $757,503,509           0.67%
                                                          Municipal Strategy      $124,220,051           1.34%*
                                                          Combined Fund**         $881,723,560           0.66%
                                                          ---------------

                                                          *   Including fee waivers and/or expense reimbursements
                                                              applicable to Municipal Strategy, the total annualized
                                                              operating expense ratio for Municipal Strategy would have
                                                              been 1.24%.
                                                          ** Assumes that the Reorganization had taken place on
                                                              April 30, 2001.


                                                          Purchases and Sales of Common Stock and AMPS. Investors
                                                          typically purchase and sell shares of MuniYield Common
                                                          Stock through a registered broker-dealer on each day that
                                                          the NYSE is open for trading, and may incur a brokerage
                                                          commission set by the broker-dealer. Alternatively,
                                                          investors may purchase or sell shares of MuniYield Common
                                                          Stock through privately negotiated transactions with
                                                          existing stockholders.

                                                          Investors typically can purchase shares of Municipal
                                                          Strategy Common Stock from FAM Distributors, Inc., other
                                                          selected securities dealers or other financial
                                                          intermediaries, including Merrill Lynch, Pierce, Fenner &
                                                          Smith Incorporated ("Merrill Lynch"). The Fund offers its
                                                          common stock on a best efforts basis at a price equal to
                                                          the next determined net asset value per share without a
                                                          front-end sales charge. Shares are sold subject to certain
                                                          minimum initial and subsequent purchase requirements.

                                                          Municipal Strategy Common Stock is not listed on any
                                                          exchange and no secondary market presently exists for
                                                          Municipal Strategy Common Stock, nor is it currently
                                                          expected that a secondary market will develop. To provide
                                                          liquidity for stockholders of Municipal Strategy, the
                                                          Fund's Board of Directors considers, on a quarterly basis,
                                                          whether the Fund should make a tender offer for its common
                                                          stock. See "Liquidity" above.

                                                          Purchase and sale procedures for the AMPS of each Fund are
                                                          identical. Such AMPS generally are purchased and sold at
                                                          separate auctions conducted on a regular basis by The Bank
                                                          of New York ("BONY"), as the auction agent for each Fund's
                                                          AMPS (in such capacity, the "Auction Agent"). Unless
                                                          otherwise permitted by the Funds, existing and potential
                                                          holders of AMPS may participate in auctions only through
                                                          their broker-dealers. Broker-dealers submit the orders of
                                                          their respective customers who are existing and potential
                                                          holders of AMPS to the Auction Agent. On or prior to each
                                                          auction date for the AMPS (the business day next preceding
                                                          the first day of each dividend period), each holder may
                                                          submit orders to buy, sell or hold AMPS to its
                                                          broker-dealer.

                                                          Outside of these auctions, shares of AMPS may be purchased
                                                          or sold through broker-dealers for the AMPS in a secondary
                                                          trading market maintained by the broker-dealers. However,
                                                          no assurance can be given that a secondary market will
                                                          develop, or, if it does develop, that it will provide
                                                          holders with a liquid trading market for the AMPS of
                                                          either Fund.

                                                          Ratings of AMPS. The AMPS of each Fund have been assigned
                                                          a rating of AAA from S&P and "aaa" from Moody's. See
                                                          "Comparison of the Funds -- Rating Agency Guidelines."

                                                          Portfolio Transactions. The portfolio transactions in
                                                          which the Funds may engage are substantially similar, as
                                                          are the procedures for such transactions. See "Comparison
                                                          of the Funds-- Portfolio Transactions."

                                                          Dividends and Distributions. The methods of dividend
                                                          payment and distributions are identical with respect to
                                                          the common stock and the AMPS of each Fund. See
                                                          "Comparison of the Funds-- Dividends and Distributions."

                                                          Net Asset Value. MuniYield determines its net asset value
                                                          per share of common stock as of the close of business on
                                                          the NYSE (generally, 4:00 p.m., Eastern time) (the "NYSE
                                                          close of business") on the last business day of each week.
                                                          Municipal Strategy determines its net asset value as of
                                                          the NYSE close of business once daily on each day the NYSE
                                                          is open for trading.

                                                          For purposes of determining the net asset value of a share
                                                          of common stock of each Fund, the value of the securities
                                                          held by the Fund plus any cash or other assets (including
                                                          interest accrued but not yet received) minus all
                                                          liabilities (including accrued expenses) and the aggregate
                                                          liquidation value of the outstanding shares of AMPS of the
                                                          Fund is divided by the total number of shares of common
                                                          stock of the Fund outstanding at such time. Expenses,
                                                          including fees payable to FAM, are accrued daily. See
                                                          "Comparison of the Funds -- Net Asset Value."

                                                          Voting Rights. The corresponding voting rights of the
                                                          holders of shares of each Fund's common stock are
                                                          substantially similar. The corresponding voting rights of
                                                          the holders of shares of each Fund's AMPS are also
                                                          substantially similar. See "Comparison of the Funds--
                                                          Capital Stock."

                                                          Stockholder Services. An automatic dividend reinvestment
                                                          plan is available to holders of shares of common stock of
                                                          each Fund. See "Comparison of the Funds -- Automatic
                                                          Dividend Reinvestment Plan." Other stockholder services,
                                                          including the provision of annual and semi-annual reports,
                                                          are the same for each Fund.

</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                    Outstanding Securities of MuniYield and Municipal Strategy as of May 31, 2001

                                                                                                  Amount
                                                                                 Amount        Outstanding
                                                                                Held By        Exclusive of
                                                                                Fund for       Amount Shown
                                                              Amount            Its Own        in Previous
Title of Class                                              Authorized          Account           Column
- --------------                                           -------------          --------       ------------
<S>                                                      <C>                    <C>            <C>
MuniYield
Common Stock.......................................      199,990,000               0            38,560,928
AMPS
      Series A........................                         1,800               0                 1,800
      Series B................                                 1,800               0                 1,800
      Series C........................                         1,800               0                 1,800
      Series D................                                 1,800               0                 1,800
      Series E................                                 2,800               0                 2,800
Municipal Strategy
Common Stock............................                 199,960,000               0              8,434,658
AMPS
     Series A.......................                           8,000               0                 1,720
     Series B......................................            8,000               0                     0
     Series C......................................            8,000               0                     0
     Series D......................................            8,000               0                     0
     Series E......................................            8,000               0                     0

</TABLE>

<TABLE>
<CAPTION>

<S>                                                       <C>
Tax Considerations...................................     The Funds will receive an opinion of counsel with respect
                                                          to the Reorganization to the effect that, among other
                                                          things, neither Fund will recognize gain or loss on the
                                                          transaction and no stockholder of Municipal Strategy will
                                                          recognize gain or loss upon the exchange of his or her
                                                          shares for MuniYield Common Stock or MuniYield Series F
                                                          AMPS, as applicable, in the Reorganization (except to the
                                                          extent that a holder of Municipal Strategy Common Stock
                                                          receives cash representing an interest in fractional
                                                          shares of MuniYield Common Stock in the Reorganization).
                                                          The consummation of the Reorganization is subject to the
                                                          receipt of such opinion of counsel.

                                                          The Reorganization will not affect the status of MuniYield
                                                          as a regulated investment company. Municipal Strategy will
                                                          liquidate pursuant to the Reorganization. See "The
                                                          Reorganization -- Tax Consequences of the Reorganization."

</TABLE>

<PAGE>

                    RISK FACTORS AND SPECIAL CONSIDERATIONS

     The investment objective, policies and restrictions of MuniYield and
Municipal Strategy are substantially similar. Therefore, many of the
investment risks associated with an investment in MuniYield are substantially
similar to the investment risks associated with an investment in Municipal
Strategy. These investment risks will also apply to an investment in the
Combined Fund after the Reorganization. The principal difference in risk
between MuniYield and Municipal Strategy results from the fact that MuniYield
common stock trades at market value on the NYSE and shares may often trade at
a discount from the net asset value of the shares. Conversely, Municipal
Strategy Common Stock is not listed on any exchange and no secondary market
presently exists for its common stock, nor is it currently expected that a
secondary market will develop. Investors have been able, however, to tender
their shares to the Fund for repurchase at net asset value on a quarterly
basis.

     The risk factors to which an investment in MuniYield is subject are
summarized below. It is expected that the Reorganization itself will not
adversely affect the rights of holders of shares of common stock or of any
series of AMPS of either Fund or create any additional risks.

     Except where noted, each Fund is subject to the following risks:


Trading at a Discount

         Closed-end funds that are listed on an exchange, such as MuniYield,
are subject to the risk that the market price of their common stock may trade
at a price that is lower than their net asset value, commonly referred to
as "trading at a discount." Shares may also trade at a premium above net asset
value. Each Fund is designed primarily for long-term investors and should not
be considered a vehicle for trading purposes.

     Municipal Strategy Common Stock is not listed on any exchange and no
secondary market presently exists for its common stock, nor is it expected
that a secondary market will develop. As long as there is no secondary market
for Municipal Strategy Common Stock, the Fund is not subject to the risk that
its shares will trade at a discount from net asset value. To provide liquidity
to shareholders, the Fund's Board of Directors considers making tender offers
once each quarter to repurchase the Fund's shares at net asset value. However,
shares of Municipal Strategy Common Stock are less liquid than shares of funds
traded on a stock exchange, and shareholders who tender shares of Municipal
Strategy Common Stock held for less than three years may pay a CDSC. The Board
of Directors of Municipal Strategy is not obligated to authorize any tender
offer, and there may be quarters in which no tender offer is made. If the
Board does not authorize a tender offer, shareholders may be unable to sell
their shares. Since the inception of Municipal Strategy, however, the Board
has authorized a tender offer each quarter. The most recent tender offer for
shares of Municipal Strategy Common Stock concluded on August 20, 2001. If the
Reorganization is consummated, that will have been the Fund's final tender
offer.


Secondary Market

     Broker-dealers intend to maintain a secondary trading market in the AMPS
of each Fund outside of the auctions; however, they have no obligation to do
so and there can be no assurance that a secondary market for the AMPS of each
Fund will develop or, if it does develop, that it will provide AMPS holders
with a liquid trading market. Neither Fund's AMPS will 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 of each Fund, and a selling stockholder may sell AMPS
between auctions at a price per share of less than $25,000.


Non-Diversified Status

     Each Fund is registered as a "non-diversified" investment company. This
means that each Fund may invest a greater percentage of its assets in the
obligations of a single issuer than a diversified investment company. Since
either Fund may invest a relatively high percentage of its assets in a limited
number of issuers, it may be more exposed to the effects of a single economic,
political or regulatory occurrence than a Fund that invests more widely. Even
as a non-diversified fund, each Fund must meet the diversification
requirements of applicable Federal income tax laws.


Interest Rate and Credit Risk

     Each Fund invests primarily in long-term municipal bonds that are subject
to interest rate and credit risk. Interest rate risk is the risk that prices
of municipal bonds generally increase when interest rates decline and decrease
when interest rates increase. Prices of longer-term securities generally
change more in response to interest rate changes than prices of shorter-term
securities. Credit risk is the risk that the issuer of a security owned by a
Fund will be unable to pay the interest or principal when due. The degree of
credit risk depends on both the financial condition of the issuer and the
terms of the obligation.


High Yield or "Junk Bonds"

     Each Fund may invest up to 25% of its total assets in debt securities
commonly known as "junk bonds." Investments in high yield securities entail a
higher level of credit risk (loss of income and/or principal) than investments
in higher rated securities. Securities rated in the lower rating categories
are considered to be predominantly speculative with respect to capacity to pay
interest and repay principal. Issuers of high yield securities may be highly
leveraged and may not have available to them more traditional methods of
financing. New issuers also may be inexperienced in managing their debt
burden. The issuer's ability to service its debt obligations may be adversely
affected by business developments unique to the issuer, the issuer's inability
to meet specific projected business forecasts or the inability of the issuer
to obtain additional financing. High yield securities may be unsecured and may
be subordinated to other creditors of the issuer.


Private Activity Bonds

     Each Fund may invest in certain tax-exempt securities classified as
"private activity bonds." These bonds may subject certain investors in a Fund
to a Federal alternative minimum tax.


Rating Agency Guidelines

     Each Fund has received ratings of AAA from S&P and "aaa" from Moody's
with respect to its AMPS. In order to maintain these ratings, the Funds are
required to maintain portfolio holdings that meet the specified guidelines of
such rating agencies. These guidelines may impose asset coverage or portfolio
composition requirements that are stricter than those imposed by the
Investment Company Act. The Funds do not expect these requirements or
guidelines to prevent the investment adviser from managing each Fund's
portfolio in accordance with each Fund's investment objective and policies.
See Appendix III -- "Ratings of Municipal Bonds and Commercial Paper."

     The Board of Directors of each Fund, without stockholder approval, may
amend, alter or repeal certain definitions or restrictions that have been
adopted by a Fund pursuant to the rating agency guidelines, if a 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.


Indexed and Inverse Floating Rate Securities

     Each 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.
Each 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 a Fund to the risks of reduced or eliminated interest payments and
losses 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 a Fund's investment. As
a result, the market value of such securities will generally be more volatile
than that of fixed rate, tax exempt securities. Both indexed securities and
inverse floaters are derivative securities and can be considered speculative.


Options and Futures Transactions

         Each Fund may engage in certain options and futures transactions to
reduce its exposure to interest rate movements. If a Fund incorrectly
forecasts market value, interest rates or other factors, that Fund's
performance could suffer. Each Fund also may suffer a loss if the other party
to the transaction fails to meet its obligations. The Funds are not required
to use hedging and each Fund may choose not to do so. The Funds cannot
guarantee that any hedging strategies that they use will work.


Antitakeover Provisions

     The Articles of Incorporation of each Fund (in each case, a "Charter")
and Maryland law include provisions that could limit the ability of other
entities or persons to acquire control of that Fund or to change the
composition of its Board of 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.


Leverage

     Issuance of Preferred Stock. Each Fund is leveraged through the issuance
of AMPS. The preferred stock may represent up to approximately 35% of a Fund's
capital, including the capital raised by issuing the preferred stock.

     The issuance and ongoing expenses of the preferred stock are borne by
each of the Funds and reduce the net asset value of that Fund's common stock.
In addition, at times when a Fund is required to allocate taxable income to
preferred stockholders, the AMPS may require, and it is expected that the
terms of any other preferred stock may also require, that Fund to make an
additional distribution to its preferred stockholders (an "Additional
Distribution"). The amount of this Additional Distribution approximately
equals the tax liability resulting from the allocation and the additional
distribution.

     Risks. The use of leverage creates certain risks for common stockholders,
including higher volatility of both the net asset value and the market value
of the common stock. Since any decline in the value of a Fund's investments
will affect only the common stockholders, the use of leverage will cause a
Fund's net asset value and market price to decrease more than if the Fund was
not leveraged. In addition, fluctuations in dividend rates paid on, and the
amount of taxable income allocable to any holder of AMPS and any other
preferred stockholder will affect the yield to common stockholders. There can
be no assurance that the Fund will earn a higher return on its investments
than the then current dividend rate (and any Additional Distribution) it pays
on the preferred stock.

     Under certain conditions, the benefits of leverage to common stockholders
will be reduced, and the Fund's leveraged capital structure could result in a
lower rate of return to common stockholders than if the Fund were not
leveraged. During times of rising interest rates, the value of the Fund's
portfolio and the net assets value of its shares may decline. The Fund's
leverage structure may exaggerate any such decline. In addition, the Fund may
invest in securities that create investment leverage, such as inverse floating
obligations, which may further exaggerate any decline.

     In an extreme case, a decline in net asset value could affect a Fund's
ability to pay dividends on its common stock. Failure to make such dividend
payments could adversely affect the Fund's qualification as a regulated
investment company under the Federal tax laws. See "Taxes." However, each Fund
intends to take all measures necessary to continue to make common stock
dividend payments. If a Fund's current investment income were not sufficient
to meet dividend requirements on either the common stock or the preferred
stock, it could be necessary for the Fund to liquidate certain of its
investments.

     Each Fund has the authority to redeem its AMPS for any reason. Redemption
of the preferred stock or insufficient investment income to make dividend
payments may reduce the net asset value of the common stock and require a Fund
to liquidate a portion of its investments at a time when it may be
disadvantageous, in the absence of such extraordinary circumstances, to do so.


Portfolio Management and Other Considerations

     The portfolio management strategies of the Funds are substantially
similar. In the event of an increase in short-term or medium-term rates or
other change in market conditions to the point where a Fund's leverage could
adversely affect holders of common stock as noted above, or in anticipation of
such changes, each Fund may attempt to shorten the average maturity of its
investment portfolio, which would tend to offset the negative impact of
leverage on holders of its common stock. Each Fund also may attempt to reduce
the degree to which it is leveraged by redeeming AMPS pursuant to the
provisions of the applicable Articles Supplementary that establish the rights
and preferences of each series of AMPS or otherwise purchasing shares of AMPS.
Purchases and sales or redemptions of AMPS, whether on the open market or in
negotiated transactions, are subject to limitations under the Investment
Company Act. In determining whether or not it is in the best interest of a
Fund and its stockholders to redeem or repurchase outstanding preferred stock,
its Board of Directors will take into account a variety of factors, including
market conditions, the ratio of preferred stock to common stock, and the
expenses associated with such redemptions or repurchase. If market conditions
subsequently change, each Fund may sell previously unissued shares of AMPS or
shares of AMPS that the Fund previously issued but later repurchased or
redeemed.

     Under the Investment Company Act, a Fund is not permitted to issue shares
of preferred stock unless immediately after such issuance the net asset value
of a Fund's portfolio is at least 200% of the liquidation value of the
outstanding preferred stock (expected to equal the original purchase price of
the outstanding shares of preferred stock plus any accumulated and unpaid
dividends thereon and any accumulated and unpaid Additional Distributions). In
addition, a Fund is not permitted to declare any cash dividend or other
distribution on its common stock unless, at the time of such declaration, the
net asset value of a Fund's portfolio (determined after deducting the amount
of such dividend or distribution) is at least 200% of such liquidation value.
As of May 31, 2001, MuniYield's capital structure included 10,000 shares of
AMPS representing approximately 33% of the Fund's capital, and the asset
coverage with respect to the AMPS was approximately 302% and Municipal
Strategy's capital structure included 1,720 shares of AMPS representing
approximately 36% of the Fund's capital, and the asset coverage with respect
to the AMPS was approximately 276%. To the extent possible, each Fund intends
to purchase or redeem shares of preferred stock from time to time to maintain
asset coverage of preferred stock of at least 200%.

<PAGE>

                            COMPARISON OF THE FUNDS

Financial Highlights

     MuniYield

     The financial information in the table below has been audited in
conjunction with the annual audit of the financial statements of MuniYield by
_____________, independent auditors. The financial information for the six
month period ended April 30, 2001 is unaudited and has been provided by FAM.
The following per share data and ratios have been derived from information
provided in the financial statements of MuniYield.

<TABLE>
<CAPTION>


                                                      For the
                                                     Six Months
                                                       Ended
                                                     April 30,                                      For the Year Ended October 31,
                                                    -------------------------------------------------------------------------------
                                                       2001         2000         1999         1998         1997         1996
                                                      ------       ------       ------       ------       ------       ------
                                                    (Unaudited)
<S>                                                 <C>         <C>           <C>          <C>          <C>          <C>
Increase (Decrease) in Net Asset Value:
Per Share Operating Performance:
- ---------------------------------------------------
Net asset value, beginning of period...............   $13.08       $13.21       $16.27       $16.09       $15.68       $15.47
- --------------------------------------------------- ----------- -----------   ----------   ----------   ----------   ----------
Investment income-- net............................      .52     .   1.09         1.12         1.19         1.24         1.26
- ---------------------------------------------------
Realized and unrealized gain (loss)
on investments-- net...............................     (.17)        (.08)       (2.34)         .49          .65          .23
- --------------------------------------------------- ----------- -----------   ----------   ----------   ----------   ----------
Total from investment operations...................      .35         1.01        (1.22)        1.68         1.89         1.49
- --------------------------------------------------- ----------- -----------   ----------   ----------   ----------   ----------
Less dividends and distributions to
Common Stock shareholders:
  Investment income-- net..........................     (.43)        (.87)        (.95)        (.97)       (1.00)       (1.04)
  Realized gain on investments-- net...............      --           --          (.38)        (.26)        (.22)         --
  In excess of realized gain on                          --           --          (.27)         --          (.01)         --
  investments-- net................................
                                                   ----------- -----------   ----------   ----------   ----------   ----------
Total dividends and distributions to
Common Stock shareholders..........................     (.43)        (.87)       (1.60)       (1.23)       (1.23)       (1.04)
                                                   ----------- -----------   ----------   ----------   ----------   ----------
Capital charge resulting from
issuance of Common Stock...........................      --           --           --            --           --          --
- --------------------------------------------------- ----------- -----------   ----------   ----------   ----------   ----------
Effect of Preferred Stock activity:++++
  Dividends and distributions to
  Preferred Stock shareholders:
    Investment income-- net........................     (.13)        (.27)        (.17)        (.18)        (.20)        (.24)
    Realized gain on investments-- net.............       --           --         (.04)        (.09)        (.05)         --
    In excess of realized gain on
      investments-- net............................       --           --         (.03)         --         -- +++++       --
   Capital charge resulting from
   issuance of Preferred Stock.....................       --           --           --            --           --          --
- --------------------------------------------------- ----------- -----------   ----------   ----------   ----------   ----------
Total effect of Preferred Stock activity...........     (.13)        (.27)        (.24)        (.27)        (.25)        (.24)
- --------------------------------------------------- ----------- -----------   ----------   ----------   ----------   ----------
Net asset value, end of period.....................   $12.87       $13.08       $13.21       $16.27       $16.09       $15.68
- --------------------------------------------------- =========== ===========   ==========   ==========   ==========   ==========
Market price per share, end of period..............   $13.45       $12.625      $12.875      $16.875      $15.875      $14.875
- --------------------------------------------------- =========== ===========   ==========   ==========   ==========   ==========
Total Investment Return:**
- ---------------------------------------------------
Based on market price per share....................   10.05%+++      5.26%      (15.35%)      14.74%       15.56%       10.88%
                                                    =========== ===========   ==========   ==========   ==========   ==========

<CAPTION>

                                                                                           For the
                                                                                            Period
                                                                                         November 29,
                                                                                          1991++ to
                                                                                        October 31,
                                                    --------------------------------------------------
                                                      1995         1994         1993         1992
                                                     ------       ------       ------       ------

<S>                                                 <C>         <C>          <C>          <C>
Increase (Decrease) in Net Asset Value:
Per Share Operating Performance:
- ---------------------------------------------------
Net asset value, beginning of period...............  $14.35       $16.80       $14.69       $14.18
- --------------------------------------------------- ----------  ----------   ----------   -----------
Investment income-- net............................    1.27         1.29         1.31         1.18
- ---------------------------------------------------
Realized and unrealized gain (loss)
on investments-- net...............................    1.34        (2.23)        2.27          .57
- --------------------------------------------------- ----------  ----------   ----------   -----------
Total from investment operations...................    2.61         (.94)        3.58         1.75
- --------------------------------------------------- ----------  ----------   ----------   -----------
Less dividends and distributions to
Common Stock shareholders:
  Investment income-- net..........................   (1.00)       (1.07)       (1.11)        (.89)
  Realized gain on investments-- net...............    (.22)        (.23)        (.16)         --
  In excess of realized gain on                         --           --           --           --
  investments-- net................................
                                                    ----------  ----------   ----------   -----------
Total dividends and distributions to
Common Stock shareholders..........................   (1.22)       (1.30)       (1.27)        (.89)
                                                    ----------  ----------   ----------   -----------
Capital charge resulting from
issuance of Common Stock...........................     --           --            --         (.02)
- --------------------------------------------------- ----------- -----------  ----------   ----------
Effect of Preferred Stock activity
  Dividends and distributions to
  Preferred Stock shareholders:
    Investment income-- net........................    (.23)        (.18)        (.17)        (.19)
    Realized gain on investments-- net.............    (.04)        (.03)        (.03)         --
    In excess of realized gain on
      investments-- net............................     --           --           --           --
  Capital charge resulting from
  issuance of Preferred Stock......................     --           --            --         (.14)
- --------------------------------------------------- ----------  ----------   ----------   -----------
Total effect of Preferred Stock activity...........    (.27)        (.21)        (.20)        (.33)
- --------------------------------------------------- ----------  ----------   ----------   -----------
Net asset value, end of period.....................  $15.47       $14.35       $16.80       $14.69
- --------------------------------------------------- ==========  ==========  ===========   ===========
Market price per share, end of period..............  $14.375      $12.125      $16.75       $15.125
- --------------------------------------------------- ==========  ==========  ===========   ===========
Total Investment Return:**
- ---------------------------------------------------
Based on market price per share....................   29.76%      (20.94%)      19.91%      7.06%+++
                                                    ==========  ==========  ===========   ===========
                                                                                                          (continued on next page)

</TABLE>

<PAGE>

<TABLE>
<CAPTION>


                                                      For the
                                                     Six Months
                                                       Ended
                                                     April 30,                                      For the Year Ended October 31,
                                                    -------------------------------------------------------------------------------
                                                       2001         2000         1999         1998         1997         1996
                                                      ------       ------       ------       ------       ------       ------
                                                    (Unaudited)
- ---------------------------------------------------
<S>                                                <C>          <C>           <C>          <C>          <C>          <C>
Based on net asset value per share.................    1.64%+++      6.28%       (9.92%)       9.15%       11.11%        8.61%
                                                    =========== ===========   ==========   ==========   ==========   ==========
Ratios Based on Average Net Assets of Common
Stock:
- ---------------------------------------------------
Total expenses***..................................     1.00%*        .99%         .93%         .89%         .91%         --
- --------------------------------------------------- =========== ===========   ==========   ==========   ==========   ==========
Total investment income-- net***...................     7.87%*       8.35%        7.42%        7.43%        7.81%         --
- --------------------------------------------------- =========== ===========   ==========   ==========   ==========   ==========
Amount of dividends to Preferred Stock
shareholders.......................................     1.91%*       2.07%        1.11%        1.10%        1.28%         --
- --------------------------------------------------- =========== ===========   ==========   ==========   ==========   ==========
Investment income-- net, to
Common Stock shareholders..........................     5.96%*       6.28%        6.31%        6.33%        6.53%         --
- --------------------------------------------------- =========== ===========   ==========   ==========   ==========   ==========
Ratios Based on Total Average
Net Assets: ***+
- ---------------------------------------------------
Total expenses, net of reimbursement...............      .67%*        .66%         .65%         .63%         .64%         .64%
- --------------------------------------------------- =========== ===========   ==========   ==========   ==========   ==========
Total expenses.....................................      .67%*        .66%         .65%         .63%         .64%         .64%
- --------------------------------------------------- =========== ===========   ==========   ==========   ==========   ==========
Total investment income-- net......................     5.27%*       5.56%        5.17%        5.26%        5.48%        5.64%
- --------------------------------------------------- =========== ===========   ==========   ==========   ==========   ==========
Ratios Based on Average Net Assets
of Preferred Stock:
- ---------------------------------------------------
Dividends to Preferred Stock shareholders..........     3.88%*       4.12%        2.55%        2.66%        3.02%         --
- --------------------------------------------------- =========== ===========   ==========   ==========   ==========   ==========
Supplemental Data:
- ---------------------------------------------------
Net assets, net of Preferred Stock,
end of period (in thousands)....................... $495,409       $501,361     $506,030     $611,222     $596,320     $581,124
- --------------------------------------------------- =========== ===========   ==========   ==========   ==========   ==========
Preferred Stock outstanding,
end of period (in thousands)....................... $250,000       $250,000     $250,000     $250,000     $250,000     $250,000
- --------------------------------------------------- =========== ===========   ==========   ==========   ==========   ==========
Portfolio turnover.................................    36.66%      103.44%       78.42%       91.63%      111.45%       96.74%
- --------------------------------------------------- =========== ===========   ==========   ==========   ==========   ==========
Leverage:
- ---------------------------------------------------
Asset coverage per $1,000..........................   $2,982         $3,005       $3,024       $3,445       $3,385       $3,324
- --------------------------------------------------- =========== ===========   ==========   ==========   ==========   ==========
Dividends Per Share on Preferred Stock
Outstanding:++++++
Series A--  Investment income-- net................  $   450         $1,052      $   588      $   694      $   747      $   894
- --------------------------------------------------- =========== ===========   ==========   ==========   ==========   ==========
Series B-- Investment income-- net.................  $   542         $1,009      $   595      $   687      $   751      $   897
- --------------------------------------------------- =========== ===========   ==========   ==========   ==========   ==========
Series C-- Investment income-- net...................$   466         $1,032      $   687      $   643      $   763      $   998
- --------------------------------------------------- =========== ===========   ==========   ==========   ==========   ==========
Series D-- Investment income-- net ..................$   468         $1,035      $   694      $   637      $   762      $   888
- --------------------------------------------------- =========== ===========   ==========   ==========   ==========   ==========
Series E-- Investment income-- net ..................$   481         $1,038      $   627      $   656      $   752      $   875
- --------------------------------------------------- =========== ===========   ==========   ==========   ==========   ==========

<CAPTION>

                                                                                          For the
                                                                                          Period
                                                                                       November 29,
                                                                                        1991++ to
                                                                                       October 31,
                                                   --------------------------------------------------
                                                     1995         1994         1993         1992
                                                    ------       ------       ------       ------
- ---------------------------------------------------
<S>                                                <C>         <C>         <C>           <C>
Based on net asset value per share.................  18.00%       (6.71%)      23.83%      9.99%+++
                                                   ==========  ==========  ===========   ===========
Ratios Based on Average Net Assets of Common
Stock:
- ---------------------------------------------------
Total expenses***..................................    --           --           --           --
- ---------------------------------------------------==========  ==========  ===========   ===========
Total investment income-- net***...................    --           --           --           --
- ---------------------------------------------------==========  ==========  ===========   ===========
Amount of dividends to Preferred Stock
shareholders.......................................    --           --           --           --
- ---------------------------------------------------==========  ==========  ===========   ===========
Investment income-- net, to
Common Stock shareholders..........................    --           --           --           --
- ---------------------------------------------------==========  ==========  ===========   ===========
Ratios Based on Total Average
Net Assets: ***+
- ---------------------------------------------------
Total expenses, net of reimbursement...............    .66%         .66%         .64%       .58%*
- ---------------------------------------------------==========  ==========  ===========   ===========
Total expenses.....................................    .66%         .66%         .64%       .65%*
- ---------------------------------------------------==========  ==========  ===========   ===========
Total investment income-- net......................   5.91%        5.76%        5.72%      6.08%*
- ---------------------------------------------------==========  ==========  ===========   ===========
Ratios Based on Average Net Assets
of Preferred Stock:
- ---------------------------------------------------
Dividends to Preferred Stock shareholders..........    --           --           --           --
- ---------------------------------------------------==========  ==========  ===========   ===========
Supplemental Data:
- ---------------------------------------------------
Net assets, net of Preferred Stock,
end of period (in thousands)....................... $573,400     $531,657     $619,775     $526,287
- ---------------------------------------------------==========  ==========  ===========   ===========
Preferred Stock outstanding,
end of period (in thousands)....................... $250,000     $250,000     $250,000     $250,000
- ---------------------------------------------------==========  ==========  ===========   ===========
Portfolio turnover.................................  52.99%       44.27%       25.58%       66.45%
- ---------------------------------------------------==========  ==========  ===========   ===========
Leverage:
- ---------------------------------------------------
Asset coverage per $1,000..........................   $3,294       $3,127       $3,479       $3,105
- ---------------------------------------------------==========  ==========  ===========   ===========
Dividends Per Share on Preferred Stock
Outstanding:++++++
Series A--  Investment income-- net................  $   887      $   598      $   560      $   680
- ---------------------------------------------------==========  ==========  ===========   ===========
Series B-- Investment income-- net.................  $   850      $   733      $   554      $   690
- ---------------------------------------------------==========  ==========  ===========   ===========
Series C-- Investment income-- net.................  $   827      $   647      $   566      $   685
- ---------------------------------------------------==========  ==========  ===========   ===========
Series D-- Investment income-- net ................  $   897      $   659      $   556      $   688
- ---------------------------------------------------==========  ==========  ===========   ===========
Series E-- Investment income-- net ................  $   759      $   707      $   542      $   688
- ---------------------------------------------------==========  ==========  ===========   ===========

</TABLE>

- ------------------------------------------------------------------------------
       * Annualized.
      ** Total investment returns based on market value, which can be
         significantly greater or lesser than the net asset value, may
         result in substantially different returns. Total investment returns
         exclude the effects of sales charges.
     *** Do not reflect the effect of dividends to Preferred Stock
         shareholders.
       + Includes Common and Preferred Stock average net assets.
      ++ Commencement of operations.
     +++ Aggregate total investment return.
    ++++ MuniYield's Preferred Stock was issued on December 23, 1991.
   +++++ Amount is less than $0.1 per share.
  ++++++ Dividends per share have been adjusted to reflect a two-for-one stock
         split that occurred on December 1, 1994.

<PAGE>

     Municipal Strategy

     The financial information in the table below has been audited in
conjunction with the annual audit of the financial statements of Municipal
Strategy by _______________, independent auditors. The financial information
for the six month period ended April 30, 2001 is unaudited and has been
provided by FAM. The following per share data and ratios have been derived
from information provided in the financial statements of Municipal Strategy.

<TABLE>
<CAPTION>

                                                                                                                     For the
                                                                                                                     Period
                                                                                                                     November
                                                                                                                     3, 1995++
                                                        For the Six                                                     to
                                                        Months Ended                                                 October
                                                          April 30,          For the Year Ended October 31,             31,
                                                       --------------  -----------------------------------------   -----------
                                                           2001         2000        1999       1998        1997        1996
                                                           ----         ----        ----       ----        ----        ----
                                                        (Unaudited)
<S>                                                    <C>              <C>        <C>         <C>        <C>      <C>
Increase (Decrease) in Net Asset Value:
Per Share Operating Performance:
- -------------------------------------------------------
Net asset value, beginning of period...................    $8.75        $8.89      $10.96      $10.87     $10.17      $10.00
- ------------------------------------------------------- ------------  ---------- ---------- ---------- ----------  -----------
Investment income-- net................................      .31          .72         .71         .73        .75         .68
- -------------------------------------------------------
Realized and unrealized gain
(loss) on investments-- net............................      .10         (.14)      (1.75)        .35        .70         .21
- ------------------------------------------------------- ------------  ---------- ---------- ---------- ----------  -----------
Total from investment operations.......................      .41          .58       (1.04)       1.08       1.45         .89
                                                        ------------  ---------- ---------- ---------- ----------  -------------
Less dividends and distributions to
Common Stock shareholders:
Investment income-- net................................     (.23)        (.49)       (.58 )       (.60)      (.59)       (.59)
Realized gain on investments-- net.....................       -- #         --          --         (.19)       --          --
In excess of realized gain on investments
 --net.................................................       --           --        (.27)          --        --          --
- ------------------------------------------------------- ------------  ---------- ---------- ---------- ----------  -------------
Total dividends and distributions to Common
Stock shareholders.....................................     (.23)        (.49)       (.85)       (.79)      (.59)       (.59)
                                                        ------------  ---------- ---------- ---------- ----------  -------------
Effect of Preferred Stock activity: ++++
  Dividends and distributions to
  Preferred Stock shareholders:
    Investment income-- net............................     (.08)        (.23)       (.13)       (.13)      (.16)       (.09)
    Realized gain on investments-- net.................       -- #         --          --        (.07)        --          --
    In excess of realized gain on investments--net.....       --           --        (.05)
- -------------------------------------------------------
Capital charge resulting from issuance
of Preferred Stock.....................................       --           --          --          --         --        (.04)
- ------------------------------------------------------- ------------  ---------- ---------- ---------- ----------  -------------
Total effect of Preferred Stock activity...............     (.08)        (.23)       (.18)       (.20)      (.16)       (.13)
- ------------------------------------------------------- ------------  ---------- ---------- ---------- ----------  -------------
Net asset value, end of period.........................    $8.85        $8.75       $8.89      $10.96     $10.87      $10.17
- ------------------------------------------------------- ============  =========  ========== ========== ==========  =============
Total Investment Return:**
- -------------------------------------------------------
Based on net asset value per share.....................     3.73%+++     4.09%     (11.94%)      8.28%     13.08%       7.81%+++
- ------------------------------------------------------- ============  =========  ========== ========== ==========  =============
Ratios Based on Average Net Assets of Common
Stock:
- -------------------------------------------------------
Total expenses, net of reimbursement***................     1.90%*       1.88%       1.75%       1.61%      1.37%        .68%*
- ------------------------------------------------------- ============  =========  ========== ========== ==========  =============
Total expenses***......................................     2.05%*       2.04%       1.90%       1.80%      1.83%       1.60%*
- ------------------------------------------------------- ============  =========  ========== ========== ==========  =============
Total investment income-- net***.......................     6.99%*       8.14%       6.98%       6.65%      7.14%       6.86%*
- ------------------------------------------------------- ============  =========  ========== ========== ==========  =============
Amount of dividends to
Preferred Stock shareholders...........................     1.84%*       2.56%       1.31%       1.21%      1.53%        .94%*
- ------------------------------------------------------- ============  =========  ========== ========== ==========  =============
Investment income-- net,
to Common Stock shareholders...........................     5.15%*       5.58%       5.67%       5.44%      5.61%       5.92%*
- ------------------------------------------------------- ============  =========  ========== ========== ==========  =============
Ratios Based on Total Average Net Assets:
***+++++
- -------------------------------------------------------
Total expenses, net of reimbursement...................     1.24%*       1.15%       1.17%       1.12%       .96%        .53%*
- ------------------------------------------------------- ============  =========  ========== ========== ==========  =============
Total expenses.........................................     1.34%*       1.25%       1.27%       1.25%      1.28%       1.26%*
- ------------------------------------------------------- ============  =========  ========== ========== ==========  =============
Total investment income-- net..........................     4.57%*       4.99%       4.66%       4.61%      5.01%       5.40%*
- ------------------------------------------------------- ============  =========  ========== ========== ==========  =============
Ratios Based on Average Net Assets
of Preferred Stock:
- -------------------------------------------------------
Dividends to Preferred Stock shareholders..............     3.47%*       4.05%       2.63%       2.75%      3.58%       3.49%*
- ------------------------------------------------------- ============  =========  ========== ========== ==========  =============
Supplemental Data:
- -------------------------------------------------------
Net assets, net of Preferred Stock,
end of period (in thousands)...........................   $78,479      $85,394    $102,174    $115,339   $101,463     $83,573
- ------------------------------------------------------- ============  =========  ========== ========== ==========  =============

                                                                                                      (continued on next page)

</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                                                                                                                     For the
                                                                                                                     Period
                                                                                                                     November
                                                                                                                     3, 1995++
                                                        For the Six                                                     to
                                                        Months Ended                                                 October
                                                          April 30,          For the Year Ended October 31,             31,
                                                       --------------  -----------------------------------------   -----------
                                                           2001         2000        1999       1998        1997        1996
                                                           ----         ----        ----       ----        ----        ----
                                                        (Unaudited)
<S>                                                    <C>              <C>        <C>         <C>        <C>      <C>
Preferred Stock outstanding,
end of period (in thousands)...........................  $43,000      $44,900     $58,000     $48,000    $48,000     $38,000
- ------------------------------------------------------- ============  =========  ========== ========== ==========  =============
Portfolio turnover.....................................   .20.49%      115.52%     158.57%     141.53%    144.34%     234.41%
- ------------------------------------------------------- ============  =========  ========== ========== ==========  =============
Leverage:
- -------------------------------------------------------
Asset coverage per $1,000..............................   $2,825       $2,902      $2,762      $3,403     $3,114      $3,199
- ------------------------------------------------------- ============  =========  ========== ========== ==========  =============
Dividends Per Share on
Preferred Stock Outstanding:
Investment income-- net................................     $431       $1,015        $644        $533       $897        $564
- ------------------------------------------------------- ============  =========  ========== ========== ==========  =============

</TABLE>

- -----------------
       * Annualized.
      ** Total investment returns exclude the effects of the CDSC, if any.
         (Municipal Strategy is a continuously offered closed-end fund, the
         shares of which are offered by the Fund at net asset value. No
         secondary market exists for the purchase of these shares.) FAM
         voluntarily waived a portion of its management fee. Without such
         waiver, the Fund's performance would have been lower.
     *** Do not reflect the effect of dividends to Preferred Stock
         shareholders.
      ++ Commencement of operations.
     +++ Aggregate total investment return.
    ++++ Municipal Strategy's Preferred Stock was initially issued on March
         11, 1996.
   +++++ Includes Common and Preferred Stock average net assets.
       # Amount is less than $.01 per share.

<TABLE>
<CAPTION>

                                    Per Share Data for Common Stock (Unaudited)


MuniYield (Traded on NYSE)

                                                                                                   Premium
                                                                                                 (Discount)
                                                                                                   to Net
                                                  Market Price**       Net Asset Value           Asset Value
                                              -------------------  ---------------------  ----------------------
                                                High        Low      High          Low      High           Low
                                              --------   --------  --------     -------  ---------     --------
                Quarter
                 Ended*                          $           $         $            $         %             %
                -------
<S>                                           <C>        <C>       <C>          <C>      <C>           <C>
January 31, 1999........................       17.187      16.062    16.36       15.40      8.34          2.06
April 30, 1999..........................       16.25       15.187    15.58       15.32      4.37         (1.25)
July 31, 1999...........................       15.625      14.00     15.35       14.52      1.79         (4.37)
October 31, 1999........................       14.188      12.375    14.53       13.02     (1.22)        (7.42)
January 31, 2000........................       13.00       11.25     13.55       12.51     (2.51)       (12.38)
April 30, 2000..........................       12.25       11.125    13.24       12.50     (2.50)       (13.49)
July 31, 2000...........................       12.625      11.375    13.18       12.49     (3.63)        (9.58)
October 31, 2000........................       13.063      12.25     13.45       13.03     (1.37)        (7.27)
January 31, 2001........................       14.11       12.313    13.46       12.84      6.57         (5.00)
April 30, 2001..........................       13.94       13.28     13.51       12.87      4.58          (.15)
July 31, 2001...........................       [o]         [o]      [o]         [o]       [o]           [o]

</TABLE>

- -----------------
    * Calculations are based on shares of common stock outstanding at the
      end of each quarter.
   ** As reported in the consolidated transaction operating system.


     As shown above, since November 1, 1998, share prices for MuniYield's
Common Stock have fluctuated between a maximum premium of approximately
[ o%] and a maximum discount of approximately ([o]%). Although there is no
reason to believe that this pattern should be affected by the Reorganization,
it is not possible to predict whether shares of the Combined Fund will trade
at a premium above or discount from net asset value following the
Reorganization, or what the magnitude of any such premium or discount might
be.


         Municipal Strategy

                  Quarter                              High        Low
                  Ended*                            --------   ---------

                                                       $          $

January 31, 1999........................              11.00      10.52
April 30, 1999..........................              10.66      10.48
July 31, 1999...........................              10.55       9.90
October 31, 1999........................               9.89       8.76
January 31, 2000........................               9.11       8.39
April 30, 2000..........................               8.89       8.39
July 31, 2000...........................               8.81       8.31
October 31, 2000........................               8.96       8.71
January 31, 2001........................               9.22       8.07
April 30, 2001..........................               9.23       8.85
July 31, 2001...........................              [o]        [o]

- ------------------
       * Calculations are based on shares of common stock outstanding at the
         end of each quarter.

Investment Objective and Policies

     The structure, organization and investment policies of the Funds are
substantially similar. Each Fund seeks as high a level of current income
exempt from Federal income tax as is consistent with its investment policies.
Each Fund's investment objective is a fundamental policy that may not be
changed without a vote of a majority of a Fund's outstanding voting
securities, as defined below under "Investment Restrictions."

         Each Fund seeks to achieve its investment objective by investing
primarily in a portfolio of long-term, investment grade Municipal Bonds issued
by or on behalf of states, territories and possessions of the United States
and their political subdivisions, agencies or instrumentalities that pay
interest which, in the opinion of bond counsel to the issuer, is exempt from
Federal income taxes. Each Fund at all times, except during interim and
temporary periods, will invest at least 80% of its total assets in Municipal
Bonds. Each Fund at all times, except during temporary defensive periods, will
maintain at least 75% of its total assets in Municipal Bonds that are rated
investment grade by a nationally recognized statistical rating organization
or, if unrated, are considered to be of comparable quality by FAM.
Additionally, each Fund may invest up to 25% of its total assets in Municipal
Bonds that are rated below investment grade by a nationally recognized
statistical rating organization or are unrated but considered by FAM to be of
comparable quality. Neither Fund has established a minimum percentage of
assets that must be invested in such lower quality Municipal Bonds. Such lower
quality Municipal Bonds are frequently traded only in markets where the number
of potential purchasers and sellers, if any, is very limited.

     Ordinarily, neither Fund intends to realize significant interest income
that is subject to Federal income tax. Each Fund will not invest more than 25%
of its total assets (taken at market value) in Municipal Bonds whose issuers
are located in the same state. Each Fund may invest all or a portion of its
assets in certain tax-exempt securities classified as "private activity bonds"
(in general, bonds that benefit non-governmental entities) that may subject
certain investors in a Fund to a Federal alternative minimum tax. Each Fund
also may invest in securities not issued by or on behalf of a state or
territory or by an agency or instrumentality thereof, if a Fund nevertheless
believes such securities pay interest or distributions that are exempt from
Federal income taxation ("Non-Municipal Tax-Exempt Securities"). Non-Municipal
Tax-Exempt Securities may include securities issued by other investment
companies that invest in Municipal Bonds, to the extent such investments are
permitted by the Investment Company Act. Other Non-Municipal Tax-Exempt
Securities could include trust certificates or other instruments evidencing
interests in one or more long-term Municipal Bonds. Certain Non-Municipal
Tax-Exempt Securities may be characterized as derivative instruments.
Non-Municipal Tax-Exempt Securities that pay interest exempt from federal
income taxes will be considered "Municipal Bonds" for purposes of each Fund's
investment objective and policies. At times, each Fund may seek to hedge its
portfolio through the use of futures transactions and options to reduce
volatility in the net asset value of its shares of common stock.

     The investment grade Municipal Bonds in which each Fund primarily invests
are those Municipal Bonds rated at the date of purchase in the four highest
rating categories of S&P, Moody's or Fitch or, if unrated, are considered to
be of comparable quality by FAM. In the case of long-term debt, the investment
grade rating categories are AAA through BBB for S&P and Fitch, and Aaa through
Baa for Moody's. In the case of short-term notes, the investment grade rating
categories are SP-l+ through SP-3 for S&P, MIG-1 through MIG-3 for Moody's and
F-1+ through F-3 for Fitch. In the case of tax-exempt commercial paper, the
investment grade rating categories are A-1+ through A-3 for S&P, Prime-1
through Prime-3 for Moody's and F-1+ through F-3 for Fitch. Obligations ranked
in the lowest investment grade rating category (BBB, SP-3 and A-3 for S&P;
Baa, MIG-3 and Prime-3 for Moody's; and BBB and F-3 for Fitch), while
considered "investment grade," have certain speculative characteristics. There
may be sub-categories or gradations indicating relative standing within the
rating categories set forth above. See Appendix III to this Proxy Statement
and Prospectus for a description of S&P's, Moody's and Fitch's ratings of
Municipal Bonds. Certain Municipal Bonds may be entitled to the benefit of
insurance as well as letters of credit or similar credit enhancements issued
by municipal bond issuers or other financial institutions. In such instances,
the Board of Directors and FAM will take into account in assessing the quality
of such bonds not only the creditworthiness of the issuer of such bonds but
also the creditworthiness of the financial institution that provided such
insurance or credit enhancement.

     As noted above, each Fund may invest up to 25% of its assets in Municipal
Bonds that are rated below investment grade or, if unrated, are considered to
be of comparable quality by FAM. These high yield bonds are commonly referred
to as "junk bonds" and are regarded as predominantly speculative as to the
issuer's ability to make payments of principal and interest. Consequently,
although such bonds can be expected to provide higher yields and be less
subject to interest rate fluctuations, they may be subject to greater market
price fluctuations and risk of loss of principal than lower yielding, higher
rated fixed income securities. Such securities are particularly vulnerable to
adverse changes in the issuer's industry and in general economic conditions.
Issuers of high yield bonds may be highly leveraged and may not have available
to them more traditional methods of financing. The risk of loss due to default
by the issuer is significantly greater for the holders of these bonds because
such securities may be unsecured and may be subordinated to other creditors of
the issuer. In addition, while the high yield bonds in which the Funds may
invest normally will not include securities that, at the time of investment,
are in default or the issuers of which are in bankruptcy, there can be no
assurance that such events will not occur after a Fund purchases a particular
security, in which case that Fund may experience losses and incur costs.

     High yield bonds frequently have call or redemption features that permit
an issuer to repurchase such bonds from a Fund, which may decrease the net
investment income to a Fund and dividends to shareholders in the event that a
Fund is required to replace a called security with a lower yielding security.
Each Fund may have difficulty disposing of certain high yield bonds because
there may be a thin trading market for such securities. Reduced secondary
market liquidity may have an adverse impact on market price and each Fund's
ability to dispose of particular issues when necessary to meet that Fund's
liquidity needs or in response to a specific economic event such as a
deterioration in the creditworthiness of the issuer. In addition, market
quotations are generally available on many high yield bond issues only from a
limited number of dealers and may not necessarily represent firm bids of such
dealers or prices for actual sales.

     Each Fund may invest in variable rate demand obligations ("VRDOs") and
VRDOs in the form of participation interests ("Participating VRDOs") in
variable rate tax-exempt obligations held by a financial institution,
typically a commercial bank. The VRDOs in which each Fund may invest are
tax-exempt obligations, in the opinion of counsel to the issuer, that contain
a floating or variable interest rate adjustment formula and an unconditional
right of demand on the part of the holder thereof to receive payment of the
unpaid principal balance plus accrued interest on a notice period not to
exceed seven days. Participating VRDOs provide a Fund with a specified
undivided interest (up to 100%) in the underlying obligation and the right to
demand payment of the unpaid principal balance plus accrued interest on the
Participating VRDOs from the financial institution on a specified number of
days' notice, not to exceed seven days. There is, however, the possibility
that because of default or insolvency, the demand feature of VRDOs or
Participating VRDOs may not be honored. Each Fund has been advised by its
counsel that a Fund should be entitled to treat the income received on
Participating VRDOs as interest from tax-exempt obligations.

     The average maturity of each Fund's portfolio securities will vary based
upon FAM's assessment of economic and market conditions. The net asset value
of the shares of common stock of closed-end investment companies, such as the
Funds, which invest 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 generally can be expected to rise.
Conversely, when interest rates rise, the value of a fixed-income portfolio
generally can be expected to decline. Prices of longer-term securities
generally fluctuate more in response to interest rate changes than do
short-term or medium-term securities. These changes in net asset value are
likely to be greater in the case of a fund having a leveraged capital
structure, such as that used by the Funds. See "Risk Factors and Special
Considerations -- Leverage."

     Each Fund intends to invest primarily in long-term Municipal Bonds with
maturities of more than ten years. Also, each Fund may invest in
intermediate-term Municipal Bonds with maturities of between three years and
ten years. Each Fund may invest in short-term, tax-exempt securities,
short-term U.S. Government securities, repurchase agreements or cash.
Investments in such short-term securities or cash will not exceed 20% of a
Fund's total assets except during interim periods pending investment of the
net proceeds of public offerings of that Fund's securities or in anticipation
of the repurchase or redemption of that Fund's securities and temporary
periods when, in the opinion of FAM, prevailing market or economic conditions
warrant. The Funds do not ordinarily intend to realize significant interest
income not exempt from Federal income taxes.

     Each Fund is classified as non-diversified within the meaning of the
Investment Company Act, which means that the Funds are not limited by the
Investment Company Act in the proportion of their respective assets that they
may invest in securities of a single issuer. However, each Fund's investments
will be limited so as to qualify the Fund for the special tax treatment
afforded regulated investment companies ("RICs") under the Federal tax laws.
See "Comparison of the Funds -- Tax Rules Applicable to the Funds and Their
Stockholders." Requirements for qualification as a RIC include, among others,
limiting its investments so that, at the close of each quarter of the taxable
year, (i) not more than 25% of the market value of the Fund's total assets
will be invested in the securities (other than U.S. Government securities) of
a single issuer, and (ii) with respect to 50% of the market value of its total
assets, not more than 5% of the market value of its total assets will be
invested in the securities (other than U.S. Government securities) of a single
issuer. A fund that elects to be classified as "diversified" under the
Investment Company Act must satisfy, among other requirements, the foregoing
5% requirement with respect to 75% of its total assets. To the extent that a
Fund assumes large positions in the securities of a small number of issuers,
that Fund's yield may fluctuate to a greater extent than that of a diversified
investment company as a result of changes in the financial condition or in the
market's assessment of the issuers.


Description of Municipal Bonds

     Municipal Bonds include debt obligations issued to obtain funds for
various public purposes, including construction of a wide range of public
facilities, refunding of outstanding obligations and obtaining funds for
general operating expenses and loans to other public institutions and
facilities. In addition, certain types of private activity bonds ("PABs") are
issued by or on behalf of public authorities to finance various privately
operated facilities, including airports, public ports, mass commuting
facilities, multifamily housing projects, as well as facilities for water
supply, gas, electricity, sewage or solid waste disposal. For purposes of this
Proxy Statement and Prospectus, such obligations are Municipal Bonds if the
interest paid thereon is exempt from Federal income tax even though such bonds
may be PABs as discussed below. Also, for purposes of this Proxy Statement and
Prospectus, Non-Municipal Tax-Exempt Securities that pay interest that is
exempt from Federal income tax will be considered Municipal Bonds.

     The two principal classifications of Municipal Bonds are "general
obligation" bonds and "revenue" bonds, which latter category includes PABs
and, for bonds issued on or before August 15, 1986, industrial development
bonds or "IDBs." General obligation bonds are secured by the issuer's pledge
of faith, credit and taxing power for the repayment of principal and the
payment of interest. Revenue or special obligation bonds are payable only from
the revenues derived from a particular facility or class of facilities or, in
some cases, from the proceeds of a special excise tax or other specific
revenue source such as from the user of the facility being financed. PABs are
in most cases revenue bonds and do not generally constitute the pledge of the
credit or taxing power of the issuer of such bonds. The payment of principal
and interest when due on revenue bonds depends solely on the ability of the
user of the facility financed by the bonds to meet its financial obligations
and the pledge, if any, of real and personal property so financed as security
for such payment. Municipal Bonds may also include "moral obligation" bonds,
which are normally issued by special purpose public authorities. If an issuer
of moral obligation bonds is unable to meet its obligations, the repayment of
such bonds becomes a moral commitment but not a legal obligation of the state
or municipality in question.

     Each Fund may purchase Municipal Bonds classified as PABs. Interest
received on certain PABs is treated as an item of "tax preference" for
purposes of the Federal alternative minimum tax and may impact the overall tax
liability of investors in a Fund. There is no limitation on the percentage of
each Fund's assets that may be invested in Municipal Bonds the interest on
which is treated as an item of "tax preference" for purposes of the Federal
alternative minimum tax. See "Comparison of the Funds -- Tax Rules Applicable
to the Funds and Their Stockholders."

     Also included within the general category of Municipal Bonds are
certificates of participation ("COPs") executed and delivered for the benefit
of government authorities or entities to finance the acquisition or
construction of equipment, land and/or facilities. COPs represent
participation interests in a lease, an installment purchase contract or a
conditional sales contract (hereinafter collectively referred to as "lease
obligations") relating to such equipment, land or facilities. Although lease
obligations do not constitute general obligations of the issuer for which the
issuer's unlimited tax power is pledged, a lease obligation frequently is
backed by the issuer's covenant to budget for, appropriate and make the
payments due under the lease obligation. However, certain lease obligations
contain "non-appropriation" clauses, which provide that the issuer has no
obligation to make lease or installment purchase payments in future years
unless money is appropriated for such purpose on a yearly basis. Although
"non-appropriation" lease obligations are secured by the lease property,
disposition of such property in the event of foreclosure might prove to be
difficult and the proceeds thereof may not be sufficient to pay principal and
interest when due on such obligations.

     Federal tax legislation has limited the types and volume of bonds
qualifying for the Federal income tax exemption of interest. 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 Funds.


Other Investment Policies

     Each Fund has adopted certain other policies as set forth below:

     Borrowings. Each 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 MuniYield is authorized to borrow moneys in excess of 5% of the
value of its total assets for the purpose of repurchasing its own common stock
or redeeming shares of preferred stock and Municipal Strategy is authorized to
borrow moneys in amounts of up to 33 1/3% of the value of its total assets at
the time of such borrowings to finance the repurchase of its own common stock
pursuant to tender offers or otherwise to redeem or repurchase shares of
preferred stock or for temporary, extraordinary or emergency purposes.
Borrowings by each Fund (commonly known, as with the issuance of preferred
stock, as "leveraging") create an opportunity for greater total return since
the Funds will not be required to sell portfolio securities to repurchase or
redeem shares but, at the same time, such borrowings increase exposure to
capital risk. In addition, borrowed funds are subject to interest costs that
may offset or exceed the return earned on the borrowed funds.

     When-Issued Securities and Delayed Delivery Transactions. Each Fund may
purchase or sell Municipal Bonds on a delayed delivery basis or on a
when-issued basis at fixed purchase or sale terms. These transactions arise
when securities are purchased or sold by a Fund with payment and delivery
taking place in the future. The purchase will be recorded on the date a Fund
enters into the commitment, and the value of the obligation will thereafter be
reflected in the calculation of that Fund's net asset value. The value of the
obligation on the delivery day may be more or less than its purchase price. A
separate account of a Fund will be established with its custodian, consisting
of cash, cash equivalents or liquid Municipal Bonds having a market value at
all times at least equal to the amount of the commitment.

     Indexed and Inverse Floating Obligations. Each Fund may invest in
Municipal Bonds (and Non-Municipal Tax-Exempt Securities) yielding a return
based on a particular index of value or interest rates. For example, each Fund
may invest in Municipal Bonds that pay interest based upon maturity of certain
Municipal Bonds (and Non-Municipal Tax-Exempt Securities) and on the value of
an index. To the extent a Fund invests in these types of Municipal Bonds, that
Fund's return on such Municipal Bonds will be subject to risk with respect to
the value of the particular index including reduced or eliminated interest
payments and losses of invested principal. Also, each Fund may invest in
so-called "inverse floating obligations" or "residual interest bonds" on which
the interest rates typically vary inversely with a short-term floating rate
(which may be reset periodically by a Dutch auction, a remarketing agent, or
by reference to a short-term tax-exempt interest rate index). Each Fund may
purchase synthetically-created inverse floating 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 that is a multiple (typically two) of the rate at which fixed-rate,
long-term, tax-exempt securities increase or decrease in response to such
changes. As a result, the market values of such securities generally will be
more volatile than the market values of fixed-rate tax-exempt securities. To
seek to limit the volatility of these securities, each Fund may purchase
inverse floating obligations with shorter-term maturities or limitations on
the extent to which the interest rate may vary. FAM believes that indexed and
inverse floating obligations represent a flexible portfolio management
instrument for each Fund that allows FAM to vary the degree of investment
leverage relatively efficiently under different market conditions.

     Call Rights. Each Fund may purchase a Municipal Bond issuer's right to
call all or a portion of such Municipal Bond for mandatory tender for purchase
(a "Call Right"). A holder of a Call Right may exercise such right to require
a mandatory tender for the purchase of related Municipal Bonds, subject to
certain conditions. A Call Right that is not exercised prior to the 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.

     Repurchase Agreements. Each Fund may invest in Municipal Bonds and U.S.
Government securities pursuant to repurchase agreements. Repurchase agreements
may be entered into only with a member bank of the Federal Reserve System or a
primary dealer in U.S. Government securities or an affiliate thereof. Under
such agreements, the seller agrees, upon entering into the contract, to
repurchase the security at a mutually agreed-upon time and price, thereby
determining the yield during the term of the agreement. A Fund may not invest
in repurchase agreements maturing in more than seven days if such investments,
together with all other illiquid investments, would exceed 15% of that Fund's
net assets. In the event of default by the seller under a repurchase
agreement, a Fund may suffer time delays and incur costs or possible losses in
connection with the disposition of the underlying securities. In general, for
Federal income tax purposes, repurchase agreements are treated as
collateralized loans secured by the securities "sold." Therefore, amounts
earned under such agreements will not be considered tax-exempt interest.


Information Regarding Options and Futures Transactions

     Each Fund may hedge all or a portion of its portfolio investments against
fluctuations in interest rates through the use of options and certain
financial futures contracts and options thereon. While each Fund's use of
hedging strategies is intended to reduce the volatility of the net asset value
of the common stock, the net asset value of the common stock will fluctuate.
There can be no assurance that a Fund's hedging transactions will be
effective. In addition, because of the leveraged nature of the common stock,
hedging transactions will result in a larger impact on the net asset value of
the common stock than would be the case if the common stock were not
leveraged. Furthermore, a Fund may only engage in hedging activities from time
to time and may not necessarily be engaging in hedging activities when
movements in interest rates occur. Neither Fund is required to enter into
hedging transactions and each may choose not to do so.

     Gains from transactions in options and futures contracts distributed to
stockholders are taxable as ordinary income or, in certain circumstances, as
long-term capital gains to stockholders. See "Comparison of the Funds -- Tax
Rules Applicable to the Funds and Their Stockholders -- Tax Treatment of
Options and Futures Transactions." In addition, in order to obtain ratings of
the AMPS from one or more nationally recognized statistical rating
organizations, a Fund may be required to limit its use of hedging techniques
in accordance with the specified guidelines of such rating organizations. See
"Rating Agency Guidelines" below.

     The following is a description of the options and futures transactions in
which each Fund may engage, limitations on the Fund's use of such transactions
and risks associated with these transactions. The investment policies with
respect to the hedging transactions of a Fund are not fundamental policies and
may be modified by the Board of Directors of that Fund without the approval of
that Fund's stockholders.

     Writing Covered Call Options. Each Fund is authorized to write (i.e.,
sell) covered call options with respect to Municipal Bonds it owns, thereby
giving the holder of the option the right to buy the underlying security
covered by the option from a Fund at the stated exercise price until the
option expires. Each Fund writes only covered call options, which means that
so long as a Fund is obligated as the writer of a call option, it will own the
underlying securities subject to the option. Neither Fund may write covered
call options on underlying securities in an amount exceeding 15% of the market
value of its total assets.

     Each Fund receives a premium from writing a call option, which increases
a Fund's return on the underlying security in the event the option expires
unexercised or is closed out at a profit. By writing a call, a Fund limits its
opportunity to profit from an increase in the market value of the underlying
security above the exercise price of the option for as long as that Fund's
obligation as a writer continues. Covered call options serve as a partial
hedge against a decline in the price of the underlying security. Each Fund may
engage in closing transactions in order to terminate outstanding options that
it has written.

     Purchase of Options. Each Fund may purchase put options in connection
with its hedging activities. By buying a put, a Fund has a right to sell the
underlying security at the exercise price, thus limiting its risk of loss
through a decline in the market value of the security until the put expires.
The amount of any appreciation in the value of the underlying security will be
partially offset by the amount of the premium paid for the put option and any
related transaction costs. Prior to its expiration, a put option may be sold
in a closing sale transaction; profit or loss from the sale will depend on
whether the amount received is more or less than the premium paid for the put
option plus the related transaction costs. A closing sale transaction cancels
out a Fund's position as the purchaser of an option by means of an offsetting
sale of an identical option prior to the expiration of the option it has
purchased. In certain circumstances, a Fund may purchase call options on
securities held in its portfolio on which it has written call options, or on
securities which it intends to purchase. Neither Fund will purchase options on
securities if, as a result of such purchase, the aggregate cost of all
outstanding options on securities held by that Fund would exceed 5% of the
market value of that Fund's total assets.

     Financial Futures Contracts and Options. Each Fund is authorized to
purchase and sell certain financial futures contracts and options thereon
solely for the purposes of hedging its investments in Municipal Bonds against
declines in value and hedging against increases in the cost of securities it
intends to purchase. A financial futures contract obligates the seller of a
contract to deliver and the purchaser of a contract to take delivery of the
type of financial instrument covered by the contract or, in the case of
index-based financial futures contracts, to make and accept a cash settlement,
at a specific future time for a specified price. A sale of financial futures
contracts may provide a hedge against a decline in the value of portfolio
securities because such depreciation may be offset, in whole or in part, by an
increase in the value of the position in the financial futures contracts or
options. A purchase of financial futures contracts may provide a hedge against
an increase in the cost of securities intended to be purchased, because such
appreciation may be offset, in whole or in part, by an increase in the value
of the position in the financial futures contracts.

     The purchase or sale of a financial futures contract differs from the
purchase or sale of a security in that no price or premium is paid or
received. Instead, an amount of cash or securities acceptable to the broker
equal to approximately 5% of the contract amount must be deposited with the
broker. This amount is known as initial margin. Subsequent payments to and
from the broker, called variation margin, are made on a daily basis as the
price of the financial futures contract fluctuates making the long and short
positions in the financial futures contract more or less valuable.

     Each Fund may purchase and sell financial futures contracts based on The
Bond Buyer Municipal Bond Index, a price-weighted measure of the market value
of 40 large tax-exempt issues, and purchase and sell put and call options on
such financial futures contracts for the purpose of hedging Municipal Bonds
that a Fund holds or anticipates purchasing against adverse changes in
interest rates. Each Fund also may purchase and sell financial futures
contracts on U.S. Government securities and purchase and sell put and call
options on such financial futures contracts for such hedging purposes. With
respect to U.S. Government securities, currently there are financial futures
contracts based on long-term U.S. Treasury bonds, U.S. Treasury notes, GNMA
Certificates and three-month U.S. Treasury bills.

     Subject to policies adopted by its Board of Directors, each Fund also may
engage in transactions in other financial futures contracts, such as financial
futures contracts on other municipal bond indices that may become available,
if FAM should determine that there is normally sufficient correlation between
the prices of such financial futures contracts and the Municipal Bonds in
which a Fund invests to make such hedging appropriate.

     Over-The-Counter Options. Each Fund may engage in options and futures
transactions on exchanges and in the over-the-counter markets ("OTC options").
In general, exchange-traded contracts are third-party contracts (i.e.,
performance of the parties' obligations is guaranteed by an exchange or
clearing corporation) with standardized strike prices and expiration dates.
OTC option transactions are two-party contracts with price and terms
negotiated by the buyer and seller. See "Restrictions on OTC Options" below
for information as to restrictions on the use of OTC Options.

     Restrictions on OTC Options. Each Fund will engage in transactions in OTC
options only with banks or dealers that have capital of at least $50 million
or whose obligations are guaranteed by an entity having capital of at least
$50 million. Certain OTC options and assets used to cover OTC options written
by the Funds are considered to be illiquid. The illiquidity of such options or
assets may prevent a successful sale of such options or assets, result in a
delay of sale, or reduce the amount of proceeds that otherwise might be
realized.

     Risk Factors in Financial Futures Contracts and Options Thereon.
Utilization of futures transactions involves the risk of imperfect correlation
in movements in the price of financial futures contracts and movements in the
price of the security that is the subject of the hedge. If the price of the
financial futures contract moves more or less than the price of the security
that is the subject of the hedge, a Fund will experience a gain or loss that
will not be completely offset by movements in the price of such security.
There is a risk of imperfect correlation where the securities underlying
financial futures contracts have different maturities, ratings, geographic
compositions or other characteristics different from those of the security
being hedged. In addition, the correlation may be affected by additions to or
deletions from the index that serves as a basis for a financial futures
contract. Finally, in the case of financial futures contracts on U.S.
Government securities and options on such financial futures contracts, the
anticipated correlation of price movements between the U.S. Government
securities underlying the futures or options and Municipal Bonds may be
adversely affected by economic, political, legislative or other developments
which have a disparate impact on the respective markets for such securities.

     Under regulations of the Commodity Futures Trading Commission, the
futures trading activities described herein will not result in a Fund being
deemed a "commodity pool," as defined under such regulations, provided that
such Fund adheres to certain restrictions. In particular, a Fund may purchase
and sell financial futures contracts and options thereon (i) for bona fide
hedging purposes, without regard to the percentage of that Fund's assets
committed to margin and option premiums, and (ii) for non-hedging purposes,
if, immediately thereafter the sum of the amount of initial margin deposits on
that Fund's existing futures positions and option premiums entered into for
non-hedging purposes do not exceed 5% of the market value of the liquidation
value of that Fund's portfolio, after taking into account unrealized profits
and unrealized losses on any such transactions. Margin deposits may consist of
cash or securities acceptable to the broker and the relevant contract market.

     When a Fund purchases a financial futures contract, or writes a put
option or purchases a call option thereon, it will maintain an amount of cash,
cash equivalents (e.g., commercial paper and daily tender adjustable notes) or
liquid securities in a segregated account with that Fund's custodian, so that
the amount so segregated plus the amount of initial and variation margin held
in the account of its broker equals the market value of the financial futures
contract, thereby ensuring that the use of such financial futures contract is
unleveraged.

     Although certain risks are involved in options and futures transactions,
FAM believes that, because the Funds will engage in options and futures
transactions only for hedging purposes, the options and futures portfolio
strategies of the Funds will not subject them to certain risks associated with
speculation in options and futures transactions.

     The volume of trading in the exchange markets with respect to Municipal
Bond options may be limited, and it is impossible to predict the amount of
trading interest that may exist in such options. In addition, no assurance can
be given that viable exchange markets will continue.

     Each Fund intends to enter into options and futures transactions, on an
exchange or in the over-the-counter market, only if there appears to be a
liquid secondary market for such options or futures. There can be no
assurance, however, that a liquid secondary market will exist at any specific
time. Thus, it may not be possible to close an option or futures transaction.
The inability to close options and futures positions also could have an
adverse impact on a Fund's ability to effectively hedge its portfolio. There
is also the risk of loss by a Fund of margin deposits or collateral in the
event of bankruptcy of a broker with which that Fund has an open position in
an option or financial futures contract.

     The liquidity of a secondary market in a financial futures contract may
be adversely affected by "daily price fluctuation limits" established by
commodity exchanges that limit the amount of fluctuation in a financial
futures contract price during a single trading day. Once the daily limit has
been reached in the contract, no trades may be entered into at a price beyond
the limit, thus preventing the liquidation of open futures positions. Prices
have in the past moved beyond the daily limit on a number of consecutive
trading days.

     If it is not possible to close a financial futures position entered into
by a Fund, that Fund would continue to be required to make daily cash payments
of variation margin in the event of adverse price movements. In such a
situation, if a Fund has insufficient cash, it may have to sell portfolio
securities to meet daily variation margin requirements at a time when it may
be disadvantageous to do so.

     The successful use of these transactions also depends on the ability of
FAM to forecast correctly the direction and extent of interest rate and
foreign exchange rate movements within a given time frame. To the extent these
rates remain stable during the period in which a financial futures contract is
held by a Fund or move in a direction opposite to that anticipated, that Fund
may realize a loss on the hedging transaction that is not fully or partially
offset by an increase in the value of portfolio securities. As a result, a
Fund's total return for such period may be less than if it had not engaged in
the hedging transaction. Furthermore, a Fund will only engage in hedging
transactions from time to time and may not necessarily be engaging in hedging
transactions when movements in interest rates occur.


Investment Restrictions

     The Funds have similar investment restrictions. The following are
fundamental investment restrictions of MuniYield and may not be changed
without the approval of the holders of a majority of the outstanding shares of
common stock and the outstanding shares of AMPS and any other preferred stock,
voting together as a single class, and a majority of the outstanding shares of
AMPS and any other preferred stock, voting separately as a class. These
fundamental restrictions will also be the fundamental restrictions of the
Combined Fund. (For this purpose and under the Investment Company Act, for the
common stock and AMPS voting together as a single class "majority" 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, but for the AMPS voting separately as a single
class, "majority" means more than 50% of the outstanding AMPS.) MuniYield may
not:

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

     2. Purchase securities of other investment companies, except in
   connection with a merger, consolidation, acquisition or reorganization, or
   by purchase in the open market of securities of closed-end investment
   companies and only if immediately thereafter not more than 10% of
   MuniYield's total assets would be invested in such securities.

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

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

     5. Underwrite securities of other issuers except insofar as MuniYield may
   be deemed an underwriter under the Securities Act in selling portfolio
   securities.

     6. Make loans to other persons, except that MuniYield may purchase
   Municipal Bonds and other debt securities in accordance with its investment
   objective, policies and limitations.

     7. Purchase any securities on margin, except that MuniYield 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 MuniYield of
   initial or variation margin in connection with financial futures contracts
   and options thereon is not considered the purchase of a security on
   margin).

     8. Make short sales of securities or maintain a short position or invest
   in put, call, straddle or spread options, except that MuniYield may write,
   purchase and sell options and futures on Municipal Bonds, U.S. Government
   obligations and related indices or otherwise in connection with bona fide
   hedging activities.

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

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

     Municipal Strategy's fundamental investment restrictions are the same as
MuniYield's fundamental investment restrictions (1), (3), (4), (5), (6) and
(9) above. Municipal Strategy is subject to certain non-fundamental investment
restrictions set forth below. Two of those restrictions (b. and c.) are
similar to restrictions (7) and (8) of MuniYield.

     An additional investment restriction adopted by each Fund, which may be
changed by the Board of Directors without shareholder appoval, provides that
neither Fund may mortgage, pledge, hypothecate or in any manner transfer, as
security for indebtedness, any securities owned or held by such Fund except as
may be necessary in connection with borrowings mentioned in investment
restriction (4) above or except as may be necessary in connection with
transactions in financial futures contracts and options thereon.

     Municipal Strategy has also adopted the following additional
non-fundamental investment restrictions, which may be changed by its Board of
Directors without shareholder approval. These restrictions provide that the
Fund may not:

     a.   Purchase securities of other investment companies, except to the
          extent that such purchases are permitted by applicable law.
          Applicable law currently 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's
          total assets, taken at market value, would be invested in any one
          such company, (iii) 10% of the Fund's total assets, taken at 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.

     b.   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).

     c.   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.

     If a percentage restriction on the investment or use of assets set forth
above is adhered to at the time a transaction is effected, later changes in
percentages resulting from changing values will not be considered a violation.

     For so long as shares of AMPS are rated by Moody's, no Fund will change
these additional investment restrictions unless it receives written
confirmation from Moody's that engaging in such transactions would not impair
the rating then assigned to the shares of AMPS by Moody's.

     FAM and Merrill Lynch are owned and controlled by Merrill Lynch & Co.,
Inc. ("ML & Co."). Because of the affiliation of Merrill Lynch with FAM, each
Fund is prohibited from engaging in certain transactions involving Merrill
Lynch except pursuant to an exemptive order or otherwise in compliance with
the provisions of the Investment Company Act and the rules and regulations
thereunder. Included among such restricted transactions will be purchases from
or sales to Merrill Lynch of securities in transactions in which it acts as
principal. An exemptive order has been obtained that permits the Funds to
effect principal transactions with Merrill Lynch in high quality, short-term,
tax-exempt securities subject to conditions set forth in such order.


Rating Agency Guidelines

     Each Fund intends that, so long as shares of its AMPS are outstanding,
the composition of its portfolio will reflect guidelines established by
Moody's and S&P in connection with a Fund's receipt of a rating for such
shares on or prior to their date of original issue of at least "aaa" from
Moody's and AAA from S&P. Moody's and S&P, which are nationally recognized
statistical rating organizations, issue ratings for various securities
reflecting the perceived creditworthiness of such securities. The guidelines
for rating AMPS have been developed by Moody's and S&P in connection with
issuances of asset-backed and similar securities, including debt obligations
and variable rate preferred 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
sufficiently varied and of sufficient quality and amount to justify investment
grade ratings. The guidelines do not have the force of law but have been
adopted by each Fund in order to satisfy current requirements necessary for
Moody's and S&P to issue the above-described ratings for shares of AMPS, which
ratings generally are relied upon by institutional investors in purchasing
such securities. The guidelines provide a set of tests for portfolio
composition and asset coverage that supplement (and in some cases are more
restrictive than) the applicable requirements under the Investment Company
Act.

     Each Fund may, but is not required to, adopt any modifications to these
guidelines that hereafter may be established by Moody's or S&P. Failure to
adopt any such modifications, however, may result in a change in the ratings
described above or a withdrawal of the ratings altogether. In addition, any
rating agency providing a rating for the shares of AMPS, at any time, may
change or withdraw any such rating. As set forth in the Articles Supplementary
of each Fund, the Board of Directors, without stockholder approval, may modify
certain definitions or restrictions that have been adopted by a Fund pursuant
to the rating agency guidelines, provided the Board of Directors has obtained
written confirmation from Moody's and S&P that any such change would not
impair the ratings then assigned by Moody's and S&P to the AMPS. See "Summary
- -- Risk Factors and Special Considerations -- Ratings Considerations."

     For so long as any shares of a Fund's AMPS are rated by Moody's or S&P,
as the case may be, a Fund's use of options and financial futures contracts
and options thereon will be subject to certain limitations mandated by the
rating agencies.


Portfolio Composition

     There are differences in concentration among the types of securities held
in the portfolio of each Fund. For MuniYield, as of April 30, 2001,
approximately 76.1%, 22.6% and 1.3% of its portfolio was invested in revenue
bonds, general obligation bonds and cash equivalents, respectively; for
Municipal Strategy, approximately 84.8%, 14.5% and 0.7% of its portfolio was
invested in revenue bonds, general obligation bonds and cash equivalents,
respectively.

     Although the investment portfolios of the Funds must satisfy the same
standards with respect to credit quality, the actual securities owned by each
Fund will not be identical. As a result, there are certain differences in the
composition of the two investment portfolios. The tables below set forth
ratings information as of April 30, 2001 for the Municipal Bonds held by each
Fund.

     MuniYield

     As of April 30, 2001, approximately 97.4% and 2.6% of the market value of
MuniYield's portfolio was invested in long-term municipal obligations and
short-term municipal obligations, respectively. The following table sets forth
certain information with respect to the composition of MuniYield's long-term
municipal obligation investment portfolio as of April 30, 2001.

<TABLE>
<CAPTION>

                                                                           Value
    S&P                       Moody's            Number of Issues     (in Thousands)            Percent
- -----------------------  ----------------  ---------------------  --------------------   ------------------
<S>                      <C>               <C>                    <C>                    <C>
    AAA                         Aaa                      50                $317,363                 44.3%
     AA                         Aa                       25                 107,929                 15.1
     A                          A                         4                  39,183                  5.4
    BBB                         Baa                      21                 108,656                 15.2
     NR                         NR                       25                 143,054                 20.0
                                                         --                 -------                 ----
                                       Total            125                $716,185                100.0%
                                                        ===                ========                =======

</TABLE>

- --------------
*   Ratings: Using the higher of S&P's or Moody's rating on MuniYield's
    municipal obligations. S&P's rating categories may be modified further by
    a plus (+) or minus (-) in AA, A and BBB ratings. Moody's rating
    categories may be modified further by a 1, 2 or 3 in Aa, A and Baa
    ratings. See Appendix III -- "Ratings of Municipal Bonds and Commercial
    Paper."

    Municipal Strategy

     As of April 30, 2001, approximately 97.0% and 3.0% of the market value of
Municipal Strategy's portfolio was invested in long-term municipal obligations
and short-term municipal obligations, respectively. The following table sets
forth certain information with respect to the composition of Municipal
Strategy's long-term municipal obligation investment portfolio as of April 30,
2001.

<TABLE>
<CAPTION>

                                                                           Value
    S&P                       Moody's            Number of Issues     (in Thousands)            Percent
- -----------------------  ----------------  ---------------------  --------------------   ------------------
<S>                      <C>               <C>                    <C>                    <C>
    AAA                      Aaa                      25                $ 63,605                 54.3%
    AA                       Aa                        9                  20,121                 17.2
    A                        A                         1                   2,526                  2.2
    BBB                      Baa                       5                   8,249                  7.0
    NR                       NR                       15                  22,545                 19.3
                                                      --                  ------                 ----
                                    Total             55                $117,046                100.0%
                                                      ==                ========                =======

</TABLE>

- --------------
* Ratings: Using the higher of S&P's or Moody's rating on Municipal Strategy's
municipal obligations. S&P's rating categories may be modified further by a
plus (+) or minus (-) in AA, A and BBB ratings. Moody's rating categories may
be modified further by a 1, 2 or 3 in Aa, A and Baa ratings. See Appendix III
- -- "Ratings of Municipal Bonds and Commercial Paper."


     Performance. The table below details for each Fund the yield and tax
equivalent yield for the 30 days ended May 31, 2001 and the average annual
total return for one, five and ten years ended May 31, 2001.

<TABLE>
<CAPTION>

     ------------------- -------------------------------------------------------------
                                         Average Annual Total Return
                         -------------------------------------------------------------
                                    Tax
                                 Equivalent
                 Yield-30 days   Yield-30 days                        Five Years         Since
                    ended           ended         One Year ended        ended         Inception to
                 May 31, 2001    May 31, 2001+     May 31, 2001       May 31, 2001    May 31, 2001
     ----------- --------------- --------------   ----------------    ------------    -------------
     <S>            <C>          <C>               <C>                    <C>               <C>
     Municipal
     Strategy       5.27%          [o]%             12.26%                 4.91%            4.52%*
     ----------- --------------- ---------------  ----------------    ------------    -------------
     MuniYield      6.40%          [o]%             10.87%                 5.17%            7.40%**
     (31 Days)
     ----------- --------------- ---------------  ----------------    ------------    -------------

</TABLE>

- --------------------
     +  Assumes a 28% Federal income tax rate.
     *  Municipal Strategy commenced operations on November 3, 1995.
    **  MuniYield commenced operations on November 29, 1991.

Portfolio Transactions

     The procedures for engaging in portfolio transactions are the same for
each Fund. Subject to policies established by the Board of Directors of each
Fund, FAM is primarily responsible for the execution of each Fund's portfolio
transactions. In executing such transactions, FAM seeks to obtain the best
results for each Fund, taking into account such factors as price (including
the applicable brokerage commission or dealer spread), size of order,
difficulty of execution and operational facilities of the firm involved and
the firm's risk in positioning a block of securities. While FAM generally
seeks reasonably competitive commission rates, the Funds do not necessarily
pay the lowest commission or spread available.

     Neither Fund has any obligation to deal with any broker or dealer in the
execution of transactions in portfolio securities. Subject to obtaining the
best price and execution, securities firms that provide supplemental
investment research to FAM, including Merrill Lynch, may receive orders for
transactions by a Fund. Information so received will be in addition to, and
not in lieu of, the services required to be performed by FAM under its
investment advisory agreements with the Funds, and the expenses of FAM will
not be reduced as a result of the receipt of such supplemental research
information.

     Each Fund invests in securities that are primarily traded in the
over-the-counter markets, and each Fund normally deals directly with the
dealers who make markets in the securities involved, except in those
circumstances where better prices and execution are available elsewhere. Under
the Investment Company Act, except as permitted by exemptive order, persons
affiliated with a Fund are prohibited from dealing with the Fund as principals
in the purchase and sale of securities. Since transactions in the
over-the-counter markets usually involve transactions with dealers acting as
principals for their own account, the Funds do not deal with affiliated
persons, including Merrill Lynch and its affiliates, in connection with such
transactions, except that, pursuant to an exemptive order obtained by FAM, a
Fund may engage in principal transactions with Merrill Lynch in high quality,
short-term, tax-exempt securities. An affiliated person of a Fund may serve as
its broker in over-the-counter transactions conducted on an agency basis.

     Each Fund also may purchase tax-exempt debt instruments in individually
negotiated transactions with the issuers of such securities. Because an active
trading market may not exist for such securities, the prices that a Fund may
pay for these securities or receive on their resale may be lower than that for
similar securities with a more liquid market.

     The Board of Directors of each Fund has considered the possibility of
recapturing for the benefit of the Funds brokerage commissions, dealer spreads
and other expenses of possible portfolio transactions, such as underwriting
commissions, by conducting portfolio transactions through affiliated entities,
including Merrill Lynch. For example, brokerage commissions received by
Merrill Lynch could be offset against the investment advisory fees paid by the
Fund to FAM. After considering all factors deemed relevant, the Directors of
each Fund made a determination not to seek such recapture. The Directors will
reconsider this matter from time to time.


Portfolio Turnover

     Generally, neither Fund purchases securities for short-term trading
profits. However, either Fund may dispose of securities without regard to the
time that they have been held when such action, for defensive or other
reasons, appears advisable to FAM. (The portfolio turnover rate is calculated
by dividing the lesser of purchases or sales of portfolio securities for the
particular fiscal year by the monthly average of the value of the portfolio
securities owned by a Fund during the particular fiscal year. For purposes of
determining this rate, all securities whose maturities at the time of
acquisition are one year or less are excluded.) A high portfolio turnover rate
results in greater transaction costs, which are borne directly by a Fund, and
also has certain tax consequences for stockholders. The portfolio turnover
rate for each Fund for the periods indicated is set forth below:

<TABLE>
<CAPTION>

                                               For the Six Month Period
                                                 Ended April 30, 2001                  For the Year Ended
                                                      (Unaudited)                         October 31,
                                           ------------------------------      -------------------------------
                                                                                       2000             1999
                                                                                       ----             ----
<S>                                        <C>                                  <C>                    <C>
         MuniYield                                      36.66%                       103.44%           78.42%
         ---------


                                               For the Six Month Period
                                                 Ended April 30, 2001                  For the Year Ended
                                                      (Unaudited)                         October 31,
                                           ------------------------------      -------------------------------
                                                                                       2000             1999
                                                                                       ----             ----
         Municipal Strategy                             20.49%                       115.52%          158.57%
         ------------------

</TABLE>

Net Asset Value

     MuniYield determines the net asset value per share of its common stock as
of the NYSE close of business on the last business day of each week. Municipal
Strategy determines its net asset value as of the NYSE close of business once
daily on each day the NYSE is open for trading. The NYSE generally closes at
4:00 p.m. Eastern time. For purposes of determining the net asset value of a
share of common stock of each Fund, the value of the securities held by a Fund
plus any cash or other assets (including interest accrued but not yet
received) minus all liabilities (including accrued expenses) and the aggregate
liquidation value of the outstanding shares of AMPS is divided by the total
number of shares of common stock outstanding at such time. Expenses, including
the fees payable to FAM, are accrued daily.

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

     MuniYield determines and makes available for publication weekly the net
asset value of its common stock. Currently, the net asset values of shares of
publicly traded closed-end investment companies investing in debt securities
are published in Barron's, the Monday edition of The Wall Street Journal, and
the Monday and Saturday editions of The New York Times.


Capital Stock

     Each Fund has outstanding both common stock and AMPS. The MuniYield
Common Stock is listed on the NYSE and may be bought or sold at market price
on each day the NYSE is open for trading. The shares of MuniYield Common Stock
commenced trading on the NYSE on November 29, 1991. As of May 31, 2001, the
net asset value per share of MuniYield Common Stock was $12.87 and the market
price per share was $13.47. Municipal Strategy engages in a continuous
offering of its common stock and Series A AMPS. Municipal Strategy Common
Stock is not listed on any exchange and no secondary market presently exists
for Municipal Strategy Common Stock, nor is it currently expected that a
secondary market will develop. As of May 31, 2001, the net asset value per
share of Municipal Strategy Common Stock was $8.85.

     Each Fund is authorized to issue 200,000,000 shares of capital stock, all
of which shares initially were classified as common stock. The Board of
Directors of each Fund is authorized to classify or reclassify any unissued
shares of capital stock by setting or changing the preferences, conversion or
other rights, voting powers, restrictions, limitations as to dividends,
qualifications, or terms or conditions of redemption. In connection with each
Fund's offering of shares of AMPS, MuniYield reclassified 10,000 shares of
unissued capital stock as AMPS (in connection with the Reorganization,
MuniYield intends to reclassify an additional 1,720 shares of unissued capital
stock as AMPS), and Municipal Strategy reclassified 40,000 shares of unissued
capital stock as AMPS.

     Common Stock

     Holders of each Fund's common stock are entitled to share equally in
dividends declared by a Fund's Board of Directors payable to holders of the
common stock and in the net assets of a Fund available for distribution to
holders of the common stock after payment of the preferential amounts payable
to holders of any outstanding preferred stock. See "Voting Rights" and
"Liquidation Rights of Holders of AMPS" below. Holders of a Fund's common
stock do not have preemptive or conversion rights and shares of a Fund's
common stock are not redeemable. The outstanding shares of common stock of
each Fund are fully paid and nonassessable.

     So long as any shares of a Fund's AMPS or any other preferred stock are
outstanding, holders of that Fund's common stock will not be entitled to
receive any dividends of or other distributions from that Fund unless all
accumulated dividends on outstanding shares of that Fund's AMPS and any other
preferred stock have been paid, and unless asset coverage (as defined in the
Investment Company Act) with respect to such AMPS and any other preferred
stock would be at least 200% after giving effect to such distributions.

     The market price for MuniYield Common Stock on the NYSE may be at a
premium above or a discount from the net asset value of the MuniYield Common
Stock. Conversely, Municipal Strategy engages in a continuous offering of its
common stock. In order to provide liquidity for stockholders of Municipal
Strategy, the Board of Directors of the Fund considers, on a quarterly basis,
whether the Fund should make a tender offer for its common stock. In a tender
offer, the Fund repurchases outstanding common stock at the Fund's net asset
value (less any applicable CDSC) on the last day of the offer.

     The Board of Directors of Municipal Strategy is not required to authorize
the making of a tender offer and there can be no assurance that a tender offer
will be made during any particular quarter. If a tender offer is not made,
stockholders may be unable to sell their shares. Since the inception of
Municipal Strategy, however, the Board has authorized a tender offer each
quarter.

     Contingent Deferred Sales Charge

     Stockholders of MuniYield do not pay any CDSC because the Fund's common
stock trades on the NYSE. If common stockholders of Municipal Strategy sell
their stock back to the Fund during a tender offer and they have held those
shares for less than three years when the tender offer begins, they may have
to pay a CDSC. This charge varies depending on how long a shareholder has
owned the tendered shares. The amount of the charge is based on how much the
shareholder paid for the tendered shares or their net asset value, whichever
amount is less.

     If the Reorganization is consummated, the tender offer that concluded on
August 20, 2001 will have been the final tender offer for Municipal Strategy
Common Stock.

     Preferred Stock

     MuniYield currently has outstanding five series of AMPS and Municipal
Strategy has outstanding one series of AMPS. The AMPS of each Fund have a
similar structure. The AMPS of a Fund are shares of preferred stock of that
Fund 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. The AMPS of each
Fund have a liquidation preference of $25,000 per share; the AMPS of the Funds
are not traded on any stock exchange or automated quotation system. Each
Fund's AMPS can be purchased at an auction or through broker-dealers who
maintain a secondary market in the AMPS.

     Auctions generally have been held and will be held every seven days for
Series E AMPS of MuniYield and Municipal Strategy Series A AMPS and every
twenty-eight days for Series A, B, C and D AMPS of MuniYield, unless the
applicable Fund elects, subject to certain limitations, to have a special
dividend period. The following table provides information about the dividend
rates for each series of AMPS of each Fund as of a recent auction.

Auction Date         Fund              Dividend Period  Series   Dividend Rate
- ------------         ----              ---------------  ------   -------------
July 10, 2001    MuniYield                  28 days        A         2.59%
June 19, 2001    MuniYield                  28 days        B         2.85%
July 3, 2001     MuniYield                  28 days        C         2.70%
July 3, 2001     MuniYield                  28 days        D         2.70%
July 10, 2001    MuniYield                   7 days        E         2.60%
July 11, 2001    Municipal Strategy          7 days        A         2.59%


     Periodic auctions are conducted for the AMPS of each Fund by the Auction
Agent for the Funds. The auctions require the participation of one or more
broker-dealers, each of whom enters into an agreement with the Auction Agent.
After each auction, the Auction Agent pays a service charge, from funds
provided by the issuing Fund, to each broker-dealer at the annual rate of
0.25% calculated on the basis of the purchase price of shares of the relevant
AMPS placed by such broker-dealer at such auction.

     Under the Investment Company Act, each 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. Holders of a Fund's preferred stock do
not have preemptive rights to purchase any shares of AMPS or any other
preferred stock that might be issued. The net asset value per share of a
Fund's AMPS equals its liquidation preference plus accumulated dividends per
share.

     The redemption provisions pertaining to the AMPS of each Fund are
substantially similar. It is anticipated that shares of AMPS of each Fund will
generally be redeemable at the option of the Fund at a price equal to their
liquidation preference of $25,000 plus accumulated but unpaid dividends
(whether or not earned or declared) to the date of redemption plus, under
certain circumstances, a redemption premium. Shares of AMPS will also be
subject to mandatory redemption at a price equal to their liquidation
preference plus accumulated but unpaid dividends to the date of redemption
upon the occurrence of certain specified events, such as the failure of the
Fund to maintain the asset coverage for the AMPS specified by Moody's and S&P
in connection with their issuance of ratings on the AMPS.


Certain Provisions of the Charters

     Each Fund's Charter includes provisions that could have the effect of
limiting the ability of other entities or persons to acquire control of a Fund
or to change the composition of its Board of Directors and could have the
effect of depriving 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 2/3% of the votes
entitled to be voted on the matter. 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.

     In addition, the Charter of each Fund requires the favorable vote of the
holders of at least 66 2/3% of all of a Fund's shares of capital stock, then
entitled to be voted, voting as a single class, to approve, adopt or authorize
the following:

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

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

     o    a liquidation or dissolution of the Fund,

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

     In addition, conversion of a Fund to an open-end investment company would
require an amendment to that Fund's Charter. The amendment would have to be
declared advisable by the Board of Directors prior to its submission to
stockholders. Such an amendment would require the affirmative vote of the
holders of at least 66 2/3% of a Fund's outstanding shares of capital stock
(including the 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 at least a majority of outstanding
shares of preferred stock of that Fund (including the AMPS), voting as a
separate class. Such a vote also would satisfy a separate requirement in the
Investment Company Act that the change be approved by the 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 Investment Company Act) at their
net asset value, less such redemption charge, if any, as might be in effect at
the time of a redemption. All redemptions will be made in cash. If the Fund is
converted to an open-end investment company, it could be required to liquidate
portfolio securities to meet requests for redemption and the Common Stock no
longer would 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 would require changes in certain of a
Fund's investment policies and restrictions, such as those relating to the
issuance of senior securities, the borrowing of money and the purchase of
illiquid securities.

     The Board of Directors of each Fund has determined that the 66 2/3%
voting requirements described above, which are greater than the minimum
requirements under the Investment Company Act, are in the best interests of
stockholders generally. Reference should be made to the Charter of each Fund
on file with the Commission for the full text of these provisions.


Management of the Funds

     Directors and Officers. The Board of Directors of MuniYield currently
consists of six persons, five of whom are not "interested persons," as defined
in the Investment Company Act, of MuniYield. The Board of Directors of
Municipal Strategy currently consists of eight persons, seven of whom are not
"interested persons" of Municipal Strategy. Terry K. Glenn serves as a
Director and President of each Fund. The Directors of each Fund are
responsible for the overall supervision of the operations of the Fund and
perform the various duties imposed on the directors of investment companies by
the Investment Company Act and under applicable Maryland law. The Funds share
some of the same officers. For further information regarding the Directors and
officers of each Fund, see Appendix I -- "Information Pertaining to Each
Fund."

     Roberto W. Roffo currently manages the investment portfolio of each Fund
and will manage the Combined Fund after the Reorganization. The portfolio
manager is primarily responsible for the day to day management of the
applicable Fund's portfolio. Biographical information about Mr. Roffo is
contained in Appendix I to this Proxy Statement and Prospectus.

     Advisory and Administrative Arrangements. FAM, which is owned and
controlled by Merrill Lynch & Co., Inc. ("ML & Co."), serves as the investment
adviser for MuniYield and Municipal Strategy pursuant to separate investment
advisory agreements that are substantially similar, except for certain
provisions in the investment advisory agreement for MuniYield relating to FAM's
provision of administrative services to MuniYield. FAM provides each Fund with
the same investment advisory and management services. As of May 2001, FAM and
its affiliates had a total of approximately $545 billion in investment
company and other portfolio assets under management (approximately $30.4
billion of which were invested in municipal securities). This amount includes
assets managed for certain affiliates of FAM. FAM was organized as an
investment adviser in 1977 and offers investment advisory services to more
than 50 registered investment companies. The principal business address of FAM
is 800 Scudders Mill Road, Plainsboro, New Jersey 08536.

     Each Fund's investment advisory agreement with FAM (each, an "Investment
Advisory Agreement") provides that, subject to the supervision of the Board of
Directors of each Fund, FAM is responsible for the actual management of each
Fund's portfolio. The responsibility for making decisions to buy, sell or hold
a particular security for each Fund rests with FAM, subject to review by the
Board of Directors of that Fund.

     FAM provides the portfolio management for each Fund. Such portfolio
management considers analyses from various sources (including brokerage firms
with which each Fund does business), makes the necessary investment decisions,
and places orders for transactions accordingly. FAM also is responsible for
the performance of certain administrative and management services for each
Fund.

     For the investment advisory services pursuant to each Fund's Investment
Advisory Agreement, each Fund pays a monthly fee at an annual rate of 0.50% of
its average net assets. MuniYield's average net assets are computed on a
weekly basis and Municipal Strategy's average net assets are computed on a
daily basis (i.e., the average weekly or daily value, as applicable, of the
total assets of a Fund, including assets acquired from the sale of preferred
stock, minus the sum of accrued liabilities of the Fund and accumulated
dividends on its shares of preferred stock). For purposes of this calculation,
average weekly or daily net assets, as applicable, are determined at the end
of each month on the basis of the average net assets of the Fund for each week
or day, as applicable 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 average daily
net assets are determined at the end of each month on the basis of the average
net assets of Municipal Strategy for each day during the month.

     Since the commencement of operations of Municipal Strategy to the
present, FAM has waived a portion of its advisory fee and/or reimbursed
certain other expenses. The fee waiver and/or expense reimbursement with
respect to Municipal Strategy is voluntary and may be reduced or discontinued
by FAM at any time without notice to stockholders. After the Reorganization,
the Combined Fund is expected to pay FAM a monthly fee at the annual rate of
0.50% of its average weekly net assets, including proceeds from the issuance
of AMPS, as described above.

     For the fiscal years ended October 31, 1998, 1999 and 2000, the fees paid
by MuniYield to FAM pursuant to the Investment Advisory Agreement were
$4,261,373, $4,104,482 and $3,743,649, respectively (such fees based on
average weekly net assets of approximately $854.2 million, $825.2 million and
$748.9 million, respectively). For the fiscal years ended October 31, 1998,
1999 and 2000, the fees paid by Municipal Strategy to FAM pursuant to the
Investment Advisory Agreement were $787,978, $852,812 and $746,301,
respectively (such fees based on average daily net assets of approximately
$158.0 million, $171.0 million and $149.3 million, respectively). For the
fiscal years ended October 31, 1998, 1999 and 2000, FAM voluntarily waived
$204,377, $170,562 and $149,260, respectively, of the fees paid by Municipal
Strategy pursuant to its Investment Advisory Agreement.

     Administrative Services and Fees. Under the terms of the administration
agreement between Municipal Strategy and FAM (the "Administration Agreement"),
FAM also performs or arranges for the performance of the administrative
services (i.e., services other than investment advice and related portfolio
activities) necessary for the operation of Municipal Strategy, including
administering shareholder accounts and handling shareholder relations.
Pursuant to the MuniYield Investment Advisory Agreement, FAM provides similar
services for MuniYield.

     For administrative services, Municipal Strategy pays FAM a monthly fee at
an annual rate of 0.25% of the Fund's average daily net assets determined in
the same manner as the fee payable by the Fund under the Investment Advisory
Agreement. FAM may pay a portion of the fee received pursuant to the
Administration Agreement to its affiliate, Merrill Lynch, for administrative
services rendered in connection with the AMPS or other preferred stock of the
Fund. MuniYield does not pay a separate administrative fee to FAM. After the
Reorganization, the Combined Fund also will not pay a separate administrative
fee to FAM.

     For the fiscal years ended October 31, 1998, 1999 and 2000 the fees paid
by Municipal Strategy pursuant to the Administration Agreement were $393,989,
$426,406 and $373,150, respectively (such fees based on average daily net
assets of approximately $158.0 million, $171.0 million and $149.3 million,
respectively).

     Payment of Fund Expenses. Each Fund's Investment Advisory Agreement
obligates FAM to provide investment advisory services and, in the case of
MuniYield, administrative services to the Fund. Under MuniYield's Investment
Advisory Agreement, FAM pays all compensation of and furnishes office space
for officers and employees of MuniYield connected with investment and economic
research, trading and investment management of MuniYield, as well as the
compensation of all Directors of MuniYield who are affiliated persons of FAM
or any of its affiliates. Under Municipal Strategy's Investment Advisory
Agreement, FAM pays all compensation of officers and employees of the Fund as
well as the fees of all Directors who are affiliated persons of ML & Co. or
its subsidiaries.

     Each Fund pays all other expenses incurred in the operation of the Fund,
including, among other things, expenses for legal and auditing services,
taxes, costs of printing proxies, listing fees, if any, stock certificates and
stockholder reports, charges of the custodian and the transfer agent, dividend
disbursing agent and registrar, fees and expenses with respect to the issuance
of AMPS, Commission fees, fees and expenses of unaffiliated 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.

     Accounting Services. Each Fund entered into a separate agreement with
State Street Bank and Trust Company ("State Street"), effective January 1,
2001, pursuant to which State Street provides certain accounting services to
each Fund. Each Fund pays a fee for these services. Prior to January 1, 2001,
FAM provided accounting services to each Fund and was reimbursed by each Fund
in connection with such services. FAM continues to provide certain accounting
services to each Fund and MuniYield and Municipal Strategy reimburse FAM for
these services.

     The table below shows the amounts paid by each Fund to State Street and
to FAM for the periods indicated.

     MuniYield

                Period                     Paid to State Street     Paid to FAM
                ------                     --------------------     -----------
Fiscal year ended October 31,                       N/A               $ 86,625
1998..................................
Fiscal year ended October 31,                       N/A               $103,026
1999..................................
Fiscal year ended October 31,                       N/A               $115,121
2000..................................
For the six months ended April 30,               $70,706*             $ 54,031
2001..................................

*    Represents payments pursuant to the agreement with State Street commencing
     January 1, 2001.

<PAGE>

     Municipal Strategy

                Period                   Paid to State Street       Paid to FAM
                ------                   --------------------       -----------
Fiscal year ended October 31,                     N/A
1998..................................                                 $65,847
Fiscal year ended October 31,                     N/A
1999..................................                                 $55,031
Fiscal year ended October 31,                     N/A
2000..................................                                 $86,990
For the six months ended April 30,             $11,318*
2001..................................                                $  8,000

*    Represents payments pursuant to the agreement with State Street commencing
     January 1, 2001.

     Duration and Termination of Investment Advisory and Administration
Agreements. Unless earlier terminated as described below, the Investment
Advisory Agreement between each Fund and FAM will continue from year to year
if approved annually (a) by the Board of Directors of the Fund or by a
majority of the outstanding shares of a Fund's Common Stock and AMPS, voting
together as a single class, and (b) by a majority of the Directors of a Fund
who are not parties to such contract or "interested persons," as defined in
the Investment Company Act, of any such party. The contract is not assignable
and it may be terminated without penalty on 60 days' written notice at the
option of either party thereto or by the vote of the stockholders of the Fund.
Municipal Strategy's Administration Agreement is subject to the same duration
and termination requirements.

     Municipal Strategy's Administration Agreement will continue in effect
until terminated. The agreement is not assignable and may be terminated
without penalty on 60 days' written notice at the option of either party
thereto.

     Securities held by a Fund may also be held by, or be appropriate
investments for, other funds or investment advisory clients for which FAM or
its affiliates act as an adviser. Because of different objectives or other
factors, a particular security may be bought for an advisory client when other
clients are selling the same security. If purchases or sales of securities by
FAM for a Fund or other funds for which it acts as investment adviser or for
advisory clients arise for consideration at or about the same time,
transactions in such securities will be made, insofar as feasible, for the
respective funds and clients in a manner deemed equitable to all. Transactions
effected by FAM (or its affiliates) on behalf of more than one of its clients
during the same period may increase the demand for securities being purchased
or the supply of securities being sold, causing an adverse effect on price.


Code of Ethics

     The Board of Directors of each Fund has adopted a Code of Ethics pursuant
to Rule 17j-1 under the Investment Company Act that covers each Fund, its
adviser and its distributor. 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 a Fund.


Voting Rights

     Voting rights are identical for the holders of shares of each Fund's
common stock. Holders of each Fund's common stock are entitled to one vote for
each share held and will vote with the holders of any outstanding shares of
the Fund's AMPS or other preferred stock on each matter submitted to a vote of
holders of common stock, except as set forth below.

     Voting rights of the holders of each Fund's AMPS are identical. Except as
otherwise indicated below, and except as otherwise required by applicable law,
holders of shares of a Fund's AMPS will be entitled to one vote per share on
each matter submitted to a vote of a Fund's stockholders and will vote
together with the holders of shares of a Fund's common stock as a single
class.

     The shares of each Fund's common stock, 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 a Fund's common stock, AMPS and any other
preferred stock voting for the election of Directors can elect all of the
Directors standing for election by such holders, and, in such event, the
holders of the remaining shares of a Fund's common stock, AMPS and any other
preferred stock will not be able to elect any of such Directors.

     In connection with the election of a Fund's Directors, holders of shares
of a Fund's AMPS, voting separately as a class, shall be entitled at all times
to elect two of that Fund's Directors, and the remaining Directors will be
elected by holders of shares of that Fund's common stock and shares of that
Fund's AMPS and any other preferred stock, voting together as a single class.
In addition, if at any time dividends on outstanding shares of a Fund's AMPS
shall be unpaid in an amount equal to at least two full years' dividends
thereon or if at any time holders of any shares of a Fund's preferred stock
are entitled, together with the holders of shares of that Fund's AMPS, to
elect a majority of the Directors of that Fund under the Investment Company
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 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 that Fund's AMPS and any other preferred stock, voting
separately as a class, will be entitled to elect the smallest number of
additional Directors that, together with the two Directors which such holders
in any event will be entitled to elect, constitutes a majority of the total
number of Directors of the Fund as so increased. The terms of office of the
persons who are Directors at the time of that election will continue. If a
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 for all past dividend periods, the additional voting rights of the
holders of shares of AMPS and any other preferred stock as described above
shall cease, and the terms of office of all of the additional Directors
elected by the holders of shares of AMPS and any other preferred stock (but
not of the Directors with respect to whose election the holders of shares of
common stock were entitled to vote or the two Directors the holders of shares
of AMPS and any other preferred stock have the right to elect in any event)
will terminate automatically.

     The affirmative vote of the holders of a majority of the outstanding
shares of a Fund's AMPS, voting as a separate class, will be required to (i)
authorize, create or issue any class or series of stock ranking prior to any
series of preferred stock with respect to payment of dividends or the
distribution of assets on liquidation, (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 preferred stock, (iii) approve any plan of
reorganization adversely affecting such AMPS or (iv) take any action to change
a Fund's investment policies requiring a vote of stockholders under Section
13(a) of the Investment Company Act.


Stockholder Inquiries

     Stockholder inquiries with respect to any Fund may be addressed to such
Fund by telephone at 1-609-282-2800 or at the address set forth on the cover
page of this Proxy Statement and Prospectus.


Dividends and Distributions

     The Funds' current policies with respect to dividends and distributions
relating to shares of their common stock are identical. Each Fund intends to
distribute substantially all its net investment income monthly to holders of a
Fund's common stock. As long as any preferred stock is outstanding, monthly
distributions to holders of a Fund's common stock normally consist of all or a
portion of its net investment income remaining after the payment of dividends
(and any Additional Distribution) on the Fund's AMPS. All net realized
long-term or short-term capital gains, if any, are distributed pro rata at
least annually to holders of shares of a Fund's common stock and AMPS. While
any shares of a Fund's AMPS are outstanding, that Fund may not declare any
cash dividend or other distribution on its common stock, unless at the time of
such declaration (1) all accumulated dividends on its AMPS, including any
Additional Distribution, have been paid, and (2) the net asset value of its
portfolio (determined after deducting the amount of such dividend or other
distribution) is at least 200% of the liquidation value of the outstanding
shares of AMPS (expected to equal the original purchase price of the
outstanding shares of preferred stock plus any accumulated and unpaid
dividends thereon and any accumulated but unpaid Additional Distribution). If
a Fund's ability to make distributions on its common stock is limited, such
limitation could under certain circumstances impair the ability of the Fund to
maintain its qualification for taxation as a regulated investment company,
which would have adverse tax consequences for holders of common stock and
AMPS. See "Comparison of the Funds -- Tax Rules Applicable to the Funds and
Their Stockholders."

     Similarly, the Funds' current policies with respect to dividends and
distributions on shares of their AMPS are identical. The holders of shares of
a Fund's AMPS are entitled to receive, when, as and if declared by the Fund's
Board of Directors, out of funds legally available therefor, cumulative cash
dividends on their shares. Dividends on a Fund's shares of AMPS so declared
and payable shall be paid (i) in preference to and in priority over any
dividends so declared and payable on that Fund's common stock, and (ii) to the
extent permitted under the Internal Revenue Code of 1986, as amended (the
"Code") and to the extent available, out of net tax-exempt income earned on
the Fund's investments. Dividends for each Fund's AMPS are paid through The
Depository Trust Company ("DTC") (or a successor securities depository) on
each dividend payment date. DTC's normal procedures now provide for it to
distribute dividends in same-day funds to agent members, who in turn are
expected to distribute such dividends to the person for whom they are acting
as agent in accordance with the instructions of such person. Prior to each
dividend payment date, the relevant Fund is required to deposit with the
Auction Agent sufficient funds for the payment of such declared dividends.
Neither of the Funds intends to establish any reserves for the payment of
dividends, and no interest will be payable in respect of any dividend payment
or payment on the shares of a Fund's AMPS which may be in arrears.

     Dividends paid by each Fund, to the extent paid from tax-exempt income
earned on Municipal Bonds, are exempt from Federal income tax, subject to the
possible application of a Federal alternative minimum tax. However, each Fund
is required to allocate net capital gains and other income subject to regular
Federal income tax, if any, proportionately between shares of its common stock
and shares of its AMPS in accordance with the current position of the IRS
described herein. See "Tax Rules Applicable to the Funds and Their
Stockholders" below. Each Fund notifies the Auction Agent of the amount of any
net capital gains or other taxable income to be included in any dividend on
shares of AMPS prior to the auction establishing the applicable rate for such
dividend. The Auction Agent in turn notifies each broker-dealer whenever it
receives any such notice from a Fund, and each broker-dealer then notifies its
customers who are holders of the Fund's AMPS. Each Fund also may include such
income in a dividend on shares of its AMPS without giving advance notice
thereof if it increases the dividend by an additional amount to offset the tax
effect thereof. The amount of taxable income allocable to shares of a Fund's
AMPS will depend upon the amount of such income realized by the Fund and other
factors, but generally is not expected to be significant.

     For information concerning the manner in which dividends and
distributions to holders of each Fund's common stock may be reinvested
automatically in shares of a Fund's common stock, see "Automatic Dividend
Reinvestment Plan" below. Dividends and distributions will be subject to the
tax treatment discussed below, whether they are reinvested in shares of a Fund
or received in cash.

     If a Fund retroactively allocates any net capital gains or other income
subject to regular Federal income tax to shares of its AMPS without having
given advance notice thereof as described above, which only may happen when
such allocation is made as a result of the redemption of all or a portion of
the outstanding shares of its AMPS or the liquidation of the Fund, such Fund
will make certain payments to holders of shares of its AMPS to which such
allocation was made to offset substantially the tax effect thereof. In no
other instances will a Fund be required to make payments to holders of shares
of its AMPS to offset the tax effect of any reallocation of net capital gains
or other taxable income.


Automatic Dividend Reinvestment Plan

     Pursuant to each Fund's Automatic Dividend Reinvestment Plan (each, a
"Plan"), unless a holder of a Fund's common stock is ineligible or elects
otherwise, all dividends and distributions are automatically reinvested by
either BONY, as agent for MuniYield stockholders in administering the Plan, or
Financial Data Services, Inc. ("FDS"), as agent for stockholders of Municipal
Strategy in administering the Plan (each, a "Plan Agent"), in additional
shares of the applicable Fund's common stock. Certain provisions of each Plan
are different because only MuniYield shares are exchange-listed while
Municipal Strategy shares are continuously offered by Municipal Strategy.
After the Reorganization, the Combined Fund will use the MuniYield Plan and
BONY will be the Plan Agent. Stockholders whose shares are held in the name of
a broker or nominee should contact such broker or nominee to confirm that they
are eligible to participate in a Fund's dividend reinvestment plan. Holders of
a Fund's common stock who are ineligible or elect not to participate in a Plan
receive all distributions in cash paid by check mailed directly to the
stockholder of record (or, if the shares are held in street or other nominee
name, then to such nominee) by BONY or FDS, as applicable, as dividend paying
agent. Such stockholders may elect not to participate in a Plan and to receive
all distributions of dividends and capital gains in cash by sending written
instructions to BONY or FDS, as applicable, as dividend paying agent, at the
addresses set forth below. Participation in each Plan is completely voluntary
and may be terminated or resumed at any time without penalty by written notice
if received by the applicable Plan Agent not less than ten days prior to any
dividend record date; otherwise, such termination or resumption will be
effective with respect to any subsequently declared dividend or capital gains
distribution.

     The applicable Plan Agent maintains all stockholders' accounts in a Plan
and furnishes written confirmation of all transactions in the account,
including information needed by stockholders for tax records. Shares in the
account of each Plan participant are held by the applicable Plan Agent in
non-certificated form in the name of the participant, and each stockholder's
proxy includes those shares purchased or received pursuant to a Plan. The
applicable Plan Agent will forward all proxy solicitation materials to
participants and vote proxies for shares held pursuant to a Plan in accordance
with the instructions of the participants.

     In the case of stockholders such as banks, brokers or nominees that hold
shares for others who are the beneficial owners, the applicable Plan Agent
will administer a Plan on the basis of the number of shares certified from
time to time by the record stockholders as representing the total amount
registered in the record stockholder's name and held for the account of
beneficial owners who are to participate in that Plan.

     The automatic reinvestment of dividends and distributions does not
relieve participants of any Federal, state or local income tax that may be
payable (or required to be withheld) on such dividends. See "Comparison of the
Funds -- Tax Rules Applicable to the Funds and Their Stockholders."

     There are no brokerage charges with respect to shares issued directly by
either Fund as a result of dividends or capital gains distributions payable
either in shares or in cash. However, each participant in the MuniYield Plan
pays a pro rata share of brokerage commissions incurred with respect to any
open-market purchases by the Plan Agent in connection with the reinvestment of
dividends as described below.

     Each Fund reserves the right to amend or terminate its Plan. There is no
direct service charge to participants in a Plan; however, each Fund reserves
the right to amend its Plan to include a service charge payable by the
participants.

     MuniYield

     Under the MuniYield Plan, whenever MuniYield declares an ordinary income
dividend or a capital gain dividend (collectively referred to as "dividends")
payable either in shares or in cash, non-participants in its Plan receive
cash, and participants in the Plan receive the equivalent in shares of the
Fund's common stock. The shares are acquired by the Plan Agent for the
participant's account, depending upon the circumstances described below,
either (i) through receipt of additional unissued but authorized shares of
MuniYield Common Stock from MuniYield ("newly issued shares") or (ii) by
purchase of outstanding shares of MuniYield Common Stock on the open market
("open-market purchases"), on the NYSE or elsewhere. If on the payment date
for the dividend, the net asset value per share of MuniYield Common Stock is
equal to or less than the market price per share of MuniYield Common Stock
plus estimated brokerage commissions (such condition being referred to herein
as "market premium"), the Plan Agent invests the dividend amount in newly
issued shares on behalf of the participant. The number of newly issued shares
of MuniYield Common Stock to be credited to the participant's account is
determined by dividing the dollar amount of the dividend by the net asset
value per share on the date the shares are issued, provided that the maximum
discount from the then current market price per share on the date of issuance
may not exceed 5%. If on the dividend payment date, the net asset value per
share is greater than the market value (such condition being referred to
herein as "market discount"), the Plan Agent invests the dividend amount in
shares acquired on behalf of the participant in open-market purchases.

     In the event of a market discount on the dividend payment date, the Plan
Agent has until the last business day before the next date on which the shares
trade on an "ex-dividend" basis or in no event more than 30 days after the
dividend payment date (the "last purchase date") to invest the dividend amount
in shares acquired in open-market purchases. MuniYield intends to pay monthly
income dividends. Therefore, the period during which open-market purchases can
be made exists only from the payment date on the dividend through the date
before the next "ex-dividend" date, which typically is approximately ten days.
If, before the Plan Agent has completed its open-market purchases, the market
price of a share of MuniYield Common Stock exceeds the net asset value per
share, the average per share purchase price paid by the Plan Agent may exceed
the net asset value of MuniYield shares, resulting in the acquisition of fewer
shares than if the dividend had been paid in newly issued shares on the
dividend payment date. Because of the foregoing difficulty with respect to
open market purchases, MuniYield's Plan provides that if the Plan Agent is
unable to invest the full dividend amount in open market purchases during the
purchase period or if the market discount shifts to a market premium during
the purchase period, the Plan Agent ceases making open-market purchases and
invests the uninvested portion of the dividend amount in newly-issued shares
at the close of business on the last purchase date.

     Stockholders participating in the Plan may receive benefits not available
to stockholders not participating in the Plan. If the market price (plus
commissions) of shares of MuniYield Common Stock is higher than the net asset
value of such shares, participants in the Plan receive shares of MuniYield
Common Stock at less than they otherwise could purchase them and have shares
with a cash value greater than the value of any cash distribution they would
have received on their shares. If the market price plus commissions is lower
than the net asset value of such shares, participants receive distributions of
shares with a net asset value greater than the value of any cash distribution
they would have received on their shares. However, there may be insufficient
shares available in the market to make distributions of shares at prices below
the net asset value. Also, since MuniYield normally does not redeem its
shares, the price on resale may be more or less than the net asset value. See
"Comparison of the Funds -- Tax Rules Applicable to the Funds and Their
Stockholders" for a discussion of the tax consequences of each Plan.

     Municipal Strategy

     Under the Municipal Strategy Plan, Municipal Strategy always issues newly
issued shares at net asset value. No CDSC is imposed upon redemption of shares
issued as a result of the automatic reinvestment of dividends or capital gains
distributions. After the Reorganization, Municipal Strategy common
stockholders will own shares of MuniYield and will be subject to the MuniYield
Plan.

     After the Reorganization, a holder of shares of Municipal Strategy who
has elected to receive dividends in cash will continue to receive dividends in
cash; all other holders will have their dividends automatically reinvested in
shares of the Combined Fund. However, if a stockholder owns shares in
Municipal Strategy and in MuniYield, after the Reorganization, the
stockholder's election with respect to the dividends of MuniYield will control
unless the stockholder specifically elects a different option at that time.
Following the Reorganization, all correspondence should be directed to the
Plan Agent for MuniYield as follows: The Bank of New York, 101 Barclay Street,
New York, New York 10286.


Mutual Fund Investment Option

     A holder of MuniYield Common Stock, who purchased his or her shares
through Merrill Lynch in the initial public offering of MuniYield Common
Stock, has the right to reinvest the net proceeds from a sale of such shares
in Class A shares of certain eligible Merrill Lynch-sponsored open-end funds
at their net asset value, without the imposition of an initial sales charge,
if certain conditions are satisfied. A holder of Municipal Strategy Common
Stock has an investment option consisting of the right to reinvest the net
proceeds from a sale of shares of Municipal Strategy Common Stock in a tender
offer by Municipal Strategy in Class D shares of certain eligible Merrill
Lynch-sponsored open-end funds at their net asset value, without the
imposition of a sales charge, if certain conditions are met. If the
Reorganization is consummated, a holder of Municipal Strategy Common Stock
will have the same investment option as a holder of MuniYield Common Stock who
purchased his or her shares through Merrill Lynch in the initial public
offering of MuniYield Common Stock as described above.


Liquidation Rights of Holders of AMPS

     Upon any liquidation, dissolution or winding up of either Fund, whether
voluntary or involuntary, the holders of shares of that Fund's 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
that Fund's common stock or any other capital stock of the Fund ranking junior
in right of payment upon liquidation to AMPS, $25,000 per share together with
the amount of any dividends accumulated but unpaid (whether or not earned or
declared) thereon to the date of distribution, and after such payment the
holders of AMPS will be entitled to no other payments except for any
additional dividends. If the assets of a Fund shall be insufficient to make
the full liquidation payment on the AMPS and liquidation payments on any other
outstanding class or series of preferred stock of the Fund ranking on a parity
with the AMPS as to payment upon liquidation, then such assets will be
distributed among the holders of shares of AMPS and the holders of shares of
such other class or series ratably in proportion to the respective
preferential amounts to which they are entitled. After payment of the full
amount of liquidation distribution to which they are entitled, the holders of
shares of a Fund's AMPS will not be entitled to any further participation in
any distribution of assets by that Fund except for any additional dividends. A
consolidation, merger or share exchange of a Fund with or into any other
entity or entities or a sale, whether for cash, shares of stock, securities or
properties, of all or substantially all or any part of the assets of that Fund
shall not be deemed or construed to be a liquidation, dissolution or winding
up of that Fund for this purpose.


Tax Rules Applicable to the Funds and Their Stockholders

     The tax consequences of investing in shares of common stock or AMPS of
each Fund are substantially similar. The Funds have elected and qualified
since inception for the special tax treatment afforded RICs under the Code. As
a result, in any taxable year in which they distribute an amount equal to at
least 90% of taxable net income and 90% of tax-exempt net income (see below),
the Funds (but not their stockholders) are not subject to Federal income tax
to the extent that they distribute their net investment income and net
realized capital gains. In all taxable years through the taxable year of the
Reorganization, each Fund has distributed substantially all of its income.
MuniYield intends to continue to distribute substantially all of its income
following the Reorganization.

     Each Fund is qualified to pay "exempt-interest dividends" as defined in
Section 852(b)(5) of the Code. Under such section, if, at the close of each
quarter of its taxable year, at least 50% of the value of a Fund's total
assets consists of obligations exempt from Federal income tax ("tax-exempt
obligations") under Section 103(a) of the Code (relating generally to
obligations of a state or local governmental unit), that Fund is qualified to
pay exempt-interest dividends to its stockholders. Exempt-interest dividends
are dividends or any part thereof paid by a Fund which are attributable to
interest on tax-exempt obligations and designated by a Fund as exempt-interest
dividends in a written notice mailed to stockholders within 60 days after the
close of its taxable year. To the extent that the dividends distributed to a
Fund's stockholders are derived from interest income exempt from Federal
income tax under Code Section 103(a) and are properly designated as
exempt-interest dividends, they are excludable from a stockholder's gross
income for Federal income tax purposes. Exempt-interest dividends are
included, however, in determining the portion, if any, of a person's social
security benefits and railroad retirement benefits subject to Federal income
taxes. A tax adviser should be consulted with respect to whether
exempt-interest dividends retain the exclusion under Code Section 103(a) if a
stockholder would be treated as a "substantial user" or "related person" under
Code Section 147(a) with respect to property financed with the proceeds from
an issue of IDBs or PABs, if any, held by a Fund.

     The IRS, in a revenue ruling, held that certain AMPS would be treated as
stock for Federal income tax purposes. The terms of the currently outstanding
AMPS of each Fund, as well as the MuniYield Series F AMPS to be issued by
MuniYield, are substantially similar, but not identical, to the AMPS discussed
in the revenue ruling. In the opinion of Sidley Austin Brown & Wood LLP,
counsel to the Funds, the shares of each Fund's currently outstanding AMPS, as
well as the MuniYield Series F AMPS to be issued by MuniYield, constitute
stock, and distributions with respect to shares of such AMPS (other than
distributions in redemption of shares of AMPS subject to Section 302(b) of the
Code) will constitute dividends to the extent of current and accumulated
earnings and profits as calculated for Federal income tax purposes.
Nevertheless, the IRS could take a contrary position, asserting, for example,
that the shares of AMPS constitute debt. If this position were upheld, the
discussion of the treatment of distributions below would not apply to holders
of shares of AMPS. Instead, distributions by each Fund to holders of shares of
its AMPS would constitute interest, whether or not they exceeded the earnings
and profits of the Fund, would be included in full in the income of the
recipient and taxed as ordinary income. Counsel believes that such a position,
if asserted by the IRS, would be unlikely to prevail.

     To the extent that a Fund's distributions are derived from interest on
its taxable investments or from an excess of net short-term capital gains over
net long-term capital losses ("ordinary income dividends"), such distributions
are considered taxable ordinary income for Federal income tax purposes.
Distributions, if any, from an excess of net long-term capital gains over net
short-term capital losses derived from the sale of securities or from certain
transactions in futures or options ("capital gain dividends") are taxable as
long-term capital gains for Federal income tax purposes, regardless of the
length of time the stockholder has owned Fund shares. Certain categories of
capital gains are taxable at different rates for Federal income tax purposes.
Generally not later than 60 days after the close of its taxable year, a Fund
provides its stockholders with a written notice designating the amounts of any
exempt-interest dividends and capital gain dividends, as well as any amount of
capital gain dividends in the different categories of capital gain referred to
above. Distributions by a Fund, whether from exempt-interest income, ordinary
income or capital gains, are not eligible for the dividends received deduction
for corporations under the Code.

     A loss realized on a sale or exchange of shares of a Fund is disallowed
if other Fund shares are acquired (whether under the Automatic Dividend
Reinvestment Plan or otherwise) within a 61-day period beginning 30 days
before and ending 30 days after the date that the shares are disposed of. In
such a case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss.

     All or a portion of a Fund's gain from the sale or redemption of
tax-exempt obligations purchased at a market discount will be treated as
ordinary income rather than capital gain. This rule may increase the amount of
ordinary income dividends received by stockholders. Any loss upon the sale or
exchange of Fund shares held for six months or less is treated as long-term
capital loss to the extent of exempt-interest dividends received by the
stockholder. In addition, such loss is disallowed to the extent of any capital
gain dividends received by the stockholder. Distributions in excess of a
Fund's earnings and profits first will reduce the adjusted tax basis of a
holder's shares and, after such adjusted tax basis is reduced to zero, will
constitute capital gains to such holder (assuming the shares are held as a
capital asset). If a Fund pays a dividend in January which was declared in the
previous October, November or December to stockholders of record on a
specified date in one of such months, then such dividend is treated for tax
purposes as paid by the Fund and received by its stockholders on December 31
of the year in which such dividend was declared.

     The IRS has taken the position in a revenue ruling that if a RIC has two
or more classes of shares it may designate distributions made to each class in
any year as consisting of no more than such class' proportionate share of
particular types of income, including exempt-interest dividends and capital
gain dividends. A class's proportionate share of a particular type of income
is determined according to the percentage of total dividends paid by the RIC
during such year that was paid to such class. Consequently, when common stock
and one or more series of AMPS are outstanding, each Fund designates
distributions made to the classes as consisting of particular types of income
in accordance with each class's proportionate share of such income. After the
Reorganization, MuniYield will, likewise, so designate distributions with
respect to its common stock and its AMPS, Series A, B, C, D, E and F. Each
Fund may notify the Auction Agent of the amount of any net capital gains and
other taxable income to be included in any dividend on shares of its AMPS
prior to the auction establishing the applicable rate for such dividend.
Except for the portion of any dividend that a Fund informs the Auction Agent
will be treated as capital gains or other taxable income, the dividends paid
on the shares of AMPS constitute exempt-interest dividends. Alternatively,
each Fund may include such income in a dividend on shares of its AMPS without
giving advance notice thereof if it increases the dividend by an additional
amount to offset the tax effect thereof. The amount of net capital gains and
ordinary income allocable to shares of a Fund's AMPS (the "taxable
distribution") depends upon the amount of such gains and income realized by
that Fund and the total dividends paid on shares of its common stock and
shares of its AMPS during a taxable year, but the taxable distribution
generally is not significant.

     In the opinion of Sidley Austin Brown & Wood LLP, counsel to both Funds,
under current law the manner in which each Fund allocates, and MuniYield will
allocate, items of tax-exempt income, net capital gains, and other taxable
income, if any, among shares of common stock and outstanding AMPS (including,
for MuniYield, its Series A, Series B, Series C, Series D and Series E AMPS
and, after the Reorganization, the newly issued Series F AMPS) will be
respected for Federal income tax purposes. However, the tax treatment of
additional dividends may affect a Fund's calculation of each class' allocable
share of capital gains and other taxable income. In addition, there is
currently no direct guidance from the IRS or other sources specifically
addressing whether a Fund's method for allocating tax-exempt income, net
capital gains and other taxable income among shares of common stock and the
outstanding series of AMPS will be respected for Federal income tax purposes,
and it is possible that the IRS could disagree with counsel's opinion and
attempt to reallocate a Fund's net capital gains or other taxable income. In
the event of a reallocation, some of the dividends identified by a Fund as
exempt-interest dividends to holders of shares of its AMPS could be
recharacterized as additional capital gains or other taxable income. In the
event of such recharacterization, a Fund is not required to make payments to
the affected stockholders to offset the tax effect of such reallocation. In
addition, a reallocation could cause a Fund to be liable for income tax and
excise tax on all reallocated taxable income. Sidley Austin Brown & Wood LLP
has advised each Fund that, in its opinion, if the IRS were to challenge in
court its allocations of income and gain, the IRS would be unlikely to
prevail. The opinion of Sidley Austin Brown & Wood LLP, however, represents
only its best legal judgment and is not binding on the IRS or the courts.

     The Code requires a RIC to pay a nondeductible 4% excise tax to the
extent it does not distribute during each calendar year 98% of its ordinary
income, determined on a calendar year basis, and 98% of its capital gains,
determined in general, on an October 31 year-end, plus certain undistributed
amounts from previous years. The required distributions, however, are based
only on the taxable income of a RIC. The excise tax, therefore, generally does
not apply to the tax-exempt income of RICs, such as the Funds, that pay
exempt-interest dividends.

     The Code subjects interest received on certain otherwise tax-exempt
securities to a Federal alternative minimum tax. The alternative minimum tax
applies to interest received on "activity bonds" issued after August 7, 1986.
As set forth above, "private activity bonds" are bonds which, although
tax-exempt, are used for purposes other than those generally performed by
governmental units and which benefit non-governmental entities (e.g., bonds
used for industrial development or housing purposes). Income received on such
bonds is classified as an item of "tax preference" which could subject
investors in such bonds, including stockholders of the Funds, to an increased
Federal alternative minimum tax. Each Fund purchases such "private activity
bonds" and reports to stockholders within 60 days after calendar year-end the
portion of its dividends declared during the year which constitutes an item of
tax preference for alternative minimum tax purposes. The Code further provides
that corporations are subject to a Federal alternative minimum tax based, in
part, on certain differences between taxable income as adjusted for other tax
preferences and the corporation's "adjusted current earnings" which more
closely reflect a corporation's economic income. Because an exempt-interest
dividend paid by a Fund is included in adjusted current earnings, a corporate
stockholder may be required to pay a Federal alternative minimum tax on
exempt-interest dividends paid by such Fund.

     Each Fund may invest in high yield securities or junk bonds. Furthermore,
the Funds may also invest in instruments the return on which includes
nontraditional features such as indexed principal or interest payments
("nontraditional instruments"). These investments may be subject to special
tax rules under which a Fund may be required to accrue and distribute income
before amounts due under the obligations are paid. In addition, it is possible
that all or a portion of the interest payments on such junk bonds and/or
nontraditional instruments could be recharacterized as taxable ordinary
income.

     If at any time when shares of AMPS are outstanding a Fund does not meet
the asset coverage requirements of the Investment Company Act, that Fund will
be required to suspend distributions to holders of its common stock until the
asset coverage is restored. See "Dividends and Distributions." This may
prevent a Fund from distributing at least 90% of its net investment income and
may, therefore, jeopardize that Fund's qualification for taxation as a RIC. If
a Fund were to fail to qualify as a RIC, some or all of the distributions paid
by that Fund would be fully taxable to stockholders for Federal income tax
purposes. Upon any failure to meet the asset coverage requirements of the
Investment Company Act, a Fund, in its sole discretion, may redeem shares of
AMPS in order to maintain or restore the requisite asset coverage and avoid
the adverse consequences to that Fund and its stockholders of failing to
qualify as a RIC. No assurance can be given, however, that any such action
would achieve such objectives.

     As noted above, a Fund must distribute annually at least 90% of its net
taxable and tax-exempt interest income. A distribution will only be counted
for this purpose if it qualifies for the dividends paid deduction under the
Code. Some types of preferred stock that the Funds have issued and that
MuniYield contemplates issuing may raise a question as to whether
distributions on such preferred stock are "preferential" under the Code and,
therefore, not eligible for the dividends paid deduction. Counsel has advised
the Funds that the outstanding preferred stock and the preferred stock to be
issued by MuniYield will not result in the payment of a preferential dividend.
If a Fund ultimately relies solely on a legal opinion when it issues such
preferred stock, no assurance can be given 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 Funds could be disqualified as RICs. In this case, dividends paid by the
Funds on the common stock and the AMPS would not be exempt from Federal income
taxes. Additionally, the Funds would be subject to a Federal alternative
minimum tax.

     Under certain circumstances when a Fund is required to allocate taxable
income to the AMPS, it will pay Additional Distributions to holders of shares
of AMPS. The Federal income tax consequences of Additional Distributions under
existing law are uncertain. The Funds treat and MuniYield intends to continue
to treat a holder as receiving a dividend distribution in the amount of any
Additional Distribution only as and when such Additional Distribution is paid.
An Additional Distribution generally is designated by a Fund as an
exempt-interest dividend except as otherwise required by applicable law.
However, the IRS may assert that all or part of an Additional Distribution is
a taxable dividend either in the taxable year for which the allocation of
taxable income is made or in the taxable year in which the Additional
Distribution is paid.

     The value of shares acquired pursuant to a Fund's dividend reinvestment
plan is generally excluded from gross income to the extent that the cash
amount reinvested would be excluded from gross income. If, at a time when a
Fund's shares are trading at a premium over net asset value, MuniYield issues
shares pursuant to the dividend reinvestment plan that have a greater fair
market value than the amount of cash reinvested, it is possible that all or a
portion of such discount (which may not exceed 5% of the fair market value of
such Fund's shares) could be viewed as a taxable distribution. If the discount
is viewed as a taxable distribution, it is also possible that the taxable
character of this discount would be allocable to all of the stockholders,
including stockholders who do not participate in a Fund's dividend
reinvestment plan. Thus, stockholders who do not participate in the dividend
reinvestment plan of a Fund, as well as dividend reinvestment plan
participants, might be required to report as ordinary income a portion of
their distributions equal to the allocable share of the discount.

     Under certain provisions of the Code, some stockholders may be subject to
a withholding tax on certain ordinary income dividends and on capital gain
dividends and redemption payments ("backup withholding"). Generally,
stockholders subject to backup withholding will be those for whom no taxpayer
identification number is on file with a Fund or who, to that Fund's knowledge,
have furnished an incorrect number. When establishing an account, an investor
must certify under penalty of perjury that such number is correct and that
such stockholder is not otherwise subject to backup withholding.

     Ordinary income dividends paid to stockholders who are nonresident aliens
or foreign entities are subject to a 30% United States withholding tax under
existing provisions of the Code applicable to foreign individuals and entities
unless a reduced rate of withholding or a withholding exemption is provided
under applicable treaty law. Nonresident stockholders are urged to consult
their own tax advisers concerning the applicability of the United States
withholding tax.

     The Code provides that every stockholder required to file a tax return
must include for information purposes on such return the amount of
exempt-interest dividends received from all sources (including the Funds)
during the taxable year.


Tax Treatment of Options and Futures Transactions

     Each Fund may purchase or sell municipal bond index financial futures
contracts and interest rate financial futures contracts on U.S. Government
securities. Each Fund may also purchase and write call and put options on such
financial futures contracts. In general, unless an election is available to a
Fund or an exception applies, such options and financial futures contracts
that are "Section 1256 contracts" will be "marked to market" for Federal
income tax purposes at the end of each taxable year (i.e., each such option or
financial futures contract will be treated as sold for its fair market value
on the last day of the taxable year), and any gain or loss attributable to
Section 1256 contracts will be 60% long-term and 40% short-term capital gain
or loss. Application of these rules to Section 1256 contracts held by a Fund
may alter the timing and character of distributions to stockholders. The
mark-to-market rules outlined above, however, will not apply to certain
transactions entered into by a Fund solely to reduce the risk of changes in
price or interest rates with respect to its investments.

     Code Section 1092, which applies to certain "straddles," may affect the
taxation of a Fund's sales of securities and transactions in financial futures
contracts and related options. Under Section 1092, a Fund may be required to
postpone recognition for tax purposes of losses incurred in certain sales of
securities and certain closing transactions in financial futures contracts or
the related options.

     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.

     Stockholders are urged to consult their tax advisers regarding specific
questions as to Federal, foreign, state or local tax consequences of an
investment in a Fund.


                     AGREEMENT AND PLAN OF REORGANIZATION


General

     Under the Agreement and Plan (attached hereto as Appendix II), MuniYield
will acquire substantially all of the assets, and will assume substantially
all of the liabilities, of Municipal Strategy in return solely for shares of
MuniYield Common Stock and MuniYield Series F AMPS to be issued by MuniYield.
The number of full shares of MuniYield Common Stock issued to Municipal
Strategy will have an aggregate net asset value equal to the aggregate net
asset value of the outstanding shares of Municipal Strategy Common Stock, and
the number of shares of MuniYield Series F AMPS issued to Municipal Strategy
will have an aggregate liquidation preference and value equal to the aggregate
liquidation preference and value of the outstanding shares of Municipal
Strategy Series A AMPS. Upon receipt by Municipal Strategy of such shares,
Municipal Strategy will (i) distribute the shares of MuniYield Common Stock to
the holders of Municipal Strategy Common Stock (plus cash in lieu of
fractional shares) in return for their shares of Municipal Strategy Common
Stock, and (ii) distribute the shares of MuniYield Series F AMPS to the
holders of Municipal Strategy Series A AMPS in return for their shares of
Municipal Strategy Series A AMPS. MuniYield will file Articles Supplementary
establishing the powers, rights and preferences of the MuniYield Series F AMPS
with the State Department of Assessments and Taxation of Maryland (the
"Maryland Department") prior to the closing of the Reorganization. As soon as
practicable after the date that the Reorganization takes place (the "Closing
Date"), Municipal Strategy will file Articles of Dissolution with the Maryland
Department to effect the formal dissolution of such Fund, and will dissolve
and deregister as an investment company under the Investment Company Act.

     Municipal Strategy will distribute the shares of MuniYield Common Stock
(plus cash in lieu of fractional shares) and the shares of MuniYield Series F
AMPS received by it pro rata to its holders of record of common stock and
AMPS, as applicable, in return for such stockholders' shares in Municipal
Strategy. Such distribution will be accomplished by opening new accounts on
the books of MuniYield in the names of the common and preferred stockholders
of Municipal Strategy and transferring to those stockholder accounts the
MuniYield Common Stock or MuniYield Series F AMPS previously credited on those
books to the accounts of Municipal Strategy. Each newly-opened account on the
books of MuniYield for the previous holders of Municipal Strategy Common Stock
would represent the respective pro rata number of shares of MuniYield Common
Stock (rounded down, in the case of fractional shares, to the next largest
number of whole shares) due such holder of common stock. No fractional shares
of MuniYield Common Stock will be issued. In lieu thereof, MuniYield's
Transfer Agent will aggregate all fractional shares of MuniYield Common Stock
and sell the resulting whole shares on the NYSE for the account of all holders
of fractional interests, and each such holder will be entitled to the pro rata
share of the proceeds from such sale upon surrender of the stock certificates
representing shares of Municipal Strategy Common Stock. Similarly, each
newly-opened account on the books of MuniYield for the previous holders of
Municipal Strategy AMPS would represent the respective pro rata number of
shares of MuniYield Series F AMPS due such holder of AMPS. See "Surrender and
Exchange of Stock Certificates" below for a description of the procedures to
be followed by the stockholders of Municipal Strategy to obtain their
MuniYield Common Stock (and cash in lieu of fractional shares, if any).
Because AMPS are held in "street name" by DTC, all transfers with respect to
AMPS are accomplished by book entry.

     Accordingly, as a result of the Reorganization, every holder of Municipal
Strategy Common Stock would own shares of MuniYield Common Stock that (except
for cash payments received in lieu of fractional shares) would have an
aggregate net asset value immediately after the Closing Date equal to the
aggregate net asset value of that stockholder's Municipal Strategy Common
Stock immediately prior to the Closing Date. Since the MuniYield Common Stock
would be issued at net asset value and the shares of Municipal Strategy Common
Stock would be valued at net asset value for the purposes of the exchange, the
interests of common stockholders of neither Fund will be diluted as a result
of the Reorganization. Similarly, since the MuniYield Series F AMPS would be
issued at a liquidation preference and value per share equal to the
liquidation preference and value per share of the AMPS of Municipal Strategy,
the interests of the AMPS stockholders of neither Fund will be diluted as
result of the Reorganization. However, as a result of the Reorganization,
stockholders of both Funds likely will hold a reduced percentage of ownership
in the Combined Fund than he or she held in MuniYield or Municipal Strategy.


Procedure

     At separate meetings of the Boards of Directors of Municipal Strategy and
MuniYield, each Board, including all of the Directors who are not "interested
persons" of the applicable Fund, unanimously approved the Agreement and Plan.
The Board of Directors of Municipal Strategy, including all of the Directors
who are not "interested persons" also approved the submission of such
Agreement and Plan to the Municipal Strategy stockholders for approval.

     The Board of Directors of MuniYield approved the filing of Articles
Supplementary establishing the powers, rights and preferences of the MuniYield
Series F AMPS in order that they may be distributed to holders of AMPS of
Municipal Strategy as part of the Reorganization.

     As a result of such Board approvals, Municipal Strategy has filed this
proxy statement with the Commission soliciting a vote of the Municipal
Strategy stockholders to approve the Reorganization. The costs of such
solicitation will be deducted from the assets of Municipal Strategy as of the
Valuation Time as defined below. A special meeting of Municipal Strategy
stockholders will be held on October 24, 2001. If the stockholders of
Municipal Strategy approve the Reorganization, the Reorganization will take
place as soon as practicable after such approval, provided that the Funds have
obtained prior to that time an opinion of counsel concerning the tax
consequences of the Reorganization as set forth in the Agreement and Plan.

     The Board of Directors of Municipal Strategy recommends that the
stockholders of Municipal Strategy approve the Agreement and Plan.


Terms of the Agreement and Plan of Reorganization

     The following is a summary of the significant terms of the Agreement and
Plan. This summary is qualified in its entirety by reference to the Agreement
and Plan, attached hereto as Appendix II.

     Valuation of Assets and Liabilities. The respective assets of each Fund
will be valued on the business day prior to the Closing Date (the "Valuation
Date"). The valuation procedures are the same for each Fund: the net asset
value per share of the common stock of each Fund will be determined as of the
close of business on the NYSE (generally, 4:00 p.m., Eastern time) on the
Valuation Date (the "Valuation Time"). For the purpose of determining the net
asset value of a share of common stock of each Fund, the value of the
securities held by the issuing Fund plus any cash or other assets (including
interest accrued but not yet received) minus (i) all liabilities (including
accrued expenses) and (ii) the aggregate liquidation value of the outstanding
shares of AMPS of the issuing Fund, is divided by the total number of shares
of common stock of the issuing Fund outstanding at such time. Daily expenses,
including the fees payable to FAM, will accrue on the Valuation Date.

     The Municipal Bonds in which each Fund invests are traded primarily in
the over-the-counter markets. In determining net asset value on the Valuation
Date, each Fund will use the valuations of portfolio securities furnished by a
pricing service approved by the Boards of Directors of the Funds. The pricing
service typically values portfolio securities at the bid price or the yield
equivalent when quotations are readily available. Municipal Bonds for which
quotations are not readily available will be valued at fair market value on a
consistent basis as determined by the pricing service using a matrix system to
determine valuations. The Boards of Directors of the Funds have determined in
good faith that the use of a pricing service is a fair method of determining
the valuation of portfolio securities. Positions in financial futures
contracts will be valued on the Valuation Date at closing prices for such
contracts established by the exchange on which they are traded, or if market
quotations are not readily available, will be valued at fair value on a
consistent basis using methods determined in good faith by each Board of
Directors.

     Distribution of MuniYield Common Stock and MuniYield Series F AMPS. On
the Closing Date, MuniYield will issue to Municipal Strategy a number of full
shares of MuniYield Common Stock the aggregate net asset value of which will
equal the aggregate net asset value of shares of Municipal Strategy Common
Stock on the Valuation Date. Each holder of Municipal Strategy Common Stock
will receive the number of full shares of MuniYield Common Stock (plus cash in
lieu of fractional shares) corresponding to his or her proportionate interest
in the respective aggregate net asset value of the Municipal Strategy Common
Stock.

     On the Closing Date, MuniYield also will issue to Municipal Strategy a
number of shares of MuniYield Series F AMPS, the aggregate liquidation
preference and value of which will equal the aggregate liquidation preference
and value of Municipal Strategy Series A AMPS on the Valuation Date. Each
holder of Municipal Strategy Series A AMPS will receive the number of shares
of MuniYield Series F AMPS corresponding to his or her proportionate interest
in the aggregate liquidation preference and value of the Municipal Strategy
Series A AMPS. No sales charge or fee of any kind will be charged to
stockholders of Municipal Strategy in connection with their receipt of
MuniYield Common Stock or MuniYield Series F AMPS in the Reorganization. No
CDSC will apply to shares of MuniYield Common Stock issued to Municipal
Strategy in the Reorganization, nor will any CDSC be due on the shares of
Municipal Strategy Common Stock in connection with the Reorganization. It is
anticipated that the auction for MuniYield Series F AMPS will be held on
Wednesday. The auction procedures for all of the AMPS are substantially
similar. As a result of the Reorganization, the last dividend period for the
AMPS of Municipal Strategy prior to the Closing Date will be shorter than the
dividend period for such AMPS determined as set forth in the applicable
Articles Supplementary.

     Expenses. The expenses of the Reorganization that are directly
attributable to Municipal Strategy and the conduct of its business will be
deducted from the assets of Municipal Strategy as of the Valuation Time. These
expenses are expected to include transfer agent fees, the expenses incurred in
preparing, printing and mailing the proxy materials to be used in connection
with the Meeting, the expenses related to the solicitation of proxies to be
voted at the Meeting and a portion of the expenses incurred in printing the
registration statement on Form N-14 of which this Proxy Statement and
Prospectus is a part (the "N-14 Registration Statement"). FAM has agreed to
bear the expenses of the Reorganization that are directly attributable to
MuniYield and the conduct of its business. The expenses attributable to
MuniYield include fees, if any, of the rating agencies with respect to the
MuniYield Series F AMPS, the costs of printing stock certificates, transfer
agent fees, and a portion of the expenses incurred in printing the N-14
Registration Statement. Certain other expenses of the Reorganization,
including expenses in connection with obtaining an opinion of counsel as to
certain tax matters, the preparation of the Agreement and Plan, legal fees,
stock exchange fees and audit fees, will be borne equally by Municipal
Strategy and by FAM, which has agreed to bear such expenses on behalf of
MuniYield.

     As of May 31, 2001, the expenses of the Reorganization attributable to
Municipal Strategy are estimated to be approximately $125,800 and the expenses
of the Reorganization attributable to MuniYield are estimated to be
approximately $95,400.

     Required Approvals. Under the Charter of Municipal Strategy (including
Articles Supplementary establishing the powers, rights and preferences of the
Municipal Strategy Series A AMPS) and relevant Maryland law, stockholder
approval of the Agreement and Plan requires the affirmative vote of
stockholders of Municipal Strategy representing more than 50% of the
outstanding shares of Municipal Strategy Common Stock and Municipal Strategy
Series A AMPS, voting together as a single class, and more than 50% of the
outstanding shares of Municipal Strategy Series A AMPS, voting separately as a
class.

     Deregistration and Dissolution. Following the transfer of the assets and
liabilities of Municipal Strategy and the distribution of shares of MuniYield
Common Stock and MuniYield Series F AMPS to Municipal Strategy stockholders,
in accordance with the foregoing, Municipal Strategy will terminate its
registration under the Investment Company Act and its incorporation under
Maryland law and will withdraw its authority to do business in any state where
it is required to do so.

     Amendments and Conditions. The Agreement and Plan may be amended at any
time prior to the Closing Date with respect to any of the terms therein. The
obligations of each Fund pursuant to the Agreement and Plan are subject to
various conditions, including the N-14 Registration Statement being declared
effective by the Commission, approval by the stockholders of Municipal
Strategy as described above, an opinion of counsel being received with respect
to certain tax matters, an opinion of counsel being received as to securities
matters and the continuing accuracy of various representations and warranties
of the Funds being confirmed by the respective parties.

     Postponement, Termination. Under the Agreement and Plan, the Board of
Directors of either Fund may cause the Reorganization to be postponed or
abandoned under certain circumstances should such Board determine that it is
in the best interests of the stockholders of its respective Fund to do so. The
Agreement and Plan may be terminated, and the Reorganization abandoned at any
time (whether before or after adoption thereof by the stockholders of either
Fund) prior to the Closing Date, or the Closing Date may be postponed: (i) by
mutual consent of the Boards of Directors of the Funds and (ii) by the Board
of Directors of either Fund if any condition to that Fund's obligations set
forth in the Agreement and Plan has not been fulfilled or waived by such
Board.


Potential Benefits to Stockholders as a Result of the Reorganization

     In approving the Reorganization, the Board of Directors of Municipal
Strategy identified certain potential benefits for Municipal Strategy common
stockholders that are likely to result from the Reorganization, including that
(i) Municipal Strategy common stockholders will be invested in a substantially
larger non-diversified, leveraged, closed-end fund with an investment
objective and investment policies substantially similar to Municipal
Strategy's investment objective and policies, (ii) Municipal Strategy common
stockholders will experience lower expenses per share, economies of scale and
greater flexibility in portfolio management, (iii) the Combined Fund will not
pay the administrative fee currently paid by Municipal Strategy, (iv)
Municipal Strategy common stockholders will no longer be subject to the
expenses associated with Municipal Strategy's required yearly prospectus
updates, (v) Municipal Strategy common stockholders will no longer be subject
to the expenses of conducting quarterly tender offers, (vi) Municipal Strategy
common stockholders will no longer be subject to a CDSC that currently applies
upon the sale of shares held for less than three years, and (vii) Municipal
Strategy common stockholders will be able to sell their shares on each day
that the NYSE is open for trading, although any such sales will be made at the
then current market price, which may be at a premium above or a discount from
the Combined Fund's net asset value and may be subject to brokerage
commissions. While Municipal Strategy stockholders may currently sell their
shares at net asset value on a quarterly basis, the Directors believe the
potential benefits of the Reorganization make it in the best interests of
Municipal Strategy and its stockholders.

     The Board of Directors of Municipal Strategy also considered that
Municipal Strategy common stockholders should experience an additional benefit
because certain fixed costs, such as the costs of printing stockholder
reports, legal expenses, audit fees, mailing costs and other expenses will be
spread across a larger asset base, resulting in an expense ratio for the
Combined Fund that is lower than Municipal Strategy's current expense ratio.
Due to the larger asset base, the Combined Fund may also experience economies
of scale and greater flexibility in portfolio management.

     Although the pro forma total operating expense ratio of the Combined Fund
is not expected to be significantly lower than MuniYield's current operating
expense ratio, MuniYield common stockholders will not be adversely affected by
the Reorganization since FAM has agreed to bear all Reorganization expenses
attributable to MuniYield and MuniYield may otherwise benefit from an increase
in the Combined Fund's level of net assets.

     It is not anticipated that the Reorganization will directly benefit the
holders of shares of any series of AMPS of either Fund. However, the
Reorganization will not adversely affect the holders of shares of any series
of AMPS of either Fund. The expenses of the Reorganization will not be borne
by the holders of shares of AMPS of either Fund.

     The Boards considered the possible risks and costs of combining the
Funds, and examined the relative credit strength, maturity characteristics,
mix of type and purpose, and yield of the Funds' portfolios of Municipal Bonds
and the costs involved in a transaction such as the Reorganization. The Boards
noted the many similarities between the Funds, including their substantially
similar investment objectives and investment policies, their use of
substantially the same management personnel and their similar portfolios of
Municipal Bonds. The Boards also considered the relative tax positions of the
portfolios of the Funds. As of May 31, 2001, each Fund had net realized
capital losses that, subject to certain limitations, can be shared by the
stockholders of the Combined Fund. Please see "Pro Forma Combined Statement of
Assets and Liabilities." As a result of the Reorganization and subject to
certain limitations, the stockholders of each Fund may benefit from the
ability of the Combined Fund to use the net realized capital losses of the
Funds to offset future net realized capital gains of the Combined Fund, if
any. Based on these factors, among others, the Board of Directors of Municipal
Strategy concluded that the Reorganization will potentially benefit the
stockholders of Municipal Strategy in that it (i) presents no significant
risks that would outweigh the benefits discussed above, (ii) involves minimal
costs (including relatively minor legal, accounting and administrative costs)
and (iii) does not adversely affect the stockholders of Municipal Strategy
Series A AMPS. The Board of Directors of MuniYield concluded that, although
the pro forma total operating expense ratio of the Combined Fund is not
expected to be significantly lower than MuniYield's current operating expense
ratio, (i) MuniYield common stockholders will not be adversely affected by the
Reorganization since (a) FAM has agreed to bear all Reorganization expenses
attributable to MuniYield, and (b) MuniYield may otherwise benefit from an
increase in the Combined Fund's level of net assets, and (ii) does not
adversely affect the stockholders of MuniYield AMPS.

     In the past, FAM has voluntarily waived a portion of its advisory fee
and/or reimbursed certain other expenses with respect to Municipal Strategy.
FAM has not waived fees or reimbursed expenses with respect to MuniYield and
it is not anticipated that FAM will waive its advisory fee and/or reimburse
expenses with respect to the Combined Fund on an ongoing basis. Total
annualized operating expense ratios for MuniYield, Municipal Strategy
(excluding advisory fee waivers and/or expense reimbursements) and the
Combined Fund based on their respective average net assets (excluding assets
attributable to AMPS) for the six month period ended April 30, 2001 are
summarized below.

                            Average Net Assets
                             (Excluding Assets
                           Attributable to AMPS)
                             for the Six Month
                                Period ended         Total Annualized Operating
                               April 30, 2001               Expense Ratio
                               --------------               -------------
     MuniYield                   $507,503,509                  1.00%
     Municipal Strategy         $  81,220,051                  2.05%*
     Combined Fund**             $588,723,560                  0.99%
- --------------
*    Including fee waivers and/or expense reimbursements applicable to
     Municipal Strategy, the total annualized operating expense ratio for
     Municipal Strategy would have been 1.90%.
**  Assumes that the Reorganization had taken place on April 30, 2001.

     Total annualized operating expense ratios for MuniYield, Municipal
Strategy (excluding advisory fee waivers and/or expense reimbursements) and
the Combined Fund based on their respective average net assets (including
assets attributable to AMPS) for the six month period ended April 30, 2001 are
summarized below.

                          Average Net Assets
                           (Including Assets
                         Attributable to AMPS)
                           for the Six Month
                             Period ended           Total Annualized Operating
                            April 30, 2001                 Expense Ratio
                            --------------                 -------------
     MuniYield               $757,503,509                       0.67%
     Municipal Strategy      $124,220,051                       1.34%*
     Combined Fund**         $881,723,560                       0.66%
- --------------
*    Including fee waivers and/or expense reimbursements applicable to
     Municipal Strategy, the total annualized operating expense ratio for
     Municipal Strategy would have been 1.24%.
**   Assumes that the Reorganization had taken place on April 30, 2001.

     Although, as indicated above, the pro forma total operating expense ratio
of the Combined Fund is not expected to be significantly lower than
MuniYield's current operating expense ratio, MuniYield stockholders will not
be adversely affected by the Reorganization since FAM has agreed to bear all
Reorganization expenses attributable to MuniYield.

     MuniYield may otherwise benefit from an increase in its level of net
assets. It is estimated that the Combined Fund will have net assets in excess
of $860 million upon completion of the Reorganization. A larger asset base
should provide benefits in portfolio management. After the Reorganization, the
Combined Fund should be able to purchase larger amounts of Municipal Bonds at
more favorable prices than either Fund separately and, with this greater
purchasing power, request improvements in the terms of the Municipal Bonds
(e.g., added indenture provisions covering call protection, sinking funds and
audits for the benefit of large holders) prior to purchase.

     In approving the Reorganization, the Board of Directors of each Fund
determined that the Reorganization is in the best interests of the
stockholders of that Fund because the Reorganization presents no significant
risks or costs (including legal, accounting and administrative costs) that
would outweigh the potential benefits discussed above and because, with
respect to net asset value, the interests of existing stockholders of that
Fund would not be diluted as a result of the Reorganization.


Surrender and Exchange of Stock Certificates

     After the Closing Date, each holder of an outstanding certificate or
certificates formerly representing shares of Municipal Strategy Common Stock
will be entitled to receive, upon surrender of their certificate or
certificates, a certificate or certificates representing the number of shares
of MuniYield Common Stock distributable with respect to such holder's shares
of Municipal Strategy Common Stock, together with cash in lieu of any
fractional shares of common stock. Promptly after the Closing Date, the
transfer agent for MuniYield Common Stock will mail to each holder of
certificates formerly representing shares of Municipal Strategy Common Stock a
letter of transmittal for use in surrendering their certificates for
certificates representing shares of MuniYield Common Stock and cash in lieu of
any fractional shares of common stock.

     Shares of AMPS are held in "street name" by DTC, and all transfers will
be accomplished by book entry. Surrender of physical certificates for AMPS is
not required.

<TABLE>
<CAPTION>

If Prior To The Reorganization You Held:       After The Reorganization, You Will Hold:
- ---------------------------------------        ---------------------------------------
<S>                                            <C>
     Municipal Strategy Common Stock                  MuniYield Common Stock
     Municipal Strategy Series A AMPS                 MuniYield Series F AMPS

</TABLE>

     Please do not send in any stock certificates at this time. Upon
consummation of the Reorganization, Municipal Strategy common stockholders
will be furnished with instructions for exchanging their stock certificates
for MuniYield stock certificates and, if applicable, cash in lieu of
fractional shares of MuniYield Common Stock.

     From and after the Closing Date, certificates formerly representing
shares of Municipal Strategy Common Stock will be deemed for all purposes to
evidence ownership of the number of full shares of MuniYield Common Stock
distributable with respect to the shares of Municipal Strategy held before the
Reorganization as described above and as shown in the table above, provided
that, until such stock certificates have been so surrendered, no dividends
payable to the holders of record of Municipal Strategy Common Stock as of any
date subsequent to the Closing Date will be paid to the holders of such
outstanding stock certificates. Dividends payable to holders of record of
shares of MuniYield Common Stock, as of any date after the Closing Date and
prior to the exchange of certificates by any stockholder of Municipal
Strategy, will be paid to such stockholder, without interest, at the time such
stockholder surrenders the stock certificates for exchange.

     From and after the Closing Date, there will be no transfers on the stock
transfer books of Municipal Strategy. If, after the Closing Date, certificates
representing shares of Municipal Strategy Common Stock are presented to
MuniYield, they will be canceled and exchanged for certificates representing
MuniYield Common Stock, and cash in lieu of fractional shares of common stock,
if any, distributable with respect to such common stock in the Reorganization.


Tax Consequences of the Reorganization

     General. The Reorganization has been structured with the intention that
it qualify for Federal income tax purposes as a tax-free reorganization under
Section 368(a)(1)(C) of the Code. Each Fund has elected and qualified since
inception for the special tax treatment afforded RICs under the Code, and
MuniYield intends to continue to so qualify after the Reorganization. The
Reorganization is conditioned upon the receipt of an opinion of counsel that
for Federal income tax purposes (i) the transfer of assets by Municipal
Strategy for MuniYield Common Stock and MuniYield Series F AMPS, as described
above, will constitute a reorganization within the meaning of Section
368(a)(1)(C) of the Code, and Municipal Strategy and MuniYield each will be
deemed a "party" to a reorganization within the meaning of Section 368(b) of
the Code; (ii) in accordance with Section 361(a) of the Code, no gain or loss
will be recognized to Municipal Strategy as a result of the Reorganization or
on the distribution of MuniYield Common Stock and MuniYield Series F AMPS to
the respective stockholders of Municipal Strategy under Section 361(c)(1) of
the Code; (iii) under Section 1032 of the Code, no gain or loss will be
recognized to MuniYield as a result of the Reorganization; (iv) in accordance
with Section 354(a)(1) of the Code, no gain or loss will be recognized to the
stockholders of Municipal Strategy on their respective receipt of MuniYield
Common Stock and MuniYield Series F AMPS in return for their corresponding
shares of Municipal Strategy Common Stock or AMPS (except to the extent that
common stockholders receive cash representing an interest in fractional shares
of MuniYield Common Stock in the Reorganization); (v) in accordance with
Section 362(b) of the Code, the tax basis of the assets of Municipal Strategy
in the hands of MuniYield will be the same as the tax basis of such assets in
the hands of Municipal Strategy immediately prior to the consummation of the
Reorganization; (vi) in accordance with Section 358 of the Code, immediately
after the Reorganization, the tax basis of the MuniYield Common Stock and
MuniYield Series F AMPS received by the stockholders of Municipal Strategy in
the Reorganization will be equal to the tax basis of the Municipal Strategy
Common Stock or AMPS surrendered in return; (vii) in accordance with Section
1223 of the Code, a stockholder's holding period for the MuniYield Common
Stock and MuniYield Series F AMPS will be determined by including the period
for which such stockholder held the Municipal Strategy Common Stock or AMPS
exchanged therefor, provided, that such shares were held as a capital asset;
(viii) in accordance with Section 1223 of the Code, MuniYield's holding period
with respect to the assets of Municipal Strategy transferred will include the
period for which such assets were held by Municipal Strategy; (ix) the payment
of cash to common stockholders of Municipal Strategy in lieu of fractional
shares of MuniYield Common Stock will be treated as though the fractional
shares were distributed as part of the Reorganization and then redeemed by
MuniYield, with the result that such stockholders will have short- or
long-term capital gain or loss to the extent that the cash distribution
differs from the stockholder's basis allocable to the MuniYield fractional
shares; and (x) the taxable year of Municipal Strategy will end on the
effective date of the Reorganization, and pursuant to Section 381(a) of the
Code and regulations thereunder, MuniYield will succeed to and take into
account, subject to limitation, certain tax attributes of Municipal Strategy,
such as earnings and profits, capital loss carryovers and method of
accounting.

     As noted in the discussion under "Comparison of the Funds -- Tax Rules
Applicable to the Funds and Their Stockholders," a Fund must distribute
annually at least 90% of its net taxable and tax-exempt income. A distribution
will only be counted for this purpose if it qualifies for the dividends paid
deduction under the Code. In the opinion of Sidley Austin Brown & Wood LLP,
the issuance of MuniYield Series F AMPS pursuant to the Agreement and Plan in
addition to the already existing MuniYield Series A, Series B, Series C,
Series D and Series E AMPS will not cause distributions on any series of
MuniYield AMPS to be treated as preferential dividends ineligible for the
dividends paid deduction. It is possible, however, that the IRS may assert
that, because there are several series of AMPS, distributions on such shares
are preferential under the Code and therefore not eligible for the dividends
paid deduction. If the IRS successfully disallowed the dividends paid
deduction for dividends on the AMPS, MuniYield could lose the special tax
treatment afforded RICs. In this case, dividends on the shares of MuniYield
Common Stock and MuniYield AMPS would not be exempt from Federal income tax.
Additionally, MuniYield would be subject to a Federal alternative minimum tax.

     Under Section 381(a) of the Code, MuniYield will succeed to and take into
account certain tax attributes of Municipal Strategy, including, but not
limited to, earnings and profits, any net operating loss carryovers, any
capital loss carryovers and method of accounting. The Code, however, contains
special limitations with regard to the use of net operating losses, capital
losses and other similar items in the context of certain reorganizations,
including tax-free reorganizations pursuant to Section 368(a)(1)(C) of the
Code, which could reduce the benefit of these attributes to MuniYield.

     Stockholders should consult their tax advisers regarding the effect of
the Reorganization in light of their individual circumstances. As the
foregoing relates only to Federal income tax consequences, stockholders also
should consult their tax advisers as to the foreign, state and local tax
consequences of the Reorganization.

     Regulated Investment Company Status. The Funds have elected and qualified
since inception for taxation as RICs under Sections 851-855 of the Code, and
after the Reorganization MuniYield intends to continue to so qualify.

<PAGE>

Capitalization

         The following table sets forth as of April 30, 2001 (i) the
capitalization of MuniYield, (ii) the capitalization of Municipal Strategy,
and (iii) the capitalization of the Combined Fund as adjusted to give effect
to the Reorganization.

<TABLE>
<CAPTION>

                                    Capitalization of MuniYield, Municipal Strategy,
                                       and the Combined Fund as of April 30, 2001
                                                       (unaudited)
                                                                                                         Combined
                                                                   Municipal          Pro Forma             Fund
                                                 MuniYield          Strategy         Adjustment        as Adjusted(a)
                                               --------------     --------------   ----------------  ------------------
<S>                                            <C>                <C>              <C>               <C>
Net Assets:
   Net Assets Attributable to
     Common Stock.......................        $495,408,940        $78,478,891       $(6,833,262)      $567,054,569
   Net Assets Attributable to AMPS......        $250,000,000        $43,000,000                         $293,000,000
                                                                                             -----
Shares Outstanding:
   Common Stock.........................          38,482,330          8,871,713        (2,705,008)        44,649,035(b)
   AMPS
     Series A...........................               1,800              1,720            (1,720)             1,800
     Series B...........................               1,800             ------              -----             1,800
     Series C...........................               1,800             ------              -----             1,800
     Series D...........................               1,800             ------              -----             1,800
     Series E...........................               2,800             ------              -----             2,800
     Series F...........................               -----             ------              1,720             1,720(b)
Net Asset Value Per Share:

     Common Stock.......................      $        12.87      $        8.85              -----       $     12.70(c)

     AMPS...............................      $       25,000      $      25,000              -----       $    25,000
</TABLE>

- --------------
(a)  The adjusted balances are presented as if the Reorganization had been
     consummated on April 30, 2001 and are for informational purposes only.
     Assumes distribution of undistributed net investment income and accrual
     of estimated Reorganization expenses of approximately $125,800
     attributable to MuniYield. No assurance can be given about how many
     shares of MuniYield Common Stock will be received by holders of common
     stock of Municipal Strategy on the Closing Date, and the foregoing should
     not be relied upon to reflect the number of shares of MuniYield Common
     Stock that actually will be received on or after such date.
(b)  Assumes the issuance of 6,166,705 shares of MuniYield Common Stock and
     one newly created series of AMPS consisting of 1,720 Series F shares, in
     return for the net assets of Municipal Strategy. The estimated number of
     shares issued was based on the net asset value of the Fund, net of
     distributions, on April 30, 2001.
(c)  Net Asset Value Per Share of common stock net of Reorganization-related
     expenses of $125,800 attributable to MuniYield and distribution of
     undistributed net investment income of $6,673,054 for MuniYield and
     $34,408 for Municipal Strategy.

<PAGE>

                      INFORMATION CONCERNING THE MEETING


Date, Time and Place of Meeting

     The Meeting will be held on October 24, 2001 at the offices of Fund Asset
Management, L.P., 800 Scudders Mill Road, Plainsboro, New Jersey at 9:30 a.m.,
Eastern time.


Solicitation, Revocation and Use of Proxies

     A stockholder executing and returning a proxy has the power to revoke it
at any time prior to its exercise by executing a superseding proxy or by
submitting a notice of revocation to the Secretary of Municipal Strategy or by
voting at the Meeting. Although mere attendance at the Meeting will not revoke
a proxy, a stockholder present at the Meeting may withdraw his or her proxy
and vote in person.

     All shares represented by properly executed proxies, unless such proxies
previously have been superseded or revoked, will be voted at the Meeting in
accordance with the directions on the proxies; if no direction is indicated on
a properly executed proxy, such shares will be voted "FOR" the approval of the
Agreement and Plan.

     It is not anticipated that any other matters will be brought before the
Meeting. If, however, any other business properly is brought before the
Meeting, proxies will be voted in accordance with the judgment of the persons
designated on such proxies.


Record Date and Outstanding Shares

     Only the stockholders of record of shares of Municipal Strategy Common
Stock and Municipal Strategy Series A AMPS at the close of business on the
Record Date are entitled to vote at the Meeting or any adjournment thereof. At
the close of business on the Record Date, there were ____ shares of Municipal
Strategy Common Stock outstanding and 1,720 shares of Municipal Strategy
Series A AMPS outstanding.


Security Ownership of Certain Beneficial Owners and Management

     To the knowledge of the management of Municipal Strategy, no person or
entity owns beneficially 5% or more of the outstanding shares of the Municipal
Strategy Common Stock or Municipal Strategy Series A AMPS as of the Record
Date.

     As of the Record Date, the Directors and officers of MuniYield as a group
(11 persons) owned an aggregate of less than 1% of the outstanding shares of
MuniYield Common Stock and owned no MuniYield AMPS.

     As of the Record Date, the Directors and officers of Municipal Strategy
as a group (13 persons) owned an aggregate of less than 1% of the outstanding
shares of Municipal Strategy Common Stock and owned no Municipal Strategy
AMPS.

     On the Record Date, Mr. Glenn, a Director and an officer of each Fund,
and the other Directors and officers of each Fund owned an aggregate of less
than 1% of the outstanding shares of common stock of ML & Co.


Voting Rights and Required Vote

     For purposes of this Proxy Statement and Prospectus, each share of
Municipal Strategy Common Stock and Municipal Strategy Series A AMPS is
entitled to one vote. Approval of the Agreement and Plan requires the approval
of the affirmative vote of stockholders representing (i) a majority of the
outstanding shares of Municipal Strategy Common Stock and Municipal Strategy
Series A AMPS, voting together as a single class, and (ii) a majority of the
outstanding shares of Municipal Strategy Series A AMPS, voting separately as a
class.

     For purposes of the Meeting, a quorum consists of a majority of the
outstanding shares of Municipal Strategy's Common Stock and a majority of the
outstanding shares of Municipal Strategy's Series A AMPS. If, by the time
scheduled for the Meeting, a quorum of the applicable Municipal Strategy
stockholders is not present, or if a quorum is present but sufficient votes to
take action upon the Agreement and Plan are not received from the stockholders
of Municipal Strategy, the persons named as proxies may propose one or more
adjournments of the Meeting to permit further solicitation of proxies from
stockholders. Any such adjournment will require the affirmative vote of a
majority of the shares of Municipal Strategy present in person or by proxy and
entitled to vote at the session of the Meeting to be adjourned. The persons
named as proxies will vote in favor of any such adjournment if they determine
that adjournment and additional solicitation are reasonable and in the
interests of the Municipal Strategy's stockholders. Notice of any such
adjournment is not required to be sent to stockholders.


Appraisal Rights

     Under Maryland law, since Municipal Strategy Common Stock and Municipal
Strategy Series A AMPS are not publicly traded, Municipal Strategy
stockholders will be entitled to appraisal rights upon the consummation of the
Reorganization.

     Under Maryland law, a holder of Municipal Strategy Common Stock or
Municipal Strategy Series A AMPS desiring to receive payment of the fair value
of their stock (an "objecting stockholder") (i) must file with Municipal
Strategy a written objection to the Reorganization at or before the Meeting,
(ii) must not vote in favor of the Reorganization (although a vote against the
Reorganization is not required), and (iii) must make written demand on
MuniYield for payment of their stock, stating the number and class of shares
for which such stockholder demands payment, within 20 days after the Maryland
Department accepts for filing the Articles of Transfer with respect to the
Reorganization (MuniYield is required promptly to give written notice to all
objecting stockholders of the date that the Articles of Transfer are accepted
for record). A vote against the Reorganization will not be sufficient to
satisfy the requirement of a written demand described in clause (iii). An
objecting stockholder who fails to adhere to this procedure will be bound by
the terms of the Reorganization. An objecting stockholder ceases to have any
rights of a stockholder except the right to receive fair value for their
shares and has no right to receive any dividends or distribution payable to
such holders on a record date after the close of business on the date on which
fair value is to be determined, which, for these purposes, will be the Meeting
date. A demand for payment of fair market value may not be withdrawn, except
upon the consent of MuniYield. Within 50 days after the Articles of Transfer
have been accepted for filing, an objecting stockholder who has not received
payment for his or her shares may petition a court located in Baltimore,
Maryland for an appraisal to determine the fair value of the stock.

                            ADDITIONAL INFORMATION

     The expenses of preparation, printing and mailing of the enclosed form of
proxy, the accompanying Notice and this Proxy Statement and Prospectus that
are directly attributable to Municipal Strategy will be borne by Municipal
Strategy.

     Municipal Strategy likewise will reimburse banks, brokers and others for
their reasonable expenses in forwarding proxy solicitation materials to the
beneficial owners of shares of Municipal Strategy Common Stock and Municipal
Strategy Series A AMPS and certain persons that Municipal Strategy may employ
for their reasonable expenses in assisting in the solicitation of proxies from
such beneficial owners of shares of capital stock of Municipal Strategy.

     In order to obtain the necessary quorum at the Meeting, supplementary
solicitation may be made by mail, telephone, telegraph or personal interview
by officers of Municipal Strategy. Municipal Strategy has retained Georgeson
Shareholder Communications Inc., 17 State Street, New York, New York 10004 to
aid in the solicitation of proxies, at a cost to be borne by Municipal
Strategy of approximately $____________, plus aggregate out-of-pocket expenses
of approximately $_______.

     Broker-dealer firms, including Merrill Lynch, holding Municipal Strategy
shares in "street name" for the benefit of their customers and clients will
request the instructions of such customers and clients on how to vote their
shares on each proposal before the Meeting. With respect to shares of
Municipal Strategy Common Stock, broker-dealer firms, including Merrill Lynch,
will not be permitted to grant voting authority without instructions with
respect to the approval of the Agreement and Plan. Shares of Municipal
Strategy Series A AMPS held in "street name," however, may be voted by
broker-dealer firms without instructions from the broker-dealer's customers
and clients under certain conditions with respect to the approval of the
Agreement and Plan and will be counted for purposes of establishing a quorum
of Municipal Strategy shareholders if no instructions are received one
business day before the Meeting or, if adjourned, one business day before the
day to which the Meeting is adjourned. These conditions include, among others,
that (i) at least 30% of the outstanding Municipal Strategy Series A AMPS have
voted on the Agreement and Plan, (ii) less than 10% of the outstanding
Municipal Strategy Series A AMPS outstanding have voted against the Agreement
and Plan, and (iii) holders of Municipal Strategy Common Stock have voted to
approve the Agreement and Plan. In such instances, the broker-dealer firm will
vote such uninstructed shares of Municipal Strategy Series A AMPS in the same
proportion as the votes cast by all holders of Municipal Strategy Series A
AMPS who voted on the Agreement and Plan. Municipal Strategy will include
shares held of record by broker-dealers as to which such authority has been
granted in its tabulation of the total number of shares present for purposes
of determining whether the necessary quorum of stockholders of Municipal
Strategy exists. Proxies that are returned to Municipal Strategy but that are
marked "abstain" or on which a broker-dealer has declined to vote on any
proposal ("broker non-votes") will be counted as present for the purposes of
determining a quorum. Abstentions and broker non-votes will not be counted as
votes cast. Abstentions and broker non-votes will have the same effect as a
vote against the Agreement and Plan.

     This Proxy Statement and Prospectus does not contain all of the
information set forth in the N-14 Registration Statement and the exhibits
relating thereto that MuniYield has filed with the Commission under the
Securities Act of 1933, as amended, and the Investment Company Act, to which
reference is hereby made.

     The Funds are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and the Investment Company Act and in
accordance therewith are required to file reports and other information with
the Commission. Reports, proxy statements, registration statements and other
information filed by MuniYield and Municipal Strategy can be inspected and
copied at the public reference facilities of the Commission in Washington D.C.
and at the New York Regional Office of the Commission at Seven World Trade
Center, New York, New York, 10048. Copies of such materials also can be
obtained by mail from the Public Reference Branch, Office of Consumer Affairs
and Information Services, Securities and Exchange Commission, Washington D.C.
20549, at prescribed rates. The Commission maintains a web site
(http:/www.sec.gov) that contains a prospectus relating to MuniYield Common
Stock, dated November 21, 1991, a prospectus relating to MuniYield AMPS dated
December 18, 1991, a prospectus relating to Municipal Strategy Common Stock,
dated February 27, 2001, a prospectus relating to Municipal Strategy AMPS,
dated February 27, 2001, and a statement of additional information relating to
Municipal Strategy AMPS, dated February 27, 2001 and other information
regarding the Funds. Reports, proxy materials and other information concerning
MuniYield may also be inspected at the offices of the NYSE, 20 Broad Street,
New York, New York 10005.

                                   CUSTODIAN

     BONY acts as the custodian for cash and securities of MuniYield and
Municipal Strategy and will serve as custodian for the Combined Fund after the
Reorganization. The principal business address of BONY in such capacity is 90
Washington Street, New York, New York 10286.

            TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND REGISTRAR

     BONY serves as the transfer agent, dividend disbursing agent and
registrar with respect to the MuniYield Common Stock and AMPS and Municipal
Strategy AMPS, pursuant to a registrar, transfer agency and service agreement
with MuniYield. The principal business address of BONY in such capacity is 101
Barclay Street, New York, New York 10286. It is anticipated that BONY will
continue to provide these services to the Combined Fund after the
Reorganization.

     FDS serves as the transfer agent, dividend disbursing agent and registrar
with respect to Municipal Strategy Common Stock, pursuant to a registrar,
transfer agency and service agreement with Municipal Strategy. The principal
business address of FDS in such capacity is 4800 Deer Lake Drive East,
Jacksonville, Florida 32246-6484.

                         ACCOUNTING SERVICES PROVIDER

     State Street provides certain accounting services for MuniYield and
Municipal Strategy and will provide the same services to the Combined Fund
after the Reorganization.  The principal business address of State Street in
such capacity is 500 College Road East, Princeton, New Jersey 08540.

                                LEGAL OPINIONS

     Certain legal matters in connection with the Reorganization will be
passed upon for the Funds by Sidley Austin Brown & Wood LLP, New York, New
York.

                                    EXPERTS

     _____________________, independent auditors, have audited the financial
statements and financial highlights of MuniYield and Municipal Strategy as of
October 31, 2000 as set forth in their reports which appear in this Proxy
Statement and Prospectus. The financial statements and financial highlights of
the Funds are included in reliance upon their reports, given on their
authority as experts in accounting and auditing.

     _____________________ will serve as the independent auditors for the
Combined Fund after the Reorganization. The principal business address of
_____________________ is ________________, _____________________.

                               LEGAL PROCEEDINGS

     On June 21, 1996, a putative class action titled Jack Green, et al. v.
Fund Asset Management, L.P., et al. was filed in the United States District
Court for the District of Massachusetts. Among the named defendants in the
action are seven of the leveraged closed-end municipal bond funds (including
MuniYield) for which FAM serves as the investment adviser. In addition to the
named defendants, plaintiffs also purport to assert claims against a defendant
class consisting of all other publicly traded, closed-end investment companies
for which FAM serves as investment adviser and which, among other things, have
issued AMPS. The named plaintiffs, who claim to be investors in the seven
named funds, purport to bring the action on behalf of a class consisting of
all holders of the common stock of the subject funds.

     Plaintiffs claim, among other things, that the registration statements,
annual reports and other documents filed by the funds with the Commission were
misleading because such documents allegedly failed to disclose that proceeds
arising from the issuance of AMPS would be included in a fund's net assets for
the purposes of calculating the investment advisory fee payable to FAM. In
addition, plaintiffs allege that a conflict of interest existed because it
would always be in the defendants' interest to keep the funds fully leveraged
to maximize the advisory fees and collateral compensation notwithstanding
adverse market conditions. Plaintiffs also allege an additional conflict of
interest arising from the receipt by such affiliates of underwriting
discounts, or other revenues in connection with the sale of the AMPS by the
funds. The complaint also attempted to assert claims under Sections 8(e),
34(b), 36(a) and 36(b) of the Investment Company Act and the common law.
Plaintiffs seek unspecified monetary damages as well as injunctive relief.

     On September 17, 1997, defendants moved to dismiss plaintiffs' complaint
on the ground that plaintiffs had failed to state a claim upon which relief
could be granted. On February 23, 1998, the District Court granted defendants'
motion in substantial part and dismissed plaintiffs' claims under Sections
8(e), 34(b) and 36(a) of the Investment Company Act with prejudice, but
declined to dismiss plaintiffs' claims under section 36(b) and state law.

     On February 4, 1999, defendants moved to dismiss plaintiffs' state law
claims for breach of fiduciary duty and deceit on the ground that they are
preempted by Section 36(b) of the Investment Company Act. On June 14, 1999,
the District Court granted defendants' motion and dismissed plaintiffs' state
law claims. At the same time, the District Court granted plaintiffs permission
to immediately file an interlocutory appeal to the United States Court of
Appeals for the Third Circuit. On March 16, 2001, the Third Circuit reversed
the District Court's decision and reinstated plaintiffs' state law claims.

     On February 5, 2001, while plaintiffs' appeal before the Third Circuit
was still pending, defendants moved in the District Court for summary judgment
as to plaintiffs' remaining federal claim under Section 36(b). On March 16,
2001, plaintiffs cross-moved for partial summary judgment on liability. On
June 5, 2001, the District Court granted defendants' motion for summary
judgment, denied plaintiffs' motion for partial summary judgment, and
dismissed the case in its entirety. In doing so, the Court refused to exercise
supplemental jurisdiction over plaintiffs' remaining (and recently reinstated)
state law claims.

     Plaintiffs have filed a Notice of Appeal seeking review of the District
Court's decision before the U.S. Court of Appeals for the Third Circuit.
Defendants believe that the plaintiffs' allegations are without merit and
intend to continue to defend the action vigorously.

     FAM has agreed to indemnify the named defendant funds (including
MuniYield) for any liabilities or expenses that they may incur in connection
with this litigation.

                             STOCKHOLDER PROPOSALS

     A stockholder proposal intended to be presented at any subsequent meeting
of stockholders of Municipal Strategy must be received by Municipal Strategy
in a reasonable time before Municipal Strategy begins to print and mail the
proxy solicitation materials to be used in connection with such meeting in
order to be considered in Municipal Strategy's proxy statement and form of
proxy relating to the meeting. Any stockholder who desires to present any
proposal at any subsequent meeting of stockholders of Municipal Strategy,
without including such proposal in Municipal Strategy's proxy statement
relating to the meeting also must send their written proposal to Municipal
Strategy within a reasonable time before the Board of Directors' solicitation
relating to such meeting is to be made. Written proposals should be sent to
the Secretary of Municipal Strategy at the offices of Municipal Strategy.

                                           By Order of the Board of Directors

                                           ALICE A. PELLEGRINO
                                           Secretary

Plainsboro, New Jersey
Dated: September __, 2001

<PAGE>

<TABLE>
<CAPTION>

                                            INDEX TO FINANCIAL STATEMENTS

                                                                                                               Page
<S>                                                                                                            <C>
Audited Financial Statements for MuniYield Fund, Inc. for the Year Ended
   October 31, 2000.............................................................................................F-2
Unaudited Financial Statements for MuniYield Fund, Inc. for the Six Months
   Ended April 30, 2001.........................................................................................F-3
Audited Financial Statements for Merrill Lynch Municipal Strategy Fund, Inc.
   for the Year Ended October 31, 2000..........................................................................F-4
Unaudited Financial Statements for Merrill Lynch Municipal Strategy Fund, Inc.
   for the Six Months Ended April 30, 2001......................................................................F-5
Pro Forma Unaudited Financial Statements for the Combined Fund as of April 30, 2001.............................F-6

</TABLE>

<PAGE>

                       Audited Financial Statements for
                             MuniYield Fund, Inc.
                      for the Year Ended October 31, 2000


































                          [To Be Filed By Amendment]

<PAGE>

                      Unaudited Financial Statements for
                             MuniYield Fund, Inc.
                    for the Six Months Ended April 30, 2001











































                          [To Be Filed By Amendment]

<PAGE>

                       Audited Financial Statements for
                  Merrill Lynch Municipal Strategy Fund, Inc.
                      for the Year Ended October 31, 2000





























                          [To Be Filed By Amendment]

<PAGE>

                      Unaudited Financial Statements for
                  Merrill Lynch Municipal Strategy Fund, Inc.
                    for the Six Months Ended April 30, 2001





























                          [To Be Filed By Amendment]


<PAGE>

                 Pro Forma Unaudited Financial Statements for
                               the Combined Fund
                             as of April 30, 2001






























                          [To Be Filed By Amendment]

<PAGE>

<TABLE>
<CAPTION>

                                                                                                         APPENDIX I

                                            INFORMATION PERTAINING TO EACH FUND

General Information Pertaining to Each Fund

                                                        Defined Term            Fiscal          State of          Meeting
Fund                                                 Used in Appendix I        Year End      Incorporation          Time
- ----                                               ---------------------      ----------    ---------------     ----------
<S>                                                <C>                        <C>           <C>                 <C>
MuniYield Fund, Inc.....................           MuniYield                    10/31           Maryland            N/A
Merrill Lynch Municipal Strategy Fund, Inc.        Municipal Strategy           10/31           Maryland         9:30 a.m.

</TABLE>

<TABLE>
<CAPTION>

                                                                             Shares of Capital Stock Outstanding
                                                                                    as of the Record Date
                                                                             -----------------------------------
Fund                                                                             Common Stock           AMPS
- ----                                                                         ------------------     ------------
<S>                                                                          <C>                    <C>
MuniYield...............................................................                                10,000
Municipal Strategy......................................................                                 1,720

</TABLE>

Information Pertaining to Directors of MuniYield

     Set forth in the table below is information regarding board of directors
and audit committee meetings held and the aggregate fees and expenses paid by
MuniYield to non-interested Directors during the most recently completed
fiscal year.

<TABLE>
<CAPTION>

                                    Board of Directors                   Audit Committee
                            --------------------------------------   -------------------------
                            # Meetings   Annual Fee    Per Meeting   # Meetings    Per Meeting     Aggregate Fees
Fund                          Held*         ($)**      Fee ($)***       Held*       Fee ($)***    and Expenses ($)
- ----                        ----------   ----------    -----------   ----------    -----------    ----------------
<S>                         <C>           <C>          <C>           <C>           <C>            <C>
MuniYield................       4            227          1,491           4            114             52,397

</TABLE>

- ---------------
*     Includes meetings held via teleconferencing equipment.
**    Each non-interested Director receives an aggregate annual retainer of
$100,000 for his or her services to certain funds advised by Fund Asset
Management, L.P. ("FAM") and its affiliate, Merrill Lynch Investment Managers,
L.P. ("MLIM") ("Affiliate-Advised Funds"). The portion of the annual retainer
allocated to each Affiliate-Advised Fund is determined quarterly based on the
relative net assets of each fund.
***   The fee is payable for each meeting attended in person. A fee is not
paid for telephonic meetings. The annual per meeting fees paid to each
non-interested Director aggregate $60,000 for all Affiliate-Advised Funds for
which the Director serves and are allocated equally among those funds.


     Set forth in the table below is information regarding compensation paid
by MuniYield to the non-interested Directors during the most recently
completed fiscal year.

<TABLE>
<CAPTION>

Fund                          Bodurtha          London            May             Perold              Ramo
- ----                          --------          ------            ---             ------              ----
<S>                           <C>               <C>              <C>              <C>                <C>
MuniYield*............         $7,142           $7,142           $7,142           $7,142             $13,779

</TABLE>

- ---------------
*   No pension or retirement benefits are accrued as part of the expenses
of MuniYield.

     Set forth in the table below is information regarding the aggregate
compensation paid by all registered investment companies advised by Fund Asset
Management, L.P. ("FAM") and its affiliate, Merrill Lynch Investment Managers,
L.P. ("MLIM") (collectively, "Affiliate-Advised Funds"), including MuniYield,
to the non-interested Directors for the year ended December 31, 2000.

<PAGE>

<TABLE>
<CAPTION>


                                                               Aggregate Compensation from Affiliate-Advised
Name of MuniYield Director                                                  Funds Paid to Directors($)*
                                                               ---------------------------------------------
<S>                                                                                  <C>
James H. Bodurtha.......................................                             $132,250
Herbert I. London.......................................                             $132,250
Joseph L. May...........................................                             $132,250
Andre F. Perold.........................................                             $132,250
Roberta Cooper Ramo.....................................                             $169,000

</TABLE>

- ---------------
*    The Directors serve on the boards of Affiliate-Advised Funds as follows:
     Mr. Bodurtha (30 registered investment companies consisting of 42
     portfolios); Mr. London (30 registered investment companies consisting of
     42 portfolios); Mr. May (30 registered investment companies consisting of
     42 portfolios); Mr. Perold (30 registered investment companies consisting
     of 42 portfolios); and Ms. Ramo (30 registered investment companies
     consisting of 42 portfolios).


Information Pertaining to Directors of Municipal Strategy

         Set forth in the table below is information regarding board of
directors and Nominating and Oversight Committee (the "Audit Committee")
meetings held and the aggregate fees and expenses paid by Municipal Strategy
to non-interested Directors during the most recently completed fiscal year.


<TABLE>
<CAPTION>


                                    Board of Directors                       Audit Committee
                            --------------------------------       ------------------------------------
                                                         Per                        Per       Aggregate
                           # Meetings   Annual Fee     Meeting     # Meetings     Meeting     Fees and
Fund                          Held*        ($)**     Fee ($)***      Held*       Fee ($)+     Expenses
- ----                       ----------   ----------   ----------    ----------    --------     ---------
<S>                             <C>        <C>           <C>           <C>        <C>          <C>
Municipal Strategy....          4          4,400         200           4          200***       31,324


- ---------------
*        Includes meetings held via teleconferencing equipment.
**       The Annual Fee is the combined fee for the Board of Directors and its Nominating and Oversight Committee (the
         "Audit Committee").
***      The Co-Chairmen of the Audit Committee each receive an additional annual fee of $1,000.
+        The fee is payable for each meeting attended in person. A fee is not paid for telephonic meetings.

</TABLE>

         Set forth in the table below is information regarding compensation
paid by Municipal Strategy to the non-interested Directors during the most
recently completed fiscal year.

<TABLE>
<CAPTION>


Fund                       Forbes++      Montgomery      Reilly++       Ryan       Suddarth+      West      Zinbarg+
- ----                       --------      ----------      --------       ----       ---------      ----      --------
<S>                         <C>            <C>            <C>          <C>           <C>         <C>         <C>
Municipal
Strategy*............       $6,400         $5,400         $6,400       $5,400        $1,275      $5,400      $1,275


- ---------------
*        No pension or retirement benefits are accrued as part of the expenses of Municipal Strategy.
+        Mr. Suddarth and Mr. Zinbarg were elected Directors of the Fund on July 10, 2000.
++       Effective July 2001, Mr. Forbes and Mr. Reilly are Co-Chairmen of the Audit Committee, each receiving
         $1,000 annually for serving in such position.

</TABLE>


         Set forth in the table below is information regarding the aggregate
compensation paid by all Affiliate-Advised Funds, including Municipal
Strategy, to the non-interested Directors for the year ended December 31,
2000.

<TABLE>
<CAPTION>

                                                               Aggregate Compensation from Affiliate-Advised Funds
Name of Municipal Strategy Director                                          Paid to Directors($)(*)
- -----------------------------------                            ---------------------------------------------------
<S>                                                                                  <C>
Ronald W. Forbes........................................                             $295,008
Cynthia A. Montgomery...................................                             $264,008
Charles C. Reilly.......................................                             $352,050
Kevin A. Ryan...........................................                             $264,008
Roscoe S. Suddarth......................................                             $193,977
Richard R. West.........................................                             $373,000
Edward D. Zinbarg.......................................                             $242,435

- ---------------
*    The Directors serve on the boards of Affiliate-Advised Funds as follows: Mr. Forbes (51 registered investment companies
     consisting of 58 portfolios); Ms. Montgomery (51 registered investment companies consisting of 58 portfolios); Mr.
     Reilly (51 registered investment companies consisting of 58 portfolios); Mr. Ryan (51 registered investment companies
     consisting of 58 portfolios); Mr. Suddarth (51 registered investment companies consisting of 58 portfolios); Mr. West
     (66 registered investment companies consisting of 72 portfolios); and Mr. Zinbarg (51 registered investment companies
     consisting of 58 portfolios).

</TABLE>

<PAGE>

<TABLE>
<CAPTION>

Information Pertaining to Directors of MuniYield and Municipal Strategy

                                                                                          Director Since
                                                                             ----------------------------------------
Name, Address and Biography                                 Age              MuniYield             Municipal Strategy
- ---------------------------                                 ---              ---------             ------------------

<S>                                                         <C>              <C>                   <C>
James H. Bodurtha.................................          57                 1995                      N/A
          36 Popponesset Road, Cotuit, Massachusetts
          02635. Director and Executive Vice President,
          The China Business Group, Inc. since 1996;
          Chairman and Chief Executive Officer, China
          Enterprise Management Corporation from 1993
          to 1996; Chairman, Berkshire Corporation
          since 1980; Partner, Squire, Sanders &
          Dempsey from 1980 to 1993.


Ronald W. Forbes.................................           60                 N/A                       1996
          1400 Washington Avenue, Albany, New York
          12222. 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. since 1999.

Terry K. Glenn...................................           60                 1999                      1999
          P.O. Box 9011, Princeton, New Jersey
          08543-9011. Executive Vice President of FAM
          and its affiliate MLIM (which terms as used
          herein include their corporate predecessors)
          since 1983; Executive Vice President and
          Director of Princeton Services, Inc.
          ("Princeton Services") since 1993; President
          of FAM Distributors, Inc. ("FAMD") since 1986
          and Director thereof since 1991; President of
          Princeton Administrators, L.P. ("Princeton
          Administrators") since 1988; Director of
          Financial Data Services, Inc. ("FDS") since
          1985.

Herbert I. London.................................          62                 1991                      N/A
          2 Washington Square Village, New York, New
          York 10012. John M. Olin Professor of
          Humanities, New York University since 1993
          and Professor since 1980; President, Hudson
          Institute since 1997 and Trustee thereof
          since 1980; Dean, Gallatin Division of New
          York University from 1976 to 1993;
          Distinguished Fellow, Herman Kahn Chair,
          Hudson Institute from 1984 to 1985; Director,
          Damon Corp. from 1991 to 1995; Overseer,
          Center for Naval Analyses from 1983 to 1993;
          Limited Partner, Hypertech LP since 1996.

<PAGE>


                                                                                          Director Since
                                                                             ----------------------------------------
Name, Address and Biography                                 Age              MuniYield             Municipal Strategy
- ---------------------------                                 ---              ---------             ------------------

Joseph L. May......................................         71                 1991                      N/A
          424 Church Street, Suite 2000, Nashville,
          Tennessee 37219. Attorney in private practice
          since 1984; President, May and Athens Hosiery
          Mills Division, Wayne-Gossard Corporation
          from 1954 to 1983; Vice President,
          Wayne-Gossard Corporation from 1972 to 1983;
          Chairman, The May Corporation (personal
          holding company) from 1972 to 1983; Director,
          Signal Apparel Co. from 1972 to 1989.

Cynthia A. Montgomery............................           48                 N/A                       1996
          Harvard Business School, Soldiers Field Road,
          Boston, Massachusetts 02163. Professor,
          Harvard Business School since 1989; Associate
          Professor, J.L. Kellogg Graduate School of
          Management, Northwestern University from 1985
          to 1989; Assistant Professor, Graduate School
          of Business Administration, The University of
          Michigan from 1979 to 1985; Director
          UnumProvident Corporation since 1990 and
          Director of Newell Rubbermaid Inc. since
          1995.

Andre F. Perold..................................           48                 1991                      N/A
          Morgan Hall, Soldiers Field, Boston,
          Massachusetts 02163. Harvard Business School:
          George Gund Professor of Finance and Banking
          since 2000, Finance Area Chair since 1996,
          Sylvan C. Coleman Professor of Financial
          Management from 1993 to 2000; Trustee, The
          Common Fund since 1989; Director, Genbel
          Securities Limited and Gensec Bank since
          1999; Director, Gensec Asset Management since
          2000; Director, Bulldogresearch.com since
          2000; Director, Stockback.com since 2000;
          Director, Quantec Limited from 1991 to 1999;
          Director, TIBCO from 1994 to 1996.


<PAGE>

                                                                                          Director Since
                                                                             ----------------------------------------
Name, Address and Biography                                 Age              MuniYield             Municipal Strategy
- ---------------------------                                 ---              ---------             ------------------

Roberta Cooper Ramo..............................           58                 1999                      N/A
          P.O. Box 2168, 500 Fourth Street, N.W.,
          Albuquerque, New Mexico 87103. Shareholder,
          Modrall, Sperling, Roehl, Harris & Sisk, P.A.
          since 1993; President, American Bar
          Association from 1995 to 1996 and Member of
          the Board of Governors thereof from 1994 to
          1997; Partner, Poole, Kelly & Ramo, Attorneys
          at Law, P.C. from 1977 to 1993; Director,
          Coopers, Inc. since 1999; Director, United
          New Mexico Bank (now Wells Fargo) from 1983
          to 1988; Director, First National Bank of New
          Mexico (now First Security) from 1975 to
          1976.

Charles C. Reilly................................           69                 N/A                       1996
          9 Hampton Harbor Road, Hampton Bays, New York
          11946. Self-employed financial consultant
          since 1990; President and Chief Investment
          Officer of Verus Capital, Inc. from 1979 to
          1990; Senior Vice President of Arnhold and S.
          Bleichroeder, Inc. from 1973 to 1990; Adjunct
          Professor, Columbia University Graduate
          School of Business from 1990 to 1991; Adjunct
          Professor, Wharton School, University of
          Pennsylvania from 1989 to 1990; Partner,
          Small Cities Cable Television from 1986 to
          1997.

Kevin A. Ryan....................................           68                 N/A                       1996
          127 Commonwealth Avenue, Chestnut Hill,
          Massachusetts 02467. Founder and currently
          Director Emeritus of The Boston University
          Center for the Advancement of Ethics and
          Character and Director thereof from 1989
          until 1999; Professor from 1982 to 1999 and
          currently Professor Emeritus of Education at
          Boston University; formerly taught on the
          faculties of The University of Chicago,
          Stanford University and Ohio State
          University.


<PAGE>
                                                                                          Director Since
                                                                             ----------------------------------------
Name, Address and Biography                                 Age              MuniYield             Municipal Strategy
- ---------------------------                                 ---              ---------             ------------------

Roscoe S. Suddarth...............................           65                 N/A                       2000
          7403 MacKenzie Court, Bethesda, Maryland
          20817. 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; U.S.
          Ambassador to the Hashemite Kingdom of
          Jordan, from 1987 to 1990; Deputy Inspector
          General, U.S. Department of State, from 1991
          to 1994

Richard R. West..................................           63                 N/A                       1996
          Box 604, Genoa, Nevada 89411. Professor of
          Finance since 1984, Dean from 1984 to 1993,
          and currently Dean Emeritus of New York
          University, Leonard N. Stern School of
          Business Administration; Director of Bowne &
          Co., Inc. (financial printers), Vornado
          Realty Trust, Inc. (real estate holding
          company) and Alexander's Inc. (real estate
          company).

Edward D. Zinbarg................................           66                 N/A                       2000
          5 Hardwell Road, Short Hills, New Jersey
          07078-2117. 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.

</TABLE>


Information Pertaining to Officers of MuniYield and Municipal Strategy

         Set forth in the table below is information about the officers of
MuniYield and Municipal Strategy.


<TABLE>
<CAPTION>


                                                                                             Officer Since
                                                                                   ------------------------------------
Name, Address and Biography*                                Age      Office        MuniYield         Municipal Strategy
- ---------------------------                                 ---      ------        ---------         ------------------

<S>                                                         <C>      <C>             <C>                   <C>
Terry K. Glenn...................................           60       President        1991**               1995**
     Executive Vice President of MLIM and FAM since
     1983; Executive Vice President and Director of
     Princeton Services since 1993; President of FAMD
     since 1986 and Director thereof since 1991;
     President of Princeton Administrators, L.P. since
     1988; Director of FDS since 1985.


Vincent R. Giordano..............................          56        Senior Vice      1991                 1995
     Managing Director of MLIM since 2001; Senior Vice                President
     President of FAM and MLIM from 1984 to 2000;
     Senior Vice President of Princeton Services since
     1993.

Kenneth A. Jacob.................................          50        Vice             1991                 1995
     First Vice President of MLIM since 1997; Vice                   President
     President of MLIM from 1984 to 1997; Vice
     President of FAM since 1984.

Donald C. Burke.................................. .         40       Vice             1993                 1995
     First Vice President of MLIM and FAM since 1997                 President;
     and Treasurer thereof since 1999; Senior Vice                   Treasurer
     President and Treasurer of Princeton Services 1999
     1999 since 1999; Vice President of FAMD since
     1999; Vice President of MLIM from 1990 to 1997;
     Director of Taxation of MLIM since 1990.

John M. Loffredo, CFA............................           37       Vice             N/A                  1997
     First Vice President of MLIM since 1997; Vice t                 President
     President of MLIM from 1991 to 1997.

Roberto W. Roffo..................................         35        Vice             2000                 2000
     Vice President of MLIM since 1996 and a Portfolio               President
     Manager thereof since 1992.

Alice A. Pellegrino...............................         41        Secretary         1999                2001
     Vice President of MLIM since 1999; Attorney
     associated with MLIM since 1997; Associate with
     Kirkpatrick & Lockhart LLP from 1992 to 1997.


- -----------------
*  The address of each officer is 800 Scudders Mill Road, Plainsboro, New Jersey 08536.
** Mr. Glenn was elected President of each Fund in 1999. Prior to that he served as Executive Vice President of each Fund.

</TABLE>

<PAGE>

                                                                   APPENDIX II

                     AGREEMENT AND PLAN OF REORGANIZATION

         THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made
as of the ______ day of ____________, 2001, by and between Merrill Lynch
Municipal Strategy Fund, Inc., a Maryland corporation ("Municipal Strategy"),
and MuniYield Fund, Inc., a Maryland corporation ("MuniYield"). Municipal
Strategy and MuniYield are sometimes referred to herein collectively as the
"Funds" and individually as a "Fund," as the context requires.

         The reorganization will constitute the following:

         (1) the acquisition by MuniYield of substantially all of the assets,
and the assumption by MuniYield of substantially all of the liabilities of
Municipal Strategy in return solely for an equal aggregate value of newly
issued full shares of (A) common stock, with a par value of $0.10 per share,
of MuniYield ("MuniYield Common Stock") and (B) auction market preferred stock
("AMPS") of MuniYield, with a par value of $0.10 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), designated Series F
("MuniYield Series F AMPS"), and

         (2) the subsequent distribution by Municipal Strategy to Municipal
Strategy stockholders of (A) all of the full shares MuniYield Common Stock
received by Municipal Strategy in return for Municipal Strategy stockholders'
shares of common stock, with a par value of $0.10 per share, including shares
of common stock of Municipal Strategy representing the Dividend Reinvestment
Plan ("DRIP") shares held in the book deposit accounts of the holders of
common stock of Municipal Strategy ("Municipal Strategy Common Stock") (plus
cash in lieu of fractional shares), and (B) all of the MuniYield Series F AMPS
received by Municipal Strategy in return for Municipal Strategy stockholders'
shares of AMPS, with a par value of $0.10 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), designated Series A
("Municipal Strategy AMPS");

all upon and subject to the terms hereinafter set forth (collectively, the
"Reorganization").

         In the course of the Reorganization, MuniYield Common Stock and
MuniYield Series F AMPS will be distributed to the stockholders of Municipal
Strategy as follows:

         (1) each holder of Municipal Strategy Common Stock will be entitled
to receive a number of full shares of MuniYield Common Stock, plus cash in
lieu of fractional shares, equal to the aggregate net asset value of Municipal
Strategy Common Stock owned by such stockholder on the Closing Date (as
defined in Section 7(a) below); and (2) each holder of Municipal Strategy AMPS
will be entitled to receive a number of shares of MuniYield Series F AMPS
equal to the aggregate liquidation preference (and aggregate value) of the
Municipal Strategy AMPS owned by such stockholder on the Closing Date.

         It is intended that the Reorganization described in this Agreement
shall be a reorganization within the meaning of Section 368(a)(1)(C) of the
Internal Revenue Code of 1986, as amended (the "Code"), and any successor
provision.

         Prior to the Closing Date, Municipal Strategy shall declare a
dividend or dividends which, together with all such previous dividends, shall
have the effect of distributing to its stockholders all of its respective net
investment company taxable income to and including the Closing Date, if any
(computed without regard to any deduction for dividends paid), and all of its
net capital gain, if any, realized to and including the Closing Date. In this
regard and in connection with the Reorganization, the last dividend period for
the Municipal Strategy AMPS prior to the Closing Date may be shorter than the
dividend period for such AMPS determined as set forth in the Articles
Supplementary to Municipal Strategy's Articles of Incorporation establishing
the powers, rights and preferences of the Municipal Strategy AMPS.

         Articles Supplementary to MuniYield's Articles of Incorporation
establishing the powers, rights and preferences of the MuniYield Series F AMPS
will have been filed with the State Department of Assessments and Taxation of
Maryland (the "Maryland Department") prior to the Closing Date.

         As promptly as practicable after the consummation of the
Reorganization, Municipal Strategy shall be dissolved in accordance with the
laws of the State of Maryland and will terminate its registration under the
Investment Company Act of 1940, as amended (the "1940 Act").

<PAGE>

                                   AGREEMENT
                                   ---------


         In order to consummate the Reorganization and in consideration of the
promises and the covenants and agreements hereinafter set forth, and intending
to be legally bound, each Fund hereby agrees as follows:

         1. Representations and Warranties of MuniYield.

         MuniYield represents and warrants to, and agrees with, Municipal
Strategy that:

            (a) MuniYield is a corporation duly organized, validly existing and
in good standing in conformity with the laws of the State of Maryland, and has
the power to own all of its assets and to carry out this Agreement. MuniYield
has all necessary Federal, state and local authorizations to carry on its
business as it is now being conducted and to carry out this Agreement.

            (b) MuniYield is duly registered under the 1940 Act as a
non-diversified, closed-end management investment company (File No.
811-06435), and such registration has not been revoked or rescinded and is in
full force and effect. MuniYield has elected and qualified for the special tax
treatment afforded regulated investment companies ("RICs") under Sections
851-855 of the Code at all times since its inception and intends to continue
to so qualify until consummation of the Reorganization and thereafter.

            (c) Municipal Strategy has been furnished with MuniYield's Annual
Report to Stockholders for the fiscal year ended October 31, 2000, and the
audited financial statements appearing therein, having been examined by
Deloitte & Touche LLP, independent public accountants, fairly present the
financial position of MuniYield as of the respective dates indicated, in
conformity with generally accepted accounting principles applied on a
consistent basis.

            (d) Municipal Strategy has been furnished with MuniYield's
Semi-Annual Report to Stockholders for the period ended April 30, 2001, and
the unaudited financial statements appearing therein, fairly present the
financial position of MuniYield as of the respective dates indicated, in
conformity with generally accepted accounting principles applied on a
consistent basis.

            (e) An unaudited statement of assets, liabilities and capital of
MuniYield and an unaudited schedule of investments of MuniYield, each as of
the Valuation Time (as defined in Section 3(d) of this Agreement), will be
furnished to Municipal Strategy, at or prior to the Closing Date for the
purpose of determining the number of shares of MuniYield Common Stock and
MuniYield Series F AMPS to be issued pursuant to Section 4 of this Agreement;
each will fairly present the financial position of MuniYield as of the
Valuation Time in conformity with generally accepted accounting principles
applied on a consistent basis.

            (f) MuniYield has full power and authority to enter into and
perform its obligations under this Agreement. The execution, delivery and
performance of this Agreement have been duly authorized by all necessary
action of its Board of Directors, and this Agreement constitutes a valid and
binding contract enforceable in accordance with its terms, subject to the
effects of bankruptcy, insolvency, moratorium, fraudulent conveyance and
similar laws relating to or affecting creditors' rights generally and court
decisions with respect thereto.

            (g) There are no material legal, administrative or other
proceedings pending or, to the knowledge of MuniYield, threatened against it
which assert liability on the part of MuniYield or which materially affect its
financial condition or its ability to consummate the Reorganization. MuniYield
is not charged with or, to the best of its knowledge, threatened with any
violation or investigation of any possible violation of any provisions of any
Federal, state or local law or regulation or administrative ruling relating to
any aspect of its business.

            (h) MuniYield is not obligated under any provision of its Articles
of Incorporation, as amended, or its by-laws, as amended, or a party to any
contract or other commitment or obligation, and is not subject to any order or
decree which would be violated by its execution of or performance under this
Agreement, except insofar as the Funds have mutually agreed to amend such
contract or other commitment or obligation to cure any potential violation as
a condition precedent to the Reorganization.

            (i) There are no material contracts outstanding to which MuniYield
is a party that have not been disclosed in the N-14 Registration Statement (as
defined in subsection (l) below) or will not otherwise be disclosed to
Municipal Strategy prior to the Valuation Time.

            (j) MuniYield has no known liabilities of a material amount,
contingent or otherwise, other than those shown on its statements of assets,
liabilities and capital referred to above, those incurred in the ordinary
course of its business as an investment company since April 30, 2001; and
those incurred in connection with the Reorganization. As of the Valuation
Time, MuniYield will advise Municipal Strategy in writing of all known
liabilities, contingent or otherwise, whether or not incurred in the ordinary
course of business, existing or accrued as of such time.

            (k) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by MuniYield of the
Reorganization, except such as may be required under the Securities Act of
1933, as amended (the "1933 Act"), the Securities Exchange Act of 1934, as
amended (the "1934 Act") and the 1940 Act or state securities laws (which term
as used herein shall include the laws of the District of Columbia and Puerto
Rico).

            (l) The registration statement filed by MuniYield on Form N-14
which includes the proxy statement of Municipal Strategy with respect to the
transactions contemplated herein and the prospectus of MuniYield relating to
the MuniYield Common Stock and MuniYield Series F AMPS to be issued pursuant
to this Agreement, (the "Proxy Statement and Prospectus"), and any supplement
or amendment thereto or to the documents therein (as amended or supplemented,
the "N-14 Registration Statement"), on its effective date, at the time of the
stockholder's meeting of Municipal Strategy referred to in Section 6(a) of
this Agreement and at the Closing Date, insofar as it relates to MuniYield (i)
complied or will comply in all material respects with the provisions of the
1933 Act, the 1934 Act and the 1940 Act and the rules and regulations
thereunder and (ii) did not or will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading; and the Proxy
Statement and Prospectus included therein did not or will not contain any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that the
representations and warranties in this subsection only shall apply to
statements in or omissions from the N-14 Registration Statement made in
reliance upon and in conformity with information furnished by MuniYield for
use in the N-14 Registration Statement as provided in Section 6(e) of this
Agreement.

            (m) MuniYield is authorized to issue 200,000,000 shares of capital
stock, of which 1,800 shares have been designated as Series A AMPS, 1,800
shares have been designated as Series B AMPS, 1,800 shares have been
designated as Series C AMPS, 1,800 shares have been designated as Series D
AMPS and 2,800 shares have been designated as Series E AMPS, (the Series A
AMPS of MuniYield, the Series B AMPS of MuniYield, the Series C AMPS of
MuniYield, the Series D AMPS of MuniYield and the Series E AMPS of MuniYield
being collectively referred to herein as the "MuniYield AMPS"), each with a
par value of $0.05, and 199,990,000 shares have been designated as common
stock, par value $0.10 per share; each outstanding share of which is fully
paid and nonassessable and has full voting rights.

            (n) The shares of MuniYield Common Stock and MuniYield Series F
AMPS to be issued to Municipal Strategy pursuant to this Agreement will have
been duly authorized and, when issued and delivered pursuant to this
Agreement, will be legally and validly issued and will be fully paid and
nonassessable and will have full voting rights, and no stockholder of
MuniYield will have any preemptive right of subscription or purchase in
respect thereof.

            (o) At or prior to the Closing Date, the MuniYield Common Stock to
be transferred to Municipal Strategy for distribution to the stockholders of
Municipal Strategy on the Closing Date will be duly qualified for offering to
the public in all states of the United States in which the sale of shares of
Municipal Strategy presently are qualified, and there will be a sufficient
number of such shares registered under the 1933 Act and, as may be necessary,
with each pertinent state securities commission to permit the transfers
contemplated by this Agreement to be consummated.

            (p) At or prior to the Closing Date, the shares of MuniYield
Series F AMPS to be transferred to Municipal Strategy on the Closing Date will
be duly qualified for offering to the public in all states of the United
States in which the sale of Municipal Strategy AMPS presently are qualified,
and there are a sufficient number of MuniYield Series F AMPS registered under
the 1933 Act and with each pertinent state securities commission to permit the
transfers contemplated by this Agreement to be consummated.

            (q) At or prior to the Closing Date, MuniYield will have obtained
any and all regulatory, Director and stockholder approvals necessary to issue
the MuniYield Common Stock and MuniYield Series F AMPS to Municipal Strategy.

         2. Representations and Warranties of Municipal Strategy.

         Municipal Strategy represents and warrants to, and agrees with,
MuniYield that:

            (a) Municipal Strategy is a corporation duly organized, validly
existing and in good standing in conformity with the laws of the State of
Maryland, and has the power to own all of its assets and to carry out this
Agreement. Municipal Strategy has all necessary Federal, state and local
authorizations to carry on its business as it is now being conducted and to
carry out this Agreement.

            (b) Municipal Strategy is duly registered under the 1940 Act as a
continuously offered, non-diversified, closed-end management investment
company (File No. 811-07203), and such registration has not been revoked or
rescinded and is in full force and effect. Municipal Strategy has elected and
qualified for the special tax treatment afforded RICs under Sections 851-855
of the Code at all times since its inception, and intends to continue to so
qualify through its taxable year ending upon liquidation.

            (c) As used in this Agreement, the term "Municipal Strategy
Investments" shall mean (i) the investments of Municipal Strategy shown on the
schedule of its investments as of the Valuation Time furnished to MuniYield;
and (ii) all other assets owned by Municipal Strategy or liabilities incurred
as of the Valuation Time.

            (d) Municipal Strategy has full power and authority to enter into
and perform its obligations under this Agreement. The execution, delivery and
performance of this Agreement has been duly authorized by all necessary action
of its Board of Directors and this Agreement constitutes a valid and binding
contract enforceable in accordance with its terms, subject to the effects of
bankruptcy, insolvency, moratorium, fraudulent conveyance and similar laws
relating to or affecting creditors' rights generally and court decisions with
respect thereto.

            (e) MuniYield has been furnished with Municipal Strategy's Annual
Report to Stockholders for the fiscal year ended October 31, 2000, and the
audited financial statements appearing therein, having been audited by
Deloitte & Touche LLP, independent auditors, fairly present the financial
position of Municipal Strategy as of the respective dates indicated, in
conformity with accounting principles generally accepted in the United States
of America applied on a consistent basis.

            (f) MuniYield has been furnished with Municipal Strategy's
Semi-Annual Report to Stockholders for the period ended April 30, 2001 and the
unaudited financial statements appearing therein, fairly present the financial
position of Municipal Strategy as of the respective dates indicated, in
conformity with generally accepted accounting principles applied on a
consistent basis.

            (g) An unaudited statement of assets, liabilities and capital of
Municipal Strategy and an unaudited schedule of investments of Municipal
Strategy, each as of the Valuation Time, will be furnished to MuniYield at or
prior to the Closing Date for the purpose of determining the number of shares
of MuniYield Common Stock and MuniYield Series F AMPS to be issued to
Municipal Strategy pursuant to Section 4 of this Agreement; each will fairly
present the financial position of Municipal Strategy as of the Valuation Time
in conformity with generally accepted accounting principles applied on a
consistent basis.

            (h) There are no material legal, administrative or other
proceedings pending or, to the knowledge of Municipal Strategy, threatened
against it which assert liability on the part of Municipal Strategy or which
materially affect its financial condition or its ability to consummate the
Reorganization. Municipal Strategy is not charged with or, to the best of its
knowledge, threatened with any violation or investigation of any possible
violation of any provisions of any Federal, state or local law or regulation
or administrative ruling relating to any aspect of its business.

            (i) There are no material contracts outstanding to which Municipal
Strategy is a party that have not been disclosed in the N-14 Registration
Statement or will not otherwise be disclosed to MuniYield prior to the
Valuation Time.

            (j) Municipal Strategy is not obligated under any provision of its
Articles of Incorporation, as amended, or its by-laws, as amended, or a party
to any contract or other commitment or obligation, and is not subject to any
order or decree which would be violated by its execution of or performance
under this Agreement, except insofar as the Funds have mutually agreed to
amend such contract or other commitment or obligation to cure any potential
violation as a condition precedent to the Reorganization.

            (k) Municipal Strategy has no known liabilities of a material
amount, contingent or otherwise, other than those shown on its statements of
assets, liabilities and capital referred to above, those incurred in the
ordinary course of its business as an investment company since April 30, 2001
and those incurred in connection with the Reorganization. As of the Valuation
Time, Municipal Strategy will advise MuniYield in writing of all known
liabilities, contingent or otherwise, whether or not incurred in the ordinary
course of business, existing or accrued as of such time.

            (l) Municipal Strategy has filed, or has obtained extensions to
file, all Federal, state and local tax returns which are required to be filed
by it, and has paid or has obtained extensions to pay, all Federal, state and
local taxes shown on said returns to be due and owing and all assessments
received by it, up to and including the taxable year in which the Closing Date
occurs. All tax liabilities of Municipal Strategy have been adequately
provided for on its books, and no tax deficiency or liability of Municipal
Strategy has been asserted and no question with respect thereto has been
raised by the Internal Revenue Service or by any state or local tax authority
for taxes in excess of those already paid, up to and including the taxable
year in which the Closing Date occurs.

            (m) At both the Valuation Time and the Closing Date, Municipal
Strategy will have full right, power and authority to sell, assign, transfer
and deliver the Municipal Strategy Investments. At the Closing Date, subject
only to the obligation to deliver the Municipal Strategy Investments as
contemplated by this Agreement, Municipal Strategy will have good and
marketable title to all of the Municipal Strategy Investments, and MuniYield
will acquire all of the Municipal Strategy Investments free and clear of any
encumbrances, liens or security interests and without any restrictions upon
the transfer thereof (except those imposed by the Federal or state securities
laws and those imperfections of title or encumbrances as do not materially
detract from the value or use of the Municipal Strategy Investments or
materially affect title thereto).

            (n) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by Municipal Strategy
of the Reorganization, except such as may be required under the 1933 Act, the
1934 Act, the 1940 Act or state securities laws.

            (o) The N-14 Registration Statement, on its effective date, at the
time of the stockholder's meeting of Municipal Strategy referred to in Section
6(a) of this Agreement and on the Closing Date, insofar as it relates to
Municipal Strategy (i) complied or will comply in all material respects with
the provisions of the 1933 Act, the 1934 Act and the 1940 Act and the rules
and regulations thereunder, and (ii) did not or will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading; and
the Proxy Statement and Prospectus included therein did not or will not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that the representations and warranties in this subsection shall apply only to
statements in or omissions from the N-14 Registration Statement made in
reliance upon and in conformity with information furnished by Municipal
Strategy for use in the N-14 Registration Statement as provided in Section
6(e) of this Agreement.

            (p) Municipal Strategy is authorized to issue 200,000,000 shares
of capital stock, of which 8,000 shares have been designated as Series A AMPS,
8,000 shares have been designated as Series B AMPS, 8,000 shares have been
designated as Series C AMPS, 8,000 shares have been designated as Series D
AMPS, 8,000 shares have been designated as Series E AMPS and 199,960,000
shares have been designated as common stock, par value $.10 per share; each
outstanding share of which is fully paid and nonassessable and has full voting
rights. Series A AMPS are the only issued and outstanding AMPS of Municipal
Strategy.

            (q) All of the issued and outstanding shares of Municipal Strategy
Common Stock and Municipal Strategy AMPS were offered for sale and sold in
conformity with all applicable Federal and state securities laws.

            (r) The books and records of Municipal Strategy made available to
MuniYield and/or its counsel are substantially true and correct and contain no
material misstatements or omissions with respect to the operations of
Municipal Strategy.

            (s) Municipal Strategy will not sell or otherwise dispose of any
of the shares of MuniYield Common Stock or MuniYield Series F AMPS to be
received in the Reorganization, except in distribution to the stockholders of
Municipal Strategy, as provided in Section 3 of this Agreement.

         3. The Reorganization.

            (a) Subject to receiving the requisite approvals of the
stockholders of each Fund, and to the other terms and conditions contained
herein, Municipal Strategy agrees to convey, transfer and deliver to MuniYield
and MuniYield agrees to acquire from Municipal Strategy on the Closing Date,
all of the Municipal Strategy Investments (including interest accrued as of
the Valuation Time on debt instruments) and assume substantially all of the
liabilities of Municipal Strategy in return solely for that number of full
shares of MuniYield Common Stock and MuniYield Series F AMPS provided in
Section 4 of this Agreement.

            Pursuant to this Agreement, as soon as practicable after the
Closing Date Municipal Strategy will distribute all of the full shares of
MuniYield Common Stock (plus cash in lieu of fractional shares) and MuniYield
Series F AMPS received by it to its stockholders in return for their shares of
Municipal Strategy Common Stock and Municipal Strategy AMPS, respectively.
Such distributions shall be accomplished by the opening of stockholder
accounts on the stock ledger records of MuniYield in the amounts due the
stockholders of Municipal Strategy based on their holdings in Municipal
Strategy as of the Valuation Time.

            (b) Prior to the Closing Date, Municipal Strategy shall declare a
dividend or dividends which, together with all such previous dividends, shall
have the effect of distributing to its stockholders all of its net investment
company taxable income to and including the Closing Date, if any (computed
without regard to any deduction for dividends paid), and all of their net
capital gain, if any, realized to and including the Closing Date. In this
regard and in connection with the Reorganization, the last dividend period for
Municipal Strategy AMPS prior to the Closing Date may be shorter than the
dividend period for such AMPS determined as set forth in the Articles
Supplementary.

            (c) Municipal Strategy will pay or cause to be paid to MuniYield
any interest Municipal Strategy receives on or after the Closing Date with
respect to any of the Municipal Strategy Investments transferred to MuniYield
hereunder.

            (d) The Valuation Time shall be 4:00 p.m., Eastern time, on
[______o_______], 2001, or such earlier or later day and time as may be
mutually agreed upon in writing (the "Valuation Time").

            (e) Recourse for liabilities assumed from Municipal Strategy by
MuniYield in the Reorganization will be limited to the net assets of Municipal
Strategy acquired by MuniYield. The known liabilities of Municipal Strategy,
as of the Valuation Time, shall be confirmed in writing to MuniYield pursuant
to Sections 2(k) of this Agreement.

            (f) The Funds will jointly file Articles of Transfer with the
Maryland Department and any other such instrument as may be required by the
State of Maryland to effect the transfer of the Municipal Strategy
Investments.

            (g) Municipal Strategy will be dissolved following the Closing
Date by filing Articles of Dissolution with the Maryland Department.

            (h) MuniYield will file with the Maryland Department Articles
Supplementary to its Articles of Incorporation establishing the powers, rights
and preferences of the MuniYield Series F AMPS prior to the closing of the
Reorganization.

            (i) As promptly as practicable after the liquidation of Municipal
Strategy pursuant to the Reorganization, Municipal Strategy shall terminate
its registration under the 1940 Act.

         4.   Issuance and Valuation of MuniYield Common Stock and MuniYield
              Series F AMPS in the Reorganization.

         Full shares of MuniYield Common Stock and MuniYield Series F AMPS of
an aggregate net asset value or liquidation preference, as the case may be,
equal (to the nearest one ten thousandth of one cent) to the value of the
assets of Municipal Strategy acquired in the Reorganization determined as
hereinafter provided, reduced by the amount of liabilities of Municipal
Strategy assumed by MuniYield in the Reorganization, shall be issued by
MuniYield to Municipal Strategy in return for such assets of Municipal
Strategy. MuniYield will issue to Municipal Strategy (a) a number of shares of
MuniYield Common Stock the aggregate net asset value of which will equal the
aggregate net asset value of the shares of Municipal Strategy Common Stock,
determined as set forth below, and (b) a number of shares of MuniYield Series
F AMPS, the aggregate liquidation preference and value of which will equal the
aggregate liquidation preference and value of Municipal Strategy AMPS,
determined as set forth below.

         The net asset value of each Fund and the liquidation preference and
value of the AMPS of each Fund shall be determined as of the Valuation Time in
accordance with the procedures described in the N-14 Registration Statement to
be filed by MuniYield in connection with the Reorganization and no formula
will be used to adjust the net asset value so determined of either Fund to
take into account differences in realized and unrealized gains and losses.
Values in all cases shall be determined as of the Valuation Time. The value of
the Municipal Strategy Investments to be transferred to MuniYield shall be
determined by MuniYield pursuant to the procedures utilized by MuniYield in
valuing its own assets and determining its own liabilities for purposes of the
Reorganization. Such valuation and determination shall be made by MuniYield in
cooperation with Municipal Strategy and shall be confirmed in writing by
MuniYield to Municipal Strategy. The net asset value per share of the
MuniYield Common Stock and the liquidation preference and value per share of
the MuniYield Series F AMPS shall be determined in accordance with such
procedures and MuniYield shall certify the computations involved. For purposes
of determining the net asset value of a share of Common Stock of each Fund,
the value of the securities held by the Fund plus any cash or other assets
(including interest accrued but not yet received) minus all liabilities
(including accrued expenses) and the aggregate liquidation value of the
outstanding shares of AMPS of that Fund is divided by the total number of
shares of Common Stock of that Fund outstanding at such time.

         MuniYield shall issue to Municipal Strategy separate certificates or
share deposit receipts for the MuniYield Common Stock and the MuniYield Series
F AMPS, each registered in the name of Municipal Strategy. Municipal Strategy
then shall distribute the MuniYield Common Stock and the MuniYield Series F
AMPS to the holders of Municipal Strategy Common Stock and Municipal Strategy
AMPS by redelivering the certificates or share deposit receipts evidencing
ownership of (i) the MuniYield Common Stock to The Bank of New York ("BONY"),
as the transfer agent and registrar for the MuniYield Common Stock for
distribution to the holders of Municipal Strategy Common Stock on the basis of
such holder's proportionate interest in the aggregate net asset value of the
Common Stock of Municipal Strategy and (ii) the MuniYield Series F AMPS to
BONY as the transfer agent and registrar for the MuniYield Series F AMPS for
distribution to the holders of Municipal Strategy AMPS on the basis of such
holder's proportionate interest in the aggregate liquidation preference and
value of Municipal Strategy AMPS. With respect to any Municipal Strategy
stockholder holding certificates evidencing ownership of either Municipal
Strategy Common Stock or Municipal Strategy AMPS as of the Closing Date, and
subject to MuniYield being informed thereof in writing by Municipal Strategy,
MuniYield will not permit such stockholder to receive new certificates
evidencing ownership of the MuniYield Common Stock or MuniYield Series F AMPS,
exchange MuniYield Common Stock or MuniYield Series F AMPS credited to such
stockholder's account for shares of other investment companies managed by Fund
Asset Management, L.P. ("FAM") or any of its affiliates, or pledge or redeem
such MuniYield Common Stock or MuniYield Series F AMPS, in any case, until
notified by Municipal Strategy or its agent that such stockholder has
surrendered his or her outstanding certificates evidencing ownership of
Municipal Strategy Common Stock or, in the event of lost certificates, posted
adequate bond. Municipal Strategy, at its own expense, will request its
stockholders to surrender their outstanding certificates evidencing ownership
of Municipal Strategy Common Stock or post adequate bond therefor.

         Dividends payable to holders of record of shares of MuniYield Common
Stock and MuniYield Series F AMPS, as of any date after the Closing Date and
prior to the receipt of certificates in connection with the Reorganization by
any stockholder of Municipal Strategy, shall be payable to such stockholder
without interest; however, such dividends shall not be paid unless and until
such stockholder surrenders the stock certificates representing shares of
common stock or AMPS of Municipal Strategy, as the case may be, in return for
shares of common stock or AMPS of MuniYield, as the case may be.

         No fractional shares of MuniYield Common Stock will be issued to
holders of Municipal Strategy Common Stock. In lieu thereof, MuniYield's
transfer agent, BONY, will aggregate all fractional shares of MuniYield Common
Stock and sell the resulting full shares on the New York Stock Exchange at the
current market price for shares of MuniYield Common Stock for the account of
all holders of fractional interests, and each such holder will receive such
holder's pro rata share of the proceeds of such sale upon surrender of such
holder's certificates representing Municipal Strategy Common Stock.

         5. Payment of Expenses.

            (a) The expenses of the Reorganization that are directly
attributable to Municipal Strategy and the conduct of its business will be
deducted from the assets of Municipal Strategy as of the Valuation Time. These
expenses are expected to include transfer agent fees, the expenses incurred in
preparing, printing and mailing the proxy materials to be utilized in
connection with the special meeting of the stockholders of Municipal Strategy
to consider the Reorganization, the expenses related to the solicitation of
proxies to be voted at that meeting and a portion of the expenses of printing
the N-14 Registration Statement. FAM has agreed to bear the expenses of the
Reorganization that are directly attributable to MuniYield and the conduct of
its business. The expenses attributable to MuniYield include fees, if any, of
the rating agencies with respect to MuniYield Series F AMPS, the costs of
printing stock certificates, transfer agent fees and a portion of the expenses
incurred in printing the N-14 Registration Statement. Certain other expenses
of the Reorganization, including expenses in connection with obtaining an
opinion of counsel as to certain tax matters, the preparation of this
Agreement, legal fees, stock exchange fees and audit fees, will be borne
equally by Municipal Strategy and FAM, which has agreed to bear such expenses
on behalf of MuniYield.

            (b) If for any reason the Reorganization is not consummated, no
party shall be liable to any other party for any damages resulting therefrom,
including, without limitation, consequential damages.

         6. Covenants of the Funds.

            (a) Municipal Strategy agrees to hold a special meeting of its
stockholders as soon as is practicable after the effective date of the N-14
Registration Statement for the purpose of considering the Reorganization as
described in this Agreement.

            (b) Each Fund covenants to operate its business as presently
conducted between the date hereof and the Closing Date.

            (c) Municipal Strategy agrees that following the consummation of
the Reorganization, it will dissolve in accordance with the laws of the State
of Maryland and any other applicable law, it will not make any distributions
of any shares of MuniYield Common Stock and MuniYield Series F AMPS, as
applicable, other than to its respective stockholders and without first paying
or adequately providing for the payment of all of its respective liabilities
not assumed by MuniYield, if any, and on and after the Closing Date it shall
not conduct any business except in connection with its dissolution.

            (d) Municipal Strategy undertakes that if the Reorganization is
consummated, it will file an application pursuant to Section 8(f) of the 1940
Act for an order declaring that Municipal Strategy has ceased to be a
registered investment company.

            (e) MuniYield will file the N-14 Registration Statement with the
Securities and Exchange Commission (the "Commission") and will use its best
efforts to provide that the N-14 Registration Statement becomes effective as
promptly as practicable. Each Fund agrees to cooperate fully with the other,
and each will furnish to the other the information relating to itself to be
set forth in the N-14 Registration Statement as required by the 1933 Act, the
1934 Act, the 1940 Act, and the rules and regulations thereunder and the state
securities laws.

            (f) MuniYield has no plan or intention to sell or otherwise
dispose of the Municipal Strategy Investments, except for dispositions made in
the ordinary course of business.

            (g) Each Fund agrees that by the Closing Date all of its Federal
and other tax returns and reports required to be filed on or before such date
shall have been filed and all taxes shown as due on said returns either have
been paid or adequate liability reserves have been provided for the payment of
such taxes. In connection with this covenant, the Funds agree to cooperate
with each other in filing any tax return, amended return or claim for refund,
determining a liability for taxes or a right to a refund of taxes or
participating in or conducting any audit or other proceeding in respect of
taxes. MuniYield agrees to retain for a period of ten (10) years following the
Closing Date all returns, schedules and work papers and all material records
or other documents relating to tax matters of Municipal Strategy for such
Fund's taxable period first ending after the Closing Date and for all prior
taxable periods. Any information obtained under this subsection shall be kept
confidential except as otherwise may be necessary in connection with the
filing of returns or claims for refund or in conducting an audit or other
proceeding. After the Closing Date, Municipal Strategy shall prepare, or cause
its agents to prepare, any Federal, state or local tax returns, including any
Forms 1099, required to be filed by such fund with respect to its final
taxable year ending with its complete liquidation and for any prior periods or
taxable years and further shall cause such tax returns and Forms 1099 to be
duly filed with the appropriate taxing authorities. Notwithstanding the
aforementioned provisions of this subsection, any expenses incurred by
Municipal Strategy (other than for payment of taxes) in connection with the
preparation and filing of said tax returns and Forms 1099 after the Closing
Date shall be borne by such Fund to the extent such expenses have been accrued
by such Fund in the ordinary course without regard to the Reorganization; any
excess expenses shall be borne by FAM at the time such tax returns and Forms
1099 are prepared.

            (h) Municipal Strategy agrees to mail to its stockholders of
record entitled to vote at the special meeting of its stockholders at which
action is to be considered regarding this Agreement, in sufficient time to
comply with requirements as to notice thereof, a combined proxy statement and
prospectus which complies in all material respects with the applicable
provisions of Section 14(a) of the 1934 Act and Section 20(a) of the 1940 Act,
and the rules and regulations, respectively, thereunder.

            (i) Following the consummation of the Reorganization, MuniYield
will stay in existence and continue its business as a non-diversified,
closed-end management investment company registered under the 1940 Act.

         7. Closing Date.

            (a) Delivery of the assets of Municipal Strategy to be transferred
and the shares of MuniYield Common Stock and MuniYield Series F AMPS to be
issued as provided in this Agreement, shall be made at the offices of Sidley
Austin Brown & Wood LLP, One World Trade Center, New York, New York 10048, at
9:00 a.m. on the next full business day following the Valuation Time, or at
such other place, time and date agreed to by the Funds, the date and time upon
which such delivery is to take place being referred to herein as the "Closing
Date." To the extent that any Municipal Strategy Investments, for any reason,
are not transferable on the Closing Date, Municipal Strategy shall cause such
Municipal Strategy Investments to be transferred to MuniYield's account with
BONY at the earliest practicable date thereafter.

            (b) Municipal Strategy will deliver to MuniYield on the Closing
Date confirmations or other adequate evidence as to the tax basis of each of
its respective Municipal Strategy Investments delivered to MuniYield
hereunder, certified by Deloitte & Touche LLP.

            (c) As soon as practicable after the close of business on the
Closing Date, Municipal Strategy shall deliver to MuniYield a list of the
names and addresses of all of the stockholders of record of Municipal Strategy
on the Closing Date and the number of shares of Municipal Strategy Common
Stock and AMPS owned by each such stockholder, certified to the best of their
knowledge and belief by the transfer agent for Municipal Strategy or by its
President.

         8. Conditions of Municipal Strategy.

         The obligations of Municipal Strategy hereunder shall be subject to
the following conditions:

            (a) That this Agreement shall have been adopted, and the
Reorganization shall have been approved, by the affirmative vote of (i) the
Board of Directors of MuniYield, and (ii) at least two-thirds of the members
of the Board of Directors of Municipal Strategy, and by the affirmative vote
of (A) a majority of the shares Municipal Strategy Common Stock and Municipal
Strategy AMPS, voting together as a single class, and (B) a majority of the
shares of Municipal Strategy AMPS, voting separately as a class, in each case
issued and outstanding and entitled to vote thereon. MuniYield shall have
delivered to MuniYield Strategy a copy of the resolution approving this
Agreement adopted by such Fund's Board of Directors.

            (b) That Municipal Strategy shall have received from MuniYield a
statement of assets, liabilities and capital, with values determined as
provided in Section 4 of this Agreement, together with a schedule of such
Fund's investments, all as of the Valuation Time, certified on MuniYield's
behalf by its President (or any Vice President) and its Treasurer, and a
certificate signed by MuniYield's President (or any Vice President) and its
Treasurer, dated as of the Closing Date, certifying that as of the Valuation
Time and as of the Closing Date there has been no material adverse change in
the financial position of MuniYield since the date of such Fund's most recent
Annual or Semi-Annual Report, as applicable, other than changes in its
portfolio securities since that date or changes in the market value of its
portfolio securities.

            (c) That MuniYield shall have furnished to Municipal Strategy a
certificate signed by MuniYield's President (or any Vice President) and its
Treasurer, dated as of the Closing Date, certifying that, as of the Valuation
Time and as of the Closing Date all representations and warranties of
MuniYield made in this Agreement are true and correct in all material respects
with the same effect as if made at and as of such dates, and that MuniYield
has complied with all of the agreements and satisfied all of the conditions on
its part to be performed or satisfied at or prior to each of such dates.

            (d) That there shall not be any material litigation pending with
respect to the matters contemplated by this Agreement.

            (e) That Municipal Strategy shall have received an opinion of
Sidley Austin Brown & Wood LLP, as counsel to the Funds, in form and substance
satisfactory to Municipal Strategy and dated the Closing Date, to the effect
that (i) each Fund is a corporation duly organized, validly existing and in
good standing in conformity with the laws of the State of Maryland; (ii) the
shares of MuniYield Common Stock and MuniYield Series F AMPS to be issued
pursuant to this Agreement are duly authorized and, upon delivery, will be
validly issued and outstanding and fully paid and nonassessable by MuniYield,
and no stockholder of MuniYield has any preemptive right to subscription or
purchase in respect thereof (pursuant to the Articles of Incorporation or the
by-laws of MuniYield or the state law of Maryland, or to the best of such
counsel's knowledge, otherwise); (iii) this Agreement has been duly
authorized, executed and delivered by the Funds, and represents a valid and
binding contract, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or
other similar laws pertaining to the enforcement of creditors' rights
generally and court decisions with respect thereto; provided, such counsel
shall express no opinion with respect to the application of equitable
principles in any proceeding, whether at law or in equity; (iv) the execution
and delivery of this Agreement does not, and the consummation of the
Reorganization will not, violate any material provisions of Maryland law or
the Articles of Incorporation, as amended, the by-laws, as amended, or any
agreement (known to such counsel) to which either Fund is a party or by which
a Fund is bound, except insofar as the parties have agreed to amend such
provision as a condition precedent to the Reorganization; (v) Municipal
Strategy has the power to sell, assign, transfer and deliver the assets
transferred by it hereunder and, upon consummation of the Reorganization in
accordance with the terms of this Agreement, Municipal Strategy will have duly
transferred such assets and liabilities in accordance with this Agreement;
(vi) to the best of such counsel's knowledge, no consent, approval,
authorization or order of any United States federal or Maryland state court or
governmental authority is required for the consummation by the Funds of the
Reorganization, except such as have been obtained under the 1933 Act, the 1934
Act and the 1940 Act and the published rules and regulations of the Commission
thereunder and under Maryland law and such as may be required under state
securities laws; (vii) the N-14 Registration Statement has become effective
under the 1933 Act, no stop order suspending the effectiveness of the N-14
Registration Statement has been issued and no proceedings for that purpose
have been instituted or are pending or contemplated under the 1933 Act, and
the N-14 Registration Statement, and each amendment or supplement thereto, as
of their respective effective dates, appear on their face to be appropriately
responsive in all material respects to the requirements of the 1933 Act, the
1934 Act and the 1940 Act and the published rules and regulations of the
Commission thereunder; (viii) the descriptions in the N-14 Registration
Statement of statutes, legal and governmental proceedings and contracts and
other documents are accurate and fairly present the information required to be
shown; (ix) the information in the Proxy Statement and Prospectus under
"Comparison of the Funds -- Tax Rules Applicable to the Funds and their
Stockholders" and "Agreement and Plan of Reorganization -- Tax Consequences of
the Reorganization," to the extent that it constitutes matters of law,
summaries of legal matters or legal conclusions, has been reviewed by such
counsel and is correct in all material respects as of the date of the Proxy
Statement and Prospectus; (x) such counsel does not know of any statutes,
legal or governmental proceedings or contracts or other documents related to
the Reorganization of a character required to be described in the N-14
Registration Statement which are not described therein or, if required to be
filed, filed as required; (xi) neither Fund, to the knowledge of such counsel,
is required to qualify to do business as a foreign corporation in any
jurisdiction except as may be required by state securities laws, and except
where it has so qualified or the failure so to qualify would not have a
material adverse effect on the Fund or its respective stockholders; (xii)
except as disclosed in the N-14 Registration Statement, such counsel does not
have actual knowledge of any material suit, action or legal or administrative
proceeding pending or threatened against the Fund, the unfavorable outcome of
which would materially and adversely affect the Fund; (xiii) all corporate
actions required to be taken by the Funds to authorize this Agreement and to
effect the Reorganization have been duly authorized on the part of the Funds;
and (xiv) such opinion is solely for the benefit of the Funds and their
respective Directors and officers. Such opinion also shall state that (A)
while such counsel cannot make any representation as to the accuracy or
completeness of statements of fact in the N-14 Registration Statement or any
amendment or supplement thereto, nothing has come to their attention that
would lead them to believe that, on the respective effective dates of the N-14
Registration Statement and any amendment or supplement thereto, (1) the N-14
Registration Statement or any amendment or supplement thereto contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading; and (2) the prospectus included in the N-14 Registration Statement
contained any untrue statement of a material fact or omitted to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (B) such counsel
does not express any opinion or belief as to the financial statements or other
financial or statistical data relating to either Fund contained or
incorporated by reference in the N-14 Registration Statement. In giving the
opinion set forth above, Sidley Austin Brown & Wood LLP may state that it is
relying on certificates of officers of the Funds with regard to matters of
fact and certain certificates and written statements of governmental officials
with respect to the organization and good standing of the Funds.

            (f) That Municipal Strategy shall have received an opinion of
Sidley Austin Brown & Wood LLP, to the effect that for Federal income tax
purposes (i) the transfer by Municipal Strategy of substantially all of its
assets to MuniYield in exchange solely for shares of MuniYield Common Stock
and MuniYield Series F AMPS as provided in this Agreement will constitute a
reorganization within the meaning of Section 368(a)(1)(C) of the Code, and
Municipal Strategy and MuniYield will each be deemed to be a "party" to a
reorganization within the meaning of Section 368(b); (ii) in accordance with
Section 361(a) of the Code, no gain or loss will be recognized to Municipal
Strategy as a result of the asset transfer solely in exchange for shares of
MuniYield Common Stock and MuniYield Series F AMPS or on the distribution of
MuniYield Common Stock and MuniYield Series F AMPS to stockholders of
Municipal Strategy under Section 361(c)(1); (iii) under Section 1032 of the
Code, no gain or loss will be recognized to MuniYield on the receipt of assets
of Municipal Strategy in exchange for its shares; (iv) in accordance with
Section 354(a)(1) of the Code, no gain or loss will be recognized to the
stockholders of Municipal Strategy on their respective receipt of shares of
MuniYield Common Stock and MuniYield Series F AMPS in exchange for their
shares of Municipal Strategy (except to the extent that Municipal Strategy
common stockholders receive cash representing an interest in fractional shares
of MuniYield Common Stock in the Reorganization); (v) in accordance with
Section 362(b) of the Code, the tax basis of Municipal Strategy's assets in
the hands of MuniYield will be the same as the tax basis of such assets in the
hands of Municipal Strategy immediately prior to the consummation of the
Reorganization; (vi) in accordance with Section 358 of the Code, immediately
after the Reorganization, the tax basis of the shares of MuniYield Common
Stock and MuniYield Series F AMPS received by the stockholders of Municipal
Strategy in the Reorganization will be equal to the tax basis of the shares of
Municipal Strategy surrendered in exchange; (vii) in accordance with Section
1223 of the Code, a stockholder's holding period for the shares of MuniYield
will be determined by including the period for which such stockholder held the
Municipal Strategy shares returned therefor, provided, that such shares were
held as a capital asset; (viii) in accordance with Section 1223 of the Code,
MuniYield's holding period with respect to Municipal Strategy's assets
transferred will include the period for which such assets were held by
Municipal Strategy; (ix) the payment of cash to common stockholders of
Municipal Strategy in lieu of fractional shares of MuniYield Common Stock will
be treated as though the fractional shares were distributed as part of the
Reorganization and then redeemed by MuniYield, with the result that such
stockholders will have short- or long-term capital gain or loss to the extent
that the cash distribution differs from the stockholder's basis allocable to
the MuniYield fractional shares; and (x) the taxable year of Municipal
Strategy will end on the effective date of the Reorganization, and pursuant to
Section 381(a) of the Code and regulations thereunder, MuniYield will succeed
to and take into account, subject to limitation, certain tax attributes of
Municipal Strategy, such as earnings and profits, capital loss carryovers and
method of accounting.

            (g) That all proceedings taken by Municipal Strategy and its
counsel in connection with the Reorganization and all documents incidental
thereto shall be satisfactory in form and substance to the others.

            (h) That the N-14 Registration Statement shall have become
effective under the 1933 Act, and no stop order suspending such effectiveness
shall have been instituted or, to the knowledge of MuniYield, be contemplated
by the Commission.

            (i) That Municipal Strategy shall have received from _________ a
letter dated within three days prior to the effective date of the N-14
Registration Statement and a similar letter dated within five days prior to
the Closing Date, in form and substance satisfactory to them, to the effect
that (i) they are independent public accountants with respect to MuniYield
within the meaning of the 1933 Act and the applicable published rules and
regulations thereunder; (ii) in their opinion, the financial statements and
supplementary information of MuniYield included or incorporated by reference
in the N-14 Registration Statement and reported on by them comply as to form
in all material respects with the applicable accounting requirements of the
1933 Act and the published rules and regulations thereunder; (iii) on the
basis of limited procedures agreed upon by the Funds and described in such
letter (but not an examination in accordance with generally accepted auditing
standards) consisting of a reading of any unaudited interim financial
statements and unaudited supplementary information of MuniYield included in
the N-14 Registration Statement, and inquiries of certain officials of
MuniYield responsible for financial and accounting matters, nothing came to
their attention that caused them to believe that (a) such unaudited financial
statements and related unaudited supplementary information do not comply as to
form in all material respects with the applicable accounting requirements of
the 1933 Act and the published rules and regulations thereunder, (b) such
unaudited financial statements are not fairly presented in conformity with
generally accepted accounting principles, applied on a basis substantially
consistent with that of the audited financial statements, or (c) such
unaudited supplementary information is not fairly stated in all material
respects in relation to the unaudited financial statements taken as a whole;
and (iv) on the basis of limited procedures agreed upon by the Funds and
described in such letter (but not an examination in accordance with generally
accepted auditing standards), the information relating to MuniYield appearing
in the N-14 Registration Statement, which information is expressed in dollars
(or percentages derived from such dollars) (with the exception of performance
comparisons, if any), if any, has been obtained from the accounting records of
MuniYield or from schedules prepared by officials of MuniYield having
responsibility for financial and reporting matters and such information is in
agreement with such records, schedules or computations made therefrom.

            (j) That the Commission shall not have issued an unfavorable
advisory report under Section 25(b) of the 1940 Act, nor instituted or
threatened to institute any proceeding seeking to enjoin consummation of the
Reorganization under Section 25(c) of the 1940 Act, and no other legal,
administrative or other proceeding shall be instituted or threatened which
would materially affect the financial condition of MuniYield or would prohibit
the Reorganization.

            (k) That Municipal Strategy shall have received from the
Commission such orders or interpretations as Sidley Austin Brown & Wood LLP,
as counsel to Municipal Strategy, deems reasonably necessary or desirable
under the 1933 Act and the 1940 Act in connection with the Reorganization,
provided, that such counsel shall have requested such orders as promptly as
practicable, and all such orders shall be in full force and effect.

         9. Conditions of MuniYield.

         The obligations of MuniYield hereunder shall be subject to the
following conditions:

            (a) That this Agreement shall have been adopted, and the
Reorganization shall have been approved, by the Board of Directors of each of
the Funds and by the stockholders of Municipal Strategy as set forth in
Section 8(a); and that Municipal Strategy shall have delivered to MuniYield a
copy of the resolution approving this Agreement adopted by such Fund's Board
of Directors, and a certificate setting forth the vote of the stockholders of
Municipal Strategy obtained at the special meeting of its stockholders,
certified by its Secretary.

            (b) That Municipal Strategy shall have furnished to MuniYield a
statement of its assets, liabilities and capital, with values determined as
provided in Section 4 of this Agreement, together with a schedule of
investments with their respective dates of acquisition and tax costs, all as
of the Valuation Time, certified on such Fund's behalf by its President (or
any Vice President) and its Treasurer, and a certificate signed by such Fund's
President (or any Vice President) and its Treasurer, dated as of the Closing
Date, certifying that as of the Valuation Time and as of the Closing Date
there has been no material adverse change in the financial position of
Municipal Strategy since the date of such Fund's most recent Annual Report or
Semi-Annual Report, as applicable, other than changes in the Municipal
Strategy Investments since that date or changes in the market value of the
Municipal Strategy Investments.

            (c) That Municipal Strategy shall have furnished to MuniYield a
certificate signed by such Fund's President (or any Vice President) and its
Treasurer, dated the Closing Date, certifying that as of the Valuation Time
and as of the Closing Date all representations and warranties of Municipal
Strategy made in this Agreement are true and correct in all material respects
with the same effect as if made at and as of such dates and Municipal Strategy
has complied with all of the agreements and satisfied all of the conditions on
its part to be performed or satisfied at or prior to such dates.

            (d) That Municipal Strategy shall have delivered to MuniYield a
letter from ___________, dated the Closing Date, stating that such firm has
performed a limited review of the Federal, state and local income tax returns
of Municipal Strategy for the period ended October 31, 2000 (which returns
originally were prepared and filed by Municipal Strategy), and that based on
such limited review, nothing came to their attention which caused them to
believe that such returns did not properly reflect, in all material respects,
the Federal, state and local income taxes of Municipal Strategy for the period
covered thereby; and that for the period from November 1, 2000, to and
including the Closing Date and for any taxable year of Municipal Strategy
ending upon the liquidation of Municipal Strategy, such firm has performed a
limited review to ascertain the amount of applicable Federal, state and local
taxes, and has determined that either such amount has been paid or reserves
have been established for payment of such taxes, this review to be based on
unaudited financial data; and that based on such limited review, nothing has
come to their attention which caused them to believe that the taxes paid or
reserves set aside for payment of such taxes were not adequate in all material
respects for the satisfaction of Federal, state and local taxes for the period
from November 1, 2000, to and including the Closing Date and for any taxable
year of Municipal Strategy, ending upon the liquidation of such Fund or that
such Fund would not qualify as a regulated investment company for Federal
income tax purposes for the tax years in question.

            (e) That there shall not be any material litigation pending with
respect to the matters contemplated by this Agreement.

            (f) That MuniYield shall have received an opinion of Sidley Austin
Brown & Wood LLP, as counsel to the Funds, in form and substance satisfactory
to MuniYield and dated the Closing Date, with respect to the matters specified
in Section 8(e) of this Agreement and such other matters as MuniYield
reasonably may deem necessary or desirable.

            (g) That MuniYield shall have received an opinion of Sidley Austin
Brown & Wood LLP with respect to the matters specified in Section 8(f) of this
Agreement.

            (h) That MuniYield shall have received from Deloitte & Touche LLP
a letter dated within three days prior to the effective date of the N-14
Registration Statement and a similar letter dated within five days prior to
the Closing Date, in form and substance satisfactory to MuniYield, to the
effect that (i) they are independent public accountants with respect to
Municipal Strategy within the meaning of the 1933 Act and the applicable
published rules and regulations thereunder; (ii) in their opinion, the
financial statements and supplementary information of Municipal Strategy
included or incorporated by reference in the N-14 Registration Statement and
reported on by them (if applicable) comply as to form in all material respects
with the applicable accounting requirements of the 1933 Act and the published
rules and regulations thereunder; (iii) on the basis of limited procedures
agreed upon by the Funds and described in such letter (but not an examination
in accordance with generally accepted auditing standards) consisting of a
reading of any unaudited interim financial statements and unaudited
supplementary information of Municipal Strategy included in the N-14
Registration Statement, and inquiries of certain officials of Municipal
Strategy responsible for financial and accounting matters, nothing came to
their attention that caused them to believe that (a) such unaudited financial
statements and related unaudited supplementary information do not comply as to
form in all material respects with the applicable accounting requirements of
the 1933 Act and the published rules and regulations thereunder, (b) such
unaudited financial statements are not fairly presented in conformity with
generally accepted accounting principles, or (c) such unaudited supplementary
information is not fairly stated in all material respects in relation to the
unaudited financial statements taken as a whole; and (iv) on the basis of
limited procedures agreed upon by the Funds and described in such letter (but
not an examination in accordance with generally accepted auditing standards),
the information relating to Municipal Strategy appearing in the N-14
Registration Statement, which information is expressed in dollars (or
percentages derived from such dollars) (with the exception of performance
comparisons, if any), if any, has been obtained from the accounting records of
Municipal Strategy or from schedules prepared by officials of Municipal
Strategy having responsibility for financial and reporting matters and such
information is in agreement with such records, schedules or computations made
therefrom.

            (i) That the Municipal Strategy Investments to be transferred to
MuniYield shall not include any assets or liabilities which MuniYield, by
reason of charter limitations or otherwise, may not properly acquire or
assume.

            (j) That the N-14 Registration Statement shall have become
effective under the 1933 Act and no stop order suspending such effectiveness
shall have been instituted or, to the knowledge of Municipal Strategy, be
contemplated by the Commission.

            (k) That the Commission shall not have issued an unfavorable
advisory report under Section 25(b) of the 1940 Act, nor instituted or
threatened to institute any proceeding seeking to enjoin consummation of the
Reorganization under Section 25(c) of the 1940 Act, and no other legal,
administrative or other proceeding shall be instituted or threatened which
would materially affect the financial condition of Municipal Strategy or would
prohibit the Reorganization.

            (l) That MuniYield shall have received from the Commission such
orders or interpretations as Sidley Austin Brown & Wood LLP, as counsel to
MuniYield, deems reasonably necessary or desirable under the 1933 Act and the
1940 Act in connection with the Reorganization, provided, that such counsel
shall have requested such orders as promptly as practicable, and all such
orders shall be in full force and effect.

            (m) That all proceedings taken by Municipal Strategy and its
respective counsel in connection with the Reorganization and all documents
incidental thereto shall be satisfactory in form and substance to MuniYield.

            (n) That prior to the Closing Date, Municipal Strategy shall have
declared a dividend or dividends which, together with all such previous
dividends, shall have the effect of distributing to its stockholders all of
its net investment company taxable income for the period to and including the
Closing Date, if any (computed without regard to any deduction for dividends
paid), and all of its net capital gain, if any, realized to and including the
Closing Date. In this regard, the last dividend period for Municipal Strategy
AMPS may be shorter than the dividend period for such AMPS determined as set
forth in the applicable Articles Supplementary.

         10. Termination, Postponement and Waivers.

            (a) Notwithstanding anything contained in this Agreement to the
contrary, this Agreement may be terminated and the Reorganization abandoned at
any time (whether before or after adoption thereof by the stockholders of the
Funds) prior to the Closing Date, or the Closing Date may be postponed, (i) by
mutual consent of the Boards of Directors of the Funds, (ii) by the Board of
Directors of Municipal Strategy if any condition of Municipal Strategy's
obligations set forth in Section 8 of this Agreement has not been fulfilled or
waived by such Board; or (iii) by the Board of Directors of MuniYield if any
condition of MuniYield's obligations set forth in Section 9 of this Agreement
has not been fulfilled or waived by such Board.

            (b) If the transactions contemplated by this Agreement have not
been consummated by June 30, 2002, this Agreement automatically shall
terminate on that date, unless a later date is mutually agreed to by the
Boards of Directors of the Funds.

            (c) In the event of termination of this Agreement pursuant to the
provisions hereof, the same shall become void and have no further effect, and
there shall not be any liability on the part of either Fund or persons who are
their directors, trustees, officers, agents or stockholders in respect of this
Agreement.

            (d) At any time prior to the Closing Date, any of the terms or
conditions of this Agreement may be waived by the Board of Directors of either
Fund (whichever is entitled to the benefit thereof), if, in the judgment of
such Board after consultation with its counsel, such action or waiver will not
have a material adverse effect on the benefits intended under this Agreement
to the stockholders of their respective Fund, on behalf of which such action
is taken. In addition, the Boards of Directors of the Funds have delegated to
FAM the ability to make non-material changes to the transaction if it deems it
to be in the best interests of the Funds to do so.

            (e) The respective representations and warranties contained in
Sections 1 and 2 of this Agreement shall expire with, and be terminated by,
the consummation of the Reorganization, and no Fund nor any of its officers,
directors, trustees, agents or stockholders shall have any liability with
respect to such representations or warranties after the Closing Date. This
provision shall not protect any officer, director, trustee, agent or
stockholder of either Fund against any liability to the entity for which that
officer, director, trustee, agent or stockholder so acts or to its
stockholders, to which that officer, director, trustee, agent or stockholder
otherwise would be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties in the conduct of such office.

            (f) If any order or orders of the Commission with respect to this
Agreement shall be issued prior to the Closing Date and shall impose any terms
or conditions which are determined by action of the Boards of Directors of the
Funds to be acceptable, such terms and conditions shall be binding as if a
part of this Agreement without further vote or approval of the stockholders of
Municipal Strategy, unless such terms and conditions shall result in a change
in the method of computing the number of shares of MuniYield Common Stock and
MuniYield Series F AMPS to be issued to Municipal Strategy, as applicable, in
which event, unless such terms and conditions shall have been included in the
proxy solicitation materials furnished to the stockholders of Municipal
Strategy prior to the meetings at which the Reorganization shall have been
approved, this Agreement shall not be consummated and shall terminate unless
Municipal Strategy promptly shall call a special meeting of stockholders at
which such conditions so imposed shall be submitted for approval.

         11. Indemnification.

            (a) Municipal Strategy hereby agrees to indemnify and hold
MuniYield harmless from all loss, liability and expenses (including reasonable
counsel fees and expenses in connection with the contest of any claim), as
incurred, which MuniYield may incur or sustain by reason of the fact that (i)
MuniYield shall be required to pay any corporate obligation of Municipal
Strategy, whether consisting of tax deficiencies or otherwise, based upon a
claim or claims against Municipal Strategy which were omitted or not fairly
reflected in the financial statements to be delivered to MuniYield in
connection with the Reorganization; (ii) any representations or warranties
made by Municipal Strategy in this Agreement should prove to be false or
erroneous in any material respect; (iii) any covenant of Municipal Strategy
has been breached in any material respect; or (iv) any claim is made alleging
that (a) the N-14 Registration Statement included any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading or (b) the
Proxy Statement and Prospectus delivered to the stockholders of Municipal
Strategy and forming a part of the N-14 Registration Statement included any
untrue statement of a material fact or omitted to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except with respect to (iv)(a) and
(b) herein insofar as such claim is based on written information furnished to
Municipal Strategy by MuniYield.

            (b) MuniYield hereby agrees to indemnify and hold Municipal
Strategy harmless from all loss, liability and expenses (including reasonable
counsel fees and expenses in connection with the contest of any claim), as
incurred, which Municipal Strategy may incur or sustain by reason of the fact
that (i) any representations or warranties made by MuniYield in this Agreement
should prove false or erroneous in any material respect, (ii) any covenant of
MuniYield has been breached in any material respect, or (iii) any claim is
made alleging that (a) the N-14 Registration Statement included any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements therein not misleading
or (b) the Proxy Statement and Prospectus delivered to stockholders of
Municipal Strategy and forming a part of the N-14 Registration Statement
included any untrue statement of a material fact or omitted to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except with respect
to (iii)(a) and (b) herein insofar as such claim is based on written
information furnished to MuniYield by Municipal Strategy.

            (c) In the event that any claim is made against MuniYield in
respect of which indemnity may be sought by MuniYield from Municipal Strategy
under Section 11(a) of this Agreement, or in the event that any claim is made
against Municipal Strategy in respect of which indemnity may be sought by
Municipal Strategy from MuniYield under Section 11(b) of this Agreement, then
the party seeking indemnification (the "Indemnified Party"), with reasonable
promptness and before payment of such claim, shall give written notice of such
claim to the other party (the "Indemnifying Party"). If no objection as to the
validity of the claim is made in writing to the Indemnified Party by the
Indemnifying Party within thirty (30) days after the giving of notice
hereunder, then the Indemnified Party may pay such claim and shall be entitled
to reimbursement therefor, pursuant to this Agreement. If, prior to the
termination of such thirty-day period, objection in writing as to the validity
of such claim is made to the Indemnified Party, the Indemnified Party shall
withhold payment thereof until the validity of such claim is established (i)
to the satisfaction of the Indemnifying Party, or (ii) by a final
determination of a court of competent jurisdiction, whereupon the Indemnified
Party may pay such claim and shall be entitled to reimbursement thereof,
pursuant to this Agreement, or (iii) with respect to any tax claims, within
seven (7) calendar days following the earlier of (A) an agreement between
MuniYield and Municipal Strategy that an indemnity amount is payable, (B) an
assessment of a tax by a taxing authority, or (C) a "determination" as defined
in Section 1313(a) of the Code. For purposes of this Section 11, the term
"assessment" shall have the same meaning as used in Chapter 63 of the Code and
Treasury Regulations thereunder, or any comparable provision under the laws of
the appropriate taxing authority. In the event of any objection by the
Indemnifying Party, the Indemnifying Party promptly shall investigate the
claim, and if it is not satisfied with the validity thereof, the Indemnifying
Party shall conduct the defense against such claim. All costs and expenses
incurred by the Indemnifying Party in connection with such investigation and
defense of such claim shall be borne by it. These indemnification provisions
are in addition to, and not in limitation of, any other rights the parties may
have under applicable law.

         12. Other Matters.

            (a) Pursuant to Rule 145 under the 1933 Act, and in connection
with the issuance of any shares to any person who at the time of the
Reorganization is, to its knowledge, an affiliate of a party to the
Reorganization pursuant to Rule 145(c), MuniYield will cause to be affixed
upon the certificate(s) issued to such person (if any) a legend as follows:

            THESE SHARES ARE SUBJECT TO RESTRICTIONS ON TRANSFER UNDER THE
            SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR OTHERWISE
            TRANSFERRED EXCEPT TO MUNIYIELD FUND, INC. (OR ITS STATUTORY
            SUCCESSOR), OR ITS PRINCIPAL UNDERWRITER UNLESS (I) A
            REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER
            THE SECURITIES ACT OF 1933 OR (II) IN THE OPINION OF COUNSEL
            REASONABLY SATISFACTORY TO THE FUND, SUCH REGISTRATION IS NOT
            REQUIRED.

and, further, that stop transfer instructions will be issued to MuniYield's
transfer agent with respect to such shares. Municipal Strategy will provide
MuniYield on the Closing Date with the name of any stockholder of Municipal
Strategy who is to the knowledge of Municipal Strategy an affiliate of
Municipal Strategy on such date.

            (b) All covenants, agreements, representations and warranties made
under this Agreement and any certificates delivered pursuant to this Agreement
shall be deemed to have been material and relied upon by each of the parties,
notwithstanding any investigation made by them or on their behalf.

            (c) Any notice, report or demand required or permitted by any
provision of this Agreement shall be in writing and shall be made by hand
delivery, prepaid certified mail or overnight service, addressed to either
Fund, at 800 Scudders Mill Road, Plainsboro, New Jersey 08536, Attn: Terry K.
Glenn, President.

            (d) This Agreement supersedes all previous correspondence and oral
communications between the parties regarding the Reorganization, constitutes
the only understanding with respect to the Reorganization, may not be changed
except by a letter of agreement signed by each party and shall be governed by
and construed in accordance with the laws of the State of New York applicable
to agreements made and to be performed in said state.

            (e) Copies of the Articles of Incorporation, as amended, and
Articles Supplementary, as amended, of each Fund are on file with the Maryland
Department and notice is hereby given that this instrument is executed on
behalf of the Directors of each Fund.



<PAGE>

         This Agreement may be executed in any number of counterparts, each of
which, when executed and delivered, shall be deemed to be an original but all
such counterparts together shall constitute but one instrument.


                                    MUNIYIELD FUND, INC.




                                    By:
                                       ---------------------------------------
                                         Name:
                                        Title:


Attest:


_____________________________
Secretary




                                    MERRILL LYNCH MUNICIPAL STRATEGY FUND, INC.



                                    By:
                                       ---------------------------------------
                                          Name:
                                         Title:


Attest:


_____________________________
Secretary

<PAGE>

                                                                  APPENDIX III

                RATINGS OF MUNICIPAL BONDS AND COMMERCIAL PAPER

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

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

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

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

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

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

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

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

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

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

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

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

Description of Moody's Commercial Paper Ratings

     Moody's Commercial Paper ratings are opinions of the ability of issuers
to repay punctually promissory obligations not having an original maturity in
excess of nine months. Moody's employs the following three designations, all
judged to be investment grade, to indicate the relative repayment capacity of
rated issuers:

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

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

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

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

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

     A Standard & Poor's municipal debt rating is a current opinion of the
creditworthiness of an obligor with respect to a specific financial
obligation, a specific class of financial obligations, or a specific financial
program. It takes into consideration the creditworthiness of guarantors,
insurers or other forms of credit enhancement on the obligation.

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

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

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

     I.   Likelihood of payment-capacity and willingness of the obligor to
          meet its financial commitment on an obligation in accordance with
          the terms of the obligation;

     II.  Nature of and provisions of the obligation; and

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

<PAGE>

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

AA        Debt rated "AA" differs from the highest rated obligations only in
          small degree. The obligor's capacity to meet its financial
          commitment on the obligation is very strong.

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

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

BB        Debt rated "BB," "B," "CCC," "CC" and "C" are regarded as having
B         significant speculative characteristics. "BB" indicates the least
CCC       degree of speculation and "C" the highest degree of speculation.
CC        While such bonds will likely have some quality and protective
C         characteristics, these may be outweighed by large uncertainties or
          major exposures to adverse conditions.

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

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

Description of Standard & Poor's Commercial Paper Ratings

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

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

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

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

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

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

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

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


Description of Standard & Poor's Short-Term Issue Credit Ratings

     A Standard & Poor's note rating reflects the liquidity factors and market
access risks unique to notes. Notes due in three years or less will likely
receive a note rating. Notes maturing beyond three years will most likely
receive a long-term debt rating. The following criteria will be used in
making that assessment.

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

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

Note rating symbols are as follows:

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

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

SP-3     Speculative capacity to pay principal and interest.

c         The "c" subscript is used to provide additional information to
          investors that the bank may terminate its obligation to purchase
          tendered bonds if the long-term credit rating of the issuer is below
          an investment-grade level and/or the issuer's bonds are deemed
          taxable.

p         The letter "p" indicates that the rating is provisional. A
          provisional rating assumes the successful completion of the project
          financed by the debt being rated and indicates that payment of the
          debt service requirements is largely or entirely dependent upon the
          successful, timely completion of the project. this rating, however,
          while addressing credit quality subsequent to completion of the
          project, makes no comment on the likelihood of or the risk of
          default upon failure of such completion. The investor should
          exercise his own judgment with respect to such likelihood and risk.

          Continuance of the ratings is contingent upon Standard & Poor's
          receipt of an executed copy of the escrow agreement or closing
          documentation confirming investments and cash flows.

r         The "r" highlights derivative, hybrid, and certain other obligations
          that Standard & Poor's believes may experience high volatility or
          high variability in expected returns as a result of noncredit risks.
          Examples of such obligations are securities with principal or
          interest return indexed to equities, commodities, or currencies;
          certain swaps and options; and interest-only and principal-only
          mortgage securities. The absence of an "r" symbol should not be
          taken as an indication that an obligation will exhibit no volatility
          or variability in total return.

Description of Fitch, Inc.'s ("Fitch") Investment Grade Bond Ratings

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

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

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

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

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

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

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

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

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

BBB       Bonds considered to be investment grade and of satisfactory credit
          quality. The obligor's ability to pay interest and repay principal
          is considered to be adequate. Adverse changes in economic conditions
          and circumstances, however, are more likely to have adverse impact
          on these bonds, and therefore impair timely payment. The likelihood
          that the ratings of these bonds will fall below investment grade is
          higher than for bonds with higher ratings.

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

NR:       Indicates that Fitch does not rate the specific issue.

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

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

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

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

Description of Fitch's Speculative Grade Bond Ratings

     Fitch speculative grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
("BB" to "C") represent Fitch's assessment of the likelihood of timely payment
of principal and interest in accordance with the terms of obligation for bond
issues not in default. For defaulted bonds, the rating ("DDD" to "D") is an
assessment of the ultimate recovery value through reorganization or
liquidation.

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

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


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

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

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

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

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

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

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

Description of Fitch's Short-Term Ratings

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

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

     Fitch short-term ratings are as follows:

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

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

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

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

F-4       Weak Credit Quality. Issues assigned this rating have
          characteristics suggesting a minimal degree of assurance for timely
          payment and are vulnerable to near-term adverse changes in financial
          and economic conditions.

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

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

<PAGE>

[Proxy Card Front]


                                                                  COMMON STOCK


                  MERRILL LYNCH MUNICIPAL STRATEGY FUND, INC.
                                 P.O. BOX 9011
                       PRINCETON, NEW JERSEY 08543-9011

                                     PROXY

          This proxy is solicited on behalf of the Board of Directors

     The undersigned hereby appoints Terry K. Glenn, Donald C. Burke and Alice
A. Pellegrino as proxies, each with the power to appoint his or her
substitute, and hereby authorizes each of them to represent and to vote, as
designated on the reverse hereof, all of the shares of common stock of Merrill
Lynch Municipal Strategy Fund, Inc. (the "Fund") held of record by the
undersigned on August 27, 2001 at the Special Meeting of Stockholders of the
Fund to be held on October 24, 2001, or any adjournment thereof.

     This proxy when properly executed will be voted in the manner herein
directed by the undersigned stockholder. If no direction is made, this proxy
will be voted "FOR" Item 1. to approve the Agreement and Plan of
Reorganization.

     By signing and dating the reverse side of this card, you authorize the
proxies to vote the proposal as marked, or if not marked, to vote "FOR" the
proposal, and to use their discretion to vote for any other matter as may
properly come before the meeting or any adjournment thereof. If you do not
intend to personally attend the meeting, please complete and return this card
at once in the enclosed envelope.

     You may also vote your shares by touch-tone phone by calling
1-800-690-6903 or through the internet at www.proxyvote.com.

     (Continued and to be signed on the reverse side)

<PAGE>

[Proxy Card Reverse]

                          -
Please mark boxes /X/ or /X/ in blue or black ink.
                          -

1.   To consider and act upon a proposal to approve the Agreement and Plan of
     Reorganization between the Fund and MuniYield Fund, Inc.

          For   | |          Against    | |           Abstain     | |

2.   In the discretion of such proxies, upon such other business as properly
     may come before the meeting or any adjournment thereof.




                                        Please sign exactly as name appears
                                        hereon. When shares are held by joint
                                        tenants, both should sign. When
                                        signing as attorney or as executor,
                                        administrator, trustee or guardian,
                                        please give full title as such. If a
                                        corporation, please sign in full
                                        corporate name by president or other
                                        authorized officer. If a partnership,
                                        please sign in partnership name by
                                        authorized persons.

                                        Dated:
                                              --------------------------------


                                        X
                                         -------------------------------------
                                                     Signature

                                        X
                                         -------------------------------------
                                               Signature, if held jointly




Sign, date, and return the Proxy Card promptly using the enclosed envelope.

<PAGE>

[Proxy Card Front]


                                                             AUCTION MARKET
                                                             PREFERRED STOCK


                  MERRILL LYNCH MUNICIPAL STRATEGY FUND, INC.
                                 P.O. BOX 9011
                       PRINCETON, NEW JERSEY 08543-9011

                                     PROXY

          This proxy is solicited on behalf of the Board of Directors

     The undersigned hereby appoints Terry K. Glenn, Donald C. Burke and Alice
A. Pellegrino as proxies, each with the power to appoint his or her
substitute, and hereby authorizes each of them to represent and to vote, as
designated on the reverse hereof, all of the shares of Auction Market
Preferred Stock of Merrill Lynch Municipal Strategy Fund, Inc. (the "Fund")
held of record by the undersigned on August 27, 2001 at the Special Meeting of
Stockholders of the Fund to be held on October 24, 2001, or any adjournment
thereof.

     This proxy when properly executed will be voted in the manner herein
directed by the undersigned stockholder. If no direction is made, this proxy
will be voted "FOR" Item 1. to approve the Agreement and Plan of
Reorganization.

     By signing and dating the reverse side of this card, you authorize the
proxies to vote each proposal as marked, or if not marked, to vote "FOR" each
proposal, and to use their discretion to vote for any other matter as may
properly come before the meeting or any adjournment thereof. If you do not
intend to personally attend the meeting, please complete and return this card
at once in the enclosed envelope.

     You may also vote your shares by touch-tone phone by calling
1-800-690-6903 or through the internet at www.proxyvote.com.

               (Continued and to be signed on the reverse side)

<PAGE>

[Proxy Card Reverse]

                          -
Please mark boxes /X/ or /X/ in blue or black ink.
                          -


1.   To consider and act upon a proposal to approve the Agreement and Plan of
     Reorganization between the Fund and MuniYield Fund, Inc.




              For  | |          Against  | |           Abstain   | |

2.   In the discretion of such proxies, upon such other business as properly
     may come before the meeting or any adjournment thereof.

     If the undersigned is a broker-dealer, it hereby instructs the proxies,
pursuant to Rule 452 of the New York Stock Exchange, to vote any uninstructed
Auction Market Preferred Stock, in the same proportion as votes cast by
holders of Auction Market Preferred Stock, who have responded to this proxy
solicitation.



                                        Please sign exactly as name appears
                                        hereon. When shares are held by joint
                                        tenants, both should sign. When
                                        signing as attorney or as executor,
                                        administrator, trustee or guardian,
                                        please give full title as such. If a
                                        corporation, please sign in full
                                        corporate name by president or other
                                        authorized officer. If a partnership,
                                        please sign in partnership name by
                                        authorized persons.

                                        Dated:
                                              --------------------------------


                                        X
                                         -------------------------------------
                                                      Signature

                                       X
                                        --------------------------------------
                                               Signature, if held jointly



Sign, date, and return the Proxy Card promptly using the enclosed envelope.

<PAGE>

                           PART C. OTHER INFORMATION

Item 15. Indemnification.

     Section 2-418 of the General Corporation Law of the State of Maryland,
Article VI of the Registrant's By-Laws, filed as Exhibit 2 hereto, and the
Investment Advisory Agreement, a form of which is filed as Exhibit 6 hereto,
provide for indemnification.

     Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "1933 Act"), may be provided to directors,
officers and controlling persons of the Registrant, pursuant to the foregoing
provisions or otherwise, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission, such indemnification is against
public policy as expressed in the 1933 Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in connection with any
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the 1933 Act and will be governed by the
final adjudication of such issue.

     Reference is made to (i) Section 6 of the Purchase Agreement relating to
the Registrant's Common Stock, a form of which is filed as Exhibit 7(a)
hereto, and (ii) Section 7 of the Purchase Agreement relating to the
Registrant's Auction Market Preferred Stock ("AMPS"), a form of which is filed
as Exhibit 7(b) hereto, for provisions relating to the indemnification of the
underwriter.

Item 16. Exhibits.

<TABLE>
<CAPTION>

<S>                                                                      <C> <C>
1   (a) --  Articles of Incorporation of the Registrant, dated September 20, 1991.
    (b) --  Articles of Amendment to the Articles of Incorporation of the Registrant, dated November 15, 1991.
    (c) --  Form of Articles Supplementary creating the Registrant's Five Series of AMPS.  (a)
    (d) --  Articles of Amendment to Articles Supplementary creating the Registrant's Five Series of AMPS,
            dated November 13, 1992.
    (e) --  Articles of Amendment to Articles Supplementary creating the Registrant's Five Series of AMPS,
            dated November 30, 1994.
    (f) --  Articles of Amendment to Articles Supplementary creating the Registrant's Five Series of AMPS,
            dated November 30, 1994.
    (g) --  Articles of Amendment to Articles Supplementary creating the Registrant's Five Series of AMPS,
            dated June 23, 1999.
    (h) --  Form of Articles Supplementary creating the Registrant's Series F AMPS.
2       --  By-Laws of the Registrant.
3       --  Not Applicable.
4       --  Form of Agreement and Plan of Reorganization among the Registrant and Merrill Lynch Municipal
            Strategy Fund, Inc. ("Municipal Strategy") (included as Appendix II to the Proxy Statement and
            Prospectus contained in this Registration Statement).
5   (a) --  Copies of instruments defining the rights of stockholders, including the relevant portions of the
            Articles of Incorporation and the By-Laws of the Registrant. (b)
    (b) --  Form of specimen certificate for the Common Stock of the Registrant. (a)
    (c) --  Form of specimen certificate for the AMPS of the Registrant. (a)
6       --  Investment Advisory Agreement between Registrant and Fund Asset Management, L.P. ("FAM").
7   (a) --  Form of Purchase Agreement for the Common Stock of the Registrant. (a)
    (b) --  Form of Purchase Agreement for the AMPS of the Registrant. (a)
    (c) --  Form of Merrill Lynch Standard Dealer Agreement.(a)
8       --  Not applicable.
9       --  Custodian Contract between the Registrant and The Bank of New York ("BONY"). (a)
10      --  Form of Terms and Conditions of Amended Automatic Dividend Reinvestment Plan.
11      --  Opinion and Consent of Sidley Austin Brown & Wood LLP, counsel for the Registrant. (a)
12      --  Opinion of Sidley Austin Brown & Wood LLP, relating to certain tax matters. (a)
13  (a) --  Form of Registrar, Transfer Agency and Service Agreement between the Registrant and BONY.(a)
    (b) --  Form of Auction Agent Agreement between the Registrant and BONY. (a)
    (c) --  Form of Broker-Dealer Agreement. (a)
    (d) --  Form of Letter of Representations. (a)
14      --  Consent of ___________________, independent auditors for the Registrant. (a)
15      --  Not applicable.
16      --  Not applicable.
17      --  Not applicable.

</TABLE>

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

  (a)  To be filed by amendment to this Registration Statement.

  (b)  Reference is made to Article V, Article VI (sections 2, 3, 4, 5 and
       6), Article VII, Article VIII, Article X, Article XI, Article XII
       and Article XIII of the Registrant's Articles of Incorporation,
       filed as Exhibit 1(a) hereto, to Article II, Article III (sections
       1, 2, 3, 5 and 17), Article VI, Article VII, Article XII, Article
       XIII and Article XIV of the Registrant's By-Laws, filed as Exhibit 2
       hereto, and to the Form of Articles Supplementary relating to the
       Registrant's Five Series of AMPS, filed as Exhibit 1(c) hereto.
       Reference is also made to the Form of Articles Supplementary
       relating to the Registrant's Series F AMPS, filed as Exhibit 1(h)
       hereto.

Item 17. Undertakings.

(1)    The undersigned Registrant agrees that prior to any public reoffering
       of the securities registered through use of a prospectus which is part
       of this Registration Statement by any person or party who is deemed to
       be an underwriter within the meaning of Rule 145(c) of the Securities
       Act of 1933, as amended, the reoffering prospectus will contain
       information called for by the applicable registration form for
       reofferings by persons who may be deemed underwriters, in addition to
       the information called for by other items of the applicable form.

(2)    The undersigned Registrant agrees that every prospectus that is filed
       under paragraph (1) above will be filed as part of an amendment to the
       registration statement and will not be used until the amendment is
       effective, and that, in determining any liability under the Securities
       Act of 1933, as amended, each post-effective amendment shall be deemed
       to be a new registration statement for the securities offered therein,
       and the offering of securities at that time shall be deemed to be the
       initial bona fide offering of them.

(3)    The Registrant undertakes to file, by post-effective amendment, an
       opinion of counsel as to certain tax matters within a reasonable time
       after receipt of such opinion.

<PAGE>

                                  SIGNATURES

     As required by the Securities Act of 1933, this Registration Statement
has been signed on behalf of the Registrant, in the Township of Plainsboro and
State of New Jersey, on the 17th day of July, 2001.



                                                    MUNIYIELD FUND, INC.
                                                     (Registrant)

                                                   By: /s/ TERRY K. GLENN
                                                       ------------------
                                                 (Terry K. Glenn, President)


     Each person whose signature appears below hereby authorizes Terry K.
Glenn, Donald C. Burke and Alice A. Pellegrino, or any of them, as
attorney-in-fact, to sign on his or her behalf, individually and in each
capacity stated below, any amendments to this Registration Statement
(including post-effective amendments) and to file the same, with all exhibits
thereto, with the Securities and Exchange Commission.

     As required by the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated.

<TABLE>
<CAPTION>

                      Signatures                            Title                                    Date
                      ----------                            -----                                    ----

<S>                                             <C>                                             <C>
                  /s/ TERRY K. GLENN                President and Director                      July 17, 2001
- ----------------------------------------------  (Principal Executive Officer)
                   (Terry K. Glenn)

                 /s/ DONALD C. BURKE                 Vice President and                         July 17, 2001
- ---------------------------------------------- Treasurer (Principal Financial
                  (Donald C. Burke)                and Accounting Officer)


                /s/ JAMES H. BODURTHA                     Director                              July 17, 2001
- ----------------------------------------------
                 (James H. Bodurtha)

                /s/ HERBERT I. LONDON                     Director                              July 17, 2001
- ----------------------------------------------
                 (Herbert I. London)

                  /s/ JOSEPH L. MAY                       Director                              July 17, 2001
- ----------------------------------------------
                   (Joseph L. May)

                 /s/ ANDRE F. PEROLD                      Director                              July 17, 2001
- ----------------------------------------------
                  (Andre F. Perold)

              /s/ ROBERTA COOPER RAMO                     Director                              July 17, 2001
- ----------------------------------------------
                (Roberta Cooper Ramo)

</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                                               INDEX TO EXHIBITS

Exhibit Number

<S>  <C>
1    (a) --  Articles of Incorporation of the Registrant, dated September 20, 1991.
     (b) --  Articles of  Amendment to the Articles of Incorporation of the Registrant, dated November 15, 1991.
     (d) --  Articles of  Amendment to Articles  Supplementary  creating  the  Registrant's  Five Series of AMPS,
         --  dated November 30, 1992.
     (e) --  Articles of  Amendment to Articles  Supplementary  creating  the  Registrant's  Five Series of AMPS,
         --  dated November 30, 1994.
     (f) --  Articles of Amendment to Articles Supplementary creating the Registrant's Five Series of AMPS, dated
         --  November 30, 1994.
     (g) --  Articles of Amendment to Articles Supplementary creating the Registrant's Five Series of AMPS, dated
         --  June 23, 1999.
     (h) --  Form of Articles Supplementary creating the Registrant's Series F AMPS.
2        --  By-laws of the Registrant.
6        --  Investment Advisory Agreement between Registrant and FAM.
10       --  Form of Terms and Conditions of Amended Automatic Dividend Reinvestment Plan.

</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-1.A
<SEQUENCE>2
<FILENAME>efc1-0727_844004ex1a.txt
<DESCRIPTION>ARTICLES OF INC. OF THE REGISTRANT
<TEXT>

                                                            Exhibit 1(a)


                           ARTICLES OF INCORPORATION

                                      OF

                             MUNIYIELD FUND, INC.

                                  ARTICLE I

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

                                  ARTICLE II

                                     NAME

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

                                 ARTICLE III

                              PURPOSES AND POWERS

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

                                  ARTICLE IV

                      PRINCIPAL OFFICE AND RESIDENT AGENT

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

                                  ARTICLE V

                                 CAPITAL STOCK

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

     (2) The Board of Directors may classify and reclassify any unissued
shares of capital stock into one or more additional or other classes or series
as may be established from time to time by setting or changing in any one or
more respects the designations, preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividend, qualifications or
terms or conditions of redemption of such shares of stock and pursuant to such
classification or reclassification to increase or decrease the number of
authorized shares of any existing class or series.

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

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

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

     (6) Unless otherwise expressly provided in the charter of the Corporation,
including any Articles Supplementary creating any class or series of capital
stock, in the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of all classes and
series of capital stock of the Corporation shall be entitled, after payment or
provision for payment of the debts and other liabilities of the Corporation,
to share ratably in the remaining net assets of the Corporation.

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

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

                                  ARTICLE VI

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

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

                              Philip L. Kirstein
                               Mark B. Goldfus
                                Susan B. Baker

     (2) The Board of Directors of the Corporation is hereby empowered to
authorize the issuance from time to time of shares of capital stock, whether
now or hereafter authorized, for such consideration as the Board of Directors
may deem advisable, subject to such limitations as may be set forth in these
Articles of Incorporation or in the By-Laws of the Corporation or in the
General Laws of the State of Maryland.

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

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

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

     (6) A director elected by the holders of capital stock may be removed for
cause (but not without cause), but only by action taken by the holders of at
least sixty-six and two-thirds percent (66 2/3%) of the shares of capital
stock then entitled to vote in an election to fill that directorship.

                                  ARTICLE VII
                          DENIAL OF PREEMPTIVE RIGHTS

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

                                 ARTICLE VIII

                             DETERMINATION BINDING

     Any determination made in good faith, so far as accounting matters are
involved, in accordance with accepted accounting practice by or pursuant to
the direction of the Board of Directors, as to the amount of assets,
obligations or liabilities of the Corporation, as to the amount of net income
of the Corporation from dividends and interest for any period or amounts at
any time legally available for the payment of dividends, as to the amount of
any reserves or charges set up and the propriety thereof, as to the time of or
purpose for creating reserves or as to the use, alteration or cancellation of
any reserves or charges (whether or not any obligation or liability for which
such reserves or charges shall have bean created, shall have been paid or
discharged or shall be then or thereafter required to be paid or discharged),
or s as to the price of any security owned by the Corporation or as to any
matters relating to the issuance, sale, redemption or other acquisition or
disposition of securities or shares of capital stock of the Corporation, and
any reasonable determination made in good faith by the Board of Directors as
to whether any transaction constitutes a purchase of securities on "margin," a
sale of securities "short," or an underwriting of the sale of, or a
participation in any underwriting or selling group in connection with the
public distribution of, any securities, shall be final and conclusive, and
shall be binding upon the Corporation and all holders of its capital stock,
past, present and future, and shares of the capital stock of the Corporation
are issued and sold on the condition and understanding evidenced by the
purchase of shares of capital stock or acceptance of share certificates, that
any and all such determinations shall be binding as aforesaid. No provision of
these Articles of Incorporation shall be effective to (a) require a waiver of
compliance with any provision of the Securities Act of 1933, as amended, or
the Investment Company Act of 1940, as amended, or of any valid rule,
regulation or order of the Securities and Exchange Commission thereunder or
(b) protect or purport to protect any director or officer of the Corporation
against any liability to the Corporation or its security holders to which he
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.

                                  ARTICLE IX

                              PERPETUAL EXISTENCE

     The duration of the Corporation shall be perpetual.

                                  ARTICLE X

                       PRIVATE PROPERTY OF STOCKHOLDERS

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

                                  ARTICLE XI

                        CONVERSION TO OPEN-END COMPANY

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

                                 ARTICLE XII

                      MERGER, SALE OF ASSETS, LIQUIDATION

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

                                 ARTICLE XIII

                                   AMENDMENT

     The Corporation reserves the right to amend, alter, change or repeal any
provision contained in these Articles of Incorporation, in the manner now or
hereafter prescribed by statute, including any amendment which alters the
contract rights, as expressly set forth in the charter, of any outstanding
stock and substantially adversely affects the stockholders' rights and all
rights conferred upon stockholders herein are granted subject to this
reservation. Notwithstanding any other provisions of these Articles of
Incorporation or the By-Laws of the Corporation (and notwithstanding the fact
that a lesser percentage may be specified by law, these Articles of
Incorporation or the By-Laws of the Corporation) the amendment or repeal of
Section (5) of Article V, Section (1), Section (3), Section (4) , Section (5)
and Section (6) of Article VI, Article IX, Article X, Article XI, Article XII,
or this Article XIII, of these Articles of Incorporation shall require the
affirmative vote of the holders of at least sixty-six and two-thirds percent
(69 2/3%) of the outstanding shares of capital stock of the Corporation
entitled to be voted on the matter.

<PAGE>

     IN WITNESS WHEREOF, the undersigned incorporator of MuniYield Fund, Inc.
hereby executes the foregoing Articles of Incorporation and acknowledges the
same to be his act and further acknowledges that, to the best of his
knowledge, the matters and set forth therein are true in all material respects
under the penalties of perjury.

Dated the 19th day
of September 1991.



                                                      /s/ Craig S. Lax
                                                  -------------------------
                                                      Craig S. Lax

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-1.B
<SEQUENCE>3
<FILENAME>efc1-0727_843775ex1b.txt
<DESCRIPTION>EXHIBIT 1(B)
<TEXT>

                                                            Exhibit 1(b)


                             MUNIYIELD FUND, INC.

                             ARTICLES OF AMENDMENT


     MUNIYIELD FUND, INC., a Maryland corporation having its principal
office c/o The Corporation Trust Incorporated, 33South Street, Baltimore,
Maryland 21202 (hereinafter called the Corporation), hereby certifies to the
State Department of Assessments and Taxation of Maryland, that:

     FIRST: The charter of the Corporation is hereby amended by striking out
Section (6) of Article VI of the Articles of Incorporation and inserting in
lieu thereof the following:

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

     SECOND: The foregoing amendments do not increase the authorized capital
stock of the Corporation or alter the par value of such capital stock.

     THIRD: The foregoing amendments to the charter of the Corporation have
been duly approved by the entire Board of Directors at a meeting thereof held
on November 5, 1991, and at the time of the approval by the Directors there
were no shares of stock of the Corporation entitled to vote on the matter
either outstanding or subscribed for.


<PAGE>



     IN WITNESS WHEREOF, MuniYield Fund, Inc. has caused these Articles to be
signed in its name and on its behalf by its President and attested by its
Secretary on November 5, 1991. The undersigned, Philip L. Kirstein, President
of MuniYield, Inc., who executed on behalf of said corporation these Articles
of Amendment, of which this certificate is made a part, hereby acknowledges in
the name of and on behalf of said corporation, these Articles of Amendment to
be the corporate act of said corporation; and further certifies that to the
best of his knowledge, information and belief, the matters and the facts set
forth herein, with respect to the authorization and approval hereof are true
in all material respects, under the penalties of perjury.

                                            MUNIYIELD FUND, INC.



                                            By: /s/ Philip L. Kirstein
                                                ----------------------------
                                                Philip L. Kirstein, President



Attest:



By: /s/ Mark B. Goldfus
    ---------------------------
     Mark B. Goldfus, Secretary
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-1.D
<SEQUENCE>4
<FILENAME>efc1-0727_844009ex1d.txt
<DESCRIPTION>ARTICLES OF AMENDMENT NOV 1994
<TEXT>

                                                            Exhibit 1(d)


                             MUNIYIELD FUND, INC.

                           Articles of Amendment to
                        Articles Supplementary creating
                                five series of
                      Auction Market Preferred Stock(R)


     MUNIYIELD FUND, INC., a Maryland corporation having its principal
Maryland office in the City of Baltimore (the "Corporation"), hereby certifies
to the State Department of Assessments and Taxation of Maryland that:

     FIRST: The Articles Supplementary, dated December 19, 1991 and received
and approved for record on December 20, 1991, creating five series of Auction
Market Preferred Stock of the Corporation (the "Articles Supplementary") are
hereby amended by the addition of the following definitions to paragraph 1(a)
thereof:

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

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





- --------
(R) Registered trademark of Merrill Lynch & Co., Inc.
<PAGE>


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

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

     "S&P Volatility Factor" means 304% or such other potential dividend rate
increase factor as S&P advises the Corporation in writing is applicable.

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

     SECOND: The Articles Supplementary are hereby amended by striking out the
definitions labeled "AMPS Basic Maintenance Amount," "Long Term Dividend
Period," "Reference Rate" and "Special Dividend Period" in paragraph 1(a)
thereof and inserting in lieu thereof the following:

     "AMPS Basic Maintenance Amount," as of any Valuation Date, means the
dollar amount equal to (i) the sum of (A) the product of the number of shares
of AMPS of all series and other AMPS outstanding on such Valuation Date
multiplied by the sum of (a) $50,000 and (b) any applicable redemption premium
attributable to the designation of a Premium Call Period; (B) the aggregate
amount of cash dividends (whether or not earned or declared) that will have
accumulated for each share of AMPS and Other AMPS Outstanding, in each case,
to (but not including) the end of the current Dividend Period that follows
such Valuation Date; (C) the aggregate amount of cash dividends that would
accumulate at the then current Maximum Applicable Rate on any shares of AMPS
and Other AMPS Outstanding from the end of such Dividend Period through the
49th day after such Valuation Date, multiplied by the larger of the Moody's
Volatility Factor and the S&P Volatility Factor (currently 304%) determined
from time to time by Moody's and S&P, respectively (except that if such
Valuation Date occurs during a Non-Payment Period, the cash dividend for
purposes of calculation would accumulate at the then current Non-Payment
Period Rate); (D) the amount of anticipated expenses of the Corporation for
the 90 days subsequent to such Valuation Date; (E) the amount of the
Corporation's Maximum Potential Additional Dividend Liability as of such
Valuation Date; and (F) any current liabilities as of such Valuation Date to
the extent not reflected in any of (i)(A) through (i)(E) (including, without
limitation, and immediately upon determination, any amounts due and payable by
the Corporation pursuant to repurchase agreements and any payables for
Municipal Bonds purchased as of such Valuation Date) less (ii) the sum of (A)
the lesser of (1) the aggregate of (a) the book value of receivable for
Municipal Bonds sold as of or prior to such Valuation Date if such receivables
are due within five Business Days of such Valuation Date, and if the trades
which generated such receivables are (x) settled through clearing house firms
with respect to which the Corporation has received prior written authorization
from Moody's or (y) with counterparties having a Moody's long term debt rating
of at least Baa3, and (b) the Discounted Value of Municipal Bonds sold as of
or prior to such Valuation Date which generated receivables calculated using
the Moody's Discount Factor applicable to such Municipal Bonds, if such
receivables are due within five Business Days of such Valuation Date but do
not comply with either of conditions (x) or (y) of the preceding clause (a)
and (2) the Discounted Value of such Municipal Bonds calculated using the
higher of the S&P Discount Factor and the Moody's Discount Factor applicable
to such Municipal Bonds and (E) the Discounted Value of any of the
Corporation's assets irrevocably deposited by the Corporation for the payment
of the amount needed to redeem shares of AMPS subject to redemption or any of
(i)(B) through (i)(F).

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

     "Reference Rate" means: (i) with respect to a Dividend Period or a Short
Term Dividend Period having 28 or fewer days, the higher of the applicable
"AA" Composite Commercial Paper Rate and the Taxable Equivalent of the Short
Term Municipal Bond Rate, (ii) with respect to any Short Term Dividend Period
having more than 28 but fewer than 183 days, the applicable "AA" Composite
Commercial Paper Rate, (iii) with respect to any Short Term Dividend Period
having 183 or more but fewer than 364 days, the applicable U.S. Treasury Bill
Rate and (iv) with respect to any Long Term Dividend Period, the applicable
U.S. Treasury Note Rate.

     "Special Dividend Period" means a Dividend Period consisting of (i) a
specified number of days (other than 28 in the case of Series A AMPS, Series B
AMPS, Series C AMPS and Series D AMPS and other than seven in the case of
Series E AMPS), evenly divisible by seven, and not fewer than seven nor more
than 364 or (ii) a specified period of one whole year or more but not greater
than five years (in each case subject to adjustment as provided in paragraph
2(b)(1)).

     THIRD: The Articles Supplementary are hereby amended by striking out
paragraph 2 thereof and inserting in lieu thereof the following:

     2. Dividends. (a) The Holders shall be entitled to receive, when, as and
if declared by the Board of Directors of the Corporation, out of funds legally
available therefor, cumulative dividends each consisting of (i) cash at the
Applicable Rate, (ii) a Right to receive cash as set forth in paragraph 2(e)
below, and (iii) any additional amounts as set forth in paragraph 2(f) below,
and no more, payable on the respective dates set forth below. Dividends on the
shares of AMPS so declared and payable shall be paid (i) in preference to and
in priority over any dividends declared and payable on the Common Stock, and
(ii) to the extent permitted under the Code and to the extent available, out
of net tax-exempt income earned on the Corporation's investments. To the
extent permitted under the Code, dividends on shares of AMPS will be
designated as exempt-interest dividends. For the purposes of this section, the
term "net tax-exempt income" shall exclude capital gains of the Corporation.

     (b) (i) Cash dividends on shares of AMPS shall accumulate from the Date
of Original Issue and shall be payable, when, as and if declared by the Board
of Directors commencing on the Initial Dividend Payment Date with respect to
each series of AMPS. Following the Initial Dividend Payment Date for each
series of AMPS, dividends on such series of AMPS will be payable at the option
of the Corporation, either (i) with respect to any 7-day Dividend Period, any
28-day Dividend Period and any Short Term Dividend Period of 35 or fewer days,
on the day next succeeding the last day thereof and (ii) with respect to any
Short Term Dividend Period of more than 35 days and with respect to any Long
Term Dividend Period, monthly on the first day of each calendar month during
such Short Term Dividend Period or Long Term Dividend Period and on the day
next succeeding the 1ast day thereof (each such date referred to in clause (i)
or (ii) being herein referred to as a "Normal Dividend Payment Date"), except
that (i) if such Normal Dividend Payment Date is not a Business Day, then the
Dividend Payment Date shall be the next succeeding date if both such dates
following the Normal Dividend Payment Date are Business Days, or (ii) if the
date following such Normal Dividend Payment Date is not a Business Day, then
the Dividend Payment Date will be the date next preceding such Normal Dividend
Payment Date if both such date and such Normal Dividend Payment Date are
Business Days or (iii) if such Normal Dividend Payment Date and either the
preceding date or the succeeding date are not Business Days, then the Dividend
Payment Date shall be the first Business Day next preceding such Normal
Dividend Payment Date that is next succeeded by a Business Day. Although any
particular Dividend Payment Date may not occur on the originally scheduled
date because of the exceptions discussed above, the next succeeding Dividend
Payment Date, subject to such 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 Initial Dividend Period, 7-day Dividend Periods, 28-day
Dividend Periods and Special Dividend Periods are hereinafter sometimes
referred to as Dividend Periods. Each dividend payment date determined as
provided above is hereinafter referred to as a "Dividend Payment Date."

     (ii) Each dividend shall be paid to the Holders as they appear in the
Stock Register as of 12:00 noon, New York City time, on the Business Day
preceding the Dividend Payment Date. Dividends in arrears for any past
Dividend Period may be declared and paid at any time, without reference to any
regular Dividend Payment Date, to the Holders as they appear on the Stock
Register on a date, not exceeding 15 days prior to the payment date therefor,
as may be fixed by the Board of Directors of the Corporation.

     (c) (i) During the period from and including the Date of Original Issue
to but excluding the Initial Dividend Payment Date (the "Initial Dividend
Period"), the Applicable Rate shall be the Initial Dividend Rate. Commencing
on the Initial Dividend Payment Date, the Applicable Rate for each subsequent
dividend period (hereinafter referred to as a "Subsequent Dividend Period"),
which Subsequent Dividend Period shall commence on and include a Dividend
Payment Date and shall end on and include the calendar day prior to the next
Dividend Payment Date (or last Dividend Payment Date in a Dividend Period if
there is more than one Dividend Payment Date), shall be equal to the rate per
annum that results from implementation of the Auction Procedures.

     The Applicable Dividend Rate for each Dividend Period commencing during a
Non-Payment Period shall be equal to the Non Payment Period Rate; and each
Dividend Period, commencing after the first day of, and during, a Non-Payment
Period shall be a 28-day Dividend Period in the case of Series A AMPS, Series
B AMPS, Series C AMPS and Series D AMPS and a 7-day Dividend Period in the
case of Series E AMPS, provided that if the preceding Dividend Period for
Series A AMPS, Series B AMPS, Series C AMPS or Series D AMPS is a Special
Dividend Period of less than 28 days, the Dividend Period commencing during a
Non-Payment Period will be the same length as such preceding Dividend Period.
Except in the case of the willful failure of the Corporation to pay a dividend
on a Dividend Payment Date or to redeem any of AMPS on the date set for such
redemption, any amount of any dividend due on any Dividend Payment Date (if,
prior to the close of business on the second Business Day preceding such
Dividend Payment Date, the Corporation has declared such dividend payable on
such Dividend Payment Date to the Holders of such shares of AMPS as of 12:00
noon, New York City time, on the Business Day preceding such Dividend Payment
Date) or redemption price with respect to any shares of AMPS not paid to such
Holders when due may be paid to such Holders in the same form of funds by
12:00 noon, New York City time, on any of the first three Business Days after
such Dividend Payment Date or due date, as the case may be, provided that,
such amount is accompanied by a late charge calculated for such period of
non-payment at the Non-Payment Period Rate applied to the amount of such
non-payment based on the actual number of days comprising such period divided
by 365. In the case of a willful failure of the Corporation to pay a dividend
on a Dividend Payment Date or to redeem any shares of AMPS on the date set for
such redemption, the preceding sentence shall not apply and the Applicable
Dividend Rate for the Dividend Period commencing during the Non-Payment Period
resulting from such failure shall be the Non-Payment Period Rate. For the
purposes of the foregoing, payment to a person in same-day funds on any
Business Day at any time shall be considered equivalent to payment to such
person in New York Clearing House (next-day) funds at the same time on the
preceding Business Day, and any payment made after 12:00 noon, New York City
time, on any Business Day shall be considered to have been made instead in the
same form of funds and to the same person before 12:00 noon, New York City
times, on the next Business Day.

     (ii) The amount of cash dividends per share of AMPS payable (if declared)
on each Dividend Payment Date of each 7-day Dividend Period, 28-day Dividend
Period and Short Term Dividend Period shall be computed by multiplying the
Applicable Rate for such Dividend Period by a fraction, the numerator of which
will be the number of days in such Dividend Period such share was outstanding
and the denominator of which will be 365, multiplying the amount so obtained
by $50,000, and rounding the amount so obtained to the nearest cent. During
any Long Term Dividend Period, the amount of dividends per share payable on
any Dividend Payment Date shall be computed on the basis of a year consisting
of twelve 30-day months.

     (iii) With respect to each Dividend Period that is a Special Dividend
Period, the Corporation may, at its sole option and to the extent permitted by
law, by telephonic and written notice (a "Request for Special Dividend
Period") to the Auction Agent and to each Broker-Dealer, request that the next
succeeding Dividend Period for a series of AMPS be a number of days (other
than 28 in the case of Series A AMPS, Series B AMPS, Series C AMPS and Series
D AMPS and other than seven in the case of Series E AMPS) evenly divisible by
seven, and not fewer than seven or more than 364 in the case of a Short Term
Dividend Period or one whole year or more but not greater than five years in
the case of a Long Term Dividend Period, specified in such notice, provided
that for any Auction occurring after the initial Auction, the corporation may
not give a Request for Special Dividend Period (and any such request shall be
null and void) unless the Corporation has received written confirmation from
S&P and Moody's that such action would not impair the ratings then assigned to
the AMPS by S&P and Moody's and unless Sufficient Clearing Bids were made in
the last occurring Auction and unless full cumulative dividends, any amounts
due with respect to redemptions, and any Additional Dividends payable prior to
such date have been paid in full. Such Request for Special Dividend Period, in
the case of a Short Term Dividend Period, shall be given on or prior to the
fourth day but not more than seven days prior to an Auction Date for a series
of AMPS and, in the case of a Long Term Dividend Period, shall be given on or
prior to the 14th day but not more than 28 days prior to an Auction Date for
the AMPS. Upon receiving such Request for Special Dividend Period, the
Broker-Dealer(s) shall jointly determine whether, given the factors set forth
below, it is advisable that the Corporation issue a Notice of Special Dividend
Period for the series of AMPS as contemplated by such Request for Special
Dividend Period and the Optional Redemption Price of the AMPS during such
Special Dividend Period and the Specific Redemption Provisions and shall give
the Corporation and the Auction Agent written notice (a "Response") of such
determination by no later than the third day prior to such Auction Date. In
making such determination the Broker-Dealer(s) will consider (1) existing
short-term and long-term market rates and indices of such short-term and
long-term rates, (2) existing market supply and demand for short-term and
long-term securities, (3) existing yield curves for short-term and long-term
securities comparable to the AMPS, (4) industry and financial conditions which
may affect the AMPS, (5) the investment objective of the Corporation, and (6)
the Dividend Periods and dividend rates at which current and potential
beneficial holders of the AMPS would remain or become beneficial holders. If
the Broker-Dealer(s) shall not give the Corporation and the Auction Agent a
Response by such third day or if the Response states that given the factors
set forth above it is not advisable that the Corporation give a Notice of
Special Dividend Period for the Series of AMPS, the Corporation may not give a
Notice of Special Dividend Period in respect of such Request for Special
Dividend Period. In the event the Response indicates that it is advisable that
the Corporation give a Notice of Special Dividend Period for the series of
AMPS, the Corporation may by no later than the second day prior to such
Auction Date give a notice (a "Notice of Special Dividend Period") to the
Auction Agent, the Securities Depository and each Broker-Dealer which notice
will specify (i) the duration of the Special Dividend Period, (ii) the
Optional Redemption Price as specified in the related Response and (iii) the
Specific Redemption Provisions, if any, as specified in the related Response.
The Corporation shall not given a Notice of Special Dividend Period and, if
the Corporation has given a Notice of Special Dividend Period, the Corporation
is required to give telephonic and written notice (a "Notice of Revocation")
to the Auction Agent, each Broker-Dealer, and the Securities Depository on or
prior to the day prior to the relevant Auction Date if (x) either the 1940 Act
AMPS Coverage is not satisfied or the Corporation shall fail to maintain S&P
Eligible Assets and Moody's Eligible Assets each with an aggregate Discounted
Value at least equal to the AMPS Basic Maintenance Amount, in each case on
each of the two Valuation Dates immediately preceding the business day prior
to the relevant Auction Date on an actual basis and on a pro forma basis
giving effect to the proposed Special Dividend Period (using as a pro forma
dividend rate with respect to such Special Dividend Period the dividend rate
which the Broker-Dealers shall advise the Corporation is an approximately
equal rate for securities similar to the AMPS with an equal dividend period),
provided that, in calculating the aggregate Discounted Value of Moody's
Eligible Assets for this purpose, the Moody's Exposure Period shall be deemed
to be one week longer, (y) sufficient funds for the payment of dividends
payable on the immediately succeeding Dividend Payment Date have not been
irrevocably deposited with the Auction Agent by the close of business on the
third Business Day preceding the related Auction Date or (z) the
Broker-Dealer(s) jointly advise the Corporation that after consideration of
the factors listed above they have concluded that it is advisable to give a
Notice of Revocation. If the Corporation is prohibited from giving a Notice of
Special Dividend Period as a result of any of the factors enumerated in clause
(x), (y) or (z) of the prior sentence or if the Corporation gives a Notice of
Revocation with respect to a Notice of Special Dividend Period for any series
of AMPS, the next succeeding Dividend Period for that series will be a 28-day
Dividend Period in the case of Series A AMPS, Series B AMPS, Series C AMPS and
Series D AMPS, and a 7-day Dividend Period in the case of Series E AMPS,
provided that if the then current Dividend Period for Series A AMPS, Series B
AMPS, Series C AMPS or Series D AMPS is a Special Dividend Period of less than
28 days, the next succeeding Dividend Period for such series of AMPS will be
the same length as such current Dividend Period. In addition, in the event
Sufficient Clearing Bids are not made in the applicable Auction or such
Auction is not held for any reason, such next succeeding Dividend Period will
be a 28-day Dividend Period (in the case of Series A AMPS, Series B AMPS,
Series C AMPS and Series D AMPS) or a 7-day Dividend Period (in the case of
Series E AMPS) and the Corporation may not again give a Notice of Special
Dividend Period for the AMPS (and any such attempted notice shall be null and
void) until Sufficient Clearing Bids have been made in an Auction with respect
to a 28-day Dividend Period (in the case of Series A AMPS, Series B AMPS,
Series C AMPS and Series D AMPS) or a 7-day Dividend Period (in the case of
Series E AMPS).

     (d) (i) Holders shall not be entitled to any dividends, whether payable
in cash, property or stock, in excess of full cumulative dividends and
applicable late charge, as herein provided, on the shares of AMPS (except for
Additional Dividends as provided in paragraph 2(e) hereof and additional
payments as provided in paragraph 2(f) hereof). Except for the late charge
payable pursuant to paragraph 2(c)(i) hereof, no interest, or sum of money in
lieu of interest, shall be payable in respect of any dividend payment on the
shares of AMPS that may be in arrears.

     (ii) For so long as any share of AMPS is outstanding, the Corporation
shall not declare, pay or set apart for payment any dividend or other
distribution (other than a dividend or distribution paid in shares of, or
options, warrants or rights to subscribe for or purchase, Common Stock or
other stock, if any, ranking junior to the shares of AMPS as to dividends or
upon liquidation) in respect of the Common Stock or any other stock of the
Corporation ranking junior to or on a parity with the shares of AMPS as to
dividends or upon liquidation, or call for redemption, redeem, purchase or
otherwise acquire for consideration any shares of the Common Stock or any
other such junior stock (except by conversion into or exchange for stock of
the Corporation ranking junior to the shares of AMPS as to dividends and upon
liquidation) or any other such Parity Stock (except by conversion into or
exchange for stock of the corporation ranking junior to or on a parity with
the shares of AMPS as to dividends and upon liquidation), unless (A)
immediately after such transaction, the Corporation shall have S&P Eligible
Assets and Moody's Eligible Assets each with an aggregate Discounted Value
equal to or greater than the AMPS Basic Maintenance Amount and the Corporation
shall maintain the 1940 Act AMPS Asset Coverage, (B) full cumulative dividends
on shares of AMPS and shares of Other AMPS due on or prior to the date of the
transaction have been declared and paid or shall have been declared and
sufficient funds for the payment thereof deposited with the Auction Agent, (C)
any Additional Dividend required to be paid under paragraph 2(e) below on or
before the date of such declaration or payment has been paid and (D) the
Corporation has redeemed the full number of shares of AMPS required to be
redeemed by any provision for mandatory redemption contained herein.

     (e) Each dividend shall consist of (i) cash at the Applicable Dividend
Rate, (ii) an uncertificated right (a "Right") to receive an Additional
Dividend (as defined below), and (iii) any additional amounts as set forth in
paragraph 2(f) below. Each Right shall thereafter be independent of the share
or shares of AMPS on which the dividend was paid. The Corporation shall cause
to be maintained a record of each Right received by the respective Holders. A
Right may not be transferred other than by operation of law. If the
corporation retroactively allocates any net capital gains or other taxable
income to shares of AMPS without having given advance notice thereof to the
Auction Agent as described in paragraph 2(f) hereof solely by reason of the
fact that such allocation is made as a result of the redemption of all or a
portion of the outstanding shares of AMPS or the liquidation of the
Corporation (the amount of such allocation referred to herein as a
"Retroactive Taxable Allocation"), the Corporation will, within 90 days (and
generally within 60 days) after the end of the Corporation's fiscal year for
which a Retroactive Taxable Allocation is made, provide notice thereof to the
Auction Agent and to each holder of a Right applicable to such shares of AMPS
(initially Cede & Co. as nominee of The Depository Trust Company) during such
fiscal year at such holder's address as the same appears or last appeared on
the stock books of the Corporation. The Corporation will, within 30 days after
such notice is given to the Auction Agent, pay to the Auction Agent (who will
then distribute to such holders of Rights), out of funds legally available
therefor, an amount equal to the aggregate Additional Dividend with respect to
all Retroactive Taxable Allocations made to such holders during the fiscal
year in question.

     An "Additional Dividend" means payment to a present or former holder of
shares of AMPS of an amount which, when taken together with the aggregate
amount of Retroactive Taxable Allocations made to such holder with respect to
the fiscal year in question, would cause such holder's dividends in dollars
from the aggregate of both the Retroactive Taxable Allocations and the
Additional Dividend to be equal to the dollar amount of the dividends which
would have been received by such holder if the amount of the aggregate
Retroactive Taxable Allocations would have been excludable from the gross
income of such holder. Such Additional Dividend shall be calculated (i)
without consideration being given to the time value of money; (ii) assuming
that no holder of shares of AMPS is subject to the Federal alternative minimum
tax with respect to dividends received from the Corporation; and (iii)
assuming that each Retroactive Taxable Allocation would be taxable in the
hands of each holder of shares of AMPS at the maximum marginal regular Federal
income tax rate applicable to individuals or corporations, whichever is
greater, in effect during the fiscal year in question.

     (f) Except as provided below, whenever the Corporation intends to include
any net capital gains or other taxable income in any dividend on shares of
AMPS, the Corporation will notify the Auction Agent of the amount to be so
included at least five Business Days prior to the Auction Date on which the
Applicable Rate for such dividend is to be established. The Corporation may
also include such income in a dividend on shares of AMPS without giving
advance notice thereof if it increases the dividend by an additional amount
calculated as if such income was a Retroactive Taxable Allocation and the
additional amount was an Additional Dividend.

     (g) No fractional shares of AMPS shall be issued.

     FOURTH: The foregoing amendment to the Articles Supplementary of the
Corporation has been duly approved by the Corporation in the manner and by the
vote required by its Charter and the laws of Maryland. The manner of approval
by the Corporation of the amendment set forth in these Articles is as follows.
The Board of Directors of the corporation at a meeting thereof held on June
12, 1992, duly adopted a resolution that declared that said amendment was
advisable and directed that it be submitted for consideration by the
stockholders at a Special Meeting of Stockholders. The amendment was duly
approved by the Corporation's stockholders in the manner and by the vote
required by law and the Charter of the Corporation at the Special Meeting of
Stockholders held on August 17, 1992, by the affirmative vote of a majority of
the votes entitled to be cast by the holders of the outstanding shares of
Common Stock and Preferred Stock of the Corporation voting together as a
single class.


<PAGE>



     The undersigned Vice President acknowledges these Articles of Amendment
to be the corporate act of the Corporation and states that to the best of his
knowledge, information and belief the matters and facts set forth in these
Articles with respect to the authorization and approval of the amendment of
the Corporation's Articles Supplementary are true in all material respects,
and that this statement is made under the penalties of perjury.

     IN WITNESS WHEREOF, MUNIYIELD FUND, INC. has caused these Articles to be
signed in its name and on its behalf by its Vice President and attested by its
Secretary on November 12, 1992.


                                         MUNIYIELD FUND, INC.

                                         By -----------------------------
                                            Name: Vice President


Attest:

/s/ Mark Goldfus
    --------------
    Mark Goldfus, Secretary


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-1.E
<SEQUENCE>5
<FILENAME>efc1-0727_844015ex1e.txt
<DESCRIPTION>ARTICLES OF AMEN. /SERIES
<TEXT>

                                                       Exhibit 1(e)


                             MUNIYIELD FUND, INC.

           Articles of Amendment to Articles Supplementary creating
                five series of Auction Market Preferred Stock(R)


     MUNIYIELD FUND, INC., a Maryland corporation having its principal
Maryland office in the City of Baltimore (the "Corporation"), certifies to the
Maryland State Department of Assessments and Taxation that:

     FIRST: The Articles Supplementary, filed on December 20, 1991, as amended
by Articles of Amendment to Articles Supplementary, filed on November 13,
1992, and the Articles Supplementary, filed on December 1, 1994, each creating
5,000 shares of Auction Market Preferred Stock of the Corporation
(collectively, the "Articles Supplementary"), are hereby amended by these
Articles of Amendment as follows:

     In each instance in which "$.10" appears, delete "$.10" and substitute
"$.05" therefor;

     In each instance in which "$50,000" appears, delete "$50,000" and
substitute "$25,000" therefor.

     SECOND: The foregoing amendment to the Articles Supplementary has been
effected in the manner and by the vote required by the Corporation's Charter
and the laws of Maryland. Pursuant to Section 2-603 of the Code, the amendment
of the Articles Supplementary as hereinabove set forth has been duly advised,
approved and adopted by a majority of the entire Board of Directors of the
Corporation, there being no stock entitled to be voted on the Charter
amendment outstanding or subscribed for at the time of approval.

- --------
(R) Registered trademark of Merrill Lynch & Co., Inc.

<PAGE>

     THIRD: Except as amended hereby, the Charter shall remain in full force
and effect.

     FOURTH: The authorized capital stock of the Corporation has not been
increased by these Articles of Amendment.

     FIFTH: These Articles of Amendment shall be effective contemporaneously
with the acceptance for recording or filing by the Maryland State Department
of Assessments and Taxation of the Corporation's Articles Supplementary dated
November 30, 1994.

     The Senior Vice President acknowledges these Articles of Amendment to be
the corporate act of the Corporation and states that to the best of his
knowledge, information and belief the matters and facts set forth in these
Articles with respect to the authorization and approval of the amendment of
the Corporation's Articles Supplementary are true in all material respects,
and that this statement is made under the penalties of perjury.

     IN WITNESS WHEREOF, MUNIYIELD FUND, INC. has caused these Articles to be
signed in its name and on its behalf by its Senior Vice President, a duly
authorized officer of the Corporation, and attested by its Secretary as of
November 30 , 1994.

                                              MUNIYIELD FUND, INC.


                                              By:/s/ Vincent R. Giordano
                                                 -------------------------
                                              Name:  Vincent R. Giordano
                                              Title: Senior Vice President
Attest:

/s/ Mark B. Goldfus
- ----------------------
Name:  Mark B. Goldfus
Title: Secretary



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-1.F
<SEQUENCE>6
<FILENAME>efc1-0727_844013ex1f.txt
<TEXT>

                                                                 Exhibit 1(f)



                             MUNIYIELD FUND, INC.
                        Articles Supplementary creating

               five series of Auction Market Preferred Stock(R)

     MUNIYIELD FUND, INC., a Maryland corporation having its principal
Maryland office in the City of Baltimore (the "Corporation"), certifies to the
Maryland State Department of Assessments and Taxation that:

     FIRST: Pursuant to authority expressly vested in the Board of Directors
of the Corporation by Article FIFTH of its Charter, the Board of Directors has
reclassified 5,000 authorized and unissued shares of common stock of the
Corporation as additional preferred stock of the Corporation and has
authorized the issuance of preferred stock, par value $.10 per share,
liquidation preference $50,000 per share plus an amount equal to accumulated
but unpaid dividends (whether or not earned or declared) thereon, to be
designated Auction Market Preferred Stock.

     SECOND: The preferences, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption, of the
shares of such preferred stock shall be identical to the 5,000 shares of
Auction Market Preferred Stock previously reclassified and authorized by the
Board of Directors pursuant to Articles Supplementary dated December 19, 1991
and filed on December 20, 1991 with the Maryland State Department of
Assessments and Taxation, as amended by Articles of Amendment to Articles
Supplementary filed on November 13, 1992. Accordingly, these Articles
Supplementary hereby incorporate by reference such previously filed Articles
Supplementary beginning with the section entitled "DESIGNATION"

- --------------------------
(R) Registered trademark of Merrill Lynch & Co., Inc.


<PAGE>



and continuing until the end of the final section entitled "Securities
Depository; Stock Certificates," with the following exception:

     At page 2, in the section entitled "DESIGNATION," strike out "a date
to be determined by the Board of Direators of the Corporation" and insert in
lieu thereof the date " Dec. 1, 1994";

     IN WITNESS WHEREOF, MUNIYIELD FUND, INC. has caused these presents to be
signed in its name and on its behalf by a duly authorized officer, and
attested by its Secretary, and the said officers of the Corporation further
acknowledge said instrument to be the corporate act of the Corporation, and
state under the penalties of perjury that to the best of their knowledge,
information and belief the matters and facts herein set forth with respect to
approval are true in all material respects, all on Nov. 30, 1994.

                                            MUNIYIELD FUND, INC.


                                            By /s/ Vincent R. Giordano
                                               ------------------------
                                               Name: Vincent R. Giordano
                                               Title: Senior Vice President


Attest:

/s/ Mark B. Goldfus
- ---------------------
Name: Mark B. Goldfus
Its: Secretary
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-1.G
<SEQUENCE>7
<FILENAME>efc1-0727_844074ex1g.txt
<TEXT>

                                                            Exhibit 1(g)



                             MUNIYIELD FUND, INC.


           Articles of Amendment to Articles Supplementary creating
             Series A, Series B, Series C, Series D, and Series E
                       of Auction Market Preferred Stock


     MUNIYIELD FUND, INC., a Maryland corporation having its principal
Maryland office in the City of Baltimore (the "Corporation"), certifies to the
Maryland State Department of Assessments and Taxation that:

     First: The Articles Supplementary, filed on December 20, 1991, and the
Articles Supplementary, filed on December 1, 1994, each creating 900 shares of
Series A Auction Market Preferred Stock, 900 shares of Series B Auction Market
Preferred Stock, 900 shares of Series C Auction Market Preferred Stock, 900
shares of Series D Auction Market Preferred Stock, and 1,400 shares of Series
E Auction Market Preferred Stock (collectively, the "AMPS(R)") of the
Corporation (collectively, the "Articles Supplementary"), are hereby amended
by these Articles of Amendment as follows:

     In each of the Articles Supplementary, paragraph (c) of section 5
entitled "Right to Vote with Respect to Certain Other Matters" is deleted in
its entirety and replaced with the following:

          (c) Right to Vote with Respect to Certain Other Matters. So long as
     any shares of AMPS are outstanding, the Corporation shall not, without
     the affirmative vote of the holders of a majority of the shares of the
     Preferred Stock Outstanding at the time, voting separately as one class:
     (i) authorize, create or issue any class or series of stock ranking prior
     to the AMPS or any other series of Preferred Stock with respect to
     payment of dividends or the distribution of assets on liquidation, or
     (ii) amend, alter or repeal the provisions of the Charter, whether by

- ------------------------
(R)  Registered trademark of Merrill Lynch & Co., Inc.

<PAGE>

     merger, consolidation or otherwise, so as to adversely affect any of the
     contract rights expressly set forth in the Charter of holders of shares
     of AMPS or any other Preferred Stock. To the extent permitted under the
     1940 Act, in the event shares of more than one series of AMPS are
     outstanding, the Corporation shall not approve any of the actions set
     forth in clause (i) or (ii) which adversely affects the contract rights
     expressly set forth in the Charter of a Holder of shares of a series of
     AMPS differently than those of a Holder of shares of any other series of
     AMPS without the affirmative vote of the holders of at least a majority
     of the shares of AMPS of each series adversely affected and outstanding
     at such time (each such adversely affected series voting separately as a
     class). The Corporation shall notify Moody's and S&P 10 Business Days
     prior to any such vote described in clause (i) or (ii). Unless a higher
     percentage is provided for under the Charter, the affirmative vote of the
     holders of a majority of the outstanding shares of Preferred Stock,
     including AMPS, voting together as a single class, will be required to
     approve any plan of reorganization (including bankruptcy proceedings)
     adversely affecting such shares or any action requiring a vote of
     security holders under Section 13(a) of the 1940 Act. The class vote of
     holders of shares of Preferred Stock, including AMPS, described above
     will in each case be in addition to a separate vote of the requisite
     percentage of shares of Common Stock and shares of Preferred Stock,
     including AMPS, voting together as a single class necessary to authorize
     the action in question.

     Second: The foregoing amendment to the Articles Supplementary has been
effected in the manner and by the vote required by the charter of the
Corporation (the "Charter") and the laws of Maryland. The amendment of the
Articles Supplementary, as hereinabove set forth has been duly advised,
approved, and adopted by a majority of the entire Board of Directors of the
Corporation, and by a majority of the outstanding Common Stock and AMPS voting
together as a single class and by a majority of the outstanding AMPS voting
together as a separate class.

     Third: Except as amended, hereby, the Charter shall remain in full force
and effect.

     Fourth: The authorized capital stock of the Corporation has not been
increased by these Articles of Amendment.

     Fifth: These Articles of Amendment shall be effective immediately upon
the acceptance for recording or filing by the Maryland State Department of
Assessments and Taxation.

     The undersigned Vice President and Treasurer acknowledges these Articles
of Amendment to be the corporate act of the Corporation and as to all matters
or facts to be verified under oath, the undersigned Vice President and
Treasurer states that to the best of his knowledge, information and belief the
matters and facts set forth in these Articles of Amendment with respect to the
authorization and approval of the amendment of the Corporation's Articles
Supplementary are true in all material respects, and that this statement is
made under the penalties of perjury.



<PAGE>



     IN WITNESS WHEREOF, MUNIYIELD FUND, INC. has caused these Articles of
Amendment to be signed in its name and on its behalf by its Vice President and
Treasurer, a duly authorized officer of the Corporation, and attested by its
Secretary as of June 23, 1999.

                                       MUNIYIELD FUND, INC.



                                       By /s/ Donald C. Burke
                                          ----------------------
                                          Name:  Donald C. Burke
                                          Title:  Vice President and Treasurer



Attest:



/s/ Alice A. Pellegrino
- --------------------------
Name: Alice A. Pellegrino
Title:  Secretary


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-1.H
<SEQUENCE>8
<FILENAME>efc1-0727_819607ex1h.txt
<TEXT>

                                                            Exhibit 1(h)


                             MUNIYIELD FUND, INC.

                 Articles Supplementary creating one series of

                       Auction Market Preferred Stock(R)


         MUNIYIELD FUND, INC., a Maryland corporation having its principal
Maryland office in the City of Baltimore (the "Corporation"), certifies to the
State Department of Assessments and Taxation of Maryland that:

         FIRST: Pursuant to authority expressly vested in the Board of
Directors of the Corporation by article fifth of its Charter, the Board of
Directors has reclassified 1,720 authorized and unissued shares of common
stock of the Corporation as preferred stock of the Corporation and has
authorized the issuance of one series of preferred stock, par value $.10 per
share, liquidation preference $25,000 per share plus an amount equal to
accumulated but unpaid dividends (whether or not earned or declared) thereon,
to be designated, Auction Market Preferred Stock, Series F.

         SECOND: The preferences, voting powers, restrictions, limitations as
to dividends, qualifications, and terms and conditions of redemption, of the
shares of such series of preferred stock are as follows:



- ----------------------
(R)      Registered trademark of Merrill Lynch & Co., Inc.

<PAGE>

                                  DESIGNATION

         A series of 1,720 shares of preferred stock, par value $.10 per
share, liquidation preference $25,000 per share plus an amount equal to
accumulated but unpaid dividends (whether or not earned or declared) thereon,
is hereby designated "Auction Market Preferred Stock, Series F." Each share of
Auction Market Preferred Stock, Series F (sometimes referred to herein as
"AMPS") shall be issued on a date to be determined by the Board of Directors
of the Corporation or pursuant to their delegated authority; have an Initial
Dividend Rate and an Initial Dividend Payment Date as shall be determined in
advance of the issuance thereof by the Board of Directors of the Corporation
or pursuant to their delegated authority; and have such other preferences,
voting powers, limitations as to dividends, qualifications and terms and
conditions of redemption as are set forth in these Articles Supplementary. The
Auction Market Preferred Stock, Series F shall constitute a separate series of
preferred stock of the Corporation, and each share of Auction Market Preferred
Stock, Series F shall be identical.

         1. Definitions. (a) Unless the context or use indicates another or
different meaning or intent, in these Articles Supplementary the following
terms have the following meanings, whether used in the singular or plural:

         "'AA' Composite Commercial Paper Rate," on any date of determination,
means (i) the Interest Equivalent of the rate on commercial paper placed on
behalf of issuers whose corporate bonds are rated "AA" by S&P or "Aa" by
Moody's or the equivalent of such rating by another nationally recognized
rating agency, as such rate is made available on a discount basis or otherwise
by the Federal Reserve Bank of New York for the Business Day immediately
preceding such date, or (ii) in the event that the Federal Reserve Bank of New
York does not make available such a rate, then the arithmetic average of the
Interest Equivalent of the rate on commercial paper placed on behalf of such
issuers, as quoted on a discount basis or otherwise by Merrill Lynch, Pierce,
Fenner & Smith Incorporated or its successors that are Commercial Paper
Dealers, to the Auction Agent for the close of business on the Business Day
immediately preceding such date. If one of the Commercial Paper Dealers does
not quote a rate required to determine the "AA" Composite Commercial Paper
Rate, the "AA" Composite Commercial Paper Rate will be determined on the basis
of the quotation or quotations furnished by any Substitute Commercial Paper
Dealer or Substitute Commercial Paper Dealers selected by the Corporation to
provide such rate or rates not being supplied by the Commercial Paper Dealer.
If the number of Dividend Period days shall be (i) 7 or more but fewer than 49
days, such rate shall be the Interest Equivalent of the 30-day rate on such
commercial paper; (ii) 49 or more but fewer than 70 days, such rate shall be
the Interest Equivalent of the 60-day rate on such commercial paper; (iii) 70
or more days but fewer than 85 days, such rate shall be the arithmetic average
of the Interest Equivalent on the 60-day and 90-day rates on such commercial
paper; (iv) 85 or more days but fewer than 99 days, such rate shall be the
Interest Equivalent of the 90-day rate on such commercial paper; (v) 99 or
more days but fewer than 120 days, such rate shall be the arithmetic average
of the Interest Equivalent of the 90-day and 120-day rates on such commercial
paper; (vi) 120 or more days but fewer than 141 days, such rate shall be the
Interest Equivalent of the 120-day rate on such commercial paper; (vii) 141 or
more days but fewer than 162 days, such rate shall be the arithmetic average
of the Interest Equivalent of the 120-day and 180-day rates on such commercial
paper; and (viii) 162 or more days but fewer than 183 days, such rate shall be
the Interest Equivalent of the 180-day rate on such commercial paper.

         "Accountant's Confirmation" has the meaning set forth in paragraph
7(c) of these Articles Supplementary.

         "Additional Dividend" has the meaning set forth in paragraph 2(e) of
these Articles Supplementary.

         "Adviser" means the Corporation's investment adviser which initially
shall be Fund Asset Management, L.P.

         "Affiliate" means any Person, other than Merrill Lynch, Pierce,
Fenner & Smith Incorporated or its successors, known to the Auction Agent to be
controlled by, in control of, or under common control with, the Corporation.

         "Agent Member" means a member of the Securities Depository that will
act on behalf of a Beneficial Owner of one or more shares of AMPS or a
Potential Beneficial Owner.

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

         "AMPS Basic Maintenance Amount," as of any Valuation Date, means the
dollar amount equal to (i) the sum of (A) the product of the number of shares
of AMPS of each series and Other AMPS Outstanding on such Valuation Date
multiplied by the sum of (a) $25,000 and (b) any applicable redemption premium
attributable to the designation of a Premium Call Period; (B) the aggregate
amount of cash dividends (whether or not earned or declared) that will have
accumulated for each share of AMPS and Other AMPS Outstanding, in each case,
to (but not including) the end of the current Dividend Period that follows
such Valuation Date in the event the then current Dividend Period will end
within 49 calendar days of such Valuation Date or through the 49th day after
such Valuation Date in the event the then current Dividend Period will not end
within 49 calendar days of such Valuation Date; (C) in the event the then
current Dividend Period will end within 49 calendar days of such Valuation
Date, the aggregate amount of cash dividends that would accumulate at the
Maximum Applicable Rate applicable to a Dividend Period of 28 or fewer days on
any shares of AMPS and Other AMPS Outstanding from the end of such Dividend
Period through the 49th day after such Valuation Date, multiplied by the
larger of the Moody's Volatility Factor and the S&P Volatility Factor,
determined from time to time by Moody's and S&P, respectively (except that if
such Valuation Date occurs during a Non-Payment Period, the cash dividend for
purposes of calculation would accumulate at the then current Non-Payment
Period Rate); (D) the amount of anticipated expenses of the Corporation for
the 90 days subsequent to such Valuation Date; (E) the amount of the
Corporation's Maximum Potential Additional Dividend Liability as of such
Valuation Date; and (F) any current liabilities as of such Valuation Date to
the extent not reflected in any of (i)(A) through (i)(E) (including, without
limitation, and immediately upon determination, any amounts due and payable by
the Corporation pursuant to repurchase agreements and any amounts payable for
Municipal Bonds purchased as of such Valuation Date) less (ii) either (A) the
Discounted Value of any of the Corporation's assets, or (B) the face value of
any of the Corporation's assets if such assets mature prior to or on the date
of redemption of AMPS or payment of a liability and are either securities
issued or guaranteed by the United States Government or Deposit Securities, in
both cases irrevocably deposited by the Corporation for the payment of the
amount needed to redeem shares of AMPS subject to redemption or to satisfy any
of (i)(B) through (i)(F).

         "AMPS Basic Maintenance Cure Date," with respect to the failure by
the Corporation to satisfy the AMPS Basic Maintenance Amount (as required by
paragraph 7(a) of these Articles Supplementary) as of a given Valuation Date,
means the sixth Business Day following such Valuation Date.

         "AMPS Basic Maintenance Report" means a report signed by any of the
President, Treasurer, any Senior Vice President or any Vice President of the
Corporation which sets forth, as of the related Valuation Date, the assets of
the Corporation, the Market Value and the Discounted Value thereof (seriatim
and in aggregate), and the AMPS Basic Maintenance Amount.

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

         "Applicable Percentage" has the meaning set forth in paragraph
10(a)(vii) of these Articles Supplementary.

         "Applicable Rate" means the rate per annum at which cash dividends
are payable on the AMPS or Other AMPS, as the case may be, for any Dividend
Period.

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

         "Auction Agent" means The Bank of New York unless and until another
commercial bank, trust company or other financial institution appointed by a
resolution of the Board of Directors of the Corporation or a duly authorized
committee thereof enters into an agreement with the Corporation to follow the
Auction Procedures for the purpose of determining the Applicable Rate and to
act as transfer agent, registrar, dividend disbursing agent and redemption
agent for the AMPS and Other AMPS.

         "Auction Procedures" means the procedures for conducting Auctions set
forth in paragraph 10 of these Articles Supplementary.

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

         "Broker-Dealer" means any broker-dealer, or other entity permitted by
law to perform the functions required of a Broker-Dealer in paragraph 10 of
these Articles Supplementary, that has been selected by the Corporation and
has entered into a Broker-Dealer Agreement with the Auction Agent that remains
effective.

         "Broker-Dealer Agreement" means an agreement between the Auction
Agent and a Broker-Dealer pursuant to which such Broker-Dealer agrees to
follow the procedures specified in paragraph 10 of these Articles
Supplementary.

         "Business Day" means a day on which the New York Stock Exchange, Inc.
is open for trading and which is not a Saturday, Sunday or other day on which
banks in The City of New York are authorized or obligated by law to close.

         "Charter" means the Articles of Incorporation, as amended and
supplemented (including these Articles Supplementary), of the Corporation on
file in the State Department of Assessments and Taxation of Maryland.

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

         "Commercial Paper Dealers" means Merrill Lynch, Pierce, Fenner &
Smith Incorporated and such other commercial paper dealer or dealers as the
Corporation may from time to time appoint, or, in lieu of any thereof, their
respective affiliates or successors.

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

         "Corporation" means MuniYield Fund, Inc., a Maryland corporation.

         "Date of Original Issue" means, with respect to any share of AMPS or
Other AMPS, the date on which the Corporation originally issues such share.

         "Deposit Securities" means cash and Municipal Bonds rated at least A2
(having a remaining maturity of 12 months or less), P-1, VMIG-1 or MIG-1 by
Moody's or A (having a remaining maturity of 12 months or less), A-1+ or SP-1+
by S&P.

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

         "Dividend Payment Date," with respect to AMPS, has the meaning set
forth in paragraph 2(b)(i) of these Articles Supplementary and, with respect
to Other AMPS, has the equivalent meaning.

         "Dividend Period" means the Initial Dividend Period, any 7-Day
Dividend Period and any Special Dividend Period.

         "Existing Holder" means a Broker-Dealer or any such other Person as
may be permitted by the Corporation that is listed as the holder of record of
shares of AMPS in the Stock Books.

        "Fitch" means Fitch, Inc. or its successors.

         "Forward Commitment" has the meaning set forth in paragraph 8(c) of
these Articles Supplementary.

         "Holder" means a Person identified as a holder of record of shares of
AMPS in the Stock Register.

         "Independent Accountant" means a nationally recognized accountant, or
firm of accountants, that is, with respect to the Corporation, an independent
public accountant or firm of independent public accountants under the
Securities Act of 1933, as amended.

         "Initial Dividend Payment Date" means the Initial Dividend Payment
Date as determined by the Board of Directors of the Corporation with respect
to the AMPS or Other AMPS, as the case may be.

         "Initial Dividend Period," with respect to the AMPS, has the meaning
set forth in paragraph 2(c)(i) of these Articles Supplementary and, with
respect to Other AMPS, has the equivalent meaning.

         "Initial Dividend Rate," with respect to the AMPS, means the rate per
annum applicable to the Initial Dividend Period for the AMPS and, with respect
to Other AMPS, has the equivalent meaning.

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

         "Interest Equivalent" means a yield on a 360-day basis of a discount
basis security which is equal to the yield on an equivalent interest-bearing
security.

         "Inverse Floaters" means trust certificates or other instruments
evidencing interests in one or more Municipal Bonds that qualify as S&P
Eligible Assets (and are not part of a private placement of Municipal Bonds
and satisfy the issuer and original issue size or ratings requirements of
clause (vii) of the definition of S&P Eligible Assets) the interest rates on
which are adjusted at short term intervals on a basis that is inverse to the
simultaneous readjustment of the interest rates on corresponding floating rate
trust certificates or other instruments issued by the same issuer, provided
that the ratio of the aggregate dollar amount of floating rate instruments to
inverse floating rate instruments issued by the same issuer does not exceed
one to one at their time of original issuance unless the floating rate
instrument has only one reset remaining until maturity.

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

         "Mandatory Redemption Price" means $25,000 per share of AMPS plus an
amount equal to accumulated but unpaid dividends (whether or not earned or
declared) to the date fixed for redemption and excluding Additional Dividends.

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

         "Market Value" of any asset of the Corporation shall be the market
value thereof determined by the Pricing Service. Market Value of any asset
shall include any interest accrued thereon. The Pricing Service shall value
portfolio securities at the quoted bid prices or the mean between the quoted
bid and asked price or the yield equivalent when quotations are not readily
available. Securities for which quotations are not readily available shall be
valued at fair value as determined by the Pricing Service using methods which
include consideration of: yields or prices of municipal bonds of comparable
quality, type of issue, coupon, maturity and rating; indications as to value
from dealers; and general market conditions. The Pricing Service may employ
electronic data processing techniques and/or a matrix system to determine
valuations. In the event the Pricing Service is unable to value a security,
the security shall be valued at the lower of two dealer bids obtained by the
Corporation from dealers who are members of the National Association of
Securities Dealers, Inc. and who make a market in the security, at least one
of which shall be in writing. Futures contracts and options are valued at
closing prices for such instruments established by the exchange or board of
trade on which they are traded, or if market quotations are not readily
available, are valued at fair value on a consistent basis using methods
determined in good faith by the Board of Directors.

        "Maximum Applicable Rate," with respect to AMPS, has the meaning set
forth in paragraph 10(a)(vii) of these Articles Supplementary and, with
respect to Other AMPS, has the equivalent meaning.

         "Maximum Potential Additional Dividend Liability," as of any
Valuation Date, means the aggregate amount of Additional Dividends that would
be due if the Corporation were to make Retroactive Taxable Allocations, with
respect to any fiscal year, estimated based upon dividends paid and the amount
of undistributed realized net capital gains and other taxable income earned by
the Corporation, as of the end of the calendar month immediately preceding
such Valuation Date and assuming such Additional Dividends are fully taxable.

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

         "Moody's Discount Factor" means, for purposes of determining the
Discounted Value of any Municipal Bond which constitutes a Moody's Eligible
Asset, the percentage determined by reference to (i) the rating by Moody's or
S&P on such Bond and (ii) the Moody's Exposure Period, in accordance with the
table set forth below:

<TABLE>
<CAPTION>
                                                          Rating Category
                                  --------------------------------------------------------------
<S>                                 <C>    <C>    <C>    <C>    <C>         <C>         <C>
Moody's Exposure Period             Aaa    Aa*     A*    Baa*   Other**     VMIG-1***   SP-1+***
- -----------------------------       ---    ---    ---    ---    ---         ---         ---
7 weeks or less .............       151%   159%   168%   202%   229%        136%        148%
8 weeks or less but
greater than seven weeks ....       154    164    173    205    235         137         149
9 weeks or less but
greater than eight weeks ....       158    169    179    209    242         138         150

</TABLE>
- ----------------------------
*    Moody's rating.
**   Municipal Bonds not rated by Moody's but rated BBB-, BBB or BBB+ by S&P.
***  Municipal Bonds rated MIG-1, VMIG-1 or P-1 or, if not rated by Moody's,
     rated SP-1+ or A-1+ by S&P which do not mature or have a demand feature
     at par exercisable within the Moody's Exposure Period and which do not
     have a long-term rating. For the purposes of the definition of Moody's
     Eligible Assets, these securities will have an assumed rating of "A" by
     Moody's.


         Notwithstanding the foregoing, (i) a 102% Moody's Discount Factor
will be applied to short-term Municipal Bonds so long as such Municipal Bonds
are rated at least MIG-1, VMIG-1 or P-1 by Moody's and mature or have a demand
feature at par exercisable within the Moody's Exposure Period, and the Moody's
Discount Factor for such Bonds will be 125% if such Bonds are not rated by
Moody's but are rated A-1+ or SP-1+ or AA by S&P and mature or have a demand
feature at par exercisable within the Moody's Exposure Period, and (ii) no
Moody's Discount Factor will be applied to cash or to Receivables for
Municipal Bonds Sold. "Receivables for Municipal Bonds Sold," for purposes of
calculating Moody's Eligible Assets as of any Valuation Date, means no more
than the aggregate of the following: (i) the book value of receivables for
Municipal Bonds sold as of or prior to such Valuation Date if such receivables
are due within five Business Days of such Valuation Date, and if the trades
which generated such receivables are (x) settled through clearing house firms
with respect to which the Corporation has received prior written authorization
from Moody's or (y) with counterparties having a Moody's long-term debt rating
of at least Baa3; and (ii) the Moody's Discounted Value of Municipal Bonds
sold as of or prior to such Valuation Date which generated receivables, if
such receivables are due within five Business Days of such Valuation Date but
do not comply with either of conditions (x) or (y) of the preceding clause
(i).

         "Moody's Eligible Asset" means cash, Receivables for Municipal Bonds
Sold or a Municipal Bond that (i) pays interest in cash, (ii) is publicly
rated Baa or higher by Moody's or, if not rated by Moody's but rated by S&P,
is rated at least BBB- by S&P (provided that, for purposes of determining the
Moody's Discount Factor applicable to any such S&P-rated Municipal Bond, such
Municipal Bond (excluding any short-term Municipal Bond) will be deemed to
have a Moody's rating which is one full rating category lower than its S&P
rating), (iii) does not have its Moody's rating suspended by Moody's; and (iv)
is part of an issue of Municipal Bonds of at least $10,000,000. In addition,
Municipal Bonds in the Corporation's portfolio must be within the following
diversification requirements in order to be included within Moody's Eligible
Assets:

<TABLE>
<CAPTION>

                                                                                 Maximum State
                                    Minimum               Maximum                 or Territory
                                  Issue Size            Underlying               Concentration
  Rating                         ($ Millions)         Obligor (%) (1)             (%) (1) (3)
  ------------------------       ------------         ---------------             -----------
<S>                                   <C>                 <C>                          <C>
  Aaa..................               10                  100                          100
  Aa...................               10                   20                           60
  A....................               10                   10                           40
  Baa..................               10                    6                           20
  Other (2)............               10                    4                           12
</TABLE>

- ------------------------
(1)      The referenced percentages represent maximum cumulative totals for
         the related rating category and each lower rating category.
(2)      Municipal Bonds not rated by Moody's but rated BBB-, BBB or BBB+ by
         S&P.
(3)      Territorial bonds (other than those issued by Puerto Rico and counted
         collectively) are each limited to 10% of Moody's Eligible Assets. For
         diversification purposes, Puerto Rico will be treated as a state.

For purposes of the maximum underlying obligor requirement described above,
any Municipal Bond backed by the guaranty, letter of credit or insurance
issued by a third party will be deemed to be issued by such third party if the
issuance of such third party credit is the sole determinant of the rating on
such Bond.

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

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

         "Moody's Exposure Period" means a period that is the same length or
longer than the number of days used in calculating the cash dividend component
of the AMPS Basic Maintenance Amount and shall initially be the period
commencing on and including a given Valuation Date and ending 48 days
thereafter.

         "Moody's Hedging Transactions" has the meaning set forth in paragraph
8(b) of these Articles Supplementary.

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

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

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

         "Municipal Bonds" means "Municipal Bonds" as defined in the
Corporation's Registration Statement on Form N-14 (File No. 333-_________)
relating to the AMPS on file with the Securities and Exchange Commission, as
such Registration Statement may be amended from time to time, as well as
short-term municipal obligations and Inverse Floaters.

         "Municipal Index" has the meaning set forth in paragraph 8(a) of
these Articles Supplementary.

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

         "1940 Act AMPS Asset Coverage" means asset coverage, as defined in
section 18(h) of the 1940 Act, of at least 200% with respect to all
outstanding senior securities of the Corporation which are stock, including
all outstanding shares of AMPS and Other AMPS (or such other asset coverage as
may in the future be specified in or under the 1940 Act as the minimum asset
coverage for senior securities which are stock of a closed-end investment
company as a condition of paying dividends on its common stock).

         "1940 Act Cure Date," with respect to the failure by the Corporation
to maintain the 1940 Act AMPS Asset Coverage (as required by paragraph 6 of
these Articles Supplementary) as of the last Business Day of each month, means
the last Business Day of the following month.

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

         "Non-Payment Period" means, with respect to the AMPS, any period
commencing on and including the day on which the Corporation shall fail to (i)
declare, prior to the close of business on the second Business Day preceding
any Dividend Payment Date, for payment on or (to the extent permitted by
paragraph 2(c)(i) of these Articles Supplementary) within three Business Days
after such Dividend Payment Date to the Holders as of 12:00 noon, New York
City time, on the Business Day preceding such Dividend Payment Date, the full
amount of any dividend on shares of AMPS payable on such Dividend Payment Date
or (ii) deposit, irrevocably in trust, in same-day funds, with the Auction
Agent by 12:00 noon, New York City time, (A) on such Dividend Payment Date the
full amount of any cash dividend on such shares payable (if declared) on such
Dividend Payment Date or (B) on any redemption date for any shares of AMPS
called for redemption, the Mandatory Redemption Price per share of such AMPS
or, in the case of an optional redemption, the Optional Redemption Price per
share, and ending on and including the Business Day on which, by 12:00 noon,
New York City time, all unpaid cash dividends and unpaid redemption prices
shall have been so deposited or shall have otherwise been made available to
Holders in same-day funds; provided that, a Non-Payment Period shall not end
unless the Corporation shall have given at least five days' but no more than
30 days' written notice of such deposit or availability to the Auction Agent,
all Existing Holders (at their addresses appearing in the Stock Books) and the
Securities Depository. Notwithstanding the foregoing, the failure by the
Corporation to deposit funds as provided for by clauses (ii)(A) or (ii)(B)
above within three Business Days after any Dividend Payment Date or redemption
date, as the case may be, in each case to the extent contemplated by paragraph
2(c)(i) of these Articles Supplementary, shall not constitute a "Non-Payment
Period."

         "Non-Payment Period Rate" means, initially, 200% of the applicable
Reference Rate (or 275% of such rate if the Corporation has provided
notification to the Auction Agent prior to the Auction establishing the
Applicable Rate for any dividend pursuant to paragraph 2(f) hereof that net
capital gains or other taxable income will be included in such dividend on
shares of AMPS), provided that the Board of Directors of the Corporation shall
have the authority to adjust, modify, alter or change from time to time the
initial Non-Payment Period Rate if the Board of Directors of the Corporation
determines and Moody's and S&P (and any Substitute Rating Agency in lieu of
Moody's or S&P in the event either of such parties shall not rate the AMPS)
advise the Corporation in writing that such adjustment, modification,
alteration or change will not adversely affect their then current ratings on
the AMPS.

         "Normal Dividend Payment Date" has the meaning set forth in paragraph
2(b)(i) of these Articles Supplementary.

         "Notice of Redemption" means any notice with respect to the
redemption of shares of AMPS pursuant to paragraph 4 of these Articles
Supplementary.

         "Notice of Revocation" has the meaning set forth in paragraph
2(c)(iii) of these Articles Supplementary.

         "Notice of Special Dividend Period" has the meaning set forth in
paragraph 2(c)(iii) of these Articles Supplementary.

         "Optional Redemption Price" means $25,000 per share plus an amount
equal to accumulated but unpaid dividends (whether or not earned or declared)
to the date fixed for redemption and excluding Additional Dividends plus any
applicable redemption premium attributable to the designation of a Premium
Call Period.

         "Other AMPS" means the auction rate preferred stock of the
Corporation, other than the AMPS.

         "Outstanding" means, as of any date (i) with respect to AMPS, shares
of AMPS theretofore issued by the Corporation except, without duplication, (A)
any shares of AMPS theretofore cancelled or delivered to the Auction Agent for
cancellation, or redeemed by the Corporation, or as to which a Notice of
Redemption shall have been given and Deposit Securities shall have been
deposited in trust or segregated by the Corporation pursuant to paragraph 4(c)
and (B) any shares of AMPS as to which the Corporation or any Affiliate
thereof shall be a Beneficial Owner, provided that shares of AMPS held by an
Affiliate shall be deemed outstanding for purposes of calculating the AMPS
Basic Maintenance Amount and (ii) with respect to shares of other Preferred
Stock, has the equivalent meaning.

         "Parity Stock" means the AMPS and each other outstanding series of
Preferred Stock the holders of which, together with the holders of the AMPS,
shall be entitled to the receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in proportion to
the full respective preferential amounts to which they are entitled, without
preference or priority one over the other.

         "Person" means and includes an individual, a partnership, a
corporation, a trust, an unincorporated association, a joint venture or other
entity or a government or any agency or political subdivision thereof.

         "Potential Beneficial Owner" means a customer of a Broker-Dealer or a
Broker-Dealer that is not a Beneficial Owner of shares of AMPS but that wishes
to purchase such shares, or that is a Beneficial Owner that wishes to purchase
additional shares of AMPS.

         "Potential Holder" means any Broker-Dealer or any such other Person
as may be permitted by the Corporation, including any Existing Holder, who may
be interested in acquiring shares of AMPS (or, in the case of an Existing
Holder, additional shares of AMPS).

         "Preferred Stock" means the preferred stock of the Corporation, and
includes AMPS and Other AMPS.

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

         "Pricing Service" means J.J. Kenny or any pricing service designated
by the Board of Directors of the Corporation provided the Corporation obtains
written assurance from S&P and Moody's that such designation will not impair
the rating then assigned by S&P and Moody's to the AMPS.

         "Quarterly Valuation Date" means the last Business Day of each fiscal
quarter of the Corporation in each fiscal year of the Corporation, commencing
______________.

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

         "Reference Rate" means: (i) with respect to a Dividend Period or a
Short Term Dividend Period having 28 or fewer days, the higher of the
applicable "AA" Composite Commercial Paper Rate and the Taxable Equivalent of
the Short-Term Municipal Bond Rate, (ii) with respect to any Short Term
Dividend Period having more than 28 but fewer than 183 days, the applicable
"AA" Composite Commercial Paper Rate, (iii) with respect to any Short Term
Dividend Period having 183 or more but fewer than 364 days, the applicable
U.S. Treasury Bill Rate and (iv) with respect to any Long Term Dividend
Period, the applicable U.S. Treasury Note Rate.

         "Request for Special Dividend Period" has the meaning set forth in
paragraph 2(c)(iii) of these Articles Supplementary.

         "Response" has the meaning set forth in paragraph 2(c)(iii) of these
Articles Supplementary.

          "Retroactive Taxable Allocation" has the meaning set forth in
paragraph 2(e) of these Articles Supplementary.

         "Right" with respect to the AMPS, has the meaning set forth in
paragraph 2(e) of these Articles Supplementary and, with respect to Other
AMPS, has the equivalent meaning.

         "S&P" means Standard & Poor's, a division of The McGraw-Hill
Companies, Inc., or its successors.

         "S&P Discount Factor" means, for purposes of determining the
Discounted Value of any Municipal Bond which constitutes an S&P Eligible
Asset, the percentage determined by reference to (i) the rating by S&P,
Moody's or Fitch on such Bond and (ii) the S&P Exposure Period, in accordance
with the tables set forth below:

<PAGE>

<TABLE>
<CAPTION>
                                                     Rating Category
                              ---------------------------------------------------------------
S&P Exposure Period                AAA*             AA*              A*            BBB*
- -------------------                ----             ---              --            ----

<S>                                <C>             <C>              <C>            <C>
45 Business Days                   190%            195%             210%           250%
25 Business Days                   170%            175%             190%           230%
10 Business Days                   155%            160%             175%           215%
 7 Business Days                   150%            155%             170%           210%
 3 Business Days                   130%            135%             150%           190%
</TABLE>

- --------------------
*    S&P rating.

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

         "S&P Eligible Asset" means cash, Receivables for Municipal Bonds Sold
or a Municipal Bond that (i) is issued by any of the 50 states, the
territories and their subdivisions, counties, cities, towns, villages, and
school districts, agencies, such as authorities and special districts created
by the states, and certain federally sponsored agencies such as local housing
authorities (payments made on these bonds are exempt from regular federal
income taxes and are generally exempt from state and local taxes in the state
of issuance), (ii) is interest bearing and pays interest at least
semi-annually; (iii) is payable with respect to principal and interest in
United States Dollars; (iv) is publicly rated BBB or higher by S&P or, except
in the case of Anticipation Notes that are grant anticipation notes or bond
anticipation notes which must be rated by S&P to be included in S&P Eligible
Assets, if not rated by S&P but rated by Moody's or Fitch, is rated at least A
by Moody's or Fitch (provided that such Moody's-rated or Fitch-rated Municipal
Bonds will be included in S&P Eligible Assets only to the extent the Market
Value of such Municipal Bonds does not exceed 50% of the aggregate Market
Value of the S&P Eligible Assets; and further provided that, for purposes of
determining the S&P Discount Factor applicable to any such Moody's-rated or
Fitch-rated Municipal Bond, such Municipal Bond will be deemed to have an S&P
rating which is one full rating category lower than its Moody's rating or
Fitch rating); (v) is not subject to a covered call or covered put option
written by the Corporation; (vi) except for Inverse Floaters, is not part of a
private placement of Municipal Bonds; and (vii) except for Inverse Floaters,
is part of an issue of Municipal Bonds with an original issue size of at least
$20 million or, if of an issue with an original issue size below $20 million
(but in no event below $10 million), is issued by an issuer with a total of at
least $50 million of securities outstanding. Notwithstanding the foregoing:

                  (A) Municipal Bonds of any one issuer or guarantor
         (excluding bond insurers) will be considered S&P Eligible Assets only
         to the extent the Market Value of such Municipal Bonds does not
         exceed 10% of the aggregate Market Value of the S&P Eligible Assets,
         provided that 2% is added to the applicable S&P Discount Factor for
         every 1% by which the Market Value of such Municipal Bonds exceeds 5%
         of the aggregate Market Value of the S&P Eligible Assets; and

                  (B) Municipal Bonds issued by issuers in any one state or
         territory will be considered S&P Eligible Assets only to the extent
         the Market Value of such Municipal Bonds does not exceed 25% of the
         aggregate Market Value of S&P Eligible Assets.

         "S&P Exposure Period" means the maximum period of time following a
Valuation Date, including the Valuation Date and the AMPS Basic Maintenance
Cure Date, that the Corporation has under these Articles Supplementary to cure
any failure to maintain, as of such Valuation Date, the Discounted Value for
its portfolio at least equal to the AMPS Basic Maintenance Amount (as
described in paragraph 7(a) of these Articles Supplementary).

         "S&P Hedging Transactions" has the meaning set forth in paragraph
8(a) of these Articles Supplementary.

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

         "Securities Depository" means The Depository Trust Company or any
successor company or other entities elected by the Corporation as securities
depository for the shares of AMPS that agrees to follow the procedures
required to be followed by such securities depository in connection with the
shares of AMPS.

         "Service" means the United States Internal Revenue Service.

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

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

         "Special Dividend Period" means a Dividend Period consisting of (i) a
specified number of days (other than seven), evenly divisible by seven and not
fewer than seven nor more than 364 or (ii) a specified period of one whole
year or more but not greater than five years (in each case subject to
adjustment as provided in paragraph 2(b)(i)).

         "Specific Redemption Provisions" means, with respect to a Special
Dividend Period either, or any combination of, (i) a period (a "Non-Call
Period") determined by the Board of Directors of the Corporation, after
consultation with the Auction Agent and the Broker-Dealers, during which the
shares of AMPS subject to such Dividend Period shall not be subject to
redemption at the option of the Corporation and (ii) a period (a "Premium Call
Period"), consisting of a number of whole years and determined by the Board of
Directors of the Corporation, after consultation with the Auction Agent and
the Broker-Dealers, during each year of which the shares of AMPS subject to
such Dividend Period shall be redeemable at the Corporation's option at a
price per share equal to $25,000 plus accumulated but unpaid dividends plus a
premium expressed as a percentage of $25,000, as determined by the Board of
Directors of the Corporation after consultation with the Auction Agent and the
Broker-Dealers.

         "Stock Books" means the books maintained by the Auction Agent setting
forth at all times a current list, as determined by the Auction Agent, of
Existing Holders of the AMPS.

         "Stock Register" means the register of Holders maintained on behalf
of the Corporation by the Auction Agent in its capacity as transfer agent and
registrar for the AMPS.

         "Subsequent Dividend Period," with respect to AMPS, has the meaning
set forth in paragraph 2(c)(i) of these Articles Supplementary and, with
respect to Other AMPS, has the equivalent meaning.

         "Substitute Commercial Paper Dealers" means such Substitute
Commercial Paper Dealer or Dealers as the Corporation may from time to time
appoint or, in lieu of any thereof, their respective affiliates or successors.

         "Substitute Rating Agency" and "Substitute Rating Agencies" mean a
nationally recognized statistical rating organization or two nationally
recognized statistical rating organizations, respectively, selected by Merrill
Lynch, Pierce, Fenner & Smith Incorporated or its affiliates and successors,
after consultation with the Corporation, to act as the substitute rating
agency or substitute rating agencies, as the case may be, to determine the
credit ratings of the shares of AMPS.

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

         "Treasury Bonds" has the meaning set forth in paragraph 8(a) of these
Articles Supplementary.

         "U.S. Treasury Bill Rate" on any date means (i) the Interest
Equivalent of the rate on the actively traded Treasury Bill with a maturity
most nearly comparable to the length of the related Dividend Period, as such
rate is made available on a discount basis or otherwise by the Federal Reserve
Bank of New York in its Composite 3:30 P.M. Quotations for U.S. Government
Securities report for such Business Day, or (ii) if such yield as so
calculated is not available, the Alternate Treasury Bill Rate on such date.
"Alternate Treasury Bill Rate" on any date means the Interest Equivalent of
the yield as calculated by reference to the arithmetic average of the bid
price quotations of the actively traded Treasury Bill with a maturity most
nearly comparable to the length of the related Dividend Period, as determined
by bid price quotations as of any time on the Business Day immediately
preceding such date, obtained from at least three recognized primary U.S.
Government securities dealers selected by the Auction Agent.

         "U.S. Treasury Note Rate" on any date means (i) the yield as
calculated by reference to the bid price quotation of the actively traded,
current coupon Treasury Note with a maturity most nearly comparable to the
length of the related Dividend Period, as such bid price quotation is
published on the Business Day immediately preceding such date by the Federal
Reserve Bank of New York in its Composite 3:30 P.M. Quotations for U.S.
Government Securities report for such Business Day, or (ii) if such yield as
so calculated is not available, the Alternate Treasury Note Rate on such date.
"Alternate Treasury Note Rate" on any date means the yield as calculated by
reference to the arithmetic average of the bid price quotations of the
actively traded, current coupon Treasury Note with a maturity most nearly
comparable to the length of the related Dividend Period, as determined by the
bid price quotations as of any time on the Business Day immediately preceding
such date, obtained from at least three recognized primary U.S. Government
securities dealers selected by the Auction Agent.

         "Valuation Date" means, for purposes of determining whether the
Corporation is maintaining the AMPS Basic Maintenance Amount, each Business
Day commencing with the Date of Original Issue.

         "Variation Margin" means, in connection with an outstanding futures
contract owned or sold by the Corporation, the amount of cash or securities
paid to or received from a broker (subsequent to the Initial Margin payment)
from time to time as the price of such futures contract fluctuates.

         (b) The foregoing definitions of Accountant's Confirmation, AMPS
Basic Maintenance Amount, AMPS Basic Maintenance Cure Date, AMPS Basic
Maintenance Report, Deposit Securities, Discounted Value, Independent
Accountant, Initial Margin, Inverse Floaters, Market Value, Maximum Potential
Additional Dividend Liability, Moody's Discount Factor, Moody's Eligible
Asset, Moody's Exposure Period, Moody's Hedging Transactions, Moody's
Volatility Factor, S&P Discount Factor, S&P Eligible Asset, S&P Exposure
Period, S&P Hedging Transactions, S&P Volatility Factor, Valuation Date and
Variation Margin have been determined by the Board of Directors of the
Corporation in order to obtain a "aaa" rating from Moody's and a AAA rating
from S&P on the AMPS on their Date of Original Issue; and the Board of
Directors of the Corporation shall have the authority, without shareholder
approval, to amend, alter or repeal from time to time the foregoing
definitions and the restrictions and guidelines set forth thereunder if
Moody's and S&P or any Substitute Rating Agency advises the Corporation in
writing that such amendment, alteration or repeal will not adversely affect
their then current ratings on the AMPS.

         2. Dividends. (a) The Holders shall be entitled to receive, when, as
and if declared by the Board of Directors of the Corporation, out of funds
legally available therefor, cumulative dividends each consisting of (i) cash
at the Applicable Rate, (ii) a Right to receive cash as set forth in paragraph
2(e) below, and (iii) any additional amounts as set forth in paragraph 2(f)
below, and no more, payable on the respective dates set forth below. Dividends
on the shares of AMPS so declared and payable shall be paid (i) in preference
to and in priority over any dividends declared and payable on the Common
Stock, and (ii) to the extent permitted under the Code and to the extent
available, out of net tax-exempt income earned on the Corporation's
investments. To the extent permitted under the Code, dividends on shares of
AMPS will be designated as exempt-interest dividends. For the purposes of this
section, the term "net tax-exempt income" shall exclude capital gains of the
Corporation.

          (b) (i) Cash dividends on shares of AMPS shall accumulate from the
Date of Original Issue and shall be payable, when, as and if declared by the
Board of Directors, out of funds legally available therefor, commencing on the
Initial Dividend Payment Date with respect to the AMPS. Following the Initial
Dividend Payment Date for the AMPS, dividends on the AMPS will be payable, at
the option of the Corporation, either (A) 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 (B) 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
(A) or (B) being herein referred to as a "Normal Dividend Payment Date"),
except that if such Normal Dividend Payment Date is not a Business Day, then
the Dividend Payment Date shall be the first Business Day next succeeding such
Normal Dividend Payment Date. Although any particular Dividend Payment Date
may not occur on the originally scheduled date because of the exception
discussed above, the next succeeding Dividend Payment Date, subject to such
exception, will occur on the next following originally scheduled date. If for
any reason a Dividend Payment Date cannot be fixed as described above, then
the Board of Directors shall fix the Dividend Payment Date. The Board of
Directors by resolution prior to authorization of a dividend by the Board of
Directors may change a Dividend Payment Date if such change does not adversely
affect the contract rights of the Holders of shares of AMPS set forth in the
Charter. The Initial Dividend Period, 7-Day Dividend Periods and Special
Dividend Periods are hereinafter sometimes referred to as Dividend Periods.
Each dividend payment date determined as provided above is hereinafter
referred to as a "Dividend Payment Date."

          (ii) Each dividend shall be paid to the Holders as they appear in
the Stock Register as of 12:00 noon, New York City time, on the Business Day
preceding the Dividend Payment Date. Dividends in arrears for any past
Dividend Period may be declared and paid at any time, without reference to any
regular Dividend Payment Date, to the Holders as they appear on the Stock
Register on a date, not exceeding 15 days prior to the payment date therefor,
as may be fixed by the Board of Directors of the Corporation.

         (c) (i) During the period from and including the Date of Original
Issue to but excluding the Initial Dividend Payment Date (the "Initial
Dividend Period"), the Applicable Rate shall be the Initial Dividend Rate.
Commencing on the Initial Dividend Payment Date, the Applicable Rate for each
subsequent dividend period (hereinafter referred to as a "Subsequent Dividend
Period"), which Subsequent Dividend Period shall commence on and include a
Dividend Payment Date and shall end on and include the calendar day prior to
the next Dividend Payment Date (or last Dividend Payment Date in a Dividend
Period if there is more than one Dividend Payment Date), shall be equal to the
rate per annum that results from implementation of the Auction Procedures.

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

         (ii) The amount of cash dividends per share of AMPS payable (if
declared) on the Initial Dividend Payment Date, each 7-Day Dividend Period and
each Dividend Payment Date of each Short Term Dividend Period shall be
computed by multiplying the Applicable Rate for such Dividend Period by a
fraction, the numerator of which will be the number of days in such Dividend
Period or part thereof that such share was outstanding and the denominator of
which will be 365, multiplying the amount so obtained by $25,000, and rounding
the amount so obtained to the nearest cent. During any Long Term Dividend
Period, the amount of cash dividends per share of AMPS payable (if declared)
on any Dividend Payment Date shall be computed by multiplying the Applicable
Rate for such Dividend Period by a fraction, the numerator of which will be
such number of days in such part of such Dividend Period that such share was
outstanding and for which dividends are payable on such Dividend Payment Date
and the denominator of which will be 360, multiplying the amount so obtained
by $25,000, and rounding the amount so obtained to the nearest cent.

          (iii) With respect to each Dividend Period that is a Special
Dividend Period, the Corporation may, at its sole option and to the extent
permitted by law, by telephonic and written notice (a "Request for Special
Dividend Period") to the Auction Agent and to each Broker-Dealer, request that
the next succeeding Dividend Period for the AMPS be a number of days (other
than seven), evenly divisible by seven and not fewer than seven nor more than
364 in the case of a Short Term Dividend Period or one whole year or more but
not greater than five years in the case of a Long Term Dividend Period,
specified in such notice, provided that the Corporation may not give a Request
for Special Dividend Period of greater than 28 days (and any such request
shall be null and void) unless, for any Auction occurring after the initial
Auction, Sufficient Clearing Bids were made in the last occurring Auction and
unless full cumulative dividends, any amounts due with respect to redemptions,
and any Additional Dividends payable prior to such date have been paid in
full. Such Request for Special Dividend Period, in the case of a Short Term
Dividend Period, shall be given on or prior to the second Business Day but not
more than seven Business Days prior to an Auction Date for the AMPS and, in
the case of a Long Term Dividend Period, shall be given on or prior to the
second Business Day but not more than 28 days prior to an Auction Date for the
AMPS. Upon receiving such Request for Special Dividend Period, the
Broker-Dealer(s) shall jointly determine whether, given the factors set forth
below, it is advisable that the Corporation 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
Corporation and the Auction Agent written notice (a "Response") of such
determination by no later than the second Business Day prior to such Auction
Date. In making such determination the Broker-Dealer(s) will consider (A)
existing short-term and long-term market rates and indices of such short-term
and long-term rates, (B) existing market supply and demand for short-term and
long-term securities, (C) existing yield curves for short-term and long-term
securities comparable to the AMPS, (D) industry and financial conditions which
may affect the AMPS, (E) the investment objective of the Corporation, and (F)
the Dividend Periods and dividend rates at which current and potential
beneficial holders of the AMPS would remain or become beneficial holders. If
the Broker-Dealer(s) shall not give the Corporation and the Auction Agent a
Response by such second Business Day or if the Response states that given the
factors set forth above it is not advisable that the Corporation give a Notice
of Special Dividend Period for the AMPS, the Corporation may not give a Notice
of Special Dividend Period in respect of such Request for Special Dividend
Period. In the event the Response indicates that it is advisable that the
Corporation give a Notice of Special Dividend Period for the AMPS, the
Corporation may by no later than the second Business Day prior to such Auction
Date give a notice (a "Notice of Special Dividend Period") to the Auction
Agent, the Securities Depository and each Broker-Dealer which notice will
specify (A) the duration of the Special Dividend Period, (B) the Optional
Redemption Price as specified in the related Response and (C) the Specific
Redemption Provisions, if any, as specified in the related Response. The
Corporation also shall provide a copy of such Notice of Special Dividend
Period to Moody's and S&P. The Corporation shall not give a Notice of Special
Dividend Period and, if the Corporation has given a Notice of Special Dividend
Period, the Corporation is required to give telephonic and written notice of
its revocation (a "Notice of Revocation") to the Auction Agent, each
Broker-Dealer, and the Securities Depository on or prior to the Business Day
prior to the relevant Auction Date if (x) either the 1940 Act AMPS Asset
Coverage is not satisfied or the Corporation shall fail to maintain S&P
Eligible Assets and Moody's Eligible Assets each with an aggregate Discounted
Value at least equal to the AMPS Basic Maintenance Amount, in each case on
each of the two Valuation Dates immediately preceding the Business Day prior
to the relevant Auction Date on an actual basis and on a pro forma basis
giving effect to the proposed Special Dividend Period (using as a pro forma
dividend rate with respect to such Special Dividend Period the dividend rate
which the Broker-Dealers shall advise the Corporation is an approximately
equal rate for securities similar to the AMPS with an equal dividend period),
provided that, in calculating the aggregate Discounted Value of Moody's
Eligible Assets for this purpose, the Moody's Exposure Period shall be deemed
to be one week longer, (y) sufficient funds for the payment of dividends
payable on the immediately succeeding Dividend Payment Date have not been
irrevocably deposited with the Auction Agent by the close of business on the
third Business Day preceding the related Auction Date or (z) the
Broker-Dealer(s) jointly advise the Corporation that after consideration of
the factors listed above they have concluded that it is advisable to give a
Notice of Revocation. The Corporation also shall provide a copy of such Notice
of Revocation to Moody's and S&P. If the Corporation is prohibited from giving
a Notice of Special Dividend Period as a result of any of the factors
enumerated in clause (x), (y) or (z) above or if the Corporation gives a
Notice of Revocation with respect to a Notice of Special Dividend Period for
the AMPS, the next succeeding Dividend Period will be a 7-Day Dividend Period.
In addition, in the event Sufficient Clearing Bids are not made in the
applicable Auction or such Auction is not held for any reason, such next
succeeding Dividend Period will be a 7-Day Dividend Period and the Corporation
may not again give a Notice of Special Dividend Period for the AMPS (and any
such attempted notice shall be null and void) until Sufficient Clearing Bids
have been made in an Auction with respect to a 7-Day Dividend Period.

         (d) (i) Holders shall not be entitled to any dividends, whether
payable in cash, property or stock, in excess of full cumulative dividends and
applicable late charges, as herein provided, on the shares of AMPS (except for
Additional Dividends as provided in paragraph 2(e) hereof and additional
payments as provided in paragraph 2(f) hereof). Except for the late charge
payable pursuant to paragraph 2(c)(i) hereof, no interest, or sum of money in
lieu of interest, shall be payable in respect of any dividend payment on the
shares of AMPS that may be in arrears.

         (ii) For so long as any share of AMPS is Outstanding, the Corporation
shall not declare, pay or set apart for payment any dividend or other
distribution (other than a dividend or distribution paid in shares of, or
options, warrants or rights to subscribe for or purchase, Common Stock or
other stock, if any, ranking junior to the shares of AMPS as to dividends or
upon liquidation) in respect of the Common Stock or any other stock of the
Corporation ranking junior to or on a parity with the shares of AMPS as to
dividends or upon liquidation, or call for redemption, redeem, purchase or
otherwise acquire for consideration any shares of the Common Stock or any
other such junior stock (except by conversion into or exchange for stock of
the Corporation ranking junior to the shares of AMPS as to dividends and upon
liquidation) or any other such Parity Stock (except by conversion into or
exchange for stock of the Corporation ranking junior to or on a parity with
the shares of AMPS as to dividends and upon liquidation), unless (A)
immediately after such transaction, the Corporation shall have S&P Eligible
Assets and Moody's Eligible Assets each with an aggregate Discounted Value
equal to or greater than the AMPS Basic Maintenance Amount and the Corporation
shall maintain the 1940 Act AMPS Asset Coverage, (B) full cumulative dividends
on shares of AMPS and shares of Other AMPS due on or prior to the date of the
transaction have been declared and paid or shall have been declared and
sufficient funds for the payment thereof deposited with the Auction Agent, (C)
any Additional Dividend required to be paid under paragraph 2(e) below on or
before the date of such declaration or payment has been paid and (D) the
Corporation has redeemed the full number of shares of AMPS required to be
redeemed by any provision for mandatory redemption contained herein.

         (e) Each dividend shall consist of (i) cash at the Applicable Rate,
(ii) an uncertificated right (a "Right") to receive an Additional Dividend (as
defined below), and (iii) any additional amounts as set forth in paragraph
2(f) below. Each Right shall thereafter be independent of the share or shares
of AMPS on which the dividend was paid. The Corporation shall cause to be
maintained a record of each Right received by the respective Holders. A Right
may not be transferred other than by operation of law. If the Corporation
retroactively allocates any net capital gains or other income subject to
regular Federal income taxes to shares of AMPS without having given advance
notice thereof to the Auction Agent as described in paragraph 2(f) hereof
solely by reason of the fact that such allocation is made as a result of the
redemption of all or a portion of the outstanding shares of AMPS or the
liquidation of the Corporation (the amount of such allocation referred to
herein as a "Retroactive Taxable Allocation"), the Corporation will, within 90
days (and generally within 60 days) after the end of the Corporation's fiscal
year for which a Retroactive Taxable Allocation is made, provide notice
thereof to the Auction Agent and to each holder of a Right applicable to such
shares of AMPS (initially Cede & Co. as nominee of The Depository Trust
Company) during such fiscal year at such holder's address as the same appears
or last appeared on the Stock Books of the Corporation. The Corporation will,
within 30 days after such notice is given to the Auction Agent, pay to the
Auction Agent (who will then distribute to such holders of Rights), out of
funds legally available therefor, an amount equal to the aggregate Additional
Dividend with respect to all Retroactive Taxable Allocations made to such
holders during the fiscal year in question.

         An "Additional Dividend" means payment to a present or former holder
of shares of AMPS of an amount which, when taken together with the aggregate
amount of Retroactive Taxable Allocations made to such holder with respect to
the fiscal year in question, would cause such holder's dividends in dollars
(after Federal income tax consequences) from the aggregate of both the
Retroactive Taxable Allocations and the Additional Dividend to be equal to the
dollar amount of the dividends which would have been received by such holder
if the amount of the aggregate Retroactive Taxable Allocations would have been
excludable from the gross income of such holder. Such Additional Dividend
shall be calculated (i) without consideration being given to the time value of
money; (ii) assuming that no holder of shares of AMPS is subject to the
Federal alternative minimum tax with respect to dividends received from the
Corporation; and (iii) assuming that each Retroactive Taxable Allocation would
be taxable in the hands of each holder of shares of AMPS at the greater of:
(x) the maximum marginal regular Federal individual income tax rate applicable
to ordinary income or capital gains depending on the taxable character of the
distribution (including any surtax); or (y) the maximum marginal regular
Federal corporate income tax rate applicable to ordinary income or capital
gains depending on the taxable character of the distribution (disregarding in
both (x) and (y) the effect of any state or local taxes and the phase out of,
or provision limiting, personal exemptions, itemized deductions, or the
benefit of lower tax brackets).

         (f) Except as provided below, whenever the Corporation intends to
include any net capital gains or other income subject to regular Federal
income taxes in any dividend on shares of AMPS, the Corporation will notify
the Auction Agent of the amount to be so included at least five Business Days
prior to the Auction Date on which the Applicable Rate for such dividend is to
be established. The Corporation may also include such income in a dividend on
shares of a series of AMPS without giving advance notice thereof if it
increases the dividend by an additional amount calculated as if such income
was a Retroactive Taxable Allocation and the additional amount was an
Additional Dividend, provided that the Corporation will notify the Auction
Agent of the additional amounts to be included in such dividend at least five
Business Days prior to the applicable Dividend Payment Date.

         (g) No fractional shares of AMPS shall be issued.

         3. Liquidation Rights. Upon any liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, the Holders shall be
entitled to receive, out of the assets of the Corporation available for
distribution to shareholders, before any distribution or payment is made upon
any Common Stock or any other capital stock ranking junior in right of payment
upon liquidation to the AMPS, the sum of $25,000 per share plus accumulated
but unpaid dividends (whether or not earned or declared) thereon to the date
of distribution, and after such payment the Holders will be entitled to no
other payments other than Additional Dividends as provided in paragraph 2(e)
hereof. If upon any liquidation, dissolution or winding up of the Corporation,
the amounts payable with respect to the AMPS and any other Outstanding class
or series of Preferred Stock of the Corporation ranking on a parity with the
AMPS as to payment upon liquidation are not paid in full, the Holders and the
holders of such other class or series will share ratably in any such
distribution of assets in proportion to the respective preferential amounts to
which they are entitled. After payment of the full amount of the liquidating
distribution to which they are entitled, the Holders will not be entitled to
any further participation in any distribution of assets by the Corporation
except for any Additional Dividends. A consolidation, merger or statutory
share exchange of the Corporation with or into any other corporation or entity
or a sale, whether for cash, shares of stock, securities or properties, of all
or substantially all or any part of the assets of the Corporation shall not be
deemed or construed to be a liquidation, dissolution or winding up of the
Corporation.

         4. Redemption. (a) Shares of AMPS shall be redeemable by the
Corporation as provided below:

               (i) To the extent permitted under the 1940 Act and Maryland
          law, upon giving a Notice of Redemption, the Corporation at its
          option may redeem shares of AMPS, in whole or in part, out of funds
          legally available therefor, at the Optional Redemption Price per
          share, on any Dividend Payment Date; provided that no share of AMPS
          may be redeemed at the option of the Corporation during (A) the
          Initial Dividend Period with respect to such shares or (B) a
          Non-Call Period to which such share is subject. In addition, holders
          of AMPS which are redeemed shall be entitled to receive Additional
          Dividends to the extent provided herein. The Corporation may not
          give a Notice of Redemption relating to an optional redemption as
          described in this paragraph 4(a)(i) unless, at the time of giving
          such Notice of Redemption, the Corporation has available Deposit
          Securities with maturity or tender dates not later than the day
          preceding the applicable redemption date and having a value not less
          than the amount due to Holders by reason of the redemption of their
          shares of AMPS on such redemption date.

               (ii) The Corporation shall redeem, out of funds legally
          available therefor, at the Mandatory Redemption Price per share,
          shares of AMPS to the extent permitted under the 1940 Act and
          Maryland law, on a date fixed by the Board of Directors, if the
          Corporation fails to maintain S&P Eligible Assets and Moody's
          Eligible Assets each with an aggregate Discounted Value equal to or
          greater than the AMPS Basic Maintenance Amount as provided in
          paragraph 7(a) or to satisfy the 1940 Act AMPS Asset Coverage as
          provided in paragraph 6 and such failure is not cured on or before
          the AMPS Basic Maintenance Cure Date or the 1940 Act Cure Date
          (herein collectively referred to as a "Cure Date"), as the case may
          be. In addition, holders of AMPS so redeemed shall be entitled to
          receive Additional Dividends to the extent provided herein. The
          number of shares of AMPS to be redeemed shall be equal to the lesser
          of (i) the minimum number of shares of AMPS the redemption of which,
          if deemed to have occurred immediately prior to the opening of
          business on the Cure Date, together with all shares of other
          Preferred Stock subject to redemption or retirement, would result in
          the Corporation having S&P Eligible Assets and Moody's Eligible
          Assets each with an aggregate Discounted Value equal to or greater
          than the AMPS Basic Maintenance Amount or satisfaction of the 1940
          Act AMPS Asset Coverage, as the case may be, on such Cure Date
          (provided that, if there is no such minimum number of shares of AMPS
          and shares of other Preferred Stock the redemption of which would
          have such result, all shares of AMPS and shares of other Preferred
          Stock then Outstanding shall be redeemed), and (ii) the maximum
          number of shares of AMPS, together with all shares of other
          Preferred Stock subject to redemption or retirement, that can be
          redeemed out of funds expected to be legally available therefor on
          such redemption date. In determining the number of shares of AMPS
          required to be redeemed in accordance with the foregoing, the
          Corporation shall allocate the number required to be redeemed which
          would result in the Corporation having S&P Eligible Assets and
          Moody's Eligible Assets each with an aggregate Discounted Value
          equal to or greater than the AMPS Basic Maintenance Amount or
          satisfaction of the 1940 Act AMPS Asset Coverage, as the case may
          be, pro rata among shares of AMPS of all series, Other AMPS and
          other Preferred Stock subject to redemption pursuant to provisions
          similar to those contained in this paragraph 4(a)(ii); provided
          that, shares of AMPS which may not be redeemed at the option of the
          Corporation due to the designation of a Non-Call Period applicable
          to such shares (A) will be subject to mandatory redemption only to
          the extent that other shares are not available to satisfy the number
          of shares required to be redeemed and (B) will be selected for
          redemption in an ascending order of outstanding number of days in
          the Non-Call Period (with shares with the lowest number of days to
          be redeemed first) and by lot in the event of shares having an equal
          number of days in such Non-Call Period. The Corporation shall effect
          such redemption on a Business Day which is not later than 35 days
          after such Cure Date, except that if the Corporation does not have
          funds legally available for the redemption of all of the required
          number of shares of AMPS and shares of other Preferred Stock which
          are subject to mandatory redemption or the Corporation otherwise is
          unable to effect such redemption on or prior to 35 days after such
          Cure Date, the Corporation shall redeem those shares of AMPS which
          it is unable to redeem on the earliest practicable date on which it
          is able to effect such redemption out of funds legally available
          therefor.

         (b) Notwithstanding any other provision of this paragraph 4, no
shares of AMPS may be redeemed pursuant to paragraph 4(a)(i) of these Articles
Supplementary (i) unless all dividends in arrears on all remaining outstanding
shares of Parity Stock shall have been or are being contemporaneously paid or
declared and set apart for payment and (ii) if redemption thereof would result
in the Corporation's failure to maintain Moody's Eligible Assets or S&P
Eligible Assets with an aggregate Discounted Value equal to or greater than
the AMPS Basic Maintenance Amount. In the event that less than all the
outstanding shares of the AMPS are to be redeemed and there is more than one
Holder, the shares of that series of AMPS to be redeemed shall be selected by
lot or such other method as the Corporation shall deem fair and equitable.

         (c) Whenever shares of AMPS are to be redeemed, the Corporation, not
less than 17 nor more than 60 days prior to the date fixed for redemption,
shall mail a notice ("Notice of Redemption") by first-class mail, postage
prepaid, to each Holder of shares of AMPS to be redeemed and to the Auction
Agent. The Corporation shall cause the Notice of Redemption to also be
published in the eastern and national editions of The Wall Street Journal. The
Notice of Redemption shall set forth (i) the redemption date, (ii) the amount
of the redemption price, (iii) the aggregate number of shares of AMPS 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 shall cease to accumulate on such redemption date
(except that holders may be entitled to Additional Dividends) and (vi) the
provision of these Articles Supplementary pursuant to which such shares are
being redeemed. No defect in the Notice of Redemption or in the mailing or
publication thereof shall affect the validity of the redemption proceedings,
except as required by applicable law.

         If the Notice of Redemption shall have been given as aforesaid and,
concurrently or thereafter, the Corporation shall have deposited in trust with
the Auction Agent, or segregated in an account at the Corporation's custodian
bank for the benefit of the Auction Agent, Deposit Securities (with a right of
substitution) having an aggregate Discounted Value (utilizing in the case of
S&P an S&P Exposure Period of 22 Business Days) equal to the redemption
payment for the shares of AMPS as to which such Notice of Redemption has been
given with irrevocable instructions and authority to pay the redemption price
to the Holders of such shares, then upon the date of such deposit or, if no
such deposit is made, then upon such date fixed for redemption (unless the
Corporation shall default in making the redemption payment), all rights of the
Holders of such shares as shareholders of the Corporation by reason of the
ownership of such shares will cease and terminate (except their right to
receive the redemption price in respect thereof and any Additional Dividends,
but without interest), and such shares shall no longer be deemed outstanding.
The Corporation shall be entitled to receive, from time to time, from the
Auction Agent the interest, if any, on such Deposit Securities deposited with
it and the Holders of any shares so redeemed shall have no claim to any of
such interest. In case the Holder of any shares so called for redemption shall
not claim the redemption payment for his shares within one year after the date
of redemption, the Auction Agent shall, upon demand, pay over to the
Corporation such amount remaining on deposit and the Auction Agent shall
thereupon be relieved of all responsibility to the Holder of such shares
called for redemption and such Holder thereafter shall look only to the
Corporation for the redemption payment.

         5. Voting Rights. (a) General. Except as otherwise provided in the
Charter or By-Laws, each Holder of shares of AMPS shall be entitled to one
vote for each share held on each matter submitted to a vote of shareholders of
the Corporation, and the holders of outstanding shares of Preferred Stock,
including AMPS, and of shares of Common Stock shall vote together as a single
class; provided that, at any meeting of the shareholders of the Corporation
held for the election of directors, the holders of outstanding shares of
Preferred Stock, including AMPS, shall be entitled, as a class, to the
exclusion of the holders of all other securities and classes of capital stock
of the Corporation, to elect two directors of the Corporation. Subject to
paragraph 5(b) hereof, the holders of outstanding shares of capital stock of
the Corporation, including the holders of outstanding shares of Preferred
Stock, including AMPS, voting as a single class, shall elect the balance of
the directors.

         (b) Right to Elect Majority of Board of Directors. During any period
in which any one or more of the conditions described below shall exist (such
period being referred to herein as a "Voting Period"), the number of directors
constituting the Board of Directors shall be automatically increased by the
smallest number that, when added to the two directors elected exclusively by
the holders of shares of Preferred Stock, would constitute a majority of the
Board of Directors as so increased by such smallest number; and the holders of
shares of Preferred Stock shall be entitled, voting separately as one class
(to the exclusion of the holders of all other securities and classes of
capital stock of the Corporation), to elect such smallest number of additional
directors, together with the two directors that such holders are in any event
entitled to elect. A Voting Period shall commence:

               (i) if at any time accumulated dividends (whether or not earned
          or declared, and whether or not funds are then legally available in
          an amount sufficient therefor) on the outstanding shares of AMPS
          equal to at least two full years' dividends shall be due and unpaid
          and sufficient cash or specified securities shall not have been
          deposited with the Auction Agent for the payment of such accumulated
          dividends; or

               (ii) if at any time holders of any other shares of Preferred
          Stock are entitled to elect a majority of the directors of the
          Corporation under the 1940 Act.

         Upon the termination of a Voting Period, the voting rights described
in this paragraph 5(b) shall cease, subject always, however, to the reverting
of such voting rights in the Holders upon the further occurrence of any of the
events described in this paragraph 5(b).

         (c) Right to Vote with Respect to Certain Other Matters. So long as
any shares of AMPS are outstanding, the Corporation shall not, without the
affirmative vote of the holders of a majority of the shares of Preferred Stock
Outstanding at the time, voting separately as one class: (i) authorize, create
or issue any class or series of stock ranking prior to the AMPS or any other
series of Preferred Stock with respect to payment of dividends or the
distribution of assets on liquidation, 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 AMPS and Other
AMPS are outstanding, the Corporation shall not approve any of the actions set
forth in clause (i) or (ii) which adversely affects the contract rights
expressly set forth in the Charter of a Holder of shares of AMPS differently
than those of a holder of shares of Other AMPS without the affirmative vote of
the Holders of at least a majority of the shares of AMPS adversely affected
and outstanding at such time (voting separately as a class). The Corporation
shall notify Moody's and S&P ten Business Days prior to any such vote
described in clause (i) or (ii). Unless a higher percentage is provided for
under the Charter, the affirmative vote of the holders of a majority of the
outstanding shares of Preferred Stock, including AMPS, voting together as a
single class, will be required to approve any plan of reorganization
(including bankruptcy proceedings) adversely affecting such shares or any
action requiring a vote of security holders under Section 13(a) of the 1940
Act. The class vote of holders of shares of Preferred Stock, including AMPS,
described above will in each case be in addition to a separate vote of the
requisite percentage of shares of Common Stock and shares of Preferred Stock,
including AMPS, voting together as a single class necessary to authorize the
action in question.

         (d)      Voting Procedures.

                  (i) As soon as practicable after the accrual of any right of
the holders of shares of Preferred Stock to elect additional directors as
described in paragraph 5(b) above, the Corporation shall call a special
meeting of such holders and instruct the Auction Agent to mail a notice of
such special meeting to such holders, such meeting to be held not less than 10
nor more than 20 days after the date of mailing of such notice. If the
Corporation fails to send such notice to the Auction Agent or if the
Corporation does not call such a special meeting, it may be called by any such
holder on like notice. The record date for determining the holders entitled to
notice of and to vote at such special meeting shall be the close of business
on the fifth Business Day preceding the day on which such notice is mailed. At
any such special meeting and at each meeting held during a Voting Period, such
Holders, voting together as a class (to the exclusion of the holders of all
other securities and classes of capital stock of the Corporation), shall be
entitled to elect the number of directors prescribed in paragraph 5(b) above.
At any such meeting or adjournment thereof in the absence of a quorum, a
majority of such holders present in person or by proxy shall have the power to
adjourn the meeting without notice, other than by an announcement at the
meeting, to a date not more than 120 days after the original record date.

               (ii) For purposes of determining any rights of the Holders to
          vote on any matter or the number of shares required to constitute a
          quorum, whether such right is created by these Articles
          Supplementary, by the other provisions of the Charter, by statute or
          otherwise, a share of AMPS which is not Outstanding shall not be
          counted.

               (iii) The terms of office of all persons who are directors of
          the Corporation at the time of a special meeting of Holders and
          holders of other Preferred Stock to elect directors shall continue,
          notwithstanding the election at such meeting by the Holders and such
          other holders of the number of directors that they are entitled to
          elect, and the persons so elected by the Holders and such other
          holders, together with the two incumbent directors elected by the
          Holders and such other holders of Preferred Stock and the remaining
          incumbent directors elected by the holders of the Common Stock and
          Preferred Stock, shall constitute the duly elected directors of the
          Corporation.

               (iv) Simultaneously with the expiration of a Voting Period, the
          terms of office of the additional directors elected by the Holders
          and holders of other Preferred Stock pursuant to paragraph 5(b)
          above shall terminate, the remaining directors shall constitute the
          directors of the Corporation and the voting rights of the Holders
          and such other holders to elect additional directors pursuant to
          paragraph 5(b) above shall cease, subject to the provisions of the
          last sentence of paragraph 5(b).

         (e) Exclusive Remedy. Unless otherwise required by law, the Holders
of shares of AMPS shall not have any rights or preferences other than those
specifically set forth herein. The Holders of shares of AMPS shall have no
preemptive rights or rights to cumulative voting. In the event that the
Corporation fails to pay any dividends on the shares of AMPS, the exclusive
remedy of the Holders shall be the right to vote for directors pursuant to the
provisions of this paragraph 5.

         (f) Notification to S&P and Moody's. In the event a vote of Holders
of AMPS is required pursuant to the provisions of Section 13(a) of the 1940
Act, the Corporation shall, not later than ten Business Days prior to the date
on which such vote is to be taken, notify S&P and Moody's that such vote is to
be taken and the nature of the action with respect to which such vote is to be
taken and, not later than ten Business Days after the date on which such vote
is taken, notify S&P and Moody's of the result of such vote.

         6. 1940 Act AMPS Asset Coverage. The Corporation shall maintain, as
of the last Business Day of each month in which any share of AMPS is
outstanding, the 1940 Act AMPS Asset Coverage.

         7. AMPS Basic Maintenance Amount. (a) The Corporation shall maintain,
on each Valuation Date, and shall verify to its satisfaction that it is
maintaining on such Valuation Date, (i) S&P Eligible Assets having an
aggregate Discounted Value equal to or greater than the AMPS Basic Maintenance
Amount and (ii) Moody's Eligible Assets having an aggregate Discounted Value
equal to or greater than the AMPS Basic Maintenance Amount. Upon any failure
to maintain the required Discounted Value, the Corporation will use its best
efforts to alter the composition of its portfolio to reattain a Discounted
Value at least equal to the AMPS Basic Maintenance Amount on or prior to the
AMPS Basic Maintenance Cure Date.

         (b) On or before 5:00 p.m., New York City time, on the third Business
Day after a Valuation Date on which the Corporation fails to satisfy the AMPS
Basic Maintenance Amount, the Corporation shall complete and deliver to the
Auction Agent, and Moody's and S&P, as the case may be, a complete AMPS Basic
Maintenance Report as of the date of such failure, which will be deemed to
have been delivered to the Auction Agent if the Auction Agent receives a copy
or telecopy, telex or other electronic transcription thereof and on the same
day the Corporation mails to the Auction Agent for delivery on the next
Business Day the complete AMPS Basic Maintenance Report. The Corporation will
deliver an AMPS Basic Maintenance Report to the Auction Agent and Moody's and
S&P, as the case may be, on or before 5:00 p.m., New York City time, on the
third Business Day after a Valuation Date on which the Corporation cures its
failure to maintain Moody's Eligible Assets or S&P Eligible Assets, as the
case may be, with an aggregate Discounted Value equal to or greater than the
AMPS Basic Maintenance Amount or on which the Corporation fails to maintain
Moody's Eligible Assets or S&P Eligible Assets, as the case may be, with an
aggregate Discounted Value which exceeds the AMPS Basic Maintenance Amount by
5% or more. The Corporation will also deliver an AMPS Basic Maintenance Report
to the Auction Agent, Moody's and S&P as of each Quarterly Valuation Date on
or before the third Business Day after such date. Additionally, on or before
5:00 p.m., New York City time, on the third Business Day after the first day
of a Special Dividend Period, the Corporation will deliver an AMPS Basic
Maintenance Report to S&P and the Auction Agent. The Corporation shall also
provide Moody's and S&P with an AMPS Basic Maintenance Report when
specifically requested by either Moody's or S&P. A failure by the Corporation
to deliver an AMPS Basic Maintenance Report under this paragraph 7(b) shall be
deemed to be delivery of an AMPS Basic Maintenance Report indicating the
Discounted Value for S&P Eligible Assets and Moody's Eligible Assets of the
Corporation is less than the AMPS Basic Maintenance Amount, as of the relevant
Valuation Date.

         (c) Within ten Business Days after the date of delivery of an AMPS
Basic Maintenance Report in accordance with paragraph 7(b) above relating to a
Quarterly Valuation Date, the Independent Accountant will confirm in writing
to the Auction Agent, S&P and Moody's (i) the mathematical accuracy of the
calculations reflected in such Report (and in any other AMPS Basic Maintenance
Report, randomly selected by the Independent Accountant, that was delivered by
the Corporation during the quarter ending on such Quarterly Valuation Date),
(ii) that, in such Report (and in such randomly selected Report), the
Corporation correctly determined the assets of the Corporation which
constitute S&P Eligible Assets or Moody's Eligible Assets, as the case may be,
at such Quarterly Valuation Date in accordance with these Articles
Supplementary, (iii) that, in such Report (and in such randomly selected
Report), the Corporation determined whether the Corporation had, at such
Quarterly Valuation Date (and at the Valuation Date addressed in such randomly
selected Report) in accordance with these Articles Supplementary, S&P Eligible
Assets of an aggregate Discounted Value at least equal to the AMPS Basic
Maintenance Amount and Moody's Eligible Assets of an aggregate Discounted
Value at least equal to the AMPS Basic Maintenance Amount, (iv) with respect
to the S&P ratings on Municipal Bonds, the issuer name, issue size and coupon
rate listed in such Report, that the Independent Accountant has requested that
S&P verify such information and the Independent Accountant shall provide a
listing in its letter of any differences, (v) with respect to the Moody's
ratings on Municipal Bonds, the issuer name, issue size and coupon rate listed
in such Report, that such information has been verified by Moody's (in the
event such information is not verified by Moody's, the Independent Accountant
will inquire of Moody's what such information is, and provide a listing in its
letter of any differences), (vi) with respect to the bid or mean price (or
such alternative permissible factor used in calculating the Market Value)
provided by the custodian of the Corporation's assets to the Corporation for
purposes of valuing securities in the Corporation's portfolio, the Independent
Accountant has traced the price used in such Report to the bid or mean price
listed in such Report as provided to the Corporation and verified that such
information agrees (in the event such information does not agree, the
Independent Accountant will provide a listing in its letter of such
differences) and (vii) with respect to such confirmation to Moody's, that the
Corporation has satisfied the requirements of paragraph 8(b) of these Articles
Supplementary (such confirmation is herein called the "Accountant's
Confirmation").

         (d) Within ten Business Days after the date of delivery to the
Auction Agent, S&P and Moody's of an AMPS Basic Maintenance Report in
accordance with paragraph 7(b) above relating to any Valuation Date on which
the Corporation failed to maintain S&P Eligible Assets with an aggregate
Discounted Value and Moody's Eligible Assets with an aggregate Discounted
Value equal to or greater than the AMPS Basic Maintenance Amount, and relating
to the AMPS Basic Maintenance Cure Date with respect to such failure, the
Independent Accountant will provide to the Auction Agent, S&P and Moody's an
Accountant's Confirmation as to such AMPS Basic Maintenance Report.

         (e) If any Accountant's Confirmation delivered pursuant to
subparagraph (c) or (d) of this paragraph 7 shows that an error was made in
the AMPS Basic Maintenance Report for a particular Valuation Date for which
such Accountant's Confirmation as required to be delivered, or shows that a
lower aggregate Discounted Value for the aggregate of all S&P Eligible Assets
or Moody's Eligible Assets, as the case may be, of the Corporation was
determined by the Independent Accountant, the calculation or determination
made by such Independent Accountant shall be final and conclusive and shall be
binding on the Corporation, and the Corporation shall accordingly amend and
deliver the AMPS Basic Maintenance Report to the Auction Agent, S&P and
Moody's promptly following receipt by the Corporation of such Accountant's
Confirmation.

         (f) On or before 5:00 p.m., New York City time, on the first Business
Day after the Date of Original Issue of the shares of AMPS, the Corporation
will complete and deliver to S&P and Moody's an AMPS Basic Maintenance Report
as of the close of business on such Date of Original Issue. Within five
Business Days of such Date of Original Issue, the Independent Accountant will
confirm in writing to S&P and Moody's (i) the mathematical accuracy of the
calculations reflected in such Report and (ii) that the aggregate Discounted
Value of S&P Eligible Assets and the aggregate Discounted Value of Moody's
Eligible Assets reflected thereon equals or exceeds the AMPS Basic Maintenance
Amount reflected thereon. Also, on or before 5:00 p.m., New York City time, on
the first Business Day after shares of Common Stock are repurchased by the
Corporation, the Corporation will complete and deliver to S&P and Moody's an
AMPS Basic Maintenance Report as of the close of business on such date that
Common Stock is repurchased.

         (g) For so long as shares of AMPS are rated by Moody's, in managing
the Corporation's portfolio, the Adviser will not alter the composition of the
Corporation's portfolio if, in the reasonable belief of the Adviser, the
effect of any such alteration would be to cause the Corporation to have
Moody's Eligible Assets with an aggregate Discounted Value, as of the
immediately preceding Valuation Date, less than the AMPS Basic Maintenance
Amount as of such Valuation Date; provided, however, that in the event that,
as of the immediately preceding Valuation Date, the aggregate Discounted Value
of Moody's Eligible Assets exceeded the AMPS Basic Maintenance Amount by five
percent or less, the Adviser will not alter the composition of the
Corporation's portfolio in a manner reasonably expected to reduce the
aggregate Discounted Value of Moody's Eligible Assets unless the Corporation
shall have confirmed that, after giving effect to such alteration, the
aggregate Discounted Value of Moody's Eligible Assets would exceed the AMPS
Basic Maintenance Amount.

         8.       Certain Other Restrictions and Requirements.

         (a) For so long as any shares of AMPS are rated by S&P, the
Corporation will not purchase or sell futures contracts, write, purchase or
sell options on futures contracts or write put options (except covered put
options) or call options (except covered call options) on portfolio securities
unless it receives written confirmation from S&P that engaging in such
transactions will not impair the ratings then assigned to the shares of AMPS
by S&P, except that the Corporation may purchase or sell futures contracts
based on the Bond Buyer Municipal Bond Index (the "Municipal Index") or United
States Treasury Bonds or Notes ("Treasury Bonds") and write, purchase or sell
put and call options on such contracts (collectively, "S&P Hedging
Transactions"), subject to the following limitations:

               (i) the Corporation will not engage in any S&P Hedging
          Transaction based on the Municipal Index (other than transactions
          which terminate a futures contract or option held by the Corporation
          by the Corporation's taking an opposite position thereto ("Closing
          Transactions")), which would cause the Corporation at the time of
          such transaction to own or have sold the least of (A) more than
          1,000 outstanding futures contracts based on the Municipal Index,
          (B) outstanding futures contracts based on the Municipal Index
          exceeding in number 25% of the quotient of the Market Value of the
          Corporation's total assets divided by $1,000 or (C) outstanding
          futures contracts based on the Municipal Index exceeding in number
          10% of the average number of daily traded futures contracts based on
          the Municipal Index in the 30 days preceding the time of effecting
          such transaction as reported by The Wall Street Journal;

               (ii) the Corporation will not engage in any S&P Hedging
          Transaction based on Treasury Bonds (other than Closing
          Transactions) which would cause the Corporation at the time of such
          transaction to own or have sold the lesser of (A) outstanding
          futures contracts based on Treasury Bonds exceeding in number 50% of
          the quotient of the Market Value of the Corporation's total assets
          divided by $100,000 ($200,000 in the case of the two-year United
          States Treasury Note) or (B) outstanding futures contracts based on
          Treasury Bonds exceeding in number 10% of the average number of
          daily traded futures contracts based on Treasury Bonds in the 30
          days preceding the time of effecting such transaction as reported by
          The Wall Street Journal;

               (iii) the Corporation will engage in Closing Transactions to
          close out any outstanding futures contract which the Corporation
          owns or has sold or any outstanding option thereon owned by the
          Corporation in the event (A) the Corporation does not have S&P
          Eligible Assets with an aggregate Discounted Value equal to or
          greater than the AMPS Basic Maintenance Amount on two consecutive
          Valuation Dates and (B) the Corporation is required to pay Variation
          Margin on the second such Valuation Date;

               (iv) the Corporation will engage in a Closing Transaction to
          close out any outstanding futures contract or option thereon in the
          month prior to the delivery month under the terms of such futures
          contract or option thereon unless the Corporation holds the
          securities deliverable under such terms; and

               (v) when the Corporation writes a futures contract or option
          thereon, it will either maintain an amount of cash, cash equivalents
          or high grade (rated A or better by S&P), fixed-income securities in
          a segregated account with the Corporation's custodian, so that the
          amount so segregated plus the amount of Initial Margin and Variation
          Margin held in the account of or on behalf of the Corporation's
          broker with respect to such futures contract or option equals the
          Market Value of the futures contract or option, or, in the event the
          Corporation writes a futures contract or option thereon which
          requires delivery of an underlying security, it shall hold such
          underlying security in its portfolio.

         For purposes of determining whether the Corporation has S&P Eligible
Assets with a Discounted Value that equals or exceeds the AMPS Basic
Maintenance Amount, the Discounted Value of cash or securities held for the
payment of Initial Margin or Variation Margin shall be zero and the aggregate
Discounted Value of S&P Eligible Assets shall be reduced by an amount equal to
(i) 30% of the aggregate settlement value, as marked to market, of any
outstanding futures contracts based on the Municipal Index which are owned by
the Corporation plus (ii) 25% of the aggregate settlement value, as marked to
market, of any outstanding futures contracts based on Treasury Bonds which
contracts are owned by the Corporation.

         (b) For so long as any shares of AMPS are rated by Moody's, the
Corporation will not buy or sell futures contracts, write, purchase or sell
call options on futures contracts or purchase put options on futures contracts
or write call options (except covered call options) on portfolio securities
unless it receives written confirmation from Moody's that engaging in such
transactions would not impair the ratings then assigned to the shares of AMPS
by Moody's, except that the Corporation may purchase or sell exchange-traded
futures contracts based on the Municipal Index or Treasury Bonds and purchase,
write or sell exchange-traded put options on such futures contracts and
purchase, write or sell exchange-traded call options on such futures contracts
(collectively, "Moody's Hedging Transactions"), subject to the following
limitations:

               (i) the Corporation will not engage in any Moody's Hedging
          Transaction based on the Municipal Index (other than Closing
          Transactions) which would cause the Corporation at the time of such
          transaction to own or have sold (A) outstanding futures contracts
          based on the Municipal Index exceeding in number 10% of the average
          number of daily traded futures contracts based on the Municipal
          Index in the 30 days preceding the time of effecting such
          transaction as reported by The Wall Street Journal or (B)
          outstanding futures contracts based on the Municipal Index having a
          Market Value exceeding the Market Value of all Municipal Bonds
          constituting Moody's Eligible Assets owned by the Corporation (other
          than Moody's Eligible Assets already subject to a Moody's Hedging
          Transaction);

               (ii) the Corporation will not engage in any Moody's Hedging
          Transaction based on Treasury Bonds (other than Closing
          Transactions) which would cause the Corporation at the time of such
          transaction to own or have sold (A) outstanding futures contracts
          based on Treasury Bonds having an aggregate Market Value exceeding
          40% of the aggregate Market Value of Moody's Eligible Assets owned
          by the Corporation and rated Aa by Moody's (or, if not rated by
          Moody's but rated by S&P, rated AAA by S&P) or (B) outstanding
          futures contracts based on Treasury Bonds having an aggregate Market
          Value exceeding 80% of the aggregate Market Value of all Municipal
          Bonds constituting Moody's Eligible Assets owned by the Corporation
          (other than Moody's Eligible Assets already subject to a Moody's
          Hedging Transaction) and rated Baa or A by Moody's (or, if not rated
          by Moody's but rated by S&P, rated A or AA by S&P) (for purposes of
          the foregoing clauses (i) and (ii), the Corporation shall be deemed
          to own the number of futures contracts that underlie any outstanding
          options written by the Corporation);

               (iii) the Corporation will engage in Closing Transactions to
          close out any outstanding futures contract based on the Municipal
          Index if the amount of open interest in the Municipal Index as
          reported by The Wall Street Journal is less than 5,000;

               (iv) the Corporation will engage in a Closing Transaction to
          close out any outstanding futures contract by no later than the
          fifth Business Day of the month in which such contract expires and
          will engage in a Closing Transaction to close out any outstanding
          option on a futures contract by no later than the first Business Day
          of the month in which such option expires;

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

               (vi) the Corporation will not engage in options and futures
          transactions for leveraging or speculative purposes and will not
          write any call options or sell any futures contracts for the purpose
          of hedging the anticipated purchase of an asset prior to completion
          of such purchase; and

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

         For purposes of determining whether the Corporation has Moody's
Eligible Assets with an aggregate Discounted Value that equals or exceeds the
AMPS Basic Maintenance Amount, the Discounted Value of Moody's Eligible Assets
which the Corporation is obligated to deliver or receive pursuant to an
outstanding futures contract or option shall be as follows: (i) assets subject
to call options written by the Corporation which are either exchange-traded
and "readily reversible" or which expire within 49 days after the date as of
which such valuation is made shall be valued at the lesser of (a) Discounted
Value and (b) the exercise price of the call option written by the
Corporation; (ii) assets subject to call options written by the Corporation
not meeting the requirements of clause (i) of this sentence shall have no
value; (iii) assets subject to put options written by the Corporation shall be
valued at the lesser of (A) the exercise price and (B) the Discounted Value of
the subject security; (iv) futures contracts shall be valued at the lesser of
(A) settlement price and (B) the Discounted Value of the subject security,
provided that, if a contract matures within 49 days after the date as of which
such valuation is made, where the Corporation is the seller the contract may
be valued at the settlement price and where the Corporation is the buyer the
contract may be valued at the Discounted Value of the subject securities; and
(v) where delivery may be made to the Corporation with any security of a class
of securities, the Corporation shall assume that it will take delivery of the
security with the lowest Discounted Value.

         For purposes of determining whether the Corporation has Moody's
Eligible Assets with an aggregate Discounted Value that equals or exceeds the
AMPS Basic Maintenance Amount, the following amounts shall be subtracted from
the aggregate Discounted Value of the Moody's Eligible Assets held by the
Corporation: (i) 10% of the exercise price of a written call option; (ii) the
exercise price of any written put option; (iii) where the Corporation is the
seller under a futures contract, 10% of the settlement price of the futures
contract; (iv) where the Corporation is the purchaser under a futures
contract, the settlement price of assets purchased under such futures
contract; (v) the settlement price of the underlying futures contract if the
Corporation writes put options on a futures contract; and (vi) 105% of the
Market Value of the underlying futures contracts if the Corporation writes
call options on a futures contract and does not own the underlying contract.

         (c) For so long as any shares of AMPS are rated by Moody's, the
Corporation will not enter into any contract to purchase securities for a
fixed price at a future date beyond customary settlement time (other than such
contracts that constitute Moody's Hedging Transactions that are permitted
under paragraph 8(b) of these Articles Supplementary), except that the
Corporation may enter into such contracts to purchase newly-issued securities
on the date such securities are issued ("Forward Commitments"), subject to the
following limitations:

               (i) the Corporation will maintain in a segregated account with
          its custodian cash, cash equivalents or short-term, fixed-income
          securities rated P-1, MIG-1 or VMIG-1 by Moody's and maturing prior
          to the date of the Forward Commitment with a Market Value that
          equals or exceeds the amount of the Corporation's obligations under
          any Forward Commitments to which it is from time to time a party or
          long-term fixed income securities with a Discounted Value that
          equals or exceeds the amount of the Corporation's obligations under
          any Forward Commitment to which it is from time to time a party; and

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

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

         (d) For so long as shares of AMPS are rated by S&P or Moody's, the
Corporation will not, unless it has received written confirmation from S&P
and/or Moody's, as the case may be, that such action would not impair the
ratings then assigned to shares of AMPS by S&P and/or Moody's, as the case may
be, (i) borrow money except for the purpose of clearing transactions in
portfolio securities (which borrowings shall under any circumstances be
limited to the lesser of $10 million and an amount equal to 5% of the Market
Value of the Corporation's assets at the time of such borrowings and which
borrowings shall be repaid within 60 days and not be extended or renewed and
shall not cause the aggregate Discounted Value of Moody's Eligible Assets and
S&P Eligible Assets to be less than the AMPS Basic Maintenance Amount), (ii)
engage in short sales of securities, (iii) lend any securities, (iv) issue any
class or series of stock ranking prior to or on a parity with the AMPS with
respect to the payment of dividends or the distribution of assets upon
dissolution, liquidation or winding up of the Corporation, (v) reissue any
AMPS previously purchased or redeemed by the Corporation, (vi) merge or
consolidate into or with any other corporation or entity, (vii) change the
Pricing Service or (viii) engage in reverse repurchase agreements.

         (e) For so long as shares of AMPS are rated by Moody's, the
Corporation agrees to provide Moody's with the following, unless the
Corporation has received written confirmation from Moody's that the provision
of such information is no longer required and that the current rating then
assigned to the shares of AMPS by Moody's would not be impaired: a
notification letter at least 30 days prior to any material change in the
Charter; a copy of the AMPS Basic Maintenance Report prepared by the
Corporation in accordance with these Articles Supplementary; and a notice upon
the occurrence of any of the following events: (i) any failure by the
Corporation to declare or pay any dividends on the AMPS or successfully
remarket the AMPS; (ii) any mandatory or optional redemption of the AMPS
effected by the Corporation; (iii) any assumption of control of the Board of
Directors of the Corporation by the holders of the AMPS; (iv) a general
unavailability of dealer quotes on the assets of the Corporation; (v) any
material auditor discrepancies on valuations; (vi) the dividend rate on the
AMPS equals or exceeds 95% of the Aaa Composite Commercial Paper Rate; (vii)
the occurrence of any Special Dividend Period; (viii) any change in the
Maximum Applicable Rate or the Reference Rate; (ix) the acquisition by any
person of beneficial ownership of more than 5% of the Corporation's voting
stock (inclusive of Common Stock and Preferred Stock); (x) the occurrence of
any change in Internal Revenue Service rules with respect to the payment of
Additional Dividends; (xi) any change in the Pricing Service employed by the
Corporation; (xii) any change in the Investment Adviser; (xiii) any increase
of greater than 40% to the maximum marginal Federal income tax rate applicable
to individuals or corporations; and (xiv) the maximum marginal Federal income
tax rate applicable to individuals or corporations is increased to a rate in
excess of 50%.

         9. Notice. All notices or communications, unless otherwise specified
in the By-Laws of the Corporation or these Articles Supplementary, shall be
sufficiently given if in writing and delivered in person or mailed by
first-class mail, postage prepaid. Notice shall be deemed given on the earlier
of the date received or the date seven days after which such notice is mailed.

         10. Auction Procedures. (a) Certain definitions. As used in this
paragraph 10, the following terms shall have the following meanings, unless
the context otherwise requires:

               (i) "AMPS" means the shares of AMPS being auctioned pursuant to
          this paragraph 10.

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

               (iii) "Available AMPS" has the meaning specified in paragraph
          10(d)(i) below.

               (iv) "Bid" has the meaning specified in paragraph 10(b)(i)
          below.

               (v) "Bidder" has the meaning specified in paragraph 10(b)(i)
          below.

              (vi) "Hold Order" has the meaning specified in paragraph 10(b)(i)
          below.

              (vii) "Maximum Applicable Rate" for any Dividend Period will be
          the Applicable Percentage of the Reference Rate. The Applicable
          Percentage will be determined based on (i) the lower of the credit
          rating or ratings assigned on such date to such shares by Moody's
          and S&P (or if Moody's or S&P or both shall not make such rating
          available, the equivalent of either or both of such ratings by a
          Substitute Rating Agency or two Substitute Rating Agencies or, in
          the event that only one such rating shall be available, such rating)
          and (ii) whether the Corporation has provided notification to the
          Auction Agent prior to the Auction establishing the Applicable Rate
          for any dividend pursuant to paragraph 2(f) hereof that net capital
          gains or other taxable income will be included in such dividend on
          shares of AMPS as follows:


<TABLE>
<CAPTION>
                                                             Applicable         Applicable
                  Credit Ratings                             Percentage of      Percentage of
                                                             Reference          Reference
- ---------------------------------------------------          Rate -             Rate -
        Moody's                        S&P                   No Notification    No Notification
- -------------------------       -------------------          ---------------    ----------------

<S>                             <C>                                <C>                <C>
"aa3" or higher                 AA- or higher                       110%               150%
"a3" to "a1"                    A- to A+                            125%               160%
"baa3" to "baa1"                BBB- to BBB+                        150%               250%
Below "baa3"                    Below BBB-                          200%               275%
</TABLE>

         The Corporation shall take all reasonable action necessary to enable
S&P and Moody's to provide a rating for the AMPS. If either S&P or Moody's
shall not make such a rating available, or neither S&P nor Moody's shall make
such a rating available, Merrill Lynch, Pierce, Fenner & Smith Incorporated or
its affiliates and successors, after consultation with the Corporation, shall
select a nationally recognized statistical rating organization or two
nationally recognized statistical rating organizations to act as a Substitute
Rating Agency or Substitute Rating Agencies, as the case may be.

               (viii) "Order" has the meaning specified in paragraph 10(b)(i)
          below.

               (ix) "Sell Order" has the meaning specified in paragraph
          10(b)(i) below.

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

               (xi) "Submitted Bid" has the meaning specified in paragraph
          10(d)(i) below.

               (xii) "Submitted Hold Order" has the meaning specified in
          paragraph 10(d)(i) below.

               (xiii) "Submitted Order" has the meaning specified in paragraph
          10(d)(i) below.

               (xiv) "Submitted Sell Order" has the meaning specified in
          paragraph 10(d)(i) below.

               (xv) "Sufficient Clearing Bids" has the meaning specified in
          paragraph 10(d)(i) below.

               (xvi) "Winning Bid Rate" has the meaning specified in paragraph
          10(d)(i) below.

         (b) Orders by Beneficial Owners, Potential Beneficial Owners,
Existing Holders and Potential Holders.

               (i) Unless otherwise permitted by the Corporation, Beneficial
          Owners and Potential Beneficial Owners may only participate in
          Auctions through their Broker-Dealers. Broker-Dealers will submit
          the Orders of their respective customers who are Beneficial Owners
          and Potential Beneficial Owners to the Auction Agent, designating
          themselves as Existing Holders in respect of shares subject to
          Orders submitted or deemed submitted to them by Beneficial Owners
          and as Potential Holders in respect of shares subject to Orders
          submitted to them by Potential Beneficial Owners. A Broker-Dealer
          may also hold shares of AMPS in its own account as a Beneficial
          Owner. A Broker-Dealer may thus submit Orders to the Auction Agent
          as a Beneficial Owner or a Potential Beneficial Owner and therefore
          participate in an Auction as an Existing Holder or Potential Holder
          on behalf of both itself and its customers. On or prior to the
          Submission Deadline on each Auction Date:

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

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

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

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

                    (B) each Broker-Dealer, using a list of Potential
               Beneficial Owners that shall be maintained in good faith for
               the purpose of conducting a competitive Auction, shall contact
               Potential Beneficial Owners, including Persons that are not
               Beneficial Owners, on such list to determine the number of
               Outstanding shares, if any, of AMPS which each such Potential
               Beneficial Owner offers to purchase, provided that the
               Applicable Rate for the next succeeding Dividend Period shall
               not be less than the rate per annum specified by such Potential
               Beneficial Owner.

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

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

                         (1) the number of Outstanding shares of AMPS
                    specified in such Bid if the Applicable Rate determined on
                    such Auction Date shall be less than the rate per annum
                    specified in such Bid; or

                         (2) such number or a lesser number of Outstanding
                    shares of AMPS to be determined as set forth in paragraph
                    10(e)(i)(D) if the Applicable Rate determined on such
                    Auction Date shall be equal to the rate per annum
                    specified therein; or

                         (3) a lesser number of Outstanding shares of AMPS to
                    be determined as set forth in paragraph 10(e)(ii)(C) if
                    such specified rate per annum shall be higher than the
                    Maximum Applicable Rate and Sufficient Clearing Bids do
                    not exist.

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

                         (1) the number of Outstanding shares of AMPS
                    specified in such Sell Order; or

                         (2) such number or a lesser number of Outstanding
                    shares of AMPS to be determined as set forth in paragraph
                    10(e)(ii)(C) if Sufficient Clearing Bids do not exist.

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

                         (1) the number of Outstanding shares of AMPS
                    specified in such Bid if the Applicable Rate determined on
                    such Auction Date shall be higher than the rate per annum
                    specified in such Bid; or

                         (2) such number or a lesser number of Outstanding
                    shares of AMPS to be determined as set forth in paragraph
                    10(e)(i)(E) if the Applicable Rate determined on such
                    Auction Date shall be equal to the rate per annum
                    specified therein.

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

               (i) Each Broker-Dealer shall submit in writing or through the
          Auction Agent's Auction Processing System to the Auction Agent prior
          to the Submission Deadline on each Auction Date all Orders obtained
          by such Broker-Dealer, designating itself (unless otherwise
          permitted by the Corporation) as an Existing Holder in respect of
          shares subject to Orders submitted or deemed submitted to it by
          Beneficial Owners and as a Potential Holder in respect of shares
          subject to Orders submitted to it by Potential Beneficial Owners,
          and specifying with respect to each Order:

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

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

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

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

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

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

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

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

               (iii) If an Order or Orders covering all of the Outstanding
          shares of AMPS held by an Existing Holder are not submitted to the
          Auction Agent prior to the Submission Deadline, the Auction Agent
          shall deem a Hold Order (in the case of an Auction relating to a
          Dividend Period which is not a Special Dividend Period of 28 days or
          more) and a Sell Order (in the case of an Auction relating to a
          Special Dividend Period of 28 days or more) to have been submitted
          on behalf of such Existing Holder covering the number of Outstanding
          shares of AMPS held by such Existing Holder and not subject to
          Orders submitted to the Auction Agent.

               (iv) If one or more Orders on behalf of an Existing Holder
          covering in the aggregate more than the number of Outstanding shares
          of AMPS held by such Existing Holder are submitted to the Auction
          Agent, such Order shall be considered valid as follows and in the
          following order of priority:

                    (A) any Hold Order submitted on behalf of such Existing
               Holder shall be considered valid up to and including the number
               of Outstanding shares of AMPS held by such Existing Holder;
               provided that if more than one Hold Order is submitted on
               behalf of such Existing Holder and the number of shares of AMPS
               subject to such Hold Orders exceeds the number of Outstanding
               shares of AMPS held by such Existing Holder, the number of
               shares of AMPS subject to each of such Hold Orders shall be
               reduced pro rata so that such Hold Orders, in the aggregate,
               will cover exactly the number of Outstanding shares of AMPS
               held by such Existing Holder;

                    (B) any Bids submitted on behalf of such Existing Holder
               shall be considered valid, in the ascending order of their
               respective rates per annum if more than one Bid is submitted on
               behalf of such Existing Holder, up to and including the excess
               of the number of Outstanding shares of AMPS held by such
               Existing Holder over the number of shares of AMPS subject to
               any Hold Order referred to in paragraph 10(c)(iv)(A) above (and
               if more than one Bid submitted on behalf of such Existing
               Holder specifies the same rate per annum and together they
               cover more than the remaining number of shares that can be the
               subject of valid Bids after application of paragraph
               10(c)(iv)(A) above and of the foregoing portion of this
               paragraph 10(c)(iv)(B) to any Bid or Bids specifying a lower
               rate or rates per annum, the number of shares subject to each
               of such Bids shall be reduced pro rata so that such Bids, in
               the aggregate, cover exactly such remaining number of shares);
               and the number of shares, if any, subject to Bids not valid
               under this paragraph 10(c)(iv)(B) shall be treated as the
               subject of a Bid by a Potential Holder; and

                    (C) any Sell Order shall be considered valid up to and
               including the excess of the number of Outstanding shares of
               AMPS held by such Existing Holder over the number of shares of
               AMPS subject to Hold Orders referred to in paragraph
               10(c)(iv)(A) and Bids referred to in paragraph 10(c)(iv)(B);
               provided that if more than one Sell Order is submitted on
               behalf of any Existing Holder and the number of shares of AMPS
               subject to such Sell Orders is greater than such excess, the
               number of shares of AMPS subject to each of such Sell Orders
               shall be reduced pro rata so that such Sell Orders, in the
               aggregate, cover exactly the number of shares of AMPS equal to
               such excess.

               (v) If more than one Bid is submitted on behalf of any
          Potential Holder, each Bid submitted shall be a separate Bid with
          the rate per annum and number of shares of AMPS therein specified.

               (vi) Any Order submitted by a Beneficial Owner as a Potential
          Beneficial Owner to its Broker-Dealer, or by a Broker-Dealer to the
          Auction Agent, prior to the Submission Deadline on any Auction Date
          shall be irrevocable.

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

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

                    (A) the excess of the total number of Outstanding shares
               of AMPS over the number of Outstanding shares of AMPS that are
               the subject of Submitted Hold Orders (such excess being
               hereinafter referred to as the "Available AMPS");

                    (B) from the Submitted Orders whether the number of
               Outstanding shares of AMPS that are the subject of Submitted
               Bids by Potential Holders specifying one or more rates per
               annum equal to or lower than the Maximum Applicable Rate
               exceeds or is equal to the sum of:

                           (1) the number of Outstanding shares of AMPS that
                  are the subject of Submitted Bids by Existing Holders
                  specifying one or more rates per annum higher than the
                  Maximum Applicable Rate, and

                           (2) the number of Outstanding shares of AMPS that
                  are subject to Submitted Sell Orders (if such excess or such
                  equality exists (other than because the number of
                  Outstanding shares of AMPS in clause (1) above and this
                  clause (2) are each zero because all of the Outstanding
                  shares of AMPS are the subject of Submitted Hold Orders),
                  such Submitted Bids by Potential Holders being hereinafter
                  referred to collectively as "Sufficient Clearing Bids"); and

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

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

                         (2) each Submitted Bid from Potential Holders
                    specifying the Winning Bid Rate and all other Submitted
                    Bids from Potential Holders specifying lower rates per
                    annum were accepted, thus entitling the Potential Holders
                    to purchase the shares of AMPS that are the subject of
                    such Submitted Bids,

would result in the number of shares subject to all Submitted Bids specifying
the Winning Bid Rate or a lower rate per annum being at least equal to the
Available AMPS.

     (ii) Promptly after the Auction Agent has made the determinations
pursuant to paragraph 10(d)(i), the Auction Agent shall advise the Corporation
of the Maximum Applicable Rate and, based on such determinations, the
Applicable Rate for the next succeeding Dividend Period as follows:

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

                    (B) if Sufficient Clearing Bids do not exist (other than
               because all of the Outstanding shares of AMPS are the subject
               of Submitted Hold Orders), that the Applicable Rate for the
               next succeeding Dividend Period shall be equal to the Maximum
               Applicable Rate; or

                    (C) if all of the Outstanding shares of AMPS are the
               subject of Submitted Hold Orders, that the Dividend Period next
               succeeding the Auction shall automatically be the same length
               as the immediately preceding Dividend Period and the Applicable
               Rate for the next succeeding Dividend Period shall be equal to
               40% of the Reference Rate (or 60% of such rate if the
               Corporation has provided notification to the Auction Agent
               prior to the Auction establishing the Applicable Rate for any
               dividend pursuant to paragraph 2(f) hereof that net capital
               gains or other taxable income will be included in such dividend
               on shares of AMPS) on the date of the Auction.

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

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

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

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

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

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

                    (D) the Submitted Bid of each of the Existing Holders
               specifying a rate per annum that is equal to the Winning Bid
               Rate shall be rejected, thus entitling each such Existing
               Holder to continue to hold the Outstanding shares of AMPS that
               are the subject of such Submitted Bid, unless the number of
               Outstanding shares of AMPS subject to all such Submitted Bids
               shall be greater than the number of Outstanding shares of AMPS
               ("Remaining Shares") equal to the excess of the Available AMPS
               over the number of Outstanding shares of AMPS subject to
               Submitted Bids described in paragraph 10(e)(i)(B) and paragraph
               10(e)(i)(C), in which event the Submitted Bids of each such
               Existing Holder shall be accepted, and each such Existing
               Holder shall be required to sell Outstanding shares of AMPS,
               but only in an amount equal to the difference between (1) the
               number of Outstanding shares of AMPS then held by such Existing
               Holder subject to such Submitted Bid and (2) the number of
               shares of AMPS obtained by multiplying (x) the number of
               Remaining Shares by (y) a fraction the numerator of which shall
               be the number of Outstanding shares of AMPS held by such
               Existing Holder subject to such Submitted Bid and the
               denominator of which shall be the sum of the number of
               Outstanding shares of AMPS subject to such Submitted Bids made
               by all such Existing Holders that specified a rate per annum
               equal to the Winning Bid Rate; and

                    (E) the Submitted Bid of each of the Potential Holders
               specifying a rate per annum that is equal to the Winning Bid
               Rate shall be accepted but only in an amount equal to the
               number of Outstanding shares of AMPS obtained by multiplying
               (x) the difference between the Available AMPS and the number of
               Outstanding shares of AMPS subject to Submitted Bids described
               in paragraph 10(e)(i)(B), paragraph 10(e)(i)(C) and paragraph
               10(e)(i)(D) by (y) a fraction the numerator of which shall be
               the number of Outstanding shares of AMPS subject to such
               Submitted Bid and the denominator of which shall be the sum of
               the number of Outstanding shares of AMPS subject to such
               Submitted Bids made by all such Potential Holders that
               specified rates per annum equal to the Winning Bid Rate.

          (ii) If Sufficient Clearing Bids have not been made (other than
     because all of the Outstanding shares of AMPS are subject to Submitted
     Hold Orders), subject to the provisions of paragraph 10(e)(iii),
     Submitted Orders shall be accepted or rejected as follows in the
     following order of priority and all other Submitted Bids shall be
     rejected:

                    (A) the Submitted Bid of each Existing Holder specifying
               any rate per annum that is equal to or lower than the Maximum
               Applicable Rate shall be rejected, thus entitling such Existing
               Holder to continue to hold the Outstanding shares of AMPS that
               are the subject of such Submitted Bid;

                    (B) the Submitted Bid of each Potential Holder specifying
               any rate per annum that is equal to or lower than the Maximum
               Applicable Rate shall be accepted, thus requiring such
               Potential Holder to purchase the Outstanding shares of AMPS
               that are the subject of such Submitted Bid; and

                    (C) the Submitted Bids of each Existing Holder specifying
               any rate per annum that is higher than the Maximum Applicable
               Rate shall be accepted and the Submitted Sell Orders of each
               Existing Holder shall be accepted, in both cases only in an
               amount equal to the difference between (1) the number of
               Outstanding shares of AMPS then held by such Existing Holder
               subject to such Submitted Bid or Submitted Sell Order and (2)
               the number of shares of AMPS obtained by multiplying (x) the
               difference between the Available AMPS and the aggregate number
               of Outstanding shares of AMPS subject to Submitted Bids
               described in paragraph 10(e)(ii)(A) and paragraph 10(e)(ii)(B)
               by (y) a fraction the numerator of which shall be the number of
               Outstanding shares of AMPS held by such Existing Holder subject
               to such Submitted Bid or Submitted Sell Order and the
               denominator of which shall be the number of Outstanding shares
               of AMPS subject to all such Submitted Bids and Submitted Sell
               Orders.

          (iii) If, as a result of the procedures described in paragraph
     10(e)(i) or paragraph 10(e)(ii), any Existing Holder would be entitled or
     required to sell, or any Potential Holder would be entitled or required
     to purchase, a fraction of a share of AMPS on any Auction Date, the
     Auction Agent shall, in such manner as in its sole discretion it shall
     determine, round up or down the number of shares of AMPS to be purchased
     or sold by any Existing Holder or Potential Holder on such Auction Date
     so that each Outstanding share of AMPS purchased or sold by each Existing
     Holder or Potential Holder on such Auction Date shall be a whole share of
     AMPS.

          (iv) If, as a result of the procedures described in paragraph
     10(e)(i), any Potential Holder would be entitled or required to purchase
     less than a whole share of AMPS on any Auction Date, the Auction Agent
     shall, in such manner as in its sole discretion it shall determine,
     allocate shares of AMPS for purchase among Potential Holders so that only
     whole shares of AMPS are purchased on such Auction Date by any Potential
     Holder, even if such allocation results in one or more of such Potential
     Holders not purchasing any shares of AMPS on such Auction Date.

          (v) Based on the results of each Auction, the Auction Agent shall
     determine, with respect to each Broker-Dealer that submitted Bids or Sell
     Orders on behalf of Existing Holders or Potential Holders, the aggregate
     number of Outstanding shares of AMPS to be purchased and the aggregate
     number of the Outstanding shares of AMPS to be sold by such Potential
     Holders and Existing Holders and, to the extent that such aggregate
     number of Outstanding shares to be purchased and such aggregate number of
     Outstanding shares to be sold differ, the Auction Agent shall determine
     to which other Broker-Dealer or Broker-Dealers acting for one or more
     purchasers such Broker-Dealer shall deliver, or from which other
     Broker-Dealer or Broker-Dealers acting for one or more sellers such
     Broker-Dealer shall receive, as the case may be, Outstanding shares of
     AMPS.

         (f) Miscellaneous. The Corporation may interpret the provisions of
this paragraph 10 to resolve any inconsistency or ambiguity, remedy any formal
defect or make any other change or modification that does not substantially
adversely affect the rights of Beneficial Owners of AMPS. A Beneficial Owner
or an Existing Holder (A) may sell, transfer or otherwise dispose of shares of
AMPS only pursuant to a Bid or Sell Order in accordance with the procedures
described in this paragraph 10 or to or through a Broker-Dealer, provided that
in the case of all transfers other than pursuant to Auctions such Beneficial
Owner or Existing Holder, its Broker-Dealer, if applicable, or its Agent
Member advises the Auction Agent of such transfer and (B) except as otherwise
required by law, shall have the ownership of the shares of AMPS held by it
maintained in book entry form by the Securities Depository in the account of
its Agent Member, which in turn will maintain records of such Beneficial
Owner's beneficial ownership. Neither the Corporation nor any Affiliate shall
submit an Order in any Auction. Any Beneficial Owner that is an Affiliate
shall not sell, transfer or otherwise dispose of shares of AMPS to any Person
other than the Corporation. All of the Outstanding shares of 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 Corporation's option and upon its receipt of such documents
as it deems appropriate, any shares of AMPS may be registered in the Stock
Register in the name of the Beneficial Owner thereof and such Beneficial Owner
thereupon will be entitled to receive certificates therefor and required to
deliver certificates therefor upon transfer or exchange thereof.

         11. Securities Depository; Stock Certificates. (a) If there is a
Securities Depository, one certificate for all of the shares of AMPS shall be
issued to the Securities Depository and registered in the name of the
Securities Depository or its nominee. Additional certificates may be issued as
necessary to represent shares of AMPS. All such certificates shall bear a
legend to the effect that such certificates are issued subject to the
provisions restricting the transfer of shares of AMPS contained in these
Articles Supplementary. Unless the Corporation shall have elected, during a
Non-Payment Period, to waive this requirement, the Corporation will also issue
stop-transfer instructions to the Auction Agent for the shares of AMPS. Except
as provided in paragraph (b) below, the Securities Depository or its nominee
will be the Holder, and no Beneficial Owner shall receive certificates
representing its ownership interest in such shares.

         (b) If the Applicable Rate applicable to all shares of AMPS shall be
the Non-Payment Period Rate or there is no Securities Depository, the
Corporation may at its option issue one or more new certificates with respect
to such shares (without the legend referred to in paragraph 11(a)) registered
in the names of the Beneficial Owners or their nominees and rescind the
stop-transfer instructions referred to in paragraph 11(a) with respect to such
shares.


<PAGE>



         IN WITNESS WHEREOF, MUNIYIELD FUND, INC. has caused these presents to
be signed in its name and on its behalf by a duly authorized officer, and
attested by its Secretary, and the said officers of the Corporation further
acknowledge said instrument to be the corporate act of the Corporation, and
state under the penalties of perjury that to the best of their knowledge,
information and belief the matters and facts herein set forth with respect to
approval are true in all material respects, all on ____________, 200__.

                                      MUNIYIELD FUND, INC.



                                      By
                                          -----------------------------------
                                             Terry K. Glenn
                                             President
Attest:


- ------------------------------
Alice A. Pellegrino
Secretary


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-2
<SEQUENCE>9
<FILENAME>efc1-0727_843579ex2.txt
<DESCRIPTION>BY-LAWS OF THE REGISTRANT
<TEXT>

                                                                 Exhibit 2


                                                As Amended on November 5, 1991

                                    BY-LAWS

                                      OF

                             MUNIYIELD FUND, INC.

                                  ARTICLE I
                                    Offices

         Section 1. Principal office. The principal office of the Corporation
shall be in the City of Baltimore, State of Maryland.

         Section 2. Principal Executive Office. The principal executive office
of the Corporation shall be at 800 Scudders Mill Road, Plainsboro, New Jersey
08536.

         Section 3. Other Offices. The Corporation may have such other offices
in such places as the Board of Directors may from time to time determine.

                                  ARTICLE II
                           Meetings of Stockholders

         Section 1. Annual Meeting. The annual meeting of the stockholders of
the Corporation for the election of directors and for the transaction of such
other business as may properly be brought before the meeting shall be held on
such day in May of each year as shall be designated annually by the Board of
Directors.

         Section 2. Special Meetings. Special meetings of the stockholders,
unless otherwise provided by law or by the Charter, may be called for any
purpose or purposes by a majority of the Board of Directors, the President, or
on the written request of the holders of the outstanding shares of capital
stock of the Corporation entitled to vote at such meeting to the extent
permitted by Maryland law.

         Section 3. Place of Meetings. The annual meeting and any special
meeting of the stockholders shall be held at such place within the United
States as the Board of Directors may from time to time determine.

         Section 4. Notice of Meetings; Waiver of Notice. Notice of the place,
date and time of the holding of each annual and special meeting of the
stockholders and the purpose or purposes of each special meeting shall be
given personally or by mail, not less than ten nor more than ninety days
before the date of such meeting, to each stockholder entitled to vote at such
meeting and to each other stockholder entitled to notice of the meeting.
Notice by mail shall be deemed to be duly given when deposited in the United
States mail addressed to the stockholder at his address as it appears on the
records of the Corporation, with postage thereon prepaid.

         Notice of any meeting of stockholders shall be deemed waived by any
stockholder who shall attend such meeting in person or by proxy, or who shall,
either before or after the meeting, submit a signed waiver of notice which is
filed with the records of the meeting. When a meeting is adjourned to another
time and place, unless the Board of Directors, after the adjournment, shall
fix a new record date for an adjourned meeting, or the adjournment is for more
than one hundred and twenty days after the original record date, notice of
such adjourned meeting need not be given if the time and place to which the
meeting shall be adjourned were announced at the meeting at which the
adjournment is taken.

         Section 5. Quorum. At all meetings of the stockholders, the holders
of a majority of the shares of stock of the Corporation entitled to vote at
the meeting, present in person or by proxy, shall constitute a quorum for the
transaction of any business, except as otherwise provided by statute or by the
Charter. In the absence of a quorum no business may be transacted, except that
the holders of a majority of the shares of stock present in person or by proxy
and entitled to vote may adjourn the meeting from time to time, without notice
other than announcement thereat except as otherwise required by these By-Laws,
until the holders of the requisite amount of shares of stock shall be so
present. At any such adjourned meeting at which a quorum may be present any
business may be transacted which might have been transacted at the meeting as
originally called. The absence from any meeting, in person or by proxy, of
holders of the number of shares of stock of the Corporation in excess of a
majority thereof which may be required by the laws of the State of Maryland,
the Investment Company Act of 1940, as amended, or other applicable statute,
the Charter, or these By-Laws, for action upon any given matter shall not
prevent action at such meeting upon any other matter or matters which may
properly come before the meeting, if there shall be present thereat, in person
or by proxy, holders of the number of shares of stock of the Corporation
required for action in respect of such other matter or matters.

         Section 6. Organization. At each meeting of the stockholders, the
Chairman of the Board (if one has been designated by the Board), or in his
absence or inability to act, the President, or in the absence or inability to
act of the Chairman of the Board and the President, a Vice President, shall
act as chairman of the meeting. The Secretary, or in his absence or inability
to act, any person appointed by the chairman of the meeting, shall act as
secretary of the meeting and keep the minutes thereof.

         Section 7. Order of Business. The order of business at all meetings
of the stockholders shall be as determined by the chairman of the meeting.

         Section 8. Voting. Except as otherwise provided by statute or the
Charter, each holder of record of shares of stock of the Corporation having
voting power shall be entitled at each meeting of the stockholders to one vote
for every share of such stock standing in his name on the record of
stockholders of the Corporation as of the record date determined pursuant to
Section 9 of this Article or if such record date shall not have been so fixed,
then at the later of (i) the close of business on the day on which notice of
the meeting is mailed or (ii) the thirtieth day before the meeting.

         Each stockholder entitled to vote at any meeting of stockholders may
authorize another person or persons to act for him by a proxy signed by such
stockholder or his attorney-in-fact. No proxy shall be valid after the
expiration of eleven months from the date thereof, unless otherwise provided
in the proxy. Every proxy shall be revocable at the pleasure of the
stockholder executing it, except in those cases where such proxy states that
it is irrevocable and where an irrevocable proxy is permitted by law. Except
as otherwise provided by statute, the Charter or these By-Laws, any corporate
action to be taken by vote of the stockholders shall be authorized by a
majority of the total votes cast at a meeting of stockholders by the holders
of shares present in person or represented by proxy and entitled to vote on
such action.

         If a vote shall be taken on any question other than the election of
directors, which shall be by written ballot, then unless required by statute
or these By-Laws, or determined by the chairman of the meeting to be
advisable, any such vote need not be by ballot. On a vote by ballot, each
ballot shall besigned by the stockholder voting, or by his proxy, if there be
such proxy, and shall state the number of shares voted.

         Section 9. Fixing of Record Date. The Board of Directors may set a
record date for the purpose of determining stockholders entitled to vote at
any meeting of the stockholders. The record date, which may not be prior to
the close of business on the day the record date is fixed, shall be not more
than ninety nor less than ten days before the date of the meeting of the
stockholders. All persons who were holders of record of shares at such time,
and not others, shall be entitled to vote at such meeting and any adjournment
thereof.

         Section 10. Inspectors. The Board may, in advance of any meeting of
stockholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If the inspectors shall not be so appointed or if any of
them shall fail to appear or act, the chairman of the meeting may, and on the
request of any stockholder entitled to vote thereat shall, appoint inspectors.
Each inspector, before entering upon the discharge of his duties, shall take
and sign an oath to execute faithfully the duties of inspector at such meeting
with strict impartiality and according, to the best of his ability. The
inspectors shall determine the number of shares outstanding and the voting
powers of each, the number of shares represented at the meeting, the existence
of a quorum, the validity and effect of proxies, and shall receive votes,
ballots or consents, hear and determine all challenges and questions arising
in connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all stockholders. On request of the chairman
of the meeting or any stockholder entitled to vote thereat, the inspectors
shall make a report in writing of any challenge, request or matter determined
by them and shall execute a certificate of any fact found by them. No director
or candidate for the office of director shall act as inspector of an election
of directors. Inspectors need not be stockholders.

         Section 11. Consent of Stockholders in Lieu of Meeting. Except as
otherwise provided by statute or the Charter, any action required to be taken
at any annual or special meeting of stockholders, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if the following
are filed with the records of stockholders meetings: (i) a unanimous written
consent which sets forth the action and is signed by each stockholder entitled
to vote on the matter and (ii) a written waiver of any right to dissent signed
by each, stockholder entitled to notice of the meeting but not entitled to
vote thereat.

                                 ARTICLE III
                              Board of Directors

         Section 1. General Powers. Except as otherwise provided in the
Charter, the business and affairs of the Corporation shall be managed under
the direction of the Board of Directors. All powers of the Corporation may be
exercised by or under authority of the Board of Directors except as conferred
on or reserved to the stockholders by law or by the Charter or these By-Laws.

         Section 2. Number of Directors. The number of directors shall be
fixed from time to time by resolution of the Board of Directors adopted by a
majority of the Directors then in office; provided, however, that the number
of directors shall in no event be less than three nor more than fifteen. Any
vacancy created by an increase in Directors may be filled in accordance with
Section 6 of this Article III. No reduction in the number of directors shall
have the effect of removing any director from office prior to the expiration
of his term unless such director is specifically removed pursuant to Section 5
of this Article III at the time of such decrease. Directors need not be
stockholders. As long as any preferred stock of the Corporation is
outstanding, the number of Directors shall be not less than five.

         Section 3. Election and Term of Directors. Directors shall be elected
annually, by written ballot at the annual meeting of stockholders, or a
special meeting held for that purpose. The term of office of each director
shall be from the time of his election and qualification until the annual
election of directors next succeeding his election and until his successor
shall have been elected and shall have qualified, or until his death, or until
he shall have resigned, or have been removed as hereinafter provided in these
By-Laws, or as otherwise provided by statute or the Charter.

         Section 4. Resignation. A director of the Corporation may resign at
any time by giving written notice of his resignation to the Board or the
Chairman of the Board or the President or the Secretary. Any such resignation
shall take effect at the time specified therein or, if the time when it shall
become effective shall not be specified therein, immediately upon its receipt;
and, unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.

         Section 5. Removal of Directors. Any director of the Corporation may
be removed (with or without cause) by the stockholders by a vote of sixty-six
and two-thirds percent (66 2/3%) of the outstanding shares of capital stock
then entitled to vote in the election of such director.

         Section 6. Vacancies. Subject to the provisions of the Investment
Company Act of 1940, as amended, any vacancies in the Board, whether arising
from death, resignation, removal, an increase in the number of directors or
any other cause, shall be filled by a vote of the Board of Directors in
accordance with the Charter.

         Section 7. Place of Meetings. Meetings of the Board may be held at
such place as the Board may from time to time determine or as shall be
specified in the notice of such meeting.

         Section 8. Regular Meeting. Regular meetings of the Board may be held
without notice at such time and place as may be determined by the Board of
Directors.

         Section 9. Special Meetings. Special meetings of the Board may be
called by two or more directors of the Corporation or by the Chairman of the
Board or the President.

         Section 10. Telephone Meetings. Members of the Board of Directors or
of any committee thereof may participate in a meeting by means of a conference
telephone or similar communications equipment if all persons participating in
the meeting can hear each other at the same time. Subject to the provisions of
the Investment Company Act of 1940, as amended, participation in a meeting by
these means constitutes presence in person at the meeting.

         Section 11. Notice of Special Meetings. Notice of each special
meeting of the Board shall be given by the Secretary as hereinafter provided,
in which notice shall be stated the time and place of the meeting. Notice of
each such meeting shall be delivered to each director, either personally or by
telephone or any standard form of telecommunication, at least twenty-four
hours before the time at which such meeting is to be held, or by first-class
mail, postage prepaid, addressed to him at his residence or usual place of
business, at least three days before the day on which such meeting is to be
held.

         Section 12. Waiver of Notice of Meetings. Notice of any special
meeting need not be given to any director who shall, either before or after
the meeting, sign a written waiver of notice which is filed with the records
of the meeting or who shall attend such meeting. Except as otherwise
specifically required by these By-Laws, a notice or waiver or notice of any
meeting need not state the purposes of such meeting.

         Section 13. Quorum and Voting. One-third, but not less than two, of
the members of the entire Board shall be present in person at any meeting of
the Board in order to constitute a quorum for the transaction of business at
such meeting, and except as otherwise expressly required by statute, the
Charter, these By-Laws, the Investment Company Act of 1940, as amended, or
other applicable statute, the act of a majority of the directors present at
any meeting at which a quorum is present shall be the act of the Board. In the
absence of a quorum at any meeting of the Board, a majority of the directors
present thereat may adjourn such meeting to another time and place until a
quorum shall be present thereat. Notice of the time and place of any such
adjourned meeting shall be given to the directors who were not present at the
time of the adjournment and, unless such time and place were announced at the
meeting at which the adjournment was taken, to the other directors. At any
adjourned meeting at which a quorum is present, any business may be transacted
which might have been transacted at the meeting as originally called.

         Section 14. Organization. The Board may, by resolution adopted by a
majority of the entire Board, designate a Chairman of the Board, who shall
preside at each meeting of the Board. In the absence or inability of the
Chairman of the Board to preside at a meeting, the President or, in his
absence of inability to act, another director chosen by a majority of the
directors present, shall act as chairman of the meeting and preside thereat.
The Secretary (or, in his absence or inability to act, any person appointed by
the Chairman) shall act as secretary of the meeting and keep the minutes
thereof.

         Section 15. Written Consent of Directors in Lieu of a Meeting.
Subject to the provisions of the Investment Company Act of 1940, as amended,
any action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a meeting if all
members of the Board or committee, as the case may be, consent thereto in
writing, and the writings or writing are filed with the minutes of the
proceedings of the Board or committee.

         Section 16. Compensation. Directors may receive compensation for
services to the Corporation in their capacities as directors or otherwise in
such manner and in such amounts as may be fixed from time to time by the
Board.

         Section 17. Investment Policies. It shall be the duty of the Board of
Directors to direct that the purchase, sale, retention and disposal of
portfolio securities and the other investment practices of the Corporation are
at all times consistent with the investment policies and restrictions with
respect to securities investments and otherwise of the Corporation, as recited
in the Prospectus of the Corporation included in the registration statement of
the Corporation relating to the initial public offering of its capital stock,
as filed with the Securities and Exchange Commission (or as such investment
policies and restrictions may be modified by the Board of Directors, or, if
required, by majority vote of the stockholders of the Corporation in
accordance with the Investment Company Act of 1940, as amended) and as
required by the Investment Company Act of 1940, as amended. The Board however,
may delegate the duty of management of the assets and the administration of
its day to day operations to an individual or corporate management company
and/or investment adviser pursuant to a written contract or contracts which
have obtained the requisite approvals, including the requisite approvals of
renewals thereof, of the Board of Directors and/or the stockholders of the
Corporation in accordance with the provisions of the Investment Company Act of
1940, as amended.

                                  ARTICLE IV
                                  Committees

         Section 1. Executive Committee. The Board may, by resolution adopted
by a majority of the entire board, designate an Executive Committee consisting
of two or more of the directors of the Corporation, which committee shall have
and may exercise all the powers and authority of the Board with respect to all
matters other than:

         (a) the submission to stockholders of any action requiring
authorization of stockholders pursuant to statute or the Charter;

         (b) the filling of vacancies on the Board of Directors;

         (c) the fixing of compensation of the directors for serving on the
Board or on any committee of the Board, including the Executive Committee;

         (d) the approval or termination of any contract with an investment
adviser or principal underwriter, as such terms are defined in the Investment
Company Act of 1940, as amended, or the taking of any other action required to
be taken by the Board of Directors by the Investment Company Act of 1940, as
amended;

         (e) the amendment or repeal of these By-Laws or the adoption of new
By-Laws;

         (f) the amendment or repeal of any resolution of the Board which by
its terms may be amended or repealed only by the Board;

         (g) the declaration of dividends and the issuance of capital stock of
the Corporation; and

         (h) the approval of any merger or share exchange which does not
require stockholder approval.

         The Executive Committee shall keep written minutes of its proceedings
and shall report such minutes to the Board. All such proceedings shall be
subject to revision or alteration by the Board; provided, however, that third
parties shall not be prejudiced by such revision or alteration.

         Section 2. Other Committees of the Board. The Board of Directors may
from time to time, by resolution adopted by a majority of the whole Board,
designate one or more other committees of the Board, each such committee to
consist of two or more directors and to have such powers and duties as the
Board of Directors may, by resolution, prescribe.

         Section 3. General. One-third, but not less than two, of the members
of any committee shall be present in person at any meeting of such committee
in order to constitute a quorum for the transaction of business at such
meeting, and the act of a majority present shall be the act of such committee.
The Board may designate a chairman of any committee and such chairman or any
two members of any committee may fix the time and place of its meetings unless
the Board shall otherwise provide. In the absence or disqualification of any
member of any committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to
act at the meeting in the place of any such absent or disqualified member. The
Board shall have the power at any time to change the membership of any
committee, to fill all vacancies, to designate alternate members to replace
any absent or disqualified member, or to dissolve any such committee. Nothing
herein shall be deemed to prevent the Board from appointing one or more
committees consisting in whole or in part of persons who are not directors of
the Corporation; provided, however, that no such committee shall have or may
exercise any authority or power of the Board in the management of the business
or affairs of the Corporation.

                                  ARTICLE V
                        Officers, Agents and Employees

         Section 1. Number of Qualifications. The officers of the Corporation
shall be a President, who shall be a director of the Corporation, a Secretary
and a Treasurer, each of whom shall be elected by the Board of Directors. The
Board of Directors may elect or appoint one or more Vice Presidents and may
also appoint such other officers, agents and employees as it may deem
necessary or proper. Any two or more offices may be held by the same person,
except the offices of President and Vice President, but no officer shall
execute, acknowledge or verify any instrument in more than one capacity. Such
officers shall be elected by the Board of Directors each year at its first
meeting held after the annual meeting of stockholders, each to hold office
until the next meeting of the stockholders and until his successor shall have
been duly elected and shall have qualified, or until his death, or until he
shall have resigned, or have been removed, as hereinafter provided in these
By-Laws. The Board may from time to time elect, or delegate to the President
the power to appoint, such officers (including one or more Assistant Vice
Presidents, one or more Assistant Treasurers and one or more Assistant
Secretaries) and such agents, as may be necessary or desirable for the
business of the Corporation. Such officers and agents shall have such duties
and shall hold their offices for such terms as may be prescribed by the Board
or by the appointing authority.

         Section 2. Resignations. Any officer of the Corporation may resign at
any time by giving written notice of resignation to the Board, the Chairman of
the Board, President or the Secretary. Any such resignation shall take effect
at the time specified therein or, if the time when it shall become effective
shall not be specified therein, immediately upon its receipt; and, unless
otherwise specified therein, the acceptance of such resignation shall be
necessary to make it effective.

         Section 3. Removal of Officer, Agent or Employee. Any officer, agent
or employee of the Corporation may be removed by the Board of Directors with
or without cause at any time, and the Board may delegate such power of removal
as to agents and employees not elected or appointed by the Board of Directors.
Such removal shall be without prejudice to such person's contract rights, if
any, but the appointment of any person as an officer, agent or employee of the
Corporation shall not of itself create contract rights.

         Section 4. Vacancies. A vacancy in any office, whether arising from
death, resignation, removal or any other cause, may be filled for the
unexpired portion of the term of the office which shall be vacant, in the
manner prescribed in these By-Laws for the regular election or appointment to
such office.

         Section 5. Compensation. The compensation of the officers of the
Corporation shall be fixed by the Board of Directors, but this power may be
delegated to any officer in respect of other officers under his control.

         Section 6. Bonds or Other Security. If required by the Board, any
officer, agent or employee of the Corporation shall give a bond or other
security for the faithful performance of his duties, in such amount and with
such surety or sureties as the Board may require.

         Section 7. President. The President shall be the chief executive
officer of the Corporation. In the absence of the Chairman of the Board (or if
there be none), he shall preside at all meetings of the stockholders and of
the Board of Directors. He shall have, subject to the control of the Board of
Directors, general charge of the business and affairs of the Corporation. He
may employ and discharge employees and agents of the corporation, except such
as shall be appointed by the Board, and he may delegate these powers.

         Section 8. Vice President. Each Vice President shall have such powers
and perform such duties as the Board of Directors or the President may from
time to time prescribe.

         Section 9. Treasurer. The Treasurer shall:

         (a) have charge and custody of, and be responsible for, all the funds
and securities of the Corporation, except those which the Corporation has
placed in the custody of a bank or trust company or member of a national
securities exchange (as that term is defined in the Securities Exchange Act of
1934, as amended) pursuant to a written agreement designating such bank or
trust company or member of a national securities exchange as custodian of the
property of the corporation;

         (b) keep full and accurate accounts of receipts and disbursements in
books belonging to the Corporation;

         (c) cause all moneys and other valuables to be deposited to the
credit of the Corporation;

         (d) receive, and give receipts for, moneys due and payable, to the
Corporation from any source whatsoever;

         (e) disburse the funds of the Corporation and supervise the
investment of its funds as ordered or authorized by the Board, taking proper
vouchers therefor; and

         (f) in general, perform all the duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him by
the Board or the President.

         Section 10. Secretary. The Secretary shall:

         (a) keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of the Board, the committees of the Board
and the stockholders;

         (b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;

         (c) be custodian of the records and the seal of the Corporation and
affix and attest the seal to all stock certificates of the Corporation (unless
the seal of the Corporation on such certificates shall be a facsimile, as
hereinafter provided) and affix and attest the seal to all other documents to
be executed on behalf of the Corporation under its seal;

         (d) see that the books, reports, statements, certificates and other
documents and records required by law to be kept and filed are properly kept
and filed; and

         (e) in general, perform all the duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the Board or the President.

         Section 11. Delegation of Duties. In case of the absence of any
officer of the Corporation, or for any other reason that the Board may deem
sufficient, the Board may confer for the time being the powers or duties, or
any of them, of such officer upon any other officer or upon any director.

                                  ARTICLE VI
                                Indemnification

         Each officer and director of the Corporation shall be indemnified by
the Corporation to the full extent permitted under the General Laws of the
State of Maryland, except that such indemnity shall not protect any such
person against any liability to the Corporation or any stockholder thereof to
which such person would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in
the conduct of his office. Absent a court determination that an officer or
director seeking indemnification was not liable on the merits or guilty of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office, the decision by the Corporation
to indemnify such person must be based upon the reasonable determination of
independent counsel or non-party independent directors, after review of the
facts, that such officer or director is not guilty of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office.

         The Corporation may purchase insurance on behalf of an officer or
director protecting such person to the full extent permitted under the General
Laws of the State of Maryland, from liability arising from his activities as
officer or director of the Corporation. The Corporation, however, may not
purchase insurance on behalf of any officer or director of the Corporation
that protects or purports to protect such person from liability to the
Corporation or to its stockholders to which such officer or director would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.

         The Corporation may indemnify or purchase insurance to the extent
provided in this Article VI on behalf of an employee or agent who is not an
officer or director of the Corporation.

                                 ARTICLE VII
                                 Capital Stock

         Section 1. Stock Certificates. Each holder of stock of the
Corporation shall be entitled upon request to have a certificate or
certificates, in such form as shall be approved by the Board, representing the
number of shares of stock of the Corporation owned by him, provided, however,
that certificates for fractional shares will not be delivered in any case. The
certificates ;representing shares of stock shall be signed by or in the name
of the Corporation by the President or a Vice President and by the Secretary
or an Assistant Secretary or the Treasurer or an Assistant Treasurer and
sealed with the seal of the Corporation. Any or all of the signatures or the
seal on the certificate may be a facsimile. In case any officer, transfer
agent or registrar who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer, transfer agent or
registrar before such certificate shall be issued, it may be issued by the
Corporation with the same effect as if such officer, transfer agent or
registrar were still in office at the date of issue.

         Section 2. Books of Account and Record of Stockholders. There shall
be kept at the principal executive office of the Corporation correct and
complete books and records of account of all the business and transactions of
the Corporation. There shall be made available upon request of any
stockholder, in accordance with Maryland law, a record containing the number
of shares of stock issued during a specified period not to exceed twelve
months and the consideration received by the Corporation for each such share.

         Section 3. Transfers of Shares. Transfers of shares of stock of the
Corporation shall be made on the stock records of the Corporation only by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary or with a transfer agent
or transfer clerk, and on surrender of the certificate or certificates, if
issued, for such shares properly endorsed or accompanied by a duly executed
stock transfer power and the payment of all taxes thereon. Except as otherwise
provided by law, the Corporation shall be entitled to recognize the exclusive
right of a person in whose name any share or shares stand on the record of
stockholders as the owner of such share or shares for all purposes, including,
without limitation, the rights to receive dividends or other distributions,
and to vote as such owner, and the Corporation shall not be bound to recognize
any equitable or legal claim to or interest in any such share or shares on the
part of any other person.

         Section 4. Regulations. The Board may make such additional rules and
regulations, not inconsistent with these By-Laws, as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation. It may appoint, or authorize any officer or officers
to appoint, one or more transfer agents or one or more transfer clerks and one
or more registrars and may require all certificates for shares of stock to
bear the signature or signatures of any of them.

         Section 5. Lost, Destroyed or Mutilated Certificates. The holder of
any certificates representing shares of stock of the Corporation shall
immediately notify the Corporation of any loss, destruction or mutilation of
such certificate, and the Corporation may issue a new certificate of stock in
the place of any certificate theretofore issued by it which the owner thereof
shall allege to have been lost or destroyed or which shall have been
mutilated, and the Board may, in its discretion, require such owner or his
legal representatives to give to the Corporation a bond in such sum, limited
or unlimited, and in such form and with such surety or sureties, as the Board
in its absolute discretion shall determine, to indemnify the Corporation
against any claim that may be made against it on account of the alleged loss
or destruction of any such certificate, or issuance of a new certificate.
Anything herein to the contrary notwithstanding, the Board, in its absolute
discretion, may refuse to issue any such new certificate, except pursuant to
legal proceedings under the laws of the State of Maryland.

         Section 6. Fixing of a Record Date for Dividends and Distributions.
The Board may fix, in advance, a date not more than ninety days preceding the
date fixed for the payment of any dividend or the making of any distribution
or the allotment of rights to subscribe for securities of the Corporation, or
for the delivery of evidences of rights or evidences of interests arising out
of any change, conversion or exchange of common stock or other securities, as
the record date for the determination of the stockholders entitled to receive
any such dividend, distribution, allotment, rights or interests, and in such
case only the stockholders of record at the time so fixed shall be entitled to
receive such dividend, distribution, allotment, rights or interests.

         Section 7. Information to Stockholders and Others. Any stockholder of
the Corporation or his agent may inspect and copy during usual business hours
the Corporation's By-Laws, minutes of the proceedings of its stockholders,
annual statements of its affairs, and voting trust agreements on file at its
principal office.

                                 ARTICLE VIII
                                     Seal

         The seal of the Corporation shall be circular in form and shall bear,
in addition to any other emblem or device approved by the Board of Directors,
the name of the Corporation, the year of its incorporation and the words
"Corporate Seal" and "Maryland". Said seal may be used by causing it or a
facsimile thereof to be impressed or affixed or in any other manner
reproduced.

                                  ARTICLE IX
                                  Fiscal Year

         Unless otherwise determined by the Board, the fiscal year of the
Corporation shall end on the 31st day of October.

                                  ARTICLE X
                          Depositories and Custodians

         Section 1. Depositories. The funds of the Corporation shall be
deposited with such banks or other depositories as the Board of Directors of
the Corporation may from time to time determine.

         Section 2. Custodians. All securities and other investments shall be
deposited in the safekeeping of such banks or other companies as the Board of
Directors of the Corporation may from time to time determine. Every
arrangement entered into with any bank or other company for the safekeeping of
the securities and investments of the Corporation shall contain provisions
complying with the Investment Company Act of 1940, as amended, and the general
rules and regulations thereunder.

                                  ARTICLE XI
                           Execution of Instruments

         Section 1. Checks, Notes, Drafts, etc. Checks, notes, drafts,
acceptances, bills of exchange and other orders or obligations for the payment
of money shall be signed by such officer or officers or person or persons as
the Board of Directors by resolution shall from time to time designate.

         Section 2. Sale or Transfer of Securities. Stock certificates, bonds
or other securities at any time owned by the Corporation may be held on behalf
of the Corporation or sold, transferred or otherwise disposed of subject to
any limits imposed by these By-Laws and pursuant to authorization by the Board
and, when so authorized to be held on behalf of the Corporation or sold,
transferred or otherwise disposed of, may be transferred from the name of the
Corporation by the signature of the President or a Vice President or the
Treasurer or pursuant to any procedure approved by the Board of Directors,
subject to applicable law.

                                 ARTICLE XII
                        Independent Public Accountants

         The firm of independent public accountants which shall sign or
certify the financial statements of the Corporation which are filed with the
Securities and Exchange Commission shall be selected annually by the Board of
Directors and ratified by the stockholders in accordance with the provisions
of the Investment Company Act of 1940, as amended.

                                 ARTICLE XIII
                               Annual Statement

         The books of account of the Corporation shall be examined by an
independent firm of public accountants at the close of each annual period of
the Corporation and at such other times as may be directed by the Board. A
report to the stockholders based upon each such examination shall be mailed to
each stockholder of record of the Corporation on such date with respect to
each report as may be determined by the Board, at his address as the same
appears on the books of the Corporation. Such annual statement shall also be
available at the annual meeting of stockholders and be placed on file at the
Corporation's principal office in the State of Maryland. Each such report
shall show the assets and liabilities of the Corporation as of the close of
the annual or quarterly period covered by the report and the securities in
which the funds of the Corporation were then invested. Such report shall also
show the Corporation's income and expenses for the period from the end of the
Corporation's preceding fiscal year to the close of the annual or quarterly
period covered by the report and any other information required by the
Investment Company Act of 1940, as amended, and shall set forth such other
matters as the Board or such firm of independent public accountants shall
determine.

                                 ARTICLE XIV
                                  Amendments

         These By-Laws or any of them may be amended, altered or repealed at
any regular meeting of the stockholders or at any special meeting of the
stockholders by a favorable vote of the holders of at least sixty-six and
two-thirds percent (66 2/3%) of the outstanding shares of capital stock of the
Corporation entitled to be voted on the matter, provided that notice of the
proposed amendment, alteration or repeal be contained in the notice of such
special meeting. These By-Laws may also be amended, altered or repealed by the
affirmative vote of a majority of the Board of Directors at any regular or
special meeting of the Board of Directors, except any particular By-Law which
is specified as not subject to alteration or repeal by the Board of Directors,
subject to the requirements of the Investment Company Act of 1940, as amended.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-6
<SEQUENCE>10
<FILENAME>efc1-0727_843587ex6.txt
<DESCRIPTION>INVESTMENT ADVISORY AGMT
<TEXT>

                                                            Exhibit 6


                             MuniYield Fund, Inc.

<PAGE>

                         INVESTMENT ADVISORY AGREEMENT

         AGREEMENT made this 11th day of November, 1991, by and between
MUNIYIELD FUND, INC., a Maryland corporation (hereinafter referred to as the
"Fund"), and FUND ASSET MANAGEMENT, INC., a Delaware corporation (hereinafter
referred to as the "Investment Adviser").

                             W I T N E S S E T H:

         WHEREAS, the Fund is engaged in business as a closed-end management
investment company registered under the Investment Company Act of 1940, as
amended (hereinafter referred to as the "Investment Company Act"); and

         WHEREAS, the Investment Adviser is engaged principally in rendering
management and investment advisory services and is registered as an investment
adviser under the Investment Adviser's Act of 1940; and

         WHEREAS, the Fund desires to retain the Investment Adviser to provide
management and investment advisory services to the Fund in the manner and on
the terms hereinafter set forth; and

         WHEREAS, the Investment Adviser is willing to provide management and
investment advisory services to the Fund on the terms and conditions
hereinafter set forth;

         NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Fund and the Investment Adviser hereby agree as
follows:

                                   ARTICLE I
                       Duties of the Investment Adviser

         The Fund hereby employs the Investment Adviser to act as a manager
and investment adviser of the Fund and to furnish, or arrange for affiliates
to furnish, the management and investment advisory services described below,
subject to the policies of, review by and overall control of the Board of
Directors of the Fund, for the period and on the terms and conditions set
forth in this Agreement. The Investment Adviser hereby accepts such employment
and agrees during such period, at its own expense, to render, or arrange for
the rendering of, such services and to assume the obligations herein set forth
for the compensation provided for herein. The Investment Adviser and its
affiliates shall for all purposes herein be deemed to be independent
contractors and shall, unless otherwise expressly provided or authorized, have
no authority to act for or represent the Fund in any way or otherwise be
deemed agents of the Fund.

         (a) Investment Advisory Services. The Investment Adviser shall
perform (or arrange for the performance by affiliates of) the management and
administrative services necessary for the operation of the Fund including
administering shareholder accounts and handling shareholder relations. The
Investment Adviser shall provide the Fund with office space, facilities,
equipment and necessary personnel and such other services as the Investment
Adviser, subject to review by the Board of Directors, shall from time to time
determine to be necessary or useful to perform its obligations under this
Agreement. The Investment Adviser shall also, on behalf of the Fund, conduct
relations with custodians, depositories, transfer agents, pricing agents,
dividend disbursing agents, other shareholder servicing agents, accountants,
attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers,
banks and such other persons in any such other capacity deemed to be necessary
or desirable. The Investment Adviser shall generally monitor the Fund's
compliance with investment policies and restrictions as set forth in filings
made by the Fund under the Federal securities laws. The Investment Adviser
shall make reports to the Board of Directors of its performance of obligations
hereunder and furnish advice and recommendations with respect to such other
aspects of the business and affairs of the Fund as it shall determine to be
desirable.

         (b) Investment Advisory Services. The Investment Adviser shall
provide (or arrange for affiliates to provide) the Fund with such investment
research, advice and supervision as the latter may from time to time consider
necessary for the proper supervision of the assets of the Fund, shall furnish
continuously an investment program for the Fund and shall determine from time
to time which securities shall be purchased, sold or exchanged and what
portion of the assets of the Fund shall be held in the various securities in
which the Fund invests, options, futures, options on futures or cash, subject
always to the restrictions of the Articles of Incorporation and By-Laws of the
Fund, as amended from time to time, the provisions of the Investment Company
Act and the statements relating to the Fund's investment objectives,
investment policies and investment restrictions as the same are set forth in
filings made by the Fund under the Federal securities laws. The Investment
Adviser shall make decisions for the Fund as to foreign currency matters and
make determinations as to foreign exchange contracts, foreign currency
options, foreign currency futures and related options on foreign currency
futures. The Investment Adviser shall make decisions for the Fund as to the
manner in which voting rights, rights to consent to corporate action and any
other rights pertaining to the Fund's portfolio securities shall be exercised.
Should the Directors at any time, however, make any definite determination as
to investment policy and notify the Investment Adviser thereof in writing, the
Investment Adviser shall be bound by such determination for the period, if
any, specified in such notice or until similarly notified that such
determination has been revoked. The Investment Adviser shall take, on behalf
of the Fund, all actions which it deems necessary to implement the investment
policies determined as provided above, and in particular to place all orders
for the purchase or sale of portfolio securities for the Fund's account with
brokers or dealers selected by it, and to that end, the Investment Adviser is
authorized as the agent of the Fund to give instructions to the Custodian of
the Fund as to deliveries of securities and payments of cash for the account
of the Fund. In connection with the selection of such brokers or dealers and
the placing of such orders with respect to assets of the Fund, the Investment
Adviser is directed at all times to seek to obtain execution and prices within
the policy guidelines determined by the Board of Directors and set forth in
filings made by the Fund under the Federal securities laws. Subject to this
requirement and the provisions of the Investment Company Act, the Securities
Exchange Act of 1934, as amended, and other applicable provisions of law, the
Investment Adviser may select brokers or dealers with which it or the Fund is
affiliated.

                                  ARTICLE II
                      Allocation of Charges and Expenses

         (a) The Investment Adviser. The Investment Adviser assumes and shall
pay for maintaining the staff and personnel necessary to perform its
obligations under this Agreement, and shall at its own expense, provide the
office space, facilities, equipment and necessary personnel which it is
obligated to provide under Article I hereof, and shall pay all compensation of
officers of the Fund and all Directors of the Fund who are affiliated persons
of the Investment Adviser.

         The Fund. The Fund assumes and shall pay or cause to be paid all
other expenses of the Fund including, without limitation: taxes, expenses for
legal and auditing services, costs of printing proxies, stock certificates,
shareholder reports, prospectuses, charges of the custodian, any sub-custodian
and transfer agent, expenses of portfolio transactions, Securities and
Exchange Commission fees, expenses of registering the shares under Federal,
state and foreign laws, fees and actual out-of-pocket expenses of Directors
who are not affiliated persons of the Investment Adviser, accounting and
pricing costs (including the daily calculation of the net asset value),
insurance, interest, brokerage costs, litigation and other extraordinary or
non-recurring expenses, and other expenses properly payable by the Fund. It is
also understood that the Fund will reimburse the Investment Adviser for its
costs in providing accounting services to the Fund.

                                 ARTICLE III
                    Compensation of the Investment Adviser

         (a) Investment Advisory Fee. For the services rendered, the
facilities furnished and expenses assumed by the Investment Adviser, the Fund
shall pay to the Investment Adviser at the end of each calendar month a fee
based upon the average weekly value of the net assets of the Fund at the
annual rate of 0.50 of 1.0% (0.50%) of the average weekly net assets of the
Fund (i.e., the average weekly value of the total assets of the Fund, minus
the sum of accrued liabilities of the Fund and accumulated dividends on shares
of outstanding preferred stock), commencing on the day following effectiveness
hereof. For purposes of this calculation, average weekly net assets is
determined at the end of each month on the basis of the average net assets of
the Fund for each week during the month. The assets for each weekly period are
determined by averaging the net assets at the last business day of a week with
the net assets at the last business day of the prior week. It is understood
that the liquidation preference of any outstanding preferred stock (other than
accumulated dividends) is not considered a liability in determining the Fund's
average weekly net assets. If this Agreement becomes effective subsequent to
the first day of a month or shall terminate before the last day of a month,
compensation for that part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculation of the fee as set forth
above. Subject to the provisions of subsection (b) hereof, payment of the
Investment Adviser's compensation for the preceding month shall be made as
promptly as possible after completion of the computations contemplated by
subsection (b) hereof. During any period when the determination of net asset
value is suspended by the Board of Directors, the average net asset value of a
share for the last week prior to such suspension shall for this purpose be
deemed to be the net asset value at the close of each succeeding week until it
is again determined.

         (b) Expense Limitations. In the event the operating expenses of the
Fund, including amounts payable to the Investment Adviser pursuant to
subsection (a) hereof, for any fiscal year ending on a date on which this
Agreement is in effect exceed the expense limitations applicable to the Fund
imposed by applicable state securities laws or regulations thereunder, as such
limitations may be raised or lowered from time to time, the Investment Adviser
shall reduce its management and investment advisory fee by the extent of such
excess and, if required pursuant to any such laws or regulations, will
reimburse the Fund in the amount of such excess; provided, however, to the
extent permitted by law, there shall be excluded from such expenses the amount
of any interest, taxes, brokerage fees and commissions and extraordinary
expenses (including but not limited to legal claims and liabilities and
litigation costs and any indemnification related thereto) paid or payable by
the Fund. Whenever the expenses of the Fund exceed a pro rata portion of the
applicable annual expense limitations, the estimated amount of reimbursement
under such limitations shall be applicable as an offset against the monthly
payment of the fee due to the Investment Adviser. Should two or more such
expenses limitations be applicable as at the end of the last business day of
the month, that expense limitation which results in the largest reduction in
the Investment Adviser's fee shall be applicable.

                                  ARTICLE IV
               Limitation of Liability of the Investment Adviser

         The Investment Adviser shall not be liable for any error of judgment
or mistake of law or for any loss arising out of any investment or for any act
or omission in the management of the Fund, except for willful misfeasance, bad
faith or gross negligence in the performance of its duties, or by reason of
reckless disregard of its obligations and duties hereunder. As used in this
Article IV, the term "Investment Adviser" shall include any affiliates of the
Investment Adviser performing services for the Fund contemplated hereby and
directors, officers and employees of the Investment Adviser and such
affiliates.

                                  ARTICLE V
                     Activities of the Investment Adviser

         The services of the Investment Adviser to the Fund are not to be
deemed to be exclusive: the Investment Adviser and any person controlled by or
under common control with the Investment Adviser (for purposes of this Article
V referred to as "affiliates") are free to render services to others. It is
understood that Directors, officers, employees and shareholders of the Fund
are or may become interested in the Investment Adviser and its affiliates, as
directors, officers, employees, partners and shareholders or otherwise, and
that directors, officers, employees, partners and shareholders of the
Investment Adviser and its affiliates are or may become similarly interested
in the Fund, and that the Investment Adviser and directors, officers,
employees, partners and shareholders of its affiliates may become interested
in the Fund as shareholder or otherwise.

                                  ARTICLE VI
                  Duration and Termination of this Agreement

         This Agreement shall become effective as of the date first above
written and shall remain in force until November 30, 1993 and thereafter, but
only so long as such continuance is specifically approved at least annually by
(i) the Board of Directors of the Fund, or by the vote of a majority of the
outstanding voting securities of the Fund, and (ii) a majority of those
Directors who are not parties to this Agreement or interested persons of any
such party cast in person at a meeting called for the purpose of voting on
such approval.

         This Agreement may be terminated at any time, without the payment of
any penalty, by the Board of Directors or by vote of a majority of the
outstanding voting securities of the Fund, or by the Investment Adviser, on
sixty days' written notice to the other party. This Agreement shall
automatically terminate in the event of its assignment.

                                 ARTICLE VII
                         Amendments of this Agreement

         This Agreement may be amended by the parties only if such amendment
is specifically approved by (i) the vote of a majority of outstanding voting
securities of the Fund, and (ii) a majority of those Directors who are not
parties to this Agreement or interested persons of any such party cast in
person at a meeting called for the purpose of voting on such approval.

                                 ARTICLE VIII
                         Definitions of Certain Terms

         The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act and the Rules and Regulations thereunder, subject, however, to
such exemptions as may be granted by the Securities and Exchange Commission
under said Act.

                                  ARTICLE IX
                                 Governing Law

         This Agreement shall be construed in accordance with laws of the
State of New York and the applicable provisions of the Investment Company Act.
To the extent that the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.


<PAGE>



         IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first above written.

                                      MUNIYIELD FUND, INC.



                                      By ______________________________________
                                                    (Authorized Signatory)


                                      FUND ASSET MANAGEMENT, INC.



                                      By ______________________________________
                                                    (Authorized Signatory)


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>11
<FILENAME>efc1-0727_843595ex10.txt
<DESCRIPTION>FORM OF TERMS AND CONDITIONS
<TEXT>

                                                            Exhibit 10


                             MUNIYIELD FUND, INC.

                        TERMS AND CONDITIONS OF AMENDED
                     AUTOMATIC DIVIDEND REINVESTMENT PLAN

         1. Appointment of Agent. You, The Bank of New York, will act as Agent
for me, and will open an account for me under the Dividend Reinvestment Plan
(the "Plan") in the same name as my present shares of common stock, par value
$.10 per share ("Common Stock"), of MuniYield Fund, Inc. (the "Fund") are
registered, and will automatically put into effect for me the dividend
reinvestment option of the Plan as of the first record date for a dividend or
capital gains distribution (collectively referred to herein as a "dividend"),
payable at the election of shareholders in cash or shares of Common Stock.

         2. Dividends Payable in Common Stock. My participation in the Plan
constitutes an election by me to receive dividends in shares of Common Stock
whenever the Fund declares a dividend. In such event, the dividend amount
shall automatically be made payable to me entirely in shares of Common Stock
which shall be acquired by the Agent for my account, depending upon the
circumstances described in paragraph 3, either (i) through receipt of
additional shares of unissued but authorized shares of Common Stock from the
Fund ("newly issued shares") as described in paragraph 6 or (ii) by purchase
of outstanding shares of Common Stock on the open market ("open-market
purchases") as described in paragraph 7.

         3. Determination of Whether Newly-Issued Shares or Open-Market
Purchases. If on the payment date for the dividend (the "valuation date"), the
net asset value per share of the Common Stock, as defined in paragraph 7, is
equal to or less than the market price per share of the Common Stock, as
defined in paragraph 8, plus estimated brokerage commissions (such condition
being referred to herein as a "market premium"), the Agent shall invest the
dividend amount in newly issued shares on my behalf as described in paragraph
6. If on the valuation date, the net asset value per share is greater than the
market value (such condition being referred to herein as a "market discount"),
the Agent shall invest the dividend amount in shares acquired on my behalf in
open-market purchases as described in paragraph 7.

         4. Purchase Period for Open-Market Purchases. In the event of a
market discount on the valuation date, the Agent shall have until the last
business day before the next ex-dividend date with respect to the shares of
Common Stock or in no event more than 30 days after the valuation date (the
"last purchase date") to invest the dividend amount in shares acquired in
open-market purchases except where temporary curtailment or suspension of
purchases is necessary to comply with applicable provisions of federal
securities laws.

         5. Failure to Complete Open-Market Purchases During Purchase Period.
If the Agent is unable to invest the full dividend amount in open-market
purchases during the purchase period because the market discount has shifted
to a market premium or otherwise, the Agent will invest the uninvested portion
of the dividend amount in newly issued shares at the close of business on the
last purchase date as described in paragraph 4.

         6. Acquisition of Newly-Issued Shares. In the event that all or part
of the dividend amount is to be invested in newly-issued shares, you shall
automatically receive such newly-issued shares of Common Stock, including
fractions, for my account, and the number of additional newly-issued shares of
Common Stock to be credited to my account shall be determined by dividing the
dollar amount of the dividend on my shares to be invested in newly-issued
shares by the net asset value per share of Common Stock on the date the shares
are issued (the valuation date in the case of an initial market premium or the
last purchase date in case the Agent is unable to complete open-market
purchases during the purchase period); provided, that the maximum discount
from the then current market price per share on the date of issuance shall not
exceed 5%.

         7. Manner of Making Open-Market Purchases. In the event that the
dividend amount is to be invested in shares of Common Stock acquired in
open-market purchases, you shall apply the amount of such dividend on my
shares (less my pro rata share of brokerage commissions incurred with respect
to your open-market purchases) to the purchase on the open market of shares of
the Common Stock for my account. Open-market purchases may be made on any
securities exchange where the Common Stock is traded, in the over-the-counter
market or in negotiated transactions and may be on such terms as to price,
delivery and otherwise as you shall determine. My funds held by you uninvested
will not bear interest, and it is understood that, in any event, you shall
have no liability in connection with any inability to purchase shares within
30 days after the initial date of such purchase as herein provided, or with
the timing of any purchases affected. You shall have no responsibility as to
the value of the Common Stock acquired for my account. For the purposes of
cash investments you may commingle my funds with those of other shareholders
of the Fund for whom you similarly act as Agent, and the average price
(including brokerage commissions) of all shares purchased by you as Agent in
the open market shall be the price per share allocable to me in connection
with open-market purchases.

         8. Meaning of Market Price and Net Asset Value. For all purposes of
the Plan: (a) the market price of the Common Stock on a particular date shall
be the last sales price on the New York Stock Exchange (the "Exchange") on
that date, or, if there is no sale on the Exchange on that date, then the mean
between the closing bid and asked quotations for such stock on the Exchange on
such date and (b) net asset value per share of the Common Stock on a
particular date shall be as determined by or on behalf of the Fund.

         9. Registration of Shares Acquired Pursuant to the Plan. You may hold
my shares of Common Stock acquired pursuant to the Plan, together with shares
of other shareholders of the Fund acquired pursuant to the Plan, in
noncertificated form in your name or that of your nominee. You will forward to
me any proxy solicitation material and will vote any shares so held for me
only in accordance with the proxy returned by me to the Fund. Upon my written
request, you will deliver to me, without charge, a certificate or certificates
for the full shares held by you for my account.

         10. Confirmations. You will confirm to me each acquisition made for
my account as soon as practicable but not later than 60 days after the date
thereof.

         11. Fractional Interests. Although I may from time to time have an
undivided fractional interest (computed to three decimal places) in a share of
the Fund, no certificates for a fractional share will be issued. However,
dividends and distributions on fractional shares will be credited to my
account. In the event of termination of my account under the Plan, you will
adjust for any such undivided fractional interest in cash at the market value
of the Fund's shares at the time of termination less the pro rata expense of
any sale required to make such an adjustment.

         12. Stock Dividends or Share Purchase Rights. Any stock dividends or
split shares distributed by the Fund on shares held by you for me will be
credited to my account. In the event that the Fund makes available to its
shareholders rights to purchase additional shares or other securities, the
shares held for me under the Plan will be added to other shares held by me in
calculating the number of rights to be issued to me.

         13. Service Fee. Your service fee for handling capital gains
distributions or income dividends will be paid by the Fund. I will be charged
for my pro rata share of brokerage commissions on all open market purchases.

         14. Termination of Account. I may terminate my account under the Plan
by notifying you in writing. Such termination will be effective immediately if
my notice is received by you not less than ten days prior to any dividend or
distribution record date; otherwise such termination will be effective on the
first trading day after the payment date for such dividend or distribution
with respect to any subsequent dividend or distribution. The Plan may be
terminated by you or the Fund upon notice in writing mailed to me at least 90
days prior to any record date for the payment of any dividend or distribution
by the fund. Upon any termination you will cause a certificate or certificates
for the full shares held for me under the Plan and cash adjustment for any
fraction to be delivered to me without charge. If I elect by notice to you in
writing in advance of such termination to have you sell part or all of my
shares and remit the proceeds to me, you are authorized to deduct brokerage
commissions for this transaction from the proceeds.

         15. Amendment of Plan. These terms and conditions may be amended or
supplemented by you or the Fund at any time or times but, except when
necessary or appropriate to comply with applicable law or the rules or
policies of the Securities and Exchange Commission or any other regulatory
authority, only by mailing to me appropriate written notice at least 90 days
prior to the effective date thereof. The amendment or supplement shall be
deemed to be accepted by me unless, prior to the effective date thereof, you
receive written notice of the termination of my account under the Plan. Any
such amendment may include an appointment by you in your place and stead of a
successor Agent under these terms and conditions, with full power and
authority to perform all or any of the acts to be performed by the Agent under
these terms and conditions. Upon any such appointment of an Agent for the
purpose of receiving dividends and distributions, the Fund will be authorized
to pay to such successor Agent, for my account, all dividends and
distributions payable on Common Stock of the Fund held in my name or under the
Plan for retention or application by such successor Agent as provided in these
terms and conditions.

         16. Extent of Responsibility of Agent. You shall at all times act in
good faith and agree to use your best efforts within reasonable limits to
insure the accuracy of all services performed under this Agreement and to
comply with applicable law, but assume no responsibility and shall not be
liable for loss or damage due to errors unless such error is caused by your
negligence, bad faith, or willful misconduct or that of your employees.

         17. Governing Law. These terms and conditions shall be governed by
the laws of the State of New York without regard to its conflicts of laws
provisions.



</TEXT>
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