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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0000891092-01-500616.txt : 20010911
<SEC-HEADER>0000891092-01-500616.hdr.sgml : 20010911
ACCESSION NUMBER:		0000891092-01-500616
CONFORMED SUBMISSION TYPE:	N-14 8C/A
PUBLIC DOCUMENT COUNT:		12
FILED AS OF DATE:		20010910

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			MUNIASSETS FUND INC
		CENTRAL INDEX KEY:			0000901243
		STANDARD INDUSTRIAL CLASSIFICATION:	 []
		STATE OF INCORPORATION:			MD
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		N-14 8C/A
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-65446
		FILM NUMBER:		1735020

	BUSINESS ADDRESS:	
		STREET 1:		800 SCUDDERS MILL RD
		CITY:			PLAINSBORO
		STATE:			NJ
		ZIP:			08536
		BUSINESS PHONE:		6092822800

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	MUNIINCOME FUND INC
		DATE OF NAME CHANGE:	19930517
</SEC-HEADER>
<DOCUMENT>
<TYPE>N-14 8C/A
<SEQUENCE>1
<FILENAME>file001.htm
<DESCRIPTION>FORM N-14 8C/A
<TEXT>

<html>
<head>
<title> N-14 </title>
</head>
<body>






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<p>
<table width=600>
  <tr>
    <td  align=center><font size=2><B>&lt;R&gt;As filed with the Securities and
      Exchange Commission on September 10, 2001</B></font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td align=right><font size=2><b>Securities Act File No. 333-65446 <BR>
      Investment Company Act File No. 811-7642&lt;/R&gt;</b></font></td>
  </tr>
</table>
<TABLE WIDTH=600>
  <TR>
    <TD>
      <HR ALIGN=LEFT WIDTH=100% SIZE=4 noshade>
      <HR ALIGN=LEFT WIDTH=100% SIZE=1 noshade>
  </TR>
</TABLE>
<p>
<table width=600>
  <tr>
    <td  align=center><font size=4><B>SECURITIES AND EXCHANGE COMMISSION</B></font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td  align=center><font size=2><B>Washington, DC 20549</B></font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td>
      <hr size=1 noshade align=CENTER width=150>
    </td>
  </tr>
</table>
<table width=600>
  <tr>
    <td  align=center><font size=3><B><font size="4">FORM N-14</font></B></font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td  align=center><font size=2><B><font size="3">REGISTRATION STATEMENT <BR>
      UNDER <BR>
      THE SECURITIES ACT OF 1933</font></B></font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td>
      <hr size=1 noshade align=CENTER width=150>
    </td>
  </tr>
</table>
<table width="600" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td align="left" width="192"><font size=2>&lt;R&gt;</font>&nbsp;&nbsp;</td>
    <td width="222" align="center"><font size=2><b>Pre-Effective Amendment No.
      1</b></font></td>
    <td width="186" align="right"><font size=2><b></b>|<u>X</u>|<b>&lt;/R&gt;</b></font></td>
  </tr>
  <tr>
    <td align="left" width="192"><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font>&nbsp;</td>
    <td width="222" align="center"><font size=2><b>Post-Effective Amendment No.</b></font><font size=2><b>
      </b></font></td>
    <td width="186" align="right"><font size=2><b> </b>&nbsp;|<u>&nbsp;&nbsp;&nbsp;</u>|</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2><b></b></font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td  align=center><font size=2><B> (Check appropriate box or boxes)</B></font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td>
      <hr size=1 noshade align=CENTER width=150>
    </td>
  </tr>
</table>
<table width=600>
  <tr>
    <td  align=center><font size=5><b>MuniAssets Fund, Inc.</b></font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td align=center><font size=1><B>(Exact Name of Registrant as Specified in
      Charter)</B></font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td>
      <hr size=1 noshade align=CENTER width=150>
    </td>
  </tr>
</table>
<table width=600>
  <tr>
    <td  align=center><font size=2><B>(609) 282-2800 <BR>
      (Area Code and Telephone Number)</B></font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td>
      <hr size=1 noshade align=CENTER width=150>
    </td>
  </tr>
</table>
<table width=600>
  <tr>
    <td  align=center><font size=2><B>800 Scudders Mill Road <BR>
      Plainsboro, New Jersey 08536 <BR>
      <font size=1>(Address of Principal Executive Offices: <BR>
      Number, Street, City, State, Zip Code)</font></B></font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td>
      <hr size=1 noshade align=CENTER width=150>
    </td>
  </tr>
</table>
<table width=600>
  <tr>
    <td  align=center><font size=2><B>Terry K. Glenn<BR>
      MuniAssets Fund, Inc. <BR>
      800 Scudders Mill Road, Plainsboro, New Jersey 08536<BR>
      Mailing Address: <BR>
      PO Box 9011, Princeton, New Jersey 08543-9011</B></font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td align=center><font size=1><B>(Name and Address of Agent for Service)</B></font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td>
      <hr size=1 noshade align=CENTER width=150>
    </td>
  </tr>
</table>
<table width=93 cellspacing=0 cellpadding=0 border="0">
  <tr valign="bottom" align="center">
    <td colspan="6">
      <p align="CENTER"><b><font size="2"><i>Copies to</i></font></b><i>: </i>
    </td>
  </tr>
</table>
<table width=600 cellpadding="0" cellspacing="0" border="0">
  <tr align="center" valign="bottom">
    <td>
      <p><font size="2"><b>Leonard B. Mackey, Jr. <br>
        CLIFFORD CHANCE <br>
        ROGERS &amp; WELLS<font size="1"> LLP</font> <br>
        200 Park Avenue <br>
        New York, New York 10166 </b></font></p>
    </td>
    <td><b><font size="2">Frank P. Bruno, Esq. <br>
      SIDLEY AUSTIN <br>
      BROWN &amp; WOOD <font size="1">LLP</font> <br>
      One World Trade Center <br>
      New York, New York 10048-0557 </font></b></td>
    <td><b><font size="2">&lt;R&gt;Philip L. Kirstein, Esq.&lt;/R&gt; <br>
      FUND ASSET <br>
      MANAGEMENT, L.P. <br>
      800 Scudders Mill Road <br>
      Plainsboro, New Jersey 08543-9011</font></b></td>
  </tr>
</table>
<table width=0 cellspacing=0 cellpadding=0 border="0">
  <tr valign="bottom" align="center"> </tr>
  <tr valign="bottom" align="center"> </tr>
  <tr valign="bottom" align="center"> </tr>
  <tr valign="bottom" align="center"> </tr>
</table>
<table width=600>
  <tr>
    <td>
      <hr size=1 noshade align=CENTER width=150>
    </td>
  </tr>
</table>
<table width=600>
  <tr>
    <td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Approximate Date of Proposed
      Public Offering:</B> As soon as practicable after the Registration Statement
      becomes effective under the Securities Act of 1933.</FONT></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td>
      <hr size=1 noshade align=CENTER width=150>
    </td>
  </tr>
</table>
<table width=600>
  <tr>
    <td  align=center><font size=2><B>Calculation of Registration Fee Under the
      Securities Act of 1933</B></font></td>
  </tr>
</table>
<table width="600" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td>
      <hr size="2" noshade>
    </td>
  </tr>
</table>
<table width="600" border="0" cellspacing="0" cellpadding="0">
  <tr valign="bottom">
    <td> <b><font size="1"><font color="#000000">Title Of Securities Being Registered</font></font></b></td>
    <td align="center"><b><font size="1"> Amount being <br>
      Registered (1) </font></b></td>
    <td align="center"><b><font size="1"> Proposed <br>
      Maximum <br>
      Offering Price <br>
      Per Unit(1)</font></b></td>
    <td align="center"><b><font size="1"> Proposed<br>
      Maximum <br>
      Aggregate <br>
      Offering <br>
      Price (1)</font></b></td>
    <td align="center" colspan="3"><b><font size="1"> Amount of<br>
      Registration <br>
      Fee (2)</font></b></td>
  <tr>
    <td colspan="8">
      <hr size="1" noshade>
    </td>
  </tr>
  <tr>
    <td><font size="2">Common Stock ($.10 par value) </font></td>
    <td align="center"><font size="2">11,079,988</font></td>
    <td align="center"><font size="2">$13.07</font></td>
    <td align="center"><font size="2">$144,815,443</font></td>
    <td colspan="3" align="center"><font size="2">$36,204</font></td>
  </tr>
</table>
<table width="600" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td>
      <hr size="2" noshade>
    </td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3% valign=top><font size="1">(1) </font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">Estimated solely for the purpose of calculating
      the filing fee.</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3% valign=top><font size="1">(2) </font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">Previously paid by wire transfer to the designated
      lockbox of the Securities and Exchange Commission in Pittsburgh, Pennsylvania.</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td>
      <hr size=1 noshade align=CENTER width=150>
    </td>
  </tr>
</table>
<table width=600>
  <tr>
    <td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>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.</B></FONT></td>
  </tr>
</table>
<TABLE WIDTH=600>
  <TR>
    <TD>
      <HR ALIGN=LEFT WIDTH=100% SIZE=1 noshade>
      <HR ALIGN=LEFT WIDTH=100% SIZE=4 noshade>
  </TR>
</TABLE>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>












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<p>
<table width=600>
  <tr>
    <td  align=center><font size=2><B>MUNIASSETS FUND, INC.<BR>
      MERRILL LYNCH HIGH INCOME MUNICIPAL BOND FUND, INC. <BR>
      P.O. BOX 9011 <BR>
      PRINCETON, NEW JERSEY 08543-9011</B></font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td>
      <hr size=1 noshade align=CENTER width=150>
    </td>
  </tr>
</table>
<table width=600>
  <tr>
    <td  align=center><font size=2><B>NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
      OF MUNIASSETS FUND, INC.</B></font></td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td  align=center><font size=2><B>NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
      OF <BR>
      MERRILL LYNCH HIGH INCOME MUNICIPAL BOND FUND, INC.</B></font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td>
      <hr size=1 noshade align=CENTER width=150>
    </td>
  </tr>
</table>
<table width=600>
  <tr>
    <td  align=center><font size=2><B>To Be Held on October 24, 2001</B></font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td><font size=2>T<font size="1">O</font> T<font size="1">HE</font> S<font size="1">TOCKHOLDERS</font>
      <font size="1">OF</font></font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width="30">&nbsp;</td>
    <td width="557"><font size=2>M<font size="1">UNI<font size="2">A</font>SSETS</font>
      F<font size="1">UND</font>, I<font size="1">NC</font>. <br>
      M<font size="1">ERRILL</font> L<font size="1">YNCH</font> H<font size="1">IGH</font>
      I<font size="1">NCOME</font> M<font size="1">UNICIPAL</font> B<font size="1">OND</font>
      F<font size="1">UND</font>, I<font size="1">NC</font>.:</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOTICE IS HEREBY GIVEN that
      an annual meeting of stockholders of MuniAssets Fund, Inc. (&#147;MuniAssets&#148;)
      and a special meeting of stockholders of Merrill Lynch High Income Municipal
      Bond Fund, Inc. (&#147;High Income Municipal&#148;) (together, the &#147;Meetings&#148;)
      will be held at the offices of Fund Asset Management, L.P. and Merrill Lynch
      Investment Managers, L.P., respectively, 800 Scudders Mill Road, Plainsboro,
      New Jersey on Wednesday, October 24, 2001 at 9:00 a.m. Eastern time (MuniAssets)
      and 10:00 a.m. Eastern time (High Income Municipal) for the following purposes:</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the stockholders of MuniAssets
      and High Income Municipal:</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) To approve or disapprove
      an Agreement and Plan of Reorganization (the &#147;Agreement and Plan&#148;)
      contemplating (i) the acquisition of substantially all of the assets and
      the assumption of substantially all of the liabilities of High Income Municipal
      by MuniAssets, in return for newly issued shares of common stock of MuniAssets,
      and (ii) the distribution by High Income Municipal of such MuniAssets common
      stock to the holders of common stock of High Income Municipal (plus cash
      in lieu of fractional shares). A vote in favor of this proposal also will
      constitute a vote in favor of the liquidation and dissolution of High Income
      Municipal under Maryland corporate law and the termination of High Income
      Municipal&#146;s registration under the Investment Company Act of 1940,
      as amended;</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the stockholders of MuniAssets
      only:</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) To elect two Class I Directors
      of MuniAssets to serve for a term of three years; and</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the stockholders of both
      Funds:</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) To transact such other
      business as properly may come before the Meetings or any adjournment thereof.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Boards of Directors of
      MuniAssets and High Income Municipal have 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 Meetings or any adjournment thereof.</font></td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A complete list of the stockholders
      of MuniAssets and High Income Municipal entitled to vote at the Meetings
      will be available and open to the examination of any stockholder of MuniAssets
      or High Income Municipal, respectively, for any purpose germane to the Meetings
      during ordinary business hours from and after October 10, 2001, at the offices
      of each Fund, 800 Scudders Mill Road, Plainsboro, New Jersey.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You are cordially invited
      to attend the applicable Meeting. Stockholders who do not expect to attend
      the Meetings 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.<b>
      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
      MuniAssets or High Income Municipal, as applicable.</b></font></td>
  </tr>
</table>
<p><br>
</p>
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> </font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>












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<p>
<p>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;If you have any questions
      regarding the enclosed proxy material or need assistance in voting your
      shares of common stock, please contact our proxy solicitor, Georgeson Shareholder
      at 1-888-856-1572.&lt;/R&gt;</font></td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td align=right width="276">&nbsp;</td>
    <td align=left width="312">
      <p><font size="2">By Order of the Boards of Directors, <br>
        <br>
        B<font size="1">RADLEY</font> J. L<font size="1">UCIDO</font> <br>
        <i>Secretary </i><br>
        MuniAssets Fund, Inc. </font></p>
      <p><font size="2">A<font size="1">LICE</font> A. P<font size="1">ELLEGRINO
        </font><br>
        <i>Secretary </i><br>
        Merrill Lynch High Income Municipal Bond Fund, Inc.</font></p>
    </td>
  </tr>
</table>
<table width=600>
  <tr>
    <td><font size=2>&lt;R&gt;Plainsboro, New Jersey <BR>
      Dated: September 10, 2001&lt;/R&gt;</font></td>
  </tr>
</table>
<p>&nbsp;
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> </font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>












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<p>
<p>
<table width=600>
  <tr>
    <td  align=center><font size=2><B>&lt;R&gt;&lt;/R&gt;</B></font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td>
      <hr size=1 noshade align=CENTER width=150>
    </td>
  </tr>
</table>
<table width=600>
  <tr>
    <td  align=center><font size=2><B>JOINT PROXY STATEMENT AND PROSPECTUS <BR>
      MUNIASSETS FUND, INC. <BR>
      MERRILL LYNCH HIGH INCOME MUNICIPAL BOND FUND, INC. <BR>
      P.O. BOX 9011 <BR>
      PRINCETON, NEW JERSEY 08543-9011 <BR>
      (609) 282-2800</B></font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td>
      <hr size=1 noshade align=CENTER width=150>
    </td>
  </tr>
</table>
<table width=600>
  <tr>
    <td  align=center><font size=2><B>ANNUAL MEETING OF STOCKHOLDERS OF MUNIASSETS
      FUND, INC.</B></font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td>
      <hr size=1 noshade align=CENTER width=150>
    </td>
  </tr>
</table>
<table width=600>
  <tr>
    <td  align=center><font size=2><B>SPECIAL MEETING OF STOCKHOLDERS OF <BR>
      MERRILL LYNCH HIGH INCOME MUNICIPAL BOND FUND, INC.</B></font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td>
      <hr size=1 noshade align=CENTER width=150>
    </td>
  </tr>
</table>
<table width=600>
  <tr>
    <td  align=center><font size=2><B>To Be Held on October 24, 2001</B></font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td>
      <hr size=1 noshade align=CENTER width=150>
    </td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Joint Proxy Statement
      and Prospectus is furnished to you as a stockholder of one or both of the
      funds listed above. An annual meeting of stockholders of MuniAssets Fund,
      Inc. (&#147;MuniAssets&#148;) and a special meeting of stockholders of Merrill
      Lynch High Income Municipal Bond Fund, Inc. (&#147;High Income Municipal&#148;)
      will be held on October 24, 2001 (each, a &#147;Meeting&#148; and together,
      the &#147;Meetings&#148;) to consider the items listed below and discussed
      in greater detail elsewhere in this Joint Proxy Statement and Prospectus.
      The Board of Directors of each of the funds is requesting its stockholders
      to submit a proxy to be used at the applicable Meeting to vote the shares
      held by the stockholder submitting the proxy.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td>
      <p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The proposals to be considered
      at the Meetings are:</font></p>
      </td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td>
      <p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For stockholders of MuniAssets and High Income Municipal:<br>
        <br>
        </font><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. To approve or disapprove
      an Agreement and Plan of Reorganization between the funds;</font></p>
      </td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For stockholders of  MuniAssets only:</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. To elect two Class I Directors
      of MuniAssets to serve for a term of three years; and</font></td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the stockholders of both
      MuniAssets and High Income Municipal:</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. To transact such other business
      as may properly come before the Meetings or any adjournment thereof.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Agreement and Plan of Reorganization
      that you are being asked to consider involves a transaction that will be
      referred to in this Joint Proxy Statement and Prospectus as the &#147;Reorganization.&#148;
      The Reorganization involves the combination of two funds into one. The two
      funds are: </font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MuniAssets, which will be the
      surviving fund, and</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;High Income Municipal</font></td>
  </tr>
</table>
<table width=600>
  <tr align="right">
    <td><font size=2><font size="1"></font><i><font size="1">(continued on next page)</font></i><font size="1"></font></font></td>
  </tr>
</table>
<p>

<table width=600>
  <tr>
    <td>
      <hr size=1 noshade align=CENTER width=150>
    </td>
  </tr>
</table>
<table width=600>
  <tr>
    <td  align=center><font size="2"><b>The Securities and Exchange Commission
      has not approved or disapproved these securities <br>
      or passed upon the adequacy of this Joint Proxy Statement and Prospectus.<br>
      Any representation to the contrary is a criminal offense.</b></font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td>
      <hr size=1 noshade align=CENTER width=150>
    </td>
  </tr>
</table>
<table width=600>
  <tr>
    <td  align=center><font size=2><b>&lt;R&gt;The date of this Joint Proxy Statement
      and Prospectus is September 10, 2001.&lt;/R&gt;</b></font></td>
  </tr>
</table>
<p>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>












<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 5, page: 5" -->



<p>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MuniAssets and High Income
      Municipal are sometimes referred to herein collectively as the &#147;Funds&#148;
      and individually as a &#147;Fund,&#148; as the context requires. The fund
      resulting from the Reorganization is sometimes referred to herein as the
      &#147;Combined Fund.&#148;</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the Reorganization, MuniAssets
      will acquire substantially all of the assets and assume substantially all
      of the liabilities of High Income Municipal solely in return for shares
      of common stock of MuniAssets (&#147;MuniAssets Common Stock&#148;). High
      Income Municipal will distribute the MuniAssets Common Stock 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 &#147;Investment Company Act&#148;). MuniAssets
      will continue to operate as a registered, non-diversified, closed-end investment
      company with the investment objective and policies described in this Joint
      Proxy Statement and Prospectus. </font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;In the Reorganization,
      a holder of common stock of High Income Municipal (&#147;High Income Municipal
      Common Stock&#148;) will receive MuniAssets Common Stock (plus cash in lieu
      of fractional shares) with an aggregate net asset value equal to the aggregate
      net asset value of the shares of High Income Municipal Common Stock such
      stockholder held just prior to the Reorganization. All references to the
      High Income Municipal Common Stock will include shares of Common Stock representing
      Dividend Reinvestment Plan shares held in the book deposit accounts of holders
      of High Income Municipal Common Stock.&lt;/R&gt;</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Joint Proxy Statement
      and Prospectus serves as a prospectus of MuniAssets in connection with the
      issuance of MuniAssets Common Stock in the Reorganization.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Joint Proxy Statement
      and Prospectus sets forth information about MuniAssets and High Income Municipal
      that stockholders of the Funds should know before considering the Reorganization
      and should be retained for future reference. Each Fund has authorized the
      solicitation of proxies in connection with the Meetings solely on the basis
      of this Joint Proxy Statement and Prospectus and the accompanying documents.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The address of the principal
      executive offices of MuniAssets and High Income Municipal is 800 Scudders
      Mill Road, Plainsboro, New Jersey 08536, and the telephone number is (609)
      282-2800.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MuniAssets Common Stock is
      listed on the New York Stock Exchange (the &#147;NYSE&#148;) under the symbol
      &#147;MUA&#148; and may be bought or sold at the market price on each day the NYSE is open for
      trading. High Income Municipal engages in a continuous offering of its Common
      Stock. High Income Municipal Common Stock is not listed on any exchange
      and no secondary market presently exists for High Income Municipal Common
      Stock nor is it expected that a secondary market will develop. After the
      Reorganization, shares of MuniAssets Common Stock will continue to be listed
      on the NYSE under the symbol &#147;MUA.&#148; See &#147;Additional Information.&#148;</font></td>
  </tr>
</table>

<P></p>

<table width=600><tr><td><hr size=1 noshade align=CENTER width=150></td></tr></table>


<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>












<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 6, page: 6" -->



<p>
<table width=600>
  <tr>
    <td  align=center><font size=2><B>Table of Contents</B></font></td>
  </tr>
</table>
<br>
<table cellspacing=0 cellpadding=0 width=600>
  <tr>
    <td valign="TOP" colspan="2">&nbsp;</td>
    <td valign="TOP" align="right" width="32"><font size="1">Page</font>
      <hr noshade size="1" width="100%">
    </td>
    <td valign="TOP" width="36">&nbsp;&nbsp;&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2">
      <p><font size="2"><a href="#1">INTRODUCTION</a></font>
    </td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">1</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2">&nbsp;</td>
    <td valign="TOP" align="right" width="32">&nbsp;</td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2"><font size="2"><a href="#2">ITEM 1. THE REORGANIZATION</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">1</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2">
      <p><font size="2"><a href="#2a">SUMMARY</a></font>
    </td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">1</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td valign="TOP" width="508">
      <p><font size="2"><a href="#2b">The Reorganization</a></font>
    </td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">1</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22"><font size="2"></font></td>
    <td valign="TOP" width="508">
      <p><font size="2"><a href="#2c">What Will Be the Results of the Reorganization</a></font>
    </td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">2</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22"><font size="2"></font></td>
    <td valign="TOP" width="508">
      <p><font size="2"><a href="#2d">Reasons for the Reorganization</a></font>
    </td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">2</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2">&nbsp;</td>
    <td valign="TOP" align="right" width="32">&nbsp;</td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2">
      <p><font size="2"><a href="#11">RISK FACTORS AND SPECIAL CONSIDERATIONS</a></font>
    </td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">9</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22">&nbsp;</td>
    <td valign="TOP" width="508">
      <p><font size="2"><a href="#11a">Trading at a Discount</a> </font>
    </td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">9</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22">&nbsp;</td>
    <td valign="TOP" width="508">
      <p><font size="2"><a href="#11b">Interest Rate and Credit Risk</a> </font>
    </td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">9</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22">&nbsp;</td>
    <td valign="TOP" width="508"><font size="2"><a href="#12">Non-Diversification</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">9</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22">&nbsp;</td>
    <td valign="TOP" width="508"><font size="2"><a href="#12a">High Yield or &#147;Junk
      Bonds&#148;</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">10</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22">&nbsp;</td>
    <td valign="TOP" width="508"><font size="2"><a href="#12b">Private Activity
      Bonds</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">10</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22">&nbsp;</td>
    <td valign="TOP" width="508"><font size="2"><a href="#12c">Indexed and Inverse
      Floating Obligations</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">10</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22">&nbsp;</td>
    <td valign="TOP" width="508"><font size="2"><a href="#12d">Options and Futures
      Transactions</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">10</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22">&nbsp;</td>
    <td valign="TOP" width="508"><font size="2"><a href="#12e">Antitakeover Provisions</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">10</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2">&nbsp;</td>
    <td valign="TOP" align="right" width="32">&nbsp;</td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2">
      <p><font size="2"><a href="#13">COMPARISON OF THE FUNDS</a></font>
    </td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">11</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22"><font size="2"></font></td>
    <td valign="TOP" width="508"><font size="2"><a href="#13a">Financial Highlights</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">11</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22"><font size="2"></font></td>
    <td valign="TOP" width="508"><font size="2"><a href="#18">Investment Objective
      and Policies</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">13</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22"><font size="2"></font></td>
    <td valign="TOP" width="508"><font size="2"><a href="#20">Description of Municipal
      Bonds</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">15</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22"><font size="2"></font></td>
    <td valign="TOP" width="508"><font size="2"><a href="#21">Other Investment
      Policies</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">15</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22"><font size="2"></font></td>
    <td valign="TOP" width="508"><font size="2"><a href="#23">Information Regarding
      Options and Futures Transactions</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">17</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22"><font size="2"></font></td>
    <td valign="TOP" width="508"><font size="2"><a href="#26">Investment Restrictions</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">19</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22"><font size="2"></font></td>
    <td valign="TOP" width="508"><font size="2"><a href="#27">Portfolio Composition</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">21</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22"><font size="2"></font></td>
    <td valign="TOP" width="508"><font size="2"><a href="#29">Performance</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">21</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22"><font size="2"></font></td>
    <td valign="TOP" width="508"><font size="2"><a href="#29a">Portfolio Transactions</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">22</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22"><font size="2"></font></td>
    <td valign="TOP" width="508"><font size="2"><a href="#30">Portfolio Turnover</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">22</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22"><font size="2"></font></td>
    <td valign="TOP" width="508"><font size="2"><a href="#30a">Net Asset Value</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">23</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22"><font size="2"></font></td>
    <td valign="TOP" width="508"><font size="2"><a href="#31">Capital Stock</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">23</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22">&nbsp;</td>
    <td valign="TOP" width="508"><font size="2"><a href="#31a">Certain Provisions
      of the Charters</a></font></td>
    <td valign="TOP" align="right" width="32"><font size="2">23 </font></td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22"><font size="2"></font></td>
    <td valign="TOP" width="508"><font size="2"><a href="#32">Management of the
      Funds</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">24</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22"><font size="2"></font></td>
    <td valign="TOP" width="508"><font size="2"><a href="#35">Code of Ethics</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">26</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22"><font size="2"></font></td>
    <td valign="TOP" width="508"><font size="2"><a href="#35a">Voting Rights</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">26</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22"><font size="2"></font></td>
    <td valign="TOP" width="508"><font size="2"><a href="#35b">Stockholder Inquiries</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">27</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22"><font size="2"></font></td>
    <td valign="TOP" width="508"><font size="2"><a href="#35c">Dividends and Distributions</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">27</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22"><font size="2"></font></td>
    <td valign="TOP" width="508"><font size="2"><a href="#36">Automatic Dividend
      Reinvestment Plan</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">27</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22"><font size="2"></font></td>
    <td valign="TOP" width="508"><font size="2"><a href="#38">Mutual Fund Investment
      Option</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">29</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22"><font size="2"></font></td>
    <td valign="TOP" width="508"><font size="2"><a href="#38a">Tax Rules Applicable
      to the Funds and Their Stockholders</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">29</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22">&nbsp;</td>
    <td valign="TOP" width="508"><font size="2"><a href="#41">Tax Treatment of
      Options and Futures Transactions</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">31</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
</table>
<table width=600>
  <tr>
    <td valign="TOP" colspan="2">
      <p><font size="2"><a href="#41a">AGREEMENT AND PLAN OF REORGANIZATION</a>
        </font>
    </td>
    <td valign="TOP" align="right" width="29">
      <p><font size="2">32</font>
    </td>
    <td valign="TOP" width="30">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="17"><font size="2"></font></td>
    <td valign="TOP" width="504"><font size="2"><a href="#41b">General</a></font></td>
    <td valign="TOP" align="right" width="29">
      <p><font size="2">32</font>
    </td>
    <td valign="TOP" width="30">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="17"><font size="2"></font></td>
    <td valign="TOP" width="504"><font size="2"> <a href="#42">Procedure</a></font></td>
    <td valign="TOP" align="right" width="29">
      <p><font size="2">32</font>
    </td>
    <td valign="TOP" width="30">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="17">&nbsp;</td>
    <td valign="TOP" width="504"><font size="2"><a href="#43">Terms of the Agreement
      and Plan of Reorganization</a></font></td>
    <td valign="TOP" align="right" width="29">
      <p><font size="2">33</font>
    </td>
    <td valign="TOP" width="30">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="17">&nbsp;</td>
    <td valign="TOP" width="504"><font size="2"><a href="#45">Potential Benefits
      to Common Stockholders of the Funds as a Result of the Reorganization</a></font></td>
    <td valign="TOP" align="right" width="29">
      <p><font size="2">34</font>
    </td>
    <td valign="TOP" width="30">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="17">&nbsp;</td>
    <td valign="TOP" width="504"><font size="2"><a href="#47">Surrender and Exchange
      of Stock Certificates</a></font></td>
    <td valign="TOP" align="right" width="29">
      <p><font size="2">35</font>
    </td>
    <td valign="TOP" width="30">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="17"><font size="2"></font></td>
    <td valign="TOP" width="504"><font size="2"><a href="#47a">Tax Consequences
      of the Reorganization</a></font></td>
    <td valign="TOP" align="right" width="29">
      <p><font size="2">36</font>
    </td>
    <td valign="TOP" width="30">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="17">&nbsp;</td>
    <td valign="TOP" width="504"><font size="2"> <a href="#49">Capitalization</a></font></td>
    <td valign="TOP" align="right" width="29">
      <p><font size="2">37</font>
    </td>
    <td valign="TOP" width="30">&nbsp;</td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>












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<p>&nbsp;
<table cellspacing=0 cellpadding=0 width=600>
  <tr>
    <td valign="TOP" colspan="2">&nbsp;</td>
    <td valign="TOP" align="right" width="32"><font size="1">Page</font>
      <hr noshade size="1" width="100%">
    </td>
    <td valign="TOP" width="36">&nbsp;&nbsp;&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2"><font size="2"><a href="#49a">ITEM 2. ELECTION
      OF DIRECTORS OF MUNIASSETS</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">37</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22">&nbsp;</td>
    <td valign="TOP" width="508"><font size="2"><a href="#50">Committee Report</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">39</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22">&nbsp;</td>
    <td valign="TOP" width="508"><font size="2"><a href="#51">Committee and Board
      Meetings</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">39</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22">&nbsp;</td>
    <td valign="TOP" width="508">
      <p><font size="2"><a href="#51a">Independent Auditors&#146; Fees</a></font></p>

      </td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">40</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22">&nbsp;</td>
    <td valign="TOP" width="508"><font size="2"><a href="#52">Compliance with
      Section 16(a) of the Securities Exchange Act of 1934</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">40</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22">&nbsp;</td>
    <td valign="TOP" width="508"><font size="2"> <a href="#52a">Interested Persons</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">40</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22">&nbsp;</td>
    <td valign="TOP" width="508"><font size="2"><a href="#52b">Compensation of
      Directors</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">40</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22">&nbsp;</td>
    <td valign="TOP" width="508"><font size="2"><a href="#52c">Officers of MuniAssets</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">40</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2">&nbsp;</td>
    <td valign="TOP" align="right" width="32">&nbsp;</td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2"><font size="2"><a href="#52d">INFORMATION CONCERNING
      THE MEETINGS</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">40</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="22"><font size="2"></font></td>
    <td valign="TOP" width="508"><font size="2"><a href="#52e">Date, Time and
      Place of Meetings</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">40</font>
    </td>
    <td valign="TOP" width="36"><font size="2"></font></td>
  </tr>
  <tr>
    <td valign="TOP" width="22"><font size="2"></font></td>
    <td valign="TOP" width="508"><font size="2"><a href="#53">Solicitation, Revocation
      and Use of Proxies</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">40</font>
    </td>
    <td valign="TOP" width="36"><font size="2"></font></td>
  </tr>
  <tr>
    <td valign="TOP" width="22"><font size="2"></font></td>
    <td valign="TOP" width="508"><font size="2"><a href="#53a">Record Date and
      Outstanding Shares</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">41</font>
    </td>
    <td valign="TOP" width="36"><font size="2"></font></td>
  </tr>
  <tr>
    <td valign="TOP" width="22"><font size="2"></font></td>
    <td valign="TOP" width="508"><font size="2"><a href="#53b">Security Ownership
      of Certain Beneficial Owners and Management</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">41</font>
    </td>
    <td valign="TOP" width="36"><font size="2"></font></td>
  </tr>
  <tr>
    <td valign="TOP" width="22"><font size="2"></font></td>
    <td valign="TOP" width="508"><font size="2"> <a href="#53c">Voting Rights
      and Required Vote</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">41</font>
    </td>
    <td valign="TOP" width="36"><font size="2"></font></td>
  </tr>
  <tr>
    <td valign="TOP" width="22"><font size="2"></font></td>
    <td valign="TOP" width="508"><font size="2"><a href="#54">Appraisal Rights</a></font></td>
    <td valign="TOP" align="right" width="32"><font size="2">41</font> </td>
    <td valign="TOP" width="36"><font size="2"></font></td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2" height="21">&nbsp;</td>
    <td valign="TOP" align="right" width="32" height="21">&nbsp;</td>
    <td valign="TOP" width="36" height="21">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2" height="21"><font size="2"><a href="#55">ADDITIONAL
      INFORMATION</a></font></td>
    <td valign="TOP" align="right" width="32" height="21">
      <p><font size="2">42</font>
    </td>
    <td valign="TOP" width="36" height="21">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2">&nbsp;</td>
    <td valign="TOP" align="right" width="32">&nbsp;</td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2"><font size="2"><a href="#56">CUSTODIAN</a></font></td>
    <td valign="TOP" align="right" width="32"><font size="2">43</font> </td>
    <td valign="TOP" width="36"><font size="2"></font></td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2">&nbsp;</td>
    <td valign="TOP" align="right" width="32">&nbsp;</td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2"><font size="2"><a href="#56a">TRANSFER AGENT,
      DIVIDEND DISBURSING AGENT AND REGISTRAR</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">43</font>
    </td>
    <td valign="TOP" width="36"><font size="2"></font></td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2">&nbsp;</td>
    <td valign="TOP" align="right" width="32">&nbsp;</td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2"><font size="2"><a href="#56b">ACCOUNTING SERVICES
      PROVIDER</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">43</font>
    </td>
    <td valign="TOP" width="36"><font size="2"></font></td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2">&nbsp;</td>
    <td valign="TOP" align="right" width="32">&nbsp;</td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2"><font size="2"><a href="#56c">LEGAL PROCEEDINGS</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">43</font>
    </td>
    <td valign="TOP" width="36"><font size="2"></font></td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2">&nbsp;</td>
    <td valign="TOP" align="right" width="32">&nbsp;</td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2"><font size="2"><a href="#57">LEGAL OPINIONS</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">43</font>
    </td>
    <td valign="TOP" width="36"><font size="2"></font></td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2">&nbsp;</td>
    <td valign="TOP" align="right" width="32">&nbsp;</td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2"><font size="2"><a href="#57a">EXPERTS</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">43</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2">&nbsp;</td>
    <td valign="TOP" align="right" width="32">&nbsp;</td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2"><font size="2"><a href="#57b">STOCKHOLDER PROPOSALS</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">43</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2">&nbsp;</td>
    <td valign="TOP" align="right" width="32">&nbsp;</td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2" height="22"><font size="2"><a href="#f1">INDEX
      TO FINANCIAL STATEMENTS</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">F-1</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="530" height="22" colspan="2"><font size="2"><a href="#i1">APPENDIX
      I:&nbsp; INFORMATION PERTAINING TO EACH FUND</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">I-1</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="530" colspan="2" height="22"><font size="2"><a href="#ii1">APPENDIX
      II:&nbsp; AGREEMENT AND PLAN OF REORGANIZATION</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">II-1</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="530" colspan="2" height="22"><font size="2"><a href="#iii1">APPENDIX
      III:&nbsp; RATINGS OF MUNICIPAL BONDS AND COMMERCIAL PAPER</a></font></td>
    <td valign="TOP" align="right" width="32">
      <p><font size="2">III-1</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
  <tr>
    <td valign="bottom" width="530" colspan="2"><font size="2"><a href="#iv1">APPENDIX
      IV:&nbsp; CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF <br>
      &nbsp;&nbsp;&nbsp; DIRECTORS OF MUNIASSETS FUND, INC.</a></font></td>
    <td valign="bottom" align="right" width="32">
      <p><font size="2">IV-1</font>
    </td>
    <td valign="TOP" width="36">&nbsp;</td>
  </tr>
</table>
<br>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>












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<!-- MARKER LABEL="sheet: 8, page: 8" -->



<p>
<table width=600>
  <tr align="center">
    <td><font size=2><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="1"></a>INTRODUCTION</b></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;This Joint Proxy Statement
      and Prospectus is furnished to you in connection with the solicitation of
      proxies on behalf of the Board of Directors of MuniAssets and High Income
      Municipal for use at the Meetings to be held at the offices of Fund Asset
      Management, L.P. (&#147;FAM&#148;) and Merrill Lynch Investment Managers,
      L.P. (&#147;MLIM&#148;), respectively, 800 Scudders Mill Road, Plainsboro,
      New Jersey on October 24, 2001, at the time specified for each Fund in Appendix
      I to this Joint Proxy Statement and Prospectus. The mailing address for
      each Fund is P.O. Box 9011, Princeton, New Jersey 08543-9011. The approximate
      mailing date of this Joint Proxy Statement and Prospectus is September 13,
      2001.&lt;/R&gt;</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any person giving a proxy may
      revoke it at any time prior to its exercise by executing a superseding proxy,
      by giving written notice of the revocation to the Secretary of MuniAssets
      or High Income Municipal, as applicable, at the address indicated above
      or by voting in person at the applicable Meeting. All properly executed
      proxies received prior to the Meetings will be voted at the Meetings in
      accordance with the instructions marked thereon or otherwise as provided
      therein. Unless instructions to the contrary are marked, (a) for the stockholders
      of both Funds, all proxies will be voted &#147;FOR&#148; Item 1 to approve
      the Agreement and Plan of Reorganization between MuniAssets and High Income
      Municipal (the &#147;Agreement and Plan&#148;); and (b) for the stockholders
      of MuniAssets only, all proxies submitted by MuniAssets stockholders will
      be voted &#147;FOR&#148; Item 2 to elect two Class I Directors of MuniAssets
      to serve for a term of three years.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td height="94"><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;With respect
      to Item 1, assuming the required quorum is present at each Meeting, approval
      of the Agreement and Plan will require (i) the affirmative vote of a majority
      of the outstanding shares of High Income Municipal entitled to vote thereon
      and (ii) the affirmative vote of a majority of the votes cast by the holders
      of MuniAssets Common Stock with respect to such item, provided that the
      total number of votes cast on such item represents over 50% shares entitled
      to vote on such item. The Reorganization will not take place if either the
      MuniAssets stockholders or the High Income Municipal stockholders do not
      approve the Agreement and Plan.&lt;/R&gt;</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With respect to Item 2, assuming
      the required quorum is present at the Meeting of MuniAssets stockholders,
      the election of two Class I Directors of MuniAssets will require the affirmative
      vote of a plurality of the votes cast by MuniAssets stockholders. A &#147;plurality
      of the votes cast&#148; means the candidates must receive more votes than
      any other candidates for the same positions, but not necessarily a majority
      of votes cast.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td height="109"><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;The Board
      of Directors of each Fund has fixed the close of business on August 27,
      2001 as the record date (the &#147;Record Date&#148;) for the determination
      of stockholders entitled to notice of, and to vote at, the Meetings, or
      any adjournment thereof. Stockholders on the Record Date will be entitled
      to one vote for each share held, with no shares having cumulative voting
      rights. At the Record Date, each Fund had outstanding the number of shares
      of Common Stock indicated in Appendix I. To the knowledge of the management
      of each Fund, no person owned beneficially more than 5% of the outstanding
      shares of capital stock of the respective Fund as of the Record Date.&lt;/R&gt;</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Boards of Directors of
      the Funds know of no business other than that discussed in Item 1 and Item
      2 below that will be presented for consideration at the Meetings. 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.</font></td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td  align=center><font size=2><b><a name="2"></a>ITEM 1. THE REORGANIZATION</b></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td  align=center><font size=2><b><a name="2a"></a>SUMMARY</b></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>The following is a summary
      of certain information contained elsewhere in this Joint Proxy Statement
      and Prospectus and is qualified in its entirety by reference to the more
      complete information contained in this Joint Proxy Statement and Prospectus
      and in the Agreement and Plan attached hereto as Appendix II.</i></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><b><a name="2b"></a>The Reorganization</b></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At separate meetings of the
      Board of Directors of High Income Municipal and MuniAssets held on June
      7, 2001 and July 11, 2001, respectively, each Board unanimously approved
      the transaction whereby (i) MuniAssets would acquire substantially all of
      the assets and assume substantially all of the liabilities of High Income
      Municipal, (ii) MuniAssets would simultaneously issue to High Income Municipal
      shares of MuniAssets </font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> </font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>












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<p>
<p>
<p>
<table width=600>
  <tr>
    <td><font size=2>Common Stock, (iii) the shares of MuniAssets Common Stock
      would be subsequently distributed to the holders of High Income Municipal
      Common Stock (plus cash in lieu of fractional shares) and (iv) High Income
      Municipal would be deregistered and dissolved, as described below.</font></td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td><font size=2><B><a name="2c"></a>What Will Be the Results of the Reorganization</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the Agreement and Plan is
      approved and the Reorganization is completed:</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3%></td>
    <td width=1% valign=top><font size=3>&#149;</font></td>
    <td width=3%></td>
    <td width=93%><font size=2>MuniAssets will acquire substantially all of the
      assets and assume substantially all of the liabilities of High Income Municipal;</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3%></td>
    <td width=1% valign=top><font size=3>&#149;</font></td>
    <td width=3%></td>
    <td width=93%><font size=2>Stockholders of High Income Municipal will become
      stockholders of MuniAssets; and</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3%></td>
    <td width=1% valign=top><font size=3>&#149;</font></td>
    <td width=3%></td>
    <td width=93%><font size=2>Stockholders of High Income Municipal Common Stock
      will receive full shares of MuniAssets Common Stock (plus cash in lieu of
      fractional shares) equal to the aggregate net asset value of the shares
      of High Income Municipal Common Stock currently owned by such stockholders.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stockholders should consult
      their tax advisers regarding the effect of the Reorganization in light of
      their individual circumstances.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><B><a name="2d"></a>Reasons for the Reorganization</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Boards of Directors of
      MuniAssets and High Income Municipal have approved the Agreement and Plan.
      The Boards of Directors of MuniAssets and High Income Municipal recommend
      that you vote to approve the Agreement and Plan.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><I>High Income Municipal</I></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;The Board of Directors
      of High Income Municipal has determined that High Income Municipal common
      stockholders are likely to benefit from the Reorganization and that the
      interests of existing stockholders will not be diluted as a result of the
      Reorganization. The Board of Directors believes that the Reorganization
      is in the best interests of High Income Municipal and its common stockholders.</font></td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td height="22"><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In reaching its
      decision, the Board of Directors considered a number of factors including
      the following:&lt;/R&gt;</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3%></td>
    <td width=1% valign=top><font size=3>&#149;</font></td>
    <td width=3%></td>
    <td width=93%><font size=2>After the Reorganization, High Income Municipal
      common stockholders will be invested in a substantially larger non-diversified,
      closed-end fund with an investment objective and policies substantially
      similar to High Income Municipal&#146;s investment objective and policies;</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3%></td>
    <td width=1% valign=top><font size=3>&#149;</font></td>
    <td width=3%></td>
    <td width=93%><font size=2>After the Reorganization, High Income Municipal
      common stockholders are expected to experience lower expenses per share,
      economies of scale and greater flexibility in portfolio management;</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3%></td>
    <td width=1% valign=top><font size=3>&#149;</font></td>
    <td width=3%></td>
    <td width=93%><font size=2>After the Reorganization, High Income Municipal
      common stockholders will benefit from the fact that the Combined Fund will
      not pay the administrative fee currently paid by High Income Municipal;</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3%></td>
    <td width=1% valign=top><font size=3>&#149;</font></td>
    <td width=3%></td>
    <td width=93%><font size=2>After the Reorganization, High Income Municipal
      common stockholders will no longer be subject to the expenses associated
      with High Income Municipal&#146;s required yearly prospectus updates;</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3%></td>
    <td width=1% valign=top><font size=3>&#149;</font></td>
    <td width=3%></td>
    <td width=93%><font size=2>After the Reorganization, High Income Municipal
      common stockholders will no longer be subject to the expenses of conducting
      quarterly tender offers;</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3%></td>
    <td width=1% valign=top><font size=3>&#149;</font></td>
    <td width=3%></td>
    <td width=93%><font size=2>After the Reorganization, High Income Municipal
      common stockholders will no longer be subject to an early withdrawal charge
      (&#147;EWC&#148;) upon the sale of shares held for less than three years;
      and</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3%></td>
    <td width=1% valign=top><font size=3>&#149;</font></td>
    <td width=3%></td>
    <td width=93%><font size=2>&lt;R&gt;After the Reorganization, High Income
      Municipal 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 lower or higher than the net asset value of the shares and transactions
      in shares may be subject to brokerage commissions and other charges.&lt;/R&gt;</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><i>MuniAssets</i></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;The Board of Directors
      of MuniAssets has determined that MuniAssets common stockholders are likely
      to benefit from the Reorganization and that the interests of existing stockholders
      will not be diluted as a result of the Reorganization. The Board believes
      that the Reorganization is in the best interest of MuniAssets and its common
      stockholders.&lt;/R&gt;</font></td>
  </tr>
</table>
<p>&nbsp;</p>
<p>
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 2 </font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>












<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 10, page: 10" -->



<p>
<p>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In reaching its decision the
      Board considered a number of factors including the following:</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3%></td>
    <td width=1% valign=top><font size=3>&#149;</font></td>
    <td width=3%></td>
    <td width=93%><font size=2>After the Reorganization, MuniAssets common stockholders
      will remain invested in a non-diversified, closed-end fund that has no changes
      to its current investment objective but has a larger asset base and is expected to have a lower
      expense ratio; and</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3%></td>
    <td width=1% valign=top><font size=3>&#149;</font></td>
    <td width=3%></td>
    <td width=93%><font size=2>After the Reorganization, MuniAssets common stockholders
      should experience economies of scale and greater flexibility in portfolio
      management.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See &#147;Fee Table&#148; below
      and &#147;The Reorganization&#151;Potential Benefits to Stockholders as
      a Result of the Reorganization.&#148;</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Reorganization requires
      the approval of the stockholders of both Funds. The Reorganization will
      not take place if either the MuniAssets stockholders or the High Income
      Municipal stockholders do not approve the Agreement and Plan. 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 stockholders of the Funds 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&#146;s obligations has not been fulfilled or waived by such
      Fund&#146;s Board of Directors.</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td  align=center><font size=2><b>Fee Table for Common Stockholders of MuniAssets,
      <br>
      High Income Municipal and the Pro Forma Combined Fund <br>
      as of May 31, 2001 (Unaudited)</b></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following fee table below
      illustrates the expenses incurred by each Fund individually and the estimated
      pro forma expenses to be incurred by the Combined Fund after the Reorganization.
      Future fees and expenses may be greater or less than those indicated.</font></td>
  </tr>
</table>
<br>
<table width="600" border="0" cellspacing="0" cellpadding="0">
  <tr valign="bottom">
    <td align="left" width="275"><font size="2">&lt;R&gt;</font></td>
    <td colspan="4" align="center"><font size="1"><b>Actual </b></font>
      <hr noshade align="center" size="1" width="95%">
    </td>
    <td align="center" colspan="2"><font size="1"><b> Pro Forma </b></font>
      <hr noshade align="center" size="1" width="95%">
    </td>
  </tr>
  <tr valign="top">
    <td width="275"><b> </b></td>
    <td align="center" colspan="2"><b><font size="1">MuniAssets </font></b>
      <hr noshade align="center" size="1" width="95%">
      <b></b></td>
    <td align="center" colspan="2"><b><font size="1">High Income Municipal </font></b>
      <hr noshade align="center" size="1" width="95%">
      <b></b></td>
    <td align="center" colspan="2"><b><font size="1">Combined Fund* </font></b>
      <hr noshade align="center" size="1" width="95%">
    </td>
  </tr>
  <tr>
    <td width="275"><b><font size="2">Stockholder Transaction Expenses </font></b></td>
    <td width="78">&nbsp;</td>
    <td width="23">&nbsp;</td>
    <td width="78">&nbsp;</td>
    <td width="46">&nbsp;</td>
    <td width="58">&nbsp;</td>
    <td width="42">&nbsp;</td>
  </tr>
  <tr>
    <td width="275"><font size="2">Maximum Sales Load (as a percentage of the
      <br>
      &nbsp;&nbsp; offering price) imposed on purchases <br>
      &nbsp;&nbsp; of Common Stock</font></td>
    <td width="78" align="right"><font size="2">None</font></td>
    <td width="23" align="left"><font size="2">(a)</font></td>
    <td width="78" align="right"><font size="2"> None</font></td>
    <td width="46" align="left">&nbsp;</td>
    <td width="58" align="right"><font size="2"> None</font></td>
    <td width="42" align="left"><font size="2">(a)(b) </font></td>
  </tr>
  <tr>
    <td width="275"><font size="2">Dividend Reinvestment and Cash Purchase <br>
      &nbsp;&nbsp; Plan Fees</font></td>
    <td width="78" align="right"><font size="2">None</font></td>
    <td width="23" align="right">&nbsp;</td>
    <td width="78" align="right"><font size="2">None</font></td>
    <td width="46" align="left">&nbsp;</td>
    <td width="58" align="right"><font size="2">None</font></td>
    <td width="42" align="left">&nbsp;</td>
  </tr>
  <tr>
    <td width="275"><font size="2">Early Withdrawal Charge <br>
      &nbsp;&nbsp;(as a percentage of original purchase<br>
      &nbsp;&nbsp;price or net asset value at the<br>
      &nbsp;&nbsp;time of repurchase)(c) </font></td>
    <td align="right" width="78"><font size="2">None </font></td>
    <td align="center" width="23">&nbsp;</td>
    <td align="center" colspan="2"><font size="2">3.0% during the first<br>
      year, decreasing 1.0% <br>
      annually thereafter to<br>
      0.0% after the third year</font></td>
    <td width="58" align="right"><font size="2">None</font></td>
    <td width="42" align="left">&nbsp;</td>
  </tr>
  <tr>
    <td width="275"> <font size="2"><b>Annual Expenses (as a percentage of average
      <br>
      &nbsp;&nbsp; net assets attributable to Common Stock <br>
      &nbsp;&nbsp; at May 31, 2001)</b></font></td>
    <td width="78" align="right">&nbsp;</td>
    <td width="23" align="left">&nbsp;</td>
    <td width="78" align="right">&nbsp;</td>
    <td width="46" align="left">&nbsp;</td>
    <td width="58" align="right">&nbsp;</td>
    <td width="42" align="left">&nbsp;</td>
  </tr>
  <tr>
    <td width="275" height="18"><font size="2">Investment Advisory Fees(d)</font></td>
    <td width="78" align="right" height="18"><font size="2">.55</font></td>
    <td width="23" align="left" height="18"><font size="2"> % </font></td>
    <td width="78" align="right" height="18"><font size="2">.95</font></td>
    <td width="46" align="left" height="18"><font size="2"> % </font></td>
    <td width="58" align="right" height="18"><font size="2">.55</font></td>
    <td width="42" align="left" height="18"><font size="2"> % </font></td>
  </tr>
  <tr>
    <td width="275"><font size="2">Other Expenses</font></td>
    <td width="78" align="right"><font size="2">.21</font></td>
    <td width="23" align="left"><font size="2"> % </font></td>
    <td width="78" align="right"><font size="2"> .66</font> </td>
    <td width="46" align="left"><font size="2"> %(e) </font></td>
    <td width="58" align="right"><font size="2"> .13</font></td>
    <td width="42" align="left"><font size="2"> % </font></td>
  </tr>
  <tr>
    <td width="275">&nbsp;</td>
    <td width="78" align="right">
      <hr noshade width="25%" align="right" size="1">
    </td>
    <td width="23" align="left">&nbsp;</td>
    <td width="78" align="right">
      <hr noshade width="25%" align="right" size="1">
    </td>
    <td width="46" align="left">&nbsp;</td>
    <td width="58" align="right">
      <hr noshade width="25%" align="right" size="1">
    </td>
    <td width="42" align="left">&nbsp;</td>
  </tr>
  <tr>
    <td width="275"><font size="2">Total Annual Expenses</font></td>
    <td width="78" align="right"><font size="2">.76</font></td>
    <td width="23" align="left"><font size="2"> % </font></td>
    <td width="78" align="right"><font size="2"> 1.61</font></td>
    <td width="46" align="left"><font size="2"> % </font></td>
    <td width="58" align="right"><font size="2"> .68</font></td>
    <td width="42" align="left"><font size="2"> % </font></td>
  </tr>
  <tr>
    <td width="275"><font size="2"></font></td>
    <td width="78" align="right">
      <hr noshade width="26%" align="right" size="2">
    </td>
    <td width="23" align="left">&nbsp;</td>
    <td width="78" align="right">
      <hr noshade width="26%" align="right" size="2">
    </td>
    <td width="46" align="left">&nbsp;</td>
    <td width="58" align="right">
      <hr noshade width="26%" align="right" size="2">
    </td>
    <td width="42" align="left">&nbsp;</td>
  </tr>
</table>
<table width=600>
  <tr>
    <td>
      <hr size=1 noshade align=left  width=75>
    </td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3% align=right valign=top><font size="1">* </font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">The expenses for the Combined Fund represent
      the estimated annualized expenses as of May 31, 2001 assuming MuniAssets
      had acquired substantially all of the assets and assumed substantially all
      of the liabilities of High Income Municipal as of that date.</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3% align=right valign=top><font size="1">(a) </font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">Shares of Common Stock purchased in the secondary
      market may be subject to brokerage commissions or other charges. </font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3% align=right valign=top><font size="1">(b) </font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">No sales load will be charged on the issuance
      of shares in the Reorganization. Shares of Common Stock are not available
      for purchase directly from the Combined Fund but may be purchased through
      a broker-dealer subject to individually negotiated commission rates.</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3% align=right valign=top><font size="1">(c) </font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">No Early Withdrawal Charge (&#147;EWC&#148;) will apply to
      shares of MuniAssets Common Stock issued to High Income Municipal in the
      Reorganization, nor will any EWC be due on shares of High Income Municipal
      Common Stock in connection with the Reorganization.&lt;/R&gt;</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3% align=right valign=top><font size="1">(d) </font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">Based on average net assets of each Fund and
      the Combined Fund as of May 31, 2001.</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3% align=right valign=top><font size="1">(e) </font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">Includes the administrative fee at the rate of
      0.25% of average daily net assets paid by High Income Municipal.</font></td>
  </tr>
</table>
<p>&nbsp;</p>
<p>&nbsp;
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 3 </font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>












<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 11, page: 11" -->



<p>
<table width=600>
  <tr>
    <td><font size=2><B>Example:</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><B>Cumulative Expenses Paid on Shares of Common Stock for
      the Periods Indicated:</B></font></td>
  </tr>
</table>
<br>
<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
  <TR VALIGN="BOTTOM">
    <TH COLSPAN="2"></TH>
    <TH COLSPAN="2"><font size="1">1 Year</font>
      <hr noshade align="center" size="1" width="45">
    </TH>
    <TH COLSPAN="2"><font size="1">3 Years</font>
      <hr noshade align="center" size="1" width="45">
    </TH>
    <TH COLSPAN="2"><font size="1">5 Years</font>
      <hr noshade align="center" size="1" width="45">
    </TH>
    <TH COLSPAN="2"><font size="1">10 Years</font>
      <hr noshade align="center" size="1" width="45">
    </TH>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD WIDTH="42%" ALIGN="LEFT"><font size="2">An investor would pay the following
      expenses on a $1,000 investment assuming (1) the operating expense ratio
      for each Fund set forth above and (2) a 5% annual return throughout the
      period:</font></TD>
    <TD WIDTH="6%" ALIGN="LEFT"><font size="2"></font></TD>
    <TD WIDTH="8%" ALIGN="RIGHT"><font size="2"></font></TD>
    <TD WIDTH="6%" ALIGN="LEFT"><font size="2"></font></TD>
    <TD WIDTH="8%" ALIGN="RIGHT"><font size="2"></font></TD>
    <TD WIDTH="6%" ALIGN="LEFT"><font size="2"></font></TD>
    <TD WIDTH="8%" ALIGN="RIGHT"><font size="2"></font></TD>
    <TD WIDTH="6%" ALIGN="LEFT"><font size="2"></font></TD>
    <TD WIDTH="8%" ALIGN="RIGHT"><font size="2"></font></TD>
    <TD WIDTH="2%" ALIGN="LEFT"><font size="2"></font></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD WIDTH="42%" ALIGN="LEFT">&nbsp;</TD>
    <TD WIDTH="6%" ALIGN="LEFT">&nbsp;</TD>
    <TD WIDTH="8%" ALIGN="RIGHT">&nbsp;</TD>
    <TD WIDTH="6%" ALIGN="LEFT">&nbsp;</TD>
    <TD WIDTH="8%" ALIGN="RIGHT">&nbsp;</TD>
    <TD WIDTH="6%" ALIGN="LEFT">&nbsp;</TD>
    <TD WIDTH="8%" ALIGN="RIGHT">&nbsp;</TD>
    <TD WIDTH="6%" ALIGN="LEFT">&nbsp;</TD>
    <TD WIDTH="8%" ALIGN="RIGHT">&nbsp;</TD>
    <TD WIDTH="2%" ALIGN="LEFT">&nbsp;</TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD WIDTH="42%" ALIGN="LEFT"><font size="2">MuniAssets</font></TD>
    <TD WIDTH="6%" ALIGN="LEFT">&nbsp;</TD>
    <TD WIDTH="8%" ALIGN="RIGHT"><font size="2">$&nbsp;&nbsp;8</font></TD>
    <TD WIDTH="6%" ALIGN="LEFT">&nbsp;</TD>
    <TD WIDTH="8%" ALIGN="RIGHT"><font size="2">$24</font></TD>
    <TD WIDTH="6%" ALIGN="LEFT">&nbsp;</TD>
    <TD WIDTH="8%" ALIGN="RIGHT"><font size="2">$42</font></TD>
    <TD WIDTH="6%" ALIGN="LEFT">&nbsp;</TD>
    <TD WIDTH="8%" ALIGN="RIGHT"><font size="2">$&nbsp;&nbsp;94</font></TD>
    <TD WIDTH="2%" ALIGN="LEFT">&nbsp;</TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><font size="2">High Income Municipal*</font></TD>
    <TD ALIGN="LEFT">&nbsp;</TD>
    <TD ALIGN="RIGHT"><font size="2">$16</font></TD>
    <TD ALIGN="LEFT">&nbsp;</TD>
    <TD ALIGN="RIGHT"><font size="2">$51</font></TD>
    <TD ALIGN="LEFT">&nbsp;</TD>
    <TD ALIGN="RIGHT"><font size="2">$88</font></TD>
    <TD ALIGN="LEFT">&nbsp;</TD>
    <TD ALIGN="RIGHT"><font size="2">$191</font></TD>
    <TD ALIGN="LEFT">&nbsp;</TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><font size="2">Combined Fund**</font></TD>
    <TD ALIGN="LEFT">&nbsp;</TD>
    <TD ALIGN="RIGHT"><font size="2">$&nbsp;&nbsp;7</font></TD>
    <TD ALIGN="LEFT">&nbsp;</TD>
    <TD ALIGN="RIGHT"><font size="2">$22</font></TD>
    <TD ALIGN="LEFT">&nbsp;</TD>
    <TD ALIGN="RIGHT"><font size="2">$38</font></TD>
    <TD ALIGN="LEFT">&nbsp;</TD>
    <TD ALIGN="RIGHT"><font size="2">$&nbsp;&nbsp;85</font></TD>
    <TD ALIGN="LEFT">&nbsp;</TD>
  </TR>
</TABLE>
<table width=600>
  <tr>
    <td>
      <hr size=1 noshade align=left  width=75>
    </td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3% align=right valign=top><font size="1">* </font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">Assumes that the investor is not tendering shares
      at the end of the period.</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3% align=right valign=top><font size="1">** </font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">Assumes that the Reorganization had taken place
      on May 31, 2001.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The foregoing Fee Table is
      intended to assist investors in understanding the costs and expenses that
      a stockholder of each Fund will bear directly or indirectly as compared
      to the costs and expenses that would be borne by such investors taking into
      account the Reorganization. The example set forth above assumes that all
      dividends were reinvested and uses a 5% annual rate of return as mandated
      by SEC regulations and for shares of High Income Municipal Common Stock
      that such shares were purchased in the initial public offering of shares
      of High Income Municipal Common Stock. The example 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 example. See &#147;Comparison of the Funds&#148; and
      &#147;The Reorganization &#151; Potential Benefits to Common Stockholders
      of the Funds as a Result of the Reorganization.&#148;</font></td>
  </tr>
</table>
<br>
<table cellspacing=0 border=0 cellpadding=0 width=600>
  <tr>
    <td valign="TOP" colspan="2"> <font size="2"><b>MuniAssets</b></font></td>
    <td valign="TOP" width="18"> <font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td valign="TOP" colspan="3"> <font size="2">&lt;R&gt;MuniAssets was incorporated
      under the laws of the State of Maryland on April 15, 1993 and commenced
      operations on June 25, 1993. As of July 31, 2001, MuniAssets had net assets
      of approximately $137.6 million.</font> </td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2">&nbsp;</td>
    <td valign="TOP" width="18">&nbsp;</td>
    <td valign="TOP" colspan="3">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2"> <font size="2"><b>High Income Municipal</b></font></td>
    <td valign="TOP" width="18">&nbsp;</td>
    <td valign="TOP" colspan="3"> <font size="2">High Income Municipal was incorporated
      under the laws of the State of Maryland on August 16, 1990 and commenced
      operations on November 2, 1990. As of July 31, 2001, High Income Municipal
      had net assets of approximately $133.2 million</font>.</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2">&nbsp;</td>
    <td valign="TOP" width="18">&nbsp;</td>
    <td valign="TOP" colspan="3">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2"> <font size="2"><b>Comparison of the Funds</b></font></td>
    <td valign="TOP" width="18"><font size="2"></font></td>
    <td valign="TOP" width="182" align="center"><b><font size="1">MuniYield </font></b>
      <hr noshade size="1" width="60%">
    </td>
    <td valign="TOP" width="12" align="center"><b><font size="1">&nbsp;&nbsp;
      </font></b></td>
    <td valign="TOP" width="210" align="center"><b><font size="1">Municipal Strategy
      </font></b>
      <hr noshade size="1" width="60%">
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="83">&nbsp;</td>
    <td valign="TOP" width="95"><font size="1">Fund Structure</font></td>
    <td valign="TOP" width="18"><font size="1"></font></td>
    <td valign="TOP" width="182"><font size="1">Closed-end fund with its Common  Stock
      listed on the NYSE </font></td>
    <td valign="TOP" width="12"><font size="1"></font></td>
    <td valign="TOP" width="210"><font size="1">Continuously offered closed-end
      fund </font></td>
  </tr>
  <tr>
    <td valign="TOP" width="83">&nbsp;</td>
    <td valign="TOP" width="95"><font size="1"></font></td>
    <td valign="TOP" width="18"><font size="1"></font></td>
    <td valign="TOP" width="182"><font size="1"></font></td>
    <td valign="TOP" width="12"><font size="1"></font></td>
    <td valign="TOP" width="210"><font size="1"></font></td>
  </tr>
  <tr>
    <td valign="TOP" width="83">&nbsp;</td>
    <td valign="TOP" width="95"><font size="1">Liquidity</font></td>
    <td valign="TOP" width="18"><font size="1"></font></td>
    <td valign="TOP" width="182"><font size="1">Common Stock trades at market
      price (which may be higher or lower than net asset value) on the NYSE on
      each day the NYSE is open for trading</font></td>
    <td valign="TOP" width="12"><font size="1"></font></td>
    <td valign="TOP" width="210"><font size="1">Fund makes quarterly tender offers
      to purchase its Common Stock from stockholders at net asset value per share
      (less any applicable EWC)</font></td>
  </tr>
  <tr>
    <td valign="TOP" width="83">&nbsp;</td>
    <td valign="TOP" width="95"><font size="1"></font></td>
    <td valign="TOP" width="18"><font size="1"></font></td>
    <td valign="TOP" width="182"><font size="1"></font></td>
    <td valign="TOP" width="12"><font size="1"></font></td>
    <td valign="TOP" width="210"><font size="1"></font></td>
  </tr>
  <tr>
    <td valign="TOP" width="83">&nbsp;</td>
    <td valign="TOP" width="95"><font size="1">Purchases and Sales of Common Stock
      </font></td>
    <td valign="TOP" width="18"><font size="1"></font></td>
    <td valign="TOP" width="182"><font size="1">Investors purchase and sell Common
      Stock through a registered broker-dealer on the NYSE, and transactions in
      shares may be subject to brokerage commissions or other charges</font></td>
    <td valign="TOP" width="12"><font size="1"></font></td>
    <td valign="TOP" width="210"><font size="1">Investors purchase Common Stock
      from FAM Distributors, Inc. or from other selected securities dealers or
      financial intermediaries, and may sell their shares by tendering Common
      Stock to the Fund on a quarterly basis</font></td>
  </tr>
  <tr>
    <td valign="TOP" width="83"><font size="2">&lt;/R&gt;</font></td>
    <td valign="TOP" width="95">&nbsp;</td>
    <td valign="TOP" width="18">&nbsp;</td>
    <td valign="TOP" width="182">&nbsp;</td>
    <td valign="TOP" width="12">&nbsp;</td>
    <td valign="TOP" width="210">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2">&nbsp;</td>
    <td valign="TOP" width="18">&nbsp;</td>
    <td valign="TOP" colspan="3"><font size="2"><i>Investment Objectives and Policies.
      </i>Each Fund is a non-diversified, closed-end management investment company.
      The Funds have substantially similar</font></td>
  </tr>
</table>
<br>
<p>&nbsp;
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 4</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>




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<br>
<table cellspacing=0 border=0 cellpadding=0 width=600>
  <tr>
    <td valign="TOP" colspan="2">&nbsp;</td>
    <td valign="TOP" width="192">&nbsp;</td>
    <td valign="TOP" colspan="3" width="400"><font size="2"> investment objectives
      and policies. Each Fund seeks to provide stockholders with high current
      income exempt from Federal income taxes. </font></td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2">&nbsp;</td>
    <td valign="TOP" width="192">&nbsp;</td>
    <td valign="TOP" colspan="3" width="400">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2"><font size="2"></font></td>
    <td valign="TOP" width="192"><font size="2"></font></td>
    <td valign="TOP" colspan="3" width="400"><font size="2">&lt;R&gt;Each Fund
      seeks to achieve its investment objective by investing primarily in a portfolio
      of medium to lower grade or unrated municipal obligations, issued by or
      on behalf of states, territories and possessions of the United States and
      their political subdivisions, agencies or instrumentalities paying interest
      which, in the opinion of bond counsel to the issuer, is exempt from Federal
      income taxes (&#147;Municipal Bonds&#148;). Under normal circumstances,
      at least 80% of each Fund&#146;s total assets will be invested in Municipal
      Bonds. MuniAssets and High Income Municipal each invests at least 65% and
      75%, respectively, of its total assets in Municipal Bonds that are rated
      in any one of the medium and lower rating categories by Moody&#146;s Investors
      Service, Inc. (&#147;Moody&#146;s&#148;), Standard &amp; Poor&#146;s (&#147;S&amp;P&#148;)
      or Fitch, Inc. (&#147;Fitch&#148;) or in unrated Municipal Bonds that the
      Funds&#146; investment adviser believes are of comparable quality. The average
      maturity of each Fund&#146;s portfolio securities, and therefore each Fund&#146;s
      portfolio as a whole, will vary based upon an assessment by the Funds&#146;
      investment adviser of economic and market conditions. As of May 31, 2001,
      the weighted average maturity of the portfolio of MuniAssets and High Income
      Municipal was 22.36 years and 17.71 years, respectively. See &#147;Comparison
      of the Funds &#151; Investment Objective and Policies&#148; in this Joint
      Proxy Statement and Prospectus. </font></td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2">&nbsp;</td>
    <td valign="TOP" width="192">&nbsp;</td>
    <td valign="TOP" colspan="3" width="400">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2"><font size="2"></font></td>
    <td valign="TOP" width="192"><font size="2"></font></td>
    <td valign="TOP" colspan="3" width="400"><font size="2"> <i>Capital Stock.</i>
      Each Fund has outstanding Common Stock. As of August&nbsp;31, 2001, (i)
      the net asset value per share of MuniAssets Common Stock was $13.26 and
      the market price per share was $13.32; and (ii) the net asset value per
      share of High Income Municipal Common Stock was $9.52. See &#147;Comparison
      of the Funds &#151; Capital Stock&#148; in this Joint Proxy Statement and
      Prospectus. &lt;/R&gt;</font></td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2"><font size="2"></font></td>
    <td valign="TOP" width="192"><font size="2"></font></td>
    <td valign="TOP" colspan="3" width="400">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2"><font size="2"></font></td>
    <td valign="TOP" width="192"><font size="2"></font></td>
    <td valign="TOP" colspan="3" width="400"><font size="2"> <i>Liquidity.</i>
      MuniAssets Common Stock trades in the secondary market 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 MuniAssets Common Stock on the NYSE
      may be at a premium above or discount from the net asset value of the MuniAssets
      Common Stock.</font></td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2">&nbsp;</td>
    <td valign="TOP" width="192">&nbsp;</td>
    <td valign="TOP" colspan="3" width="400">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2">&nbsp;</td>
    <td valign="TOP" width="192">&nbsp;</td>
    <td valign="TOP" colspan="3" width="400"><font size=2>High Income Municipal
      engages in a continuous offering of High Income Municipal Common Stock.
      High Income Municipal is not listed on any exchange and no secondary market
      presently exists for High Income Municipal Common Stock nor is it currently
      expected that a secondary market will develop. In order to provide liquidity
      for stockholders of High Income Municipal, the Fund makes tender offers
      on a quarterly basis to purchase its Common Stock from stockholders at net
      asset value per share (less any applicable EWC). If High Income</font></td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 5</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>




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<p>
<table cellspacing=0 border=0 cellpadding=0 width=600>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP"> <font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td valign="TOP" width="400"> <font size=2> Municipal stockholders approve
      the Reorganization, it is not expected that High Income Municipal will make
      any additional tender offers for its shares. </font> </td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP" width="400">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP" width="400"><font size=2><i>Portfolio Management.</i> The
      investment adviser for MuniAssets is FAM and the investment adviser for
      High Income Municipal is MLIM. FAM and MLIM are affiliates. The investment
      adviser for the Combined Fund will be FAM. Theodore R. Jaeckel, Jr. currently
      serves as the portfolio manager for each Fund and will continue to serve
      as the portfolio manager for the Combined Fund after the Reorganization.</font></td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP" width="400">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP" width="400"><font size=2><i>Advisory and Administrative Fees.
      </i>FAM and MLIM are responsible for the management of the investment portfolio
      of MuniAssets and High Income Municipal, respectively, and for providing
      administrative services to each respective Fund.</font></td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP" width="400">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP" width="400"><font size=2>MuniAssets pays FAM a monthly advisory
      fee at the annual rate of 0.55% of MuniAssets&#146; average weekly net assets.
      High Income Municipal pays MLIM a monthly advisory fee at the annual rate
      of 0.95% of High Income Municipal&#146;s average daily net assets. High
      Income Municipal also pays MLIM a monthly administrative fee at the annual
      rate of 0.25% of High Income Municipal&#146;s average daily net assets.
      MuniAssets does not pay FAM a separate administrative fee. After the Reorganization,
      the Combined Fund will pay FAM a monthly advisory fee at the annual rate
      of 0.55% of its average weekly net assets. The Combined Fund will not pay
      a separate administrative fee to FAM. See &#147;Comparison of the Funds
      &#151; Management of the Funds.&#148;</font></td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP" width="400">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP" width="400"><font size=2><i>Overall Expense Ratio</i>. The
      table below sets forth the total annualized operating expense ratio for
      MuniAssets and High Income Municipal and the Combined Fund based on their
      respective average net assets as of May 31, 2001.</font></td>
  </tr>
</table>
<br>
<table cellspacing=0 border=0 cellpadding=0 width=600>
  <tr valign="bottom">
    <td align="left" width="176">&nbsp;</td>
    <td align="left" width="25">&nbsp;</td>
    <td align="center" width="114">&nbsp;</td>
    <td width="11"><font size="1"></font></td>
    <td align="center" width="118"><font size="1"><b> Average Net Assets <br>
      as of <br>
      May 31, 2001 </b></font>
      <hr size="1" noshade>
    </td>
    <td align="center" width="36"><font size="1"></font></td>
    <td align="center" width="120"><font size="1"><b> Total Annualized <br>
      Operating <br>
      Expense Ratio </b></font>
      <hr size="1" noshade>
    </td>
  </tr>
  <tr valign="bottom" align="center">
    <td align="left" width="176">&nbsp;</td>
    <td align="left" width="25">&nbsp;</td>
    <td align="left" width="114"><font size="2"> MuniAssets </font></td>
    <td width="11"><font size="2">&nbsp;&nbsp;&nbsp;</font></td>
    <td width="118"><font size="2"> $134,643,032 </font></td>
    <td width="36"><font size="2">&nbsp;&nbsp;&nbsp;</font></td>
    <td width="120"> <font size="2">0.76% </font></td>
  </tr>
  <tr valign="bottom" align="center">
    <td align="left" width="176">&nbsp;</td>
    <td align="left" width="25">&nbsp;</td>
    <td align="left" width="114">&nbsp;</td>
    <td width="11">&nbsp;</td>
    <td width="118">&nbsp;</td>
    <td width="36">&nbsp;</td>
    <td width="120">&nbsp;</td>
  </tr>
  <tr valign="bottom" align="center">
    <td align="left" width="176">&nbsp;</td>
    <td align="left" width="25">&nbsp;</td>
    <td align="left" width="114"> <font size="2">High Income Municipal </font></td>
    <td width="11"><font size="2"></font></td>
    <td width="118"><font size="2"> $130,237,579 </font></td>
    <td width="36"><font size="2"></font></td>
    <td width="120"> <font size="2"> 1.61% </font></td>
  </tr>
  <tr valign="bottom" align="center">
    <td align="left" width="176">&nbsp;</td>
    <td align="left" width="25">&nbsp;</td>
    <td align="left" width="114"><font size="2"> <br>
      Combined Fund </font></td>
    <td width="11"><font size="2"></font></td>
    <td width="118"><font size="2"> $264,880,611 </font></td>
    <td width="36"><font size="2"></font></td>
    <td width="120"> <font size="2"> 0.68% </font></td>
  </tr>
</table>
<br>
<table cellspacing=0 border=0 cellpadding=0 width=600>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP"> <font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td valign="TOP" width="400"> <font size=2>After the Reorganization, on a
      pro forma basis, the total annualized operating expenses of the Combined
      Fund as a percentage of net assets is expected to be: (a) 0.93% lower than
      High Income Municipal&#146;s total annualized operating expense ratio, and
      (b) 0.08% lower than MuniAssets&#146; total annualized operating expense
      ratio.</font> </td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP" width="400">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP" width="400"><font size="2">&lt;R&gt;<i>Purchases and Sales
      of Common Stock.</i> Investors typically purchase and sell shares of MuniAssets
      Common Stock through a registered broker-dealer on each day that the NYSE
      is open for trading at the market price on that day, and may incur a brokerage
      commission set by the broker-dealer. Investors typically can purchase&lt;/R&gt;</font></td>
  </tr>
</table>
<p>&nbsp;</p>
<p>
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 6</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>












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<p>
<table cellspacing=0 border=0 cellpadding=0 width=600>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP" width="400"><font size="2">shares of High Income Municipal
      Common Stock from FAM Distributors, Inc. (&#147;FAMD&#148;), or from other
      selected securities dealers or other financial intermediaries. High Income
      Municipal Common Stock is not listed on any exchange. No secondary market
      presently exists for High Income Municipal Common Stock and it is not expected
      that a secondary market will develop. In order to provide liquidity for
      stockholders of High Income Municipal, High Income Municipal makes tender
      offers on a quarterly basis to purchase its Common Stock from stockholders
      at net asset value per share (less any applicable EWC). If High Income Municipal
      stockholders approve the Reorganization, it is not expected that High Income
      Municipal will make any additional tender offers for its shares.</font></td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP" width="400">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP" width="400"><font size="2"><i>Ratings of Municipal Bonds.</i>
      MuniAssets and High Income Municipal each invests at least 65% and 75%,
      respectively, of its total assets in Municipal Bonds that are rated in any
      one of the medium and lower rating categories by Moody&#146;s, S&amp;P or
      Fitch or in unrated bonds that FAM or MLIM believes are of comparable quality.
      MuniAssets and High Income Municipal each has the authority to invest as
      much as 35% and 25%, respectively, of its assets in Municipal Bonds in the
      higher rating categories (ratings of A or higher by Moody&#146;s, S&amp;P
      or Fitch or comparable unrated securities). In addition, each Fund reserves
      the right to invest temporarily more than 20% of its assets in short-term
      municipal securities, or short-term taxable money market securities (including
      commercial paper, certificates of deposit and repurchase agreements) for
      defensive purposes when, in the opinion of FAM or MLIM, prevailing market
      or financial conditions warrant.</font></td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP" width="400">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP" width="400"><font size=2><i>Portfolio Transactions</i>. The
      portfolio transactions in which the Funds may engage are substantially similar,
      as are the procedures for such transactions. See &#147;Comparison of the
      Funds &#151; Portfolio Transactions.&#148;</font></td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP" width="400">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP" width="400"><font size=2><i>Dividends and Distributions</i>.
      The methods of dividend payment and distributions are substantially similar
      with respect to the Common Stock of each Fund. See &#147;Comparison of the
      Funds &#151; Dividends and Distributions.&#148;</font> </td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP" width="400">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP" width="400"><font size=2><i>Net Asset Value. </i>The net
      asset value per share of MuniAssets Common Stock is determined as of the
      close of business on the NYSE (generally, 4:00 p.m., Eastern time) on the
      last business day of each week. The net asset value per share of High Income
      Municipal Common Stock is determined as of the close of business on the
      NYSE on each day the NYSE is open for trading.</font></td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP" width="400">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP" width="400"><font size=2>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
      and dividends accrued but not yet received) minus all liabilities (including
      accrued expenses) is divided by the total number of shares of </font></td>
  </tr>
</table>
<p>
<p>
<p>
<p>
<p>&nbsp;
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 7</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>












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<p>
<table cellspacing=0 border=0 cellpadding=0 width=600>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP" width="400"><font size=2>Common Stock of the Fund. Expenses,
      including fees payable to FAM and MLIM, are accrued daily. See &#147;Comparison
      of the Funds &#151; Net Asset Value.&#148;</font></td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP" width="400">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP" width="400"><font size="2"><i>Voting Rights.</i> The corresponding
      voting rights of the holders of shares of each Fund&#146;s Common Stock
      are substantially similar. See &#147;Comparison of the Funds &#151; Capital
      Stock.&#148;</font></td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP" width="400">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP" width="400"><font size="2"><i>Stockholder Services.</i> An
      automatic dividend reinvestment plan is available to holders of shares of
      the Common Stock of each Fund. The plans are different for each Fund. Under
      the respective plans, High Income Municipal issues new shares at net asset
      value. MuniAssets, however, purchases shares on the open market if its shares
      are trading at a discount to net asset value but issues new shares at net
      asset value if its shares are trading at a premium to net asset value. See
      &#147;Comparison of the Funds &#151; Automatic Dividend Reinvestment Plan.&#148;
      Other stockholder services, including the provision of annual and semi-annual
      reports, are the same for each Fund.</font></td>
  </tr>
</table>
<p>
<p>
<p>
<p>
<p>&nbsp;
<table width=600>
  <tr>
    <td  align=center><font size=2><B>Outstanding Securities of MuniAssets and
      High Income Municipal as of May 31, 2001</B></font>
      <hr size="1" noshade align="center" width="485">
    </td>
  </tr>
</table>
<br>
<table width="600" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="261" valign="bottom"><b><font size="1">Title of Class </font></b>
      <hr noshade align="left" size="1" width="25%">
    </td>
    <td width="129" valign="bottom" align="center"><b><font size="1"> Amount <br>
      Authorized </font></b>
      <hr noshade align="center" size="1" width="50%">
      <b><font size="1"> </font></b></td>
    <td width="106" valign="bottom" align="center"><b><font size="1"> Amount Held
      By <br>
      Fund for Its <br>
      Own Account </font></b>
      <hr noshade align="center" size="1" width="75%">
    </td>
    <td width="104" valign="bottom" align="center"><b><font size="1"> Amount <br>
      Outstanding Exclusive <br>
      of Amount Shown in Previous Column </font></b>
      <hr noshade align="center" size="1" width="91%">
    </td>
  </tr>
  <tr>
    <td width="261"><font size="2">MuniAssets Common Stock</font><b><font size="2"> </font></b></td>
    <td align="center" width="129"><font size="2">200,000,000 </font></td>
    <td align="center" width="106"><font size="2"> 0 </font></td>
    <td align="center" width="104"><font size="2">10,454,359 </font></td>
  </tr>
  <tr>
    <td width="261"><b></b></td>
    <td align="center" width="129">&nbsp;</td>
    <td align="center" width="106">&nbsp;</td>
    <td align="center" width="104">&nbsp;</td>
  </tr>
  <tr>
    <td width="261"><font size="2">High Income Municipal Common Stock</font><b><font size="2"> </font></b></td>
    <td align="center" width="129"><font size="2">200,000,000 </font></td>
    <td align="center" width="106"><font size="2"> 0 </font></td>
    <td align="center" width="104"><font size="2">13,883,973 </font></td>
  </tr>
</table>
<table cellspacing=0 border=0 cellpadding=0 width=600>
  <tr>
    <td valign="TOP">
      <p>&nbsp;</p>
      <p>&nbsp;</p>
    </td>
    <td valign="TOP">&nbsp;</td>
    <td valign="TOP" width="400">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP"> <font size="2"><b>Tax Considerations </b></font></td>
    <td valign="TOP"> <font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td valign="TOP" width="400"><font size="2"> &lt;R&gt;The consummation of
      the Reorganization is subject to the receipt of an opinion of counsel to
      the effect that, among other things, neither Fund will recognize gain or
      loss on the transaction and the stockholders of High Income Municipal will
      not recognize gain or loss on the exchange of their shares of High Income
      Municipal Common Stock for MuniAssets Common Stock (except to the extent
      that a holder of High Income Municipal Common Stock receives cash representing
      an interest in less than a full share of MuniAssets Common Stock in the
      Reorganization). The Reorganization will not affect the status of MuniAssets
      as a regulated investment company (&#147;RIC&#148;) under the Internal Revenue
      Code of 1986, as amended (the &#147;Code&#148;). See &#147;Agreement and
      Plan of Reorganization &#151; Tax Consequences of the Reorganization.&#148;
      &lt;/R&gt; </font></td>
  </tr>
</table>
<p>&nbsp;
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 8</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>












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<p>
<table width=600>
  <tr>
    <td  align=center><font size=2><B><a name="11"></a>RISK FACTORS AND SPECIAL
      CONSIDERATIONS</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;The investment objective,
      policies and restrictions of MuniAssets and High Income Municipal are substantially
      similar. Each Fund invests primarily in long term municipal obligations,
      the interest on which, in the opinion of bond counsel to the issuer, is
      exempt from Federal income tax (&#147;Municipal Bonds&#148;). Therefore,
      many of the investment risks associated with an investment in MuniAssets
      are substantially similar to the investment risks associated with an investment
      in High Income Municipal. These investment risks will also apply to an investment
      in the Combined Fund after the Reorganization. The principal difference
      in risk between MuniAssets and High Income Municipal results from the fact
      that MuniAssets Common Stock trades at market value and shares may often
      trade at a discount to net asset value on the NYSE. Conversely, High Income
      Municipal Common Stock is not listed on any exchange and no secondary market
      presently exists for its common stock, nor is a secondary market currently
      expected to develop. Investors may, however, tender their shares to High
      Income Municipal for repurchase at net asset value on a quarterly basis.
      It is expected that the Reorganization itself will not adversely affect
      the rights of holders of shares of Common Stock of either Fund or create
      additional risks.&lt;/R&gt;</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except where noted, each Fund
      is subject to the following risks:</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><B><a name="11a"></a>Trading at a Discount</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Closed-end funds that are listed
      on an exchange, such as MuniAssets, are subject to the risk that the market
      price at which the common stock trades may be lower than the net asset value,
      commonly referred to as &#147;trading at a discount.&#148; Shares may also
      trade at a price that is higher than the Fund&#146;s net asset value (a
      &#147;premium&#148;).</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td>
      <p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;High Income Municipal Common
        Stock is not listed on any exchange and no secondary market presently
        exists for its common stock, nor is a secondary market expected to develop.
        As long as there is no secondary market for High Income Municipal Common
        Stock, the Fund is not subject to the risk that its shares will trade
        at a discount to net asset value. To provide liquidity to stockholders,
        the Fund&#146;s Board of Directors considers making tender offers once
        each quarter to repurchase the Fund&#146;s shares at net asset value.
        However, shares of High Income Municipal Common Stock are less liquid
        than shares of funds traded on a stock exchange, and stockholders who
        tender shares of High Income Municipal Common Stock held for less than
        three years at the date of tender may pay an EWC. The Board of Directors
        of High Income Municipal 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, stockholders may be unable to sell
        their shares. Since the inception of High Income Municipal, however, the
        Board has authorized a tender offer each quarter. The most recent tender
        offer for shares of High Income Municipal Common Stock concluded on August
        20, 2001. If the Reorganization is consummated, that will have been the
        final tender offer.</font></p>
      <p>&nbsp;&nbsp;&nbsp;&nbsp;<font size=2>Each Fund is designed primarily for
      long-term investors and should not be considered a vehicle for trading purposes.</font></p>
    </td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><B><a name="11b"></a>Interest Rate and Credit Risk</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 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. Because each Fund invests primarily
      in lower rated municipal bonds, each Fund is more subject to credit risk
      than a fund that invests primarily in investment grade municipal bonds.</font></td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td><font size=2><b><a name="12"></a>Non-Diversification</b></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund is registered as
      a &#147;non-diversified&#148; 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 a Fund may invest a
      relatively high percentage of its assets in a limited number of issuers,
      the Fund may be more exposed to any single economic, political or regulatory
      occurrence than a more widely-diversified fund. Even as a non-diversified
      fund, each Fund must still meet the diversification requirements of applicable
      Federal income tax law.</font></td>
  </tr>
</table>
<p>
<p>&nbsp;
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 9</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>












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<!-- MARKER LABEL="sheet: 17, page: 17" -->



<p>
<p>
<table width=600>
  <tr>
    <td><font size=2><b><a name="12a"></a>High Yield or &#147;Junk Bonds&#148;</b></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Funds invest primarily in Municipal
      Bonds that are rated in any one of the medium and lower rating categories
      by S&amp;P, Moody&#146;s or Fitch, or are considered by MLIM or FAM, as
      applicable, to be of comparable quality. These high yield or &#147;junk
      bonds&#148; 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&#146;s ability to service its
      debt obligations may be adversely affected by business developments unique
      to the issuer, the issuer&#146;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.</font></td>
  </tr>
</table>
<p>
<p>
<p>
<table width=600>
  <tr>
    <td><font size=2><B><a name="12b"></a>Private Activity Bonds</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund may invest all or
      a portion of its assets in certain tax-exempt securities classified as &#147;private
      activity bonds.&#148; These bonds may subject certain investors in a Fund
      to a Federal alternative minimum tax.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><b><a name="12c"></a>Indexed and Inverse Floating Obligations</b></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund may invest in municipal
      bonds yielding returns based on a particular index of value or interest
      rates. Each Fund also may invest in &#147;inverse floating obligations&#148;
      or &#147;residual interest bonds.&#148; These securities generally pay interest
      at floating interest rates that decline as short-term market rates increase
      and increase as short-term market rates decline. FAM and MLIM believe that
      investing in indexed and inverse floating obligations allows a Fund to vary
      the degree of investment leverage relatively efficiently under different
      market conditions.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><B><a name="12d"></a>Options and Futures Transactions</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;Each Fund may engage
      in certain options and futures transactions to reduce its exposure to interest
      rate movements. If a Fund incorrectly forecasts market values, interest
      rates or other factors, that Fund&#146;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
      may choose not to do so. The Funds cannot guarantee that any hedging strategies
      that they use will work.&lt;/R&gt;</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><B><a name="12e"></a>Antitakeover Provisions</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Articles of Incorporation
      of each Fund (in each case, a &#147;Charter&#148;) and Maryland law contain certain
      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 a Fund.</font></td>
  </tr>
</table>
<p>&nbsp;
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 10</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>












<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 18, page: 18" -->



<p>
<table width=600>
  <tr>
    <td  align=center><font size=2><B><a name="13"></a>COMPARISON OF THE FUNDS</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><B><a name="13a"></a>Financial Highlights</B></font></td>
  </tr>
</table>
<p>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>MuniAssets</i>. The financial information in
      the table below has been audited in conjunction with the annual audit of
      the financial statements of MuniAssets by Deloitte &amp; Touche <font size="1">LLP</font>,
      independent auditors. The following per share data and ratios have been
      derived from information provided in the financial statements of MuniAssets.</font></td>
  </tr>
</table>
<br>
<table cellspacing=0 cellpadding=0 border="0" width=610>
  <tr valign="bottom">
    <td width="174"><font size="2"></font><font size="1"></font></td>
    <td width="9"> <font size=2>
      <p><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;</font>
      </font></td>
    <td colspan="13" align="center"> <font size=2>
      <p><b><font size="1">For the Year Ended May 31,</font> </b>
      </font>
      <hr noshade size="1">
    </td>
    <td width="8">&nbsp;</td>
    <td colspan="2" align="center"><b><font size="1">For the Period<br>
      June&nbsp;25, 1993&#134;<br>
      to May&nbsp;31,</font></b></td>
  </tr>
  <tr valign="bottom">
    <td width="174"><font size="1"></font></td>
    <td width="9"> <font size=2>
      <p>&nbsp;
      </font></td>
    <td colspan="2" align="center"> <b><font size="1"> 2001</font> </b>
      <hr noshade size="1" width="90%">
    </td>
    <td colspan="2" align="center"> <b><font size="1"> 2000</font> </b>
      <hr noshade size="1" width="90%">
    </td>
    <td colspan="2" align="center"> <b><font size="1"> 1999</font> </b>
      <hr noshade size="1" width="90%">
    </td>
    <td colspan="2" align="center"> <b><font size="1"> 1998</font> </b>
      <hr noshade size="1" width="90%">
    </td>
    <td colspan="2" align="center"><b><font size="1">1997</font> </b>
      <hr noshade size="1" width="90%">
    </td>
    <td colspan="2" align="center"><b><font size="1">1996</font> </b>
      <hr noshade size="1" width="90%">
    </td>
    <td colspan="2" align="center"><b><font size="1">1995</font> </b>
      <hr noshade size="1" width="90%">
    </td>
    <td align="center" colspan="2"><b><font size="1">1994</font> </b>
      <hr noshade size="1" width="90%">
    </td>
  </tr>
  <tr valign="bottom">
    <td width="174" rowspan="3">
      <p><font size="1"><b>Increase (Decrease) in Net Asset Value:<br>
        </b></font><b><font size="1">Per Share Operating Performance:</font></b><br>
        <font size="1">Net asset value, beginning of period </font><font size=2></font>
    </td>
    <td width="9" rowspan="3"><font size="1"></font><font size="1"></font><font size="1"></font></td>
    <td align="right" width="42" rowspan="3"><font size="1"></font><font size="1"></font>
      <font size=2>
      <p><font size="1">$12.76 </font>
      </font></td>
    <td valign="bottom" align="left" width="8" rowspan="3"><font size="1"></font><font size="1"></font><font size="1"></font></td>
    <td align="right" width="42" rowspan="3"><font size="1"></font><font size="1"></font>
      <font size=2>
      <p><font size="1">$14.46 </font>
      </font></td>
    <td align="left" width="12" rowspan="3"><font size="1"></font><font size="1"></font><font size="1"></font></td>
    <td align="right" width="41" rowspan="3"><font size="1"></font><font size="1"></font>
      <font size=2>
      <p><font size="1">$14.77 </font>
      </font></td>
    <td align="left" width="8" rowspan="3"><font size="1"></font><font size="1"></font><font size="1"></font></td>
    <td align="right" width="41" rowspan="3"><font size="1"></font><font size="1"></font>
      <font size=2>
      <p><font size="1">$14.16 </font>
      </font></td>
    <td align="left" width="8" rowspan="3"><font size="1"></font><font size="1"></font><font size="1"></font></td>
    <td align="right" width="41" rowspan="3"><font size="1"></font><font size="1"></font>
      <font size=2>
      <p><font size="1">$ 13.74 </font>
      </font></td>
    <td align="left" width="8" rowspan="3"><font size="1"></font><font size="1"></font>
      <font size=2>
      <p>&nbsp;
      </font></td>
    <td align="right" width="41" rowspan="3"><font size="1"></font><font size="1"></font><font size="1">$13.73
      </font></td>
    <td align="left" width="8" rowspan="3"><font size="1"></font><font size="1"></font>
      <font size=2>
      <p>&nbsp;
      </font></td>
    <td align="right" width="41" rowspan="3"><font size="1"></font><font size="1"></font><font size="1">$13.40</font></td>
    <td align="left" width="8" rowspan="3"><font size="1"></font><font size="1"></font>
      <font size=2>
      <p>&nbsp;
      </font></td>
    <td align="right" width="43" rowspan="3"><font size="1"></font><font size="1"></font><font size="1">$14.18
      </font></td>
    <td align="left" width="25" rowspan="3"><font size="1"></font><font size="1"></font><font size="1"></font></td>
  </tr>
  <tr valign="bottom"> </tr>
  <tr valign="bottom"> </tr>
  <tr valign="bottom">
    <td width="174">&nbsp;</td>
    <td width="9">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="right" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="right" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="right" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="right" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="right" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="right" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="right" width="417">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="174"> <font size=2>
      <p><font size="1">Investment income &#151; net</font>
      </font></td>
    <td width="9"><font size="1"></font></td>
    <td align="right" width="42"> <font size=2>
      <p><font size="1">.83</font>
      </font></td>
    <td valign="bottom" align="left" width="8"><font size="1"></font></td>
    <td align="right" width="42"> <font size=2>
      <p><font size="1">.80</font>
      </font></td>
    <td align="left" width="12"><font size="1"></font></td>
    <td align="right" width="41"> <font size=2>
      <p><font size="1">.83</font>
      </font></td>
    <td align="left" width="8"><font size="1"></font></td>
    <td align="right" width="41"> <font size=2>
      <p><font size="1">.84</font>
      </font></td>
    <td align="left" width="8"><font size="1"></font></td>
    <td align="right" width="41"> <font size=2>
      <p><font size="1">.84</font>
      </font></td>
    <td align="left" width="8"><font size="1"></font></td>
    <td align="right" width="41"> <font size=2>
      <p><font size="1">.88</font>
      </font></td>
    <td align="left" width="8"><font size="1"></font></td>
    <td align="right" width="41"> <font size=2>
      <p><font size="1">.87</font>
      </font></td>
    <td align="left" width="8"><font size="1"></font></td>
    <td align="right" width="43"> <font size=2>
      <p><font size="1">.81</font>
      </font></td>
    <td align="left" width="25"><font size="1"></font></td>
  </tr>
  <tr valign="bottom">
    <td width="174" rowspan="2"> <font size=2>
      <p><font size="1">Realized and unrealized gain (loss) on<br>
        </font><font size="1">investments &#151; net </font><font size=2></font>
      </font></td>
    <td width="9" rowspan="2"><font size="1"></font><font size="1"></font></td>
    <td align="right" width="42" rowspan="2"><font size="1"></font> <font size=2>
      <p><font size="1">.19 </font>
      </font></td>
    <td valign="bottom" align="left" width="8" rowspan="2"><font size="1"></font><font size="1"></font></td>
    <td align="right" width="42" rowspan="2"><font size="1"></font> <font size=2>
      <p><font size="1">(1.69 </font>
      </font></td>
    <td align="left" width="12" rowspan="2"><font size="1"></font> <font size=2>
      <p><font size="1">) </font>
      </font></td>
    <td align="right" width="41" rowspan="2"><font size="1"></font> <font size=2>
      <p><font size="1">(.32 </font>
      </font></td>
    <td align="left" width="8" rowspan="2"><font size="1"></font> <font size=2>
      <p><font size="1">) </font>
      </font></td>
    <td align="right" width="41" rowspan="2"><font size="1"></font> <font size=2>
      <p><font size="1">.62 </font>
      </font></td>
    <td align="left" width="8" rowspan="2"><font size="1"></font><font size="1"></font></td>
    <td align="right" width="41" rowspan="2"><font size="1"></font> <font size=2>
      <p><font size="1">.42 </font>
      </font></td>
    <td align="left" width="8" rowspan="2"><font size="1"></font><font size="1"></font></td>
    <td align="right" width="41" rowspan="2"><font size="1"></font> <font size=2>
      <p><font size="1">.03 </font>
      </font></td>
    <td align="left" width="8" rowspan="2"><font size="1"></font><font size="1"></font></td>
    <td align="right" width="41" rowspan="2"><font size="1"></font> <font size=2>
      <p><font size="1">.33</font>
      </font></td>
    <td align="left" width="8" rowspan="2"><font size="1"></font><font size="1"></font></td>
    <td align="right" width="43" rowspan="2"><font size="1"></font> <font size=2>
      <p><font size="1">(.66 </font>
      </font></td>
    <td align="left" width="25" rowspan="2"><font size="1"></font> <font size=2>
      <p><font size="1">) </font>
      </font></td>
  </tr>
  <tr valign="bottom"> </tr>
  <tr valign="bottom">
    <td width="174">&nbsp;</td>
    <td width="9">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="174"> <font size=2>
      <p><font size="1">Total from investment operations</font>
      </font></td>
    <td width="9"><font size="1"></font></td>
    <td align="right" width="42"> <font size=2>
      <p><font size="1">1.02</font>
      </font></td>
    <td valign="bottom" align="left" width="8"><font size="1"></font></td>
    <td align="right" width="42"> <font size=2>
      <p><font size="1">(.89</font>
      </font></td>
    <td align="left" width="12"> <font size=2>
      <p><font size="1">)</font>
      </font></td>
    <td align="right" width="41"> <font size=2>
      <p><font size="1">.51</font>
      </font></td>
    <td align="left" width="8"><font size="1"></font></td>
    <td align="right" width="41"> <font size=2>
      <p><font size="1">1.46</font>
      </font></td>
    <td align="left" width="8"><font size="1"></font></td>
    <td align="right" width="41"> <font size=2>
      <p><font size="1">1.26</font>
      </font></td>
    <td align="left" width="8"><font size="1"></font></td>
    <td align="right" width="41"> <font size=2>
      <p><font size="1">.91</font>
      </font></td>
    <td align="left" width="8"><font size="1"></font></td>
    <td align="right" width="41"> <font size=2>
      <p><font size="1">1.20</font>
      </font></td>
    <td align="left" width="8"><font size="1"></font></td>
    <td align="right" width="43"> <font size=2>
      <p><font size="1">.15</font>
      </font></td>
    <td align="left" width="25"><font size="1"></font></td>
  </tr>
  <tr valign="bottom">
    <td width="174">&nbsp;</td>
    <td width="9">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="174" rowspan="2">
      <p><font size="1"><b>Less dividends and distributions:</b><br>
        </font><font size="1">Investment income</font><font size=2><font size="1">
        &#151; </font></font> <font size="1">net </font> <font size=2></font>
    </td>
    <td width="9" rowspan="2"><font size="1"></font><font size="1"></font></td>
    <td align="right" width="42" rowspan="2"><font size="1"></font> <font size=2>
      <p><font size="1">(.82 </font>
      </font></td>
    <td valign="bottom" align="left" width="8" rowspan="2"><font size="1"></font><font size=2><font size="1">)</font></font><font size="1"></font></td>
    <td align="right" width="42" rowspan="2"><font size="1"></font> <font size=2>
      <p><font size="1">(.81 </font>
      </font></td>
    <td align="left" width="12" rowspan="2"><font size="1"></font> <font size=2>
      <p><font size="1">) </font>
      </font></td>
    <td align="right" width="41" rowspan="2"><font size="1"></font> <font size=2>
      <p><font size="1">(.82 </font>
      </font></td>
    <td align="left" width="8" rowspan="2"><font size="1"></font> <font size=2>
      <p><font size="1">) </font>
      </font></td>
    <td align="right" width="41" rowspan="2"><font size="1"></font> <font size=2>
      <p><font size="1">(.85 </font>
      </font></td>
    <td align="left" width="8" rowspan="2"><font size="1"></font> <font size=2>
      <p><font size="1">) </font>
      </font></td>
    <td align="right" width="41" rowspan="2"><font size="1"></font> <font size=2>
      <p><font size="1">(.84 </font>
      </font></td>
    <td align="left" width="8" rowspan="2"><font size="1"></font> <font size=2>
      <p><font size="1">) </font>
      </font></td>
    <td align="right" width="41" rowspan="2"><font size="1"></font> <font size=2>
      <p><font size="1">(.89 </font>
      </font></td>
    <td align="left" width="8" rowspan="2"><font size="1"></font> <font size=2>
      <p><font size="1">) </font>
      </font></td>
    <td align="right" width="41" rowspan="2"><font size="1"></font> <font size=2>
      <p><font size="1">(.85</font>
      </font></td>
    <td align="left" width="8" rowspan="2"><font size="1"></font> <font size=2>
      <p><font size="1">) </font>
      </font></td>
    <td align="right" width="43" rowspan="2"><font size="1"></font> <font size=2>
      <p><font size="1">(.74 </font>
      </font></td>
    <td align="left" width="25" rowspan="2"><font size="1"></font> <font size=2>
      <p><font size="1">) </font>
      </font></td>
  </tr>
  <tr valign="bottom"> </tr>
  <tr valign="bottom">
    <td width="174"> <font size=2>
      <p><font size="1">&nbsp;Realized gain on investments &#151; net</font>
      </font></td>
    <td width="9"><font size="1"></font></td>
    <td align="right" width="42"> <font size=2>
      <p><font size="1">&#151;</font>
      </font></td>
    <td valign="bottom" align="left" width="8"><font size="1"></font></td>
    <td align="right" width="42"> <font size=2>
      <p><font size="1">&#151;</font>
      </font></td>
    <td align="left" width="12"> <font size=2>
      <p>&nbsp;
      </font></td>
    <td align="right" width="41"><font size=2><font size="1">&#151;</font></font></td>
    <td align="left" width="8"> <font size=2>
      <p>&nbsp;
      </font></td>
    <td align="right" width="41"><font size=2><font size="1">&#151;</font></font><font size="1"></font></td>
    <td align="left" width="8"> <font size=2>
      <p>&nbsp;
      </font></td>
    <td align="right" width="41"><font size=2></font><font size=2><font size="1">&#151;</font></font><font size="1"></font><font size="1"></font></td>
    <td align="left" width="8"> <font size=2>
      <p>&nbsp;
      </font></td>
    <td align="right" width="41"><font size=2><font size="1">&#151;</font></font></td>
    <td align="left" width="8"> <font size=2>
      <p>&nbsp;
      </font></td>
    <td align="right" width="41"><font size=2><font size="1">&#151;</font></font><font size="1"></font></td>
    <td align="left" width="8"> <font size=2>
      <p>&nbsp;
      </font></td>
    <td align="right" width="43"> <font size=2> <font size="1">(.15</font></font><font size="1"></font></td>
    <td align="left" width="25">
      <p><font size="1">)</font>
    </td>
  </tr>
  <tr valign="bottom">
    <td width="174">&nbsp;</td>
    <td width="9">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="174"> <font size=2>
      <p><font size="1">Total dividends and distributions</font>
      </font></td>
    <td width="9"><font size="1"></font></td>
    <td align="right" width="42"> <font size=2>
      <p><font size="1">(.82</font>
      </font></td>
    <td valign="bottom" align="left" width="8"> <font size=2>
      <p><font size="1">)</font>
      </font></td>
    <td align="right" width="42"> <font size=2>
      <p><font size="1">(.81</font>
      </font></td>
    <td align="left" width="12"> <font size=2>
      <p><font size="1">)</font>
      </font></td>
    <td align="right" width="41"> <font size=2>
      <p><font size="1">(.82</font>
      </font></td>
    <td align="left" width="8"> <font size=2>
      <p><font size="1">)</font>
      </font></td>
    <td align="right" width="41"> <font size=2>
      <p><font size="1">(.85</font>
      </font></td>
    <td align="left" width="8"> <font size=2>
      <p><font size="1">)</font>
      </font></td>
    <td align="right" width="41"> <font size=2>
      <p><font size="1">(.84</font>
      </font></td>
    <td align="left" width="8"> <font size=2>
      <p><font size="1">)</font>
      </font></td>
    <td align="right" width="41"> <font size=2>
      <p><font size="1">(.89</font>
      </font></td>
    <td align="left" width="8"> <font size=2>
      <p><font size="1">)</font>
      </font></td>
    <td align="right" width="41"> <font size=2>
      <p><font size="1">(.85</font>
      </font></td>
    <td align="left" width="8"> <font size=2>
      <p><font size="1">)</font>
      </font></td>
    <td align="right" width="43"> <font size=2>
      <p><font size="1">(.89</font>
      </font></td>
    <td align="left" width="25"> <font size=2>
      <p><font size="1">)</font>
      </font></td>
  </tr>
  <tr valign="bottom">
    <td width="174">&nbsp;</td>
    <td width="9">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="174" rowspan="2">
      <p><font size="1">Capital charge resulting from Issuance <br>
        &nbsp;&nbsp;&nbsp; of </font><font size="1">Common Stock </font><font size=2></font>
    </td>
    <td width="9" rowspan="2"><font size="1"></font><font size="1"></font></td>
    <td align="right" width="42" rowspan="2"><font size="1"></font><font size=2><font size="1">&#151;</font></font><font size="1"></font></td>
    <td valign="bottom" align="left" width="8" rowspan="2"><font size="1"></font><font size="1"></font></td>
    <td align="right" width="42" rowspan="2"><font size="1"></font><font size=2><font size="1">&#151;</font></font><font size="1"></font></td>
    <td align="left" width="12" rowspan="2"><font size="1"></font><font size="1"></font></td>
    <td align="right" width="41" rowspan="2"><font size="1"></font><font size=2><font size="1">&#151;</font></font><font size="1"></font></td>
    <td align="left" width="8" rowspan="2"><font size="1"></font><font size="1"></font></td>
    <td align="right" width="41" rowspan="2"><font size="1"></font><font size=2><font size="1">&#151;</font></font><font size="1"></font></td>
    <td align="left" width="8" rowspan="2"><font size="1"></font> <font size=2>
      <p>&nbsp;
      </font></td>
    <td align="right" width="41" rowspan="2"><font size="1"></font> <font size=2>
      <font size="1">&#151;</font> </font></td>
    <td align="left" width="8" rowspan="2"><font size="1"></font> <font size=2>
      <p>&nbsp;
      </font></td>
    <td align="right" width="41" rowspan="2"><font size="1"></font> <font size=2>
      <font size="1">(.01</font></font></td>
    <td align="left" width="8" rowspan="2"><font size="1"></font> <font size=2>
      <p><font size="1">) </font>
      </font></td>
    <td align="right" width="41" rowspan="2"><font size="1"></font> <font size=2>
      <font size="1">(.02</font></font></td>
    <td align="left" width="8" rowspan="2"><font size=2><font size="1">)</font></font><font size="1">
      </font></td>
    <td align="right" width="43" rowspan="2"><font size="1"></font><font size=2><font size="1">(.04
      </font></font><font size="1"></font></td>
    <td align="left" width="25" rowspan="2"><font size="1"></font><font size=2><font size="1">)</font></font><font size="1"></font></td>
  </tr>
  <tr valign="bottom"> </tr>
  <tr valign="bottom">
    <td width="174">&nbsp;</td>
    <td width="9">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="1">
    </td>
    <td align="left" width="417">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="174"> <font size=2>
      <p><font size="1">Net asset value, end of period</font>
      </font></td>
    <td width="9"><font size="1"></font></td>
    <td align="right" width="42"> <font size=2>
      <p><font size="1">$12.96</font>
      </font></td>
    <td valign="bottom" align="left" width="8"><font size="1"></font></td>
    <td align="right" width="42"> <font size=2>
      <p><font size="1">$12.76</font>
      </font></td>
    <td align="left" width="12"><font size="1"></font></td>
    <td align="right" width="41"> <font size=2>
      <p><font size="1">$14.46</font>
      </font></td>
    <td align="left" width="8"><font size="1"></font></td>
    <td align="right" width="41"> <font size=2>
      <p><font size="1">$14.77</font>
      </font></td>
    <td align="left" width="8"><font size="1"></font></td>
    <td align="right" width="41"> <font size=2>
      <p><font size="1">$14.16</font>
      </font></td>
    <td align="left" width="8"><font size="1"></font></td>
    <td align="right" width="41"> <font size=2>
      <p><font size="1">$13.74</font>
      </font></td>
    <td align="left" width="8"><font size="1"></font></td>
    <td align="right" width="41"> <font size=2>
      <p><font size="1">$13.73</font>
      </font></td>
    <td align="left" width="8"><font size="1"></font></td>
    <td align="right" width="43"> <font size=2>
      <p><font size="1">$13.40</font>
      </font></td>
    <td align="left" width="25"><font size="1"></font></td>
  </tr>
  <tr valign="bottom">
    <td width="174">&nbsp;</td>
    <td width="9">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="174"> <font size=2>
      <p><font size="1">Market price per share, end of period</font>
      </font></td>
    <td width="9"><font size="1"></font></td>
    <td align="right" width="42"> <font size=2>
      <p><font size="1">$13.00</font>
      </font></td>
    <td valign="bottom" align="left" width="8"><font size="1"></font></td>
    <td align="right" width="42"> <font size=2>
      <p><font size="1">$11.1875</font>
      </font></td>
    <td align="left" width="12"><font size="1"></font></td>
    <td align="right" width="41"> <font size=2>
      <p><font size="1">$13.00</font>
      </font></td>
    <td align="left" width="8"><font size="1"></font></td>
    <td align="right" width="41"> <font size=2>
      <p><font size="1">$13.75</font>
      </font></td>
    <td align="left" width="8"><font size="1"></font></td>
    <td align="right" width="41"> <font size=2>
      <p><font size="1">$12.625</font>
      </font></td>
    <td align="left" width="8"><font size="1"></font></td>
    <td align="right" width="41"> <font size=2>
      <p><font size="1">$12.375</font>
      </font></td>
    <td align="left" width="8"><font size="1"></font></td>
    <td align="right" width="41"> <font size=2>
      <p><font size="1">$11.875</font>
      </font></td>
    <td align="left" width="8"> <font size=2>
      <p>&nbsp;
      </font></td>
    <td align="right" width="43"><font size=2><font size="1">$12.25</font></font><font size="1"></font></td>
    <td align="left" width="25"><font size="1"></font></td>
  </tr>
  <tr valign="bottom">
    <td width="174">&nbsp;</td>
    <td width="9">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="174" rowspan="2">
      <p><font size="1"><b>Total Investment Return:*<br>
        </b></font> <font size="1">Based on net asset value per share </font>
    </td>
    <td width="9" rowspan="2">&nbsp;</td>
    <td align="right" width="42" rowspan="2">
      <p><font size="1">8.58 </font>
    </td>
    <td valign="bottom" align="left" width="8" rowspan="2">
      <p><font size="1">% </font>
    </td>
    <td align="right" width="42" rowspan="2">
      <p><font size="1">(5.45 </font>
    </td>
    <td align="left" width="12" rowspan="2">
      <p><font size="1">%) </font>
    </td>
    <td align="right" width="41" rowspan="2">
      <p><font size="1">3.74 </font>
    </td>
    <td align="left" width="8" rowspan="2">
      <p><font size="1">% </font>
    </td>
    <td align="right" width="41" rowspan="2">
      <p><font size="1">10.87 </font>
    </td>
    <td align="left" width="8" rowspan="2">
      <p><font size="1">% </font>
    </td>
    <td align="right" width="41" rowspan="2">
      <p><font size="1">10.11 </font>
    </td>
    <td align="left" width="8" rowspan="2">
      <p><font size="1">% </font>
    </td>
    <td align="right" width="41" rowspan="2">
      <p><font size="1">7.46 </font>
    </td>
    <td align="left" width="8" rowspan="2">
      <p><font size="1">% </font>
    </td>
    <td align="right" width="41" rowspan="2">
      <p><font size="1">9.93</font>
    </td>
    <td align="left" width="8" rowspan="2">
      <p><font size="1">% </font>
    </td>
    <td align="right" width="43" rowspan="2">
      <p><font size="1">.83 </font>
    </td>
    <td align="left" width="25" rowspan="2">
      <p><font size="1">%** </font>
    </td>
  </tr>
  <tr valign="bottom"> </tr>
  <tr valign="bottom">
    <td width="174"><font size="1"></font></td>
    <td width="9"><font size="1"></font></td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="174">
      <p><font size="1">Based on market price per share</font>
    </td>
    <td width="9">&nbsp;</td>
    <td align="right" width="42">
      <p><font size="1">24.22</font>
    </td>
    <td valign="bottom" align="left" width="8">
      <p><font size="1">%</font>
    </td>
    <td align="right" width="42">
      <p><font size="1">(7.79</font>
    </td>
    <td align="left" width="12">
      <p><font size="1">%)</font>
    </td>
    <td align="right" width="41">
      <p><font size="1">.19</font>
    </td>
    <td align="left" width="8">
      <p><font size="1">%</font>
    </td>
    <td align="right" width="41">
      <p><font size="1">15.76</font>
    </td>
    <td align="left" width="8">
      <p><font size="1">%</font>
    </td>
    <td align="right" width="41">
      <p><font size="1">9.01</font>
    </td>
    <td align="left" width="8">
      <p><font size="1">%</font>
    </td>
    <td align="right" width="41">
      <p><font size="1">11.91</font>
    </td>
    <td align="left" width="8">
      <p><font size="1">%</font>
    </td>
    <td align="right" width="41">
      <p><font size="1">4.00</font>
    </td>
    <td align="left" width="8">
      <p><font size="1">%</font>
    </td>
    <td align="right" width="43">
      <p><font size="1">(12.87 </font>
    </td>
    <td align="left" width="25">
      <p><font size="1">)%** </font>
    </td>
  </tr>
  <tr valign="bottom">
    <td width="174"><font size="1"></font></td>
    <td width="9"><font size="1"></font></td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="174" rowspan="2">
      <p><font size="1"><b>Ratios to Average Net Assets:<br>
        </b>Expenses, net of reimbursement </font>
    </td>
    <td width="9" rowspan="2">&nbsp;</td>
    <td align="right" width="42" rowspan="2">
      <p><font size="1">.76 </font>
    </td>
    <td valign="bottom" align="left" width="8" rowspan="2"><font size="1">%</font></td>
    <td align="right" width="42" rowspan="2">
      <p><font size="1">.74 </font>
    </td>
    <td align="left" width="12" rowspan="2">
      <p><font size="1">% </font>
    </td>
    <td align="right" width="41" rowspan="2">
      <p><font size="1">.72 </font>
    </td>
    <td align="left" width="8" rowspan="2">
      <p><font size="1">% </font>
    </td>
    <td align="right" width="41" rowspan="2">
      <p><font size="1">.75 </font>
    </td>
    <td align="left" width="8" rowspan="2">
      <p><font size="1">% </font>
    </td>
    <td align="right" width="41" rowspan="2">
      <p><font size="1">.76 </font>
    </td>
    <td align="left" width="8" rowspan="2">
      <p><font size="1">% </font>
    </td>
    <td align="right" width="41" rowspan="2">
      <p><font size="1">.55 </font>
    </td>
    <td align="left" width="8" rowspan="2">
      <p><font size="1">% </font>
    </td>
    <td align="right" width="41" rowspan="2">
      <p><font size="1">.50</font>
    </td>
    <td align="left" width="8" rowspan="2">
      <p><font size="1">% </font>
    </td>
    <td align="right" width="43" rowspan="2">
      <p><font size="1">.20 </font>
    </td>
    <td align="left" width="25" rowspan="2">
      <p><font size="1">%&#134;&#134; </font>
    </td>
  </tr>
  <tr valign="bottom"> </tr>
  <tr valign="bottom">
    <td width="174"><font size="1"></font></td>
    <td width="9"><font size="1"></font></td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="174">
      <p><font size="1">Expenses</font>
    </td>
    <td width="9">&nbsp;</td>
    <td align="right" width="42">
      <p><font size="1">.76</font>
    </td>
    <td valign="bottom" align="left" width="8"><font size="1">%</font></td>
    <td align="right" width="42">
      <p><font size="1">.74</font>
    </td>
    <td align="left" width="12">
      <p><font size="1">%</font>
    </td>
    <td align="right" width="41">
      <p><font size="1">.72</font>
    </td>
    <td align="left" width="8">
      <p><font size="1">%</font>
    </td>
    <td align="right" width="41">
      <p><font size="1">.75</font>
    </td>
    <td align="left" width="8">
      <p><font size="1">%</font>
    </td>
    <td align="right" width="41">
      <p><font size="1">.76</font>
    </td>
    <td align="left" width="8">
      <p><font size="1">%</font>
    </td>
    <td align="right" width="41">
      <p><font size="1">.77</font>
    </td>
    <td align="left" width="8">
      <p><font size="1">%</font>
    </td>
    <td align="right" width="41">
      <p><font size="1">.85</font>
    </td>
    <td align="left" width="8">
      <p><font size="1">%</font>
    </td>
    <td align="right" width="43">
      <p><font size="1">.85</font>
    </td>
    <td align="left" width="25">
      <p><font size="1">%&#134;&#134;</font>
    </td>
  </tr>
  <tr valign="bottom">
    <td width="174"><font size="1"></font></td>
    <td width="9"><font size="1"></font></td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="174">
      <p><font size="1">Investment income &#151; net</font>
    </td>
    <td width="9">&nbsp;</td>
    <td align="right" width="42">
      <p><font size="1">6.44</font>
    </td>
    <td valign="bottom" align="left" width="8">
      <p><font size="1">%</font>
    </td>
    <td align="right" width="42">
      <p><font size="1">5.96</font>
    </td>
    <td align="left" width="12">
      <p><font size="1">%</font>
    </td>
    <td align="right" width="41">
      <p><font size="1">5.66</font>
    </td>
    <td align="left" width="8">
      <p><font size="1">%</font>
    </td>
    <td align="right" width="41">
      <p><font size="1">5.75</font>
    </td>
    <td align="left" width="8">
      <p><font size="1">%</font>
    </td>
    <td align="right" width="41">
      <p><font size="1">6.06</font>
    </td>
    <td align="left" width="8">
      <p><font size="1">%</font>
    </td>
    <td align="right" width="41">
      <p><font size="1">6.24</font>
    </td>
    <td align="left" width="8">
      <p><font size="1">%</font>
    </td>
    <td align="right" width="41">
      <p><font size="1">6.54</font>
    </td>
    <td align="left" width="8">
      <p><font size="1">%</font>
    </td>
    <td align="right" width="43">
      <p><font size="1">6.12</font>
    </td>
    <td align="left" width="25">
      <p><font size="1">%&#134;&#134;</font>
    </td>
  </tr>
  <tr valign="bottom">
    <td width="174"><font size="1"></font></td>
    <td width="9"><font size="1"></font></td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="174" rowspan="2">
      <p><font size="1"><b>Supplemental Data:<br>
        </b></font> <font size="1">Net assets, end of period (in thousands) </font>
    </td>
    <td width="9" rowspan="2">&nbsp;</td>
    <td align="right" width="42" rowspan="2">
      <p><font size="1">$135,448 </font>
    </td>
    <td valign="bottom" align="left" width="8" rowspan="2">
      <p>&nbsp;
    </td>
    <td align="right" width="42" rowspan="2"> <font size="1"> $133,065 </font></td>
    <td align="left" width="12" rowspan="2">
      <p>&nbsp;
    </td>
    <td align="right" width="41" rowspan="2"> <font size="1"> $150,883 </font></td>
    <td align="left" width="8" rowspan="2">
      <p>&nbsp;
    </td>
    <td align="right" width="41" rowspan="2"> <font size="1"> $153,947 </font></td>
    <td align="left" width="8" rowspan="2">
      <p>&nbsp;
    </td>
    <td align="right" width="41" rowspan="2"><font size="1">$147,630 </font></td>
    <td align="left" width="8" rowspan="2">&nbsp;</td>
    <td align="right" width="41" rowspan="2"><font size="1">$143,195 </font></td>
    <td align="left" width="8" rowspan="2">&nbsp;</td>
    <td align="right" width="41" rowspan="2"><font size="1">$143,169</font></td>
    <td align="left" width="8" rowspan="2">&nbsp;</td>
    <td align="right" width="43" rowspan="2"><font size="1">$64,154 </font></td>
    <td align="left" width="25" rowspan="2">&nbsp;</td>
  </tr>
  <tr valign="bottom"> </tr>
  <tr valign="bottom">
    <td width="174"><font size="1"></font></td>
    <td width="9"><font size="1"></font></td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
    <td align="right" width="417">
      <hr noshade size="2">
    </td>
    <td align="left" width="417">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="174">
      <p><font size="1">Portfolio turnover</font>
    </td>
    <td width="9">&nbsp;</td>
    <td align="right" width="42">
      <p><font size="1">17.11</font>
    </td>
    <td valign="bottom" align="left" width="8">
      <p><font size="1">%</font>
    </td>
    <td align="right" width="42">
      <p><font size="1">32.38</font>
    </td>
    <td align="left" width="12">
      <p><font size="1">%</font>
    </td>
    <td align="right" width="41">
      <p><font size="1">40.57</font>
    </td>
    <td align="left" width="8">
      <p><font size="1">%</font>
    </td>
    <td align="right" width="41">
      <p><font size="1">36.39</font>
    </td>
    <td align="left" width="8">
      <p><font size="1">%</font>
    </td>
    <td align="right" width="41">
      <p><font size="1">45.15</font>
    </td>
    <td align="left" width="8">
      <p><font size="1">%</font>
    </td>
    <td align="right" width="41">
      <p><font size="1">42.72</font>
    </td>
    <td align="left" width="8">
      <p><font size="1">%</font>
    </td>
    <td align="right" width="41">
      <p><font size="1">55.51</font>
    </td>
    <td align="left" width="8">
      <p><font size="1">&nbsp; %</font>
    </td>
    <td align="right" width="43"><font size="1">101.59</font></td>
    <td align="left" width="25"><font size="1">%</font></td>
  </tr>
  <tr valign="bottom">
    <td width="174">&nbsp;</td>
    <td width="9">&nbsp;</td>
    <td align="right" width="42">
      <hr noshade size="2">
    </td>
    <td valign="bottom" align="left" width="8">&nbsp;</td>
    <td align="right" width="42">
      <hr noshade size="2">
    </td>
    <td align="left" width="12">&nbsp;</td>
    <td align="right" width="41">
      <hr noshade size="2">
    </td>
    <td align="left" width="8">&nbsp;</td>
    <td align="right" width="41">
      <hr noshade size="2">
    </td>
    <td align="left" width="8">&nbsp;</td>
    <td align="right" width="41">
      <hr noshade size="2">
    </td>
    <td align="left" width="8">&nbsp;</td>
    <td align="right" width="41">
      <hr noshade size="2">
    </td>
    <td align="left" width="8">&nbsp;</td>
    <td align="right" width="41">
      <hr noshade size="2">
    </td>
    <td align="left" width="8">&nbsp;</td>
    <td align="right" width="43">
      <hr noshade size="2">
    </td>
    <td align="left" width="25">&nbsp;</td>
  </tr>
</table>
<table width=600>
  <tr>
    <td>
      <hr size=1 noshade align=left  width=75>
    </td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3% align=right valign=top><font size="1">* </font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">Total investment returns based on market value,
      which can be significantly greater or lesser than the net asset value, may
      result in substantially different returns. Total investment returns exclude
      the effects of sales charges.</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3% align=right valign=top><font size="1">** </font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">Aggregate total investment return.</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3% align=right valign=top><font size="1">&#134;</font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">Commencement of operations.</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3% align=right valign=top><font size="1">&#134;&#134;</font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">Annualized.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 11</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>












<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 19, page: 19" -->



<p>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;<i>High Income Municipal</i>.
      The financial information in the table below, except for the six-month period
      ended February 28, 2001, which is unaudited and has been provided by MLIM,
      has been audited in conjunction with the annual audit of the financial statements
      of High Income Municipal by Deloitte &amp; Touche <font size="1">LLP</font>,
      independent auditors. The following per share data and ratios have been
      derived from information provided in the financial statements of High Income
      Municipal.</font></td>
  </tr>
</table>
<br>
<table cellspacing="0" cellpadding="0" width="640">
  <tr>
    <td width="84">&nbsp;</td>
    <td align="center" width="65" valign="bottom"><b><font size="1">For the Six
      <br>
      Months <br>
      Ended <br>
      February&nbsp;<br>
      28, <br>
      </font></b> </td>
    <td colspan="18" align="center" valign="bottom"><b><font size="1">For the
      Year Ended August 31, </font> </b>
      <hr noshade size="1">
    </td>
    <td align="center" width="85" valign="bottom"><b><font size="1">For the Period
      <br>
      November 2, <br>
      1990&#134; to <br>
      August 31, </font></b> </td>
  </tr>
  <tr>
    <td width="84">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td align="center" width="65"><b><font size="1">2001 </font> </b>
      <hr noshade size="1" width="90%">
    </td>
    <td align="center" width="37"><b><font size="1">2000 </font> </b>
      <hr noshade size="1" width="90%">
    </td>
    <td align="center" width="10">&nbsp;</td>
    <td align="center" width="36"><b><font size="1">1999 </font> </b>
      <hr noshade size="1" width="90%">
    </td>
    <td align="center" width="11">&nbsp;</td>
    <td align="center" width="38"><b><font size="1">1998 </font> </b>
      <hr noshade size="1" width="90%">
    </td>
    <td align="center" width="7">&nbsp;</td>
    <td align="center" width="36"><b><font size="1">1997 </font> </b>
      <hr noshade size="1" width="90%">
    </td>
    <td align="center" width="8">&nbsp;</td>
    <td align="center" width="35"><b><font size="1">1996 </font> </b>
      <hr noshade size="1" width="90%">
    </td>
    <td align="center" width="8">&nbsp;</td>
    <td align="center" width="37"><b><font size="1">1995 </font> </b>
      <hr noshade size="1" width="90%">
    </td>
    <td align="center" width="7">&nbsp;</td>
    <td align="center" width="35"><b><font size="1">1994 </font> </b>
      <hr noshade size="1" width="90%">
    </td>
    <td align="center" width="10">&nbsp;</td>
    <td align="center" width="37"><b><font size="1">1993 </font> </b>
      <hr noshade size="1" width="90%">
    </td>
    <td align="center" width="5">&nbsp;</td>
    <td align="center" width="36"><b><font size="1">1992 </font> </b>
      <hr noshade size="1" width="90%">
    </td>
    <td align="center" width="11">&nbsp;</td>
    <td align="center" width="85"><b><font size="1">1991 </font></b>
      <hr noshade size="1" width="90%">
    </td>
  </tr>
</table>
<table cellspacing=0  cellpadding=0 width="640">
  <tr valign="bottom">
    <td rowspan="14" width="89"> <font size="1"><b>Increase <br>
      (Decrease)<br>
      in Net Asset <br>
      Value: </b></font><b><font size="1"><br>
      Per Share <br>
      Operating <br>
      Performance:</font></b><font size="1"> </font><font size="1"><br>
      Net asset value, <br>
      beginning <br>
      of period </font></td>
    <td colspan=5 align="right" rowspan="14"> <font size="1">$9.45</font></td>
    <td align="left" rowspan="14" colspan="2">&nbsp;</td>
    <td colspan=2 align="right" rowspan="14"> <font size="1">$10.24</font></td>
    <td align="left" rowspan="14" width="10">&nbsp;</td>
    <td align="right" rowspan="14" width="38"> <font size="1">$11.46</font></td>
    <td align="left" rowspan="14" width="10">&nbsp;</td>
    <td align="right" rowspan="14" width="38"> <font size="1">$11.34</font></td>
    <td align="left" rowspan="14" width="7">&nbsp;</td>
    <td align="right" rowspan="14" width="38"> <font size="1">$10.94</font></td>
    <td align="left" rowspan="14" width="7">&nbsp;</td>
    <td align="right" rowspan="14" width="38"> <font size="1">$10.97</font></td>
    <td align="left" rowspan="14" width="7">&nbsp;</td>
    <td align="right" rowspan="14" width="38"> <font size="1">$10.92&nbsp;</font></td>
    <td align="left" rowspan="14" width="7">&nbsp;</td>
    <td align="right" rowspan="14" width="38"> <font size="1">$11.44</font></td>
    <td align="left" rowspan="14" width="7">&nbsp;</td>
    <td align="right" rowspan="14" width="38"> <font size="1">$10.74</font></td>
    <td align="left" rowspan="14" width="7">&nbsp;</td>
    <td align="right" rowspan="14" width="38"> <font size="1">$10.29</font></td>
    <td align="right" rowspan="14" width="7">&nbsp;</td>
    <td colspan=2 align="right" rowspan="14"> <font size="1">$10.00</font></td>
    <td align="left" colspan="2"></td>
  </tr>
  <tr valign="bottom">
    <td align="left" colspan="2"></td>
  </tr>
  <tr valign="bottom">
    <td align="left" colspan="2"></td>
  </tr>
  <tr valign="bottom">
    <td align="left" colspan="2"></td>
  </tr>
  <tr valign="bottom">
    <td align="left" colspan="2"></td>
  </tr>
  <tr valign="bottom">
    <td align="left" colspan="2"></td>
  </tr>
  <tr valign="bottom">
    <td align="left" colspan="2"></td>
  </tr>
  <tr valign="bottom">
    <td align="left" colspan="2"></td>
  </tr>
  <tr valign="bottom">
    <td align="left" colspan="2"></td>
  </tr>
  <tr valign="bottom">
    <td align="left" colspan="2"></td>
  </tr>
  <tr valign="bottom">
    <td align="left" colspan="2"></td>
  </tr>
  <tr valign="bottom">
    <td align="left" colspan="2"></td>
  </tr>
  <tr valign="bottom">
    <td align="left" valign="bottom" colspan="2"></td>
  </tr>
  <tr valign="bottom">
    <td align="left" valign="bottom" colspan="2"></td>
  </tr>
  <tr valign="bottom">
    <td width="89">&nbsp;</td>
    <td colspan=5 align="right">
      <hr noshade size="1">
    </td>
    <td align="right" width="12">&nbsp;</td>
    <td align="right" width="13">&nbsp;</td>
    <td colspan=2 align="right">
      <hr noshade size="1">
    </td>
    <td align="right" width="10">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="10">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td colspan=2 align="right">
      <hr noshade size="1">
    </td>
    <td align="right" width="9">&nbsp;</td>
    <td align="right" width="32">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="89">
      <p><font size="1">Investment<br>
        </font><font size="1">&nbsp;&nbsp;&nbsp;income <br>
        &nbsp;&nbsp; &#151; net</font></p>
    </td>
    <td colspan=5 align="right"><font size="1">.26</font></td>
    <td align="left" colspan="2">&nbsp;</td>
    <td colspan=2 align="right"><font size="1">.55</font></td>
    <td align="left" width="10">&nbsp;</td>
    <td align="right" width="38"><font size="1">.55</font></td>
    <td align="left" width="10">&nbsp;</td>
    <td align="right" width="38"><font size="1">.61</font></td>
    <td align="left" width="7">&nbsp;</td>
    <td align="right" width="38"><font size="1">.65</font></td>
    <td align="left" width="7">&nbsp;</td>
    <td align="right" width="38"><font size="1">.66</font></td>
    <td align="left" width="7">&nbsp;</td>
    <td align="right" width="38"><font size="1">.65</font></td>
    <td align="left" width="7">&nbsp;</td>
    <td align="right" width="38"><font size="1">.65</font></td>
    <td align="left" width="7">&nbsp;</td>
    <td align="right" width="38"><font size="1">.68</font></td>
    <td align="left" width="7">&nbsp;</td>
    <td align="right" width="38"><font size="1">.71</font></td>
    <td align="right" width="7">&nbsp;</td>
    <td colspan=2 align="right"><font size="1">.63</font></td>
    <td align="left" valign="bottom" colspan="2" ></td>
  </tr>
  <tr valign="bottom">
    <td width="89" height="65">
      <p><font size="1">Realized and<br>
        &nbsp;&nbsp;&nbsp;unrealized<br>
        &nbsp;&nbsp;&nbsp;gain (loss) <br>
        &nbsp;&nbsp;&nbsp;on investments<br>
        &nbsp;&nbsp;&nbsp; &#151; net</font></p>
    </td>
    <td colspan=5 align="right" height="65">
      <p><font size="1">(.19</font></p>
    </td>
    <td align="left" colspan="2" height="65"><font size="1">)</font></td>
    <td colspan=2 align="right" height="65">
      <p><font size="1">(.79</font></p>
    </td>
    <td align="left" width="10" height="65"><font size="1">)</font></td>
    <td align="right" width="38" height="65">
      <p><font size="1">(.89</font></p>
    </td>
    <td align="left" width="10" height="65"><font size="1">)</font></td>
    <td align="right" width="38" height="65">
      <p><font size="1">.32</font></p>
    </td>
    <td align="left" width="7" height="65">&nbsp;</td>
    <td align="right" width="38" height="65">
      <p><font size="1">.44</font></p>
    </td>
    <td align="left" width="7" height="65">&nbsp;</td>
    <td align="right" width="38" height="65">
      <p><font size="1">(.03</font></p>
    </td>
    <td align="left" width="7" height="65"><font size="1">)</font></td>
    <td align="right" width="38" height="65">
      <p><font size="1">.23</font></p>
    </td>
    <td align="left" width="7" height="65">&nbsp;</td>
    <td align="right" width="38" height="65">
      <p><font size="1">(.45</font></p>
    </td>
    <td align="left" width="7" height="65"><font size="1">)</font></td>
    <td align="right" width="38" height="65">
      <p><font size="1">.75</font></p>
    </td>
    <td align="left" width="7" height="65">&nbsp;</td>
    <td align="right" width="38" height="65">
      <p><font size="1">.50</font></p>
    </td>
    <td align="right" width="7" height="65">&nbsp;</td>
    <td colspan=2 align="right" height="65">
      <p><font size="1">.29</font></p>
    </td>
    <td align="left" valign="bottom" colspan="2" height="65" ></td>
  </tr>
  <tr valign="bottom">
    <td width="89">&nbsp;</td>
    <td colspan=5 align="right">
      <hr noshade size="1">
    </td>
    <td align="right" width="12">&nbsp;</td>
    <td align="right" width="13">&nbsp;</td>
    <td colspan=2 align="right">
      <hr noshade size="1">
    </td>
    <td align="right" width="10">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="10">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td colspan=2 align="right">
      <hr noshade size="1">
    </td>
    <td align="right" width="9">&nbsp;</td>
    <td align="right" width="32">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="89"><font size="1">Total from <br>
      &nbsp;&nbsp;&nbsp; investment <br>
      &nbsp;&nbsp;&nbsp; operations</font></td>
    <td colspan=5 align="right"><font size="1">.07</font></td>
    <td align="left" colspan="2">&nbsp;</td>
    <td colspan=2 align="right"><font size="1">(.24</font></td>
    <td align="left" width="10"><font size="1">)</font></td>
    <td align="right" width="38"><font size="1">(.34</font></td>
    <td align="left" width="10"><font size="1">)</font></td>
    <td align="right" width="38"><font size="1">.93</font></td>
    <td align="left" width="7">&nbsp;</td>
    <td align="right" width="38"><font size="1">1.09</font></td>
    <td align="left" width="7">&nbsp;</td>
    <td align="right" width="38"><font size="1">.63</font></td>
    <td align="left" width="7">&nbsp;</td>
    <td align="right" width="38"><font size="1">.88</font></td>
    <td align="left" width="7">&nbsp;</td>
    <td align="right" width="38"><font size="1">.20</font></td>
    <td align="left" width="7">&nbsp;</td>
    <td align="right" width="38"><font size="1">1.43</font></td>
    <td align="left" width="7">&nbsp;</td>
    <td align="right" width="38"><font size="1">1.21</font></td>
    <td align="right" width="7">&nbsp;</td>
    <td colspan=2 align="right"><font size="1">.92</font></td>
    <td align="left" valign="bottom" colspan="2" ></td>
  </tr>
  <tr valign="bottom">
    <td width="89">&nbsp;</td>
    <td colspan=5 align="right">
      <hr noshade size="1">
    </td>
    <td align="right" width="12">&nbsp;</td>
    <td align="right" width="13">&nbsp;</td>
    <td colspan=2 align="right">
      <hr noshade size="1">
    </td>
    <td align="right" width="10">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="10">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td colspan=2 align="right">
      <hr noshade size="1">
    </td>
    <td align="right" width="9">&nbsp;</td>
    <td align="right" width="32">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="89">
      <p><font size="1"><b>Less dividends <br>
        and <br>
        distributions: <br>
        </b> &nbsp;&nbsp;&nbsp;Investment <br>
        &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;income <br>
        &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &#151; net </font></p>
    </td>
    <td colspan=5 align="right" height="77">
      <p><font size="1">(.26</font></p>
    </td>
    <td align="left" colspan="2" height="77"><font size="1">)</font></td>
    <td colspan=2 align="right" height="77">
      <p><font size="1">(.55</font></p>
    </td>
    <td align="left" width="10" height="77"><font size="1">)</font></td>
    <td align="right" width="38" height="77">
      <p><font size="1">(.55</font></p>
    </td>
    <td align="left" width="10" height="77"><font size="1">)</font></td>
    <td align="right" width="38" height="77">
      <p><font size="1">(.61</font></p>
    </td>
    <td align="left" width="7" height="77"><font size="1">)</font></td>
    <td align="right" width="38" height="77">
      <p><font size="1">(.65</font></p>
    </td>
    <td align="left" width="7" height="77"><font size="1">)</font></td>
    <td align="right" width="38" height="77">
      <p><font size="1">(.66</font></p>
    </td>
    <td align="left" width="7" height="77"><font size="1">)</font></td>
    <td align="right" width="38" height="77">
      <p><font size="1">(.65</font></p>
    </td>
    <td align="left" width="7" height="77"><font size="1">)</font></td>
    <td align="right" width="38" height="77">
      <p><font size="1">(.65</font></p>
    </td>
    <td align="left" width="7" height="77"><font size="1">)</font></td>
    <td align="right" width="38" height="77">
      <p><font size="1">(.68</font></p>
    </td>
    <td align="left" width="7" height="77"><font size="1">)</font></td>
    <td align="right" width="38" height="77">
      <p><font size="1">(.71</font></p>
    </td>
    <td align="left" width="7" height="77"><font size="1">)</font></td>
    <td colspan=2 align="right" height="77">
      <p><font size="1">(.63</font></p>
    </td>
    <td align="left" valign="bottom" colspan="2" height="77" ><font size="1">)</font></td>
  </tr>
  <tr valign="bottom">
    <td width="89" height="56">
      <p><font size="1">&nbsp;&nbsp;&nbsp;Realized<br>
        &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;gain on &nbsp;&nbsp;<br>
        &nbsp;&nbsp;&nbsp;&nbsp; &nbsp;investments<br>
        &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151; net</font></p>
    </td>
    <td colspan=5 align="right" height="56">
      <p><font size="1">&#151;</font></p>
    </td>
    <td align="left" colspan="2" height="56">&nbsp;</td>
    <td colspan=2 align="right" height="56">
      <p><font size="1">&#151;</font></p>
    </td>
    <td align="left" width="10" height="56">&nbsp;</td>
    <td align="right" width="38" height="56">
      <p><font size="1">(.18</font></p>
    </td>
    <td align="left" width="10" height="56"><font size="1">)</font></td>
    <td align="right" width="38" height="56">
      <p><font size="1">(.20</font></p>
    </td>
    <td align="left" width="7" height="56"><font size="1">)</font></td>
    <td align="right" width="38" height="56">
      <p><font size="1">(.04</font></p>
    </td>
    <td align="left" width="7" height="56"><font size="1">)</font></td>
    <td align="right" width="38" height="56">
      <p><font size="1">&#151;</font></p>
    </td>
    <td align="left" width="7" height="56">&nbsp;</td>
    <td align="right" width="38" height="56">
      <p><font size="1">(.15</font></p>
    </td>
    <td align="left" width="7" height="56"><font size="1">)</font></td>
    <td align="right" width="38" height="56">
      <p><font size="1">(.07</font></p>
    </td>
    <td align="left" width="7" height="56"><font size="1">)</font></td>
    <td align="right" width="38" height="56">
      <p><font size="1">(.05</font></p>
    </td>
    <td align="left" width="7" height="56"><font size="1">)</font></td>
    <td align="right" width="38" height="56">
      <p><font size="1">(.05</font></p>
    </td>
    <td align="left" width="7" height="56"><font size="1">)</font></td>
    <td colspan=2 align="right" height="56">
      <p><font size="1">&#151;</font></p>
    </td>
    <td align="left" valign="bottom" colspan="2" height="56" ></td>
  </tr>
  <tr valign="bottom">
    <td width="89">&nbsp;</td>
    <td colspan=5 align="right">&nbsp;</td>
    <td align="right" width="12">&nbsp;</td>
    <td align="right" width="13">&nbsp;</td>
    <td colspan=2 align="right">&nbsp;</td>
    <td align="right" width="10">&nbsp;</td>
    <td align="right" width="38">&nbsp;</td>
    <td align="right" width="10">&nbsp;</td>
    <td align="right" width="38">&nbsp;</td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">&nbsp;</td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">&nbsp;</td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">&nbsp;</td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">&nbsp;</td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">&nbsp;</td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">&nbsp;</td>
    <td align="right" width="7">&nbsp;</td>
    <td colspan=2 align="right">&nbsp;</td>
    <td align="right" width="9">&nbsp;</td>
    <td align="right" width="32">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="89">
      <p><font size="1">&nbsp;&nbsp;&nbsp;In excess of <br>
        &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;realized<br>
        &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;gain on <br>
        &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;investments <br>
        &nbsp;&nbsp;&nbsp;&nbsp; &#151; net</font></p>
    </td>
    <td colspan=5 align="right">
      <p><font size="1">&#151;</font></p>
    </td>
    <td align="left" colspan="2">&nbsp;</td>
    <td colspan=2 align="right">
      <p><font size="1">&#151;</font></p>
    </td>
    <td align="left" width="10">&nbsp;</td>
    <td align="right" width="38">
      <p><font size="1">(.15</font></p>
    </td>
    <td align="left" width="10"><font size="1">)</font></td>
    <td align="right" width="38">
      <p><font size="1">&#151;</font></p>
    </td>
    <td align="left" width="7">&nbsp;</td>
    <td align="right" width="38">
      <p><font size="1">&#151;</font></p>
    </td>
    <td align="left" width="7">&nbsp;</td>
    <td align="right" width="38">
      <p><font size="1">&#151;</font></p>
    </td>
    <td align="left" width="7">&nbsp;</td>
    <td align="right" width="38">
      <p><font size="1">(.03</font></p>
    </td>
    <td align="left" width="7"><font size="1">)</font></td>
    <td align="right" width="38">
      <p><font size="1">&#151;</font></p>
    </td>
    <td align="left" width="7">&nbsp;</td>
    <td align="right" width="38">
      <p><font size="1">&#151;</font></p>
    </td>
    <td align="left" width="7">&nbsp;</td>
    <td align="right" width="38">
      <p><font size="1">&#151;</font></p>
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td colspan=2 align="right">
      <p><font size="1">&#151;</font></p>
    </td>
    <td align="left" valign="bottom" colspan="2"></td>
  </tr>
  <tr valign="bottom">
    <td width="89">&nbsp;</td>
    <td colspan=5 align="right">
      <hr noshade size="1">
    </td>
    <td align="right" width="12">&nbsp;</td>
    <td align="right" width="13">&nbsp;</td>
    <td colspan=2 align="right">
      <hr noshade size="1">
    </td>
    <td align="right" width="10">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="10">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td colspan=2 align="right">
      <hr noshade size="1">
    </td>
    <td align="right" width="9">&nbsp;</td>
    <td align="right" width="32">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="89"><font size="1">Total <br>
      &nbsp;&nbsp;&nbsp;dividends <br>
      &nbsp;&nbsp;&nbsp;and <br>
      &nbsp;&nbsp;&nbsp;distributions </font></td>
    <td colspan=5 align="right"><font size="1">(.26</font></td>
    <td align="left" colspan="2"><font size="1">)</font></td>
    <td colspan=2 align="right"><font size="1">(.55</font></td>
    <td align="left" width="10"><font size="1">)</font></td>
    <td align="right" width="38"><font size="1">(.88</font></td>
    <td align="left" width="10"><font size="1">)</font></td>
    <td align="right" width="38"><font size="1">(.81</font></td>
    <td align="left" width="7"><font size="1">)</font></td>
    <td align="right" width="38"><font size="1">(.69</font></td>
    <td align="left" width="7"><font size="1">)</font></td>
    <td align="right" width="38"><font size="1">(.66</font></td>
    <td align="left" width="7"><font size="1">)</font></td>
    <td align="right" width="38"><font size="1">(.83</font></td>
    <td align="left" width="7"><font size="1">)</font></td>
    <td align="right" width="38"><font size="1">(.72</font></td>
    <td align="left" width="7"><font size="1">)</font></td>
    <td align="right" width="38"><font size="1">(.73</font></td>
    <td align="left" width="7"><font size="1">)</font></td>
    <td align="right" width="38"><font size="1">(.76</font></td>
    <td align="left" width="7"><font size="1">)</font></td>
    <td colspan=2 align="right"><font size="1">(.63</font></td>
    <td align="left" valign="bottom" colspan="2" ><font size="1">)</font></td>
  </tr>
  <tr valign="bottom">
    <td width="89">&nbsp;</td>
    <td colspan=5 align="right">
      <hr noshade size="1">
    </td>
    <td align="right" width="12">&nbsp;</td>
    <td align="right" width="13">&nbsp;</td>
    <td colspan=2 align="right">
      <hr noshade size="1">
    </td>
    <td align="right" width="10">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="10">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td colspan=2 align="right">
      <hr noshade size="1">
    </td>
    <td align="right" width="9">&nbsp;</td>
    <td align="right" width="32">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="89"><font size="1">Net asset<br>
      &nbsp;&nbsp;&nbsp;value, end <br>
      &nbsp;&nbsp;&nbsp;of period</font></td>
    <td colspan=5 align="right"><font size="1">$9.26</font></td>
    <td align="left" colspan="2"><font size="1"></font></td>
    <td colspan=2 align="right"><font size="1">$9.45</font></td>
    <td align="left" width="10"><font size="1"></font></td>
    <td align="right" width="38"><font size="1">$10.24</font></td>
    <td align="left" width="10"><font size="1"></font></td>
    <td align="right" width="38"><font size="1">$11.46</font></td>
    <td align="left" width="7"><font size="1"></font></td>
    <td align="right" width="38"><font size="1">$11.34</font></td>
    <td align="left" width="7"><font size="1"></font></td>
    <td align="right" width="38"><font size="1">$10.94</font></td>
    <td align="left" width="7"><font size="1"></font></td>
    <td align="right" width="38"><font size="1">$10.97</font></td>
    <td align="left" width="7"><font size="1"></font></td>
    <td align="right" width="38"><font size="1">$10.92</font></td>
    <td align="left" width="7"><font size="1"></font></td>
    <td align="right" width="38"><font size="1">$11.44</font></td>
    <td align="left" width="7"><font size="1"></font></td>
    <td align="right" width="38"><font size="1">$10.74</font></td>
    <td align="right" width="7">&nbsp;</td>
    <td colspan=2 align="right"><font size="1">$10.29</font></td>
    <td align="left" valign="bottom" colspan="2" ></td>
  </tr>
  <tr valign="bottom">
    <td width="89">&nbsp;</td>
    <td colspan=5 align="right">
      <hr noshade size="1">
    </td>
    <td align="right" width="12">&nbsp;</td>
    <td align="right" width="13">&nbsp;</td>
    <td colspan=2 align="right">
      <hr noshade size="1">
    </td>
    <td align="right" width="10">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="10">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="1">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td colspan=2 align="right">
      <hr noshade size="1">
    </td>
    <td align="right" width="9">&nbsp;</td>
    <td align="right" width="32">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="89"><font size="1"><b>Total Investment <br>
      Return: *</b><br>
      </font><font size="1">Based on net<br>
      &nbsp;&nbsp;&nbsp;asset value <br>
      &nbsp;&nbsp;&nbsp;per share</font></td>
    <td colspan=5 align="right"><font size=1><font size="1">0.81</font></font></td>
    <td align="left" colspan="2"><font size=1><font size="1">%**</font></font></td>
    <td colspan=2 align="right"><font size=1><font size="1">(2.29</font></font></td>
    <td align="left" width="10"><font size=1><font size="1">)%</font></font></td>
    <td align="right" width="38"><font size=1><font size="1">(3.16</font></font></td>
    <td align="left" width="10"><font size=1><font size="1">)%</font></font></td>
    <td align="right" width="38"><font size=1><font size="1">8.43</font></font></td>
    <td align="left" width="7"><font size=1><font size="1">%</font></font></td>
    <td align="right" width="38"><font size=1><font size="1">10.20</font></font></td>
    <td align="left" width="7"><font size=1><font size="1">%</font></font></td>
    <td align="right" width="38"><font size=1><font size="1">5.81</font></font></td>
    <td align="left" width="7"><font size=1><font size="1">%</font></font></td>
    <td align="right" width="38"><font size=1><font size="1">8.68</font></font></td>
    <td align="left" width="7"><font size=1><font size="1">%</font></font></td>
    <td align="right" width="38"><font size=1><font size="1">1.75</font></font></td>
    <td align="left" width="7"><font size=1><font size="1">%</font></font></td>
    <td align="right" width="38"><font size=1><font size="1">13.83</font></font></td>
    <td align="left" width="7"><font size=1><font size="1">%</font></font></td>
    <td align="right" width="38"><font size=1><font size="1">12.29</font></font></td>
    <td align="left" width="7"><font size=1><font size="1">%</font></font></td>
    <td colspan=2 align="right"><font size=1><font size="1">9.43</font></font></td>
    <td align="left" valign="bottom" colspan="2" ><font size=1><font size="1">%**</font></font></td>
  </tr>
  <tr valign="bottom">
    <td width="89">&nbsp;</td>
    <td colspan=5 align="right">
      <hr noshade size="2">
    </td>
    <td align="right" width="12">&nbsp;</td>
    <td align="right" width="13">&nbsp;</td>
    <td colspan=2 align="right">
      <hr noshade size="2">
    </td>
    <td align="right" width="10">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="10">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td colspan=2 align="right">
      <hr noshade size="2">
    </td>
    <td align="right" width="9">&nbsp;</td>
    <td align="right" width="32">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="89">&nbsp;</td>
    <td colspan=5 align="right">&nbsp;</td>
    <td align="left" colspan="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td colspan=2 align="right">&nbsp;</td>
    <td align="left" width="10">&nbsp;</td>
    <td align="right" width="38">&nbsp;</td>
    <td align="left" width="10">&nbsp;</td>
    <td align="right" width="38">&nbsp;</td>
    <td align="left" width="7">&nbsp;</td>
    <td align="right" width="38">&nbsp;</td>
    <td align="left" width="7">&nbsp;</td>
    <td align="right" width="38">&nbsp;</td>
    <td align="left" width="7">&nbsp;</td>
    <td align="right" width="38">&nbsp;</td>
    <td align="left" width="7">&nbsp;</td>
    <td align="right" width="38">&nbsp;</td>
    <td align="left" width="7">&nbsp;</td>
    <td align="right" width="38">&nbsp;</td>
    <td align="left" width="7">&nbsp;</td>
    <td align="right" width="38">&nbsp;</td>
    <td align="left" width="7">&nbsp;</td>
    <td colspan=2 align="right">&nbsp;</td>
    <td align="left" valign="bottom" colspan="2" >&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="89"><font size="1"><b>Ratios to Average <br>
      Net Assets:</b><br>
      </font><font size="1">Expenses, <br>
      &nbsp;&nbsp;&nbsp; net of <br>
      &nbsp;&nbsp;&nbsp;&nbsp;reimburse-<br>
      &nbsp;&nbsp;&nbsp; ment</font></td>
    <td colspan=5 align="right"><font size=1><font size="1">1.57</font></font></td>
    <td align="left" colspan="2"><font size=1><font size="1">%&#134;&#134;</font></font></td>
    <td colspan=2 align="right"><font size=1><font size="1">1.46</font></font></td>
    <td align="left" width="10"><font size=1><font size="1">%</font></font></td>
    <td align="right" width="38"><font size=1><font size="1">1.46</font></font></td>
    <td align="left" width="10"><font size=1><font size="1">%</font></font></td>
    <td align="right" width="38"><font size=1><font size="1">1.48</font></font></td>
    <td align="left" width="7"><font size=1><font size="1">%</font></font></td>
    <td align="right" width="38"><font size=1><font size="1">1.44</font></font></td>
    <td align="left" width="7"><font size=1><font size="1">%</font></font></td>
    <td align="right" width="38"><font size=1><font size="1">1.50</font></font></td>
    <td align="left" width="7"><font size=1><font size="1">%</font></font></td>
    <td align="right" width="38"><font size=1><font size="1">1.52</font></font></td>
    <td align="left" width="7"><font size=1><font size="1">%</font></font></td>
    <td align="right" width="38"><font size=1><font size="1">1.48</font></font></td>
    <td align="left" width="7"><font size=1><font size="1">%</font></font></td>
    <td align="right" width="38"><font size=1><font size="1">1.37</font></font></td>
    <td align="left" width="7"><font size=1><font size="1">%</font></font></td>
    <td align="right" width="38"><font size=1><font size="1">1.30</font></font></td>
    <td align="left" width="7"><font size=1><font size="1">%</font></font></td>
    <td colspan=2 align="right"><font size=1><font size="1">.84</font></font></td>
    <td align="left" valign="bottom" colspan="2" ><font size=1><font size="1">%&#134;&#134;</font></font></td>
  </tr>
  <tr valign="bottom">
    <td width="89">&nbsp;</td>
    <td colspan=5 align="right">
      <hr noshade size="2">
    </td>
    <td align="right" width="12">&nbsp;</td>
    <td align="right" width="13">&nbsp;</td>
    <td colspan=2 align="right">
      <hr noshade size="2">
    </td>
    <td align="right" width="10">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="10">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td colspan=2 align="right">
      <hr noshade size="2">
    </td>
    <td align="right" width="9">&nbsp;</td>
    <td align="right" width="32">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="89"><font size="1">Expenses</font></td>
    <td colspan=5 align="right"><font size=1><font size="1">1.57</font></font></td>
    <td align="left" colspan="2"><font size=1><font size="1">%&#134;&#134;</font></font></td>
    <td colspan=2 align="right"><font size=1><font size="1">1.46</font></font></td>
    <td align="left" width="10"><font size=1><font size="1">%</font></font></td>
    <td align="right" width="38"><font size=1><font size="1">1.46</font></font></td>
    <td align="left" width="10"><font size=1><font size="1">%</font></font></td>
    <td align="right" width="38"><font size=1><font size="1">1.48</font></font></td>
    <td align="left" width="7"><font size=1><font size="1">%</font></font></td>
    <td align="right" width="38"><font size=1><font size="1">1.44</font></font></td>
    <td align="left" width="7"><font size=1><font size="1">%</font></font></td>
    <td align="right" width="38"><font size=1><font size="1">1.50</font></font></td>
    <td align="left" width="7"><font size=1><font size="1">%</font></font></td>
    <td align="right" width="38"><font size=1><font size="1">1.52</font></font></td>
    <td align="left" width="7"><font size=1><font size="1">%</font></font></td>
    <td align="right" width="38"><font size=1><font size="1">1.48</font></font></td>
    <td align="left" width="7"><font size=1><font size="1">%</font></font></td>
    <td align="right" width="38"><font size=1><font size="1">1.47</font></font></td>
    <td align="left" width="7"><font size=1><font size="1">%</font></font></td>
    <td align="right" width="38"><font size=1><font size="1">1.55</font></font></td>
    <td align="left" width="7"><font size=1><font size="1">%</font></font></td>
    <td colspan=2 align="right"><font size="1">1.76</font></td>
    <td align="left" valign="bottom" colspan="2" ><font size=1><font size="1">%&#134;&#134;</font></font></td>
  </tr>
  <tr valign="bottom">
    <td width="89">&nbsp;</td>
    <td colspan=5 align="right">
      <hr noshade size="2">
    </td>
    <td align="right" width="12">&nbsp;</td>
    <td align="right" width="13">&nbsp;</td>
    <td colspan=2 align="right">
      <hr noshade size="2">
    </td>
    <td align="right" width="10">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="10">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td colspan=2 align="right">
      <hr noshade size="2">
    </td>
    <td align="right" width="9">&nbsp;</td>
    <td align="right" width="32">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="89"><font size="1">Investment<br>
      &nbsp;&nbsp;&nbsp;income <br>
      &nbsp;&nbsp;&nbsp;&#151; net</font></td>
    <td colspan=5 align="right"><font size=1><font size="1">5.74</font></font></td>
    <td align="left" colspan="2"><font size=1><font size="1">%&#134;&#134;</font></font></td>
    <td colspan=2 align="right"><font size=1><font size="1">5.68</font></font></td>
    <td align="left" width="10"><font size=1><font size="1">%</font></font></td>
    <td align="right" width="38"><font size=1><font size="1">5.07</font></font></td>
    <td align="left" width="10"><font size=1><font size="1">%</font></font></td>
    <td align="right" width="38"><font size=1><font size="1">5.37</font></font></td>
    <td align="left" width="7"><font size=1><font size="1">%</font></font></td>
    <td align="right" width="38"><font size=1><font size="1">5.83</font></font></td>
    <td align="left" width="7"><font size=1><font size="1">%</font></font></td>
    <td align="right" width="38"><font size=1><font size="1">5.90</font></font></td>
    <td align="left" width="7"><font size=1><font size="1">%</font></font></td>
    <td align="right" width="38"><font size=1><font size="1">6.11</font></font></td>
    <td align="left" width="7"><font size=1><font size="1">%</font></font></td>
    <td align="right" width="38"><font size=1><font size="1">5.81</font></font></td>
    <td align="left" width="7"><font size=1><font size="1">%</font></font></td>
    <td align="right" width="38"><font size=1><font size="1">6.17</font></font></td>
    <td align="left" width="7"><font size=1><font size="1">%</font></font></td>
    <td align="right" width="38"><font size=1><font size="1">6.85</font></font></td>
    <td align="left" width="7"><font size=1><font size="1">%</font></font></td>
    <td colspan=2 align="right"><font size="1">7.43</font></td>
    <td align="left" valign="bottom" colspan="2" ><font size=1><font size="1">%&#134;&#134;</font></font></td>
  </tr>
  <tr valign="bottom">
    <td width="89">&nbsp;</td>
    <td colspan=5 align="right">
      <hr noshade size="2">
    </td>
    <td align="right" width="12">&nbsp;</td>
    <td align="right" width="13">&nbsp;</td>
    <td colspan=2 align="right">
      <hr noshade size="2">
    </td>
    <td align="right" width="10">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="10">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td colspan=2 align="right">
      <hr noshade size="2">
    </td>
    <td align="right" width="9">&nbsp;</td>
    <td align="right" width="32">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="89"><font size="1"><b>Supplemental Data:</b><br>
      </font><font size="1">Net assets, <br>
      &nbsp;&nbsp;&nbsp; end of <br>
      &nbsp;&nbsp;&nbsp; period (in <br>
      &nbsp;&nbsp;&nbsp; thousands)</font></td>
    <td colspan=5 align="right"><font size=1><font size="1">$131,124</font></font></td>
    <td align="left" colspan="2">&nbsp;</td>
    <td colspan=2 align="right"><font size=1><font size="1">$149,394</font></font></td>
    <td align="left" width="10">&nbsp;</td>
    <td align="right" width="38"><font size=1><font size="1">$201,574</font></font></td>
    <td align="left" width="10">&nbsp;</td>
    <td align="right" width="38"><font size=1><font size="1">$233,713</font></font></td>
    <td align="left" width="7">&nbsp;</td>
    <td align="right" width="38"><font size=1><font size="1">$211,620</font></font></td>
    <td align="left" width="7">&nbsp;</td>
    <td align="right" width="38"><font size=1><font size="1">$199,552</font></font></td>
    <td align="left" width="7">&nbsp;</td>
    <td align="right" width="38"><font size=1><font size="1">$198,575</font></font></td>
    <td align="left" width="7">&nbsp;</td>
    <td align="right" width="38"><font size=1><font size="1">$212,958</font></font></td>
    <td align="left" width="7">&nbsp;</td>
    <td align="right" width="38"><font size=1><font size="1">$216,922</font></font></td>
    <td align="left" width="7">&nbsp;</td>
    <td align="right" width="38"><font size=1><font size="1">$170,735</font></font></td>
    <td align="left" width="7">&nbsp;</td>
    <td colspan=2 align="right"><font size=1><font size="1">$114,628</font></font></td>
    <td align="left" valign="bottom" colspan="2" ></td>
  </tr>
  <tr valign="bottom">
    <td width="89">&nbsp;</td>
    <td colspan=5 align="right">
      <hr noshade size="2">
    </td>
    <td align="right" width="12">&nbsp;</td>
    <td align="right" width="13">&nbsp;</td>
    <td colspan=2 align="right">
      <hr noshade size="2">
    </td>
    <td align="right" width="10">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="10">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td colspan=2 align="right">
      <hr noshade size="2">
    </td>
    <td align="right" width="9">&nbsp;</td>
    <td align="right" width="32">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="89"><font size="1">Portfolio<br>
      &nbsp;&nbsp;&nbsp;turnover</font></td>
    <td colspan=5 align="right"><font size="1">5.10</font></td>
    <td align="left" colspan="2"><font size=1><font size="1">%</font></font></td>
    <td colspan=2 align="right"><font size="1">13.42</font></td>
    <td align="left" width="10"><font size=1><font size="1">%</font></font></td>
    <td align="right" width="38"><font size="1">39.53</font></td>
    <td align="left" width="10"><font size=1><font size="1">%</font></font></td>
    <td align="right" width="38"><font size="1">36.45</font></td>
    <td align="left" width="7"><font size=1><font size="1">%</font></font></td>
    <td align="right" width="38"><font size="1">43.07</font></td>
    <td align="left" width="7"><font size=1><font size="1">%</font></font></td>
    <td align="right" width="38"><font size="1">28.54</font></td>
    <td align="left" width="7"><font size=1><font size="1">%</font></font></td>
    <td align="right" width="38"><font size="1">21.28</font></td>
    <td align="left" width="7"><font size=1><font size="1">%</font></font></td>
    <td align="right" width="38"><font size="1">28.51</font></td>
    <td align="left" width="7"><font size=1><font size="1">%</font></font></td>
    <td align="right" width="38"><font size="1">28.74</font></td>
    <td align="left" width="7"><font size=1><font size="1">%</font></font></td>
    <td align="right" width="38"><font size="1">31.74</font></td>
    <td align="left" width="7"><font size=1><font size="1">%</font></font></td>
    <td colspan=2 align="right"><font size="1">75.92</font></td>
    <td align="left" valign="bottom" colspan="2" ><font size=1><font size="1">%</font></font></td>
  </tr>
  <tr valign="bottom">
    <td width="89">&nbsp;</td>
    <td colspan=5 align="right">
      <hr noshade size="2">
    </td>
    <td align="right" width="12">&nbsp;</td>
    <td align="right" width="13">&nbsp;</td>
    <td colspan=2 align="right">
      <hr noshade size="2">
    </td>
    <td align="right" width="10">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="10">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td align="right" width="38">
      <hr noshade size="2">
    </td>
    <td align="right" width="7">&nbsp;</td>
    <td colspan=2 align="right">
      <hr noshade size="2">
    </td>
    <td align="right" width="9">&nbsp;</td>
    <td align="right" width="32">&nbsp;</td>
  </tr>
</table>
<table width=600>
  <tr>
    <td><font size="2">&lt;/R&gt;</font></td>
  </tr>
  <tr>
    <td>
      <hr size=1 noshade align=left  width=75>
    </td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3% align=right valign=top><font size="1">* </font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">Total investment returns exclude the effect of
      the early withdrawal charge, if any. High Income Municipal is a continuously
      offered closed-end fund, the shares of which are offered at net asset value.
      Therefore, no separate market exists.</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3% align=right valign=top><font size="1">** </font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">Aggregate total investment return.</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3% align=right valign=top><font size="1">&#134; </font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">Commencement of operations.</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3% align=right valign=top><font size="1">&#134;&#134; </font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">Annualized.</font></td>
  </tr>
</table>

<p>
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 12</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>
<p>&nbsp;













<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 20, page: 20" -->




<p>
<table width=600>
  <tr>
    <td  align=center><font size=2><B>Per Share Data for Common Stock* (Unaudited)</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</i>&lt;R&gt;<i>MuniAssets
      (Traded on NYSE)</i></font></td>
  </tr>
</table>
<table width=600 cellspacing="0">
  <tr align="center">
    <td valign="BOTTOM" align="left"> <font size="1"><b>Quarter Ended*</b> </font>
      <hr noshade size="1" width="40%" align="left">
    </td>
    <td valign="BOTTOM" colspan=4> <font size="1"><b>Market Price** </b> </font>
      <hr noshade size="1" width="95%">
    </td>
    <td valign="BOTTOM" colspan=4> <font size="1"><b>Net Asset Value </b> </font>
      <hr noshade size="1" width="95%">
    </td>
    <td valign="BOTTOM" colspan=4> <font size="1"><b>Premium <br>
      (Discount) <br>
      to Net <br>
      Asset Value </b> </font>
      <hr noshade size="1" width="95%">
    </td>
  </tr>
  <tr>
    <td valign="BOTTOM"><font size="2"></font></td>
    <td valign="bottom" align="center" colspan="2"> <font size="1"><b>High</b>
      </font>
      <hr noshade size="1" width="95%">
    </td>
    <td valign="bottom" align="center" colspan="2"> <font size="1"><b>Low</b>
      </font>
      <hr noshade size="1" width="95%">
    </td>
    <td valign="bottom" align="center" colspan="2"> <font size="1"><b>High</b>
      </font>
      <hr noshade size="1" width="95%">
    </td>
    <td valign="bottom" align="center" colspan="2"> <font size="1"><b>Low</b>
      </font>
      <hr noshade size="1" width="95%">
    </td>
    <td valign="bottom" align="center" colspan="2"> <font size="1"><b>High</b>
      </font>
      <hr noshade size="1" width="95%">
    </td>
    <td valign="bottom" align="center" colspan="2"> <font size="1"><b>Low</b>
      </font>
      <hr noshade size="1" width="95%">
    </td>
  </tr>
  <tr>
    <td valign="TOP"><font size="2"></font></td>
    <td valign="bottom" align="center" colspan="2"> <font size="2">$</font></td>
    <td valign="bottom" align="center" colspan="2"> <font size="2">$</font></td>
    <td valign="bottom" align="center" colspan="2"> <font size="2">$</font></td>
    <td valign="bottom" align="center" colspan="2"> <font size="2">$</font></td>
    <td valign="bottom" align="center" colspan="2"> <font size="2">%</font></td>
    <td valign="bottom" align="center" colspan="2"> <font size="2">%</font></td>
  </tr>
  <tr valign="bottom">
    <td> <font size="2"> August 31, 1999 </font></td>
    <td align="right"> <font size="2"> 13.25&nbsp;&nbsp;</font></td>
    <td align="right">&nbsp;&nbsp;</td>
    <td align="right"> <font size="2"> 12.188</font></td>
    <td align="right">&nbsp;&nbsp;</td>
    <td align="right"> <font size="2"> 14.43</font></td>
    <td align="right">&nbsp;&nbsp;</td>
    <td align="right"> <font size="2"> 13.78</font></td>
    <td align="right">&nbsp;&nbsp;</td>
    <td align="right"> <font size="2"> (6.57</font></td>
    <td align="left"><font size="2">)&nbsp;</font></td>
    <td align="right"> <font size="2"> (11.81</font></td>
    <td align="left"><font size="2">)&nbsp;</font></td>
  </tr>
  <tr valign="bottom">
    <td> <font size="2"> November 30, 1999 </font></td>
    <td align="right"> <font size="2"> 12.375</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"> <font size="2"> 11.312</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"> <font size="2"> 13.85</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"> <font size="2"> 13.31</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"> <font size="2"> (9.47</font></td>
    <td align="left"><font size="2">)</font></td>
    <td align="right"> <font size="2"> (16.14</font></td>
    <td align="left"><font size="2">)</font></td>
  </tr>
  <tr valign="bottom">
    <td> <font size="2"> February 29, 2000 </font></td>
    <td align="right"> <font size="2"> 11.813</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"> <font size="2"> 10.75&nbsp;&nbsp;</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"> <font size="2"> 13.37</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"> <font size="2"> 12.88</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"> <font size="2"> (9.27</font></td>
    <td align="left"><font size="2">)</font></td>
    <td align="right"> <font size="2"> (17.27</font></td>
    <td align="left"><font size="2">)</font></td>
  </tr>
  <tr valign="bottom">
    <td> <font size="2"> May 31, 2000 </font></td>
    <td align="right"> <font size="2"> 11.437</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"> <font size="2"> 10.75&nbsp;&nbsp;</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"> <font size="2"> 13.13</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"> <font size="2"> 12.70</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"> <font size="2"> (11.68</font></td>
    <td align="left"><font size="2">)</font></td>
    <td align="right"> <font size="2"> (16.86</font></td>
    <td align="left"><font size="2">)</font></td>
  </tr>
  <tr valign="bottom">
    <td> <font size="2"> August 31, 2000 </font></td>
    <td align="right"> <font size="2"> 12.125</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"> <font size="2"> 11.188</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"> <font size="2"> 13.11</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"> <font size="2"> 12.78</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"> <font size="2"> (7.30</font></td>
    <td align="left"><font size="2">)</font></td>
    <td align="right"> <font size="2"> (13.41</font></td>
    <td align="left"><font size="2">)</font></td>
  </tr>
  <tr valign="bottom">
    <td> <font size="2"> November 30, 2000 </font></td>
    <td align="right"> <font size="2"> 12.438</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"> <font size="2"> 11.688</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"> <font size="2"> 13.16</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"> <font size="2"> 12.73</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"> <font size="2"> (4.98</font></td>
    <td align="left"><font size="2">)</font></td>
    <td align="right"> <font size="2"> (9.26</font></td>
    <td align="left"><font size="2">)</font></td>
  </tr>
  <tr valign="bottom">
    <td> <font size="2"> February 28, 2001 </font></td>
    <td align="right"> <font size="2"> 13.35&nbsp;&nbsp;</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"> <font size="2"> 12.125</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"> <font size="2"> 12.96</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"> <font size="2"> 12.72</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"> <font size="2"> 4.05</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"> <font size="2"> (4.98</font></td>
    <td align="left"><font size="2">)</font></td>
  </tr>
  <tr valign="bottom">
    <td> <font size="2"> May 31, 2001 </font></td>
    <td align="right"><font size="2">13.89&nbsp;&nbsp;</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2">12.50&nbsp;&nbsp;</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2">12.99</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2">12.84</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2">2.95</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"> <font size="2"> (3.55</font></td>
    <td align="left"><font size="2">)</font></td>
  </tr>
  <tr valign="bottom">
    <td> <font size="2"> August 31, 2001 </font></td>
    <td align="right"><font size="2">13.35&nbsp;&nbsp;</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2">13.00&nbsp;&nbsp;</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2">13.26</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2">12.96</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2">2.15</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2">(0.99</font></td>
    <td align="left"><font size="2">)</font></td>
  </tr>
</table>
<font size=2>&lt;/R&gt;</font><font size="2"></font>
<table width=600>
  <tr>
    <td>
      <hr size=1 noshade align=left  width=75>
    </td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3% align=right valign=top><font size="1">* </font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">Calculations are based upon shares of Common
      Stock outstanding at the end of each quarter.</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3% align=right valign=top><font size="1">** </font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">As reported in the consolidated transaction operating
      system.</font></td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td><font size=2><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;High Income Municipal</i></font></td>
  </tr>
</table>
<font size="2">&lt;R&gt;</font>
<table width=600 cellpadding="0" cellspacing="0" border="0">
  <tr>
    <td valign="BOTTOM" width="440" align="left"> <font size="1"><b>Quarter Ended*</b>
      </font>
      <hr noshade size="1" width="18%" align="left">
    </td>
    <td valign="BOTTOM" colspan=4 align="center"> <font size="1"><b>Net Asset
      Value</b> </font>
      <hr noshade size="1" width="95%">
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="440"><font size="1"></font></td>
    <td valign="BOTTOM" align="center" colspan="2"> <font size="1"><b>High</b>
      </font>
      <hr noshade size="1" width="95%">
    </td>
    <td valign="BOTTOM" align="center" colspan="2" width="75"> <font size="1"><b>Low</b>
      </font>
      <hr noshade size="1" width="95%">
    </td>
  </tr>
  <tr>
    <td valign="BOTTOM" width="440" height="24"><font size="2"></font></td>
    <td valign="BOTTOM" align="center" colspan="2" height="24"> <font size="2">$</font><font size="2"></font></td>
    <td valign="BOTTOM" align="center" width="75" height="24" colspan="2"> <font size="2">$</font></td>
  </tr>
  <tr>
    <td valign="BOTTOM" width="440"> <font size="2">November 30, 1999 </font></td>
    <td valign="BOTTOM" align="center" colspan="2"> <font size="2">10.24</font><font size="2">&nbsp;</font></td>
    <td valign="BOTTOM" align="center" width="75" colspan="2"> <font size="2">9.88</font></td>
  </tr>
  <tr>
    <td valign="BOTTOM" width="440"> <font size="2">February 29, 2000 </font></td>
    <td valign="BOTTOM" align="center" colspan="2"> <font size="2">&nbsp;9.90</font><font size="2"></font></td>
    <td valign="BOTTOM" align="center" width="75" colspan="2"> <font size="2">9.57</font></td>
  </tr>
  <tr>
    <td valign="BOTTOM" width="440"> <font size="2">May 31, 2000 </font></td>
    <td valign="BOTTOM" align="center" colspan="2"> <font size="2">&nbsp;9.61</font><font size="2"></font></td>
    <td valign="BOTTOM" align="center" width="75" colspan="2"> <font size="2">9.27</font></td>
  </tr>
  <tr>
    <td valign="BOTTOM" width="440"> <font size="2">August 31, 2000 </font></td>
    <td valign="BOTTOM" align="center" colspan="2"> <font size="2">&nbsp;9.46</font><font size="2"></font></td>
    <td valign="BOTTOM" align="center" width="75" colspan="2"> <font size="2">9.31</font></td>
  </tr>
  <tr>
    <td valign="BOTTOM" width="440"> <font size="2">November 30, 2000 </font></td>
    <td valign="BOTTOM" align="center" colspan="2"> <font size="2">&nbsp;9.46</font><font size="2"></font></td>
    <td valign="BOTTOM" align="center" width="75" colspan="2"> <font size="2">9.22</font></td>
  </tr>
  <tr>
    <td valign="BOTTOM" width="440"> <font size="2">February 28, 2001 </font></td>
    <td valign="BOTTOM" align="center" colspan="2"> <font size="2">&nbsp;9.29</font><font size="2"></font></td>
    <td valign="BOTTOM" align="center" width="75" colspan="2"> <font size="2">9.21</font></td>
  </tr>
  <tr>
    <td valign="BOTTOM" width="440"> <font size="2">May 31, 2001 </font></td>
    <td valign="BOTTOM" align="center" colspan="2"><font size="2">&nbsp;9.35</font><font size="2"></font></td>
    <td valign="BOTTOM" align="center" width="75" colspan="2"><font size="2">9.26</font></td>
  </tr>
  <tr>
    <td valign="BOTTOM" width="440"> <font size="2">August 31, 2001 </font></td>
    <td valign="BOTTOM" align="center" colspan="2"><font size="2">&nbsp;9.53</font><font size="2"></font></td>
    <td valign="BOTTOM" align="center" width="75" colspan="2"><font size="2">9.34</font></td>
  </tr>
</table>
<font size="2">&lt;/R&gt;</font>
<table width=600>
  <tr>
    <td>
      <hr size=1 noshade align=left  width=75>
    </td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3% valign=top><font size="1">* </font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">Calculations are based upon shares of Common
      Stock outstanding at the end of each quarter.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;During the last two
      years, share prices for MuniAssets Common Stock have fluctuated between
      a maximum premium of approximately 4.05% and a maximum discount of approximately
      17.27%. 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 or discount to net asset
      value following the Reorganization, or what the magnitude of any such premium
      or discount might be.&lt;/R&gt;</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><B><a name="18"></a>Investment Objective and Policies</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;The structure, organization
      and investment policies of the Funds are substantially similar. Each Fund
      is a non-diversified, closed-end management investment company registered
      under the Investment Company Act.<sup>1</sup> The investment objectives
      of the Funds are substantially similar. Each Fund seeks to provide stockholders
      with high current income exempt from Federal income taxes. Each Fund seeks
      to achieve its investment objective by investing primarily in a portfolio
      of medium to lower grade or unrated Municipal Bonds. Under normal circumstances,
      at least 80% of each Fund&#146;s total assets will be invested in Municipal
      Bonds. MuniAssets and High Income Municipal each invests at least 65% and
      75%, respectively, of its total assets in Municipal Bonds that are rated
      in any one of the medium and lower rating categories of Moody&#146;s, S&amp;P
      or Fitch, or in unrated Municipal Bonds that FAM or MLIM, as applicable,
      believes are of comparable quality. These ratings are currently Baa (Moody&#146;s)
      or BBB (S&amp;P or Fitch) or lower. MuniAssets and High Income Municipal
      each has the authority to invest as much as 35% and 25%, respectively, of
      its assets in Municipal Bonds in the higher rating</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td>
      <hr size=1 noshade align=left  width=75>
    </td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3% valign=top><font size="1">1 </font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%>
      <p><font size="1">High Income Municipal commenced operations on November
        2, 1990 upon the closing of its initial public offering of shares of Common
        Stock. As of August 27, 2001, High Income Municipal had 13,554,767 shares
        of Common Stock outstanding. MuniAssets commenced operations on June 25,
        1993 upon the closing of its initial public offering of shares of Common
        Stock. As of August 27, 2001, MuniAssets had 10,461,767 shares of Common
        Stock outstanding.&lt;/R&gt;</font></p>
      </td>
  </tr>
</table>
<p>&nbsp;
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 13</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>












<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 21, page: 21" -->



<p>
<p>
<table width=600>
  <tr>
    <td><font size=2> categories of nationally recognized statistical rating organizations
      (ratings of A or higher by Moody&#146;s, S&amp;P or Fitch or comparable
      unrated securities). In addition, each Fund reserves the right to temporarily
      invest more than 20% of its assets in short-term municipal securities, or
      short-term taxable money market securities (including commercial paper,
      certificates of deposit and repurchase agreements) for defensive purposes
      when, in the opinion of FAM or MLIM, prevailing market or financial conditions
      warrant. Neither Fund presently contemplates that it will invest more than
      25% of its total assets (taken at market value) in Municipal Bonds whose
      issuers are located in the same state.<br>
      <br>
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ordinarily, neither Fund intends to realize
      significant interest income that is subject to Federal income taxes. However,
      each Fund may invest all or a portion of its assets in certain tax-exempt
      securities classified as &#147;private activity bonds&#148; (in general,
      bonds that benefit non-governmental entities) that may subject certain investors
      in the Fund to a Federal alternative minimum tax.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;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 the Fund nevertheless believes
      such securities pay interest or distributions that are exempt from Federal
      income taxation (&#147;Non-Municipal Tax-Exempt Securities&#148;). 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
      interest 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 &#147;Municipal Bonds&#148; for purposes of the Funds&#146;
      investment objective and policies.&lt;/R&gt;</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investments in lower rated
      Municipal Bonds generally provide a higher yield and are less affected by
      interest rate fluctuations than higher rated tax-exempt securities of similar
      maturity but are subject to greater overall market risk and are also subject
      to a greater degree of risk with respect to the ability of the issuer to
      meet its principal and interest obligations. See &#147;Appendix III - Ratings
      of Municipal Bonds and Commercial Paper.&#148;</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund seeks to reduce risk
      through investing in multiple issuers, credit analysis and monitoring of
      current developments regarding the obligor and trends in both the economy
      and financial markets. FAM and MLIM each will use various means to research
      the stability and/or potential for improvement of various municipal issuers
      in connection with the proposed purchase of their securities by the Funds.
      Evaluation of each Municipal Bond may include the analysis of financial
      performance, debt structure, economic factors and the administrative structure
      of the issuer. Additionally, the priority of liens and the overall structure
      of the particular issue may be factors that will determine suitability for
      purchase. Further investigation may be performed and may include, among
      other things, discussions with project management, corporate officers and
      industry experts as well as site inspections, area analysis, and project
      and financial projection analysis. All purchases and sales also may be subject
      to the review of market data, economic projections and the performance of
      the financial markets. Certain economic indicators also may be monitored.
      Additionally, FAM and MLIM each will vary the average maturity of the applicable
      Fund&#146;s portfolio securities based upon their assessment of economic
      and market conditions.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;Each Fund is classified
      as non-diversified within the meaning of the Investment Company Act, which
      means that it is not limited by such Act in the proportion of its assets
      that it may invest in securities of a single issuer. However, each Fund&#146;s
      investments will be limited so as to qualify the Fund as a &#147;regulated
      investment company&#148; for purposes of Federal tax laws. See &#147;Taxes.&#148;
      Requirements for qualification include limiting its investments so that,
      at the close of each quarter of the taxable year, (i) not more than 25%
      of the market value of the Fund&#146;s total assets will be invested in
      the securities (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
      and the Fund will not own more than 10% of the outstanding voting securities
      of a single issuer. A fund that elects to be classified as &#147;diversified&#148;
      under the Investment Company Act must satisfy the foregoing 5% and 10% requirements
      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, the Fund&#146;s
      net asset value may fluctuate to a greater extent than that of a diversified
      company as a result of changes in the financial condition or in the market&#146;s
      assessment of the issuers.&lt;/R&gt;</font></td>
  </tr>
</table>
<p>&nbsp;
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 14</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>
<p>&nbsp;














<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 22, page: 22" -->




<p>

<p>
<table width=600>
  <tr>
    <td><font size=2><b><a name="20"></a>Description of Municipal Bonds</b></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;Municipal Bonds include
      debt obligations issued to obtain funds for various public purposes, including
      construction and equipping of a wide range of public facilities, refunding
      of outstanding obligations and obtaining funds for general operating expenses
      and loans to other public or private institutions for the construction of
      facilities. In addition, certain types of private activity bonds (&#147;PABs&#148;)
      are issued by or on behalf of public authorities to finance various privately-operated
      facilities, including airports, public parks, mass commuting facilities
      and multifamily housing projects, as well as facilities for water supply,
      gas, electricity, sewage or solid waste disposal and pollution control facilities.
      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 industrial development bonds or PABs
      as discussed below. &lt;/R&gt;</font></td>
  </tr>
</table>
<p>
<p>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The two principal classifications
      of Municipal Bonds are &#147;general obligation&#148; bonds and &#147;revenue&#148;
      or &#147;special obligation&#148; bonds, which latter category includes
      PABs and, for bonds issued on or before August 15, 1986, industrial development
      bonds or &#147;IDBs.&#148; General obligation bonds are typically secured
      by the issuer&#146;s pledge of faith, credit, and taxing power for the repayment
      of principal and the payment of interest. The taxing power of any governmental
      entity may be limited, however, by provisions of state constitutions or
      laws, and an entity&#146;s credit will depend on many factors, including
      potential erosion of the tax base due to population declines, natural disasters,
      declines in the state&#146;s industrial base or inability to attract new
      industries, economic limits on the ability to tax without eroding the tax
      base, state legislative proposals or voter initiatives to limit ad valorem
      real property taxes, and the extent to which the entity relies on Federal
      or state aid, access to capital markets or other factors beyond the state&#146;s
      or entity&#146;s control. 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 generally are not secured by a pledge
      of the credit or taxing power of the issuer of such bonds. The repayment
      of the principal and the payment of interest on such bonds depend 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 also
      may include &#147;moral obligation&#148; bonds, which normally are issued
      by special purpose public authorities. If an issuer of moral obligation
      bonds is unable to meet its obligations, the repayment of such bonds becomes
      a moral commitment but not a legal obligation of the state or municipality
      in question.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund may purchase Municipal
      Bonds classified as PABs. Interest received on certain PABs is treated as
      an item of &#147;tax preference&#148; for purposes of the Federal alternative
      minimum tax and may impact the overall tax liability of investors in the
      Fund. There is no limitation on the percentage of the Fund&#146;s assets
      that may be invested in Municipal Bonds the interest on which is treated
      as an item of &#147;tax preference&#148; for purposes of the Federal alternative
      minimum tax. See &#147;Tax Rules Applicable to the Funds and their Stockholders.&#148;</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;Also included within
      the general category of Municipal Bonds are certificates of participation
      (&#147;COPs&#148;) executed and delivered for the benefit of government
      authorities or entities to finance the acquisition or construction of equipment,
      land and/or facilities. The COPs represent participations in a lease, an
      installment purchase contract or a conditional sales contract (hereinafter
      collectively called &#147;lease obligations&#148;) relating to such equipment,
      land or facilities. Although lease obligations do not constitute general
      obligations of the issuer for which the issuer&#146;s unlimited taxing power
      is pledged, a lease obligation is frequently backed by the issuer&#146;s
      covenant to budget for, appropriate and make the payments due under the
      lease obligation. However, certain lease obligations contain &#147;non-appropriation&#148;
      clauses which provide that the issuer has no obligation to make lease or
      installment purchase payments in future years unless money is appropriated
      for such purpose on a yearly basis. Although &#147;non-appropriation&#148;
      lease obligations are secured by the leased property, disposition of the
      property in the event of foreclosure might prove difficult.&lt;/R&gt;</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><b><a name="21"></a>Other Investment Policies</b></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund has adopted certain
      other policies as set forth below:</font></td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Taxable Commercial Paper.</i>&nbsp;Taxable
      commercial paper must be rated A-1+ through A-3 by S&amp;P, Prime-1 through
      Prime-3 by Moody&#146;s, F-1+ through F-3 by Fitch or have credit characteristics
      equivalent to such ratings</font></td>
  </tr>
</table>
<p>
<p>&nbsp;
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 15</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>








<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 23, page: 23" -->


<p>&nbsp;</p><table width=600>
  <tr>
    <td><font size="2"> in the opinion of FAM and MLIM. The short-term tax-exempt
      obligations also will be in the highest rating categories as determined
      either by Moody&#146;s (currently, MIG-1 through MIG-3 for notes and Prime-1
      through Prime-3 for commercial paper), S&amp;P (currently, SP-1+ through
      SP-2 for notes and A-1+ through A-3 for commercial paper), or Fitch (currently,
      F-1 and F-2 for notes and F-1 for commercial paper), except that MuniAssets
      may invest in lower rated or unrated short-term tax exempt obligations to
      the extent that such investments do not exceed 20% of its assets. Certificates
      of deposit must be issued by depository institutions with total assets of
      at least $1 billion, except that the Funds may invest in certificates of
      deposit of smaller institutions if such certificates of deposit are Federally
      insured. See &#147;Appendix III &#151; Ratings of Municipal Bonds and Commercial
      Paper.&#148;<br>
      <br>
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>When-Issued Securities and Delayed Delivery
      Transactions</i>. Each Fund may purchase or sell Municipal Bonds on a delayed
      delivery basis or 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 the Fund enters into the commitment and the value of the obligation
      will thereafter be reflected in the calculation of the Fund&#146;s net asset
      value. The value of the obligation on the delivery date 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 securities
      having a market value at all times at least equal to the amount of the commitment.</font></td>
  </tr>
</table>
<p>
<p>
<table width=600>
  <tr>
    <td><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Call Rights</i>. Each
      Fund may purchase a Municipal Bond issuer&#146;s right to call all or a
      portion of such Municipal Bond for mandatory tender for purchase (a &#147;Call
      Right&#148;). A holder of a Call Right may exercise such right to require
      a mandatory tender for the purchase of related Municipal Bonds, subject
      to certain conditions. A Call Right that is not exercised prior to 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.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;<I>Indexed and Inverse
      Floating Obligations</I>. 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, the Funds may invest in Municipal
      Bonds that pay interest based on an index of Municipal Bond interest rates.
      The principal amount payable upon maturity of certain Municipal Bonds also
      may be based on the value of an index. The Funds&#146; return on these types
      of Municipal Bonds (and Non-Municipal Tax-Exempt Securities) 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. The Funds
      also may invest in so-called &#147;inverse floating obligations&#148; or
      &#147;residual interest bonds&#148; 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,
      interest rates 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
      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 will generally 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 that have
      shorter term maturities or that contain limitations on the extent to which
      the interest rate may vary. FAM and MLIM believe that indexed and inverse
      floating obligations represent a flexible portfolio management instrument
      for the Funds that allows FAM and MLIM to vary the degree of investment
      leverage relatively efficiently under different market conditions.</FONT></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Repurchase Agreements</I>.
      Each Fund may invest in securities pursuant to repurchase agreements. Repurchase
      agreements may be entered into only with a member bank of the Federal Reserve
      System or a primary dealer in U.S. Government securities or an affiliate
      thereof. Under a repurchase agreement, 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.
      This results in a fixed rate of return insulated from market fluctuations
      during such period. Each 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 the Fund&#146;s net assets. In the event
      of default by the seller under a repurchase agreement, the Fund may suffer
      time delays and incur costs or possible losses in connection with the disposal
      of the underlying securities. In general, for Federal income tax purposes,
      repurchase agreements are treated as collateralized loans secured by the
      securities &#147;sold.&#148; Therefore, amounts earned under such agreements
      will not be considered tax-exempt interest.&lt;/R&gt;</FONT></td>
  </tr>
</table>
<p>
<p>
<p>&nbsp;
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 16</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>








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<!-- MARKER LABEL="sheet: 24, page: 24" -->


<p>&nbsp;</p><table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MuniAssets and High Income
      Municipal have different policies relating to borrowings. Under MuniAssets&#146;
      borrowing policy, which will apply to the Combined Fund, MuniAssets may
      not borrow money in amounts in excess of 5% of its total assets taken at
      market value. High Income Municipal&#146;s policy relating to borrowing
      is set forth below.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Borrowings</i>. High Income
      Municipal is authorized to borrow money in amounts of up to 33<font size="1"><sup>1</sup>/3</font>%
      of the value of its total assets at the time of such borrowings to finance
      the purchase of its own shares pursuant to tender offers, if any, or for
      temporary, extraordinary or emergency purposes. Borrowings by the Fund (commonly
      known as &#147;leveraging&#148;) create an opportunity for greater total
      return since the Fund will not be required to sell portfolio securities
      to purchase tendered shares but, at the same time, increase exposure to
      capital risk. In addition, borrowed funds are subject to interest costs
      that may offset or exceed the return earned on the borrowed funds.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><b><a name="23"></a>Information Regarding Options and Futures
      Transactions</b></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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&#146;s use of hedging strategies is
      intended to reduce the volatility of the net asset value of Fund shares,
      the net asset value of Fund shares will fluctuate. There can be no assurance
      that a Fund&#146;s hedging transactions will be effective. Furthermore,
      the Funds engage in hedging activities from time to time and may not necessarily
      be engaging in hedging activities when movements in interest rates occur.
      The Funds have no obligation to enter into hedging transactions and each
      may choose not to do so.</font></td>
  </tr>
</table>
<p>
<p>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 &#147;Taxes &#151; Tax Treatment of Options and Futures
      Transactions.&#148;</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a description
      of the options and futures transactions in which the Funds may engage, limitations
      on the use of such transactions and risks associated therewith. The investment
      policies with respect to the hedging transactions of each Fund are not fundamental
      policies and may be modified by that Fund&#146;s Board of Directors without
      the approval of the Fund&#146;s stockholders.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Writing Covered Call Options</I>.
      Each Fund may write (<i>i.e.</i>, 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 the Fund at the stated
      exercise price until the option expires. Each Fund only writes covered options,
      which means that so long as the 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.</FONT></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund receives a premium
      from writing a call option that increases the Fund&#146;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 the Fund&#146;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.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Purchase of Options</I>.
      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 the Fund&#146;s 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&#146;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 that 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 the Fund&#146;s total assets.<br>
      <br>
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Financial Futures Contracts and Options</i>.
      Each Fund may purchase and sell certain financial futures contracts and
      options thereon solely for the purpose of hedging its investments in Municipal
      Bonds against </FONT></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 17</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>












<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 25, page: 25" -->



<p>
<table width=600>
  <tr>
    <td><font size="2">declines in value and to hedge 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 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. A purchase of financial futures contracts may provide a hedge
      against an increase in the cost of securities intended to be purchased,
      because such appreciation may be offset, in whole or in part, by an increase
      in the value of the position in the futures contracts.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;The purchase or sale
      of a futures contract differs from the purchase or sale of a security in
      that no price or premium is paid or received. Instead, an amount of cash
      or U.S. Treasury bills 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 futures contract fluctuates making
      the long and short positions in the futures contract more or less valuable.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Funds 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 recently
      issued tax-exempt bonds, and purchase and sell put and call options on such
      futures contracts for the purpose of hedging Municipal Bonds that the Funds
      hold or anticipate 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
      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, Treasury notes, GNMA Certificates and three-month U.S.
      Treasury bills.&lt;/R&gt;</font></td>
  </tr>
</table>
<p>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to policies adopted
      by its Directors, each Fund also may engage in transactions in other financial
      futures contracts transactions and options thereon, such as financial futures
      contracts or options on other municipal bond indices that may become available
      if FAM or MLIM, as the case may be, and the Directors of the Fund should
      determine that there is normally a sufficient correlation between the prices
      of such futures contracts and the Municipal Bonds in which the Funds invest
      to make such hedging appropriate.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Over-the-Counter Options</I>.
      Each Fund may engage in options and futures transactions on exchanges and
      in the over-the-counter markets. In general, exchange-traded contracts are
      third-party contracts (<i>i.e</i>., performance of the parties&#146; obligations
      is guaranteed by an exchange or clearing corporation) with standardized
      strike prices and expiration dates. Over-the-counter options (&#147;OTC
      options&#148;) transactions are two-party contracts with price and terms
      negotiated by the buyer and seller. See &#147;Restrictions on OTC Options&#148;
      below for information as to restrictions on the use of OTC options.</FONT></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Restrictions on OTC Options</I>.
      Each Fund will engage in OTC options only with member banks of the Federal
      Reserve System and primary dealers in U.S. Government securities or with affiliates
      of such 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.
      OTC options and assets used to cover OTC options written by a Fund may be
      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 might otherwise be realized.</FONT></td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>&lt;R&gt;Risk Factors
      in Options and Futures Transactions</i>. Utilization of futures transactions
      involves the risk of imperfect correlation in movements in the price of
      futures contracts and movements in the price of the security that is the
      subject of the hedge. If the price of the 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 futures contracts have different maturities,
      ratings, geographic compositions or other characteristics than 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 futures contracts on U.S. Government securities
      and options on such 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.&lt;/R&gt;<br>
      <br>
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under regulations of the Commodity Futures
      Trading Commission (the &#147;CFTC&#148;), the futures trading activities
      described herein will not result in a Fund being deemed a &#147;commodity
      pool,&#148; as defined under such regulations, provided that each Fund adheres
      to certain restrictions. In particular, each Fund may purchase and </font></td>
  </tr>
</table>
<p>&nbsp;
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 18</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>












<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 26, page: 26" -->



<p>
<p>
<table width=600>
  <tr>
    <td><font size=2>sell futures contracts and options thereon (i) for bona fide
      hedging purposes, without regard to the percentage of the Fund&#146;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 the Fund&#146;s existing futures position and premiums paid for outstanding
      options would exceed 5% of the market value of the liquidation value of
      the Fund&#146;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.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When a Fund purchases a futures
      contract, or writes a put option or purchases a call option thereon, it
      will maintain an amount of cash, cash equivalents (<i>e.g</i>., commercial
      paper and daily tender adjustable notes) or short-term high-grade fixed-income
      securities in a segregated account with the Fund&#146;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 futures
      contract, thereby ensuring that the use of such futures contract is unleveraged.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although certain risks are
      involved in options and futures transactions, FAM and MLIM believe that,
      because the Funds will engage in options and futures transactions only for
      hedging purposes, the options and futures portfolio strategies of the Funds
      do not subject the Funds to certain risks frequently associated with speculation
      in options and futures transactions.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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, there can be no assurance that viable
      exchange markets will continue.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 or, in the case of OTC options, FAM and MLIM believe the Funds
      can receive on each business day at least two independent bids or offers.
      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 options
      or futures transaction. The inability to close options and futures positions
      also could have an adverse impact on a Fund&#146;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 whom
      a Fund has an open position in an options or futures contract.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The liquidity of a secondary
      market in a futures contract may be adversely affected by &#147;daily price
      fluctuation limits&#148; established by commodity exchanges which limit
      the amount of fluctuation in a futures contract price during a single trading
      day. Once the daily limit has been reached in the contract, no trades may
      be entered into at a price beyond the limit, thus preventing the liquidation
      of open futures positions. Prices have in the past moved beyond the daily
      limit on a number of consecutive trading days.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The successful use of these
      transactions also depends on the ability of FAM and MLIM to forecast correctly
      the direction and extent of interest rate movements within a given time
      frame. To the extent these rates remain stable during the period in which
      a 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&#146;s total return for such period may
      be less than if it had not engaged in the hedging transaction. Furthermore,
      a Fund only engages in hedging transactions from time to time and may not
      necessarily be engaging in hedging transactions when movements in interest
      rates occur.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><B><a name="26"></a>Investment Restrictions</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Funds&#146; investment
      restrictions differ in some respects, as discussed below. The fundamental
      investment restrictions of each Fund may not be changed without the approval
      of the holders of a majority of the outstanding shares of Common Stock of
      that Fund. (For this purpose and under the Investment Company Act, &#147;majority&#148;
      means the lesser of (i) 67% of the shares represented at a meeting at which
      more than 50% of the outstanding shares are represented or (ii) more than
      50% of the outstanding shares.) The following investment restrictions of
      MuniAssets will apply to the Combined Fund. Under its fundamental investment
      restrictions, MuniAssets may not:</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3%></td>
    <td width=1% valign=top><font size=2>1)&nbsp;</font></td>
    <td width=3%></td>
    <td width=93%><font size=2>Make investments for the purpose of exercising
      control or management.</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3%></td>
    <td width=1% valign=top><font size=2>2)&nbsp;&nbsp;</font></td>
    <td width=3%></td>
    <td width=93%><font size=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
      </font></td>
  </tr>
</table>
<p>&nbsp;
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 19</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>








<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 27, page: 27" -->


<p>&nbsp;</p>
<table width=600>
  <tr>
    <td width=3%></td>
    <td width=1% valign=top>&nbsp;</td>
    <td width=3%></td>
    <td width=93%><font size=2>companies and only if immediately thereafter not
      more than 10% of the Fund&#146;s total assets would be invested in such
      securities.</font></td>
  </tr>
  <tr>
    <td width=3%></td>
    <td width=1% valign=top><font size=2>3) </font></td>
    <td width=3%></td>
    <td width=93%><font size=2> Purchase or sell real estate, real estate limited
      partnerships, commodities or commodity contracts; provided that the Fund
      may invest in securities secured by real estate or interests therein or
      issued by companies that invest in real estate or interests therein and
      the Fund may purchase and sell financial futures contracts and options thereon.</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3%></td>
    <td width=1% valign=top><font size=2>4) </font></td>
    <td width=3%></td>
    <td width=93%><font size=2> Issue senior securities or borrow amounts in excess
      of 5% of its total assets taken at market value.</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3%></td>
    <td width=1% valign=top><font size=2>5) </font></td>
    <td width=3%></td>
    <td width=93%><font size=2>Underwrite securities of other issuers except insofar
      as the Fund may be deemed an underwriter under the Securities Act of 1933
      in selling portfolio securities.</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3%></td>
    <td width=1% valign=top><font size=2>6) </font></td>
    <td width=3%></td>
    <td width=93%><font size=2>Make loans to other persons, except that the Fund
      may purchase Municipal Bonds and other debt securities and enter into repurchase
      agreements in accordance with its investment objective, policies and limitations.</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3%></td>
    <td width=1% valign=top><font size=2>7) </font></td>
    <td width=3%></td>
    <td width=93%><font size=2>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. (For purposes of this restriction, states, municipalities
      and their political subdivisions are not considered to be part of any industry.)</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For purposes of restriction
      (7), the exception for states, municipalities and their political subdivisions
      applies only to tax-exempt securities issued by such entities.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additional investment restrictions
      adopted by MuniAssets, which may be changed by its Board of Directors without
      stockholder approval, provide that MuniAssets may not:</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3%></td>
    <td width=1% valign=top><font size=2>1) </font></td>
    <td width=3%></td>
    <td width=93%><font size=2> Invest more than 25% of its total assets (taken
      at market value at the time of each investment) in the Municipal Bonds of
      any one state.</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3%></td>
    <td width=1% valign=top><font size=2>2) </font></td>
    <td width=3%></td>
    <td width=93%><font size=2> Mortgage, pledge, hypothecate or in any manner
      transfer, as security for indebtedness, any securities owned or held by
      the Fund except as may be necessary in connection with borrowings mentioned
      in (4) above or except as may be necessary in connection with transactions
      in financial futures contracts and options thereon.</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3%></td>
    <td width=1% valign=top><font size=2>3) </font></td>
    <td width=3%></td>
    <td width=93%><font size=2> Purchase any securities on margin, except that
      the Fund may obtain such short-term credit as may be necessary for the clearance
      of purchases and sales of portfolio securities (the deposit or payment by
      the Fund of initial or variation margin in connection with financial futures
      contracts and options thereon is not considered the purchase of a security
      on margin).</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3%></td>
    <td width=1% valign=top><font size=2>4) </font></td>
    <td width=3%></td>
    <td width=93%><font size=2> &lt;R&gt;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 a mandatory tender for the purchase of related municipal bonds.&lt;/R&gt;</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;High Income Municipal&#146;s
      fundamental investment restrictions are substantially the same as MuniAsset&#146;s
      fundamental investment restrictions (1) through (7) above. However, High
      Income Municipal has two other fundamental investment restrictions, which
      are substantially similar to MuniAsset&#146;s additional non-fundamental investment restrictions (3) and
      (4) above.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FAM, MLIM and Merrill Lynch,
      Pierce, Fenner &amp; Smith Incorporated (&#147;Merrill Lynch&#148;) are
      owned and controlled by Merrill Lynch &amp; Co., Inc. (&#147;ML &amp; Co.&#148;).
      Because of the affiliation of Merrill Lynch with FAM and MLIM, the Funds
      are 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 which 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. See &#147;Portfolio
      Transactions.&#148;</font></td>
  </tr>
</table>
<p>
<p>&nbsp; </p>
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 20</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>












<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 28, page: 28" -->



<p>&nbsp;
<table width=600>
  <tr>
    <td><font size=2><b><a name="27"></a>Portfolio Composition</b></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;There are differences
      in concentration among the types of securities held in the portfolio of
      each Fund. For MuniAssets, as of July 31, 2001, approximately 88.6%, 10.4%,
      0.3% and 0.7% of its portfolio was invested in revenue bonds, general obligation
      bonds, common stock and cash equivalents, respectively; for High Income
      Municipal, approximately 89.4%, 9.8%, 0.5% and 0.3% of its portfolio was
      invested in revenue bonds, general obligation bonds, common stock, and cash
      equivalents, respectively.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although the investment portfolios
      of the Funds must satisfy the same standards with respect to credit quality,
      the actual securities owned by each Fund are different. As a result there
      are certain differences in the composition of the two investment portfolios.
      The tables below set forth the percentages as of July 31, 2001 of the municipal
      bonds held by each Fund.&lt;/R&gt;</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MuniAssets</i></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;As of July 31, 2001,
      approximately 97% and 3% of the market value of MuniAssets&#146; portfolio
      was invested in long-term Municipal Bonds and short-term Municipal Bonds,
      respectively. The following table sets forth certain information with respect
      to the composition of MuniAssets&#146; long-term municipal obligation investment
      portfolio as of July 31, 2001.</font></td>
  </tr>
</table>
<font size="2"></font>
<table cellpadding="0" cellspacing="0" width=600>
  <tr align="center">
    <td valign="BOTTOM" colspan="2"> <font size="1"><b>S&amp;P</b> </font>
      <hr noshade size="1" width="95%">
    </td>
    <td valign="BOTTOM" width="87"> <font size="1"><b>Moody&#146;s</b> </font>
      <hr noshade size="1" width="95%">
    </td>
    <td valign="BOTTOM" width="176"> <font size="1"><b>Number of Issues</b> </font>
      <hr noshade size="1" width="95%">
    </td>
    <td valign="BOTTOM" width="111"> <font size="1"><b>Value (in <br>
      thousands)</b> </font>
      <hr noshade size="1" width="95%">
    </td>
    <td valign="BOTTOM" width="109"> <font size="1"><b>Percent</b> </font>
      <hr noshade size="1" width="95%">
    </td>
  </tr>
  <tr valign="bottom">
    <td align="center" width="46">&nbsp;</td>
    <td align="left" width="69"> <font size="2">BBB </font></td>
    <td align="center" width="87"> <font size="2">Baa </font></td>
    <td align="center" width="176"> <font size="2">13</font></td>
    <td align="center" width="111"> <font size="2">$&nbsp; 23,964</font></td>
    <td align="center" width="109"> <font size="2">18.1%</font></td>
  </tr>
  <tr valign="bottom">
    <td align="center" width="46">&nbsp;</td>
    <td align="left" width="69"> <font size="2">BB &nbsp;&nbsp;</font></td>
    <td align="center" width="87"> <font size="2">Ba &nbsp;</font></td>
    <td align="center" width="176"> <font size="2">15</font></td>
    <td align="center" width="111"> <font size="2">$&nbsp; 25,148</font></td>
    <td align="center" width="109"> <font size="2">19.0%</font></td>
  </tr>
  <tr valign="bottom">
    <td align="center" width="46">&nbsp;</td>
    <td align="left" width="69"> <font size="2">B &nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td align="center" width="87"> <font size="2">B&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td align="center" width="176"> <font size="2">&nbsp;3</font></td>
    <td align="center" width="111"> <font size="2">$&nbsp; &nbsp;&nbsp;4,423</font></td>
    <td align="center" width="109"> <font size="2">&nbsp;&nbsp;3.3%</font></td>
  </tr>
  <tr valign="bottom">
    <td align="center" width="46">&nbsp;</td>
    <td align="left" width="69"> <font size="2">NR &nbsp;&nbsp;</font></td>
    <td align="center" width="87"> <font size="2">NR&nbsp;&nbsp;</font></td>
    <td align="center" width="176"> <font size="2">&nbsp;44 </font> </td>
    <td align="center" width="111"> <font size="2">$&nbsp; 78,849</font></td>
    <td align="center" width="109"> <font size="2">59.6%</font></td>
  </tr>
  <tr valign="bottom">
    <td align="center" width="46">&nbsp;</td>
    <td align="left" width="69">&nbsp;</td>
    <td align="center" width="87">&nbsp;</td>
    <td align="center" width="176">
      <hr width="10%" size="1" noshade>
    </td>
    <td align="center" width="111">
      <hr width="40%" size="1" noshade>
    </td>
    <td align="center" width="109">
      <hr width="55%" size="1" noshade>
    </td>
  </tr>
  <tr valign="bottom">
    <td align="center" width="46">&nbsp;</td>
    <td align="left" width="69"><font size="2">Total:</font>&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td align="center" width="87">&nbsp;</td>
    <td align="center" width="176"> <font size="2">75</font></td>
    <td align="center" width="111"> <font size="2">$132,384</font></td>
    <td align="center" width="109"> <font size="2">&nbsp;&nbsp;100.0%&lt;/R&gt;</font></td>
  </tr>
  <tr valign="bottom">
    <td align="center" width="46">&nbsp;</td>
    <td align="left" width="69">&nbsp;</td>
    <td align="center" width="87">&nbsp;</td>
    <td align="center" width="176">
      <hr width="10%" size="2" noshade>
    </td>
    <td align="center" width="111">
      <hr width="40%" size="2" noshade>
    </td>
    <td align="center" width="109">
      <hr width="55%" size="2" noshade>
    </td>
  </tr>
</table>
<font size="2"></font>
<table width=600>
  <tr>
    <td>
      <hr size=1 noshade align=left  width=75>
    </td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3% valign=top><font size="1">* </font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">Ratings: Using the higher of S&amp;P&#146;s or
      Moody&#146;s rating on the Fund&#146;s Municipal Bonds S&amp;P&#146;s rating
      categories may be modified further by a plus (+) or minus (-) in AA, A and
      BBB ratings. Moody&#146;s rating categories may be modified further by a
      1, 2 or 3 in Aa, A and Baa ratings. See Appendix III &#151;&#147;Ratings
      of Municipal Bonds and Commercial Paper.&#148;</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;High Income Municipal</i></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;As of July 31, 2001,
      approximately 98% and 2% of the market value of High Income Municipal&#146;s
      portfolio was invested in long-term Municipal Bonds and short-term Municipal
      Bonds, respectively. The following table sets forth certain information
      with respect to the composition of High Income Municipal&#146;s long-term
      municipal obligation investment portfolio as of July 31, 2001.</font></td>
  </tr>
</table>
<font size="2"></font>
<table width=600 cellpadding="0" cellspacing="0" border="0">
  <tr align="center">
    <td valign="BOTTOM" colspan="2"> <font size="1"><b>S&amp;P</b> </font>
      <hr noshade size="1" width="95%">
    </td>
    <td width="119" valign="BOTTOM"> <font size="1"><b>Moody&#146;s</b> </font>
      <hr noshade size="1" width="95%">
    </td>
    <td width="119" valign="BOTTOM"> <font size="1"><b>Number of Issues</b> </font>
      <hr noshade size="1" width="95%">


    </td>
    <td width="119" valign="BOTTOM"> <font size="1"><b>Value (in <br>
      thousands)</b> </font>
      <hr noshade size="1" width="95%">
    </td>
    <td width="113" valign="BOTTOM"> <font size="1"><b>Percent</b> </font>
      <hr noshade size="1" width="95%">
    </td>
  </tr>
  <tr align="center" valign="bottom">
    <td width="50">&nbsp;</td>
    <td width="80" align="left"> <font size="2">AAA </font></td>
    <td width="119"> <font size="2">Aaa &nbsp;</font></td>
    <td width="119"> <font size="2">&nbsp;&nbsp;4</font></td>
    <td width="119"> <font size="2">$&nbsp;&nbsp;&nbsp; 8,178</font></td>
    <td width="113"> <font size="2">&nbsp;&nbsp;6.3%</font></td>
  </tr>
  <tr align="center" valign="bottom">
    <td width="46">&nbsp;</td>
    <td width="80" align="left"> <font size="2">A &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td width="119"> <font size="2">A&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td width="119"> <font size="2">&nbsp;&nbsp;2</font></td>
    <td width="119"> <font size="2">$&nbsp;&nbsp;&nbsp; 3,729</font></td>
    <td width="113"> <font size="2">&nbsp;&nbsp;2.9%</font></td>
  </tr>
  <tr align="center" valign="bottom">
    <td width="46">&nbsp;</td>
    <td width="80" align="left"> <font size="2">BBB &nbsp;&nbsp;</font></td>
    <td width="119"> <font size="2">Baa &nbsp;</font></td>
    <td width="119"> <font size="2">&nbsp;&nbsp;6</font></td>
    <td width="119"> <font size="2">$ &nbsp;17,811</font></td>
    <td width="113"> <font size="2">13.8%</font></td>
  </tr>
  <tr align="center" valign="bottom">
    <td width="46">&nbsp;</td>
    <td width="80" align="left"> <font size="2">BB &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td width="119"> <font size="2">Ba&nbsp; &nbsp;&nbsp;</font></td>
    <td width="119"> <font size="2">14</font></td>
    <td width="119"> <font size="2">$&nbsp; 14,879</font></td>
    <td width="113"> <font size="2">11.5%</font></td>
  </tr>
  <tr align="center" valign="bottom">
    <td width="46">&nbsp;</td>
    <td width="80" align="left"> <font size="2">B &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td width="119"> <font size="2">B&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td width="119"> <font size="2">&nbsp;&nbsp;6</font></td>
    <td width="119"> <font size="2">$&nbsp; 17,364</font></td>
    <td width="113"> <font size="2">13.5%</font></td>
  </tr>
  <tr align="center" valign="bottom">
    <td width="46">&nbsp;</td>
    <td width="80" align="left"> <font size="2">NR &nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td width="119"> <font size="2">NR &nbsp;&nbsp;</font></td>
    <td width="119"> <font size="2">37</font></td>
    <td width="119"> <font size="2">$&nbsp; 66,997</font></td>
    <td width="113"> <font size="2">52.0%</font></td>
  </tr>
  <tr valign="bottom">
    <td align="center" width="46">&nbsp;</td>
    <td width="80" align="left">&nbsp;</td>
    <td width="119" align="center">&nbsp;</td>
    <td width="119" align="center">
      <hr width="10%" size="1" noshade>
    </td>
    <td width="119" align="center">
      <hr width="40%" size="1" noshade>
    </td>
    <td width="113" align="center">
      <hr width="55%" size="1" noshade>
    </td>
  </tr>
  <tr align="center" valign="bottom">
    <td width="46">&nbsp;</td>
    <td width="80" align="left"><font size="2">Total:</font>&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td width="119">&nbsp;</td>
    <td width="119" align="left"> <font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;69
      </font></td>
    <td width="119"> <font size="2">$128,958</font></td>
    <td width="113"> <font size="2">&nbsp;100.0%&lt;/R&gt;</font></td>
  </tr>
  <tr valign="bottom">
    <td width="46" align="center">&nbsp;</td>
    <td width="80" align="left"><font size="2"></font></td>
    <td width="119" align="center">&nbsp;</td>
    <td width="119" align="center">
      <hr width="10%" size="2" noshade>
    </td>
    <td width="119" align="center">
      <hr width="40%" size="2" noshade>
    </td>
    <td width="113" align="center">
      <hr width="55%" size="2" noshade>
    </td>
  </tr>
</table>
<font size="2"></font>
<table width=601>
  <tr>
    <td>
      <hr size=1 noshade align=left  width=75>
    </td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3% valign=top><font size="1">* </font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">Ratings: Using the higher of S&amp;P&#146;s or
      Moody&#146;s rating on High Income Municipal&#146;s Municipal Bonds. S&amp;P&#146;s
      rating categories may be modified further by a plus (+) or minus (-) in
      AA, A and BBB ratings. Moody&#146;s rating categories may be modified further
      by a 1, 2 or 3 in AA, A and Baa ratings. See Appendix III &#151;&#147;Ratings
      of Municipal Bonds and Commercial Paper.&#148;</font></td>
  </tr>
</table>

<br>
<table width=600>
  <tr>
    <td><font size=2><b><a name="29"></a>Performance</b></font></td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td><font size=2>&lt;R&gt;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font> <font size="2">The
      table below sets forth for each Fund the yield and tax equivalent yield
      for the 31 days ended May 31, 2001 and the average annual total return for
      the one, five and ten years ended May 31, 2001. </font></td>
  </tr>
</table>
<table width="600">
  <tr>
    <td valign="TOP" >&nbsp;</td>
    <td valign="BOTTOM" align="center" >&nbsp; </td>
    <td valign="BOTTOM" align="center" >&nbsp;</td>
    <td valign="BOTTOM" align="center" colspan="3" ><font size="1"><b>Average
      Annual Total Return</b></font>
      <hr noshade width="98%" size="1">
    </td>
  </tr>
  <tr>
    <td valign="TOP" >&nbsp;</td>
    <td valign="BOTTOM" align="center" ><font size="1"><b>Yield &#151; 31 days <br>
      ended May 31, 2001</b> </font>
      <hr noshade width="90%" size="1">
    </td>
    <td valign="BOTTOM" align="center" ><font size="1"><b>Tax equivalent <br>
      yield &#151; 31 days <br>
      ended May 31, 2001&#134;</b> </font>
      <hr noshade width="90%" size="1">
    </td>
    <td valign="BOTTOM" align="center" ><font size="1"><b>One Year ended <br>
      May 31, 2001 </b> </font>
      <hr noshade width="90%" size="1">
    </td>
    <td valign="BOTTOM"  align="center"><font size="1"><b>Five Years ended <br>
      May 31, 2001 </b></font>
      <hr noshade width="90%" size="1">
    </td>
    <td valign="BOTTOM" align="center" ><font size="1"><b>Since Inception/<br>
      Ten Years <br>
      ended <br>
      May 31, 2001 </b></font>
      <hr noshade width="90%" size="1">
    </td>
  </tr>
  <tr>
    <td valign="TOP" >
      <p><font size="2">High Income Municipal </font>
    </td>
    <td valign="BOTTOM" align="center" ><font size="2">6.42%</font></td>
    <td valign="BOTTOM" align="center" ><font size="2">8.10%</font></td>
    <td valign="BOTTOM" align="center" >
      <p align="CENTER"><font size="2">6.51%</font>
    </td>
    <td valign="BOTTOM" align="center" >
      <p align="CENTER"><font size="2">3.50%</font>
    </td>
    <td valign="BOTTOM" align="center">
      <p align="CENTER"><font size="2">6.03%&nbsp;&nbsp;</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP">
      <p align="JUSTIFY"><font size="2">MuniAssets </font>
    </td>
    <td valign="TOP" align="center" ><font size="2">6.62%</font></td>
    <td valign="TOP" align="center" ><font size="2">9.32%</font></td>
    <td valign="TOP" align="center" >
      <p align="CENTER"><font size="2">8.58%</font>
    </td>
    <td valign="TOP" align="center" >
      <p align="CENTER"><font size="2">5.39%</font>
    </td>
    <td valign="TOP" align="center" >
      <p align="CENTER"><font size="2">5.67%*</font>
    </td>
  </tr>
</table>
<table width=601>
  <tr>
    <td>
      <hr size=1 noshade align=left  width=75>
    </td>
  </tr>
</table>
<font size="2"></font>
<table width=600>
  <tr>
    <td width=3% valign=top><font size="1">&#134;</font></td>
    <td width=2%>&nbsp;</td>
    <td width=95% valign="top"><font size="1">Assumes a 27.5% federal income tax
      rate.</font></td>
  </tr>
  <tr>
    <td width=3% valign=top><font size="1">* </font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">Since inception on June 25, 1993.&lt;/R&gt;</font></td>
  </tr>
</table>
<p>&nbsp;
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 21</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table><p>
<hr size=5 noshade width=600 align=LEFT>
<p>&nbsp;












<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 29, page: 29" -->



<p>
<p>
<table width=600>
  <tr>
    <td><font size=2><b><a name="29a"></a>Portfolio Transactions</b></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 or MLIM is primarily
      responsible for the execution of the applicable Fund&#146;s portfolio transactions.
      In executing such transactions, FAM and MLIM seek to obtain the best results
      for the applicable 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&#146;s
      risk in positioning a block of securities. While FAM and MLIM generally
      seek reasonably competitive commission rates, the Funds do not necessarily
      pay the lowest commission or spread available.</font></td>
  </tr>
</table>
<p>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 and MLIM, 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 and MLIM under their respective investment advisory
      agreements with the Funds, and the expenses of FAM and MLIM will not necessarily
      be reduced as a result of the receipt of such supplemental information.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td height="148"><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 and MLIM, 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.</font></td>
  </tr>

<p>&nbsp;

</table>
<p>
<p>

<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 each Fund to FAM or MLIM. 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.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><B><a name="30"></a>Portfolio Turnover</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 or MLIM.
      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:</font></td>
  </tr>
</table>
<br>
<TABLE width="600" cellpadding="0" cellspacing="0" border="0">
  <TR>
    <TD VALIGN="TOP" align="left" height="18">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD VALIGN="TOP" align="left" height="18">&nbsp;</TD>
    <TD VALIGN="BOTTOM" align="center" height="18"> <font size="1"><b> Year Ended
      May 31, 2000</b></font>
      <hr noshade width="70%" size="1">
    </TD>
    <TD VALIGN="BOTTOM" align="center" height="18"> <font size="1"><b> Year Ended
      May 31, 2001</b></font>
      <hr noshade width="70%" size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" align="left">&nbsp;</TD>
    <TD VALIGN="TOP" align="left">
      <P><font size="2"><b>MuniAssets</b></font>
    </TD>
    <TD VALIGN="TOP" align="center"> <font size="2"> 32.38%</font></TD>
    <TD VALIGN="TOP" align="center"> <font size="2"> 17.11%</font></TD>
  </TR>
</TABLE>
<br>
<table  width="600" cellpadding="0" cellspacing="00" border="0">
  <tr>
    <td valign="TOP" align="left" width="32">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td valign="TOP" align="left" width="146">&nbsp;</td>
    <td valign="BOTTOM" align="center" width="183"> <font size="1"><b> Year Ended
      August 31, 2000</b> </font>
      <hr noshade width="90%" size="1">
    </td>
    <td valign="BOTTOM" align="center" width="239"> <font size="1"><b> Six Months
      Ended February 28, 2001</b> </font>
      <hr noshade width="90%" size="1">
    </td>
  </tr>
  <tr>
    <td valign="TOP" align="left" width="32">&nbsp;</td>
    <td valign="TOP" align="left" width="146">
      <p><font size="2"><b>High Income Municipal</b></font>
    </td>
    <td valign="TOP" align="center" width="183"> <font size="2"> 13.42%</font></td>
    <td valign="TOP" align="center" width="239"> <font size="2"> 5.10%</font></td>
  </tr>
</table>
<br>
<p>&nbsp;
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 22</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>








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<!-- MARKER LABEL="sheet: 30, page: 30" -->


<p>&nbsp;</p><table width=600>
  <tr align="left">
    <td><font size=2> <b><a name="30a"></a>Net Asset Value</b></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The net asset value per share
      of MuniAssets Common Stock is determined as of the close of business on
      the NYSE on the last business day of each week. The net asset value per
      share of High Income Municipal Common Stock is determined as of the close
      of business on the NYSE 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 each Fund plus any cash or other assets (including
      interest and dividends accrued but not yet received) minus all liabilities
      (including accrued expenses) is divided by the total number of shares of
      Common Stock outstanding at such time. Expenses, including fees payable
      to FAM and MLIM, are accrued daily. </font></td>
  </tr>
</table>
<p>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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. 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.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MuniAssets 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 <i>Barron&#146;s</i>,
      the Monday edition of <i>The Wall Street Journal</i>, and the Monday and
      Saturday editions of <i>The New York Times</i>. The net asset value of High
      Income Municipal may be obtained by calling the Fund&#146;s transfer agent
      at 1-800-637-3863.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><B><a name="31"></a>Capital Stock</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;Each Fund has outstanding
      Common Stock. The Common Stock of MuniAssets is traded on the NYSE. The
      shares of MuniAssets Common Stock commenced trading on the NYSE on July
      20, 1993. As of August 31, 2001, the net asset value per share of MuniAssets
      Common Stock was $13.26 and the market price per share was $13.32. High
      Income Municipal engages in a continuous offering of High Income Municipal
      Common Stock. High Income Municipal Common Stock is not listed on any exchange.
      No secondary market presently exists for High Income Municipal Common Stock
      and a secondary market is not expected to develop. As of May 31, 2001, the
      net asset value per share of High Income Municipal Common Stock was $9.52.&lt;/R&gt;</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund is authorized to
      issue 200,000,000 shares of capital stock, all of which 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.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders of each Fund&#146;s
      Common Stock are entitled to share equally in dividends declared by the
      Fund&#146;s Board of Directors payable to holders of the Common Stock and
      in the net assets of the Fund available for distribution to holders of the
      Common Stock. Holders of a Fund&#146;s Common Stock do not have preemptive
      or conversion rights and shares of a Fund&#146;s Common Stock are not redeemable.
      The outstanding shares of Common Stock of each Fund are fully paid and nonassessable.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><B><a name="31a"></a>Certain Provisions of the Charters</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund&#146;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 in the case of MuniAssets, 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. With respect to High Income Municipal, a
      director may be removed from office with cause by action taken by the </font></td>
  </tr>
</table>
<p>
<p>&nbsp;
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 23</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>












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<!-- MARKER LABEL="sheet: 31, page: 31" -->



<p>
<table width=600>
  <tr>
    <td><font size=2>holders of at least 75% of the shares of capital stock
      entitled to be voted on the matter. With respect to MuniAssets, a director
      may be removed from office with or without cause by vote of the holders
      of 66% of the votes entitled to be voted on the matter.<br>
      <br>
      &nbsp;&nbsp;&nbsp;&nbsp;In addition, the Charters of MuniAssets and High
      Income Municipal require the favorable vote of the holders of at least 66<font size="1"><sup>2</sup>/3</font>%
      and 75%, respectively, of all of the Fund&#146;s shares of capital stock,
      then entitled to be voted on the matter, to approve, adopt or authorize
      the following:</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3%></td>
    <td width=1% valign=top><font size=3>&#149;</font></td>
    <td width=3%></td>
    <td width=93%><font size=2>a merger or consolidation or statutory share exchange
      of the Fund with any other corporation or entity,</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3%></td>
    <td width=1% valign=top><font size=3>&#149;</font></td>
    <td width=3%></td>
    <td width=93%><font size=2>a sale of all or substantially all of the Fund&#146;s
      assets (other than in the regular course of the Fund&#146;s investment activities),
      or</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3%></td>
    <td width=1% valign=top><font size=3>&#149;</font></td>
    <td width=3%></td>
    <td width=93%><font size=2>a liquidation or dissolution of the Fund,</font></td>
  </tr>
</table>
<p>
<p>
<table width=600>
  <tr>
    <td><font size=2>unless such action has been approved, adopted or authorized
      by the affirmative vote of at least two-thirds of the total number of Directors
      fixed in accordance with the by-laws, in which case the affirmative vote
      of a majority of all of the votes entitled to be cast by stockholders of
      such Fund is required.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, conversion of
      MuniAssets to an open-end investment company would require an amendment
      to MuniAssets&#146; 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<font size="1"><sup>2</sup>/3</font>% of MuniAssets&#146; outstanding
      shares of capital stock entitled to be voted on the matter (or a majority
      of such shares if the amendment was previously 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). 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 MuniAssets is converted to an open-end investment company, it could
      be required to liquidate portfolio securities to meet requests for redemptions,
      and the MuniAssets Common Stock would no longer be listed on a stock exchange.
      Conversion to an open-end investment company would require changes in certain
      of the Fund&#146;s investment policies and restrictions, such as those relating
      to the purchase of illiquid securities.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors of each
      Fund has determined that the voting requirements described above, which
      are greater than the minimum requirements under the Investment Company Act or, in certain circumstances, Maryland law, are in the best interests of stockholders generally. Reference
      should be made to the Charter of each Fund on file with the SEC for the
      full text of these provisions.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><B><a name="32"></a>Management of the Funds</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;<I>Directors and
      Officers</I>. The Board of Directors of MuniAssets currently consists of
      six persons, five of whom are not &#147;interested persons,&#148; as defined
      in the Investment Company Act, of MuniAssets. The Board of Directors of
      High Income Municipal currently consists of eight persons, seven of whom
      are not &#147;interested persons,&#148; as defined in the Investment Company
      Act, of High Income Municipal. Terry K. Glenn serves as President and a
      Director 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 have the same slate
      of officers with a few exceptions. For further information regarding the
      Directors and officers of each Fund, see Appendix I &#151;&#147;Information
      Pertaining to Each Fund.&#148;&lt;/R&gt;</FONT></td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Theodore R. Jaeckel, Jr. serves
      as the portfolio manager of each Fund and will continue to serve as the
      portfolio manager of the Combined Fund after the Reorganization. The portfolio
      manager is primarily responsible for the management of the applicable Fund&#146;s
      portfolio.<br>
      <br>
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Advisory and Administrative Arrangements</i>.
      FAM and MLIM, both of which are owned and controlled by ML &amp; Co., serve
      as the investment adviser for MuniAssets and High Income Municipal, respectively,
      pursuant to separate investment advisory agreements that, except for (i)
      termination dates, (ii) advisory fee rates and (iii) the fact that the investment
      advisory agreement for MuniAssets contains certain provisions relating to
      FAM&#146;s providing administrative services to MuniAssets, are substantially
      similar. See &#147;Administrative Services and </font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 24</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>












<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 32, page: 32" -->



<p>
<p>
<p>
<table width=600>
  <tr>
    <td><font size="2">&lt;R&gt;Fees&#148; below. FAM and MLIM provide the respective
      Fund with the same investment advisory and management services. FAM, MLIM,
      and their affiliates act as investment advisers to more than 100 registered
      investment companies and offer services to individuals and institutional
      accounts. As of July 2001, FAM and MLIM had a total of approximately $535
      billion in investment company and other portfolio assets under management
      (approximately $24.6 billion of which were invested in municipal securities).
      This amount includes assets managed for certain affiliates of FAM and MLIM.
      FAM and MLIM were organized as investment advisers in 1977 and 1976, respectively,
      and each offers investment advisory services to more than 50 registered
      investment companies. The principal business address of both FAM and MLIM
      is 800 Scudders Mill Road, Plainsboro, New Jersey 08536.&lt;/R&gt;</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund&#146;s investment
      advisory agreement with FAM or MLIM (each, an &#147;Investment Advisory
      Agreement&#148;), as applicable, provides that, subject to the supervision
      of the Board of Directors of the Fund, FAM or MLIM is responsible for the
      actual management of the relevant Fund&#146;s portfolio. The responsibility
      for making decisions to buy, sell or hold a particular security for a Fund
      rests with FAM or MLIM, as applicable, subject to review by the Board of
      Directors of that Fund.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the services provided by
      FAM under MuniAssets&#146; Investment Advisory Agreement, MuniAssets pays
      a monthly fee at an annual rate of 0.55% of its average weekly net assets
      (i.e., the average weekly value of the total assets of the Fund, minus the
      sum of accrued liabilities of the Fund). For purposes of this calculation,
      average weekly net assets are 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. For the services provided by MLIM under High Income
      Municipal&#146;s Investment Advisory Agreement, High Income Municipal pays
      a monthly fee at an annual rate of 0.95% of average daily net assets (<i>i.e</i>.,
      the average daily value of the total assets of the Fund, minus the sum of
      accrued liabilities of the Fund). For purposes of this calculation, average
      daily net assets are determined at the end of each month on the basis of
      the average net assets of the Fund for each day during the month. After
      the Reorganization, the investment adviser for the Combined Fund will be
      FAM, and the Combined Fund will pay FAM a monthly fee at the annual rate
      of 0.55% of its average weekly net assets as described above.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;For the fiscal years
      ended May 31, 1999, 2000 and 2001, the fees paid by MuniAssets to FAM pursuant
      to the Investment Advisory Agreement were $839,645, $770,217, and $740,906,
      respectively (such fees based on average weekly net assets of approximately
      $152.7 million, $140.0 million and $134.6 million, respectively). For the
      fiscal years ended August 31, 1998, 1999 and 2000 and the six month period
      ended February 28, 2001, the fees paid by High Income Municipal to MLIM
      pursuant to the Investment Advisory Agreement were $2,144,677, $2,138,848,
      $1,661,213 and $669,103, respectively (such fees based on average daily
      net assets of approximately $226.4 million, $225.1 million, $174.9 million
      and $142.0 million, respectively).&lt;/R&gt;</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Administrative Services
      and Fees</I>. Under the terms of the administration agreement between High
      Income Municipal and MLIM (the &#147;Administration Agreement&#148;), MLIM
      also performs or arranges for the performance of the administrative services
      (<i>i.e</i>., services other than investment advice and related portfolio activities)
      necessary for the operation of High Income Municipal, including administering
      shareholder accounts and handling shareholder relations. Pursuant to the
      MuniAssets Investment Advisory Agreement, FAM provides similar services
      for MuniAssets.</FONT></td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Administration Agreement,
      High Income Municipal pays MLIM a monthly fee at an annual rate of 0.25%
      of the Fund&#146;s average daily net assets determined in the same manner
      as the fee payable by High Income Municipal under the Investment Advisory
      Agreement. MuniAssets does not pay a separate administrative fee to FAM.
      FAM provides administrative services to MuniAssets under the MuniAssets&#146;
      Investment Advisory Agreement. After the Reorganization, the Combined Fund
      also will not pay a separate administrative fee to FAM.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;&nbsp;For the fiscal years
      ended August 31, 1998, 1999 and 2000 and the six month period ended February
      28, 2001, the fees paid by High Income Municipal to MLIM pursuant to the
      Administration Agreement were $564,389, $562,855, $437,161 and $176,080,
      respectively (such fees based on average daily net assets of approximately
      $226.4 million, $225.1 million, $174.9 million and $142.0&nbsp;million,
      respectively).&lt;/R&gt;<br>
      <br>
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Payment of Fund Expenses</i>. Each Fund&#146;s
      Investment Advisory Agreement obligates FAM or MLIM, as applicable, to provide
      investment advisory services and, in the case of MuniAssets, administrative
      services to the Fund. Under each Fund&#146;s Investment Advisory Agreement,
      FAM or MLIM, as applicable, pays all compensation of and furnishes office
      space for officers and employees of the Fund connected with investment and
      economic </font></td>
  </tr>
</table>
<p>
<p>&nbsp;
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 25</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>
<p>&nbsp;












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<!-- MARKER LABEL="sheet: 33, page: 33" -->



<p>

<p>
<table width=600>
  <tr>
    <td><FONT SIZE="2">research, trading and investment management, as well as
      the compensation of all Directors of the Fund who are affiliated persons
      of FAM, MLIM or any of their affiliates.</FONT></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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,
      SEC 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.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;<I>Accounting Services
      Provider</I>. Each Fund has entered into an agreement with State Street
      Bank and Trust Company (&#147;State Street&#148;), effective January 1,
      2001, pursuant to which State Street provides certain accounting services
      to each Fund. Each Fund pays a fee for these services. For the period January
      1, 2001 to May 31, 2001 and for the period January 1, 2001 to February 28,
      2001, MuniAssets and High Income Municipal paid State Street $21,907 and
      $8,909, respectively, under this agreement. Prior to January 1, 2001, FAM
      or MLIM, as applicable, provided accounting services to each Fund at its
      cost and each Fund reimbursed FAM or MLIM, as applicable, for these services.
      FAM or MLIM, as applicable, continues to provide certain accounting services
      to each Fund. MuniAssets and High Income Municipal reimburse FAM or MLIM,
      as applicable, for such services. For the fiscal years ended May 31, 1999, 2000 and 2001,
      MuniAssets reimbursed FAM an aggregate of $54,814, $40, 954 and $31,455, respectively, for the above-described
      accounting services. For the fiscal years ended August 31, 1998, 1999 and 2000 and the six months ended February 28, 2001, High Income
      Municipal reimbursed MLIM an aggregate of $60,910, $74,013, $34,636 and $22,050, respectively, for the above-described
      accounting services.&lt;/R&gt;</FONT></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Duration and Termination
      of Investment Advisory and Administration Agreements</i>. Unless earlier
      terminated as described below, the Investment Advisory Agreement between
      each Fund and FAM or MLIM, as applicable, will continue from year to year
      if approved annually (a) by the Board of Directors of a Fund or by a majority
      of the outstanding shares of a Fund&#146;s Common Stock, 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 &#147;interested persons,&#148; 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&#146; written notice
      at the option of either party thereto or by the vote of the stockholders
      of the Fund.</font></td>
  </tr>
</table>
<p>
<p>

<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;High Income Municipal&#146;s
      Administration Agreement will continue in effect until terminated. The agreement
      is not assignable and may be terminated without penalty on 60 days&#146;
      written notice at the option of either party thereto.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Securities held by a Fund may
      also be held by, or be appropriate investments for, other funds or investment
      advisory clients for which FAM, MLIM or their 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 or MLIM 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, MLIM (or their affiliates) on behalf of more than one of its clients
      during the same period may increase the demand for securities being purchased
      or the supply of securities being sold, causing an adverse effect on price.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><B><a name="35"></a>Code of Ethics</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;The Board of Directors
      of each Fund has approved a Code of Ethics under Rule 17j-l of the Investment
      Company Act that covers each Fund, FAM, MLIM and FAMD. The Code of Ethics
      establishes procedures for personal investing and restricts certain transactions.
      Employees subject to the Code of Ethics may invest in securities for their
      personal investment accounts, including securities that may be purchased
      or held by the Fund.&lt;/R&gt;</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><B><a name="35a"></a>Voting Rights</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Voting rights are identical
      for the holders of shares of each Fund&#146;s Common Stock. Holders of each
      Fund&#146;s Common Stock are entitled to one vote for each share held. The
      shares of each Fund&#146;s Common Stock do not have cumulative voting rights,
      which means that the holders of more than 50% of the shares of a Fund&#146;s
      Common 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&#146;s Common Stock will not be able to elect
      any of such Directors.</font></td>
  </tr>
</table>
<p>
<p>&nbsp;
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 26</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>












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<p>
<table width=600>
  <tr>
    <td><font size=2><b><a name="35b"></a>Stockholder Inquiries</b></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stockholder inquiries with
      respect to either Fund may be addressed to such Fund by telephone at (609)
      282-2800 or at the address set forth on the cover page of this Joint Proxy
      Statement and Prospectus.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><b><a name="35c"></a>Dividends and Distributions</b></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;The Funds&#146; current
      policies with respect to dividends and distributions relating to shares
      of their Common Stock are identical. Each Fund intends to distribute all
      or a portion of its net investment income monthly to holders of a Fund&#146;s
      Common Stock. A Fund may at times pay out less than the entire amount of
      net investment income earned in any particular period and may at times pay
      out such accumulated undistributed income in addition to net investment
      income earned in other periods in order to permit it to maintain a more
      stable level of dividends to holders of Common Stock. As a result, the dividend
      paid by a Fund to holders of its Common Stock for any particular period
      may be more or less than the amount of net investment income earned by that
      Fund during such period. For Federal tax purposes, a Fund is required to
      distribute substantially all of its net investment income for each year.
      All net realized capital gains, if any, are distributed pro rata at least
      annually to holders of shares of a Fund&#146;s Common Stock. See &#147;Comparison
      of the Funds &#151; Tax Rules Applicable to the Funds and Their Stockholders.&#148;&lt;/R&gt;</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 any other
      classes of stock outstanding in accordance with the current position of
      the IRS described herein. See &#147;Tax Rules Applicable to the Funds and
      Their Stockholders&#148; below.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For information concerning
      the manner in which dividends and distributions to holders of each Fund&#146;s
      Common Stock may be reinvested automatically in shares of a Fund&#146;s
      Common Stock, see &#147;Automatic Dividend Reinvestment Plan&#148; 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.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><B><a name="36"></a>Automatic Dividend Reinvestment Plan</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;Pursuant to each Fund&#146;s
      Automatic Dividend Reinvestment Plan (each, a &#147;Plan&#148;), unless
      a holder of a Fund&#146;s common stock is ineligible or elects otherwise,
      all dividends and distributions are automatically reinvested by either The
      Bank of New York (&#147;BONY&#148;), as agent for MuniAssets stockholders
      in administering the Plan, or Financial Data Services, Inc. (&#147;FDS&#148;),
      as agent for stockholders of High Income Municipal in administering the
      Plan (each, a &#147;Plan Agent&#148;), in additional shares of the applicable
      Fund&#146;s Common Stock. Certain provisions of each Plan are different
      because only MuniAssets&#146; shares are exchange-listed while High Income
      Municipal shares are continuously offered by High Income Municipal. After
      the Reorganization, the Combined Fund will use the MuniAssets 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&#146;s dividend reinvestment
      plan. Holders of a Fund&#146;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 by sending
      written instructions to FDS or calling FDS at (1-800-MER-FUND), 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.&lt;/R&gt;</font></td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The applicable Plan Agent maintains
      all stockholders&#146; 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&#146;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.</font></td>
  </tr>
</table>
<p>
<p>
<p>&nbsp;
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 27</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>












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<!-- MARKER LABEL="sheet: 35, page: 35" -->



<p>&nbsp;</p>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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&#146;s
      name and held for the account of beneficial owners who are to participate
      in that Plan.</font></td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 &#147;Comparison of the Funds &#151; Tax Rules Applicable
      to the Funds and Their Stockholders.&#148;</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 MuniAssets 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.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.</font></td>
  </tr>
</table>
<p>
<p>
<table width=600>
  <tr>
    <td><font size=2><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MuniAssets</i></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the MuniAssets Plan,
      whenever the Fund declares an ordinary income dividend or a capital gain
      dividend (collectively referred to as &#147;dividends&#148;) payable either
      in shares or in cash, non-participants in the Plan receive cash, and participants
      in the Plan receive the equivalent in shares of the Fund&#146;s Common Stock.
      The shares are acquired by the Plan Agent for the participant&#146;s account,
      depending upon the circumstances described below, either (i) through receipt
      of additional unissued but authorized shares of the Fund&#146;s Common Stock
      from the Fund (&#147;newly issued shares&#148;) or (ii) by purchase of outstanding
      shares of the Fund&#146;s Common Stock on the open market (&#147;open-market
      purchases&#148;), on the NYSE, or elsewhere. If on the payment date for
      the dividend, the net asset value per share of the Fund&#146;s Common Stock
      is equal to or less than the market price per share of the Fund&#146;s Common
      Stock plus estimated brokerage commissions (such condition being referred
      to herein as &#147;market premium&#148;), the Plan Agent invests the dividend
      amount in newly issued shares on behalf of the participant. The number of
      newly issued shares of the Fund&#146;s Common Stock to be credited to the
      participant&#146;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 &#147;market discount&#148;),
      the Plan Agent invests the dividend amount in shares acquired on behalf
      of the participant in open-market purchases.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the event of a market discount
      on the dividend payment date, the MuniAssets Plan Agent has until the last
      business day before the next date on which the shares trade on an &#147;ex-dividend&#148;
      basis or in no event more than 30 days after the dividend payment date (the
      &#147;last purchase date&#148;) to invest the dividend amount in shares
      acquired in open-market purchases. MuniAssets 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 &#147;ex-dividend&#148; 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 MuniAssets 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 the Fund&#146;s 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, the 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.<br>
      <br>
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stockholders participating in the MuniAssets
      Plan may receive benefits not available to stockholders not participating
      in that Plan. If the market price (plus commissions) of the Fund&#146;s
      shares of Common Stock is higher than the net asset value of such shares,
      participants in the Plan receive shares of the Fund&#146;s 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 </font></td>
  </tr>
</table>
<p>
<p>&nbsp;
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 28</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>












<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 36, page: 36" -->



<p>
<table width=600>
  <tr>
    <td><font size=2>available in the market to make distributions of shares at
      prices below the net asset value. Also, since the Fund normally does not
      redeem its shares, the price on resale may be more or less than the net
      asset value. See &#147;Comparison of the Funds &#151; Tax Rules Applicable
      to the Funds and Their Stockholders&#148; for a discussion of the tax consequences
      of each Plan.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;High Income Municipal</i></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;Under the High Income
      Municipal Plan, High Income Municipal always issues newly issued shares
      at net asset value. No early withdrawal charge is imposed upon redemption
      of shares issued as a result of the automatic reinvestment of dividends
      or capital gains distributions. After the Reorganization, High Income Municipal
      common stockholders will own shares of MuniAssets and such shares will not
      be subject to the EWC currently applicable to High Income Municipal Common
      Stock.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After the Reorganization, a
      holder of shares of High Income Municipal 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 both Funds, after the Reorganization,
      the stockholder&#146;s election with respect to the dividends of MuniAssets
      will control unless the stockholder specifically elects a different option
      at that time. Prior to the Reorganization, High Income Municipal stockholders
      should direct all correspondence to the Plan Agent for High Income Municipal
      as follows: Financial Data Services, Inc., 4800 Deer Lake Drive East, Jacksonville,
      Florida 32246-6484. Following the Reorganization, all correspondence should
      be directed to the Plan Agent for MuniAssets, The Bank of New York, 101
      Barclay Street, New York, New York 10286.&lt;/R&gt;</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><B><a name="38"></a>Mutual Fund Investment Option</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;A holder of MuniAssets
      Common Stock who purchased his or her shares through Merrill Lynch in the
      Fund&#146;s initial public offering has the right to reinvest the net proceeds
      from a sale of such shares in Class A shares of certain Merrill Lynch-sponsored
      open-end funds without the imposition of an initial sales charge, if certain
      conditions are satisfied. A holder of High Income Municipal Common Stock
      has an investment option consisting of the right to reinvest the net proceeds
      from a sale of shares of High Income Municipal Common Stock in a tender
      offer by High Income Municipal in Class D shares of certain Merrill Lynch-sponsored
      open-end funds at their net asset value, without imposition of a sales charge,
      if the High Income Municipal Common Stock was held for three years at the
      date of tender. If the Reorganization is consummated, a holder of High Income
      Municipal Common Stock will have the same mutual fund investment option
      as a holder of MuniAssets Common Stock who purchased his or her shares through
      Merrill Lynch in the initial public offering of MuniAssets Common Stock
      as described above.&lt;/R&gt;</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><B><a name="38a"></a>Tax Rules Applicable to the Funds and
      Their Stockholders</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The tax consequences of investing
      in shares of Common Stock 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. MuniAssets intends to continue to distribute
      substantially all of its income following the Reorganization.<br>
      <br>
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund is qualified to pay &#147;exempt-interest
      dividends&#148; as defined in Section 852(b)(5) of the Code. Under such
      section, if, at the close of each quarter of its taxable year, at least
      50% of the value of a Fund&#146;s total assets consists of obligations exempt
      from Federal income tax (&#147;tax-exempt obligations&#148;) 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&#146;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&#146;s gross income for Federal income
      tax purposes. Exempt-interest dividends are included, however, in determining
      the portion, if any, of a person&#146;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</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 29</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>












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<!-- MARKER LABEL="sheet: 37, page: 37" -->



<p>
<table width=600>
  <tr>
    <td><font size=2> &#147;substantial user&#148; or &#147;related person&#148;
      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.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To the extent that a Fund&#146;s
      distributions are derived from interest on its taxable investments or from
      an excess of net short-term capital gains over net long-term capital losses
      (&#147;ordinary income dividends&#148;), such distributions 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 (&#147;capital gain dividends&#148;) are taxable as
      long-term capital gains for Federal income tax purposes, regardless of the
      length of time the stockholder has owned Fund shares. 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.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All or a portion of a Fund&#146;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&#146;s earnings and
      profits first will reduce the adjusted tax basis of a holder&#146;s shares
      and, after such adjusted tax basis is reduced to zero, will constitute capital
      gains to such holder (assuming the shares are held as a capital asset).
      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.</font></td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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
      &#147;activity bonds&#148; issued after August 7, 1986. As set forth above,
      &#147;private activity bonds&#148; are bonds which, although tax-exempt,
      are used for purposes other than those generally performed by governmental
      units and which benefit non-governmental entities (<i>e.g</i>., bonds used
      for industrial development or housing purposes). Income received on such
      bonds is classified as an item of &#147;tax preference&#148; which could
      subject investors in such bonds, including stockholders of the Funds, to
      an increased Federal alternative minimum tax. Each Fund purchases such &#147;private
      activity bonds&#148; 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&#146;s &#147;adjusted
      current earnings&#148; which more closely reflect a corporation&#146;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.<br>
      <br>
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Fund may invest in high yield securities
      or &#147;junk bonds&#148;. Furthermore, the Funds may also invest in instruments
      the return on which includes nontraditional features such as indexed principal
      or interest payments (&#147;nontraditional instruments&#148;). 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 </font></td>
  </tr>
</table>
<p>&nbsp;
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 30</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>
<p>&nbsp;
















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<p>




<p>
<table width=600>
  <tr>
    <td><font size=2>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.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The value of shares acquired
      pursuant to a Fund&#146;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, in the case of MuniAssets, when MuniAssets&#146;
      shares are trading at a premium over net asset value, MuniAssets 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&#146;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 MuniAssets&#146;
      dividend reinvestment plan. Thus, stockholders who do not participate in
      the dividend reinvestment plan, 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.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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
      (&#147;backup withholding&#148;). 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&#146;s knowledge, have furnished
      an incorrect number. When establishing an account, an investor must certify
      under penalty of perjury that such number is correct and that such stockholder
      is not otherwise subject to backup withholding.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.</font></td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td><font size=2><B><a name="41"></a>Tax Treatment of Options and Futures
      Transactions</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;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 &#147;Section 1256
      contracts&#148; will be &#147;marked to market&#148; for Federal income
      tax purposes at the end of each taxable year (<i>i.e</i>., 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.&lt;/R&gt;</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Code Section 1092, which applies
      to certain &#147;straddles,&#148; may affect the taxation of a Fund&#146;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.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The foregoing is a general
      and abbreviated summary of the applicable provisions of the Code and Treasury
      Regulations presently in effect. For the complete provisions, reference
      should be made to the pertinent Code sections and the Treasury Regulations
      promulgated thereunder. The Code and the Treasury Regulations, are subject
      to change by legislative, judicial or administrative action either prospectively
      or retroactively.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.</font></td>
  </tr>
</table>
<p>
<p>
<p>&nbsp;
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 31</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>








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<!-- MARKER LABEL="sheet: 39, page: 39" -->


<p>&nbsp;</p>
<table width=600>
  <tr>
    <td  align=center><font size=2><b><a name="41a"></a>AGREEMENT AND PLAN OF
      REORGANIZATION</b></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><b><a name="41b"></a>General</b></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Agreement and Plan
      (attached hereto as Appendix II), MuniAssets will acquire substantially
      all of the assets, and will assume substantially all of the liabilities,
      of High Income Municipal, solely in return for shares of an equal aggregate
      value of MuniAssets Common Stock to be issued by MuniAssets. The number
      of shares of MuniAssets Common Stock issued to High Income Municipal will
      have an aggregate net asset value equal to the aggregate net asset value
      of the shares of High Income Municipal Common Stock. Upon receipt by High
      Income Municipal of such shares, High Income Municipal will distribute the
      shares of MuniAssets Common Stock to the holders of High Income Municipal
      Common Stock (plus cash in lieu of fractional shares), in return for their
      shares of High Income Municipal Common Stock. As soon as practicable after
      the date that the Reorganization takes place (the &#147;Closing Date&#148;),
      High Income Municipal will deregister under the Investment Company Act and
      will file Articles of Dissolution with the State of Maryland Department
      of Assessments and Taxation (&#147;Maryland Department&#148;) to effect
      the formal dissolution of High Income Municipal, and will dissolve.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;The distribution by
      High Income Municipal of MuniAsset Common Stock will be accomplished by
      opening new accounts on the books of MuniAssets in the names of the stockholders
      of High Income Municipal Common Stock and transferring to those stockholder
      accounts the MuniAssets Common Stock previously credited on those books
      to the accounts of High Income Municipal. Each newly-opened account on the
      books of MuniAssets for the previous holders of High Income Municipal Common
      Stock would represent the pro rata number of shares of MuniAssets 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 MuniAssets Common Stock will be issued. In lieu thereof, MuniAssets&#146;
      transfer agent, BONY, will aggregate all fractional shares of MuniAssets
      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 High
      Income Municipal Common Stock certificates. See &#147;Surrender and Exchange
      of Stock Certificates&#148; below for a description of the procedures to
      be followed by the stockholders of High Income Municipal to obtain their
      MuniAssets Common Stock (and cash in lieu of fractional shares, if any).</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accordingly, as a result of
      the Reorganization, every holder of High Income Municipal Common Stock would
      own shares of MuniAssets 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&#146;s
      High Income Municipal Common Stock immediately prior to the Closing Date.
      Since the MuniAssets Common Stock would be issued at net asset value and
      the shares of High Income Municipal Common Stock would be valued at net
      asset value for the purposes of the exchange, the holders of Common Stock
      of neither Fund will be diluted as a result of the Reorganization. However,
      as a result of the Reorganization, a stockholder of either Fund likely will
      hold a reduced percentage of ownership in the larger combined entity than
      he or she held in MuniAssets or High Income Municipal. In addition, the
      market value of the MuniAssets Common Stock may be lower than the net asset
      value of the MuniAssets Common Stock. &lt;/R&gt;</font></td>
  </tr>
</table>
<p>
<p>
<p>
<table width=600>
  <tr>
    <td><font size=2><B><a name="42"></a>Procedure</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;At a meeting of the
      Board of Directors of each Fund, the Board of Directors of each Fund, including
      all of the Directors who are not &#147;interested persons,&#148; as defined
      in the Investment Company Act, of the applicable Fund, unanimously approved
      the Agreement and Plan and the submission of such Agreement and Plan to
      the stockholders of such Fund for approval.&lt;/R&gt;</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result of such Board approvals,
      the Funds have filed this Joint Proxy Statement and Prospectus with the
      SEC soliciting a vote of the stockholders of each Fund to approve the Reorganization.
      Meetings of stockholders of each Fund will be held on October 24, 2001.
      If the stockholders of both Funds 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.</font></td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>The Boards of Directors
      of MuniAssets and High Income Municipal recommend that the stockholders
      of the respective Funds approve the Agreement and Plan</b>.</font></td>
  </tr>
</table>
<p>&nbsp;
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 32</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>
<p>&nbsp;












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<!-- MARKER LABEL="sheet: 40, page: 40" -->





<p>

<p>
<table width=600>
  <tr>
    <td><font size=2><B><a name="43"></a>Terms of the Agreement and Plan of Reorganization</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>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</I>.</FONT></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Valuation of Assets and
      Liabilities</I>. The respective assets of each Fund will be valued on the
      business day prior to the Closing Date (the &#147;Valuation Date&#148;).
      The valuation procedures are the same for both Funds: 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 based on prices at the time of closing on
      the Valuation Date. The NYSE generally closes at 4:00 p.m., Eastern 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 all liabilities (including accrued expenses) 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 or MLIM, will accrue
      on the Valuation Date.</FONT></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Distribution of MuniAssets
      Common Stock</I>. On the Closing Date, MuniAssets will issue to High Income
      Municipal a number of shares of MuniAssets Common Stock the aggregate net
      asset value of which will equal the aggregate net asset value of shares
      of High Income Municipal Common Stock on the Valuation Date. Each holder
      of High Income Municipal Common Stock will receive the number of full shares
      of MuniAssets Common Stock corresponding to his or her proportionate interest
      in the aggregate net asset value of High Income Municipal Common Stock (plus
      cash in lieu of fractional shares).</FONT></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No sales charge or fee of any
      kind will be charged to stockholders of High Income Municipal in connection
      with their receipt of MuniAssets Common Stock in the Reorganization. No
      EWC will apply to shares of MuniAssets Common Stock issued to High Income
      Municipal in the Reorganization, nor will any EWC be due on the shares of
      High Income Municipal Common Stock in connection with the Reorganization.</font></td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;<i>Expenses</i>.
      The expenses of the Reorganization that are directly attributable to High
      Income Municipal and the conduct of its business will be deducted from the
      assets of High Income Municipal as of the Valuation Date. 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 of the stockholders of High Income Municipal to consider the Reorganization,
      the expenses related to the solicitation of proxies to be voted at that
      meeting and a portion of the expenses incurred in printing the N-14 Registration
      Statement. The expenses of the Reorganization that are directly attributable
      to MuniAssets and the conduct of its business will be deducted from the
      assets of MuniAssets as of the Valuation Date. The expenses attributable
      to MuniAssets include the costs, if any, of printing stock certificates,
      transfer agent fees, the expenses incurred in preparing, printing and mailing
      the proxy materials to be used in connection with the meeting of the stockholders
      of MuniAssets to consider the Reorganization, the expenses related to the
      solicitation of proxies to be voted at that meeting 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, audit fees and any listing or registration
      fees, will be borne equally by the Funds.&lt;/R&gt;</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The total expenses associated
      with the Reorganization attributable to High Income Municipal are estimated
      to be approximately $158,000 and the total expenses attributable to MuniAssets
      are estimated to be approximately $145,900.<br>
      <br>
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Required Approvals</i>. Under High Income
      Municipal&#146;s Articles of Incorporation and relevant Maryland law, stockholder
      approval of the Agreement and Plan requires the affirmative vote of a majority
      of the outstanding </font></td>
  </tr>
</table>
<p>&nbsp;
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 33</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>












<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 41, page: 41" -->



<p>
<p>
<p>
<table width=600>
  <tr>
    <td><FONT SIZE="2">&lt;R&gt;shares of High Income Municipal Common Stock entitled
      to vote on the matter. In addition, under the rules of the NYSE, stockholder
      approval of the Agreement and Plan requires the affirmative vote of a majority
      of the votes cast by the holders of MuniAssets Common Stock, provided that
      the total number of votes cast represents over 50% of all shares entitled
      to vote on the matter. Because of the requirement that the Agreement and
      Plan be approved by the stockholders of both Funds, the Reorganization will
      not take place if the stockholders of either Fund do not approve the Agreement
      and Plan.&lt;/R&gt;</FONT></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Deregistration and Dissolution</I>.
      Following the transfer of the assets and liabilities of High Income Municipal
      and the distribution of shares of MuniAssets Common Stock to stockholders
      of High Income Municipal in accordance with the foregoing, High Income Municipal
      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.</FONT></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Amendments and Conditions</I>.
      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 a
      registration statement on Form N-14 being declared effective by the SEC,
      approval by the stockholders of each Fund as described above, an opinion
      of counsel being received with respect to tax matters, an opinion of counsel
      being received as to securities matters and the continuing accuracy of various
      representations and warranties of each Fund being confirmed by the other
      Fund.</FONT></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Postponement, Termination</I>.
      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 that 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 both Funds and (ii) by the Board of Directors of either Fund if any condition
      to that Fund&#146;s obligations set forth in the Agreement and Plan has
      not been fulfilled or waived by such Board.</FONT></td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td><font size=2><b><a name="45"></a>Potential Benefits to Common Stockholders
      of the Funds as a Result of the Reorganization</b></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In approving the Reorganization,
      the Board of Directors of each Fund identified certain potential benefits
      that are likely to result from the Reorganization, including lower aggregate
      operating expenses per share of Common Stock, greater efficiency and flexibility
      in portfolio management and a more liquid trading market for the shares
      of Common Stock of the Combined Fund. Following the Reorganization, (i)
      High Income Municipal stockholders will be invested in a non-diversified,
      closed-end fund that has a substantially similar investment objective and
      management arrangements, a larger asset base and a potentially lower expense ratio and
      (ii) MuniAssets stockholders will remain invested in a non-diversified,
      closed-end fund that has no changes to its current investment objective
      and management arrangements but has a larger asset base and a potentially
      lower expense ratio.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After the Reorganization, High
      Income Municipal common stockholders also will benefit from the fact that
      the advisory fee rate that the Combined Fund will pay is less than the advisory
      fee rate paid by High Income Municipal and that the Combined Fund will not
      pay the administrative fee currently paid by High Income Municipal. See
      &#147;Advisory and Administrative Fees&#148; above. Additionally, High Income
      Municipal common stockholders will no longer be subject to the expenses
      associated with the Fund&#146;s required yearly prospectus updates since
      a closed-end fund that is listed on an exchange, such as the Combined Fund,
      is not required to update its prospectus annually. High Income Municipal
      common stockholders also will no longer be subject to the expenses of conducting
      quarterly tender offers. Finally, High Income Municipal common stockholders
      will no longer be subject to the EWC upon the sale of shares of common stock
      held for less than three years. As common stockholders of the Combined Fund,
      however, High Income Municipal common stockholders will be subject to the
      expenses associated with listing of the Combined Fund&#146;s shares on the
      NYSE and the Combined Fund&#146;s required annual meeting of stockholders
      including the cost of the preparation and dissemination of proxy materials.
      They may also be subject to brokerage commissions on transactions in Fund
      shares. After the Reorganization, MuniAssets stockholders will benefit from
      the larger asset base and potentially lower expense ratio of the Combined
      Fund.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Boards also 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&#146; portfolios of Municipal Bonds and the costs involved
      in a transaction such as the Reorganization. The Boards noted the many similarities</font></td>
  </tr>
</table>
<p>
<p>
<p>&nbsp;
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 34</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>








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<!-- MARKER LABEL="sheet: 42, page: 42" -->


<p>&nbsp;</p><table width=600>
  <tr>
    <td><font size=2> 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.<br>
      <br>
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Combined Fund that would result from the
      Reorganization would have a larger asset base than either Fund has currently.
      Based on data presented by FAM and MLIM, certain fixed costs, such as costs
      of printing stockholder reports and proxy statements, legal expenses, audit
      fees, mailing costs and other expenses will be spread across a larger asset
      base, thereby lowering the expense ratio and increasing earnings per common
      share for the Combined Fund. Due to the larger asset base, the Combined
      Fund may also experience economies of scale and greater flexibility in portfolio
      management.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The proposed Reorganization
      will also provide High Income Municipal common stockholders with additional
      liquidity. After the Reorganization, High Income Municipal common stockholders
      will own shares of MuniAssets, an exchange listed fund, which will enable
      such stockholders to sell their Common Stock on the NYSE on each day the
      NYSE is open for trading. Any such sales, however, will be made at the then
      current market price, which may be at a premium above or a discount from
      the Combined Fund&#146;s net asset value, and may be subject to a brokerage
      commission. As noted above, such shares will not be subject to the EWC currently
      applicable to High Income Municipal Common Stock.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Presently, High Income Municipal
      common stockholders may only sell their shares at such times as High Income
      Municipal tenders for its shares, which has occurred once each quarter.
      In a tender offer, High Income Municipal purchases shares at net asset value
      (less any applicable EWC). The Board of Directors of High Income Municipal,
      however, is not obligated to authorize tender offers. Consequently, if the
      Board does not authorize a tender offer, there may be periods of time during
      which High Income Municipal&#146;s common stockholders may be unable to
      sell their shares. Since the inception of High Income Municipal, however,
      the Board has authorized a tender offer each quarter.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The table below sets forth
      the total annualized operating expense ratio for MuniAssets and High Income
      Municipal and the Combined Fund based on their respective average net assets
      as of May 31, 2001.</font></td>
  </tr>
</table>
<br>
<table width="600">
  <tr>
    <td valign="BOTTOM" align="left"><font size="2"></font></td>
    <td valign="BOTTOM" align="center">
      <p><font size="1"><b>Average Net Assets <br>
        as of <br>
        May 31, 2001 </b> </font>
      <hr noshade width="80%" size="1">
    </td>
    <td valign="BOTTOM" align="center">
      <p><font size="1"><b>Total Annualized Operating <br>
        Expense Ratio </b> </font>
      <hr noshade width="80%" size="1">
    </td>
  </tr>
  <tr>
    <td valign="TOP" align="left"> <font size="2">MuniAssets </font> </td>
    <td valign="TOP" align="center"> <font size=2> </font>
      <p><font size="2">$134,643,032</font>
    </td>
    <td valign="TOP" align="center"> <font size=2> </font>
      <p><font size="2">0.76%</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" align="left"> <font size="2">High Income Municipal</font>
    </td>
    <td valign="TOP" align="center"> <font size=2> </font>
      <p><font size="2">$130,237,579</font>
    </td>
    <td valign="TOP" align="center"> <font size=2> </font>
      <p><font size="2">1.61%</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" align="left"> <font size="2">Combined Fund</font> </td>
    <td valign="TOP" align="center"> <font size=2> </font>
      <p><font size="2">$264,880,611</font>
    </td>
    <td valign="TOP" align="center"> <font size=2> </font>
      <p><font size="2">0.68%</font>
    </td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;Management projections
      estimate that the Combined Fund will have net assets in excess of $270 million
      (based on the Net assets of the Funds as of July 31, 2001) 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 (<i>e.g.</i>, added indenture
      provisions covering call protection, sinking funds and audits for the benefit
      of large holders) prior to purchase.&lt;/R&gt;</font></td>
  </tr>
</table>
<p>
<p>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on the foregoing, the
      Board of Directors of each Fund concluded 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.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In approving the Reorganization,
      the Board of Directors of each Fund determined that the Reorganization is
      in the best interests of that Fund and, with respect to net asset value,
      that the interests of existing stockholders of that Fund would not be diluted
      as a result of the Reorganization.</font></td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td><font size=2><b><a name="47"></a>Surrender and Exchange of Stock Certificates</b></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After the Closing Date, each
      holder of an outstanding certificate or certificates formerly representing
      shares of High Income Municipal Common Stock will be entitled to receive,
      upon surrender of his or her certificate or certificates, a certificate
      or certificates representing the number of shares of MuniAssets Common Stock
      distributable with respect to such holder&#146;s shares of High Income Municipal
      Common Stock, together with cash in lieu of any fractional shares of Common
      Stock. Promptly after the Closing Date, the transfer agent for the MuniAssets
      Common Stock will mail to each holder of certificates formerly representing
      shares of High Income Municipal Common Stock a letter of transmittal for
      use in surrendering his or her certificates for certificates representing
      shares of MuniAssets Common Stock and cash in lieu of any fractional shares
      of Common Stock.</font></td>
  </tr>
</table>
<p>
<p>&nbsp;
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 35</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>
<p>&nbsp;














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<!-- MARKER LABEL="sheet: 43, page: 43" -->



<p>

<p>
<table width=600>
  <tr>
    <td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Please do not send in
      any stock certificates at this time. Upon consummation of the Reorganization,
      common stockholders of High Income Municipal will be furnished with instructions
      for exchanging their stock certificates for MuniAssets stock certificates
      and, if applicable, cash in lieu of fractional shares</B>.</FONT></td>
  </tr>
</table>
<br>
<TABLE WIDTH=600>
  <TR align="center">
    <TD VALIGN="TOP"> <font size="1"><b>If Prior to the Reorganization You Held:
      </b></font>
      <hr noshade width="80%" size="1">
    </TD>
    <TD VALIGN="TOP"> <font size="1"> <b>After the Reorganization, You Will Hold:</b></font>
      <hr noshade width="80%" size="1">
    </TD>
  </TR>
  <TR align="center">
    <TD VALIGN="TOP" align="left"> <font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;High Income Municipal Common Stock</font></TD>
    <TD VALIGN="TOP"> <FONT SIZE=2> MuniAssets Common Stock</FONT></TD>
  </TR>
  <TR align="center">
    <TD VALIGN="top" align="left"> <font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MuniAssets Common Stock</font></TD>
    <TD VALIGN="TOP"> <FONT SIZE=2> MuniAssets Common Stock</FONT></TD>
  </TR>
</TABLE>
<p>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From and after the Closing
      Date, certificates formerly representing shares of High Income Municipal
      Common Stock will be deemed for all purposes to evidence ownership of the
      number of full shares of MuniAssets Common Stock distributable with respect
      to the shares of High Income Municipal held before the Reorganization as
      described above, provided that, until such stock certificates have been
      so surrendered, no dividends payable to the holders of record of High Income
      Municipal 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 MuniAssets Common Stock as of
      any date after the Closing Date and prior to the exchange of certificates
      by any stockholder of High Income Municipal, will be paid to such stockholder,
      without interest, at the time such stockholder surrenders his or her stock
      certificates for exchange.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From and after the Closing
      Date, there will be no transfers on the stock transfer books of High Income
      Municipal. If, after the Closing Date, certificates representing shares
      of High Income Municipal Common Stock are presented to MuniAssets, they
      will be canceled and exchanged for certificates representing MuniAssets
      Common Stock and cash in lieu of fractional shares of Common Stock, if any,
      distributable with respect to such Common Stock in the Reorganization.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><B><a name="47a"></a>Tax Consequences of the Reorganization</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td>
      <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;<i>Summary.</i>&nbsp;MuniAssets
        and High Income Municipal will receive an opinion of counsel with respect
        to the Reorganization to the effect that,  among other things, neither High
        Income Municipal nor MuniAssets will recognize a gain or loss on the transaction
        and High Income Municipal stockholders will not recognize gain or loss
        on the transaction (except to the extent a High Income Municipal stockholder
        receives cash in lieu of fractional shares). </font></p>
      <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of May 31, 2001, each
        Fund had undistributed net realized capital losses and net unrealized
        capital losses. 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 other
        Fund to offset future net realized capital gains of the Combined Fund,
        if any.&lt;/R&gt;</font></p>
      <p><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>General</I>. 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 MuniAssets intends
        to continue to so qualify after the Reorganization. The Funds have jointly
        requested an opinion of counsel that for Federal income tax purposes:
        (i) the exchange of substantially all of the assets by High Income Municipal
        for MuniAssets Common</FONT> <font size=2>Stock as described above, will
        constitute a reorganization within the meaning of Section 368(a)(1)(C)
        of the Code, and each of MuniAssets and High Income Municipal will be
        deemed a &#147;party&#148; 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 High Income Municipal as a result
        of the Reorganization or on the distribution of MuniAssets Common Stock
        to the stockholders of High Income Municipal under Section 361(c)(1) of
        the Code; (iii) under Section 1032 of the Code, no gain or loss will be
        recognized to MuniAssets 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 High Income Municipal on the receipt of MuniAssets
        Common Stock in exchange for their shares of Common Stock (except to the
        extent that common stockholders receive cash representing an interest
        in fractional shares of MuniAssets Common Stock in the Reorganization);
        (v) in accordance with Section 362(b) of the Code, the tax basis of the
        assets of High Income Municipal in the hands of MuniAssets will be the
        same as the tax basis of such assets in the hands of High Income Municipal
        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 MuniAssets Common Stock received by the stockholders
        of High Income Municipal in the Reorganization will be equal to the tax
        basis of the Common Stock of High Income Municipal surrendered in exchange;
        (vii) in accordance with Section 1223 of the Code, a stockholder&#146;s
        holding period for the MuniAssets Common Stock will be determined by including
        the period for which such stockholder held the High Income Municipal Common
        Stock exchanged therefor, provided, that such </font></p>
    </td>
  </tr>
</table>
<p>&nbsp;
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 36</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>












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<!-- MARKER LABEL="sheet: 44, page: 44" -->



<p>
<table width=600>
  <tr>
    <td><font size=2>shares were held as a capital asset; (viii) in accordance
      with Section 1223 of the Code, MuniAssets&#146; holding period with respect
      to the assets of High Income Municipal transferred will include the period
      for which such assets were held by High Income Municipal; (ix) the payment
      of cash to common stockholders of High Income Municipal in lieu of fractional
      shares of MuniAssets Common Stock will be treated as though the fractional
      shares were distributed as part of the Reorganization and then redeemed,
      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&#146;s
      basis allocable to the MuniAssets fractional shares; and (x) the taxable
      year of High Income Municipal will end on the effective date of the Reorganization,
      and pursuant to Section 381(a) of the Code and regulations thereunder, MuniAssets
      will succeed to and take into account certain tax attributes of High Income
      Municipal, such as earnings and profits, capital loss carryovers and method
      of accounting.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Section 381(a) of the
      Code, MuniAssets will succeed to and take into account certain tax attributes
      of High Income Municipal, 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 MuniAssets.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;<I>Regulated Investment
      Company Status</I>. The Funds have elected and qualified since inception
      for taxation as RICs under Sections 851-855 of the Code, and after the Reorganization
      MuniAssets intends to continue to so qualify.&lt;/R&gt;</FONT></td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td><font size=2><b><a name="49"></a>Capitalization</b></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth
      as of May 31, 2001 (i) the capitalization of MuniAssets, (ii) the capitalization
      of High Income Municipal, (iii) the capitalization of the Combined Fund
      as adjusted to give effect to the Reorganization.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td  align=center><font size=2><b>Capitalization of MuniAssets, High Income
      Municipal, <br>
      and the Combined Fund as of May 31, 2001 <br>
      (unaudited)</b></font></td>
  </tr>
</table>
<br>
<table width=600 cellpadding="0" cellspacing="0" border="0">
  <tr>
    <td valign="bottom" align="right">
      <div align="left"><font size="2"></font></div>
    </td>
    <td valign="BOTTOM" align="center"> <font size=1>
      <p><font size="1"><b>MuniAssets</b></font>
      </font>
      <hr noshade width="80%" size="1">
      <font size=1></font></td>
    <td valign="BOTTOM" align="center"> <font size=1>
      <p><font size="1"><b>High Income <br>
        Municipal</b></font>
      </font>
      <hr noshade width="80%" size="1">
    </td>
    <td valign="BOTTOM" align="center"> <font size=1>
      <p><font size="1"><b>Pro Forma<br>
        Adjustment</b></font>
      </font>
      <hr noshade width="80%" size="1">
      <font size=1></font></td>
    <td valign="BOTTOM" align="center" colspan="2"> <font size=1>
      <p><font size="1"><b>Combined<br>
        Fund<br>
        as Adjusted(a)</b></font>
      </font>
      <hr noshade width="80%" size="1">
    </td>
  </tr>
  <tr>
    <td valign="TOP"> <font size="2">Net Assets Attributable to<br>
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common Stock </font> </td>
    <td align="center" valign="bottom"> <font size=2> <font size="2">$135,448,485</font></font></td>
    <td valign="bottom" align="center"><font size="2"><font size="2">$129,598,228</font></font></td>
    <td valign="bottom" align="center"><font size="2">$(1,149,363)</font></td>
    <td valign="bottom" align="right">
      <div align="right"><font size="2">$263,897,350</font></div>
    </td>
    <td valign="bottom" align="left">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP"> <font size="2">Shares of Outstanding Common
      Stock </font> </td>
    <td align="center" valign="bottom"> <font size=2> <font size="2">
      &nbsp;&nbsp; &nbsp;10,454,359</font></font></td>
    <td valign="bottom" align="center"><font size="2">&nbsp;&nbsp;&nbsp;13,883,974</font></td>
    <td valign="bottom" align="center"><font size="2">&nbsp;&nbsp;(3,819,685)
      </font></td>
    <td valign="bottom" align="right">
      <div align="right"><font size="2">20,518,648</font></div>
    </td>
    <td valign="bottom" align="left"><font size="2">(b) </font></td>
  </tr>
  <tr>
    <td valign="TOP"> <font size="2">Net Asset Value Per Share </font>
    </td>
    <td align="center" valign="bottom"> <font size=2> <font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.96 </font></font></td>
    <td valign="bottom" align="center"><font size="2"><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.33 </font></font></td>
    <td valign="bottom" align="center"><font size="2">&#151;</font></td>
    <td valign="bottom" align="right">
      <div align="right"><font size="2"><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.86</font></font></div>
    </td>
    <td valign="bottom" align="left"><font size="2">(c) </font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td>
      <hr size=1 noshade align=left  width=75>
    </td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3% valign=top><font size="1">(a) </font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">The adjusted balances are presented as if the
      Reorganization had been consummated on May 31, 2001 and are for informational
      purposes only. Assumes distribution of undistributed net investment income
      and accrual of estimated Reorganization expenses of approximately $303,900,
      of which $145,900 is attributable to Muni Assets and $158,000 is attributable
      to High Income Municipal. No assurance can be given about how many shares
      of MuniAssets Common Stock will be received by holders of High Income Municipal
      Common Stock on the Closing Date, and the foregoing should not be relied
      upon to reflect the number of shares of MuniAssets Common Stock that actually
      will be received on or after such date.</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3% valign=top><font size="1">(b) </font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">Assumes the issuance of 10,064,289 shares of
      MuniAssets Common Stock in exchange for the net assets of High Income Municipal.
      The estimated number of shares issued was based on the net asset value of
      each Fund, net of distributions, on May 31, 2001.</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3% valign=top><font size="1">(c) </font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">Net Asset Value Per Share of Common Stock net
      of Reorganization-related expenses of $303,900 and distribution of undistributed
      net investment income of $845,463 &nbsp;for MuniAssets.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td  align=center><font size=2><B><a name="49a"></a>ITEM 2. ELECTION OF DIRECTORS
      OF MUNIASSETS</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;At the MuniAssets
      Meeting, two Class I Directors will be elected to serve for a term of three
      years and until their successors are elected and qualified. Pursuant to
      MuniAssets&#146; By-Laws, the terms of office of the Directors are staggered.
      The Board of Directors is divided into three classes, designated Class I,
      Class II and Class III, with each class having a term of three years. Each
      year the term of one class expires. Class I consists of Joe Grills and Robert
      S. Salomon, Jr. Class II consists of Terry K. Glenn and Walter Mintz. Class
      III consists of Melvin R. Seiden and Stephen B. Swensrud. Only the Directors
      in Class I are being considered for election at this Meeting.&lt;/R&gt;</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the stockholders of both
      Funds approve the Reorganization, then the Board of Directors of MuniAssets
      will serve as the Board of the Combined Fund, until the next annual meeting
      of stockholders of the Combined Fund. If the stockholders of either Fund
      do not approve the Reorganization, then the Class I Directors of </font></td>
  </tr>
</table>
<p>
<p>&nbsp;
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 37</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>








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<!-- MARKER LABEL="sheet: 45, page: 45" -->


<p>&nbsp;</p>
<table width=600>
  <tr>
    <td><font size=2>MuniAssets elected at the Meeting and the incumbent Class
      II and Class III Directors of MuniAssets will continue to serve until the
      next annual meeting of stockholders of MuniAssets and the Board of High
      Income Municipal will continue to serve for an indefinite term. It is intended
      that all properly executed proxies submitted by MuniAssets stockholders
      will be voted (unless such authority has been withheld in the proxy) in
      favor of the two (2) persons designated as Class I Directors to be elected
      by the MuniAssets stockholders.<br>
      <br>
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors of MuniAssets knows
      of no reason why either of these nominees will be unable to serve, but in
      the event of any such unavailability, the proxies received will be voted
      for such substitute nominee or nominees as the Board of Directors may recommend.</font></td>
  </tr>
</table>
<p><font size=2>&lt;R&gt;</font><font size=2></font><font size=2> </font>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain information concerning
      the nominees is set forth below. Additional information relevant to the
      election of two Class I Directors and other information concerning the Directors
      is set forth in Appendix I. As of the Record Date, the Directors owned no
      shares of MuniAssets Common Stock.</font></td>
  </tr>
</table>
<br>
<TABLE WIDTH=600>
  <TR valign="bottom">
    <TD WIDTH="186"> <FONT SIZE=1> <b>Name and Address of Nominee</b></FONT>
      <hr noshade width="70%" size="1" align="left">
    </TD>
    <TD WIDTH="47" align="center"> <FONT SIZE=1> <b>Age</b></FONT>
      <hr noshade width="60%" size="1">
    </TD>
    <TD align="center" WIDTH="272"> <FONT SIZE=1><b>Principal Occupation During
      Past <br>
      Five Years and Public Directorships(1) </b></FONT>
      <hr noshade width="70%" size="1">
    </TD>
    <TD align="center" WIDTH="75">&nbsp; </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="186"> <font size="2">Joe Grills(1)(2)(3)
      <br>
      P.O. Box 98<br>
      Rapidan, Virginia 22733 </font></TD>
    <TD VALIGN="TOP" WIDTH="47" align="center"><font size="2">66</font></TD>
    <TD VALIGN="TOP" WIDTH="272"><font size="2">Member of the Committee on Investment
      of Employee Benefit Assets of the Financial Executives Institute (now associated
      with the Association of Financial Professionals) (&#147;CIEBA&#148;) since
      1986; Member of CIEBA&#146;s Executive Committee since 1988 and its Chairman
      from 1991 to 1992; Assistant Treasurer of International Business Machines
      Corporation (&#147;IBM&#148;) and Chief Investment Officer of IBM Retirement
      Funds from 1986 until 1993; Member of the Investment Advisory Committee
      of the State of New York Common Retirement Fund since 1989; Member of the
      Investment Advisory Committee of the Howard Hughes Medical Institute from
      1997 to 2000; Director, Duke Management Company since 1992 and elected Vice
      Chairman in May 1998; Director, LaSalle Street Fund from 1995 to 2001; Trustee
      of Mercury HW Funds, Mercury HW Variable Trust and Fund Asset Management
      Master Trust and Director of Merrill Lynch Investment Managers Funds, Inc.
      since 1996; Director, Kimco Realty Corporation since 1997; Member of the
      Investment Advisory Committee of the Virginia Retirement System since 1998;
      Director, Montpelier Foundation since December 1998 and its Vice Chairman
      since 2000; Member of the Investment Committee of the Woodberry Forest School
      since 2000; Member of the Investment Committee of the National Trust for
      Historic Preservation since 2000. </font></TD>
    <TD VALIGN="TOP" WIDTH="75" align="right">&nbsp;</TD>
  </TR>
  <tr>
    <td valign="TOP" width="186"> <font size="2"> Robert S. Salomon, Jr. (1)(2)
      <br>
      106 Dolphin Cove Quay<br>
      Stamford, Connecticut 06902 </font></td>
    <td valign="TOP" width="47" align="center"> <font size="2"> 64</font></td>
    <td valign="TOP" width="272"> <font size="2"> Principal of STI Management
      (investment <br>
      adviser) since 1994; Trustee, Commonfund since <br>
      1980; Chairman and CEO of Salomon Brothers <br>
      Asset Management from 1992 until 1995; <br>
      Chairman of Salomon Brothers equity mutual <br>
      funds from 1992 until 1995; regular columnist <br>
      with <i>Forbes</i> magazine since 1992; Director of <br>
      Stock Research and U.S. Equity Strategist at <br>
      Salomon Brothers from 1975 until 1991. </font></td>
    <td valign="TOP" align="right" width="75"> <font size="2"> </font></td>
  </tr>
</TABLE>
<table width=600>
  <tr>
    <td>
      <hr size=1 noshade align=left  width=75>
    </td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3% valign=top><font size="1">(1) </font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">Each of the Directors is a director, trustee
      or member of an advisory board of certain other investment companies for
      which FAM, MLIM or their affiliates act as investment adviser. See &#147;Compensation
      from MuniAssets and High Income Municipal&#148; in Appendix I.</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3% valign=top><font size="1">(2) </font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">Member of Audit Committee of the Board of Directors.
      </font></td>
  </tr>
  <tr>
    <td width=3% valign=top><font size="1">(3)</font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">Mr. Grills, formerly a Class II Director, was
      redesignated as a Class I Director at a meeting of the Board of Directors
      held on July 11, 2001. &lt;/R&gt;</font></td>
  </tr>
</table>
<p>
<p>
<p>&nbsp;
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 38</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>












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<!-- MARKER LABEL="sheet: 46, page: 46" -->



<p>
<br>
<table width=600>
  <tr>
    <td><font size=2><b><a name="50"></a>Committee Report</b></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;The Board of MuniAssets
      has a standing Audit Committee (the &#147;Committee&#148;), which consists
      of Board members who are not &#147;interested persons&#148; of the Fund
      within the meaning of the Investment Company Act and who are &#147;independent&#148;
      as defined in the NYSE listing standards. Currently, Messrs. Grills, Mintz,
      Salomon, Seiden and Swensrud are members of the Committee. The principal
      responsibilities of the Committee are to: (i) recommend to the Board the
      selection, retention or termination of the Fund&#146;s independent auditors;
      (ii) review with the independent auditors the scope, performance and anticipated
      cost of their audit; (iii) discuss with the independent auditors certain
      matters relating to the Fund&#146;s financial statements, including any
      adjustment to such financial statements recommended by such independent
      auditors, or any other results of any audit; (iv) ensure that the independent
      auditors submit on a periodic basis a formal written statement with respect
      to their independence, discuss with the independent auditors any relationships
      or services disclosed in the statement that may impact the objectivity and
      independence of the Fund&#146;s independent auditors and recommend that
      the Board take appropriate action in response thereto to satisfy itself
      of the independent auditors&#146; independence; and (v) consider the comments
      of the independent auditors and management&#146;s responses thereto with
      respect to the quality and adequacy of the Fund&#146;s accounting and financial
      reporting policies and practices and internal controls. The Board adopted
      an Audit Committee Charter (the &#147;Charter&#148;) at a meeting held on
      June 6, 2000. The Board revised and reapproved the Charter on April 11,
      2001. A copy of the current Charter is attached to this Proxy Statement
      as Appendix IV. The Committee also has (a) received written disclosures
      and the letter required by Independence Standards Board Standard No. 1 from
      Deloitte &amp; Touche <font size="1">LLP</font> (&#147;D&amp;T&#148;), independent
      auditors for the Fund, and (b) discussed certain matters required to be
      discussed by Statements on Auditing Standards No. 61 with D&amp;T. The Committee
      has considered whether the provision of non-audit services by the Fund&#146;s
      independent auditors is compatible with maintaining the independence of
      those auditors.&lt;/R&gt;</font></td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At its meeting held on July
      11, 2001, the Committee reviewed and discussed the audit of the Fund&#146;s
      financial statements with Fund management and D&amp;T<font size="1"></font>.
      Had any material concerns arisen during the course of the audit and the
      preparation of the audited financial statements mailed to stockholders and
      included in the Fund&#146;s Annual Report, the Committee would have been
      notified by Fund management or D&amp;T. The Committee received no such notifications.
      Based on the foregoing, the Committee recommended to the Board that the
      Fund&#146;s audited financial statements be included in the Fund&#146;s
      Annual Report to Stockholders for the fiscal year ended May 31, 2001.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to the above, the
      Committee also reviews and nominates candidates to serve as non-interested
      Board members. The Committee generally will not consider nominees recommended
      by stockholders of a Fund. The non-interested Board members have retained
      independent legal counsel to assist them in connection with these duties.</font></td>
  </tr>
</table>
<p>
<p>
<p>
<table width=600>
  <tr>
    <td><font size=2><B><a name="51"></a>Committee and Board Meetings</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the Fund&#146;s last
      fiscal year, each of the Board members then in office attended at least
      75% of the aggregate of the total number of meetings of the Board held during
      the fiscal year and, if a member, of the total number of meetings of the
      Committee held during the period for which he served. See Appendix I for
      further information about Committee and Board meetings.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><B><a name="51a"></a>Independent Auditors&#146; Fees</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth
      the aggregate fees MuniAssets paid D&amp;T for the fiscal year ended May
      31, 2001 for professional services rendered for: (i) the audit of the Fund&#146;s
      annual financial statements and the review of financial statements included
      in the Fund&#146;s reports to shareholders; (ii) financial information systems
      design and implementation services provided to the Fund, FAM and entities
      controlling, controlled by or under common control with FAM that provide
      services to the Fund; and (iii) all other non-audit services provided to
      the Fund, FAM, and entities controlling, controlled by or under common control
      with FAM that provide services to the Fund. The Committee determined that
      the provision of information technology services under clause (ii) and the
      provision of non-audit services under clause (iii) are compatible with maintaining
      the independence of the independent auditors.&lt;R&gt;</font></td>
  </tr>
</table>
<TABLE WIDTH=600>
  <TR align="center">
    <TD VALIGN="BOTTOM"> <font size="1"> <b>Audit Fees Charged <BR>
      to the Fund </b></font>
      <hr noshade width="70%" size="1">
    </TD>
    <TD VALIGN="BOTTOM"> <font size="1"> <b>Financial Information <br>
      Systems Design <br>
      and Implementation Fees </b></font>
      <hr noshade width="70%" size="1">
    </TD>
    <TD VALIGN="BOTTOM"> <font size="1"> <b>All Other Fees*</b></font>
      <hr noshade width="70%" size="1">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="BOTTOM" align="center"> <font size="2"> $30,700</font></TD>
    <TD VALIGN="BOTTOM" align="center"> <font size="2"> None</font></TD>
    <TD VALIGN="BOTTOM" align="center"><font size="2">$3,401,400</font></TD>
  </TR>
  <TR>
    <TD VALIGN="BOTTOM" align="left"> <font size="2"> &lt;/R&gt;</font></TD>
    <TD VALIGN="BOTTOM"><font size="2"></font></TD>
    <TD VALIGN="BOTTOM"><font size="2"></font></TD>
  </TR>
</TABLE>
<table width=600>
  <tr>
    <td>
      <hr size=1 noshade align=left  width=75>
    </td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3% valign=top><font size="1">* </font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">Includes fees billed for non-audit services rendered to MuniAssets, FAM and any entity controlling, controlled by, or under common control with FAM, during the year ended December 31, 2000.</font></td>
  </tr>
</table>
<p>
<p>&nbsp;
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 39</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>
<p>&nbsp;













<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 47, page: 47" -->



<p>



<table width=600>
  <tr>
    <td><font size=2><B><a name="52"></a>Compliance with Section 16(a) of the
      Securities Exchange Act of 1934</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 16(a) of the Securities
      Exchange Act of 1934, as amended (the &#147;Exchange Act&#148;), requires
      the officers and directors of the Fund and persons who own more than ten
      percent of a registered class of the Fund&#146;s equity securities, to file
      reports of ownership and changes in ownership on Forms 3, 4 and 5 with the
      SEC and the NYSE. Officers, directors and greater than ten percent stockholders
      are required by SEC regulations to furnish the Fund with copies of all Forms
      3, 4 and 5 they file.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;Based solely on the
      Fund&#146;s review of the copies of such forms, and amendments thereto,
      furnished to it during or with respect to its most recent fiscal year, and
      written representations from certain reporting persons that they were not
      required to file Form 5 with respect to the most recent fiscal year, each
      Fund believes that all of its officers, directors, greater than ten percent
      beneficial owners and other persons subject to Section 16 of the Exchange
      Act because of the requirements of Section 30 of the Investment Company
      Act, <i>i.e</i>., any advisory board member, investment adviser or affiliated
      person of the Fund&#146;s investment adviser, have complied with all filing
      requirements applicable to them with respect to transactions during the
      Fund&#146;s most recent fiscal year, except that Michael G. Clark inadvertently
      made a late Form 4 filing reporting changes in beneficial ownership with
      respect to MuniAssets.&lt;/R&gt;</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><B><a name="52a"></a>Interested Persons</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MuniAssets considers Mr. Glenn
      to be an &#147;interested person&#148; of the Fund within the meaning of
      Section 2(a)(19) of the Investment Company Act because of the positions
      he holds with FAM and its affiliates and/or due to his ownership of securities
      issued by ML &amp; Co. Mr. Glenn is the President of the Fund.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><B><a name="52b"></a>Compensation of Directors</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FAM, the investment adviser
      of MuniAssets, pays all compensation to all officers of and all Directors
      of MuniAssets who are affiliated with ML &amp; Co. or its subsidiaries.
      The Fund pays each Director not affiliated with FAM (each a &#147;non-affiliated
      Director&#148;) an annual fee plus a fee for each meeting attended, and
      the Fund also pays each member of the Committee an annual fee plus a fee
      for each meeting attended, together with such Director&#146;s out-of-pocket
      expenses relating to attendance at each Board and Committee meeting. Information
      with respect to fees and expenses paid to the non-interested Directors for
      the Fund&#146;s most recently completed fiscal year is set forth in Appendix
      I.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><b><a name="52c"></a>Officers of MuniAssets</b></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Information regarding the officers
      of MuniAssets is set forth in Appendix I. Officers of the Fund are elected
      and appointed by the Board and hold office until they resign, are removed
      or are otherwise disqualified to serve.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td  align=center><font size=2><b><a name="52d"></a>INFORMATION CONCERNING
      THE MEETINGS</b></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><b><a name="52e"></a>Date, Time and Place of Meetings</b></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;The Meetings will
      be held on October 24, 2001 at the offices of Fund Asset Management, L.P.
      or Merrill Lynch Investment Managers, L.P., 800 Scudders Mill Road, Plainsboro,
      New Jersey at 9:00 a.m. Eastern time (MuniAssets) and 10:00 a.m. Eastern
      time (High Income Municipal).&lt;/R&gt;</font></td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td><font size=2><b><a name="53"></a>Solicitation, Revocation and Use of Proxies</b></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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, by giving written notice of the revocation
      to the Secretary of the appropriate Fund or by voting in person at the Meeting.
      Although mere attendance at a Meeting will not revoke a proxy, a stockholder
      present at a Meeting may withdraw his or her proxy and vote in person.<br>
      <br>
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;All shares represented by properly
      executed proxies, unless such proxies previously have been revoked, will
      be voted at the Meetings in accordance with the directions on the proxies;
      if no direction is indicated, the shares will be voted as follows: (i) for
      the stockholders of MuniAssets only, all proxies submitted by MuniAssets
      stockholders will be voted &#147;FOR&#148; the election of the Class I nominees
      to the Board of Directors of MuniAssets, and (ii) for the stockholders of
      both Funds, all proxies submitted by stockholders of MuniAssets and High
      Income&lt;/R&gt; </font></td>
  </tr>
</table>
<p>
<p>&nbsp;
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 40</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>












<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 48, page: 48" -->



<p>
<p>
<p>
<table width=600>
  <tr>
    <td><font size=2>Municipal will be voted &#147;FOR&#148; the proposal to approve
      the Agreement and Plan. It is not anticipated that any other matters will
      be brought before the Meetings. If, however, any other business properly
      is brought before the Meetings, proxies will be voted in accordance with
      the judgment of the persons designated on such proxies.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><B><a name="53a"></a>Record Date and Outstanding Shares</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Only holders of record of shares
      of Common Stock of a Fund at the close of business on the Record Date are
      entitled to vote at a Meeting or any adjournment thereof. At the close of
      business on the Record Date, the Funds had the number of shares outstanding
      listed in Appendix I to this Joint Proxy Statement and Prospectus.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><B><a name="53b"></a>Security Ownership of Certain Beneficial
      Owners and Management</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;To the knowledge of
      the Funds, as of the Record Date, no person or entity owns beneficially
      or of record 5% or more of the shares of the Common Stock of either Fund.
      &lt;/R&gt; </font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of the Record Date, the
      Directors and officers of MuniAssets as a group (11 persons) owned an aggregate
      of less than 1% of the outstanding shares of MuniAssets Common Stock. </font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of the Record Date, the
      Directors and officers of High Income Municipal as a group (13 persons)
      owned an aggregate of less than 1% of the outstanding shares of High Income
      Municipal Common Stock. </font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On the Record Date, Mr. Glenn,
      a Director and an officer of each Fund and the other officers of each Fund
      owned an aggregate of less than 1% of the outstanding shares of Common Stock
      of ML &amp; Co.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><B><a name="53c"></a>Voting Rights and Required Vote</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;For the purposes of
      this Joint Proxy Statement and Prospectus, each share of Common Stock of
      each Fund is entitled to one vote. Approval of the Agreement and Plan requires
      the approval of each Fund. With respect to High Income Municipal, approval
      of the Agreement and Plan requires the affirmative vote of stockholders
      representing a majority of the shares of High Income Municipal Common Stock
      entitled to vote on the matter. With respect to MuniAssets, approval of
      the Agreement and Plan requires the affirmative vote of a majority of the
      votes cast by the holders of MuniAssets Common Stock with respect to the
      matter, provided that the total number of votes cast on the matter represents
      over 50% of all shares entitled to vote on the matter.&lt;/R&gt;</font></td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For purposes of any vote at
      a Meeting that requires the approval of the outstanding shares of a Fund&#146;s
      Common Stock, a quorum consists of a majority of the shares entitled to
      vote at that Meeting. If, by the time scheduled for each Meeting, a quorum
      of the applicable Fund&#146;s stockholders is not present, or if a quorum
      is present but sufficient votes to act upon the Agreement and Plan are not
      received from the stockholders of the applicable Fund, the persons named
      as proxies may propose one or more adjournments of a Meeting to permit further
      solicitation of proxies from stockholders. Any such adjournment will require
      the affirmative vote of a majority of the shares of the applicable Fund
      present in person or by proxy and entitled to vote at the session of a 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 applicable Fund&#146;s stockholders.
      No additional notice will be provided to you in the event that a Meeting
      is adjourned unless otherwise required by applicable law.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With respect to the election
      of two Class I Directors of MuniAssets, assuming a quorum is present, election
      of each nominee requires the affirmative vote of a plurality of the votes
      cast by MuniAssets stockholders. A &#147;plurality of the votes cast&#148;
      means the candidates must receive more votes than any other candidates for
      the same positions, but not necessarily a majority of votes cast.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><B><a name="54"></a>Appraisal Rights</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Maryland law, stockholders
      of a company whose shares are not publicly traded are entitled to demand
      payment for the fair value of their shares upon a transfer of assets. Since
      High Income Municipal Common Stock is not publicly traded, High Income Municipal
      stockholders will be entitled to appraisal rights upon the consummation
      of the Reorganization.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Maryland law, a holder
      of High Income Municipal Common Stock desiring to receive payment of the
      fair value of his or her stock (an &#147;objecting stockholder&#148;) (i)
      must file with High Income Municipal a written objection to the Reorganization
      at or before the Meeting, (ii) may not vote in favor of the Reorganization
      </font></td>
  </tr>
</table>
<p>
<p>&nbsp;
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 41</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>




<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 49, page: 49" -->

<p>&nbsp;</p><table width=600>
  <tr>
    <td><font size=2>(although a vote against the Reorganization is not required),
      and (iii) must make written demand on MuniAssets for payment of his or her
      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 (MuniAssets
      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 who demands payment for his or
      her stock pursuant to the procedure described above ceases to have any rights
      of a stockholder except the right to receive fair value for his or her 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 date
      of the Meeting. A demand for payment of fair market value may not be withdrawn,
      except upon the consent of MuniAssets. 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 his
      or her stock.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td  align=center><font size=2><b><a name="55"></a>ADDITIONAL INFORMATION</b></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;The expenses of preparing,
      printing and mailing the enclosed forms of proxy, the accompanying Notice
      and this Joint Proxy Statement and Prospectus and the costs of soliciting
      proxies to be voted at the Meetings will be borne by MuniAssets and High
      Income -- Municipal. See &#147;Agreement and Plan of Reorganization -- Terms
      of the Agreement and Plan of Reorganization Expenses.&#148;&lt;/R&gt;</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Funds will reimburse banks,
      brokers and others for their reasonable expenses in forwarding proxy solicitation
      materials to the beneficial owners of shares of each Fund and certain persons
      that the Funds may employ for their reasonable expenses in assisting in
      the solicitation of proxies from such beneficial owners of shares of capital
      stock of the Funds.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;In order to obtain
      the necessary quorum at each Meeting, supplementary solicitation may be
      made by mail, telephone, telegraph or personal interview by officers of
      the Funds. Each Fund has retained Georgeson Shareholder, 17 State Street,
      New York, New York 10004 to aid in the solicitation of proxies, at a cost
      to be borne by MuniAssets and High Income Municipal of approximately $3,000
      each, plus out-of-pocket expenses of approximately $5,000 and $7,500, respectively.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Broker-dealer firms, including
      Merrill Lynch, holding Fund shares in &#147;street name&#148; 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 Meetings.
      MuniAssets understands that, under the rules of the NYSE, such broker-dealer
      firms may, without instructions from their customers and clients, grant
      authority to the proxies designated to vote on the election of the Class
      I Directors of MuniAssets if no instructions have been received prior to
      the date specified in the broker-dealer firm&#146;s request for voting instructions.
      With respect to shares of Common Stock of each Fund, broker-dealer firms,
      including Merrill Lynch, will not be permitted to vote without instructions
      with respect to the approval of the Agreement and Plan. Each Fund 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 that Fund
      exists. Proxies that are returned to a Fund but that are marked &#147;abstain&#148;
      or on which a broker-dealer has declined to vote on any proposal (&#147;broker
      non-votes&#148;) 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, therefore, will not have an effect
      on the vote on the election of the Class I Directors of MuniAssets. Abstentions
      and broker non-votes will have the same effect as a vote against the Reorganization
      with respect to High Income Municipal, but will have no effect on the vote
      on the Reorganization with respect to MuniAssets assuming that, as required,
      at least a majority of the votes have been cast on the Reorganization. &lt;/R&gt;</font></td>
  </tr>
</table>
<p>
<p>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Joint Proxy Statement
      and Prospectus does not contain all of the information set forth in the
      registration statement and the exhibits relating thereto that MuniAssets
      has filed with the SEC under the Securities Act of 1933, as amended, and
      the Investment Company Act, to which reference is hereby made.<br>
      <br>
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Funds are subject to the informational
      requirements of the Exchange Act and the Investment Company Act and in accordance
      therewith are required to file reports, proxy statements and other information
      with the SEC. Any such reports, proxy statements and other information can
      be inspected and copied at the public </font></td>
  </tr>
</table>
<p>
<p>&nbsp;
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 42</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>
<p>&nbsp;















<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 50, page: 50" -->



<p>



<table width=600>
  <tr>
    <td><font size=2>reference facilities of the SEC at Room 1024, Judiciary Plaza,
      450 Fifth Street, N.W., Washington, D.C. 20549, and at the following regional
      offices of the SEC: Northeast Regional Office, at Seven World Trade Center,
      13th Floor, New York, New York 10048; Pacific Regional Office, at 5670 Wilshire
      Boulevard, 11th Floor, Los Angeles, California 90036; and Midwest Regional
      Office, at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
      Illinois 60661-2511. Copies of such materials can be obtained from the public
      reference section of the SEC at 450 Fifth Street, NW, Washington, DC 20549,
      at prescribed rates. The SEC maintains a Web site at http://www.sec.gov
      containing reports, proxy and information statements and other information
      regarding registrants, including the Funds, that file electronically with
      the SEC. Reports, proxy statements and other information concerning MuniAssets
      can also be inspected at the offices of the NYSE, 20 Broad Street, New York,
      New York 10005.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td  align=center><font size=2><B><a name="56"></a>CUSTODIAN</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;BONY acts as the custodian
      for cash and securities of MuniAssets and High Income Municipal 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.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td  align=center><font size=2><B><a name="56a"></a>TRANSFER AGENT, DIVIDEND
      DISBURSING AGENT AND REGISTRAR</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;BONY serves as the transfer
      agent, dividend disbursing agent and registrar with respect to the Common
      Stock of MuniAssets, pursuant to a registrar, transfer agency, dividend
      disbursing agency and service agreement with MuniAssets. 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.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FDS serves as the transfer
      agent, dividend disbursing agent and registrar with respect to the Common
      Stock of High Income Municipal, pursuant to a registrar, transfer agency,
      dividend disbursing agency and service agreement with High Income Municipal.
      The principal business address of FDS in such capacity is 4800 Deer Lake
      Drive East, Jacksonville, Florida 32246-6484.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td  align=center><font size=2><B><a name="56b"></a>ACCOUNTING SERVICES PROVIDER</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;State Street provides certain
      accounting services for MuniAssets and High Income Municipal and will provide
      the same service 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.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td  align=center><font size=2><B><a name="56c"></a>LEGAL PROCEEDINGS</B></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are no material legal
      proceedings to which MuniAssets or High Income Municipal is a party.</font></td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td  align=center><font size=2><b><a name="57"></a>LEGAL OPINIONS</b></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain legal matters in connection
      with the Reorganization will be passed upon for High Income Municipal by
      Sidley Austin Brown &amp; Wood <font size="1">LLP</font>, One World Trade
      Center, New York, New York 10048 and for MuniAssets by Clifford Chance Rogers
      &amp; Wells <font size="1">LLP</font>, 200 Park Avenue, New York, New York
      10166. Sidley Austin Brown &amp; Wood <font size="1">LLP</font>, special
      Maryland counsel and special tax counsel to MuniAssets, will render an opinion
      to MuniAssets.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td  align=center><font size=2><b><a name="57a"></a>EXPERTS</b></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The financial highlights of
      MuniAssets and High Income Municipal included in this Joint Proxy Statement
      and Prospectus, except for the financial highlights for the six month period
      ended February 28, 2001 for High Income Municipal, have been so included
      in reliance on the reports of Deloitte &amp; Touche <font size="1">LLP</font>,
      independent auditors, given on their authority as experts in auditing and
      accounting. The principal business address of Deloitte &amp; Touche <font size="1">LLP</font>
      is Two World Financial Center, New York, New York 10281-1008. Deloitte &amp;
      Touche <font size="1">LLP</font> will serve as the independent auditors
      for the Combined Fund after the Reorganization. </font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td  align=center><font size=2><b><a name="57b"></a>STOCKHOLDER PROPOSALS</b></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;The 2002 Annual Meeting
      of MuniAssets is expected to be held in August 2002. If a stockholder intends
      to present a proposal at the 2002 Annual Meeting of Stockholders of MuniAssets
      and desires to have the proposal included in the Fund&#146;s proxy statement
      and form of proxy for that meeting, the stockholder must send the written
      &lt;/R&gt; </font></td>
  </tr>
</table>
<p>&nbsp;
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 43</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>












<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 51, page: 51" -->



<p>
<p>
<table width=600>
  <tr>
    <td><font size=2>&lt;R&gt;proposal to MuniAssets by March 17, 2002. Any stockholder
      of MuniAssets who desires to present a proposal at the 2002 Annual Meeting
      of Stockholders, without including such proposal in MuniAssets&#146; proxy
      statement, must deliver written notice thereof to the Fund by May 31, 2002.
      Written proposals should be sent to the Secretary of MuniAssets at the offices
      of MuniAssets.&lt;/R&gt;<br>
      <br>
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;High Income Municipal is not required, and
      does not intend, to hold an Annual Meeting of Stockholders. Stockholders
      wishing to submit proposals for inclusion in a proxy statement for a subsequent
      stockholder meeting must send their written proposal to High Income Municipal
      a reasonable time before the Board of Directors&#146; solicitation relating
      to such meeting is to be made. Any stockholder who wishes to present any
      proposal at any subsequent stockholder meeting, without including such proposal
      in High Income Municipal&#146;s proxy statement relating to the meeting,
      also must send their written proposal to High Income Municipal within a
      reasonable time before the Board of Directors&#146; solicitation relating
      to such meeting is to be made. Written proposals should be sent to the Secretary
      of High Income Municipal at the offices of High Income Municipal.</font></td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td align=right width="276">&nbsp;</td>
    <td align=left width="312">
      <p><font size="2">By Order of the Boards of Directors, <br>
        <br>
        B<font size="1">RADLEY</font> J. L<font size="1">UCIDO</font> <br>
        <i>Secretary </i><br>
        MuniAssets Fund, Inc. </font></p>
      <p><font size="2">A<font size="1">LICE</font> A. P<font size="1">ELLEGRINO
        </font><br>
        <i>Secretary </i><br>
        Merrill Lynch High Income <br>
        Municipal Bond Fund, Inc.</font></p>
    </td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td><font size=2>&lt;R&gt;Plainsboro, New Jersey <BR>
      Dated: September 10, 2001&lt;/R&gt;</font></td>
  </tr>
</table>
<p>&nbsp;
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> 44</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>
<p>&nbsp;






<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 1, page: 1" -->

<PRE>
                          INDEX TO FINANCIAL STATEMENTS

                                                                            Page
                                                                            ----

Audited Financial Statements for MuniAssets Fund, Inc.
         for the Fiscal Year Ended May 31, 2001.............................F-2

Audited Financial Statements for Merrill Lynch High
         Income Municipal Bond Fund, Inc. for the Fiscal
         Year Ended August 31, 2000.........................................F-12

Unaudited Financial Statements for Merrill Lynch High
         Income Municipal Bond Fund, Inc. for the
         Six-Months Ended February 28, 2001.................................F-23

Unaudited Financial Statements for the Combined
         Fund on a Pro Forma Basis, as of May 31, 2001......................F-33


                                      F-1









<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 2, page: 2" -->




                        Audited Financial Statements for
                              MuniAssets Fund, Inc.
                     for the Fiscal Year Ended May 31, 2001


                                      F-2










<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 3, page: 3" -->



&lt;R&gt;
MuniAssets Fund, Inc.                                            May 31, 2001
&lt;R&gt;

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders,
MuniAssets Fund, Inc.:

We have audited the accompanying statement of assets, liabilities and capital,
including the schedule of investments, of MuniAssets Fund, Inc. as of May 31,
2001, the related statements of operations for the year then ended and changes
in net assets for each of the years in the two-year period then ended, and the
financial highlights for each of the years presented. These financial statements
and the financial highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial statements and
the financial highlights based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned at May 31, 2001 by correspondence with the custodian and
broker; where replies were not received from the broker, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of MuniAssets Fund,
Inc. as of May 31, 2001, the results of its operations, the changes in its net
assets and the financial highlights for the respective stated periods in
conformity with accounting principles generally accepted in the United States of
America.


Deloitte & Touche LLP
New York, New York
June 27, 2001


                                      F-3










<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 4, page: 4" -->



&lt;R&gt;
MuniAssets Fund, Inc.                                              May 31, 2001&lt;/R&gt;
SCHEDULE OF INVESTMENTS                                           (in Thousands)

                   S&P   Moody's  Face
STATE            Ratings Ratings Amount    Issue                                                                           Value
===================================================================================================================================
Alabama--1.2%        B      NR*   $1,420    Brewton, Alabama, IDB, PCR, Refunding (Container Corporation of
                                            America--Jefferson Smurfit Corp. Project), 8% due 4/01/2009                    $  1,448
                     CCC    NR*    4,324    Mobile, Alabama, IDB, Solid Waste Disposal Revenue Refunding Bonds
                                            (Mobile Energy Services Co. Project), 6.95% due 1/01/2020 (b)                       216
===================================================================================================================================
Alaska--1.9%         NR*    NR*    1,620    Alaska Industrial Development and Export Authority Revenue Bonds
                                            (Williams Lynxs Alaska Cargoport), AMT, 7.80% due 5/01/2014                       1,629
                     NR*    NR*    1,000    Valdez, Alaska, Marine Terminal Revenue Refunding Bonds (Amerada Hess
                                            Pipeline Corporation), 6.10% due 2/01/2024                                        1,001
===================================================================================================================================
&lt;R&gt;
Arizona--9.1%        B      Ba3    2,500    Coconino County, Arizona, Pollution Control Corporation Revenue Refunding
                                            Bonds (Tucson Electric Power Navajo), Series B, 7% due 10/01/2032                 2,550
                     BBB    Baa2   2,045    Maricopa County, Arizona, IDA, Health Facilities Revenue Bonds (Catholic
                                            Healthcare West Project), Series A, 5% due 7/01/2021                              1,658
                     NR*    NR*    1,115    Maricopa County, Arizona, IDA, M/F Housing Revenue Bonds (Sun King
                                            Apartments Project), Sub-Series C, 9.50% due 11/01/2031                           1,141
                     NR*    B3     3,000    Phoenix, Arizona, IDA, Airport Facility Revenue Refunding Bonds (America
                                            West Airlines Inc. Project), AMT, 6.30% due 4/01/2023                             2,451
                                            Pima County, Arizona, IDA, Industrial Revenue Refunding Bonds (Tucson
                                            Electric Power Company Project):
                     B+     Ba3    1,040      Series B, 6% due 9/01/2029                                                        959
                     B+     Ba3    2,000      Series C, 6% due 9/01/2029                                                      1,840
                     NR*    NR*    1,710    Show Low, Arizona, Improvement District No. 5, Special Assessment Bonds,
                                            6.375% due 1/01/2015                                                              1,762
&lt;/R&gt;
===================================================================================================================================
California--4.8%     AAA    NR*    4,000    Los Angeles, California, Department of Water and Power, Electric Plant
                                            Revenue Bonds, RIB, Series 144, 7.87% due 6/15/2029 (a)(e)                        4,587
                     NR*    NR*    1,780    Pleasanton, California, Joint Powers Financing Authority, Revenue
                                            Refunding Bonds, Reassessment, Sub-Series B, 6.60% due 9/02/2008                  1,873
===================================================================================================================================
Colorado--2.0%       NR*    NR*    2,500    Denver, Colorado, Urban Renewal Authority, Tax Increment Revenue Bonds
                                            (Pavilions), AMT, 7.75% due 9/01/2016                                             2,654
===================================================================================================================================
Connecticut--4.9%    NR*    NR*    1,590    Connecticut State Development Authority, IDR (AFCO Cargo BDL-LLC Project),
                                            AMT, 8% due 4/01/2030                                                             1,625
                     BBB    Baa2   4,000    Connecticut State Development Authority, PCR, Refunding (Connecticut Light
                                            and Power Company), Series A, 5.85% due 9/01/2028                                 3,957
                     NR*    B1       990    New Haven, Connecticut, Facility Revenue Bonds (Hill Health Corporation
                                            Project), 9.25% due 5/01/2017                                                     1,018
===================================================================================================================================
Florida--5.0%        NR*    NR*    2,000    Hillsborough County, Florida, IDA, Exempt Facilities Revenue Bonds
                                            (National Gypsum), AMT, Series A, 7.125% due 4/01/2030                            1,440

Portfolio
Abbreviations

To simplify the listings of MuniAssets Fund, Inc.'s portfolio holdings in the
Schedule of Investments, we have abbreviated the names of many of the securities
according to the list below and at right.

AMT   Alternative Minimum Tax (subject to)
EDA   Economic Development Authority
GO    General Obligation Bonds
IDA   Industrial Development Authority
IDB   Industrial Development Board
IDR   Industrial Development Revenue Bonds
M/F   Multi-Family
PCR   Pollution Control Revenue Bonds
RIB   Residual Interest Bonds
VRDN  Variable Rate Demand Notes


                                     F-4










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<!-- MARKER LABEL="sheet: 5, page: 5" -->




&lt;R&gt;
MuniAssets Fund, Inc.                                              May 31, 2001&lt;/R&gt;
SCHEDULE OF INVESTMENTS (continued)                               (in Thousands)

                   S&P   Moody's   Face
STATE            Ratings Ratings  Amount   Issue                                                                           Value
====================================================================================================================================
Florida              NR*    NR*   $2,800    Parkway Center, Florida, Community Development District Special Assessment
(concluded)                                 Refunding Bonds, Series B, 8% due 5/01/2010                                    $  2,814
                     A1+    VMIG1+ 2,500    Saint Lucie County, Florida, PCR, Refunding (Florida Power and Light
                                            Company Project), VRDN, 3.10% due 9/01/2028 (f)                                   2,500
===================================================================================================================================
Idaho--0.7%          NR*    NR*    1,000    Idaho Health Facilities Authority, Revenue Refunding Bonds (Valley Vista
                                            Care Corporation), Series A, 7.75% due 11/15/2016                                   974
===================================================================================================================================
Illinois--5.2%       NR*    NR*    1,755    Illinois Development Finance Authority Revenue Bonds (Primary Health Care
                                            Centers Facilities Acquisition Program), 7.50% due 12/01/2006                     1,839
                                            Illinois Health Facilities Authority Revenue Bonds:
                     BBB+   NR*    1,000      (Community Hospital of Ottawa Project), 6.75% due 8/15/2014                     1,004
                     BBB+   NR*    2,000      (Community Hospital of Ottawa Project), 6.85% due 8/15/2024                     1,981
                     NR*    Ba3    2,150      (Holy Cross Hospital Project), 6.70% due 3/01/2014                              1,800
                     A1     VMIG1+   400    Illinois Health Facilities Authority, Revenue Refunding Bonds (Resurrection
                                            Health), VRDN, Series A, 3.10% due 5/01/2029 (a)(f)                                 400

===================================================================================================================================
&lt;R&gt;
Iowa--0.7%           NR*    NR*     800    Iowa Finance Authority, Health Care Facilities Revenue Refunding Bonds
                                           (Care Initiatives Project), 9.25% due 7/01/2025                                      953
&lt;/R&gt;
====================================================================================================================================
Kentucky--0.7%       NR*    NR*   1,000    Kenton County, Kentucky, Airport Board, Special Facilities Revenue Bonds
                                           (Mesaba Aviation Inc. Project), AMT, Series A, 6.70% due 7/01/2029                   951
====================================================================================================================================
Louisiana--3.4%      BB-    NR*   4,500    Port New Orleans, Louisiana, IDR, Refunding (Continental Grain Company
                                           Project), 7.50% due 7/01/2013                                                      4,550
====================================================================================================================================
Maryland--4.0%       NR*    NR*   1,930    Maryland State Economic Development Corporation, Revenue Refunding Bonds
                                           (Baltimore Association for Retarded Citizens--Health and Mental Hygiene
                                           Program), Series A, 7.75% due 3/01/2025                                            1,973
                     NR*    NR*   3,000    Maryland State Energy Financing Administration, Limited Obligation
                                           Revenue Bonds (Cogeneration--AES Warrior Run), AMT, 7.40% due 9/01/2019            3,095
                     A1+    VMIG1+  400    Maryland State Energy Financing Administration, Solid Waste Disposal
                                           Revenue Bonds (Cimenteries Project), AMT, VRDN, 3.20% due 5/01/2035 (f)              400
====================================================================================================================================
Massachusetts--3.7%  NR*    NR*     825    Massachusetts State Health and Educational Facilities Authority Revenue
                                           Bonds (New England Memorial Hospital Project), Series C, 7% due 4/01/2014 (b)        165
                     NR*    Ba2   2,220    Massachusetts State Health and Educational Facilities Authority, Revenue
                                           Refunding Bonds (Bay Cove Human Services Issue), Series A, 5.90% due
                                           4/01/2028                                                                          1,810
                     NR*    Aaa   2,765    Massachusetts State Industrial Finance Agency, Revenue Refunding Bonds
                                           (Bay Cove Human Services Inc.), 8.375% due 4/01/2004 (d)                           3,103
====================================================================================================================================
Michigan--0.3%       NR*    VMIG1+  400    Michigan State Strategic Fund, PCR, Refunding (Consumers Power Project),
                                           VRDN, 3.05% due 4/15/2018 (f)(g)                                                     400
====================================================================================================================================
Mississippi--0.7%    BBB-   Ba1   1,000    Mississippi Business Finance Corporation, Mississippi, PCR, Refunding
                                           (System Energy Resources Inc. Project), 5.90% due 5/01/2022                          923
====================================================================================================================================
Missouri--0.7%       NR*    NR*   1,000    Fenton, Missouri, Tax Increment Revenue Refunding and Improvement Bonds
                                           (Gravois Bluffs), 7% due 10/01/2021                                                1,016
====================================================================================================================================
New Jersey--12.4%                          Camden County, New Jersey, Improvement Authority, Lease Revenue Bonds
                                           (Holt Hauling & Warehousing), AMT, Series A:
                     NR*    NR*   1,000      9.625% due 1/01/2011                                                               938
                     NR*    NR*   3,800      9.875% due 1/01/2021                                                             3,563


                                    F-5









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<!-- MARKER LABEL="sheet: 6, page: 6" -->




&lt;R&gt;
MuniAssets Fund, Inc.                                              May 31, 2001&lt;/R&gt;
SCHEDULE OF INVESTMENTS (continued)                               (in Thousands)

                   S&P   Moody's   Face
STATE            Ratings Ratings  Amount   Issue                                                                           Value
====================================================================================================================================
New Jersey                                 Camden County, New Jersey, Pollution Control Financing Authority, Solid
(concluded)                                Waste Resource Recovery Revenue Refunding Bonds, AMT:
                     CCC    B2   $3,000      Series A, 7.50% due 12/01/2010                                                  $2,897
                     CCC    B2      500      Series B, 7.50% due 12/01/2009                                                     483
                     NR*    NR*   2,000    New Jersey EDA, Economic Development Revenue Bonds (Glimcher Properties
                                           LP Project), AMT, 6% due 11/01/2028                                                1,773
                     NR*    NR*   1,000    New Jersey EDA, IDR, Refunding (Newark Airport Marriott Hotel), 7% due
                                           10/01/2014                                                                         1,013
                     NR*    NR*   2,800    New Jersey EDA, Retirement Community Revenue Bonds (Seabrook Village
                                           Inc.), Series A, 8.125% due 11/15/2023                                             2,804
                     BB     Ba2   2,000    New Jersey EDA, Special Facility Revenue Bonds (Continental Airlines Inc.
                                           Project), AMT, 6.25% due 9/15/2029                                                 1,868
                     BBB-   Baa3  1,500    New Jersey Health Care Facilities Financing Authority, Revenue Refunding
                                           Bonds (Trinitas Hospital Obligation Group), 7.40% due 7/01/2020                    1,495
====================================================================================================================================
New Mexico--1.0%     NR*    Baa3  1,500    Farmington, New Mexico, PCR, Refunding (Public Service Company--San Juan
                                           Project), Series A, 5.80% due 4/01/2022                                            1,413
====================================================================================================================================
New York--1.8%                             Utica, New York, GO, Public Improvement Bonds:
                     BB     Ba1     700      9.25% due 8/15/2001                                                                705
                     BB     Ba1     700      9.25% due 8/15/2002                                                                726
                     BB     Ba1     700      9.25% due 8/15/2003                                                                745
                     BB     Ba1     250      8.50% due 8/15/2015                                                                278
====================================================================================================================================
North Carolina--1.2% BBB    Baa3    350    North Carolina Eastern Municipal Power Agency, Power System Revenue
                                           Refunding Bonds, Series A, 5.75% due 1/01/2026                                       335
                     NR*    NR*   1,200    North Carolina Medical Care Commission, Health Care Facilities, First
                                           Mortgage Revenue Refunding Bonds (Presbyterian Homes Project), 7%
                                           due 10/01/2031                                                                     1,223
====================================================================================================================================
Ohio--2.2%           NR*    Ba2   3,365    Cleveland, Ohio, Airport Special Revenue Refunding Bonds (Continental
                                           Airlines Inc. Project), AMT, 5.70% due 12/01/2019                                  2,934
====================================================================================================================================
Oregon--3.3%         NR*    NR*   1,630    Klamath Falls, Oregon, Electric Revenue Refunding Bonds (Klamath
                                           Cogeneration Project), Senior Lien, 6% due 1/01/2025                               1,534
                     NR*    VMIG1+  200    Oregon State Health, Housing, Educational and Cultural Facilities
                                           Authority Revenue Bonds (Guide Dogs for the Blind), VRDN, Series A, 3.05%
                                           due 7/01/2025 (f)                                                                    200
                     NR*    NR*     700    Western Generation Agency, Oregon, Cogeneration Project Revenue Bonds
                                           (Wauna Cogeneration Project), Series A, 7.125% due 1/01/2021                         705
                     B      NR*   2,000    Yamhill County, Oregon, PCR, Refunding (Smurfit Newsprint Corporation
                                           Project), 8% due 12/01/2003                                                        2,034
====================================================================================================================================
Pennsylvania--7.4%   NR*    NR*     250    Lancaster County, Pennsylvania, Hospital Authority Revenue Bonds
                                           (Health Center--Saint Anne's Home), 6.60% due 4/01/2024                              240
                     NR*    Ba2   1,500    Lehigh County, Pennsylvania, General Purpose Authority, Revenue
                                           Refunding Bonds (Kidspeace Obligation Group), 6% due 11/01/2023                    1,266
                                      3    Northhampton Pulp LLC (b)(c)(h)                                                      398
                     AAA    NR*   1,455    Pennsylvania State Higher Educational Facilities Authority, College and
                                           University Revenue Refunding Bonds (Eastern College), Series A, 8% due
                                           10/15/2006 (d)                                                                     1,768
                     NR*    NR*   4,000    Philadelphia, Pennsylvania, Authority for IDR, Commercial Development,
                                           AMT, 7.75% due 12/01/2017                                                          4,208
                     NR*    NR*   2,625    Philadelphia, Pennsylvania, Authority for Industrial Development,
                                           Health Care Facility Revenue Refunding Bonds (Paul's Run), Series A,
                                           5.875% due 5/15/2028                                                               2,203
====================================================================================================================================
South Carolina--1.2% BBB    NR*   1,500    South Carolina Jobs, EDA, Economic Development Revenue Bonds (Westminster
                                           Presbyterian Center), 7.75% due 11/15/2030                                         1,586
====================================================================================================================================
Texas--6.1%          BBB-   Baa3  1,000    Austin, Texas, Convention Center Revenue Bonds (Convention Enterprises
                                           Inc.), First Tier, Series A, 6.70% due 1/01/2028                                   1,000


                                      F-6










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<!-- MARKER LABEL="sheet: 7, page: 7" -->




&lt;R&gt;
MuniAssets Fund, Inc.                                              May 31, 2001&lt;/R&gt;
SCHEDULE OF INVESTMENTS (concluded)                               (in Thousands)

                   S&P   Moody's   Face
STATE            Ratings Ratings  Amount   Issue                                                                           Value
====================================================================================================================================
&lt;R&gt;
Texas (concluded)    BB     Ba1  $3,000    Houston, Texas, Airport System Revenue Bonds (Special
                                           Facilities--Continental Airlines), AMT, Series B, 6.125% due 7/15/2017          $  2,766
                     BBB-   Baa2  4,500    Lower Colorado River Authority, Texas, PCR (Samsung Austin Semiconductor),
                                           AMT, 6.375% due 4/01/2027                                                          4,457
&lt;/R&gt;
====================================================================================================================================
Utah--1.3%           NR*    NR*   1,660    Carbon County, Utah, Solid Waste Disposal Revenue Refunding Bonds
                                           (Laidlaw Environmental), AMT, Series A, 7.45% due 7/01/2017                        1,694
====================================================================================================================================
Vermont--2.4%        NR*    NR*   3,015    Vermont Educational and Health Buildings Financing Agency, Revenue
                                           Refunding Bonds (College of Saint Joseph Project), 8.50% due 11/01/2024            3,307
====================================================================================================================================
Virginia--8.7%       NR*    NR*   1,500    Dulles Town Center, Virginia, Community Development Authority, Special
                                           Assessment Tax (Dulles Town Center Project), 6.25% due 3/01/2026                   1,459
                     NR*    NR*   3,075    Peninsula Ports Authority, Virginia, Revenue Refunding Bonds (Port
                                           Facility--Zeigler Coal), 6.90% due 5/02/2022 (b)                                   1,414
                                           Pittsylvania County, Virginia, IDA, Revenue Refunding Bonds,
                                           Exempt-Facility, AMT, Series A:
                     NR*    NR*   1,700      7.50% due 1/01/2014                                                              1,624
                     NR*    NR*   1,000      7.55% due 1/01/2019                                                                947
                                           Pocahontas Parkway Association, Virginia, Toll Road Revenue Bonds,
                                           Capital Appreciation:
                     NR*    Ba1   6,200      First Tier, Sub-Series C, 6.25%** due 8/15/2032                                    616
                     BBB-   Baa3 48,400      Senior Series B, 5.95%** due 8/15/2032                                           5,672
====================================================================================================================================
Washington--1.4%     NR*    NR*   1,900    Port Seattle, Washington, Special Facilities Revenue Bonds (Northwest
                                           Airlines Project), AMT, 7.25% due 4/01/2030                                        1,868
====================================================================================================================================
Wisconsin--0.7%      NR*    NR*   1,000    Wisconsin State Health and Educational Facilities Authority Revenue Bonds
                                           (Oakwood Village Project), Series A, 7.625% due 8/15/2030                          1,014
====================================================================================================================================
                     Total Investments (Cost--$143,775)--100.1%                                                             135,633

                     Liabilities in Excess of Other Assets--(0.1%)                                                             (185)
                                                                                                                           --------
                     Net Assets--100.0%                                                                                    $135,448
                                                                                                                           ========
====================================================================================================================================


(a)   FSA Insured.
(b)   Non-income producing security.
(c)   These shares represent an equity interest in the reorganization of
      Ponderosa Fibres PA. The security may be offered and sold to "qualified
      institutional buyers" under Rule 144A of the Securities Act of 1933.
(d)   Prerefunded.
(e)   The interest rate is subject to change periodically and inversely based
      upon prevailing market rates. The interest rate shown is the rate in
      effect at May 31, 2001.
(f)   The interest rate is subject to change periodically based upon prevailing
      market rates. The interest rate shown is the rate in effect at May 31,
      2001.
(g)   AMBAC Insured.
(h)   Escrowed to maturity.
 *    Not Rated.
**    Represents a zero coupon bond; the interest rate shown reflects the
      effective yield at the time of purchase by the Fund.
 +    Highest short-term rating by Moody's Investors Service, Inc.
      Ratings of issues shown have not been audited by Deloitte & Touche LLP.

      See Notes to Financial Statements.


                                      F-7









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<!-- MARKER LABEL="sheet: 8, page: 8" -->





&lt;R&gt;
MuniAssets Fund, Inc.                            May 31, 2001
&lt;/R&gt;
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL

              As of May 31, 2001
========================================================================================================
Assets:       Investments, at value (identified cost-$143,774,607) ....                    $ 135,632,525
              Cash .....................................................                          24,608
              Receivables:
                Interest ...............................................   $   2,466,628
                Securities sold ........................................         247,438       2,714,066
                                                                           -------------
              Prepaid expenses and other assets ........................                           8,195
                                                                                           -------------
              Total assets .............................................                     138,379,394
                                                                                           -------------
========================================================================================================
Liabilities:  Payables:
                Securities purchased ...................................       2,845,481
                Investment adviser .....................................          50,905       2,896,386
                                                                           -------------
              Accrued expenses and other liabilities ...................                          34,523
                                                                                           -------------
              Total liabilities ........................................                       2,930,909
                                                                                           -------------
========================================================================================================
Net Assets:   Net assets ...............................................                   $ 135,448,485
                                                                                           =============
========================================================================================================
Capital:      Common Stock, par value $.10 per share; 200,000,000 shares
              authorized; 10,454,359 shares issued and outstanding .....                   $   1,045,436
              Paid-in capital in excess of par .........................                     148,814,553
              Undistributed investment income--net .....................                         845,463
              Accumulated realized capital losses on investments--net ..                      (7,114,885)
              Unrealized depreciation on investments--net ..............                      (8,142,082)
                                                                                           -------------
              Total capital--Equivalent to $12.96 net asset value per
              share of Common Stock (market price--$13.00) .............                   $ 135,448,485
                                                                                           =============
========================================================================================================

              See Notes to Financial Statements.




STATEMENT OF OPERATIONS

                    For the Year Ended May 31, 2001
==========================================================================================================
Investment          Interest and amortization of premium and discount earned                  $  9,698,498
Income:
==========================================================================================================
Expenses:           Investment advisory fees ...............................   $    740,906
                    Professional fees ......................................         57,834
                    Accounting services ....................................         53,362
                    Directors' fees and expenses ...........................         40,498
                    Listing fees ...........................................         35,652
                    Printing and shareholder reports .......................         33,577
                    Transfer agent fees ....................................         31,869
                    Custodian fees .........................................          9,153
                    Pricing fees ...........................................          8,722
                    Other ..................................................         15,539
                                                                               ------------
                    Total expenses .........................................                     1,027,112
                                                                                              ------------
                    Investment income--net .................................                     8,671,386
                                                                                              ------------
==========================================================================================================
Realized &          Realized loss on investments--net ......................                    (2,286,735)
Unrealized          Change in unrealized depreciation on investments--net ..                     4,301,686
Gain (Loss) on                                                                                ------------
Investments--Net:   Net Increase in Net Assets Resulting from Operations ...                  $ 10,686,337
                                                                                              ============
==========================================================================================================

                    See Notes to Financial Statements.


                                       F-8









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<!-- MARKER LABEL="sheet: 9, page: 9" -->







&lt;R&gt;
MuniAssets Fund, Inc.                            May 31, 2001
&lt;/R&gt;

STATEMENTS OF CHANGES IN NET ASSETS

                                                                                                 For the Year Ended May 31,
                                                                                               ------------------------------
                 Increase (Decrease) in Net Assets:                                                 2001             2000
=============================================================================================================================
Operations:      Investment income--net ....................................................   $   8,671,386    $   8,385,908
                 Realized loss on investments--net .........................................      (2,286,735)      (3,125,350)
                 Change in unrealized appreciation/depreciation on investments--net ........       4,301,686      (14,597,801)
                                                                                               -------------    -------------
                 Net increase (decrease) in net assets resulting from operations ...........      10,686,337       (9,337,243)
                                                                                               -------------    -------------
=============================================================================================================================
Dividends to     Dividends to shareholders from investment income--net .....................      (8,588,342)      (8,480,641)
Shareholders:                                                                                  -------------    -------------
=============================================================================================================================
Common Stock     Value of shares issued to Common Stock shareholders in reinvested dividends         285,115               --
Transactions:                                                                                  -------------    -------------
=============================================================================================================================
Net Assets:      Total increase (decrease) in net assets ...................................       2,383,110      (17,817,884)
                 Beginning of year .........................................................     133,065,375      150,883,259
                                                                                               -------------    -------------
                 End of year* ..............................................................   $ 135,448,485    $ 133,065,375
                                                                                               =============    =============
=============================================================================================================================
                *Undistributed investment income--net ......................................   $     845,463    $     747,094
                                                                                               =============    =============
=============================================================================================================================

                 See Notes to Financial Statements.

FINANCIAL HIGHLIGHTS

                     The following per share data and ratios have been derived
                     from information provided in the financial statements.                 For the Year Ended May 31,
                                                                                ---------------------------------------------------
                     Increase (Decrease) in Net Asset Value:                     2001      2000       1999       1998       1997
===================================================================================================================================
Per Share            Net asset value, beginning of year ......................  $  12.76  $  14.46   $  14.77   $  14.16   $  13.74
Operating                                                                       --------  --------   --------   --------   --------
Performance:           Investment income--net .................................      .83       .80        .83        .84        .84
                       Realized and unrealized gain (loss) on investments--net       .19     (1.69)      (.32)       .62        .42
                                                                                --------  --------   --------   --------   --------
                     Total from investment operations ........................      1.02      (.89)       .51       1.46       1.26
                                                                                --------  --------   --------   --------   --------
                     Less dividends from investment income--net ..............      (.82)     (.81)      (.82)      (.85)      (.84)
                                                                                --------  --------   --------   --------   --------
                     Net asset value, end of year ............................  $  12.96  $  12.76   $  14.46   $  14.77   $  14.16
                                                                                ========  ========   ========   ========   ========
                     Market price per share, end of year .....................  $  13.00  $11.1875   $  13.00   $  13.75   $ 12.625
                                                                                ========  ========   ========   ========   ========
===================================================================================================================================
Total Investment     Based on net asset value per share ......................     8.58%    (5.45%)     3.74%     10.87%     10.11%
Return:*                                                                        ========  ========   ========   ========   ========
                     Based on market price per share .........................    24.22%    (7.79%)      .19%     15.76%      9.01%
                                                                                ========  ========   ========   ========   ========
===================================================================================================================================
Average              Expenses ................................................      .76%      .74%       .72%       .75%       .76%
Net Assets:                                                                     ========  ========   ========   ========   ========
                     Investment income--net ..................................     6.44%     5.96%      5.66%      5.75%      6.06%
                                                                                ========  ========   ========   ========   ========
===================================================================================================================================
Supplemental         Net assets, end of year (in thousands) ..................  $135,448  $133,065   $150,883   $153,947   $147,630
Data:                                                                           ========  ========   ========   ========   ========
                     Portfolio turnover ......................................    17.11%    32.38%     40.57%     36.39%     45.15%
                                                                                ========  ========   ========   ========   ========
===================================================================================================================================

*     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.

      See Notes to Financial Statements.


                                      F-9











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<!-- MARKER LABEL="sheet: 10, page: 10" -->





&lt;R&gt;
MuniAssets Fund, Inc.                                            May 31, 2001
&lt;/R&gt;

NOTES TO FINANCIAL STATEMENTS

1. Significant Accounting Policies:

MuniAssets Fund, Inc. (the "Fund") is registered under the Investment Company
Act of 1940 as a non-diversified, closed-end management investment company. The
Fund's financial statements are prepared in conformity with accounting
principles generally accepted in the United States of America, which may require
the use of management accruals and estimates. The Fund determines and makes
available for publication the net asset value of its Common Stock on a weekly
basis. The Fund's Common Stock is listed on the New York Stock Exchange under
the symbol MUA. The following is a summary of significant accounting policies
followed by the Fund.

(a) Valuation of investments--Municipal bonds are traded primarily in the
over-the-counter markets and are valued at the last available bid price in the
over-the-counter market or on the basis of yield equivalents as obtained by the
Fund's pricing service from one or more dealers that make markets in the
securities. Financial futures contracts and options thereon, which are traded on
exchanges, are valued at their closing prices as of the close of such exchanges.
Options written or purchased are valued at the last sale price in the case of
exchange-traded options. In the case of options traded in the over-the-counter
market, valuation is the last asked price (options written) or the last bid
price (options purchased). Short-term investments with a remaining maturity of
sixty days or less are valued at amortized cost, which approximates market
value. Securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
direction of the Board of Directors of the Fund, including valuations furnished
by a pricing service retained by the Fund, which may utilize a matrix system for
valuations. The procedures of the pricing service and its valuations are
reviewed by the officers of the Fund under the general supervision of the Board
of Directors.

(b) Derivative financial instruments--The Fund may engage in various portfolio
investment strategies to increase or decrease the level of risk to which the
Fund is exposed more quickly and efficiently than transactions in other types of
instruments. Losses may arise due to changes in the value of the contract or if
the counterparty does not perform under the contract.

o Financial futures contracts--The Fund may purchase or sell financial futures
contracts and options on such futures contracts for the purpose of hedging the
market risk on existing securities or the intended purchase of securities.
Futures contracts are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a contract, the
Fund deposits and maintains as collateral such initial margin as required by the
exchange on which the transaction is effected. Pursuant to the contract, the
Fund agrees to receive from or pay to the broker an amount of cash equal to the
daily fluctuation in value of the contract. Such receipts or payments are known
as variation margin and are recorded by the Fund as unrealized gains or losses.
When the contract is closed, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed.

o Options--The Fund is authorized to write covered call options and purchase
put options. When the Fund writes an option, an amount equal to the premium
received by the Fund is reflected as an asset and an equivalent liability. The
amount of the liability is subsequently marked to market to reflect the current
market value of the option written. When a security is purchased or sold through
an exercise of an option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from (or added to)
the proceeds of the security sold. When an option expires (or the Fund enters
into a closing transaction), the Fund realizes a gain or loss on the option to
the extent of the premiums received or paid (or gain or loss to the extent the
cost of the closing transaction exceeds the premium paid or received).

Written and purchased options are non-income producing investments.

(c) Income taxes--It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required.

(d) Security transactions and investment income--Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security transactions are determined on the
identified cost basis. Interest income is recognized on the accrual basis. The
Fund will adopt the provisions to amortize all premiums and discounts on debt
securities effective June 1, 2001, as now required under the new AICPA Audit and
Accounting Guide for Investment Companies. The cumulative effect of this
accounting change will have no impact on the total net assets of the Fund, but
will result in a $43,627 increase to the cost of securities and a corresponding
$43,627 decrease to net unrealized depreciation, based on debt securities held
as of May 31, 2001.

(e) Dividends and distributions--Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on the
ex-dividend dates.


                                      F-10









<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 11, page: 11" -->





&lt;R&gt;
MuniAssets Fund, Inc.                                            May 31, 2001
&lt;/R&gt;

NOTES TO FINANCIAL STATEMENTS (concluded)

(f) Reclassification--Accounting principles generally accepted in the United
States of America require that certain components of net assets be adjusted to
reflect permanent differences between financial and tax reporting. Accordingly,
the current year's permanent book/tax differences of $15,325 have been
reclassified between accumulated realized capital gains and undistributed net
investment income. These reclassifications have no effect on net assets or net
asset value per share.

2. Investment Advisory Agreement and Transactions with Affiliates:

The Fund has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect, wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML
& Co."), which is the limited partner.

FAM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Fund. For such services, the Fund pays a monthly fee of
 .55% based upon the average weekly value of the Fund's net assets.

Prior to January 1, 2001, FAM provided accounting services to the Fund at its
cost and the Fund reimbursed FAM for these services. FAM continues to provide
certain accounting services to the Fund. The Fund reimburses FAM at its cost for
such services. For the year ended May 31, 2001, the Fund reimbursed FAM an
aggregate of $31,455 for the above-described services. The Fund entered into an
agreement with State Street Bank and Trust Company ("State Street"), effective
January 1, 2001, pursuant to which State Street provides certain accounting
services to the Fund. The Fund pays a fee for these services.

Certain officers and/or directors of the Fund are officers and/or directors of
FAM, PSI, and/or ML & Co.

3. Investments:

Purchases and sales of investments, excluding short-term securities, for the
year ended May 31, 2001 were $22,491,118 and $22,156,496, respectively.

Net realized losses for the year ended May 31, 2001 and net unrealized losses as
of May 31, 2001 were as follows:

- --------------------------------------------------------------------------------
                                                Realized             Unrealized
                                                 Losses                Losses
- --------------------------------------------------------------------------------
Long-term investments ................         $(2,286,735)         $(8,142,082)
                                               -----------          -----------
Total ................................         $(2,286,735)         $(8,142,082)
                                               ===========          ===========
- --------------------------------------------------------------------------------

As of May 31, 2001, net unrealized depreciation for Federal income tax purposes
aggregated $8,142,082, of which $3,680,794 related to appreciated securities and
$11,822,876 related to depreciated securities. The aggregate cost of investments
at May 31, 2001 for Federal income tax purposes was $143,774,607.

4. Common Stock Transactions:

At May 31, 2001, the Fund had one class of shares of Common Stock, par value
$.10 per share, of which 200,000,000 shares were authorized. Shares issued and
outstanding during the year ended May 31, 2001 increased by 22,168 as a result
of dividend reinvestment and during the year ended May 31, 2000 remained
constant.

5. Capital Loss Carryforward:

At May 31, 2001, the Fund had a net capital loss carryforward of approximately
$4,941,000, of which $1,047,000 expires in 2004, $2,037,000 expires in 2008, and
$1,857,000 expires in 2009. This amount will be available to offset like amounts
of any future taxable gains.

6. Subsequent Event:

On June 7, 2001, the Fund's Board of Directors declared an ordinary income
dividend to Common Stock shareholders in the amount of $.072815 payable on June
28, 2001 to shareholders of record as of June 19, 2001.


                                      F-11









<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 12, page: 12" -->




               Audited Financial Statements for Merrill Lynch High
                 Income Municipal Bond Fund, Inc. for the Fiscal
                           Year Ended August 31, 2000


                                      F-12









<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 13, page: 13" -->


&lt;R&gt;
Merrill Lynch High Income Municipal Bond Fund, Inc.    August 31, 2000
&lt;R&gt;

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders,
Merrill Lynch High Income Municipal
Bond Fund, Inc.:

We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of Merrill Lynch
High Income Municipal Bond Fund, Inc. as of August 31, 2000, the
related statements of operations for the year then ended and changes
in net assets for each of the years in the two-year period then
ended, and the financial highlights for each of the years in the
five-year period then ended. These financial statements and the
financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our
audits.

We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned at August 31, 2000 by
correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Merrill Lynch High Income Municipal Bond Fund, Inc. as of August 31,
2000, the results of its operations, the changes in its net assets,
and the financial highlights for the respective stated periods in
conformity with accounting principles generally accepted in the
United States of America.

Deloitte & Touche LLP
Princeton, New Jersey
October 5, 2000


                                      F-13









<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 14, page: 14" -->



&lt;R&gt;
Merrill Lynch High Income Municipal Bond Fund, Inc.                                                     August 31, 2000
&lt;/R&gt;

SCHEDULE OF INVESTMENTS                                           (in Thousands)
                 S&P    Moody's   Face
State          Ratings  Ratings  Amount                       Issue                                            Value
=======================================================================================================================
Alabama--1.8%     B       NR*  $ 1,000   Brewton, Alabama, IDB, PCR, Refunding (Container Corporation
                                         of America--Jefferson Smurfit Corp. Project),
                                         8% due 4/01/2009                                                      $  1,039
                  CCC     Ca     5,285   Mobile, Alabama, IDB, Solid Waste Disposal Revenue Refunding
                                         Bonds (Mobile Energy Services Co. Project), 6.95% due
                                         1/01/2020 (e)                                                            1,718

=======================================================================================================================
&lt;R&gt;
Arizona--7.4%     B       Ba3    3,000   Coconino County, Arizona, Pollution Control Corporation,
                                         Revenue Refunding Bonds (Tucson Electric Power--Navajo),
                                         AMT, Series A, 7.125% due 10/01/2032                                     3,059
                  NR*     NR*    1,280   Maricopa County, Arizona, IDA, M/F Housing Revenue Bonds
                                         (Sun King Apartments Project), Sub-Series C, 9.50% due
                                         11/01/2031                                                               1,307
                  NR*     B1     4,600   Phoenix, Arizona, IDA, Airport Facility Revenue Refunding
                                         Bonds (America West Airlines Inc. Project), AMT, 6.30% due
                                         4/01/2023                                                                4,146
                  NR*     NR*    1,235   Pima County, Arizona, IDA, Industrial Revenue Bonds (La
                                         Hacienda Project), 9.50% due 12/01/2016                                  1,323
                  B       Ba3      500   Pima County, Arizona, IDA, Industrial Revenue Refunding Bonds
                                         (Tucson Electric Power Company Project), Series C, 6% due
                                         9/01/2029                                                                  460
                                         Sedona, Arizona, Wastewater Municipal Property Corporation,
                                         Excise Tax Revenue Refunding Bonds (d):
                  AAA     NR*    1,410      5.20%** due 7/01/2021                                                   447
                  AAA     NR*    1,310      5.24%** due 7/01/2023                                                   369
&lt;/R&gt;
=======================================================================================================================
California--4.6%  NR*     NR*    1,500   Long Beach, California, M/F Housing Redevelopment Agency,
                                         Revenue Bonds (Pacific Court Apartments), AMT, Issue B, 6.80%
                                         due 9/01/2013 (e)                                                          930
                  AAA     NR*    5,865   Los Angeles, California, Department of Water and Power,
                                         Electric Plant Revenue Bonds, RIB, Series 144, 6.89% due
                                         6/15/2029 (b)(h)                                                         5,888
=======================================================================================================================
Colorado--6.4%    NR*     NR*    1,700   Colorado Post--Secondary Educational Facilities Authority
                                         Revenue Bonds (Colorado Ocean Journey Inc. Project), 8.30%
                                         due 12/01/2017                                                           1,857
                  A       A2     2,000   Denver, Colorado, City and County Airport Revenue Bonds, AMT,
                                         Series D, 7.75% due 11/15/2013                                           2,394
                  NR*     NR*    3,000   Denver, Colorado, Urban Renewal Authority, Tax Increment and
                                         Allocation Bonds, AMT, 7.75% due 9/01/2017                               3,204
                                         San Miguel County, Colorado (Mountain Village Metropolitan
                                         District), GO, Refunding:
                  NR*     NR*    1,350      8.10% due 12/01/2002 (f)                                              1,466
                  NR*     NR*      650      8.10% due 12/01/2011                                                    693

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

PORTFOLIO ABBREVIATIONS

To simplify the listings of Merrill Lynch High Income Municipal Bond
Fund, Inc.'s portfolio holdings in the Schedule of Investments, we
have abbreviated the names of many of the securities according to
the list below and at right.

AMT        Alternative Minimum Tax (subject to)
EDA        Economic Development Authority
GO         General Obligation Bonds
HFA        Housing Finance Agency
IDA        Industrial Development Authority
IDB        Industrial Development Board
IDR        Industrial Development Revenue Bonds
INFLOS     Inverse Floating Rate Municipal Bonds
M/F        Multi-Family
PCR        Pollution Control Revenue Bonds
RIB        Residual Interest Bonds
S/F        Single-Family


                                      F-14










<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 15, page: 15" -->





&lt;R&gt;
Merrill Lynch High Income Municipal Bond Fund, Inc.                                                     August 31, 2000
&lt;/R&gt;

SCHEDULE OF INVESTMENTS (continued)                                                                 (in Thousands)

                 S&P    Moody's   Face
State          Ratings  Ratings  Amount                       Issue                                            Value
=======================================================================================================================
Connecticut--3.2% NR*     NR*  $ 1,900   Connecticut State Development Authority, IDR (AFCO Cargo
                                         BDL--LLC Project), AMT, 8% due 4/01/2030                               $ 1,942
                  NR*     NR*    1,080   Connecticut State Health and Educational Facilities Authority
                                         Revenue Bonds (Edgehill Issue), Series A, 6.875% due 7/01/2027           1,057
                  NR*     B1     1,745   New Haven, Connecticut, Facility Revenue Bonds (Hill Health
                                         Corporation Project), 9.25% due 5/01/2017                                1,808

=======================================================================================================================
Florida--5.4%     NR*     NR*      940   Arbor Greene Community Development District, Florida, Special
                                         Assessment Revenue Bonds, 7.60% due 5/01/2018                              991
                  NR*     NR*      975   Grand Haven Community Development District, Florida, Special
                                         Assessment Bonds, Series B, 6.90% due 5/01/2019                            977
                  NR*     NR*    3,000   Orlando, Florida, Special Assessment Bonds (Conroy Road
                                         Interchange Project), Series A, 5.80% due 5/01/2026                      2,654
                  NR*     NR*    3,400   Parkway Center, Florida, Community Development District
                                         Special Assessment Refunding Bonds, Series B, 8% due 5/01/2010           3,388

=======================================================================================================================
Georgia--1.3%     NR*     NR*    1,895   Atlanta, Georgia, Urban Residential Finance Authority, M/F
                                         Mortgage Revenue Bonds (Northside Plaza Apartments Project),
                                         AMT, 9.75% due 11/01/2020                                                1,941

=======================================================================================================================
Illinois--7.5%    BBB-    Baa1   4,000   Chicago, Illinois, O'Hare International Airport, Special Facility
                                         Revenue Refunding Bonds (American Airlines Inc. Project),
                                         8.20% due 12/01/2024                                                     4,383
                  NR*     NR*    3,195   Illinois Development Finance Authority, Primary Health Care
                                         Centers Facilities, Acquisition Program Revenue Bonds, 7.75%
                                         due 12/01/2016                                                           3,468
                  NR*     NR*    2,000   Illinois Educational Facilities Authority, Revenue Refunding
                                         Bonds (Chicago Osteopathic Health System), 7.25% due
                                         11/15/2019 (f)                                                           2,383
                  BBB     NR*    1,000   Lansing, Illinois, Tax Increment Revenue Refunding Bonds
                                         (Sales Tax--Landings Redevelopment), 7% due 12/01/2008                   1,058

=======================================================================================================================
&lt;R&gt;
Indiana--2.4%     A+      NR*    1,500   Indiana Bond Bank Revenue Bonds, Special Hospital Program
                                         (Hendricks Community Hospital), Series A, 7.125% due 4/01/2013           1,571
                  NR*     NR*    2,000   Indianapolis, Indiana, M/F Revenue Bonds (Lake Nora Fox Club
                                         Project), Series B, 7.50% due 10/01/2029                                 1,970
&lt;/R&gt;
=======================================================================================================================
Iowa--1.2%        NR*     NR*    1,500   Iowa Finance Authority, Health Care Facilities Revenue Refunding
                                         Bonds (Care Initiatives Project), 9.25% due 7/01/2025                    1,798
=======================================================================================================================
&lt;R&gt;
Kentucky--3.9%    NR*     NR*    1,850   Kenton County, Kentucky, Airport Board, Special Facilities
                                         Revenue Bonds (Mesaba Aviation Inc. Project), AMT, Series A,
                                         6.70% due 7/01/2029                                                      1,758
                  AAA     Aaa    3,700   Louisville, Kentucky, Hospital Revenue Refunding Bonds,
                                         INFLOS, 8.578% due 10/01/2014 (d)(h)                                     4,001
&lt;/R&gt;
=======================================================================================================================
Louisiana--2.0%   CC      NR*    3,000   Port New Orleans, Louisiana, IDR, Refunding (Continental
                                         Grain Company Project), 7.50% due 7/01/2013                              3,039

=======================================================================================================================
Maryland--3.4%    NR*     NR*    5,000   Maryland State Energy Financing Administration, Limited
                                         Obligation Revenue Bonds (Cogeneration--AES Warrior Run),
                                         AMT, 7.40% due 9/01/2019                                                 5,087

=======================================================================================================================
Massachusetts--   NR*     NR*    1,145   Boston, Massachusetts, Industrial Development Financing
6.1%                                     Authority, Solid Waste Disposal Facility Revenue Bonds
                                         (Jet-A-Way Project), AMT, 10.50% due 1/01/2011                           1,195
                  NR*     NR*    1,475   Massachusetts State Health and Educational Facilities Authority
                                         Revenue Bonds (New England Memorial Hospital Project),
                                         Series C, 7% due 4/01/2014 (e)                                             371
                  NR*     Ca     2,745   Massachusetts State Health and Educational Facilities Authority,
                                         Revenue Refunding Bonds (New England Memorial Hospital),
                                         Series B, 6.125% due 7/01/2013 (e)                                         549
                  NR*     AAA    1,580   Massachusetts State Industrial Finance Agency, Revenue
                                         Refunding Bonds (Bay Cove Human Services Inc.), 8.375% due
                                         4/01/2004 (f)                                                            1,766
                  NR*     NR*    5,000   Massachusetts State Port Authority, Special Project Revenue
                                         Bonds (Harborside Hyatt Project), AMT, 10% due 3/01/2026                 5,182

=======================================================================================================================
Mississippi--1.5% NR*     NR*    2,275   Mississippi Development Bank, Special Obligation Revenue
                                         Refunding Bonds (Diamond Lakes Utilities), Series A, 6.25%
                                         due 12/01/2017                                                           2,179

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


                                      F-15










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<!-- MARKER LABEL="sheet: 16, page: 16" -->



&lt;R&gt;
Merrill Lynch High Income Municipal Bond Fund, Inc.                                                     August 31, 2000
&lt;/R&gt;

SCHEDULE OF INVESTMENTS (continued)                                                                 (in Thousands)

                 S&P    Moody's   Face
State          Ratings  Ratings  Amount                       Issue                                            Value
=======================================================================================================================
Nevada--1.4%      BBB     Baa1 $ 2,500   Henderson, Nevada, Health Care Facility Revenue Bonds
                                         (Catholic Healthcare West--Saint Rose Dominican Hospital),
                                         5.375% due 7/01/2026                                                   $ 2,046

=======================================================================================================================
New Jersey--15.0%                        Camden County, New Jersey, Improvement Authority, Lease
                                         Revenue Bonds (Holt Hauling & Warehousing), AMT, Series A:
                  CCC     NR*    4,600      9.625% due 1/01/2011                                                  4,559
                  CCC     NR*    2,000      9.875% due 1/01/2021                                                  1,980
                  CCC     B2     4,000   Camden County, New Jersey, Pollution Control Financing
                                         Authority, Solid Waste Resource Recovery Revenue Bonds,
                                         Series D, 7.25% due 12/01/2010                                           3,790
                  CCC     B2     6,000   Camden County, New Jersey, Pollution Control Financing
                                         Authority, Solid Waste Resource Recovery Revenue Refunding
                                         Bonds, AMT, Series A, 7.50% due 12/01/2010                               5,789
                  NR*     NR*    3,000   New Jersey EDA, Economic Development Revenue Bonds
                                         (Glimcher Properties LP Project), AMT, 6% due 11/01/2028                 2,721
                  NR*     NR*    1,500   New Jersey EDA, IDR, Refunding (Newark Airport Marriott
                                         Hotel), 7% due 10/01/2014                                                1,532
                  BBB-    Baa3   2,000   New Jersey Health Care Facilities Financing Authority, Revenue
                                         Refunding Bonds (Trinitas Hospital Obligation Group), 7.375%
                                         due 7/01/2015                                                            2,061

=======================================================================================================================
New Mexico--      B      Ba3    1,000   Farmington, New Mexico, PCR, Refunding (Tucson Electric
0.7%                                     Power Co.--San Juan Project), Series A, 6.95% due 10/01/2020             1,011
&lt;/R&gt;
=======================================================================================================================
New York--2.4%                           Utica, New York, GO, Public Improvement:
                  BB      Ba3      635      8.50% due 8/15/2007                                                     709
                  BB      Ba3      635      8.50% due 8/15/2008                                                     708
                  BB      Ba3      500      8.50% due 8/15/2009                                                     558
                  BB      Ba3      500      8.50% due 8/15/2010                                                     558
                  BB      Ba3      500      8.50% due 8/15/2011                                                     558
                  BB      Ba3      500      8.50% due 8/15/2012                                                     558

=======================================================================================================================
Ohio--0.7%        AAA     Aaa    1,050   Ohio HFA, S/F Mortgage Revenue Bonds, RIB, AMT, Series A,
                                         9.061% due 3/24/2031 (c)(h)                                              1,105

=======================================================================================================================
Oregon--1.7%      NR*     NR*    1,000   Western Generation Agency, Oregon, Cogeneration Project
                                         Revenue Bonds (Wauna Cogeneration Project), AMT, Series B,
                                         7.40% due 1/01/2016                                                      1,036
                  B       NR*    1,455   Yamhill County, Oregon, PCR, Refunding (Smurfit Newsprint
                                         Corporation Project), 8% due 12/01/2003                                  1,503

=======================================================================================================================
Pennsylvania--    NR*     NR*    1,000   Lehigh County, Pennsylvania, General Purpose Authority,
6.2%                                     Revenue Refunding Bonds (Kidspeace Obligation Group),
                                         6% due 11/01/2023                                                          828
                                     5   Northhampton Pulp LLC (a)(e)(g)                                            671
                  NR*     NR*    5,000   Philadelphia, Pennsylvania, Authority for IDR, Commercial
                                         Development, AMT, 7.75% due 12/01/2017                                   5,278
                  NR*     NR*    3,125   Philadelphia, Pennsylvania, Authority for Industrial Development,
                                         Health Care Facility Revenue Refunding Bonds (Paul's Run),
                                         Series A, 5.875% due 5/15/2028                                           2,511

=======================================================================================================================
South Carolina--  BBB     NR*    2,000   South Carolina Jobs, EDA, Economic Development Revenue
1.7%                                     Bonds (Westminster Presbyterian Center), 7.75% due 11/15/2030            2,065
                  NR*     NR*      500   South Carolina Jobs, EDA, Health Facilities Revenue Bonds,
                                         First Mortgage (Lutheran Homes Project), 6.625% due 5/01/2028              467

=======================================================================================================================
Texas--1.8%       BB      Ba1    3,000   Houston, Texas, Airport System Revenue Bonds (Special
                                         Facilities--Continental Airlines), AMT, Series C, 6.125%
                                         due 7/15/2027                                                            2,674

=======================================================================================================================
Utah--0.1%        NR*     NR*    3,200   Tooele County, Utah, PCR, Refunding (Laidlaw Environmental),
                                         AMT, Series A, 7.55% due 7/01/2027 (e)                                     123

=======================================================================================================================
Vermont--1.1%     NR*     NR*    1,450   Vermont Educational and Health Buildings Financing Agency,
                                         Revenue Refunding Bonds (College of Saint Joseph Project),
                                         8.50% due 11/01/2024                                                     1,602
=======================================================================================================================


                                      F-16










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<!-- MARKER LABEL="sheet: 17, page: 17" -->



&lt;R&gt;
Merrill Lynch High Income Municipal Bond Fund, Inc.                                                     August 31, 2000
&lt;/R&gt;

SCHEDULE OF INVESTMENTS (concluded)                                                                 (in Thousands)
&lt;/R&gt;

                 S&P    Moody's   Face
State          Ratings  Ratings  Amount                       Issue                                            Value
=======================================================================================================================
Virginia--7.5%    NR*     NR*  $ 4,560   Peninsula Ports Authority, Virginia, Revenue Refunding Bonds
                                         (Port Facility--Zeigler Coal), 6.90% due 5/02/2022                    $  2,234
                  NR*     NR*    2,000   Pittsylvania County, Virginia, IDA Revenue Refunding Bonds,
                                         Exempt--Facility, AMT, Series A, 7.50% due 1/01/2014                     2,075
                                         Pocahontas Parkway Association, Virginia, Toll Road Revenue
                                         Bonds:
                  NR*     Ba1    5,500      1st Tier, Sub-Series C, 6.25%** due 8/15/2027                           729
                  NR*     Ba1    9,000      1st Tier, Sub-Series C, 6.25%** due 8/15/2035                           655
                  BBB-    Baa3  48,400      Senior Series B, 5.95%** due 8/15/2031                                5,468

=======================================================================================================================
Total Investments (Cost--$159,332)--98.4%                                                                       146,978

Other Assets Less Liabilities--1.6%                                                                               2,416
                                                                                                               --------
Net Assets--100.0%                                                                                             $149,394
                                                                                                               ========
=======================================================================================================================
(a)Escrowed to maturity.
(b)FSA Insured.
(c)GNMA Collateralized.
(d)MBIA Insured.
(e)Non-income producing security.
(f)Prerefunded.
&lt;R&gt;
(g)These shares represent an equity interest in the reorganization
   of Ponderosa Fibres PA. The security may be offered and sold to
   "qualified institutional buyers" under Rule 144A of the Securities
   Act of 1933.
(h)The interest rate is subject to change periodically and inversely
   based upon prevailing market rates. The interest rate shown is the
   rate in effect at August 31, 2000.
*Not Rated.
**Represents a zero coupon; the interest rate shown is the effective
  yield at the time of purchase by the Fund.
  Ratings of issues shown have not been audited by Deloitte & Touche
  LLP.
&lt;/R&gt;

See Notes to Financial Statements.


                                      F-17










<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 18, page: 18" -->




&lt;R&gt;
Merrill Lynch High Income Municipal Bond Fund, Inc.                                                     August 31, 2000
&lt;/R&gt;

FINANCIAL INFORMATION

Statement of Assets and Liabilities as of August 31, 2000

Assets:             Investments, at value (identified cost--$159,332,391)                                   $146,977,887
                    Cash                                                                                          45,213
                    Receivables:
                      Interest                                                             $  3,033,650
                      Capital shares sold                                                        35,604        3,069,254
                                                                                           ------------
                    Prepaid registration fees and other assets                                                    16,090
                                                                                                            ------------
                    Total assets                                                                             150,108,444
                                                                                                            ------------

========================================================================================================================
Liabilities:        Payables:
                      Dividends to shareholders                                                 330,936
                      Investment adviser                                                         98,603
                      Administration                                                             25,948          455,487
                                                                                           ------------
                    Accrued expenses and other liabilities                                                       259,179
                                                                                                            ------------
                    Total liabilities                                                                            714,666
                                                                                                            ------------

========================================================================================================================
Net Assets:         Net assets                                                                              $149,393,778
                                                                                                            ============

========================================================================================================================
Net Assets          Common stock, $.10 par value, 200,000,000 shares authorized                             $  1,580,429
Consist of:         Paid-in capital in excess of par                                                         167,925,839
                    Accumulated realized capital loss on investments--net                                    (4,607,124)
                    Accumulated distributions in excess of realized capital gains--net                       (3,150,862)
                    Unrealized depreciation on investments--net                                             (12,354,504)
                                                                                                            ------------
                    Net assets--Equivalent to $9.45 per share based on 15,804,289 shares of
                    capital outstanding                                                                     $149,393,778
                                                                                                            ============

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

                    See Notes to Financial Statements.


                                      F-18









<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 19, page: 19" -->




&lt;R&gt;
Merrill Lynch High Income Municipal Bond Fund, Inc.                                                     August 31, 2000
&lt;/R&gt;

FINANCIAL INFORMATION (continued)

Statement of Operations
                                                                                                      For the Year Ended
                                                                                                         August 31, 2000

========================================================================================================================
Investment          Interest and amortization of premium and discount earned                                $ 12,534,559
Income:

========================================================================================================================
Expenses:           Investment advisory fees                                               $  1,661,213
                    Administrative fees                                                         437,161
                    Professional fees                                                            95,905
                    Transfer agent fees                                                          86,338
                    Advertising                                                                  76,715
                    Registration fees                                                            68,616
                    Printing and shareholder reports                                             44,266
                    Accounting services                                                          34,636
                    Directors' fees and expenses                                                 29,133
                    Custodian fees                                                               15,648
                    Pricing services                                                              7,711
                    Other                                                                        10,389
                                                                                           ------------
                    Total expenses                                                                             2,567,731
                                                                                                            ------------
                    Investment income--net                                                                     9,966,828
                                                                                                            ------------

========================================================================================================================
Realized &          Realized loss on investments--net                                                        (4,607,124)
Unrealized          Change in unrealized depreciation on investments--net                                   (10,597,603)
Loss on                                                                                                     ------------
Investments--Net:   Net Decrease in Net Assets Resulting from Operations                                   $ (5,237,899)
                                                                                                            ============

========================================================================================================================
                    See Notes to Financial Statements.

Statements of Changes in Net Assets

                                                                                                  For the Year
                                                                                                 Ended August 31,
                                                                                             -----------------------
Increase (Decrease) in Net Assets:                                                           2000               1999
========================================================================================================================

Operations:         Investment income--net                                                 $  9,966,828     $ 11,419,261
                    Realized loss on investments--net                                       (4,607,124)        (569,093)
                    Change in unrealized appreciation/depreciation on
                    investments--net                                                       (10,597,603)     (17,755,283)
                                                                                           ------------     ------------
                    Net decrease in net assets resulting from operations                    (5,237,899)      (6,905,115)
                                                                                           ------------     ------------

========================================================================================================================
Dividends &         Investment income--net                                                  (9,966,828)     (11,419,261)
Distributions to    Realized gain on investments--net                                                --      (3,642,201)
Shareholders:       In excess of realized gain on investments--net                                   --      (3,150,862)
                                                                                           ------------     ------------

                    Net decrease in net assets resulting from dividends
                    and distributions to shareholders                                       (9,966,828)     (18,212,324)
                                                                                           ------------     ------------

========================================================================================================================
Capital Share       Net decrease in net assets derived from capital
Transactions:       shares transactions                                                    (36,975,237)      (7,021,727)
                                                                                           ------------     ------------

========================================================================================================================
Net Assets:         Total decrease in net assets                                           (52,179,964)     (32,139,166)
                    Beginning of year                                                       201,573,742      233,712,908
                                                                                           ------------     ------------
                    End of year                                                            $149,393,778     $201,573,742
                                                                                           ============     ============

========================================================================================================================
                    See Notes to Financial Statements.


                                      F-19










<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 20, page: 20" -->




&lt;R&gt;
Merrill Lynch High Income Municipal Bond Fund, Inc.                                                     August 31, 2000
&lt;/R&gt;

FINANCIAL INFORMATION (concluded)

Financial Highlights

The following per share data and ratios have been derived
from information provided in the financial statements.
                                                                                 For the Year Ended August 31,
                                                                      --------------------------------------------------
Increase (Decrease) in Net Asset Value:                                  2000       1999     1998      1997      1996

========================================================================================================================
Per Share           Net asset value, beginning of year                $  10.24   $  11.46  $  11.34  $  10.94   $  10.97
Operating                                                             --------   --------  --------  --------   --------
Performance:        Investment income--net                                 .55        .55       .61       .65        .66
                    Realized and unrealized gain (loss) on
                    investments--net                                     (.79)      (.89)       .32       .44      (.03)
                                                                      --------   --------  --------  --------   --------
                    Total from investment operations                     (.24)      (.34)       .93      1.09        .63
                                                                      --------   --------  --------  --------   --------
                    Less dividends and distributions:
                      Investment income--net                             (.55)      (.55)     (.61)     (.65)      (.66)
                      Realized gain on investments--net                     --      (.18)     (.20)     (.04)         --
                      In excess of realized gain on
                      investments--net                                      --      (.15)        --        --         --
                                                                      --------   --------  --------  --------   --------
                    Total dividends and distributions                    (.55)      (.88)     (.81)     (.69)      (.66)
                                                                      --------   --------  --------  --------   --------
                    Net asset value, end of year                      $   9.45   $  10.24  $  11.46  $  11.34   $  10.94
                                                                      ========   ========  ========  ========   ========

========================================================================================================================
Total Investment    Based on net asset value per share                 (2.29%)    (3.16%)     8.43%    10.20%      5.81%
Return:*                                                              ========   ========  ========  ========   ========

========================================================================================================================
Ratios to Average   Expenses                                             1.46%      1.46%     1.48%     1.44%      1.50%
Net Assets:                                                           ========   ========  ========  ========   ========
                    Investment income--net                               5.68%      5.07%     5.37%     5.83%      5.90%
                                                                      ========   ========  ========  ========   ========

========================================================================================================================
Supplemental        Net assets, end of year (in thousands)            $149,394   $201,574  $233,713  $211,620   $199,552
Data:                                                                 ========   ========  ========  ========   ========
                    Portfolio turnover                                  13.42%     39.53%    36.45%    43.07%     28.54%
                                                                      ========   ========  ========  ========   ========

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

*Total investment returns exclude the effect of the early withdrawal
charge, if any. The Fund is a continuously offered closed-end fund,
the shares of which are offered at net asset value. Therefore, no
separate market exists.

See Notes to Financial Statements.


                                      F-20










<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 21, page: 21" -->




&lt;R&gt;
Merrill Lynch High Income Municipal Bond Fund, Inc.    August 31, 2000
&lt;/R&gt;

NOTES TO FINANCIAL STATEMENTS

1. Significant Accounting Policies:
Merrill Lynch High Income Municipal Bond Fund, Inc. (the "Fund") is
registered under the Investment Company Act of 1940 as a
continuously offered, non-diversified, closed-end management
investment company. The Fund's financial statements are prepared in
accordance with accounting principles generally accepted in the
United States of America, which may require the use of management
accruals and estimates. The following is a summary of significant
accounting policies followed by the Fund.

(a) Valuation of investments--Municipal bonds and other portfolio
securities in which the Fund invests are traded primarily in the
over-the-counter municipal bond and money markets and are valued at
the last available bid price in the over-the-counter market or on
the basis of yield equivalents as obtained from one or more dealers
that make markets in the securities. Financial futures contracts and
options thereon, which are traded on exchanges, are valued at their
settlement prices as of the close of such exchanges. Options written
or purchased are valued at the last sale price in the case of
exchange-traded options. In the case of options traded in the over-
the-counter market, valuation is the last asked price (options
written) or the last bid price (options purchased). Short-term
investments with remaining maturities of sixty days or less are
valued at amortized cost, which approximates market value.
Securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or
under the direction of the Board of Directors of the Fund, including
valuations furnished by a pricing service retained by the Fund,
which may utilize a matrix system for valuations. The procedures of
the pricing service and its valuations are reviewed by the officers
of the Fund under the general supervision of the Board of Directors.

(b) Derivative financial instruments--The Fund may engage in various
portfolio investment strategies to increase or decrease the level of
risk to which the Fund is exposed more quickly and efficiently than
transactions in other types of instruments. Losses may arise due to
changes in the value of the contract or if the counterparty does not
perform under the contract.

* Financial futures contracts--The Fund may purchase or sell
financial futures contracts and options on such futures contracts
for the purpose of hedging the market risk on existing securities or
the intended purchase of securities. Futures contracts are contracts
for delayed delivery of securities at a specific future date and at
a specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to
the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as variation margin
and are recorded by the Fund as unrealized gains or losses. When the
contract is closed, the Fund records a realized gain or loss equal
to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.

* Options--The Fund is authorized to write covered call options and
purchase put and call options. When the Fund writes an option, an
amount equal to the premium received by the Fund is reflected as an
asset and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of
the option written. When a security is purchased or sold through an
exercise of an option, the related premium paid (or received) is
added to (or deducted from) the basis of the security acquired or
deducted from (or added to) the proceeds of the security sold. When
an option expires (or the Fund enters into a closing transaction),
the Fund realizes a gain or loss on the option to the extent of the
premiums received or paid (or gain or loss to the extent the cost of
the closing transaction exceeds the premium paid or received).

Written and purchased options are non-income producing investments.

(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.

(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.

(e) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.

(f) Dividends and distributions--Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded









                                      F-21









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<!-- MARKER LABEL="sheet: 22, page: 22" -->






&lt;R&gt;
Merrill Lynch High Income Municipal Bond Fund, Inc.    August 31, 2000
&lt;/R&gt;

NOTES TO FINANCIAL STATEMENTS (concluded)

on the ex-dividend dates. Distributions in excess of realized
capital gains are due primarily to differing tax treatments for
future transactions and post-October losses.

2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Merrill Lynch Investment Managers, L.P. ("MLIM"). The general
partner of MLIM is Princeton Services, Inc. ("PSI"), an indirect
wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."),
which is the limited partner.

MLIM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee at an annual rate of .95% of
the Fund's average daily net assets.

&lt;R&gt;
The Fund also has entered into an Administrative Services Agreement
with MLIM whereby the Fund pays a monthly fee at an annual rate of
 .25% of the Fund's average daily net assets, in return for the
performance of administrative services (other than investment advice
and related portfolio activities) necessary for the operation of the
Fund.
&lt;/R&gt;

For the year ended August 31, 2000, FAM Distributors, Inc. ("FAMD"),
which is a wholly-owned subsidary of Merrill Lynch Group, Inc.,
earned early withdrawal charges of $29,619 relating to the tender of
the Fund's shares.

Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.

Accounting services are provided to the Fund by MLIM at cost.

Certain officers and/or directors of the Fund are officers and/or
directors of MLIM, PSI, FDS, FAMD, and/or ML & Co.

3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended August 31, 2000 were $23,001,843 and $61,684,225,
respectively.

Net realized losses for the year ended August 31, 2000 and net
unrealized losses as of August 31, 2000 were as follows:

                                     Realized     Unrealized
                                      Losses        Losses

Long-term investments            $(4,607,124)  $(12,354,504)
                                  -----------   ------------
Total                            $(4,607,124)  $(12,354,504)
                                  ===========   ============

As of August 31, 2000, net unrealized depreciation for Federal
income tax purposes aggregated $12,355,955, of which $4,901,791
related to appreciated securities and $17,257,746 related to
depreciated securities. The aggregate cost of investments at August
31, 2000 for Federal income tax purposes was $159,333,842.

4. Capital Shares Transactions:
Transactions in capital shares were as follows:

For the Year Ended                                  Dollar
August 31, 2000                       Shares        Amount

Shares sold                           420,954   $  4,098,154
Shares issued to share-
holders in reinvestment of
dividends                             410,736      3,963,637
                                 ------------   ------------
Total issued                          831,690      8,061,791
Shares tendered                   (4,709,915)   (45,037,028)
                                 ------------   ------------
Net decrease                      (3,878,225)  $(36,975,237)
                                 ============   ============

For the Year Ended                                  Dollar
August 31, 1999                       Shares        Amount

Shares sold                         1,231,384   $ 13,670,459
Shares issued to share-
holders in reinvestment of
dividends and distributions           732,001      7,958,787
                                 ------------   ------------
Total issued                        1,963,385     21,629,246
Shares tendered                   (2,680,943)   (28,650,973)
                                 ------------   ------------
Net decrease                        (717,558)  $ (7,021,727)
                                 ============   ============

5. Capital Loss Carryforward:
At August 31, 2000, the Fund had a net capital loss carryforward of
approximately $2,052,000, all of which expires in 2008. This amount
will be available to offset like amounts of any future taxable
gains.


                                      F-22









<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 23, page: 23" -->




              Unaudited Financial Statements for Merrill Lynch High
                    Income Municipal Bond Fund, Inc. for the
                       Six-Months Ended February 28, 2001


                                      F-23










<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 24, page: 24" -->



&lt;R&gt;
Merrill Lynch High Income Municipal Bond Fund, Inc.                                               February 28, 2001
&lt;/R&gt;

SCHEDULE OF INVESTMENTS                                                                              (in Thousands)

               S&P      Moody's    Face
State        Ratings    Ratings   Amount                      Issue                                            Value
=======================================================================================================================
Alabama--1.0%    B       NR*     $1,000    Brewton, Alabama, IDB, PCR, Refunding (Container
                                           Corporation of America-Jefferson Smurfit Corp. Project),
                                           8% due 4/01/2009                                                   $  1,020
                 CCC     NR*      5,285    Mobile, Alabama, IDB, Solid Waste Disposal Revenue Refunding
                                           Bonds (Mobile Energy Services Co. Project), 6.95%
                                           due 1/01/2020 (e)                                                       264

=======================================================================================================================
&lt;R&gt;
Arizona--8.1%    B+      Ba3      3,000    Coconino County, Arizona, Pollution Control Corporation,
                                           Revenue Refunding Bonds (Tucson Electric Power-Navajo),
                                           AMT, Series A, 7.125% due 10/01/2032                                  3,048
                 NR*     NR*      1,280    Maricopa County, Arizona, IDA, M/F Housing Revenue Bonds
                                           (Sun King Apartments Project), Sub-Series C, 9.50%
                                           due 11/01/2031                                                        1,312
                 NR*     B1       4,600    Phoenix, Arizona, IDA, Airport Facility Revenue Refunding Bonds
                                           (America West Airlines Inc. Project), AMT, 6.30% due 4/01/2023        3,919
                 NR*     NR*      1,235    Pima County, Arizona, IDA, Industrial Revenue Bonds
                                           (La Hacienda Project), 9.50% due 12/01/2016                           1,302
                 B       Ba3        400    Pima County, Arizona, IDA, Industrial Revenue Refunding Bonds
                                           (Tucson Electric Power Company Project), Series C,
                                           6% due 9/01/2029                                                        361
                                           Sedona, Arizona, Wastewater Municipal Property Corporation,
                                           Excise Tax Revenue Refunding Bonds (d):
                 AAA     NR*      1,410      5.20%** due 7/01/2021                                                 487
                 AAA     NR*        500      5.24%** due 7/01/2023                                                 154

=======================================================================================================================
California--0.3% A1      NR*        445    California Pollution Control Financing Authority, PCR, Refunding
                                           (Pacific Gas and Electric), VRDN, Series D, 6% due 11/01/2026 (a)       445
&lt;/R&gt;
=======================================================================================================================
Colorado--7.4%   NR*     NR*      1,700    Colorado Post-Secondary Educational Facilities Authority
                                           Revenue Bonds (Colorado Ocean Journey Inc. Project),
                                           8.30% due 12/01/2017                                                  1,953
                 A       A2       2,000    Denver, Colorado, City and County Airport Revenue Bonds,
                                           AMT, Series D, 7.75% due 11/15/2013                                   2,457
                 NR*     NR*      3,000    Denver, Colorado, Urban Renewal Authority, Tax Increment and
                                           Allocation Bonds, AMT, 7.75% due 9/01/2017                            3,197
                                           San Miguel County, Colorado (Mountain Village Metropolitan
                                           District), GO, Refunding:
                 NR*     NR*      1,350      8.10% due 12/01/2002 (f)                                            1,466
                 NR*     NR*        650      8.10% due 12/01/2011                                                  686

=======================================================================================================================
Connecticut      NR*     NR*      1,900    Connecticut State Development Authority, IDR
- --2.8%                                     (AFCO Cargo BDL-LLC Project), AMT, 8% due 4/01/2030                   1,936
                 NR*     B1       1,745    New Haven, Connecticut, Facility Revenue Bonds
                                           (Hill Health Corporation Project), 9.25% due 5/01/2017                1,800

=======================================================================================================================
&lt;R&gt;
Florida--4.1%    NR*     NR*        940    Arbor Greene Community Development District, Florida,
                                           Special Assessment Revenue Bonds, 7.60% due 5/01/2018                 1,000
&lt;/R&gt;
=======================================================================================================================

PORTFOLIO ABBREVIATIONS

To simplify the listings of Merrill Lynch High Income Municipal Bond
Fund, Inc.'s portfolio holdings in the Schedule of Investments, we
have abbreviated the names of many of the securities according to
the list below and at right.

AMT        Alternative Minimum Tax (subject to)
EDA        Economic Development Authority
GO         General Obligation Bonds
HFA        Housing Finance Agency
IDA        Industrial Development Authority
IDB        Industrial Development Board
IDR        Industrial Development Revenue Bonds
INFLOS     Inverse Floating Rate Municipal Bonds
M/F        Multi-Family
PCR        Pollution Control Revenue Bonds
RIB        Residual Interest Bonds
S/F        Single-Family
VRDN       Variable Rate Demand Notes


                                      F-24









<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 25, page: 25" -->




&lt;R&gt;
Merrill Lynch High Income Municipal Bond Fund, Inc.                                               February 28, 2001
&lt;/R&gt;

SCHEDULE OF INVESTMENTS (continued)                                                                  (in Thousands)

               S&P      Moody's    Face
State        Ratings    Ratings   Amount                      Issue                                            Value
=======================================================================================================================
Florida          NR*     NR*     $  970    Grand Haven Community Development District, Florida,
(concluded)                                Special Assessment Bonds, Series B, 6.90% due 5/01/2019            $    984
                 NR*     NR*      3,400    Parkway Center, Florida, Community Development District
                                           Special Assessment Refunding Bonds, Series B,
                                           8% due 5/01/2010                                                      3,406

=======================================================================================================================
Georgia--1.5%    NR*     NR*      1,860    Atlanta, Georgia, Urban Residential Finance Authority,
                                           M/F Mortgage Revenue Bonds (Northside Plaza Apartments
                                           Project), AMT, 9.75% due 11/01/2020                                   1,906

=======================================================================================================================
Illinois--7.9%   BBB-    Baa1     4,000    Chicago, Illinois, O'Hare International Airport, Special Facility
                                           Revenue Refunding Bonds (American Airlines Inc. Project),
                                           8.20% due 12/01/2024                                                  4,442
                 NR*     NR*      3,195    Illinois Development Finance Authority, Primary Health Care
                                           Centers Facilities, Acquisition Program Revenue Bonds,
                                           7.75% due 12/01/2016                                                  3,456
                 NR*     NR*      2,000    Illinois Educational Facilities Authority, Revenue Refunding
                                           Bonds (Chicago Osteopathic Health System), 7.25%
                                           due 11/15/2019 (f)                                                    2,467

=======================================================================================================================
Indiana--1.5%    NR*     NR*      2,000    Indianapolis, Indiana, M/F Revenue Bonds (Lake Nora Fox Club
                                           Project), Series B, 7.50% due 10/01/2029                              1,990

=======================================================================================================================
Iowa--1.4%       NR*     NR*      1,500    Iowa Finance Authority, Health Care Facilities Revenue Refunding
                                           Bonds (Care Initiatives Project), 9.25% due 7/01/2025                 1,791

=======================================================================================================================
Kentucky--4.3%   NR*     NR*      1,850    Kenton County, Kentucky, Airport Board, Special Facilities
                                           Revenue Bonds (Mesaba Aviation Inc. Project), AMT, Series A,
                                           6.70% due 7/01/2029                                                   1,751
                 AAA     Aaa      3,600    Louisville, Kentucky, Hospital Revenue Refunding Bonds,
                                           INFLOS, 9.034% due 10/01/2014 (d)(h)                                  3,883

=======================================================================================================================
Louisiana--2.3%  BB-     NR*      3,000    Port New Orleans, Louisiana, IDR, Refunding (Continental
                                           Grain Company Project), 7.50% due 7/01/2013                           3,035
=======================================================================================================================
Maryland--3.8%   NR*     NR*      5,000    Maryland State Energy Financing Administration, Limited
                                           Obligation Revenue Bonds (Cogeneration-AES Warrior Run),
                                           AMT, 7.40% due 9/01/2019                                             5,045

=======================================================================================================================
Massachusetts--  NR*     NR*      1,045    Boston, Massachusetts, Industrial Development Financing
2.8%                                       Authority, Solid Waste Disposal Facility Revenue Bonds
                                           (Jet-A-Way Project), AMT, 10.50% due 1/01/2011                        1,089
                 NR*     NR*      1,475    Massachusetts State Health and Educational Facilities Authority
                                           Revenue Bonds (New England Memorial Hospital Project),
                                           Series C, 7% due 4/01/2014 (e)                                          295
                 NR*     Ca       2,745    Massachusetts State Health and Educational Facilities Authority,
                                           Revenue Refunding Bonds (New England Memorial Hospital),
                                           Series B, 6.125% due 7/01/2013 (e)                                      549
                 NR*     AAA      1,580    Massachusetts State Industrial Finance Agency, Revenue
                                           Refunding Bonds (Bay Cove Human Services Inc.),
                                           8.375% due 4/01/2004 (f)                                              1,779

=======================================================================================================================
Mississippi--    BBB-    Ba1      1,000    Mississippi Business Finance Corporation, Mississippi, PCR,
0.7%                                       Refunding (System Energy Resources Inc. Project),
                                           5.875% due 4/01/2022                                                    957

=======================================================================================================================
Missouri--0.8%   NR*     NR*      1,000    Fenton, Missouri, Tax Increment Revenue Refunding and
                                           Improvement Bonds (Gravois Bluffs), 6.75% due 10/01/2015                990

=======================================================================================================================
Nevada--1.5%     BBB     Baa2     2,500    Henderson, Nevada, Health Care Facility Revenue Bonds
                                           (Catholic Healthcare West-Saint Rose Dominican Hospital),
                                           5.375% due 7/01/2026                                                  1,974

=======================================================================================================================
New Jersey--18.8%                          Camden County, New Jersey, Improvement Authority,
                                           Lease Revenue Bonds (Holt Hauling & Warehousing),
                                           AMT, Series A:
                 CC      NR*      4,600      9.625% due 1/01/2011                                                4,454
                 CC      NR*      2,000      9.875% due 1/01/2021                                                1,935
                 CCC     B2       3,525    Camden County, New Jersey, Pollution Control Financing
                                           Authority, Solid Waste Resource Recovery Revenue Bonds,
                                           Series D, 7.25% due 12/01/2010                                        3,327


                                      F-25









<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 26, page: 26" -->




&lt;R&gt;
Merrill Lynch High Income Municipal Bond Fund, Inc.                                               February 28, 2001
&lt;/R&gt;

SCHEDULE OF INVESTMENTS (continued)                                                                  (in Thousands)

               S&P      Moody's    Face
State        Ratings    Ratings   Amount                      Issue                                            Value
=======================================================================================================================
New Jersey       CCC     B2      $6,000    Camden County, New Jersey, Pollution Control Financing Authority,
(concluded)                                Solid Waste Resource Recovery Revenue Refunding Bonds,
                                           AMT, Series A, 7.50% due 12/01/2010                                $  5,763
                 NR*     NR*      3,000    New Jersey EDA, Economic Development Revenue Bonds
                                           (Glimcher Properties LP Project), AMT, 6% due 11/01/2028              2,641
                 NR*     NR*      1,500    New Jersey EDA, IDR, Refunding (Newark Airport Marriott Hotel),
                                           7% due 10/01/2014                                                     1,515
                 NR*     NR*      3,000    New Jersey EDA, Retirement Community Revenue Bonds
                                           (Seabrook Village Inc.), Series A, 8.125% due 11/15/2023              2,943
                 BBB-    Baa3     2,000    New Jersey Health Care Facilities Financing Authority
                                           Revenue Refunding Bonds (Trinitas Hospital Obligation Group),
                                           7.375% due 7/01/2015                                                  2,030

=======================================================================================================================
&lt;R&gt;
New Mexico--0.8% B       Ba3      1,000    Farmington, New Mexico, PCR, Refunding (Tucson Electric
                                           Power Co.-San Juan Project), Series A, 6.95% due 10/01/2020             994
&lt;/R&gt;
=======================================================================================================================
New York--2.8%                             Utica, New York, GO, Public Improvement:
                 BB      Ba3        635      8.50% due 8/15/2007                                                   706
                 BB      Ba3        635      8.50% due 8/15/2008                                                   705
                 BB      Ba3        500      8.50% due 8/15/2009                                                   555
                 BB      Ba3        500      8.50% due 8/15/2010                                                   555
                 BB      Ba3        500      8.50% due 8/15/2011                                                   555
                 BB      Ba3        500      8.50% due 8/15/2012                                                   555

=======================================================================================================================
North            NR*     NR*      1,200    North Carolina Medical Care Commission, Health Care
Carolina--                                 Facilities, First Mortgage Revenue Refunding Bonds
0.9%                                       (Presbyterian Homes Project), 7% due 10/01/2031                       1,209

=======================================================================================================================
Ohio--0.6%       AAA     Aaa        800    Ohio, HFA, S/F Mortgage Revenue Bonds, RIB, AMT, Series A,
                                           9.72% due 3/24/2031 (c)(h)                                              840

=======================================================================================================================
Oregon--1.9%     NR*     NR*      1,000    Western Generation Agency, Oregon, Cogeneration Project
                                           Revenue Bonds (Wauna Cogeneration Project), AMT, Series B,
                                           7.40% due 1/01/2016                                                   1,024
                 B       NR*      1,455    Yamhill County, Oregon, PCR, Refunding (Smurfit Newsprint
                                           Corporation Project), 8% due 12/01/2003                               1,481

=======================================================================================================================
Pennsylvania     NR*     Ba2      1,000    Lehigh County, Pennsylvania, General Purpose Authority,
- --7.1%                                     Revenue Refunding Bonds (Kidspeace Obligation Group),
                                           6% due 11/01/2023                                                       831
                                      5    Northhampton Pulp LLC (e)(g)                                            665
                 NR*     NR*      5,000    Philadelphia, Pennsylvania, Authority for IDR, Commercial
                                           Development, AMT, 7.75% due 12/01/2017                                5,261
                 NR*     NR*      3,125    Philadelphia, Pennsylvania, Authority for Industrial Development,
                                           Health Care Facility Revenue Refunding Bonds (Paul's Run),
                                           Series A, 5.875% due 5/15/2028                                        2,488

=======================================================================================================================
South            BBB     NR*      2,000    South Carolina Jobs, EDA, Economic Development Revenue
Carolina--                                 Bonds (Westminster Presbyterian Center), 7.75% due 11/15/2030         2,068
1.6%

=======================================================================================================================
Texas--0.1%      A1+     VMIG1++    100    Sabine River Authority, Texas, PCR, Refunding
                                           (Texas Utilities Electric Company Project), VRDN,
                                           Series A, 3.15% due 3/01/2026 (a)(b)                                    100

=======================================================================================================================
Utah--0.1%       NR*     NR*      3,200    Tooele County, Utah, PCR, Refunding (Laidlaw Environmental),
                                           AMT, Series A, 7.55% due 7/01/2027 (e)                                   91

=======================================================================================================================
Vermont--1.2%    NR*     NR*      1,395    Vermont Educational and Health Buildings Financing Agency,
                                           Revenue Refunding Bonds (College of Saint Joseph Project),
                                           8.50% due 11/01/2024                                                  1,539

=======================================================================================================================
Virginia--8.0%   NR*     NR*      4,560    Peninsula Ports Authority, Virginia, Revenue Refunding Bonds
                                           (Port Facility-Zeigler Coal), 6.90% due 5/02/2022                     1,573
                 NR*     NR*      2,000    Pittsylvania County, Virginia, IDA, Revenue Refunding Bonds,
                                           Exempt-Facility, AMT, Series A, 7.50% due 1/01/2014                   1,904
                                           Pocahontas Parkway Association, Virginia, Toll Road
                                           Revenue Bonds:
                 NR*     Ba1      5,500      1st Tier, Sub-Series C, 6.25%** due 8/15/2027                         747
                 NR*     Ba1      9,000      1st Tier, Sub-Series C, 6.25%** due 8/15/2035                         668
                 BBB-    Baa3    48,400      Senior Series B, 5.95%** due 8/15/2031                              5,611
=======================================================================================================================


                                      F-26









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<!-- MARKER LABEL="sheet: 27, page: 27" -->




&lt;R&gt;
Merrill Lynch High Income Municipal Bond Fund, Inc.                                               February 28, 2001
&lt;/R&gt;

SCHEDULE OF INVESTMENTS (continued)                                                                  (in Thousands)

               S&P      Moody's    Face
State        Ratings    Ratings   Amount                      Issue                                            Value
=======================================================================================================================
Wisconsin--0.7%  NR*     NR*    $ 1,000    Wisconsin State Health and Educational Facilities Authority
                                           Revenue Bonds (Oakwood Village Project), Series A,
                                           7.625% due 8/15/2030                                               $    974

=======================================================================================================================
Total Investments (Cost--$141,200)--96.8%                                                                      126,903

Other Assets Less Liabilities--3.2%                                                                              4,221
                                                                                                              --------
Net Assets--100.0%                                                                                            $131,124
                                                                                                              ========
=======================================================================================================================

&lt;R&gt;
(a)The interest rate is subject to change periodically based upon
   prevailing market rates. The interest rate shown is the rate in
   effect at February 28, 2001.
(b)AMBAC Insured.
(c)GNMA Collateralized.
(d)MBIA Insured.
(e)Non-income producing security.
(f)Prerefunded.
(g)These shares represent an equity interest in the reorganization
   of Ponderosa Fibres PA. The security may be offered and sold to
   "qualified institutional buyers" under Rule 144A of the Securities
   Act of 1933.
(h)The interest rate is subject to change periodically and inversely
   based upon prevailing market rates. The interest rate shown is the
   rate in effect at February 28, 2001.
*Not Rated.
**Represents a zero coupon; the interest rate shown is the effective
  yield at the time of purchase by the Fund.
++Highest short-term rating by Moody's Investors Service, Inc.
&lt;/R&gt;

See Notes to Financial Statements.


                                      F-27









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<!-- MARKER LABEL="sheet: 28, page: 28" -->




&lt;R&gt;
Merrill Lynch High Income Municipal Bond Fund, Inc.                                               February 28, 2001
&lt;/R&gt;

FINANCIAL INFORMATION

Statement of Assets and Liabilities as of February 28, 2001

Assets:             Investments, at value (identified cost--$141,200,038)                                   $126,903,035
                    Cash                                                                                          55,972
                    Receivables:
                      Securities sold                                                      $  5,098,000
                      Interest                                                                2,687,847
                      Capital shares sold                                                        19,997        7,805,844
                                                                                           ------------
                    Prepaid registration fees and other assets                                                    16,089
                                                                                                            ------------
                    Total assets                                                                             134,780,940
                                                                                                            ------------


========================================================================================================================
Liabilities:        Payables:
                      Securities purchased                                                    3,154,265
                      Dividends to shareholders                                                 273,231
                      Investment adviser                                                         83,797
                      Administration                                                             22,052        3,533,345
                                                                                           ------------
                    Accrued expenses and other liabilities                                                       123,917
                                                                                                            ------------
                    Total liabilities                                                                          3,657,262
                                                                                                            ------------

========================================================================================================================
Net Assets:         Net assets                                                                              $131,123,678
                                                                                                            ============

========================================================================================================================
Net Assets          Common stock, $.10 par value, 200,000,000 shares authorized                             $  1,416,360
Consist of:         Paid-in capital in excess of par                                                         152,949,403
                    Accumulated realized capital loss on investments--net                                    (5,794,220)
                    Accumulated distributions in excess of realized capital gains--net                       (3,150,862)
                    Unrealized depreciation on investments--net                                             (14,297,003)
                                                                                                            ------------
                    Net assets--Equivalent to $9.26 per share based on 14,163,600 shares of
                    capital outstanding                                                                     $131,123,678
                                                                                                            ============

========================================================================================================================
                    See Notes to Financial Statements.


                                      F-28









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<!-- MARKER LABEL="sheet: 29, page: 29" -->










&lt;R&gt;
Merrill Lynch High Income Municipal Bond Fund, Inc.                                               February 28, 2001
&lt;/R&gt;

FINANCIAL INFORMATION (continued)

Statement of Operations

&lt;R&gt;
                                                                                                For the Six Months Ended
                                                                                                    February 28, 2001

========================================================================================================================
Investment Income:  Interest and amortization of premium and discount earned                               $   5,145,147

========================================================================================================================
Expenses:           Investment advisory fees                                                $   669,103
                    Administrative fees                                                         176,080
                    Professional fees                                                            58,379
                    Transfer agent fees                                                          44,698
                    Advertising fees                                                             39,526
                    Printing and shareholder reports                                             31,475
                    Accounting services                                                          30,959
                    Registration fees                                                            19,370
                    Directors' fees and expenses                                                 18,465
                    Custodian fees                                                                6,516
                    Pricing services                                                              4,723
                    Other                                                                         6,046
                                                                                           ------------

                    Total expenses                                                                             1,105,340
                                                                                                            ------------
                    Investment income--net                                                                     4,039,807
                                                                                                            ------------

========================================================================================================================
Realized &          Realized loss on investments--net                                                        (1,187,096)
Unrealized          Change in unrealized depreciation on investments--net                                    (1,942,499)
Loss on                                                                                                     ------------
Investments--Net:   Net Increase in Net Assets Resulting from Operations                                    $    910,212
                                                                                                            ============
========================================================================================================================
                    See Notes to Financial Statements.

Statements of Changes in Net Assets

                                                                                          For the Six          For the
                                                                                          Months Ended        Year Ended
                                                                                          February 28,        August 31,
                                                                                              2001              2000
Increase (Decrease) in Net Assets:
========================================================================================================================
Operations:         Investment income--net                                                 $  4,039,807     $  9,966,828
                    Realized loss on investments--net                                       (1,187,096)      (4,607,124)
                    Change in unrealized appreciation/depreciation on
                    investments--net                                                        (1,942,499)     (10,597,603)
                                                                                           ------------     ------------
                    Net increase (decrease) in net assets resulting
                    from operations                                                             910,212      (5,237,899)
                                                                                           ------------     ------------

========================================================================================================================
Dividends to        Investment income--net                                                  (4,039,807)      (9,966,828)
Shareholders:                                                                              ------------     ------------
                    Net decrease in net assets resulting from dividends
                    to shareholders                                                         (4,039,807)      (9,966,828)
                                                                                           ------------     ------------

========================================================================================================================
Capital Share       Net decrease in net assets derived from capital
Transactions:       shares transactions                                                    (15,140,505)     (36,975,237)
                                                                                           ------------     ------------

========================================================================================================================
Net Assets:         Total decrease in net assets                                           (18,270,100)     (52,179,964)
                    Beginning of period                                                     149,393,778      201,573,742
                                                                                           ------------     ------------
                    End of period                                                          $131,123,678     $149,393,778
                                                                                           ============     ============

========================================================================================================================
                    See Notes to Financial Statements.
&lt;/R&gt;

                                      F-29









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<!-- MARKER LABEL="sheet: 30, page: 30" -->




&lt;R&gt;
Merrill Lynch High Income Municipal Bond Fund, Inc.                                               February 28, 2001
&lt;/R&gt;

FINANCIAL INFORMATION (concluded)

Financial Highlights

&lt;R&gt;
The following per share data and ratios have been derived
from information provided in the financial statements.              For the Six
                                                                    Months Ended     For the Year Ended August 31,
                                                                    February 28,     -----------------------------
                                                                        2001       2000      1999      1998      1997
Increase (Decrease) in Net Asset Value:
========================================================================================================================
Per Share           Net asset value, beginning of period              $   9.45   $  10.24  $  11.46  $  11.34   $  10.94
Operating                                                             --------   --------  --------  --------   --------
Performance:        Investment income--net                                 .26        .55       .55       .61        .65
                    Realized and unrealized gain (loss) on
                    investments--net                                     (.19)      (.79)     (.89)       .32        .44
                                                                      --------   --------  --------  --------   --------
                    Total from investment operations                       .07      (.24)     (.34)       .93       1.09
                                                                      --------   --------  --------  --------   --------
                    Less dividends and distributions:
                      Investment income--net                             (.26)      (.55)     (.55)     (.61)      (.65)
                      Realized gain on investments--net                     --         --     (.18)     (.20)      (.04)
                      In excess of realized gain on investments--net        --         --     (.15)        --         --
                                                                      --------   --------  --------  --------   --------
                    Total dividends and distributions                    (.26)      (.55)     (.88)     (.81)      (.69)
                                                                      --------   --------  --------  --------   --------
                    Net asset value, end of period                    $   9.26   $   9.45  $  10.24  $  11.46   $  11.34
                                                                      ========   ========  ========  ========   ========

========================================================================================================================
Total Investment    Based on net asset value per share                 0.81%++    (2.29%)   (3.16%)     8.43%     10.20%
Return:**                                                             ========   ========  ========  ========   ========

========================================================================================================================
Ratios to Average   Expenses                                            1.57%*      1.46%     1.46%     1.48%      1.44%
Net Assets:                                                           ========   ========  ========  ========   ========
                    Investment income--net                              5.74%*      5.68%     5.07%     5.37%      5.83%
                                                                      ========   ========  ========  ========   ========

========================================================================================================================
Supplemental        Net assets, end of period (in thousands)          $131,124   $149,394  $201,574  $233,713   $211,620
Data:                                                                 ========   ========  ========  ========   ========
                    Portfolio turnover                                   5.10%     13.42%    39.53%    36.45%     43.07%
                                                                      ========   ========  ========  ========   ========

========================================================================================================================
*Annualized.
**Total investment returns exclude the effect of the early
  withdrawal charge, if any. The Fund is a continuously offered closed-
  end fund, the shares of which are offered at net asset value.
  Therefore, no separate market exists.
++Aggregate total investment return.
&lt;/R&gt;
See Notes to Financial Statements.


                                      F-30









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<!-- MARKER LABEL="sheet: 31, page: 31" -->



&lt;R&gt;
Merrill Lynch High Income Municipal Bond Fund, Inc.           February 28, 2001
&lt;/R&gt;

NOTES TO FINANCIAL STATEMENTS

1. Significant Accounting Policies:
Merrill Lynch High Income Municipal Bond Fund, Inc. (the "Fund") is registered
under the Investment Company Act of 1940 as a continuously offered,
non-diversified, closed-end management investment company. The Fund's financial
statements are prepared in conformity with accounting principles generally
accepted in the United States of America, which may require the use of
management accruals and estimates. These unaudited financial statements reflect
all adjustments, which are, in the opinion of management, necessary to a fair
statement of the results for the interim period presented. All such adjustments
are of a normal, recurring nature. The following is a summary of significant
accounting policies followed by the Fund.

(a) Valuation of investments--Municipal bonds and other portfolio securities in
which the Fund invests are traded primarily in the over-the-counter municipal
bond and money markets and are valued at the last available bid price in the
over-the-counter market or on the basis of yield equivalents as obtained from
one or more dealers that make markets in the securities. Financial futures
contracts and options thereon, which are traded on exchanges, are valued at
their settlement prices as of the close of such exchanges. Options written or
purchased are valued at the last sale price in the case of exchange-traded
options. In the case of options traded in the over-the-counter market,
valuation is the last asked price (options written) or the last bid price
(options purchased). Short-term investments with remaining maturities of sixty
days or less are valued at amortized cost, which approximates market value.
Securities and assets for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the direction of
the Board of Directors of the Fund, including valuations furnished by a pricing
service retained by the Fund, which may utilize a matrix system for valuations.
The procedures of the pricing service and its valuations are reviewed by the
officers of the Fund under the general supervision of the Board of Directors.

(b) Derivative financial instruments--The Fund may engage in various portfolio
investment strategies to increase or decrease the level of risk to which the
Fund is exposed more quickly and efficiently than transactions in other types of
instruments. Losses may arise due to changes in the value of the contract or if
the counterparty does not perform under the contract.

* Financial futures contracts--The Fund may purchase or sell financial futures
contracts and options on such futures contracts for the purpose of hedging the
market risk on existing securities or the intended purchase of securities.
Futures contracts are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a contract, the
Fund deposits and maintains as collateral such initial margin as required by the
exchange on which the transaction is effected. Pursuant to the contract, the
Fund agrees to receive from or pay to the broker an amount of cash equal to the
daily fluctuation in value of the contract. Such receipts or payments are known
as variation margin and are recorded by the Fund as unrealized gains or losses.
When the contract is closed, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed.

* Options--The Fund is authorized to write covered call options and purchase put
and call options. When the Fund writes an option, an amount equal to the premium
received by the Fund is reflected as an asset and an equivalent liability. The
amount of the liability is subsequently marked to market to reflect the current
market value of the option written. When a security is purchased or sold through
an exercise of an option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from (or added to)
the proceeds of the security sold. When an option expires (or the Fund enters
into a closing transaction), the Fund realizes a gain or loss on the option to
the extent of the premiums received or paid (or gain or loss to the extent the
cost of the closing transaction exceeds the premium paid or received).

Written and purchased options are non-income producing investments.

(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.

(d) Security transactions and investment income--Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security transactions are determined on the
identified cost basis. Interest income is recognized on the accrual basis. The
Fund will adopt the provisions to amortize all premiums and discounts on debt
securities effective September 1, 2001, as now required under the new AICPA
Audit and Accounting Guide for Investment Companies. The cumulative effect of
this accounting change will have no impact on the total net assets of the Fund.
The impact of this accounting change has not been determined, but will result in


                                      F-31









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<!-- MARKER LABEL="sheet: 32, page: 32" -->




&lt;R&gt;
Merrill Lynch High Income Municipal Bond Fund, Inc.           February 28, 2001
&lt;/R&gt;

NOTES TO FINANCIAL STATEMENTS (continued)

an adjustment to the cost of securities and a corresponding adjustment to net
unrealized appreciation/depreciation, based on securities held as of August 31,
2001.

(e) Prepaid registration fees--Prepaid registration fees are charged to expense
as the related shares are issued.

(f) Dividends and distributions--Dividends from net investment income are
declared daily and paid monthly. Distributions of capital gains are recorded on
the ex-dividend dates. Distributions in excess of realized capital gains are due
primarily to differing tax treatments for future transactions and post-October
losses.

2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Merrill Lynch Investment Managers, L.P. ("MLIM"). The general
partner of MLIM is Princeton Services, Inc. ("PSI"), an indirect,
wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."),
which is the limited partner.

MLIM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee at an annual rate of .95% of
the Fund's average daily net assets.

&lt;R&gt;
The Fund also has entered into an Administrative Services Agreement
with MLIM whereby the Fund pays a monthly fee at an annual rate of
 .25% of the Fund's average daily net assets, in return for the
performance of administrative services (other than investment advice
and related portfolio activities) necessary for the operation of the
Fund.
&lt;/R&gt;

For the six months ended February 28, 2001, FAM Distributors, Inc.
("FAMD"), which is a wholly-owned subsidiary of Merrill Lynch Group,
Inc., earned early withdrawal charges of $27,909 relating to the
tender of the Fund's shares.

Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.

Accounting services were provided to the Fund by MLIM through
December 31, 2000. Up to this date, the Fund reimbursed MLIM $20,076
for these services. As of January 1, 2001, accounting services are
provided for the Fund by State Street Bank and Trust Company ("State
Street") pursuant to an agreement between State Street and the Fund.
The Fund will pay the cost of these services. In addition, the Fund
will reimburse MLIM for the cost of certain additional accounting
services.

Certain officers and/or directors of the Fund are officers and/or
directors of MLIM, PSI, FDS, FAMD, and/or ML & Co.

3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended February 28, 2001 were $6,990,066 and
$24,714,908, respectively.

Net realized losses for the six months ended February 28, 2001 and
net unrealized losses as of February 28, 2001 were as follows:

                                     Realized     Unrealized
                                      Losses        Losses

Long-term investments            $(1,187,096)  $(14,297,003)
                                  -----------   ------------
Total                            $(1,187,096)  $(14,297,003)
                                  ===========   ============

As of February 28, 2001, net unrealized depreciation for Federal
income tax purposes aggregated $14,297,003, of which $4,724,153
related to appreciated securities and $19,021,156 related to
depreciated securities. The aggregate cost of investments at
February 28, 2001 for Federal income tax purposes was $141,200,038.

4. Capital Shares Transactions:
Transactions in capital shares were as follows:

For the Six Months Ended                            Dollar
February 28, 2001                     Shares        Amount
                                 ------------   ------------
Shares sold                           234,083   $  2,174,544
Shares issued to share-
holders in reinvestment
of dividends                          167,625      1,559,354
                                 ------------   ------------
Total issued                          401,708      3,733,898
Shares tendered                   (2,042,397)   (18,874,403)
                                 ------------   ------------
Net decrease                      (1,640,689)  $(15,140,505)
                                 ============   ============

For the Year Ended                                  Dollar
August 31, 2000                       Shares        Amount
                                 ------------   ------------
Shares sold                           420,954   $  4,098,154
Shares issued to share-
holders in reinvestment of
dividends                             410,736      3,963,637
                                 ------------   ------------
Total issued                          831,690      8,061,791
Shares tendered                   (4,709,915)   (45,037,028)
                                 ------------   ------------
Net decrease                      (3,878,225)  $(36,975,237)
                                 ============   ============

5. Capital Loss Carryforward:
At August 31, 2000, the Fund had a net capital loss carryforward of
approximately $2,052,000, all of which expires in 2008. This amount
will be available to offset like amounts of any future taxable
gains.


                                      F-32









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<!-- MARKER LABEL="sheet: 33, page: 33" -->





                 Unaudited Financial Statements for the Combined
                  Fund on a Pro Forma Basis, as of May 31, 2001


                                      F-33









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<!-- MARKER LABEL="sheet: 34, page: 34" -->



                                            &lt;R&gt;COMBINED SCHEDULE OF INVESTMENTS FOR
                            MUNIASSETS FUND, INC. AND MERRILL LYNCH HIGH INCOME MUNICIPAL BOND FUND, INC.
                                                   As of May 31, 2001 (unaudited)
                                                      (in thousands)&lt;/R&gt;
                                                                                                              Value
                                                                                               ----------------------------------
                                                                                                                         ProForma
                                                                                                               High         for
                 S&P     Moody's  Face                                                         MuniAssets     Income     Combined
      STATE      Ratings Ratings  Amount                                                          Fund       Municipal     Fund
===================================================================================================================================
Alabama--1.1%    B       NR*    $ 2,420    Brewton, Alabama, IDB, PCR, Refunding (Container      $1,448       $1,020      $2,468
                                           Corporation of America-Jefferson Smurfit Corp.
                                           Project),  8% due 4/01/2009
                 CCC     NR*      9,609    Mobile, Alabama, IDB, Solid Waste Disposal               216          264         480
                                           Revenue Refunding Bonds (Mobile Energy Services
                                           Co. Project), 6.95% due 1/01/2020(b)

===================================================================================================================================
Alaska--1.0%     NR*     NR*      1,620    Alaska Industrial Development and Export               1,629           --       1,629
                                           Authority Revenue Bonds (Williams Lynxs Alaska
                                           Cargoport), AMT, 7.80% due 5/01/2014
                 NR*     NR*      1,000    Valdez, Alaska, Marine Terminal Revenue Refunding      1,001           --       1,001
                                           Bonds (Amerada Hess Pipeline Corporation),  6.10%
                                           due 2/01/2024

===================================================================================================================================
&lt;R&gt;
Arizona--8.5%                              Coconino County, Arizona, Pollution Control
                                           Corporation Revenue Refunding Bonds (Tucson
                                           Electric Power-Navajo):
                 B+      Ba3      3,000        AMT, Series A,  7.125% due 10/01/2032                 --        3,055       3,055
                 B+      Ba3      2,500        Series B,  7% due 10/01/2032                       2,550           --       2,550
                                           Maricopa County, Arizona, IDA, Health Facilities
                                           Revenue Bonds:
                 BBB     Baa2     2,045       (Catholic Healthcare West Project), Series A,       1,658           --       1,658
                                              5% due 7/01/2021
                 NR*     NR*      2,395       (Sun King Apartments Project), Sub-Series C,        1,141        1,310       2,451
                                              9.50% due 11/01/2031
                 NR*     B3       7,600    Phoenix, Arizona, IDA, Airport Facility Revenue        2,451        3,758       6,209
                                           Refunding Bonds (America West Airlines Inc.
                                           Project), AMT, 6.30% due 4/01/2023
                 NR*     NR*      1,235    Pima County, Arizona, IDA, Industrial Revenue             --        1,292       1,292
                                           Bonds (La Hacienda Project),  9.50% due 12/01/2016
                                           Pima County, Arizona, IDA, Industrial Revenue
                                           Refunding Bonds (Tucson Electric Power Company
                                           Project):
                 B       Ba3      1,040        Series B,  6% due 9/01/2029                          959           --         959
                 B       Ba3      2,400        Series C,  6% due 9/01/2029                        1,840          368       2,208
                 AAA     NR*      1,000    Sedona, Arizona, Wastewater Municipal Property            --          336         336
                                           Corporation, Excise Tax Revenue Refunding Bonds,
                                           5.20% due 7/01/2021(j)**
                 NR*     NR*      1,710    Show Low, Arizona, Improvement District No. 5,         1,762           --       1,762
                                           Special Assessment Bonds,  6.375% due 1/01/2015
&lt;/R&gt;
===================================================================================================================================
California--     AAA     NR*      4,000    Los Angeles, California, Department of Water and       4,587           --       4,587
2.4%                                       Power, Electric Plant Revenue Bonds, RIB, Series
                                           144, 7.87% due 6/15/2029(a)(e)
                 NR*     NR*      1,780    Pleasanton, California, Joint Powers Financing         1,873           --       1,873
                                           Authority Revenue Refunding Bonds, Reassessment,
                                           Sub-Series B, 6.60% due 9/02/2008

===================================================================================================================================
&lt;R&gt;
Colorado--4.1%   A       A2       2,000    Denver, Colorado, City and County Airport Revenue         --        2,430       2,430
                                           Bonds, AMT, Series D,  7.75% due 11/15/2013
                                           Denver, Colorado, Urban Renewal Authority, Tax
                                           Increment Revenue Bonds (Pavilions), AMT:
                 NR*     NR*      2,500        7.75% due 9/01/2016                                2,654           --       2,654
                 NR*     NR*      3,000        7.75% due 9/01/2017                                   --        3,185       3,185
                 A-1     VMIG1+   500      Moffat County, Colorado, PCR, Refunding                   --          500         500
                                           (Pacificorp Projects),
                                           VRDN, 3% due
                                           5/01/2013(f)(g) San Miguel
                                           County, Colorado (Mountain
                                           Village Metropolitan
                                           District), GO, Refunding:
                 NR*     NR*      650          8.10% due 12/01/2011                                  --          683         683
                 NR*     NR*      1,350        8.10% due 12/01/2002(d)                               --        1,459       1,459
&lt;/R&gt;
===================================================================================================================================
Connecticut--    NR*     NR*      3,490    Connecticut State Development Authority, IDR           1,625        1,941       3,566
4.0%                                       (AFCO Cargo BDL-LLC Project), AMT,  8% due
                                           4/01/2030


                                      F-34









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<!-- MARKER LABEL="sheet: 35, page: 35" -->




                                            &lt;R&gt;COMBINED SCHEDULE OF INVESTMENTS FOR
                            MUNIASSETS FUND, INC. AND MERRILL LYNCH HIGH INCOME MUNICIPAL BOND FUND, INC.
                                             As of May 31, 2001 (unaudited) (continued)
                                                      (in thousands)&lt;/R&gt;

                                                                                                              Value
                                                                                               ----------------------------------
                                                                                                                         ProForma
                                                                                                               High         for
                 S&P     Moody's  Face                                                         MuniAssets     Income     Combined
      STATE      Ratings Ratings  Amount                                                          Fund       Municipal     Fund
===================================================================================================================================
&lt;R&gt;
Connecticut      BBB     Baa2   $ 4,000    Connecticut State Development Authority, PCR,          3,957           --     $ 3,957
                                           Refunding (Connecticut Light and Power Company),
(concluded)                                Series A, 5.85% due 9/01/2028
                 A-1     VMIG1+   300      Connecticut State Health and Educational                  --          300         300
                                           Facilities Authority Revenue Bonds (Yale
                                           University), VRDN, Series U-2,  2.45% due
                                           7/01/2033(f)
                 NR*     B1       2,690    New Haven, Connecticut, Facility Revenue Bonds         1,018        1,748       2,766
                                           (Hill Health Corporation Project),  9.25% due
                                           5/01/2017

===================================================================================================================================
Florida--4.6%    NR*     NR*      895      Arbor Greene Community Development District,              --          953         953
                                           Florida, Special Assessment Revenue Bonds,  7.60%
                                           due 5/01/2018
                 NR*     NR*      945      Grand Haven Community Development District,               --          957         957
                                           Florida, Special Assessment Bonds, Series B,
                                           6.90% due 5/01/2019
                 NR*     NR*      2,000    Hillsborough County, Florida, IDA, Exempt              1,440            -       1,440
                                           Facilities Revenue Bonds (National Gypsum), AMT,
                                           Series A, 7.125% due 4/01/2030
                 NR*     NR*      6,200    Parkway Center, Florida, Community Development         2,814        3,417       6,231
                                           District Special Assessment Refunding Bonds,
                                           Series B,  8% due 5/01/2010
                 A1      VMIG1+   2,500    Saint Lucie County, Florida, PCR, Refunding            2,500           --       2,500
                                           (Florida Power and Light Company Project), VRDN,
                                           3.10% due 9/01/2028(f)&lt;/R&gt;

===================================================================================================================================
Georgia--0.7%    NR*     NR*      1,860    Atlanta, Georgia, Urban Residential Finance               --        1,911       1,911
                                           Authority, M/F Mortgage Revenue Bonds (Northside
                                           Plaza Apartments Project), AMT,  9.75% due
                                           11/01/2020

===================================================================================================================================
Idaho--0.4%      NR*     NR*      1,000    Idaho Health Facilities Authority Revenue                974           --         974
                                           Refunding Bonds (Valley Vista Care Corporation),
                                           Series A, 7.75% due 11/15/2016

===================================================================================================================================
&lt;R&gt;
Illinois--6.6%   BBB-    Baa3     4,000    Chicago, Illinois, O'Hare International Airport,          --        4,447       4,447
                                           Special Facility Revenue Refunding Bonds
                                           (American Airlines Inc. Project),  8.20% due
                                           12/01/2024
                                           Illinois Development Finance Authority Revenue
                                           Bonds (Primary Health Care Centers Facilities
                                           Acquisition Program):
                 NR*     NR*      1,755        7.50% due 12/01/2006                               1,839           --       1,839
                 NR*     NR*      3,195        7.75% due 12/01/2016                                  --        3,448       3,448
                                           Illinois Health Facilities Authority Revenue
                                           Bonds:
                 BBB     NR*      1,000        (Community Hospital of Ottawa Project),            1,004           --       1,004
                                               6.75% due 8/15/2014
                 BBB     NR*      2,000        (Community Hospital of Ottawa Project),            1,981           --       1,981
                                               6.85% due 8/15/2024
                 NR*     Ba3      2,150        (Holy Cross Hospital Project),  6.70% due          1,800           --       1,800
                                               3/01/2014
                                           Illinois Health Facilities Authority Revenue
                                           Refunding Bonds:
                 NR*     NR*      2,000        (Chicago Osteopathic Health System), 7.25%            --        2,445       2,445
                                               due 11/15/2019(d)
                 A1      VMIG1+   400          (Resurrection Health), VRDN, Series A,  3.10%        400           --         400
                                               due 5/01/2029(a)(f)
&lt;/R&gt;
===================================================================================================================================
Indiana--0.7%    NR*     NR*      2,000    Indianapolis, Indiana, M/F Revenue Bonds (Lake            --        1,964       1,964
                                           Nora Fox Club Project), Series B,  7.50% due
                                           10/01/2029

===================================================================================================================================
Iowa--1.0%       NR*     NR*      2,300    Iowa Finance Authority, Health Care Facilities           953        1,786       2,739
                                           Revenue Refunding Bonds (Care Initiatives
                                           Project), 9.25% due 7/01/2025

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


                                      F-35









<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 36, page: 36" -->




                                            &lt;R&gt;COMBINED SCHEDULE OF INVESTMENTS FOR
                            MUNIASSETS FUND, INC. AND MERRILL LYNCH HIGH INCOME MUNICIPAL BOND FUND, INC.
                                             As of May 31, 2001 (unaudited) (continued)
                                                      (in thousands)&lt;/R&gt;

                                                                                                              Value
                                                                                               ----------------------------------
                                                                                                                         ProForma
                                                                                                               High         for
                 S&P     Moody's  Face                                                         MuniAssets     Income     Combined
      STATE      Ratings Ratings  Amount                                                          Fund       Municipal     Fund
===================================================================================================================================
Kentucky--2.5%   NR*     NR*    $ 2,850    Kenton County, Kentucky, Airport Board, Special          951        1,760     $ 2,711
                                           Facilities Revenue Bonds (Mesaba Aviation Inc.
                                           Project), AMT, Series A,  6.70% due 7/01/2029
                 AAA     Aaa      3,600    Louisville, Kentucky, Hospital Revenue Refunding          --        3,848       3,848
                                           Bonds, INFLOS,  9.496% due 10/01/2014(e)(j)

===================================================================================================================================
Louisiana--2.9%  BB-     NR*      7,500    Port New Orleans, Louisiana, IDR, Refunding            4,550        3,033       7,583
                                           (Continental Grain Company Project),  7.50% due
                                           7/01/2013

===================================================================================================================================
&lt;R&gt;
Maryland--4.0%   NR*     NR*      1,930    Maryland State Economic Development Corporation        1,973           --       1,973
                                           Revenue Refunding Bonds (Baltimore Association
                                           for Retarded Citizens-Health and Mental Hygiene
                                           Program), Series A, 7.75% due 3/01/2025
                 NR*     NR*      8,000    Maryland State Energy Financing Administration,        3,095        5,158       8,253
                                           Limited Obligation Revenue Bonds
                                           (Cogeneration-AES Warrior Run), AMT,  7.40% due
                                           9/01/2019
                 A1      VMIG1+   400      Maryland State Energy Financing Administration,          400           --         400
                                           Solid Waste Disposal Revenue Bonds (Cimenteries
                                           Project), AMT, VRDN,  3.20% due 5/01/2035(f)
&lt;/R&gt;
===================================================================================================================================
Massachusetts--  NR*     NR*      1,045    Boston, Massachusetts, Industrial Development             --        1,079       1,079
3.3%                                       Financing Authority, Solid Waste Disposal
                                           Facility Revenue Bonds (Jet-A-Way Project), AMT,
                                           10.50% due 1/01/2011
                 NR*     NR*      2,300    Massachusetts State Health and Educational               165          295         460
                                           Facilities Authority Revenue Bonds (New England
                                           Memorial Hospital Project), Series C,  7% due
                                           4/01/2014(b)
                                           Massachusetts State Health and Educational
                                           Facilities Authority Revenue Refunding Bonds:
                 NR*     Ba2      2,220        (Bay Cove Human Services Issue), Series A,         1,810           --       1,810
                                               5.90% due 4/01/2028
                 NR*     Ca       2,745        (New England Memorial Hospital), Series B,            --          549         549
                                               6.125% due 7/01/2013(b)
                 NR*     Aaa      4,345    Massachusetts State Industrial Finance Agency          3,103        1,773       4,876
                                           Revenue Refunding Bonds (Bay Cove Human Services
                                           Inc.), 8.375% due 4/01/2004(d)

===================================================================================================================================
Michigan--0.1%   NR*     VMIG1+   400      Michigan State Strategic Fund, PCR, Refunding            400           --         400
                                           (Consumers Power Project), VRDN,  3.05% due
                                           4/15/2018(f)(g)

===================================================================================================================================
Mississippi--                              Mississippi Business Finance Corporation,
0.7%                                       Mississippi, PCR, Refunding (System Energy
                                           Resources Inc. Project):
                 BBB-    Ba1      1,000       5.875% due 4/01/2022                                   --          921         921
                 BBB-    Ba1      1,000       5.90% due 5/01/2022                                   923           --         923

===================================================================================================================================
Missouri--0.8%   NR*     NR*      2,000    Fenton, Missouri, Tax Increment Revenue Refunding      1,016        1,010       2,026
                                           and Improvement Bonds (Gravois Bluffs),  7% due
                                           10/01/2021

===================================================================================================================================
Nevada--0.8%     BBB     Baa2     2,500    Henderson, Nevada, Health Care Facility Revenue           --        2,092       2,092
                                           Bonds (Catholic Healthcare West-Saint Rose
                                           Dominican Hospital),  5.375% due 7/01/2026

===================================================================================================================================
New Jersey--                               Camden County, New Jersey, Improvement Authority,
15.6%                                      Lease Revenue Bonds (Holt Hauling & Warehousing),
                                           AMT, Series A:
                 NR*     NR*      5,600        9.625% due 1/01/2011                                 938        4,313       5,251
                 NR*     NR*      5,800        9.875% due 1/01/2021                               3,563        1,875       5,438
                 CCC     B2       3,525    Camden County, New Jersey, Pollution Control              --        3,475       3,475
                                           Financing Authority, Solid Waste Resource
                                           Recovery Revenue Bonds, Series D,  7.25% due
                                           12/01/2010


                                      F-36










<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 37, page: 37" -->




                                            &lt;R&gt;COMBINED SCHEDULE OF INVESTMENTS FOR
                            MUNIASSETS FUND, INC. AND MERRILL LYNCH HIGH INCOME MUNICIPAL BOND FUND, INC.
                                             As of May 31, 2001 (unaudited) (continued)
                                                      (in thousands)&lt;/R&gt;

                                                                                                              Value
                                                                                               ----------------------------------
                                                                                                                         ProForma
                                                                                                               High         for
                 S&P     Moody's  Face                                                         MuniAssets     Income     Combined
      STATE      Ratings Ratings  Amount                                                          Fund       Municipal     Fund
===================================================================================================================================
&lt;R&gt;
New Jersey                                 Camden County, New Jersey, Pollution Control
                                           Financing Authority, Solid Waste Resource
(concluded)                                Recovery Revenue Refunding Bonds, AMT:&lt;/R&gt;
                 CCC     B2     $ 9,000        Series A,  7.50% due 12/01/2010                    2,897        5,795     $ 8,692
                 CCC     B2       500          Series B,  7.50% due 12/01/2009                      483           --         483
                 NR*     NR*      5,000    New Jersey EDA, Economic Development Revenue           1,773        2,659       4,432
                                           Bonds (Glimcher Properties LP Project), AMT,  6%
                                           due 11/01/2028
                 NR*     NR*      2,500    New Jersey EDA, IDR, Refunding (Newark Airport         1,013        1,519       2,532
                                           Marriott Hotel),  7% due 10/01/2014
                 NR*     NR*      5,800    New Jersey EDA, Retirement Community Revenue           2,804        3,005       5,809
                                           Bonds (Seabrook Village Inc.), Series A,  8.125%
                                           due 11/15/2023
                 BB      Ba2      2,000    New Jersey EDA, Special Facility Revenue Bonds         1,868           --       1,868
                                           (Continental Airlines Inc. Project), AMT,  6.25%
                                           due 9/15/2029
                                           New Jersey Health Care Facilities Financing
                                           Authority Revenue Refunding Bonds (Trinitas
                                           Hospital Obligation Group):
                 BBB-    Baa3     2,000        7.375% due 7/01/2015                                  --        1,999       1,999
                 BBB-    Baa3     1,500        7.40% due 7/01/2020                                1,495           --       1,495

===================================================================================================================================
&lt;R&gt;
New Mexico--1.4% NR*     Baa3     3,000    Farmington, New Mexico, PCR, Refunding (Public         1,413        1,412       2,825
                                           Service Company-San Juan Project), Series A,
                                           5.80% due 4/01/2022
                 B       Ba3      1,000    Farmington, New Mexico, PCR, Refunding (Tucson            --        1,001       1,001
                                           Electric Power Co.-San Juan Project), Series A,
                                           6.95% due 10/01/2020
&lt;/R&gt;
===================================================================================================================================
New York--2.3%                             Utica, New York, GO, Public Improvement Bonds:
                 BB      Ba1      700          9.25% due 8/15/2001                                  705           --         705
                 BB      Ba1      700          9.25% due 8/15/2002                                  726           --         726
                 BB      Ba1      700          9.25% due 8/15/2003                                  745           --         745
                 BB      Ba1      635          8.50% due 8/15/2007                                   --          708         708
                 BB      Ba1      635          8.50% due 8/15/2008                                   --          706         706
                 BB      Ba1      500          8.50% due 8/15/2009                                   --          556         556
                 BB      Ba1      500          8.50% due 8/15/2010                                   --          556         556
                 BB      Ba1      500          8.50% due 8/15/2011                                   --          556         556
                 BB      Ba1      500          8.50% due 8/15/2012                                   --          556         556
                 BB      Ba1      250          8.50% due 8/15/2015                                  278           --         278

===================================================================================================================================
North Carolina-- BBB     Baa3     350      North Carolina Eastern Municipal Power Agency,           335           --         335
1.1%                                       Power System Revenue Refunding Bonds, Series A,
                                           5.75% due 1/01/2026
                 NR*     NR*      2,400    North Carolina Medical Care Commission, Health         1,223        1,223       2,446
                                           Care Facilities, First Mortgage Revenue Refunding
                                           Bonds (Presbyterian Homes Project),  7% due
                                           10/01/2031

===================================================================================================================================
Ohio--1.4%       NR*     Ba2      3,365    Cleveland, Ohio, Airport Special Revenue               2,934           --       2,934
                                           Refunding Bonds (Continental Airlines Inc.
                                           Project), AMT, 5.70% due 12/01/2019
                 AAA     Aaa      700      Ohio, HFA, S/F Mortgage Revenue Bonds, RIB, AMT,          --          732         732
                                           Series A, 9.953% due 3/24/2031(e)(i)

===================================================================================================================================
&lt;R&gt;
Oregon--2.6%     NR*     NR*      1,630    Klamath Falls, Oregon, Electric Revenue Refunding      1,534           --       1,534
                                           Bonds (Klamath Cogeneration Project), Senior
                                           Lien,  6% due 1/01/2025
                 NR*     VMIG1+   200      Oregon State Health, Housing, Educational and            200           --         200
                                           Cultural Facilities Authority Revenue Bonds
                                           (Guide Dogs for the Blind), VRDN, Series A,
                                           3.05% due 7/01/2025(f)
                                           Western Generation Agency, Oregon, Cogeneration
                                           Project Revenue Bonds (Wauna Cogeneration
                                           Project):
                 NR*     NR*      1,000        AMT, Series B,  7.40% due 1/01/2016                   --        1,024       1,024
                 NR*     NR*      700          Series A,  7.125% due 1/01/2021                      705           --         705
&lt;/R&gt;

                                      F-37










<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 38, page: 38" -->




                                            &lt;R&gt;COMBINED SCHEDULE OF INVESTMENTS FOR
                            MUNIASSETS FUND, INC. AND MERRILL LYNCH HIGH INCOME MUNICIPAL BOND FUND, INC.
                                        As of May 31, 2001 (unaudited) (continued)&lt;/R&gt;
                                                      (in thousands)&lt;/R&gt;

                                                                                                              Value
                                                                                               ----------------------------------
                                                                                                                         ProForma
                                                                                                               High         for
                 S&P     Moody's  Face                                                         MuniAssets     Income     Combined
      STATE      Ratings Ratings  Amount                                                          Fund       Municipal     Fund
===================================================================================================================================
&lt;R&gt;
Oregon           B       NR*    $ 3,455    Yamhill County, Oregon, PCR, Refunding (Smurfit        2,034        1,479     $ 3,513
(concluded)                                Newsprint Corporation Project),  8% due 12/01/2003&lt;/R&gt;

===================================================================================================================================
Pennsylvania--   NR*     NR*      250      Lancaster County, Pennsylvania, Hospital                 240           --         240
7.4%                                       Authority Revenue Bonds (Health Center-Saint
                                           Anne's Home), 6.60% due 4/01/2024
                 NR*     Ba2      2,500    Lehigh County, Pennsylvania, General Purpose           1,266          844       2,110
                                           Authority Revenue Refunding Bonds (Kidspeace
                                           Obligation Group), 6% due 11/01/2023
                                      8    Northhampton Pulp LLC(b)(c)(h)                           398          663       1,061
                 AAA     NR*      1,455    Pennsylvania State Higher Educational Facilities       1,768           --       1,768
                                           Authority, College and University Revenue
                                           Refunding Bonds (Eastern College), Series A, 8%
                                           due 10/15/2006(d)
                 NR*     NR*      9,000    Philadelphia, Pennsylvania, Authority for IDR,         4,208        5,260       9,468
                                           Commercial Development, AMT, 7.75% due
                                           12/01/2017
                 NR*     NR*      5,750    Philadelphia, Pennsylvania, Authority for              2,203        2,622       4,825
                                           Industrial Development, Health Care Facility
                                           Revenue Refunding Bonds (Paul's Run), Series A,
                                           5.875% due 5/15/2028

===================================================================================================================================
South Carolina-- BBB     NR*      3,500    South Carolina Jobs, EDA, Economic Development         1,586        2,115       3,701
1.4%                                       Revenue Bonds (Westminster Presbyterian Center),
                                           7.75% due 11/15/2030

===================================================================================================================================
&lt;R&gt;
Texas--3.1%      BBB-    Baa3     1,000    Austin, Texas, Convention Center Revenue Bonds         1,000           --       1,000
                                           (Convention Enterprises Inc.), First Tier, Series
                                           A,  6.70% due 1/01/2028
                 A1      NR*      100      Harris County, Texas, Health Facilities                   --          100         100
                                           Development Corporation, Hospital Revenue
                                           Refunding Bonds (Methodist Hospital), VRDN,  3%
                                           due 12/01/2025(f)
                 BB      Ba1      3,000    Houston, Texas, Airport System Revenue Bonds           2,766           --       2,766
                                           (Special Facilities-Continental Airlines), AMT,
                                           Series B, 6.125% due 7/15/2017
                 BBB-    Baa2     4,500    Lower Colorado River Authority, Texas, PCR             4,457           --       4,457
                                           (Samsung Austin Semiconductor), AMT,  6.375% due
                                           4/01/2027
&lt;/R&gt;
===================================================================================================================================
Utah--0.7%       NR*     NR*      1,660    Carbon County, Utah, Solid Waste Disposal Revenue      1,694           --       1,694
                                           Refunding Bonds (Laidlaw Environmental), AMT,
                                           Series A, 7.45% due 7/01/2017
                 NR*     NR*      3,200    Tooele County, Utah, PCR, Refunding (Laidlaw              --           89          89
                                           Environmental), AMT, Series A,  7.55% due
                                           7/01/2027(b)

===================================================================================================================================
Vermont--1.8%    NR*     NR*      4,410    Vermont Educational and Health Buildings               3,307        1,530       4,837
                                           Financing Agency Revenue Refunding Bonds (College
                                           of Saint Joseph Project),  8.50% due 11/01/2024

===================================================================================================================================
Virginia--8.8%   NR*     NR*      1,500    Dulles Town Center, Virginia, Community                1,459           --       1,459
                                           Development Authority, Special Assessment Tax
                                           (Dulles Town Center Project),  6.25% due 3/01/2026
                 NR*     NR*      7,635    Peninsula Ports Authority, Virginia, Revenue           1,414        2,098       3,512
                                           Refunding Bonds (Port Facility-Zeigler Coal),
                                           6.90% due 5/02/2022(b)
                                           Pittsylvania County, Virginia, IDA Revenue
                                           Refunding Bonds, Exempt-Facility, AMT, Series A:
                 NR*     NR*      3,700         7.50% due 1/01/2014                               1,624        1,911       3,535
                 NR*     NR*      1,000         7.55% due 1/01/2019                                 947           --         947
                                           Pocahontas Parkway Association, Virginia, Toll
                                           Road Revenue Bonds, Capital Appreciation:
                 NR*     Ba1      5,500        First Tier, Sub-Series C,  6.25%** due                --          791         791
                                               8/15/2027
                 NR*     Ba1      6,200        First Tier, Sub-Series C,  6.25%** due               616           --         616
                                               8/15/2032


                                      F-38









<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 39, page: 39" -->





                                            &lt;R&gt;COMBINED SCHEDULE OF INVESTMENTS FOR
                            MUNIASSETS FUND, INC. AND MERRILL LYNCH HIGH INCOME MUNICIPAL BOND FUND, INC.
                                             As of May 31, 2001 (unaudited) (concluded)
                                                      (in thousands)&lt;/R&gt;

                                                                                                              Value
                                                                                               ----------------------------------
                                                                                                                         ProForma
                                                                                                               High         for
                 S&P     Moody's  Face                                                         MuniAssets     Income     Combined
      STATE      Ratings Ratings  Amount                                                          Fund       Municipal     Fund
===================================================================================================================================
&lt;R&gt;
Virginia         NR*     Ba1    $ 9,000        First Tier, Sub-Series C,  6.25%** due           $    --      $   716     $   716
(concluded)                                    8/15/2035
                 BBB-    Baa3     48,400       Senior Series B,  5.95%** due 8/15/2032            5,672           --       5,672
                 BBB-    Baa3     48,400       Senior Series B,  5.95%** due 8/15/2031               --        6,075       6,075

===================================================================================================================================
Washington--     NR*     NR*      1,900    Port Seattle, Washington, Special Facilities           1,868           --       1,868
0.7%                                       Revenue Bonds (Northwest Airlines Project), AMT,
                                           7.25% due 4/01/2030

===================================================================================================================================
Wisconsin--      NR*     NR*      2,000    Wisconsin State Health and Educational Facilities      1,014        1,015       2,029
0.8%                                       Authority Revenue Bonds (Oakwood Village
                                           Project), Series A, 7.625% due 8/15/2030

                 Total Investments  (Cost -- $284,671)  -- 100.1%                               135,633      127,473     263,106
                 Other Assets in Excess of Liabilities  -- (0.1)%                                  (185)       2,125         791++
                 Net Assets - 100.0%                                                            135,448      129,598     263,897++
===================================================================================================================================
&lt;/R&gt;
(a)              FSA Insured.
(b)              Non-income producing security.
(c)              These shares represent an equity interest in the reorganization
                 of Ponderosa Fibres PA. The security may be offered and sold to
                 "qualified institutional buyers" under Rule 144A of the
                 Securities Act of 1933.
(d)              Prerefunded.
(e)              The interest rate is subject to change periodically and
                 inversely based upon prevailing market rates. The interest rate
                 shown is the rate in effect at May 31, 2001.
(f)              The interest rate is subject to change periodically based upon
                 prevailing market rates. The interest rate shown is the rate in
                 effect at May 31, 2001.
(g)              AMBAC Insured.
(h)              Escrowed to maturity.
(i)              GNMA Collateralized.
(j)              MBIA Insured.
*                Not Rated.
**               Represents a zero coupon bond; the interest rate shown reflects
                 the effective yield at the time of purchase by the Fund.
+                Highest short-term rating by Moody's Investors Service, Inc.&lt;R&gt;
++               Amounts reflect Pro Forma adjustments to the Statement of Assets,
                 Liabilities and Capital. Ratings of issues shown have not been audited by
                 Deloitte & Touche <FONT SIZE=1>LLP</FONT>.

See Notes to Financial Statements.

Portfolio Abbreviations
- -----------------------

To simplify the listings of MuniAssets Fund's portfolio holdings in
the Schedule of Investments, we have abbreviated the names of many of
the securities according to the list below.&lt;/R&gt;

&lt;R&gt;
AMT              Alternative Minimum Tax (subject to)
EDA              Economic Development Authority
GO               General Obligation Bonds
IDA              Industrial Development Authority
IDB              Industrial Development Board
IDR              Industrial Development Revenue Bonds
INFLOS           Inverse Floating Rate Municipal Bonds
M/F              Multi-Family
PCR              Pollution Control Revenue Bonds
RIB              Residual Interest Bonds
VRDN             Variable Rate Demand Notes
&lt;R&gt;

                                      F-39









<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 40, page: 40" -->






                                 PRO FORMA COMBINED STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
                                                  FOR MUNIASSETS FUND, INC. AND
                                       MERRILL LYNCH HIGH INCOME MUNICIPAL BOND FUND, INC
                                                 As of May 31, 2001 (Unaudited)

      &lt;R&gt;The following unaudited Pro Forma Combined Statement of Assets, Liabilities and Capital has been derived from the
Statement of Assets,  Liabilities and Capital of MuniAssets  Fund, Inc. and the Statement of Assets and  Liabilities of
Merrill Lynch High Income  Municipal Bond Fund, Inc., each at May 31, 2001 and such information has been adjusted to give effect
to the  Reorganization  as if the  Reorganization  had occurred on May 31, 2001. The Pro Forma Combined  Statement of Assets and
Liabilities is presented for informational  purposes only and does not purport to be indicative of the financial  condition that
actually would have resulted if the  Reorganization  had been  consummated on May 31, 2001. The Pro Forma Combined  Statement of
Assets,  Liabilities and Capital should be read in conjunction  with the Funds'  financial  statements and related notes thereto
which are included in this Joint Proxy Statement and Prospectus. &lt;R&gt;
                                                                        High Income                               Pro Forma for
                                                    MuniAssets           Municipal           Adjustments          Combined Fund
                                                 ---------------       --------------        -----------          -------------
Assets:
Investments, at value*                             $ 135,632,525       $ 127,472,894                              $ 263,105,419
Cash                                                      24,608                  --                                     24,608
Receivables:
   Interest                                            2,466,628           2,485,107                                  4,951,735
   Securities sold                                       247,438             300,782                                    548,220
Prepaid expenses and other assets                          8,195              44,226                                     52,421
                                                   -------------       -------------       -------------          -------------
Total assets                                         138,379,394         130,303,009                                268,682,403
                                                   -------------       -------------       -------------          -------------

Liabilities:
Payables:
   Securities purchased                                2,845,481                  --                                  2,845,481
   Dividends to shareholders                                  --             315,637       $     845,463              1,161,100
   Investment adviser                                     50,905              53,402                                    104,307
   Administration fees                                        --              54,531                                     54,531
Accrued expenses and other liabilities                    34,523             281,211             303,900(1)             619,634
                                                   -------------       -------------       -------------          -------------
Total liabilities                                      2,930,909             704,781           1,149,363              4,785,053
                                                   -------------       -------------       -------------          -------------


Net Assets                                         $ 135,448,485       $ 129,598,228       $  (1,149,363)         $ 263,897,350
                                                   =============       =============       =============          =============
&lt;R&gt;
Capital
Common Stock, par value $.10 per share;                1,045,436           1,388,397            (381,969)             2,051,864
200,000,000 shares authorized+
Paid-in capital in excess of par                     148,814,553         150,376,590              78,069            299,269,212
Undistributed investment income -- net                   845,463                  --            (845,463)                    --
Accumulated realized capital losses on
investments--net                                      (7,114,885)         (5,591,995)                               (12,706,880)
Accumulated distributions in excess of
realized capital gains on investments-net                     --          (3,150,862)                                (3,150,862)
Unrealized depreciation on investments-net            (8,142,082)        (13,423,902)                               (21,565,984)
                                                   -------------       -------------       -------------          -------------
Total capital                                      $ 135,448,485       $ 129,598,228       $  (1,149,363)         $ 263,897,350
                                                   =============       =============       =============          =============
Net asset value per share of Common Stock                 $12.96               $9.33                                     $12.86
                                                   =============       =============       =============          =============
&lt;/R&gt;

 *Identified Cost                                  $ 143,774,607       $ 140,896,796                              $ 284,671,403
 +Shares issued and outstanding                       10,454,359          13,883,974          (3,819,685)            20,518,648

- --------
(1)   Reflects the charge for estimated Reorganization expenses of $303,900, of
      which $145,900 is attributable to MuniAssets Fund, Inc. and $158,000 is
      attributable to Merrill Lynch High Income Municipal Bond Fund, Inc.

See Notes to Financial Statements.


                                      F-40









<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 41, page: 41" -->






                                       &lt;R&gt;PRO FORMA COMBINED STATEMENT OF OPERATIONS
                                                  FOR MUNIASSETS FUND, INC. AND
                                       MERRILL LYNCH HIGH INCOME MUNICIPAL BOND FUND, INC.
                                           For the Period June 1, 2000 to May 31, 2001
                                                          (Unaudited)

      The following  unaudited Pro Forma Combined  Statement of Operations has been derived from the Statements of Operations of the
respective  Funds  for the  period  June 1,  2000 to May 31,  2001 and such  information  has been  adjusted  to give  effect to the
Reorganization as if the  Reorganization had occurred at the beginning of the period. The Pro Forma Combined Statement of Operations
is presented for informational  purposes only and does not purport to be indicative of the results of operations that actually would
have resulted if the Reorganization had been consummated at the beginning of the period nor which may result from future operations.
The Pro Forma Combined Statement of Operations should be read in conjunction with the Funds' financial  statements and related notes
thereto which are included in this Joint Proxy Statement and Prospectus.&lt;/R&gt;

                                                                                                      Pro Forma for
                                                                  High Income                           Combined
                                                MuniAssets         Municipal         Adjustments         Fund(2)
                                              --------------    --------------       -----------       ------------
&lt;R&gt;
Investment Income :
Interest and amortization of premium
and discount earned                           $  9,698,498       $ 10,625,561                        $ 20,324,059
                                              ------------       ------------     -----------       ------------
Expenses:
Investment advisory fees                           740,906          1,355,424        (639,487)(1)      1,456,843
Administrative fees                                     --            356,691        (356,691)(1)             --
Professional fees                                   57,834            110,998        (110,998)(1)         57,834
Transfer agent fees                                 31,869             80,955         (78,501)(1)         34,323
Accounting services                                 53,362             58,694         (19,970)(1)         92,086
Printing and shareholder reports                    33,577             61,589         (53,976)(1)         41,190
Advertising                                             --             83,365         (83,365)(1)             --
Directors' fees and expenses                        40,498             33,510         (33,510)(1)         40,498
Registration fees                                       --             47,796         (47,796)(1)             --
Listing fees                                        35,652              8,785          (9,437)(1)         35,000
Custodian fees                                       9,153             12,868              --             22,021
Pricing fees                                         8,722                 --           3,778             12,500
Other                                               15,539             11,620          (5,659)(1)         21,500
                                              ------------       ------------     -----------       ------------
Total expenses                                   1,027,112          2,222,295      (1,435,612)         1,813,795
                                              ------------       ------------     -----------       ------------
Investment income -- net                         8,671,386          8,403,266       1,435,612         18,510,264
                                              ------------       ------------     -----------       ------------
Realized & Unrealized Gain (Loss) on
Investments -- Net
Realized loss on investments--net               (2,286,735)        (1,543,036)                        (3,829,771)
Change in unrealized
appreciation/depreciation on
investments -- net                               4,301,686          2,100,641                          6,402,327
                                              ------------       ------------     -----------       ------------
Net Increase in Net Assets Resulting
from Operations                               $ 10,686,337       $  8,960,871     $ 1,435,612       $ 21,082,820
                                              ============       ============     ===========       ============
&lt;/R&gt;
- --------
(1)   Reflects the anticipated savings as a result of the Reorganization through
      fewer audits and consolidation of printing, accounting, and other
      services.

(2)   This Pro Forma Combined Statement of Operations excludes non-recurring
      aggregate estimated Reorganization expenses of $303,900, of which $145,900
      is attributable to MuniAssets Fund, Inc. and $158,000 is attributable to
      Merrill Lynch High Income Municipal Bond Fund, Inc.

See Notes to Financial Statements.


                                      F-41









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<!-- MARKER LABEL="sheet: 42, page: 42" -->





                         &lt;R&gt;MUNIASSETS FUND, INC.
               MERRILL LYNCH HIGH INCOME MUNICIPAL BOND FUND, INC.
          NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (Unaudited)&lt;/R&gt;


1. Significant Accounting Policies:

     &lt;R&gt;MuniAssets Fund, Inc. (the "Fund," which term as used herein
shall refer to MuniAssets Fund, Inc., after giving effect to
the Reorganization with Merrill Lynch High Income Municipal
Bond Fund, Inc.) is registered under the Investment Company Act of
1940 as a non-diversified, closed-end management investment company.
The Fund's financial statements are prepared in conformity with
accounting principles generally accepted in the United States of
America, which may require the use of management accruals and
estimates. These unaudited financial statements reflect all
adjustments, which are, in the opinion of management, necessary to a
fair statement of the results for the interim period presented. All
such adjustments are of a normal, recurring nature. The Fund
determines and makes available for publication the net asset value of
its Common Stock on a weekly basis. The Fund's Common Stock is listed
on the New York Stock Exchange under the symbol MUA. The following is
a summary of significant accounting policies followed by the
Fund.&lt;/R&gt;

     (a) Valuation of investments -- Municipal bonds are traded
primarily in the over-the-counter markets and are valued at the last
available bid price in the over-the-counter market or on the basis of
yield equivalents as obtained by the Fund's pricing service from one
or more dealers that make markets in the securities. Financial futures
contracts and options thereon, which are traded on exchanges, are
valued at their closing prices as of the close of such exchanges.
Options written or purchased are valued at the last sale price in the
case of exchange-traded options. In the case of options traded in the
over-the-counter market, valuation is the last asked price (options
written) or the last bid price (options purchased). Short-term
investments with a remaining maturity of sixty days or less are valued
at amortized cost, which approximates market value. Securities and
assets for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the
direction of the Board of Directors of the Fund, including valuations
furnished by a pricing service retained by the Fund, which may utilize
a matrix system for valuations. The procedures of the pricing service
and its valuations are reviewed by the officers of the Fund under the
general supervision of the Board of Directors.

     (b) Derivative financial instruments -- The Fund may engage in
various portfolio investment strategies to increase or decrease the
level of risk to which the Fund is exposed more quickly and
efficiently than transactions in other types of instruments. Losses
may arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.

o       Financial futures contracts -- The Fund may purchase or sell
        financial futures contracts and options on such futures
        contracts for the purpose of hedging the market risk on
        existing securities or the intended purchase of securities.
        Futures contracts are contracts for delayed delivery of
        securities at a specific future date and at a specific price
        or yield. Upon entering into a contract, the Fund deposits and
        maintains as collateral such initial margin as required by the
        exchange on which the transaction is effected. Pursuant to the
        contract, the Fund agrees to receive from or pay to the broker
        an amount of cash equal to the daily fluctuation in value of
        the contract. Such receipts or payments are known as variation
        margin and are recorded by the Fund as unrealized gains or
        losses. When the contract is closed, the Fund records a
        realized gain or loss equal to the difference between the
        value of the contract at the time it was opened and the value
        at the time it was closed.

o       Options -- The Fund is authorized to write covered call
        options and purchase put options. When the Fund writes an
        option, an amount equal to the premium received by the Fund is
        reflected as an asset and an equivalent liability. The amount
        of the liability is subsequently marked to market to reflect
        the current market value of the option written. When a
        security is purchased or sold through an exercise of an
        option, the related premium paid (or received) is added to (or
        deducted from) the basis of the security acquired or deducted
        from (or added to) the proceeds of the security sold. When an
        option expires (or the Fund enters into a closing
        transaction), the Fund realizes a gain or loss on the option
        to the extent of the premiums received or paid (or gain or
        loss to the extent the cost of the closing transaction exceeds
        the premium paid or received).

      Written and purchased options are non-income producing investments.

     (c) Income taxes -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.


                                      F-42










<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 43, page: 43" -->






                         &lt;R&gt;MUNIASSETS FUND, INC.
                 MERRILL LYNCH MUNICIPAL HIGH INCOME FUND, INC.
    NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (Unaudited) (concluded)&lt;/R&gt;

     (d) Security transactions and investment income - Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Realized gains and losses on security
transactions are determined on the identified cost basis. Interest
income is recognized on the accrual basis. The Fund will adopt the
provisions to amortize all premiums and discounts on debt securities
effective June 1, 2001, as now required under the new AICPA Audit and
Accounting Guide for Investment Companies. The cumulative effect of
this accounting change will have no impact on the total net assets of
the Fund, but will result in a $43,627 increase to the cost of
securities and a corresponding $43,627 decrease to net unrealized
depreciation, based on debt securities held as of May 31, 2001.

     (e) Dividends and distributions - Dividends from net investment
income are declared and paid monthly. Distributions of capital gains
are recorded on the ex-dividend dates.

     (f) Reclassification - Accounting principles generally accepted
in the United States of America require that certain components of net
assets be adjusted to reflect permanent differences between financial
and tax reporting. Accordingly, the current year's permanent book/tax
differences of $15,325 have been reclassified between accumulated
realized capital gains and undistributed net investment income. These
reclassifications have no effect on net assets or net asset value per
share.

     2. Investment Advisory Agreement and Transactions with
Affiliates:

     The Fund has entered into an Investment Advisory Agreement with
Fund Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned subsidiary
of Merrill Lynch & Co., Inc. ("ML & Co."), which is the limited
partner.

     FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee of .55% based upon the average
weekly value of the Fund's net assets.

     Prior to January 1, 2001, FAM provided accounting services to the
Fund at its cost and the Fund reimbursed FAM for these services. FAM
continues to provide certain accounting services to the Fund. The Fund
reimburses FAM at its cost for such services. For the year ended May
31, 2001, the Fund reimbursed FAM an aggregate of $31,455 for the
above-described services. The Fund entered into an agreement with
State Street Bank and Trust Company ("State Street"), effective
January 1, 2001, pursuant to which State Street provides certain
accounting services to the Fund. The Fund pays a fee for these
services.

     Certain officers and/or directors of the Fund are officers and/or
directors of FAM, PSI, and/or ML & Co.


                                      F-43
</PRE>






<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 1, page: 1" -->



<p><table width=600><tr>
    <td align=right><font size=2><B><a name="i1"></a>APPENDIX I</B></font></td>
  </tr></table>

<p><table width=600><tr><td  align=center><font size=2><B>INFORMATION
PERTAINING TO EACH FUND</B></font></td></tr></table>

<p><table width=600><tr><td><font size=2><B>General Information Pertaining to
Each Fund</B></font></td></tr></table>
<p>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=0 WIDTH=600>
  <TR valign="bottom">
    <TD WIDTH="172"><font size="1"><b> Fund </b> </font>
      <hr noshade size="1" width="25%" align="left">
    </TD>
    <TD colspan="2">
      <P ALIGN="CENTER"><font size="1"><b>Defined Term Used<br>
        in Appendix I </b></font>
      <hr noshade size="1" width="90%">
    </TD>
    <TD WIDTH="92">
      <P ALIGN="CENTER"><font size="1"><b>Fiscal<br>
        Year End </b></font>
      <hr noshade size="1" width="90%">
    </TD>
    <TD WIDTH="102">
      <P ALIGN="CENTER"><font size="1"><b>State of<br>
        Incorporation </b></font>
      <hr noshade size="1" width="90%">
    </TD>
    <TD WIDTH="82">
      <P ALIGN="CENTER"><font size="1"><b>Meeting<br>
        Time </b></font>
      <hr noshade size="1" width="90%">
    </TD>
  </TR>
  <TR valign="top">
    <TD WIDTH="172"><font size="2"> MuniAssets Fund, Inc.</font></TD>
    <TD WIDTH="38"><font size="2"></font></TD>
    <TD WIDTH="114"><font size="2"> MuniAssets </font></TD>
    <TD WIDTH="92">
      <P ALIGN="CENTER"><font size="2">5/31</font>
    </TD>
    <TD WIDTH="102">
      <P ALIGN="CENTER"><font size="2">MD</font>
    </TD>
    <TD WIDTH="82"><font size="2"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9:00 a.m.</font></TD>
  </TR>
  <TR valign="top">
    <TD WIDTH="172"><font size="2"> Merrill Lynch High Income &nbsp;&nbsp;&nbsp;Municipal
      Bond Fund, Inc.</font></TD>
    <TD WIDTH="38"><font size="2"></font></TD>
    <TD WIDTH="114"><font size="2"> High Income <br>
      Municipal </font></TD>
    <TD WIDTH="92">
      <P ALIGN="CENTER"><font size="2">8/31</font>
    </TD>
    <TD WIDTH="102">
      <P ALIGN="CENTER"><font size="2">MD</font>
    </TD>
    <TD WIDTH="82"><font size="2"> &nbsp;&nbsp;&nbsp;&nbsp;10:00 a.m.</font></TD>
  </TR>
</TABLE>

<font size="2"><br>
&lt;R&gt;</font>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=0 WIDTH=600>
  <TR valign="bottom">
    <TD WIDTH="354"><font size="1"><b> Fund </b> </font>
      <hr noshade size="1" width="12%" align="left">
    </TD>
    <TD WIDTH="246">
      <P ALIGN="CENTER"><font size="1"><b>Common Stock<br>
        Outstanding as of<br>
        the Record Date </b></font>
      <hr noshade size="1" width="50%">
    </TD>
  </TR>
  <TR valign="bottom">
    <TD WIDTH="354"><font size="2">MuniAssets</font></TD>
    <TD WIDTH="246" align="center"><font size="2">10.461,767</font></TD>
  </TR>
  <TR valign="bottom">
    <TD WIDTH="354"><font size="2"> High Income Municipal</font></TD>
    <TD WIDTH="246" align="center"><font size="2">13,554,767 </font></TD>
  </TR>
</TABLE>



<font size="2">&lt;/R&gt;</font>
<p><table width=600><tr><td><font size=2><B>Information Pertaining to Directors
of MuniAssets and High Income Municipal</B></font></td></tr></table>

<br>
<font size="2">&lt;R&gt;</font>

<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=0 WIDTH=600>
  <TR valign="bottom">
    <TD WIDTH="74"><font size="2"></font></TD>
    <TD WIDTH="74"><font size="2"></font></TD>
    <TD COLSPAN=5><font size="2"><b> Shares Beneficially Owned on the Record Date
      </b> </font> </TD>
  </TR>
  <TR valign="bottom">
    <TD WIDTH="74" height="22"> <font size="1"><B>Fund</B></font>
      <hr noshade size="1" width="35%" align="left">
    </TD>
    <TD WIDTH="74" height="22" align="center"> <font size="1"><B>Glenn</B>*</font>
      <hr noshade size="1" width="90%">
    </TD>
    <TD WIDTH="80" height="22" align="center"> <font size="1"><B>Grills</B></font>
      <hr noshade size="1" width="90%">
    </TD>
    <TD WIDTH="82" height="22" align="center"> <font size="1"><B>Mintz</B></font>
      <hr noshade size="1" width="90%">
    </TD>
    <TD WIDTH="96" height="22" align="center"> <font size="1"><B>Salomon</B></font>
      <hr noshade size="1" width="90%">
    </TD>
    <TD WIDTH="93" height="22" align="center"> <font size="1"><B>Seiden</B></font>
      <hr noshade size="1" width="90%">
    </TD>
    <TD WIDTH="101" height="22" align="center"> <font size="1"><B>Swensrud</B></font>
      <hr noshade size="1" width="90%">
    </TD>
  </TR>
  <TR valign="bottom">
    <TD WIDTH="74"><font size="2"> MuniAssets</font></TD>
    <TD WIDTH="74" align="center"><font size="2">None</font></TD>
    <TD WIDTH="80" align="center"><font size="2">None</font></TD>
    <TD WIDTH="82" align="center"><font size="2">None</font></TD>
    <TD WIDTH="96" align="center"><font size="2">None</font></TD>
    <TD WIDTH="93" align="center"><font size="2">None</font></TD>
    <TD WIDTH="101" align="center"><font size="2">None</font></TD>
  </TR>
</TABLE>



<font size="2"> </font>
<table width=600><tr><td><hr size=1 noshade align=left  width=75></td></tr></table>

<table width=600><tr><td width=3% valign=top><font size="1">*
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">Interested
person, as defined in the Investment Company Act, of MuniAssets and High Income
Municipal.</font></td></tr></table>


<font size="2">&lt;/R&gt;</font>
<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 each Fund to non-affiliated
      Directors during that Fund&#146;s most recently completed fiscal year.</font></td>
  </tr></table>

<br>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=0 WIDTH=600>
  <TR valign="bottom" align="center">
    <TD WIDTH="102">&nbsp;</TD>
    <TD COLSPAN=3>
      <P ALIGN="CENTER"><font size="1"><b>Board of Directors</b></font>
      <hr noshade size="1">
    </TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN=3>
      <P ALIGN="CENTER"><font size="1"><b>Audit Committee</b></font>
      <hr noshade size="1">
    </TD>
    <TD width="83"><font size="1"></font></TD>
  </TR>
  <TR valign="bottom" align="center">
    <TD WIDTH="102" align="left"><font size="1"><b> Fund</b></font>
      <hr noshade align="left" size="1" width="25%">
    </TD>
    <TD WIDTH="66">
      <P ALIGN="CENTER"><font size="1"><b># Meetings <br>
        Held* </b></font>
      <hr noshade size="1" width="90%">
    </TD>
    <TD WIDTH="73">
      <P ALIGN="CENTER"><font size="1"><b>Annual  <br>
        ($) </b></font>
      <hr noshade size="1" width="90%">
    </TD>
    <TD WIDTH="73">
      <P ALIGN="CENTER"><font size="1"><b>Per Meeting <br>
        Fee ($)** </b></font>
      <hr noshade size="1" width="90%">
    </TD>
    <TD WIDTH="8"><font size="1"></font></TD>
    <TD WIDTH="64">
      <P ALIGN="CENTER"><font size="1"><b># Meetings <br>
        Held* </b></font>
      <hr noshade size="1" width="90%">
    </TD>
    <TD WIDTH="64">
      <P ALIGN="CENTER"><font size="1"><b>Annual Fee <br>
        ($)*** </b></font>
      <hr noshade size="1" width="90%">
    </TD>
    <TD width="67">
      <P ALIGN="CENTER"><font size="1"><b>Per Meeting <br>
        Fee ($)** </b></font>
      <hr noshade size="1" width="90%">
    </TD>
    <TD WIDTH="83">
      <P ALIGN="CENTER"><font size="1"><b>Aggregate <br>
        Fees and <br>
        Expenses ($) </b></font>
      <hr noshade size="1" width="90%">
    </TD>
  </TR>
  <TR valign="bottom">
    <TD WIDTH="102"><font size="2"> MuniAssets</font></TD>
    <TD WIDTH="66">
      <P ALIGN="CENTER"><font size="2">4</font>
    </TD>
    <TD WIDTH="73">
      <P ALIGN="CENTER"><font size="2">2,000</font>
    </TD>
    <TD WIDTH="73">
      <P ALIGN="CENTER"><font size="2">500</font>
    </TD>
    <TD WIDTH="8"><font size="2"></font></TD>
    <TD WIDTH="64">
      <P ALIGN="CENTER"><font size="2">4</font>
    </TD>
    <TD WIDTH="64">
      <P ALIGN="CENTER"><font size="2">2,000</font>
    </TD>
    <TD width="67">
      <P ALIGN="CENTER"><font size="2">500</font>
    </TD>
    <TD WIDTH="83">
      <P ALIGN="CENTER"><font size="2">40,498</font>
    </TD>
  </TR>
  <TR valign="bottom">
    <TD WIDTH="102"><font size="2"> High Income Municipal</font></TD>
    <TD WIDTH="66">
      <P ALIGN="CENTER"><font size="2">5</font>
    </TD>
    <TD WIDTH="73">
      <P ALIGN="CENTER"><font size="2">1,900</font>
    </TD>
    <TD WIDTH="73">
      <P ALIGN="CENTER"><font size="2">150</font>
    </TD>
    <TD WIDTH="8"><font size="2"></font></TD>
    <TD WIDTH="64">
      <P ALIGN="CENTER"><font size="2">4</font>
    </TD>
    <TD WIDTH="64">
      <P ALIGN="CENTER"><font size="2">1,900</font>
    </TD>
    <TD width="67">
      <P ALIGN="CENTER"><font size="2">150</font>
    </TD>
    <TD WIDTH="83">
      <P ALIGN="CENTER"><font size="2">29,133</font>
    </TD>
  </TR>
</TABLE>


<table width=600><tr><td><hr size=1 noshade align=left  width=75></td></tr></table>

<table width=600><tr>
    <td width=3% valign=top><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;* </font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">Includes meetings held via teleconferencing equipment.</font></td>
  </tr></table>

<table width=600>
  <tr>
    <td width=3% valign=top><font size="1"> &nbsp;&nbsp;** </font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">The fee is payable for each meeting attended
      in person. A fee is not paid for telephonic meetings.&lt;R&gt;</font></td>
  </tr></table>

<table width=600><tr><td width=3% valign=top><font size="1">***
</font></td><td width=2%><font size="1"></font></td>
    <td width=95%><font size="1"> With respect to High Income Municipal, the Co-Chairmen
      of the Audit Committee each receive an additional annual fee of $500.&lt;/R&gt;</font></td>
  </tr></table>



<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
I-1</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></table><p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;




<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 2, page: 2" -->





<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set forth in the table below
      is information regarding compensation paid by each Fund to the non-affiliated
      Directors for that Fund&#146;s most recently completed fiscal year. Each
      non-affiliated Director of a Fund is a member of the Audit Committee of
      the Fund.</font></td>
  </tr></table>

<p><table width=600><tr>
    <td  align=center><font size=2><B>Compensation from MuniAssets and High Income
      Municipal($)*</B></font> </td>
  </tr></table>

<br>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=0 WIDTH=600>
  <TR valign="bottom" align="center">
    <TD WIDTH="156" align="left"><font size="1"><b> Fund</b> </font>
      <hr noshade size="1" width="20%" align="left">
    </TD>
    <TD WIDTH="64"><font size="1"><b> Grills </b> </font>
      <hr noshade size="1" width="90%">
    </TD>
    <TD WIDTH="78"><font size="1"><b> Mintz </b> </font>
      <hr noshade size="1" width="90%">
    </TD>
    <TD WIDTH="60"><font size="1"><b> Salomon </b> </font>
      <hr noshade size="1" width="90%">
    </TD>
    <TD WIDTH="52"><font size="1"><b> Seiden </b> </font>
      <hr noshade size="1" width="90%">
    </TD>
    <TD WIDTH="79"><font size="1"><b> Swensrud </b> </font>
      <hr noshade size="1" width="90%">
    </TD>
    <TD WIDTH="46"><font size="1"></font></TD>
    <TD WIDTH="65"><font size="1"></font></TD>
  </TR>
  <TR valign="bottom" align="center">
    <TD WIDTH="156" align="left"><font size="2"> MuniAssets</font></TD>
    <TD WIDTH="64"><font size="2"> $8,000</font></TD>
    <TD WIDTH="78"><font size="2"> $8,000</font></TD>
    <TD WIDTH="60"><font size="2"> $8,000</font></TD>
    <TD WIDTH="52"><font size="2"> $8,000</font></TD>
    <TD WIDTH="79"><font size="2"> $8,000</font></TD>
    <TD WIDTH="46">&nbsp;</TD>
    <TD WIDTH="65">&nbsp;</TD>
  </TR>
  <TR valign="bottom" align="center">
    <TD WIDTH="156" align="left">&nbsp;</TD>
    <TD WIDTH="64">&nbsp;</TD>
    <TD WIDTH="78">&nbsp;</TD>
    <TD WIDTH="60">&nbsp;</TD>
    <TD WIDTH="52">&nbsp;</TD>
    <TD WIDTH="79">&nbsp;</TD>
    <TD WIDTH="46">&nbsp;</TD>
    <TD WIDTH="65">&nbsp;</TD>
  </TR>
  <TR valign="bottom" align="center">
    <TD WIDTH="156" align="left"><b></b></TD>
    <TD WIDTH="64"><font size="1"><b> Forbes </b> </font>
      <hr noshade size="1" width="90%">
    </TD>
    <TD WIDTH="78"><font size="1"><b> Montgomery </b> </font>
      <hr noshade size="1" width="90%">
    </TD>
    <TD WIDTH="60"><font size="1"><b> Reilly </b> </font>
      <hr noshade size="1" width="90%">
    </TD>
    <TD WIDTH="52"><font size="1"><b> Ryan </b> </font>
      <hr noshade size="1" width="90%">
    </TD>
    <TD WIDTH="79"><font size="1"><b> Suddarth** </b> </font>
      <hr noshade size="1" width="90%">
    </TD>
    <TD WIDTH="46"><font size="1"><b> West </b> </font>
      <hr noshade size="1" width="90%">
    </TD>
    <TD WIDTH="65"><font size="1"><b> Zinbarg** </b> </font>
      <hr noshade size="1" width="90%">
    </TD>
  </TR>
  <TR valign="bottom" align="center">
    <TD WIDTH="156" align="left"><font size="2"> High Income Municipal</font></TD>
    <TD WIDTH="64"><font size="2"> $5,900</font></TD>
    <TD WIDTH="78"><font size="2"> $5,400&nbsp;</font></TD>
    <TD WIDTH="60"><font size="2"> $5,900&nbsp;</font></TD>
    <TD WIDTH="52"><font size="2"> $5,400</font></TD>
    <TD WIDTH="79">
      <P ALIGN="CENTER"><font size="2">$325</font>
    </TD>
    <TD WIDTH="46"><font size="2"> $5,400</font></TD>
    <TD WIDTH="65">
      <P ALIGN="CENTER"><font size="2">$325</font>
    </TD>
  </TR>
</TABLE>

<br>
<table width=600><tr><td><hr size=1 noshade align=left  width=75></td></tr></table>

<table width=600><tr>
    <td width=3% valign=top><font size="1">&nbsp;&nbsp;* </font></td>
    <td width=2%><font size="1"></font></td><td width=95%><font size="1">No
pension or retirement benefits are accrued as part of Fund expenses.</font></td></tr></table>

<table width=600><tr><td width=3% valign=top><font size="1">**
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">Messrs.
Suddarth and Zinbarg were elected Directors of High Income Municipal on July
10, 2000.</font></td></tr></table>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set
forth in the table below is information regarding the aggregate compensation
paid by all registered investment companies advised by FAM and its affiliate,
MLIM (collectively, &#147;FAM/MLIM Advised Funds&#148;), including MuniAssets and High
Income Municipal, to the non-affiliated Directors for the year ended December
31, 2000.</font></td></tr></table>

<br>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=0 WIDTH=600>
  <TR>
    <TD VALIGN="BOTTOM" colspan="2"><font size="1"><b> Name of Director</b></font>
      <hr noshade size="1" width="30%" align="left">
    </TD>
    <TD VALIGN="BOTTOM" WIDTH="282" align="center">
      <P><font size="1"><b>Aggregate Compensation from <br>
        FAM/MLIM Advised <br>
        Funds Paid to Directors($)(1) </b></font>
      <hr noshade size="1" width="100%">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="BOTTOM" colspan="2"><font size="2"> MuniAssets</font></TD>
    <TD VALIGN="BOTTOM" WIDTH="282"><font size="2"></font></TD>
  </TR>
  <TR>
    <TD VALIGN="BOTTOM" WIDTH="26">&nbsp;</TD>
    <TD VALIGN="BOTTOM" WIDTH="292"><font size="2">Joe Grills</font></TD>
    <TD VALIGN="BOTTOM" WIDTH="282">
      <P ALIGN="CENTER"><font size="2">$224,500 </font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="BOTTOM" WIDTH="26">&nbsp;</TD>
    <TD VALIGN="BOTTOM" WIDTH="292"><font size="2">Walter Mintz</font></TD>
    <TD VALIGN="BOTTOM" WIDTH="282">
      <P ALIGN="CENTER"><font size="2">$184,000 </font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="BOTTOM" WIDTH="26">&nbsp;</TD>
    <TD VALIGN="BOTTOM" WIDTH="292"><font size="2">Robert S. Salomon, Jr.</font></TD>
    <TD VALIGN="BOTTOM" WIDTH="282">
      <P ALIGN="CENTER"><font size="2">$184,000 </font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="BOTTOM" WIDTH="26">&nbsp;</TD>
    <TD VALIGN="BOTTOM" WIDTH="292"><font size="2">Melvin R. Seiden</font></TD>
    <TD VALIGN="BOTTOM" WIDTH="282">
      <P ALIGN="CENTER"><font size="2">$184,000 </font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="BOTTOM" WIDTH="26">&nbsp;</TD>
    <TD VALIGN="BOTTOM" WIDTH="292"><font size="2">Stephen B. Swensrud</font></TD>
    <TD VALIGN="BOTTOM" WIDTH="282">
      <P ALIGN="CENTER"><font size="2">$280,233 </font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="BOTTOM" colspan="2"><font size="2">High Income Municipal</font></TD>
    <TD VALIGN="BOTTOM" WIDTH="282"><font size="2"></font></TD>
  </TR>
  <TR>
    <TD VALIGN="BOTTOM" WIDTH="26">&nbsp;</TD>
    <TD VALIGN="BOTTOM" WIDTH="292"><font size="2">Ronald W. Forbes </font></TD>
    <TD VALIGN="BOTTOM" WIDTH="282">
      <P ALIGN="CENTER"><font size="2">$295,008 </font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="BOTTOM" WIDTH="26">&nbsp;</TD>
    <TD VALIGN="BOTTOM" WIDTH="292"><font size="2">Cynthia A. Montgomery</font></TD>
    <TD VALIGN="BOTTOM" WIDTH="282">
      <P ALIGN="CENTER"><font size="2">$264,008 </font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="BOTTOM" WIDTH="26">&nbsp;</TD>
    <TD VALIGN="BOTTOM" WIDTH="292"><font size="2">Charles C. Reilly</font></TD>
    <TD VALIGN="BOTTOM" WIDTH="282">
      <P ALIGN="CENTER"><font size="2">$352,050 </font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="BOTTOM" WIDTH="26">&nbsp;</TD>
    <TD VALIGN="BOTTOM" WIDTH="292"><font size="2">Kevin A. Ryan </font></TD>
    <TD VALIGN="BOTTOM" WIDTH="282">
      <P ALIGN="CENTER"><font size="2">$264,008 </font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="BOTTOM" WIDTH="26">&nbsp;</TD>
    <TD VALIGN="BOTTOM" WIDTH="292"><font size="2">Roscoe S. Suddarth(2)</font></TD>
    <TD VALIGN="BOTTOM" WIDTH="282">
      <P ALIGN="CENTER"><font size="2">$193,977 </font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="BOTTOM" WIDTH="26">&nbsp;</TD>
    <TD VALIGN="BOTTOM" WIDTH="292"><font size="2">Richard R. West</font></TD>
    <TD VALIGN="BOTTOM" WIDTH="282">
      <P ALIGN="CENTER"><font size="2">$373,000 </font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="BOTTOM" WIDTH="26">&nbsp;</TD>
    <TD VALIGN="BOTTOM" WIDTH="292"><font size="2">Edward D. Zinbarg(2)</font></TD>
    <TD VALIGN="BOTTOM" WIDTH="282">
      <P ALIGN="CENTER"><font size="2">$242,435 </font>
    </TD>
  </TR>
</TABLE>


<br>
<table width=600><tr><td><hr size=1 noshade align=left  width=75></td></tr></table>

<table width=600><tr><td width=3% valign=top><font size="1">(1)
</font></td><td width=2%><font size="1"></font></td>
    <td width=95%><font size="2"></font><font size="1">The Directors
      serve on the boards of FAM/MLIM-advised funds as follows: Mr. Forbes (51
      registered investment companies consisting of 58 portfolios); Mr. Grills
      (30 registered investment companies consisting of 46 portfolios); Mr. Mintz
      (16 registered investment companies consisting of 36 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. Salomon
      (16 registered investment companies consisting of 36 portfolios); Mr. Seiden
      (16 registered investment companies consisting of 36 portfolios); Mr. Suddarth
      (51 registered investment companies consisting of 58 portfolios); Mr. Swensrud
      (43 registered investment companies consisting of 93 portfolios) Mr. West
      (66 registered investment companies consisting of 72 portfolios) and Mr.
      Zinbarg (51 registered investment companies consisting of 58 portfolios).</font><font size="2"></font></td>
  </tr></table>

<table width=600><tr><td width=3% valign=top><font size="1">(2)
</font></td><td width=2%><font size="1"></font></td><td width=95%><font size="1">Messrs.
Suddarth and Zinbarg were elected Directors of High Income Municipal on July
10, 2000.</font></td></tr></table>


<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
I-2</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></table><p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;





<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 3, page: 3" -->



<p><table width=600><tr>
    <td><font size=2>&lt;R&gt;<B>Information Pertaining to Directors of MuniAssets and
      High Income Municipal*</B></font></td>
  </tr></table>

<br>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=0 WIDTH=600>
  <TR valign="bottom">
    <TD colspan="3"><font size="1"><b> Name, Address and Biography </b> </font>
      <hr noshade size="1" width="49%" align="left">
    </TD>
    <TD COLSPAN=2>
      <P ALIGN="CENTER"><font size="1"><b>Age</b></font>
      <hr noshade size="1" width="90%">
    </TD>
    <TD WIDTH="101">
      <P ALIGN="CENTER"><font size="1"><b>High Income <br>
        Municipal <br>
        Director Since </b></font>
      <hr noshade size="1" width="90%">
    </TD>
    <TD COLSPAN=2 WIDTH="101">
      <P ALIGN="CENTER"><font size="1"><b>MuniAssets <br>
        Director <br>
        Since </b></font>
      <hr noshade size="1" width="90%">
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" colspan="3">&nbsp;</TD>
    <TD VALIGN="TOP" COLSPAN=2>&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="101">&nbsp;</TD>
    <TD VALIGN="TOP" COLSPAN=2 WIDTH="101">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" colspan="3"><font size="2"> Terry K. Glenn</font></TD>
    <TD VALIGN="TOP" COLSPAN=2>
      <P ALIGN="CENTER"><font size="2">60</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="101">
      <P ALIGN="CENTER"><font size="2">1999</font>
    </TD>
    <TD VALIGN="TOP" COLSPAN=2 WIDTH="101">
      <P ALIGN="CENTER"><font size="2">1999</font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="6">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="297">
      <P ALIGN="LEFT"><font size="2">P.O. Box 9011, Princeton, New Jersey 08543-9011.
        Chairman (Americas Region) since 2001, and Executive Vice President of
        MLIM and its affiliate, FAM (which terms as used herein include their
        corporate predecessors) since 1983; President, Merrill Lynch Mutual Funds
        since 1999; President of FAMD since 1986 and Director thereof since 1991;
        Executive Vice President and Director of Princeton Services since 1993;
        President of Princeton Administrators, L.P. since 1988; Director of FDS
        since 1985. </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="33">&nbsp;</TD>
    <TD VALIGN="TOP" COLSPAN=2>&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="101">&nbsp;</TD>
    <TD VALIGN="TOP" COLSPAN=2 WIDTH="101">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" colspan="3">&nbsp;</TD>
    <TD VALIGN="TOP" COLSPAN=2>&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="101">&nbsp;</TD>
    <TD VALIGN="TOP" COLSPAN=2 WIDTH="101">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" colspan="3"><font size="2"> Ronald W. Forbes</font></TD>
    <TD VALIGN="TOP" COLSPAN=2>
      <P ALIGN="CENTER"><font size="2">60</font>
    </TD>
    <TD VALIGN="TOP" WIDTH="101">
      <P ALIGN="CENTER"><font size="2">1997</font>
    </TD>
    <TD VALIGN="TOP" COLSPAN=2 WIDTH="101">
      <P ALIGN="CENTER"><font size="2">N/A</font>
    </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="6">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="297">
      <P ALIGN="LEFT"><font size="2">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. from 1995
        to 1999. </font>
    </TD>
    <TD VALIGN="TOP" WIDTH="33">&nbsp;</TD>
    <TD VALIGN="TOP" COLSPAN=2>&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="101">&nbsp;</TD>
    <TD VALIGN="TOP" COLSPAN=2 WIDTH="101">&nbsp;</TD>
  </TR>

</TABLE>



<table cellspacing=0 border=0 cellpadding=0 width=600>


  <tr>
    <td valign="TOP" colspan="3">&nbsp;</td>
    <td valign="TOP" colspan=2>&nbsp;</td>
    <td valign="TOP" width="101">&nbsp;</td>
    <td valign="TOP" colspan=2 width="101">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="3"><font size="2"> Walter Mintz </font></td>
    <td valign="TOP" colspan=2>
      <p align="CENTER"><font size="2">72</font>
    </td>
    <td valign="TOP" width="101">
      <p align="CENTER"><font size="2">N/A</font>
    </td>
    <td valign="TOP" colspan=2 width="101">
      <p align="CENTER"><font size="2">1993</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="6">&nbsp;</td>
    <td valign="TOP" width="297"><font size="2"> 1114 Avenue of the Americas,
      New York, New York 10036. Special Limited Partner of Cumberland Associates
      (investment partnership) since 1982.</font></td>
    <td valign="TOP" width="33">&nbsp;</td>
    <td valign="TOP" colspan=2>&nbsp;</td>
    <td valign="TOP" width="101">&nbsp;</td>
    <td valign="TOP" colspan=2 width="101">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="3">&nbsp;</td>
    <td valign="TOP" colspan=2>&nbsp;</td>
    <td valign="TOP" width="101">&nbsp;</td>
    <td valign="TOP" colspan=2 width="101">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="3"><font size="2"> Cynthia A. Montgomery
      </font></td>
    <td valign="TOP" colspan=2>
      <p align="CENTER"><font size="2">49</font>
    </td>
    <td valign="TOP" width="101">
      <p align="CENTER"><font size="2">1997</font>
    </td>
    <td valign="TOP" colspan=2 width="101">
      <p align="CENTER"><font size="2">N/A</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="6">&nbsp;</td>
    <td valign="TOP" width="297">
      <p align="LEFT"><font size="2">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; Associate Professor, Graduate
        School of Business Administration, The University of Michigan from 1979
        to 1985; Director, UNUMProvident Corporation since 1990 and Director,
        NewellRubbermaid Inc. since 1995. </font>
    </td>
    <td valign="TOP" width="33">&nbsp;</td>
    <td valign="TOP" colspan=2>&nbsp;</td>
    <td valign="TOP" width="101">&nbsp;</td>
    <td valign="TOP" colspan=2 width="101">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="3">&nbsp;</td>
    <td valign="TOP" colspan=2>&nbsp;</td>
    <td valign="TOP" width="101">&nbsp;</td>
    <td valign="TOP" colspan=2 width="101">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="3"><font size="2"> Charles C. Reilly </font></td>
    <td valign="TOP" colspan=2>
      <p align="CENTER"><font size="2">70</font>
    </td>
    <td valign="TOP" width="101">
      <p align="CENTER"><font size="2">1997</font>
    </td>
    <td valign="TOP" colspan=2 width="101">
      <p align="CENTER"><font size="2">N/A</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="6">&nbsp;</td>
    <td valign="TOP" width="297">
      <p align="LEFT"><font size="2">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, The University of Pennsylvania
        from 1989 to 1990; Partner, Small Cities Cable Television from 1986 to
        1997. </font>
    </td>
    <td valign="TOP" width="33">&nbsp;</td>
    <td valign="TOP" colspan=2>&nbsp;</td>
    <td valign="TOP" width="101">&nbsp;</td>
    <td valign="TOP" colspan=2 width="101">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="3">&nbsp;</td>
    <td valign="TOP" colspan=2>&nbsp;</td>
    <td valign="TOP" width="101">&nbsp;</td>
    <td valign="TOP" colspan=2 width="101">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="3"><font size="2"> Kevin A. Ryan </font></td>
    <td valign="TOP" colspan=2>
      <p align="CENTER"><font size="2">68</font>
    </td>
    <td valign="TOP" width="101">
      <p align="CENTER"><font size="2">1997</font>
    </td>
    <td valign="TOP" colspan=2 width="101">
      <p align="CENTER"><font size="2">N/A</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="6">&nbsp;</td>
    <td valign="TOP" width="297">
      <p><font size="2">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 to 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.
        </font>
    </td>
    <td valign="TOP" width="33">&nbsp;</td>
    <td valign="TOP" colspan=2>&nbsp;</td>
    <td valign="TOP" width="101">&nbsp;</td>
    <td valign="TOP" colspan=2 width="101">&nbsp;</td>
  </tr>
  </table>





<table width=600><tr><td><hr size=1 noshade align=left  width=75></td></tr></table>

<table width=600><tr><td width=3% valign=top><font size="1">*
</font></td><td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">Biographical information pertaining to the Director
      nominees, Joe Grills and Robert S. Salomon, Jr., appears on page 38.&lt;/R&gt;</font></td>
  </tr></table>









<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
I-3</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></table><p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;





<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 4, page: 4" -->




<P><table cellspacing=0 border=0 cellpadding=0 width=600>
  <tr valign="bottom">
    <td colspan="3"><font size="1"><b> Name, Address and Biography </b> </font>
      <hr noshade size="1" width="49%" align="left">
    </td>
    <td colspan=2>
      <p align="CENTER"><font size="1"><b>Age</b></font>
      <hr noshade size="1" width="90%">
    </td>
    <td width="101">
      <p align="CENTER"><font size="1"><b>High Income <br>
        Municipal <br>
        Director Since </b></font>
      <hr noshade size="1" width="90%">
    </td>
    <td colspan=2 width="101">
      <p align="CENTER"><font size="1"><b>MuniAssets <br>
        Director <br>
        Since </b></font>
      <hr noshade size="1" width="90%">
    </td>
  </tr>

  <tr>
    <td valign="TOP" colspan="3">&nbsp;</td>
    <td valign="TOP" colspan=2>&nbsp;</td>
    <td valign="TOP" width="101">&nbsp;</td>
    <td valign="TOP" colspan=2 width="101">&nbsp;</td>
  </tr>

  <tr>
    <td valign="TOP" colspan="3"><font size="2"> Melvin R. Seiden </font></td>
    <td valign="TOP" colspan=2>
      <p align="CENTER"><font size="2">70</font>
    </td>
    <td valign="TOP" width="101">
      <p align="CENTER"><font size="2">N/A</font>
    </td>
    <td valign="TOP" colspan=2 width="101">
      <p align="CENTER"><font size="2">1993</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="6">&nbsp;</td>
    <td valign="TOP" width="297"><font size="2"> 780 Third Avenue, Suite 2502,
      New York, New York 10017. Director of Silbanc Properties, Ltd. (real estate,
      investment and consulting) since 1987; Chairman and President of Seiden
      &amp; de Cuevas, Inc. (private investment firm) from 1964 to 1987.</font></td>
    <td valign="TOP" width="33">&nbsp;</td>
    <td valign="TOP" colspan=2>&nbsp;</td>
    <td valign="TOP" width="101">&nbsp;</td>
    <td valign="TOP" colspan=2 width="101">&nbsp;</td>
  </tr>
</table>
<table cellspacing=0 border=0 cellpadding=0 width=600>

  <tr>
    <td valign="TOP" colspan="3"><font size="2">&lt;R&gt;</font></td>
    <td valign="TOP" colspan=2>&nbsp;</td>
    <td valign="TOP" width="101">&nbsp;</td>
    <td valign="TOP" colspan=2 width="101">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="3"><font size="2"> Roscoe S. Suddarth </font></td>
    <td valign="TOP" colspan=2>
      <p align="CENTER"><font size="2">66</font>
    </td>
    <td valign="TOP" width="101">
      <p align="CENTER"><font size="2">2000</font>
    </td>
    <td valign="TOP" colspan=2 width="101">
      <p align="CENTER"><font size="2">N/A</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="6">&nbsp;</td>
    <td valign="TOP" width="297">
      <p><font size="2">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, Deputy Inspector General, U.S. Department of State
        from 1991 to 1994, U.S. Ambassador to the Hashemite Kingdom of Jordan
        from 1987 to 1990. </font>
    </td>
    <td valign="TOP" width="33">&nbsp;</td>
    <td valign="TOP" colspan=2>&nbsp;</td>
    <td valign="TOP" width="101">&nbsp;</td>
    <td valign="TOP" colspan=2 width="101">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="3">&nbsp;</td>
    <td valign="TOP" colspan=2>&nbsp;</td>
    <td valign="TOP" width="101">&nbsp;</td>
    <td valign="TOP" colspan=2 width="101">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="3"><font size="2"> Stephen B. Swensrud </font></td>
    <td valign="TOP" colspan=2>
      <p align="CENTER"><font size="2">68</font>
    </td>
    <td valign="TOP" width="101">
      <p align="CENTER"><font size="2">N/A</font>
    </td>
    <td valign="TOP" colspan=2 width="101">
      <p align="CENTER"><font size="2">1993</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="6">&nbsp;</td>
    <td valign="TOP" width="297"><font size="2"> 88 Broad Street, 2<sup>nd</sup>
      Floor, Boston, Massachusetts 02110. Chairman of Fernwood Advisors (investment
      adviser) since 1996; Principal, Fernwood Associates (financial consultant)
      since 1975; Chairman of RPP Corporation (manufacturing) since 1978; Director
      of International Mobile Communications, Inc. (telecommunications) since
      1998. </font></td>
    <td valign="TOP" width="33">&nbsp;</td>
    <td valign="TOP" colspan=2>&nbsp;</td>
    <td valign="TOP" width="101">&nbsp;</td>
    <td valign="TOP" colspan=2 width="101">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="3"><font size="2">&lt;/R&gt;</font></td>
    <td valign="TOP" colspan=2>&nbsp;</td>
    <td valign="TOP" width="101">&nbsp;</td>
    <td valign="TOP" colspan=2 width="101">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="3"><font size="2"> Richard R. West </font></td>
    <td valign="TOP" colspan=2>
      <p align="CENTER"><font size="2">63</font>
    </td>
    <td valign="TOP" width="101">
      <p align="CENTER"><font size="2">1997</font>
    </td>
    <td valign="TOP" colspan=2 width="101">
      <p align="CENTER"><font size="2">N/A</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="6">&nbsp;</td>
    <td valign="TOP" width="297">
      <p><font size="2">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 &amp; Co., Inc. (financial printers), Vornado Realty
        Trust, Inc. (real estate holding company) and Alexander&#146;s Inc. (real estate
        holding company). </font>
    </td>
    <td valign="TOP" width="33">&nbsp;</td>
    <td valign="TOP" colspan=2>&nbsp;</td>
    <td valign="TOP" width="101">&nbsp;</td>
    <td valign="TOP" colspan=2 width="101">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="3">&nbsp;</td>
    <td valign="TOP" colspan=2>&nbsp;</td>
    <td valign="TOP" width="101">&nbsp;</td>
    <td valign="TOP" colspan=2 width="101">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="3"><font size="2"> Edward D. Zinbarg </font></td>
    <td valign="TOP" colspan=2>
      <p align="CENTER"><font size="2">66</font>
    </td>
    <td valign="TOP" width="101">
      <p align="CENTER"><font size="2">2000</font>
    </td>
    <td valign="TOP" colspan=2 width="101">
      <p align="CENTER"><font size="2">N/A</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="6">&nbsp;</td>
    <td valign="TOP" width="297"><font size="2"> 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. </font></td>
    <td valign="TOP" width="33">&nbsp;</td>
    <td valign="TOP" colspan=2>&nbsp;</td>
    <td valign="TOP" width="101">&nbsp;</td>
    <td valign="TOP" colspan=2 width="101">&nbsp;</td>
  </tr>
</table>
<p>

<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
I-4</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></table><p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;





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<!-- MARKER LABEL="sheet: 5, page: 5" -->



<p><table width=600><tr><td><font size=2><B>Information Pertaining to Officers
of MuniAssets and High Income Municipal</B></font></td></tr></table>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set
forth in the table below is information about the officers of MuniAssets and
High Income Municipal.</font></td></tr></table>

<br>
<font size="2">&lt;R&gt;</font>
<br>
<table cellspacing=0 border=0 cellpadding=0 width=601>
  <tr valign="bottom">
    <td width="6">&nbsp;</td>
    <td width="325">&nbsp;</td>
    <td width="19">&nbsp;</td>
    <td width="36" align="center">&nbsp;</td>
    <td width="90">&nbsp;</td>
    <td colspan=2>
      <p align="CENTER"><b><font size="1">Officer Since</font></b>
      <hr noshade size="1">
    </td>
  </tr>
  <tr valign="bottom">
    <td colspan="2"><b><font size="1"> Name and Biography</font></b>
      <hr noshade size="1" width="41%" align="left">
    </td>
    <td width="19">&nbsp;</td>
    <td width="36" align="center">
      <p align="CENTER"><b><font size="1">Age</font></b>
      <hr noshade size="1" width="90%">
    </td>
    <td width="90">
      <p align="CENTER"><b><font size="1">Office</font></b>
      <hr noshade size="1" width="90%">
    </td>
    <td width="59">
      <p align="CENTER"><b><font size="1">MuniAssets</font></b>
      <hr noshade size="1" width="90%">
    </td>
    <td width="66">
      <p align="CENTER"><b><font size="1">High Income Municipal</font></b>
      <hr noshade size="1" width="90%">
    </td>
  </tr>
  <tr valign="bottom">
    <td colspan="2"><font size="2">Terry K. Glenn</font></td>
    <td width="19">&nbsp;</td>
    <td width="36">
      <p align="CENTER"><font size="2">60</font>
    </td>
    <td width="90"><font size="2"> President*</font></td>
    <td width="59">
      <p align="CENTER"><font size="2">1993</font>
    </td>
    <td width="66">
      <p align="CENTER"><font size="2">1990</font>
    </td>
  </tr>
  <tr valign="top">
    <td width="6">&nbsp;</td>
    <td width="325"><font size="2">Chairman (Americas Region) since 2001, and
      Executive Vice President of MLIM and its affiliate, FAM (which terms as
      used herein include their corporate predecessors) since 1983; President,
      Merrill Lynch Mutual Funds since 1999; President of FAMD since 1986 and
      Director thereof since 1991; Executive Vice President and Director of Princeton
      Services since 1993; President of Princeton Administrators, L.P. since 1988;
      Director of FDS since 1985. </font></td>
    <td width="19">&nbsp;</td>
    <td width="36" align="center">&nbsp;</td>
    <td width="90">&nbsp;</td>
    <td width="59">&nbsp;</td>
    <td width="66">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td colspan="2" height="18">&nbsp;</td>
    <td width="19" height="18">&nbsp;</td>
    <td width="36" height="18" align="center">&nbsp;</td>
    <td width="90" height="18">&nbsp;</td>
    <td width="59" height="18">&nbsp;</td>
    <td width="66" height="18">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td colspan="2"><font size="2">Vincent R Giordano</font></td>
    <td width="19">&nbsp;</td>
    <td width="36" align="center"><font size="2">57</font></td>
    <td width="90"><font size="2">Senior Vice</font></td>
    <td width="59">
      <p align="CENTER"><font size="2">1993</font>
    </td>
    <td width="66">
      <p align="CENTER"><font size="2">1993</font>
    </td>
  </tr>
  <tr valign="top">
    <td width="6">&nbsp;</td>
    <td width="325"><font size="2"> Managing Director of MLIM since 2000 and Senior
      Vice President thereof from 1984 to 2000; Senior Vice President of Princeton
      Services since 1993. </font></td>
    <td width="19">&nbsp;</td>
    <td width="36" align="center">
      <p align="CENTER">&nbsp;
    </td>
    <td width="90"><font size="2"> President</font></td>
    <td width="59">&nbsp;</td>
    <td width="66">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="6">&nbsp;</td>
    <td width="325">&nbsp;</td>
    <td width="19">&nbsp;</td>
    <td width="36" align="center">&nbsp;</td>
    <td width="90">&nbsp;</td>
    <td width="59">&nbsp;</td>
    <td width="66">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td colspan="2"><font size="2">Kenneth A. Jacob</font></td>
    <td width="19">&nbsp;</td>
    <td width="36" align="center"><font size="2">50</font></td>
    <td width="90"><font size="2">Vice President</font></td>
    <td width="59">
      <p align="CENTER"><font size="2">1993</font>
    </td>
    <td width="66">
      <p align="CENTER"><font size="2">1990</font>
    </td>
  </tr>
  <tr valign="top">
    <td width="6">&nbsp;</td>
    <td width="325"><font size="2"> First Vice President of MLIM since 1997 and
      Vice President thereof from 1984 to 1997; Vice President of FAM since 1984.
      </font></td>
    <td width="19">&nbsp;</td>
    <td width="36" align="center">
      <p align="CENTER">&nbsp;
    </td>
    <td width="90"><font size="2"> </font></td>
    <td width="59">&nbsp;</td>
    <td width="66">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="6">&nbsp;</td>
    <td width="325">&nbsp;</td>
    <td width="19">&nbsp;</td>
    <td width="36" align="center">&nbsp;</td>
    <td width="90">&nbsp;</td>
    <td width="59">&nbsp;</td>
    <td width="66">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td colspan="2"><font size="2">Theodore R. Jaeckel, Jr.</font></td>
    <td width="19">&nbsp;</td>
    <td width="36" align="center"><font size="2">42</font></td>
    <td width="90"><font size="2">Vice President</font></td>
    <td width="59">
      <p align="CENTER"><font size="2">1997</font>
    </td>
    <td width="66">
      <p align="CENTER"><font size="2">1995</font>
    </td>
  </tr>
  <tr valign="top">
    <td width="6">&nbsp;</td>
    <td width="325"><font size="2"> Director (Municipal Tax-Exempt Fund Management)
      of MLIM since 1997; Vice President of MLIM from 1991 to 1997. </font></td>
    <td width="19">&nbsp;</td>
    <td width="36" align="center">
      <p align="CENTER">&nbsp;
    </td>
    <td width="90"><font size="2"> and Portfolio<br>
      Manager</font></td>
    <td width="59">&nbsp;</td>
    <td width="66">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="6">&nbsp;</td>
    <td width="325">&nbsp;</td>
    <td width="19">&nbsp;</td>
    <td width="36" align="center">&nbsp;</td>
    <td width="90">&nbsp;</td>
    <td width="59">&nbsp;</td>
    <td width="66">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td colspan="2"><font size="2">Donald C. Burke</font></td>
    <td width="19">&nbsp;</td>
    <td width="36" align="center"><font size="2">41</font></td>
    <td width="90"><font size="2">Vice President</font></td>
    <td width="59" align="center"><font size="2">1993</font></td>
    <td width="66" align="center"><font size="2">1994</font></td>
  </tr>
  <tr valign="top">
    <td width="6" rowspan="2">&nbsp;</td>
    <td width="325" rowspan="2"><font size="2"> First Vice President of MLIM and
      FAM since 1997 and Treasurer thereof since 1999; Senior Vice President and
      Treasurer of Princeton Services since 1999;&nbsp;Vice President of FAMD
      since 1999; Vice President of MLIM and FAM from 1990 to 1997; Director&nbsp;of
      Taxation of MLIM since 1990. </font></td>
    <td width="19" height="65" rowspan="2">&nbsp;</td>
    <td width="36" height="65" rowspan="2" align="center">
      <p align="CENTER">&nbsp;
    </td>
    <td width="90" height="70" rowspan="2"><font size="2"> and Treasurer<br>
      </font></td>
    <td width="59" height="70" rowspan="2">
      <p align="CENTER"><font size="2">1999 </font></p>
    </td>
    <td width="66" height="70" rowspan="2">
      <p align="CENTER"><font size="2">1999 </font></p>
    </td>
  </tr>
  <tr valign="top"> </tr>
  <tr valign="top">
    <td width="6">&nbsp;</td>
    <td width="325">&nbsp;</td>
    <td width="19">&nbsp;</td>
    <td width="36" align="center">&nbsp;</td>
    <td width="90">&nbsp;</td>
    <td width="59">&nbsp;</td>
    <td width="66">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td colspan="2"><font size="2">Bradley J. Lucido</font></td>
    <td width="19">&nbsp;</td>
    <td width="36" align="center"><font size="2">35</font></td>
    <td width="90"><font size="2"> Secretary</font></td>
    <td width="59">
      <p align="CENTER"><font size="2">1999</font>
    </td>
    <td width="66">
      <p align="CENTER"><font size="2">N/A</font>
    </td>
  </tr>
  <tr valign="top">
    <td width="6">&nbsp;</td>
    <td width="325"><font size="2"> Vice President of MLIM since 1999; attorney
      with MLIM since 1995. </font></td>
    <td width="19">&nbsp;</td>
    <td width="36" align="center">
      <p align="CENTER">&nbsp;
    </td>
    <td width="90">&nbsp;</td>
    <td width="59">&nbsp;</td>
    <td width="66">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="6">&nbsp;</td>
    <td width="325">&nbsp;</td>
    <td width="19">&nbsp;</td>
    <td width="36" align="center">&nbsp;</td>
    <td width="90">&nbsp;</td>
    <td width="59">&nbsp;</td>
    <td width="66">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td colspan="2"><font size="2">Alice A. Pellegrino</font></td>
    <td width="19">&nbsp;</td>
    <td width="36" align="center"><font size="2">41</font></td>
    <td width="90"><font size="2"> Secretary</font></td>
    <td width="59">
      <p align="CENTER"><font size="2">N/A</font>
    </td>
    <td width="66">
      <p align="CENTER"><font size="2">2001</font>
    </td>
  </tr>
  <tr valign="top">
    <td width="6">&nbsp;</td>
    <td width="325"><font size="2"> Vice President of MLIM since 1999; attorney
      with MLIM since 1997; Associate with Kirkpatrick &amp; Lockhart <font size="1">LLP</font>
      from 1992 to 1997. </font></td>
    <td width="19">&nbsp;</td>
    <td width="36" align="center">
      <p align="CENTER">&nbsp;
    </td>
    <td width="90">&nbsp;</td>
    <td width="59">&nbsp;</td>
    <td width="66">&nbsp;</td>
  </tr>
</table>
<font size="2">&lt;/R&gt;</font>
<br>
<table width=600>
  <tr>
    <td>
      <hr size=1 noshade align=left  width=75>
    </td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3% valign=top><font size="1">*
</font></td>
    <td width=2%><font size="1"></font></td>
    <td width=95%><font size="1">Prior
to being elected President of MuniAssets and High Income Municipal in 1999, Mr.
Glenn served as Executive Vice President of both Funds.</font></td>
  </tr>
</table>
<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
I-5</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></table><p>&nbsp;<hr size=5 noshade width=600 align=LEFT>
<p>&nbsp;









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<!-- MARKER LABEL="sheet: 1, page: 1" -->

<p>
<p><table width=600><tr>
    <td  align=right><font size=2><B><a name="ii1"></a>APPENDIX II</B></font></td>
  </tr></table>

<p><table width=600><tr><td  align=center><font size=2><B>AGREEMENT AND PLAN OF
REORGANIZATION</B></font></td></tr></table>


<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;&nbsp;THIS AGREEMENT AND
      PLAN OF REORGANIZATION (this &#147;Agreement&#148;) is made as of the 7th
      day of September, 2001, by and between Merrill Lynch High Income Municipal
      Bond Fund, Inc., a Maryland corporation (&#147;High Income Municipal&#148;),
      and MuniAssets Fund, Inc., a Maryland corporation (&#147;MuniAssets&#148;).
      MuniAssets and High Income Municipal are sometimes referred to herein collectively
      as the &#147;Funds&#148; and individually as a &#147;Fund,&#148; as the
      context requires.&lt;/R&gt;</font></td>
  </tr></table>

<p><table width=600><tr>
    <td  align=center><font size=2><b>PLAN OF REORGANIZATION</b></font></td>
  </tr></table>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
reorganization will constitute the following:</font></td></tr></table>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) the
acquisition by MuniAssets of substantially all of the assets, and the
assumption by MuniAssets of substantially all of the liabilities of High Income
Municipal in return solely for an equal aggregate value of newly issued full
shares of common stock, with a par value of $0.10 per share, of MuniAssets
(&#147;MuniAssets Common Stock&#148;), and</font></td></tr></table>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) the
subsequent distribution by High Income Municipal to High Income Municipal
stockholders of all of the full shares of MuniAssets Common Stock received by
High Income Municipal in return for High Income Municipal stockholders&#146; shares
of common stock, with a par value of $0.10 per share, including shares of
common stock of High Income Municipal representing the Dividend Reinvestment
Plan (&#147;DRIP&#148;) shares held in the book deposit accounts of the holders of common
stock of High Income Municipal (&#147;High Income Municipal Common Stock&#148;)( plus
cash in lieu of fractional shares);</font></td></tr></table>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;all upon and subject to the
      terms hereinafter set forth (collectively, the &#147;Reorganization&#148;).</font></td>
  </tr></table>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the
course of the Reorganization, each holder of High Income Municipal Common Stock
will be entitled to receive a number of full shares of MuniAssets Common Stock
and cash in lieu of fractional shares equal to the aggregate net asset value of
High Income Municipal Common Stock owned by such stockholder on the Closing
Date (as defined in Section 7(a) below).</font></td></tr></table>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 &#147;Code&#148;), and any successor provision.</font></td></tr></table>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to
the Closing Date, High Income Municipal 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 its net capital gain, if any,
realized to and including the Closing Date.</font></td></tr></table>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
promptly as practicable after the consummation of the Reorganization, High
Income Municipal 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 &#147;1940 Act&#148;).</font></td></tr></table>
<p><table width=600><tr>
    <td  align=center><font size=2><b>AGREEMENT</b></font></td>
  </tr></table>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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:</font></td></tr></table>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. <i>&nbsp;Representations
      and Warranties of MuniAssets.</i></font></td>
  </tr></table>

<p>
<table width=600>
  <tr>
    <td width="30">&nbsp;</td>
    <td width="558"><font size=2>MuniAssets represents and warrants to, and agrees
      with, High Income Municipal that:</font></td>
  </tr>
</table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)
MuniAssets 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. MuniAssets 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.</font></td></tr></table>

<br>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) MuniAssets is
      duly registered under the 1940 Act as a non-diversified, closed-end management
      investment company (File No. 811-07642), and such registration has not been
      revoked or rescinded and is in full force and effect. MuniAssets has elected
      and qualified since inception for the special tax treatment </font></td>
  </tr>
</table>



<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
II-1</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></table><p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;





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<!-- MARKER LABEL="sheet: 2, page: 2" -->



<p><table width=600>
<tr><td width=30>&nbsp;</td>
    <td width=570><font size=2>afforded regulated investment companies (&#147;RICs&#148;)
      under Sections 851-855 of the Code and intends to continue to so qualify
      until consummation of the Reorganization and thereafter.</font></td>
  </tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) High Income Municipal
      has been furnished with MuniAssets&#146; Annual Report to Stockholders for
      the fiscal year ended May 31, 2001, and the audited financial statements
      appearing therein, having been audited  by Deloitte &amp; Touche <font size="1">LLP</font>,
      independent public accountants, fairly present the financial position of
      MuniAssets as of the respective dates indicated, in conformity with  accounting principles generally
accepted in the United States of America applied on a consistent basis.</font></td>
  </tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) An unaudited
      statement of assets, liabilities and capital of MuniAssets and an unaudited
      schedule of investments of MuniAssets, each as of the Valuation Time (as
      defined in Section 3(d) of this Agreement), will be furnished to High Income
      Municipal, at or prior to the Closing Date for the purpose of determining
      the number of shares of MuniAssets Common Stock to be issued pursuant to
      Section 4 of this Agreement; each will fairly present the financial position
      of MuniAssets as of the Valuation Time in conformity with accounting principles
      generally accepted in the United States of America applied on a consistent
      basis.</font></td>
  </tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)
MuniAssets 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&#146; rights generally and court decisions with respect thereto.</font></td></tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)
There are no material legal, administrative or other proceedings pending or, to
the knowledge of MuniAssets, threatened against it which assert liability on
the part of MuniAssets or which materially affect its financial condition or
its ability to consummate the Reorganization. MuniAssets 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.</font></td></tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)
MuniAssets 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.</font></td></tr></table>

<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) There are no
      material contracts outstanding to which MuniAssets 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 High Income Municipal prior
      to the Valuation Time.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) MuniAssets 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 May 31, 2001, and those incurred in connection with the Reorganization.
      As of the Valuation Time, MuniAssets will advise High Income Municipal 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.</font></td>
  </tr>
</table>
<p>
<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)
No consent, approval, authorization or order of any court or governmental
authority is required for the consummation by MuniAssets of the Reorganization,
except such as may be required under the Securities Act of 1933, as amended
(the &#147;1933 Act&#148;), the Securities Exchange Act of 1934, as amended (the &#147;1934
Act&#148;) 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).</font></td></tr></table>

<br>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) The registration
      statement filed by MuniAssets on Form N-14 which includes the joint proxy
      statement of the Funds with respect to the transactions contemplated herein
      and the prospectus of MuniAssets relating to the MuniAssets Common Stock
      to be issued pursuant to this Agreement, (the &#147;Joint Proxy Statement
      and Prospectus&#148;), and any supplement or amendment thereto or to the
      documents therein (as amended or supplemented, the &#147;N-14 Registration
      Statement&#148;), on its effective date, at the time of the stockholders&#146;
      meetings referred to in Section 6(a) of this Agreement and at the Closing
      Date, insofar as it relates to MuniAssets (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 </font></td>
  </tr>
</table>


<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
II-2</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></table><p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;







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<!-- MARKER LABEL="sheet: 3, page: 3" -->




<p>
<p><table width=600>
<tr><td width=30>&nbsp;</td>
    <td width=570><font size=2>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 Joint 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 light of the circumstances under which they were
      made, not misleading;<i> provided, however</i>, 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 MuniAssets for use in the N-14 Registration
      Statement as provided in Section 6(e) of this Agreement.</font></td>
  </tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)
MuniAssets is authorized to issue 200,000,000 shares of capital stock, all of
which 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.</font></td></tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)
The shares of MuniAssets Common Stock to be issued to High Income Municipal
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 MuniAssets will have any preemptive right of subscription or
purchase in respect thereof.</font></td></tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)
At or prior to the Closing Date, the MuniAssets Common Stock to be transferred
to High Income Municipal for distribution to the stockholders of High Income
Municipal 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 High Income
Municipal 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.</font></td></tr></table>

<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o) At or prior to
      the Closing Date, MuniAssets will have obtained any and all regulatory,
      Director and stockholder approvals necessary to issue the MuniAssets Common
      Stock to High Income Municipal.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp; <i>Representations
      and Warranties of High Income Municipal.</i></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width="29">&nbsp;</td>
    <td width="559"><font size=2>High Income Municipal represents and warrants
      to, and agrees with, MuniAssets that:</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) High Income Municipal
      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. High Income Municipal
      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.</font></td>
  </tr>
</table>
<p>
<table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)
High Income Municipal is duly registered under the 1940 Act as a continuously
offered, non-diversified, closed-end management investment company (File No.
811-06156), and such registration has not been revoked or rescinded and is in
full force and effect. High Income Municipal has elected and qualified since
inception for the special tax treatment afforded RICs under Sections 851-855 of
the Code and intends to continue to so qualify through its taxable year ending
upon liquidation.</font></td></tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)
As used in this Agreement, the term &#147;High Income Municipal Investments&#148; shall
mean (i) the investments of High Income Municipal shown on the schedule of its
investments as of the Valuation Time furnished to MuniAssets; and (ii) all
other assets owned by High Income Municipal or liabilities incurred as of the
Valuation Time.</font></td></tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)
High Income Municipal 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&#146; rights generally and court decisions with respect thereto.</font></td></tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) MuniAssets has
      been furnished with High Income Municipal&#146;s Annual Report to Stockholders
      for the fiscal year ended August 31, 2000, and the audited financial statements
      appearing therein, having been audited by Deloitte &amp; Touche <font size="1">LLP</font>,
      independent auditors, fairly present the financial position of High Income
      Municipal as of the respective dates indicated, in conformity with accounting
      principles generally accepted in the United States of America applied on
      a consistent basis.</font></td>
  </tr></table>


<p>
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
II-3</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></table><p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;









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<!-- MARKER LABEL="sheet: 4, page: 4" -->




<p><table width=600>
<tr>
    <td width=30 align="right" valign="top"><font size="2.">&lt;R&gt;</font></td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) MuniAssets has
      been furnished with High Income Municipal&#146;s Semi-Annual Report to Stockholders
      for the period ended February 28, 2001 and the unaudited financial statements
      appearing therein, fairly present the financial position of High Income
      Municipal as of the respective dates indicated, in conformity with accounting
      principles generally accepted in the United States of America applied on
      a consistent basis. &lt;/R&gt;</font></td>
  </tr></table>

<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) An unaudited
      statement of assets, liabilities and capital of High Income Municipal and
      an unaudited schedule of investments of High Income Municipal, each as of
      the Valuation Time, will be furnished to MuniAssets at or prior to the Closing
      Date for the purpose of determining the number of shares of MuniAssets Common
      Stock to be issued to High Income Municipal pursuant to Section 4 of this
      Agreement; each will fairly present the financial position of High Income
      Municipal as of the Valuation Time in conformity with generally accepted
      accounting principles applied on a consistent basis.</font></td>
  </tr>
</table>

<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) There are no
      material legal, administrative or other proceedings pending or, to the knowledge
      of High Income Municipal, threatened against it which assert liability on
      the part of High Income Municipal or which materially affect its financial
      condition or its ability to consummate the Reorganization. High Income Municipal
      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.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) There are no
      material contracts outstanding to which High Income Municipal is a party
      that have not been disclosed in the N-14 Registration Statement or will
      not otherwise be disclosed to MuniAssets prior to the Valuation Time.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) High Income Municipal
      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.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) High Income Municipal
      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 February 28, 2001, and those incurred in
      connection with the Reorganization. As of the Valuation Time, High Income
      Municipal will advise MuniAssets 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.</font></td>
  </tr>
</table>
<p>
<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)
High Income Municipal 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 High Income Municipal have been adequately provided for on its
books, and no tax deficiency or liability of High Income Municipal 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.</font></td></tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)
At both the Valuation Time and the Closing Date, High Income Municipal will
have full right, power and authority to sell, assign, transfer and deliver the
High Income Municipal Investments. At the Closing Date, subject only to the
obligation to deliver the High Income Municipal Investments as contemplated by
this Agreement, High Income Municipal will have good and marketable title to
all of the High Income Municipal Investments, and MuniAssets will acquire all
of the High Income Municipal 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 High Income Municipal Investments or materially affect
title thereto).</font></td></tr></table>

<br>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n) No consent, approval,
      authorization or order of any court or governmental authority is required
      for the consummation by High Income Municipal of the Reorganization, except
      such as may be required under the 1933 Act, the 1934 Act, the 1940 Act or
      state securities laws. </font></td>
  </tr>
</table>
<p><table width=600>
<tr><td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o) The N-14 Registration
      Statement, on its effective date, at the time of the stockholders&#146;
      meetings referred to in Section 6(a) of this Agreement and on the Closing
      Date, insofar as it relates to High Income Municipal (i) complied or will
      comply in all material respects with the provisions of the 1933 Act, the
      1934</font></td>
  </tr></table>


<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
II-4</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></table><p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;









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<!-- MARKER LABEL="sheet: 5, page: 5" -->


<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2> 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 Joint 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; <i>provided,
      however</i>, 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 High Income Municipal for use in the N-14 Registration Statement as provided
      in Section 6(e) of this Agreement.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p) High Income Municipal
      is authorized to issue 200,000,000 shares of capital stock, all of which
      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.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q) All of the issued
      and outstanding shares of High Income Municipal Common Stock were offered
      for sale and sold in conformity with all applicable Federal and state securities
      laws.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r) The books and
      records of High Income Municipal made available to MuniAssets and/or its
      counsel are substantially true and correct and contain no material misstatements
      or omissions with respect to the operations of High Income Municipal.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(s) High Income Municipal
      will not sell or otherwise dispose of any of the shares of MuniAssets Common
      Stock to be received in the Reorganization, except in distribution to the
      stockholders of High Income Municipal, as provided in Section 3 of this
      Agreement.</font></td>
  </tr>
</table>
<p>
<table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. &nbsp;<i>The Reorganization.</i></font></td>
  </tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)
Subject to receiving the requisite approvals of the stockholders of each Fund,
and to the other terms and conditions contained herein, High Income Municipal
agrees to convey, transfer and deliver to MuniAssets and MuniAssets agrees to
acquire from High Income Municipal on the Closing Date, substantially all of
the High Income Municipal Investments (including interest accrued as of the
Valuation Time on debt instruments) and assume substantially all of the
liabilities of High Income Municipal in return solely for that number of full
shares of MuniAssets Common Stock and cash in lieu of fractional shares
provided in Section 4 of this Agreement.</font></td></tr></table>

<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to this
      Agreement, as soon as practicable after the Closing Date High Income Municipal
      will distribute all full shares of MuniAssets Common Stock received by it
      to its stockholders (plus cash in lieu of fractional shares) in return for
      their shares of High Income Municipal Common Stock. Such distributions shall
      be accomplished by the opening of stockholder accounts on the stock ledger
      records of MuniAssets in the amounts due the stockholders of High Income
      Municipal based on their holdings in High Income Municipal as of the Valuation
      Time.</font></td>
  </tr>
</table>
<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)
Prior to the Closing Date, High Income Municipal 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 its net capital gain,
if any, realized to and including the Closing Date.</font></td></tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) High Income Municipal
      will pay or cause to be paid to MuniAssets any interest High Income Municipal
      receives on or after the Closing Date with respect to any of the High Income
      Municipal Investments transferred to MuniAssets hereunder.&lt;R&gt;</font></td>
  </tr></table>

<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) The Valuation
      Time shall be 4:00 p.m., Eastern time, on November 9, 2001, or such earlier
      or later day and time as may be mutually agreed upon in writing (the &#147;Valuation
      Time&#148;).&lt;/R&gt;</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) Recourse for
      liabilities assumed from High Income Municipal by MuniAssets in the Reorganization
      will be limited to the net assets of High Income Municipal acquired by MuniAssets.
      The known liabilities of High Income Municipal, as of the Valuation Time,
      shall be confirmed in writing to MuniAssets pursuant to Section 2(k) of
      this Agreement.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) The Funds will
      jointly file Articles of Transfer with the State Department of Assessments
      and Taxation of Maryland (the &#147;Maryland Department&#148;) and any other
      such instrument as may be required by the State of Maryland to effect the
      transfer of the High Income Municipal Investments.</font></td>
  </tr>
</table>


<p>
<p>
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
II-5</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></table><p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;







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<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) High Income Municipal
      will be dissolved following the Closing Date by filing Articles of Dissolution
      with the Maryland Department.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) As promptly as
      practicable after the liquidation of High Income Municipal pursuant to the
      Reorganization, High Income Municipal shall terminate its registration under
      the 1940 Act.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp; <i>Issuance and Valuation
      of MuniAssets Common Stock.</i></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Full shares of MuniAssets Common
      Stock of an aggregate net asset value equal (to the nearest one ten thousandth
      of one cent) to the value of the assets of High Income Municipal acquired
      in the Reorganization determined as hereinafter provided, reduced by the
      amount of liabilities of High Income Municipal assumed by MuniAssets in
      the Reorganization, shall be issued by MuniAssets to High Income Municipal
      in return for such assets of High Income Municipal.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The net asset value of each
      Fund shall be determined as of the Valuation Time in accordance with the
      procedures described in the N-14 Registration Statement 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 High Income Municipal Investments to be transferred to MuniAssets shall
      be determined by MuniAssets pursuant to the procedures utilized by MuniAssets
      in valuing its own assets and determining its own liabilities for purposes
      of the Reorganization. Such valuation and determination shall be made by
      MuniAssets in cooperation with High Income Municipal and shall be confirmed
      in writing by MuniAssets to High Income Municipal. The net asset value per
      share of the MuniAssets Common Stock shall be determined in accordance with
      such procedures and MuniAssets 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) is divided by the total number
      of shares of Common Stock of that Fund outstanding at such time.</font></td>
  </tr>
</table>
<p>
<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MuniAssets
shall issue to High Income Municipal separate certificates for the MuniAssets
Common Stock, registered in the name of High Income Municipal. High Income
Municipal then shall distribute the MuniAssets Common Stock to the holders of
High Income Municipal Common Stock by redelivering the certificates evidencing
ownership of the MuniAssets Common Stock to The Bank of New York (&#147;BONY&#148;), as
the transfer agent and registrar for the MuniAssets Common Stock, for
distribution to the holders of High Income Municipal Common Stock on the basis
of such holder&#146;s proportionate interest in the aggregate net asset value of
High Income Municipal Common Stock. With respect to any High Income Municipal
stockholder holding certificates evidencing ownership of High Income Municipal
Common Stock as of the Closing Date, and subject to MuniAssets being informed
thereof in writing by High Income Municipal, MuniAssets will not permit such
stockholder to receive new certificates evidencing ownership of the MuniAssets
Common Stock, exchange MuniAssets Common Stock credited to such stockholder&#146;s
account for shares of other investment companies managed by Fund Asset
Management, L.P. (&#147;FAM&#148;) or any of its affiliates, or pledge or redeem such
MuniAssets Common Stock, in any case, until notified by High Income Municipal
or its agent that such stockholder has surrendered his or her outstanding
certificates evidencing ownership of High Income Municipal Common Stock or, in
the event of lost certificates, posted adequate bond. High Income Municipal, at
its own expense, will request its stockholders to surrender their outstanding
certificates evidencing ownership of High Income Municipal Common Stock or post
adequate bond therefor.</font></td></tr></table>


<P><table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dividends payable to holders
      of record of shares of MuniAssets Common Stock, as of any date after the
      Closing Date and prior to the receipt of certificates in connection with
      the Reorganization by any stockholder of High Income Municipal, 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 High Income Municipal Common Stock in return for
      shares of MuniAssets Common Stock.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No fractional shares of MuniAssets
      Common Stock will be issued to holders of High Income Municipal Common Stock.
      In lieu thereof, MuniAssets&#146; transfer agent, BONY, will aggregate all
      fractional shares of MuniAssets Common Stock and sell the resulting full
      shares on the New York Stock Exchange at the current market price for shares
      of MuniAssets Common Stock for the account of all holders of fractional
      interests, and each such holder will receive such holder&#146;s <i>pro rata</i>
      share of the proceeds of such sale upon surrender of such holder&#146;s
      certificates representing High Income Municipal Common Stock.</font></td>
  </tr>
</table>



<p>
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
II-6</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></table><p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;









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<!-- MARKER LABEL="sheet: 7, page: 7" -->



<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. &nbsp;<i>Payment of Expenses.</i></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;The expenses of the
      Reorganization that are directly attributable to High Income Municipal and
      the conduct of its business will be deducted from the assets of High Income
      Municipal 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 meeting of the
      stockholders of High Income Municipal to consider the Reorganization, the
      expenses related to the solicitation of proxies to be voted at that meeting
      and a portion of the expenses incurred in printing the N-14 Registration
      Statement. The expenses of the Reorganization that are directly attributable
      to MuniAssets and the conduct of its business will be deducted from the
      assets of MuniAssets as of the Valuation Time. The expenses attributable
      to MuniAssets are expected to include the costs, if any of transfer agent
      fees, the costs of printing stock certificates, the expenses incurred in
      preparing, printing and mailing the proxy materials to be utilized in connection
      with the meeting of the stockholders of MuniAssets to consider the Reorganization,
      the expenses related to the solicitation of proxies to be voted at that
      meeting 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 the Funds.&lt;/R&gt;</font></td>
  </tr>
</table>
<p>
<p>
<table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. &nbsp;<i>Covenants of the
      Funds.</i></font></td>
  </tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)
Each Fund agrees to hold a meeting of its stockholders, special or otherwise,
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.</font></td></tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)
Each Fund covenants to operate its business as presently conducted between the
date hereof and the Closing Date.</font></td></tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)
High Income Municipal 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 MuniAssets Common Stock 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 MuniAssets, if any, and on and after the
Closing Date it shall not conduct any business except in connection with its
dissolution.</font></td></tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)
High Income Municipal 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 High Income Municipal has ceased to be a registered investment
company.</font></td></tr></table>

<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) MuniAssets will
      file the N-14 Registration Statement with the Securities and Exchange Commission
      (the &#147;Commission&#148;) 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.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) MuniAssets has
      no plan or intention to sell or otherwise dispose of the High Income Municipal
      Investments, except for dispositions made in the ordinary course of business.
      </font></td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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. MuniAssets 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 High Income Municipal for such Fund&#146;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, High Income Municipal 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</font></td>
  </tr>
</table>
<br>
<p>
<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
II-7</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></table><p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;









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<!-- MARKER LABEL="sheet: 8, page: 8" -->



<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>and Forms 1099 to be duly
      filed with the appropriate taxing authorities. Notwithstanding the aforementioned
      provisions of this subsection, any expenses incurred by High Income Municipal
      (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.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) Each Fund agrees
      to mail to its respective stockholders of record entitled to vote at the
      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, the Joint 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.</font></td>
  </tr>
</table>
<p>
<table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
Following the consummation of the Reorganization, MuniAssets will stay in
existence and continue its business as a non-diversified, closed-end management
investment company registered under the 1940 Act.</font></td></tr></table>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. &nbsp;<i>Closing Date.</i></font></td>
  </tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Delivery of the
      assets of High Income Municipal to be transferred and the shares of MuniAssets
      Common Stock to be issued as provided in this Agreement, shall be made at
      the offices of Sidley Austin Brown &amp; Wood <font size="1">LLP</font>,
      One World Trade Center, New York, New York 10048, at 10:00 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 &#147;Closing
      Date.&#148; To the extent that any High Income Municipal Investments, for
      any reason, are not transferable on the Closing Date, High Income Municipal
      shall cause such High Income Municipal Investments to be transferred to
      MuniAssets&#146;s account with BONY at the earliest practicable date thereafter.</font></td>
  </tr></table>


<br>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) High Income Municipal
      will deliver to MuniAssets on the Closing Date confirmations or other adequate
      evidence as to the tax basis of each of its respective High Income Municipal
      Investments delivered to MuniAssets hereunder, certified by Deloitte &amp; Touche
      <font size="1">LLP</font>.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) As soon as practicable
      after the close of business on the Closing Date, High Income Municipal shall
      deliver to MuniAssets a list of the names and addresses of all of the stockholders
      of record of High Income Municipal on the Closing Date and the number of
      shares of High Income Municipal Common Stock owned by each such stockholder,
      certified to the best of their knowledge and belief by the transfer agent
      for High Income Municipal or by its President.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. &nbsp;<i>Conditions of High
      Income Municipal.</i></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width="29">&nbsp;</td>
    <td width="559"><font size=2>The obligations of High Income Municipal hereunder
      shall be subject to the following conditions:</font></td>
  </tr>
</table>
<p>
<table width=601>
  <tr>
    <td width=29>&nbsp;</td>
    <td width=560><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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 MuniAssets, and
      (ii) at least two-thirds of the members of the Board of Directors of High
      Income Municipal, and by the affirmative vote, (A) with respect to High
      Income Municipal, of the holders of a majority of the outstanding shares
      of capital stock of High Income Municipal entitled to vote thereon, and
      (B) with respect to MuniAssets, of the holders of a majority of the outstanding
      shares of capital stock of MuniAssets entitled to vote thereon, and further
      that MuniAssets shall have delivered to High Income Municipal a copy of
      the resolution approving this Agreement adopted by MuniAssets&#146; Board
      of Directors, and a certificate setting forth the vote of MuniAssets&#146;
      stockholders obtained at the meeting of its stockholders, each certified
      by the Secretary of MuniAssets.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) That High Income
      Municipal shall have received from MuniAssets 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&#146;s investments, all as of the
      Valuation Time, certified on MuniAssets&#146; behalf by its President (or
      any Vice President) and its Treasurer, and a certificate signed by MuniAssets&#146;
      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 MuniAssets
      since the date of such Fund&#146;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.</font></td>
  </tr>
</table>


<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
II-8</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></table><p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;









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<!-- MARKER LABEL="sheet: 9, page: 9" -->



<p><table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) That MuniAssets
      shall have furnished to High Income Municipal a certificate signed by MuniAssets&#146;
      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 MuniAssets 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 MuniAssets 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.</font></td>
  </tr>
</table>

<br>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) That there shall
      not be any material litigation pending with respect to the matters contemplated
      by this Agreement.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) That High Income
      Municipal shall have received an opinion of Sidley Austin Brown &amp; Wood
      <font size="1">LLP</font>, as Maryland counsel to MuniAssets, as to Maryland
      law in form satisfactory to High Income Municipal and dated the Closing
      Date, to the effect that (i) MuniAssets 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 MuniAssets to be issued pursuant to
      this Agreement are duly authorized and, upon delivery, will be validly issued
      and fully paid and nonassessable by MuniAssets, and no stockholder of MuniAssets
      has any preemptive right to subscription or purchase in respect thereof
      (pursuant to the Articles of Incorporation or the by-laws of MuniAssets
      or, to the best of such counsel&#146;s knowledge, otherwise); (iii) this
      Agreement has been duly authorized, executed and delivered by MuniAssets;
      (iv) the execution and delivery of this Agreement by MuniAssets does not,
      and the consummation of the Reorganization will not, violate any provisions
      of Maryland law or the Articles of Incorporation, as amended, or the by-laws,
      as amended, of MuniAssets; (v) to the best of such counsel&#146;s knowledge,
      no consent, approval, authorization or order of any Maryland court or governmental
      authority is required for the consummation by MuniAssets of the Reorganization,
      except such as have been obtained under Maryland law; and (vi) such opinion
      is solely for the benefit of High Income Municipal and its Directors and
      Officers. In giving the opinion set forth above, Sidley Austin Brown &amp;
      Wood<font size="1"> LLP</font> may state that it is relying on certificates
      of officers of MuniAssets with regard to matters of fact and certain certificates
      and written statements of government officials with respect to the organization
      and good standing of MuniAssets.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) That High Income
      Municipal shall have received an opinion of Clifford Chance Rogers &amp;
      Wells <font size="1">LLP</font>, as counsel to MuniAssets, in form satisfactory
      to High Income Municipal and dated the Closing Date, to the effect that
      (i) this Agreement represents 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&#146; 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,
      and provided further, that such counsel shall express no opinion with respect
      to the indemnification and contribution provisions set forth in this Agreement;
      (ii) the execution and delivery of this Agreement by MuniAssets does not,
      and the consummation of the Reorganization will not, violate any material
      provisions of any agreement (known to such counsel to which MuniAssets is
      a party or by which MuniAssets is bound), except insofar as the parties
      have agreed to amend such provisions as a condition precedent to the Reorganization;
      (iii) to the best of such counsel&#146;s knowledge, no consent, approval,
      authorization or order of any United States federal court or governmental
      authority is required for the consummation by MuniAssets 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 such as may be required under state securities laws; (iv) 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; (v) 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; (vi) 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; (vii) MuniAssets, to the knowledge of such counsel, is not
      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 MuniAssets
      has so qualified or the failure so to qualify would not have a material
      adverse effect on</font></td>
  </tr>
</table>
<p>
<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
II-9</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></table><p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;








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<!-- MARKER LABEL="sheet: 10, page: 10" -->





<p><p><table width=600><tr><td width=30>&nbsp;</td>
    <td width=570><font size=2> MuniAssets or its stockholders; (viii) such counsel
      does not have actual knowledge of any material suit, action or legal or
      administrative proceeding pending or threatened against MuniAssets, the
      unfavorable outcome of which would materially and adversely affect MuniAssets;
      (ix) all corporate actions required to be taken by MuniAssets to authorize
      this Agreement and to effect the Reorganization have been duly authorized
      on the part of MuniAssets; and (x) such opinion is solely for the benefit
      of High Income Municipal and its 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 relating to MuniAssets required to be stated therein
      or necessary to make the statements therein not misleading; and (2) the
      proxy statement and prospectus included in the N-14 Registration Statement
      contained any untrue statement of a material fact or omitted to state any
      material fact relating to MuniAssets 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 contained or incorporated
      by reference in the N-14 Registration Statement. In giving the opinion set
      forth above, Clifford Chance Rogers &amp; Wells <font size="1">LLP</font>
      may state that it is relying on certificates of officers of MuniAssets with
      regard to matters of fact and certain certificates and written statements
      of governmental officials with respect to the good standing of MuniAssets.</font></td>
  </tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) That High Income
      Municipal shall have received an opinion of Sidley Austin Brown &amp; Wood <font size="1">LLP</font>
      to the effect that for Federal income tax purposes (i) the transfer by High
      Income Municipal of substantially all of its assets to MuniAssets in exchange
      solely for shares of MuniAssets Common Stock as provided in this Agreement
      will constitute a reorganization within the meaning of Section 368(a)(1)(C)
      of the Code, and MuniAssets and High Income Municipal will each be deemed
      to be a &#147;party&#148; 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 High Income Municipal as a result
      of the asset transfer solely in exchange for shares of MuniAssets Common
      Stock or on the distribution of MuniAssets Common Stock to High Income Municipal
      stockholders under Section 361(c)(1) of the Code; (iii) under Section 1032
      of the Code, no gain or loss will be recognized to MuniAssets on the receipt
      of assets of High Income Municipal in exchange for MuniAssets shares; (iv)
      in accordance with Section 354(a)(1) of the Code, no gain or loss will be
      recognized to the stockholders of High Income Municipal on the receipt of
      shares of MuniAssets Common Stock in exchange for their shares of High Income
      Municipal Common Stock (except to the extent that High Income Municipal
      common stockholders receive cash representing an interest in fractional
      shares of MuniAssets Common Stock in the Reorganization); (v) in accordance
      with Section 362(b) of the Code, the tax basis of the High Income Municipal
      assets in the hands of MuniAssets will be the same as the tax basis of such
      assets in the hands of High Income Municipal 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 MuniAssets
      Common Stock received by the stockholders of High Income Municipal in the
      Reorganization will be equal to the tax basis of the shares of High Income
      Municipal surrendered in exchange; (vii) in accordance with Section 1223
      of the Code, a stockholder&#146;s holding period for the shares of MuniAssets
      will be determined by including the period for which such stockholder held
      the shares of High Income Municipal Common Stock exchanged therefor, provided,
      that such shares of High Income Municipal were held as a capital asset;
      (viii) in accordance with Section 1223 of the Code, MuniAssets&#146; holding
      period with respect to the High Income Municipal assets transferred will
      include the period for which such assets were held by High Income Municipal;
      (ix) the payment of cash to common stockholders of High Income Municipal
      will be treated as though the fractional shares of MuniAssets Common Stock
      were distributed as part of the Reorganization and then redeemed by MuniAssets,
      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&#146;s
      basis allocable to the MuniAssets fractional shares: and (x) the taxable
      year of High Income Municipal will end on the effective date of the Reorganization,
      and pursuant to Section 381(a) of the Code and regulations thereunder, MuniAssets
      will succeed to and take into account, subject to limitation, certain tax
      attributes of High Income Municipal, such as earnings and profits, capital
      loss carryovers and method of accounting.</font></td>
  </tr></table>

<br>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) That all proceedings
      taken by MuniAssets and its counsel in connection with the Reorganization
      and all documents incidental thereto shall be satisfactory in form and substance
      to High Income Municipal.</font></td>
  </tr>
</table>

<p>&nbsp;
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> II-10</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>

<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>





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<!-- MARKER LABEL="sheet: 11, page: 11" -->


<p><table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) 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 MuniAssets, be contemplated by the Commission.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) That High Income
      Municipal shall have received from Deloitte &amp; Touche<font size="1"> LLP</font>
      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
      MuniAssets 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 MuniAssets 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 High Income Municipal
      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
      MuniAssets included in the N-14 Registration Statement, and inquiries of
      certain officials of MuniAssets 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 High Income Municipal and described in such letter (but not an examination
      in accordance with generally accepted auditing standards), the information
      relating to MuniAssets 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 MuniAssets or from schedules prepared
      by officials of MuniAssets having responsibility for financial and reporting
      matters and such information is in agreement with such records, schedules
      or computations made therefrom.</font></td>
  </tr>
</table>
<p>
<p>
<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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 MuniAssets or would prohibit the Reorganization.</font></td></tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) That High Income
      Municipal shall have received from the Commission such orders or interpretations
      as Sidley Austin Brown &amp; Wood <font size="1">LLP</font>, as counsel to High
      Income Municipal, deems reasonably necessary or desirable under the 1933
      Act and the 1940 Act in connection with the Reorganization, <i>provided</i>,
      that such counsel shall have requested such orders as promptly as practicable,
      and all such orders shall be in full force and effect.</font></td>
  </tr></table>


<br>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9. &nbsp;<i>Conditions of MuniAssets.</i></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width="30">&nbsp;</td>
    <td width="558"><font size=2>The obligations of MuniAssets hereunder shall
      be subject to the following conditions:</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) That this Agreement
      shall have been adopted, and the Reorganization shall have been approved,
      by the Board of Directors and the stockholders of each of the Funds as set
      forth in Section 8(a); and that High Income Municipal shall have delivered
      to MuniAssets a copy of the resolution approving this Agreement adopted
      by High Income Municipal&#146;s Board of Directors, and a certificate setting
      forth the vote of High Income Municipal&#146;s stockholders obtained at
      the meeting of its stockholders, certified by the Secretary of High Income
      Municipal.</font></td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) That High Income
      Municipal shall have furnished to MuniAssets 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&#146;s behalf by its President (or any Vice President) and
      its Treasurer, and a certificate signed by such Fund&#146;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</font></td>
  </tr>
</table>
<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> II-11</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td></tr></table><p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;









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<!-- MARKER LABEL="sheet: 12, page: 12" -->




<p><table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2> position of High Income Municipal since the date
      of such Fund&#146;s most recent Annual Report or Semi-Annual Report, as
      applicable, other than changes in the High Income Municipal Investments
      since that date or changes in the market value of the High Income Municipal
      Investments.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) That High Income
      Municipal shall have furnished to MuniAssets a certificate signed by such
      Fund&#146;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 High Income Municipal 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 High Income Municipal 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. </font></td>
  </tr>
</table>
<p>
<p><table width=600>
<tr><td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) That High Income
      Municipal shall have delivered to MuniAssets a letter from Deloitte &amp; Touche
      <font size="1">LLP</font>, dated the Closing Date, stating that such firm
      has performed a limited review of the Federal, state and local income tax
      returns of High Income Municipal for the period ended May 31, 2001 (which
      returns originally were prepared and filed by High Income Municipal), 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 High Income
      Municipal for the period covered thereby; and that for the period from June
      1, 2001 to and including the Closing Date and for any taxable year of High
      Income Municipal ending upon the liquidation of High Income Municipal, 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 June 1, 2001 to and including
      the Closing Date and for any taxable year of High Income Municipal 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.</font></td>
  </tr></table>


<br>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) That there shall
      not be any material litigation pending with respect to the matters contemplated
      by this Agreement.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) That MuniAssets
      shall have received an opinion of Sidley Austin Brown &amp; Wood <font size="1">LLP</font>,
      as counsel to High Income Municipal, in form satisfactory to MuniAssets
      and dated the Closing Date, to the effect that (i) High Income Municipal
      is a corporation duly organized, validly existing and in good standing in
      conformity with the laws of the State of Maryland; (ii) this Agreement has
      been duly authorized, executed and delivered by High Income Municipal, 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&#146;
      rights generally and court decisions with respect thereto; <i>provided</i>,
      such counsel shall express no opinion with respect to the application of
      equitable principles in any proceeding, whether at law or in equity, and,
      provided further, that such counsel shall express no opinion with respect
      to the indemnification and contribution provisions set forth in this Agreement;
      (iii) the execution and delivery of this Agreement by High Income Municipal
      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 High Income Municipal is a party or by which High Income Municipal
      is bound, except insofar as the parties have agreed to amend such provision
      as a condition precedent to the Reorganization; (iv) High Income Municipal
      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, High Income Municipal will have duly transferred
      such assets and liabilities in accordance with this Agreement; (v) to the
      best of such counsel&#146;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 High Income Municipal 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 such as may be required under state securities
      laws; (vi) 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</font></td>
  </tr>
</table>
<p>
<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> II-12</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td></tr></table><p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;









<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 13, page: 13" -->





<p><table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2> requirements of the 1933 Act, the 1934 Act and
      the 1940 Act and the published rules and regulations of the Commission thereunder;
      (vii) 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; (viii) the information
      in the Joint Proxy Statement and Prospectus under &#147;Comparison of the
      Funds&#151;Tax Rules Applicable to the Funds and their Stockholders&#148;
      and &#147;Agreement and Plan of Reorganization&#151;Tax Consequences of
      the Reorganization,&#148; 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 Joint
      Proxy Statement and Prospectus; (ix) 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; (x) High Income Municipal, to the knowledge
      of such counsel, is not 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 High Income Municipal has so qualified or the failure
      so to qualify would not have a material adverse effect on High Income Municipal
      or its stockholders; (xi) such counsel does not have actual knowledge of
      any material suit, action or legal or administrative proceeding pending
      or threatened against High Income Municipal, the unfavorable outcome of
      which would materially and adversely affect High Income Municipal; (xii)
      all corporate actions required to be taken by High Income Municipal to authorize
      this Agreement and to effect the Reorganization have been duly authorized
      on the part of High Income Municipal; and (xiii) such opinion is solely
      for the benefit of MuniAssets and its 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 relating to High Income Municipal required to be
      stated therein or necessary to make the statements therein not misleading;
      and (2) the proxy statement and prospectus included in the N-14 Registration
      Statement contained any untrue statement of a material fact or omitted to
      state any material fact relating to High Income Municipal necessary to make
      the statements therein, in 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 contained or incorporated by reference in the N-14 Registration Statement.
      In giving the opinion set forth above, Sidley Austin Brown &amp; Wood <font size="1">LLP</font>
      may state that it is relying on certificates of officers of High Income
      Municipal with regard to matters of fact and certain certificates and written
      statements of governmental officials with respect to the organization and
      good standing of High Income Municipal.</font></td>
  </tr>
</table>



<br>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) That MuniAssets
      shall have received an opinion of Sidley Austin Brown &amp; Wood <font size="1">LLP</font>
      with respect to the matters specified in Section 8(g) of this Agreement.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) That MuniAssets
      shall have received from Deloitte &amp; Touche <font size="1">LLP</font>
      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 MuniAssets, to
      the effect that (i) they are independent public accountants with respect
      to High Income Municipal 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 High Income Municipal 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 MuniAssets 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 High Income Municipal included in the N-14 Registration Statement,
      and inquiries of certain officials of High Income Municipal 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; </font></td>
  </tr>
</table>
<p>
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> II-13</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td></tr></table><p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;









<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 14, page: 14" -->




<p><table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2> and (iv) on the basis of limited procedures agreed
      upon by MuniAssets and described in such letter (but not an examination
      in accordance with generally accepted auditing standards), the information
      relating to High Income Municipal 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 High Income Municipal or
      from schedules prepared by officials of High Income Municipal having responsibility
      for financial and reporting matters and such information is in agreement
      with such records, schedules or computations made therefrom.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) That the High
      Income Municipal Investments to be transferred to MuniAssets shall not include
      any assets or liabilities which MuniAssets, by reason of charter limitations
      or otherwise, may not properly acquire or assume.</font></td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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 High Income Municipal, be contemplated by the Commission.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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 High Income Municipal or would prohibit the Reorganization.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) That MuniAssets
      shall have received from the Commission such orders or interpretations as
      Clifford Chance Rogers &amp; Wells <font size="1">LLP</font>, as counsel
      to MuniAssets, 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.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m) That all proceedings
      taken by High Income Municipal and its counsel in connection with the Reorganization
      and all documents incidental thereto shall be satisfactory in form and substance
      to MuniAssets.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n) That prior to
      the Closing Date, High Income Municipal 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 gains, if any, realized to and including the Closing Date.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.&nbsp; <i>Termination, Postponement
      and Waivers.</i></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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 High Income Municipal if any condition of High Income Municipal&#146;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 MuniAssets
      if any condition of MuniAssets&#146; obligations set forth in Section 9
      of this Agreement has not been fulfilled or waived by such Board.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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 Board of Directors of MuniAssets has delegated to</font></td>
  </tr>
</table>

<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> II-14</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td></tr></table><p>&nbsp;<hr size=5 noshade width=600 align=LEFT>




<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 15, page: 15" -->

<p><table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=558><font size=2> FAM and the Board of Directors of High Income
      Municipal has delegated to Merrill Lynch Investment Managers, L.P. (&#147;MLIM&#148;),
      the ability to make non-material changes to the transaction if MLIM or FAM,
      as the case may be, deems it to be in the best interests of the Funds to
      do so. FAM and the Board of Directors of High Income Municipal has delegated
      to Merrill Lynch Investment Managers, L.P. (&#147;MLIM&#148;), the ability
      to make non-material changes to the transaction if MLIM or FAM, as the case
      may be, deems it to be in the best interests of the Funds to do so.</font></td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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 the Funds unless
      such terms and conditions shall result in a change in the method of computing
      the number of shares of MuniAssets Common Stock to be issued to High Income
      Municipal, as applicable, in which event, unless such terms and conditions
      shall have been included in the proxy solicitation materials furnished to
      the stockholders of the Funds prior to the meetings at which the Reorganization
      shall have been approved, this Agreement shall not be consummated and shall
      terminate unless the Funds promptly shall call a meeting of stockholders
      at which such conditions so imposed shall be submitted for approval.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11. <i>Indemnification.</i></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) High Income Municipal
      hereby agrees to indemnify and hold MuniAssets harmless from all loss, liability
      and expenses (including reasonable counsel fees and expenses in connection
      with the contest of any claim), as incurred, which MuniAssets may incur
      or sustain by reason of the fact that (i) MuniAssets shall be required to
      pay any corporate obligation of High Income Municipal, whether consisting
      of tax deficiencies or otherwise, based upon a claim or claims against High
      Income Municipal which were omitted or not fairly reflected in the financial
      statements to be delivered to MuniAssets in connection with the Reorganization;
      (ii) any representations or warranties made by High Income Municipal in
      this Agreement should prove to be false or erroneous in any material respect;
      (iii) any covenant of High Income Municipal 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 Joint Proxy Statement and
      Prospectus delivered to the stockholders of the Funds 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 High Income Municipal
      by MuniAssets.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) MuniAssets hereby
      agrees to indemnify and hold High Income Municipal harmless from all loss,
      liability and expenses (including reasonable counsel fees and expenses in
      connection with the contest of any claim), as incurred, which High Income
      Municipal may incur or sustain by reason of the fact that (i) any representations
      or warranties made by MuniAssets in this Agreement should prove false or
      erroneous in any material respect, (ii) any covenant of MuniAssets 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 Joint
      Proxy Statement and Prospectus delivered to stockholders of the Funds 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 MuniAssets
      by High Income Municipal.</font></td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) In the event
      that any claim is made against MuniAssets in respect of which indemnity
      may be sought by MuniAssets from High Income Municipal under Section 11(a)
      of this Agreement, or in the event that any claim is made against High Income
      Municipal in respect of which indemnity may be sought by </font></td>
  </tr>
</table>
<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> II-15</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td></tr></table><p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;









<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 16, page: 16" -->




<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2> High Income Municipal from MuniAssets under Section
      11(b) of this Agreement, then the party seeking indemnification (the &#147;Indemnified
      Party&#148;), with reasonable promptness and before payment of such claim,
      shall give written notice of such claim to the other party (the &#147;Indemnifying
      Party&#148;). 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 MuniAssets and High Income Municipal that an
      indemnity amount is payable, (B) an assessment of a tax by a taxing authority,
      or (C) a &#147;determination&#148; as defined in Section 1313(a) of the
      Code. For purposes of this Section 11, the term &#147;assessment&#148; 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.</font></td>
  </tr>
</table>
<p>
<p>
<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12. &nbsp;<i>Other Matters.</i></font></td>
  </tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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), MuniAssets will cause to be affixed upon the certificate(s) issued to
such person (if any) a legend as follows:</font></td></tr></table>

<p><table width=600><tr>
    <td width=50>&nbsp;</td>
    <td width=550><font size=2><b>THESE SHARES ARE SUBJECT TO RESTRICTIONS ON
      TRANSFER UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR OTHERWISE
      TRANSFERRED EXCEPT TO MUNIASSETS 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.</b></font></td>
  </tr></table>

<p>
<table width=600>
  <tr>
    <td width=30>&nbsp;</td>
    <td width=570><font size=2>and, further, that stop transfer instructions will
      be issued to MuniAssets&#146; transfer agent with respect to such shares.
      High Income Municipal will provide MuniAssets on the Closing Date with the
      name of any stockholder of High Income Municipal who is to the knowledge
      of High Income Municipal an affiliate of High Income Municipal on such date.</font></td>
  </tr>
</table>
<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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.</font></td></tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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.</font></td></tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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.</font></td></tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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.</font></td></tr></table>
<p>
<p>&nbsp;
<table width=600>
  <tr>
    <td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> II-16</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;
<hr size=5 noshade width=600 align=LEFT>
<p>&nbsp; <!-- *************************************************************************** -->
  <!-- MARKER LABEL="sheet: 17, page: 17" -->
<table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.</font></td></tr></table>



<br>
<table width="600" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="240"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td colspan="2"><font size="2">M<font size="1">UNI<font size="2">A</font>SSETS</font>
      F<font size="1">UND</font>, I<font size="1">NC</font>.</font></td>
  </tr>
  <tr>
    <td colspan="2">&nbsp;</td>
    <td width="342">&nbsp;</td>
  </tr>
  <tr>
    <td align="right" valign="top" colspan="2"><font size="2">B<font size="1">Y</font>:</font></td>
    <td valign="bottom" align="center" width="342"><font size="2"> /s/ D<font size="1">ONALD</font>
      C. B<font size="1">URKE</font> </font>
      <hr size="1" noshade width="100%" align="right">
    </td>
  </tr>
  <tr>
    <td colspan="2">&nbsp;</td>
    <td align="center" valign="top" width="342"><font size="2"> Donald C. Burke <br> Vice President </font></td>
  </tr>
</table>
<br>
<table width="600" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="305"><font size="2">A<font size="1">TTEST</font>:</font></td>
    <td width="295">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
  </tr>
  <tr>
    <td width="305" align="center"><font size="2">/s/ B<font size="1">RADLEY</font>
      J. L<font size="1">UCIDO</font></font></td>
    <td width="295">&nbsp;</td>
  </tr>
  <tr>
    <td width="305" align="center" valign="bottom">
      <hr size="1" noshade width="92%" align="right">
    </td>
    <td width="295">&nbsp;</td>
  </tr>
  <tr>
    <td width="305" align="center" valign="top"><font size="2">Bradley J. Lucido <br>
      Secretary </font></td>
    <td width="295">&nbsp;</td>
  </tr>
</table>
<br>
<table width="600" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="245"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td colspan="2"><font size="2">M<font size="1">ERRILL</font> L<font size="1">YNCH</font>
      H<font size="1">IGH</font> I<font size="1">NCOME</font> M<font size="1">UNICIPAL</font>
      B<font size="1">OND</font> F<font size="1">UND</font>, I<font size="1">NC.</font></font></td>
  </tr>
  <tr>
    <td colspan="2">&nbsp;</td>
    <td width="337">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="2" valign="top" align="right"><font size="2">B<font size="1">Y</font>:</font></td>
    <td valign="bottom" width="337" align="center"><font size="2">/s/ D<font size="1">ONALD</font>
      C. B<font size="1">URKE</font> </font>
      <hr size="1" noshade width="100%" align="right">
    </td>
  </tr>
  <tr>
    <td colspan="2">&nbsp;</td>
    <td align="center" valign="top" width="337"><font size="2"> Donald C. Burke <br>
      Vice President </font></td>
  </tr>
</table>
<br>
<table width="600" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="305"><font size="2">A<font size="1">TTEST</font>:</font></td>
    <td width="295">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
  </tr>
  <tr>
    <td width="305">&nbsp;</td>
    <td width="295">&nbsp;</td>
  </tr>
  <tr>
    <td width="305" align="center" valign="bottom"> /s/ A<font size="1">LICE </font>A.
      P<font size="1">ELLEGRINO</font><br>
      <hr size="1" noshade width="92%" align="right">
    </td>
    <td width="295">&nbsp;</td>
  </tr>
  <tr>
    <td width="305" align="center" valign="top"><font size="2">Alice A. Pellegrino <br>
      Secretary </font></td>
    <td width="295">&nbsp;</td>
  </tr>
</table>
<p>&nbsp;</p>


<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center>
      <p><font size="2"> II-17</font></p>
      </td>
    <td width=60 align=right><font size="1">&nbsp;</font></td></tr></table><p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;







<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 1, page: 1" -->



<p><table width=600><tr>
    <td align=right><font size=2><B><a name="iii1"></a>APPENDIX III</B></font></td>
  </tr></table>

<p><table width=600><tr><td  align=center><font size=2><B>RATINGS OF MUNICIPAL
BONDS AND COMMERCIAL PAPER</B></font></td></tr></table>

<br>
<table width=600>
  <tr>
    <td  align=center><font size=2><b>Description of Moody&#146;s Investors Service,
      Inc.&#146;s (&#147;Moody&#146;s&#148;)<br>
      Municipal Bond Ratings</b></font></td>
  </tr>
</table>
<p>
<P>
<TABLE CELLSPACING=0 CELLPADDING=0 WIDTH=600>
  <TR>
    <TD VALIGN="TOP" WIDTH="101"> <FONT SIZE=2>
      <P>Aaa
      </FONT></TD>
    <TD VALIGN="TOP" WIDTH="499"> <FONT SIZE=2>
      <P>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 &#147;gilt edged.&#148; 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 can be
        visualized are most unlikely to impair the fundamentally strong position
        of such issues.
      </FONT></TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="101">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="499">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="101"> <FONT SIZE=2>
      <P>Aa
      </FONT></TD>
    <TD VALIGN="TOP" WIDTH="499"> <FONT SIZE=2>
      <P>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.
      </FONT></TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="101">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="499">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="101"> <FONT SIZE=2>
      <P>A
      </FONT></TD>
    <TD VALIGN="TOP" WIDTH="499"> <FONT SIZE=2>
      <P>Bonds which are rated A possess many favorable investment attributes
        and are to be considered as upper-medium-grade obligations. Factors giving
        security to principal and interest are considered adequate, but elements
        may be present which suggest a susceptibility to impairment some time
        in the future.
      </FONT></TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="101">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="499">&nbsp; </TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="101"> <FONT SIZE=2>
      <P>Baa
      </FONT></TD>
    <TD VALIGN="TOP" WIDTH="499"> <FONT SIZE=2>
      <P>Bonds which are rated Baa are considered as medium-grade obligations,
        <I>i.e.</I>, they are neither highly protected nor poorly secured. Interest
        payments and principal security appear adequate for the present, but certain
        protective elements may be lacking or may be characteristically unreliable
        over any great length of time. Such bonds lack outstanding investment
        characteristics and in fact have speculative characteristics as well.
      </FONT></TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="101">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="499">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="101"> <FONT SIZE=2>
      <P>Ba
      </FONT></TD>
    <TD VALIGN="TOP" WIDTH="499"> <FONT SIZE=2>
      <P>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.
      </FONT></TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="101">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="499">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="101"> <FONT SIZE=2>
      <P>B
      </FONT></TD>
    <TD VALIGN="TOP" WIDTH="499"> <FONT SIZE=2>
      <P>Bonds which are rated B generally lack characteristics of a 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.
      </FONT></TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="101">&nbsp;</TD>
    <TD VALIGN="TOP" WIDTH="499">&nbsp;</TD>
  </TR>
  <TR>
    <TD VALIGN="TOP" WIDTH="101"> <FONT SIZE=2>
      <P>Caa
      </FONT></TD>
    <TD VALIGN="TOP" WIDTH="499"> <FONT SIZE=2>
      <P>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.
      </FONT></TD>
  </TR>
</TABLE>


<table cellspacing=0 cellpadding=0 width=600>
  <tr>
    <td valign="TOP" width="101">
      <p><font size="2">Ca </font>
    </td>
    <td valign="TOP" width="499">
      <p><font size="2">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. </font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="101">&nbsp;</td>
    <td valign="TOP" width="499">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="101">
      <p><font size="2">C </font>
    </td>
    <td valign="TOP" width="499">
      <p><font size="2">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. </font>
    </td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td width="49" valign="top"><font size=2><i>Note:</i></font></td>
    <td width="539"><font size=2> Moody&#146;s applies numerical modifiers 1,
      2, and 3 in each generic rating classification from Aa through Caa. The
      modifier 1 indicates that the obligation ranks in the higher end of its
      generic rating category; the modifier 2 indicates a mid-range ranking; and
      the modifier 3 indicates a ranking in the lower end of that generic rating
      category.</font></td>
  </tr>
</table>
<br>
<table cellspacing=0 cellpadding=0 width=601>
  <tr>
    <td valign="bottom" width="100">
      <p><font size="2"><i>Short-term </i></font>
    </td>
    <td valign="TOP" width="499">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="100">
      <p><font size="2"><i>Notes:</i> </font>
    </td>
    <td valign="TOP" width="499">
      <p><font size="2">In municipal debt issuance, there are three rating categories
        for short-term obligations that are considered investment grade. These
        ratings are designated as Moody&#146;s Investment Grade (MIG) and are
        divided into three levels &#151; MIG 1 through MIG 3. </font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="100">&nbsp;</td>
    <td valign="TOP" width="499">
      <p>&nbsp;
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="100">&nbsp;</td>
    <td valign="TOP" width="499"> <font size=2> MIG 1/VMIG 1<br>
      <br>
      This designation denotes superior credit quality. Excellent protection is
      afforded by established cash flows, highly reliable liquidity support, or
      demonstrated broad-based access to the market for refinancing.</font></td>
  </tr>
</table>
<p>
<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
III-1</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></table><p>&nbsp;<hr size=5 noshade width=600 align=LEFT>
<p>&nbsp;






<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 2, page: 2" -->




 <br>
<table cellspacing=0 cellpadding=0 width=601>
  <tr>
    <td valign="TOP" width="100">&nbsp;</td>
    <td valign="TOP" width="499"> <font size=2> MIG 2/VMIG 2<br>
      <br>
      This designation denotes strong credit quality. Margins of protection are
      ample, although not as large as in the preceding group. </font></td>
  </tr>
  <tr>
    <td valign="TOP" width="100">&nbsp;</td>
    <td valign="TOP" width="499">
      <p>&nbsp;
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="100">&nbsp;</td>
    <td valign="TOP" width="499"> <font size=2> MIG 3/VMIG 3<br>
      <br>
      This designation denotes acceptable credit quality. Liquidity and cash-flow
      protection may be narrow, and market access for refinancing is likely to
      be less well-established.</font></td>
  </tr>
  <tr>
    <td valign="TOP" width="100">&nbsp;</td>
    <td valign="TOP" width="499">
      <p>&nbsp;
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="100">&nbsp;</td>
    <td valign="TOP" width="499"> <font size=2> SG<br>
      <br>
      This designation denotes speculative-grade credit quality. Debt instruments
      in this category may lack sufficient margins of protection.</font></td>
  </tr>
</table>


<p><table width=600><tr><td><font size=2><B>Description of Moody&#146;s Commercial
Paper Ratings (Prime Rating System)</B></font></td></tr></table>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Moody&#146;s short-term issuer
      ratings are opinions of the ability of issuers to honor senior financial
      obligations and contracts. Such obligations generally have an original maturity
      not exceeding one year. Moody&#146;s employs the following three designations,
      all judged to be investment grade, to indicate the relative repayment ability
      of rated issuers:</font></td>
  </tr></table>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Issuers rated Prime-1 (or
      supporting institutions) have a superior ability for repayment of short-term
      debt obligations. Prime-1 repayment ability will often be evidenced by many
      of the following characteristics: leading market positions in well established
      industries; high rates of return on funds employed; conservative capitalization
      structures with moderate reliance on debt and ample asset protection; broad
      margins, in earning coverage of fixed financial charges and high internal
      cash generation; and well-established access to a range of financial markets
      and assured sources of alternate liquidity.</font></td>
  </tr></table>

<br>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Issuers rated Prime-2 (or
      supporting institutions) have a strong ability for repayment of senior short-term
      debt obligations. This will normally be evidenced by many of the characteristics
      cited above but to a lesser degree. Earnings trends and coverage ratios,
      while sound, will be more subject to variation. Capitalization characteristics,
      while still appropriate, may be more affected by external conditions. Ample
      alternate liquidity is maintained.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Issuers rated Prime-3 (or
      supporting institutions) have an acceptable ability for repayment of senior
      short-term obligations. The effects of industry characteristics and market
      composition may be more pronounced. Variability in earnings and profitability
      may result in changes to the level of debt protection measurements and may
      require relatively high financial leverage. Adequate alternate liquidity
      is maintained.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Issuers rated Not Prime do
      not fall within any of the Prime rating categories.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; If an issuer represents to
      Moody&#146;s that its short-term debt obligations are supported by the credit
      of another entity or entities, then the name or names of such supporting
      entity or entities are listed within the parenthesis beneath the name of
      the issuer, or there is a footnote referring the reader to another page
      for the name or names of the supporting entity or entities. In assigning
      ratings to such issuers, Moody&#146;s evaluates the financial strength of
      the affiliated corporations, commercial banks, insurance companies, foreign
      governments or other entities, but only as one factor in the total rating
      assessment. Moody&#146;s makes no representation and gives no opinion on
      the legal validity or enforceability of any support arrangements.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Moody&#146;s ratings are opinions,
      not recommendations to buy or sell, and their accuracy is not guaranteed.
      A rating should be weighed solely as one factor in an investment decision
      and you should make your own study and evaluation of any issuer whose securities
      or debt obligations you consider buying or selling.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><b>Description of Standard &amp; Poor&#146;s, A Division
      of The McGraw-Hill Companies, Inc. (&#147;Standard &amp; Poor&#146;s&#148;),
      Municipal Issue Ratings </b></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; A Standard &amp; Poor&#146;s
      issue credit rating is a current opinion of the creditworthiness of an obligor
      with respect to a specific financial obligation, a specific class of financial
      obligations or a specific financial program. It takes into consideration
      the creditworthiness of guarantors, insurers, or other forms of credit enhancement
      on the obligation.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The issue credit rating is
      not a recommendation to purchase, sell or hold a financial obligation, inasmuch
      as it does not comment as to market price or suitability for a particular
      investor.</font></td>
  </tr>
</table>
<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
III-2</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></table><p>&nbsp;<hr size=5 noshade width=600 align=LEFT>
<p>&nbsp;
<p>&nbsp;







<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 3, page: 3" -->





<table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Issue Credit ratings are based
      on current information furnished by the obligors or obtained by Standard
      &amp; Poor&#146;s from other sources Standard &amp; Poor&#146;s considers
      reliable. Standard &amp; Poor&#146;s does not perform an audit in connection
      with any rating and may, on occasion, rely on unaudited financial information.
      Credit ratings may be changed, suspended or withdrawn as a result of changes
      in, or unavailability of, such information, or based on other circumstances.</font></td>
  </tr></table>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The ratings are based, in
      varying degrees, on the following considerations:</font></td>
  </tr></table>

<p>
<table width=600>
  <tr>
    <td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </font><font size=2>I.
      Likelihood of payment-capacity and willingness of the obligor to meet the
      financial commitment on an obligation in accordance with the terms of the
      obligation; II. Nature of and provisions of the obligation; III. Protection
      afforded to, and relative position of, the obligation in the event of bankruptcy,
      reorganization or other arrangement under the laws of bankruptcy and other
      laws affecting creditors&#146; rights.</font></td>
  </tr>
</table>

<p>
<table cellspacing=0 cellpadding=0 width=600>
  <tr>
    <td valign="TOP" width="101">
      <p><font size="2">AAA </font>
    </td>
    <td valign="TOP" width="499">
      <p><font size="2">An obligation rated &#147;AAA&#148; has the highest rating assigned
        by Standard &amp; Poor&#146;s. The obligor&#146;s Capacity to meet its financial
        commitment on the obligation is extremely strong. </font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="101">&nbsp;</td>
    <td valign="TOP" width="499">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="101">
      <p><font size="2">AA </font>
    </td>
    <td valign="TOP" width="499">
      <p><font size="2">An obligation rated &#147;AA&#148; differs from the highest-rated
        obligations only in small degree. The obligor&#146;s capacity to meet its financial
        commitment on the obligation is very strong. </font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="101">&nbsp;</td>
    <td valign="TOP" width="499">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="101">
      <p><font size="2">A </font>
    </td>
    <td valign="TOP" width="499">
      <p><font size="2">An obligation rated &#147;A&#148; is somewhat more susceptible to
        the adverse effects of changes in circumstances and economic conditions
        than obligations in higher-rated categories. However, the obligor&#146;s capacity
        to meet its financial commitment on the obligation is still strong. </font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="101">&nbsp;</td>
    <td valign="TOP" width="499">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="101">
      <p><font size="2">BBB </font>
    </td>
    <td valign="TOP" width="499">
      <p><font size="2">An obligation rated &#147;BBB&#148; exhibits adequate protection
        parameters. However, adverse economic conditions or changing circumstances
        are more likely to lead to a weakened capacity of the obligor to meet
        its financial commitment on the obligation. </font>
    </td>
  </tr>
</table>


<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Obligations rated &#147;BB,&#148;
      &#147;B,&#148; &#147;CCC,&#148; &#147;CC,&#148; and &#147;C&#148; are regarded
      as having significant speculative characteristics. &#147;BB&#148; indicates
      the least degree of speculation and &#147;C&#148; the highest degree of
      speculation. While such debt will likely have some quality and protective
      characteristics, these may be outweighed by large uncertainties or major
      risk exposures to adverse conditions.&nbsp;&nbsp;&nbsp;</font></td>
  </tr></table>

<br>
<table cellspacing=0 cellpadding=0 width=600>
  <tr>
    <td valign="TOP" width="101">
      <p><font size="2">BB </font>
    </td>
    <td valign="TOP" width="499">
      <p><font size="2">An obligation rated &#145;BB&#146; is less vulnerable to nonpayment
        than other speculative issues. However, it faces major ongoing uncertainties
        or exposure to adverse business, financial, or economic conditions, which
        could lead to the obligor&#146;s inadequate capacity to meet its financial
        commitment on the obligation. </font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="101">&nbsp;</td>
    <td valign="TOP" width="499">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="101">
      <p><font size="2">B </font>
    </td>
    <td valign="TOP" width="499">
      <p><font size="2">An obligation rated &#145;B&#146; is more vulnerable to nonpayment
        than obligations rated &#145;BB,&#146; but the obligor currently has the capacity
        to meet its financial commitment on the obligation. Adverse business,
        financial, or economic conditions will likely impair the obligor&#146;s capacity
        or willingness to meet its financial commitment on the obligation. </font>
    </td>
  </tr>
</table>


<br>
<table cellspacing=0 cellpadding=0 width=600>
  <tr>
    <td valign="TOP" width="101">
      <p><font size="2">CCC </font>
    </td>
    <td valign="TOP" width="499">
      <p><font size="2">An obligation rated &#145;CCC&#146; is currently vulnerable
        to nonpayment and is dependent upon favorable business, financial, and
        economic conditions for the obligor to meet its financial commitment on
        the obligation. In the event of adverse business, financial, or economic
        conditions, the obligor is not likely to have the capacity to meet its
        financial commitment on the obligation. </font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="101">&nbsp;</td>
    <td valign="TOP" width="499">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="101">
      <p><font size="2">CC </font>
    </td>
    <td valign="TOP" width="499">
      <p><font size="2">An obligation rated &#145;CC&#146; is currently highly
        vulnerable to nonpayment. </font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="101">&nbsp;</td>
    <td valign="TOP" width="499">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="101">
      <p><font size="2">C </font>
    </td>
    <td valign="TOP" width="499">
      <p><font size="2">The &#145;C&#146; rating may be used to cover a situation
        where a bankruptcy petition has been filed or similar action has been
        taken, but payments on this obligation are being continued. </font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="101">&nbsp;</td>
    <td valign="TOP" width="499">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="101">
      <p><font size="2">D </font>
    </td>
    <td valign="TOP" width="499">
      <p><font size="2">An obligation rated &#147;D&#148; is in payment default.
        The &#147;D&#148; rating category is used when payments on an obligation
        are not made on the date due even if the applicable grace period has not
        expired, unless Standard &amp; Poor&#146;s believes that such payments
        will be made during such grace period. The &#147;D&#148; rating also will
        be used upon the filing of a bankruptcy petition or the taking of similar
        action if payments on an obligation are jeopardized. </font>
    </td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><i>Plus</i> (+) or <i>Minus</i> (-): The ratings from &#147;AA&#148;
      to &#147;CCC&#148; may be modified by the addition of a plus or minus sign
      to show relative standing within the major rating categories.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><b>Description of Standard &amp; Poor&#146;s Short-Term Issuer
      Credit</b></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Issue credit ratings can be
      either long term or short term. Short-term ratings are generally assigned
      to those obligations considered short term in the relevant market. In the
      U.S., for example, that means obligations with an</font></td>
  </tr>
</table>
<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> III-3</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td></tr></table><p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;







<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 4, page: 4" -->







<P>
<p>
<p>
<p><table width=600><tr>
    <td><font size=2>original maturity of no more than 365 days&#151;including
      commercial paper. Short-term ratings are also used to indicate the creditworthiness
      of an obligor with respect to put features on long-term obligations. The
      result is a dual rating, in which the short-term ratings address the put
      feature, in addition to the usual long-term rating. Medium-term notes are
      assigned long-term ratings.</font></td>
  </tr></table>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <i>Local Currency and Foreign
      Currency Risks:</i> Country risk considerations are a standard part of Standard
      &amp; Poor&#146;s analysis for credit ratings on any issuer or issue. Currency
      of repayment is a key factor in this analysis. An obligor&#146;s capacity
      to repay foreign currency obligations may be lower than its capacity to
      repay obligations in its local currency due to the sovereign government&#146;s
      own relatively lower capacity to repay external versus domestic debt. These
      sovereign risk considerations are incorporated in the debt ratings assigned
      to specific issues. Foreign currency issuer ratings are also distinguished
      from local currency issuer ratings to identify those instances where sovereign
      risks make them different for the same issuer.</font></td>
  </tr></table>

<P>
<table cellspacing=0 cellpadding=0 width=600>
  <tr>
    <td valign="TOP" width="101">
      <p><font size="2">A-1 </font>
    </td>
    <td valign="TOP" width="499">
      <p><font size="2">An obligor rated &#145;A-1&#145; has STRONG capacity to
        meet its financial commitments. It is rated in the highest category by
        Standard &amp; Poor&#146;s. Within this category, certain obligors are
        designated with a plus sign (+). This indicates that the obligor&#146;s
        capacity to meet its financial commitments is EXTREMELY STRONG. </font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="101">&nbsp;</td>
    <td valign="TOP" width="499">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="101">
      <p><font size="2">A-2 </font>
    </td>
    <td valign="TOP" width="499">
      <p><font size="2">An obligor rated &#145;A-2&#145; has SATISFACTORY capacity
        to meet its financial commitments. However, it is somewhat more susceptible
        to the adverse effects of changes in circumstances and economic conditions
        than obligors in the highest rating category. </font>
    </td>
  </tr>
</table>


<br>
<table cellspacing=0 cellpadding=0 width=600>
  <tr>
    <td valign="TOP" width="101">
      <p><font size="2">A-3 </font>
    </td>
    <td valign="TOP" width="499">
      <p><font size="2">An obligor rated &#145;A-3&#145; has ADEQUATE capacity
        to meet its financial obligations. However, adverse economic conditions
        or changing circumstances are more likely to lead to a weakened capacity
        of the obligor to meet its financial commitments. </font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="101">&nbsp;</td>
    <td valign="TOP" width="499">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="101">
      <p><font size="2">B </font>
    </td>
    <td valign="TOP" width="499">
      <p><font size="2">An obligation rated &#145;B&#146; is more vulnerable to
        nonpayment than obligations rated &#145;BB&#146;, but the obligor currently
        has the capacity to meet its financial commitment on the obligation. Adverse
        business, financial, or economic conditions will likely impair the obligor&#146;s
        capacity or willingness to meet its financial commitment on the obligation.
        </font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="101">&nbsp;</td>
    <td valign="TOP" width="499">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="101">
      <p><font size="2">C </font>
    </td>
    <td valign="TOP" width="499">
      <p><font size="2">A subordinated debt or preferred stock obligation rated
        &#145;C&#146; is CURRENTLY HIGHLY VULNERABLE to nonpayment. The &#145;C&#146;
        rating may be used to cover a situation where a bankruptcy petition has
        been filed or similar action taken, but payments on this obligation are
        being continued. A &#145;C&#146; also will be assigned to a preferred
        stock issue in arrears on dividends or sinking fund payments, but that
        is currently paying. </font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="101">&nbsp;</td>
    <td valign="TOP" width="499">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="101">
      <p><font size="2">SD<br>
        and<br>
        D </font>
    </td>
    <td valign="TOP" width="499">
      <p><font size="2">An obligor rated &#145;SD&#146; (Selective Default) or
        &#145;D&#146; has failed to pay one or more of its financial obligations
        (rated or unrated) when it came due. A &#145;D&#146; rating is assigned
        when Standard &amp; Poor&#146;s believes that the default will be a general
        default and that the obligor will fail to pay all or substantially all
        of its obligations as they come due. An &#145;SD&#146; rating is assigned
        when Standard &amp; Poor&#146;s believes that the obligor has selectively
        defaulted on a specific issue or class of obligations but it will continue
        to meet its payment obligations on other issues or classes of obligations
        in a timely manner. Please see Standard &amp; Poor&#146;s issue credit
        ratings for a more detailed description of the effects of a default on
        specific issues or classes of obligations. </font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="101">&nbsp;</td>
    <td valign="TOP" width="499">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="101">
      <p><font size="2">R </font>
    </td>
    <td valign="TOP" width="499">
      <p><font size="2">An obligor rated &#145;R&#146; is under regulatory supervision
        owing to its financial condition. During the pendency of the regulatory
        supervision the regulators may have the power to favor one class of obligations
        over others or pay some obligations and not others. Please see Standard
        &amp; Poor&#146;s issue credit ratings for a more detailed description
        of the effects of regulatory supervision on specific issues or classes
        of obligations. </font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="101"><font size="2">&lt;R&gt;</font></td>
    <td valign="TOP" width="499">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="101">
      <p><font size="2">N.R. </font>
    </td>
    <td valign="TOP" width="499">
      <p><font size="2">An issue designated N.R. is not rated. &lt;/R&gt;</font>
    </td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><b>Description of Fitch, Inc.&#146;s (&#147;Fitch&#148;)
      Investment Grade Bond Ratings</b></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; When assigning ratings, Fitch
      considers the historical and prospective financial condition, quality of
      management, and operating performance of the issuer and of any guarantor,
      any special features of a specific issue or guarantee, the issue&#146;s
      relationship to other obligations of the issuer, as well as developments
      in the economic and political environment that might affect the issuer&#146;s
      financial strength and credit quality. In the case of a structured financing,
      the quality of its underlying assets and the integrity of its legal structure
      are considered. In the case of banks, for which sector there is a history
      of rescue by sovereign &#147;lenders of last resort&#148; or by major shareholders,
      the potential strength of any such support is also taken into account in
      the ratings.</font></td>
  </tr>
</table>
<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> III-4</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td></tr></table><p>&nbsp;<hr size=5 noshade width=600 align=LEFT>
<p>&nbsp;
<p>
<p>&nbsp;











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<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Investment-grade ratings reflect
      expectations of timeliness of payment. However, ratings of different classes
      of obligations of the same issuer may vary based on expectations of recoveries
      in the event of a default or liquidation. Recovery expectations, which are
      the amounts expected to be received by investors after a security defaults,
      are a relatively minor consideration in investment grade ratings, but we
      do use &#147;notching&#148; of particular issues to reflect their degree
      of preference in a winding up, liquidation, or reorganization, as well as
      other factors. Recoveries do, however, gain in importance at lower rating
      levels, because of the greater likelihood of default, and become the major
      consideration at the &#145;DDD&#146; category. Factors that affect recovery
      expectations include collateral and seniority relative to other obligations
      in the capital structure.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Entities or issues carrying
      the same rating are of similar but not necessarily identical credit quality
      since the rating categories do not fully reflect small differences in the
      degrees of credit risk.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Fitch ratings are not recommendations
      to buy, sell, or hold any security. Ratings do not comment on the adequacy
      of market price, the suitability of any security for a particular investor,
      or the tax-exempt nature or taxability of payments made in respect of any
      security.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Fitch ratings are based on
      information obtained from issuers, other obligors, underwriters, their experts,
      and other sources Fitch believes to be reliable. Fitch does not audit or
      verify the truth or accuracy of such information. Ratings may be changed,
      suspended, or withdrawn as a result of changes in, or the unavailability
      of, information or for other reasons.</font></td>
  </tr>
</table>
<br>
<table cellspacing=0 cellpadding=0 width=600>
  <tr>
    <td valign="TOP" width="100">
      <p><font size="2">AAA </font>
    </td>
    <td valign="TOP" colspan="2">
      <p><font size="2">Highest credit quality. &#145;AAA&#146; ratings denote
        the lowest expectation of credit risk. They are assigned only in case
        of exceptionally strong capacity for timely payment of financial commitments.
        This capacity is highly unlikely to be adversely affected by foreseeable
        events. </font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="100">&nbsp;</td>
    <td valign="TOP" colspan="2">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="100">
      <p><font size="2">AA </font>
    </td>
    <td valign="TOP" colspan="2">
      <p><font size="2">Very high credit quality. &#145;AA&#146; ratings denote
        a very low expectation of credit risk. They indicate very strong capacity
        for timely payment of financial commitments. This capacity is not significantly
        vulnerable to foreseeable events. </font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="100">&nbsp;</td>
    <td valign="TOP" colspan="2">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="100">
      <p><font size="2">A </font>
    </td>
    <td valign="TOP" colspan="2">
      <p><font size="2">High credit quality. &#145;A&#146; ratings denote a low
        expectation of credit risk. The capacity for timely payment of financial
        commitments is considered strong. This capacity may, nevertheless, be
        more vulnerable to changes in circumstances or in economic conditions
        than is the case for higher ratings. </font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="100">&nbsp;</td>
    <td valign="TOP" colspan="2">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="100">
      <p><font size="2">BBB </font>
    </td>
    <td valign="TOP" colspan="2">
      <p><font size="2">Good credit quality. &#145;BBB&#146; ratings indicate
        that there is currently a low expectation of credit risk. The capacity
        for timely payment of financial commitments is considered adequate, but
        adverse changes in circumstances and in economic conditions are more likely
        to impair this capacity. This is the lowest investment-grade category.
        </font>
    </td>
  </tr>
</table>



<p>
<table cellspacing=0 cellpadding=0 width=600>
  <tr>
    <td valign="TOP" colspan="3">
      <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <i>Plus</i> (+) </font><font size="2">or
        <i> Minus</i> (-): </font> <font size="2">Plus and minus signs are used
        with a rating symbol to indicate the relative position of a credit within
        the rating category. Plus and minus signs, however, are not used in the
        &#147;AAA&#148; category. </font>
    </td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NR Indicates that Fitch does
      not rate the specific issue.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &#145;Withdrawn&#146;: A rating
      will be withdrawn when an issue matures or is called or refinanced and,
      at Fitch&#145;s discretion, when an issuer fails to furnish proper and timely
      information.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Rating Watch: Ratings are
      placed on Rating Watch to notify investors that there is a reasonable probability
      of a rating change and the likely direction of such change. These are designated
      as &#147;Positive,&#148; indicating a potential upgrade, &#147;Negative,&#148;
      for potential downgrade, or &#147;Evolving,&#148; if ratings may be raised,
      lowered, or maintained. Rating Watch is typically resolved over a relatively
      short period.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &lt;R&gt;Rating Outlook: A
      Rating Outlook indicates the direction a rating is likely to move over a
      one to two-year period. Outlooks may be positive, stable or negative. A
      positive or negative Rating Outlook does not imply a rating change is inevitable.
      Similarly, companies whose outlooks are &#145;stable&#146; could be upgraded
      or downgraded before an outlook moves to positive or negative if circumstances
      warrant such an action. Occasionally, Fitch may be unable to identify the
      fundamental trend. In these cases, the Rating Outlook may be described as
      evolving. &lt;/R&gt;</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2><b>Description of Fitch&#146;s Speculative Grade Bond Ratings</b></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Fitch speculative grade bond
      ratings provide a guide to investors in determining the credit risk associated
      with a particular security. The ratings (&#147;BB&#148; to &#147;C&#148;)
      represent Fitch&#145;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 </font></td>
  </tr>
</table>
<p>
<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> III-5</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td></tr></table><p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;









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<P>
<br>
<p>
<p>
<p>
<p>
<p>
<table width=600>
  <tr>
    <td><font size=2>defaulted bonds, the rating (&#147;DDD&#148; to &#147;D&#148;)
      is an assessment of the ultimate recovery value through reorganization or
      liquidation.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The rating takes into consideration
      special features of the issue, its relationship to other obligations of
      the issuer, the current and prospective financial condition and operating
      performance of the issuer and any guarantor, as well as the economic and
      political environment that might affect the issuer&#145;s future financial
      strength.</font></td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Bonds that have the rating
      are of similar but not necessarily identical credit quality since rating
      categories cannot fully reflect the differences in degrees of credit risk.</font></td>
  </tr>
</table>

<br>
<table cellspacing=0 cellpadding=0 width=600>
  <tr>
    <td valign="TOP" width="101">
      <p><font size="2">BB </font>
    </td>
    <td valign="TOP" colspan="2">
      <p><font size="2">Speculative. &#145;BB&#146; ratings indicate that there
        is a possibility of credit risk developing, particularly as the result
        of adverse economic change over time; however, business or financial alternatives
        </font> <font size="2">may be available to allow financial commitments
        to be met. Securities rated in this category are not investment grade.
        </font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="101">&nbsp;</td>
    <td valign="TOP" colspan="2">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="101">&nbsp;</td>
    <td valign="TOP" colspan="2">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="101">
      <p><font size="2">B </font>
    </td>
    <td valign="TOP" colspan="2">
      <p><font size="2">Highly speculative. &#145;B&#146; ratings indicate that
        significant credit risk is present, but a limited margin of safety remains.
        Financial commitments are currently being met; however, capacity for continued
        payment is contingent upon a sustained, favourable business and economic
        environment. </font>
    </td>
  </tr>
</table>


<br>
<table cellspacing=0 cellpadding=0 width=600>
  <tr>
    <td valign="TOP" width="101">
      <p><font size="2">CCC,<br>
        CC, </font> <font size="2"><br>
        and C </font>
    </td>
    <td valign="TOP" colspan="2">
      <p><font size="2">High default risk. Default is a real possibility. Capacity
        for meeting financial commitments is solely reliant upon sustained, favourable
        business or economic developments. A &#145;CC&#146; rating indicates that
        default of some kind appears probable. &#145;C&#146; ratings signal imminent
        default. </font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="101">&nbsp;</td>
    <td valign="TOP" width="72">&nbsp;</td>
    <td valign="TOP" width="425">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="101">
      <p><font size="2">DDD,<br>
        DD,<br>
        and D </font>
    </td>
    <td valign="TOP" colspan="2">
      <p><font size="2">Default. The ratings of obligations in this category are
        based on their prospects for achieving partial or full recovery in a reorganization
        or liquidation of the obligor. While expected recovery values are highly
        speculative and cannot be estimated with any precision, the following
        serve as general guidelines. &#145;DDD&#146; obligations have the highest
        potential for recovery, around 90% - 100% of outstanding amounts and accrued
        interest. &#145;DD&#146; indicates potential recoveries in the range of
        50% - 90% and &#145;D&#146; the lowest recovery potential, <i>i.e.</i>,
        below 50%. Entities rated in this category have defaulted on some or all
        of their obligations. Entities rated &#145;DDD&#146; have the highest
        prospect for resumption of performance or continued operation with or
        without a formal reorganization process. Entities rated &#145;DD&#146;
        and &#145;D&#146; are generally undergoing a formal reorganization or
        liquidation process; those rated &#145;DD&#146; are likely to satisfy
        a higher portion of their outstanding obligations, while entities rated
        &#145;D&#146; have a poor prospect of repaying all obligations.</font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" colspan="2">&nbsp;</td>
    <td valign="TOP" width="425">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" colspan="3">
      <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <i>Plus</i> (+) or <i>Minus</i>
        (-): Plus and minus signs are used with a rating symbol to indicate the
        relative position of a credit within the rating category. Plus and minus
        signs, however, are not used in the &#147;DDD,&#148; &#147;DD,&#148; or
        &#147;D&#148; categories. </font>
    </td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td><font size=2><b>Description of Fitch&#146;s Short-Term Ratings</b></font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Fitch&#146;s short-term ratings
      apply to debt obligations that are payable on demand or have original maturities
      of up to three years, including commercial paper, certificates of deposit,
      medium-term notes, and municipal and investment notes.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The short-term rating places
      greater emphasis than a long-term rating on the existence of liquidity necessary
      to meet the issuer&#146;s obligations in a timely manner.</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Fitch short-term ratings are
      as follows:</font></td>
  </tr>
</table>
<p>
<table cellspacing=0 cellpadding=0 width=600>
  <tr>
    <td valign="TOP" width="101">
      <p><font size="2">F-1 </font>
    </td>
    <td valign="TOP" width="499">
      <p><font size="2">Highest credit quality. Indicates the strongest capacity
        for timely payment of financial commitments; may have an added "+" to
        denote any exceptionally strong credit feature. </font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="101">&nbsp;</td>
    <td valign="TOP" width="499">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="101">
      <p><font size="2">F-2 </font>
    </td>
    <td valign="TOP" width="499">
      <p><font size="2">Good credit quality. A satisfactory capacity for timely
        payment of financial commitments, but the margin of safety is not as great
        as in the case of the higher ratings. </font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="101">&nbsp;</td>
    <td valign="TOP" width="499">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="101">
      <p><font size="2">F-3 </font>
    </td>
    <td valign="TOP" width="499">
      <p><font size="2">Fair credit quality. The capacity for timely payment of
        financial commitments is adequate; however, near-term adverse changes
        could result in a reduction to non-investment grade. </font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="101">&nbsp;</td>
    <td valign="TOP" width="499">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="101">
      <p><font size="2">B </font>
    </td>
    <td valign="TOP" width="499">
      <p><font size="2">Speculative. Minimal capacity for timely payment of financial
        commitments, plus vulnerability to near-term adverse changes in financial
        and economic conditions. </font>
    </td>
  </tr>
  <tr>
    <td valign="TOP" width="101">&nbsp;</td>
    <td valign="TOP" width="499">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" width="101">
      <p><font size="2">C </font>
    </td>
    <td valign="TOP" width="499">
      <p><font size="2">High default risk. Default is a real possibility. Capacity
        for meeting financial commitments is solely reliant upon a sustained,
        favourable business and economic environment. </font>
    </td>
  </tr>
</table>
<p>
<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> III-6</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td></tr></table><p>&nbsp;<hr size=5 noshade width=600 align=LEFT>
<p>&nbsp; <br>
<p>&nbsp;
<p>&nbsp;

<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 7, page: 7" -->

<p>&nbsp;
<table cellspacing=0 cellpadding=0 width=600>
  <tr>
    <td valign="TOP" width="101">
      <p><font size="2">D </font>
    </td>
    <td valign="TOP" width="499">
      <p><font size="2">Default. Denotes actual or imminent payment default. </font>
    </td>
  </tr>
</table>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Notes
to Long-term and Short-term ratings:&nbsp;&nbsp;&nbsp;</font></td></tr></table>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &#147;+&#148; or
&#147;-&#148; may be appended to a rating to denote relative status within major rating
categories. Such suffixes are not added to the &#145;AAA&#146; Long-term rating category,
to categories below &#145;CCC&#146;, or to Short-term ratings other than &#145;F1&#146;.&nbsp;&nbsp;&nbsp;</font></td></tr></table>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &#145;NR&#146;
indicates that Fitch does not rate the issuer or issue in question.&nbsp;&nbsp;&nbsp;</font></td></tr></table>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &#145;Withdrawn&#146;:
A rating is withdrawn when Fitch deems the amount of information available to
be inadequate for rating purposes, or when an obligation matures, is called, or
refinanced.&nbsp;&nbsp;&nbsp;</font></td></tr></table>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Rating
Watch: Ratings are placed on Rating Watch to notify investors that there is a
reasonable probability of a rating change and the likely direction of such
change. These are designated as &#147;Positive&#148;, indicating a potential upgrade,
&#147;Negative&#148;, for a potential downgrade, or &#147;Evolving&#148;, if ratings may be raised,
lowered or maintained. Rating Watch is typically resolved over a relatively
short period.&nbsp;&nbsp;&nbsp;</font></td></tr></table>

<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> III-7</font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td></tr></table><p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;









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<p><table width=600><tr>
    <td align=right><font size=2><B><a name="iv1"></a>APPENDIX IV</B></font></td>
  </tr></table>

<p><table width=600><tr><td  align=center><font size=2><B>CHARTER OF THE AUDIT
COMMITTEE OF<BR>THE BOARD OF DIRECTORS OF MUNIASSETS FUND, INC.</B></font></td></tr></table>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although
MuniAssets Fund, Inc.&#146;s audit committee also serves as a nominating committee,
the following charter pertains only to its audit and nominating committee&#146;s
duties as an audit committee. The Board of Directors of the Fund has adopted
the following audit committee charter:</font></td></tr></table>

<P><table width=600><TR><TD width=10% valign=top><FONT SIZE="2"><B>
I.</B></FONT></TD>
<TD width=90% valign=top><FONT SIZE="2"><B>Composition of the Audit
Committee</B></FONT></TD></TR></TABLE>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Audit Committee shall be composed of at least three Directors:</font></td></tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)
each of whom shall not be an &#147;interested person&#148; of the Fund, as
defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended;</font></td></tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) each
of whom shall not have any relationship to the Fund that may interfere with the
exercise of their independence from Fund management and the Fund;</font></td></tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) each
of whom shall otherwise satisfy the applicable independence requirements for
any stock exchange or market quotation system on which Fund shares are listed
or quoted;</font></td></tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) each
of whom shall be financially literate, as such qualification is interpreted by
the Board of Directors in its business judgment, or shall become financially
literate within a reasonable period of time after his or her appointment to the
Audit Committee; and</font></td></tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) at
least one of whom shall have accounting or related financial management
expertise as the Board of Directors interprets such qualification in its
business judgment.</font></td></tr></table>

<table width=600>
  <tr>
    <td width=10% valign=top><font size="2"><b> II.</b></font></td>
    <td width=90% valign=top><font size="2"><b>Purposes of the Audit Committee</b></font></td>
  </tr>
</table>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
purposes of the Audit Committee are to assist the Board of Directors:</font></td></tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) in
its oversight of the Fund&#146;s accounting and financial reporting policies
and practices, the Fund&#146;s internal audit controls and procedures and, as
appropriate, the internal audit controls and procedures of certain of the Fund&#146;s
service providers;</font></td></tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)
in its oversight of the Fund&#146;s financial statements and the independent
audit thereof; and</font></td></tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)
in acting as a liaison between the Fund&#146;s independent accountants and the
Board of Directors.</font></td></tr></table>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
function of the Audit Committee is oversight. Fund management is responsible
for maintaining appropriate systems for accounting. The independent accountants
of the Fund are responsible for conducting a proper audit of the Fund&#146;s
financial statements.</font></td></tr></table>


<table width=600>
  <tr>
    <td width=10% valign=top><font size="2"><b> III.</b></font></td>
    <td width=90% valign=top><font size="2"><b>Responsibilities and Duties of
      the Audit Committee</b></font></td>
  </tr>
</table>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
policies and procedures of the Audit Committee shall remain flexible to
facilitate its ability to react to changing conditions and to generally
discharge its functions. The following listed responsibilities describe areas
of attention in broad terms.</font></td></tr></table>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To carry
out its purposes, the Audit Committee shall have the following responsibilities
and duties:</font></td></tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)
to recommend the selection, retention or termination of the Fund&#146;s
independent accountants based on an evaluation of their independence and the
nature and performance of audit services and other services;</font></td></tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)
to ensure that the independent accountants for the Fund submit on a periodic
basis to the Audit Committee a formal written statement delineating all
relationships between such independent accountants and the Fund, consistent
with Independence Standards Board Standard No. 1, and actively engage in a
dialogue with the independent accountants for the Fund with respect to any
disclosed relationships or services that may impact the objectivity and
independence of such independent accountants and, if deemed appropriate by the
Audit Committee, to recommend that the Board of Directors take appropriate
action in response to the report of such independent accountants to satisfy
itself of the independence of such independent accountants;</font></td></tr></table>




<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
IV-I</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></table><p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;






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<p>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)
to receive specific representations from the independent accountants with
respect to their independence and to consider whether the provision of any
disclosed non-audit services by the independent accountants is compatible with
maintaining the independence of those accountants;</font></td></tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)
to review the fees charged by independent accountants for audit and other
services;</font></td></tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)
to review with the independent accountants arrangements for annual audits and
special audits and the scope thereof;</font></td></tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)
to discuss with the independent accountants those matters required by SAS No.
61 and SAS No. 90 relating to the Fund&#146;s financial statements, including,
without limitation, any adjustment to such financial statements recommended by
such independent accountants, or any other results of any audit;</font></td></tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)
to consider with the independent accountants their comments with respect to the
quality and adequacy of the Fund&#146;s accounting and financial reporting
policies, practices and internal controls and management&#146;s responses
thereto, including, without limitation, the effect on the Fund of any
recommendation of changes in accounting principles or practices by management
or the independent accountants;</font></td></tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)
to report to the Board of Directors regularly with respect to the Audit
Committee&#146;s activities and to make any recommendations it believes
necessary or appropriate with respect to the Fund&#146;s accounting and
financial reporting policies, practices and the Fund&#146;s internal controls;</font></td></tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
to review and reassess the adequacy of this Charter on an annual basis and
recommend any changes to the Board of Directors;</font></td></tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)
to review legal and regulatory matters presented by counsel and the independent
accountants for the Fund that may have a material impact on the Fund&#146;s
financial statements;</font></td></tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)
to cause to be prepared and to review and submit any report, including any
recommendation of the Audit Committee, required to be included in the Fund&#146;s
annual proxy statement by the rules of the Securities and Exchange Commission;</font></td></tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)
to assist the Fund, if necessary, in preparing any written affirmation or
written certification required to be filed with any stock exchange on which
Fund shares are listed; and</font></td></tr></table>

<p><table width=600>
<tr><td width=30>&nbsp;</td>
<td width=570><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)
to perform such other functions consistent with this Charter, the Fund&#146;s
By-laws and governing law, as the Audit Committee or the Board of Directors
deems necessary or appropriate.</font></td></tr></table>

<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In fulfilling their responsibilities
      hereunder, it is recognized that members of the Audit Committee are not
      full-time employees of the Fund and are not, and do not represent themselves
      to be, accountants or auditors by profession or experts in the field of
      accounting or auditing. As such, it is not the duty or responsibility of
      the Audit. Committee or its members to conduct &#147;field work&#148; or
      other types of auditing or accounting reviews or procedures, and each member
      of the Audit Committee shall be entitled to rely on (i) the integrity of
      those persons and organizations inside and outside the Fund from which the
      Audit Committee receives information and (ii) the accuracy of the financial
      and other information provided to the Audit Committee by such persons or
      organizations absent actual knowledge to the contrary (which actual knowledge
      shall be promptly reported to the Board of Directors).</font></td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The independent accountants
      for the Fund are ultimately accountable to the Board of Directors and the
      Audit Committee. The Board of Directors and the Audit Committee have the
      ultimate authority and responsibility to select, evaluate and, where appropriate,
      replace the independent accountants for the Fund (or to nominate the independent
      accountants to be proposed for shareholder approval in the proxy statement).</font></td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td width=10% valign=top><font size="2"><b> IV.</b></font></td>
    <td width=90% valign=top><font size="2"><b>Meetings</b></font></td>
  </tr>
</table>
<p>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee shall meet
      at least once annually with the independent accountants (outside the presence
      of Fund management) and at least once annually with the representatives
      of Fund management responsible for the financial and accounting operations
      of the Fund. The Audit Committee shall hold special meetings at such times
      as the Audit Committee believes appropriate. Members of the Audit Committee
      may participate in a meeting of the Audit Committee by means of conference
      call or similar communications equipment by means of which all persons participating
      in such meeting can hear each other.</font></td>
  </tr>
</table>
<P>
<P>
<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
IV-2</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></table><p>&nbsp;<hr size=5 noshade width=600 align=LEFT>
<p>&nbsp; <br>








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<!-- MARKER LABEL="sheet: 10, page: 10" -->




<table width=600>
  <tr>
    <td width=10% valign=top><font size="2"><b> V.</b></font></td>
    <td width=90% valign=top><font size="2"><b>Outside Resources and Assistance
      from Fund Management</b></font></td>
  </tr>
</table>
<p>
<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
appropriate officers of the Fund shall provide or arrange to provide such
information, data and services as the Audit Committee may request. The Audit
Committee shall have the power and authority to take all action it believes
necessary or appropriate to discharge its responsibilities, including the
authority to retain at the expense of the Fund their own counsel and other
experts and consultants whose expertise would be considered helpful to the
Audit Committee.</font></td></tr></table>

<p><table width=600><tr>
    <td><font size=2>Dated June 6, 2000<br>
      Revised April 11, 2001</font></td>
  </tr></table>

<p>
<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
IV-3</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></table><p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;














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<!-- MARKER LABEL="sheet: 1, page: 1" -->




<p>
<font size=2><b>&lt;R&gt;</b></font>
<table width=600><tr>
    <td  align=center><font size=2><B>PART C <br>
      OTHER INFORMATION </B></font></td>
  </tr></table>

<font size=2><b>&lt;/R&gt;</b></font><br>
<table width=600>
  <tr>
    <td><font size=2><b>Item 15.<i> Indemnification.</i></b></font></td>
  </tr>
</table>
<p>
<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section
2-418 of the General Corporation Law of the State of Maryland, Article VI of
the Registrant&#146;s Articles of Incorporation, which was previously filed as an
exhibit to the Common Stock Registration Statement (as defined below), Article
VI of the Registrant&#146;s By-Laws, which was previously filed as an exhibit to the
Common Stock Registration Statement, and the Investment Advisory Agreement, a
form of which was previously filed as an exhibit to the Common Stock
Registration Statement, provide for indemnification.</font></td></tr></table>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insofar as indemnification
      for liabilities arising under the Securities Act of 1933, as amended (the
      &#147;1933 Act&#148;), 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.</font></td>
  </tr></table>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reference
is made to Section 6 of the Purchase Agreement relating to the Registrant&#146;s
Common Stock, a form of which was filed as an exhibit to the Common Stock
Registration Statement.</font></td></tr></table>




<br>
<table width=600>
  <tr>
    <td><font size=2><b>Item 16. <i>Exhibits.</i></b></font></td>
  </tr>
</table>
<font size="2">&lt;R&gt;</font><br>
<table cellspacing=0 cellpadding=0 width=600>
  <tr valign="top">
    <td align="right"> <font size=2>
      <p><font size="2">1</font>
      </font></td>
    <td> <font size=2>
      <p><font size="2">(a)</font>
      </font></td>
    <td>&nbsp;&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">&#151;</font>
      </font></td>
    <td>&nbsp;&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">Articles of Incorporation of the Registrant, dated April
        14, 1993.(a)</font>
      </font></td>
  </tr>
  <tr valign="top">
    <td align="right">&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">(b)</font>
      </font></td>
    <td>&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">&#151;</font>
      </font></td>
    <td>&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">Articles of Amendment to Articles of Incorporation.(a)</font>
      </font></td>
  </tr>
  <tr valign="top">
    <td align="right"> <font size=2>
      <p><font size="2">2</font>
      </font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">&#151;</font>
      </font></td>
    <td>&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">Amended and Restated By-Laws of the Registrant.(d)</font>
      </font></td>
  </tr>
  <tr valign="top">
    <td align="right"> <font size=2>
      <p><font size="2">3</font>
      </font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">&#151;</font>
      </font></td>
    <td>&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">Not Applicable.</font>
      </font></td>
  </tr>
  <tr valign="top">
    <td align="right"> <font size=2>
      <p><font size="2">4</font>
      </font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">&#151;</font>
      </font></td>
    <td>&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">Form of Agreement and Plan of Reorganization between the
        Registrant and Merrill Lynch High Income Municipal Bond Fund, Inc. (included
        in Appendix II to the Joint Proxy Statement and Prospectus contained in
        this Registration Statement).</font>
      </font></td>
  </tr>
  <tr valign="top">
    <td align="right"> <font size=2>
      <p><font size="2">5</font>
      </font></td>
    <td> <font size=2>
      <p><font size="2">(a)</font>
      </font></td>
    <td>&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">&#151;</font>
      </font></td>
    <td>&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">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)</font>
      </font></td>
  </tr>
  <tr valign="top">
    <td align="right">&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">(b)</font>
      </font></td>
    <td>&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">&#151;</font>
      </font></td>
    <td>&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">Form of specimen certificate for the Common Stock of the
        Registrant.(a)</font>
      </font></td>
  </tr>
  <tr valign="top">
    <td align="right"> <font size=2>
      <p><font size="2">6</font>
      </font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">&#151;</font>
      </font></td>
    <td>&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">Form of Investment Advisory Agreement between Registrant
        and Fund Asset Management, L.P.(a)</font>
      </font></td>
  </tr>
  <tr valign="top">
    <td align="right"> <font size=2>
      <p><font size="2">7</font>
      </font></td>
    <td> <font size=2>
      <p><font size="2">(a)</font>
      </font></td>
    <td>&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">&#151;</font>
      </font></td>
    <td>&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">Form of Purchase Agreement.(a)</font>
      </font></td>
  </tr>
  <tr valign="top">
    <td align="right">&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">(b)</font>
      </font></td>
    <td>&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">&#151;</font>
      </font></td>
    <td>&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">Form of Merrill Lynch Standard Dealer Agreement.(a)</font>
      </font></td>
  </tr>
  <tr valign="top">
    <td align="right"> <font size=2>
      <p><font size="2">8</font>
      </font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">&#151;</font>
      </font></td>
    <td>&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">Not applicable.</font>
      </font></td>
  </tr>
  <tr valign="top">
    <td align="right"> <font size=2>
      <p><font size="2">9</font>
      </font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">&#151;</font>
      </font></td>
    <td>&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">Form of Custodian Agreement between the Fund and The Bank
        of New York.(a)</font>
      </font></td>
  </tr>
  <tr valign="top">
    <td align="right"> <font size=2>
      <p><font size="2">10</font>
      </font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">&#151;</font>
      </font></td>
    <td>&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">Not applicable.</font>
      </font></td>
  </tr>
  <tr valign="top">
    <td align="right"> <font size=2>
      <p><font size="2">11</font>
      </font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">&#151;</font>
      </font></td>
    <td>&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">Opinion of Clifford Chance Rogers &amp; Wells <font size="1">LLP</font>,
        counsel for the Registrant.</font>
      </font></td>
  </tr>
  <tr valign="top">
    <td align="right"> <font size=2>
      <p><font size="2">12</font>
      </font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">&#151;</font>
      </font></td>
    <td>&nbsp;</td>
    <td> <font size=2>
      <p>Opinion of Sidley Austin Brown &amp; Wood <font size=1>LLP</font>, relating
        to certain tax matters.*
      </font></td>
  </tr>
  <tr valign="top">
    <td align="right"> <font size=2>
      <p><font size="2">13</font>
      </font></td>
    <td> <font size=2>
      <p>&nbsp;
      </font></td>
    <td>&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">&#151;</font>
      </font></td>
    <td>&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">Form of Transfer Agency, Dividend Disbursing Agency and
        Shareholder Servicing Agency Agreement between the Registrant and The
        Bank of New York.(a)</font>
      </font></td>
  </tr>
  <tr valign="top">
    <td align="right"> <font size=2>
      <p><font size="2">14</font>
      </font></td>
    <td> <font size=2>
      <p><font size="2">(a)</font>
      </font></td>
    <td>&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">&#151;</font>
      </font></td>
    <td>&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">Consent of Deloitte &amp; Touche <font size="1">LLP</font>,
        independent auditors for the Registrant.</font>
      </font></td>
  </tr>
  <tr valign="top">
    <td align="right">&nbsp;</td>
    <td><font size=2><font size="2">(b)</font></font></td>
    <td>&nbsp;</td>
    <td><font size=2><font size="2">&#151;</font></font></td>
    <td>&nbsp;</td>
    <td><font size="2">Consent of Deloitte &amp; Touche <font size="1">LLP</font>,
      independent auditors for Merrill Lynch High Income Municipal Bond Fund,
      Inc.</font></td>
  </tr>
  <tr valign="top">
    <td align="right"> <font size=2>
      <p><font size="2">15</font>
      </font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">&#151;</font>
      </font></td>
    <td>&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">Not applicable.</font>
      </font></td>
  </tr>
  <tr valign="top">
    <td align="right"> <font size=2>
      <p><font size="2">16</font>
      </font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">&#151;</font>
      </font></td>
    <td>&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">Power of Attorney.(e)</font>
      </font></td>
  </tr>
  <tr valign="top">
    <td align="right"> <font size=2>
      <p><font size="2">17</font>
      </font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">&#151;</font>
      </font></td>
    <td>&nbsp;</td>
    <td> <font size=2>
      <p><font size="2">Code of Ethics.(c)</font>
      </font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td valign=top colspan="3">
      <hr noshade size="1" width="100" align="left">
    </td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3% align=right valign=top><font size="2">* </font></td>
    <td width=2%><font size="2"></font></td>
    <td width=95%><font size="2">To be filed by post-effective amendment.</font></td>
  </tr>
</table>
<table width=600>
  <tr>
    <td width=3% align=right valign=top><font size="2">(a) </font></td>
    <td width=2%><font size="2"></font></td>
    <td width=95%><font size="2">Refiled as an Exhibit to this Pre-Effective Amendment
      No. 1 to the Registrant&#146;s Registration Statement on Form N-14 (File
      No. 333-65446) (the &#147;N-14 Registration Statement&#148;) pursuant to
      Electronic Data Gathering, Analysis and Retrieval (EDGAR) requirements.&lt;/R&gt;</font></td>
  </tr>
</table>
<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
C-1</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></table><p>&nbsp;<hr size=5 noshade width=600 align=LEFT>
<p>&nbsp;








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<!-- MARKER LABEL="sheet: 2, page: 2" -->





<P><table width=600><TR><TD width=10% valign=top><font size=2>
(b)
</FONT></TD><TD width=90% valign=top><font size=2>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&#146;s Articles
of Incorporation, previously filed as Exhibit (1) to the Registration
Statement, and 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&#146;s
By-Laws previously filed as Exhibit (2) to the Registration Statement.</font></TD></TR></TABLE><p></P>


<P><table width=600><TR><TD width=10% valign=top><font size=2>
(c)
</FONT></TD><TD width=90% valign=top><font size=2>Incorporated by reference to
Exhibit 15 to Post-Effective Amendment No. 8 to the Registration Statement on
Form N-1A of Merrill Lynch Middle East/Africa Fund, Inc. (File No. 33-55843),
filed on March 29, 2000.&lt;R&gt;</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
(d)
</FONT></TD><TD width=90% valign=top><font size=2>Filed on July 19, 2001 as an
Exhibit to the N-14 Registration Statement.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
(e)
</FONT></TD><TD width=90% valign=top><font size=2> Included on the signature
page of the N-14 Registration Statement and incorporated herein by reference.&lt;/R&gt;</font></TD></TR></TABLE>
<br>
<table width=600>
  <tr>
    <td><font size=2><b>Item 17. <i>Undertakings.</i></b></font></td>
  </tr>
</table>

<p></P>


<P><table width=600><TR><TD width=10% valign=top><font size=2>
 (1)
</FONT></TD><TD width=90% valign=top><font size=2>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.</font></TD></TR></TABLE></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
 (2)
</FONT></TD><TD width=90% valign=top><font size=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.</font></TD></TR></TABLE><p></P>

<P><table width=600><TR><TD width=10% valign=top><font size=2>
 (3)
</FONT></TD><TD width=90% valign=top><font size=2>The Registrant undertakes to
file, by post-effective amendment, a copy of an opinion of counsel as to
certain tax matters within a reasonable time after receipt of such opinion.</font></TD></TR></TABLE><p></P>

<p>
<p>
<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
C-2</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></table><p>&nbsp;<hr size=5 noshade width=600 align=LEFT>
<p>&nbsp;





<!-- *************************************************************************** -->
  <!-- MARKER LABEL="sheet: 3, page: 3" -->
<p>
<table width=600>
  <tr>
    <td  align=center><font size=2><b>SIGNATURES</b></font></td>
  </tr>
</table>
<br>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&lt;R&gt;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 10th day of September, 2001.&lt;/R&gt;</font></td>
  </tr>
</table>
<br>
<table cellpadding="0" cellspacing="0" border="0" width=600>
  <tr>
    <td height="33" width="321">&nbsp;</td>
    <td height="33" colspan="2" align="center"><font size=2> M<font size="1">UNI<font size="2">A</font>SSETS</font>
      F<font size="1">UND</font>, I<font size="1">NC</font>. <br>
      &nbsp;(Registrant)</font></td>
  </tr>
  <tr>
    <td height="16" width="321">&nbsp;</td>
    <td height="16" width="15">&nbsp;</td>
    <td height="16" width="267">&nbsp;</td>
  </tr>
  <tr>
    <td height="16" width="321">&nbsp;</td>
    <td height="16" width="15">&nbsp;</td>
    <td height="16" width="267">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td height="16" width="321">
      <div align="right"></div>
    </td>
    <td height="16" width="15" valign="baseline">
      <div align="right"><font size="2">By:</font></div>
    </td>
    <td height="16" width="267" align="center"><font size="2">/s/ D<font size="1">ONALD</font>
      C. B<font size="1">URKE</font></font>
      <hr noshade align="center" width="250" size="1">
      <font size=1><b>(Donald C. Burke, Vice President and Treasurer) </b></font>
    </td>
  </tr>
  <tr valign="top">
    <td colspan="2" height="3"></td>
    <td width="267" align="center" height="3"> <font size=1></font> </td>
  </tr>
  <tr valign="top">
    <td colspan="2" height="3">&nbsp;</td>
    <td width="267" height="3">
      <div align="center"><font size=1></font></div>
    </td>
  </tr>
</table>
<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.</font></td>
  </tr>
</table>
<font size="2">&lt;R&gt;</font> <br>
<table cellspacing=0 cellpadding=0 width=600>
  <tr align="center" valign="bottom">
    <td height="44" colspan="2"> <b><font size="1">Signature</font></b>
      <hr noshade size="1" width="25%">
    </td>
    <td width="2%" height="44">&nbsp;</td>
    <td width="29%" height="44"> <b><font size="1">Title</font></b>
      <hr noshade size="1" width="15%">
    </td>
    <td width="24%" height="44"> <b><font size="1">Date</font></b>
      <hr size="1" noshade width="22%">
    </td>
  </tr>
  <tr>
    <td valign="bottom" align="left" colspan="2">&nbsp;</td>
    <td valign="TOP" width="2%" align="center">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td valign="TOP" width="29%">&nbsp;</td>
    <td valign="TOP" width="24%" align="center">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" align="center" colspan="2">
      <p> <font size="2"> T</font><font size="1">ERRY</font> <font size="2">K.</font>
        <font size="2">G</font><font size="1">LENN</font><font size="2">*</font>
      <hr noshade size="1">
      <font size="1"><b>(Terry K. Glenn) </b></font> </td>
    <td valign="TOP" width="2%" align="center">&nbsp;</td>
    <td valign="TOP" width="29%">
      <p><font size="2">President and Director<br>
        &nbsp;&nbsp; (Principal Executive Officer) </font>
    </td>
    <td valign="TOP" width="24%" align="center">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" align="center" colspan="2"> </td>
    <td valign="TOP" width="2%" align="center">&nbsp;</td>
    <td valign="TOP" width="29%">
      <p>&nbsp;
    </td>
    <td valign="TOP" width="24%" align="center">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" align="center" colspan="2">
      <p> <font size="2"> D</font><font size="1">ONALD</font><font size="2"> C.</font>
        <font size="2">B</font><font size="1">URKE</font><font size="2">*</font>
      <hr noshade size="1">
      <font size="1"><b>(Donald C. Burke)</b></font> </td>
    <td valign="TOP" width="2%" align="center">&nbsp;</td>
    <td valign="TOP" width="29%">
      <p><font size="2">Vice President and Treasurer<br>
        &nbsp;&nbsp;(Principal Financial and <br>
        &nbsp;&nbsp; Accounting Officer) </font>
    </td>
    <td valign="TOP" width="24%" align="center">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" align="center" colspan="2"> </td>
    <td valign="TOP" width="2%" align="center">&nbsp;</td>
    <td valign="TOP" width="29%"> </td>
    <td valign="TOP" width="24%" align="center">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" align="center" colspan="2"><font size="2"> J<font size="1">OE</font>
      G<font size="1">RILLS</font>* </font>
      <hr noshade size="1">
      <font size="1"><b>(Joe Grills)</b></font> </td>
    <td valign="TOP" width="2%" align="center">&nbsp;</td>
    <td valign="TOP" width="29%">
      <p><font size="2">Director</font>
    </td>
    <td valign="TOP" width="24%" align="center">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" align="center" colspan="2">&nbsp;</td>
    <td valign="TOP" width="2%" align="center">&nbsp;</td>
    <td valign="TOP" width="29%">&nbsp;</td>
    <td valign="TOP" width="24%" align="center">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" align="center" colspan="2"><font size="2"> W<font size="1">ALTER</font>
      M<font size="1">INTZ</font></font><font size="2">*</font>
      <hr noshade size="1">
      <font size="1"><b>(Walter Mintz)</b></font> </td>
    <td valign="TOP" width="2%" align="center">&nbsp;</td>
    <td valign="TOP" width="29%">
      <p><font size="2">Director</font>
    </td>
    <td valign="TOP" width="24%" align="center">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" align="center" colspan="2">&nbsp;</td>
    <td valign="TOP" width="2%" align="center">&nbsp;</td>
    <td valign="TOP" width="29%">&nbsp;</td>
    <td valign="TOP" width="24%" align="center">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" align="center" colspan="2" height="51"><font size="2"> R<font size="1">OBERT</font>
      S. S<font size="1">ALOMON</font>, J<font size="1">R.</font>*</font>
      <hr noshade size="1">
      <font size="1"><b>(Robert S. Salomon, Jr.)</b></font> </td>
    <td valign="TOP" width="2%" align="center" height="51">&nbsp;</td>
    <td valign="TOP" width="29%" height="51">
      <p><font size="2">Director</font>
    </td>
    <td valign="TOP" width="24%" align="center" height="51">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" align="center" colspan="2">&nbsp;</td>
    <td valign="TOP" width="2%" align="center">&nbsp;</td>
    <td valign="TOP" width="29%">&nbsp;</td>
    <td valign="TOP" width="24%" align="center">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" align="center" colspan="2"><font size="2"> M<font size="1">ELVIN</font>
      R. S<font size="1">EIDEN</font></font><font size="2">*</font>
      <hr noshade size="1">
      <font size="1"><b>(Melvin R. Seiden)</b></font> </td>
    <td valign="TOP" width="2%" align="center">&nbsp;</td>
    <td valign="TOP" width="29%">
      <p><font size="2">Director</font>
    </td>
    <td valign="TOP" width="24%" align="center">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" align="center" colspan="2">&nbsp;</td>
    <td valign="TOP" width="2%" align="center">&nbsp;</td>
    <td valign="TOP" width="29%">&nbsp;</td>
    <td valign="TOP" width="24%" align="center">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" align="center" colspan="2"><font size="2"> S<font size="1">TEPHEN</font>
      B. S<font size="1">WENSRUD</font></font><font size="2">*</font>
      <hr noshade size="1">
      <font size="1"><b>(Stephen B. Swensrud)</b></font> </td>
    <td valign="TOP" width="2%" align="center">&nbsp;</td>
    <td valign="TOP" width="29%">
      <p><font size="2">Director</font>
    </td>
    <td valign="TOP" width="24%" align="center">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" align="center" colspan="2">&nbsp; </td>
    <td valign="TOP" width="2%" align="center">&nbsp;</td>
    <td valign="TOP" width="29%">&nbsp;</td>
    <td valign="TOP" width="24%" align="center">&nbsp;</td>
  </tr>
  <tr>
    <td valign="TOP" align="center" colspan="2"><font size="2">*By&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/&nbsp;D<font size="1">ONALD</font>
      C. B<font size="1">URKE</font></font> <font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font>
      <hr noshade size="1">
      <font size="1"><b>(Donald C. Burke, Attorney-in-Fact))</b></font> </td>
    <td valign="TOP" width="2%" align="center">&nbsp;</td>
    <td valign="TOP" width="29%">&nbsp;</td>
    <td valign="TOP" width="24%" align="center"><font size="2">September 10, 2001</font></td>
  </tr>
</table>
<font size="2">&lt;/R&gt;</font>
<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
C-3</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></table><p>&nbsp;<hr size=5 noshade width=600 align=LEFT>
<p>&nbsp;





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  <!-- MARKER LABEL="sheet: 4, page: 4" -->
<p>
<table width=600>
  <tr>
    <td  align=center><font size=2><b>INDEX TO EXHIBITS </b></font></td>
  </tr>
</table>
<p>
<table width=600 cellpadding="0" cellspacing="0">
  <tr>
    <td height="23" width="58"><font size=2><b><font size="1">Exhibit <br>
      Number </font></b></font>
      <hr width="60%" align="left" noshade size="1">
    </td>
    <td height="23" width="540"><font size="1"><b>Description</b></font>
      <hr width="9%" align="left" noshade size="1">
    </td>
  </tr>
</table>
<font size="2">&lt;R&gt;</font><br>
<table cellspacing=0 cellpadding=0 width=600>
  <tr valign="top">
    <td align="right">
      <p><font size="2">1 </font>
    </td>
    <td>
      <p><font size="2">(a) </font>
    </td>
    <td><font size="2">&nbsp;&nbsp;</font></td>
    <td>
      <p><font size="2">&#151;</font>
    </td>
    <td><font size="2"></font></td>
    <td> <font size="2"> Articles of Incorporation of the Registrant, dated April
      14, 1993. </font></td>
  </tr>
  <tr valign="top">
    <td align="right">&nbsp;</td>
    <td>
      <p><font size="2">(b)</font>
    </td>
    <td><font size="2"></font></td>
    <td>
      <p><font size="2">&#151;</font>
    </td>
    <td><font size="2"></font></td>
    <td> <font size="2"> Articles of Amendment to Articles of Incorporation. </font></td>
  </tr>
  <tr valign="top">
    <td align="right">
      <p><font size="2">5 </font>
    </td>
    <td><font size="2">(b)</font></td>
    <td><font size="2"></font></td>
    <td>
      <p><font size="2">&#151;</font>
    </td>
    <td><font size="2">&nbsp;&nbsp;</font></td>
    <td> <font size="2"> Form of specimen certificate for the Common Stock of
      the Registrant. </font></td>
  </tr>
  <tr valign="top">
    <td align="right"><font size="2">6</font></td>
    <td><font size="2"></font></td>
    <td><font size="2"></font></td>
    <td><font size="2"><font size="2">&#151;</font> </font></td>
    <td><font size="2"></font></td>
    <td><font size="2"> Form of Investment Advisory Agreement between the Registrant
      and Fund Asset Management, L.P. </font></td>
  </tr>
  <tr valign="top">
    <td align="right"><font size="2">7</font></td>
    <td><font size="2">(a)</font></td>
    <td><font size="2"></font></td>
    <td><font size="2"><font size="2">&#151;</font> </font></td>
    <td><font size="2"></font></td>
    <td><font size="2">Form of Purchase Agreement. </font></td>
  </tr>
  <tr valign="top">
    <td align="right"><font size="2"></font></td>
    <td><font size="2">(b)</font></td>
    <td><font size="2"></font></td>
    <td><font size="2"><font size="2">&#151;</font> </font></td>
    <td><font size="2"></font></td>
    <td><font size="2">Form of Merrill Lynch Standard Dealer Agreement. </font></td>
  </tr>
  <tr valign="top">
    <td align="right"><font size="2">9</font></td>
    <td><font size="2"></font></td>
    <td><font size="2"></font></td>
    <td><font size="2"><font size="2">&#151;</font> </font></td>
    <td><font size="2"></font></td>
    <td><font size="2"> Form of Custodian Agreement between the Registrant and
      The Bank of New York. </font></td>
  </tr>
  <tr valign="top">
    <td align="right"><font size="2">11</font></td>
    <td><font size="2"></font></td>
    <td><font size="2"></font></td>
    <td><font size="2"><font size="2">&#151;</font> </font></td>
    <td><font size="2"></font></td>
    <td><font size="2">Opinion of Clifford Chance Rogers &amp; Wells <font size="1">LLP</font>,
      counsel for the Registrant. </font></td>
  </tr>
  <tr valign="top">
    <td align="right"><font size="2">13</font></td>
    <td><font size="2"></font></td>
    <td><font size="2"></font></td>
    <td><font size="2"><font size="2">&#151;</font> </font></td>
    <td><font size="2"></font></td>
    <td><font size="2"> Form of Transfer Agency, Dividend Disbursing Agency and
      Shareholder Servicing Agency Agreement between the Registrant and The Bank
      of New York. &lt;/R&gt;</font></td>
  </tr>
  <tr valign="top">
    <td align="right"><font size="2">14</font></td>
    <td><font size="2">(a)</font></td>
    <td><font size="2"></font></td>
    <td><font size="2"><font size="2">&#151;</font></font></td>
    <td><font size="2"></font></td>
    <td><font size="2">Consent of Deloitte &amp; Touche <font size="1">LLP</font>,
      independent auditors for the registrant.</font></td>
  </tr>
  <tr valign="top">
    <td align="right"><font size="2">14</font></td>
    <td><font size="2">(b)</font></td>
    <td><font size="2"></font></td>
    <td><font size="2"><font size="2">&#151;</font></font></td>
    <td><font size="2"></font></td>
    <td><font size="2">Consent of Deloitte &amp; Touche <font size="1">LLP</font>,
      independent auditors for Merrill Lynch High Income Municipal Bond Fund,
      Inc. </font></td>
  </tr>
</table>
<p><br>
  <br>
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td>
    <td width=480 align=center><font size="2"> </font></td>
    <td width=60 align=right><font size="1">&nbsp;</font></td></tr></table><p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;











<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 1, page: 1" -->




<p><table width=600><tr><td><font size=2>[Proxy Card Front]</font></td></tr></table>


<p>
<p><table width=600><tr><td  align=center><font size=2><B>MERRILL LYNCH HIGH
INCOME MUNICIPAL BOND FUND, INC.<BR>P.O. BOX 9011<BR>PRINCETON, NEW JERSEY 08543-9011</B></font></td></tr></table>

<p><table width=600><tr><td  align=center><font size=2><B>PROXY</B></font></td></tr></table>

<p><table width=600><tr><td  align=center><font size=2><B>This proxy is
solicited on behalf of the Board of Directors</B></font></td></tr></table>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 High
Income Municipal Bond Fund, Inc. (the &#147;Fund&#148;) 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.</font></td></tr></table>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>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
&#147;FOR&#148; approval of the Agreement and Plan of Reorganization.</B></FONT></td></tr></table>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 &#147;FOR&#148; 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.</font></td></tr></table>

<br>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;You may also vote your shares by
      touch-tone phone by calling 1-800-690-6903 or through the Internet at www.proxyvote.com.</font></td>
  </tr>
</table>
<p><table width=600>
  <tr align="right">
    <td><font size=2><I>(Continued and to be signed on the reverse side)</I></font></td>
  </tr></table>

<p>&nbsp;
<p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;



<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 2, page: 2" -->




<p><table width=600><tr><td><font size=2>[Proxy Card Reverse]</font></td></tr></table>


<p>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Please mark boxes /&nbsp;&nbsp;&nbsp;/
      or /X/ in blue or black ink.</font></td>
  </tr>
</table>
<P>
<table width=600><TR>
    <TD width=6% valign=top><font size=2> 1. </FONT></TD>
    <TD width=94% valign=top><font size=2>To consider and act upon a proposal
      to approve the Agreement and Plan of Reorganization between the Fund and
      MuniAssets Fund, Inc.</font></TD>
  </TR></TABLE>




<br>
<table width="600" border="0" cellpadding="0" cellspacing="0">
  <tr align="center">
    <td width="168"><font size="2"><b>FOR&nbsp;&nbsp;</b> /&nbsp;&nbsp; /</font></td>
    <td width="197"><font size="2"><b>AGAINST&nbsp;&nbsp;</b> /&nbsp;&nbsp; /</font></td>
    <td width="235"><font size="2"><b>ABSTAIN</b>&nbsp;&nbsp; /&nbsp;&nbsp; /</font></td>
  </tr>
</table>
<br>
<table width=600><TR>
    <TD width=6% valign=top><font size=2> 2. </FONT></TD>
    <TD width=94% valign=top><font size=2>In the discretion of such proxies, upon
      such other business as properly may come before the meeting or any adjournment
      thereof.</font></TD>
  </TR></TABLE>





<br>
<table width=600>
  <tr>
    <td width=45% valign=top><font size=2> . </font></td>
    <td width=55% valign=top align="center">
      <div align="left"><font size="2">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.<br>
        Dated: _____________________________<br>
        <br>
        X _________________________________<br>
        &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Signature
        <br>
        <br>
        X _________________________________<br>
        &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Signature,
        if held jointly </font></div>
    </td>
  </tr>
</table>
<br>
<table width=600><tr>
    <td  align=left><font size=2><B>Sign, date, and Return the Proxy Card Promptly
      Using the Enclosed Envelope.</B></font></td>
  </tr></table>


<p>&nbsp;
<p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;





<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 3, page: 3" -->



<p><table width=600><tr><td><font size=2>[Proxy Card Front]</font></td></tr></table>


<p>
<p><table width=600><tr><td  align=center><font size=2><B>MUNIASSETS FUND, INC.<BR>P.O. BOX 9011<BR>PRINCETON, NEW JERSEY 08543-9011</B></font></td></tr></table>

<p><table width=600><tr><td  align=center><font size=2><B>PROXY</B></font></td></tr></table>

<p><table width=600><tr><td  align=center><font size=2><B>This proxy is
solicited on behalf of the Board of Directors</B></font></td></tr></table>

<p><table width=600><tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned hereby appoints
      Terry K. Glenn, Donald C. Burke and Bradley J. Lucido as proxies, each with
      the power to appoint his 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 MuniAssets Fund, Inc. (the &#147;Fund&#148;) held
      of record by the undersigned on August 27, 2001 at the Annual Meeting of
      Stockholders of the Fund to be held on October 24, 2001, or any adjournment
      thereof.</font></td>
  </tr></table>

<p><table width=600><tr><td><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>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
&#147;FOR&#148; Items 1 and 2.</B></FONT></td></tr></table>

<p><table width=600><tr><td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 &#147;FOR&#148; 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.</font></td></tr></table>

<br>
<table width=600>
  <tr>
    <td><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;You may also vote your shares by
      touch-tone phone by calling 1-800-690-6903 or through the Internet at www.proxyvote.com.</font></td>
  </tr>
</table>
<p><table width=600>
  <tr align="right">
    <td><font size=2><I>(Continued and to be signed on the reverse side)</I></font></td>
  </tr></table>

<p>&nbsp;
<p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;





<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 4, page: 4" -->



<p><table width=600><tr><td><font size=2>[Proxy Card Reverse]</font></td></tr></table>


<p><table width=600><tr>
    <td><font size=2>Please mark boxes /&nbsp;&nbsp;&nbsp;/ or /X/ in blue or
      black ink.</font></td>
  </tr></table>


<P><table width=600><TR>
    <TD width=5% valign=top><font size=2> 1. </FONT></TD>
    <TD width=95% valign=top><font size=2>To consider and act upon a proposal
      to approve the Agreement and Plan of Reorganization between the Fund and
      Merrill Lynch High Income Municipal Bond Fund, Inc.</font></TD>
  </TR></TABLE>





<br>
<table width="600" border="0" cellpadding="0" cellspacing="0">
  <tr align="center">
    <td width="168"><font size="2"><b>FOR&nbsp;&nbsp;</b> /&nbsp;&nbsp; /</font></td>
    <td width="197"><font size="2"><b>AGAINST&nbsp;&nbsp;</b> /&nbsp;&nbsp; /</font></td>
    <td width="235"><font size="2"><b>ABSTAIN</b>&nbsp;&nbsp; /&nbsp;&nbsp; /</font></td>
  </tr>
</table>
<br>
<table width="600" border="0" cellpadding="0" cellspacing="0">
  <tr align="center">
    <td width="31" align="left" valign="top"><font size="2">2</font>.</td>
    <td width="193" align="left" valign="top"><font size="2">To elect two Class
      I Directors for<br>
      a term of three years </font></td>
    <td width="161" align="left" valign="top"><font size="2">FOR all nominees
      listed below (except as marked to the contrary below) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/&nbsp;&nbsp;&nbsp;/</font></td>
    <td width="19" align="left" valign="top">&nbsp;</td>
    <td width="196" align="left" valign="top"><font size="2">WITHHOLD AUTHORITY
      to vote for all nominees listed below &nbsp;&nbsp;&nbsp;/&nbsp;&nbsp;&nbsp;/</font></td>
  </tr>
</table>
<P><table width=600><TR>
    <TD width=5% valign=top><font size=2> </FONT></TD>
    <TD width=95% valign=top><font size=2><b><i>(INSTRUCTION: To withhold authority
      to vote for any individual nominee, strike a line through the nominee&#146;s
      name in the list below.)</i></b></font></TD>
  </TR></TABLE>

<P><table width=600><TR>
    <TD width=5% valign=top><font size=2> </FONT></TD>
    <TD width=95% valign=top><font size=2>Class I Nominees: Joe Grills, Robert
      S. Salomon, Jr.</font></TD>
  </TR></TABLE>

<P><table width=600><TR>
    <TD width=5% valign=top><font size=2> 3. </FONT></TD>
    <TD width=95% valign=top><font size=2>In the discretion of such proxies, upon
      such other business as properly may come before the meeting or any adjournment
      thereof.</font></TD>
  </TR></TABLE>




<br>
<table width=600>
  <tr>
    <td width=45% valign=top><font size=2> . </font></td>
    <td width=55% valign=top align="center">
      <div align="left"><font size="2">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.<br>
        Dated: _____________________________<br>
        <br>
        X _________________________________<br>
        &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Signature
        <br>
        <br>
        X _________________________________<br>
        &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Signature,
        if held jointly </font></div>
    </td>
  </tr>
</table>
<br>
<p><table width=600><tr>
    <td><font size=2><b>Sign, Date, and Return the Proxy Card Promptly Using the
      Enclosed Envelope.</b></font></td>
  </tr></table>

<p>&nbsp;
<p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;



</body>
</html>




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-1.A
<SEQUENCE>3
<FILENAME>file002.txt
<DESCRIPTION>ARTICLES OF INCORPORATION
<TEXT>

                                                                    Exhibit 1(a)

                            ARTICLES OF INCORPORATION

                                       OF

                              MUNIINCOME FUND, INC.

                                    ARTICLE I

      THE UNDERSIGNED,  Jon R. Lewis, whose post-office  address is c/o Rogers &
Wells, 200 Park Avenue,  New York, New York 10166,  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 MUNIINCOME 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 Investment Company Act of
1940,  as  amended,  and to  exercise  and enjoy all of the  powers,  rights and
privileges  granted to, or conferred  upon,  corporations by the General Laws of
the State of Maryland now or hereafter in force.


<PAGE>

                                   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 dividends,  qualifications or terms or
conditions  of  redemption  of  such  shares  of  stock  and  pursuant  to  such
classification  or  reclassification  to  increase  or  decrease  the  number of
authorized shares of any existing class or series.


                                       2
<PAGE>


      (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


                                       3
<PAGE>

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.

      (8) All persons who shall acquire stock in the  Corporation  shall acquire
the  same  subject  to  the  provisions  of  the  charter  and  By-Laws  of  the
Corporation. As used in the charter of the Corporation,  the terms "charter" and
"Articles of Incorporation" shall mean and include the Articles of Incorporation
of the


                                       4
<PAGE>

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:

                                  Robert Harris
                               Philip L. Kirstein
                                 Mark B. Goldfus

      (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


                                       5
<PAGE>

directors  and  officers  under this  provision  in  connection  with any act or
omission that occurred prior to such amendment or repeal.

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

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

      (6) A  director  elected by the  holders  of capital  stock may be removed
(with or without  cause),  but only 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,


                                       6
<PAGE>

debentures,  bonds or other securities convertible into shares of capital stock,
now or  hereafter  to be  authorized,  whether or not the  issuance  of any such
shares, or notes,  debentures,  bonds or other securities would adversely affect
the dividend or voting  rights of such  shareholder;  and the Board of Directors
may issue  shares of any class of the  Corporation,  or any  notes,  debentures,
bonds, other securities convertible into shares of any class, either whole or in
part, to the existing shareholders.

                                  ARTICLE VIII

                              DETERMINATION BINDING

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


                                       7
<PAGE>

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.


                                       8
<PAGE>

                                    ARTICLE X

                        PRIVATE PROPERTY OF STOCKHOLDERS

      The private  property of Stockholders  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%)


                                       9
<PAGE>

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,


                                       10
<PAGE>

Section (1),  Section (3),  Section (4),  Section (5) and Section (6) of Article
VI,  Article IX,  Article X, Article XI,  Article XII, or this Article  XIII, of
these  Articles  of  Incorporation  shall  require the  affirmative  vote of the
holders  of  at  least  sixty-six  and  two-thirds  percent  (66  2/3%)  of  the
outstanding  shares of capital stock of the Corporation  entitled to be voted on
the matter.

      IN WITNESS WHEREOF, the undersigned  incorporator of MuniIncome 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 facts set forth therein are true in all material  respects under
the penalties of perjury.

Dated the 14th day
of April 1993

                                        /s/ Jon R. Lewis
                                        -----------------------
                                             Jon R. Lewis


                                       11


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-1.B
<SEQUENCE>4
<FILENAME>file003.txt
<DESCRIPTION>ARTICLES OF AMENDMENT
<TEXT>

                                                                    Exhibit 1(b)

                              MUNIINCOME FUND, INC.

                              ARTICLES OF AMENDMENT

      MUNIINCOME FUND, INC., a Maryland  corporation having its principal office
c/o The Corporation Trust  Incorporated,  32 South 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
Article II of the Articles of  Incorporation  and  inserting in lieu thereof the
following:

                                   ARTICLE II

                                      NAME

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

      SECOND: The foregoing amendment to the charter of the Corporation has been
duly  approved by the entire Board of Directors  by  Unanimous  Written  Consent
dated  as of the 5th day of May,  1993 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.

      The 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  charter are
true in all  material  respects,  and that  this  statement  is made  under  the
penalties of perjury.


<PAGE>

      IN WITNESS WHEREOF, MuniIncome 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 May 5, 1993.

                                                MUNIINCOME FUND, INC.

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

Attest:

By: /s/ Mark B. Goldfus
    ----------------------------
    Mark B. Goldfus, Secretary


                                       2


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-5.B
<SEQUENCE>5
<FILENAME>file004.txt
<DESCRIPTION>TEMPORARY CERTIFICATE
<TEXT>

                                                                    Exhibit 5(b)

                             TEMPORARY CERTIFICATE
                      Exchangeable for Definitive Engraved
                      Certificate When Ready for Delivery

                               [GRAPHIC OMITTED]

                              MuniAssets Fund, Inc.

              INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND

  COMMON STOCK                                         CUSIP 62618Q 10 6
 PAR VALUE $.10                              SEE REVERSE FOR CERTAIN DEFINITIONS

This certifies that

is the owner of

            FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF

MuniAssets  Fund,  Inc.,  transferable  on the books of the  Corporation  by the
holder  in  person  or by  duly  authorized  attorney  upon  surrender  of  this
Certificate  properly  endorsed.  This  Certificate  and the shares  represented
hereby  are  issued and shall be held  subject  to all of the  provisions of the
Articles of Incorporation and of the By-Laws of the Corporation,  and of all the
amendments from time to time made thereto.  This Certificate is not valid unless
countersigned and registered by the Transfer Agent and Registrar.

      WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.

MUNIASSETS FUND, INC.
     CORPORATE
        SEAL
        1993
      MARYLAND

Dated:

                              Authorized Signature

          /s/ Mark B. Goldfus                      /s/ Arthur Zeikel
     ------------------------------          ------------------------------
               Secretary                               President

                          Countersigned and Registered
                              The Bank of New York

By _______________________                          Transfer Agent
                                                    and Registrar


<PAGE>

                              MuniAssets Fund, Inc.

      A full statement of the designations  and any preferences,  conversion and
other  rights,  voting  powers,  restrictions,   limitations  as  to  dividends,
qualifications  and terms and  conditions  of  redemption  of the shares of each
class and series of stock which the  Corporation  is authorized to issue and the
differences in the relative  rights and  preferences  between the shares of each
class and series to the extent that they have been set, and the authority of the
Board of Directors  to set the relative  rights and  preferences  of  subsequent
classes and series,  will be furnished by the  Corporation  to any  stockholder,
without  charge,  upon  request  to  the  Secretary  of the  Corporation  at its
principal office.


The following  abbreviations,  when used in the  inscription on the face of this
certificate,  shall  be  construed  as  though  they  were  written  out in full
according to applicable laws or regulations:

TEN COM -- as tenants in common       UNIF GIFT MIN ACT --       Custodian
                                                           ---------------------
                                                           (Cust)       (Minor)
TEN ENT -- as tenants by the entireties            under Uniform Gifts to Minors

JT TEN  -- as joint tenants with right                     Act _________________
           of survivorship and not as                               (State)
           tenants in common

     Additional abbreviations may also be used though not in the above list

      NOTICE: The signature  to this assignment must correspond with the name as
written  upon  the  face  of  the  Certificate,  in  every  particular,  without
alteration or enlargement, or any change whatever.

  For value received ____________________ hereby sell, assign and transfer unto

    PLEASE INSERT SOCIAL SECURITY OR OTHER
        IDENTIFYING NUMBER OF ASSIGNEE

________________________________________________________________________________

________________________________________________________________________________
    PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OF ASSIGNEE

________________________________________________________________________________

________________________________________________________________________________

_________________________________________________________________________ Shares
represented by the within Certificate and do hereby  irrevocably  constitute and
appoint

________________________________________________________________________________

________________________________________________________________________________
Attorney to transfer the said stock on the books of the within named Corporation
with full power of substitution in the premises.

Dated: __________________________

                                       X ________________________________

Signatures  must be guaranteed by an "eligible  guarantor  institution"  as such
term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934.


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-6
<SEQUENCE>6
<FILENAME>file005.txt
<DESCRIPTION>INVESTMENT ADVISORY AGREEMENT
<TEXT>

                                                                       Exhibit 6

                          INVESTMENT ADVISORY AGREEMENT

      AGREEMENT  made this 25th day of June,  1993,  by and  between  MUNIASSETS
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 non-diversified,  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 Advisers Act of l94O; 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:


<PAGE>

                                    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,  investment
advisory 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


                                       2
<PAGE>

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


                                       3
<PAGE>

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


                                       4
<PAGE>

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 and employees
of the Fund and all  Directors  of the Fund who are  affiliated  persons  of the
Investment Adviser.

      (b) The Fund. The Fund assumes and shall pay or cause to be paid all other
expenses of the Fund including, without limitation: organizational costs, taxes,
expenses  for legal and  auditing  services,  costs of printing  proxies,  stock
certificates,  shareholder reports,  prospectuses,  listing fees, charges of the
custodian,  any  sub-custodian,  transfer agent,  dividend  disbursing agent and
registrar,   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 weekly calculation of the net asset value), insurance,  interest,
brokerage costs, litigation and other extraordinary or nonrecurring


                                       5
<PAGE>

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 0.55%
of the Fund's average  weekly net assets (i.e.,  the average weekly value of the
total  assets of the Fund,  minus the sum of accrued  liabilities  of the Fund),
commencing  on the day  following  effectiveness  hereof.  For  purposes of this
calculation,  average  weekly net assets are 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. 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. Payment of the Investment Adviser's  compensation for the preceding month
shall be made as promptly as possible.  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


                                       6
<PAGE>

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.

                                   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


                                       7
<PAGE>

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 a  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 June 18, 1995 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.


                                       8
<PAGE>

                                   ARTICLE VII

                           Amendment 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.


                                       9
<PAGE>

      IN WITNESS  WHEREOF,  the parties  hereto have executed and delivered this
Agreement as of the date first above written.

                                             MUNIASSETS FUND, INC.

                                             By /s/ Mark B. Goldfus
                                                ----------------------------
                                                   (Authorized Signatory)

                                             FUND ASSET MANAGEMENT, INC.

                                             By /s/ Mark B. Goldfus
                                                ----------------------------
                                                   (Authorized Signatory)


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-7.A
<SEQUENCE>7
<FILENAME>file006.txt
<DESCRIPTION>PURCHASE AGREEMENT
<TEXT>

                                                                    Exhibit 7(a)
                                6,700,000 Shares

                              MuniAssets Fund, Inc.
                            (a Maryland corporation)

                                  Common Stock
                           (Par Value $0.10 Per Share)

                               PURCHASE AGREEMENT


                                                                  June ___, 1993

MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
            INCORPORATED
Merrill Lynch World Headquarters
World Financial Center
North Tower
New York, NY 10281-1305

Dear Sirs:

      MuniAssets Fund, Inc., a Maryland corporation (the "Fund"), and Fund Asset
Management,  Inc., a Delaware  corporation  (the  "Adviser"),  each confirms its
agreement  with  Merrill  Lynch & Co.,  Merrill  Lynch,  Pierce,  Fenner & Smith
Incorporated (the  "Underwriter"),  with respect to the sale by the Fund and the
purchase by the Underwriter of 6,700,000  shares of common stock, par value $.10
per share,  of the Fund (the "Common  Stock") and,  with respect to the grant by
the Fund to the  Underwriter  of the  option  described  in  Section 2 hereof to
purchase all or any part of 1,005,000 additional shares of Common Stock to cover
over-allotments. The aforesaid 6,700,000 shares (the "Initial Shares"), together
with all or any part of the 1,005,000  additional shares of Common Stock subject
to the  option  described  in  Section  2  hereof  (the  "Option  Shares"),  are
collectively hereinafter called the "Shares."

      Prior  to  the  purchase  and  public   offering  of  the  Shares  by  the
Underwriter,  the  Fund  and the  Underwriter  shall  enter  into  an  agreement
substantially  in the form of Exhibit A hereto (the  "Pricing  Agreement").  The
Pricing  Agreement  may take the form of an  exchange  of any  standard  form of
written telecommunication between the Fund and the Underwriter and shall specify
such applicable information as is indicated in Exhibit A hereto. The offering of
the Shares will be governed by this  Agreement,  as  supplemented by the Pricing
Agreement.  From and after the date of the execution and delivery of the Pricing
Agreement, this Agreement shall be deemed to incorporate the Pricing Agreement.

<PAGE>

      The Fund has  filed  with the  Securities  and  Exchange  Commission  (the
"Commission") a registration  statement on Form N-2 (No. 33-61150) and a related
preliminary  prospectus for the  registration of the Shares under the Securities
Act of 1933,  as amended (the "1933 Act"),  and a  notification  on Form N-8A of
registration of the Fund as an investment  company under the Investment  Company
Act of 1940, as amended (the "1940 Act"),  and the rules and  regulations of the
Commission under the 1940 Act (together with the rules and regulations under the
1933 Act, the "Rules and  Regulations")  and has filed such  amendments  to such
registration  statement  on Form  N-2,  if any,  and  such  amended  preliminary
prospectuses as may have been required to the date hereof. The Fund will prepare
and file such additional amendments thereto and such amended prospectuses as may
hereafter be required.  Such registration  statement (as amended, if applicable)
and the  prospectus  constituting  a part  thereof  (including  in each case the
information,  if any, deemed to be part thereof  pursuant to Rule 430A(b) of the
Rules and Regulations), as from time to time amended or supplemented pursuant to
the 1933 Act, are hereinafter  referred to as the  "Registration  Statement" and
the "Prospectus,"  respectively,  except that if any revised prospectus shall be
provided to the  Underwriter by the Fund for use in connection with the offering
of the Shares which differs from the Prospectus on file at the Commission at the
time  the  Registration   Statement  becomes  effective  (whether  such  revised
prospectus  is required to be filed by the Fund  pursuant to Rule 497(b) or Rule
497(h) of the Rules and Regulations),  the term "Prospectus" shall refer to each
such  revised  prospectus  from and after the time it is first  provided  to the
Underwriter for such use.

      The  Fund  understands  that  the  Underwriter  proposes  to make a public
offering  of the Shares as soon as the  Underwriter  deems  advisable  after the
Registration  Statement  becomes  effective  and the Pricing  Agreement has been
executed and delivered.

      SECTION 1.  Representations  and Warranties.  (a) The Fund and the Adviser
each severally  represents and warrants to the Underwriter as of the date hereof
and as of the date of the Pricing  Agreement (such later date being  hereinafter
referred to as the "Representation Date") as follows:

            (i) At the time the Registration  Statement becomes effective and at
      the  Representation  Date, the  Registration  Statement will comply in all
      material  respects with the requirements of the 1933 Act, the 1940 Act and
      the Rules and  Regulations  and will not contain an untrue  statement of a
      material  fact or omit to state a  material  fact  required  to be  stated
      therein or necessary to make the statements therein not misleading. At the
      time the Registration  Statement becomes effective,  at the Representation
      Date and at Closing Time referred to in Section 2, the Prospectus  (unless
      the term  "Prospectus"  refers to a prospectus  which has been provided to
      the Underwriter by the Fund for use in connection with the offering of the
      Shares which differs from the


                                       2
<PAGE>

      Prospectus  on file  with the  Commission  at the  time  the  Registration
      Statement becomes effective,  in which case at the time such prospectus is
      first provided to the Underwriter for such use) will not contain an untrue
      statement of a material fact or omit to state a material fact necessary in
      order to make the statements  therein,  in the light of the  circumstances
      under which they were made, not misleading;  provided,  however,  that the
      representations  and  warranties  in this  subsection  shall  not apply to
      statements in or omissions from the  Registration  Statement or Prospectus
      made in reliance upon and in conformity with information  furnished to the
      Fund in writing by the Underwriter  expressly for use in the  Registration
      Statement or Prospectus.

            (ii) The  accountants  who  certified  the  statement  of assets and
      liabilities included in the Registration  Statement are independent public
      accountants as required by the 1933 Act and the Rules and Regulations.

            (iii)  The  statement  of assets  and  liabilities  included  in the
      Registration  Statement presents fairly the financial position of the Fund
      as at  the  date  indicated  and  said  statement  has  been  prepared  in
      conformity with generally accepted accounting principles.

            (iv) Since the respective dates as of which  information is given in
      the Registration Statement and the Prospectus,  except as otherwise stated
      therein,  (A) there has been no material  adverse change in the condition,
      financial or otherwise, of the Fund, or in the earnings,  business affairs
      or business  prospects of the Fund, whether or not arising in the ordinary
      course of business,  (B) there have been no  transactions  entered into by
      the Fund which are  material to the Fund other than those in the  ordinary
      course of business,  and (C) there has been no dividend or distribution of
      any kind  declared,  paid or made by the Fund on any class of its  capital
      stock.

            (v) The Fund has been duly incorporated and is validly existing as a
      corporation  in good standing under the laws of the State of Maryland with
      corporate power and authority to own, lease and operate its properties and
      conduct its business as described in the Registration Statement;  the Fund
      is duly qualified as a foreign  corporation to transact business and is in
      good  standing  in  each  jurisdiction  in  which  such  qualification  is
      required; and the Fund has no subsidiaries.

            (vi) The Fund is registered  with the Commission  under the 1940 Act
      as a closed-end,  non-diversified  management  investment company,  and no
      order of suspension or revocation of such  registration has been issued or
      proceedings therefor initiated or threatened by the Commission.


                                       3
<PAGE>

            (vii) The authorized,  issued and  outstanding  capital stock of the
      Fund is as set forth in the Prospectus  under the caption  "Description of
      Capital Stock"; the Shares have been duly authorized for issuance and sale
      to the  Underwriter  pursuant  to this  Agreement  and,  when  issued  and
      delivered by the Fund pursuant to this  Agreement  against  payment of the
      consideration set forth in the Pricing  Agreement,  will be validly issued
      and fully  paid and  nonassessable;  the Shares  conform  in all  material
      respects to all statements  relating thereto contained in the Registration
      Statement;  and the  issuance of the Shares is not  subject to  preemptive
      rights.

            (viii)  The  Fund  is  not  in   violation   of  its   articles   of
      incorporation, as amended (the "Charter") or in default in the performance
      or observance of any material obligation, agreement, covenant or condition
      contained in any material contract,  indenture,  mortgage, loan agreement,
      note,  lease or other  instrument to which it is a party or by which it or
      its  properties  may be bound;  and the  execution  and  delivery  of this
      Agreement, the Pricing Agreement and the Investment Advisory Agreement and
      the Custodial Agreement referred to in the Registration Statement (as used
      herein,   the   "Advisory   Agreement"   and  the   "Custody   Agreement,"
      respectively) and the consummation of the transactions contemplated herein
      and therein have been duly  authorized by all necessary  corporate  action
      and will not conflict with or constitute a breach of, or default under, or
      result in the creation or  imposition of any lien,  charge or  encumbrance
      upon any property or assets of the Fund pursuant to any material contract,
      indenture,  mortgage,  loan agreement,  note, lease or other instrument to
      which  the Fund is a party or by which it may be bound or to which  any of
      the property or assets of the Fund is subject, nor will such action result
      in any violation of the provisions of the Charter or by-laws,  as amended,
      of the Fund (the  "By-Laws") or, to the best knowledge of the Fund and the
      Adviser,  any law,  administrative  regulation or  administrative or court
      decree; and no consent,  approval,  authorization or order of any court or
      governmental  authority or agency is required for the  consummation by the
      Fund of the  transactions  contemplated  by this  Agreement,  the  Pricing
      Agreement,  the Advisory Agreement and the Custody Agreement,  except such
      as has been  obtained  under the 1940 Act or as may be required  under the
      1933 Act, state securities or Blue Sky laws or foreign  securities laws in
      connection  with  the  purchase  and  distribution  of the  Shares  by the
      Underwriter.

            (ix)  The  Fund  owns or  possesses  or has  obtained  all  material
      governmental  licenses,  permits,  consents,  orders,  approvals and other
      authorizations  necessary  to  lease or own,  as the  case may be,  and to
      operate its properties and to carry on its businesses as  contemplated  in
      the Prospectus.


                                       4
<PAGE>

            (x) There is no action, suit or proceeding before or by any court or
      governmental agency or body, domestic or foreign,  now pending, or, to the
      knowledge of the Fund,  threatened  against or affecting,  the Fund, which
      might result in any material adverse change in the condition, financial or
      otherwise,  business  affairs or business  prospects of the Fund, or might
      materially and adversely  affect the properties or assets of the Fund; and
      there  are no  material  contracts  or  documents  of the Fund  which  are
      required to be filed as exhibits to the Registration Statement by the 1933
      Act, the 1940 Act or by the Rules and  Regulations  which have not been so
      filed.

            (xi) The Fund owns or possesses, or can acquire on reasonable terms,
      adequate  trademarks,  service marks and trade names  necessary to conduct
      its business as described in the Registration Statement,  and the Fund has
      not  received  any notice of  infringement  of or conflict  with  asserted
      rights of others with respect to any  trademarks,  service  marks or trade
      names which, singly or in the aggregate,  if the subject of an unfavorable
      decision, ruling or finding, would materially adversely affect the conduct
      of the business, operations, financial condition or income of the Fund.

            (xii) The  Shares  have been  approved  for  listing on the New York
      Stock Exchange upon notice of issuance.

      (b) The Adviser  represents and warrants to the Underwriter as of the date
hereof and as of the Representation Date as follows:

            (i) The Adviser has been duly  incorporated  as a corporation  under
      the laws of the State of Delaware  with  corporate  power and authority to
      conduct its business as described in the Prospectus.

            (ii) The Adviser is duly  registered as an investment  adviser under
      the Investment  Advisers Act of 1940, as amended (the "Advisers Act"), and
      is not  prohibited  by the  Advisers Act or the 1940 Act, or the rules and
      regulations under such acts, from acting under the Advisory  Agreement for
      the Fund as contemplated by the Prospectus.

            (iii)  This  Agreement  has  been  duly  authorized,   executed  and
      delivered by the Adviser; the Advisory Agreement has been duly authorized,
      executed and delivered by the Adviser and  constitutes a valid and binding
      obligation  of the  Adviser,  enforceable  in  accordance  with its terms,
      subject, as to enforcement, to bankruptcy,  insolvency,  reorganization or
      other  laws  relating  to or  affecting  creditors'  rights and to general
      equity  principles;  and  neither  the  execution  and  delivery  of  this
      Agreement, or the Advisory Agreement nor the performance by the Adviser of
      its obligations hereunder or thereunder will conflict with, or result in a
      breach of any of


                                       5
<PAGE>

      the terms and provisions of, or constitute,  with or without the giving of
      notice  or  lapse of time or both,  a  default  under,  any  agreement  or
      instrument to which the Adviser is a party or by which it is bound, or any
      law,  order,  rule or  regulation  applicable  to it of any  jurisdiction,
      court,  federal or state regulatory body,  administrative  agency or other
      governmental  body,  stock  exchange  or  securities   association  having
      jurisdiction over the Adviser or its respective properties or operations.

            (iv)  The  Adviser  has  the  financial  resources  available  to it
      necessary  for  the   performance  of  its  services  and  obligations  as
      contemplated in the Prospectus.

            (v) Any advertisement  approved by the Adviser for use in the public
      offering  of  the  Shares  pursuant  to  Rule  482  under  the  Rules  and
      Regulations (an "Omitting  Prospectus")  complies with the requirements of
      such Rule 482.

      (c) Any  certificate  signed by any officer of the Fund or the Adviser and
delivered to the Underwriter  shall be deemed a  representation  and warranty by
the  Fund or the  Adviser,  as the case may be,  to the  Underwriter,  as to the
matters covered thereby.

      SECTION 2. Sale and Delivery to the Underwriter;  Closing. On the basis of
the representations and warranties herein contained and subject to the terms and
conditions  herein set forth,  the Fund agrees to sell the Initial Shares to the
Underwriter,  and the Underwriter agrees to purchase the Initial Shares from the
Fund, at the price per share set forth in the Pricing Agreement.

      (a) If the Fund has elected not to rely upon Rule 430A under the Rules and
Regulations, the initial public offering prices and the purchase price per share
to be paid by the  Underwriter  for the Shares has been determined and set forth
in the  Pricing  Agreement,  dated  the date  hereof,  and an  amendment  to the
Registration  Statement and the Prospectus will be filed before the Registration
Statement becomes effective.

      (b) If the Fund has  elected  to rely upon  Rule 430A  under the Rules and
Regulations,  the purchase price per share to be paid by the Underwriter for the
Shares shall be an amount equal to the applicable initial public offering price,
less an amount per share to be determined by agreement  between the  Underwriter
and the Fund. The applicable  initial public offering price per share shall be a
fixed price based upon the number of Shares purchased in a single transaction to
be determined by agreement  between the  Underwriter  and the Fund.  The initial
public offering prices and the purchase price, when so determined,  shall be set
forth in the  Pricing  Agreement.  In the event that such  prices  have not been
agreed upon and the Pricing Agreement has not been executed and delivered by all
parties  thereto by the close of business on the fourth  business day  following
the date of this Agreement,  this Agreement shall terminate  forthwith,  without
liability of any party to any other


                                       6
<PAGE>

party,  except as provided in Section 4, unless otherwise agreed to by the Fund,
the Adviser and the Underwriter.

      In addition,  on the basis of the  representations  and warranties  herein
contained  and subject to the terms and  conditions  herein set forth,  the Fund
hereby  grants an option to the  Underwriter  to purchase all or any part of the
Option Shares at the price per share set forth above.  The option hereby granted
will  expire 45 days after the date  hereof (or, if the Fund has elected to rely
upon Rule 430A under the Rules and  Regulations,  45 days after the execution of
the Pricing  Agreement)  and may be  exercised  only for the purpose of covering
over-allotments   which  may  be  made  in  connection  with  the  offering  and
distribution  of the Initial  Shares upon notice by the  Underwriter to the Fund
setting  forth the number of Option Shares as to which the  Underwriter  is then
exercising  the option and the time,  date and place of payment and delivery for
such Option  Shares.  Any such time and date of delivery (a "Date of  Delivery")
shall be  determined by the  Underwriter  but shall not be later than seven full
business  days after the  exercise  of said  option,  nor in any event  prior to
Closing  Time,  as  hereinafter  defined,  unless  otherwise  agreed upon by the
Underwriter and the Fund.

      Payment of the purchase price for, and delivery of  certificates  for, the
Initial  Shares shall be made at the office of Rogers & Wells,  200 Park Avenue,
New York, New York 10166,  or at such other place as shall be agreed upon by the
Underwriter  and the Fund, at 10:00 A.M. on the fifth business day following the
date the Registration  Statement  becomes effective (or, if the Fund has elected
to rely upon Rule 430A under the Rules and  Regulations,  the fifth business day
after execution of the Pricing Agreement), or such other time not later than ten
business days after such date as shall be agreed upon by the Underwriter and the
Fund (such time and date of payment and delivery  being herein  called  "Closing
Time").  In  addition,  in the event  that any or all of the  Option  Shares are
purchased by the Underwriter, payment of the purchase price for, and delivery of
certificates for, such Option Shares shall be made at the above-mentioned office
of Rogers & Wells,  or at such other place as shall be  mutually  agreed upon by
the Fund and the  Underwriter,  on each Date of  Delivery  as  specified  in the
notice from the  Underwriter  to the Fund.  Payment shall be made to the Fund by
check or checks drawn in New York  Clearing  House or similar next day funds and
payable  to the  order of the  Fund,  against  delivery  to the  Underwriter  of
certificates for the Shares to be purchased by it.  Certificates for the Initial
Shares and Option Shares shall be in such  denominations  and registered in such
names as the  Underwriter  may  request in writing  at least two  business  days
before  Closing  Time  or  the  Date  of  Delivery,  as the  case  may  be.  The
certificates for the Initial Shares and the Option Shares will be made available
by the Fund for  examination  and  packaging by the  Underwriter  not later than
10:00  A.M.  on the  last  business  day  prior to  Closing  Time or the Date of
Delivery, as the case may be.


                                       7
<PAGE>

      SECTION 3. Covenants of the Fund. The Fund covenants with the  Underwriter
as follows:

      (a) The Fund will use its best efforts to cause the Registration Statement
to become effective under the 1933 Act, and will advise the Underwriter promptly
as to the time at which the  Registration  Statement and any amendments  thereto
(including any post-effective  amendment) becomes so effective and, if required,
to cause the issuance of any orders  exempting  the Fund from any  provisions of
the 1940 Act and will  advise the  Underwriter  promptly as to the time at which
any such orders are granted.

      (b) The Fund will  notify the  Underwriter  immediately,  and  confirm the
notice in writing,  (i) of the  effectiveness of the Registration  Statement and
any amendment  thereto  (including any  post-effective  amendment),  (ii) of the
receipt  of any  comments  from  the  Commission,  (iii) of any  request  by the
Commission for any amendment to the  Registration  Statement or any amendment or
supplement to the Prospectus or for additional information, (iv) of the issuance
by  the  Commission  of any  stop  order  suspending  the  effectiveness  of the
Registration  Statement or the initiation of any  proceedings  for that purpose,
and  (v)  of the  issuance  by the  Commission  of an  order  of  suspension  or
revocation of the  notification  on Form N-8A of  registration of the Fund as an
Investment  Company under the 1940 Act or the  initiation of any  proceeding for
that purpose. The Fund will make every reasonable effort to prevent the issuance
of any stop  order  described  in  subsection  (iv)  hereunder  or any  order of
suspension or revocation  described in subsection (v) hereunder and, if any such
stop order or order of suspension or revocation is issued, to obtain the lifting
thereof at the earliest possible moment.

      (c) The Fund will give the Underwriter notice of its intention to file any
amendment to the Registration Statement (including any post-effective amendment)
or  any  amendment  or  supplement  to the  Prospectus  (including  any  revised
prospectus which the Fund proposes for use by the Underwriter in connection with
the offering of the Shares,  which  differs from the  prospectus  on file at the
Commission at the time the Registration  Statement  becomes  effective,  whether
such revised  prospectus is required to be filed pursuant to Rule 497(b) or Rule
497(h) of the Rules and Regulations), whether pursuant to the 1940 Act, the 1933
Act, or  otherwise,  and will  furnish the  Underwriter  with copies of any such
amendment  or  supplement  a  reasonable  amount of time prior to such  proposed
filing  or use,  as the case may be,  and  will not file any such  amendment  or
supplement to which the Underwriter shall reasonably object.

      (d) The Fund will deliver to the Underwriter, as soon as practicable,  two
signed copies of the notification of registration and registration  statement as
originally  filed and of each amendment  thereto,  in each case with two sets of
the  exhibits  filed  therewith,  and will also  deliver  to the  Underwriter  a
conformed copy of the registration statement as originally filed and of each


                                       8
<PAGE>

amendment  thereto (but without  exhibits to the  registration  statement or any
such amendment).

      (e) The Fund will furnish to the Underwriter, from time to time during the
period when the Prospectus is required to be delivered  under the 1933 Act, such
number  of  copies  of  the  Prospectus  (as  amended  or  supplemented)  as the
Underwriter may reasonably request for the purposes contemplated by the 1933 Act
or the Rules and Regulations.

      (f) If any event shall occur as a result of which it is necessary,  in the
opinion of counsel for the Underwriter, to amend or supplement the Prospectus in
order to make the Prospectus  not  misleading in the light of the  circumstances
existing at the time it is  delivered to a  purchaser,  the Fund will  forthwith
amend  or  supplement   the  Prospectus  by  preparing  and  furnishing  to  the
Underwriter a reasonable  number of copies of an amendment or amendments of or a
supplement or supplements to, the Prospectus (in form and substance satisfactory
to counsel for the  Underwriter),  so that, as so amended or  supplemented,  the
Prospectus  will not contain an untrue  statement of a material  fact or omit to
state a material fact necessary in order to make the statements  therein, in the
light of the circumstances existing at the time the Prospectus is delivered to a
purchaser, not misleading.

      (g) The Fund  will  endeavor,  in  cooperation  with the  Underwriter,  to
qualify the Shares for offering and sale under the applicable securities laws of
such states and other  jurisdictions of the United States as the Underwriter may
designate,  and will maintain such  qualifications in effect for a period of not
less than one year after the date hereof. The Fund will file such statements and
reports as may be required by the laws of each  jurisdiction in which the Shares
have been qualified as above provided.

      (h) The Fund will make generally  available to its securityholders as soon
as practicable,  but no later than 60 days after the close of the period covered
thereby,  an earnings  statement (in form  complying with the provisions of Rule
158 of the Rules and Regulations)  covering a twelve-month  period beginning not
later  than the first day of the  Funds's  fiscal  quarter  next  following  the
"effective" date (as defined in said Rule 158) of the Registration Statement.

      (i) Between the date of this Agreement and the  termination of any trading
restrictions  or Closing Time,  whichever is later,  the Fund will not,  without
your prior  consent,  offer or sell,  or enter into any  agreement to sell,  any
equity or equity related securities of the Fund other than the Shares and shares
of Common stock issued in reinvestment of dividends or distributions.

      (j) If, at the time that the Registration Statement becomes effective, any
information  shall have been omitted therefrom in reliance upon Rule 430A of the
Rules and Regulations,


                                       9
<PAGE>

then immediately following the execution of the Pricing Agreement, the Fund will
prepare,  and file or transmit for filing with the Commission in accordance with
such Rule 430A and Rule  497(h)  of the  Rules  and  Regulations,  copies of the
amended  Prospectus,  or,  if  required  by such  Rule  430A,  a  post-effective
amendment  to the  Registration  Statement  (including  an amended  Prospectus),
containing all information so omitted.

      (k)  Trading of the Shares on the New York  Stock  Exchange  will begin no
later than four weeks from the date of the Prospectus.

      SECTION 4. Payment of Expenses.  The Fund will pay all expenses incidental
to the performance of its obligations under this Agreement,  including,  but not
limited to, expenses relating to (i) the printing and filing of the Registration
Statement as originally filed and of each amendment  thereto,  (ii) the printing
of this Agreement and the Pricing Agreement, (iii) the preparation, issuance and
delivery of the certificates  for the Shares to the  Underwriter,  (iv) the fees
and  disbursements of the Fund's counsel and accountants,  (v) the qualification
of the Shares under securities laws in accordance with the provisions of Section
3(g) of this  Agreement,  including  filing  fees  and  any  reasonable  fees or
disbursements  of counsel for the  Underwriter  in  connection  therewith and in
connection  with the  preparation of the blue sky survey,  (vi) the printing and
delivery  to  the  Underwriter  of  copies  of  the  registration  statement  as
originally filed and of each amendment thereto,  of the preliminary  prospectus,
and of the  Prospectus  and any  amendments or  supplements  thereto,  (vii) the
printing  and  delivery  to the  Underwriter  of copies of the blue sky  survey,
(viii) the fees and  expenses  incurred  with  respect  to the  filing  with the
National Association of Securities Dealers,  Inc. and (ix) the fees and expenses
incurred  with  respect  to the  listing  of the  Shares  on the New York  Stock
Exchange.

      If this Agreement is terminated by the  Underwriter in accordance with the
provisions  of Section 5 or  Section 9 (a) (i),  the Fund or the  Adviser  shall
reimburse the  Underwriter  for all of its  reasonable  out-of-pocket  expenses,
including the reasonable fees and  disbursements of counsel for the Underwriter.
In the event the transactions  contemplated  hereunder are not consummated,  the
Adviser  agrees  to pay all of the  costs  and  expenses  set forth in the first
paragraph of this Section 4 which the Fund would have paid if such  transactions
were consummated.

      SECTION 5. Conditions of Underwriter's Obligations. The obligations of the
Underwriter  hereunder  are subject to the accuracy of the  representations  and
warranties of the Fund and the Adviser herein  contained,  to the performance by
the Fund and the Adviser of their respective obligations  hereunder,  and to the
following further conditions:

      (a) The Registration  Statement shall have become effective not later than
5:30 P.M., New York City time, on the date


                                       10
<PAGE>

of this  Agreement,  or at a later time and date not later,  however,  than 5:30
P.M. on the first business day following the date hereof,  or at such later time
and date as may be  approved  by the  Underwriter,  and at Closing  Time no stop
order suspending the effectiveness of the Registration Statement shall have been
issued under the 1933 Act or proceedings therefor initiated or threatened by the
Commission.  If the Fund has  elected  to rely  upon  Rule 430A of the Rules and
Regulations,  the  prices  of  the  Shares  and  any  price-related  information
previously  omitted from the effective  Registration  Statement pursuant to such
Rule 430A shall have been  transmitted to the Commission for filing  pursuant to
Rule 497(h) of the Rules and Regulations  within the prescribed time period, and
prior to Closing Time the Fund shall have provided evidence  satisfactory to the
Underwriter of such timely filing, or a post-effective  amendment providing such
information shall have been promptly filed and declared  effective in accordance
with the requirements of Rule 430A of the Rules and Regulations.

      (b) At Closing Time, the Underwriter shall have received:

      (1) The  favorable  opinion,  dated as of Closing Time, of Rogers & Wells,
counsel for the Fund and the Underwriter, to the effect that:

            (i) The Fund has been duly incorporated and is validly existing as a
      corporation in good standing under the laws of the State of Maryland.

            (ii) The Fund has corporate  power and  authority to own,  lease and
      operate  its  properties  and conduct its  business  as  described  in the
      Registration Statement and the Prospectus.

            (iii)  The  Fund is  duly  qualified  as a  foreign  corporation  to
      transact  business and is in good standing in each  jurisdiction  in which
      such qualification is required.

            (iv) The Shares have been duly  authorized  for issuance and sale to
      the Underwriter  pursuant to this Agreement and, when issued and delivered
      by  the  Fund  pursuant  to  this   Agreement   against   payment  of  the
      consideration set forth in the Pricing  Agreement,  will be validly issued
      and  fully  paid and  nonassessable;  the  issuance  of the  Shares is not
      subject to preemptive rights; and the authorized capital stock conforms as
      to legal matters in all material  respects to the  description  thereof in
      the  Registration  Statement  under the  caption  "Description  of Capital
      Stock."

            (v) This  Agreement  and the Pricing  Agreement  each have been duly
      authorized,  executed and delivered by the Fund and each complies with all
      applicable provisions of the 1940 Act.


                                       11
<PAGE>

            (vi) The Registration Statement is effective under the 1933 Act and,
      to the best of their knowledge and  information,  no stop order suspending
      the effectiveness of the Registration  Statement has been issued under the
      1933  Act  or  proceedings   therefor   initiated  or  threatened  by  the
      Commission.

            (vii) At the time the Registration Statement became effective and at
      the  Representation  Date,  the  Registration  Statement  (other  than the
      financial  statements  included  therein,  as to which no opinion  need be
      rendered)   complied  as  to  form  in  all  material  respects  with  the
      requirements  of the  1933  Act  and  the  1940  Act  and  the  Rules  and
      Regulations.

            (viii) To the best of their knowledge and information,  there are no
      legal or governmental  proceedings  pending or threatened against the Fund
      which are required to be disclosed in the  Registration  Statement,  other
      than those disclosed therein.

            (ix) To the best of their  knowledge and  information,  there are no
      contracts, indentures,  mortgages, loan agreements, notes, leases or other
      instruments  of the Fund  required to be  described  or referred to in the
      Registration Statement or to be filed as exhibits thereto other than those
      described  or  referred  to  therein  or filed as  exhibits  thereto,  the
      descriptions thereof are correct in all material respects,  and no default
      exists in the due  performance  or observance of any material  obligation,
      agreement,  covenant or condition  contained in any  contract,  indenture,
      mortgage,  loan agreement,  note,  lease or other instrument so described,
      referred to or filed.

            (x) No  consent,  approval,  authorization  or order of any court or
      governmental  authority or agency is required in connection  with the sale
      of the Shares to the  Underwriter,  except such as has been obtained under
      the 1933 Act, the 1940 Act or the Rules and  Regulations or such as may be
      required under state or foreign  securities laws; and to the best of their
      knowledge and  information,  the execution and delivery of this Agreement,
      the Pricing  Agreement,  the Advisory  Agreement and the Custody Agreement
      and the consummation of the transactions  contemplated  herein and therein
      will not conflict  with or  constitute a breach of, or default  under,  or
      result in the creation or  imposition of any lien,  charge or  encumbrance
      upon any  property  or  assets  of the Fund  pursuant  to,  any  contract,
      indenture,  mortgage,  loan agreement,  note, lease or other instrument to
      which  the Fund is a party or by which it may be bound or to which  any of
      the property or assets of the Fund is subject, nor will such action result
      in any violation of the  provisions of the Charter or By-Laws of the Fund,
      or any law or administrative


                                       12
<PAGE>

      regulation,   or,  to  the  best  of  their  knowledge  and   information,
      administrative or court decree.

            (xi) The Advisory Agreement and the Custody Agreement have each been
      duly  authorized  and  approved  by the Fund and  comply as to form in all
      material respects with all applicable provisions of the 1940 Act, and both
      have been duly executed by the Fund.

            (xii) The Fund is registered with the Commission  under the 1940 Act
      as a closed-end  nondiversified  management  investment  company,  and all
      required  action has been  taken by the Fund under the 1933 Act,  the 1940
      Act and  the  Rules  and  Regulations  to make  the  public  offering  and
      consummate  the  sale  of the  Shares  pursuant  to  this  Agreement;  the
      provisions of the Charter and By-Laws of the Fund comply as to form in all
      material  respects with the requirements of the 1940 Act; and, to the best
      of their knowledge and  information,  no order of suspension or revocation
      of such  registration  under the 1940 Act, pursuant to Section 8(e) of the
      1940 Act, has been issued or proceedings  therefor initiated or threatened
      by the Commission.

            (xiii) The information in the Prospectus  under the caption "Taxes,"
      to the extent that it constitutes matters of law or legal conclusions, has
      been reviewed by them and is correct in all material respects.

      (2) The  favorable  opinion,  dated  as of  Closing  Time,  of  Philip  L.
Kirstein,   Esq.,  General  Counsel  to  the  Adviser,  in  form  and  substance
satisfactory to counsel for the Underwriter, to the effect that:

            (i) The Adviser has been duly  organized as a corporation  under the
      laws of the  State of  Delaware  with  corporate  power and  authority  to
      conduct its business as described in the  Registration  Statement  and the
      Prospectus.

            (ii) The Adviser is duly  registered as an investment  adviser under
      the  Advisers  Act and is not  prohibited  by the Advisers Act or the 1940
      Act, or the rules and  regulations  under such Acts, from acting under the
      Advisory Agreement for the Fund as contemplated by the Prospectus.

            (iii)  This  Agreement  and the  Advisory  Agreement  have been duly
      authorized,  executed  and  delivered  by the  Adviser,  and the  Advisory
      Agreement  constitutes  a valid and  binding  obligation  of the  Adviser,
      enforceable in accordance with its terms,  subject, as to enforcement,  to
      bankruptcy,  insolvency,  reorganization  or  other  laws  relating  to or
      affecting creditors' rights and to general equity principles;  and, to the
      best of his knowledge and information,  neither the execution and delivery
      of this Agreement or the Advisory


                                       13
<PAGE>

      Agreement nor the performance by the Adviser of its obligations  hereunder
      or  thereunder  will  conflict  with, or result in a breach of, any of the
      terms and provisions  of, or constitute,  with or without giving notice or
      lapse of time or both, a default  under,  any  agreement or  instrument to
      which the Adviser is a party or by which the Adviser is bound, or any law,
      order,  rule or regulation  applicable to the Adviser of any jurisdiction,
      court,  federal or state regulatory body,  administrative  agency or other
      governmental  body,  stock  exchange  or  securities   association  having
      jurisdiction over the Adviser or its properties or operations.

            (iv) To the best of his knowledge and information,  the description
      of the Adviser in the  Registration  Statement and the Prospectus does not
      contain  any  untrue  statement  of a  material  fact or omit to state any
      material  fact  required  to be stated  therein or  necessary  to make the
      statements therein not misleading.

      (3) In addition to providing the opinion required by subsection (b) (1) of
this  Section,  Rogers & Wells  shall also state that  nothing has come to their
attention that would lead them to believe that the Registration Statement on the
date it became  effective or at the  Representation  Date,  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 or
that the Prospectus, as of the date the Registration Statement became effective,
at the Representation  Date (unless the term "Prospectus" refers to a prospectus
which has been  provided to the  Underwriter  by the Fund for use in  connection
with the offering of the Shares which differs from the Prospectus on file at the
Commission at the time the Registration  Statement becomes  effective,  in which
case at the time they are first provided to the  Underwriter for such use) or at
Closing  Time,  contained or contain any untrue  statement of a material fact or
omitted 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.  In  making  such  statement,  Rogers  & Wells  may  state  that the
limitations inherent in the independent  verification of factual matters and the
character  of  determinations  involved  in the  registration  process are such,
however,   that  it  does  not  assume  any  responsibility  for  the  accuracy,
completeness  or  fairness  of the  statements  contained  in  the  Registration
Statement and Prospectus,  except to the limited extent stated in paragraph b(l)
(xiii) above.  In addition,  it does not express any opinion or belief as to the
financial statements  contained in the Registration  Statement or the Prospectus
and  understands  that the  Underwriters  are  relying  upon  Deloitte & Touche,
certified public accountants, as to the form and content of financial statements
contained in the Registration Statement and Prospectus. In giving their opinion,
Rogers  & Wells  may  rely as to  matters  involving  the  laws of the  State of
Maryland upon the opinion of Ginsburg,  Feldman and Bress, Chartered.  Ginsburg,
Feldman and Bress, Chartered and Rogers & Wells may rely, as to matters of fact,
upon certificates


                                       14
<PAGE>

and written statements of officers and employees of and accountants for the Fund
and the Adviser and of public officials.

      (c) At Closing Time,  (i) the  Registration  Statement and the  Prospectus
shall  contain  all  statements  which  are  required  to be stated  therein  in
accordance  with the 1933 Act, the 1940 Act and the Rules and Regulations and in
all material  respects  shall conform to the  requirements  of the 1933 Act, the
1940 Act and the Rules and Regulations and the Prospectus  shall 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,  and no action,  suit or proceeding at law or in
equity  shall be  pending  or,  to the  knowledge  of the  Fund or the  Adviser,
threatened  against  the Fund or the  Adviser  which would be required to be set
forth in the Prospectus  other than as set forth  therein,  (ii) there shall not
have been,  since the respective  dates as of which  information is given in the
Registration  Statement and the Prospectus,  any material  adverse change in the
condition,  financial or  otherwise,  of the Fund or in its  earnings,  business
affairs or business prospects,  whether or not arising in the ordinary course of
business,  from that set forth in the  Registration  Statement  and  Prospectus,
(iii) the Adviser shall have the financial  resources  available to it necessary
for the  performance  of its services and  obligations  as  contemplated  in the
Registration  Statement  and the  Prospectus  and (iv) no  proceedings  shall be
pending or, to the knowledge of the Fund or the Adviser,  threatened against the
Fund or the Adviser before or by any federal,  state or other commission,  board
or  administrative  agency  wherein an unfavorable  decision,  ruling or finding
would  materially  and  adversely  affect  the  business,   property,  financial
condition or income of either the Fund or the Adviser other than as set forth in
the Registration  Statement and the Prospectus;  and the Underwriter  shall have
received,  at Closing Time, a  certificate  of the President or Treasurer of the
Fund and of the President or a Vice President of the Adviser dated as of Closing
Time, evidencing  compliance with the appropriate  provisions of this subsection
(c).

      (d) At Closing Time,  the  Underwriter  shall have received  certificates,
dated as of Closing  Time,  (i) of the President or Treasurer of the Fund to the
effect that the  representations and warranties of the Fund contained in Section
1(a) and (b) are true and  correct  with the same  force  and  effect  as though
expressly  made at and as of Closing  Time,  and (ii) of the President or a Vice
President of the Adviser to the effect that the  representations  and warranties
of the Adviser  contained in Sections 1(a) and (b) are true and correct with the
same force and effect as though expressly made at and as of Closing Time.

      (e) At the time of execution of this Agreement, the Underwriter shall have
received from Deloitte & Touche a letter,  dated such date in form and substance
satisfactory to the Underwriter, to the effect that:


                                       15
<PAGE>

            (i) they are independent accountants with respect to the Fund within
      the meaning of the 1933 Act and the Rules and Regulations;

            (ii) in their  opinion,  the  statement  of assets  and  liabilities
      examined by them and included in the Registration Statement complies as to
      form in all material respects with the applicable accounting  requirements
      of the 1933 Act and the 1940 Act and the Rules and Regulations; and

            (iii) they have performed specified procedures,  not constituting an
      audit,  including  a reading of the  latest  available  interim  financial
      statements  of the  Fund,  a  reading  of the  minute  books of the  Fund,
      inquiries of officials of the Fund  responsible  for financial  accounting
      matters and such other  inquiries  and  procedures  as may be specified in
      such letter,  and on the basis of such  inquiries and  procedures  nothing
      came to their  attention  that caused them to believe  that at the date of
      the latest  available  statement  of assets and  liabilities  read by such
      accountants,  or at a  subsequent  specified  date not more than five days
      prior to the date of this  Agreement,  there was any change in the capital
      stock or net  assets of the Fund as  compared  with  amounts  shown on the
      statement of net assets included in the Prospectus.

      (f) At Closing Time, the  Underwriter  shall have received from Deloitte &
Touche a letter,  dated as of Closing Time, to the effect that they reaffirm the
statements  made in the letter  furnished  pursuant  to  subsection  (e) of this
Section,  except that the "specified  date" referred to shall be a date not more
than five days prior to Closing Time.

      (g) At Closing Time, all proceedings  taken by the Fund and the Adviser in
connection with the organization and registration of the Fund under the 1940 Act
and the issuance and sale of the Shares as herein and therein contemplated shall
be satisfactory in form and substance to the Underwriter.

      (h) In the event the Underwriter  exercises its option provided in section
2  hereof  to  purchase   all  or  any  portion  of  the  Option   Shares,   the
representations  and warranties of the Fund and the Adviser contained herein and
the  statements  in any  certificate  furnished  by the  Fund  and  the  Adviser
hereunder  shall  be true  and  correct  as of each  Date of  Delivery,  and the
Underwriter shall have received:

            (1)  certificates,  dated the Date of Delivery,  of the President or
      Treasurer  of the Fund and of the  President  or a Vice  President  of the
      Adviser  confirming  that the  information  contained  in the  certificate
      delivered  by each of them at Closing Time  pursuant to Sections  5(c) and
      (d), as the case may be, remains true as of such Date of Delivery;


                                       16
<PAGE>

            (2) the  favorable  opinion of Rogers & Wells,  counsel for the Fund
      and Philip L. Kirstein, Esq., General Counsel to the Adviser, each in form
      and  substance  satisfactory  to  the  Underwriter,  dated  such  Date  of
      Delivery,  relating to the Option  Shares and otherwise to the same effect
      as the opinions required by Sections 5(b)(1) and (2), respectively; and

            (3)  a  letter  from  Deloitte  &  Touche,  in  form  and  substance
      satisfactory   to  the  Underwriter  and  dated  such  Date  of  Delivery,
      substantially  the same in scope and substance as the letter  furnished to
      the Underwriter pursuant to Section 5(e), except that the "specified date"
      in the letter  furnished  pursuant to this Section 5(h)(3) shall be a date
      not more than five days prior to such Date of Delivery.

      If any condition  specified in this Section shall not have been  fulfilled
when and as required to be  fulfilled,  this  Agreement may be terminated by the
Underwriter  by notice to the Fund at any time at or prior to Closing Time,  and
such  termination  shall be without  liability  of any party to any other  party
except as provided in Section 4.

      SECTION 6.  Indemnification.  (a) The Fund and the  Adviser,  jointly  and
severally, agree to indemnify and hold harmless the Underwriter and each person,
if any,  who controls  the  Underwriter  within the meaning of Section 15 of the
1933 Act as follows:

            (i) against any and all loss,  liability,  claim, damage and expense
      whatsoever,  as incurred,  arising out of any untrue  statement or alleged
      untrue  statement  of  a  material  fact  contained  in  the  Registration
      Statement (or any amendment thereto),  including the information deemed to
      be part of the Registration  Statement  pursuant to Rule 430A of the Rules
      and  Regulations,  if  applicable,  or the  omission  or alleged  omission
      therefrom of a material fact required to be stated therein or necessary to
      make the  statements  therein not  misleading or arising out of any untrue
      statement or alleged untrue  statement of a material fact contained in any
      preliminary  prospectus or the  Prospectus (or any amendment or supplement
      thereto) or the omission or alleged omission  therefrom of a material fact
      necessary  in order to make the  statements  therein,  in the light of the
      circumstances under which they were made, not misleading;

            (ii) against any and all loss, liability,  claim, damage and expense
      whatsoever  as  incurred  to the extent of the  aggregate  amount  paid in
      settlement  of any  litigation,  or  investigation  or  proceeding  by any
      governmental  agency or body,  commenced  or  threatened,  or of any claim
      whatsoever based upon any such untrue  statement or omission,  or any such
      alleged untrue statement or omission, if such settlement is


                                       17
<PAGE>

          effected with the written consent of the indemnifying party; and

            (iii) against any and all expense whatsoever (including the fees and
      disbursements of counsel chosen by the Underwriter) reasonably incurred in
      investigating,   preparing  or  defending   against  any  litigation,   or
      investigation or proceeding by any governmental agency or body,  commenced
      or  threatened,  or any  claim  whatsoever  based  upon  any  such  untrue
      statement or omission,  or any such alleged untrue  statement or omission,
      to the extent that any such expense is not paid under (i) or (ii) above;

provided,  however,  that this  indemnity  agreement does not apply to any loss,
liability,  claim,  damage or expense to the  extent  arising  out of any untrue
statement or omission or alleged  untrue  statement or omission made in reliance
upon and in  conformity  with written  information  furnished to the Fund by the
Underwriter  expressly for use in the  Registration  Statement (or any amendment
thereto) or any  preliminary  prospectus or the  Prospectus (or any amendment or
supplement thereto).

      (b) The Underwriter  agrees,  severally and not jointly,  to indemnify and
hold harmless the Fund and the Adviser, their respective directors,  each of the
Fund's officers who signed the Registration Statement,  and each person, if any,
who  controls  the Fund or the  Adviser  within the meaning of Section 15 of the
1933 Act,  against  any and all  loss,  liability,  claim,  damage  and  expense
described in the  indemnity  contained in  subsection  (a) of this  Section,  as
incurred,  but only with respect to untrue  statements or omissions,  or alleged
untrue  statements  or  omissions,  made in the  Registration  Statement (or any
amendment  thereto) or any  preliminary  prospectus  or the  Prospectus  (or any
amendment or supplement thereto) in reliance upon and in conformity with written
information  furnished to the Fund by the  Underwriter  expressly for use in the
Registration  Statement (or any amendment thereto) or any preliminary prospectus
or the Prospectus (or any amendment or supplement thereto).

      (c) In addition to the foregoing indemnification,  the Adviser also agrees
to indemnify  and hold  harmless the  Underwriter  and each Person,  if any, who
controls  the  Underwriter  within  the  meaning  of Section 15 of the 1933 Act,
against any and all loss, liability,  claim, damage and expense described in the
indemnity  contained  in  subsection  (a) of this  Section,  with respect to any
Omitting Prospectus or any advertising materials approved by the Adviser for use
in connection with the public offering of the Shares.

      (d) Each  indemnified  party shall give  notice as promptly as  reasonably
practicable to each  indemnifying  party of any action  commenced  against it in
respect of which indemnity may be sought hereunder,  but failure to so notify an
indemnifying  party  shall not relieve it from any  liability  which it may have
otherwise than on


                                       18
<PAGE>

account of this indemnity  agreement.  An indemnifying  party may participate at
its own  expense  in the  defense  of any such  action.  In no event  shall  the
indemnifying  parties  be  liable  for the fees and  expenses  of more  than one
counsel (in addition to any local  counsel)  separate from their own counsel for
all  indemnified  parties  in  connection  with any one action or  separate  but
similar or  related  actions in the same  jurisdiction  arising  out of the same
general allegations or circumstances.

      SECTION  7.  Contribution.  In order  to  provide  for just and  equitable
contribution in circumstances in which the indemnity  agreement  provided for in
Section 6 is for any reason held to be unenforceable by the indemnified  parties
although  applicable in accordance with its terms, the Fund, the Adviser and the
Underwriter  shall  contribute to the  aggregate  losses,  liabilities,  claims,
damages and expenses of the nature  contemplated by said indemnity  agreement as
incurred by the Fund,  the Adviser and the  Underwriter,  as  incurred,  in such
proportion that the  Underwriter is responsible for that portion  represented by
the percentage that the aggregate underwriting  compensation payable pursuant to
Section 2 hereof bears to the aggregate  initial  public  offering  price of the
Shares sold under this  Agreement  and the Fund and the Adviser are  responsible
for  the  balance;  provided,  however,  that no  person  guilty  of  fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to  contribution  from any person who was not guilty of such fraudulent
misrepresentation.  For  purposes of this  Section,  each  person,  if any,  who
controls the Underwriter  within the meaning of Section 15 of the 1933 Act shall
have the same rights to  contribution as the  Underwriter,  and each director of
the Fund and the Adviser, respectively,  each officer of the Fund who signed the
Registration  Statement,  and each person,  if any, who controls the Fund or the
Adviser  within  the  meaning  of Section 15 of the 1933 Act shall have the same
rights to contribution as the Fund and the Adviser, respectively.

      SECTION 8. Representations, Warranties and Agreements to Survive Delivery.
All  representations,  warranties and agreements  contained in this Agreement or
the Pricing  Agreement,  or contained in certificates of officers of the Fund or
the Adviser submitted pursuant hereto,  shall remain operative and in full force
and  effect,  regardless  of  any  investigation  made  by or on  behalf  of the
Underwriter or controlling person, or by or on behalf of the Fund or the Adviser
and shall survive delivery of the Shares to the Underwriter.

      SECTION 9. Termination of Agreement. (a) The Underwriter, by notice to the
Fund,  may terminate  this Agreement at any time at or prior to Closing Time (i)
if there has  been,  since the date of this  Agreement  or since the  respective
dates  as of which  information  is given  in the  Registration  Statement,  any
material  adverse  change in the  condition,  financial or otherwise,  or in the
earnings,  business  affairs or business  prospects  of the Fund or the Adviser,
whether or not arising in the ordinary course


                                       19
<PAGE>

of business,  or (ii) if there has occurred any material  adverse  change in the
financial  markets  in  the  United  States  or  elsewhere  or any  outbreak  of
hostilities   or  other  calamity  or  crisis  or  any  escalation  of  existing
hostilities  the  effect  of which is such as to make it,  in the  Underwriter's
judgment,  impracticable to market the Shares or enforce  contracts for the sale
of the Shares, or (iii) if trading in the Common Stock has been suspended by the
Commission or if trading  generally on either the American Stock Exchange or the
New York Stock  Exchange has been  suspended,  or minimum or maximum  prices for
trading have been fixed,  or maximum ranges for prices for securities  have been
required, by either of said exchanges or by order of the Commission or any other
governmental  authority, or if a banking moratorium has been declared by Federal
or New York authorities.

      (b) If  this  Agreement  is  terminated  pursuant  to this  Section,  such
termination shall be without liability of any party to any other party except as
provided in Section 4.

      SECTION 10. Notices. All notices and other communications  hereunder shall
be in  writing  and  shall be  deemed  to have  been  duly  given if  mailed  or
transmitted  by any standard form of written  telecommunication.  Notices to the
Underwriter shall be directed to Merrill Lynch World Headquarters,  North Tower,
World  Financial  Center,  New  York,  New  York  10281,  Attention:  _________,
Director;  notices to the Fund or the Adviser  shall be directed to each of them
at 800 Scudders  Mill Road,  Plainsboro,  New Jersey  08536,  Attention:  Arthur
Zeikel, President.

      SECTION 11. Parties.  This Agreement and the Pricing Agreement shall inure
to the benefit of and be binding upon the Underwriter, the Fund, the Adviser and
their respective successors. Nothing expressed or mentioned in this Agreement or
the Pricing Agreement is intended or shall be construed to give any person, firm
or corporation,  other than the parties hereto and their  respective  successors
and the controlling persons and officers and directors referred to in Sections 6
and 7 and their heirs and legal  representatives,  any legal or equitable right,
remedy or claim under or in respect of this  Agreement or any  provision  herein
contained.  This  Agreement  and the Pricing  Agreement and all  conditions  and
provisions  hereof are intended to be for the sole and exclusive  benefit of the
parties hereto and thereto and their respective successors, and said controlling
persons and officers and  directors  and their heirs and legal  representatives,
and for the benefit of no other  person,  firm or  corporation.  No purchaser of
Shares from the  Underwriter  shall be deemed to be a successor by reason merely
of such purchase.

      SECTION  12.  Governing  Law and  Time.  This  Agreement  and the  Pricing
Agreement  shall be governed by the laws of the State of New York  applicable to
agreements made and to be performed in said State.  Specified times of day refer
to New York City time.


                                       20
<PAGE>

      If  the  foregoing  is  in  accordance  with  your  understanding  of  our
Agreement,  please sign and return to us a counterpart  hereof,  whereupon  this
instrument, along with all counterparts,  will become a single binding agreement
among the Underwriter, the Fund and the Adviser in accordance with its terms.

                                       Very truly yours,

                                       MUNIASSETS FUND, INC.


                                       By:__________________________________
                                                 (Authorized Officer)


                                       FUND ASSET MANAGEMENT, INC.


                                       By:__________________________________
                                                 (Authorized Officer)


Confirmed and Accepted,
  as of the date first above
  written:

MERRILL LYNCH, PIERCE, FENNER & SMITH
            INCORPORATED




By:_______________________________________
   Vice President
   Investment Banking Group


                                       21
<PAGE>

                                                                       Exhibit A

                                6,700,000 Shares
                              MuniAssets Fund, Inc
                            (a Maryland corporation)

                                  Common Stock
                           (Par Value $.l0 Per Share)

                                PRICING AGREEMENT


                                                                   June __, 1993

MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
            INCORPORATED
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281

Dear Sirs:

      Reference is made to the  Purchase  Agreement,  dated June ___,  1993 (the
"Purchase Agreement"),  relating to the purchase by Merrill Lynch & Co., Merrill
Lynch,  Pierce,  Fenner & Smith Incorporated (the  "Underwriter"),  of the above
shares of Common  Stock par value  $.10 per share  (the  "Initial  Shares"),  of
MuniAssets  Fund,  Inc.  (the "Fund") and relating to the option  granted to the
Underwriter  to purchase up to an additional  1,005,000  shares of Common Stock,
par value $.10 per share,  of the Fund to cover  over-allotments  in  connection
with the sale of the Initial  Shares (the "Option  Shares").  The Initial Shares
and all or any part of the Option Shares are collectively  herein referred to as
the "Shares."

      Pursuant to Section 2 of the Purchase Agreement,  the Fund agrees with the
Underwriter as follows:

      1. The applicable  initial public offering price per share for the Shares,
determined as provided in said Section 2 shall be as follows:

            (a) $15.00 for purchases in single  transactions  of less than 3,500
      Shares;

            (b)  $14.85 for  purchase  in single  transactions  of 3,500 or more
      Shares but less than 7,000 Shares; and

            (c) $14.70 for  purchases  in single  transactions  of 7,000 or more
      Shares.

<PAGE>

      2.  The  purchase  price  per  share  for  the  Shares  to be  paid by the
Underwriter shall be $_________ being an amount equal to the applicable  initial
public offering price set forth above less (i) $_____ per share for purchases in
single  transactions  of less  than  3,500  Shares;  (ii)  $_____  per share for
purchases  in single  transactions  of 3,500 or more  Shares but less than 7,000
Shares and (iii) $_____ per share for purchases in single  transactions of 7,000
or more Shares.

      If  the  foregoing  is  in  accordance  with  your  understanding  of  our
agreement,  please sign and return to the Fund a counterpart  hereof,  whereupon
this instrument,  along with all  counterparts,  will become a binding agreement
between the Underwriter and the Fund in accordance with its terms.

                                               Very truly yours,

                                               MUNIASSETS FUND, INC.


                                                By:_____________________________
                                                     (Authorized Officer)


Confirmed and Accepted, as
  of the date first above
  written:

MERRILL LYNCH, PIERCE, FENNER & SMITH
            INCORPORATED


By:_______________________________________
   Vice President
   Investment Banking Group


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-7.B
<SEQUENCE>8
<FILENAME>file007.txt
<DESCRIPTION>STANDARD DEALER AGREEMENT
<TEXT>

                                                                    Exhibit 7(b)

                                                        Revised October 29, 1990

[LOGO]                         Merrill Lynch & Co.
               Merrill Lynch, Pierce, Fenner & Smith Incorporated
                        Merrill Lynch World Headquarters
                                   North Tower
                             World Financial Center
                            New York, N.Y. 10281-1305

                            STANDARD DEALER AGREEMENT

Dear Sirs:

      In connection with public  offerings of securities  underwritten by us, or
by a group of underwriters  (the  "Underwriters")  represented by us, you may be
offered the opportunity to purchase a portion of such securities,  as principal,
at a discount  from the offering  price  representing  a selling  concession  or
reallowance granted as consideration for services rendered by you in the sale of
such  securities.  We  request  that  you  agree  to  the  following  terms  and
provisions,  and make the following  representations,  which,  together with any
additional  terms and  provisions set forth in any wire or letter sent to you in
connection  with a  particular  offering,  will  govern  all such  purchases  of
securities and the reoffering thereof by you.

      Your subscription to, or purchase of, such securities will constitute your
reaffirmation of this Agreement.

      1. When we are  acting as  representative  (the  "Representative")  of the
Underwriters  in offering  securities to you, it should be  understood  that all
offers are made subject to prior sale of the subject securities, when, as and if
such securities are delivered to and accepted by the Underwriters and subject to
the approval of legal matters by their  counsel.  In such cases,  any order from
you for securities will be strictly  subject to confirmation  and we reserve the
right in our  uncontrolled  discretion  to reject any order in whole or in part.
Upon release by us, you may reoffer such  securities at the offering price fixed
by us.  With  our  consent,  you may  allow a  discount,  not in  excess  of the
reallowance  fixed by us, in selling such securities to other dealers,  provided
that in doing so you  comply  with the Rules of Fair  Practice  of the  National
Association of Securities Dealers, Inc. (the "NASD"). Upon our request, you will
advise us of the  identity  of any dealer to whom you allow such a discount  and
any  Underwriter  or dealer  from whom you receive  such a  discount.  After the
securities  are released for sale to the public,  we may vary the offering price
and other selling terms.

      2. You represent that you are a dealer actually  engaged in the investment
banking  or  securities  business  and that you are  either (i) a member in good
standing  of the NASD or (ii) a  dealer  with its  principal  place of  business
located  outside the United  States,  its  territories  or  possessions  and not
registered  under the  Securities  Exchange Act of 1934 (a  "non-member  foreign
dealer") or (iii) a bank not eligible for  membership  in the NASD. If you are a
non-member  foreign dealer,  you agree to make no sales of securities within the
United  States,  its  territories  or its  possessions  or to  persons  who  are
nationals  thereof or residents  therein.  Non-member  foreign dealers and banks
agree,  in making  any sales,  to comply  with the  NASD's  interpretation  with
respect to free-riding and withholding.  In accepting a selling concession where
we are acting as Representative of the Underwriters,  in accepting a reallowance
from us whether or not we are acting as such  Representative,  and in allowing a
discount to any other person, you agree to comply with the provisions of Section
24 of Article III of the Rules of Fair  Practice of the NASD,  and, in addition,
if you are a non-member  foreign dealer or bank, you agree to comply,  as though
you were a member of the  NASD,  with the  provisions  of  Sections  8 and 36 of
Article  III of such Rules of Fair  Practice  and to comply  with  Section 25 of
Article III thereof as that Section  applies to a non-member  foreign  dealer or
bank. You represent that you are fully familiar with the above provisions of the
Rules of Fair Practice of the NASD.

      3. If the securities have been registered under the Securities Act of 1933
(the  "1933  Act"),  in  offering  and  selling  such  securities,  you  are not
authorized to give any information or make any

<PAGE>

representation  not contained in the prospectus  relating  thereto.  You confirm
that you are familiar with the rules and policies of the Securities and Exchange
Commission  relating to the distribution of preliminary and final  prospectuses,
and you agree that you will comply  therewith  in any  offering  covered by this
Agreement. If we are acting as Representative of the Underwriters,  we will make
available  to you,  to the  extent  made  available  to us by the  issuer of the
securities,  such number of copies of the prospectus or offering documents,  for
securities not registered under the 1933 Act, as you may reasonably request.

      4. If we are acting as Representative of the Underwriters of securities of
an issuer that is not required to file reports under the Securities Exchange Act
of 1934 (the "1934 Act"), you agree that you will not sell any of the securities
to any account over which you have discretionary authority.

      5.  Payment for  securities  purchased by you is to be made at our office,
One Liberty Plaza, 165 Broadway, New York, N.Y. 10006 (or at such other place as
we may advise),  at the offering  price less the  concession  allowed to you, on
such date as we may advise,  by  certified  or  official  bank check in New York
Clearing  House  funds (or such other  funds as we may  advise),  payable to our
order,  against delivery of the securities to be purchased by you. We shall have
authority  to make  appropriate  arrangements  for payment  for and/or  delivery
through  the  facility  of  The  Depository  Trust  Company  or any  such  other
depository or similar facility for the securities.

      6. In the event  that,  prior to the  completion  of the  distribution  of
securities  covered  by this  Agreement,  we  purchase  in the  open  market  or
otherwise any securities delivered to you, if we are acting as Representative of
the Underwriters,  you agree to repay to us for the accounts of the Underwriters
the amount of the concession  allowed to you plus brokerage  commissions and any
transfer taxes paid in connection with such purchase.

      7. At any time prior to the completion of the  distribution  of securities
covered by this Agreement you will,  upon our request as  Representative  of the
Underwriters,  report to us the amount of securities purchased by you which then
remains unsold and will, upon our request,  sell to us for the account of one or
more of the  Underwriters  such  amount  of  such  unsold  securities  as we may
designate,  at the offering  price less an amount to be  determined by us not in
excess of the concession allowed to you.

      8.  If  we  are  acting  as  Representative  of  the  Underwriters,   upon
application to us, we will inform you of the states and other  jurisdictions  of
the United States in which it is believed that the securities  being offered are
qualified  for sale  under,  or are  exempt  from  the  requirements  of,  their
respective securities laws, but we assume no responsibility with respect to your
right to sell  securities in any  jurisdiction.  We shall have authority to file
with the  Department  of State of the State of New York a Further  State  Notice
with respect to the securities, if necessary.

      9. You agree that in connection with any offering of securities covered by
this  Agreement you will comply with the  applicable  provisions of the 1933 Act
and the 1934 Act and the applicable  rules and regulations of the Securities and
Exchange  Commission  thereunder,  the applicable  rules and  regulations of the
NASD, and the applicable  rules of any securities  exchange having  jurisdiction
over the offering.

      10.  We shall  have  full  authority  to take  such  action as we may deem
advisable in respect of all matters  pertaining to any offering  covered by this
Agreement.  We shall be under no  liability  to you  except for our lack of good
faith and for obligations  assumed by us in this  Agreement,  except that you do
not  waive  any  rights  that you may have  under  the 1933 Act or the rules and
regulations thereunder.

      11. Any  notice  from us shall be deemed to have been duly given if mailed
or transmitted by any standard form of written  telecommunications to you at the
above address or at such other address as you shall specify to us in writing.

      12. With respect to any Offering of securities  covered by this Agreement,
the price  restrictions  contained in Paragraph 1 hereof and the  provisions  of
Paragraphs  6 and 7 hereof shall  terminate as to such  offering at the close of
business on the 45th day after the  securities  are  released for sale or, as to
any or all such  provisions,  at such earlier  time as we may advise.  All other
provisions of this Agreement shall remain operative and in full force and effect
with respect to such offering.


                                       2
<PAGE>

      13. This Agreement shall be governed by the laws of the State of New York.

      Please  confirm your  agreement  hereto by signing the enclosed  duplicate
copy hereof in the place provided below and returning such signed duplicate copy
to us at World Headquarters, North Tower, World Financial Center, New York, N.Y.
10281-1305,   Attention:   Corporate  Syndicate.   Upon  receipt  thereof,  this
instrument and such signed  duplicate  copy will evidence the agreement  between
us.

                                         Very truly yours,


                                         MERRILL LYNCH, PIERCE, FENNER & SMITH
                                                     INCORPORATED




                                         By:  /s/ Fred F. Hessinger
                                              ---------------------------------
                                                   Name: Fred F. Hessinger

Confirmed and accepted as of the
     day of         ,19


- ------------------------------------------
             Name of Dealer



- ------------------------------------------
     Authorized Officer or Partner
(if not Officer or Partner, attach copy of
      Instrument of Authorization)


                                        3

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-9
<SEQUENCE>9
<FILENAME>file008.txt
<DESCRIPTION>CUSTODY AGREEMENT
<TEXT>

                                                                       Exhibit 9

                                CUSTODY AGREEMENT

      Agreement made as of this 14th day of June, 1993, between MuniAssets Fund,
Inc.,  a  corporation  organized  and  existing  under  the laws of the State of
Maryland   having   its   principal    office   and   place   of   business   at
                                    hereinafter called the "Fund"), and THE BANK
OF NEW YORK, a New York corporation authorized to do a banking business,  having
its principal office and place of business at 48 Wall Street, New York, New York
10286 (hereinafter called the "Custodian").

                              W I T N E S S E T H:

that for and in consideration of the mutual promises  hereinafter set forth, the
Fund and the Custodian agree as follows:

                                   ARTICLE I.

                                   DEFINITIONS

      Whenever used in this Agreement,  the following words and phrases,  unless
the context otherwise requires, shall have the following meanings:

      1. "Book-Entry System" shall mean the Federal Reserve/Treasury  book-entry
system for  United  States and  federal  agency  securities,  its  successor  or
successors and its nominee or nominees.

      2. "Call  Option"  shall mean an exchange  traded  option with  respect to
Securities  other than Stock  Index  Options,  Futures  Contracts,  and  Futures
Contract Options  entitling the holder,  upon timely exercise and payment of the
exercise  price, as specified  therein,  to purchase from the writer thereof the
specified underlying Securities.

      3. "Certificate" shall mean any notice,  instruction,  or other instrument
in  writing,  authorized  or  required  by this  Agreement  to be  given  to the
Custodian  which is actually  received by the  Custodian and signed on behalf of
the  Fund by any two  Officers,  and the term  Certificate  shall  also  include
instructions by the Fund to the Custodian communicated by a Terminal Link.

      4.  "Clearing  Member"  shall mean a registered  broker-dealer  which is a
clearing member under the rules of O.C.C. and a member of a national  securities
exchange  qualified  to act as a custodian  for an  investment  company,  or any
broker-dealer reasonably believed by the Custodian to be such a clearing member.


<PAGE>

      5.  "Collateral  Account"  shall mean a segregated  account so denominated
which is  specifically  allocated  to a Series and pledged to the  Custodian  as
security for, and in consideration  of, the Custodian's  issuance of (a) any Put
Option guarantee letter or similar document  described in paragraph 8 of Article
V herein, or (b) any receipt described in Article V or VIII herein.

      6. "Covered Call Option"  shall mean an exchange  traded option  entitling
the holder, upon timely exercise and payment of the exercise price, as specified
therein, to purchase from the writer thereof the specified underlying Securities
(excluding  Futures Contracts) which are owned by the writer thereof and subject
to appropriate restrictions.

      7.  "Depository"  shall  mean The  Depository  Trust  Company  ("DTC"),  a
clearing  agency  registered  with the Securities and Exchange  Commission,  its
successor or successors and its nominee or nominees. The term "Depository" shall
further  mean and include any other  person  authorized  to act as a  depository
under the  Investment  Company Act of 1940,  its successor or successors and its
nominee or nominees, specifically identified in a certified copy of a resolution
of the Fund's Board of Directors  specifically approving deposits therein by the
Custodian.

      8. "Financial  Futures  Contract" shall mean the firm commitment to buy or
sell fixed income securities including, without limitation, U.S. Treasury Bills,
U.S. Treasury Notes, U.S. Treasury Bonds, domestic bank certificates of deposit,
and Eurodollar  certificates  of deposit,  during a specified month at an agreed
upon price.

      9. "Futures Contract" shall mean a Financial Futures Contract and/or Stock
Index Futures Contracts.

      10.  "Futures  Contract  Option"  shall mean an option  with  respect to a
Futures Contract.

      11.  "Margin  Account"  shall mean a  segregated  account in the name of a
broker,  dealer,  futures commission  merchant,  or a Clearing Member, or in the
name of the  Fund  for the  benefit  of a  broker,  dealer,  futures  commission
merchant,  or Clearing  Member,  or otherwise,  in accordance  with an agreement
between  the Fund,  the  Custodian  and a  broker,  dealer,  futures  commission
merchant  or a Clearing  Member (a "Margin  Account  Agreement"),  separate  and
distinct from the custody account,  in which certain  Securities and/or money of
the Fund shall be deposited and withdrawn  from time to time in connection  with
such  transactions as the Fund may from time to time determine.  Securities held
in the  Book-Entry  System  or the  Depository  shall  be  deemed  to have  been
deposited in, or withdrawn from, a Margin Account upon the Custodian's effecting
an appropriate entry in its books and records.


                                      -2-
<PAGE>

      12.  "Money  Market   Security"  shall  be  deemed  to  include,   without
limitation,  certain Reverse Repurchase  Agreements,  debt obligations issued or
guaranteed as to interest and  principal by the  government of the United States
or agencies or instrumentalities  thereof, any tax, bond or revenue anticipation
note issued by any state or municipal government or public authority, commercial
paper,  certificates of deposit and bankers' acceptances,  repurchase agreements
with respect to the same and bank time deposits,  where the purchase and sale of
such securities normally requires settlement in federal funds on the same day as
such purchase or sale.

      13.  "O.C.C."  shall mean the  Options  Clearing  Corporation,  a clearing
agency registered under Section 17A of the Securities  Exchange Act of 1934, its
successor or successors, and its nominee or nominees.

      14.  "Officers"  shall  be  deemed  to  include  the  President,  any Vice
President,  the  Secretary,   the  Treasurer,  the  Controller,   any  Assistant
Secretary,  any Assistant Treasurer, and any other person or persons, whether or
not any such  other  person is an officer of the Fund,  duly  authorized  by the
Board of Directors of the Fund to execute any Certificate,  instruction,  notice
or other instrument on behalf of the Fund and listed in the Certificate  annexed
hereto  as  Appendix  A or such  other  Certificate  as may be  received  by the
Custodian from time to time.

      15.  "Option" shall mean a Call Option,  Covered Call Option,  Stock Index
Option and/or a Put Option.

      16. "Oral Instructions"  shall mean verbal instructions  actually received
by the  Custodian  from an Officer or from a person  reasonably  believed by the
Custodian to be an Officer.

      17. "Put  Option"  shall mean an exchange  traded  option with  respect to
Securities  other than Stock  Index  Options,  Futures  Contracts,  and  Futures
Contract  Options  entitling the holder,  upon timely exercise and tender of the
specified underlying  Securities,  to sell such Securities to the writer thereof
for the exercise price.

      18. "Reverse  Repurchase  Agreement"  shall mean an agreement  pursuant to
which the Fund sells  Securities and agrees to repurchase  such  Securities at a
described or specified date and price.

      19.  "Security"  shall be deemed to  include,  without  limitation,  Money
Market Securities,  Call Options, Put Options,  Stock Index Options, Stock Index
Futures  Contracts,  Stock Index Futures  Contract  Options,  Financial  Futures
Contracts,  Financial Futures Contract Options,  Reverse Repurchase  Agreements,
common  stocks and other  securities  having  characteristics  similar to common
stocks, preferred


                                      -3-
<PAGE>

stocks, debt obligations issued by state or municipal  governments and by public
authorities  (including,  without limitation,  general obligation bonds, revenue
bonds,  industrial bonds and industrial  development bonds), bonds,  debentures,
notes, mortgages or other obligations, and any certificates,  receipts, warrants
or other instruments representing rights to receive, purchase, sell or subscribe
for the  same,  or  evidencing  or  representing  any other  rights or  interest
therein, or any property or assets.

      20.  "Senior  Security  Account"  shall  mean an  account  maintained  and
specifically  allocated  to a Series  under  the  terms of this  Agreement  as a
segregated account,  by recordation or otherwise,  within the custody account in
which certain Securities and/or other assets of the Fund specifically  allocated
to such Series shall be deposited and withdrawn  from time to time in accordance
with Certificates received by the Custodian in connection with such transactions
as the Fund may from time to time determine.

      21.  "Series"  shall mean the various  portfolios,  if any, of the Fund as
described  from time to time in the current  and  effective  prospectus  for the
Fund.

      22.  "Shares" shall mean the shares of capital stock of the Fund,  each of
which is, in the case of a Fund having Series, allocated to a particular Series.

      23.  "Stock  Index  Futures  Contract"  shall mean a  bilateral  agreement
pursuant  to which the  parties  agree to take or make  delivery of an amount of
cash equal to a specified  dollar amount times the difference  between the value
of a  particular  stock  index  at the  close of the  last  business  day of the
contract and the price at which the futures contract is originally struck.

      24. "Stock Index Option"  shall mean an exchange  traded option  entitling
the holder,  upon timely  exercise,  to receive an amount of cash  determined by
reference  to the  difference  between the  exercise  price and the value of the
index on the date of exercise.

      25.  "Terminal  Link"  shall mean an  electronic  data  transmission  link
between the Fund and the Custodian  requiring in connection with each use of the
Terminal Link by or on behalf of the Fund use of an authorization  code provided
by the Custodian and at least two access codes established by the Fund.


                                      -4-
<PAGE>

                                   ARTICLE II.

                            APPOINTMENT OF CUSTODIAN

      1. The Fund hereby  constitutes and appoints the Custodian as custodian of
the  Securities  and moneys at any time  owned by the Fund  during the period of
this Agreement.

      2. The Custodian  hereby accepts  appointment as such custodian and agrees
to perform the duties thereof as hereinafter set forth.

                                  ARTICLE III.

                         CUSTODY OF CASH AND SECURITIES

      1.  Except as  otherwise  provided in  paragraph 7 of this  Article and in
Article  VIII,  the Fund will deliver or cause to be delivered to the  Custodian
all Securities and all moneys owned by it, at any time during the period of this
Agreement,  and shall  specify  with  respect to such  Securities  and money the
Series  to which  the same  are  specifically  allocated.  The  Custodian  shall
segregate,  keep and maintain the assets of the Series  separate and apart.  The
Custodian  will not be  responsible  for any  Securities and moneys not actually
received by it. The  Custodian  will be entitled to reverse any credits  made on
the Fund's  behalf where such credits have been  previously  made and moneys are
not  finally  collected.  The Fund shall  deliver to the  Custodian  a certified
resolution of the Board of Directors of the Fund,  substantially  in the form of
Exhibit A hereto,  approving,  authorizing  and  instructing  the Custodian on a
continuous and on-going basis to deposit in the Book-Entry System all Securities
eligible  for deposit  therein,  regardless  of the Series to which the same are
specifically  allocated  and to  utilize  the  Book-Entry  System to the  extent
possible  in  connection  with its  performance  hereunder,  including,  without
limitation, in connection with settlements of purchases and sales of Securities,
loans of Securities and deliveries and returns of Securities  collateral.  Prior
to a deposit of Securities specifically allocated to a Series in the Depository,
the Fund shall deliver to the  Custodian a certified  resolution of the Board of
Directors of the Fund, substantially in the form of Exhibit B hereto, approving,
authorizing  and  instructing  the  Custodian on a continuous  and ongoing basis
until  instructed  to the  contrary by a  Certificate  actually  received by the
Custodian to deposit in the Depository all Securities  specifically allocated to
such Series eligible for deposit  therein,  and to utilize the Depository to the
extent  possible  with  respect  to  such  Securities  in  connection  with  its
performance  hereunder,   including,  without  limitation,  in  connection  with
settlements  of purchases  and sales of  Securities,  loans of  Securities,  and
deliveries and returns of Securities collateral. Securities and moneys deposited
in either the Book-Entry System or the


                                      -5-
<PAGE>

      Depository  will be represented in accounts which include only assets held
by the Custodian for customers, including, but not limited to, accounts in which
the  Custodian  acts in a  fiduciary  or  representative  capacity  and  will be
specifically  allocated on the Custodian's books to the separate account for the
applicable Series. Prior to the Custodian's accepting, utilizing and acting with
respect to Clearing Member confirmations for Options and transactions in Options
for a Series as provided in this Agreement,  the Custodian shall have received a
certified resolution of the Fund's Board of Directors, substantially in the form
of Exhibit C hereto,  approving,  authorizing and instructing the Custodian on a
continuous and on-going basis, until instructed to the contrary by a Certificate
actually  received by the  Custodian,  to accept,  utilize and act in accordance
with such  confirmations  as provided  in this  Agreement  with  respect to such
Series.

      2. The Custodian shall establish and maintain  separate  accounts,  in the
name of each Series,  and shall  credit to the separate  account for each Series
all  moneys  received  by it for the  account  of the Fund with  respect to such
Series.  Money credited to a separate account for a Series shall be disbursed by
the Custodian only:

            (a) As hereinafter provided;

            (b) Pursuant to  Certificates  setting forth the name and address of
      the person to whom the  payment is to be made,  the  Series  account  from
      which  payment is to be made and the  purpose  for which  payment is to be
      made; or

            (c) In payment of the fees and in  reimbursement of the expenses and
      liabilities of the Custodian attributable to such Series.

      3. Promptly  after the close of business on each day, the Custodian  shall
furnish the Fund with confirmations and a summary, on a per Series basis, of all
transfers to or from the account of the Fund for a Series,  either  hereunder or
with any  co-custodian  or  sub-custodian  appointed  in  accordance  with  this
Agreement  during said day. Where  Securities are  transferred to the account of
the Fund for a Series,  the  Custodian  shall also by  book-entry  or  otherwise
identify as belonging to such Series a quantity of Securities in a fungible bulk
of Securities  registered in the name of the Custodian (or its nominee) or shown
on  the  Custodian's  account  on the  books  of the  Book-Entry  System  or the
Depository.  At least monthly and from time to time, the Custodian shall furnish
the Fund with a detailed statement, on a per Series basis, of the Securities and
moneys held by the Custodian for the Fund.

      4.  Except as  otherwise  provided in  paragraph 7 of this  Article and in
Article VIII, all Securities held by the


                                      -6-
<PAGE>

Custodian  hereunder,  which are issued or issuable only in bearer form,  except
such  Securities  as are  held in the  Book-Entry  System,  shall be held by the
Custodian in that form; all other Securities held hereunder may be registered in
the name of the Fund, in the name of any duly  appointed  registered  nominee of
the Custodian as the Custodian may from time to time  determine,  or in the name
of the Book-Entry System or the Depository or their successor or successors,  or
their  nominee  or  nominees.  The  Fund  agrees  to  furnish  to the  Custodian
appropriate  instruments  to enable the  Custodian  to hold or deliver in proper
form for transfer,  or to register in the name of its  registered  nominee or in
the name of the Book-Entry  System or the Depository any Securities which it may
hold  hereunder and which may from time to time be registered in the name of the
Fund. The Custodian shall hold all such Securities  specifically  allocated to a
Series which are not held in the  Book-Entry  System or in the  Depository  in a
separate account in the name of such Series  physically  segregated at all times
from those of any other person or persons.

      5. Except as otherwise  provided in this  Agreement  and unless  otherwise
instructed to the contrary by a Certificate, the Custodian by itself, or through
the use of the Book-Entry  System or the  Depository  with respect to Securities
held hereunder and therein deposited,  shall with respect to all Securities held
for the Fund hereunder in accordance with preceding paragraph 4:

            (a) Collect all income due or payable;

            (b) Present for  payment  and collect the amount  payable  upon such
      Securities which are called, but only if either (i) the Custodian receives
      a written  notice of such call, or (ii) notice of such call appears in one
      or more of the publications listed in Appendix B annexed hereto, which may
      be amended at any time by the Custodian without the prior  notification or
      consent of the Fund;

            (c) Present for  payment  and  collect the amount  payable  upon all
      Securities which mature;

            (d) Surrender   Securities  in   temporary   form   for   definitive
      Securities;

            (e) Execute,   as   custodian,   any   necessary   declarations   or
      certificates of ownership under the Federal Income Tax Laws or the laws or
      regulations of any other taxing authority now or hereafter in effect; and

            (f) Hold  directly,   or  through  the  Book-Entry  System   or  the
      Depository with respect to Securities therein  deposited,  for the account
      of a Series,  all rights and similar securities issued with respect to any
      Securities held by the Custodian for such Series hereunder.


                                      -7-
<PAGE>

      6.  Upon  receipt  of a  Certificate  and not  otherwise,  the  Custodian,
directly or through the use of the Book-Entry System or the Depository, shall:

      (a)  Execute  and  deliver to such  persons as may be  designated  in such
Certificate proxies, consents, authorizations, and any other instruments whereby
the  authority  of the  Fund as owner of any  Securities  held by the  Custodian
hereunder for the Series specified in such Certificate may be exercised;

      (b) Deliver any Securities held by the Custodian  hereunder for the Series
specified in such Certificate in exchange for other Securities or cash issued or
paid in connection with the liquidation,  reorganization,  refinancing,  merger,
consolidation or  recapitalization  of any  corporation,  or the exercise of any
conversion  privilege and receive and hold hereunder  specifically  allocated to
such Series any cash or other Securities received in exchange;

      (c) Deliver any Securities held by the Custodian  hereunder for the Series
specified  in  such  Certificate  to any  protective  committee,  reorganization
committee or other person in connection  with the  reorganization,  refinancing,
merger,  consolidation,  recapitalization  or sale of assets of any corporation,
and  receive  and hold  hereunder  specifically  allocated  to such  Series such
certificates of deposit,  interim receipts or other  instruments or documents as
may be issued to it to evidence such delivery;

      (d) Make such transfers or exchanges of the assets of the Series specified
in such  Certificate,  and take  such  other  steps as shall be  stated  in such
Certificate to be for the purpose of  effectuating  any duly  authorized plan of
liquidation,  reorganization,  merger,  consolidation or recapitalization of the
Fund; and

      (e) Present for payment and collect the amount payable upon Securities not
described in  preceding  paragraph  5(b) of this Article  which may be called as
specified in the Certificate.

      7. Notwithstanding any provision elsewhere contained herein, the Custodian
shall not be required to obtain  possession  of any  instrument  or  certificate
representing any Futures  Contract,  any Option,  or any Futures Contract Option
until after it shall have determined,  or shall have received a Certificate from
the Fund stating,  that any such instruments or certificates are available.  The
Fund  shall  deliver  to the  Custodian  such a  Certificate  no later  than the
business day preceding the  availability  of any such instrument or certificate.
Prior to such availability, the Custodian shall comply with Section 17(f) of the
Investment  Company Act of 1940, as amended,  in  connection  with the purchase,
sale,


                                      -8-
<PAGE>

settlement,  closing out or writing of Futures  Contracts,  Options,  or Futures
Contract  Options by making  payments or  deliveries  specified in  Certificates
received by the Custodian in connection with any such purchase,  sale,  writing,
settlement  or closing out upon its receipt  from a broker,  dealer,  or futures
commission  merchant of a statement or confirmation  reasonably  believed by the
Custodian  to be in the form  customarily  used by brokers,  dealers,  or future
commission merchants with respect to such Futures Contracts, Options, or Futures
Contract  Options,  as the case may be, confirming that such Security is held by
such  broker,  dealer or futures  commission  merchant,  in  book-entry  form or
otherwise,  in the name of the  Custodian  (or any nominee of the  Custodian) as
custodian for the Fund, provided,  however,  that notwithstanding the foregoing,
payments to or deliveries from the Margin Account,  and payments with respect to
Securities to which a Margin Account  relates,  shall be made in accordance with
the terms and  conditions  of the Margin  Account  Agreement.  Whenever any such
instruments or certificates are available, the Custodian shall,  notwithstanding
any provision in this  Agreement to the  contrary,  make payment for any Futures
Contract,  Option, or Futures Contract Option for which such instruments or such
certificates  are  available  only against the delivery to the Custodian of such
instrument  or such  certificate,  and deliver any Futures  Contract,  Option or
Futures  Contract  Option for which such  instruments or such  certificates  are
available only against  receipt by the Custodian of payment  therefor.  Any such
instrument  or  certificate  delivered  to the  Custodian  shall  be held by the
Custodian  hereunder in accordance  with, and subject to, the provisions of this
Agreement.

                                   ARTICLE IV.

                  PURCHASE AND SALE OF INVESTMENTS OF THE FUND
                    OTHER THAN OPTIONS, FUTURES CONTRACTS AND
                            FUTURES CONTRACT OPTIONS

      1. Promptly  after each  purchase of Securities by the Fund,  other than a
purchase of an Option, a Futures  Contract,  or a Futures  Contract Option,  the
Fund shall  deliver  to the  Custodian  (i) with  respect  to each  purchase  of
Securities which are not Money Market Securities,  a Certificate,  and (ii) with
respect to each  purchase of Money  Market  Securities,  a  Certificate  or Oral
Instructions,  specifying with respect to each such purchase:  (a) the Series to
which such  Securities  are to be  specifically  allocated;  (b) the name of the
issuer  and the  title  of the  Securities;  (c) the  number  of  shares  or the
principal  amount  purchased  and  accrued  interest,  if any;  (d) the  date of
purchase and  settlement;  (e) the purchase price per unit; (f) the total amount
payable upon such  purchase;  (g) the name of the person from whom or the broker
through whom the purchase was made, and the name of the


                                      -9-
<PAGE>

clearing broker, if any; and (h) the name of the broker to whom payment is to be
made. The Custodian  shall,  upon receipt of Securities  purchased by or for the
Fund, pay to the broker  specified in the Certificate out of the moneys held for
the account of such Series the total amount payable upon such purchase, provided
that  the  same  conforms  to the  total  amount  payable  as set  forth in such
Certificate or Oral Instructions.

      2. Promptly  after each sale of Securities by the Fund,  other than a sale
of any  Option,  Futures  Contract,  Futures  Contract  Option,  or any  Reverse
Repurchase  Agreement,  the Fund shall deliver to the Custodian (i) with respect
to each sale of Securities which are not Money Market Securities, a Certificate,
and (ii) with respect to each sale of Money Market Securities,  a Certificate or
Oral Instructions,  specifying with respect to each such sale: (a) the Series to
which such Securities were  specifically  allocated;  (b) the name of the issuer
and the title of the  Security;  (c) the  number of shares or  principal  amount
sold, and accrued interest, if any; (d) the date of sale; (e) the sale price per
unit;  (f) the total amount  payable to the Fund upon such sale; (g) the name of
the broker through whom or the person to whom the sale was made, and the name of
the  clearing  broker,  if any;  and (h) the  name  of the  broker  to whom  the
Securities  are to be  delivered.  The Custodian  shall  deliver the  Securities
specifically allocated to such Series to the broker specified in the Certificate
against payment of the total amount payable to the Fund upon such sale, provided
that  the  same  conforms  to the  total  amount  payable  as set  forth in such
Certificate or Oral Instructions.

                                   ARTICLE V.

                                     OPTIONS

      1. Promptly  after the purchase of any Option by the Fund,  the Fund shall
deliver to the  Custodian a Certificate  specifying  with respect to each Option
purchased:  (a) the Series to which such Option is specifically  allocated;  (b)
the type of Option  (put or call);  (c) the name of the issuer and the title and
number of shares subject to such Option or, in the case of a Stock Index Option,
the stock  index to which such  Option  relates  and the  number of Stock  Index
Options  purchased;  (d) the expiration  date; (e) the exercise  price;  (f) the
dates of purchase and  settlement;  (g) the total amount  payable by the Fund in
connection with such purchase;  (h) the name of the Clearing Member through whom
such Option was purchased;  and (i) the name of the broker to whom payment is to
be made. The Custodian shall pay, upon receipt of a Clearing Member's  statement
confirming  the  purchase of such Option  held by such  Clearing  Member for the
account of the Custodian (or any duly  appointed and  registered  nominee of the
Custodian) as custodian for the Fund,  out of moneys held for the account of the
Series to which such Option is to be

                                      -10-
<PAGE>

specifically  allocated,  the total  amount  payable  upon such  purchase to the
Clearing  Member  through  whom the purchase  was made,  provided  that the same
conforms to the total amount payable as set forth in such Certificate.

      2. Promptly after the sale of any Option purchased by the Fund pursuant to
paragraph  1 hereof,  the Fund shall  deliver  to the  Custodian  a  Certificate
specifying  with respect to each such sale:  (a) the Series to which such Option
was specifically  allocated;  (b) the type of Option (put or call); (c) the name
of the issuer and the title and number of shares  subject to such  Option or, in
the case of a Stock Index Option,  the stock index to which such Option  relates
and the number of Stock Index Options sold;  (d) the date of sale;  (e) the sale
price; (f) the date of settlement; (g) the total amount payable to the Fund upon
such sale;  and (h) the name of the  Clearing  Member  through whom the sale was
made.  The  Custodian  shall  consent to the  delivery of the Option sold by the
Clearing  Member  which  previously  supplied  the  confirmation   described  in
preceding  paragraph  1 of this  Article  with  respect to such  Option  against
payment to the Custodian of the total amount payable to the Fund,  provided that
the same conforms to the total amount payable as set forth in such Certificate.

      3. Promptly after the exercise by the Fund of any Call Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian
a  Certificate  specifying  with respect to such Call Option:  (a) the Series to
which such Call Option was  specifically  allocated;  (b) the name of the issuer
and the  title  and  number  of  shares  subject  to the  Call  Option;  (c) the
expiration date; (d) the date of exercise and settlement; (e) the exercise price
per share;  (f) the total amount to be paid by the Fund upon such exercise;  and
(g) the name of the Clearing Member through whom such Call Option was exercised.
The Custodian shall,  upon receipt of the Securities  underlying the Call Option
which was exercised, pay out of the moneys held for the account of the Series to
which such Call Option was  specifically  allocated the total amount  payable to
the Clearing  Member through whom the Call Option was  exercised,  provided that
the same conforms to the total amount payable as set forth in such Certificate.

      4. Promptly after the exercise by the Fund of any Put Option  purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian
a  Certificate  specifying  with  respect to such Put Option:  (a) the Series to
which such Put Option was specifically allocated; (b) the name of the issuer and
the title and number of shares  subject to the Put  Option;  (c) the  expiration
date; (d) the date of exercise and settlement; (e) the exercise price per share;
(f) the total amount to be paid to the Fund upon such exercise; and (g) the name
of the Clearing Member through whom such Put Option was exercised. The Custodian
shall,  upon receipt of the amount  payable upon the exercise of the Put Option,
deliver or


                                      -11-
<PAGE>

direct the Depository to deliver the Securities  specifically  allocated to such
Series,  provided  the same  conforms  to the amount  payable to the Fund as set
forth in such Certificate.

      5.  Promptly  after the  exercise  by the Fund of any Stock  Index  Option
purchased by the Fund pursuant to paragraph 1 hereof,  the Fund shall deliver to
the Custodian a Certificate  specifying with respect to such Stock Index Option:
(a) the Series to which such Stock Index Option was specifically allocated;  (b)
the type of Stock Index  Option (put or call);  (c) the number of Options  being
exercised;  (d) the stock index to which such Option relates; (e) the expiration
date; (f) the exercise price; (g) the total amount to be received by the Fund in
connection.  with such  exercise;  and (h) the  Clearing  Member  from whom such
payment is to be received.

      6. Whenever the Fund writes a Covered Call Option, the Fund shall promptly
deliver to the Custodian a Certificate  specifying  with respect to such Covered
Call Option: (a) the Series for which such Covered Call Option was written;  (b)
the name of the issuer and the title and number of shares for which the  Covered
Call Option was written and which underlie the same;  (c) the  expiration  date;
(d) the exercise price; (e) the premium to be received by the Fund; (f) the date
such Covered Call Option was  written;  and (g) the name of the Clearing  Member
through whom the premium is to be received. The Custodian shall deliver or cause
to be  delivered,  in  exchange  for  receipt of the  premium  specified  in the
Certificate  with  respect to such Covered  Call  Option,  such  receipts as are
required  in  accordance  with the customs  prevailing  among  Clearing  Members
dealing in Covered Call Options and shall  impose,  or direct the  Depository to
impose, upon the underlying Securities specified in the Certificate specifically
allocated to such Series such  restrictions as may be required by such receipts.
Notwithstanding  the foregoing,  the Custodian has the right, upon prior written
notification  to the  Fund,  at any time to refuse  to issue  any  receipts  for
Securities  in the  possession  of the  Custodian  and not  deposited  with  the
Depository underlying a Covered Call Option.

      7. Whenever a Covered Call Option written by the Fund and described in the
preceding  paragraph  of this  Article is  exercised,  the Fund  shall  promptly
deliver to the Custodian a Certificate  instructing the Custodian to deliver, or
to direct the Depository to deliver, the Securities subject to such Covered Call
Option and  specifying:  (a) the Series for which such  Covered  Call Option was
written;  (b) the name of the issuer and the title and number of shares  subject
to the Covered  Call  Option;  (c) the  Clearing  Member to whom the  underlying
Securities  are to be  delivered;  and (d) the total amount  payable to the Fund
upon  such  delivery.  Upon  the  return  and/or  cancellation  of any  receipts
delivered pursuant to paragraph 6 of this Article,  the Custodian shall deliver,
or direct the Depository to deliver, the underlying Securities as specified


                                      -12-
<PAGE>

in the Certificate  against payment of the amount to be received as set forth in
such Certificate.

      8. Whenever the Fund writes a Put Option,  the Fund shall promptly deliver
to the Custodian a Certificate  specifying with respect to such Put Option:  (a)
the Series for which such Put Option was written; (b) the name of the issuer and
the title and number of shares  for which the Put  Option is  written  and which
underlie the same; (c) the  expiration  date;  (d) the exercise  price;  (e) the
premium to be received by the Fund; (f) the date such Put Option is written; (g)
the name of the Clearing  Member  through whom the premium is to be received and
to whom a Put  Option  guarantee  letter is to be  delivered;  (h) the amount of
cash, and/or the amount and kind of Securities,  if any, specifically  allocated
to such Series to be deposited in the Senior  Security  Account for such Series;
and (i) the amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be deposited  into the  Collateral  Account for such
Series.  The  Custodian  shall,  after making the deposits  into the  Collateral
Account  specified  in the  Certificate,  issue a Put  Option  guarantee  letter
substantially  in the form  utilized by the  Custodian on the date  hereof,  and
deliver the same to the Clearing  Member  specified in the  Certificate  against
receipt  of the  premium  specified  in said  Certificate.  Notwithstanding  the
foregoing,  the  Custodian  shall be under no obligation to issue any Put Option
guarantee  letter  or  similar  document  if it is  unable  to  make  any of the
representations contained therein.

      9.  Whenever  a Put  Option  written  by the  Fund  and  described  in the
preceding  paragraph  is  exercised,  the Fund  shall  promptly  deliver  to the
Custodian a Certificate specifying:  (a) the Series to which such Put Option was
written;  (b) the name of the issuer  and title and number of shares  subject to
the Put Option; (c) the Clearing Member from whom the underlying  Securities are
to be received; (d) the total amount payable by the Fund upon such delivery; (e)
the  amount  of cash  and/or  the  amount  and kind of  Securities  specifically
allocated to such Series to be withdrawn  from the  Collateral  Account for such
Series  and (f) the amount of cash  and/or  the  amount and kind of  Securities,
specifically  allocated to such Series,  if any, to be withdrawn from the Senior
Security  Account.  Upon  the  return  and/or  cancellation  of any  Put  Option
guarantee  letter or similar document issued by the Custodian in connection with
such Put Option,  the Custodian shall pay out of the moneys held for the account
of the  Series to which such Put Option  was  specifically  allocated  the total
amount payable to the Clearing Member  specified in the Certificate as set forth
in such  Certificate  against  delivery of such  Securities,  and shall make the
withdrawals specified in such Certificate.

      10. Whenever the Fund writes a Stock Index Option, the Fund shall promptly
deliver to the  Custodian a  Certificate  specifying  with respect to such Stock
Index Option: (a) the


                                      -13-
<PAGE>

Series for which such Stock Index  Option was  written;  (b) whether  such Stock
Index  Option is a put or a call;  (c) the  number of options  written;  (d) the
stock index to which such  Option  relates;  (e) the  expiration  date;  (f) the
exercise  price;  (g) the Clearing  Member through whom such Option was written;
(h) the premium to be  received  by the Fund;  (i) the amount of cash and/or the
amount and kind of Securities,  if any, specifically allocated to such Series to
be deposited in the Senior Security  Account for such Series;  (j) the amount of
cash and/or the amount and kind of Securities, if any, specifically allocated to
such Series to be deposited in the Collateral  Account for such Series;  and (k)
the  amount  of  cash  and/or  the  amount  and  kind  of  Securities,  if  any,
specifically  allocated to such Series to be deposited in a Margin Account,  and
the name in which such account is to be or has been  established.  The Custodian
shall,  upon  receipt of the  premium  specified  in the  Certificate,  make the
deposits, if any, into the Senior Security Account specified in the Certificate,
and  either  (1)  deliver  such  receipts,  if  any,  which  the  Custodian  has
specifically  agreed  to  issue,  which  are  in  accordance  with  the  customs
prevailing  among Clearing  Members in Stock Index Options and make the deposits
into  the  Collateral  Account  specified  in the  Certificate,  or (2) make the
deposits into the Margin Account specified in the Certificate.

      11. Whenever a Stock Index Option written by the Fund and described in the
preceding  paragraph  of this  Article is  exercised,  the Fund  shall  promptly
deliver to the  Custodian a  Certificate  specifying  with respect to such Stock
Index Option: (a) the Series for which such Stock Index Option was written;  (b)
such  information  as may be  necessary to identify the Stock Index Option being
exercised; (c) the Clearing Member through whom such Stock Index Option is being
exercised;  (d) the total amount  payable upon such  exercise,  and whether such
amount is to be paid by or to the Fund; (e) the amount of cash and/or amount and
kind of Securities, if any, to be withdrawn from the Margin Account; and (f) the
amount of cash and/or  amount and kind of  Securities,  if any, to be  withdrawn
from the Senior Security Account for such Series;  and the amount of cash and/or
the amount and kind of  Securities,  if any, to be withdrawn from the Collateral
Account for such Series.  Upon the return and/or cancellation of the receipt, if
any,  delivered  pursuant  to the  preceding  paragraph  of  this  Article,  the
Custodian  shall pay out of the  moneys  held for the  account  of the Series to
which such Stock Index Option was specifically  allocated to the Clearing Member
specified  in the  Certificate  the total amount  payable,  if any, as specified
therein.

      12.  Whenever  the Fund  purchases  any Option  identical  to a previously
written  Option  described  in  paragraphs,  6,  8 or 10 of  this  Article  in a
transaction expressly designated as a "Closing Purchase Transaction" in order to
liquidate its position as a writer of an Option, the Fund shall promptly deliver
to the Custodian a Certificate specifying with respect to the


                                      -14-
<PAGE>

Option  being  purchased:  (a)  that  the  transaction  is  a  Closing  Purchase
Transaction;  (b) the Series for which the Option was  written;  (c) the name of
the issuer and the title and number of shares subject to the Option,  or, in the
case of a Stock Index Option,  the stock index to which such Option  relates and
the number of Options held; (d) the exercise  price;  (e) the premium to be paid
by the Fund; (f) the expiration  date; (g) the type of Option (put or call); (h)
the date of such  purchase;  (i) the  name of the  Clearing  Member  to whom the
premium is to be paid;  and (j) the amount of cash and/or the amount and kind of
Securities,  if any, to be withdrawn  from the Collateral  Account,  a specified
Margin  Account,  or the  Senior  Security  Account  for such  Series.  Upon the
Custodian's  payment of the premium and the return  and/or  cancellation  of any
receipt issued pursuant to paragraphs 6, 8 or 10 of this Article with respect to
the Option  being  liquidated  through the  Closing  Purchase  Transaction,  the
Custodian  shall  remove,  or direct the  Depository to remove,  the  previously
imposed restrictions on the Securities underlying the Call Option.

      13. Upon the expiration,  exercise or  consummation of a Closing  Purchase
Transaction  with  respect  to any Option  purchased  or written by the Fund and
described  in this  Article,  the  Custodian  shall  delete such Option from the
statements delivered to the Fund pursuant to paragraph 3 Article III herein, and
upon the return and/or  cancellation  of any receipts  issued by the  Custodian,
shall make such withdrawals from the Collateral Account,  and the Margin Account
and/or the Senior Security Account as may be specified in a Certificate received
in connection with such expiration, exercise, or consummation.

                                   ARTICLE VI.

                                FUTURES CONTRACTS

      1. Whenever the Fund shall enter into a Futures  Contract,  the Fund shall
deliver to the Custodian a Certificate  specifying  with respect to such Futures
Contract, (or with respect to any number of identical Futures Contract(s)):  (a)
the Series for which the Futures Contract is being entered;  (b) the category of
Futures   Contract  (the  name  of  the  underlying  stock  index  or  financial
instrument); (c) the number of identical Futures Contracts entered into; (d) the
delivery  or  settlement  date of the  Futures  Contract  (s);  (e) the date the
Futures  Contract(s)  was (were) entered into and the maturity date; (f) whether
the Fund is  buying  (going  long) or  selling  (going  short)  on such  Futures
Contract(s); (g) the amount of cash and/or the amount and kind of Securities, if
any, to be deposited  in the Senior  Security  Account for such Series;  (h) the
name of the broker,  dealer,  or futures  commission  merchant  through whom the
Futures  Contract was entered into; and (i) the amount of fee or commission,  if
any, to be paid and the name of the broker,


                                      -15-
<PAGE>

dealer,  or futures  commission  merchant to whom such amount is to be paid. The
Custodian  shall make the deposits,  if any, to the Margin Account in accordance
with the terms and  conditions of the Margin  Account  Agreement.  The Custodian
shall make  payment out of the moneys  specifically  allocated to such Series of
the fee or commission,  if any,  specified in the Certificate and deposit in the
Senior Security Account for such Series the amount of cash and/or the amount and
kind of Securities specified in said Certificate.

      2. (a) Any variation margin payment or similar payment required to be made
by the Fund to a broker,  dealer, or futures commission merchant with respect to
an outstanding  Futures  Contract,  shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account Agreement.

         (b) Any  variation  margin  payment or similar  payment  from a broker,
dealer,  or  futures  commission  merchant  to  the  Fund  with  respect  to  an
outstanding Futures Contract,  shall be received and dealt with by the Custodian
in accordance with the terms and conditions of the Margin Account Agreement.

      3. Whenever a Futures Contract held by the Custodian hereunder is retained
by the Fund until delivery or settlement is made on such Futures  Contract,  the
Fund shall deliver to the Custodian a  Certificate  specifying:  (a) the Futures
Contract and the Series to which the same  relates;  (b) with respect to a Stock
Index Futures Contract, the total cash settlement amount to be paid or received,
and with respect to a Financial Futures  Contract,  the Securities and/or amount
of cash  to be  delivered  or  received;  (c) the  broker,  dealer,  or  futures
commission  merchant  to or  from  whom  payment  or  delivery  is to be made or
received;  and (d) the amount of cash and/or Securities to be withdrawn from the
Senior Security Account for such Series. The Custodian shall make the payment or
delivery specified in the Certificate, and delete such Futures Contract from the
statements delivered to the Fund pursuant to paragraph 3 of Article III herein.

      4.  Whenever  the Fund  shall  enter into a Futures  Contract  to offset a
Futures Contract held by the Custodian hereunder,  the Fund shall deliver to the
Custodian a Certificate  specifying:  (a) the items of information required in a
Certificate  described  in  paragraph  1 of this  Article,  and (b) the  Futures
Contract  being  offset.  The  Custodian  shall  make  payment  out of the money
specifically  allocated  to  such  Series  of the  fee or  commission,  if  any,
specified in the Certificate  and delete the Futures  Contract being offset from
the  statements  delivered  to the Fund  pursuant to  paragraph 3 of Article III
herein,  and make such  withdrawals  from the Senior  Security  Account for such
Series as may be specified in such Certificate.  The withdrawals,  if any, to be
made from the Margin  Account shall be made by the Custodian in accordance  with
the terms and conditions of the Margin Account Agreement.


                                      -16-
<PAGE>

                                  ARTICLE VII.

                            FUTURES CONTRACT OPTIONS

      1. Promptly after the purchase of any Futures Contract Option by the Fund,
the Fund shall promptly  deliver to the Custodian a Certificate  specifying with
respect to such Futures Contract Option:  (a) the Series to which such Option is
specifically  allocated;  (b) the type of Futures Contract Option (put or call);
(c) the type of Futures Contract and such other  information as may be necessary
to  identify  the  Futures  Contract  underlying  the  Futures  Contract  Option
purchased;  (d) the expiration  date; (e) the exercise  price;  (f) the dates of
purchase and  settlement;  (g) the amount of premium to be paid by the Fund upon
such purchase; (h) the name of the broker or futures commission merchant through
whom such  option  was  purchased;  and (i) the name of the  broker,  or futures
commission merchant,  to whom payment is to be made. The Custodian shall pay out
of the moneys specifically allocated to such Series, the total amount to be paid
upon such purchase to the broker or futures  commissions  merchant  through whom
the purchase was made,  provided  that the same conforms to the amount set forth
in such Certificate.

      2. Promptly after the sale of any Futures Contract Option purchased by the
Fund  pursuant to  paragraph 1 hereof,  the Fund shall  promptly  deliver to the
Custodian a Certificate specifying with respect to each such sale: (a) Series to
which such Futures Contract Option was specifically  allocated;  (b) the type of
Future Contract Option (put or call);  (c) the type of Futures Contract and such
other  information  as  may  be  necessary  to  identify  the  Futures  Contract
underlying  the  Futures  Contract  Option;  (d) the date of sale;  (e) the sale
price; (f) the date of settlement; (g) the total amount payable to the Fund upon
such sale; and (h) the name of the broker of futures commission merchant through
whom the sale was made. The Custodian  shall consent to the  cancellation of the
Futures  Contract  Option being closed  against  payment to the Custodian of the
total amount payable to the Fund, provided the same conforms to the total amount
payable as set forth in such Certificate.

      3. Whenever a Futures  Contract  Option  purchased by the Fund pursuant to
paragraph 1 is exercised  by the Fund,  the Fund shall  promptly  deliver to the
Custodian  a  Certificate  specifying:  (a) the  Series  to which  such  Futures
Contract Option was specifically allocated;  (b) the particular Futures Contract
Option  (put or  call)  being  exercised;  (c)  the  type  of  Futures  Contract
underlying the Futures Contract Option;  (d) the date of exercise;  (e) the name
of the broker or futures  commission  merchant through whom the Futures Contract
Option is exercised;  (f) the net total amount, if any, payable by the Fund; (g)
the amount, if any, to be received by the Fund; and


                                      -17-
<PAGE>

(h) the amount of cash and/or the amount and kind of  Securities to be deposited
in the Senior Security Account for such Series. The Custodian shall make, out of
the moneys and Securities  specifically  allocated to such Series, the payments,
if any, and the deposits,  if any, into the Senior Security Account as specified
in the Certificate. The deposits, if any, to be made to the Margin Account shall
be made by the  Custodian in  accordance  with the terms and  conditions  of the
Margin Account Agreement.

      4.  Whenever  the Fund writes a Futures  Contract  Option,  the Fund shall
promptly deliver to the Custodian a Certificate  specifying with respect to such
Futures Contract  Option:  (a) the Series for which such Futures Contract Option
was written; (b) the type of Futures Contract Option (put or call); (c) the type
of Futures  Contract and such other  information as may be necessary to identify
the Futures Contract  underlying the Futures Contract Option; (d) the expiration
date;  (e) the exercise  price;  (f) the premium to be received by the Fund; (g)
the name of the broker or futures  commission  merchant through whom the premium
is to be  received;  and (h) the  amount of cash  and/or  the amount and kind of
Securities,  if any, to be  deposited  in the Senior  Security  Account for such
Series.  The  Custodian  shall,  upon  receipt of the premium  specified  in the
Certificate,  make out of the moneys and  Securities  specifically  allocated to
such Series the deposits into the Senior Security Account,  if any, as specified
in the Certificate. The deposits, if any, to be made to the Margin Account shall
be made by the  Custodian in  accordance  with the terms and  conditions  of the
Margin Account Agreement.

      5. Whenever a Futures  Contract Option written by the Fund which is a call
is  exercised,  the Fund shall  promptly  deliver to the Custodian a Certificate
specifying:   (a)  the  Series  to  which  such  Futures   Contract  Option  was
specifically  allocated;  (b) the particular  Futures Contract Option exercised;
(c) the type of Futures Contract underlying the Futures Contract Option; (d) the
name of the broker or futures  commission  merchant  through  whom such  Futures
Contract Option was exercised;  (e) the net total amount, if any, payable to the
Fund upon such exercise;  (f) the net total amount,  if any, payable by the Fund
upon such  exercise;  and (g) the  amount of cash  and/or the amount and kind of
Securities to be deposited in the Senior Security  Account for such Series.  The
Custodian  shall,  upon its receipt of the net total amount payable to the Fund,
if any,  specified  in such  Certificate  make  the  payments,  if any,  and the
deposits,  if  any,  into  the  Senior  Security  Account  as  specified  in the
Certificate.  The  deposits,  if any, to be made to the Margin  Account shall be
made by the Custodian in accordance  with the terms and conditions of the Margin
Account Agreement.

      6.  Whenever a Futures  Contract  Option  which is written by the Fund and
which is a put is exercised,  the Fund shall promptly deliver to the Custodian a
Certificate specifying:


                                      -18-
<PAGE>

(a) the  Series  to  which  such  Option  was  specifically  allocated;  (b) the
particular  Futures Contract Option exercised;  (c) the type of Futures Contract
underlying such Futures Contract  Option;  (d) the name of the broker or futures
commission merchant through whom such Futures Contract Option is exercised;  (e)
the net total amount,  if any,  payable to the Fund upon such exercise;  (f) the
net total amount,  if any,  payable by the Fund upon such exercise;  and (g) the
amount and kind of Securities  and/or cash to be withdrawn from or deposited in,
the Senior Security Account for such Series,  if any. The Custodian shall,  upon
its receipt of the net total amount  payable to the Fund,  if any,  specified in
the Certificate, make out of the moneys and Securities specifically allocated to
such Series,  the payments,  if any, and the  deposits,  if any, into the Senior
Security  Account  as  specified  in the  Certificate.  The  deposits  to and/or
withdrawals  from the Margin Account,  if any, shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account Agreement.

      7. Whenever the Fund purchases any Futures  Contract Option identical to a
previously written Futures Contract Option described in this Article in order to
liquidate  its position as a writer of such Futures  Contract  Option,  the Fund
shall promptly deliver to the Custodian a Certificate specifying with respect to
the Futures Contract Option being purchased: (a) the Series to which such Option
is specifically  allocated;  (b) that the transaction is a closing  transaction;
(c) the type of Future  Contract and such other  information as may be necessary
to identify the Futures Contract underlying the Futures Option Contract; (d) the
exercise price; (e) the premium to be paid by the Fund; (f) the expiration date;
(g) the name of the broker or futures commission merchant to whom the premium is
to be paid; and (h) the amount of cash and/or the amount and kind of Securities,
if any, to be withdrawn from the Senior  Security  Account for such Series.  The
Custodian  shall  effect  the  withdrawals  from  the  Senior  Security  Account
specified  in the  Certificate.  The  withdrawals,  if any,  to be made from the
Margin  Account shall be made by the Custodian in accordance  with the terms and
conditions of the Margin Account Agreement.

      8. Upon the expiration, exercise, or consummation of a closing transaction
with respect to, any Futures  Contract  Option  written or purchased by the Fund
and  described  in this  Article,  the  Custodian  shall (a) delete such Futures
Contract Option from the statements  delivered to the Fund pursuant to paragraph
3 of Article III herein and, (b) make such  withdrawals  from and/or in the case
of an  exercise  such  deposits  into  the  Senior  Security  Account  as may be
specified in a Certificate.  The deposits to and/or  withdrawals from the Margin
Account, if any, shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.


                                      -19-
<PAGE>

      9.  Futures  Contracts  acquired  by the Funds through  the  exercise of a
Futures Contract Option described in this Article shall be subject to Article VI
hereof.

                                  ARTICLE VIII.

                                   SHORT SALES

      1.  Promptly  after any short  sales by any  Series of the Fund,  the Fund
shall promptly deliver to the Custodian a Certificate specifying: (a) the Series
for which such short sale was made;  (b) the name of the issuer and the title of
the  Security;  (c) the number of shares or principal  amount sold,  and accrued
interest or dividends, if any; (d) the dates of the sale and settlement; (e) the
sale price per unit;  (f) the total amount  credited to the Fund upon such sale,
if any, (g) the amount of cash and/or the amount and kind of Securities, if any,
which are to be deposited in a Margin  Account and the name in which such Margin
Account  has been or is to be  established;  (h) the  amount of cash  and/or the
amount and kind of  Securities,  if any, to be  deposited  in a Senior  Security
Account,  and (i) the name of the broker  through whom such short sale was made.
The Custodian shall upon its receipt of a statement from such broker  confirming
such sale and that the total amount credited to the Fund upon such sale, if any,
as  specified in the  Certificate  is held by such broker for the account of the
Custodian (or any nominee of the  Custodian)  as custodian of the Fund,  issue a
receipt or make the  deposits  into the Margin  Account and the Senior  Security
Account specified in the Certificate.

      2. In connection  with the  closing-out  of any short sale, the Fund shall
promptly deliver to the Custodian a Certificate  specifying with respect to each
such closing out: (a) the Series for which such  transaction  is being made; (b)
the name of the issuer and the title of the  Security;  (c) the number of shares
or the principal amount, and accrued interest or dividends,  if any, required to
effect  such  closing-out  to be  delivered  to the  broker;  (d) the  dates  of
closing-out and  settlement;  (e) the purchase price per unit; (f) the net total
amount  payable  to the Fund upon  such  closing-out;  (g) the net total  amount
payable  to the  broker  upon such  closing-out;  (h) the amount of cash and the
amount and kind of Securities to be withdrawn,  if any, from the Margin Account;
(i) the amount of cash and/or the amount and kind of  Securities,  if any, to be
withdrawn  from the  Senior  Security  Account;  and (j) the name of the  broker
through whom the Fund is effecting such  closing-out.  The Custodian shall, upon
receipt of the net total amount payable to the Fund upon such  closing-out,  and
the return and/ or cancellation of the receipts, if any, issued by the Custodian
with respect to the short sale being closed-out,  pay out of the moneys held for
the  account  of the Fund to the  broker  the net total  amount  payable  to the
broker, and make the withdrawals from the Margin Account and the


                                      -20-
<PAGE>

Senior Security Account, as the same are specified in the Certificate.

                                   ARTICLE IX.

                          REVERSE REPURCHASE AGREEMENTS

      1.  Promptly  after the Fund enters a Reverse  Repurchase  Agreement  with
respect to Securities and money held by the Custodian hereunder,  the Fund shall
deliver to the Custodian a Certificate,  or in the event such Reverse Repurchase
Agreement  is a Money  Market  Security,  a  Certificate  or  Oral  Instructions
specifying:  (a) the  Series  for  which the  Reverse  Repurchase  Agreement  is
entered;  (b) the  total  amount  payable  to the Fund in  connection  with such
Reverse Repurchase Agreement and specifically  allocated to such Series; (c) the
broker or  dealer  through  or with whom the  Reverse  Repurchase  Agreement  is
entered;  (d) the amount and kind of  Securities  to be delivered by the Fund to
such broker or dealer;  (e) the date of such Reverse Repurchase  Agreement;  and
(f) the  amount  of cash  and/or  the  amount  and kind of  Securities,  if any,
specifically  allocated  to such  Series to be  deposited  in a Senior  Security
Account for such Series in connection  with such Reverse  Repurchase  Agreement.
The  Custodian  shall,  upon  receipt  of the total  amount  payable to the Fund
specified in the Certificate,  Oral Instructions,  or Written  Instructions make
the delivery to the broker or dealer,  and the  deposits,  if any, to the Senior
Security Account, specified in such Certificate or Oral Instructions.

      2. Upon the  termination of a Reverse  Repurchase  Agreement  described in
preceding  paragraph  1 of this  Article,  the Fund  shall  promptly  deliver  a
Certificate or, in the event such Reverse Repurchase Agreement is a Money Market
Security,  a Certificate or Oral Instructions to the Custodian  specifying:  (a)
the Reverse Repurchase  Agreement being terminated and the Series for which same
was entered;  (b) the total amount  payable by the Fund in connection  with such
termination;  (c) the amount and kind of  Securities  to be received by the Fund
and specifically  allocated to such Series in connection with such  termination;
(d) the  date of  termination;  (e) the name of the  broker  or  dealer  with or
through whom the Reverse Repurchase  Agreement is to be terminated;  and (f) the
amount of cash and/or the amount and kind of Securities to be withdrawn from the
Senior Securities  Account for such Series. The Custodian shall, upon receipt of
the amount and kind of  Securities  to be received by the Fund  specified in the
Certificate or Oral Instructions,  make the payment to the broker or dealer, and
the  withdrawals,  if any, from the Senior Security  Account,  specified in such
Certificate or Oral Instructions.


                                      -21-
<PAGE>

                                   ARTICLE X.

                    LOAN OF PORTFOLIO SECURITIES OF THE FUND

      1. Promptly after each loan of portfolio Securities specifically allocated
to a Series held by the Custodian hereunder,  the Fund shall deliver or cause to
be delivered to the Custodian a Certificate specifying with respect to each such
loan: (a) the Series to which the loaned Securities are specifically  allocated;
(b) the name of the  issuer and the title of the  Securities,  (c) the number of
shares or the principal  amount loaned,  (d) the date of loan and delivery,  (e)
the total  amount  to be  delivered  to the  Custodian  against  the loan of the
Securities,  including the amount of cash  collateral  and the premium,  if any,
separately  identified,  and (f) the name of the broker,  dealer,  or  financial
institution  to  which  the loan was  made.  The  Custodian  shall  deliver  the
Securities  thus  designated to the broker,  dealer or financial  institution to
which the loan was made upon  receipt of the total  amount  designated  as to be
delivered  against the loan of  Securities.  The Custodian may accept payment in
connection  with a delivery  otherwise  than  through the  Book-Entry  System or
Depository  only in the form of a certified or bank  cashier's  check payable to
the order of the Fund or the Custodian  drawn on New York  Clearing  House funds
and may deliver  Securities  in  accordance  with the customs  prevailing  among
dealers in securities.

      2. Promptly after each  termination of the loan of Securities by the Fund,
the Fund shall  deliver or cause to be delivered to the  Custodian a Certificate
specifying with respect to each such loan  termination and return of Securities:
(a) the Series to which the loaned  Securities are specifically  allocated;  (b)
the name of the issuer and the title of the  Securities to be returned,  (c) the
number  of  shares  or the  principal  amount  to be  returned,  (d) the date of
termination,  (e) the total amount to be delivered by the  Custodian  (including
the  cash  collateral  for such  Securities  minus  any  offsetting  credits  as
described  in said  Certificate),  and (f) the name of the  broker,  dealer,  or
financial institution from which the Securities will be returned.  The Custodian
shall  receive all  Securities  returned from the broker,  dealer,  or financial
institution to which such  Securities were loaned and upon receipt thereof shall
pay,  out of the  moneys  held for the  account  of the Fund,  the total  amount
payable upon such return of Securities as set forth in the Certificate.


                                      -22-
<PAGE>

                                   ARTICLE XI.

                   CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
                        ACCOUNTS, AND COLLATERAL ACCOUNTS

      1. The  Custodian  shall,  from time to time,  make such  deposits  to, or
withdrawals  from,  a Senior  Security  Account as  specified  in a  Certificate
received by the Custodian.  Such Certificate  shall specify the Series for which
such  deposit  or  withdrawal  is to be made and the  amount of cash  and/or the
amount  and kind of  Securities  specifically  allocated  to such  Series  to be
deposited in, or withdrawn from,  such Senior Security  Account for such Series.
In the event that the Fund fails to specify in a  Certificate  the  Series,  the
name of the issuer,  the title and the number of shares or the principal  amount
of any particular Securities to be deposited by the Custodian into, or withdrawn
from, a Senior Securities Account, the Custodian shall be under no obligation to
make any such deposit or withdrawal and shall so notify the Fund.

      2. The Custodian  shall make  deliveries or payments from a Margin Account
to the broker,  dealer,  futures commission merchant or Clearing Member in whose
name,  or for whose  benefit,  the account was  established  as specified in the
Margin Account Agreement.

      3. Amounts  received by the  Custodian as payments or  distributions  with
respect to  Securities  deposited in any Margin  Account  shall be dealt with in
accordance with the terms and conditions of the Margin Account Agreement.

      4. The Custodian shall have a continuing lien and security interest in and
to any  property at any time held by the  Custodian  in any  Collateral  Account
described  herein.  In accordance  with applicable law the Custodian may enforce
its lien and  realize  on any such  property  whenever  the  Custodian  has made
payment  or  delivery  pursuant  to any Put Option  guarantee  letter or similar
document or any receipt  issued  hereunder  by the  Custodian.  In the event the
Custodian  should  realize on any such property net proceeds which are less than
the Custodian's  obligations  under any Put Option  guarantee  letter or similar
document or any receipt,  such deficiency  shall be a debt owed the Custodian by
the Fund within the scope of Article XIV herein.

      5. On each  business  day the  Custodian  shall  furnish  the Fund  with a
statement  with respect to each Margin  Account in which money or Securities are
held  specifying  as of the close of business on the previous  business day: (a)
the name of the  Margin  Account;  (b) the amount  and kind of  Securities  held
therein;  and (c) the amount of money held  therein.  The  Custodian  shall make
available upon request to any broker,  dealer,  or futures  commission  merchant
specified in the name of a Margin Account a copy of the statement  furnished the
Fund with respect to such Margin Account.


                                      -23-
<PAGE>

      6. Promptly after the close of business on each business day in which cash
and/or  Securities  are maintained in a Collateral  Account for any Series,  the
Custodian  shall  furnish  the  Fund  with a  statement  with  respect  to  such
Collateral  Account  specifying the amount of cash and/or the amount and kind of
Securities held therein. No later than the close of business next succeeding the
delivery to the Fund of such statement,  the Fund shall furnish to the Custodian
a Certificate  or Written  Instructions  specifying the then market value of the
Securities  described in such statement.  In the event such then market value is
indicated  to be less  than  the  Custodian's  obligation  with  respect  to any
outstanding  Put Option  guarantee  letter or similar  document,  the Fund shall
promptly  specify in a Certificate the additional  cash and/or  Securities to be
deposited in such Collateral Account to eliminate such deficiency.

                                  ARTICLE XII.

                      PAYMENT OF DIVIDENDS OR DISTRIBUTIONS

      1. The Fund shall furnish to the Custodian a copy of the resolution of the
Board of Directors  of the Fund,  certified  by the  Secretary or any  Assistant
Secretary, either (i) setting forth with respect to the Series specified therein
the date of the declaration of a dividend or  distribution,  the date of payment
thereof,  the record date as of which shareholders  entitled to payment shall be
determined,  the amount payable per Share of such Series to the  shareholders of
record as of that date and the total amount  payable to the  Dividend  Agent and
any sub-dividend  agent or co-dividend agent of the Fund on the payment date, or
(ii) authorizing with respect to the Series specified therein the declaration of
dividends and  distributions  on a daily basis and  authorizing the Custodian to
rely on  Oral  Instructions  or a  Certificate  setting  forth  the  date of the
declaration of such dividend or distribution,  the date of payment thereof,  the
record date as of which  shareholders  entitled to payment shall be  determined,
the amount payable per Share of such Series to the  shareholders of record as of
that date and the total  amount  payable to the  Dividend  Agent on the  payment
date.

      2. Upon the payment date specified in such resolution,  Oral  Instructions
or  Certificate,  as the case may be, the Custodian  shall pay out of the moneys
held for the account of each  Series the total  amount  payable to the  Dividend
Agent and any sub-dividend  agent or co-dividend  agent of the Fund with respect
to such Series.


                                      -24-
<PAGE>

                                  ARTICLE XIII.

                          SALE AND REDEMPTION OF SHARES

      1.  Whenever  the Fund  shall  sell any  Shares,  it shall  deliver to the
Custodian a Certificate duly specifying:

            (a) The Series,  the number of Shares sold,  trade date,  and price;
and

            (b) The amount of money to be received by the Custodian for the sale
of such Shares and  specifically  allocated to the  separate account in the name
of such Series.

      2. Upon  receipt of such money  from the  Transfer  Agent,  the  Custodian
shall  credit such money to the  separate  account in the name of the Series for
which such money was received.

      3. Upon  issuance of any Shares of any Series  described in the  foregoing
provisions of this Article,  the Custodian  shall pay, out of the money held for
the account of such  Series,  all original  issue or other taxes  required to be
paid by the  Fund in  connection  with  such  issuance  upon  the  receipt  of a
Certificate specifying the amount to be paid.

      4.  Whenever  the Fund  desires the  Custodian  to make payment out of the
money held by the  Custodian  hereunder in  connection  with a redemption of any
Shares, it shall furnish to the Custodian:

            (a) A resolution by the Board of Directors of the Fund directing the
                Transfer Agent to redeem the Shares; and

            (b) A  Certificate  specifying  the  number  and  Series  of  Shares
                redeemed; and

            (c) The amount to be paid for such Shares.

      5. Upon  receipt from the Transfer  Agent of an advice  setting  forth the
Series and number of Shares  received by the Transfer  Agent for  redemption and
that such  Shares  are in good form for  redemption,  the  Custodian  shall make
payment to the Transfer Agent out of the moneys held in the separate  account in
the name of the Series the total  amount  specified  in the  Certificate  issued
pursuant to the foregoing paragraph 4 of this Article.


                                      -25-
<PAGE>

                                  ARTICLE XIV.

                           OVERDRAFTS OR INDEBTEDNESS

      1. If the Custodian, should in its sole discretion advance funds on behalf
of any Series  which  results in an  overdraft  because  the moneys  held by the
Custodian in the separate  account for such Series shall be  insufficient to pay
the total amount payable upon a purchase of Securities specifically allocated to
such  Series,  as set  forth in a  Certificate  or Oral  Instructions,  or which
results in an overdraft  in the  separate  account of such Series for some other
reason,  or if the Fund is for any other reason  indebted to the Custodian  with
respect to a Series,  including any  indebtedness  to The Bank of New York under
the Fund's Cash Management and Related Services  Agreement,  (except a borrowing
for  investment  or for  temporary or emergency  purposes  using  Securities  as
collateral  pursuant to a separate  agreement  and subject to the  provisions of
paragraph 2 of this Article),  such overdraft or indebtedness shall be deemed to
be a loan made by the  Custodian  to the Fund for such Series  payable on demand
and shall bear  interest  from the date incurred at a rate per annum (based on a
360-day  year  for the  actual  number  of days  involved)  equal  to 1/2%  over
Custodian's prime commercial lending rate in effect from time to time, such rate
to be  adjusted  on the  effective  date of any change in such prime  commercial
lending rate but in no event to be less than 6% per annum. In addition, the Fund
hereby  agrees that the  Custodian  shall have a  continuing  lien and  security
interest in and to any  property  specifically  allocated  to such Series at any
time held by it for the  benefit of such Series or in which the Fund may have an
interest which is then in the Custodian's possession or control or in possession
or  control  of any third  party  acting  in the  Custodian's  behalf.  The Fund
authorizes the Custodian, in its sole discretion, at any time to charge any such
overdraft or indebtedness together with interest due thereon against any balance
of  account  standing  to such  Series'  credit  on the  Custodian's  books.  In
addition, the Fund hereby covenants that on each Business Day on which either it
intends to enter a Reverse Repurchase  Agreement and/ or otherwise borrow from a
third  party,  or which next  succeeds  a Business  Day on which at the close of
business  the Fund had  outstanding  a Reverse  Repurchase  Agreement  or such a
borrowing,  it shall prior to 9 a.m., New York City time,  advise the Custodian,
in writing,  of each such borrowing,  shall specify the Series to which the same
relates,  and shall not incur any  indebtedness not so specified other than from
the Custodian.


      2. The  Fund  will  cause to be  delivered  to the  Custodian  by any bank
(including, if the borrowing is pursuant to a separate agreement, the Custodian)
from  which it  borrows  money for  investment  or for  temporary  or  emergency
purposes using Securities held by the Custodian hereunder as collateral for


                                      -26-
<PAGE>

such borrowings,  a notice or undertaking in the form currently  employed by any
such bank setting forth the amount which such bank will loan to the Fund against
delivery of a stated amount of collateral.  The Fund shall  promptly  deliver to
the Custodian a Certificate specifying with respect to each such borrowing:  (a)
the Series to which such  borrowing  relates;  (b) the name of the bank, (c) the
amount and terms of the borrowing,  which may be set forth by  incorporating  by
reference an attached  promissory note, duly endorsed by the Fund, or other loan
agreement,  (d) the time and date, if known,  on which the loan is to be entered
into,  (e) the date on which the loan  becomes  due and  payable,  (f) the total
amount  payable  to the Fund on the  borrowing  date,  (g) the  market  value of
Securities  to be delivered as collateral  for such loan,  including the name of
the issuer,  the title and the number of shares or the  principal  amount of any
particular  Securities,  and (h) a statement specifying whether such loan is for
investment purposes or for temporary or emergency purposes and that such loan is
in  conformance  with  the  Investment  Company  Act  of  1940  and  the  Fund's
prospectus.  The Custodian  shall deliver on the borrowing  date  specified in a
Certificate the specified  collateral and the executed  promissory note, if any,
against  delivery by the lending bank of the total  amount of the loan  payable,
provided that the same conforms to the total amount  payable as set forth in the
Certificate.  The Custodian  may, at the option of the lending  bank,  keep such
collateral in its possession, but such collateral shall be subject to all rights
therein  given  the  lending  bank  by  virtue  of any  promissory  note or loan
agreement.  The Custodian shall deliver such Securities as additional collateral
as may be specified in a Certificate to  collateralize  further any  transaction
described in this paragraph.  The Fund shall cause all Securities  released from
collateral  status to be returned  directly to the Custodian,  and the Custodian
shall  receive from time to time such return of collateral as may be tendered to
it. In the event that the Fund fails to specify in a Certificate the Series, the
name of the issuer,  the title and number of shares or the  principal  amount of
any particular  Securities to be delivered as collateral by the  Custodian,  the
Custodian shall not be under any obligation to deliver any Securities.

                                   ARTICLE XV.

                                  TERMINAL LINK

      1. At no time and under no  circumstances  shall the Fund be  obligated to
have or utilize the Terminal  Link,  and the  provisions  of this Article  shall
apply if, but only if, the Fund in its sole and  absolute  discretion  elects to
utilize the Terminal Link to transmit Certificates to the Custodian.

      2. The Terminal Link shall be utilized by the Fund only for the purpose of
the Fund providing  Certificates  to the Custodian with respect to  transactions
involving  Securities  or for the transfer of money to be applied to the payment
of


                                      -27-
<PAGE>

dividends, distributions or redemptions of Fund Shares, and shall be utilized by
the Custodian  only for the purpose of providing  notices to the Fund.  Such use
shall  commence  only after the Fund shall have  delivered  to the  Custodian  a
Certificate  substantially  in the form of Exhibit D and shall have  established
access  codes.  Each use of the  Terminal  Link by the Fund shall  constitute  a
representation  and warranty  that the Terminal  Link is being used only for the
purposes  permitted  hereby,  that at least two Officers  have each  utilized an
access code, that such safekeeping procedures have been established by the Fund,
and that such use does not  contravene  the  Investment  Company Act of 1940, as
amended, or the rules or regulations thereunder.

      3. The Fund shall  obtain and  maintain  at its own cost and  expense  all
equipment and services,  including,  but not limited to communications services,
necessary for it to utilize the Terminal  Link,  and the Custodian  shall not be
responsible  for the  reliability  or  availability  of any  such  equipment  or
services.

      4. The Fund acknowledges that any data bases made available as part of, or
through  the  Terminal  Link  and any  proprietary  data,  software,  processes,
information and  documentation  (other than any such which are or become part of
the public  domain or are legally  required to be made  available to the public)
(collectively,  the "Information"),  are the exclusive and confidential property
of the Custodian.  The Fund shall,  and shall cause others to which it discloses
the Information, to keep the Information confidential by using the same care and
discretion  it uses with  respect  to its own  confidential  property  and trade
secrets,  and shall neither make nor permit any  disclosure  without the express
prior written consent of the Custodian.

      5. Upon  termination  of this  Agreement  for any  reason,  the Fund shall
return to the Custodian any and all copies of the  Information  which are in the
Fund's  possession or under its control,  or which the Fund distributed to third
parties. The provisions of this Article shall not affect the copyright status of
any of  the  Information  which  may  be  copyrighted  and  shall  apply  to all
Information whether or not copyrighted.

      6. The Custodian  reserves the right to modify the Terminal Link from time
to time without notice to the Fund except that the Custodian shall give the Fund
notice  not  less  than 75 days  in  advance  of any  modification  which  would
materially  adversely affect the Fund's operation,  and the Fund agrees that the
Fund  shall not  modify or  attempt to modify  the  Terminal  Link  without  the
Custodian's  prior written consent.  The Fund  acknowledges that any software or
procedures  provided the Fund as part of the  Terminal  Link are the property of
the Custodian and,  accordingly,  the Fund agrees that any  modifications to the
Terminal Link, whether by the Fund, or by


                                      -28-
<PAGE>

the Custodian and whether with or without the Custodian's consent,  shall become
the property of the Custodian.

      7. Neither the Custodian nor any  manufacturers  and suppliers it utilizes
or the Fund utilizes in connection  with the Terminal Link makes any  warranties
or  representations,  express or implied,  in fact or in law,  including but not
limited to warranties of merchantability and fitness for a particular purpose.

      8.  The  Fund  will  cause  its  Officers  and   employees  to  treat  the
authorization  codes and the  access  codes  applicable  to  Terminal  Link with
extreme care, and irrevocably authorizes the Custodian to act in accordance with
and rely on  Certificates  received by it through the  Terminal  Link.  The Fund
acknowledges that it is its  responsibility to assure that only its Officers use
the Terminal Link on its behalf,  and that a Custodian  shall not be responsible
nor liable for use of the Terminal  Link on the Fund's  behalf by persons  other
than  such  persons  or  Officers,  or by  only a  single  Officer,  nor for any
alteration, omission, or failure to promptly forward.

      9 (a). Except as otherwise  specifically  provided in Section 9(b) of this
Article,  the  Custodian  shall  have  no  liability  for any  losses,  damages,
injuries,  claims,  costs or expenses  arising out of or in connection  with any
failure,  malfunction or other problem  relating to the Terminal Link except for
money damages  suffered as the direct result of the  negligence of the Custodian
in an amount not exceeding for any incident $25,000 provided,  however, that the
Custodian  shall have no  liability  under  this  Section 9 if the Fund fails to
comply with the provisions of Section 11.

      9 (b).  The  Custodian's  liability  for its  negligence  in  executing or
failing to execute in accordance with a Certificate  received  through  Terminal
Link  shall be only with  respect to a  transfer  of funds  which is not made in
accordance with such  Certificate  after such  Certificate  shall have been duly
acknowledged  by the Custodian,  and shall be contingent upon the Fund complying
with the  provisions of Section 12 of this Article,  and shall be limited to (i)
restoration of the principal  amount  mistransferred,  if and to the extent that
the Custodian would be required to make such  restoration  under applicable law,
and (ii) the lesser of (A) a Fund's actual  pecuniary loss incurred by reason of
its  loss  of use of the  mistransferred  funds  or the  funds  which  were  not
transferred,  as the case may be, or (B) compensation for the loss of the use of
the  mistransferred  funds or the funds which were not transferred,  as the case
may be, at a rate per annum equal to the average  federal funds rate as computed
from the Federal Reserve Bank of New York's daily determination of the effective
rate for federal funds,  for the period during which a Fund has lost use of such
funds. In no event shall the Custodian have any liability for failing to execute
in


                                      -29-
<PAGE>

accordance  with a  Certificate  a transfer  of funds where the  Certificate  is
received  by  the  Custodian  through  Terminal  Link  other  than  through  the
applicable  transfer  module for the particular  instructions  contained in such
Certificate.

      10. Without  limiting the  generality of the foregoing,  in no event shall
the  Custodian  or any  manufacturer  or  supplier  of its  computer  equipment,
software  or services  relating  to the  Terminal  Link be  responsible  for any
special, indirect,  incidental or consequential damages which the Fund may incur
or experience by reason of its use of the Terminal Link even if the Custodian or
any  manufacturer  or  supplier  has been  advised  of the  possibility  of such
damages, nor with respect to the use of the Terminal Link shall the Custodian or
any such  manufacturer or supplier be liable for acts of God, or with respect to
the following to the extent beyond such person's reasonable control:  machine or
computer breakdown or malfunction,  interruption or malfunction of communication
facilities, labor difficulties or any other similar or dissimilar cause.

      11. The Fund shall  notify  the  Custodian  of any  errors,  omissions  or
interruptions in, or delay or  unavailability  of, the Terminal Link as promptly
as  practicable,  and in any event  within 24 hours  after the  earliest  of (i)
discovery thereof, (ii) the Business Day on which discovery should have occurred
through the exercise of reasonable care and (iii) in the case of any error,  the
date of actual  receipt of the earliest  notice which  reflects  such error,  it
being agreed that  discovery  and receipt of notice may only occur on a business
day. The Custodian shall promptly advise the Fund whenever the Custodian  learns
of any errors,  omissions or interruption in, or delay or unavailability of, the
Terminal Link.

      12. The Custodian  shall verify to the Fund, by use of the Terminal  Link,
receipt of each  Certificate the Custodian  receives  through the Terminal Link,
and in the absence of such  verification  the Custodian  shall not be liable for
any  failure to act in  accordance  with such  Certificate  and the Fund may not
claim that such  Certificate was received by the Custodian.  Such  verification,
which may occur after the  Custodian has acted upon such  Certificate,  shall be
accomplished on the same day on which such Certificate is received.


                                      -30-
<PAGE>

                                  ARTICLE XVI.

                DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY
                 OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES

      1. The Custodian is authorized and instructed to employ,  as sub-custodian
for each Series'  Foreign  Securities  (as such term is defined in paragraph (c)
(1) of Rule 17f-5  under the  Investment  Company Act of 1940,  as amended)  and
other  assets,   the  foreign  banking   institutions  and  foreign   securities
depositories  and clearing  agencies  designated on Schedule I hereto  ("Foreign
Sub-Custodians")  to carry out their respective  responsibilities  in accordance
with the terms of the  sub-custodian  agreement  between  each such Foreign Sub-
Custodian and the Custodian,  copies of which have been previously  delivered to
the Fund and receipt of which is hereby  acknowledged  (each such  agreement,  a
"Foreign Sub-Custodian  Agreement").  The Custodian shall be liable for the acts
and omissions of each Foreign Sub-Custodian  constituting  negligence or willful
misconduct in the conduct of its responsibilities under the terms of the Foreign
Sub-Custodian  Agreement.  Upon  receipt  of  a  Certificate,  together  with  a
certified  resolution  substantially  in the form  attached  as Exhibit E of the
Fund's  Board of  Directors,  the  Fund may  designate  any  additional  foreign
sub-custodian  with which the  Custodian has an agreement for such entity to act
as the Custodian's  agent, as its sub-custodian and any such additional  foreign
sub-custodian shall be deemed added to Schedule I. Upon receipt of a Certificate
from the Fund,  the  Custodian  shall  cease the  employment  of any one or more
Foreign  Sub-Custodians  for  maintaining  custody of the Fund's assets and such
Foreign Sub-Custodian shall be deemed deleted from Schedule I.

      2. Each Foreign Sub-Custodian Agreement shall be substantially in the form
previously  delivered  to the  Fund  and  will  not  be  amended  in a way  that
materially adversely affects the Fund without the Fund's prior written consent.

      3. The Custodian  shall  identify on its books as belonging to each Series
of the  Fund  the  Foreign  Securities  of such  Series  held  by  each  Foreign
Sub-Custodian.  At  the  election  of the  Fund,  it  shall  be  entitled  to be
subrogated to the rights of the Custodian with respect to any claims by the Fund
or any Series  against a Foreign  Sub-Custodian  as a  consequence  of any loss,
damage,  cost, expense,  liability or claim sustained or incurred by the Fund or
any Series if and to the extent  that the Fund or such  Series has not been made
whole for any such loss, damage, cost, expense, liability or claim.


                                      -31-
<PAGE>

      4. Upon request of the Fund, the Custodian will, consistent with the terms
of the applicable  Foreign  Sub-Custodian  Agreement,  use reasonable efforts to
arrange for the independent accountants of the Fund to be afforded access to the
books and records of any Foreign Sub-Custodian insofar as such books and records
relate to the performance of such Foreign Sub-Custodian under its agreement with
the Custodian on behalf of the Fund.

      5. The  Custodian  will supply to the Fund from time to time,  as mutually
agreed upon,  statements in respect of the  securities  and other assets of each
Series  held by  Foreign  Sub-Custodians,  including  but  not  limited  to,  an
identification of entities having possession of each Series' Foreign  Securities
and other  assets,  and advices or  notifications  of any  transfers  of Foreign
Securities  to or from each  custodial  account  maintained  by a  Foreign  Sub-
Custodian for the Custodian on behalf of the Series.

      6. The Custodian  shall furnish  annually to the Fund, as mutually  agreed
upon,  information  concerning  the  Foreign  Sub-Custodians   employed  by  the
Custodian. Such information shall be similar in kind and scope to that furnished
to the Fund in  connection  with the Fund's  initial  approval  of such  Foreign
Sub-Custodians  and, in any event, shall include  information  pertaining to (i)
the Foreign Custodians'  financial strength,  general reputation and standing in
the  countries  in which they are  located  and their  ability  to  provide  the
custodial services required,  and (ii) whether the Foreign  Sub-Custodians would
provide a level of safeguards  for  safekeeping  and custody of  securities  not
materially  different from those prevailing in the United States.  The Custodian
shall monitor the general operating  performance of each Foreign  Sub-Custodian,
and at least annually obtain and review the annual financial report published by
such Foreign  Sub-Custodian to determine that it meets the financial criteria of
an "Eligible Foreign Custodian" under Rule 17f-5(c)(2)(i) or (ii). The Custodian
will  promptly  inform the Fund in the event that the  Custodian  learns  that a
Foreign Sub-Custodian no longer satisfies the financial criteria of an "Eligible
Foreign  Custodian"  under  such Rule.  The  Custodian  agrees  that it will use
reasonable care in monitoring  compliance by each Foreign Sub-Custodian with the
terms of the relevant Foreign  Sub-Custodian  Agreement and that if it learns of
any breach of such Foreign Sub-Custodian  Agreement believed by the Custodian to
have a material adverse effect on the Fund or any Series it will promptly notify
the Fund of such  breach.  The  Custodian  also  agrees  to use  reasonable  and
diligent efforts to enforce its rights under the relevant Foreign  Sub-Custodian
Agreement.

      7. The Custodian shall transmit promptly to the Fund all notices,  reports
or  other  written  information   received  pertaining  to  the  Fund's  Foreign
Securities,  including without limitation,  notices of corporate action, proxies
and proxy solicitation materials.


                                      -32-
<PAGE>

      8.  Notwithstanding  any  provision  of this  Agreement  to the  contrary,
settlement and payment for securities received for the account of any Series and
delivery of securities maintained for the account of such Series may be effected
in accordance with the customary or established securities trading or securities
processing  practices and procedures in the  jurisdiction or market in which the
transaction occurs, including, without limitation, delivery of securities to the
purchaser  thereof or to a dealer  therefor  (or an agent for such  purchaser or
dealer)  against a receipt with the  expectation of receiving  later payment for
such securities from such purchaser or dealer.

                                  ARTICLE XVII.

                            CONCERNING THE CUSTODIAN

      1. Except as hereinafter  provided,  or as provided in Article XVI neither
the Custodian nor its nominee shall be liable for any loss or damage,  including
counsel fees, resulting from its action or omission to act or otherwise,  either
hereunder  or under any Margin  Account  Agreement,  except for any such loss or
damage  arising out of its own  negligence  or willful  misconduct.  In no event
shall  the  Custodian  be liable  to the Fund or any  third  party for  special,
indirect or consequential  damages or lost profits or loss of business,  arising
under or in connection with this Agreement,  even if previously  informed of the
possibility of such damages and regardless of the form of action.  The Custodian
may,  with  respect to  questions  of law arising  hereunder or under any Margin
Account Agreement, apply for and obtain the advice and opinion of counsel to the
Fund or of its own  counsel,  at the  expense  of the  Fund,  and shall be fully
protected  with  respect  to  anything  done or  omitted  by it in good faith in
conformity  with such advice or opinion.  The  Custodian  shall be liable to the
Fund for any loss or damage  resulting from the use of the Book-Entry  System or
any Depository  arising by reason of any negligence or willful misconduct on the
part of the Custodian or any of its employees or agents.

      2. Without  limiting the generality of the foregoing,  the Custodian shall
be under no obligation to inquire into, and shall not be liable for:

             (a) The validity of the issue of any Securities purchased, sold, or
written  by or for the Fund,  the  legality  of the  purchase,  sale or  writing
thereof, or the propriety of the amount paid or received therefor;

             (b) The legality of the sale or  redemption  of any Shares,  or the
propriety of the amount to be received or paid therefor;


                                      -33-
<PAGE>

             (c) The legality of the  declaration  or payment of any dividend by
the Fund;

             (d) The legality of any  borrowing by the Fund using  Securities as
collateral;

             (e) The legality of any loan of portfolio Securities, nor shall the
Custodian be under any duty or obligation to see to it that any cash  collateral
delivered to it by a broker,  dealer, or financial  institution or held by it at
any  time as a  result  of such  loan of  portfolio  Securities  of the  Fund is
adequate  collateral  for the Fund against any loss it might sustain as a result
of such loan. The Custodian  specifically,  but not by way of limitation,  shall
not be under any duty or  obligation  periodically  to check or notify  the Fund
that the amount of such cash  collateral  held by it for the Fund is  sufficient
collateral  for  the  Fund,  but  such  duty or  obligation  shall  be the  sole
responsibility of the Fund. In addition, the Custodian shall be under no duty or
obligation  to see that any broker,  dealer or  financial  institution  to which
portfolio  Securities  of the Fund  are lent  pursuant  to  Article  XIV of this
Agreement  makes payment to it of any dividends or interest which are payable to
or for the  account  of the  Fund  during  the  period  of  such  loan or at the
termination of such loan, provided,  however,  that the Custodian shall promptly
notify the Fund in the event that such  dividends  or interest  are not paid and
received when due; or

             (f) The  sufficiency  or  value  of any  amounts  of  money  and/or
Securities  held in any Margin Account,  Senior  Security  Account or Collateral
Account in connection with transactions by the Fund. In addition,  the Custodian
shall be under no duty or  obligation  to see that any broker,  dealer,  futures
commission  merchant  or  Clearing  Member  makes  payment  to the  Fund  of any
variation  margin  payment or similar  payment which the Fund may be entitled to
receive  from such  broker,  dealer,  futures  commission  merchant  or Clearing
Member,  to see that any  payment  received  by the  Custodian  from any broker,
dealer, futures commission merchant or Clearing Member is the amount the Fund is
entitled  to  receive,  or to  notify  the Fund of the  Custodian's  receipt  or
non-receipt of any such payment.

      3.  The  Custodian  shall  not be  liable  for,  or  considered  to be the
Custodian of, any money,  whether or not  represented  by any check,  draft,  or
other instrument for the payment of money,  received by it on behalf of the Fund
until the Custodian actually receives and collects such money directly or by the
final  crediting  of  the  account  representing  the  Fund's  interest  at  the
Book-Entry System or the Depository.

      4. The Custodian shall have no responsibility  and shall not be liable for
ascertaining or acting upon any calls,  conversions,  exchange offers,  tenders,
interest  rate changes or similar  matters  relating to  Securities  held in the
Depository, unless the Custodian shall have actually received


                                      -34-
<PAGE>

timely  notice from the  Depository.  In no event shall the  Custodian  have any
responsibility or liability for the failure of the Depository to collect, or for
the late  collection or late  crediting by the  Depository of any amount payable
upon  Securities  deposited in the  Depository  which may mature or be redeemed,
retired,  called  or  otherwise  become  payable.  However,  upon  receipt  of a
Certificate  from  the  Fund of an  overdue  amount  on  Securities  held in the
Depository the Custodian  shall make a claim against the Depository on behalf of
the Fund,  except that the Custodian shall not be under any obligation to appear
in,  prosecute  or defend  any  action  suit or  proceeding  in  respect  to any
Securities held by the Depository which in its opinion may involve it in expense
or  liability,  unless  indemnity  satisfactory  to it against  all  expense and
liability be furnished as often as may be required.

      5. The Custodian  shall not be under any duty or obligation to take action
to effect  collection  of any amount due to the Fund from the Transfer  Agent of
the Fund  nor to take any  action  to  effect  payment  or  distribution  by the
Transfer  Agent of the Fund of any amount paid by the  Custodian to the Transfer
Agent of the Fund in accordance with this Agreement.

      6. The Custodian  shall not be under any duty or obligation to take action
to effect  collection of any amount, if the Securities upon which such amount is
payable  are  in  default,  or  if  payment  is  refused  after  due  demand  or
presentation, unless and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction of reimbursement of
its costs and expenses in connection with any such action.

      7.  The   Custodian   may  in  addition  to  the   employment  of  Foreign
Sub-Custodians  pursuant to Article XVI appoint one or more banking institutions
as  Depository  or  Depositories,  as  Sub-Custodian  or  Sub-Custodians,  or as
Co-Custodian   or   Co-Custodians   including,   but  not  limited  to,  banking
institutions located in foreign countries,  of Securities and moneys at any time
owned by the  Fund,  upon such  terms and  conditions  as may be  approved  in a
Certificate or contained in an agreement executed by the Custodian, the Fund and
the appointed institution.

      8.  The  Custodian  shall  not be  under  any  duty or  obligation  (a) to
ascertain  whether any  Securities at any time delivered to, or held by it or by
any  Foreign  Sub-Custodian,  for  the  account  of the  Fund  and  specifically
allocated  to a  Series  are  such as  properly  may be held by the Fund or such
Series under the provisions of its then current prospectus,  or (b) to ascertain
whether any  transactions  by the Fund,  whether or not involving the Custodian,
are such transactions as may properly be engaged in by the Fund.


                                      -35-
<PAGE>

      9. The  Custodian  shall be entitled to receive and the Fund agrees to pay
to the  Custodian all  out-of-pocket  expenses and such  compensation  as may be
agreed upon from time to time between the Custodian and the Fund.  The Custodian
may charge such  compensation and any expenses with respect to a Series incurred
by the Custodian in the  performance  of its duties  pursuant to such  agreement
against any money  specifically  allocated to such Series.  Unless and until the
Fund  instructs the Custodian by a  Certificate  to apportion any loss,  damage,
liability or expense among the Series in a specified manner, the Custodian shall
also be  entitled  to charge  against  any money held by it for the account of a
Series such  Series' pro rata share (based on such Series net asset value at the
time of the charge to the  aggregate net asset value of all Series at that time)
of the amount of any loss, damage, liability or expense, including counsel fees,
for which it shall be entitled to  reimbursement  under the  provisions  of this
Agreement.   The  expenses  for  which  the  Custodian   shall  be  entitled  to
reimbursement  hereunder shall include,  but are not limited to, the expenses of
sub-custodians  and  foreign  branches  of the  Custodian  incurred  in settling
outside  of New  York  City  transactions  involving  the  purchase  and sale of
Securities of the Fund.

      10. The Custodian shall be entitled to rely upon any  Certificate,  notice
or other instrument in writing received by the Custodian and reasonably believed
by the Custodian to be a  Certificate.  The Custodian  shall be entitled to rely
upon  any Oral  Instructions  actually  received  by the  Custodian  hereinabove
provided  for.  The Fund  agrees to forward to the  Custodian a  Certificate  or
facsimile thereof  confirming such Oral Instructions in such manner so that such
Certificate or facsimile  thereof is received by the Custodian,  whether by hand
delivery,  telecopier or other  similar  device,  or otherwise,  by the close of
business of the same day that such Oral Instructions are given to the Custodian.
The Fund agrees that the fact that such confirming instructions are not received
by the  Custodian  shall in no way affect the  validity of the  transactions  or
enforceability  of the  transactions  hereby  authorized  by the Fund.  The Fund
agrees that the  Custodian  shall incur no  liability to the Fund in acting upon
Oral Instructions given to the Custodian hereunder  concerning such transactions
provided  such  instructions  reasonably  appear to have been  received  from an
Officer.

      11.  The  Custodian  shall  be  entitled  to  rely  upon  any  instrument,
instruction or notice  received by the Custodian and reasonably  believed by the
Custodian to be given in accordance  with the terms and conditions of any Margin
Account  Agreement.  Without  limiting  the  generality  of the  foregoing,  the
Custodian  shall be under no duty to inquire into,  and shall not be liable for,
the  accuracy  of any  statements  or  representations  contained  in  any  such
instrument or other notice including,  without limitation,  any specification of
any


                                      -36-
<PAGE>

amount to be paid to a broker,  dealer,  futures commission merchant or Clearing
Member.

      12.  The  books  and  records  pertaining  to the  Fund  which  are in the
possession  of the Custodian  shall be the property of the Fund.  Such books and
records shall be prepared and maintained as required by the  Investment  Company
Act of 1940,  as amended,  and other  applicable  securities  laws and rules and
regulations.  The Fund,  or the Fund's  authorized  representatives,  shall have
access to such books and records during the  Custodian's  normal business hours.
Upon the  reasonable  request of the Fund,  copies of any such books and records
shall  be  provided  by the  Custodian  to the  Fund  or the  Fund's  authorized
representative,  and the Fund shall  reimburse  the  Custodian  its  expenses of
providing such copies.  Upon reasonable request of the Fund, the Custodian shall
provide in hard copy or on  micro-film,  whichever  the  Custodian  elects,  any
records included in any such delivery which are maintained by the Custodian on a
computer  disc, or are similarly  maintained,  and the Fund shall  reimburse the
Custodian for its expenses of providing such hard copy or micro-film.

      13. The Custodian  shall provide the Fund with any report  obtained by the
Custodian on the system of internal accounting control of the Book-Entry System,
the Depository or O. C. C., and with such reports on its own systems of internal
accounting control as the Fund may reasonably request from time to time.

      14.  Subject to the  foregoing  provisions of this  Agreement,  including,
without limitation, those contained in Article XVI the Custodian may deliver and
receive  Securities,  and receipts with respect to such Securities,  and arrange
for payments to be made and received by the  Custodian  in  accordance  with the
customs  prevailing  from  time  to  time  among  brokers  or  dealers  in  such
Securities.  When the  Custodian is  instructed  to deliver  Securities  against
payment,  delivery of such Securities and receipt of payment therefor may not be
completed simultaneously.  The Fund assumes all responsibility and liability for
all credit  risks  involved  in  connection  with the  Custodian's  delivery  of
Securities  pursuant  to  instructions  of the Fund,  which  responsibility  and
liability  shall  continue  until final payment in full has been received by the
Custodian.

      15.  The  Custodian  shall have no duties or  responsibilities  whatsoever
except such duties and  responsibilities  as are  specifically set forth in this
Agreement,  and no covenant  or  obligation  shall be implied in this  Agreement
against the Custodian.


                                      -37-
<PAGE>

                                 ARTICLE XVIII.

                                   TERMINATION

      1. Either of the parties  hereto may terminate this Agreement by giving to
the other  party a notice in writing  specifying  the date of such  termination,
which  shall be not less than  ninety (90) days after the date of giving of such
notice.  In the event such notice is given by the Fund, it shall be  accompanied
by a copy of a resolution  of the Board of  Directors of the Fund,  certified by
the Secretary or any Assistant  Secretary,  electing to terminate this Agreement
and  designating a successor  custodian or custodians,  each of which shall be a
bank or trust company having not less than $2,000,000 aggregate capital, surplus
and undivided profits.  In the event such notice is given by the Custodian,  the
Fund shall, on or before the termination  date,  deliver to the Custodian a copy
of a  resolution  of the  Board  of  Directors  of the  Fund,  certified  by the
Secretary  or any  Assistant  Secretary,  designating  a successor  custodian or
custodians.  In the absence of such  designation  by the Fund, the Custodian may
designate a successor  custodian  which shall be a bank or trust company  having
not less than $2,000,000 aggregate capital,  surplus and undivided profits. Upon
the date set  forth in such  notice  this  Agreement  shall  terminate,  and the
Custodian  shall  upon  receipt  of a  notice  of  acceptance  by the  successor
custodian  on  that  date  deliver  directly  to  the  successor  custodian  all
Securities and moneys then owned by the Fund and held by it as Custodian,  after
deducting all fees,  expenses and other amounts for the payment or reimbursement
of which it shall then be entitled.

      2. If a successor custodian is not designated by the Fund or the Custodian
in  accordance  with  the  preceding  paragraph,  the Fund  shall  upon the date
specified in the notice of  termination  of this Agreement and upon the delivery
by the Custodian of all Securities (other than Securities held in the Book-Entry
system  which cannot be delivered to the Fund) and moneys then owned by the Fund
be deemed to be its own custodian and the Custodian shall thereby be relieved of
all duties and responsibilities pursuant to this Agreement,  other than the duty
with  respect  to  Securities  held in the  Book-Entry  System  which  cannot be
delivered to the Fund to hold such Securities  hereunder in accordance with this
Agreement.

                                  ARTICLE XIX.

                                  MISCELLANEOUS

      1.  Annexed  hereto as  Appendix A is a  Certificate  signed by two of the
present  Officers of the Fund under its corporate seal,  setting forth the names
and the  signatures  of the  present  Officers  of the Fund.  The Fund agrees to
furnish to


                                      -38-
<PAGE>

the  Custodian a new  Certificate  in similar form in the event any such present
Officer  ceases to be an  Officer  of the Fund,  or in the event  that  other or
additional  Officers are elected or appointed.  Until such new Certificate shall
be  received,  the  Custodian  shall be fully  protected  in  acting  under  the
provisions of this Agreement upon the signatures of the Officers as set forth in
the last delivered Certificate.

      2. Any notice or other  instrument  in writing,  authorized or required by
this  Agreement to be given to the  Custodian,  shall be  sufficiently  given if
addressed  to the  Custodian  and mailed or delivered to it at its offices at 90
Washington  Street,  New York,  New York  10286,  or at such other  place as the
Custodian may from time to time designate in writing.

      3. Any notice or other  instrument  in writing,  authorized or required by
this Agreement to be given to the Fund shall be sufficiently  given if addressed
to the Fund and mailed or  delivered  to it at its office at the address for the
Fund first  above  written,  or at such other place as the Fund may from time to
time designate in writing.

      4. This Agreement may not be amended or modified in any manner except by a
written  agreement  executed by both  parties  with the same  formality  as this
Agreement and approved by a resolution of the Board of Directors of the Fund.

      5. This  Agreement  shall  extend to and shall be binding upon the parties
hereto, and their respective  successors and assigns;  provided,  however,  that
this Agreement  shall not be assignable by the Fund without the written  consent
of the Custodian,  or by the Custodian  without the written consent of the Fund,
authorized or approved by a resolution of the Fund's Board of Directors.

      6. This  Agreement  shall be construed in accordance  with the laws of the
State of New York without giving effect to conflict of laws principles  thereof.
Each party  hereby  consents  to the  jurisdiction  of a state or federal  court
situated  in New York City,  New York in  connection  with any  dispute  arising
hereunder and hereby waives its right to trial by jury.

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


                                      -39-
<PAGE>

      IN WITNESS  WHEREOF,  the parties  hereto have caused this Agreement to be
executed by their respective  corporate Officers,  thereunto duly authorized and
their respective  corporate seals to be hereunto affixed, as of the day and year
first above written.

                                   MUNIASSET FUND, INC.

[SEAL]                             By: /s/ Gerald M Richard, Treasurer
                                       ---------------------------------
                                       GERALD M. RICHARD, TREASURER

Attest:
/s/ Mark B. Goldfus
- --------------------------

                                   THE BANK OF NEW YORK

[SEAL]                             By: /s/ Illegible
                                       -----------------------------

Attest:
/s/ Illegible
- --------------------------


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-11
<SEQUENCE>10
<FILENAME>file009.txt
<DESCRIPTION>OPINION OF CLIFFORD CHANCE ROGERS & WELLS LLP
<TEXT>

                                                                      Exhibit 11

                       Clifford Change Rogers & Wells LLP
                                200 Park Avenue
                         New York, New York 10166-0153
                              Tel +1 212 878 8000
                              Fax +1 212 878 8375
                             www.cliffordchance.com

September 10, 2001

MuniAssets Fund, Inc.
800 Scudders Mill Road
Plainsboro, New Jersey 08536

Ladies and Gentlemen:

      We have  acted as  counsel  for  MuniAssets  Fund,  Inc.  (the  "Fund") in
connection with the proposed acquisition by the Fund of substantially all of the
assets and the  assumption of  substantially  all of the  liabilities of Merrill
Lynch High Income Municipal Bond Fund, Inc. ("High Income"),  in exchange solely
for an equal  aggregate value of newly issued shares of common stock of the Fund
to be distributed  thereafter to stockholders of High Income (collectively,  the
"Reorganization").  This  opinion is  furnished  in  connection  with the Fund's
Registration Statement on Form N-14 under the Securities Act of 1933, as amended
(the "Registration Statement"),  relating to shares of common stock of the Fund,
each with a par value of $0.10 per  share  (the  "Shares"),  to be issued in the
Reorganization.

      As counsel for the Fund, we are familiar with the proceedings  taken by it
and to be taken by it in connection with the authorization, issuance and sale of
the Shares. In addition,  we have examined and are familiar with the Articles of
Incorporation  of the Fund,  as amended,  the By-Laws of the Fund and such other
documents as we have deemed relevant to the matters referred to in this opinion.

      Based upon the  foregoing,  we are of the opinion that  subsequent  to the
approval by the stockholders of the Fund and of High Income of the Agreement and
Plan of  Reorganization  between the Fund and High Income set forth in the joint
proxy statement and prospectus constituting a part of the Registration Statement
(the "Proxy Statement and Prospectus"),  the Shares, upon issuance in the manner
referred to in the Registration  Statement,  for consideration not less than the
par value thereof,  will be legally issued, fully paid and non-assessable shares
of common stock of the Fund.

      We hereby  consent  to the  filing of this  opinion  as an  exhibit to the
Registration  Statement  and to the use of our name in the Proxy  Statement  and
Prospectus constituting a part thereof.

                                          Very truly yours,

                                          /s/ Clifford Chance Rogers & Wells LLP


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>11
<FILENAME>file010.txt
<DESCRIPTION>TRANSFER AGENCY AGREEMENT
<TEXT>

                                                                      Exhibit 13

AGREEMENT,  made  as  of  June  14,  1993,  between  MuniAssets  Fund,  Inc.,  a
corporation  organized  and  existing  under the laws of the  State of  Maryland
(hereinafter  referred to as the  "Customer"),  and The Bank of New York,  a New
York trust company (hereinafter referred to as the "Bank").

                                   WITNESSETH:

That for  and in consideration of the mutual promises hereinafter set forth, the
parties hereto covenant and agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

Whenever used in this Agreement,  the following words and phrases shall have the
following meanings:

1.  "Business Day" shall  be deemed to be each day on which the Bank is open for
business.

2.  "Certificate"  shall mean any notice,  instruction,  or other  instrument in
writing, authorized or required by this Agreement to be given to the Bank by the
Customer which is signed by any Officer,  as hereinafter  defined,  and actually
received by the Bank.

3.  "Officer"  shall be deemed to be the  Customer's  Chief  Executive  Officer,
President, any Vice President, the Secretary, the Treasurer, the Controller, any
Assistant  Treasurer and any Assistant Secretary duly authorized by the Board of
Directors of the  Customer to execute any  Certificate,  instruction,  notice or
other  instrument on behalf of the Customer and named in a Certificate,  as such
Certificate may be amended from time to time.

4. "Prospectus" shall mean the last Customer prospectus actually received by the
Bank from the  Customer  with  respect to which the  Customer  has  indicated  a
registration  statement under the Securities Act of 1933, as amended, has become
effective,  including the Statement of Additional  Information  incorporated  by
reference therein.

5.  "Shares"  shall  mean all or any part of each class of the shares of capital
stock of the Customer  which from time to time are  authorized  and/or issued by
the Customer and  identified in a  Certificate  of the Secretary of the Customer
under corporate seal, as such Certificate may be amended from time to time.

                                   ARTICLE II
                               APPOINTMENT OF BANK

1. The Customer hereby constitutes and appoints the Bank as its agent to perform
the services  described herein and as more particularly  described in Schedule I
attached  hereto (the  "Services"),  and the Bank hereby accepts  appointment as
such agent and agrees to  perform  the  Services  in  accordance  with the terms
hereinafter set forth.

2. In connection with such appointment, the Customer shall deliver the following
documents  to the  Bank  on or  about  the  closing  day of the  initial  public
offering:

      (a) A certified copy of the Certificate of Incorporation or other document
evidencing  the  Customer's  form  of  organization  (the  "Charter")  and  all
amendments thereto;
<PAGE>

                                      -2-


      (b) A certified copy of the By-Laws of the Customer;

      (c) A certified  copy of a  resolution  of the Board of  Directors  of the
Customer  appointing  the Bank to  perform  the  Services  and  authorizing  the
execution and delivery of this Agreement;

      (d) A Certificate signed by the Secretary of the Customer specifying:  the
number of authorized  Shares,  the number of such  authorized  Shares issued and
currently outstanding, and the names and specimen signatures of all persons duly
authorized by the Board of Directors of the Customer to execute any  Certificate
on behalf of the Customer, which Certificate may be amended from time to time;

      (e) A  Specimen  Share  certificate  for each  class of Shares in the form
approved by the Board of Directors of the Customer,  together with a Certificate
signed by the Secretary of the Customer as to such approval;

      (f) A copy of the Customer's Registration Statement, filed by the Customer
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended; and

      (g) An opinion of counsel for the Customer with respect to the validity of
the authorized and  outstanding  Shares,  whether such Shares are fully paid and
non-assessable  and the status of such Shares under the  Securities Act of 1933,
as amended,  and any other  applicable  law or  regulation  (i.e., if subject to
registration, that they have been registered and that the Registration Statement
has become effective or, if exempt, the specific grounds therefor).

3. The Customer  shall furnish the Bank with a sufficient  supply of blank Share
certificates  and from time to time will renew such supply  upon  request of the
Bank. Such blank Share  certificates  shall be properly signed,  by facsimile or
otherwise,  by officers of the Customer  authorized  by law or by the By-Laws to
sign Share  certificates,  and, if required,  shall bear the corporate seal or a
facsimile thereof.

                                   ARTICLE III
                      AUTHORIZATION AND ISSUANCE OF SHARES

1. The Customer  shall deliver to the Bank a certified  copy of the amendment to
the Charter giving effect to such increase, decrease or change, on or before the
effective date of any increase,  decrease or other change in the total number of
Shares authorized to be issued.

      (a) A certified copy of the amendment to the Charter giving effect to such
increase, decrease or change;

      (b) An opinion of counsel for the Customer with respect to the validity of
the Shares and the status of such Shares under the  Securities  Act of 1933,  as
amended,  and any other applicable  federal law or regulations (i.e., if subject
to  registration,  that  they  have been  registered  and that the  Registration
Statement has become effective or, if exempt,  the specific  grounds  therefor);
and

      (c) In the  case  of an  increase,  if the  appointment  of the  Bank  was
theretofore  expressly limited, a certified copy of a resolution of the Board of
Directors of the Customer increasing the authority of the Bank.
<PAGE>

                                      -3-


2. Prior to the issuance of any additional  Shares pursuant to stock  dividends,
stock splits or  otherwise,  and prior to any  reduction in the number of Shares
outstanding, the Customer shall deliver the following documents to the Bank:

      (a) A certified copy of the resolutions  adopted by the Board of Directors
and/or the shareholders of the Customer  authorizing such issuance of additional
Shares of the Customer or such reduction, as the case may be;

      (b) A  certified  copy of the order or  consent,  if  applicable,  of each
governmental  or regulatory  authority  required by law as a prerequisite to the
issuance or reduction of such Shares; and

      (c) An opinion of counsel for the Customer with respect to the validity of
the Shares and the status of such the Shares under the  Securities  Act of 1933,
as amended,  and any other  applicable  law or regulation  (i.e.,  if subject to
registration, that they have been registered and that the Registration Statement
has become effective, or, if exempt, the specific grounds therefor).

                                   ARTICLE IV
                     RECAPITALIZATION OR CAPITAL ADJUSTMENT

1. In the case of any negative  stock split,  recapitalization  or other capital
adjustment  requiring a change in the form of Share certificates,  the Bank will
issue Share  certificates  in the new form in exchange for, or upon transfer of,
outstanding Share certificates in the old form, upon receiving:

      (a) A Certificate  authorizing  the issuance of Share  certificates in the
new form;

      (b) A certified  copy of any  amendment to the Charter with respect to the
change;

      (c) Specimen Share  certificates  for each class of Shares in the new form
approved by the Board of Directors of the Customer, with a Certificate signed by
the Secretary of the Customer as to such approval;

      (d) A  certified  copy of the order or  consent  of each  governmental  or
regulatory  authority  required by law as a prerequisite  to the issuance of the
Shares in the new form,  and an  opinion of counsel  for the  Customer  that the
order or consent of no other  governmental or regulatory  authority is required;
and

      (e) An opinion of counsel for the Customer with respect to the validity of
the Shares in the new form and the status of such  Shares  under the  Securities
Act of 1933, as amended,  and any other  applicable law or regulation  (i.e., if
subject  to  registration  that the  Shares  have been  registered  and that the
Registration  Statement has become effective or, if exempt, the specific grounds
therefor).

2. The Customer  shall furnish the Bank with a sufficient  supply of blank Share
certificates  in the new form,  and from time to time will replenish such supply
upon the request of the Bank.  Such blank Share  certificates  shall be properly
signed, by facsimile or otherwise, by Officers of the Customer authorized by law
or by the By-Laws to sign Share  Certificates  and, if required,  shall bear the
corporate seal or a facsimile thereof.
<PAGE>

                                      -4-


                                    ARTICLE V
                         ISSUANCE AND TRANSFER OF SHARES

1. (a) The Bank will issue Share certificates upon receipt of a Certificate from
an Officer,  but shall not be required to issue Share  certificates after it has
received from an appropriate  federal or state  authority  written  notification
that the sale of Shares has been suspended or  discontinued,  and the Bank shall
be  entitled  to rely  upon such  written  notification.  The Bank  shall not be
responsible  for the payment of any original issue or other taxes required to be
paid by the Customer in connection with the issuance of any shares.

      (b) Shares  will be  transferred  upon  presentation  to the Bank of Share
certificates  in  form  deemed  by the  Bank  properly  endorsed  for  transfer,
accompanied  by such  documents  as the Bank deems  necessary  to  evidence  the
authority of the person making such transfer,  and bearing satisfactory evidence
of the payment of applicable  stock transfer taxes. In the case of small estates
where no  administration  is contemplated,  the Bank may, when furnished with an
appropriate surety bond, and without further approval of the Customer,  transfer
Shares  registered in the name of the decedent where the current market value of
the Shares  being  transferred  does not exceed  such amount as may from time to
time be prescribed by the various states.  The Bank reserves the right to refuse
to  transfer  Shares  until  it is  satisfied  that  the  endorsements  on Share
certificates are valid and genuine, and for that purpose it may require,  unless
otherwise instructed by an Officer of the Customer, a guaranty of signature by a
member  firm of the New  York  Stock  Exchange  or by a bank  or  trust  company
acceptable  to the Bank.  The Bank also reserves the right to refuse to transfer
Shares until it is satisfied that the requested transfer is legally  authorized,
and it shall incur no liability for the refusal in good faith to make  transfers
which the Bank, in its judgment, deems improper or unauthorized,  or until it is
satisfied  that there is no basis to any claims  adverse to such  transfer.  The
Bank may, in effecting  transfers of Shares,  rely upon those  provisions of the
Uniform  Act for the  Simplification  of  Fiduciary  Security  Transfers  or the
Uniform  Commercial  Code,  as the  same  may be  amended  from  time  to  time,
applicable to the transfer of securities,  and the Customer shall  indemnify the
Bank for any act done or omitted by it in good faith in reliance upon such laws.

      (c) All certificates  representing Shares that are subject to restrictions
on transfer (e.g., securities acquired pursuant to an investment representation,
securities  held by controlling  persons,  securities  subject to  stockholders'
agreements, etc.), other than the general restrictions on the transferability of
the  Shares  described  in the  Prospectus,  shall  be  stamped  with  a  legend
describing  the extent and  conditions of the  restrictions  or referring to the
source of such restrictions.  The Bank assumes no responsibility with respect to
the transfer of restricted  securities  where  counsel for the Customer  advises
that such transfer may be properly effected.

      (d) Notwithstanding the foregoing or any other provision contained in this
Agreement to the contrary,  the Bank shall be fully protected by the Customer in
not  requiring  any   instruments,   documents,   assurances,   endorsements  or
guarantees,   including,   without  limitation,  any  signature  guarantees,  in
connection with a transfer of Shares whenever the Bank reasonably  believes that
requiring  the  same  would be  inconsistent  with the  transfer  procedures  as
described in the Prospectus.
<PAGE>

                                      -5-


                                   ARTICLE VI
                           DIVIDENDS AND DISTRIBUTIONS

1. The Customer shall furnish to the Bank a copy of a resolution of its Board of
Directors,  certified by the  Secretary or any Assistant  Secretary,  either (i)
setting forth the date of the  declaration  of a dividend or  distribution,  the
date of accrual  or  payment,  as the case may be,  the record  date as of which
shareholders  entitled to  payment,  or  accrual,  as the case may be,  shall be
determined,  the amount per Share of such dividend or distribution,  the payment
date on which all  previously  accrued and unpaid  dividends are to be paid, and
the total  amount,  if any,  payable to the Bank on such payment  date,  or (ii)
authorizing the declaration of dividends and  distributions  on a periodic basis
and authorizing the Bank to rely on a Certificate  setting forth the information
described in subsection (i) of this paragraph.

2. Prior to the payment date specified in such Certificate or resolution, as the
case may be, the Customer shall, in the case of a cash dividend or distribution,
pay to the Bank an amount of cash,  sufficient for the Bank to make the payment,
specified in such Certificate or resolution, to the shareholders of record as of
such payment date. The Bank will, upon receipt of any such cash, (i) in the case
of  shareholders  who are  participants in a dividend  reinvestment  and/or cash
purchase plan of the Customer,  reinvest such cash dividends or distributions in
accordance with the terms of such plan, and (ii) in the case of shareholders who
are not  participants  in any such plan,  make payment of such cash dividends or
distributions  to the  shareholders of record as of the record date by mailing a
check,  payable  to the  registered  shareholder,  to the  address  of record or
dividend mailing address.  The Bank shall not be liable for any improper payment
made in accordance  with a Certificate or resolution  described in the preceding
paragraph.  If the Bank shall not receive  sufficient  cash prior to the payment
date  to  make  payments  of any  cash  dividend  or  distribution  pursuant  to
subsections  (i) and (ii) above to all  shareholders  of the  Customer as of the
record date, the Bank shall,  upon notifying the Customer,  withhold  payment to
all  shareholders of the Customer as of the record date until sufficient cash is
provided to the Bank.

3. It is  understood  that  the  Bank  shall  in no way be  responsible  for the
determination  of the  rate or form of  dividends  or  distributions  due to the
shareholders.

4. It is  understood  that the Bank  shall  file  such  appropriate  information
returns  concerning the payment of dividends and  distributions  with the proper
federal,  state and local  authorities as are required by law to be filed by the
Customer but shall in no way be responsible for the collection or withholding of
taxes due on such dividends or  distributions  due to  shareholders,  except and
only to the extent required of it by applicable law.

                                   ARTICLE VII
                             CONCERNING THE CUSTOMER

1. The Customer shall promptly  deliver to the Bank written notice of any change
in  the  Officers   authorized   to  sign  Share   certificates,   Certificates,
notifications  or  requests,  together  with a  specimen  signature  of each new
Officer.  In the event any  Officer  who shall  have  signed  manually  or whose
facsimile  signature shall have been affixed to blank Share  certificates  shall
die, resign or be removed prior to issuance of such Share certificates, the Bank
may issue such Share  certificates  as the Share  certificates  of the  Customer
notwithstanding  such death,  resignation  or removal,  and the  Customer  shall
promptly  deliver to the Bank such approvals,  adoptions or ratifications as may
be required by law.
<PAGE>

                                      -6-


2. Each copy of the Charter of the Customer and copies of all amendments thereto
shall be certified by the Secretary of State (or other appropriate  official) of
the state of  incorporation,  and if such Charter and/or amendments are required
by law also to be filed  with a county or other  officer  or  official  body,  a
certificate of such filing shall be filed with a certified copy submitted to the
Bank. Each copy of the By-Laws and copies of all amendments thereto,  and copies
of resolutions of the Board of Directors of the Customer,  shall be certified by
the  Secretary or an Assistant  Secretary  of the Customer  under the  corporate
seal.

3. It shall be the sole  responsibility  of the  Customer to deliver to the Bank
the  Customer's  currently  effective  Prospectus  and,  for  purposes  of  this
Agreement,  the Bank  shall  not be deemed  to have  notice  of any  information
contained in such Prospectus until it is actually received by the Bank.

                                  ARTICLE VIII
                               CONCERNING THE BANK

1. The Bank shall not be liable and shall be fully  protected in acting upon any
oral instruction,  writing or document  reasonably  believed by it to be genuine
and to have been given, signed or made by the proper person or persons and shall
not be held to have any notice of any change of  authority  of any person  until
receipt of written notice thereof from an Officer of the Customer. It shall also
be protected in processing Share  certificates  which it reasonably  believes to
bear the proper manual or facsimile  signatures of the duly authorized  officers
of the Customer and the proper countersignature of the Bank.

2. The Bank may establish  such  additional  procedures,  rules and  regulations
governing  the transfer or  registration  of Share  certificates  as it may deem
advisable and consistent  with such rules and regulations  generally  adopted by
bank transfer agents.

3. The Bank may keep such  records as it deems  advisable  but not  inconsistent
with resolutions adopted by the Board of Directors of the Customer. The Bank may
deliver to the Customer from time to time at its discretion,  for safekeeping or
disposition by the Customer in accordance with law, such records,  papers, Share
certificates  which  have been  cancelled  in  transfer  or  exchange  and other
documents  accumulated in the execution of its duties  hereunder as the Bank may
deem  expedient,  other than those which the Bank is itself required to maintain
pursuant to applicable laws and  regulations,  and the Customer shall assume all
responsibility  for  any  failure  thereafter  to  produce  any  record,  paper,
cancelled Share certificate or other document so returned, if and when required.
The records  maintained  by the Bank pursuant to this  paragraph  which have not
been previously  delivered to the Customer pursuant to the foregoing  provisions
of this paragraph shall be considered to be the property of the Customer,  shall
be made  available  upon request for  inspection by the Officers,  employees and
auditors of the  Customer,  and shall be delivered to the Customer  upon request
and in any event upon the date of termination of this Agreement, as specified in
Article IX of this  Agreement,  in the form and manner  kept by the Bank on such
date of termination or such earlier date as may be requested by the Customer.

4. The Bank may employ agents or  attorneys-in-fact at the reasonable expense of
the Customer, and shall not be liable for any loss or expense arising out of, or
in  connection  with,  the  actions  or  omissions  to  act  of  its  agents  or
attorneys-in-fact, so long as the Bank acts in good faith and without negligence
or  willful  misconduct  in  connection  with the  selection  of such  agents or
attorneys-in-fact.

5. The Bank  shall not be liable for any loss or  damage,  including  reasonable
attorney's  fees,  resulting  from its actions or omissions to act or otherwise,
except  for any loss or damage  arising  out of its own  negligence  or  willful
misconduct.
<PAGE>

                                      -7-


6. The Customer shall  indemnify and hold harmless the Bank from and against any
and all claims (whether with or without basis in fact or law),  costs,  demands,
expenses and liabilities,  including reasonable  attorney's fees, which the Bank
may sustain or incur or which may be  asserted  against the Bank by reason of or
as a result of any action  taken or omitted to be taken by the Bank  without its
own negligence or willful  misconduct in reliance upon (i) any provision of this
agreement, (ii) the Prospectus, (iii) any instrument, order or Share certificate
reasonably  believed  by it to be  genuine  and to be signed,  countersigned  or
executed by any duly authorized Officer of the Customer, (iv) any Certificate or
other  instructions  of an  Officer,  (v) any  opinion of legal  counsel for the
Customer or the Bank, or (vi) any law, act,  regulation or any interpretation of
the same even  though  such law,  act or  regulation  may  thereafter  have been
altered, changed, amended or repealed.

7. Specifically,  but not by way of limitation, the Customer shall indemnify and
hold  harmless  the Bank from and  against any and all claims  (whether  with or
without  basis  in fact or  law),  costs,  demands,  expenses  and  liabilities,
including reasonable attorney's fees, of any and every nature which the Bank may
sustain or incur or which may be asserted  against the Bank in  connection  with
the genuineness of a Share certificate, the Bank's capacity and authorization to
issue Shares and the form and amount of authorized Shares.

8. At any time the Bank may apply to an  Officer  of the  Customer  for  written
instructions  with respect to any matter  arising in connection  with the Bank's
duties and obligations  under this  Agreement,  and the Bank shall not be liable
for any  action  taken or  omitted  to be  taken  by the  Bank in good  faith in
accordance with such instructions. Such application by the Bank for instructions
from an Officer of the  Customer  may,  at the option of the Bank,  set forth in
writing any action  proposed to be taken or omitted to be taken by the Bank with
respect to its duties or obligations under this Agreement and the date on and/or
after which such action shall be taken, and the Bank shall not be liable for any
action taken or omitted to be taken in  accordance  with a proposal  included in
any such  application on or after the date specified  therein  unless,  prior to
taking  or  omitting  to take any such  action,  the Bank has  received  written
instructions in response to such  application  specifying the action to be taken
or omitted.  The Bank may consult counsel to the Customer or its own counsel, at
the  expense  of the  Customer,  and shall be fully  protected  with  respect to
anything  done or omitted by it in good faith in  accordance  with the advice or
opinion of such counsel.

9. When mail is used for  delivery of  non-negotiable  Share  certificates,  the
value of which does not exceed the limits of the Bank's  Blanket Bond,  the Bank
shall send such non-negotiable  Share certificates by first class mail, and such
deliveries  will be  covered  while  in  transit  by the  Bank's  Blanket  Bond.
Non-negotiable  Share certificates,  the value of which exceed the limits of the
Bank's Blanket Bond, will be sent by insured  registered mail.  Negotiable Share
certificates will be sent by insured  registered mail. The Bank shall advise the
Customer of any Share certificates  returned as undeliverable after being mailed
as herein provided for.

10.  The Bank may issue new Share  certificates  in place of Share  certificates
represented to have been lost,  stolen or destroyed upon receiving  instructions
in  writing  from an  Officer  and  indemnity  satisfactory  to the  Bank.  Such
instructions from the Customer shall be in such form as approved by the Board of
Directors of the Customer in accordance  with  applicable  law or the By-Laws of
the Customer governing such matters.  If the Bank receives written  notification
from the  owner of the lost,  stolen or  destroyed  Share  certificate  within a
reasonable  time after he has notice of it, the Bank shall  promptly  notify the
Customer and shall act pursuant to written instructions signed by an Officer. If
the  Customer  receives  such written  notification  from the owner of the lost,
stolen or destroyed  Share  certificate  within a  reasonable  time after he has
notice of it, the Customer shall promptly notify the Bank and the Bank shall act
pursuant to written  instructions  signed by an  Officer.  The Bank shall not be
liable for any act done or omitted by it pursuant  to the  written  instructions
described herein. The Bank may issue new Share certificates in exchange for, and
upon surrender of, mutilated Share certificates.
<PAGE>

                                      -8-


11.  The Bank will  issue and mail  subscription  warrants  for  Shares,  Shares
representing  stock dividends,  exchanges or splits,  or act as conversion agent
upon receiving written  instructions from an Officer and such other documents as
the Bank may deem necessary.

12. The Bank will supply  shareholder  lists to the  Customer  from time to time
upon receiving a request therefor from an Officer of the Customer.

13. In case of any  requests or demands for the  inspection  of the  shareholder
records of the  Customer,  the Bank will  notify the  Customer  and  endeavor to
secure instructions from an officer as to such inspection. The Bank reserves the
right,  however, to exhibit the shareholder records to any person whenever it is
advised by its counsel that there is a reasonable  likelihood that the Bank will
be held  liable  for the  failure  to exhibit  the  shareholder  records to such
person.

14.  At the  request  of an  Officer,  the  Bank  will  address  and  mail  such
appropriate notices to shareholders as the Customer may direct.

15.  Notwithstanding any provisions of this Agreement to the contrary,  the Bank
shall be under no duty or obligation  to inquire  into,  and shall not be liable
for:

      (a) The  legality  of the  issue,  sale or  transfer  of any  Shares,  the
sufficiency  of the  amount  to be  received  in  connection  therewith,  or the
authority of the Customer to request such issuance, sale or transfer;

      (b) The legality of the  purchase of any Shares,  the  sufficiency  of the
amount to be paid in connection  therewith,  or the authority of the Customer to
request such purchase;

      (c) The legality of the  declaration  of any dividend by the Customer,  or
the legality of the issue of any Shares in payment of any stock dividend; or

      (d) The legality of any recapitalization or readjustment of the Shares.

16. The Bank shall be entitled to receive and the Customer  hereby agrees to pay
to the Bank for its performance hereunder (i) out-of-pocket  expenses (including
reasonable  attorney's  fees and  expenses)  incurred  in  connection  with this
Agreement and its performance hereunder,  and (ii) the compensation for services
as set forth in Schedule I.

17. The Bank shall not be responsible for any money,  whether or not represented
by any check, draft or other instrument for the payment of money, received by it
on behalf of the Customer,  until the Bank  actually  receives and collects such
funds.

18. The Bank shall have no duties or  responsibilities  whatsoever  except  such
duties and responsibilities as are specifically set forth in this Agreement, and
no covenant or obligation  shall be implied  against the Bank in connection with
this Agreement.
<PAGE>

                                      -9-


                                   ARTICLE IX
                                   TERMINATION

Either of the parties hereto may terminate this Agreement by giving to the other
party a notice in writing  specifying the date of such termination,  which shall
be not less than 60 days after the date of receipt of such notice.  In the event
such notice is given by the  Customer,  it shall be  accompanied  by a copy of a
resolution of the Board of Directors of the Customer, certified by the Secretary
electing to terminate this Agreement and designating a successor  transfer agent
or transfer agents.  In the event such notice is given by the Bank, the Customer
shall,  on or  before  the  termination  date,  deliver  to the Bank a copy of a
resolution of its Board of Directors  certified by the  Secretary  designating a
successor  transfer agent or transfer agents. In the absence of such designation
by the  Customer,  the Bank may  designate a successor  transfer  agent.  If the
Customer fails to designate a successor transfer agent and if the Bank is unable
to find a successor  transfer agent, the Customer shall, upon the date specified
in the notice of  termination  of this  Agreement  and  delivery  of the records
maintained hereunder,  be deemed to be its own transfer agent and the Bank shall
thereafter  be  relieved  of all duties  and  responsibilities  hereunder.  Upon
termination  hereof, the Customer shall pay to the Bank such compensation as may
be due to the Bank as of the date of such  termination,  and shall reimburse the
Bank for any disbursements and expenses made or incurred by the Bank and payable
or reimbursable hereunder.

                                    ARTICLE X
                                  MISCELLANEOUS

1. The  Customer  agrees that prior to  effecting  any change in the  Prospectus
which would increase or alter the duties and  obligations of the Bank hereunder,
it shall  advise the Bank of such  proposed  change at least ten  business  days
prior to the intended date of the same,  and shall proceed with such change only
if it shall have received the written consent of the Bank thereto.

2. The  indemnities  contained  herein shall be  continuing  obligations  of the
Customer,  its successors and assigns,  notwithstanding  the termination of this
Agreement.

3. Any notice or other  instrument  in writing,  authorized  or required by this
Agreement to be given to the Customer shall be  sufficiently  given if addressed
to the  Customer  and  mailed or  delivered  to it at 800  Scudders  Mill  Road,
Plainsboro,  NJ 08536 or at such  place as the  Customer  may from  time to time
designate in writing.

4. Any notice or other  instrument  in writing,  authorized  or required by this
Agreement  to be given to the Bank shall be  sufficiently  given if addressed to
the Bank and  mailed or  delivered  to it at its  office at 101  Barclay  Street
(22W), New York, New York 10286 or at such other place as the Bank may from time
to time designate in writing.

5. This  Agreement  may not be amended  or  modified  in any manner  except by a
written  agreement  duly  authorized  and  executed  by both  parties.  Any duly
authorized  Officer may amend any  Certificate  naming  Officers  authorized  to
execute and deliver  Certificates,  instructions,  notices or other instruments,
and the Secretary or any Assistant  Secretary may amend any Certificate  listing
the shares of capital stock of the Customer for which the Bank performs Services
hereunder.
<PAGE>

                                      -10-


6. This  Agreement  shall extend to and shall be binding upon the parties hereto
and  their  respective  successors  and  assigns;  provided, however,  that this
Agreement  shall not be  assignable  by either party  without the prior  written
consent of the other party.

7. This Agreement shall be governed by and construed in accordance with the laws
of the State of New York.

8. This  Agreement may be executed in any number of  counterparts  each of which
shall be  deemed  to be an  original;  but such  counterparts,  together,  shall
constitute only one instrument.

9. The  provisions  of this  Agreement are intended to benefit only the Bank and
the Customer,  and no rights shall be granted to any other person,  by virtue of
this Agreement.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their  respective  corporate  officer,  thereunto  duly  authorized and their
respective  corporate seals to be hereunto affixed, as of the day and year first
above written.

Attest:                                      MUNIASSETS FUND, INC.


/s/ Mark B. Goldfus                          BY:  /s/ Gerald M. Richard
- -----------------------------                     ------------------------------
                                             Title: GERALD M. RICHARD, TREASURER


Attest:                                      THE BANK OF NEW YORK

/s/ Illegible                                BY:  /s/ Illegible
- -----------------------------                     ------------------------------
                                             Title: Vice President


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-14.A
<SEQUENCE>12
<FILENAME>file011.htm
<DESCRIPTION>CONSENT OF DELOITTE & TOUCHE
<TEXT>

<html>
<head>
<title> Exhibit 14(a) </title>
</head>
<body>







<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 1, page: 1" -->



<p><table width=600><tr><td  align=right><font size=2><B>Exhibit 14(a)</B></font></td></tr></table>

<p>
<p><table width=600><tr><td><font size=2>INDEPENDENT AUDITORS&#146; CONSENT</font></td></tr></table>

<p><table width=600><tr>
    <td>
      <p><font size=2>We consent to the use in Pre-Effective Amendment No. 1 to
        </font><font size=2>Registration Statement No. 333-65446 on </font><font size=2>Form
        N-14 of MuniAssets Fund, Inc. (the &#147;Fund&#148;) of our report dated
        June 27, 2001 appearing in the May 31, 2001 </font><font size=2>Annual
        Report of the </font><font size=2> Fund, and to the references to us under
        the captions &#147;COMPARISON OF THE FUNDS&#151;Financial Highlights&#151;<i>MuniAssets</i>&#148;
        and &#147;EXPERTS&#148; appearing in the Joint Proxy Statement and Prospectus,
        which is a part of such Registration Statement.</font></p>
      </td>
  </tr></table>

<p><table width=600><tr>
    <td><font size=2>/s/ Deloitte &amp; Touche <font size="1">LLP</font></font></td>
  </tr></table>

<p><table width=600><tr><td><font size=2>New York, New York<BR>
      September 7, 2001</font></td>
  </tr></table>

<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></table><p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;

</body>
</html>



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-14.B
<SEQUENCE>13
<FILENAME>file012.htm
<DESCRIPTION>INDEPENDENT AUDITORS' CONSENT
<TEXT>

<html>
<head>
<title> Exhibit 14(b) </title>
</head>
<body>






<!-- *************************************************************************** -->
<!-- MARKER LABEL="sheet: 1, page: 1" -->


<p><table width=600><tr><td  align=right><font size=2><B>Exhibit 14(b)</B></font></td></tr></table>

<p>
<p><table width=600><tr><td><font size=2>INDEPENDENT AUDITORS&#146; CONSENT</font></td></tr></table>

<p><table width=600><tr>
    <td>
      <p><font size=2>We consent to the use in Pre-Effective Amendment No. 1 to
        Registration Statement No. 333-65446 on Form N-14 of MuniAssets Fund,
        Inc. of our report dated October 5, 2000 for Merrill Lynch High Income
        Municipal Bond Fund, Inc. (the &#147;Fund&#148;) appearing
        in the August 31, 2000 Annual Report of the Fund, and to the references
        to us under the captions &#147;COMPARISON OF THE FUNDS&#151;Financial
        Highlights&#151;<i>High Income Municipal</i>&#148; and &#147;EXPERTS&#148;
        appearing in the Joint Proxy Statement and Prospectus, which is a part
        of such Registration Statement.</font></p>
      </td>
  </tr></table>

<p><table width=600><tr>
    <td><font size=2>/s/ Deloitte &amp; Touche <font size="1">LLP</font></font></td>
  </tr></table>

<p><table width=600><tr><td><font size=2>New York, New York<BR>
      September 7, 2001</font></td>
  </tr></table>

<p>&nbsp;
<table width=600><tr><td width=60 align=left><font size=1>&nbsp;</font></td><td width=480 align=center><font size="2">
</font></td><td width=60 align=right><font size="1">&nbsp;</font></td></tr></table><p>&nbsp;<hr size=5 noshade width=600 align=LEFT><p>&nbsp;

</body>
</html>


</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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