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<SEC-DOCUMENT>0000891092-05-001782.txt : 20050914
<SEC-HEADER>0000891092-05-001782.hdr.sgml : 20050914
<ACCEPTANCE-DATETIME>20050914152839
ACCESSION NUMBER:		0000891092-05-001782
CONFORMED SUBMISSION TYPE:	N-2/A
PUBLIC DOCUMENT COUNT:		3
FILED AS OF DATE:		20050914
DATE AS OF CHANGE:		20050914

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			MUNIYIELD NEW YORK INSURED FUND INC
		CENTRAL INDEX KEY:			0000882150
		IRS NUMBER:				223144223
		STATE OF INCORPORATION:			NJ
		FISCAL YEAR END:			0930

	FILING VALUES:
		FORM TYPE:		N-2/A
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-126729
		FILM NUMBER:		051084378

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

	MAIL ADDRESS:	
		STREET 1:		PO BOX 9011
		STREET 2:		C/O MERRILL LYNCH ASSET MANAGEMENT
		CITY:			PRINCETON
		STATE:			NJ
		ZIP:			08543-9011

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	NEW YORK MUNIYIELD FUND INC
		DATE OF NAME CHANGE:	19600201

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			MUNIYIELD NEW YORK INSURED FUND INC
		CENTRAL INDEX KEY:			0000882150
		IRS NUMBER:				223144223
		STATE OF INCORPORATION:			NJ
		FISCAL YEAR END:			0930

	FILING VALUES:
		FORM TYPE:		N-2/A
		SEC ACT:		1940 Act
		SEC FILE NUMBER:	811-06500
		FILM NUMBER:		051084379

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

	MAIL ADDRESS:	
		STREET 1:		PO BOX 9011
		STREET 2:		C/O MERRILL LYNCH ASSET MANAGEMENT
		CITY:			PRINCETON
		STATE:			NJ
		ZIP:			08543-9011

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	NEW YORK MUNIYIELD FUND INC
		DATE OF NAME CHANGE:	19600201
</SEC-HEADER>
<DOCUMENT>
<TYPE>N-2/A
<SEQUENCE>1
<FILENAME>e21107_n2a.htm
<DESCRIPTION>FORM N-2
<TEXT>
<HTML>
<HEAD>
<TITLE></TITLE>
</HEAD>
<BODY>


<!-- MARKER FORMAT-SHEET="Center Head 2 no bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As filed with
  the Securities and Exchange Commission on September 14, 2005 </FONT></P>

<!-- MARKER FORMAT-SHEET="Right Head Bold" FSL="Workstation" -->
<P ALIGN=Right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Securities Act
  File No. 333-126729 <BR>
  Investment Company Act File No. 811-6500 </FONT></P>


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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><font size="4">SECURITIES
  AND EXCHANGE COMMISSION</font><BR>
                                Washington, D.C. 20549 </B></FONT></P>

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<HR SIZE=1 noshade ALIGN=CENTER WIDTH=150>
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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>FORM N-2<BR>
  |X| REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 </B></FONT></P>


<!-- MARKER FORMAT-SHEET="Center Head 2 Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>|X| PRE-EFFECTIVE
  AMENDMENT NO.&nbsp;&nbsp;1 </B></FONT></P>


<!-- MARKER FORMAT-SHEET="Center Head 2 Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>|_| POST-EFFECTIVE
  AMENDMENT NO.&nbsp;&nbsp;&nbsp;<BR>
  AND/OR<BR>
  |X| REGISTRATION STATEMENT UNDER THE<BR>
  INVESTMENT COMPANY ACT OF 1940 </B></FONT></P>


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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>|X| AMENDMENT
  NO. 7<BR>
  (Check appropriate box or boxes) </B></FONT></P>


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

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>MUNIYIELD NEW YORK
INSURED FUND, INC.<BR>                (Exact Name of Registrant as Specified in Charter) </B></FONT></P>

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

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>800 Scudders Mill Road<BR>
                          Plainsboro, New Jersey 08536<BR>                     (Address of
Principal Executive Offices) </FONT></P>

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

<!-- MARKER FORMAT-SHEET="Center Head 2 no bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(609) 282-2800<BR>
              (Registrant&#146;s Telephone Number, Including Area Code) </FONT></P>

<!-- MARKER FORMAT-SHEET="Center Head 2 no bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Robert C. Doll, Jr.<BR>
                      MuniYield New York Insured Fund, Inc.<BR>               800 Scudders
Mill Road, Plainsboro, New Jersey 08536<BR>         Mailing Address: P.O. Box 9011,
Princeton, New Jersey 08543-9011<BR>                      (Name and Address of Agent for
Service) </FONT></P>

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

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Copies to: </FONT></P>


<div align="center">
  <table border=0 cellspacing=0 cellpadding=0>
    <tr>
      <td width=367 valign=top>
        <p align=center><font face="Times New Roman" size="2"><b>Andrew J. Donohue,
          Esq.</b></font></p>
      </td>
      <td width=367 valign=top>
        <p align=center><font face="Times New Roman" size="2"><b>Frank P. Bruno,
          Esq.</b></font></p>
      </td>
    </tr>
    <tr>
      <td width=367 valign=top>
        <p align=center><font face="Times New Roman" size="2"><b>FUND ASSET MANAGEMENT,
          L.P.</b></font></p>
      </td>
      <td width=367 valign=top>
        <p align=center><font face="Times New Roman" size="2"><b>SIDLEY AUSTIN
          BROWN &amp; WOOD <font size="1">LLP</font></b></font></p>
      </td>
    </tr>
    <tr>
      <td width=367 valign=top>
        <p align=center><font face="Times New Roman" size="2"><b>P.O. Box 9011</b></font></p>
      </td>
      <td width=367 valign=top>
        <p align=center><font face="Times New Roman" size="2"><b>787 Seventh Avenue</b></font></p>
      </td>
    </tr>
    <tr>
      <td width=367 valign=top>
        <p align=center><font face="Times New Roman" size="2"><b>Princeton, New
          Jersey 08543-9011</b></font></p>
      </td>
      <td width=367 valign=top>
        <p align=center><font face="Times New Roman" size="2"><b>New York, New
          York 10019</b></font></p>
      </td>
    </tr>
  </table>
  <!-- MARKER FORMAT-SHEET="Cutoff rule centered" FSL="Workstation" --> <p>&nbsp;</p></div>
<HR SIZE=1 noshade ALIGN=CENTER WIDTH=150>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Approximate     date of
proposed public offering: As                                             soon as
practicable after the<BR>                                             effective date of this
Registration                                             Statement. </FONT></P>

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<HR SIZE=1 noshade ALIGN=CENTER WIDTH=150>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If any of the securities
  being registered on this form are to be offered on a delayed or continuous basis
  pursuant to Rule 415 under the Securities Act of 1933, as amended (the &#147;Securities
  Act&#148;), other than securities offered only in connection with dividend or

  interest reinvestment plans, check the following box. <b>|_|</b></FONT></P>

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<HR SIZE=1 noshade ALIGN=CENTER WIDTH=150>
<p>&nbsp;</p>
<div align="center">
  <table border=0 cellspacing=0 cellpadding=0 width="100%">
    <tr>
      <td width=702 valign=bottom colspan="5">
        <div align="center"><b><font size="2">CALCULATION OF REGISTRATION FEE
          UNDER THE SECURITIES ACT OF 1933</font></b></div>
      </td>
    </tr>
    <tr>
      <td width=234 valign=bottom align="center">
        <p align=center><font face="Times New Roman" size="1"><b>Title of Securities<br>
          Being Registered</b></font></p>
      </td>
      <td width=114 valign=bottom>
        <p align=center><font face="Times New Roman" size="1"><b>Amount being<br>
          Registered</b></font></p>
      </td>
      <td width=138 valign=bottom>
        <p align=center><font face="Times New Roman" size="1"><b>Proposed Maximum<br>
          Offering Price Per Unit (1)</b></font></p>
      </td>
      <td width=114 valign=bottom>
        <p align=center><font face="Times New Roman" size="1"><b>Proposed Maximum<br>
          Aggregate Offering<br>
          Price (1)</b></font></p>
      </td>
      <td width=102 valign=bottom>
        <p align=center><font face="Times New Roman" size="1"><b>Amount of<br>
          Registration Fee(2)</b></font></p>
      </td>
    </tr>
    <tr>
      <td width=234 valign=bottom>
        <hr noshade size="1" width="100%">
      </td>
      <td width=114 valign=bottom>
        <hr noshade size="1" width="100%">
      </td>
      <td width=138 valign=bottom>
        <hr noshade size="1" width="100%">
      </td>
      <td width=114 valign=bottom>
        <hr noshade size="1" width="100%">
      </td>
      <td width=102 valign=bottom>
        <hr noshade size="1" width="100%">
      </td>
    </tr>
    <tr>
      <td width=234 valign=bottom>
        <p><font face="Times New Roman" size="1">Auction Market Preferred Stock
          </font></p>
      </td>
      <td width=114 valign=bottom>
        <p align=center><font face="Times New Roman" size="1"><b>1,800 shares</b></font></p>
      </td>
      <td width=138 valign=bottom>
        <p align=center><font face="Times New Roman" size="1"><b>$25,000</b></font></p>
      </td>
      <td width=114 valign=bottom>
        <p align=center><font face="Times New Roman" size="1"><b>$45,000,000</b></font></p>
      </td>
      <td width=102 valign=bottom>
        <p align=center><font face="Times New Roman" size="1"><b>$5,296.50</b></font></p>
      </td>
    </tr>
  </table>
</div>
<br>
<TABLE WIDTH=100%><TR><TD WIDTH=2% ALIGN=left VALIGN=top><FONT SIZE="1">(1) </FONT></TD>
    <TD WIDTH=1%>&nbsp;</TD>
    <TD WIDTH=97% ALIGN=left VALIGN=top><FONT SIZE="1">Estimated
solely for the purpose of calculating the registration fee.</FONT></TD></TR></TABLE>


<!-- MARKER FORMAT-SHEET="Footnote Left" FSL="Workstation" -->
<TABLE WIDTH=100%><TR><TD WIDTH=2% ALIGN=left VALIGN=top><FONT SIZE="1">(2) </FONT></TD>
    <TD WIDTH=1%>&nbsp;</TD>
    <TD WIDTH=97% ALIGN=left VALIGN=top><FONT SIZE="1">Previously paid.</FONT></TD>
  </TR></TABLE>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Registrant hereby amends this
Registration Statement on such date or dates as may become necessary to delay its
effective date until the Registrant shall file a further amendment, which specifically
states that this Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine. </FONT></P>

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<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> </font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr align=LEFT width=100% size=5 noshade>
<br>








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






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


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

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>$45,000,000 </B></FONT><BR><FONT FACE="Times New Roman, Times, Serif" SIZE=5><B>MuniYield New York
Insured Fund, Inc. </B></FONT><BR><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>Auction Market
Preferred Stock (&#147;AMPS&#148;) <BR>1,800 Shares,
Series F <BR>Liquidation Preference $25,000 per Share </B></FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MuniYield
New York Insured Fund, Inc. is a non-diversified, closed-end fund. The investment
objective of the Fund is to provide shareholders with as high a level of current income
exempt from Federal income taxes and New York State and New York City personal income
taxes as is consistent with its investment policies and prudent investment management.
The Fund seeks to achieve its investment objective by investing, as a fundamental policy,
at least 80% of an aggregate of the Fund&#146;s net assets (including proceeds from the
issuance of any preferred stock) and the proceeds of any borrowings for investment
purposes, in a portfolio of municipal obligations the interest on which, in the opinion
of bond counsel to the issuer, is excludable from gross income for Federal income tax
purposes (except that the interest may be includable in taxable income for purposes of
the Federal alternative minimum tax) and exempt from New York State and New York City
personal income taxes. Under normal market conditions, the Fund invests primarily in a
portfolio of long term municipal obligations that are rated investment grade or, if
unrated, are considered by the Fund&#146;s investment adviser to be of comparable quality.
Under normal circumstances and after the investment period following this offering (not
expected to exceed three months), the Fund invests, as a non-fundamental policy, at least
80% of an aggregate of the Fund&#146;s net assets (including proceeds from the issuance of any
preferred stock) and the proceeds of any borrowings for investment purposes, in municipal
obligations that are covered by insurance guaranteeing the timely payment of principal at
maturity and interest when due. The Fund may invest in certain tax exempt securities
classified as &#147;private activity bonds,&#148; as discussed within, that may subject certain
investors in the Fund to an alternative minimum tax. There can be no assurance that the
Fund&#146;s investment objective will be realized. </FONT></P>

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<P align=right><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>(continued on following page)</I> </FONT> </P>

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


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


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[INSERT TABLE]


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)
The estimated offering expenses payable by the Fund are $150,000. </FONT></P>

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

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


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


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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=5><B>Merrill Lynch &amp; Co. </B></FONT></P>

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


<!-- MARKER FORMAT-SHEET="Center Head 2-Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>The date of this
prospectus is &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2005. </B></FONT></P>







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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>(continued from
previous page)  </I></FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
prospectus contains information you should know before investing, including information
about risks. Please read it before you invest and keep it for future reference. The
Fund&#146;s statement of additional information dated &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2005 contains further information
about the Fund and is incorporated by reference (legally considered to be part of this
prospectus) and the table of contents of the statement of additional information appears
on page 52 of this prospectus. A copy of the statement of additional information and
copies of the Fund&#146;s semi-annual and annual reports may be obtained without charge by
writing to the Fund at its address at 800 Scudders Mill Road, Plainsboro, New Jersey
08536, or by calling the Fund at (800) 543-6217. Copies of the Fund&#146;s semi-annual and
annual reports may also be obtained without charge at mutualfunds.ml.com. Due to the
relatively short offering period for the AMPS, the statement of additional information is
not available at this website. In addition, you may request other information about the
Fund or make stockholder inquiries by calling the Fund toll-free at (800) 543-6217. In
addition, the Securities and Exchange Commission maintains a website (http://sec.gov)
that contains the statement of additional information, material incorporated by reference
and other information regarding registrants that file electronically with the Securities
and Exchange Commission. </FONT></P>


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






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

<div>


  <table border=0 cellspacing=0 cellpadding=0 width="600">
    <tr valign="bottom">
      <td>
        <p align="right">&nbsp;</p>
      </td>
      <td>
        <p align="right">&nbsp;</p>
      </td>
      <td align="right">
        <p align="right"><font size="2"><b><font size="1">Page </font></b> </font>
        <hr noshade align="right" size="1" width="65%">
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">Prospectus Summary </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">5 </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">Risk Factors and Special Considerations </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">11 </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">Financial Highlights </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">15 </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">The Fund </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">17 </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">Use of Proceeds </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">17 </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">Capitalization </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">17 </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">Portfolio Composition </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">17 </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">Investment Objective and Policies </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">18 </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">Other Investment Policies </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">27 </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">Description of AMPS </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">31 </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">The Auction </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">36 </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">Rating Agency Guidelines </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">44 </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">Investment Advisory and Management Arrangements </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">45 </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">Taxes </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">46 </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">Description of Capital Stock </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">47 </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">Custodian </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">49 </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">Underwriting </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">50 </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">Transfer Agent, Dividend Disbursing Agent and Registrar </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">50 </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">Accounting Services Provider </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">50 </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">Legal Matters </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">50 </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">Independent Registered Public Accounting Firm and Experts </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">51 </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">Additional Information </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">51 </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">Table of Contents of Statement of Additional Information </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">52 </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">Glossary </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">53 </font></p>
      </td>
    </tr>
  </table>
  <p>&nbsp;</p>

</div>

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


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

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

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

<div>
  <table border=0 cellspacing=0 cellpadding=0 width="600">
    <tr>
      <td valign=top width=146>
        <p><font size="2"><b>The Fund</b></font></p>
      </td>
      <td valign=top width=60>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">
        <p><font face="Times" size="2">MuniYield New York Insured Fund, Inc. is
          a non-diversified, closed-end management investment company.</font></p>
      </td>
    </tr>
    <tr>
      <td valign=top width=146>&nbsp;</td>
      <td valign=top width=60>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=146>
        <p><font size="2"><b>The Offering</b></font></p>
      </td>
      <td valign=top width=60>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">
        <p><font face="Times" size="2">The Fund is offering a total of 1,800 shares
          of Auction Market Preferred Stock, Series F, at a purchase price of
          $25,000 per share plus accumulated dividends, if any, from the date
          the shares are first issued. The shares of AMPS are being offered by
          Merrill Lynch, Pierce, Fenner &amp; Smith Incorporated (&#147;Merrill
          Lynch&#148;), as underwriter.</font></p>
      </td>
    </tr>
    <tr>
      <td valign=top width=146>&nbsp;</td>
      <td valign=top width=60>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=146>
        <p>&nbsp;</p>
      </td>
      <td valign=top width=60>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">
        <p><font face="Times" size="2">The Series F AMPS will be shares of preferred
          stock of the Fund that entitle their holders to receive cash dividends
          at an annual rate that may vary for the successive dividend periods.
          In general, except as described below, each dividend period for the
          Series F AMPS following the initial dividend period will be seven days.
          The applicable dividend for a particular dividend period will be determined
          by an auction conducted on the business day next preceding the start
          of that dividend period.</font></p>
      </td>
    </tr>
    <tr>
      <td valign=top width=146>&nbsp;</td>
      <td valign=top width=60>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=146>&nbsp;</td>
      <td valign=top width=60>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2"><font face="Times" size="2">Investors and potential
        investors in shares of Series F AMPS may participate in auctions for the
        AMPS through their broker-dealers.</font></td>
    </tr>
    <tr>
      <td valign=top width=146>&nbsp;</td>
      <td valign=top width=60>&nbsp;</td>
      <td valign=top colspan="2">&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=146>
        <p>&nbsp;</p>
      </td>
      <td valign=top width=60>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">
        <p><font face="Times" size="2">Generally, AMPS investors will not receive
          certificates representing ownership of their shares. Ownership of AMPS
          will be maintained in book-entry form by the securities depository (The
          Depository Trust Company) or its nominee for the account of the investor&#146;s
          agent member (generally the investor&#146;s broker-dealer). The investor&#146;s
          agent member, in turn, will maintain records of such investor&#146;s
          beneficial ownership of AMPS.</font></p>
      </td>
    </tr>
    <tr>
      <td valign=top width=146>&nbsp;</td>
      <td valign=top width=60>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=146>
        <p><font size="2"><b>Investment Objective</b></font><b><font size="2">
          <br>
          &nbsp;&nbsp; and Policies</font></b></p>
      </td>
      <td valign=top width=60>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">
        <p><font face="Times" size="2">The investment objective of the Fund is
          to provide shareholders with as high a level of current income exempt
          from Federal income taxes and New York State and New York City personal
          income taxes as is consistent with its investment policies and prudent
          investment management. The Fund seeks to achieve its investment objective
          by investing, as a fundamental policy, at least 80% of an aggregate
          of the Fund&#146;s net assets (including proceeds from the issuance
          of any preferred stock) and the proceeds of any borrowings for investment
          purposes, in a portfolio of municipal obligations issued by or on behalf
          of the State of New York, its political subdivisions, agencies and instrumentalities
          and by other qualifying issuers, each of which pays interest that, in
          the opinion of bond counsel to the issuer, is excludable from gross
          income for Federal income tax purposes (except that the interest may
          be includable in taxable income for purposes of the Federal alternative
          minimum tax) and exempt from New York State and New York City personal
          income taxes (&#147;New York Municipal Bonds&#148;). The Fund also may
          invest in municipal obligations issued by or on behalf of states, territories
          and possessions of the United States and their political subdivisions,
          agencies or instrumentalities, which pay interest that is excludable
          from gross income for Federal income tax purposes, in the opinion of
          bond counsel to the issuer, but is not exempt from New York State and
          New York City personal income taxes (&#147;Municipal Bonds&#148;). In
          general, the Fund does not intend for its investments to earn a large
          amount of interest income that is (i) includable in gross income for
          Federal income tax purposes or (ii) not exempt from New York State and
          New York City personal income taxes. There can be no assurance that
          the Fund&#146;s investment objective will be realized.</font></p>
      </td>
    </tr>
  </table>
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<div>
  <table border=0 cellspacing=0 cellpadding=0 width="600">
    <tr>
      <td valign=top width=142>
        <p>&nbsp;</p>
      </td>
      <td valign=top width=61>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2" width="397">
        <p><font size="2"><i>Maturity</i>. The average maturity of the Fund&#146;s
          portfolio securities varies from time to time based upon an assessment
          of economic and market conditions by Fund Asset Management, L.P., the
          Fund&#146;s investment adviser (the &#147;Investment Adviser&#148;).
          The Fund intends to invest primarily in long term New York Municipal
          Bonds and Municipal Bonds (that is, New York Municipal Bonds and Municipal
          Bonds with maturities of more than ten years). However, the Fund also
          may invest in intermediate term New York Municipal Bonds and Municipal
          Bonds with maturities of between three years and ten years. The Fund
          also may invest from time to time in short term New York Municipal Bonds
          and Municipal Bonds with maturities of less than three years.</font></p>
      </td>
    </tr>
    <tr>
      <td valign=top width=142>&nbsp;</td>
      <td valign=top width=61>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2" width="397">&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=142>
        <p>&nbsp;</p>
      </td>
      <td valign=top width=61>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2" width="397">
        <p><font size="2"><i>Municipal Bond Insurance</i>. Under normal circumstances
          and after the investment period following the offering (not expected
          to exceed three months), the Fund invests, as a non-fundamental policy,
          at least 80% of an aggregate of the Fund&#146;s net assets (including
          proceeds from the issuance of any preferred stock) and the proceeds
          of any borrowings for investment purposes, in New York Municipal Bonds
          and Municipal Bonds that are covered by insurance guaranteeing the timely
          payment of principal at maturity and interest when due.</font></p>
      </td>
    </tr>
    <tr>
      <td valign=top width=142>&nbsp;</td>
      <td valign=top width=61>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2" width="397">&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=142>
        <p>&nbsp;</p>
      </td>
      <td valign=top width=61>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2" width="397">
        <p><font size="2"><i>Investment Grade Municipal Bonds</i>. Under normal
          market conditions, the Fund invests primarily in a portfolio of long
          term New York Municipal Bonds and Municipal Bonds that are rated investment
          grade by one or more nationally recognized statistical rating organizations
          (&#147;NRSROs&#148;) (Baa or higher by Moody&#146;s Investors Service,
          Inc. (&#147;Moody&#146;s&#148;) or BBB or higher by Standard &amp; Poor&#146;s
          (&#147;S&amp;P&#148;) or Fitch Ratings (&#147;Fitch&#148;)) or in unrated
          bonds considered by the Investment Adviser to be of comparable quality.
          In assessing the quality of New York Municipal Bonds and Municipal Bonds,
          the Investment Adviser takes into account the Municipal Bond insurance
          as well as the nature of any letters of credit or similar credit enhancement
          to which particular New York Municipal Bonds or Municipal Bonds are
          entitled and the creditworthiness of the financial institution that
          provided such Municipal Bond insurance or credit enhancement.</font></p>
      </td>
    </tr>
    <tr>
      <td valign=top width=142>&nbsp;</td>
      <td valign=top width=61>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2" width="397">&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=142>
        <p>&nbsp;</p>
      </td>
      <td valign=top width=61>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2" width="397">
        <p><font size="2"><i>Indexed and Inverse Floating Rate Securities</i>.
          The Fund may invest in securities whose potential returns are directly
          related to changes in an underlying index or interest rate, known as
          indexed securities. The return on indexed securities will rise when
          the underlying index or interest rate rises and fall when the index
          or interest rate falls. The Fund may also invest in securities whose
          return is inversely related to changes in an interest rate (inverse
          floaters). In general, income on inverse floaters will decrease when
          short term interest rates increase and increase when short term interest
          rates decrease. Investments in inverse floaters may subject the Fund
          to the risks of reduced or eliminated interest payments and loss of
          principal. In addition, certain indexed securities and inverse floaters
          may increase or decrease in value at a greater rate than the underlying
          interest rate, which effectively leverages the Fund&#146;s investment.
          As a result, the market value of such securities will generally be more
          volatile than that of fixed rate, tax exempt securities. Both indexed
          securities and inverse floaters are derivative securities and can be
          considered speculative.</font></p>
      </td>
    </tr>
    <tr>
      <td valign=top width=142>&nbsp;</td>
      <td valign=top width=61>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2" width="397">&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=142>
        <p>&nbsp;</p>
      </td>
      <td valign=top width=61>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2" width="397">
        <p><font size="2"><i>Hedging Transactions</i>. The Fund may seek to hedge
          its portfolio against changes in interest rates using options and financial
          futures contracts or swap transactions. The Fund&#146;s hedging transactions
          are designed to reduce volatility, but come at some cost. For example,
          the Fund may try to limit its risk of loss from a decline in price of
          a portfolio security by purchasing a put option. However, the Fund must
          pay for the option, and the price of the security may not in fact drop.
          In large part, the success of the Fund&#146;s hedging activities depends
          on its ability to forecast movements in </font></p>
      </td>
    </tr>
    <tr>
      <td valign=top width=142>&nbsp;</td>
      <td valign=top width=61>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2" width="397">&nbsp;</td>
    </tr>
  </table>
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<div>
  <table border=0 cellspacing=0 cellpadding=0 width="600">
    <tr>
      <td valign=top width=145 height="17">&nbsp;</td>
      <td valign=top width=53 height="17">&nbsp;</td>
      <td valign=top colspan="2" height="17"><font size="2">securities prices
        and interest rates. The Fund is not required to hedge its portfolio and
        may choose not to do so. The Fund cannot guarantee that any hedging strategies
        it uses will work.</font></td>
    </tr>
    <tr>
      <td valign=top width=145 height="17">&nbsp;</td>
      <td valign=top width=53 height="17">&nbsp;</td>
      <td valign=top colspan="2" height="17">&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=145>
        <p>&nbsp;</p>
      </td>
      <td valign=top width=53>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">
        <p><font size="2"><i>Swap Agreements</i>. The Fund is authorized to enter
          into swap agreements, which are over-the-counter contracts in which
          one party agrees to make periodic payments based on the change in the
          market value of a specific bond, basket of bonds or index in return
          for periodic payments based on a fixed or variable interest rate or
          the change in market value of a different bond, basket of bonds or index.
          Swap agreements may be used to obtain exposure to a bond or market without
          owning or taking physical custody of securities.</font></p>
      </td>
    </tr>
    <tr>
      <td valign=top width=145>&nbsp;</td>
      <td valign=top width=53>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=145>
        <p>&nbsp;</p>
      </td>
      <td valign=top width=53>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">
        <p><font size="2"><i>Federal Tax Considerations</i>. While exempt interest
          dividends derived from interest on New York Municipal Bonds and Municipal
          Bonds are excluded from gross income for Federal income tax purposes,
          they may be subject to the Federal alternative minimum tax in certain
          circumstances. Distributions of any capital gain or other taxable income
          will be taxable to stockholders. The Fund may not be a suitable investment
          for investors subject to the Federal alternative minimum tax or who
          would become subject to such tax by investing in the Fund. See &#147;Taxes.&#148;</font></p>
      </td>
    </tr>
    <tr>
      <td valign=top width=145>&nbsp;</td>
      <td valign=top width=53>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=145>
        <p><font size="2"><b>Risk Factors</b></font></p>
      </td>
      <td valign=top width=53>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">
        <p><font size="2"><i>Set forth below is a summary of the main risks of
          investing in the Fund&#146;s Series F AMPS. For a more detailed description
          of the main risks as well as certain other risks associated with investing
          in the Fund&#146;s Series F AMPS, see &#147;Risk Factors and Special
          Considerations.&#148; </i></font></p>
      </td>
    </tr>
    <tr>
      <td valign=top width=145>&nbsp;</td>
      <td valign=top width=53>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top width=17>&nbsp;</td>
      <td valign=top width=385>&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=145>
        <p>&nbsp;</p>
      </td>
      <td valign=top width=53>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top width=17>
        <p><font size="2">&#149;</font></p>
      </td>
      <td valign=top width=385><font size="2">The credit ratings of the AMPS could
        be reduced or terminated while an investor holds the AMPS, which could
        affect liquidity.</font></td>
    </tr>
    <tr>
      <td valign=top width=145>&nbsp;</td>
      <td valign=top width=53>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top width=17>&nbsp;</td>
      <td valign=top width=385>&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=145>
        <p>&nbsp;</p>
      </td>
      <td valign=top width=53>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top width=17>
        <p><font size="2">&#149;</font></p>
      </td>
      <td valign=top width=385><font size="2">Neither broker-dealers nor the Fund
        are obligated to purchase shares of AMPS in an auction or otherwise, nor
        is the Fund required to redeem shares of AMPS in the event of a failed
        auction.</font></td>
    </tr>
    <tr>
      <td valign=top width=145>&nbsp;</td>
      <td valign=top width=53>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=145>
        <p>&nbsp;</p>
      </td>
      <td valign=top width=53>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top width=17>
        <p><font size="2">&#149;</font></p>
      </td>
      <td valign=top width=385><font size="2">If sufficient bids do not exist
        in an auction, the applicable dividend rate will be the maximum applicable
        dividend rate, and in such event, owners of AMPS wishing to sell will
        not be able to sell all, and may not be able to sell any, AMPS in the
        auction. As a result, investors may not have liquidity of investment.</font></td>
    </tr>
    <tr>
      <td valign=top width=145>&nbsp;</td>
      <td valign=top width=53>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=145>
        <p>&nbsp;</p>
      </td>
      <td valign=top width=53>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top width=17>
        <p><font size="2">&#149;</font></p>
      </td>
      <td valign=top width=385><font size="2">As a result of bidding by broker-dealers
        in an auction, the dividend rate that would apply at the auction may be
        higher or lower than the rate that would have prevailed had the broker-dealer
        not bid.</font></td>
    </tr>
    <tr>
      <td valign=top width=145>&nbsp;</td>
      <td valign=top width=53>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top width=17>&nbsp;</td>
      <td valign=top width=385>&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=145>
        <p>&nbsp;</p>
      </td>
      <td valign=top width=53>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top width=17>
        <p><font size="2">&#149;</font></p>
      </td>
      <td valign=top width=385><font size="2">A broker-dealer may bid in an auction
        in order to prevent what would otherwise be (i) a failed auction, (ii)
        an &#147;all-hold&#148; auction, or (iii) an applicable dividend rate
        that the broker-dealer believes, in its sole discretion, does not reflect
        the market for the AMPS at the time of the auction.</font></td>
    </tr>
    <tr>
      <td valign=top width=145>&nbsp;</td>
      <td valign=top width=53>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=145>
        <p>&nbsp;</p>
      </td>
      <td valign=top width=53>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top width=17>
        <p><font size="2">&#149;</font></p>
      </td>
      <td valign=top width=385><font size="2">The relative buying and selling
        interest of market participants in AMPS and in the auction rate securities
        market as a whole will vary over time, and such variations may be affected
        by, among other things, news relating to the issuer, the attractiveness
        of alternative investments, the perceived risk of owning the security
        (whether related to credit, liquidity or any other risk), the tax treatment
        accorded the instruments, the accounting treatment accorded auction rate
        securities, including recent clarifications of U.S. generally accepted
        principles relating to the treatment of auction rate securities, reactions
        to regulatory actions or press reports, financial reporting cycles and
        market sentiment generally. Shifts of demand in response to any one or
        simultaneous particular events cannot be predicted and may be short-lived
        or exist for longer periods.</font></td>
    </tr>
  </table>
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<div>
  <table border=0 cellspacing=0 cellpadding=0 width="600">
    <tr>
      <td valign=top width=144>
        <p>&nbsp;</p>
      </td>
      <td valign=top width=51>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top width=22>
        <p><font size="2">&#149;</font></p>
      </td>
      <td valign=top width=383><font size="2">Merrill Lynch has advised the Fund
        that it and various other broker-dealers and other firms that participate
        in the auction rate securities market received letters from the staff
        of the Securities and Exchange Commission last spring. The letters requested
        that each of these firms voluntarily conduct an investigation regarding
        its respective practices and procedures in that market. Pursuant to this
        request, Merrill Lynch conducted its own voluntary review and reported
        its findings to the Securities and Exchange Commission staff. At the Securities
        and Exchange Commission staff&#146;s request, Merrill Lynch, together
        with certain other broker-dealers and other firms that participate in
        the auction rate securities market, is engaging in discussions with the
        Securities and Exchange Commission staff concerning its inquiry. Neither
        Merrill Lynch nor the Fund can predict the ultimate outcome of the inquiry
        or how that outcome will affect the market for the AMPS or the auctions.</font></td>
    </tr>
    <tr>
      <td valign=top width=144>&nbsp;</td>
      <td valign=top width=51>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top width=22>&nbsp;</td>
      <td valign=top width=383>&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=144>
        <p>&nbsp;</p>
      </td>
      <td valign=top width=51>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top width=22>
        <p><font size="2">&#149;</font></p>
      </td>
      <td valign=top width=383><font size="2">Broker-dealers have no obligation
        to maintain a secondary trading market in the AMPS outside of auctions
        and there can be no assurance that a secondary market for the AMPS will
        develop or, if it does develop, that it will provide holders with a liquid
        trading market. An increase in the level of interest rates likely will
        have an adverse effect on the secondary market price of the AMPS, and
        a selling stockholder may have to sell AMPS between auctions at a price
        per share of less than $25,000.</font></td>
    </tr>
    <tr>
      <td valign=top width=144>&nbsp;</td>
      <td valign=top width=51>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top width=22>&nbsp;</td>
      <td valign=top width=383>&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=144>
        <p>&nbsp;</p>
      </td>
      <td valign=top width=51>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top width=22>
        <p><font size="2">&#149;</font></p>
      </td>
      <td valign=top width=383><font size="2">The Fund will issue the AMPS only
        if the AMPS have received a rating of Aaa from Moody&#146;s and AAA from
        S&amp;P. Under certain circumstances, the Fund may voluntarily terminate
        compliance with Moody&#146;s or S&amp;P guidelines, or both, in which
        case the AMPS may no longer be rated by Moody&#146;s or S&amp;P, as applicable,
        but will be rated by at least one rating agency.</font></td>
    </tr>
    <tr>
      <td valign=top width=144>&nbsp;</td>
      <td valign=top width=51>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=144>
        <p>&nbsp;</p>
      </td>
      <td valign=top width=51>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top width=22>
        <p><font size="2">&#149;</font></p>
      </td>
      <td valign=top width=383><font size="2">The Fund issues shares of AMPS,
        which generally pay dividends based on short term interest rates. The
        Fund generally will purchase New York Municipal Bonds and Municipal Bonds
        that pay interest at fixed or adjustable rates. If market interest rates
        rise, this could negatively impact the value of the Fund&#146;s investment
        portfolio, reducing the amount of assets serving as asset coverage for
        the AMPS. If the asset coverage becomes too low, the Fund may be required
        to redeem some or all of the shares of AMPS.</font></td>
    </tr>
    <tr>
      <td valign=top width=144>&nbsp;</td>
      <td valign=top width=51>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top width=22>&nbsp;</td>
      <td valign=top width=383>&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=144>
        <p>&nbsp;</p>
      </td>
      <td valign=top width=51>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top width=22>
        <p><font size="2">&#149;</font></p>
      </td>
      <td valign=top width=383><font size="2">The Fund is registered as a &#147;non-diversified&#148;
        investment company, the Fund may invest a greater percentage of its assets
        in a single issuer than a diversified investment company. Since the Fund
        may invest a relatively high percentage of its assets in a limited number
        of issuers, the Fund may be more exposed to any single economic, political
        or regulatory occurrence than a more widely diversified fund. Additionally,
        the Fund is more exposed to risks affecting issuers of New York Municipal
        Bonds than in a municipal bond fund that invests more widely.</font></td>
    </tr>
    <tr>
      <td valign=top width=144>&nbsp;</td>
      <td valign=top width=51>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=144>
        <p>&nbsp;</p>
      </td>
      <td valign=top width=51>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top width=22>
        <p><font size="2">&#149;</font></p>
      </td>
      <td valign=top width=383><font size="2">The amount of public information
        available about New York Municipal Bonds and Municipal Bonds in the Fund&#146;s
        portfolio is generally less than that for corporate equities or bonds,
        and the investment performance of the Fund may, therefore, be more dependent
        on the analytical abilities of the Investment Adviser than the performance
        of a stock fund or taxable bond fund.</font></td>
    </tr>
    <tr>
      <td valign=top width=144>&nbsp;</td>
      <td valign=top width=51>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=144>
        <p>&nbsp;</p>
      </td>
      <td valign=top width=51>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top width=22>
        <p><font size="2">&#149;</font></p>
      </td>
      <td valign=top width=383><font size="2">The Fund invests in New York Municipal
        Bonds and Municipal Bonds, which are subject to interest rate and credit
        risk. Interest rate risk is the risk that prices of New York Municipal
        Bonds and Municipal Bonds generally increase when interest rates decline
        and decrease when interest rates increase. Credit risk is the risk that
        the issuer will be unable to pay the interest or principal when due. Changes
        in an issuer&#146;s credit rating or the market&#146;s perception of an
        issuer&#146;s creditworthiness may affect the value of the Fund&#146;s
        investment in that issuer.</font></td>
    </tr>
    <tr>
      <td valign=top width=144>&nbsp;</td>
      <td valign=top width=51>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">&nbsp;</td>
    </tr>
  </table>
</div>


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<div>
  <table border=0 cellspacing=0 cellpadding=0 width="600">
    <tr>
      <td valign=top width=117>
        <p><font size="2"><b>Investment Adviser</b></font></p>
      </td>
      <td valign=top width=51>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">
        <p><font size="2">The Investment Adviser provides investment advisory
          and administrative services to the Fund. For its services, the Fund
          pays the Investment Adviser a monthly fee at the annual rate of 0.50%
          of the Fund&#146;s average weekly net assets (including any proceeds
          from the issuance of preferred stock).</font></p>
      </td>
    </tr>
    <tr>
      <td valign=top width=117>&nbsp;</td>
      <td valign=top width=51>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=117>
        <p><font size="2"><b>Dividends and<br>
          &nbsp;&nbsp; Dividend Periods</b></font></p>
      </td>
      <td valign=top width=51>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">
        <p><font size="2">Dividends on the Series F AMPS will be cumulative from
          the date the shares are first issued and payable at the annualized cash
          dividend rate for the initial dividend period on the initial dividend
          payment date as follows:</font></p>
      </td>
    </tr>
  </table>
  <br>

  <table border=0 cellspacing=0 cellpadding=0 width="600">
    <tr valign="bottom">
      <td rowspan="4" width=165><font size="1">&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 rowspan="4" width=151>
        <p><font size="1"><b>AMPS Series </b></font>
        <hr noshade align="left" size="1" width="52">
      </td>
      <td rowspan="4" width=24><font size="1"></font></td>
      <td rowspan="4" align="center" width=86>
        <p><font size="1"><b>Initial <br>
          Dividend <br>
          Rate </b></font>
        <hr noshade align="center" size="1" width="60">
      </td>
      <td rowspan="4" align="center" width=86>
        <p><font size="1"><b>Initial <br>
          Dividend <br>
          Period <br>
          Ending </b></font>
        <hr noshade align="center" size="1" width="40">
      </td>
      <td rowspan="4" align="center" width=88>
        <p><font size="1"><b>Initial <br>
          Dividend <br>
          Payment <br>
          Date </b></font>
        <hr noshade align="center" size="1" width="40">
      </td>
    </tr>
    <tr> </tr>
    <tr> </tr>
    <tr> </tr>
    <tr valign="bottom">
      <td width=165>
        <p>&nbsp;</p>
      </td>
      <td width=151>
        <p><font size="2">Series F</font></p>
      </td>
      <td width=24>
        <p>&nbsp;</p>
      </td>
      <td align="center" width=86>
        <p><font size="2">%</font></p>
      </td>
      <td align="center" width=86>
        <p><font size="2">, 2005</font></p>
      </td>
      <td align="center" width=88>
        <p><font size="2">, 2005</font></p>
      </td>
    </tr>
  </table>

<br>
  <table border=0 cellspacing=0 cellpadding=0 width="600">
    <tr>
      <td valign=top width=117>
        <p>&nbsp;</p>
      </td>
      <td valign=top width=51>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">
        <p><font size="2">After the initial dividend period, each dividend period
          for the Series F AMPS will generally consist of seven days; provided
          however, that, before any auction, the Fund may decide, subject to certain
          limitations and only if it gives notice to holders, to declare a special
          dividend period of up to five years.</font></p>
      </td>
    </tr>
    <tr>
      <td valign=top width=117>&nbsp;</td>
      <td valign=top width=51>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=117>
        <p>&nbsp;</p>
      </td>
      <td valign=top width=51>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">
        <p><font size="2">After the initial dividend period, in the case of dividend
          periods that are not special dividend periods, dividends generally will
          be payable on each succeeding Friday in the case of the Series F AMPS.</font></p>
      </td>
    </tr>
    <tr>
      <td valign=top width=117>&nbsp;</td>
      <td valign=top width=51>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=117>
        <p>&nbsp;</p>
      </td>
      <td valign=top width=51>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">
        <p><font size="2">Dividends for the Series F AMPS will be paid through
          the securities depository (The Depository Trust Company) on each dividend
          payment date for the AMPS.</font></p>
      </td>
    </tr>
    <tr>
      <td valign=top width=117>&nbsp;</td>
      <td valign=top width=51>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=117>
        <p>&nbsp;</p>
      </td>
      <td valign=top width=51>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">
        <p><font size="2">For each subsequent dividend period, the auction agent
          (The Bank of New York) will hold an auction to determine the cash dividend
          rate on the shares of Series F AMPS.</font></p>
      </td>
    </tr>
    <tr>
      <td valign=top width=117>&nbsp;</td>
      <td valign=top width=51>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=117>
        <p><font size="2"><b>Determination of<br>
          &nbsp;&nbsp; Maximum <br>
          &nbsp;&nbsp; Dividend Rates</b></font></p>
      </td>
      <td valign=top width=51>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">
        <p><font size="2">Generally, the applicable dividend rate for any dividend
          period for the Series F AMPS will not be more than the maximum applicable
          rate attributable to such shares. The maximum applicable rate will be
          the higher of (A) the applicable percentage of the reference rate on
          the auction date or (B) the applicable spread plus the reference rate
          on the auction date. The reference rate is (A) the higher of the applicable
          LIBOR Rate (as defined in the Glossary) and the Taxable Equivalent of
          the Short Term Municipal Bond Rate (as defined in the Glossary) (for
          a dividend period or special dividend period of 364 or fewer days),
          or (B) the applicable Treasury Index Rate (as defined in the Glossary)
          (for a special dividend period of 365 days or more). The maximum applicable
          rate for the Series F AMPS will depend on the credit rating assigned
          to the shares, the length of the dividend period and whether or not
          the Fund has given notification prior to the auction for the dividend
          period that any taxable income will be included in the dividend on the
          AMPS for that dividend period. The applicable percentage and applicable
          spread are as follows:</font></p>
      </td>
    </tr>
    <tr>
      <td valign=top width=117>&nbsp;</td>
      <td valign=top width=51>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">&nbsp;</td>
    </tr>
  </table>
  <table border=0 cellspacing=0 cellpadding=0 width="600">
    <tr> </tr>
    <tr> </tr>
    <tr> </tr>
    <tr valign="bottom">
      <td>&nbsp;</td>
      <td align="center" colspan="2"><font size="1"><b>Credit Ratings </b></font>
        <hr noshade align="center" size="1" width="150">
      </td>
      <td align="center"><font size="1"><b>Applicable <br>
        Percentage <br>
        of Reference <br>
        Rate&#151;No </b></font></td>
      <td align="center"><font size="1"><b>Applicable <br>
        Percentage <br>
        of Reference <br>
        Rate&#151; </b></font></td>
      <td align="center"><font size="1"><b>Applicable <br>
        Spread Over <br>
        Reference <br>
        Rate&#151;No</b></font></td>
      <td align="center"><font size="1"><b>Applicable <br>
        Spread Over <br>
        Reference <br>
        Rate&#151; </b></font></td>
    </tr>
    <tr valign="bottom">
      <td>&nbsp;</td>
      <td align="center">
        <p><font size="1"><b>Moody&#146;s</b></font>
        <hr noshade align="center" size="1" width="40">
      </td>
      <td align="center">
        <p><font size="1"><b>S&amp;P</b></font>
        <hr noshade align="center" size="1" width="30">
      </td>
      <td align="center">
        <p><font size="1"><b><br>
          Notification </b></font>
        <hr noshade align="center" size="1" width="80%">
      </td>
      <td align="center">
        <p><font size="1"><b><br>
          Notification </b></font>
        <hr noshade align="center" size="1" width="80%">
      </td>
      <td align="center">
        <p><font size="1"><b> <br>
          Notification </b></font>
        <hr noshade align="center" size="1" width="80%">
      </td>
      <td align="center">
        <p><font size="1"><b><br>
          Notification </b></font>
        <hr noshade align="center" size="1" width="80%">
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="center">
        <p><font size="2">Aaa</font></p>
      </td>
      <td align="center">
        <p><font size="2">AAA</font></p>
      </td>
      <td align="center">
        <p><font size="2">110%</font></p>
      </td>
      <td align="center">
        <p><font size="2">125%</font></p>
      </td>
      <td align="center">
        <p><font size="2">1.10%</font></p>
      </td>
      <td align="center">
        <p><font size="2">1.25%</font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="center">
        <p><font size="2">Aa3 to Aa1</font></p>
      </td>
      <td align="center">
        <p><font size="2">AA- to AA+</font></p>
      </td>
      <td align="center">
        <p><font size="2">125%</font></p>
      </td>
      <td align="center">
        <p><font size="2">150%</font></p>
      </td>
      <td align="center">
        <p><font size="2">1.25%</font></p>
      </td>
      <td align="center">
        <p><font size="2">1.50%</font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="center">
        <p><font size="2">A3 to A1</font></p>
      </td>
      <td align="center">
        <p><font size="2">A- to A+</font></p>
      </td>
      <td align="center">
        <p><font size="2">150%</font></p>
      </td>
      <td align="center">
        <p><font size="2">200%</font></p>
      </td>
      <td align="center">
        <p><font size="2">1.50%</font></p>
      </td>
      <td align="center">
        <p><font size="2">2.00%</font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="center">
        <p><font size="2">Baa3 to Baa1</font></p>
      </td>
      <td align="center">
        <p><font size="2">BBB- to BBB+</font></p>
      </td>
      <td align="center">
        <p><font size="2">175%</font></p>
      </td>
      <td align="center">
        <p><font size="2">250%</font></p>
      </td>
      <td align="center">
        <p><font size="2">1.75%</font></p>
      </td>
      <td align="center">
        <p><font size="2">2.50%</font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="center">
        <p><font size="2">Below Baa3</font></p>
      </td>
      <td align="center">
        <p><font size="2">Below BBB-</font></p>
      </td>
      <td align="center">
        <p><font size="2">200%</font></p>
      </td>
      <td align="center">
        <p><font size="2">300%</font></p>
      </td>
      <td align="center">
        <p><font size="2">2.00%</font></p>
      </td>
      <td align="center">
        <p><font size="2">3.00%</font></p>
      </td>
    </tr>
  </table>
  <br>
  <table border=0 cellspacing=0 cellpadding=0 width="600">
    <tr>
      <td valign=top width=117>
        <p>&nbsp;</p>
      </td>
      <td valign=top width=51>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">
        <p><font size="2">The applicable percentage and the applicable spread
          as so determined may be subject to upward but not downward adjustment
          in the discretion of the Board of Directors of the Fund after consultation
          with the broker-dealers participating in the auction for the AMPS.</font></p>
      </td>
    </tr>
    <tr>
      <td valign=top width=117>&nbsp;</td>
      <td valign=top width=51>&nbsp;</td>
      <td valign=top colspan="2">&nbsp;</td>
    </tr>
  </table>
</div>


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<div>
  <table border=0 cellspacing=0 cellpadding=0 width="600">
    <tr>
      <td valign=top width=116>
        <p>&nbsp;</p>
      </td>
      <td valign=top width=50>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">
        <p><font size="2">There is no minimum applicable dividend rate for any
          dividend period.</font></p>
      </td>
    </tr>
    <tr>
      <td valign=top width=116>&nbsp;</td>
      <td valign=top width=50>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=116>
        <p><font size="2"><b>Other AMPS</b></font></p>
      </td>
      <td valign=top width=50>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">
        <p><font size="2">The Fund has outstanding 10,360 shares of Auction Market
          Preferred Stock, each with a liquidation preference of $25,000 per share,
          plus accumulated but unpaid dividends, for an aggregate initial liquidation
          preference of $259,000,000 (the &#147;Other AMPS&#148;). The Other AMPS
          are as follows: 1,700 shares of Auction Market Preferred Stock, Series
          A; 1,700 shares of Auction Market Preferred Stock, Series B; 2,800 shares
          of Auction Market Preferred Stock, Series C; 1,960 shares of Auction
          Market Preferred Stock, Series D; and 2,200 shares of Auction Market
          Preferred Stock, Series E. The Series F AMPS offered hereby rank on
          a parity with the Other AMPS with respect to dividends and liquidation
          preference.</font></p>
      </td>
    </tr>
    <tr>
      <td valign=top width=116>&nbsp;</td>
      <td valign=top width=50>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=116>
        <p><font size="2"><b>Asset <br>
          &nbsp;&nbsp; Maintenance</b></font></p>
      </td>
      <td valign=top width=50>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">
        <p><font size="2">Under the Fund&#146;s Articles Supplementary creating
          the Series F AMPS (the &#147;Articles Supplementary&#148;), the Fund
          must maintain:</font></p>
      </td>
    </tr>
    <tr>
      <td valign=top width=116>&nbsp;</td>
      <td valign=top width=50>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=116>
        <p>&nbsp;</p>
      </td>
      <td valign=top width=50>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top width="23">
        <p><font size="2">&#149;</font></p>
      </td>
      <td valign=top width="411"><font size="2">asset coverage of the AMPS and
        Other AMPS as required by the rating agencies rating the AMPS, and</font></td>
    </tr>
    <tr>
      <td valign=top width=116>&nbsp;</td>
      <td valign=top width=50>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=116>
        <p>&nbsp;</p>
      </td>
      <td valign=top width=50>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top width="23">
        <p><font size="2">&#149;</font></p>
      </td>
      <td valign=top width="411"><font size="2">asset coverage of the AMPS and
        Other AMPS of at least 200% as required by the Investment Company Act
        of 1940 (the &#147;1940 Act&#148;).</font></td>
    </tr>
    <tr>
      <td valign=top width=116>&nbsp;</td>
      <td valign=top width=50>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=116>
        <p>&nbsp;</p>
      </td>
      <td valign=top width=50>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">
        <p><font size="2">The Fund estimates that, based on the composition of
          its portfolio at April 30, 2005, asset coverage of the AMPS and Other
          AMPS as required by the 1940 Act would be approximately 291% immediately
          after the Fund issues the shares of AMPS offered by this prospectus
          representing approximately 34% of the Fund&#146;s capital, or approximately
          52% of the Fund&#146;s common stock equity, immediately after the issuance
          of such AMPS.</font></p>
      </td>
    </tr>
    <tr>
      <td valign=top width=116>&nbsp;</td>
      <td valign=top width=50>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=116>
        <p><font size="2"><b>Mandatory<br>
          &nbsp;&nbsp; Redemption</b></font></p>
      </td>
      <td valign=top width=50>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">
        <p><font size="2">If the required asset coverage is not maintained or,
          when necessary, restored, the Fund must redeem shares of AMPS at the
          price of $25,000 per share plus accumulated but unpaid dividends thereon
          (whether or not earned or declared). The provisions of the 1940 Act
          may restrict the Fund&#146;s ability to make such a mandatory redemption.</font></p>
      </td>
    </tr>
    <tr>
      <td valign=top width=116>&nbsp;</td>
      <td valign=top width=50>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=116>
        <p><font size="2"><b>Optional <br>
          &nbsp;&nbsp; Redemption</b></font></p>
      </td>
      <td valign=top width=50>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">
        <p><font size="2">The Fund may, at its option, choose to redeem all or
          some of the shares of AMPS on any dividend payment date at the price
          of $25,000 per share, plus accumulated but unpaid dividends thereon
          (whether or not earned or declared) plus any applicable premium.</font></p>
      </td>
    </tr>
    <tr>
      <td valign=top width=116>&nbsp;</td>
      <td valign=top width=50>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=116>
        <p><b><font size="2">Liquidation <br>
          &nbsp;&nbsp; Preference</font></b></p>
      </td>
      <td valign=top width=50>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">
        <p><font size="2">The liquidation preference (that is, the amount the
          Fund must pay to holders of AMPS if the Fund is liquidated) of each
          share of AMPS will be $25,000, plus an amount equal to accumulated but
          unpaid dividends (whether or not earned or declared).</font></p>
      </td>
    </tr>
    <tr>
      <td valign=top width=116>&nbsp;</td>
      <td valign=top width=50>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=116>
        <p><b><font size="2">Ratings</font></b></p>
      </td>
      <td valign=top width=50>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">
        <p><font size="2">The AMPS will be issued with a rating of Aaa from Moody&#146;s
          and AAA from S&amp;P.</font></p>
      </td>
    </tr>
    <tr>
      <td valign=top width=116>&nbsp;</td>
      <td valign=top width=50>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">&nbsp;</td>
    </tr>
    <tr>
      <td valign=top width=116>
        <p><b><font size="2">Voting Rights</font></b></p>
      </td>
      <td valign=top width=50>
        <p>&nbsp;&nbsp;&nbsp;&nbsp;</p>
      </td>
      <td valign=top colspan="2">
        <p><font size="2">The 1940 Act requires that the holders of AMPS and any
          other preferred stock, including the Other AMPS, voting as a separate
          class, have the right to elect at least two directors at all times and
          to elect a majority of the directors at any time when dividends on the
          AMPS or any other preferred stock, including the Other AMPS, are unpaid
          for two full years. The Fund&#146;s Charter, the 1940 Act and the General
          Corporation Laws of the State of Maryland require holders of AMPS and
          any other preferred stock, including the Other AMPS, to vote as a separate
          class on certain other matters.</font></p>
      </td>
    </tr>
  </table>
</div>


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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>RISK FACTORS AND
SPECIAL CONSIDERATIONS </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>An
investment in the Fund&#146;s AMPS should not constitute a complete investment program.</I> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Set
forth below are the main risks of investing in the Fund&#146;s AMPS.</I> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investment
Considerations. Investors in AMPS should consider the following factors: </FONT></P>

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  <TR>
    <TD WIDTH=5%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=3%></TD>
    <TD WIDTH=90%><FONT SIZE=2>The
credit ratings of the AMPS could be reduced or terminated while           an investor
holds the AMPS, which could affect liquidity.</FONT></TD></TR></TABLE>

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

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

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

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

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

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

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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>New
York Municipal Bonds. </I>The Fund is more exposed to risks affecting issuers of New York
Municipal Bonds than in a municipal bond fund that invests more widely. The State of New
York maintains credit ratings of A1, AA and AA- from Moody&#146;s, S&amp;P and Fitch,
respectively. Moody&#146;s assigns a positive outlook to the State&#146;s rating, reflecting an
upgrade in November 2004, while Fitch and S&amp;P carry stable outlooks. The State economy
continues to improve and revenue collections are increasing. New York State, New York
City and other New York public bodies have sometimes encountered financial difficulties
of a type that could have an adverse effect on the performance of the Fund. In addition
to the risks associated with the national economic forecast, there are specific risks to
the State economy. Chief among them is a more prolonged downturn in the financial sector
than is currently projected, producing sharper declines in both employment and
compensation. Moreover, significant numbers of business relocations out of the State
could imply slower job and income growth as well. In contrast, a stronger national
economy than expected could result in stronger equity market growth and, in turn, a
stronger demand for financial market service, fueling a rebound in income growth in that
sector. Historically, declines in the stock market are followed by declines in personal
income tax payments as tax-liability associated with market transactions declines. See
Appendix A&#151; &#147;Economic and Other Conditions in New York&#148; in the statement of additional
information. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Municipal
Bond Insurance. </I>The Fund will be subject to certain investment restrictions imposed by
guidelines of the insurance companies that issue insurance on the New York Municipal
Bonds and Municipal Bonds in the Fund&#146;s portfolio. The Fund does not expect these
guidelines to prevent the Investment Adviser from managing the Fund&#146;s portfolio in
accordance with the Fund&#146;s investment objective and policies. </FONT> </P>

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

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

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

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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Set
forth below are certain other risks associated with investing in the Fund&#146;s AMPS.</I> </FONT> </P>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Rating
Categories. </I>The Fund intends to invest in New York Municipal Bonds and Municipal Bonds
that are rated investment grade by S&amp;P, Moody&#146;s or Fitch, or in unrated, New York
Municipal Bonds and Municipal Bonds that are considered by the Investment Adviser to
possess similar credit characteristics. Obligations rated in the lowest investment grade
category may have certain speculative characteristics. For example, their prices are more
volatile, economic downturns and financial setbacks may affect their prices more
negatively, and their trading market may be more limited. </FONT> </P>

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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Liquidity
of Investments. </I>Certain New York Municipal Bonds and Municipal Bonds in which the Fund
invests may lack an established secondary trading market or may be otherwise considered
illiquid. Liquidity of a security relates to the ability to easily dispose of the
security and the price to be obtained and does not generally relate to the credit risk or
likelihood of receipt of cash at maturity. Illiquid securities may trade at a discount
from comparable, more liquid investments. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Portfolio
Strategies. </I>The Fund may engage in various portfolio strategies both to seek to increase
the return of the Fund and to seek to hedge its portfolio against adverse effects from
movements in interest rates and in the securities markets. These portfolio strategies
include the use of derivatives, such as indexed securities, inverse floating rate
securities, options, futures, options on futures, interest rate swap transactions and
credit default swaps. Such strategies subject the Fund to the risk that, if the
Investment Adviser incorrectly forecasts market values, interest rates or other
applicable factors, the Fund&#146;s performance could suffer. Certain of these strategies,
such as investments in inverse floating rate securities and credit default swaps, may
provide investment leverage to the Fund&#146;s portfolio. The Fund is not required to use
derivatives or other portfolio strategies to seek to increase return or to seek to hedge
its portfolio and may choose not to do so. There can be no assurance that the Fund&#146;s
portfolio strategies will be effective. Some of the derivative strategies that the Fund
may use to seek to increase its return are riskier than its hedging transactions and have
speculative characteristics. Such strategies do not attempt to limit the Fund&#146;s risk of
loss. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>General
Risks Related to Derivatives. </I>Derivatives are financial contracts or instruments whose
value depends on, or is derived from, the value of an underlying asset, reference rate or
index (or relationship between two indices). The Fund may invest in a variety of
derivative instruments for investment purposes, hedging purposes or to seek to increase
its return, such as options, futures contracts and swap agreements. The Fund may use
derivatives as a substitute for taking a position in an underlying security or other
asset and/or as part of a strategy </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">designed to reduce exposure to other
risks, such as interest rate risk. The Fund also may use derivatives to add leverage to
the portfolio and/or to hedge against increases in the Fund&#146;s costs associated with the
dividend payments on the preferred stock, including the AMPS. The Fund also may invest in
certain derivative products that pay tax exempt income interest via a trust or
partnership through which the Fund holds interests in one or more underlying long term
municipal securities. The Fund&#146;s use of derivative instruments involves risks different
from, and possibly greater than, the risks associated with investing directly in
securities and other traditional investments. Derivatives are subject to a number of
risks such as liquidity risk, interest rate risk, credit risk, leverage risk and
management risk. They also involve the risk of mispricing or improper valuation and
correlation risk (<I>i.e.</I>, the risk that changes in the value of the derivative may not
correlate perfectly with the underlying asset, rate or index). If the Fund invests in a
derivative instrument it could lose more than the principal amount invested. Moreover,
derivatives raise certain tax, legal, regulatory and accounting issues that may not be
presented by investments in New York Municipal Bonds and Municipal Bonds, and there is
some risk that certain issues could be resolved in a manner that could adversely impact
the performance of the Fund and/or the tax exempt nature of the dividends paid by the
Fund. </FONT> </P>

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

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



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


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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Market
Disruption. </I>The terrorist attacks in the United States on September 11, 2001 had a
disruptive effect on the securities markets, some of which were closed for a four-day
period. The continued threat of similar attacks, and related events, including U.S.
military actions in Iraq and continued unrest in the Middle East, have led to increased
short term market volatility and may have long term effects on U.S. and world economies
and markets. Similar disruptions of the financial markets could adversely affect the
market prices of the Fund&#146;s portfolio securities, interest rates, auctions, secondary
trading, ratings, credit risk, inflation and other factors relating to the Fund&#146;s AMPS. </FONT> </P>

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


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


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


<div>
  <table border=0 cellspacing=0 cellpadding=0 width="90%">
    <tr valign="bottom" align="center">
      <td rowspan="2">
        <p>&nbsp;</p>
      </td>
      <td rowspan="2">
        <p>&nbsp;</p>
      </td>
      <td colspan="2" rowspan="2">
        <p><b><font size="1">For the Six <br>
          Months Ended <br>
          April 30, 2005 <br>
          (unaudited) </font></b>
        <hr align="center" noshade size="1" width="100%">
      </td>
      <td colspan="20">
        <p><b><font size="1">For the Year Ended October 31, </font></b>
        <hr align="center" noshade size="1" width="98%">
      </td>
    </tr>
    <tr valign="bottom" align="center">
      <td colspan="2">
        <p><b><font size="1">&nbsp;2004 </font></b>
        <hr align="center" noshade size="1" width="60%">
      </td>
      <td colspan="2">
        <p><b><font size="1">&nbsp;2003 </font></b>
        <hr align="center" noshade size="1" width="60%">
      </td>
      <td colspan="2">
        <p><b><font size="1">2002 </font></b>
        <hr align="center" noshade size="1" width="60%">
      </td>
      <td colspan="2"> <b><font size="1">2001&#135; </font></b>
        <hr align="center" noshade size="1" width="60%">
      </td>
      <td colspan="2">
        <p><b><font size="1">2000&#135; </font></b>
        <hr align="center" noshade size="1" width="60%">
      </td>
      <td colspan="2">
        <p><b><font size="1">1999&#135; </font></b>
        <hr align="center" noshade size="1" width="60%">
      </td>
      <td colspan="2">
        <p><b><font size="1">1998&#135;&nbsp; </font></b>
        <hr align="center" noshade size="1" width="60%">
      </td>
      <td colspan="2">
        <p><b><font size="1">&nbsp;1997 </font></b>
        <hr align="center" noshade size="1" width="60%">
      </td>
      <td colspan="2">
        <p><b><font size="1">&nbsp;1996 </font></b>
        <hr align="center" noshade size="1" width="60%">
      </td>
      <td colspan="2">
        <p><b><font size="1">&nbsp;1995 </font></b>
        <hr align="center" noshade size="1" width="60%">
      </td>
    </tr>
    <tr valign="bottom">
      <td><font size="1"><b>Per Share Operating </b> </font><b><font size="1">
        <br>
        &nbsp;&nbsp; Performance </font></b></td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
    </tr>
    <tr valign="bottom">
      <td><font size="1">Net asset value, </font> <br>
        &nbsp;&nbsp;<font size="1">beginning of period </font></td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">$14.81 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">$14.81 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">$14.83 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">$15.01 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">$13.76 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">$13.02 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">$16.26 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">$15.89 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">$15.49 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">$15.64 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">$14.17 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1">Investment income&#151;net </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">.47 </font></p>
      </td>
      <td align="left">
        <p><font size="1">## </font></p>
      </td>
      <td align="right">
        <p><font size="1">.91 </font></p>
      </td>
      <td align="left">
        <p><font size="1">## </font></p>
      </td>
      <td align="right">
        <p><font size="1">.97 </font></p>
      </td>
      <td align="left">
        <p><font size="1">## </font></p>
      </td>
      <td align="right">
        <p><font size="1">.94 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">.96 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">.87 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">1.03 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">1.12 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">1.15 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">1.15 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">1.19 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
    </tr>
    <tr valign="bottom">
      <td><font size="1">Realized and unrealized <br>
        &nbsp;&nbsp;gain (loss)&#151;net </font></td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">(.05 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">(.01 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">(.09 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">(.19 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">1.26 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">.90 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">(2.47 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">.61 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">.48 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">(.03 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">1.58 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1">Less dividends and distributions to </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1">&nbsp;&nbsp;Preferred Stock shareholders: </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1">&nbsp;&nbsp;Investment income&#151;net </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">(.05 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">(.06 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">(.07 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">(.10 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">(.20 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">(.25 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">(.16 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">(.19 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1">&nbsp;&nbsp;Realized gain&#151;net </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&#134; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">(.07 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">(.08 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1">In excess of realized <br>
          &nbsp;&nbsp; gain&#151;net </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">(.03 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left"><font size="1"> </font></td>
    </tr>
    <tr valign="bottom">
      <td>&nbsp;</td>
      <td>&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1">Total from investment <br>
          &nbsp;&nbsp; </font><font size="1">operations </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">.37 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">.84 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">.81 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">.65 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">2.02 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">1.52 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">(1.70 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">1.46 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">1.63 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">1.12 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">2.77 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>&nbsp;</td>
      <td>&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1">Less dividends and distributions </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1">&nbsp;&nbsp;to Common Stock shareholders: </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1">&nbsp;&nbsp;Investment income&#151;net </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">(.42 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">(.84 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">(.83 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">(.83 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">(.77 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">(.78 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">(.89 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">(.90 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">(.91 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">(.91 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">(.92 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1">&nbsp;&nbsp;Realized gain&#151;net </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p><font size="1"> </font></p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">(.45 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">(.19 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">(.07 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">(.10 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td><font size="1">In excess of realized gain&#151;net </font></td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">(.20 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">(.10 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left"><font size="1"> </font></td>
    </tr>
    <tr valign="bottom">
      <td>&nbsp;</td>
      <td>&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1">Total dividends and distributions <br>
          &nbsp;&nbsp; to Common Stock shareholders </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">(.42 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">(.84 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">(.83 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">(.83 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">(.77 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">(.78 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">(1.54 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">(1.09 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">(.98 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">(1.01 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">(1.02 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>&nbsp;</td>
      <td>&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1">Effect of Preferred Stock activity: </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1">Dividends and distributions to </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1">&nbsp;&nbsp;Preferred Stock shareholders: </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1">&nbsp;&nbsp;Investment income&#151;net </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">(.23 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">(.23 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">(.26 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1">&nbsp;&nbsp;Realized gain&#151;net </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">(.02 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">(.02 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>&nbsp;<font size="1">In excess of realized gain&#151;net </font></td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left"><font size="1"> </font></td>
      <td align="right"><font size="1"> </font></td>
      <td align="left"><font size="1"> </font></td>
      <td align="right"><font size="1"> </font></td>
      <td align="left"><font size="1"> </font></td>
      <td align="right"><font size="1"> </font></td>
      <td align="left"><font size="1"> </font></td>
      <td align="right"><font size="1"> </font></td>
      <td align="left"><font size="1"> </font></td>
      <td align="right"><font size="1"> </font></td>
      <td align="left"><font size="1"> </font></td>
      <td align="right"><font size="1"> </font></td>
      <td align="left"><font size="1"> </font></td>
      <td align="right"><font size="1"> </font></td>
      <td align="left"><font size="1"> </font></td>
      <td align="right"><font size="1"> </font></td>
      <td align="left"><font size="1"> </font></td>
      <td align="right"><font size="1"> </font></td>
      <td align="left"><font size="1"> </font></td>
      <td align="right"><font size="1"> </font></td>
      <td align="left"><font size="1"> </font></td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1">Total effect of Preferred Stock activity </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">(.25 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">(.26 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
      <td align="right">
        <p><font size="1">(.28 </font></p>
      </td>
      <td align="left">
        <p><font size="1">) </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>&nbsp;</td>
      <td>&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1">Net asset value, end of period </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">$14.76 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">$14.81 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">$ 14.81 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">$14.83 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">$15.01 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">$13.76 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">$13.02 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">$16.26 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">$15.89 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">$15.49 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">$15.64 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>&nbsp;</td>
      <td>&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td><font size="1">Market price per share, end <br>
        &nbsp;&nbsp; of period </font></td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">$13.23 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">$13.20 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">$13.25 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">$13.36 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">$14.02 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">$12.25 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">$12.4375 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">$16.3125 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">$15.875 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">$14.875 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">$14.375 </font></p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>&nbsp;</td>
      <td>&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1"><b>Total Investment Return**</b> </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p>&nbsp;</p>
      </td>
      <td align="left">
        <p>&nbsp;</p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1">Based on net asset value per share </font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="1">2.91 </font></p>
      </td>
      <td align="left">
        <p><font size="1">%# </font></p>
      </td>
      <td align="right">
        <p><font size="1">6.53 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">6.19 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">4.97 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">15.57 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">12.79 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">(11.40 </font></p>
      </td>
      <td align="left">
        <p><font size="1">%) </font></p>
      </td>
      <td align="right">
        <p><font size="1">9.53 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">9.37 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">6.04 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">18.89 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>&nbsp;</td>
      <td>&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1">Based on market price per share </font></p>
      </td>
      <td>
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">3.49 </font></p>
      </td>
      <td align="left">
        <p><font size="1">%# </font></p>
      </td>
      <td align="right">
        <p><font size="1">6.13 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">5.45 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">1.24 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">21.26 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">5.11 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">(15.63 </font></p>
      </td>
      <td align="left">
        <p><font size="1">%) </font></p>
      </td>
      <td align="right">
        <p><font size="1">9.99 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">13.79 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">10.79 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">26.40 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>&nbsp;</td>
      <td>&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td><font size="1"><b>Ratios Based on Average Net <br>
        &nbsp;&nbsp; </b> </font><b><font size="1">Assets of Common Stock </font></b></td>
      <td>
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td><font size="1">Total expenses, net of <br>
        &nbsp;&nbsp; </font><font size="1">reimbursement and excluding <br>
        &nbsp;&nbsp; </font><font size="1">reorganization expenses*** </font></td>
      <td>
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">.94 </font></p>
      </td>
      <td align="left">
        <p><font size="1">%* </font></p>
      </td>
      <td align="right">
        <p><font size="1">.94 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">.94 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">.96 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">.97 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">1.01 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">1.02 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">.98 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">1.02 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">1.02 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">1.05 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>&nbsp;</td>
      <td>&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
    </tr>
</table>
</div>



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






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



<div>
  <table border=0 cellspacing=0 cellpadding=0 width="90%">
    <tr valign="bottom" align="center">
      <td rowspan="2">
        <p>&nbsp;</p>
      </td>
      <td rowspan="2">
        <p>&nbsp;</p>
      </td>
      <td colspan="2" rowspan="2">
        <p><b><font size="1">For the Six <br>
          Months Ended <br>
          April 30, 2005 <br>
          (unaudited) </font></b>
        <hr align="center" noshade size="1" width="100%">
      </td>
      <td colspan="20">
        <p><b><font size="1">For the Year Ended October 31, </font></b>
        <hr align="center" noshade size="1" width="98%">
      </td>
    </tr>
    <tr valign="bottom" align="center">
      <td colspan="2">
        <p><b><font size="1">&nbsp;2004 </font></b>
        <hr align="center" noshade size="1" width="60%">
      </td>
      <td colspan="2">
        <p><b><font size="1">&nbsp;2003 </font></b>
        <hr align="center" noshade size="1" width="60%">
      </td>
      <td colspan="2">
        <p><b><font size="1">2002 </font></b>
        <hr align="center" noshade size="1" width="60%">
      </td>
      <td colspan="2"> <b><font size="1">2001&#135; </font></b>
        <hr align="center" noshade size="1" width="60%">
      </td>
      <td colspan="2">
        <p><b><font size="1">2000&#135; </font></b>
        <hr align="center" noshade size="1" width="60%">
      </td>
      <td colspan="2">
        <p><b><font size="1">1999&#135; </font></b>
        <hr align="center" noshade size="1" width="60%">
      </td>
      <td colspan="2">
        <p><b><font size="1">1998&#135;&nbsp; </font></b>
        <hr align="center" noshade size="1" width="60%">
      </td>
      <td colspan="2">
        <p><b><font size="1">&nbsp;1997 </font></b>
        <hr align="center" noshade size="1" width="60%">
      </td>
      <td colspan="2">
        <p><b><font size="1">&nbsp;1996 </font></b>
        <hr align="center" noshade size="1" width="60%">
      </td>
      <td colspan="2">
        <p><b><font size="1">&nbsp;1995 </font></b>
        <hr align="center" noshade size="1" width="60%">
      </td>
    </tr>
    <tr valign="bottom">
      <td><font size="1">Total expenses, excluding <br>
        &nbsp;&nbsp; </font><font size="1">reorganization expenses*** </font></td>
      <td>
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">.94 </font></p>
      </td>
      <td align="left">
        <p><font size="1">%* </font></p>
      </td>
      <td align="right">
        <p><font size="1">.95 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">.94 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">.96 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">.97 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">1.01 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">1.02 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">.98 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">1.02 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">1.02 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">1.05 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>&nbsp;</td>
      <td>&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td height="10">
        <p><font size="1">Total expenses*** </font></p>
      </td>
      <td height="10">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right" height="10">
        <p><font size="1">.94 </font></p>
      </td>
      <td align="left" height="10">
        <p><font size="1">%* </font></p>
      </td>
      <td align="right" height="10">
        <p><font size="1">.95 </font></p>
      </td>
      <td align="left" height="10">
        <p><font size="1">% </font></p>
      </td>
      <td align="right" height="10">
        <p><font size="1">.94 </font></p>
      </td>
      <td align="left" height="10">
        <p><font size="1">% </font></p>
      </td>
      <td align="right" height="10">
        <p><font size="1">.96 </font></p>
      </td>
      <td align="left" height="10">
        <p><font size="1">% </font></p>
      </td>
      <td align="right" height="10">
        <p><font size="1">.97 </font></p>
      </td>
      <td align="left" height="10">
        <p><font size="1">% </font></p>
      </td>
      <td align="right" height="10">
        <p><font size="1">1.16 </font></p>
      </td>
      <td align="left" height="10">
        <p><font size="1">% </font></p>
      </td>
      <td align="right" height="10">
        <p><font size="1">1.02 </font></p>
      </td>
      <td align="left" height="10">
        <p><font size="1">% </font></p>
      </td>
      <td align="right" height="10">
        <p><font size="1">.98 </font></p>
      </td>
      <td align="left" height="10">
        <p><font size="1">% </font></p>
      </td>
      <td align="right" height="10">
        <p><font size="1">1.02 </font></p>
      </td>
      <td align="left" height="10">
        <p><font size="1">% </font></p>
      </td>
      <td align="right" height="10">
        <p><font size="1">1.02 </font></p>
      </td>
      <td align="left" height="10">
        <p><font size="1">% </font></p>
      </td>
      <td align="right" height="10">
        <p><font size="1">1.05 </font></p>
      </td>
      <td align="left" height="10">
        <p><font size="1">% </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1">Total investment income&#151;net*** </font></p>
      </td>
      <td>
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">6.37 </font></p>
      </td>
      <td align="left">
        <p><font size="1">%* </font></p>
      </td>
      <td align="right">
        <p><font size="1">6.23 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">6.49 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">6.37 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">6.66 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">7.21 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">6.96 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">7.07 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">7.45 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">7.46 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">8.07 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>&nbsp;</td>
      <td>&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td><font size="1">Amount of dividends to <br>
        &nbsp;&nbsp; </font><font size="1">Preferred Stock shareholders </font></td>
      <td>
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">.73 </font></p>
      </td>
      <td align="left">
        <p><font size="1">%* </font></p>
      </td>
      <td align="right">
        <p><font size="1">.42 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">.50 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">.66 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">1.38 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">1.93 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">1.04 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">1.21 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">1.51 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">1.49 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">1.77 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>&nbsp;</td>
      <td>&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td><font size="1">Investment income&#151;net, to <br>
        &nbsp;&nbsp; </font><font size="1">Common Stock shareholders </font></td>
      <td>
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">5.64 </font></p>
      </td>
      <td align="left">
        <p><font size="1">%* </font></p>
      </td>
      <td align="right">
        <p><font size="1">5.81 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">5.99 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">5.71 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">5.28 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">5.28 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">5.92 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">5.86 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">5.94 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">5.97 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">6.30 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>&nbsp;</td>
      <td>&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td><font size="1"><b>Ratios Based on Average <br>
        &nbsp;&nbsp; </b> </font><b><font size="1">Net Assets of <br>
        <b>&nbsp;&nbsp; </b> </font><b><font size="1"></font></b><font size="1">Preferred
        Stock </font></b></td>
      <td>
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td><font size="1">&nbsp;&nbsp;Dividends to Preferred Stock <br>
        &nbsp;&nbsp; </font><font size="1">shareholders </font></td>
      <td>
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">1.64 </font></p>
      </td>
      <td align="left">
        <p><font size="1">%* </font></p>
      </td>
      <td align="right">
        <p><font size="1">.95 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">1.13 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">1.49 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">3.07 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">3.91 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">2.30 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">2.77 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">3.33 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">3.25 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">3.68 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>&nbsp;</td>
      <td>&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1"><b>Supplemental Data </b> </font></p>
      </td>
      <td>
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1">Net assets applicable to </font></p>
      </td>
      <td>
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1">&nbsp;&nbsp;Common Stock, end of </font></p>
      </td>
      <td>
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1">&nbsp;&nbsp;period (in thousands) </font></p>
      </td>
      <td>
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$582,117 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$584,248 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$584,025 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$584,793 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$591,942 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$542,709 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$163,807 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$199,582 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$192,107 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$186,611 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$188,354 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>&nbsp;</td>
      <td>&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td><font size="1">Preferred Stock outstanding, <br>
        &nbsp;&nbsp; </font><font size="1">end of period (in thousands) </font></td>
      <td>
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$259,000 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$259,000 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$259,000 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$259,000 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$259,000 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$259,000 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$85,000 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$85,000 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$85,000 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$85,000 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$85,000 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>&nbsp;</td>
      <td>&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1">Portfolio turnover </font></p>
      </td>
      <td>
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">15.64 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">19.91 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">51.89 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">87.56 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">83.08 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">148.51 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">99.71 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">89.76 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">81.73 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">80.59 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
      <td align="right">
        <p><font size="1">88.17 </font></p>
      </td>
      <td align="left">
        <p><font size="1">% </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>&nbsp;</td>
      <td>&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1"><b>Leverage</b> </font></p>
      </td>
      <td>
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1">Asset coverage per $1,000 </font></p>
      </td>
      <td>
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$3,248 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$3,256 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$3,255 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$3,258 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$3,285 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$3,095 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$2,927 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$3,348 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$3,260 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$3,195 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$3,216 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>&nbsp;</td>
      <td>&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td><font size="1">Liquidation preference <br>
        &nbsp;&nbsp; </font><font size="1">per share </font></td>
      <td>
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$25,000 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$25,000 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$25,000 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$25,000 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$25,000 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$25,000 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$25,000 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$25,000 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$25,000 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$25,000 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$25,000 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>&nbsp;</td>
      <td>&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td><font size="1">Average market value <br>
        &nbsp;&nbsp; </font><font size="1">per share### </font></td>
      <td>
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$25,000 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$25,000 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$25,000 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$25,000 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$25,000 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$25,000 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$25,000 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$25,000 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$25,000 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$25,000 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$25,000 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>&nbsp;</td>
      <td>&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td><font size="1"><b>Dividends Per Share <br>
        </b> </font><b><font size="1">&nbsp;<b>&nbsp;&nbsp; </b> </font><b><font size="1"></font></b><font size="1">on
        Preferred Stock <br>
        <b>&nbsp;&nbsp; </b> </font><b><font size="1"></font></b><font size="1">Outstanding&#134;&#134;
        </font></b></td>
      <td>
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1">Series A&#151; </font></p>
      </td>
      <td>
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1">&nbsp;&nbsp;Investment income&#151;net </font></p>
      </td>
      <td>
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$224 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$254 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$249 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$334 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$791 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$980 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$566 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$695 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$826 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$819 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$935 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>&nbsp;</td>
      <td>&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1">Series B&#151; </font></p>
      </td>
      <td>
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1">&nbsp;&nbsp;Investment income&#151;net </font></p>
      </td>
      <td>
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$189 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$203 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$232 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$305 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$731 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$941 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$583 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$689 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$837 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$807 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$904 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>&nbsp;</td>
      <td>&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1">Series C&#151; </font></p>
      </td>
      <td>
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1">&nbsp;&nbsp;Investment income&#151;net </font></p>
      </td>
      <td>
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$194 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$240 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$214 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$356 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$774 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$661 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>&nbsp;</td>
      <td>&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1">Series D&#151; </font></p>
      </td>
      <td>
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1">&nbsp;&nbsp;Investment income&#151;net </font></p>
      </td>
      <td>
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$185 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$231 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$454 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$503 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$715 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$634 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>&nbsp;</td>
      <td>&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1">Series E&#151; </font></p>
      </td>
      <td>
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="1">&nbsp;&nbsp;Investment income&#151;net </font></p>
      </td>
      <td>
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$233 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$251 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$255 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$356 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$812 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">$653 </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
      <td align="right">
        <p><font size="1">&#151; </font></p>
      </td>
      <td align="left">
        <p><font size="1">&nbsp; </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>&nbsp;</td>
      <td>&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
      <td align="right">
        <hr align="right" noshade size="1" width="80%">
      </td>
      <td align="left">&nbsp;</td>
    </tr>
  </table>
</div>





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

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

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

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

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

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

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

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

<!-- MARKER FORMAT-SHEET="Footnote Right 2" FSL="Project" -->
<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="2"> &#134;&#134;</FONT></TD><TD WIDTH=2%><FONT SIZE="2"></FONT></TD><TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="2">Series
C, Series D and Series E were issued on March 6, 2000.</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Footnote Right 2" FSL="Project" -->
<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="2">  &#135;</FONT></TD><TD WIDTH=2%><FONT SIZE="2"></FONT></TD><TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="2">Certain
prior year amounts have been reclassified to conform to current year presentation.</FONT></TD></TR></TABLE>

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





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




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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MuniYield
New York Insured Fund, Inc. (the &#147;Fund&#148;) is a non-diversified, closed-end fund. The Fund
was incorporated under the laws of the State of Maryland on December 17, 1991, and has
registered under the Investment Company Act of 1940, as amended (the &#147;1940 Act&#148;). The
Fund&#146;s principal executive office is located at 800 Scudders Mill Road, Plainsboro, New
Jersey 08536, and its telephone number is (609) 282-2800. </FONT></P>

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

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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
net proceeds of this offering will be approximately $44,400,000 after payment of offering
expenses (estimated to be approximately $150,000) and the deduction of the underwriting
discount. </FONT></P>

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

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

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

<div>

  <table border=0 cellspacing=0 cellpadding=0 width="640">
    <tr valign="bottom" align="center">
      <td width=456>
        <p>&nbsp;</p>
      </td>
      <td width=10>
        <p>&nbsp;</p>
      </td>
      <td colspan="2">
        <p><font size="1"><b>Actual</b> </font>
        <hr noshade align="center" size="1" width="40">
      </td>
      <td colspan="2">
        <p><font size="1"><b>As Adjusted</b> </font>
        <hr noshade align="center" size="1" width="60">
      </td>
    </tr>
    <tr valign="bottom">
      <td width=456><font size="2">Preferred Stock (10,360 shares of Other AMPS
        authorized, issued and <br>
        &nbsp;&nbsp;  </font><font size="2">outstanding at $25,000 per share liquidation
        preference, plus accumulated <br>
        &nbsp;&nbsp; </font><font size="2">but unpaid dividends; 12,160 shares
        of AMPS and Other AMPS authorized, <br>
        &nbsp;&nbsp; </font><font size="2"></font><font size="2">issued </font><font size="2">and
        outstanding, as adjusted, at $25,000 per share liquidation preference,
        <br>
        &nbsp;&nbsp; </font><font size="2"></font><font size="2"> </font><font size="2">plus
        </font><font size="2">accumulated but unpaid dividends) </font></td>
      <td width=10>
        <p>&nbsp;</p>
      </td>
      <td align="right" width=76>
        <p><font size="2">$259,119,632 </font></p>
      </td>
      <td align="left" width=10>
        <p>&nbsp;</p>
      </td>
      <td align="right" width=84>
        <p><font size="2">$304,119,632 </font></p>
      </td>
      <td align="left" width=6>
        <p>&nbsp;</p>
      </td>
    </tr>
    <tr valign="bottom">
      <td width=456>&nbsp;</td>
      <td width=10>&nbsp;</td>
      <td align="right" width=76>
        <hr align="right" size="1" noshade width="95%">
      </td>
      <td align="left" width=10>&nbsp;</td>
      <td align="right" width=84>
        <hr align="right" size="1" noshade width="95%">
      </td>
      <td align="left" width=6>&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td width=456>
        <p><font size="2">Common Stock, par value $.10 per share (199,989,640
          shares authorized,  </font></p>
      </td>
      <td width=10>
        <p>&nbsp;</p>
      </td>
      <td align="right" width=76>
        <p>&nbsp;</p>
      </td>
      <td align="left" width=10>
        <p>&nbsp;</p>
      </td>
      <td align="right" width=84>
        <p>&nbsp;</p>
      </td>
      <td align="left" width=6>
        <p>&nbsp;</p>
      </td>
    </tr>
    <tr valign="bottom">
      <td width=456>
        <p><font size="2">&nbsp;&nbsp;39,445,962 shares issued and outstanding;
          199,987,840 shares authorized,  </font></p>
      </td>
      <td width=10>
        <p>&nbsp;</p>
      </td>
      <td align="right" width=76>
        <p>&nbsp;</p>
      </td>
      <td align="left" width=10>
        <p>&nbsp;</p>
      </td>
      <td align="right" width=84>
        <p>&nbsp;</p>
      </td>
      <td align="left" width=6>
        <p>&nbsp;</p>
      </td>
    </tr>
    <tr valign="bottom">
      <td width=456>
        <p><font size="2">&nbsp;&nbsp;39,445,962 shares issued and outstanding,
          as adjusted) </font></p>
      </td>
      <td width=10>
        <p>&nbsp;</p>
      </td>
      <td align="right" width=76>
        <p><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;3,944,596 </font></p>
      </td>
      <td align="left" width=10>
        <p>&nbsp;</p>
      </td>
      <td align="right" width=84>
        <p><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;3,944,596 </font></p>
      </td>
      <td align="left" width=6>
        <p>&nbsp;</p>
      </td>
    </tr>
    <tr valign="bottom">
      <td width=456>
        <p><font size="2">Paid-in capital in excess of par value </font></p>
      </td>
      <td width=10>
        <p>&nbsp;</p>
      </td>
      <td align="right" width=76>
        <p><font size="2">557,669,466 </font></p>
      </td>
      <td align="left" width=10>
        <p>&nbsp;</p>
      </td>
      <td align="right" width=84>
        <p><font size="2">557,069,466 </font></p>
      </td>
      <td align="left" width=6>
        <p>&nbsp;</p>
      </td>
    </tr>
    <tr valign="bottom">
      <td width=456>
        <p><font size="2">Undistributed investment income&#151;net </font></p>
      </td>
      <td width=10>
        <p>&nbsp;</p>
      </td>
      <td align="right" width=76>
        <p><font size="2">7,232,123 </font></p>
      </td>
      <td align="left" width=10>
        <p>&nbsp;</p>
      </td>
      <td align="right" width=84>
        <p><font size="2">7,232,123 </font></p>
      </td>
      <td align="left" width=6>
        <p>&nbsp;</p>
      </td>
    </tr>
    <tr valign="bottom">
      <td width=456>
        <p><font size="2">Accumulated realized capital losses&#151;net </font></p>
      </td>
      <td width=10>
        <p>&nbsp;</p>
      </td>
      <td align="right" width=76>
        <p><font size="2">(33,817,432 </font></p>
      </td>
      <td align="left" width=10>
        <p><font size="2">) </font></p>
      </td>
      <td align="right" width=84>
        <p><font size="2">(33,817,432 </font></p>
      </td>
      <td align="left" width=6>
        <p><font size="2">) </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td width=456>
        <p><font size="2">Unrealized appreciation&#151;net </font></p>
      </td>
      <td width=10>
        <p>&nbsp;</p>
      </td>
      <td align="right" width=76>
        <p><font size="2">47,088,204 </font></p>
      </td>
      <td align="left" width=10>
        <p>&nbsp;</p>
      </td>
      <td align="right" width=84>
        <p><font size="2">47,088,204 </font></p>
      </td>
      <td align="left" width=6>
        <p>&nbsp;</p>
      </td>
    </tr>
    <tr valign="bottom">
      <td width=456>&nbsp;</td>
      <td width=10>&nbsp;</td>
      <td align="right" width=76>
        <hr align="right" size="1" noshade width="95%">
      </td>
      <td align="left" width=10>&nbsp;</td>
      <td align="right" width=84>
        <hr align="right" size="1" noshade width="95%">
      </td>
      <td align="left" width=6>&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td width=456>
        <p><font size="2">Net assets applicable to outstanding common stock </font></p>
      </td>
      <td width=10>
        <p>&nbsp;</p>
      </td>
      <td align="right" width=76>
        <p><font size="2">$582,116,957 </font></p>
      </td>
      <td align="left" width=10>
        <p>&nbsp;</p>
      </td>
      <td align="right" width=84>
        <p><font size="2">$581,516,957 </font></p>
      </td>
      <td align="left" width=6>
        <p>&nbsp;</p>
      </td>
    </tr>
    <tr valign="bottom">
      <td width=456>&nbsp;</td>
      <td width=10>&nbsp;</td>
      <td align="right" width=76>
        <hr align="right" size="1" noshade width="95%">
      </td>
      <td align="left" width=10>&nbsp;</td>
      <td align="right" width=84>
        <hr align="right" size="1" noshade width="95%">
      </td>
      <td align="left" width=6>&nbsp;</td>
    </tr>
  </table>
</div>


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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of April 30, 2005, approximately 99.64% of the market value of the Fund&#146;s portfolio was
invested in long term and intermediate term municipal obligations and approximately 0.36%
of the market value of the Fund&#146;s portfolio was invested in short term tax exempt
securities. The following table sets forth certain information with respect to the
composition of the Fund&#146;s long term municipal obligation investment portfolio as of April
30, 2005. </FONT></P>

<div>
  <table border=0 cellspacing=0 cellpadding=0 width="600">
    <tr align="center" valign="bottom">
      <td rowspan="2" width=123>
        <p>&nbsp;</p>
        <p><font size="1"><b>Moody&#146;s*</b> </font>
        <hr noshade align="center" size="1" width="50">
      </td>
      <td rowspan="2" width=94>
        <p>&nbsp;</p>
        <p><font size="1"><b>S&amp;P*</b> </font>
        <hr noshade align="center" size="1" width="40">
      </td>
      <td rowspan="2" colspan="2">
        <p><font size="1"><b>Number of <br>
          Issues</b> </font>
        <hr noshade align="center" size="1" width="60">
      </td>
      <td rowspan="2" colspan="2">
        <p><font size="1"><b>Valuem <br>
          (in thousands)</b> </font>
        <hr noshade align="center" size="1" width="60">
      </td>
      <td rowspan="2" colspan="2"><font size="1"><b>Percent</b> </font>
        <hr noshade align="center" size="1" width="40">
      </td>
    </tr>
    <tr align="center" valign="bottom"> </tr>
    <tr align="center" valign="bottom">
      <td width=123>
        <p><font size="2">Aaa</font></p>
      </td>
      <td width=94>
        <p><font size="2">AAA</font></p>
      </td>
      <td align="right" width=69>
        <p><font size="2">154</font></p>
      </td>
      <td align="right" width=41>&nbsp;</td>
      <td align="right" width=93>
        <p><font size="2">$726,508</font></p>
      </td>
      <td width=52>&nbsp;</td>
      <td align="right" width=91>
        <p><font size="2">88.17</font></p>
      </td>
      <td align="left" width=37><font size="2">%</font></td>
    </tr>
    <tr align="center" valign="bottom">
      <td width=123>
        <p><font size="2">Aa</font></p>
      </td>
      <td width=94>
        <p><font size="2">AA</font></p>
      </td>
      <td align="right" width=69>
        <p><font size="2">7</font></p>
      </td>
      <td align="right" width=41>&nbsp;</td>
      <td align="right" width=93>
        <p><font size="2">10,677</font></p>
      </td>
      <td width=52>&nbsp;</td>
      <td align="right" width=91>
        <p><font size="2">1.30</font></p>
      </td>
      <td align="left" width=37>&nbsp;</td>
    </tr>
    <tr align="center" valign="bottom">
      <td width=123>
        <p><font size="2">A</font></p>
      </td>
      <td width=94>
        <p><font size="2">A</font></p>
      </td>
      <td align="right" width=69>
        <p><font size="2">20</font></p>
      </td>
      <td align="right" width=41>&nbsp;</td>
      <td align="right" width=93>
        <p><font size="2">86,027</font></p>
      </td>
      <td width=52>&nbsp;</td>
      <td align="right" width=91>
        <p><font size="2">10.44</font></p>
      </td>
      <td align="left" width=37>&nbsp;</td>
    </tr>
    <tr align="center" valign="bottom">
      <td width=123>
        <p><font size="2">Baa </font></p>
      </td>
      <td width=94>
        <p><font size="2">BBB </font></p>
      </td>
      <td align="right" width=69>
        <p><font size="2">1 </font></p>
      </td>
      <td align="right" width=41>&nbsp;</td>
      <td align="right" width=93>
        <p><font size="2">750 </font></p>
      </td>
      <td width=52>&nbsp;</td>
      <td align="right" width=91>
        <p><font size="2">0.09 </font></p>
      </td>
      <td align="left" width=37>&nbsp;</td>
    </tr>
    <tr align="center" valign="bottom">
      <td width=123>&nbsp;</td>
      <td width=94>&nbsp;</td>
      <td align="right" width=69>
        <hr align="right" size="1" noshade width="40%">
      </td>
      <td align="right" width=41>&nbsp;</td>
      <td align="right" width=93>
        <hr align="right" size="1" noshade width="55%">
      </td>
      <td width=52>&nbsp;</td>
      <td align="right" width=91>
        <hr align="right" size="1" noshade width="35%">
      </td>
      <td align="left" width=37>&nbsp;</td>
    </tr>
    <tr align="center" valign="bottom">
      <td width=123>
        <p><font size="2">Total </font></p>
      </td>
      <td width=94>
        <p>&nbsp;</p>
      </td>
      <td align="right" width=69>
        <p><font size="2">182 </font></p>
      </td>
      <td align="right" width=41>&nbsp;</td>
      <td align="right" width=93>
        <p><font size="2">$823,962 </font></p>
      </td>
      <td width=52>&nbsp;</td>
      <td align="right" width=91>
        <p><font size="2">100 </font></p>
      </td>
      <td align="left" width=37><font size="2">% </font></td>
    </tr>
    <tr align="center" valign="bottom">
      <td width=123>&nbsp;</td>
      <td width=94>&nbsp;</td>
      <td align="right" width=69>
        <hr align="right" size="2" noshade width="40%">
      </td>
      <td align="right" width=41>&nbsp;</td>
      <td align="right" width=93>
        <hr align="right" size="2" noshade width="55%">
      </td>
      <td width=52>&nbsp;</td>
      <td align="right" width=91>
        <hr align="right" size="2" noshade width="35%">
      </td>
      <td align="left" width=37>&nbsp;</td>
    </tr>
  </table>

</div>


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


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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund&#146;s investment objective is to provide shareholders with as high a level of current
income exempt from Federal income taxes and New York State and New York City personal
income taxes as is consistent with its investment policies and prudent investment
management. The Fund seeks to achieve its investment objective by investing, as a
fundamental policy, at least 80% of an aggregate of the Fund&#146;s net assets (including
proceeds from the issuance of any preferred stock) and the proceeds of any borrowings for
investment purposes, in a portfolio of municipal obligations issued by or on behalf of
the State of New York, its political subdivisions, agencies and instrumentalities and by
other qualifying issuers, each of which pays interest that, in the opinion of bond
counsel to the issuer, is excludable from gross income for Federal income tax purposes
(except that the interest may be includable in taxable income for purposes of the Federal
alternative minimum tax) and exempt from New York State and New York City personal income
taxes (&#147;New York Municipal Bonds&#148;). The Fund also may invest in municipal obligations
issued by or on behalf of states, territories and possessions of the United States and
their political subdivisions, agencies or instrumentalities, which pay interest that is
excludable from gross income for Federal income tax purposes, in the opinion of bond
counsel to the issuer, but is not exempt from New York State and New York City personal
income taxes (&#147;Municipal Bonds&#148;). In general, the Fund does not intend for its
investments to earn a large amount of interest income that is (i) includable in gross
income for Federal income tax purposes or (ii) not exempt from New York State and New
York City personal income taxes. There can be no assurance that the Fund&#146;s investment
objective will be realized. Unless otherwise noted, the term &#147;Municipal Bonds&#148; also
includes New York Municipal Bonds. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund&#146;s investment objective and its policy of investing at least 80% of an aggregate of
the Fund&#146;s net assets (including proceeds from the issuance of any preferred stock) and
the proceeds of any borrowings for investment purposes, in New York Municipal Bonds are
fundamental policies that may not be changed without the approval of a majority of the
outstanding voting securities of the Fund (as defined in the 1940 Act). Under normal
circumstances and after the investment period following this offering (not expected to
exceed three months), the Fund invests, as a non-fundamental policy, at least 80% of an
aggregate of the Fund&#146;s net assets (including proceeds from the issuance of any preferred
stock) and the proceeds of any borrowings for investment purposes, in Municipal Bonds
that are covered by insurance guaranteeing the timely payment of principal at maturity
and interest when due. This is a non-fundamental policy and may be changed by the Fund&#146;s
Board of Directors without stockholder approval; provided that stockholders are given at
least 60 days&#146; prior notice of any change as required by the 1940 Act. There can be no
assurance that the Fund&#146;s investment objective will be realized. </FONT></P>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
normal market conditions, the Fund expects to invest primarily in a portfolio of long
term Municipal Bonds that are commonly referred to as &#147;investment grade&#148; securities,
which are obligations rated at the time of purchase within the four highest quality
ratings as determined by either Moody&#146;s Investors Service, Inc. (&#147;Moody&#146;s&#148;) (currently
Aaa, Aa, A and Baa), Standard &amp; Poor&#146;s (&#147;S&amp;P&#148;) (currently AAA, AA, A and BBB) or Fitch
Ratings (&#147;Fitch&#148;) (currently AAA, AA, A and BBB). In the case of short term notes, the
investment grade rating categories are SP-1+ through SP-2 for S&amp;P, MIG-1 through
MIG-3 for Moody&#146;s and F-1+ through F-3 for Fitch. In the case of tax exempt
commercial paper, the investment grade rating categories are A-1+ through A-3 for S&amp;P,Prime-1
through Prime-3 for Moody&#146;s and F-1+ through F-3 for Fitch. Obligations ranked in
the lowest investment grade rating category (BBB, SP-2 and A-3 for S&amp;P; Baa, MIG-3 and
Prime-3 for Moody&#146;s and BBB and F-3 for Fitch), while considered &#147;investment grade,&#148; may
have certain speculative characteristics. There may be sub-categories or gradations
indicating relative standing within the rating categories set forth above. In assessing
the quality of Municipal Bonds with respect to the foregoing requirements, the Investment
Adviser takes into account the Municipal Bond insurance as well as the nature of any
letters of credit or similar credit enhancement to which particular Municipal Bonds are
entitled and the creditworthiness of the financial institution that provided such
Municipal Bond insurance or credit enhancement. Consequently, if Municipal Bonds are
covered by insurance policies issued by insurers whose claims-paying ability is rated AAA
by S&amp;P or Fitch or Aaa by Moody&#146;s, the Investment Adviser may consider such Municipal
Bonds to be equivalent to securities rated AAA- or Aaa-, as the case may be, even though
such Municipal Bonds would generally be assigned a lower rating  </FONT></P>

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<!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>if the rating were based primarily
upon the credit characteristics of the issuers without regard to the insurance feature.
The insured Municipal Bonds must also comply with the standards applied by the insurance
carriers in determining eligibility for Municipal Bond insurance. See Appendix
B&#151;&#148;Description of Municipal Bond Ratings&#148; and Appendix C&#151;&#148;Municipal Bond Insurance&#148; to
the statement of additional information. If unrated, such securities will possess
creditworthiness comparable, in the opinion of the Investment Adviser, to other
obligations in which the Fund may invest. </FONT></P>

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

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


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund intends to invest primarily in long term Municipal Bonds with maturities of more
than ten years. However, the Fund also may invest in intermediate term Municipal Bonds
with maturities of between three years and ten years. The Fund also may invest from time
to time in short term Municipal Bonds with maturities of less than three years. The
average maturity of the Fund&#146;s portfolio securities will vary based upon the Investment
Adviser&#146;s assessment of economic and market conditions. As of April 30, 2005, the
weighted average maturity of the Fund&#146;s portfolio was approximately 17.77 years. </FONT></P>


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

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


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


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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
normal circumstances, the Fund invests at least 80% its assets in Municipal Bonds either
(i) insured under an insurance policy obtained by the issuer thereof or any other party,
or (ii) insured under an insurance policy purchased by the Fund. The Fund seeks to limit
its investments to Municipal Bonds insured under insurance policies issued by insurance
carriers that have total admitted assets (unaudited) of at least $75,000,000 and capital
and surplus (unaudited) of at least $50,000,000 and insurance claims-paying ability
ratings of AAA from S&amp;P or Fitch, or Aaa from Moody&#146;s. There can be no assurance that
insurance from insurance carriers meeting these criteria will be available. See Appendix
C to the statement of additional information for a brief description of insurance
claims-paying ability ratings of S&amp;P, Moody&#146;s and Fitch. Currently, it is anticipated
that a majority of the insured Municipal Bonds in the Fund&#146;s portfolio will be insured by
the following insurance companies which satisfy the foregoing criteria: Ambac Assurance
Corporation, Financial Guaranty Insurance Company, Financial Security Assurance and MBIA
Insurance Corporation. The Fund also may purchase Municipal Bonds covered by insurance
issued by any other insurance company that satisfies the foregoing criteria. A majority
of insured Municipal Bonds held by the Fund will be insured under policies obtained by
parties other than the Fund. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund may purchase, but has no obligation to purchase, separate insurance policies (the
&#147;Policies&#148;) from insurance companies meeting the criteria set forth above that guarantee
payment of principal and interest when due on specified eligible Municipal Bonds that it
purchases. A Municipal Bond will be eligible for coverage if it meets certain
requirements of the insurance company set forth in a Policy. In the event interest or
principal of an insured Municipal Bond is not paid when due, the insurer will be
obligated under its Policy to make such payment not later than 30 days after it has been
notified by, and provided with documentation from, the Fund that such nonpayment has
occurred. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Policies will be effective only as to insured Municipal Bonds beneficially owned by a
Fund. In the event of a sale of any Municipal Bonds held by a Fund, the issuer of the
relevant Policy will be liable only for those payments of interest and principal that are
then due and owing. The Policies will not guarantee the market value of an insured
Municipal Bond or the value of the shares of the Fund. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
insurer will not have the right to withdraw coverage on securities insured by its
Policies and held by the Fund so long as such securities remain in the Fund&#146;s portfolio.
In addition, the insurer may not cancel its Policies for any reason except failure to pay
premiums when due. The Board of Directors of the Fund reserves the right to terminate any
of the Policies if it determines that the benefits to the Fund of having its portfolio
insured under such Policy are not justified by the expense involved. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
premiums for the Policies are paid by the Fund and the yield on its portfolio is reduced
thereby. The Investment Adviser estimates that the cost of the annual premiums for the
Policies of the Fund currently range from approximately .05 of 1% to .40 of 1% of the
principal amount of the Municipal Bonds covered by such Policies. The estimate is based
on the expected composition of the Fund&#146;s portfolio of Municipal Bonds. Additional
information regarding the Policies is set forth in Exhibit C to the statement of
additional information. In instances in which a Fund purchases Municipal Bonds insured
under policies obtained by parties other than the Fund, the Fund does not pay the
premiums for such policies; rather, the cost of such policies may be reflected in the
purchase price of the Municipal Bonds. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It
is the intention of the Investment Adviser to retain any insured securities that are in
default or in significant risk of default and to place a value on the insurance, which
ordinarily will be the difference between the market value of the defaulted security and
the market value of similar securities that are not in default. In certain circumstances,
however, the Investment Adviser may determine that an alternate value for the insurance,
such as the difference between the market value of the defaulted security and its par
value, is more appropriate. The Investment Adviser&#146;s ability to manage the portfolio of
the Fund may be limited to the extent it holds defaulted securities for which market
quotations are not generally available, which may limit its ability in certain  </FONT></P>


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<!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>circumstances to purchase other
Municipal Bonds. See &#147;Net Asset Value&#148; in the statement of additional information for a
more complete description of the Fund&#146;s method of valuing securities for which market
quotations are not generally available. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No
assurance can be given that insurance with the terms and issued by insurance carriers
meeting the criteria described above will continue to be available to the Fund. In the
event the Board of Directors of the Fund determines that such insurance is unavailable or
that the cost of such insurance outweighs the benefits to the Fund, the Fund may modify
the criteria for insurance carriers or the terms of the insurance, or may discontinue its
policy of maintaining insurance for all or any of the Municipal Bonds held in the Fund&#146;s
portfolio. Although the Investment Adviser periodically reviews the financial condition
of each insurer, there can be no assurance that the insurers will be able to honor their
obligations under all circumstances. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Municipal
Bond insurance reduces financial or credit risk (<I>i.e.</I>, the possibility that the owners of
the insured Municipal Bonds will not receive timely scheduled payments of principal or
interest). However, the insured Municipal Bonds are subject to market risk (<I>i.e.</I>,
fluctuations in market value as a result of changes in prevailing interest rates and
other market conditions). See Appendix C&#151;&#148;Municipal Bond Insurance&#148; to the statement of
additional information. </FONT> </P>


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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund ordinarily will invest at least 80% of its total assets in New York Municipal Bonds;
therefore, it is more susceptible to factors adversely affecting issuers of New York
Municipal Bonds than is a municipal bond fund that is not concentrated in issuers of New
York Municipal Bonds to this degree. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
State of New York maintains credit ratings of A1, AA and AA- from Moody&#146;s, S&amp;P and Fitch,
respectively. Moody&#146;s assigns a positive outlook to the State&#146;s rating, reflecting an
upgrade in November 2004, while Fitch and S&amp;Pcarry stable outlooks. The State economy
continues to improve and revenue collections are increasing. New York State, New York
City and other New York public bodies have sometimes encountered financial difficulties
of a type that could have an adverse effect on the performance of the Fund. In addition
to the risks associated with the national economic forecast, there are specific risks to
the State economy. Chief among them is a more prolonged downturn in the financial sector
than is currently projected, producing sharper declines in both employment and
compensation. Moreover, significant numbers of business relocations out of the State
could imply slower job and income growth as well. In contrast, a stronger national
economy than expected could result in stronger equity market growth and, in turn, a
stronger demand for financial market service, fueling a rebound in income growth in that
sector. Historically, declines in the stock market are followed by declines in personal
income tax payments as tax-liability associated with market transactions declines. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
a discussion of economic and other conditions in the State of New York and the City of
New York, see Appendix A&#151;&#148;Economic and Other Conditions in New York&#148; in the statement of
additional information. </FONT></P>


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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Risk Factors and
Special Considerations Relating to Municipal Bonds </B></FONT></P>

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

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


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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Description of
Municipal Bonds </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set
forth below is a detailed description of the Municipal Bonds and Temporary Investments in
which the Fund may invest. Information with respect to ratings assigned to tax exempt
obligations that the Fund may purchase is set forth in Appendix B to the statement of
additional information. Obligations are included within the term Municipal Bonds if the
interest paid thereon is excluded from gross income for Federal income tax purposes in
the opinion of bond counsel to the issuer. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Municipal
Bonds include debt obligations issued to obtain funds for various public purposes,
including the construction of a wide range of public facilities, refunding of outstanding
obligations and obtaining funds for general operating expenses and loans to other public
institutions and facilities. In addition, certain types of bonds are issued by or on
behalf of public authorities to finance various privately owned or operated facilities,
including certain facilities for the local furnishing of electric energy or gas, sewage
facilities, solid waste disposal facilities and other specialized facilities. Other types
of PABs, the proceeds of which are used for the construction, equipment or improvement of
privately operated industrial or commercial facilities, may constitute Municipal Bonds,
although the current Federal tax laws place substantial limitations on the size of such
issues. The interest on Municipal Bonds may bear a fixed rate or be payable at a variable
or floating rate. The two principal classifications of Municipal Bonds are &#147;general
obligation&#148; and &#147;revenue&#148; bonds, which latter category includes PABs. </FONT></P>

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

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

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

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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Municipal
Lease Obligations. </I>Also included within the general category of Municipal Bonds are
certificates of participation (&#147;COPs&#148;) issued by government authorities or entities to
finance the acquisition or construction of equipment, land and/or facilities. COPs
represent participations in a lease, an installment purchase contract or a conditional
sales contract (hereinafter collectively called &#147;lease obligations&#148;) relating to such
equipment, land or facilities. Although lease obligations do not constitute general
obligations of the issuer for which the issuer&#146;s unlimited taxing power is pledged, a
lease obligation is frequently backed by the issuer&#146;s covenant to budget for, appropriate
and make the payments due under the lease obligation. However, certain lease obligations
contain &#147;non-appropriation&#148; clauses which provide that the issuer has no obligation to
make lease or installment purchase payments in future years unless money is appropriated
for such purpose on a yearly basis. Although &#147;non-appropriation&#148; lease obligations are
secured by the leased property, disposition of the property in the event of foreclosure
might prove difficult and the value of the property may be insufficient to issue lease
obligations. Certain investments in lease obligations may be illiquid. </FONT> </P>

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

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

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

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


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


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

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

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

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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
purchase or sale of a futures contract differs from the purchase or sale of a security in
that no price or premium is paid or received. Instead, an amount of cash or securities
acceptable to the broker and the relevant contract market, which varies, but is generally
about 5% of the contract amount, must be deposited with the broker. This amount is known
as &#147;initial margin&#148; and represents a &#147;good faith&#148; deposit assuring the performance of
both the purchaser and seller under the futures contract. Subsequent payments to and from
the broker, called &#147;variation margin,&#148; are required to be made on a daily basis as the
price of the futures contract fluctuates making the long and short positions in the
futures contract more or less valuable, a process known as &#147;marking to the market.&#148; At
any time prior to the settlement date of the futures contract, the position may be closed
out by taking  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>an opposite position that will
operate to terminate the position in the futures contract. A final determination of
variation margin is then made, additional cash is required to be paid to or released by
the broker and the purchaser realizes a loss or gain. In addition, a nominal commission
is paid on each completed sale transaction. </FONT></P>

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

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

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

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

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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Call
Options on Futures Contracts. </I>The Fund may also purchase and sell exchange traded call
and put options on financial futures contracts. The purchase of a call option on a
futures contract is analogous to the purchase of a call option on an individual security.
Depending on the pricing of the option compared to either the </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>futures contract upon which it is
based or the price of the underlying debt securities, it may or may not be less risky
than ownership of the futures contract or underlying debt securities. Like the purchase
of a futures contract, the Fund will purchase a call option on a futures contract to
hedge against a market advance when the Fund is not fully invested. </FONT></P>

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

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

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

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


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

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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
particular municipal bonds comprising the index underlying the Municipal Bond Index
financial futures contract may vary from the bonds held by the Fund. As a result, the
Fund&#146;s ability to hedge effectively all or a portion of the value of its Municipal Bonds
through the use of such financial futures contracts will depend in part on the degree to
which price movements in the index underlying the financial futures contract correlate
with the price movements of the Municipal Bonds held by the Fund. The correlation may be
affected by disparities in the average maturity, ratings, geographical mix or structure
of the Fund&#146;s investments as compared to those comprising the Municipal Bond Index and
general economic or political factors. In addition, the correlation between movements in
the value of the Municipal Bond Index may be subject to change over time as additions to
and deletions from the Municipal Bond Index alter its structure. The correlation between
futures contracts on U.S. Government securities and the Municipal Bonds held by the Fund
may be adversely affected by similar factors and the risk of imperfect correlation
between movements in the prices of such futures contracts and the prices of </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Municipal Bonds held by the Fund may
be greater. Municipal Bond Index futures contracts were approved for trading in 1986.
Trading in such futures contracts may tend to be less liquid than trading in other
futures contracts. The trading of futures contracts also is subject to certain market
risks, such as inadequate trading activity, which could at times make it difficult or
impossible to liquidate existing positions. </FONT></P>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
successful use of transactions in futures and related options also depends on the ability
of the Investment Adviser to forecast correctly the direction and extent of interest rate
movements within a given time frame. To the extent interest rates remain stable during
the period in which a futures contract or option is held by the Fund or such rates move
in a direction opposite to that anticipated, the Fund may realize a loss on the hedging
transaction which is not fully or partially offset by an increase in the value of
portfolio securities. As a result, the Fund&#146;s total return for such period may be less
than if it had not engaged in the hedging transaction. </FONT></P>

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

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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund has adopted certain other policies as set forth below. </FONT></P>


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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund may invest in short term tax exempt and taxable securities subject to the
limitations set forth above. The tax exempt money market securities may include municipal
notes, municipal commercial paper, municipal bonds with a remaining maturity of less than
one year, variable rate demand notes and participations therein. Municipal notes include
tax anticipation notes, bond anticipation notes, revenue anticipation notes and grant
anticipation notes. Anticipation notes are sold as interim financing in anticipation of
tax collection, bond sales, government grants or revenue receipts. Municipal commercial
paper refers to short term unsecured promissory notes generally issued to finance short
term credit needs. The taxable money market securities in which the Fund may invest as
Temporary Investments consist of U.S. Government securities, U.S. Government agency
securities, domestic bank or savings institution certificates of deposit and bankers&#146;
acceptances, short term corporate debt securities such as commercial paper and repurchase
agreements. These Temporary Investments  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>must have a stated maturity not in
excess of one year from the date of purchase. The Fund may not invest in any security
issued by a commercial bank or a savings institution unless the bank or institution is
organized and operating in the United States, has total assets of at least one billion
dollars and is a member of the Federal Deposit Insurance Corporation (&#147;FDIC&#148;), except
that up to 10% of total assets may be invested in certificates of deposit of smaller
institutions if such certificates are fully insured by the FDIC. </FONT></P>


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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Interest Rate Swap
Transactions </B></FONT></P>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund may purchase and sell BMA Swaps in the BMA swap market. In a BMA Swap, the Fund
exchanges with another party their respective commitments to pay or receive interest
(<I>e.g.</I>, an exchange of fixed rate payments for floating rate payments linked to the Bond
Market Association Municipal Swap Index). Because the underlying index is a tax exempt
index, BMA Swaps may reduce cross-market risks incurred by the Fund and increase the
Fund&#146;s ability to hedge effectively. BMA Swaps are typically quoted for the entire yield
curve, beginning with a seven day floating rate index out to 30 years. The duration of a
BMA Swap is approximately equal to the duration of a fixed rate Municipal Bond with the
same attributes as the swap (<I>e.g.</I>, coupon, maturity, call feature). </FONT> </P>

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

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

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


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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Credit Default Swap
Agreements </B></FONT></P>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Credit
default swap agreements involve greater risks than if the Fund had invested in the
reference obligation directly since, in addition to general market risks, credit default
swaps are subject to illiquidity risk, counterparty risk and credit risks. The Fund will
enter into credit default swap agreements only with counterparties who are rated
investment grade quality by at least one nationally recognized statistical rating
organization at the time of entering into such transaction or whose creditworthiness is
believed by the Investment Adviser to be equivalent to such rating. A buyer generally
also will lose its investment and recover nothing should no credit event occur and the
swap is held to its termination date. If a credit event were to occur, the value of any
deliverable obligation received by the seller, coupled with the upfront or periodic
payments previously received, may be less than the full notional value it pays to the
buyer, resulting in a loss of value to the seller. The Fund&#146;s obligations under a credit
default swap agreement will be accrued daily (offset against any amounts owing to the
Fund). The Fund will at all times segregate with its custodian in connection with each
such transaction liquid securities or cash with a value at least equal to the Fund&#146;s
exposure (any accrued but unpaid net amounts owed by the Fund to any counterparty), on a
marked-to-market basis (as calculated pursuant to requirements of the Securities and
Exchange Commission). Such segregation will ensure that the Fund has assets available to
satisfy its obligations with respect to the transaction and will avoid any potential
leveraging of the Fund&#146;s portfolio. Such segregation will not limit the Fund&#146;s exposure
to loss. </FONT></P>


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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Participating
VRDOs provide the Fund with a specified undivided interest (up to 100%) of the underlying
obligation and the right to demand payment of the unpaid principal balance plus accrued
interest on the Participating VRDOs from the financial institution upon a specified
number of days&#146; notice, not to exceed seven days. In addition, the Participating VRDO is
backed by an irrevocable letter of credit or guaranty of the financial institution. The
Fund would have an undivided interest in the underlying obligation and thus participate
on the same basis as the financial institution in such obligation except that the
financial institution typically retains fees  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>out of the interest paid on the
obligation for servicing the obligation, providing the letter of credit and issuing the
repurchase commitment. The Fund has been advised by its counsel that the Fund should be
entitled to treat the income received on Participating VRDOs as interest from tax exempt
obligations as long as the Fund does not invest more than 20% of its total assets in such
investments and certain other conditions are met. It is contemplated that the Fund will
not invest more than 20% of its assets in Participating VRDOs. </FONT></P>

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

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


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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund may invest in securities pursuant to repurchase agreements. Repurchase agreements
may be entered into only with a member bank of the Federal Reserve System or a primary
dealer or an affiliate thereof, in U.S. Government securities. Under such agreements, the
bank or primary dealer or an affiliate thereof agrees, upon entering into the contract,
to repurchase the security at a mutually agreed upon time and price, thereby determining
the yield during the term of the agreement. This results in a fixed rate of return
insulated from market fluctuations during such period. In repurchase agreements, the
prices at which the trades are conducted do not reflect accrued interest on the
underlying obligations. Such agreements usually cover short periods, such as under one
week. Repurchase agreements may be construed to be collateralized loans by the purchaser
to the seller secured by the securities transferred to the purchaser. In a repurchase
agreement, the Fund will require the seller to provide additional collateral if the
market value of the securities falls below the repurchase price at any time during the
term of the repurchase agreement. In the event of default by the seller under a
repurchase agreement construed to be a collateralized loan, the underlying securities are
not owned by the Fund but only constitute collateral for the seller&#146;s obligation to pay
the repurchase price. Therefore, the Fund may suffer time delays and incur costs or
possible losses in connection with the disposition of the collateral. In the event of a
default under such a repurchase agreement, instead of the contractual fixed rate of
return, the rate of return to the Fund shall be dependent upon intervening fluctuations
of the market value of such security and the accrued interest on the security. In such
event, the Fund would have rights against the seller for breach of contract with respect
to any losses arising from market fluctuations following the failure of the seller to
perform. </FONT></P>

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


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

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

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

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


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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Series F AMPS will be shares of preferred stock that entitle their holders to receive
dividends when, as and if declared by the Board of Directors, out of funds legally
available therefor, at a rate per annum that may vary for the successive Dividend
Periods. After the Initial Dividend Period, each Subsequent Dividend Period for the
Series F AMPS generally will be a 7-Day Dividend Period; provided however, that, prior to
any Auction, the Fund may elect, subject to certain limitations described herein, upon
giving notice to holders thereof, a special dividend period of up to five years (a
&#147;Special Dividend Period&#148;). The Applicable Rate for a particular Dividend Period will be
determined by an Auction conducted on the Business Day before the start of such Dividend
Period. Beneficial Owners and Potential Beneficial Owners of shares of AMPS may
participate in Auctions therefor, although, except in the case of a Special Dividend
Period of more than 28 days, Beneficial Owners desiring to continue to hold all of their
shares of AMPS regardless of the Applicable Rate resulting from Auctions need not
participate. For an explanation of Auctions and the method of determining the Applicable
Rate, see &#147;The Auction&#148; herein and in the statement of additional information. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund has outstanding 10,360 shares of five other series of Auction Market Preferred
Stock, each with a liquidation preference of $25,000 per share, plus accumulated but
unpaid dividends, for an aggregate initial liquidation preference of $259,000,000 (the
&#147;Other AMPS&#148;). The Other AMPS are as follows: 1,700 shares of Auction Market Preferred
Stock, Series A; 1,700 shares of Auction Market Preferred Stock, Series B; 2,800 shares
of Auction Market Preferred Stock, Series C; 1,960 shares of Auction Market Preferred
Stock, Series D; and 2,200 shares of Auction Market Preferred Stock, Series E. The Series
F AMPS offered hereby rank on a parity with the Other AMPS with respect to dividends and
liquidation preference. The terms of the shares of Other AMPS are substantially the same
as the terms of the shares of AMPS described below. </FONT></P>

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


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


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


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dividends
on the shares of AMPS will accumulate from the date on which the Fund originally issues
the shares of AMPS (the &#147;Date of Original Issue&#148;) and will be payable on the dates
described below. Dividends on shares of AMPS with respect to the Initial Dividend Period
shall be payable on the Initial Dividend Payment Date. Following the Initial Dividend
Payment Date for the AMPS, dividends on the AMPS will be payable, at the option of the
Fund, either (i) with respect to any 7-Day Dividend Period and any Short Term Dividend
Period of 35 or fewer days, on the day next  </FONT></P>


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

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

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


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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Notification
of Dividend Period. </I>With respect to each Dividend Period that is a Special Dividend
Period, the Fund, at its sole option and to the extent permitted by law, by telephonic
and written notice (a &#147;Request for Special Dividend Period&#148;) to the Auction Agent and to
each Broker-Dealer, may request that the next succeeding Dividend Period for the AMPS
will be a number of days (other than seven), evenly divisible by seven, and not fewer
than seven nor more than 364 in the case of a Short Term Dividend Period or one whole
year or more but not greater than five years in the case of a Long Term Dividend Period,
specified in such notice, provided that the Fund may not give a Request for Special
Dividend Period (and any such request shall be null and void) unless, for any Auction
occurring after the initial Auction, Sufficient Clearing Bids were made in the last
occurring Auction and unless full cumulative dividends and any amounts due with respect
to redemptions, and any Additional </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dividends payable prior to such date
have been paid in full. Such Request for Special Dividend Period, in the case of a Short
Term Dividend Period, shall be given on or prior to the second Business Day but not more
than seven Business Days prior to an Auction Date for the AMPS and, in the case of a Long
Term Dividend Period, shall be given on or prior to the second Business Day but not more
than 28 days prior to an Auction Date for the AMPS. Upon receiving such Request for
Special Dividend Period, the Broker-Dealers jointly shall determine whether, given the
factors set forth below, it is advisable that the Fund issue a Notice of Special Dividend
Period for the AMPS as contemplated by such Request for Special Dividend Period and the
Optional Redemption Price of the AMPS during such Special Dividend Period and the
Specific Redemption Provisions and shall give the Fund written notice (a &#147;Response&#148;) of
such determination by no later than the second Business Day prior to such Auction Date.
In the event the Response indicates that it is advisable that the Fund give a notice of a
Special Dividend Period for the AMPS, the Fund, by no later than the second Business Day
prior to such Auction Date may give a notice (a &#147;Notice of Special Dividend Period&#148;) to
the Auction Agent, the Securities Depository and each Broker-Dealer. See &#147;Description of
AMPS&#151;Dividends&#151;Notification of Dividend Period&#148; in the statement of additional
information for a detailed description of these procedures. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Determination
of Dividend Rate. </I>The dividend rate on shares of the AMPS during the period from and
including the Date of Original Issue for the Series F AMPS to but excluding the Initial
Dividend Payment Date (the &#147;Initial Dividend Period&#148;) with respect to the Series F AMPS
will be the rate per annum set forth above under &#147;Prospectus Summary&#151;Dividends and
Dividend Periods.&#148; Commencing on the Initial Dividend Payment Date for the Series F AMPS,
the Applicable Rate on the Series F AMPS for each Subsequent Dividend Period, which
Subsequent Dividend Period shall be a period commencing on and including a Dividend
Payment Date and ending on and including the calendar day prior to the next Dividend
Payment Date (or calendar day prior to the last Dividend Payment Date in a Dividend
Period if there is more than one Dividend Payment Date), shall be equal to the rate per
annum that results from the Auction with respect to such Subsequent Dividend Period. The
Initial Dividend Period and Subsequent Dividend Period for the AMPS is referred to herein
as a &#147;Dividend Period.&#148; Cash dividends shall be calculated as set forth above under
&#147;Dividends&#151;General.&#148; </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Restrictions
on Dividends and Other Payments. </I>Under the 1940 Act, the Fund may not declare dividends
or make other distributions on shares of common stock or purchase any such shares if, at
the time of the declaration, distribution or purchase, as applicable (and after giving
effect thereto), asset coverage (as defined in the 1940 Act) with respect to the
outstanding shares of AMPS (and Other AMPS) would be less than 200% (or such other
percentage as in the future may be required by law). The Fund estimates that, based on
the composition of its portfolio at April 30, 2005, asset coverage with respect to shares
of AMPS would be approximately 291% representing approximately 34% of the Fund&#146;s capital
and 52% of the Fund&#146;s common stock equity immediately after the issuance of the shares of
AMPS offered hereby. Under the Code, the Fund, among other things, must distribute at
least 90% of its investment company taxable income each year in order to maintain its
qualification for tax treatment as a regulated investment company. The foregoing
limitations on dividends, distributions and purchases under certain circumstances may
impair the Fund&#146;s ability to maintain such qualification. See &#147;Taxes&#148; in the statement of
additional information. </FONT> </P>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Additional
Dividends. </I>If the Fund retroactively allocates any net capital gain or other income
subject to regular Federal income taxes to shares of AMPS without having given advance
notice thereof to the Auction Agent as described under &#147;The Auction&#151;Auction
Procedures&#151;Auction Date; Advance Notice of Allocation of Taxable Income; Inclusion of
Taxable Income in Dividends&#148; below, which may only happen when such allocation is made as
a result of the redemption of all or some of the outstanding shares of AMPS or the
liquidation of the Fund (the amount of such allocation referred to herein as a
&#147;Retroactive Taxable Allocation&#148;), the Fund, within 90 days (and generally within 60
days) after the end of the Fund&#146;s fiscal year for which a Retroactive Taxable Allocation
is made, will provide notice thereof to the Auction Agent and to each holder of shares
(initially Cede as nominee of the Securities Depository) during such fiscal year at such
holder&#146;s address as the same appears or last appeared on the stock books of the Fund. The
Fund, within 30 days after such notice is given to the Auction </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Agent, will pay to the Auction Agent
(who then will distribute to such holders of shares of AMPS), out of funds legally
available therefor, an amount equal to the aggregate Additional Dividend (as defined
below) with respect to all Retroactive Taxable Allocations made to such holders during
the fiscal year in question. </FONT></P>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the Fund does not give advance notice of the amount of taxable income to be included in a
dividend on shares of AMPS in the related Auction, the Fund may include such taxable
income in a dividend on shares of AMPS if it increases the dividend by an additional
amount calculated as if such income were a Retroactive Taxable Allocation and the
additional amount were an Additional Dividend and notifies the Auction Agent of such
inclusion at least five Business Days prior to the applicable Dividend Payment Date. See
&#147;The Auction&#151;Auction Procedures&#151;Auction Date; Advance Notice of Allocation of Taxable
Income; Inclusion of Taxable Income in Dividends&#148; below. </FONT></P>


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

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

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


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

<div>
  <table border=0 cellspacing=0 cellpadding=0 width="600">
    <tr>
      <td valign=bottom rowspan="2" align="center">
        <p><font face="Times" size="2">Value of Fund assets less liabilities <br>
           </font><font face="Times" size="2">not constituting senior securities </font></p>
      </td>
      <td valign=bottom>
        <p>&nbsp;</p>
      </td>
      <td valign=bottom align="center">
        <p>&nbsp;</p>
      </td>
      <td valign=bottom align="center">
        <p>&nbsp;</p>
      </td>
      <td valign=top align="center">
        <p>&nbsp;</p>
      </td>
    </tr>
    <tr>
      <td valign=bottom>
        <p>&nbsp;</p>
      </td>
      <td valign=bottom align="center">
        <p><font face="Times" size="2">$885,516,957 </font></p>
      </td>
      <td valign=bottom align="center">
        <p>&nbsp;</p>
      </td>
      <td valign=top align="center">
        <p>&nbsp;</p>
      </td>
    </tr>
    <tr>
      <td valign=top align="center">
        <hr noshade align="center" size="1" width="90%">
      </td>
      <td valign=top>
        <p><font face="Times" size="2">= </font></p>
      </td>
      <td valign=top align="center">
        <hr noshade align="center" size="1" width="90%">
      </td>
      <td valign=top align="center">
        <p><font face="Times" size="2">= </font></p>
      </td>
      <td valign=top align="center">
        <p><font face="Times" size="2">291%</font></p>
      </td>
    </tr>
    <tr>
      <td valign=top rowspan="2" align="center">
        <p><font face="Times" size="2">Senior securities representing indebtedness
          plus <br>
           </font><font face="Times" size="2">liquidation value of the shares of
          AMPS </font></p>
      </td>
      <td valign=top>
        <p>&nbsp;</p>
      </td>
      <td valign=top align="center">
        <p><font face="Times" size="2">$304,119,632 </font></p>
      </td>
      <td valign=top align="center">
        <p>&nbsp;</p>
      </td>
      <td valign=top align="center">
        <p>&nbsp;</p>
      </td>
    </tr>
    <tr>
      <td valign=top>
        <p>&nbsp;</p>
      </td>
      <td valign=top align="center">
        <p>&nbsp;</p>
      </td>
      <td valign=top align="center">
        <p>&nbsp;</p>
      </td>
      <td valign=top align="center">
        <p>&nbsp;</p>
      </td>
    </tr>
  </table>
  <p>&nbsp;</p>

</div>


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


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

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

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

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


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

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


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

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

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

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

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


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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders
of the shares of the Series F AMPS will be entitled to receive cumulative cash dividends
on their shares when, as and if declared by the Board of Directors of the Fund, out of
funds legally available therefor, on the Initial Dividend Payment Date with respect to
the Initial Dividend Period and, thereafter, on each Dividend Payment Date with respect
to a Subsequent Dividend Period (generally a period of seven days, subject to certain
exceptions set forth under &#147;Description of AMPS&#151;Dividends&#151;General&#148;) at the rate per
annum equal to the Applicable Rate for each such Dividend Period. </FONT></P>

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


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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Broker-Dealer
Agreements. </I>The Auction Agent has entered into agreements with Merrill Lynch, Pierce,
Fenner &amp; Smith Incorporated (&#147;Merrill Lynch&#148;) and more than 15 other broker-dealers and
may enter into similar agreements (collectively, the &#147;Broker-Dealer Agreements&#148;) with one
or more other broker-dealers (collectively, the &#147;Broker-Dealers&#148;) selected by the Fund,
which provide for the participation of such Broker-Dealers in Auctions. Merrill Lynch is
an affiliate of the Investment Adviser in that they share a common parent, Merrill Lynch &amp; Co.,
Inc. </FONT> </P>

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


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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following is a brief discussion of the procedures to be used in conducting Auctions. This
summary is qualified by reference to the Auction Procedures set forth in Appendix E to
the statement of additional information. The Settlement Procedures to be used with
respect to Auctions are set forth in Appendix D to the statement of additional
information. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Auction
Date; Advance Notice of Allocation of Taxable Income; Inclusion of Taxable Income in
Dividends. </I>An Auction to determine the Applicable Rate for the shares of the Series F
AMPS offered hereby for each Dividend Period (other than the Initial Dividend Period
therefor) will be held on the first Business Day (as hereinafter defined) preceding the
first day of such Dividend Period, which first day is also a Dividend Payment Date for
the preceding Dividend Period (the date of each Auction being referred to herein as an
&#147;Auction Date&#148;). &#147;Business Day&#148; means a day on which the New York Stock Exchange (the
&#147;NYSE&#148;) is open for trading and which is not a Saturday, Sunday or other day on which
banks in the City of New York are authorized or obligated by law to close. Auctions for
shares of the Series F AMPS for Dividend Periods after the Initial Dividend Period
normally will be held every Thursday after the preceding Dividend Payment Date, and each
subsequent Dividend Period normally will begin on the following Friday (also a Dividend
Payment Date). The Auction Date and the first day of the related Dividend Period for the
AMPS (both of which must be Business Days) need not be consecutive calendar days. For
example, in most cases, if the Thursday that normally would be an Auction Date for the
Series F AMPS is not a Business Day, then such Auction Date will be the preceding
Wednesday and the first day of the related Dividend Period will continue to be the
following Friday. See &#147;Description of AMPS&#151;Dividends&#148; for information concerning the
circumstances under which a Dividend Payment Date may fall on a date other than the days
specified above, which may affect the Auction Date. </FONT> </P>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Orders
by Beneficial Owners, Potential Beneficial Owners, Existing Holders and Potential
Holders. </I>On or prior to each Auction Date: </FONT> </P>

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

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

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

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

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

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

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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Maximum Applicable Rate for shares of AMPS will depend on the credit rating or ratings
assigned to such shares. The Applicable Percentage and the Applicable Spread will be
determined based on (i) the lower of the credit rating or ratings assigned on such date
to such shares by Moody&#146;s and S&amp;P (or if Moody&#146;s or S&amp;P or both shall not make such
rating available, the equivalent of either or both of such ratings by a Substitute Rating  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Agency or two Substitute Rating
Agencies or, in the event that only one such rating shall be available, such rating) and
(ii) whether the Fund has provided notification to the Auction Agent prior to the Auction
establishing the Applicable Rate for any dividend that net capital gain or other taxable
income will be included in such dividend on shares of AMPS as follows: </FONT></P>

<div>
  <table border=0 cellspacing=0 cellpadding=0 width="600" align="center">
    <tr valign="bottom" align="center">
      <td colspan="2">
        <p>
        <b><font size="1"> Credit Ratings </font></b>
        <hr noshade align="center" size="1" width="80%">
        </td>
      <td><b><font size="1">Applicable <br>
        Percentage <br>
        of Reference <br>
        Rate&#151;No </font></b></td>
      <td><b><font size="1">Applicable <br>
        Percentage <br>
        of Reference <br>
        Rate&#151; </font></b></td>
      <td><b><font size="1">Applicable <br>
        Spread Over <br>
        Reference <br>
        Rate&#151;No</font></b></td>
      <td><b><font size="1">Applicable <br>
        Spread Over <br>
        Reference <br>
        Rate&#151;</font></b></td>
    </tr>
    <tr valign="top" align="center">
      <td>
        <p><b><font size="1">Moody&#146;s </font></b>
        <hr noshade align="center" size="1" width="50%">
      </td>
      <td>
        <p><b><font size="1">S&amp;P </font></b>
        <hr noshade align="center" size="1" width="50%">
      </td>
      <td>
        <p><b><font size="1">Notification </font></b>
        <hr noshade align="center" size="1" width="75%">
      </td>
      <td>
        <p><b><font size="1">Notification </font></b>
        <hr noshade align="center" size="1" width="75%">
      </td>
      <td>
        <p><b><font size="1">Notification </font></b>
        <hr noshade align="center" size="1" width="75%">
      </td>
      <td>
        <p><b><font size="1">Notification </font></b>
        <hr noshade align="center" size="1" width="75%">
      </td>
    </tr>
    <tr valign="bottom" align="center">
      <td>
        <p><font size="2">Aaa </font>
      </td>
      <td>
        <p><font size="2">AAA </font>
      </td>
      <td>
        <p><font size="2">110% </font>
      </td>
      <td>
        <p><font size="2">125% </font></p>
      </td>
      <td>
        <p><font size="2">1.10% </font></p>
      </td>
      <td>
        <p><font size="2">1.25% </font></p>
      </td>
    </tr>
    <tr valign="bottom" align="center">
      <td>
        <p><font size="2">Aa3 to Aa1 </font></p>
      </td>
      <td>
        <p><font size="2">AA- to AA+ </font></p>
      </td>
      <td>
        <p><font size="2">125% </font></p>
      </td>
      <td>
        <p><font size="2">150% </font></p>
      </td>
      <td>
        <p><font size="2">1.25% </font></p>
      </td>
      <td>
        <p><font size="2">1.50% </font></p>
      </td>
    </tr>
    <tr valign="bottom" align="center">
      <td>
        <p><font size="2">A3 to A1 </font></p>
      </td>
      <td>
        <p><font size="2">A- to A+ </font></p>
      </td>
      <td>
        <p><font size="2">150% </font></p>
      </td>
      <td>
        <p><font size="2">200% </font></p>
      </td>
      <td>
        <p><font size="2">1.50% </font></p>
      </td>
      <td>
        <p><font size="2">2.00% </font></p>
      </td>
    </tr>
    <tr valign="bottom" align="center">
      <td>
        <p><font size="2">Baa3 to Baa1 </font></p>
      </td>
      <td>
        <p><font size="2">BBB- to BBB+ </font></p>
      </td>
      <td>
        <p><font size="2">175% </font></p>
      </td>
      <td>
        <p><font size="2">250% </font></p>
      </td>
      <td>
        <p><font size="2">1.75% </font></p>
      </td>
      <td>
        <p><font size="2">2.50% </font></p>
      </td>
    </tr>
    <tr valign="bottom" align="center">
      <td>
        <p><font size="2">Below Baa3 </font></p>
      </td>
      <td>
        <p><font size="2">Below BBB- </font></p>
      </td>
      <td>
        <p><font size="2">200% </font></p>
      </td>
      <td>
        <p><font size="2">300% </font></p>
      </td>
      <td>
        <p><font size="2">2.00% </font></p>
      </td>
      <td>
        <p><font size="2">3.00% </font></p>
      </td>
    </tr>
  </table>
  <p><!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" --><FONT FACE="Times New Roman, Times, Serif" SIZE=2>There
    is no minimum Applicable Rate in respect of any Dividend Period. </FONT><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
  </p>
</div>

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

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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
Broker-Dealer also may hold AMPS in its own account as a Beneficial Owner. A
Broker-Dealer thus may submit Orders to the Auction Agent as a Beneficial Owner or a
Potential Beneficial Owner and therefore participate in an Auction as an Existing Holder
or Potential Holder on behalf of both itself and its customers. Any Order placed with the
Auction Agent by a Broker-Dealer as or on behalf of a Beneficial Owner or a Potential
Beneficial Owner will be treated in the same manner as an Order placed with a
Broker-Dealer by a Beneficial Owner or a Potential Beneficial Owner. Similarly, any
failure by a Broker-Dealer to submit to the Auction Agent an Order in respect of any AMPS
held by it or its customers who are Beneficial Owners will be treated in the same manner
as a Beneficial Owner&#146;s failure to submit to its Broker-Dealer an Order in respect of
AMPS held by it, as described in the next paragraph. Inasmuch as a Broker-Dealer
participates in an Auction as an Existing Holder or a Potential Holder only to represent
the interests of a Beneficial Owner or Potential Beneficial Owner, whether it be its
customers or itself, all discussion herein relating to the consequences of an Auction for
Existing Holders and Potential Holders also applies to the underlying beneficial
ownership interests represented thereby. For information concerning the priority given to
different types of Orders placed by Existing Holders, see &#147;Submission of Orders by
Broker-Dealers to Auction Agent.&#148; Each purchase or sale in an Auction will be settled on
the Business Day next succeeding the Auction Date at a price per share equal to $25,000.
See &#147;Notification of Results; Settlement&#148; below. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
one or more Orders covering in the aggregate all of the outstanding shares of AMPS held
by a Beneficial Owner are not submitted to the Auction Agent prior to the Submission
Deadline, either because a Broker-Dealer failed to contact such Beneficial Owner or
otherwise, the Auction Agent shall deem a Hold Order (in the case of  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>an Auction relating to a Dividend
Period which is not a Special Dividend Period of more than 28 days) and a Sell Order (in
the case of an Auction relating to a Special Dividend Period of more than 28 days) to
have been submitted on behalf of such Beneficial Owner covering the number of outstanding
shares of AMPS held by such Beneficial Owner and not subject to Orders submitted to the
Auction Agent. </FONT></P>

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

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

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

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

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

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

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



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)
any Sell Order will be considered valid up to and including the       excess of the
number of outstanding shares of AMPS held by such Existing       Holder over the sum of
the number of shares of AMPS subject to  </FONT>
</TD>
</TR>
</TABLE>
<BR>





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






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

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

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

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

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

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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
Sufficient Clearing Bids have been made: </FONT></P>

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

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

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


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

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

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

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

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

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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Notification
of Results; Settlement. </I>The Auction Agent will advise each Broker-Dealer who submitted a
Bid or Sell Order in an Auction whether such Bid or Sell Order was accepted or rejected
in whole or in part and of the Applicable Rate for the next Dividend Period for the
related shares of AMPS by telephone at approximately 3:00 p.m., Eastern time, on the
Auction Date for such Auction. Each such Broker-Dealer that submitted an Order for the
account of a customer then will advise such customer whether such Bid or Sell Order was
accepted or rejected, will confirm purchases and sales with each customer purchasing or
selling shares of AMPS as a result of the Auction and will advise each customer
purchasing or selling shares of AMPS to give instructions to its Agent Member of the
Securities Depository to pay the purchase price against delivery of such shares or to
deliver such shares against payment therefor as appropriate. If a customer selling shares
of AMPS as a result of an Auction shall fail to instruct its Agent Member to deliver such
shares, the Broker-Dealer that submitted such customer&#146;s Bid or Sell Order will instruct
such Agent Member to deliver such shares against payment therefor. Each Broker-Dealer
that submitted a Hold Order in an Auction on behalf of a customer also will advise such
customer of the Applicable Rate for the next Dividend Period for the AMPS. The Auction
Agent will record each transfer of shares of AMPS on the record book of Existing Holders
to be maintained by the Auction Agent. In accordance with the Securities Depository&#146;s
normal procedures, on the day after each Auction Date, the transactions described above
will be executed through the Securities Depository, and the accounts of the respective
Agent Members at the Securities Depository will be debited and credited as necessary to
effect the purchases and sales of shares of AMPS as determined in such Auction.
Purchasers will make payment through their Agent Members in same-day funds to the
Securities Depository against delivery through their Agent Members; the Securities
Depository will make payment in accordance with its normal procedures, which now provide
for payment in same-day funds. </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If the procedures of the Securities
Depository applicable to AMPS shall be changed to provide for payment in next-day funds,
then purchasers may be required to make payment in next day funds. If any Existing Holder
selling shares of AMPS in an Auction fails to deliver such shares, the Broker-Dealer of
any person that was to have purchased shares of AMPS in such Auction may deliver to such
person a number of whole shares of AMPS that is less than the number of shares that
otherwise was to be purchased by such person. In such event, the number of shares of AMPS
to be so delivered will be determined by such Broker-Dealer. Delivery of such lesser
number of shares will constitute good delivery. Each Broker-Dealer Agreement also will
provide that neither the Fund nor the Auction Agent will have responsibility or liability
with respect to the failure of a Potential Beneficial Owner, Beneficial Owner or their
respective Agent Members to deliver shares of AMPS or to pay for shares of AMPS purchased
or sold pursuant to an Auction or otherwise.  </FONT></P>


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

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

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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Fees.
</I>The Auction Agent after each Auction will pay a service charge from funds provided by the
Fund to each Broker-Dealer on the basis of the purchase price of shares of AMPS placed by
such Broker-Dealer at such Auction. The service charge (i) for any 7-Day Dividend Period
shall be payable at the annual rate of 0.25% of the purchase price of the shares of AMPS
placed by such Broker-Dealer in any such Auction and (ii) for any Special Dividend Period
shall be determined by mutual consent of the Fund and any such Broker-Dealer or
Broker-Dealers and shall be based upon a selling concession that would be applicable to
an underwriting of fixed or variable rate preferred shares with a similar final maturity
or variable rate dividend period, respectively, at the commencement of the Dividend
Period with respect to such Auction. For the purposes of the preceding sentence, shares
of AMPS will be placed by a Broker-Dealer if such shares were (i) the subject of Hold
Orders deemed to have been made by Beneficial Owners that were acquired by such
Beneficial Owners through such Broker-Dealer or (ii) the subject of the following Orders
submitted by such Broker-Dealer: (A) a Submitted Bid of a Beneficial Owner that resulted
in such Beneficial Owner continuing to hold such shares as a result of the Auction, (B) a
Submitted Bid of a Potential Beneficial Owner that resulted in such Potential Beneficial
Owner purchasing such shares as a result of the Auction or (C) a Submitted Hold Order. A
Broker-Dealer may share a portion of any such fees with non-participating broker-dealers
that submit Orders to the Broker-Dealer for an Auction that are placed by that
Broker-Dealer in such Auction. </FONT> </P>

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

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

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

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

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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
any failure to maintain the required Discounted Value, the Fund will seek to alter the
composition of its portfolio to reattain a Discounted Value at least equal to the AMPS
Basic Maintenance Amount on or prior to the AMPS Basic Maintenance Cure Date, thereby
incurring additional transaction costs and possible losses and/or gains on dispositions
of portfolio securities. To the extent any such failure is not cured in a timely manner,
shares of AMPS will be subject to redemption. See &#147;Description of AMPS&#151;Asset
Maintenance&#148; and &#147;Description of AMPS&#151;Redemption&#148; herein and in the statement of
additional information. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund may, but is not required to, adopt any modifications to these guidelines that
hereafter may be established by Moody&#146;s or S&amp;P. Failure to adopt any such modifications,
however, may result in a change in the ratings described above or a withdrawal of ratings
altogether. In addition, any rating agency providing a rating for the shares of AMPS, at
any time, may change or withdraw any such rating. As set forth in the Articles
Supplementary, the Board of Directors, without stockholder approval, may modify certain
definitions or </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>restrictions that have been adopted
by the Fund pursuant to the rating agency guidelines, provided the Board of Directors has
obtained written confirmation from Moody&#146;s and S&amp;P that any such change would not impair
the ratings then assigned by Moody&#146;s and S&amp;P to the AMPS. </FONT></P>

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

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

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


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


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


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
portfolio manager primarily responsible for the Fund&#146;s day-to-day management is Timothy
T. Browse, who became the Fund&#146;s portfolio manager in 2004. Mr. Browse has been a
portfolio manager and Vice President (Tax-Exempt Fixed Income) of MLIM since 2003 and has
over ten years of experience investing in Municipal Bonds as a portfolio manager on
behalf of registered investment companies. Prior to joining MLIM, Mr. Browse was a vice
president, portfolio manager and team leader of the Municipal Investments Team with Lord
Abbett &amp; Co. from 2000 to 2003. The Fund&#146;s portfolio manager will consider analyses from
various sources, make the necessary investment decisions, and place orders for
transactions accordingly. The statement of additional information provides additional
information about the Fund&#146;s portfolio manager&#146;s compensation, other accounts managed by
the portfolio manager, and the portfolio manager&#146;s ownership of securities of the Fund. </FONT></P>


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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Investment Advisory Agreement obligates the Investment Adviser to provide investment
advisory services and to pay all compensation of and furnish office space for officers
and employees of the Fund connected with investment and economic research, trading and
investment management of the Fund, as well as the compensation of all Directors of the
Fund who are affiliated persons of the Investment Adviser or any of its  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>affiliates. The Fund pays all other
expenses incurred in the operation of the Fund, including, among other things, expenses
for legal and auditing services, taxes, costs of preparing, printing and mailing proxies,
listing fees, stock certificates and stockholder reports, charges of the custodian and
the transfer agent, dividend disbursing agent and registrar, Securities and Exchange
Commission fees, fees and expenses of non-interested Directors, accounting and pricing
costs, insurance, interest, brokerage costs, litigation and other extraordinary or
non-recurring expenses, mailing and other expenses properly payable by the Fund. Certain
accounting services are provided to the Fund by State Street Bank and Trust Company
(&#147;State Street&#148;) pursuant to an agreement between State Street and the Fund. The Fund
will pay the costs of these services. In addition, the Fund will reimburse the Investment
Adviser for certain additional accounting services. </FONT></P>

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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
portion of exempt-interest dividends equal to the portion which the Fund&#146;s interest on
New York Municipal Bonds bears to all of the Fund&#146;s tax-exempt interest (whether or not
distributed) will be exempt from New York State and New York City personal income taxes.
To the extent the Fund&#146;s distributions are derived from interest on taxable investments
or from gain from the sale of investments or are attributable to the portion of the
Fund&#146;s tax-exempt interest that is not derived from New York Municipal Bonds, they will
constitute taxable income for New York State and New York City personal income tax
purposes. Capital gain dividends paid by the Fund are treated as capital gains which are
taxed at ordinary income tax rates for New York State and City personal income tax
purposes. Distributions paid to a corporate shareholder from investment income, including
exempt-interest dividends, and capital gains of the Fund will be subject to New York
State corporate franchise and New York City corporation income tax. </FONT></P>

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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund will only purchase a Municipal Bond or Non-Municipal Tax Exempt Security if it is
accompanied by an opinion of counsel to the issuer, which is delivered on the date of
issuance of the security, that the interest paid on such security is excludable from
gross income for Federal income tax purposes and is exempt from New York State and New
York City personal income taxes, if applicable. To the extent that the dividends
distributed by  </FONT></P>


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


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

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

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

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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund is authorized to issue 200,000,000 shares of capital stock, all of which shares
initially were classified as common stock, par value $.10 per share. The Board of
Directors is authorized, however, to classify and reclassify any unissued shares of
capital stock into one or more additional or other classes or series as may be
established from time to time by setting or changing in any one or more respects the
designations, preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications or terms or conditions of redemption of such
shares of stock and pursuant to such classification or reclassification to increase or
decrease the number of authorized shares of any existing class or series. In this regard,
the Board of Directors previously reclassified 10,360 shares of unissued common stock as
Other AMPS and reclassified 1,800 shares of unissued common stock as AMPS, which are
being offered hereby. See &#147;Description of AMPS&#148; herein and in the statement of additional
information. </FONT></P>

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

<div>

  <table border=0 cellspacing=0 cellpadding=0 width="600" align="center">
    <tr valign="bottom">
      <td rowspan="4">
        <p>&nbsp;</p>
        <p>&nbsp;</p>
        <p>&nbsp;</p>
        <p><font size="1"><b>Title of Class</b> </font>
        <hr noshade align="left" size="1" width="20%">
      </td>
      <td rowspan="4" align="center">
        <p>&nbsp;</p>
        <p>&nbsp;</p>
        <p>&nbsp;</p>
        <p>&nbsp;</p>
      </td>
      <td rowspan="4" align="center"><font size="1"><b>Amount <br>
        Authorized</b> </font>
        <hr noshade align="center" size="1" width="60%">
      </td>
      <td rowspan="4" align="center">
        <p>&nbsp;</p>
        <p>&nbsp;</p>
        <p><font size="1"><b>Amount Held  <br>
          By Fund <br>
          For Its  <br>
          Own Account</b> </font>
        <hr noshade align="center" size="1" width="80%">
      </td>
      <td rowspan="4" align="center">
        <p><font size="1"><b>Amount  <br>
          Outstanding <br>
          (Exclusive  <br>
          Of Amount <br>
          Held By Fund  <br>
          For Its  <br>
          Own Account)</b> </font>
        <hr noshade align="center" size="1" width="80%">
      </td>
    </tr>
    <tr valign="bottom"> </tr>
    <tr valign="bottom"> </tr>
    <tr valign="bottom"> </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">Common Stock </font></p>
      </td>
      <td>
        <p><font size="2">&nbsp; </font></p>
      </td>
      <td align="center">
        <p><font size="2">199,989,640 </font></p>
      </td>
      <td align="center">
        <p><font size="2">- 0 - </font></p>
      </td>
      <td align="center">
        <p><font size="2">39,445,962 </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">Auction Market Preferred Stock </font></p>
      </td>
      <td>
        <p><font size="2">&nbsp; </font></p>
      </td>
      <td align="center">
        <p><font size="2">&nbsp; </font></p>
      </td>
      <td align="center">
        <p><font size="2">&nbsp; </font></p>
      </td>
      <td align="center">
        <p><font size="2">&nbsp; </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;Series A AMPS</font></p>
      </td>
      <td>
        <p><font size="2">&nbsp; </font></p>
      </td>
      <td align="center">
        <p><font size="2">1,700 </font></p>
      </td>
      <td align="center">
        <p><font size="2">- 0 - </font></p>
      </td>
      <td align="center">
        <p><font size="2">1,700 </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;Series B AMPS </font></p>
      </td>
      <td>
        <p><font size="2">&nbsp; </font></p>
      </td>
      <td align="center">
        <p><font size="2">1,700 </font></p>
      </td>
      <td align="center">
        <p><font size="2">- 0 - </font></p>
      </td>
      <td align="center">
        <p><font size="2">1,700 </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;Series C AMPS </font></p>
      </td>
      <td>
        <p><font size="2">&nbsp; </font></p>
      </td>
      <td align="center">
        <p><font size="2">2,800 </font></p>
      </td>
      <td align="center">
        <p><font size="2">- 0 - </font></p>
      </td>
      <td align="center">
        <p><font size="2">2,800 </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;Series D AMPS </font></p>
      </td>
      <td>
        <p><font size="2">&nbsp; </font></p>
      </td>
      <td align="center">
        <p><font size="2">1,960 </font></p>
      </td>
      <td align="center">
        <p><font size="2">- 0 - </font></p>
      </td>
      <td align="center">
        <p><font size="2">1,960 </font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;Series E AMPS </font></p>
      </td>
      <td>
        <p><font size="2">&nbsp; </font></p>
      </td>
      <td align="center">
        <p><font size="2">2,200 </font></p>
      </td>
      <td align="center">
        <p><font size="2">- 0 - </font></p>
      </td>
      <td align="center">
        <p><font size="2">2,200 </font></p>
      </td>
    </tr>
  </table>
  <p>&nbsp;</p>

</div>

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


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

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

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

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

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


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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund has issued an aggregate of 10,360 shares of Other AMPS. Under the Articles
Supplementary for the AMPS, the Fund is authorized to issue an aggregate of 1,800
additional shares of AMPS. The terms of the shares of Other AMPS are substantially the
same as the terms of the shares of AMPS. See &#147;Description of AMPS.&#148; Under the 1940 Act,
the Fund is permitted to have outstanding more than one series of preferred stock as long
as no single series has priority over another series as to the distribution of assets of
the Fund or the payment of dividends. Neither holders of common stock nor holders of
preferred stock have pre-emptive rights to purchase any shares of AMPS, Other AMPS or any
other preferred stock that might be issued. It is anticipated that the net asset value
per share of the AMPS will equal its original purchase price per share plus accumulated
dividends per share. </FONT></P>


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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Certain Provisions of
the Charter and By-laws </B></FONT></P>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, the Charter requires the favorable vote of the holders of at least
66<FONT SIZE=1><SUP>2</SUP></FONT>/<FONT SIZE=1>3</FONT>% of
the Fund&#146;s shares to approve, adopt or authorize the following: </FONT></P>

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<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=5%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=3%></TD>
    <TD WIDTH=90%><FONT SIZE=2>a
merger or consolidation or statutory share exchange of the Fund with any other
corporation;</FONT></TD></TR></TABLE>


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<BR>&nbsp;
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<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=5%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=3%></TD>
    <TD WIDTH=90%><FONT SIZE=2>a
sale of all or substantially all of the Fund&#146;s assets (other than in the regular course
of the Fund&#146;s           investment activities); or</FONT></TD></TR></TABLE>

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<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=5%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=3%></TD>
    <TD WIDTH=90%><FONT SIZE=2>a
liquidation or dissolution of the Fund;</FONT></TD></TR></TABLE>

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

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


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Charter and By-laws provide that the Board of Directors has the power to make, amend,
alter or repeal any of the By-laws (except for any By-law specified not to be altered or
repealed by the Board), subject to the requirements of the 1940 Act. Neither this
provision of the Charter, nor any of the foregoing provisions of the Charter requiring
the affirmative vote of 66<font size=1><sup>2</sup></font>/<Font size=1>3</font>% of shares of capital stock of the Fund, can be amended or
repealed except by the vote of such required number of shares. </FONT></P>

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


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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund&#146;s securities and cash are held under a custodian agreement with The Bank of New
York, 100 Church Street, New York, New York 10286. </FONT></P>


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

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

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

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


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


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


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
expenses of the offering, excluding underwriting discount, are estimated at $150,000 and
are payable by the Fund. </FONT></P>


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

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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
address of the Underwriter is 4 World Financial Center, New York, New York 10080. </FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>TRANSFER AGENT,
DIVIDEND DISBURSING AGENT AND REGISTRAR </B></FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The transfer agent,
  dividend disbursing agent and registrar for the Fund&#146;s shares of common
  stock, AMPS and Other AMPS is The Bank of New York, 101 Barclay Street, New
  York, New York 10286. </FONT></P>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;State
Street Bank and Trust Company, 500 College Road East, Princeton, New Jersey 08540,
provides certain accounting services for the Fund. </FONT></P>

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

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

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


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


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


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

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



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




<div>

  <table border=0 cellspacing=0 cellpadding=0 width="600">
    <tr valign="bottom">
      <td>
        <p align="right">&nbsp;</p>
      </td>
      <td>
        <p align="right">&nbsp;</p>
      </td>
      <td align="right">
        <p align="right"><font size="2"><b><font size="1">Page</font></b></font>
        <hr noshade align="right" size="1" width="70%">
      </td>
    </tr>
    <tr valign="bottom">
      <td><font size="2"></font></td>
      <td>
        <p align="right">&nbsp;</p>
      </td>
      <td align="right">
        <p align="right">&nbsp;</p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">Investment Objective and Policies</font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">3</font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">Investment Restrictions</font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">3</font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">Description of AMPS</font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">5</font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">The Auction</font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">13</font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">Rating Agency Guidelines</font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">13</font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">Directors and Officers</font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">22</font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">Investment Advisory and Management Arrangements</font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">27</font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">Portfolio Transactions</font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">35</font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">Taxes</font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">37</font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">Conflicts of Interest</font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">42</font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">Net Asset Value</font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">44</font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">Financial Statements</font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">44</font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">APPENDIX A Economic and Other Conditions in New York</font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">A-1</font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">APPENDIX B Description of Municipal Bond Ratings</font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">B-1</font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">APPENDIX C Municipal Bond Insurance</font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">C-1</font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">APPENDIX D Settlement Procedures</font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">D-1</font></p>
      </td>
    </tr>
    <tr valign="bottom">
      <td>
        <p><font size="2">APPENDIX E Auction Procedures</font></p>
      </td>
      <td>
        <p>&nbsp;</p>
      </td>
      <td align="right">
        <p><font size="2">E-1</font></p>
      </td>
    </tr>
  </table>
  <p>&nbsp;</p>

</div>



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


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Additional
Dividend&#148; </I>has the meaning set forth on page 34 of this prospectus. </FONT> </P>


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

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


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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;AMPS
Basic Maintenance Report&#148; </I>has the meaning set forth on page 9 of the statement of
additional information. </FONT> </P>


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


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Applicable
Percentage&#148; </I>has the meaning set forth on pages 38 to 39 of this prospectus. </FONT> </P>


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


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Applicable
  Spread&#148; </I>has the meaning set forth on page 38 to 39 of this prospectus.
  </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Articles
Supplementary&#148; </I>means the Articles Supplementary of the Fund specifying the powers,
preferences and rights of the shares of the AMPS. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Auction&#148;
</I>means a periodic operation of the Auction Procedures. </FONT> </P>

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

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


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Auction
Date&#148; </I>has the meaning set forth on page 37 of this prospectus. </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Auction
Procedures&#148; </I>means the procedures for conducting Auctions set forth in Appendix E to the
statement of additional information. </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Available
AMPS&#148; </I>has the meaning set forth on page 41 of this prospectus. </FONT> </P>


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


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

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


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Board
of Directors&#148; </I>or <I>&#147;Board&#148; </I>means the Board of Directors of the Fund. </FONT> </P>

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

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

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

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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Code&#148;
</I>means the Internal Revenue Code of 1986, as amended. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Common
stock&#148; </I>means the common stock, par value $.10 per share, of the Fund. </FONT> </P>

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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Discount
Factor&#148; </I>means a Moody&#146;s Discount Factor or an S&amp;P Discount Factor, as the case may be. </FONT> </P>

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


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

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


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;DTC&#148;
</I>means The Depository Trust Company. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Eligible
Assets&#148; </I>means Moody&#146;s Eligible Assets or S&amp;P Eligible Assets, as the case may be. </FONT> </P>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Fitch&#148;
</I>means Fitch Ratings or its successors. </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Forward
  Commitment&#148; </I>has the meaning set forth on page 21 of the statement of
  additional information. </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Fund&#148;
</I>means MuniYield New York Insured Fund, Inc., a Maryland corporation that is the issuer of
the AMPS. </FONT> </P>

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


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


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Initial
Dividend Payment Date&#148; </I>means the first Dividend Payment Date for the Series F AMPS. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Initial
Dividend Period&#148; </I>means the period from and including the Date of Original Issue to but
excluding the Initial Dividend Payment Date for the Series F AMPS. </FONT> </P>

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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Investment
Adviser&#148; </I>means Fund Asset Management, L.P. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;IRS&#148;
</I>means the United States Internal Revenue Service. </FONT> </P>

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

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


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;London
Business Day&#148; </I>means any day on which commercial banks are generally open for business in
London. </FONT> </P>

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


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


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


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Maximum
Applicable Rate&#148; </I>has the meaning set forth on pages 38 to 39 of this prospectus. </FONT> </P>


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


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Moody&#146;s
Discount Factor&#148; </I>has the meaning set forth on pages 16 to 17 of the statement of
additional information. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Moody&#146;s
Eligible Assets&#148; </I>has the meaning set forth on pages 17 to 20 of the statement of
additional information. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Moody&#146;s
  Hedging Transactions&#148; </I>has the meaning set forth on page 19 of the statement
  of additional information. </FONT> </P>


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

<div>

  <table border=0 cellspacing=0 cellpadding=0 width="600">
    <tr align="center" valign="bottom">
      <td width=228 rowspan="2">
        <p><font size="1"><b>% Change in <BR>
          Marginal Tax Rate</b> </font>
        <hr noshade align="center" width="30%" size="1">
      </td>
      <td width=171 rowspan="2">
        <p><font size="1"><b>Moody&#146;s Volatility <BR>
          Factor</b> </font>
        <hr noshade align="center" width="30%" size="1">
      </td>
    </tr>
    <tr> </tr>
    <tr align="center" valign="bottom">
      <td width=228>
        <p><font size="2">Less than or equal to 5% </font></p>
      </td>
      <td width=171>
        <p><font size="2">292% </font></p>
      </td>
    </tr>
    <tr align="center" valign="bottom">
      <td width=228>
        <p><font size="2">greater than 5% but less than 10% </font></p>
      </td>
      <td width=171>
        <p><font size="2">313% </font></p>
      </td>
    </tr>
    <tr align="center" valign="bottom">
      <td width=228>
        <p><font size="2">greater than 10% but less than 15% </font></p>
      </td>
      <td width=171>
        <p><font size="2">338% </font></p>
      </td>
    </tr>
    <tr align="center" valign="bottom">
      <td width=228>
        <p><font size="2">greater than 15% but less than 20% </font></p>
      </td>
      <td width=171>
        <p><font size="2">364% </font></p>
      </td>
    </tr>
    <tr align="center" valign="bottom">
      <td width=228>
        <p><font size="2">greater than 20% but less than 25% </font></p>
      </td>
      <td width=171>
        <p><font size="2">396% </font></p>
      </td>
    </tr>
    <tr align="center" valign="bottom">
      <td width=228>
        <p><font size="2">greater than 25% but less than 30% </font></p>
      </td>
      <td width=171>
        <p><font size="2">432% </font></p>
      </td>
    </tr>
    <tr align="center" valign="bottom">
      <td width=228>
        <p><font size="2">greater than 30% but less than 35% </font></p>
      </td>
      <td width=171>
        <p><font size="2">472% </font></p>
      </td>
    </tr>
    <tr align="center" valign="bottom">
      <td width=228>
        <p><font size="2">greater than 35% but less than or equal to 40% </font></p>
      </td>
      <td width=171>
        <p><font size="2">520% </font></p>
      </td>
    </tr>
  </table>
  <p>&nbsp;</p>

</div>

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


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Municipal
  Bonds&#148; </I>has the meaning set forth on page 5 of this prospectus. </FONT>
</P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Municipal
Index&#148; </I>has the meaning set forth on page 15 of the statement of additional information. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;New
York Municipal Bonds&#148; </I>has the meaning set forth on page 5 of this prospectus. </FONT> </P>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;1940
Act AMPS Asset Coverage&#148; </I>has the meaning set forth on page 34 of this prospectus. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;1940
Act Cure Date&#148; </I>has the meaning set forth on page 34 of this prospectus. </FONT> </P>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Non-Payment
Period&#148; </I>has the meaning set forth on pages 7 to 8 of the statement of additional
information. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Non-Payment
Period Rate&#148; </I>has the meaning set forth on page 8 of the statement of additional
information. </FONT> </P>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Notice
of Revocation&#148; </I>has the meaning set forth on page 6 of the statement of additional
information. </FONT> </P>

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


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


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

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


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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Policy&#148;
</I>means an insurance policy purchased by the Fund which guarantees the payment of principal
and interest on specified Municipal Bonds during the period in which such Municipal Bonds
are owned by the Fund; provided, however, that, as long as the AMPS are rated by Moody&#146;s
and S&amp;P, the Fund will not obtain any Policy unless Moody&#146;s and S&amp;P advise the Fund in
writing that the purchase of such Policy will not adversely affect their then-current
rating on the AMPS. </FONT> </P>

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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Preferred
stock&#148; </I>means preferred stock of the Fund and includes the AMPS. </FONT> </P>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Receivables
for New York Municipal Bonds Sold&#148; </I>has the meaning set forth under the definition of S&amp;P Discount
Factor. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Receivables
for New York Municipal Bonds and Municipal Bonds Sold&#148; </I>has the meaning set forth under
the definition of Moody&#146;s Discount Factor. </FONT> </P>

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

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


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

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

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


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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;S&amp;P&#148; </I>means
Standard &amp; Poor&#146;s or its successors. </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;S&amp;P Discount
Factor&#148; </I>has the meaning set forth on pages 13 to 14 of the statement of additional information. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;S&amp;P Eligible
Assets&#148; </I>has the meaning set forth on pages 14 to 16 of the statement of additional
information. </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;S&amp;P Hedging
Transactions&#148; </I>has the meaning set forth on page 15 of the statement of additional
information. </FONT> </P>


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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Sell
Order&#148; </I>has the meaning specified in Subsection 10(b)(i) of the Auction Procedures. </FONT> </P>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;7-Day
Dividend Period&#148; </I>means a Dividend Period consisting of seven days. </FONT> </P>


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


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


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


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Submission
Deadline&#148; </I>has the meaning set forth on page 40 of this prospectus. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Submitted
Bid&#148; </I>has the meaning set forth on page 41 of this prospectus. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Submitted
Hold Order&#148; </I>has the meaning set forth on page 41 of this prospectus. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Submitted
Order&#148; </I>has the meaning set forth on page 41 of this prospectus. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Submitted
Sell Order&#148; </I>has the meaning set forth on page 41 of this prospectus. </FONT> </P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Subsequent
Dividend Period&#148; </I>means each Dividend Period after the Initial Dividend Period. </FONT> </P>

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


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Sufficient
Clearing Bids&#148; </I>has the meaning set forth on page 41 of this prospectus. </FONT> </P>


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


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Kenny Information Systems Inc. or
any successor, the Taxable Equivalent of the Short Term Municipal Bond Rate shall mean
the quotient of (A) the per annum rate expressed on an interest equivalent basis equal to
the most recent Kenny Index so made available for any preceding Business Day, divided by
(B) 1.00 minus the Marginal Tax Rate (expressed as a decimal). The Fund may not utilize a
successor index to the Kenny Index unless Moody&#146;s and S&amp;P provide the Fund with written
confirmation that the use of such successor index will not adversely affect the
then-current respective Moody&#146;s and S&amp;P ratings of the AMPS. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Treasury
Bonds&#148; </I>means U.S. Treasury Bonds or Notes. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Treasury
Index Rate&#148; </I>means the average yield to maturity for actively traded marketable fixed
interest rate U.S. Treasury Securities having the same number of 30-day periods to
maturity as the length of the applicable Dividend Period, determined, to the extent
necessary, by linear interpolation based upon the yield for such securities having the
next shorter and next longer number of 30-day periods to maturity treating all Dividend
Periods with a length greater than the longest maturity for such securities as having a
length equal to such longest maturity, in all cases based upon data set forth in the most
recent weekly statistical release published by the Board of Governors of the Federal
Reserve System (currently in H.15(519)); provided, however, if the most recent such
statistical release shall not have been published during the 15 days preceding the date
of computation, the foregoing computations shall be based upon the average of comparable
data as quoted to the Fund by at least three recognized dealers in U.S. Government
Securities selected by the Fund. </FONT> </P>

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


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


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


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;Winning
Bid Rate&#148; </I>has the meaning set forth on page 41 of this prospectus. </FONT> </P>



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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=5><B>$45,000,000 </B></FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=5><B>MuniYield New York
Insured Fund, Inc. </B></FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>Auction Market
Preferred Stock (&#147;AMPS&#148;)  <BR> 1,800 Shares,
Series F  <BR>Liquidation Preference $25,000 per Share </B></FONT></P>




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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>PROSPECTUS </B></FONT></P>
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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4><B>Merrill Lynch &amp; Co. </B></FONT></P>


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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
, 2005 </B></FONT></P>



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

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Subject to
  Completion</B></FONT></P>
<P ALIGN=left>





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



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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>STATEMENT OF
ADDITIONAL INFORMATION </B></FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4><B>$45,000,000 </B></FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=5><B>MuniYield New York
Insured Fund, Inc. </B></FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Auction Market
Preferred Stock (&#147;AMPS&#148;)<BR>1,800 Shares, Series F<BR>Liquidation Preference $25,000
per Share </B></FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MuniYield
New York Insured Fund, Inc. (the &#147;Fund&#148;) is a non-diversified, closed-end fund.
The investment objective of the Fund is to provide shareholders with as high a level of
current income exempt from Federal income taxes and New York State and New York City
personal income taxes as is consistent with its investment policies and prudent
investment management. The Fund seeks to achieve its investment objective by investing,
as a fundamental policy, at least 80% of an aggregate of the Fund&#146;s net assets
(including proceeds from the issuance of any preferred stock) and the proceeds of any
borrowings for investment purposes, in a portfolio of municipal obligations the interest
on which, in the opinion of bond counsel to the issuer, is excludable from gross income
for Federal income tax purposes (except that the interest may be includable in taxable
income for purposes of the Federal alternative minimum tax) and exempt from New York
State and New York City personal income taxes. Under normal market conditions, the Fund
invests primarily in a portfolio of long term municipal obligations that are rated
investment grade or, if unrated, are considered by the Fund&#146;s investment adviser to
be of comparable quality. Under normal circumstances and after the investment period
following this offering (not expected to exceed three months), the Fund invests, as a
non-fundamental policy, at least 80% of an aggregate of the Fund&#146;s net assets
(including proceeds from the issuance of any preferred stock) and the proceeds of any
borrowings for investment purposes, in municipal obligations that are covered by
insurance guaranteeing the timely payment of principal at maturity and interest when due.
The Fund may invest in certain tax exempt securities classified as &#147;private activity
bonds,&#148; as discussed within, that may subject certain investors in the Fund to an
alternative minimum tax. There can be no assurance that the Fund&#146;s investment
objective will be realized. </FONT></P>

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

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

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=5><B>Merrill Lynch &amp; Co. </B></FONT></P>

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


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


<table border=0 cellspacing=0 cellpadding=0 width="600" align="center">
  <tr>
    <td valign=top colspan="2">&nbsp;</td>
    <td valign=top width=1>&nbsp;</td>
    <td valign=top width=37 align="right"><b><font size="1">Page </font></b>
      <hr width="60%" size="1" noshade align="right">
    </td>
  </tr>
  <tr>
    <td valign=top colspan="2"> <font size="2">Investment Objective and Policies</font>
    </td>
    <td valign=top width=1>&nbsp; </td>
    <td valign=top width=37 align="right"> <font size="2">3</font></td>
  </tr>
  <tr>
    <td valign=top colspan="2"> <font size="2">Investment Restrictions</font>
    </td>
    <td valign=top width=1>&nbsp; </td>
    <td valign=top width=37 align="right"> <font size="2">3</font></td>
  </tr>
  <tr>
    <td valign=top colspan="2"> <font size="2">Description of AMPS</font> </td>
    <td valign=top width=1>&nbsp; </td>
    <td valign=top width=37 align="right"> <font size="2">5</font></td>
  </tr>
  <tr>
    <td valign=top colspan="2"> <font size="2">The Auction</font> </td>
    <td valign=top width=1>&nbsp; </td>
    <td valign=top width=37 align="right"> <font size="2">13</font></td>
  </tr>
  <tr>
    <td valign=top colspan="2"> <font size="2">Rating Agency Guidelines</font>
    </td>
    <td valign=top width=1>&nbsp; </td>
    <td valign=top width=37 align="right"> <font size="2">13</font></td>
  </tr>
  <tr>
    <td valign=top colspan="2"> <font size="2">Directors and Officers</font> </td>
    <td valign=top width=1>&nbsp; </td>
    <td valign=top width=37 align="right"> <font size="2">22</font></td>
  </tr>
  <tr>
    <td valign=top colspan="2"> <font size="2">Investment Advisory and Management
      Arrangements</font> </td>
    <td valign=top width=1>&nbsp; </td>
    <td valign=top width=37 align="right"> <font size="2">27</font></td>
  </tr>
  <tr>
    <td valign=top colspan="2"> <font size="2">Portfolio Transactions</font> </td>
    <td valign=top width=1>&nbsp; </td>
    <td valign=top width=37 align="right"> <font size="2">35</font></td>
  </tr>
  <tr>
    <td valign=top colspan="2"> <font size="2">Taxes</font> </td>
    <td valign=top width=1>&nbsp; </td>
    <td valign=top width=37 align="right"> <font size="2">37</font></td>
  </tr>
  <tr>
    <td valign=top colspan="2"> <font size="2">Conflicts of Interest</font> </td>
    <td valign=top width=1>&nbsp; </td>
    <td valign=top width=37 align="right"> <font size="2">42</font></td>
  </tr>
  <tr>
    <td valign=top colspan="2"> <font size="2">Net Asset Value</font> </td>
    <td valign=top width=1>&nbsp; </td>
    <td valign=top width=37 align="right"> <font size="2">44</font></td>
  </tr>
  <tr>
    <td valign=top colspan="2"> <font size="2">Financial Statements</font> </td>
    <td valign=top width=1>&nbsp; </td>
    <td valign=top width=37 align="right"> <font size="2">44</font></td>
  </tr>
  <tr>
    <td valign=top width=84> <font size="2">APPENDIX A </font></td>
    <td valign=top width=478> <font size="2">Economic and Other Conditions In
      New York</font></td>
    <td valign=top width=1>&nbsp; </td>
    <td valign=top width=37 align="right"> <font size="2">A-1</font></td>
  </tr>
  <tr>
    <td valign=top width=84> <font size="2">APPENDIX B </font></td>
    <td valign=top width=478> <font size="2">Description of Municipal Bond Ratings</font></td>
    <td valign=top width=1>&nbsp; </td>
    <td valign=top width=37 align="right"> <font size="2">B-1</font></td>
  </tr>
  <tr>
    <td valign=top width=84> <font size="2">APPENDIX C </font></td>
    <td valign=top width=478> <font size="2">Municipal Bond Insurance</font></td>
    <td valign=top width=1>&nbsp; </td>
    <td valign=top width=37 align="right"> <font size="2">C-1</font></td>
  </tr>
  <tr>
    <td valign=top width=84> <font size="2">APPENDIX D </font></td>
    <td valign=top width=478> <font size="2">Settlement Procedures</font></td>
    <td valign=top width=1>&nbsp; </td>
    <td valign=top width=37 align="right"> <font size="2">D-1</font></td>
  </tr>
  <tr>
    <td valign=top width=84> <font size="2">APPENDIX E </font></td>
    <td valign=top width=478> <font size="2">Auction Procedures</font></td>
    <td valign=top width=1>&nbsp; </td>
    <td valign=top width=37 align="right"> <font size="2">E-1</font></td>
  </tr>
</table>



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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund&#146;s investment objective is to provide shareholders with as high a level of
current income exempt from Federal income taxes and New York State and New York City
personal income taxes as is consistent with its investment policies and prudent
investment management. The Fund seeks to achieve its investment objective by investing,
as a fundamental policy, at least 80% of an aggregate of the Fund&#146;s net assets
(including proceeds from the issuance of any preferred stock) and the proceeds of any
borrowings for investment purposes, in a portfolio of municipal obligations issued by or
on behalf of the State of New York, its political subdivisions, agencies and
instrumentalities and by other qualifying issuers, each of which pays interest that, in
the opinion of bond counsel to the issuer, is excludable from gross income for Federal
income tax purposes (except that the interest may be includable in taxable income for
purposes of the Federal alternative minimum tax) and exempt from New York State and New
York City personal income taxes (&#147;New York Municipal Bonds&#148;). The Fund also may
invest in municipal obligations issued by or on behalf of states, territories and
possessions of the United States and their political subdivisions, agencies or
instrumentalities, which pay interest that is excludable from gross income for Federal
income tax purposes, in the opinion of bond counsel to the issuer, but is not exempt from
New York State and New York City personal income taxes (&#147;Municipal Bonds&#148;). In
general, the Fund does not intend for its investments to earn a large amount of interest
income that is (i) includable in gross income for Federal income tax purposes or (ii) not
exempt from New York State and New York City personal income taxes. Unless otherwise
noted, the term &#147;Municipal Bonds&#148; also includes New York Municipal Bonds. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund&#146;s investment objective and its policy of investing at least 80% of an aggregate
of the Fund&#146;s net assets (including proceeds from the issuance of any preferred
stock) and the proceeds of any borrowings for investment purposes, in New York Municipal
Bonds are fundamental policies that may not be changed without the approval of a majority
of the outstanding voting securities of the Fund (as defined in the Investment Company
Act of 1940 (the &#147;1940 Act&#148;). Under normal circumstances and after the
investment period following the offering (not expected to exceed three months), the Fund
invests as a non-fundamental policy, at least 80% of an aggregate of the Fund&#146;s net
assets (including proceeds from the issuance of any preferred stock) and the proceeds of
any borrowings for investment purposes, in Municipal Bonds that are covered by insurance
guaranteeing the timely payment of principal at maturity and interest when due. This is a
non-fundamental policy and may be changed by the Fund&#146;s Board of Directors without
stockholder approval; provided that stockholders are given at least 60 days&#146; prior
notice of any change as required by the 1940 Act. There can be no assurance that the Fund&#146;s
investment objective will be realized. </FONT></P>

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

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

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

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

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

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

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

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

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

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

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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
purposes of investment restriction (4) above, the Fund may borrow moneys in excess of 5%
of the value of its total assets to the extent permitted by Section 18 of the 1940 Act or
otherwise as permitted by applicable law for the purpose of repurchasing shares of common
stock or redeeming shares of preferred stock. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
purposes of investment restriction (9) above, the exception for states, municipalities
and their political subdivisions applies only to tax-exempt securities issued by such
entities. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additional
investment restrictions adopted by the Fund, which may be changed by the Board of
Directors without stockholder approval, provide that the Fund may not: </FONT></P>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.
Mortgage, pledge, hypothecate or in any manner transfer, as       security for
indebtedness, any securities owned or held by the Fund except       as may be necessary
in connection with borrowings mentioned in investment       restriction (4) above or
except as may be necessary in connection with       transactions in financial futures
contracts and options thereon. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.
Change its policy of investing, under normal circumstances, at       least 80% of the Fund&#146;s
net assets (including assets acquired from the       sale of preferred stock), plus the
amount of any borrowings for investment       purposes, in New York Municipal Bonds and
Municipal Bonds that are covered       by insurance guaranteeing the timely payment of
principal at maturity and       interest when due, unless the Fund provides stockholders
with at least 60       days&#146; prior written notice of such change. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 percentage resulting from
changing values will not be considered a violation.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund is classified as non-diversified within the meaning of the 1940 Act, which means
that the Fund is not limited by the 1940 Act in the proportion of its assets that it may
invest in securities of a single issuer. As a non-diversified fund, the Fund&#146;s
investments are limited, however, in order to allow the Fund to continue to qualify as a
regulated investment company under the Internal Revenue Code of 1986, as amended (the
&#147;Code&#148;). See &#147;Taxes.&#148; To qualify, the Fund complies with certain
requirements, including limiting its investments so that at the close of each quarter of
the taxable year (i) not more than 25% of the market value of the Fund&#146;s total
assets will be invested in the securities of a single issuer or in qualified publicly
traded partnerships as defined in the Code and (ii) with respect to 50% of the market
value of its total assets, not more than 5% of the market value of its total assets will
be invested in the securities of a single issuer and the Fund will not own more than 10%
of the  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>outstanding voting securities of a
single issuer. For purposes of this restriction, the Fund will regard each state and each
political subdivision, agency or instrumentality of such state and each multi-state
agency of which such state is a member and each public authority which issues securities
on behalf of a private entity as a separate issuer, except that if the security is backed
only by the assets and revenues of a non-government entity then the entity with the
ultimate responsibility for the payment of interest and principal may be regarded as the
sole issuer. These tax-related limitations may be changed by the Board of Directors of
the Fund to the extent necessary to comply with changes in the Federal tax requirements.
A fund that elects to be classified as &#147;diversified&#148; under the 1940 Act must
satisfy the foregoing 5% and 10% requirements with respect to 75% of its total assets. </FONT></P>

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


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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Series F AMPS will be shares of preferred stock that entitle their holders to receive
dividends when, as and if declared by the Board of Directors, out of funds legally
available therefor, at a rate per annum that may vary for the successive Dividend
Periods. After the Initial Dividend Period, each Subsequent Dividend Period for the
Series F AMPS generally will be a 7-Day Dividend Period; provided, however, that prior to
any Auction, the Fund may elect, subject to certain limitations described herein, upon
giving notice to holders thereof, a Special Dividend Period. The Applicable Rate for a
particular Dividend Period will be determined by an Auction conducted on the Business Day
before the start of such Dividend Period. Beneficial Owners and Potential Beneficial
Owners of shares of AMPS may participate in Auctions therefor, although, except in the
case of a Special Dividend Period of more than 28 days, Beneficial Owners desiring to
continue to hold all of their shares of AMPS regardless of the Applicable Rate resulting
from Auctions need not participate. For an explanation of Auctions and the method of
determining the Applicable Rate, see Appendix E&#151;&#148;Auction Procedures.&#148; </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
as otherwise required by law or unless there is no Securities Depository, all outstanding
shares of the Series F AMPS will be represented by one or more certificates registered in
the name of the nominee of the Securities Depository (initially expected to be Cede), and
no person acquiring shares of AMPS will be entitled to receive a certificate representing
such shares. See Appendix E&#151;&#148;Auction Procedures.&#148; As a result, the nominee
of the Securities Depository is expected to be the sole holder of record of the shares of
AMPS. Accordingly, each purchaser of AMPS must rely on (i) the procedures of the
Securities Depository and, if such purchaser is not a member of the Securities
Depository, such purchaser&#146;s Agent Member, to receive dividends, distributions and
notices and to exercise voting rights (if and when applicable) and (ii) the records of
the Securities Depository and, if such purchaser is not a member of the Securities
Depository, such purchaser&#146;s Agent Member, to evidence its beneficial ownership of
shares of AMPS. </FONT></P>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund also has outstanding five series of shares of Other AMPS with terms that are
substantially the same as the terms of the shares of AMPS described herein and in the
prospectus. Cede, the nominee of the Securities Depository, 55 Water Street, New York,
New York 10041-0099, is the sole holder of record of the shares of Other  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>AMPS. The Series F AMPS offered
hereby rank on a parity with the Other AMPS with respect to dividends and liquidation
preference. </FONT></P>

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

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

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


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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>&nbsp;Notification
  of Dividend Period</i>. In determining whether the Fund should issue a Notice
  of Special Dividend for the AMPS, the Broker-Dealers will consider (i) existing
  short term and long term market rates and indices of such short term and long
  term rates, (ii) existing market supply and demand for short term and long term
  securities, (iii) existing yield curves for short term and long term securities
  comparable to the AMPS, (iv) industry and financial conditions that may affect
  the AMPS, (v) the investment objective of the Fund, and (vi) the Dividend Periods
  and dividend rates at which current and potential beneficial holders of the
  AMPS would remain or become beneficial holders. If the Broker-Dealers shall
  not give the Fund a Response by such second Business Day or if the Response
  states that given the factors set forth above it is not advisable that the Fund
  give a Notice of Special Dividend Period for the AMPS, the Fund may not give
  a Notice of Special Dividend Period in respect of such Request for Special Dividend
  Period. In the event the Response indicates that it is advisable that the Fund
  give a Notice of Special Dividend Period for the AMPS, the Fund, by no later
  than the second Business Day prior to such Auction Date, may give a notice (a
  &#147;Notice of Special Dividend Period&#148;) to the Auction Agent, the Securities
  Depository and each Broker-Dealer, which notice will specify (i) the duration
  of the Special Dividend Period, (ii) the Optional Redemption Price as specified
  in the related Response and (iii) the Specific Redemption Provisions, if any,
  as specified in the related Response. The Fund also shall provide a copy of
  such Notice of Special Dividend Period to Moody&#146;s Investors Service, Inc.
  (&#147;Moody&#146;s&#148;) and Standard &amp; Poor&#146;s (&#147;S&amp;P&#148;).
  The Fund shall not give a Notice of Special Dividend Period, and, if such Notice
  of Special Dividend Period shall have been given already, shall give telephonic
  and written notice of its revocation (a &#147;Notice of Revocation&#148;) to
  the Auction Agent, each Broker-Dealer, and the Securities Depository on or prior
  to the Business Day prior to the relevant Auction Date if (x) either the 1940
  Act AMPS Asset Coverage is not satisfied or the Fund shall fail to maintain
  S&amp;P Eligible Assets and Moody&#146;s Eligible Assets each with an aggregate
  Discounted Value at least equal to the AMPS Basic Maintenance Amount, in each
  case on the Valuation Date immediately preceding the Business Day prior to the
  relevant Auction Date on an actual basis and on a pro forma basis giving effect
  to the proposed Special Dividend Period (using as a pro forma dividend rate
  with respect to such Special Dividend Period the </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>dividend rate which the
Broker-Dealers shall advise the Fund is an approximately equal rate for securities
similar to the AMPS with an equal dividend period), (y) sufficient funds for the payment
of dividends payable on the immediately succeeding Dividend Payment Date have not been
segregated in an account at the Fund&#146;s custodian bank or on the books of the Fund by
the close of business on the third Business Day preceding the related Auction Date or (z)
the Broker-Dealers jointly advise the Fund that, after consideration of the factors
listed above, they have concluded that it is advisable to give a Notice of Revocation.
The Fund also shall provide a copy of such Notice of Revocation to Moody&#146;s and S&amp;P.
If the Fund is prohibited from giving a Notice of Special Dividend Period as a result of
the factors enumerated in clause (x), (y) or (z) above or if the Fund gives a Notice of
Revocation with respect to a Notice of Special Dividend Period for the AMPS, the next
succeeding Dividend Period will be a 7-Day Dividend Period. In addition, in the event
Sufficient Clearing Bids are not made in any Auction or an Auction is not held for any
reason, the next succeeding Dividend Period will be a 7-Day Dividend Period, and the Fund
may not again give a Notice of Special Dividend Period (and any such attempted notice
shall be null and void) until Sufficient Clearing Bids have been made in an Auction with
respect to a 7-Day Dividend Period. </FONT></P>

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

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



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

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

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

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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
AMPS Basic Maintenance Amount as of any Valuation Date, means the dollar amount equal to
(i) the sum of (A) the product of the number of shares of AMPS and Other AMPS outstanding
on such Valuation Date multiplied by the sum of $25,000 and any applicable redemption
premium attributable to the designation of a Premium Call Period; (B) the aggregate
amount of cash dividends (whether or not earned or declared) that will  </FONT></P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>have accumulated for each share of
AMPS and Other AMPS outstanding to (but not including) the end of the current Dividend
Period for the AMPS that follows such Valuation Date in the event the then current
Dividend Period for the AMPS will end within 49 calendar days of such Valuation Date or
through the 49th day after such Valuation Date in the event the then current Dividend
Period will not end within 49 calendar days of such Valuation Date; (C) in the event the
then current Dividend Period will end within 49 calendar days of such Valuation Date, the
aggregate amount of cash dividends that would accumulate at the Maximum Applicable Rate
applicable to a Dividend Period of 28 or fewer days on any shares of AMPS and Other AMPS
outstanding from the end of such Dividend Period through the 49th day after such
Valuation Date, multiplied by the larger of the Moody&#146;s Volatility Factor and the S&amp;P
Volatility Factor, determined from time to time by Moody&#146;s and S&amp;P, respectively
(except that if such Valuation Date occurs during a Non-Payment Period, the cash dividend
for purposes of calculation would accumulate at the then current Non-Payment Period
Rate); (D) the amount of anticipated expenses of the Fund for the 90 days subsequent to
such Valuation Date (including any premiums payable with respect to a Policy); (E) the
amount of current outstanding balances of any indebtedness that is senior to the AMPS
plus interest actually accrued together with 30 days additional interest on the current
outstanding balances calculated at the current rate; (F) the amount of the Fund&#146;s
maximum potential Additional Dividend liability as of such Valuation Date; and (G) any
current liabilities as of such Valuation Date to the extent not reflected in any of
(i)(A) through (i)(F) (including, without limitation, and immediately upon determination,
any amounts due and payable by the Fund&#146;s portfolio securities purchased as of such
Valuation Date and any liabilities incurred for the purpose of clearing securities
transactions) less (ii) either (A) the Discounted Value of any of the Fund&#146;s assets,
or (B) the face value of any of the Fund&#146;s assets if such assets mature prior to or
on the date of redemption of AMPS or payment of a liability and are either securities
issued or guaranteed by the United States Government or Deposit Securities, in both cases
irrevocably deposited by the Fund for the payment of the amount needed to redeem shares
of AMPS subject to redemption or to satisfy any of (i)(B) through (i)(G). For Moody&#146;s,
the Fund shall include as a liability an amount calculated semi-annually equal to 150% of
the estimated cost of obtaining other insurance guaranteeing the timely payment of
interest on a Moody&#146;s Eligible Asset and principal thereof to maturity with respect
to Moody&#146;s Eligible Assets that (i) are covered by a Policy which provides the Fund
with the option to obtain such other insurance and (ii) are discounted by a Moody&#146;s
Discount Factor determined by reference to the insurance claims-paying ability rating of
the issuer of such Policy. </FONT></P>

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

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


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>determination made by the Fund&#146;s
independent accountants will be conclusive and binding on the Fund. The Fund will also
(i) provide Moody&#146;s with an AMPS Basic Maintenance Report and (ii) send S&amp;P an
electronic notification, as of each Valuation Date on or before the seventh Business Day
in the case of Moody&#146;s and the next Business Day in the case of S&amp;P after such
date when the Discounted Value of Moody&#146;s Eligible Assets or S&amp;P Eligible
Assets, as the case may be, fails to exceed the AMPS Basic Maintenance Amount by 10% or
more. Also, on or before 5:00 p.m., Eastern time, on the first Business Day after shares
of common stock are repurchased by the Fund, the Fund will complete and deliver to Moody&#146;s
an AMPS Basic Maintenance Report as of the close of business on such date that common
stock is repurchased. </FONT></P>


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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Mandatory
  Redemption</i>. The number of shares of AMPS to be redeemed will be equal to
  the lesser of (a) the minimum number of shares of AMPS the redemption of which,
  if deemed to have occurred immediately prior to the opening of business on the
  Cure Date, together with all other shares of the preferred stock subject to
  redemption or retirement, would result in the Fund having S&amp;P Eligible Assets
  and Moody&#146;s Eligible Assets each with an aggregate Discounted Value equal
  to or greater than the AMPS Basic Maintenance Amount or satisfaction of the
  1940 Act AMPS Asset Coverage, as the case may be, on such Cure Date (provided
  that, if there is no such minimum number of shares the redemption of which would
  have such result, all shares of AMPS then outstanding will be redeemed), and
  (b) the maximum number of shares of AMPS, together with all other shares of
  preferred stock subject to redemption or retirement, that can be redeemed out
  of funds expected to be legally available therefor on such redemption date.
  In determining the number of shares of AMPS required to be redeemed in accordance
  with the foregoing, the Fund shall allocate the number required to be redeemed
  which would result in the Fund having S&amp;P Eligible Assets and Moody&#146;s
  Eligible Assets each with an aggregate Discounted Value equal to or greater
  than the AMPS Basic Maintenance Amount or satisfaction of the 1940 Act AMPS
  Asset Coverage, as the case may be, pro rata among shares of AMPS, Other AMPS
  and other preferred stock subject to redemption pursuant to provisions similar
  to those set forth below; provided that, shares of AMPS that may not be redeemed
  at the option of the Fund due to the designation of a Non-Call Period applicable
  to such shares (A) will be subject to mandatory redemption only to the extent
  that other shares are not available to satisfy the number of shares required
  to be redeemed and (B) will be selected for redemption in an ascending order
  of outstanding number of days in the Non-Call Period (with shares with the lowest
  number of days to be redeemed first) and by lot in the event of shares having
  an equal number of days in such Non-Call Period. The Fund is required to effect
  such a mandatory redemption on a Business Day which is not later than 30 days
  after such Cure Date, except that if the Fund does not have funds legally available
  for the redemption of all of the required number of shares of AMPS and other
  preferred stock that are subject to mandatory redemption or the Fund otherwise
  is unable to effect such redemption on a Business Day which is on or prior to
  30 days after such Cure Date, the Fund will redeem those shares of AMPS that
  it was unable to redeem on the earliest practicable date on which it is able
  to effect such redemption out of funds legally available therefor. </FONT></P>

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the event that less than all of the outstanding shares of AMPS are to be redeemed, the
shares to be redeemed will be selected by lot or such other method as the Fund shall deem
fair and equitable, and the results thereof will be communicated to the Auction Agent.
The Auction Agent will give notice to the Securities Depository, whose nominee will be
the record holder of all shares of AMPS, and the Securities Depository will determine the
number of shares to be redeemed from the account of the Agent Member of each Existing
Holder. Each Agent Member will determine the number of shares to be redeemed from the
account of each Existing  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Holder for which it acts as agent.
An Agent Member may select for redemption shares from the accounts of some Existing
Holders without selecting for redemption any shares from the accounts of other Existing
Holders. Notwithstanding the foregoing, if neither the Securities Depository nor its
nominee is the record holder of all of the shares of AMPS, the particular shares to be
redeemed shall be selected by the Fund by lot or by such other method as the Fund shall
deem fair and equitable. </FONT></P>

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

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


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

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


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>of the directors with respect to
whose election the holders of common stock were entitled to vote or the two directors the
holders of shares of AMPS, Other AMPS and any other preferred stock have the right to
elect in any event) will terminate automatically. </FONT></P>

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

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

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


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

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

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

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


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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
the six months ended April 30, 2005 and the fiscal years ended October 31, 2004, 2003 and
2002, Merrill Lynch, an affiliate of the Investment Adviser, earned $123,943, $253,691,
$219,549 and $224,505, respectively, pursuant to its Broker-Dealer Agreement with the
Fund. </FONT></P>


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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Auction Procedures are set forth in Appendix E. The Settlement Procedures to be used with
respect to Auctions are set forth in Appendix D. </FONT></P>

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


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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Discounted Value of the Fund&#146;s S&amp;P Eligible Assets is calculated on each
Valuation Date. See &#147;Description of AMPS&#151;Asset Maintenance&#151;AMPS Basic
Maintenance Amount.&#148; S&amp;P Eligible Assets include cash, Receivables for New York
Municipal Bonds Sold (as defined below), Rule 2a-7 Money Market Funds and New York
Municipal Bonds eligible for consideration under S&amp;P&#146;s current guidelines. For
purposes of calculating the Discounted Value of the Fund&#146;s portfolio under current S&amp;P
guidelines, the fair market value of New York Municipal Bonds eligible for consideration
under such guidelines must be discounted by the applicable S&amp;P Discount Factor set
forth in the table below. The Discounted Value of a New York Municipal Bond eligible for
consideration under S&amp;P guidelines is the fair market value thereof divided by the S&amp;P
Discount Factor. The S&amp;P Discount Factor used to discount a particular New York
Municipal Bond will be determined by reference (a) to the rating by S&amp;P, Moody&#146;s
or Fitch on such New York Municipal Bond or (b) in the event the New York Municipal Bond
is insured under a Policy and the terms of the Policy permit the Fund, at its option, to
obtain other permanent insurance guaranteeing the timely payment of interest on such New
York Municipal Bond and principal thereof at maturity, the S&amp;P, Moody&#146;s or Fitch
insurance claims-paying ability rating of the issuer of the Policy or (c) in the event
the New York Municipal Bond is insured under an insurance policy that guarantees the
timely payment of interest on such New York Municipal Bond and principal thereof at
maturity, the S&amp;P, Moody&#146;s or Fitch insurance claims-paying ability rating of
the issuer of the insurance policy; provided, however, for purposes of determining the S&amp;P
Discount Factor applicable to New York Municipal Bonds not rated by S&amp;P, the New  </FONT></P>


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<p>&nbsp;</p>
<p><font size="2">York Municipal Bonds will carry an S&amp;P rating one full rating
  category lower than the S&amp;P rating category that is the equivalent of the
  rating category in which such New York Municipal Bond is placed by a NRSRO,
  in accordance with the table set forth below: </font></p>
<p>&nbsp; </p>
<table cellpadding=0 cellspacing=0 border=0 width=640 align="center">
  <tr valign=Bottom>
    <th colspan=2></th>
    <th colspan=2></th>
    <th colspan=2></th>
    <th colspan=2></th>
    <th colspan=2></th>
    <th colspan=2></th>
    <th colspan=2></th>
    <th colspan=2></th>
  </tr>
  <tr valign=Bottom align="center">
    <td colspan="16"><b><font size="1">S&amp;P&#146;s Rating Category (1) </font></b>
      <hr size="1" noshade>
    </td>
  </tr>
  <tr valign=Bottom align="center">
    <td colspan="2"><b><font size="1">AAA*(2) </font></b>
      <hr size="1" width="70%" noshade align="center">
    </td>
    <td colspan="2"><b><font size="1">AA*</font></b>
      <hr size="1" width="70%" noshade align="center">
    </td>
    <td colspan="2"><b><font size="1">A* </font></b>
      <hr size="1" width="70%" noshade align="center">
    </td>
    <td colspan="2"><b><font size="1">BBB*</font></b>
      <hr size="1" width="70%" noshade align="center">
    </td>
    <td colspan="2"><b><font size="1"> BB* </font></b>
      <hr size="1" width="70%" noshade align="center">
    </td>
    <td colspan="2"><b><font size="1">B*</font></b>
      <hr size="1" width="70%" noshade align="center">
    </td>
    <td colspan="2"><b><font size="1"> CCC* </font></b>
      <hr size="1" width="70%" noshade align="center">
    </td>
    <td colspan="2"><b><font size="1">NR**</font></b>
      <hr size="1" width="70%" noshade align="center">
    </td>
  </tr>
  <tr valign=Bottom align="center">
    <td colspan="2"><font size="2">159</font><font size="2">.75%</font></td>
    <td colspan="2"><font size="2">162</font><font size="2">.75%</font></td>
    <td colspan="2"><font size="2">165</font><font size="2">.75%</font></td>
    <td colspan="2"><font size="2">168</font><font size="2">.75%</font></td>
    <td colspan="2"><font size="2">190</font><font size="2">.11%</font></td>
    <td colspan="2"><font size="2">210</font><font size="2">.11%</font></td>
    <td colspan="2"><font size="2">230</font><font size="2">.11%</font></td>
    <td colspan="2"><font size="2">235</font><font size="2">.00%</font></td>
  </tr>
</table>
<p><!-- MARKER FORMAT-SHEET="Cutoff rule Footnote" FSL="Workstation" --> </p>
<HR SIZE=1 noshade ALIGN=left  WIDTH=75>



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

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

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

<!-- MARKER FORMAT-SHEET="Footnote Right" FSL="Workstation" -->
<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="1">(2) </FONT></TD><TD WIDTH=2%><FONT SIZE="1"></FONT></TD><TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">For
zero coupon New York Municipal Bonds, the S&amp;P Discount Factor is      441.80%.</FONT></TD></TR></TABLE>


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

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

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(i)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>except
for zero coupon New York Municipal Bonds rated AAA by S&amp;P that            mature in
30 years or less, be interest bearing and pay interest at            least semi-annually;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>      (ii)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;be
payable with respect to principal and interest in U.S. dollars;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>      (iii)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;not
be subject to a covered call or covered put option written by the Fund;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>      (iv)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;except
for Inverse Floaters, not be part of a private placement; and  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>      (v)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;except
for Inverse Floaters and legally defeased bonds that are            secured by securities
issued or guaranteed by the United States            Government, be part of an issue with
an original issue size of at            least $10 million or, if of an issue with an
original issue size            below $10 million, is rated at least AA or higher by S&amp;P.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Notwithstanding the foregoing: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
New York Municipal Bonds of any one issue type category (as described below) will be
considered S&amp;P Eligible Assets only to the extent the fair market value of such New
York Municipal Bonds does not exceed 25% of the aggregate fair market value of S&amp;P
Eligible Assets, except that New York Municipal Bonds falling within  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the general obligation issue type
category will be considered S&amp;P Eligible Assets to the extent the fair market value
of such New York Municipal Bonds does not exceed 50% of the aggregate fair market value
of S&amp;P Eligible Assets. For purposes of the issue type category requirement described
above, New York Municipal Bonds will be classified within one of the following
categories: health care issues, housing issues, educational facilities issues, student
loan issues, transportation issues, industrial development bond issues, electric, gas and
combination issues (if the combination issue includes an electric issue), water and sewer
utilities and combination issues (if the combination issue does not include an electric
issue), irrigation, resource recovery, solid waste and other utilities, general
obligation issues, lease obligations, escrowed bonds and other issues not falling within
one of the aforementioned categories. The general obligation issue type category includes
any issuer that is directly or indirectly guaranteed by the State of New York, the City
of New York or its political subdivisions. Utility issuers are included in the general
obligation issue type category if the issuer is directly or indirectly guaranteed by the
State of New York or its political subdivisions; </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)
New York Municipal Bonds that are escrow bonds or defeased bonds may compose up to 100%
of the aggregate fair market value of S&amp;P Eligible Assets if such New York Municipal
Bonds initially are assigned a rating by S&amp;P in accordance with S&amp;P&#146;s legal
defeasance criteria or rerated by S&amp;P as economic defeased escrow bonds and assigned
an AAA rating. New York Municipal Bonds may be rated as escrow bonds by another NRSRO or
rerated as an escrow bond and assigned the equivalent of an S&amp;P AAA rating, provided
that such equivalent rated New York Municipal Bonds are limited to 50% of the aggregate
fair market value of S&amp;P Eligible Assets and are deemed to have an AA S&amp;P rating
for purposes of determining the S&amp;P Discount Factor applicable to such New York
Municipal Bonds. The limitations on New York Municipal Bonds in clause (i) above and
clauses (iii) and (iv) below are not applicable to escrow bonds, however, economically
defeased bonds that are either initially rated or rerated by S&amp;P or another NRSRO and
assigned the same rating level as the issuer of the New York Municipal Bonds will remain
in its original issue type category set forth in clause (1) above; </FONT></P>

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

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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund may include Municipal Bonds other than New York Municipal Bonds as S&amp;P Eligible
Assets pursuant to guidelines and restrictions to be established by S&amp;P, provided
that S&amp;P advises the Fund in writing that such action will not adversely affect its
then current rating on the AMPS. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
discussed in the prospectus, the Fund may engage in options or futures transactions. For
so long as any shares of AMPS are rated by S&amp;P, the Fund will not purchase or sell
financial futures contracts, write, purchase or sell options on financial futures
contracts or write put options (except covered put options) or call options (except
covered call options) on portfolio securities unless it receives written confirmation
from S&amp;P that engaging in such transactions will not impair the ratings then assigned
to the shares of AMPS by S&amp;P, except that the Fund may purchase or sell financial
futures contracts based on the Bond Buyer Municipal Bond Index (the &#147;Municipal Index&#148;)
or Treasury Bonds and write, purchase or sell put and call options on such contracts
(collectively, &#147;S&amp;P Hedging Transactions&#148;), subject to the following
limitations: </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
the Fund will not engage in any S&amp;P Hedging Transaction based on       the Municipal
Index (other than transactions that terminate a financial       futures contract or
option held by the Fund by the Fund&#146;s taking an       opposite position thereto (&#147;Closing
Transactions&#148;)), that would cause the       Fund at the time of such transaction to
own or have sold the least of (A)       more than 1,000 outstanding financial futures
contracts  </FONT>
</TD>
</TR>
</TABLE>
<BR>


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





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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
based
on the       Municipal Index, (B) outstanding financial futures contracts based on the
      Municipal Index exceeding in number 25% of the quotient of the fair market
      value of the Fund&#146;s total assets divided by $1,000 or (C) outstanding
      financial futures contracts based on the Municipal Index exceeding in       number
10% of the average number of daily traded financial futures       contracts based on the
Municipal Index in the 30 days preceding the time       of effecting such transaction as
reported by The Wall Street Journal; </FONT></TD>
</TR>
</TABLE>
<BR>

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

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

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

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)
when the Fund writes a financial futures contract or an option       thereon, it will
either maintain an amount of cash, cash equivalents or       liquid assets in a
segregated account with the Fund&#146;s custodian, so that       the amount so segregated
plus the amount of Initial Margin and Variation       Margin held in the account of or on
behalf of the Fund&#146;s broker with       respect to such financial futures contract or
option equals the fair       market value of the financial futures contract or option,
or, in the event       the Fund writes a financial futures contract or option thereon
that       requires delivery of an underlying security, it shall hold such underlying
      security in its portfolio. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
purposes of determining whether the Fund has S&amp;P Eligible Assets with a Discounted
Value that equals or exceeds the AMPS Basic Maintenance Amount, the Discounted Value of
cash or securities held for the payment of Initial Margin or Variation Margin shall be
zero and the aggregate Discounted Value of S&amp;P Eligible Assets shall be reduced by an
amount equal to (i) 30% of the aggregate settlement value, as marked to market, of any
outstanding financial futures contracts based on the Municipal Index that are owned by
the Fund plus (ii) 25% of the aggregate settlement value, as marked to market, of any
outstanding financial futures contracts based on Treasury Bonds which contracts are owned
by the Fund. </FONT></P>


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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Discounted Value of the Fund&#146;s Moody&#146;s Eligible Assets is calculated on each
Valuation Date. See &#147;Description of AMPS&#151;Asset Maintenance&#151;AMPS Basic
Maintenance Amount.&#148; Moody&#146;s Eligible Assets include cash, Receivables for New
York Municipal Bonds and Municipal Bonds Sold (as defined below), Rule 2a-7 Money Market
Funds and New York Municipal Bonds or Municipal Bonds eligible for consideration under
Moody&#146;s guidelines. For purposes of calculating the Discounted Value of the Fund&#146;s
portfolio under current Moody&#146;s guidelines, the fair market value of New York
Municipal Bonds and Municipal Bonds eligible for consideration under such guidelines must
be discounted by the applicable Moody&#146;s Discount Factor set forth in the table
below. The Discounted Value of a New York Municipal Bond or Municipal Bond eligible for
consideration under Moody&#146;s guidelines is the lower of par and the quotient of the
fair market value thereof divided by the Moody&#146;s Discount Factor. The Moody&#146;s
Discount Factor used to discount a particular New York Municipal Bond or Municipal Bond
will be determined by reference to (a) the rating by Moody&#146;s, S&amp;P or Fitch on
such New York Municipal Bond or Municipal Bond or (b) in the event the Moody&#146;s
Eligible Asset is insured under a Policy and the terms of the Policy permit the Fund, at
its option, to obtain other insurance guaranteeing the timely payment of interest on such
Moody&#146;s Eligible Asset and principal thereof at maturity, the Moody&#146;s,  </FONT></P>


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





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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>S&amp;P or Fitch insurance
  claims-paying ability rating of the issuer of the Policy or (c) in the event
  the Moody&#146;s Eligible Asset is insured under an insurance policy that guarantees
  the timely payment of interest on such Moody&#146;s Eligible Asset and principal
  thereof at maturity, the Moody&#146;s, S&amp;P or Fitch insurance claims-paying
  ability rating of the issuer of the insurance policy, in accordance with the
  tables set forth below and on the following page: </FONT></P>
<table cellpadding=0 cellspacing=0 border=0 width=600 align="center">
  <tr valign=Bottom align="center">
    <th colspan=5><font size="2">Moody's Rating Category (1) </font></th>
  </tr>
  <tr valign=Bottom>
    <th colspan=5>
      <hr size="1" noshade>
    </th>
  </tr>
  <tr valign=Bottom>
    <th align="center" width="100"><font size="2">Aaa</font>
      <hr size="1" noshade width="40%">
    </th>
    <th align="center" width="115"><font size="2">Aa</font>
      <hr size="1" noshade width="40%">
    </th>
    <th align="center" width="118"><font size="2">A</font>
      <hr size="1" noshade width="40%">
    </th>
    <th align="center" width="122"><font size="2">Baa</font>
      <hr size="1" noshade width="40%">
    </th>
    <th align="center" width="145"><font size="2">Other (2)</font>
      <hr size="1" noshade width="50%">
    </th>
  </tr>
  <tr valign=Bottom>
    <td align=CENTER width=100><font size=2>151</font></td>
    <td align=CENTER width=115><font size=2>159</font></td>
    <td align=CENTER width=118><font size=2>160</font></td>
    <td align=CENTER width=122><font size=2>173</font></td>
    <td align=CENTER width=145><font size=2>225</font></td>
  </tr>
</table>
<P><!-- MARKER FORMAT-SHEET="Cutoff rule Footnote" FSL="Workstation" --> </P>
<HR SIZE=1 noshade ALIGN=left  WIDTH=75>

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

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



<p>&nbsp;</p>
<table cellpadding=0 cellspacing=0 border=0 width=600 align="center">
  <tr valign=Bottom>
    <th colspan=2></th>
    <th colspan=2 width="306"></th>
  </tr>
  <tr valign=Bottom align="center">
    <td colspan="4"><font size="1"><b>Moody&#146;s Rating Category</b></font>
      <hr size="1" noshade>
    </td>
  </tr>
  <tr valign=Bottom align="center">
    <td colspan="2"><font size="1"><b>MIG-1, VMIG-1, P-1 (1) </b></font>
      <hr size="1" width="40%" noshade>
    </td>
    <td colspan="2" width=306><font size="1"><b>MIG-1, VMIG-1, P-1 (2) </b></font>
      <hr size="1" width="40%" noshade>
    </td>
  </tr>
  <tr valign=Bottom align="center">
    <td colspan="2"><font size="2">100</font><font size="2">%</font></td>
    <td colspan="2" width=306><font size="2">136</font><font size="2">%</font></td>
  </tr>
</table>
<p><!-- MARKER FORMAT-SHEET="Cutoff rule Footnote" FSL="Workstation" --> </p>
<HR SIZE=1 noshade ALIGN=left  WIDTH=75>

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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>; provided, however, in the event a
Moody&#146;s Discount Factor applicable to a Moody&#146;s Eligible Asset is determined by
reference to an insurance claims-paying ability rating in accordance with clause (b) or
(c), such Moody&#146;s Discount Factor shall be increased by an amount equal to 50% of
the difference between (i) the percentage set forth in the foregoing table under the
applicable rating category and (ii) the percentage set forth in the foregoing table under
the rating category which is one category lower than the applicable rating category. </FONT></P>

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

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

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


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





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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Moody&#146;s guidelines impose certain requirements as to minimum issue size, issuer
diversification and geographical concentration, as well as other requirements for
purposes of determining whether Municipal Bonds constitute Moody&#146;s Eligible Assets,
as set forth in the table below: </FONT></P>



<table cellpadding=0 cellspacing=0 border=0 width=640 align="center">
  <tr valign=Bottom>
    <th colspan=2></th>
    <th colspan=2></th>
    <th colspan=2></th>
    <th colspan=2></th>
    <th></th>
  </tr>
  <tr valign=Bottom align="center">
    <td><font size="1"><b>Rating</b></font>
      <hr size="1" width="80%" noshade>
    </td>
    <td>&nbsp;</td>
    <td><font size="1"><b>Minimum Issue Size <br>
      ($ Millions) </b></font>
      <hr size="1" width="80%" noshade>
    </td>
    <td>&nbsp;</td>
    <td><font size="1"><b>Maximum Underlying<br>
      Obligor (%) (1) </b></font>
      <hr size="1" width="80%" noshade>
    </td>
    <td>&nbsp;</td>
    <td><font size="1"><b>Maximum Issue Type<br>
      (%) (1) (3) </b></font>
      <hr size="1" width="80%" noshade>
    </td>
    <td>&nbsp;</td>
    <td><font size="1"><b>Maximum State <br>
      Allowed (%) (1) (4) </b></font>
      <hr size="1" width="80%" noshade>
    </td>
  </tr>
  <tr valign=Bottom align="center">
    <td><font size="2">&nbsp;&nbsp;&nbsp;Aaa</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">*</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">100</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">100</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">100</font></td>
  </tr>
  <tr valign=Bottom align="center">
    <td><font size="2">&nbsp;&nbsp;&nbsp;Aa</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">10</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">20</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">60</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">60</font></td>
  </tr>
  <tr valign=Bottom align="center">
    <td><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;A</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">10</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">10</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">40</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">40</font></td>
  </tr>
  <tr valign=Bottom align="center">
    <td><font size="2">&nbsp;&nbsp;&nbsp;Baa</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">10</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">6</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">20</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">20</font></td>
  </tr>
  <tr valign=Bottom align="center">
    <td><font size="2">&nbsp;&nbsp;&nbsp;Ba</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">10</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">4</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">12</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">12</font></td>
  </tr>
  <tr valign=Bottom align="center">
    <td><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;B</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">10</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">3</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">12</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">12</font></td>
  </tr>
  <tr valign=Bottom align="center">
    <td><font size="2">Other (2)</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">10</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">2</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">12</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">12</font></td>
  </tr>
</table>
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<HR SIZE=1 noshade ALIGN=left  WIDTH=75>

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

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


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

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<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=left VALIGN=top><FONT SIZE="1">(3) </FONT></TD><TD WIDTH=2%><FONT SIZE="1"></FONT></TD><TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">Does
not apply to general obligation bonds.</FONT></TD></TR></TABLE>

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<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=left VALIGN=top><FONT SIZE="1">(4) </FONT></TD><TD WIDTH=2%><FONT SIZE="1"></FONT></TD><TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">Does
not apply to New York Municipal Bonds. Territorial bonds (other than      those issued by
Puerto Rico and counted collectively) are each limited to      10% of Moody&#146;s
Eligible Assets. For diversification purposes, Puerto Rico      will be treated as a
state.</FONT></TD></TR></TABLE>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
purposes of the maximum underlying obligor requirement described above, any New York
Municipal Bond or Municipal Bond backed by the guaranty, letter of credit or insurance
issued by a third party will be deemed to be issued by such third party if the issuance
of such third party credit is the sole determinant of the rating on such Bond. For
purposes of the issue type concentration requirement described above, New York Municipal
Bonds and Municipal Bonds will be classified within one of the following categories:
health care issues (teaching and non-teaching hospitals, public and private), housing
issues (single- and multi-family), educational facilities issues (public and private
schools), student loan issues, resource recovery issues, transportation issues (mass
transit, airport and highway bonds), industrial revenue/pollution control bond issues,
utility issues (including water, sewer and electricity), general obligation issues, lease
obligations/certificates of participation, escrowed bonds and other issues (&#147;Other
Issues&#148;) not falling within one of the aforementioned categories (includes special
obligations to crossover, excise and sales tax revenue, recreation revenue, special
assessment and telephone revenue bonds). In no event shall (a) more than 10% of Moody&#146;s
Eligible Assets consist of student loan issues, (b) more than 10% of Moody&#146;s
Eligible Assets consist of resource recovery issues or (c) more than 10% of Moody&#146;s
Eligible Assets consist of Other Issues. </FONT></P>

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

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


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

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

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

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

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

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

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


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

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

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

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

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

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii)
the Fund will not engage in BMA swap transactions with respect       to more than 20% of
the Fund&#146;s net assets; provided that the Fund&#146;s use of       futures will
proportionately decrease as the Fund&#146;s use of BMA swap       transactions increases,
and vice-versa. </FONT>
</TD>
</TR>
</TABLE>
<BR>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
purposes of determining whether the Fund has Moody&#146;s Eligible Assets with an
aggregate Discounted Value that equals or exceeds the AMPS Basic Maintenance Amount, the
Discounted Value of Moody&#146;s Eligible Assets that the Fund is obligated to deliver or
receive pursuant to an outstanding futures contract or option shall be as follows: (i)
assets subject to call options written by the Fund that are either exchange-traded and
&#147;readily reversible&#148; or that expire within 49 days after the date as of which
such valuation is made shall be valued at the lesser of (A) Discounted Value and (B) the
exercise price of the call option written by the Fund; (ii) assets subject to call
options written by the Fund not meeting the requirements of clause (i) of this sentence
shall have no value; (iii) assets subject to put options written by the Fund shall be
valued at the lesser of (A) the exercise price and (B) the Discounted Value of the
subject security; (iv) futures contracts shall be valued at the lesser of (A) settlement
price and (B) the Discounted Value of the subject security, provided that, if a contract
matures within 49 days after the date as of which such valuation is made, where the Fund
is the seller the contract may be valued at the settlement price and where the Fund is
the buyer the contract may be valued at the Discounted Value of the subject securities;
and (v) where delivery may be made to the Fund with any security of a class of
securities, the Fund shall assume that it will take delivery of the security with the
lowest Discounted Value. </FONT></P>

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



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

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
the Fund will maintain in a segregated account with its custodian       cash, cash
equivalents or short term, fixed-income securities rated P-1,       MIG-1 or VMIG-1 by
Moody&#146;s and maturing prior to the date of the Forward       Commitment with a fair
market value that equals or exceeds the amount of       the Fund&#146;s obligations under
any Forward Commitments to which it is from       time to time a party or long-term,
fixed income securities with a       Discounted Value that equals or exceeds the amount
of the Fund&#146;s       obligations under any Forward Commitment to which it is from
time to time       a party, and </FONT>
</TD>
</TR>
</TABLE>
<BR>

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



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



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


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

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


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

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

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

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


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

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




<table border=0 cellspacing=0 cellpadding=0 width="620" align="center">
  <tr align="center" valign="bottom">
    <td width=114> <b><font size="1">Name, Address* and <br>
      Age of Director</font></b>
      <hr size="1" noshade>
    </td>
    <td width=9> <b><font size="1">&nbsp;&nbsp;</font></b></td>
    <td width=58> <b><font size="1">Position(s) Held with<br>
      the Fund </font></b>
      <hr size="1" noshade>
    </td>
    <td width=9> <b><font size="1">&nbsp;&nbsp;</font></b></td>
    <td width=66> <b><font size="1"><b>Term of Office** and Length of<br>
      Time Served</b> </font></b>
      <hr size="1" noshade>
    </td>
    <td width=9> <b><font size="1">&nbsp;&nbsp;</font></b></td>
    <td width=195> <b><font size="1"><b>Principal Occupation(s) <br>
      During the Past Five Years</b> </font></b>
      <hr size="1" noshade>
    </td>
    <td width=10> <b><font size="1">&nbsp;&nbsp;</font></b></td>
    <td width=70> <b><font size="1"> Number of<br>
      MLIM/FAM-<br>
      Advised Funds<br>
      and Portfolios<br>
      Overseen </font></b>
      <hr size="1" noshade>
    </td>
    <td width=13> <b><font size="1">&nbsp;&nbsp;</font></b></td>
    <td width=67> <b><font size="1">Public <br>
      Directorships </font></b>
      <hr size="1" noshade>
    </td>
  </tr>
  <tr align="left">
    <td valign=top width=114><font size="1">James H. Bodurtha (61)*** </font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=58><font size="1">Director</font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=66><font size="1">Director since 1995 and Co-Chairman
      of the Board since 2005 </font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=195><font size="1">Director, The China Business Group,
      Inc. since 1996 and Executive Vice President thereof from 1996 to 2003;
      Chairman of the Board, Berkshire Holding Corporation since 1980; Partner,
      Squire, Sanders &amp; Dempsey from 1980 to 1993.</font></td>
    <td valign=top width=10>&nbsp;</td>
    <td valign=top width=70><font size="1">39 registered investment companies
      consisting of 59 portfolios</font></td>
    <td valign=top width=13>&nbsp;</td>
    <td valign=top width=67><font size="1">None</font></td>
  </tr>
  <tr align="left">
    <td valign=top width=114>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=58>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=66>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=195>&nbsp;</td>
    <td valign=top width=10>&nbsp;</td>
    <td valign=top width=70>&nbsp;</td>
    <td valign=top width=13>&nbsp;</td>
    <td valign=top width=67>&nbsp;</td>
  </tr>
  <tr align="left">
    <td valign=top width=114><font size="1">Kenneth A. Froot (48)</font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=58><font size="1">Director</font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=66><font size="1">Director since 2005 </font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=195><font size="1">Professor, Harvard University, since
      1992. </font></td>
    <td valign=top width=10>&nbsp;</td>
    <td valign=top width=70><font size="1">39 registered investment companies
      consisting of 59 portfolios</font></td>
    <td valign=top width=13>&nbsp;</td>
    <td valign=top width=67><font size="1">None</font></td>
  </tr>
  <tr align="left">
    <td valign=top width=114>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=58>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=66>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=195>&nbsp;</td>
    <td valign=top width=10>&nbsp;</td>
    <td valign=top width=70>&nbsp;</td>
    <td valign=top width=13>&nbsp;</td>
    <td valign=top width=67>&nbsp;</td>
  </tr>
</table>




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





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<p>&nbsp;</p>
<table border=0 cellspacing=0 cellpadding=0 width="620" align="center">
  <tr align="center" valign="bottom">
    <td width=114> <b><font size="1">Name, Address* and <br>
      Age of Director</font></b>
      <hr size="1" noshade>
    </td>
    <td width=9> <b><font size="1">&nbsp;&nbsp;</font></b></td>
    <td width=58> <b><font size="1">Position(s) Held with<br>
      the Fund </font></b>
      <hr size="1" noshade>
    </td>
    <td width=9> <b><font size="1">&nbsp;&nbsp;</font></b></td>
    <td width=66> <b><font size="1"><b>Term of Office** and Length of<br>
      Time Served</b> </font></b>
      <hr size="1" noshade>
    </td>
    <td width=9> <b><font size="1">&nbsp;&nbsp;</font></b></td>
    <td width=195> <b><font size="1"><b>Principal Occupation(s) <br>
      During the Past Five Years</b></font></b>
<hr size="1" noshade>
    </td>
    <td width=10> <b><font size="1">&nbsp;&nbsp;</font></b></td>
    <td width=70> <b><font size="1"> Number of<br>
      MLIM/FAM-<br>
      Advised Funds<br>
      and Portfolios<br>
      Overseen </font></b>
      <hr size="1" noshade>
    </td>
    <td width=13> <b><font size="1">&nbsp;&nbsp;</font></b></td>
    <td width=67> <b><font size="1">Public <br>
      Directorships </font></b>
      <hr size="1" noshade>
    </td>
  </tr>
  <tr align="left">
    <td valign=top width=114><font size="1">Joe Grills (70)***</font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=58><font size="1">Director</font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=66><font size="1">Director since 2002 and Co-Chairman
      of the Board since 2005</font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=195><font size="1">Member of the Committee of Investment
      of Employee Benefit Assets of the Association of Financial Professionals
      (&#147;CIEBA&#148;) since 1986; Member of CIEBA&#146;s Executive Committee
      since 1988 and its Chairman from 1991 to 1992; Assistant Treasurer of International
      Business Machines Corporation (&#147;IBM&#148;) and Chief Investment Officer
      of IBM Retirement Funds from 1986 to 1993; Member of the Investment Advisory
      Committee of the State of New York Common Retirement Fund since 1989; Member
      of the Investment Advisory Committee of the Howard Hughes Medical Institute
      from 1997 to 2000; Director, Duke University Management Company from 1992
      to 2004, Vice Chairman thereof from 1998 to 2004, and Director Emeritus
      thereof since 2004; Director, LaSalle Street Fund from 1995 to 2001; Director,
      Kimco Realty Corporation since 1997; Member of the Investment Advisory Committee
      of the Virginia Retirement System since 1998, Vice Chairman thereof from
      2002 to 2005, and Chairman thereof since 2005; Director, Montpelier Foundation
      since 1998 and its Vice Chairman since 2000; Member of the Investment Committee
      of the Woodberry Forest School since 2000; Member of the Investment Committee
      of the National Trust for Historic Preservation since 2000. </font></td>
    <td valign=top width=10>&nbsp;</td>
    <td valign=top width=70><font size="1">39 registered investment companies
      consisting of 59 portfolios</font></td>
    <td valign=top width=13>&nbsp;</td>
    <td valign=top width=67><font size="1">Kimco Realty Corporation </font></td>
  </tr>
  <tr align="left">
    <td valign=top width=114>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=58>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=66>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=195>&nbsp;</td>
    <td valign=top width=10>&nbsp;</td>
    <td valign=top width=70>&nbsp;</td>
    <td valign=top width=13>&nbsp;</td>
    <td valign=top width=67>&nbsp;</td>
  </tr>
  <tr align="left">
    <td valign=top width=114><font size="1">Herbert I. London (66) </font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=58><font size="1">Director</font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=66><font size="1">Director since 1992 </font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=195><font size="1">John M. Olin professor of Humanities,
      New York University since 1993 and Professor thereof since 1980; President,
      Hudson Institute since 1997 and Trustee thereof since 1980; Dean, Gallatin
      Division of New York University from 1976 to 1993; Distinguished Fellow,
      Herman Kahn Chair, Hudson Institute from 1984 to 1985; Director, Damon Corp.
      from 1991 to 1995; Overseer, Center for Naval Analyses from 1983 to 1993;
      Limited Partner, Hypertech LP since 1996.</font></td>
    <td valign=top width=10>&nbsp;</td>
    <td valign=top width=70><font size="1">39 registered investment companies
      consisting of 59 portfolios</font></td>
    <td valign=top width=13>&nbsp;</td>
    <td valign=top width=67><font size="1">None</font></td>
  </tr>
  <tr align="left">
    <td valign=top width=114>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=58>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=66>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=195>&nbsp;</td>
    <td valign=top width=10>&nbsp;</td>
    <td valign=top width=70>&nbsp;</td>
    <td valign=top width=13>&nbsp;</td>
    <td valign=top width=67>&nbsp;</td>
  </tr>
  <tr align="left">
    <td valign=top width=114><font size="1">Roberta Cooper Ramo (63)****</font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=58><font size="1">Director</font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=66><font size="1">Director since 1999 </font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=195><font size="1">Shareholder, Modrall, Sperling, Roehl,
      Harris &amp; Sisk, P.A. since 1993; President, American Bar Association
      from 1995 to 1996 and Member of the Board of Governors thereof from 1994
      to 1997; Shareholder, Poole, Kelly &amp; Ramo, Attorneys at Law, P.C. from
      1977 to 1993; Director, Coopers, Inc. since 1999; Director of ECMC Group
      (service provider to students, schools and lenders) since 2001; Director,
      United New Mexico Bank (now Wells Fargo) from 1983 to 1988; Director, First
      National Bank of New Mexico (now Wells Fargo) from 1975 to 1976. </font></td>
    <td valign=top width=10>&nbsp;</td>
    <td valign=top width=70><font size="1">39 registered investment companies
      consisting of 59 portfolios </font></td>
    <td valign=top width=13>&nbsp;</td>
    <td valign=top width=67><font size="1">None</font></td>
  </tr>
  <tr align="left">
    <td valign=top width=114>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=58>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=66>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=195>&nbsp;</td>
    <td valign=top width=10>&nbsp;</td>
    <td valign=top width=70>&nbsp;</td>
    <td valign=top width=13>&nbsp;</td>
    <td valign=top width=67>&nbsp;</td>
  </tr>
</table>




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





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










<p>&nbsp;</p>
<p>&nbsp;</p>
<table border=0 cellspacing=0 cellpadding=0 width="620" align="center">
  <tr align="center" valign="bottom">
    <td width=114> <b><font size="1">Name, Address* and <br>
      Age of Director</font></b>
      <hr size="1" noshade>
    </td>
    <td width=9> <b><font size="1">&nbsp;&nbsp;</font></b></td>
    <td width=58> <b><font size="1">Position(s) Held with<br>
      the Fund </font></b>
      <hr size="1" noshade>
    </td>
    <td width=9> <b><font size="1">&nbsp;&nbsp;</font></b></td>
    <td width=66> <b><font size="1"><b>Term of Office** and Length of<br>
      Time Served</b> </font></b>
      <hr size="1" noshade>
    </td>
    <td width=9> <b><font size="1">&nbsp;&nbsp;</font></b></td>
    <td width=195> <b><font size="1"><b>Principal Occupation(s) <br>
      During the Past Five Years</b> </font></b>
      <hr size="1" noshade>
    </td>
    <td width=10> <b><font size="1">&nbsp;&nbsp;</font></b></td>
    <td width=70> <b><font size="1"> Number of<br>
      MLIM/FAM-<br>
      Advised Funds<br>
      and Portfolios<br>
      Overseen </font></b>
      <hr size="1" noshade>
    </td>
    <td width=13> <b><font size="1">&nbsp;&nbsp;</font></b></td>
    <td width=67> <b><font size="1">Public <br>
      Directorships </font></b>
      <hr size="1" noshade>
    </td>
  </tr>
  <tr align="left">
    <td valign=top width=114><font size="1">Robert S. Salomon, Jr. (68)</font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=58><font size="1">Director</font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=66><font size="1">Director since 2002 </font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=195><font size="1">Principal of STI Management (investment
      adviser) since 1994; Chairman and CEO of Salomon Brothers Asset Management
      from 1992 until 1995; Chairman of Salomon Brothers equity mutual funds from
      1992 until 1995; regular columnist with Forbes Magazine from 1992 to 2002;
      Director of Stock Research and U.S. Equity Strategist at Salomon Brothers
      from 1975 until 1991; Trustee, Commonfund from 1980 to 2001.</font></td>
    <td valign=top width=10>&nbsp;</td>
    <td valign=top width=70><font size="1">39 registered investment companies
      consisting of 59 portfolios </font></td>
    <td valign=top width=13>&nbsp;</td>
    <td valign=top width=67><font size="1">None</font></td>
  </tr>
  <tr align="left">
    <td valign=top width=114>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=58>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=66>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=195>&nbsp;</td>
    <td valign=top width=10>&nbsp;</td>
    <td valign=top width=70>&nbsp;</td>
    <td valign=top width=13>&nbsp;</td>
    <td valign=top width=67>&nbsp;</td>
  </tr>
  <tr align="left">
    <td valign=top width=114><font size="1">Stephen B. Swensrud (72) </font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=58><font size="1">Director</font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=66><font size="1">Director since 2002 </font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=195><font size="1">Chairman of Fernwood Associates (investment
      adviser) since 1996; Principal, Fernwood Associates (financial consultants)
      since 1975; Chairman of R.P.P. Corporation (manufacturing company) since
      1978; Director of International Mobile Communications, Incorporated (telecommunications
      company), since 1998. </font></td>
    <td valign=top width=10>&nbsp;</td>
    <td valign=top width=70><font size="1">40 registered investment companies
      consisting of 60 portfolios</font></td>
    <td valign=top width=13>&nbsp;</td>
    <td valign=top width=67><font size="1">International Mobile Communications,
      Inc. </font></td>
  </tr>
  <tr align="left">
    <td valign=top width=114>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=58>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=66>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=195>&nbsp;</td>
    <td valign=top width=10>&nbsp;</td>
    <td valign=top width=70>&nbsp;</td>
    <td valign=top width=13>&nbsp;</td>
    <td valign=top width=67>&nbsp;</td>
  </tr>
</table>





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


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

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

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

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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain
  biographical and other information relating to the Director who is an &#147;interested
  person&#148; of the Fund as defined in the 1940 Act (the &#147;interested Director&#148;)
  and the other officers of the Fund is set forth below, including their ages,
  their principal occupations for at least the last five years, the length of
  time served, the total number of portfolios overseen in MLIM/FAM-advised funds
  and public directorships held. </FONT></P>



<table border=0 cellspacing=0 cellpadding=0 width="620" align="center">
  <tr align="center" valign="bottom">
    <td width=114> <b><font size="1"><b>Name, Address*<br>
      and Age </b></font></b>
      <hr size="1" noshade>
    </td>
    <td width=9> <b><font size="1">&nbsp;&nbsp;</font></b></td>
    <td width=58> <b><font size="1">Position(s) Held with<br>
      the Fund </font></b>
      <hr size="1" noshade>
    </td>
    <td width=9> <b><font size="1">&nbsp;&nbsp;</font></b></td>
    <td width=66> <b><font size="1"><b>Term of Office** and Length of<br>
      Time Served</b> </font></b>
      <hr size="1" noshade>
    </td>
    <td width=9> <b><font size="1">&nbsp;&nbsp;</font></b></td>
    <td width=195> <b><font size="1"><b>Principal Occupation(s) <br>
      During the Past Five Years</b> </font></b>
      <hr size="1" noshade>
    </td>
    <td width=10> <b><font size="1">&nbsp;&nbsp;</font></b></td>
    <td width=70> <b><font size="1"> Number of<br>
      MLIM/FAM-<br>
      Advised Funds<br>
      and Portfolios<br>
      Overseen </font></b>
      <hr size="1" noshade>
    </td>
    <td width=13> <b><font size="1">&nbsp;&nbsp;</font></b></td>
    <td width=67> <b><font size="1">Public <br>
      Directorships </font></b>
      <hr size="1" noshade>
    </td>
  </tr>
  <tr align="left">
    <td valign=top width=114><font size="1">Robert C. Doll, Jr. (50)***</font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=58><font size="1">President and Director </font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=66><font size="1">President and Director**** since 2005</font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=195><font size="1">President of MLIM/FAM advised funds
      since 2005; President of MLIM and FAM since 2001; Co-Head (Americas Region)
      FAM and MLIM from 2000 to 2001 and Senior Vice President thereof from 1999
      to 2001; Director of Princeton Services, Inc. (&#147;Princeton Services&#148;)
      since 2001; President of Princeton Administrators, L.P. since 2001; Chief
      Investment Officer of OppenheimerFunds, Inc. in 1999 and Executive Vice
      President thereof from 1991 to 1999. </font></td>
    <td valign=top width=10>&nbsp;</td>
    <td valign=top width=70><font size="1">125 registered investment companies
      consisting of 164 portfolios</font></td>
    <td valign=top width=13>&nbsp;</td>
    <td valign=top width=67><font size="1">None</font></td>
  </tr>
  <tr align="left">
    <td valign=top width=114>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=58>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=66>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=195>&nbsp;</td>
    <td valign=top width=10>&nbsp;</td>
    <td valign=top width=70>&nbsp;</td>
    <td valign=top width=13>&nbsp;</td>
    <td valign=top width=67>&nbsp;</td>
  </tr>
  <tr align="left">
    <td valign=top width=114><font size="1">Kenneth A. Jacob (53) </font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=58><font size="1">Senior Vice President </font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=66><font size="1">Senior Vice President since 2001 </font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=195><font size="1">Managing Director of MLIM since 2000;
      First Vice President of MLIM from 1997 to 2000; Vice President of MLIM from
      1984 to 1997.</font></td>
    <td valign=top width=10>&nbsp;</td>
    <td valign=top width=70><font size="1">38 registered investment companies
      consisting of 50 portfolios </font></td>
    <td valign=top width=13>&nbsp;</td>
    <td valign=top width=67><font size="1">None</font></td>
  </tr>
  <tr align="left">
    <td valign=top width=114>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=58>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=66>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=195>&nbsp;</td>
    <td valign=top width=10>&nbsp;</td>
    <td valign=top width=70>&nbsp;</td>
    <td valign=top width=13>&nbsp;</td>
    <td valign=top width=67>&nbsp;</td>
  </tr>
  <tr align="left">
    <td valign=top width=114><font size="1">John M. Loffredo (41)</font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=58><font size="1">Senior Vice President </font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=66><font size="1">Senior Vice President since 2001 </font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=195><font size="1">Managing Director of MLIM since 2000;
      First Vice President of MLIM from 1997 to 2000; Vice President of MLIM from
      1991 to 1997; Portfolio Manager with MLIM and FAM since 1997. </font></td>
    <td valign=top width=10>&nbsp;</td>
    <td valign=top width=70>
      <p><font size="1"> 39 registered investment companies consisting of 51 portfolios
        </font></p>
    </td>
    <td valign=top width=13>&nbsp;</td>
    <td valign=top width=67><font size="1">None</font></td>
  </tr>
  <tr align="left">
    <td valign=top width=114>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=58>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=66>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=195>&nbsp;</td>
    <td valign=top width=10>&nbsp;</td>
    <td valign=top width=70>&nbsp;</td>
    <td valign=top width=13>&nbsp;</td>
    <td valign=top width=67>&nbsp;</td>
  </tr>
</table>




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





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






<p>&nbsp;</p>
<table border=0 cellspacing=0 cellpadding=0 width="620" align="center">
  <tr align="center" valign="bottom">
    <td width=114> <b><font size="1"><b>Name, Address*<br>
      and Age </b></font></b>
      <hr size="1" noshade>
    </td>
    <td width=9> <b><font size="1">&nbsp;&nbsp;</font></b></td>
    <td width=58> <b><font size="1">Position(s) Held with<br>
      the Fund </font></b>
      <hr size="1" noshade>
    </td>
    <td width=9> <b><font size="1">&nbsp;&nbsp;</font></b></td>
    <td width=66> <b><font size="1"><b>Term of Office** and Length of<br>
      Time Served</b> </font></b>
      <hr size="1" noshade>
    </td>
    <td width=9> <b><font size="1">&nbsp;&nbsp;</font></b></td>
    <td width=195> <b><font size="1"><b>Principal Occupation(s) <br>
      During the Past Five Years</b></font></b>
      <hr size="1" noshade>
    </td>
    <td width=10> <b><font size="1">&nbsp;&nbsp;</font></b></td>
    <td width=70> <b><font size="1"> Number of<br>
      MLIM/FAM-<br>
      Advised Funds<br>
      and Portfolios<br>
      Overseen </font></b>
      <hr size="1" noshade>
    </td>
    <td width=13> <b><font size="1">&nbsp;&nbsp;</font></b></td>
    <td width=67> <b><font size="1">Public <br>
      Directorships </font></b>
      <hr size="1" noshade>
    </td>
  </tr>
  <tr align="left">
    <td valign=top width=114><font size="1">Timothy T. Browse (50)</font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=58><font size="1">Vice President and Portfolio Manager
      </font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=66><font size="1">Vice President since 2004 </font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=195><font size="1">Vice President (Tax-Exempt Fixed Income)
      and portfolio manager with the Tax-Exempt Fixed Income Group of MLIM; Vice
      President, portfolio manager and team leader of the Municipal Investments
      Team with Lord Abbett &amp; Co. from 2000 to 2003; Vice President and portfolio
      manager in the municipal fund management group of Eaton Vance Management,
      Inc. from 1992 to 2000. </font></td>
    <td valign=top width=10>&nbsp;</td>
    <td valign=top width=70><font size="1">4 registered investment companies consisting
      of 5 portfolios </font></td>
    <td valign=top width=13>&nbsp;</td>
    <td valign=top width=67><font size="1">None</font></td>
  </tr>
  <tr align="left">
    <td valign=top width=114>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=58>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=66>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=195>&nbsp;</td>
    <td valign=top width=10>&nbsp;</td>
    <td valign=top width=70>&nbsp;</td>
    <td valign=top width=13>&nbsp;</td>
    <td valign=top width=67>&nbsp;</td>
  </tr>
  <tr align="left">
    <td valign=top width=114><font size="1">Donald C. Burke (45) </font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=58><font size="1">Vice President and Treasurer</font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=66><font size="1">Vice President since 1993 and Treasurer
      since 1999 </font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=195><font size="1">First Vice President of FAM and MLIM
      since 1997 and Treasurer thereof since 1999; Senior Vice President and Treasurer
      of Princeton Services since 1999 and Director since 2004; Vice President
      of FAM Distributors, Inc. (&#147;FAMD&#148;) since 1999; Vice President
      of MLIM and FAM from 1990 to 1997; Director of Taxation of MLIM from 1990
      to 2001. </font></td>
    <td valign=top width=10>&nbsp;</td>
    <td valign=top width=70><font size="1">127 registered investment companies
      consisting of 166 portfolios</font></td>
    <td valign=top width=13>&nbsp;</td>
    <td valign=top width=67><font size="1">None</font></td>
  </tr>
  <tr align="left">
    <td valign=top width=114>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=58>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=66>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=195>&nbsp;</td>
    <td valign=top width=10>&nbsp;</td>
    <td valign=top width=70>&nbsp;</td>
    <td valign=top width=13>&nbsp;</td>
    <td valign=top width=67>&nbsp;</td>
  </tr>
  <tr align="left">
    <td valign=top width=114><font size="1">Jeffrey Hiller (53) </font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=58><font size="1">Chief Compliance Officer</font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=66><font size="1">Chief Compliance Officer since 2004</font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=195><font size="1">Chief Compliance Officer of the MLIM/FAM-advised
      funds since 2004; First Vice President and Chief Compliance Officer of MLIM
      since 2004; Chief Compliance Officer of the IQ Funds since 2004; Global
      Director of Compliance at Morgan Stanley Investment Management from 2002
      to 2004; Managing Director and Global Director of Compliance at Citigroup
      Asset Management from 2000 to 2002; Chief Compliance Officer at Soros Fund
      Management in 2000; and Chief Compliance Officer at Prudential Financial
      from 1995 to 2000; Senior Counsel in the Securities and Exchange Commission&#146;s
      Division of Enforcement in Washington, D.C. from 1990 to 1995. </font></td>
    <td valign=top width=10>&nbsp;</td>
    <td valign=top width=70><font size="1">128 registered investment companies
      consisting of 167 portfolios</font></td>
    <td valign=top width=13>&nbsp;</td>
    <td valign=top width=67><font size="1">None</font></td>
  </tr>
  <tr align="left">
    <td valign=top width=114>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=58>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=66>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=195>&nbsp;</td>
    <td valign=top width=10>&nbsp;</td>
    <td valign=top width=70>&nbsp;</td>
    <td valign=top width=13>&nbsp;</td>
    <td valign=top width=67>&nbsp;</td>
  </tr>
  <tr align="left">
    <td valign=top width=114><font size="1">Alice A. Pellegrino (45)</font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=58><font size="1">Secretary</font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=66><font size="1">Secretary since 2004 </font></td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=195><font size="1">Director (Legal Advisory) of MLIM
      since 2002; Vice President of MLIM from 1999 to 2002; Attorney associated
      with MLIM since 1997; Secretary of FAM, MLIM, FAMD and Princeton Services
      since 2004.</font></td>
    <td valign=top width=10>&nbsp;</td>
    <td valign=top width=70><font size="1">125 registered investment companies
      consisting of 164 portfolios </font></td>
    <td valign=top width=13>&nbsp;</td>
    <td valign=top width=67><font size="1">None</font></td>
  </tr>
  <tr align="left">
    <td valign=top width=114>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=58>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=66>&nbsp;</td>
    <td valign=top width=9>&nbsp;</td>
    <td valign=top width=195>&nbsp;</td>
    <td valign=top width=10>&nbsp;</td>
    <td valign=top width=70>&nbsp;</td>
    <td valign=top width=13>&nbsp;</td>
    <td valign=top width=67>&nbsp;</td>
  </tr>
</table>
<p><!-- MARKER FORMAT-SHEET="Cutoff rule Footnote" FSL="Workstation" --> </p>
<HR SIZE=1 noshade ALIGN=left  WIDTH=75>



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

<!-- MARKER FORMAT-SHEET="Footnote Right" FSL="Workstation" -->
<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="1">  ** </FONT></TD><TD WIDTH=2%><FONT SIZE="1"></FONT></TD><TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">Elected
by and serves at the pleasure of the Board of Directors of the Fund.</FONT></TD></TR></TABLE>

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

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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
connection with the election of the Fund&#146;s Directors, holders of shares of AMPS,
Other AMPS and other preferred stock, voting as a separate class, are entitled to elect
two of the Fund&#146;s Directors, and the remaining Directors are elected by all holders
of capital stock, voting as a single class. Mr. London and Mr. Salomon are the Directors
elected by holders of preferred stock. See &#147;Description of AMPS&#151;Voting Rights.&#148; </FONT></P>



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





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







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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Information
relating to each Director&#146;s share ownership in the Fund and in all registered funds
in the Merrill Lynch family of funds that are overseen by the respective Director (&#147;Supervised
Merrill Lynch Funds&#148;) as of December 31, 2004 is set forth in the chart below. </FONT></P>


<table cellpadding=0 cellspacing=0 border=0 width=620 align="center">
  <tr valign=Bottom>
    <th colspan=2></th>
    <th colspan=2></th>
    <th></th>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size="1"><b>Name</b></font>
      <hr width="12%" size="1" noshade align="left">
    </td>
    <td align=LEFT>&nbsp;</td>
    <td align=center><font size="1"><b>Aggregate Dollar Range</b></font><font size="1"><b><br>
      of Equity in the Fund</b></font>
      <hr width="80%" size="1" noshade>
    </td>
    <td align=center>&nbsp;</td>
    <td align=center><font size="1"><b>Aggregate Dollar Range<br>
      of Securities in Supervised</b></font><font size="1"><b><br>
      Merrill Lynch Funds* </b></font>
      <hr width="80%" size="1" noshade>
    </td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size="2"><i>Interested Director:</i></font></td>
    <td align=LEFT><font size="2"></font></td>
    <td align=center>&nbsp;</td>
    <td align=center><font size="2"></font></td>
    <td align=center>&nbsp;</td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size="2">&nbsp;&nbsp;&nbsp;Robert C. Doll, Jr</font></td>
    <td align=LEFT><font size="2"></font></td>
    <td align=center><font size="2">None</font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2">Over $100,000</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size="2"><i>Non-interested Directors:</i></font></td>
    <td align=LEFT><font size="2"></font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size="2">&nbsp;&nbsp;&nbsp;James H. Bodurtha</font></td>
    <td align=LEFT><font size="2"></font></td>
    <td align=center><font size="2">None</font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2">Over $100,000</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size="2">&nbsp;&nbsp;&nbsp;Kenneth A. Froot**</font></td>
    <td align=LEFT><font size="2"></font></td>
    <td align=center><font size="2">None</font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2">None</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size="2">&nbsp;&nbsp;&nbsp;Joe Grills</font></td>
    <td align=LEFT><font size="2"></font></td>
    <td align=center><font size="2">None</font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2">Over $100,000</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size="2">&nbsp;&nbsp;&nbsp;Herbert I. London</font></td>
    <td align=LEFT><font size="2"></font></td>
    <td align=center><font size="2">None</font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2">Over $100,000</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size="2">&nbsp;&nbsp;&nbsp;Roberta Cooper Ramo</font></td>
    <td align=LEFT><font size="2"></font></td>
    <td align=center><font size="2">None</font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2">Over $100,000</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size="2">&nbsp;&nbsp;&nbsp;Robert S. Salomon, Jr</font></td>
    <td align=LEFT><font size="2"></font></td>
    <td align=center><font size="2">None</font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2">Over $100,000</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size="2">&nbsp;&nbsp;&nbsp;Stephen B. Swensrud</font></td>
    <td align=LEFT><font size="2"></font></td>
    <td align=center><font size="2">None</font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2">$50,001-$100,000</font></td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Cutoff rule Footnote" FSL="Workstation" -->
<HR SIZE=1 noshade ALIGN=left  WIDTH=75>



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

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


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

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

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


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


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  following table sets forth the compensation paid by the Fund to the non-interested
  Directors for the Fund&#146;s fiscal year ended October 31, 2004, and the aggregate
  compensation paid to them from all registered MLIM/FAM-advised funds for the
  calendar year ended December 31, 2004.</FONT></P>
<table cellpadding=0 cellspacing=0 border=0 width=600 align="center">
  <tr valign=Bottom>
    <th colspan=2></th>
    <th colspan=2></th>
    <th colspan=2></th>
    <th></th>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><b><font size="1">Name of Director </font></b>
      <hr width="40%" size="1" noshade align="left">
    </td>
    <td align=LEFT>&nbsp;</td>
    <td align=center><b><font size="1">Compensation<br>
      from Fund </font></b>
      <hr width="80%" size="1" noshade>
    </td>
    <td align=center>&nbsp;</td>
    <td align=center><b><font size="1">Pension or<br>
      Retirement<br>
      Benefits Accrued<br>
      as Part of <br>
      Fund Expense </font></b>
      <hr width="80%" size="1" noshade>
    </td>
    <td align=center>&nbsp;</td>
    <td align=center><b><font size="1">Aggregate<br>
      Compensation <br>
      From Fund and <br>
      other MLIM/FAM- <br>
      Advised Funds*** </font></b>
      <hr width="80%" size="1" noshade>
    </td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size="2">James H. Bodurtha*</font></td>
    <td align=LEFT><font size="2"></font></td>
    <td align=center><font size="2">$5,257</font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2">None</font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2">$250,000</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size="2">Kenneth A. Froot**</font></td>
    <td align=LEFT><font size="2"></font></td>
    <td align=center><font size="2">-0-</font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2">None</font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2">-0-</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size="2">Joe Grills*</font></td>
    <td align=LEFT><font size="2"></font></td>
    <td align=center><font size="2">$5,257</font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2">None</font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2">$250,000</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size="2">Herbert I. London</font></td>
    <td align=LEFT><font size="2"></font></td>
    <td align=center><font size="2">$4,676</font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2">None</font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2">$225,000</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size="2">Roberta Cooper Ramo</font></td>
    <td align=LEFT><font size="2"></font></td>
    <td align=center><font size="2">$4,676</font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2">None</font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2">$225,000</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size="2">Robert S. Salomon, Jr</font></td>
    <td align=LEFT><font size="2"></font></td>
    <td align=center><font size="2">$4,676</font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2">None</font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2">$225,000</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size="2">Stephen B. Swensrud</font></td>
    <td align=LEFT><font size="2"></font></td>
    <td align=center><font size="2">$4,676</font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2">None</font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2">$231,000</font></td>
  </tr>
</table>


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<P ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>(footnotes
  on following page) </i></FONT></P>



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<BR>&nbsp;
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<HR SIZE=1 noshade ALIGN=left  WIDTH=75>


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


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


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


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


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


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


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
portfolio manager primarily responsible for the Fund&#146;s day-to-day management is
Timothy T. Browse, who became the Fund&#146;s portfolio manager in 2004. Mr. Browse has
been a portfolio manager and Vice President (Tax-Exempt Fixed Income) of MLIM since 2003
and has over ten years of experience investing in Municipal Bonds as a portfolio manager
on behalf of registered investment companies. Prior to joining MLIM, Mr. Browse was a
vice president, portfolio manager and team leader of the Municipal Investments Team with
Lord Abbett &amp; Co. from 2000 to 2003. The Fund&#146;s portfolio manager will consider
analyses from various sources, make the necessary investment decisions, and place orders
for transactions accordingly. </FONT></P>


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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
the six months ended April 30, 2005 and the fiscal years ended October 31, 2004, 2003,
and 2002, the fees paid by the Fund to the Investment Adviser pursuant to the Investment
Advisory Agreement were $2,096,244, $4,174,910, $4,261,264 and $4,202,246, respectively. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
the six months ended April 30, 2005 and the fiscal years ended October 31, 2004, 2003 and
2002, the Investment Adviser reimbursed the Fund $1,827, $4,248, $33,687 and $0,
respectively. </FONT></P>

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



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





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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Trust Company (&#147;State Street&#148;)
pursuant to an agreement between State Street and the Fund. The Fund will pay the costs
of these services. In addition, the Fund will reimburse the Investment Adviser for
certain additional accounting services. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
table below shows the amounts paid by the Fund to State Street and to the Investment
Adviser for accounting services for the periods indicated: </FONT></P>


<table cellpadding=0 cellspacing=0 border=0 width=600 align="center">
  <tr valign=Bottom>
    <th colspan=2></th>
    <th colspan=2></th>
    <th></th>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size="1"><b>Period</b></font>
      <hr width="10%" size="1" noshade align="left">
    </td>
    <td align=LEFT>&nbsp;</td>
    <td align=center><font size="1"><b>Paid by the Fund to<br>
      State Street </b></font>
      <hr width="80%" size="1" noshade>
    </td>
    <td align=center>&nbsp;</td>
    <td align=center><font size="1"><b>Paid by the Fund to <br>
      the Investment <br>
      Adviser </b></font>
      <hr width="80%" size="1" noshade>
    </td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size="2">Six months ended April 30, 2005</font></td>
    <td align=LEFT><font size="2"></font></td>
    <td align=center><font size="2">$115,883</font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2">$&nbsp;&nbsp;8,920</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size="2">Fiscal year ended October 31, 2004</font></td>
    <td align=LEFT><font size="2"></font></td>
    <td align=center><font size="2">$230,380</font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2">$16,087</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size="2">Fiscal year ended October 31, 2003</font></td>
    <td align=LEFT><font size="2"></font></td>
    <td align=center><font size="2">$231,537</font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2">$18,446</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size="2">Fiscal year ended October 31, 2002</font></td>
    <td align=LEFT><font size="2"></font></td>
    <td align=center><font size="2">$230,978</font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2">$27,880</font></td>
  </tr>
</table>



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



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

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


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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Investment Advisory
Agreement &#151; Matters Considered by the Board </B></FONT></P>


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


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


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board believes that the Investment Adviser is one of the most experienced global asset
management firms and considers the overall quality of services provided by the Investment
Adviser to be generally of high quality. The Board also believes that the Investment
Adviser is financially sound and well managed and notes that the Investment Adviser is
affiliated with one of America&#146;s largest financial firms. The Board believes that
for  </FONT></P>



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<!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>many of the Fund&#146;s
stockholders, the investment decision involved the selection of the Investment Adviser as
the investment adviser to the Fund. The Board works closely with the Investment Adviser
in overseeing the Investment Adviser&#146;s efforts to achieve good performance. As part
of this effort, the Board discusses portfolio manager effectiveness and, when performance
is not satisfactory, discusses with the Investment Adviser taking steps such as changing
investment personnel. </FONT></P>



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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Annual
Consideration of Approval by the Board of Directors </I></B></FONT></P>


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



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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Certain Specific
Renewal Data </I></B></FONT></P>

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


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>The
  Investment Adviser&#146;s Services and Fund Performance</i>. The Board reviewed
  the nature, extent and quality of services provided by the Investment Adviser,
  including the investment advisory services and the resulting performance of
  the Fund. The Board focused primarily on the Investment Adviser&#146;s investment
  advisory services and the Fund&#146;s investment performance, having concluded
  that the other services provided to the Fund by the Investment Adviser were
  satisfactory. The Board compared Fund performance &#151; both including and
  excluding the effects of the Fund&#146;s fees and expenses &#151; to the performance
  of a comparable group of funds, and the performance of a relevant index or combination
  of indexes. While the Board reviews performance data at least quarterly, consistent
  with the Investment Adviser&#146;s investment goals, the Board attaches primary
  importance to performance over relatively long periods of time, typically three
  to five years. The Board noted that the Fund&#146;s performance within the group
  after fees and expenses ranked in the fifth quintile for the one, three and
  five year periods ended May 31, 2005. The Board sought and received additional
  information regarding Fund performance and was satisfied that the Fund&#146;s
  Investment Adviser is addressing all performance issues. The Board also noted
  that the Fund was taking steps through the issuance of the AMPs to increase
  its leverage so that its performance opportunity is more comparable to its peer
  group. Finally, the Board noted that the peer group of closed-end, leveraged,
  insured, New York municipal bond funds is small and that the performance comparison
  should take into consideration the size of the group. The Board concluded that
  the steps being taken by the Investment Adviser to address performance issues,
  considered in the context of the other services provided by the Investment Adviser,
  supported the continuation of the Investment Advisory Agreement. </FONT></P>

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




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





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






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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Fund and concluded that the Fund
benefits, and should continue to benefit, from that expertise; moreover the Investment
Adviser and its investment staff have extensive experience in analyzing and managing the
types of investments used by the Fund. The Board concluded that the Fund benefits from
that expertise. </FONT></P>

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

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


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


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


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



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

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


<!-- MARKER FORMAT-SHEET="Left Head 2 Bold Italic" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Other Funds and
Accounts Managed by Portfolio Manager as of April 30, 2005 </I></B></FONT></P>



<table cellpadding=0 cellspacing=0 border=0 width=640 align="center">
  <tr valign=Bottom>
    <th colspan=2></th>
    <th colspan=2></th>
    <th colspan=2></th>
    <th colspan=2></th>
    <th colspan=2></th>
    <th colspan=2></th>
    <th></th>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=center colspan="5"><b><font size="1">Number of Other Accounts Managed<br>
      and Assets by Account Type </font></b>
      <hr width="90%" size="1" noshade>
    </td>
    <td align=center>&nbsp;</td>
    <td align=center colspan="5"><b><font size="1">Number of Accounts and Assets
      for Which<br>
      Advisory Fee is Performance-Based </font></b>
      <hr width="95%" size="1" noshade>
    </td>
  </tr>
  <tr valign=bottom>
    <td align=center> <b><font size="1">Name of Investment <br>
      Adviser and <br>
      Portfolio Manager </font></b>
      <hr width="50%" size="1" noshade>
    </td>
    <td align=LEFT>&nbsp;</td>
    <td align=center><b><font size="1">Registered<br>
      Investment <br>
      Companies </font></b>
      <hr width="80%" size="1" noshade>
    </td>
    <td align=center>&nbsp;</td>
    <td align=center><b><font size="1">Other Pooled<br>
      Investment <br>
      Vehicles </font></b>
      <hr width="80%" size="1" noshade>
    </td>
    <td align=center>&nbsp;</td>
    <td align=center><b><font size="1">Other<br>
      accounts </font></b>
      <hr width="80%" size="1" noshade>
      <b><font size="1"> </font></b></td>
    <td align=center>&nbsp;</td>
    <td align=center><b><font size="1">Registered<br>
      Investment <br>
      Companies </font></b>
      <hr width="80%" size="1" noshade>
      <b><font size="1"> </font></b></td>
    <td align=center>&nbsp;</td>
    <td align=center><b><font size="1">Other Pooled <br>
      Investment <br>
      Vehicles </font></b>
      <hr width="80%" size="1" noshade>
    </td>
    <td align=center>&nbsp;</td>
    <td align=center><b><font size="1">Other<br>
      accounts </font></b>
      <hr width="80%" size="1" noshade>
    </td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size="2">Fund Asset Management, L.P.</font></td>
    <td align=LEFT><font size="2"></font></td>
    <td align=center><font size="2">4</font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2">0</font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2">0</font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2">0</font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2">0</font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2">0</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size="2">&nbsp;Timothy T. Browse</font></td>
    <td align=LEFT><font size="2"></font></td>
    <td align=RIGHT>
      <div align="center"><font size="2">$1,958,538,205</font></div>
    </td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2"></font></td>
    <td align=center><font size="2"></font></td>
  </tr>
</table>


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


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


<table cellpadding=0 cellspacing=0 border=0 width=600 align="center">
  <tr valign=Bottom>
    <th colspan=2></th>
    <th></th>
  </tr>
  <tr valign=Bottom align="center">
    <td><font size="1"><b>Portfolio Manager </b></font>
      <hr size="1" width="25%">
    </td>
    <td>&nbsp;</td>
    <td><font size="1"><b>Dollar Range </b></font>
      <hr size="1" width="30%">
    </td>
  </tr>
  <tr valign=Bottom align="center">
    <td><font size="2">Timothy T. Browse</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">None</font></td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" -->
<BR>&nbsp;
<TABLE WIDTH=100%><TR><TD WIDTH=20% ALIGN=left><FONT SIZE=1>&nbsp;</FONT></TD>
    <TD WIDTH=60% ALIGN=center><FONT SIZE="2"> 30 </FONT></TD>
    <TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR SIZE=5 noshade WIDTH=100% ALIGN=LEFT>





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<!-- MARKER PAGE="sheet: 69; page: 69" -->







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

<!-- MARKER FORMAT-SHEET="Left Head 2 Indent Italic" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Portfolio
Manager Compensation </I></FONT></P>

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


<!-- MARKER FORMAT-SHEET="Left Head 2 Indent Italic" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Compensation
Program </I></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
elements of total compensation for MLIM and its affiliates portfolio managers are fixed
base salary, annual performance-based cash and stock compensation (cash and stock bonus)
and other benefits. MLIM has balanced these components of pay to provide portfolio
managers with a powerful incentive to achieve consistently superior investment
performance. By design, portfolio manager compensation levels fluctuate &#151; both up
and down &#151; with the relative investment performance of the portfolios that they
manage. </FONT></P>


<!-- MARKER FORMAT-SHEET="Left Head 2 Indent Italic" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Base
Salary </I></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the MLIM approach, like that of many asset management firms, base salaries represent a
relatively small portion of a portfolio manager&#146;s total compensation. This approach
serves to enhance the motivational value of the performance-based (and therefore
variable) compensation elements of the compensation program. </FONT></P>


<!-- MARKER FORMAT-SHEET="Left Head 2 Indent Italic" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Performance-Based
Compensation </I></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MLIM
believes that the best interests of investors are served by recruiting and retaining
exceptional asset management talent and managing their compensation within a consistent
and disciplined framework that emphasizes pay for performance in the context of an
intensely competitive market for talent. To that end, MLIM and its affiliates portfolio
manager incentive compensation is based on a formulaic compensation program. MLIM&#146;s
formulaic portfolio manager compensation program includes: investment performance
relative to a subset of general closed-end, leveraged, municipal debt funds over 1-, 3-
and 5-year performance periods and a measure of operational efficiency. If a portfolio
manager&#146;s tenure is less than 5-years, performance periods will reflect time in
position. Portfolio managers are compensated based on products they manage. A
discretionary element of portfolio manager compensation may include consideration of:
financial results, expense control, profit margins, strategic planning and
implementation, quality of client service, market share, corporate reputation, capital
allocation, compliance and risk control, leadership, workforce diversity, supervision,
technology and innovation. MLIM and its affiliates also consider the extent to which
individuals exemplify and foster ML &amp; Co.&#146;s principles of client focus, respect
for the individual, teamwork, responsible citizenship and integrity. All factors are
considered collectively by MLIM management. </FONT></P>


<!-- MARKER FORMAT-SHEET="Left Head 2 Indent Italic" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash
Bonus </I></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Performance-based
compensation is distributed to portfolio managers in a combination of cash and stock.
Typically, the cash bonus, when combined with base salary, represents more than 60% of
total compensation for portfolio managers. </FONT></P>


<!-- MARKER FORMAT-SHEET="Left Head 2 Indent Italic" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock
Bonus </I></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
portion of the dollar value of the total annual performance-based bonus is paid in
restricted shares of ML &amp; Co. stock. Paying a portion of annual bonuses in stock puts
compensation earned by a portfolio manager for a given year &#147;at risk&#148; based on
the company&#146;s ability to sustain and improve its performance over future periods.
The ultimate value of stock bonuses is dependent on future ML &amp; Co. stock price
performance. As such, the stock bonus aligns each portfolio manager&#146;s financial
interests with those of the ML &amp; Co. shareholders and encourages a balance between
short-term goals and long-term strategic objectives. Management strongly believes that
providing a significant portion of competitive performance-based compensation in stock is
in the best interests of investors and shareholders. This approach ensures that portfolio
managers participate as shareholders in both the &#147;downside risk&#148; and &#147;upside
opportunity&#148; of the company&#146;s performance. Portfolio managers therefore have a
direct incentive to protect ML &amp; Co.&#146;s reputation for integrity. </FONT></P>


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





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




<!-- MARKER FORMAT-SHEET="Left Head 2 Indent Italic" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other
Compensation Programs </I></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Portfolio
managers who meet relative investment performance and financial management objectives
during a performance year are eligible to participant in a deferred cash program. Awards
under this program are in the form of deferred cash that may be benchmarked to a menu of
MLIM mutual funds (including their own fund) during a five-year vesting period. The
deferred cash program aligns the interests of participating portfolio managers with the
investment results of MLIM products and promotes continuity of successful portfolio
management teams. </FONT></P>


<!-- MARKER FORMAT-SHEET="Left Head 2 Indent Italic" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other
Benefits </I></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Portfolio
managers are also eligible to participate in broad-based plans offered generally to
employees of ML &amp; Co. and its affiliates, including broad-based retirement, 401(k),
health, and other employee benefit plans. </FONT></P>


<!-- MARKER FORMAT-SHEET="Left Head 2 Bold Italic" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Potential Material
Conflicts of Interest </I></B></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Real,
potential or apparent conflicts of interest may arise when a portfolio manager has
day-to-day portfolio management responsibilities with respect to more than one fund or
account, including the following: </FONT></P>

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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
the extent that the Fund&#146;s portfolio management team has responsibilities for
managing accounts in addition to the Fund, a portfolio manager will need to divide his
time and attention among relevant accounts. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
some cases, a real, potential or apparent conflict may also arise where (i) the
Investment Adviser may have an incentive, such as a performance based fee, in managing
one account and not with respect to other accounts it manages or (ii) where a member of
the Fund&#146;s portfolio management team owns an interest in one fund or account he or
she manages and not another. </FONT></P>


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

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


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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund&#146;s Board of Directors has delegated to the Investment Adviser authority to vote
all proxies relating to the Fund&#146;s portfolio securities. The Investment Adviser has
adopted policies and procedures (&#147;Proxy Voting Procedures&#148;) with respect to the
voting of proxies related to the portfolio securities held in the account of one or more
of its clients, including the Fund. Pursuant to these Proxy Voting Procedures, the
Investment Adviser&#146;s primary objective when voting proxies is to make proxy voting
decisions solely in the best interests of the Fund and its stockholders, and to act in a
manner that the Investment Adviser believes is most likely to enhance the  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>economic value of the securities
held by the Fund. The Proxy Voting Procedures are designed to ensure that the Investment
Adviser considers the interests of its clients, including the Fund, and not the interests
of the Investment Adviser, when voting proxies and that real (or perceived) material
conflicts that may arise between the Investment Adviser&#146;s interest and those of the
Investment Adviser&#146;s clients are properly addressed and resolved. </FONT></P>

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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
assist the Investment Adviser in voting proxies, the Proxy Committee has retained
Institutional Shareholder Services (&#147;ISS&#148;). ISS is an independent adviser that
specializes in providing a variety of fiduciary-level proxy-related services to
institutional investment managers, plan sponsors, custodians, consultants, and other
institutional investors. The services provided to the Investment Adviser by ISS include
in-depth research, voting recommendations (although the Investment Adviser is not
obligated to follow such recommendations), vote execution, and recordkeeping. ISS will
also assist the Fund in fulfilling its reporting and recordkeeping obligations under the
1940 Act. </FONT></P>

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


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

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

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

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

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<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=5%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=3%></TD>
    <TD WIDTH=90%><FONT SIZE=2>&#149;Proposals
related to the composition of the board of directors of issuers other than investment
companies. As a general                matter, the Proxy Committee believes that a company&#146;s
board of directors (rather than stockholders) is most likely to                have
access to important, nonpublic information regarding a company&#146;s business and
prospects, and is therefore                best-positioned to set corporate policy and
oversee management. The Proxy Committee, therefore, believes that the
               foundation of good corporate governance is the election of qualified,
independent corporate directors who are likely to                diligently represent the
interests of stockholders and oversee management of the corporation in a manner that will
seek                to maximize stockholder value over time. In individual cases, the
Proxy Committee may look at a nominee&#146;s number of                other
directorships, history of representing stockholder interests as a director of other
companies or other factors,                to the extent the Proxy Committee deems
relevant.</FONT></TD></TR></TABLE>

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<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=5%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=3%></TD>
    <TD WIDTH=90%><FONT SIZE=2>&#149;Proposals
related to the selection of an issuer&#146;s independent                auditors. As a
general matter, the Proxy Committee believes that                corporate auditors have
a responsibility to represent the                interests of stockholders and provide an
independent view on the                propriety of financial reporting decisions of
corporate                management. While the Proxy Committee will generally defer to a
               corporation&#146;s choice of auditor, in individual cases, the Proxy
               Committee may look at an auditors&#146; history of representing
               stockholder interests as auditor of other companies, to the
               extent the Proxy Committee deems relevant.</FONT></TD></TR></TABLE>


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  <TR>
    <TD WIDTH=5%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=3%></TD>
    <TD WIDTH=90%><FONT SIZE=2>Proposals
related to management compensation and employee                benefits. As a general
matter, the Proxy Committee favors                disclosure of an issuer&#146;s
compensation and benefit policies and                opposes excessive compensation, but
believes that compensation                matters are normally best determined by an
issuer&#146;s board of                directors, rather than stockholders. Proposals to
&#147;micro-manage&#148;               an issuer&#146;s compensation practices or to set
arbitrary                restrictions on compensation or benefits will, therefore,
               generally not be supported.</FONT></TD></TR></TABLE>

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<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=5%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=3%></TD>
    <TD WIDTH=90%><FONT SIZE=2>Proposals
related to requests, principally from management, for                approval of
amendments that would alter an issuer&#146;s capital                structure. As a
general matter, the Proxy Committee will support                requests that enhance the
rights of common stockholders and                oppose requests that appear to be
unreasonably dilutive.</FONT></TD></TR></TABLE>

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  <TR>
    <TD WIDTH=5%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=3%></TD>
    <TD WIDTH=90%><FONT SIZE=2>Proposals
related to requests for approval of amendments to an                issuer&#146;s charter
or by-laws. As a general matter, the Proxy                Committee opposes poison pill
provisions.</FONT></TD></TR></TABLE>

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<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=5%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=3%></TD>
    <TD WIDTH=90%><FONT SIZE=2>Routine
proposals related to requests regarding the formalities of corporate meetings.</FONT></TD></TR></TABLE>

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

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<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=5%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=3%></TD>
    <TD WIDTH=90%><FONT SIZE=2>Proposals
related to limiting corporate conduct in some manner                that relates to the
stockholder&#146;s environmental or social                concerns. The Proxy Committee
generally believes that annual                stockholder meetings are inappropriate
forums for discussion of                larger social issues, and opposes stockholder
resolutions                &#147;micro-managing&#148; corporate conduct or requesting
release of                information that would not help a stockholder evaluate an
               investment in the corporation as an economic matter. While the
               Proxy Committee is generally supportive of proposals to require
               corporate disclosure of matters that seem relevant and material
               to the economic interests of stockholders, the Proxy Committee is
               generally not supportive of proposals to require disclosure of
               corporate matters for other purposes.</FONT></TD></TR></TABLE>

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

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

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

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


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

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

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


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
the six months ended April 30, 2005 and the fiscal years ended October 31, 2004, 2003 and
2002, the Fund paid $7,197, $6,971, $7,695, and $63,205, respectively, in brokerage
commissions. No brokerage commissions were paid to Merrill Lynch or its affiliates during
these periods. </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Securities
held by the Fund may also be held by, or be appropriate investments for, other funds or
investment advisory clients for which the Investment Adviser or its affiliates act as an
adviser. Because of different investment objectives or other factors, a particular
security may be bought for an advisory client when other clients are selling the same
security. If purchases or sales of securities by the Investment Adviser for the Fund or
other funds for which it acts as investment adviser or for other advisory clients arise
for consideration at or about the same time, transactions in such securities will be
made, insofar as feasible, for the respective funds and clients in a manner deemed
equitable to all. Transactions effected by the Investment Adviser (or its affiliates) on
behalf of more than one of its clients during the same period may increase the demand for
securities being purchased or the supply of securities being sold, causing an adverse
effect on price. </FONT></P>

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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Generally,
the Fund does not purchase securities for short term trading profits. However, the Fund
may dispose of securities without regard to the time they have been held when such
actions, for defensive or other reasons, appear advisable to the Investment Adviser.
While it is not possible to predict turnover rates with any certainty, at present it is
anticipated that the Fund&#146;s annual portfolio turnover rate, under normal
circumstances, should be less than 100%. (The portfolio turnover rate is calculated by
dividing the lesser of purchases or sales of portfolio securities for the particular
fiscal year by the monthly average of the value of the portfolio securities  </FONT></P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>owned by the Fund during the
particular fiscal year. For purposes of determining this rate, all securities whose
maturities at the time of acquisition are one year or less are excluded.) A high
portfolio turnover rate results in greater transaction costs, which are borne directly by
the Fund and may have certain tax consequences for stockholders. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
the six months ended April 30, 2005 and the fiscal years ended October 31, 2004 and 2003,
the Fund&#146;s portfolio turnover rates were 15.64%, 19.91% and 51.89%, respectively. </FONT></P>


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

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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Internal Revenue Service (the &#147;IRS&#148;), in a revenue ruling, held that certain
auction rate preferred stock would be treated as stock for Federal income tax purposes.
The terms of the AMPS are substantially similar, but not identical, to the auction rate
preferred stock discussed in the revenue ruling, and in the opinion of Sidley Austin
Brown &amp; Wood LLP, counsel to the Fund, the shares of AMPS will constitute stock of
the Fund and distributions with respect to shares of AMPS (other than distributions in
redemption of shares of AMPS subject to Section 302(b) of the Code) will constitute
dividends to the extent of the Fund&#146;s current and accumulated earnings and profits
as calculated for Federal income tax purposes. Nevertheless, it is possible that the IRS
might take a contrary position, asserting, for example, that the shares of AMPS
constitute debt of the Fund. If this position were upheld, the discussion of the
treatment of distributions below would not apply. Instead, distributions by the Fund to
holders of shares of AMPS would constitute taxable interest income, whether or not they
exceeded the earnings and profits of the Fund, would be included in full in the income of
the recipient and would be taxed as ordinary income. Counsel believes that such a
position, if asserted by the IRS, would be unlikely to prevail. </FONT></P>

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


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>exempt-interest dividends retain the
exclusion under Code Section 103(a) if such stockholder would be treated as a &#147;substantial
user&#148; or &#147;related person&#148; under Code Section 147(a) with respect to
property financed with the proceeds of an issue of &#147;industrial development bonds&#148; or
&#147;private activity bonds,&#148; if any, held by the Fund. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
portion of exempt-interest dividends equal to the portion which the Fund&#146;s interest
on New York Municipal Bonds bears to all of the Fund&#146;s tax-exempt interest (whether
or not distributed) will be exempt from New York State and New York City personal income
taxes. To the extent the Fund&#146;s distributions are derived from interest on taxable
investments or from gain from the sale of investments or are attributable to the portion
of the Fund&#146;s tax-exempt interest that is not derived from New York Municipal Bonds,
they will constitute taxable income for New York State and New York City personal income
tax purposes. Capital gain dividends paid by the Fund are treated as capital gains which
are taxed at ordinary income tax rates for New York State and City personal income tax
purposes. Distributions paid to a corporate shareholder from investment income, including
exempt-interest dividends, and capital gains of the Fund will be subject to New York
State corporate franchise and New York City corporation income tax. </FONT></P>

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

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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
IRS has taken the position in a revenue ruling that if a RIC has two or more classes of
shares, it may designate distributions made to each class in any year as consisting of no
more than such class&#146;s proportionate share of particular types of income, including
exempt-interest income and net long-term capital gains. A class&#146;s proportionate
share of a particular type of income is determined according to the percentage of total
dividends paid by the RIC during such year that was paid to such class. Thus, the Fund is
required to allocate a portion of its net capital gain and other taxable income to the
shares of AMPS and Other AMPS of each series. Accordingly, the Fund intends to designate
dividends paid to the Series F AMPS and Other AMPS as tax exempt interest, capital gains
or other taxable income, as applicable, in proportion to each series&#146; share of total
dividends paid during the  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>year. The Fund may notify the
Auction Agent of the amount of any net capital gain and other taxable income to be
included in any dividend on shares of AMPS prior to the Auction establishing the
Applicable Rate for such dividend. The Fund also may include such income in a dividend on
shares of AMPS without giving advance notice thereof if it increases the dividend by an
additional amount calculated as if such income were a Retroactive Taxable Allocation and
the additional amount were an Additional Dividend, provided that the Fund will notify the
Auction Agent of the additional amounts to be included in such dividend prior to the
applicable Dividend Payment Date. See &#147;The Auction&#151;Auction Procedures&#151;Auction
Date; Advance Notice of Allocation of Taxable Income; Inclusion of Taxable Income in
Dividends&#148; in the prospectus. Except for the portion of any dividend that it informs
the Auction Agent will be treated as capital gains or other taxable income, the Fund
anticipates that the dividends paid on the shares of AMPS will constitute exempt-interest
dividends. The amount of net capital gain and ordinary income allocable to shares of AMPS
(the &#147;taxable distribution&#148;) will depend upon the amount of such gains and
income realized by the Fund and the total dividends paid by the Fund on shares of common
stock and shares of the series of AMPS during a taxable year, but the taxable
distribution generally is not expected to be significant. </FONT></P>

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

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

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


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

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

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

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

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

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


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

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

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

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


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


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


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

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


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

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

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

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

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

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

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

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


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

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

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

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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Investment Adviser, its affiliates, and its directors, officers and employees, may buy
and sell securities or other investments for their own accounts, and may have conflicts
of interest with respect to investments made on behalf of the Fund. As a result of
differing trading and investment strategies or constraints, positions may be taken by
directors, officers and employees and affiliates of the Investment Adviser that are the
same, different from or made at different times than positions taken for the Fund. To
lessen the possibility that the Fund will be adversely affected by this personal trading,
each of the Fund and the Investment Adviser has adopted a Code of Ethics in compliance
with Section 17(j) of the 1940 Act that restricts securities trading in the personal
accounts of investment professionals and others who normally come into possession of
information regarding the Fund&#146;s portfolio transactions. </FONT></P>

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


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


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

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

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

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


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


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




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

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>ECONOMIC AND OTHER
CONDITIONS IN NEW YORK </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b><i>&nbsp;The
  following information is a brief summary of factors affecting the economy of
  New York City (the &#147;City&#148;) or New York State (the &#147;State&#148;
  or &#147;New York&#148;) and does not purport to be a complete description of
  such factors. Other factors will affect issuers. The summary is based primarily
  upon the most recent publicly available offering statements relating to debt
  offerings of State and local issuers and other financial and demographic information,
  and it does not reflect recent developments since the dates of such offering
  statements and other information. The Fund has not independently verified this
  information. </i></b></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
State, some of its agencies, instrumentalities and public authorities and certain of its
municipalities have sometimes faced serious financial difficulties that could have an
adverse effect on the sources of payment for or the market value of the New York
municipal bonds in which the Fund invests. </FONT></P>


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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>General</i>.
  The City, with a population of approximately 8,000,000, is an international
  center of business and culture. Its non-manufacturing economy is broadly based,
  with the banking and securities, life insurance, communications, publishing,
  fashion design, retailing and construction industries accounting for a significant
  portion of the City&#146;s total employment earnings. Additionally, the City
  is a leading tourist destination. Manufacturing activity in the City is conducted
  primarily in apparel and printing. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
each of the 1981 through 2004 fiscal years, the City&#146;s General Fund had an operating
surplus, before discretionary and other transfers, and achieved balanced operating
results as reported in accordance with then applicable generally accepted accounting
principles (&#147;GAAP&#148;), after discretionary and other transfers. The City has been
required to close substantial gaps between forecast revenues and forecast expenditures in
order to maintain balanced operating results. There can be no assurance that the City
will continue to maintain balanced operating results as required by State law without
proposed tax or other revenue increases or reductions in City services or entitlement
programs, which could adversely affect the City&#146;s economic base. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
required by law, the City prepares a four-year annual financial plan, which is reviewed
and revised on a quarterly basis and which includes the City&#146;s capital, revenue and
expense projections and outlines proposed gap-closing programs for years with projected
budget gaps. The City&#146;s current financial plan projects budget balance in the 2005
and 2006 fiscal years and budget gaps for each of the 2007 through 2009 fiscal years. A
pattern of current year balance and projected subsequent year budget gaps has been
consistent through the entire period since 1982, during which the City has achieved an
excess of revenues over expenditures, before discretionary transfers, for each fiscal
year. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Mayor is responsible for preparing the City&#146;s financial plan which relates to the
City and certain entities that receive funds from the City, including the financial plan
for the 2005 through 2008 fiscal years submitted to the New York State Financial Control
Board (the &#147;Control Board&#148;) on June 29, 2004 (the &#147;June 2004 Financial Plan&#148;),
Modification No. 05-4 to the June 2004 Financial Plan and the financial plan for the 2006
through 2009 fiscal years submitted to the Control Board on July 6, 2005. Modification
No. 05-4 and the financial plan for the 2006 through 2009 fiscal years are referred to
herein as the &#147;2005-2009 Financial Plan&#148; or &#147;Financial Plan.&#148; The City&#146;s
projections set forth in the Financial Plan are based on various assumptions and
contingencies which are uncertain and which may not materialize. Such assumptions and
contingencies include the condition of the regional and local economies, the provision of
State and federal aid, the impact on City revenues and expenditures of any future federal
or State policies affecting the City and the cost of future labor settlements. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>&nbsp;City&#146;s
  Financing Program.</i> Implementation of the Financial Plan is dependent upon
  the City&#146;s ability to market its securities successfully. Implementation
  of the Financial Plan is also dependent upon the ability to market the securities
  of other financing entities, including the New York City Municipal Water Finance
  Authority (the &#147;Water Authority&#148;) which issues debt secured by water
  and sewer revenues. In addition, the City may issue revenue and tax anticipation
  notes to finance its seasonal working capital requirements although it currently
  does not expect to issue such notes in fiscal year 2006. The success of projected
  public sales of City, Water Authority </FONT></P>




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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>and other bonds and notes will be
subject to prevailing market conditions. Future developments concerning the City and
public discussion of such developments, as well as prevailing market conditions, may
affect the market for outstanding City general obligation bonds and notes. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>2005-2009
  Financial Plan</i>. For the 2004 fiscal year, the City&#146;s General Fund had
  an operating surplus of $1.928 billion, before discretionary transfers, and
  achieved balanced operating results in accordance with GAAP, after discretionary
  and other transfers. The 2004 fiscal year is the twenty-fourth consecutive year
  that the City has achieved balanced operating results when reported in accordance
  with GAAP. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
City&#146;s expense and capital budgets for the 2005 fiscal year were adopted on June 25,
2004. The June 2004 Financial Plan was consistent with the City&#146;s expense and
capital budgets as adopted for the 2005 fiscal year. The June 2004 Financial Plan
projected revenues and expenditures for the 2005 fiscal year balanced in accordance with
GAAP and gaps of $3.7 billion, $4.5 billion and $3.7 billion for fiscal years 2006, 2007
and 2008, respectively. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
July 6, 2005, the City submitted the Financial Plan to the Control Board. The Financial
Plan relates to the City and certain entities that receive funds from the City and
reflects changes as a result of the City&#146;s expense and capital budgets for the 2006
fiscal year which were adopted on June 30, 2005. The Financial Plan includes a
modification to the June 2004 Financial Plan as subsequently modified by the financial
plans submitted to the Control Board on October 21, 2004, February 2, 2005 and May 9,
2005 (the &#147;May Financial Plan&#148;). The Financial Plan projects revenues and
expenditures for the 2005 and 2006 fiscal years balanced in accordance with GAAP, and
projects gaps of $4.5 billion, $4.5 billion and $3.9 billion in fiscal years 2007 through
2009, respectively, after implementation of a gap-closing program described below. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Financial Plan reflects increases in projected net revenues since the June 2004 Financial
Plan totaling $3.6 billion, $2.2 billion, $1.9 billion and $1.3 billion in fiscal years
2005 through 2008, respectively. Changes in projected revenues since the June 2004
Financial Plan include: (i) increases in projected net tax revenues of $3.5 billion, $2
billion, $1.9 billion and $1.3 billion in fiscal years 2005 through 2008, respectively,
resulting primarily from increases in personal income and business tax revenues,
reflecting securities industry profits and an improving economy, and increases in
mortgage recording, real property transfer and sales tax revenues; (ii) increases in
non-tax revenues of $274 million, $121 million, $51 million and $45 million in fiscal
years 2005 through 2008, respectively, primarily due to increased investment earnings;
(iii) reduction in anticipated federal assistance of $50 million in fiscal year 2005; and
(iv) the delay from fiscal year 2005 to fiscal year 2006 of the receipt from TSASC, Inc. (&#147;TSASC&#148;)
of $120 million tobacco settlement receivables (&#147;TSRs&#148;) retained in the TSASC
trapping account. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Financial Plan also reflects increases in projected net expenditures since the June 2004
Financial Plan totaling $577 million, $2.4 billion, $2.3 billion and $2.7 billion in
fiscal years 2005 through 2008, respectively. Increases in projected expenditures since
the June 2004 Financial Plan include: (i) increased Medicaid expenses of $184 million,
$334 million, $508 million and $699 million in fiscal years 2005 through 2008,
respectively; (ii) interest payments associated with the financing by the Hudson Yards
Infrastructure Corporation (&#147;HYIC&#148;), a local development corporation created by
the City, of the planned Hudson Yards development on the west side of Manhattan, of $52
million, $95 million and $139 million in fiscal years 2006 through 2008, respectively;
(iii) increased other debt service expenditures of $46 million in fiscal year 2008; (iv)
increased pension and fringe benefit expenditures of $14 million, $711 million, $608
million and $514 million in fiscal years 2005 through 2008, respectively; (v) increased
expenditures for education of $110 million in fiscal year 2005, $177 million in fiscal
year 2006 and $116 million in each of fiscal years 2007 and 2008; (vi) increased agency
spending of $114 million, $812 million, $333 million and $346 million in fiscal years
2005 through 2008, respectively; (vii) increased expenses for the next round of
collective bargaining of $100 million, $350 million and $625 million in fiscal years 2006
through 2008, respectively; and (viii) a reserve available to cover increased
expenditures, primarily for uniformed employees, expected to result from the eventual
conclusion of the 2002-2005 round of collective bargaining of $778 million, $357 million,
$282 million and $230 million in fiscal years 2005 through 2008, respectively. Decreases
in projected expenditures since the June 2004 Financial Plan include decreased other debt
service expenditures of $169 million, $145 million and $7 million in fiscal years 2005
through 2007, respectively. Prior years&#146; expenses have been reduced by $200 million
in fiscal year 2005 and the General Reserve has been reduced in fiscal year 2005 by $260
million. </FONT></P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Financial Plan reflects a shortfall in anticipated State assistance by $201 million, $196
million, $94 million and $77 million in fiscal years 2005 through 2008, respectively. The
Financial Plan also includes a tax reduction program that reduces tax revenues by $221
million, $233 million and $92 million in fiscal years 2006 through 2008, respectively,
primarily due to the proposed restoration of the local sales tax exemption on clothing
and footwear purchases under $110, which has been approved by the State. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, the Financial Plan sets forth gap-closing actions to eliminate the previously
projected gap for the 2006 fiscal year and to reduce previously projected gaps for fiscal
years 2007 and 2008. The gap-closing actions include: (i) reduced agency expenditures or
increased revenues totaling $402 million, $477 million, $318 million and $317 million in
fiscal years 2005 through 2008, respectively; (ii) debt service savings of $10 million
and $85 million in fiscal years 2005 and 2006, respectively; (iii) $85 million in fiscal
year 2005 from the lease with the Port Authority of New York and New Jersey for LaGuardia
and John F. Kennedy International Airports and taxi medallion sales; and (iv) State
actions of $23 million, $317 million, $375 million and $443 million in fiscal years 2005
through 2008, respectively, and additional federal actions of $50 million in fiscal year
2006, which require the approval of the federal government. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Financial Plan includes discretionary transfers in fiscal year 2005 of $3.5 billion,
reflecting early payment of debt service and other payments otherwise expected to be made
in fiscal year 2006. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Financial Plan makes provisions for wage increases for all City employees other than
uniformed employees for the 2002-2005 round of bargaining consistent with the settlement
with District Council 37 of the American Federation of State, County and Municipal
Employees (&#147;DC 37&#147;). The Financial Plan provides a collective bargaining
reserve sufficient to pay contract settlements for all uniformed employees consistent
with the recent award to police represented by the Patrolmen&#146;s Benevolent
Association (&#147;PBA&#148;), including the productivity offsets contained therein. Any
labor settlement in excess of such amounts could result in substantial additional costs
to the City. Each incremental 1% wage increase for the portion of the City&#146;s
workforce which does not yet have settled contracts for the 2002-2005 round of bargaining
would cost approximately $135 million annually. Any incremental increases could be
retroactive to as far back as the prior contracts&#146; expiration dates, the vast
majority of which were before July 1, 2003 and many of which were during the 2002
calendar year. The Financial Plan provides for 1.25% wage increases annually for all City
employees for the next round of collective bargaining. The City Comptroller and others
have issued reports identifying various risks. (See &#147;Certain Reports&#148; within). </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Assumptions</i>.
  The Financial Plan is based on numerous assumptions, including the condition
  of the City&#146;s and the region&#146;s economies and the concomitant receipt
  of economically sensitive tax revenues in the amounts projected. The Financial
  Plan is subject to various other uncertainties and contingencies relating to,
  among other factors, the continuing effects on the City economy of the September
  11 attack; the extent, if any, to which wage increases for City employees exceed
  the annual wage costs assumed for the 2005 through 2009 fiscal years; realization
  of projected interest earnings for pension fund assets and current assumptions
  with respect to wages for City employees affecting the City&#146;s required
  pension fund contributions; the willingness and ability of the State to provide
  the aid contemplated by the Financial Plan and to take various other actions
  to assist the City; the ability of the New York City Health and Housing Corporation
  (&#147;HHC&#148;) and other such entities to maintain balanced budgets; the
  willingness of the federal government to provide the amount of federal aid contemplated
  in the Financial Plan; the impact on City revenues and expenditures of federal
  and State welfare reform and any future legislation affecting Medicare or other
  entitlement programs; adoption of the City&#146;s budgets by the City Council
  in substantially the forms submitted by the Mayor; the ability of the City to
  implement cost reduction initiatives, and the success with which the City controls
  expenditures; the impact of conditions in the real estate market on real estate
  tax revenues; and the ability of the City and other financing entities to market
  their securities successfully in the public credit markets. Certain of these
  assumptions have been questioned by the City Comptroller and other public officials.
  (See &#147;Certain Reports&#148; within). </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
projections and assumptions contained in the Financial Plan are subject to revision which
may involve substantial change, and no assurance can be given that these estimates and
projections, which include actions which the City expects will be taken but are not
within the City&#146;s control, will be realized. </FONT></P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>&nbsp;Personal
  Service Costs</i>. The Financial Plan projects that the authorized number of
  City-funded full-time and full-time equivalent employees whose salaries are
  paid directly from City funds, as opposed to federal or State funds or water
  and sewer funds, will increase from an estimated level of 255,302 on June 30,
  2005 to an estimated level of 256,463 by June 30, 2009. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>&nbsp;&nbsp;Intergovernmental
  Aid</i>. For its normal operations, the City depends on aid from the State both
  to enable the City to balance its budget and to meet its cash requirements.
  There can be no assurance that there will not be delays or reductions in State
  aid to the City from amounts currently projected; that State budgets will be
  adopted by the April 1 statutory deadline, or interim appropriations will be
  enacted; or that any such reductions or delays will not have adverse effects
  on the City&#146;s cash flow or expenditures. In addition, the federal budget
  negotiation process could result in a reduction or a delay in the receipt of
  federal grants, which could have adverse effects on the City&#146;s cash flow
  or revenues. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Certain
  Reports</i>. From time to time, the Control Board staff, the Office of the State
  Deputy Comptroller (&#147;OSDC&#148;), the City Comptroller, the Independent
  Budget Office (&#147;IBO&#148;) and others issue reports and make public statements
  regarding the City&#146;s financial condition, commenting on, among other matters,
  the City&#146;s financial plans, projected revenues and expenditures and actions
  by the City to eliminate projected operating deficits. Some of these reports
  and statements have warned that the City may have underestimated certain expenditures
  and overestimated certain revenues and have suggested that the City may not
  have adequately provided for future contingencies. Certain of these reports
  have analyzed the City&#146;s future economic and social conditions and have
  questioned whether the City has the capacity to generate sufficient revenues
  in the future to meet the costs of its expenditure increases and to provide
  necessary services. It is reasonable to expect that reports and statements will
  continue to be issued and to engender public comment. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
July 28, 2005, the City Comptroller released a report on the adopted budget for fiscal
year 2006 and the Financial Plan. The report stated that the fiscal 2006 adopted budget
is balanced, and that the potential risks may be offset through additional revenues. The
report included an assessment of the budget gaps in fiscal years 2007 through 2009 of the
Financial Plan, and stated that their magnitude poses a significant fiscal challenge to
the City that, if coupled with a recession or other event that places further stress on
the budget, would require additional service cuts, tax increases, or both. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
his report, the City Comptroller identified net risks and possible resources for fiscal
years 2006 through 2009 which, when added to the projected results in the Financial Plan,
would result in a surplus of $899 million in fiscal year 2006 and gaps of $4.0 billion,
$4.2 billion and $4.3 billion in fiscal years 2007 through 2009, respectively. The risks
and possible resources set forth in the City Comptroller&#146;s report include: (i) the
possibility that tax revenues could be greater than projected in the Financial Plan by
$1.1 billion, $575 million and $365 million in fiscal years 2006 through 2008,
respectively, and less than projected by $240 million in fiscal year 2009; (ii) increased
overtime expenditures of $181 million in fiscal year 2006 and $75 million per year in
fiscal years 2007 through 2009; (iii) a $30 million increased cost of an eventual
retroactive settlement of the teachers&#146; contract if patterned after the existing DC
37 labor contract, in fiscal year 2006; and (iv) possible increased City expenses for
certain welfare services resulting from the State&#146;s implementation of a block grant
program that consolidates funding for certain welfare services and reduces overall State
support, creating risks of $10 million per year in fiscal years 2007 through 2009. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition to the risks and possible resources quantified in the report, the report
identified additional issues, the impacts of which are uncertain with respect to timing
and magnitude. The report noted that the Executive Budget includes reserves to support
wage increases for teachers patterned after the DC 37 agreement for civilian employees
and noted that if the teachers&#146; settlement instead follows the pattern of the recent
PBA award, costs in excess of the reserves in fiscal year 2006 would reach $980 million
for retroactive payments and $120 million for annual wages. Furthermore, the report noted
that the next round of collective bargaining is funded by the City at half the projected
rate of inflation, and that this level of funding will require that new collective
bargaining agreements contain substantial productivity savings. The report stated that
the court order in the Campaign for Fiscal Equity litigation, which is under appeal,
would require a phased-in goal of $5.6 billion in additional education spending each
year, and that while it is unknown whether this amount will stand on appeal or how much,
if any, will be the City&#146;s liability, this matter is unlikely to have an impact in
fiscal year 2006. The report  </FONT></P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>stated that certain recommendations
of the City&#146;s Chief Actuary, if entirely implemented, would reduce the City&#146;s
projected pension outlays by $855 million in fiscal year 2006 and $528 million in fiscal
year 2007, although they would lead to additional expense in subsequent years. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
report also forecast strong economic growth in the City in 2005, with 30,000 new jobs,
followed by job growth of 28,000, 26,000, 25,000 and 28,000 jobs per year in the years
2006 through 2009, which, the report noted, are approximately 10,000 fewer jobs per year
in 2005 and 2006, 1,000 more jobs in 2007, 1,000 fewer jobs in 2008 and 3,000 fewer jobs
in 2009 than estimated by the City&#146;s Office of Management and Budget (&#147;OMB&#148;)
in the Financial Plan. The report estimated the City&#146;s Gross City Product will grow
by 3.3 percent in 2005, 2.9 percent in 2006, 2.7 percent in 2007 and 2.4 percent in each
of the years 2008 and 2009, which the report compared to the 2.6 percent in 2005, 1.7
percent in 2006, 0.6 percent in 2007, 3.9 percent in 2008 and 4.0 percent in 2009
estimated by OMB in the Executive Budget. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
July 26, 2005, the staff of OSDC issued a report on the Financial Plan. The report stated
that the City ended fiscal year 2005 with an estimated surplus of $3.5 billion, projects
a balanced budget for fiscal year 2006 and shows budget gaps of $4.5 billion in each of
fiscal years 2007 and 2008. The report stated that the fiscal year 2007 gap represents
13.3 percent of City fund revenues, and results from the use of non-recurring resources
to balance the fiscal year 2006 budget, including the entire estimated surplus of $3.5
billion from fiscal year 2005, the expiration of temporary taxes, and the growth in
non-discretionary expenses. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
risks to the Financial Plan identified in the report include: (i) possible increased
spending for uniformed agency overtime of $40 million in fiscal year 2006 and $25 million
in fiscal years 2007 through 2009; and (ii) possible failure to receive $50 million of
federal assistance in fiscal year 2006. The report noted that such risks could be offset
by possible additional revenues, including: (i) additional tax revenues of $450 million
and $200 million in fiscal years 2006 and 2007, respectively, (ii) $200 million in fiscal
year 2006 from the re-estimation of prior year expenses, (iii) $150 million in fiscal
year 2006 from the sale of an asset to the Battery Park City Authority, (iv) $50 million
in fiscal year 2006 from delayed hiring, and (v) lower pension contributions of $10
million in fiscal year 2006, $25 million in fiscal year 2007, $50 million in fiscal year
2008 and $75 million in fiscal year 2009 resulting from increased pension fund earnings
in fiscal year 2005. These risks and offsets, when added to the results projected in the
Financial Plan, would produce a surplus of $770 million in fiscal year 2006 and result in
gaps of $4.3 billion, $4.4 billion and $3.9 billion in fiscal years 2007 through 2009,
respectively. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, the report identified other issues which could have a significant impact on the
City, including the possibility of substantial payments for wage increases, possible
increased funding for education and various possible effects of changes in assumptions
and methodologies used to calculate pension contributions. The report identified the
completion of the current round of collective bargaining as a budget risk and estimated
that a settlement with the United Federation of Teachers (&#147;UFT&#148;), if patterned
after the economic terms in the recent PBA award rather than the DC 37 agreement, would
cost about $1 billion more than the City set aside through fiscal year 2006 and an
additional $500 million annually thereafter. The costs could be reduced if the City and
the UFT reach an agreement on productivity improvements. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
report also stated that although the Financial Plan assumes that all employees will
self-fund wage increases in fiscal year 2005 with productivity and other savings, and
includes a reserve for collective bargaining that is sufficient to fund annual wage
increases of 1.25 percent beginning in fiscal year 2006, actual settlements could
increase City costs. For example, wage increases at the projected inflation rate for all
employees who have yet to reach new agreements covering fiscal year 2005, and for all
employees beginning in fiscal year 2006, would exceed the City reserve for this purpose
in fiscal year 2006 through 2009 by $750 million, $950 million, $1.2 billion and $1.5
billion respectively. These potential liabilities could be reduced to the extent that the
City and the municipal unions reach agreements that include productivity savings. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
report noted that the Financial Plan incorporates the recommendations of an independent
actuarial consultant and other technical re-estimates, which increase planned pension
contributions by $862 million in fiscal year 2006 and $718 million in fiscal year 2007
and about $450 million annually thereafter, but does not incorporate the possible effects
of changes in methodologies recommended by the City&#146;s Chief Actuary. In May 2005,
the City Actuary submitted to the boards of the five actuarial pension funds a proposal
that included both revised actuarial assumptions and methodologies, but the pension
boards did not approve the proposed revisions.  </FONT></P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The City Actuary is expected to
resubmit his proposal to the five boards in fiscal year 2006; if approved, pension
contributions could be lower than anticipated in the Financial Plan by $640 million in
fiscal year 2006 and $490 million in fiscal year 2007, but higher than anticipated in the
Financial Plan by $20 million in fiscal year 2008 and $200 million in fiscal year 2009.
Elements of these recommendations would also require State approval. The report noted
that if the Court of Appeals upholds the lower court ruling in the Campaign for Fiscal
Equity litigation, and if the State Legislature requires the City to contribute 40
percent of the additional educational funding as recommended by the Governor, City
education costs could increase by as much as $575 million in fiscal year 2007, $1.1
billion in fiscal year 2008, $1.6 billion in fiscal year 2009 and $2.3 billion in fiscal
year 2010. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
report included a review of several years&#146; current-year operating results,
considered without regard to the transfer of surplus resources from prior years. The
report noted that although the Financial Plan projects a balanced budget for fiscal year
2006, the use of the $3.5 billion surplus from fiscal 2005 to achieve this result
indicates that the City is on track to end fiscal year 2006 with a current-year operating
deficit of $3.5 billion without taking account of discretionary transfers, and that
although this deficit will narrow as the City takes actions to help balance the fiscal
2007 budget, the City may not generate a current year operating surplus in fiscal year
2006. The report compared that projection to recent current-year operating results, which
included deficits, without taking into account discretionary transfers, of $2.6 billion
and $795 million in fiscal years 2002 and 2003, respectively, a surplus of $511 million
in fiscal year 2004 and an expected surplus of $1.6 billion in fiscal year 2005. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
report noted that high oil prices and interest rates are major factors that will continue
to determine economic growth in the City, and that other risks to the City&#146;s economy
include high consumer and business debt levels, widening federal budget and trade
deficits, the effects of revaluation of the Chinese Yuan, and the sluggish economic
growth overseas. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
report also noted that a number of City-related public authorities also face fiscal
challenges. The report noted that the Off-Track Betting Corporation projects increased
losses during the fiscal plan period, that while the Metropolitan Transportation
Authority is on track to balance its budget in calendar years 2006 and 2007, it still
faces long-term fiscal challenges and that HHC is making progress balancing this year&#146;s
budget on a cash basis, but continues to operate in a difficult financial environment. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
July 28, 2005, the staff of the Control Board issued a report on the Financial Plan. The
report noted that the City has adopted a fiscal year 2006 budget that will likely end the
year in balance but that reliance on the large fiscal year 2005 surplus to balance the
fiscal year 2006 budget leaves fiscal year 2007 with a large projected deficit of $4.5
billion. The report also noted that the City expects 2006 revenues and expenditures to
decline by $4 billion. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
report quantified certain small risks and possible resources. The report identified
possible net resources of $137 million for fiscal year 2006, and net risks of $55 million
in each of fiscal years 2007 through 2009, which, when combined with the results
projected in the Financial Plan, result in an estimated surplus of $137 million in fiscal
year 2006 and estimated gaps of $4.6 billion, $4.5 billion and $4.0 billion for fiscal
years 2007 through 2009, respectively. The risk identified is the possibility that
overtime could be greater than expected by $188 million in fiscal year 2006 and $205
million in each of fiscal years 2007 through 2009. The report further noted that this
risk could be partially offset by greater than projected non-property tax revenues of
$200 million in fiscal year 2006 and by increased miscellaneous revenues of $125 million
in fiscal year 2006 and $150 million in each of fiscal years 2007 through 2009. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition to the risks quantified in the report, the report noted two significant risks
that were not quantifiable and might impact fiscal years 2006 or 2007. First, the report
noted the City&#146;s unsettled labor situation, stating that although the recent PBA
award settled retroactive terms for the police for fiscal years 2003 and 2004, the other
uniformed services and UFT do not have contacts for that round of bargaining or beyond,
and no City employees have contracts for fiscal year 2006 or beyond. The report noted
that there is a significant risk that the amounts provided in the Financial Plan for
future settlements may be inadequate. The second significant risk noted was the
possibility of increased expenditures for education that could result from a final
decision in the unresolved Campaign for Fiscal Equity litigation. </FONT></P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
report also identified fringe benefits, pensions, Medicaid and debt service as sources of
spending growth in the Financial Plan. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Seasonal
  Financing Requirements</i>. The City since 1981 has fully satisfied its seasonal
  financing needs in the public credit markets, repaying all short term obligations
  within their fiscal year of issuance. To finance its projected cash flow needs,
  the City issued $1.5 billion of short-term obligations in fiscal years 2004,
  2003 and 2002, and $750 million of short term obligations in fiscal years 2001
  and 2000. The delay in the adoption of the State&#146;s budget in certain past
  fiscal years has required the City to issue short term notes in amounts exceeding
  those expected early in such fiscal years. Although the Financial Plan reflects
  the issuance of $1.5 billion of short-term obligations during fiscal year 2006
  to satisfy the City&#146;s seasonal financing needs current cash-flow projections
  do not anticipate the need for the City to issue such obligations. The City
  will continue to review its cash position and the need for short-term borrowing
  on a daily basis. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Outstanding
  Indebtedness</i>. As of June 30, 2005, the City had approximately $33.688 billion
  of outstanding net long term debt. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>&nbsp;&nbsp;Water,
  Sewer and Waste</i>. The City&#146;s financing program includes the issuance
  of water and sewer revenue bonds by the Water Authority which is authorized
  to issue bonds to finance capital investment in the City&#146;s water and sewer
  system. Pursuant to State law, debt service on this indebtedness is secured
  by water and sewer fees paid by users of the water and sewer system. Such fees
  are revenues of the Water Board, which holds a lease interest in the City&#146;s
  water and sewer system. After providing for debt service on obligations of the
  Water Authority and certain incidental costs, the revenues of the Water Board
  are paid to the City to cover the City&#146;s costs of operating the water and
  sewer system and as rental for the system. The City&#146;s ten year capital
  strategy applicable to the City&#146;s water and sewer system covering fiscal
  years 2006 through 2015, projects City-funded water and sewer investment (which
  is expected to be financed with proceeds of Water Authority debt) at approximately
  $15.6 billion. The City&#146;s capital commitment plan for fiscal years 2005
  through 2009 reflects total anticipated City-funded water and sewer commitments
  of $9.8 billion which are expected to be financed with the proceeds of Water
  Authority debt. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Litigation</i>.
  The City is a defendant is a significant number of lawsuits. While the ultimate
  outcome and fiscal impact, if any, on the City of the proceedings and claims
  are not currently predictable, adverse determinations in certain of them might
  have a material adverse effect upon the City&#146;s ability to carry out the
  Financial Plan. The City has estimated that its potential future liability on
  account of outstanding claims against it as of June 30, 2004 amounted to approximately
  $4.4 billion. </FONT></P>


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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>&nbsp;The
  New York Economy.</i> The New York economy continues to expand. Above-trend
  national growth rates continue to buttress the New York State economy, sustaining
  the recovery from the State&#146;s 2001-2003 recession that is estimated to
  have ended in August 2003. Since then, the State labor market has added 130,000
  private sector jobs. Total and private non-farm employment is projected to grow
  1.1 percent and 1.2 percent, respectively, for the current year. The continued
  strengthening of New York economy will help sustain the housing market in 2005,
  though the pace of growth observed in 2004 has already begun to cool. With the
  pickup in equity market activity toward the end of 2004, the securities industry
  saw solid profit levels, though below those earned in 2003. Consequently, bonus
  growth for 2005 will fall short of the extraordinary growth experienced in 2004,
  offsetting the impact of higher employment growth on personal income and wages.
  New York personal income is projected to rise 5.1 percent for 2005, while wage
  and salary growth is projected at 4.9 percent. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;New
York is the third most populous state in the nation and has a relatively high level of
personal wealth. The State&#146;s economy is diverse, with a comparatively large share of
the nation&#146;s financial activities, information, education, and health services
employment, and a very small share of the nation&#146;s farming and mining activity. The
services sector accounts for more than four of every ten nonagricultural jobs in New
York, and accounts for a higher proportion of total jobs than the rest of the nation.
Manufacturing employment continues to decline in New York, as in most other states, and
New York&#146;s economy is less reliant on this sector than in the past. As defined under
the new (&#147;NAICS&#148;) industrial classification system, the trade, transportation
and utilities sector accounts for the largest component of state nonagricultural
employment, but only the fourth largest when measured by income share. New York City is
the nation&#146;s leading center of banking and finance and as a result, this is a far
more  </FONT></P>




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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>important sector in the State than
in the nation as a whole. Although this sector accounts for under one-tenth of all
nonagricultural jobs in the State, it contributes about one-fifth of total wages. Farming
is an important part of the economy in rural areas, although it constitutes a very minor
part of total State output. Federal, State and local governments together comprise the
second largest sector in terms of nonagricultural jobs, with the bulk of the employment
accounted for by local governments. The State is likely to be less affected than the
nation as a whole during an economic recession that is concentrated in manufacturing and
construction, but likely to be more affected by any economic downturn that is
concentrated in the services sector. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Economic
  and Demographic Trends</i>. In the calendar years 1990 through 1998, the State&#146;s
  rate of economic growth was somewhat slower than that of the nation. In particular,
  during the 1990-91 recession and post-recession period, the economy of the State,
  and that of the rest of the Northeast, was more heavily damaged than that of
  the nation as a whole and had been slower to recover. However, the situation
  subsequently improved. In 1999, for the first time in 13 years, the employment
  growth rate of the State surpassed the national growth rate, and, in 2000, the
  rates were essentially the same. In 2001, the September 11th attack resulted
  in a slowdown in New York that was more severe than in the nation as a whole.
  Although the State unemployment rate was higher than the national rate from
  1991 to 2000, the gap between them has since closed. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Recent
  Events</i>. The State ended its 2004-2005 fiscal year in balance on a cash basis,
  with a reported closing balance in the General Fund of $1.2 billion. The State&#146;s
  current fiscal year began on April 1, 2005 and ends on March 31, 2006. The State
  released its Annual Information Statement on May 4, 2005 (the &#147;Annual Information
  Statement&#148;), which reflects the Enacted Budget Financial Plan for the 2005-2006
  fiscal year (&#147;Enacted Budget&#148;) based on the budget bills and chapter
  amendments enacted through April 12, 2005. The Governor&#146;s Executive Budget
  presented a balanced General Fund financial plan that eliminated a projected
  budget gap of $4.2 billion with a closing balance in the General Fund of $1.8
  billion, and projected gaps of $2.5 billion in fiscal year 2006-2007 and $2.5
  billion in fiscal year 2007-2008, assuming all the Executive Budget savings
  proposals were enacted. The Enacted Budget is also balanced, identifying $1.4
  billion in new General Fund resources to fund $1.4 billion in net additions,
  approving roughly $3.3 billion of the $4.1 billion in Executive Budget gap-closing
  recommendations, and projecting a closing fund balance in the General Fund of
  $1.8 billion, and gaps of approximately $3.2 billion in fiscal year 2006-2007
  and $4.1 billion in fiscal year 2007-2008. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Enacted Budget authorized approximately $1.8 billion of the $2.8 billion in spending
restraint proposed with the Executive Budget, including (a) roughly one-half of the $1.1
billion in proposed Medicaid provider and recipient cost containment and all $800 million
in savings from financing certain Medicaid spending outside of the General Fund, (b) debt
management initiatives to help reduce the growth in debt service costs ($150 million),
and (c) mental hygiene savings ($250 million). Revenue actions net of tax cuts total $605
million, or $72 million above the $533 million proposed with the Executive Budget.
Finally, $889 million in one-time actions are authorized in the budget, an increase of
$33 million above the Executive Budget. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
State has released its first quarterly update to its 2005-2006 financial plan dated
August 1, 2005, which, among other things, updates projections for its 2005-2006,
2006-2007 and 2007-2008 fiscal years and an Annual Information Statement Update, dated
August 8, 2005 (collectively, the &#147;August Updates&#148;). In the August Updates, the
Division of the Budget (&#147;DOB&#148;), projects slightly improved operations in the
current year, and gaps declining to approximately $2.9 billion in fiscal year 2006-2007
and $3.9 billion in fiscal year 2007-2008. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the August Updates, DOB projects that General Fund disbursements, including transfers to
other funds, will now total $46.4 billion, an increase of $242 million over the Enacted
Budget estimate. State funds disbursements, which include spending financed from other
state revenue sources as well as the General Fund, are projected to reach $70.5 billion
in fiscal year 2005-2006, an increase of $179 million since the Enacted Budget. All Funds
spending, which includes federal grants and the broadest measure of the State budget, is
projected to total $106.7 billion in fiscal year 2005-2006, up $148 million from the
Enacted Budget estimate. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the August Updates, DOB projects that General Fund receipts, including transfers from
other funds, to total $46.3 billion in fiscal year 2005-2006, an increase of $321 million
from the Enacted Budget estimate. The upward revision is primarily due to increases in
the settlement portion of the Personal Income Tax (&#147;PIT&#148;). Downward revisions
to the estimates for sales and the corporation and utilities taxes, based on collections
to date, partially offset the income tax increase. All Funds tax receipts are projected
to total nearly $52 billion in the current year, an increase of $194 million from Enacted
Budget estimates. The change reflects the increases in the PIT estimate and decreases in
the corporation and utilities and sales tax projections. </FONT></P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DOB
noted in the August Updates that the General Fund ended the first quarter of fiscal year
2005-2006 with a balance of $4 billion, $536 million below the Enacted Budget estimate.
DOB attributed this lower balance to a combination of $148 million in lower receipts and
$388 million in higher spending in comparison to the Enacted Budget forecast. DOB stated
that these variances were due to timing-related factors, and that underlying trends
indicate the State will end fiscal year 2005-2006 with slightly improved results compared
to the Enacted Budget. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>&nbsp;Special
  Considerations</i>. Many complex political, social, and economic forces influence
  the State&#146;s economy and finances, which may in turn affect the State&#146;s
  Financial Plan (the &#147;State Financial Plan&#148;). These forces may affect
  the State from fiscal year to fiscal year and are influenced by governments,
  institutions, and events that are not subject to the State&#146;s control. The
  State Financial Plan is also necessarily based upon forecasts of national and
  State economic activity. Economic forecasts have frequently failed to predict
  accurately the timing and magnitude of changes in the national and State economies.
  The DOB has stated that its belief that its current receipts and spending estimates
  related to the performance of the State and national economies are reasonable.
  However, there can be no assurance that actual results will not differ materially
  and adversely from the current forecast. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
State was involved in litigation challenging the use of proceeds from the conversion of
Empire Blue Cross/Blue Shield from a not-for-profit corporation to a for-profit
corporation. The State was counting on $2.2 billion in conversion proceeds from Empire
and other sources to finance Health Care Reform Act (&#147;HCRA&#148;) programs in
2005-2006. In order to insure General Fund balance, the Enacted Budget provides that no
spending for certain HCRA programs may occur after June 30, 2005 unless conversion
proceeds become available. The State Financial Plan assumes that this issue will be
resolved to allow full year spending for all HCRA programs. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
June 20, 2005, the Court of Appeals ruled in favor of the State in Consumers Union of
U.S., Inc. v. State in which the Consumers Union challenged the constitutionality of the
Empire conversion and the use of proceeds from such conversion. As a result, the State
Comptroller has transferred the Empire proceeds received to date ($754 million) that were
held in escrow pending resolution of the court to the HCRA Resources Fund. HCRA is
counting on another $1.1 billion in Empire conversion proceeds to become available by the
end of fiscal year 2005-2006. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
State Financial Plan projections assume that Video Lottery Terminal (&#147;VLT&#148;)
revenues will be used to continue to finance the State&#146;s new &#147;sound basic
education&#148; (&#147;SBE&#148;) aid formula. The SBE program is part of the State&#146;s
efforts to comply with a State Court of Appeals ruling that found that the school finance
system failed to provide students in New York City with an adequate education in
violation of the State Constitution. The compliance plan also includes traditional school
aid and Federal aid. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
May 2005, the Court of Appeals upheld the constitutionality of VLTs. The ruling allows
for continued operation of VLTs and distinguishes VLTs from slot machines, which are not
permitted under the State Constitution. The ruling ensures that the State will continue
receiving revenues from VLTs, which have so far been implemented at five of the State&#146;s
racetracks. Four other racetracks have received authorization to operate VLTs, and are in
various stages of implementation. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of the close of 2004-2005, DOB projected balances in the State&#146;s general reserves to
guard against unbudgeted risks would total $1.5 billion. The reserves include $872
million in the Tax Stabilization Reserve Fund (&#147;TSRF&#148;), $601 million in a new
fiscal stability reserve fund, and $21 million in the Contingency Reserve Fund for
litigation. To permanently improve the State&#146;s reserve levels, the Governor has
proposed legislation to increase both the maximum size of the TSRF from 2 percent to 5
percent of General Fund spending, and the maximum annual deposits from two-tenths of 1
percent to five-tenths of 1 percent. The TSRF has reached its statutory maximum balance
of 2 percent and can only increase as the size of the budget increases. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Aside
from the $21 million in the Contingency Reserve Fund, the current State Financial Plan
does not set aside specific reserves to cover potential costs that could materialize as a
result of adverse rulings in pending litigation, Federal disallowances, or other Federal
actions that could adversely affect the State&#146;s projections of receipts or
disbursements. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, the State is a defendant in several court cases that could ultimately result in
costs to the State Financial Plan. The most significant is the Campaign for Fiscal Equity
v. State of New York, in which the New York State Court of Appeals held that, with
respect to education in New York City, the State was not in  </FONT></P>




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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>compliance with a State
constitutional mandate requiring the provision of a sound basic education to children.
The court directed that by July 30, 2004, the State must have determined the actual cost
of providing a sound basic education in the City and enacted appropriate reforms. The
State did not implement a compliance plan by the deadline, and on August 3, 2004 the
State Supreme Court issued an order appointing a three member panel to report on the
measures taken by the State to bring the State&#146;s funding mechanism into
Constitutional compliance and to identify the areas, if any, in which such compliance is
lacking. The panel&#146;s report was released on November 30, 2004. It recommends
additional operational funding of $5.63 billion per year for education in the City,
phased in over four years beginning with $1.41 billion in fiscal year 2006, and
additional spending on capital improvements for education in the City, over five years,
of $9.179 billion. On March 15, 2005, the Supreme Court, New York County, issued an order
confirming the panel&#146;s report and recommendations and directing the State to take
all steps necessary to provide the additional funding for New York City schools
recommended in the panel&#146;s report. The State appealed from the March 15, 2005 order
to the Appellate Division, First Department and the trial court&#146;s decision was
stayed pending resolution of the appeal. On May 3, 2005, the First Department denied the
plaintiffs&#146; motion to lift the automatic stay. The Enacted Budget provides an $850
million school year increase in school aid, $324 million above the level recommended in
the Executive Budget. The school aid program includes the SBE program, financed with VLT
revenues, that will distribute aid through a formula that benefits high-need districts,
and is part of the State&#146;s effort to comply with the State Court of Appeal&#146;s
decision in Campaign for Fiscal Equity v. State of New York. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
federal government is currently auditing Medicaid claims submitted since 1993 under the
School Supportive Health Services Program. At this point, certain audits have not been
finalized, and, as a result, the liability of the State and school districts for any
disallowances cannot be determined. Federal regulations include an appeals process that
could postpone repayment of any disallowances. The current State Financial Plan assumes
the Federal government will fully reimburse these costs. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, a portion of Federal Medicaid payments related to School Supportive Health
Services have been deferred by the Federal Centers for Medicare and Medicaid Services (&#147;CMS&#148;)
pending finalization of six audits conducted by the Office of the Inspector General (&#147;OIG&#148;)
of the Department of Health and Human Services, covering $1.5 billion in claims submitted
between 1990 and 2001. Since the State has continued to reimburse local school districts
for these costs, these Federal deferrals, if not resolved, could negatively impact the
State Financial Plan. Alternatively, if the State suspends reimbursement, local
governments could be adversely affected. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
date, OIG has issued three final audit reports, which covers claims submitted by upstate
school districts for speech pathology and transportation services and the City for speech
pathology services. In these reports, OIG recommends that the State refund to the CMS
$173 million of the $362 million in claims for upstate speech pathology services, $17
million of the $72 million for upstate transportation services, and $436 million of the
$551 million in claims submitted for New York City speech pathology services. While CMS
has not taken any action with regard to the recommended disallowances by OIG, CMS is
deferring 25 percent of City claims and 9.7 percent of claims submitted by the rest of
the State pending completion of the audits. The State disagrees with the audit findings
on several grounds and has requested that these be withdrawn. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While
information on the specific prescription drugs that will be covered by the new Federal
Medicare Part D Prescription Drug Benefit Program is not yet available, Part D does pose
a potentially significant risk to the State Financial Plan. The risk results from a
Federal requirement that the State contribute a portion of the Medicaid savings (90
percent in 2006 declining to 75 percent in 2015) for those recipients who are eligible
for both Medicaid and Medicare (dually eligible) and the potential that certain drugs now
available to dually eligible individuals through Medicaid will not be covered by Part D
&#151;even though State law requires a comparable benefit. Information on Medicaid Part D
formularies is expected to be available in October 2005. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
State Legislature has approved a concurrent resolution to amend the State&#146;s budget
process that will be submitted to the voters on November 8, 2005. If approved, the
amendment to the State Constitution and its companion statute would take effect on
January 1, 2006. The Governor and Attorney General have stated their opposition to the
amendment. Taken together, the constitutional amendment and the accompanying statutory
implementing language would (in summary): (i) extend the 2006-2007 fiscal year by one
month to April 30, 2007, and shift the start of the State&#146;s fiscal year from April 1
to May 1, beginning with the 2007-2008 fiscal year; (ii) create a Contingency Budget to
take effect the first day of the fiscal year that contains statutorily determined
spending levels in the event the Legislature does not act on all of the Governor&#146;s
proposed Executive Budget;  </FONT></P>





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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(iii) grant the Legislature the
ability to pass two multiple-purpose appropriation bills (rather than the one currently
authorized); (iv) create a new fiscal stabilization reserve fund, that may be used only
to help balance a subsequent fiscal year, and limit the purpose of the existing TSRF to
current year needs; and (v) establish a new Budget Office and a separate Advisory
Committee, appointed by the Senate Majority Leader and Assembly Speaker. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DOB
noted in the August Updates that it believes the amendment, if enacted, could present a
number of substantive and technical problems that have the potential to disrupt State
finances. For example, moving the start of the State&#146;s fiscal year from April 1 to
May 1 results in the State ending the fiscal year on a volatile revenue month, increasing
the risk of year-end shortfalls. In addition, starting the fiscal year on May 1 may
potentially require the State to issue short-term notes (&#147;seasonal borrowing&#148;)
to support General Fund cash disbursements in the first quarter of the fiscal year, since
May disbursements typically exceed May receipts by $2 billion to $3 billion. The State
eliminated the practice of seasonal borrowing in the early 1990s through the Local
Government Assistance Corporation (&#147;LGAC&#148;) and is limited by existing law and
bond covenants from returning to similar borrowing in the future. DOB plans to publish a
more complete analysis of the proposed amendments at a future time. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other
risks inherent in the current projections include the performance of the State and
national economies, adverse judgments against the State, and changes in the level of
Federal aid. </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>Cash-Basis Results for
  Prior Fiscal Years. </i></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
DOB reported a 2004-2005 General Fund surplus of $1.2 billion. Total receipts, including
transfers from other funds, were $43.8 billion. Disbursements, including transfers to
other funds, totaled $43.6 billion. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
General Fund ended the 2004-2005 fiscal year with a balance of $1.2 billion, which
included dedicated balances of $872 million in the TSRF (after an $78 million deposit at
the close of 2004-2005), $21 million in the Contingency Reserve Fund (&#147;CRF&#148;)
and $325 million in the Community Projects Fund (&#147;CPF&#148;), which pays primarily
for legislative &#147;member items.&#148; The closing fund balance excludes $1.3 billion
on deposit in the refund reserve account at the end of the 2004-2005 fiscal year,
including $601 million in the new fiscal stability reserve fund. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General
Fund receipts, including transfers from other funds, totaled $43.8 billion in 2004-2005,
an increase of $1.4 billion from 2003-2004 results. Tax receipts, excluding the impact of
the tax reserve transaction, increased by nearly $4 billion on an annual basis. The
growth was offset by an annual decline of $3.5 billion in miscellaneous receipts, due
mainly to the State&#146;s securitization of tobacco settlement payments in 2003-2004. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General
Fund spending, including transfers to other funds, totaled $43.6 billion in 2004-2005, an
increase of $1.6 billion from 2003-2004. Medicaid, school aid, fringe benefits, and debt
service were the main sources of annual growth. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
DOB reported a 2003-2004 General Fund surplus of $308 million. Total receipts, including
transfers from other funds, were $42.3 billion. Disbursements, including transfers to
other funds, totaled $42.1 billion. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
General Fund ended the 2003-2004 fiscal year with a balance of $1.1 billion, which
included dedicated balances of $794 million in the TSRF (after an $84 million deposit at
the close of 2003-2004), $21 million in the CRF and $262 million in the CPF, which pays
primarily for legislative &#147;member items.&#148; The closing fund balance excludes
$1.2 billion on deposit in the refund reserve account at the end of the 2003-2004 fiscal
year. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
State ended the 2002-2003 fiscal year with available General Fund cash resources of $1.01
billion. The General Fund cash balance at year-end totaled $815 million and the refund
reserve account had $200 million in resources not budgeted for other purposes. The
General Fund balance was comprised of $710 million in the TSRF, $20 million in the CRF to
pay costs related to litigation against the State, and $85 million in the CPF. The
closing balance excluded $627 million on deposit in the refund reserve account at the end
of the 2002-2003 fiscal year. The refund reserve account is used to pay for tax refunds
across fiscal years and to help accomplish other Financial Plan objectives, including the
movement of resources from one year to the next. Changes to the refund reserve affect the
level of reported personal income tax receipts. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General
Fund receipts and transfers from other funds totaled $37.4 billion in 2002-2003, a
decrease of $2.3 billion from the forecast set forth in the revised 2002-2003 Financial
Plan dated February 28, 2003 (the &#147;February Financial Plan&#148;). The February
Financial Plan had counted on $1.9 billion in revenues from the tobacco  </FONT></P>




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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>settlement sale. General Fund
disbursements and transfers to other funds totaled $37.6 billion, a decrease of $2.2
billion from the February Financial Plan. The substantial decline resulted from the
deferral of $1.9 billion in payments originally scheduled for 2002-2003 and $253 million
in one-time savings. After adjusting for the payment deferrals, General Fund
disbursements would have totaled $39.5 billion in 2002-2003 (a decrease of $1.7 billion
or 4 percent from 2001-2002 results). </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>&nbsp;State
  Retirement Systems</i>. The New York State and Local Retirement Systems (the
  &#147;Systems&#148;) provide coverage for public employees of the State and
  its localities (except employees of New York City and teachers, who are covered
  by separate plans). The Systems comprise the New York State and Local Employees
  Retirement System and the New York State and Local Police and Fire Retirement
  System. The Comptroller is the administrative head of the Systems. State employees
  made up about 33 percent of the membership during the 2003-04 fiscal year. There
  were 2,835 other public employers participating in the Systems, including all
  cities and counties (except New York City), most towns, villages and school
  districts (with respect to non-teaching employees) and a large number of local
  authorities of the State. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of March 31, 2004, 641,721 persons were members and 328,355 pensioners or beneficiaries
were receiving benefits. The State Constitution considers membership in any State pension
or retirement system to be a contractual relationship, the benefits of which shall not be
diminished or impaired. Members cannot be required to begin making contributions or make
increased contributions beyond what was required when membership began. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Assets
  and Liabilities</i>. Assets are held exclusively for the benefit of members,
  pensioners and beneficiaries. Investments for the Systems are made by the Comptroller
  as trustee of the Common Retirement Fund, a pooled investment vehicle. The Office
  of State Comptroller (&#147;OSC&#148;) reports the net assets available for
  benefits as of March 31, 2004 were $120.8 billion (including $1.4 billion in
  receivables), an increase of $23.4 billion or 24.1 percent from the 2002-2003
  level of $97.4 billion, reflecting, in large part, equity market performance.
  OSC reports that the present value of anticipated benefits for current members,
  retirees, and beneficiaries increased from $130.5 billion on April 1, 2003 to
  $140.2 billion (including $52.8 billion for current retirees and beneficiaries)
  on April 1, 2004. The funding method used by the Systems anticipates that the
  net assets, plus future actuarially determined contributions, will be sufficient
  to pay for the anticipated benefits of current members, retirees and beneficiaries.
  Actuarially determined contributions are calculated using actuarial assets and
  the present value of anticipated benefits. Actuarial assets differed from net
  assets on April 1, 2004 in that amortized cost was used instead of market value
  for bonds and mortgages. Actuarial assets increased from $106.7 billion on April
  1, 2003 to $117.5 billion on April 1, 2004. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Local
  Government Assistance Corporation</i>. In 1990, as part of a State fiscal reform
  program, legislation was enacted creating the LGAC, a public benefit corporation
  empowered to issue long term obligations to fund certain payments to local governments
  traditionally funded through the State&#146;s annual seasonal borrowing. The
  legislation also dedicated revenues equal to the first one percent of the State
  sales and use tax to pay debt service on these bonds. As of June 1995, LGAC
  had issued bonds and notes to provide net proceeds of $4.7 billion, completing
  the program. The impact of these long-term obligations, which are to be amortized
  over no more than 30 years, was expected to eliminate the need for continued
  short-term seasonal borrowing. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  legislation also imposed a limitation on the annual seasonal borrowing of the
  State, except in cases where the Governor and the legislative leaders have certified
  the need for additional seasonal borrowing, based on emergency or extraordinary
  factors or factors unanticipated at the time of adoption of the budget, and
  provided a schedule for eliminating it over time. Any seasonal borrowing is
  required by law to be eliminated by the fourth year after the limit was first
  exceeded (<i>i.e</i>., no tax and revenue anticipation note seasonal borrowing
  in the fifth year). This provision limiting the State&#146;s seasonal borrowing
  practices was included as a covenant with LGAC&#146;s bondholders in the resolution
  authorizing such bonds. No restrictions were placed on the State&#146;s ability
  to issue deficit notes. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
impact of the LGAC reforms, as well as other changes in revenue and spending patterns, is
that the State has been able to meet its cash flow needs throughout the fiscal year
without relying on short term seasonal borrowings. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Legislation
enacted in 2003 currently requires LGAC to certify, in addition to its own cash needs,
$170 million annually to provide an incentive for the State to seek an annual
appropriation to provide local assistance payments to New York City or its assignee. In
May 2004, LGAC amended its resolution authorizing  </FONT></P>




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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>such bonds to make clear that any
failure to certify or make payments to the City or its assignee has no impact on LGAC&#146;s
own bondholders; and that if any such act or omission were to occur with respect to any
possible bonds issued by the City or its assignee, that act or omission would not
constitute an event of default with respect to LGAC bonds. The Enacted Budget includes a
local assistance appropriation of $170 million from the Local Government Assistance Tax
Fund to the City. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Financing
  Activities</i>. For purposes of analyzing the financial condition of the State,
  debt may be classified as &#147;State-supported debt&#148; and &#147;State-related
  debt.&#148; &#147;State-supported debt&#148; includes general obligation debt,
  to which the full faith and credit of the State has been pledged, as well as
  lease-purchase and contractual-obligations of public authorities and municipalities,
  where the State&#146;s legal obligation to make payments to those public authorities
  and municipalities is subject to annual appropriations made by the State Legislature.
  &#147;State-related debt&#148; includes State-supported debt, as well as State-guaranteed
  debt (to which the full faith and credit of the State has been pledged), moral
  obligation financings and certain contingent-contractual obligation financings,
  where debt service is expected to be paid from other sources and State appropriations
  are contingent in that they may be made and used only under certain circumstances.
  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of March 31, 2005, the total amount of outstanding general obligation debt was $3.7
billion. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Debt Reform Act of 2000, which applies to all new State-supported debt issued on and
after April 1, 2000, imposes phased-in caps on new debt outstanding and new debt service
costs. The cap on new State-supported debt outstanding began at 0.75 percent of personal
income in 2000-2001 and will gradually increase until it is fully phased in at 4 percent
of personal income in 2010-11. Similarly, the cap on new State-supported debt service
costs began at 0.75 percent of total governmental funds receipts in 2000-2001 and will
gradually increase until it is fully phased in at 5 percent in 2013-14. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Debt Reform Act requires that the limitations on the issuance of State-supported debt and
debt service costs be calculated by October 31 of each year and reported in the quarterly
Financial Plan Update most proximate to such date. If the calculations for new
State-supported debt outstanding and debt service costs are less than the State-supported
debt outstanding and debt service costs permitted under the Debt Reform Act, new
State-supported debt may continue to be issued. However, if either the debt outstanding
or the debt service cap is met or exceeded, the State would be precluded from contracting
new State-supported debt until the next annual cap calculation is made and
State-supported debt is found to be within the appropriate limitations. The prohibition
on issuing new State-supported debt if the caps are met or exceeded provides an incentive
to treat the debt caps as absolute limits that should not be reached, and therefore DOB
intends to manage subsequent capital plans and issuance schedules under these limits. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to the provisions of the Debt Reform Act, the most recent annual calculation of the
limitations imposed by the Debt Reform Act was reported in the Financial Plan Update most
proximate to October 31, 2004. On October 30, 2004, the State reported that it was in
compliance with both debt caps, with debt issued after March 31, 2000 and outstanding at
March 31, 2004 at 1.55 percent of personal income and debt service on such debt at 0.84
percent of total governmental receipts, compared to caps of 1.98 percent for each. The
Annual Information Statement states that DOB projects that debt outstanding and debt
service costs for the 2004-2005 fiscal year and the entire five-year forecast period will
also be within the statutory caps. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Public
  Authorities &#151; General</i>. As of December 31, 2004, there were 18 public
  authorities that had outstanding debt of $100 million or more, and the aggregate
  outstanding debt, including refunding bonds, of these State public authorities
  was $120.4 billion, only a portion of which constitutes State-supported or State-related
  debt. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Litigation</i>.
  Adverse developments in legal proceedings or the initiation of new proceedings
  could affect the ability of the State to maintain a balanced State Financial
  Plan. There can be no assurance that adverse decisions in legal proceedings
  against the State would not exceed the amount of all potential State Financial
  Plan resources available for the payment of judgments, and could therefore affect
  the ability of the State to maintain a balanced State Financial Plan. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
State is a defendant in several court cases that could ultimately result in costs to the
State Financial Plan. The most significant litigation is the State Court of Appeals
ruling that the State&#146;s financing system for New York City public schools is
unconstitutional. (See &#147;Special Considerations&#148; within). </FONT></P>




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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Other
  Localities</i>. Certain localities outside the City have experienced financial
  problems and have requested and received additional State assistance during
  the last several State fiscal years. The potential impact on the State of any
  future requests by localities for additional oversight or financial assistance
  is not included in the projections of the State&#146;s receipts and disbursements
  for the State&#146;s 2005-2006 fiscal year or thereafter. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Grants
  to Local Governments</i>. Grants to Local Governments include financial aid
  to local governments and non-profit organizations, as well as entitlement payments
  to individuals. Local assistance spending is projected to be $31.4 billion in
  2005-2006, an increase of $1.4 billion (4.8 percent) from the current year.
  Growth in school aid ($864 million) and CUNY operating costs (mainly for salary
  growth and increases in fixed costs) and CUNY/SUNY community college enrollment
  growth ($179 million) are partially offset by savings from Medicaid cost containment
  and a patient income revenue reclassification. </FONT></P>



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

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


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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Description  </b></FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>of Moody&#146;s
      Municipal Bond Ratings </b> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Aaa  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&#151;Issuers
or issues rated Aaa demonstrate the strongest               creditworthiness relative to
other US municipal or tax-exempt               issuers or issues.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Aa  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;Issuers
or issues rated Aa demonstrate very strong creditworthiness relative to other US
municipal or tax-exempt               issuers or issues. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;Issuers
or issues rated A present above-average creditworthiness relative to other US municipal
or tax-exempt               issuers or issues. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Baa  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Issuers
or issues rated Baa represent average creditworthiness relative to other US municipal or
tax-exempt               issuers or issues. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Ba  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Issuers
or issues rated Ba demonstrate below-average creditworthiness relative to other US
municipal or tax-exempt               issuers or issues. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>B  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Issuers
or issues rated B demonstrate weak creditworthiness relative to other US municipal or
tax-exempt issuers               or issues. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Caa  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Issuers
or issues rated Caa demonstrate very weak creditworthiness relative to other US municipal
or tax-exempt               issuers or issues. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Ca  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Issuers
or issues rated Ca demonstrate extremely weak               creditworthiness relative to
other US municipal or tax-exempt               issuers or issues. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>C  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Issuers
or issues rated C demonstrate the weakest creditworthiness relative to other US municipal
or tax-exempt               issuers or issues. </FONT></TD>
</TR>
</TABLE>
<BR>

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


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

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
    <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>MIG 1 </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This designation
      denotes superior credit quality. Excellent protection is afforded by established
      cash flows, highly reliable liquidity support, or demonstrated broad-based
      access to the market for refinancing. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
    <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>MIG 2 </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This designation
      denotes strong credit quality. Margins of protection are ample, although
      not as large as in the preceding group. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
    <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>MIG 3 </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This designation
      denotes acceptable credit quality. Liquidity and cash-flow protection may
      be narrow, and market access for refinancing is likely to be less well-established.
      </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SG  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This
designation denotes speculative-grade credit quality. Debt               instruments in
this category may lack sufficient margins of               protection. </FONT></TD>
</TR>
</TABLE>
<BR>


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

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

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


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





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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;VMIG
rating expirations are a function of each issue&#146;s specific structural or credit
features. </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
    <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>VMIG 1 </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> This designation
      denotes superior credit quality. Excellent protection is afforded by the
      superior short-term credit strength of the liquidity provider and structural
      and legal protections that ensure the timely payment of purchase price upon
      demand. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
    <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>VMIG 2</FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> This designation
      denotes strong credit quality. Good protection is afforded by the strong
      short-term credit strength of the liquidity provider and structural and
      legal protections that ensure the timely payment of purchase price upon
      demand. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
    <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>VMIG 3 </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> This designation
      denotes acceptable credit quality. Adequate protection is afforded by the
      satisfactory short-term credit strength of the liquidity provider and structural
      and legal protections that ensure the timely payment of purchase price upon
      demand. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SG  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This
designation denotes speculative-grade credit quality. Demand               features rated
in this category may be supported by a liquidity               provider that does not
have an investment grade short-term rating               or may lack the structural
and/or legal protections necessary to               ensure the timely payment of purchase
price upon demand. </FONT></TD>
</TR>
</TABLE>
<BR>


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

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

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

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

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

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


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

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

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

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

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

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>      I.  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Likelihood
of payment&#151;capacity and willingness of the obligor as to            the timely
payment of interest and repayment of principal in            accordance with the terms of
the obligation; </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>      II.  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Nature
of and provisions of the obligation; </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>      III.  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Protection
afforded to, and relative position of, the obligation in            the event of
bankruptcy, reorganization or other arrangement under            the laws of bankruptcy
and other laws affecting creditors&#146; rights. </FONT></TD>
</TR>
</TABLE>
<BR>




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





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

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

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

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

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

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
    <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>BB <br>
      B <br>
      CCC <br>
      CC <br>
      C <br>
      </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>An obligation
      rated &#147;BB,&#148; &#147;B,&#148; &#147;CCC,&#148; &#147;CC&#148; and
      &#147;C&#148; are regarded as having significant speculative characteristics.
      &#147;BB&#148; indicates the least degree of speculation and &#147;C&#148;
      the highest degree of speculation. While such debt will likely have some
      quality and protective characteristics, these may be outweighed by large
      uncertainties or major risk exposures to adverse conditions. </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>D  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>An
obligation rated &#147;D&#148; is in payment default. The &#147;D&#148; rating category
is used when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard &amp; Poor&#146;s believes that
such payments will be made during such grace period. The &#147;D&#148; rating also will
be used upon the filing of a bankruptcy petition or the taking of similar action if
payments on an obligation are jeopardized. </FONT></TD>
</TR>
</TABLE>
<BR>

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

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

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

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

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

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


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

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

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A-1  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A
short-term obligation rated &#147;A-1&#147; is rated in the highest
              category by Standard &amp; Poor&#146;s. The obligor&#146;s capacity to meet
its               financial commitment on the obligation is strong. Within this
              category,  </FONT></TD>
</TR>
</TABLE>
<BR>




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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>certain obligations
are designated with a plus sign (+).               This indicates that the obligor&#146;s
capacity to meet its financial               commitment on these obligations is extremely
strong. </FONT></TD>
</TR>
</TABLE>
<BR>

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

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

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

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

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

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

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

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

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

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

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

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

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



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

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

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

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


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

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

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

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

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

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

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

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

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

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

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

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



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

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

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

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

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>B  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Bonds
are considered highly speculative. While bonds in this class               are currently
meeting debt service requirements, the probability               of continued timely
payment of principal and interest reflects the               obligor&#146;s limited
margin of safety and the need for reasonable               business and economic activity
throughout the life of the issue. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CCC  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Bonds
have certain identifiable characteristics which, if not               remedied, may lead
to default. The ability to meet obligations               requires an advantageous
business and economic environment. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CC  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Bonds
are minimally protected. Default in payment of interest and/or principal seems probable
over time. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>C  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Bonds
are in imminent default in payment of interest or principal. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
    <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>D <br>
      DD<br>
      DDD </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Bonds are
      in default on interest and/or principal payments. Such bonds are extremely
      speculative and should be valued on the basis of their ultimate recovery
      value in liquidation or reorganization of the obligor. &#147;DDD&#148;represents
      the highest potential for recovery on these bonds, and &#147;D&#148; represents
      the lowest potential for recovery. </FONT></TD>
</TR>
</TABLE>
<BR>

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


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

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

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

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

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-1+  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exceptionally
Strong Credit Quality. Issues assigned this rating are regarded as having the strongest
degree of               assurance for timely payment. </FONT></TD>
</TR>
</TABLE>
<BR>

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

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

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



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<BR>&nbsp;
<TABLE WIDTH=100%><TR><TD WIDTH=20% ALIGN=left><FONT SIZE=1>&nbsp;</FONT></TD><TD WIDTH=60% ALIGN=center><FONT SIZE="2">
B-6</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR SIZE=5 noshade WIDTH=100% ALIGN=LEFT>





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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-S  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Weak
Credit Quality. Issues assigned this rating have               characteristics suggesting
a minimal degree of assurance for               timely payment and are vulnerable to
near-term adverse changes in               financial and economic conditions. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>D  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Default.
Issues assigned this rating are in actual or imminent payment default. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>LOC  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
symbol &#147;LOC&#148; indicates that the rating is based on a letter of credit issued by
a commercial bank. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NR  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicates
that Fitch does not rate the specific issue. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
    <TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Conditional
      </FONT></TD>
    <TD width="1%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      </FONT></TD>
    <TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A conditional
      rating is premised on the successful completion of a project or the occurrence
      of a specific event. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
    <TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Suspended </FONT></TD>
    <TD width="2%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=92%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A rating is
      suspended when Fitch deems the amount of information available from the
      issuer to be inadequate for rating purposes. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
    <TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Withdrawn </FONT></TD>
    <TD width="2%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=92%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A rating will
      be withdrawn when an issue matures or is called or refinanced and, at Fitch&#146;s
      discretion, when an issuer fails to furnish proper and timely information.
      </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
    <TD WIDTH=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>FitchAlert </FONT></TD>
    <TD width="2%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=92%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Ratings are placed
      on FitchAlert to notify investors of an occurrence that is likely to result
      in a rating change and the likely direction of such change. These are designated
      as &#147;Positive,&#148; indicating a potential upgrade, &#147;Negative,&#148;
      for potential downgrade, or &#147;Evolving,&#148; where ratings may be raised
      or lowered. FitchAlert is relatively short term, and should be resolved
      within 12 months. </FONT></TD>
</TR>
</TABLE>
<BR>

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

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





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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set
forth below is further information with respect to the insurance policies (the &#147;Policies&#148;)
that MuniYield New York Insured Fund, Inc. (the &#147;Fund&#148;) may obtain from several
insurance companies with respect to insured Municipal Bonds held by the Fund. The Fund
has no obligation to obtain any such Policies, and the terms of any Policies actually
obtained may vary significantly from the terms discussed below. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
determining eligibility for insurance, insurance companies will apply their own
standards. These standards correspond generally to the standards such companies normally
use in establishing the insurability of new issues of Municipal Bonds and are not
necessarily the criteria that would be used in regard to the purchase of such bonds by
the Fund. The Policies do not insure (i) municipal securities ineligible for insurance
and (ii) municipal securities no longer owned by the Fund. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Policies do not guarantee the market value of the insured Municipal Bonds or the value of
the shares of the Fund. In addition, if the provider of an original issuance insurance
policy is unable to meet its obligations under such policy or if the rating assigned to
the insurance claims-paying ability of any such insurer deteriorates, the insurance
company will not have any obligation to insure any issue held by the Fund that is
adversely affected by either of the above described events. In addition to the payment of
premium, the policies may require that the Fund notify the insurance company as to all
Municipal Bonds in a Fund&#146;s portfolio and permit the insurance company to audit
their records. The insurance premiums will be payable monthly by a Fund in accordance
with a premium schedule to be furnished by the insurance company at the time the Policies
are issued. Premiums are based upon the amounts covered and the composition of the
portfolio. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund will seek to utilize insurance companies that have insurance claims-paying ability
ratings of AAA from Standard &amp; Poor&#146;s (&#147;S&amp;P&#148;) or Fitch Ratings (&#147;Fitch&#148;)
or Aaa from Moody&#146;s Investors Service, Inc. (&#147;Moody&#146;s&#148;). No assurance
can be given, however, that insurance from insurance carriers meeting these criteria will
be at all times available. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An
S&amp;P insurance claims-paying ability rating is an assessment of an operating insurance
company&#146;s financial capacity to meet obligations under an insurance policy in
accordance with the terms. An insurer with an insurance claims-paying ability rating of
AAA has the highest rating assigned by S&amp;P. Capacity to honor insurance contracts is
considered by S&amp;P to be extremely strong and highly likely to remain so over a long
period of time. A Fitch insurance claims-paying ability rating provides an assessment of
an insurance company&#146;s financial strength and, therefore, its ability to pay policy
and contract claims under the terms indicated. An insurer with an insurance claims-paying
ability rating of AAA has the highest rating assigned by Fitch. The ability to pay claims
is adjudged by Fitch to be extremely strong for insurance companies with this highest
rating. In the opinion of Fitch, foreseeable business and economic risk factors should
not have any material adverse impact on the ability of these insurers to pay claims. In
Fitch&#146;s opinion, profitability, overall balance sheet strength, capitalization and
liquidity are all at very secure levels and are unlikely to be affected by potential
adverse underwriting, investment or cyclical events. A Moody&#146;s insurance
claims-paying ability rating is an opinion of the ability of an insurance company to
repay punctually senior policyholder obligations and claims. An insurer with an insurance
claims-paying ability rating of Aaa is considered by Moody&#146;s to be of the best
quality. In the opinion of Moody&#146;s, the policy obligations of an insurance company
with an insurance claims-paying ability rating of Aaa carry the smallest degree of credit
risk and, while the financial strength of these companies is likely to change, such
changes as can be visualized are most unlikely to impair the company&#146;s fundamentally
strong position. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An
  insurance claims-paying ability rating of S&amp;P, Fitch or Moody&#146;s does
  not constitute an opinion on any specific contract in that such an opinion can
  only be rendered upon the review of the specific insurance contract. Furthermore,
  an insurance claims-paying ability rating does not take into account deductibles,
  surrender or cancellation penalties or the timeliness of payment; nor does it
  address the ability of a company to meet nonpolicy obligations (<i>i.e</i>.,
  debt contracts). </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
assignment of ratings by S&amp;P, Fitch or Moody&#146;s to debt issues that are fully or
partially supported by insurance policies, contracts or guarantees is a separate process
from the determination of claims-paying ability ratings. The likelihood of a timely flow
of funds from the insurer to the trustee for the bondholders is a key element in the
rating determination for such debt issues. </FONT></P>


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





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

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

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

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

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

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

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

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

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

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

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

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

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

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

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





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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>AMPS to
be sold pursuant to such Order against payment            therefor and advise any such
Beneficial Owner that will continue to            hold shares of AMPS of the Applicable
Rate for the next succeeding            Dividend Period; </FONT></TD>
</TR>
</TABLE>
<p><BR>
  <!-- MARKER FORMAT-SHEET="Para Hang 10" FSL="Workstation" --> </p>
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)
      advise each Beneficial Owner on whose behalf such Broker-Dealer submitted
      a Hold Order of the Applicable Rate for the next succeeding Dividend Period;
      </font> </td>
  </tr>
</table>
<p> <!-- MARKER FORMAT-SHEET="Para Hang 10" FSL="Workstation" --> </p>
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)
      advise each Beneficial Owner on whose behalf such Broker-Dealer submitted
      an Order of the Auction Date for the next succeeding Auction; and </font>
    </td>
  </tr>
</table>
<p> <!-- MARKER FORMAT-SHEET="Para Hang 10" FSL="Workstation" --> </p>
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10% height="11"><font face="Times New Roman, Times, Serif" size=2>&nbsp;
      </font></td>
    <td width=90% height="11"><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)
      advise each Potential Beneficial Owner on whose behalf such Broker-Dealer
      submitted a Bid that was accepted, in whole or in part, of the Auction Date
      for the next succeeding Auction. </font> </td>
  </tr>
</table>
<p> <!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" --> </p>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)
On the basis of the information provided to it pursuant to (a)       above, each
Broker-Dealer that submitted a Bid or a Sell Order on behalf       of a Potential
Beneficial Owner or a Beneficial Owner shall, in such       manner and at such time or
times as in its sole discretion it may       determine, allocate any funds received by it
pursuant to (b)(i) above and       any shares of AMPS received by it pursuant to (b)(ii)
above among the       Potential Beneficial Owners, if any, on whose behalf such
Broker-Dealer       submitted Bids, the Beneficial Owners, if any, on whose behalf such
      Broker-Dealer submitted Bids that were accepted or Sell Orders, and any
      Broker-Dealer or Broker-Dealers identified to it by the Auction Agent
      pursuant to (a)(v) or (a)(vi) above. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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

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

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

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

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

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

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

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

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)
If a Beneficial Owner selling shares of AMPS in an Auction fails       to deliver such
shares (by authorized book-entry), a Broker-Dealer may       deliver to the Potential
Beneficial Owner on behalf of which it submitted       a Bid that was accepted a number
of whole shares of AMPS that is less than       the number of shares that otherwise was
to be purchased by such Potential       Beneficial Owner. In such event, the number of
shares of AMPS to be so       delivered shall be determined solely by such Broker-Dealer.
Delivery of       such lesser number of shares shall constitute good delivery.
      Notwithstanding the foregoing terms of this paragraph (f),  </FONT>
</TD>
</TR>
</TABLE>
<BR>


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






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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
any delivery or       non-delivery of shares which shall represent any departure from the
      results of an Auction, as determined by the Auction Agent, shall be of no
      effect unless and until the Auction Agent shall have been notified of such
      delivery or non-delivery in accordance with the provisions of the Auction
      Agent Agreement and the Broker-Dealer Agreements. </FONT>
</TD>
</TR>
</TABLE>
<BR>


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





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

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

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


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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Paragraph 10(a)
Certain Definitions. </B></FONT></P>

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

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

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

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

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

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

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

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii)
&#147;Maximum Applicable Rate&#148; for any Dividend Period will be the       higher of
the Applicable Percentage of the Reference Rate or the       Applicable Spread plus the
Reference Rate. The Applicable Percentage and       the Applicable Spread will be
determined based on (i) the lower of the       credit rating or ratings assigned on such
date to such shares by Moody&#146;s       and S&amp;P (or if Moody&#146;s or S&amp;P or
both shall not make such rating       available, the equivalent of either or both of such
ratings by a       Substitute Rating Agency or two Substitute Rating Agencies or, in the
      event that only one such rating shall be available, such rating) and (ii)
      whether the Fund has provided notification to the Auction Agent prior to       the
Auction establishing the Applicable Rate for any dividend that net       capital gains or
other taxable income will be included in such dividend on       shares of AMPS as follows: </FONT>
</TD>
</TR>
</TABLE>
<p>&nbsp;</p>
<table cellpadding=0 cellspacing=0 border=0 width=620 align="center">
  <tr valign=Bottom>
    <th colspan=2></th>
    <th colspan=2></th>
    <th colspan=2></th>
    <th colspan=2></th>
    <th colspan=2></th>
    <th colspan=2></th>
  </tr>
  <tr valign=Bottom align="center">
    <td colspan="3"><b><font size="1">Credit Ratings </font></b>
      <hr width="90%" size="1" noshade>
    </td>
    <td>&nbsp;</td>
    <td rowspan="2"><b><font size="1">Applicable<br>
      Percentage<br>
      of Reference <br>
      Rate&#151;No <br>
      Notification </font></b>
      <hr width="90%" size="1" noshade>
      <b></b></td>
    <td>&nbsp;</td>
    <td rowspan="2"><b><font size="1">Applicable <br>
      Percentage <br>
      of Reference <br>
      Rate&#151;Notification </font></b>
      <hr width="90%" size="1" noshade>
      <b></b></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td rowspan="2"><b><font size="1">Applicable<br>
      Spread Over <br>
      Reference Rate&#151;<br>
      No&#151;Notification </font></b>
      <hr width="90%" size="1" noshade>
      <b></b></td>
    <td>&nbsp;</td>
    <td rowspan="2"><b><font size="1">Applicable<br>
      Spread Over <br>
      Reference Rate&#151; <br>
      Notification </font></b>
      <hr width="90%" size="1" noshade>
    </td>
  </tr>
  <tr valign=Bottom align="center">
    <td><b><font size="1">Moody&#146;s</font></b>
      <hr width="90%" size="1" noshade>
    </td>
    <td>&nbsp;</td>
    <td><b><font size="1">S&amp;P</font></b>
      <hr width="90%" size="1" noshade>
    </td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign=Bottom align="center">
    <td><font size="2">Aaa</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">AAA</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">110%</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">125%</font></td>
    <td><font size="2"></font></td>
    <td><font size="2"></font></td>
    <td><font size="2">1.10%</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">1.25%</font></td>
  </tr>
  <tr valign=Bottom align="center">
    <td><font size="2">&nbsp;Aa3 to Aa1</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">AA- to AA+</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">125%</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">150%</font></td>
    <td><font size="2"></font></td>
    <td><font size="2"></font></td>
    <td><font size="2">1.25%</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">1.50%</font></td>
  </tr>
  <tr valign=Bottom align="center">
    <td><font size="2">&nbsp;&nbsp;A3 to A1</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">A- to A+</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">150%</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">200%</font></td>
    <td><font size="2"></font></td>
    <td><font size="2"></font></td>
    <td><font size="2">1.50%</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">2.00%</font></td>
  </tr>
  <tr valign=Bottom align="center">
    <td><font size="2">Baa3 to Baa1</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">BBB- to BBB+</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">175%</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">250%</font></td>
    <td><font size="2"></font></td>
    <td><font size="2"></font></td>
    <td><font size="2">1.75%</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">2.50%</font></td>
  </tr>
  <tr valign=Bottom align="center">
    <td><font size="2">&nbsp;Below Baa3</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">Below BBB-</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">200%</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">300%</font></td>
    <td><font size="2"></font></td>
    <td><font size="2"></font></td>
    <td><font size="2">2.00%</font></td>
    <td><font size="2"></font></td>
    <td><font size="2">3.00%</font></td>
  </tr>
</table>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Applicable Percentage and the Applicable Spread as so determined may be further subject
to upward but not downward adjustment in the discretion of the Board of Directors of the
Fund after consultation with the Broker-Dealers, provided that immediately following any
such increase the Fund would be in compliance with the AMPS Basic Maintenance Amount.
Subject to the provisions of paragraph 12 of the Articles Supplementary entitled &#147;Termination
of Rating Agency Provisions,&#148; the Fund shall take all reasonable action necessary to
enable S&amp;P and Moody&#146;s to provide a rating for the AMPS. If either S&amp;P or
Moody&#146;s shall not make such a rating available or if neither S&amp;P nor Moody&#146;s
shall make such a rating available, subject to the provisions of paragraph 12 of the
Articles Supplementary entitled &#147;Termination of Rating Agency Provisions,&#148;Merrill
Lynch, Pierce, Fenner &amp; Smith Incorporated or its affiliates and successors, after
obtaining the Fund&#146;s approval, shall select a NRSRO or two NRSROs to act as a
Substitute Rating Agency or Substitute Rating Agencies, as the case may be. </FONT></P>

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

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

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





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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x)
&#147;Submission Deadline&#148; shall mean 1:00 p.m., Eastern time, on any       Auction
Date or such other time on any Auction Date as may be specified by       the Auction
Agent from time to time as the time by which each       Broker-Dealer must submit to the
Auction Agent in writing all Orders       obtained by it for the Auction to be conducted
on such Auction Date. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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

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

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

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

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

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


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

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

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

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

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

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

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

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



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





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

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

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

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

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

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

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

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

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

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

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


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

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

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

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

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

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

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

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

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

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


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

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

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

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

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

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

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


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

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

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

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


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

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

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

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

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

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

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

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

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


<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Paragraph 10(e)
Acceptance and Rejection of Submitted Bids and Submitted Sell Orders and Allocation of
Shares. </B></FONT></P>

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

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
If Sufficient Clearing Bids have been made, subject to the       provisions of Paragraph
10(e)(iii) and Paragraph 10(e)(iv), Submitted Bids       and Submitted Sell Orders shall
be accepted or rejected in the following       order of priority and all other Submitted
Bids shall be rejected: </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)
the Submitted Sell Orders of Existing Holders shall be            accepted and the
Submitted Bid of each of the Existing Holders            specifying any rate per annum
that is higher than the Winning Bid            Rate shall be accepted, thus requiring
each such Existing Holder to            sell the outstanding shares of AMPS that are the
subject of such            Submitted Sell Order or Submitted Bid; </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)
the Submitted Bid of each of the Existing Holders specifying            any rate per
annum that is lower than the Winning Bid Rate shall be            rejected, thus
entitling each such Existing Holder to continue to            hold the outstanding shares
of AMPS that are the subject of such            Submitted Bid; </FONT>
</TD>
</TR>
</TABLE>
<BR>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)
the Submitted Bid of each of the Potential Holders            specifying any rate per
annum that is lower than the Winning Bid Rate            shall be accepted; </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D)
the Submitted Bid of each of the Existing Holders specifying            a rate per annum
that is equal to the Winning Bid Rate shall be            rejected, thus entitling each
such Existing Holder to continue to            hold the outstanding shares of AMPS that
are the subject of such            Submitted Bid, unless the number of outstanding shares
of AMPS            subject to all such Submitted Bids shall be greater than the number
           of outstanding shares of AMPS (&#147;Remaining Shares&#148;) equal to the
           excess of the Available AMPS over the number of outstanding shares of
           AMPS subject to Submitted Bids described in Paragraph 10(e)(i)(B) and
           Paragraph 10(e)(i)(C), in which event the Submitted Bids of each such
           Existing Holder shall be accepted, and each such Existing Holder
           shall be required to sell outstanding shares of AMPS, but only in an
           amount equal to the difference between (1) the number of outstanding
           shares of AMPS then held by such Existing Holder subject to such
           Submitted Bid and (2) the number of shares of AMPS obtained by
           multiplying (x) the number of Remaining Shares by (y) a fraction the
           numerator of which shall be the number of outstanding shares of AMPS
           held by such Existing Holder subject to such Submitted Bid and the
           denominator of which shall be the sum of the numbers of outstanding
           shares of AMPS subject to such Submitted Bids made by all such
           Existing Holders that specified a rate per annum equal to the Winning
           Bid Rate; and </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(E)
the Submitted Bid of each of the Potential Holders            specifying a rate per annum
that is equal to the Winning Bid Rate            shall be accepted but only in an amount
equal to the number of            outstanding shares of AMPS obtained by multiplying (x)
the difference            between the Available AMPS and the number of outstanding shares
of            AMPS subject to Submitted Bids described in Paragraph 10(e)(i)(B),
           Paragraph 10(e)(i)(C) and Paragraph 10(e)(i)(D) by (y) a fraction the
           numerator of which shall be the number of outstanding shares of AMPS
           subject to such Submitted Bid and the denominator of which shall be
           the sum of the number of outstanding shares of AMPS subject to such
           Submitted Bids made by all such Potential Holders that specified
           rates per annum equal to the Winning Bid Rate. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)
If Sufficient Clearing Bids have not been made (other than       because all of the
outstanding shares of AMPS are subject to Submitted       Hold Orders), subject to the
provisions of Paragraph 10(e)(iii), Submitted       Orders shall be accepted or rejected
as follows in the following order of       priority and all other Submitted Bids shall be
rejected: </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)
the Submitted Bid of each Existing Holder specifying any            rate per annum that
is equal to or lower than the Maximum Applicable            Rate shall be rejected, thus
entitling such Existing Holder to            continue to hold the outstanding shares of
AMPS that are the subject            of such Submitted Bid; </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)
the Submitted Bid of each Potential Holder specifying any            rate per annum that
is equal to or lower than the Maximum Applicable            Rate shall be accepted, thus
requiring such Potential Holder to            purchase the outstanding shares of AMPS
that are the subject of such            Submitted Bid; and </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)
the Submitted Bids of each Existing Holder specifying any            rate per annum that
is higher than the Maximum Applicable Rate shall            be accepted and the Submitted
Sell Orders of each Existing Holder            shall be accepted, in both cases only in
an amount equal to the            difference between (1) the number of outstanding shares
of AMPS then            held by such Existing Holder subject to such Submitted Bid or
           Submitted Sell Order and (2) the number of shares of AMPS obtained by
           multiplying (x) the difference between the Available AMPS and the
           aggregate number of outstanding shares of AMPS subject to Submitted
           Bids described in Paragraph 10(e)(ii)(A) and Paragraph 10(e)(ii)(B)
           by (y) a fraction the numerator of which shall be the number of
           outstanding shares of AMPS held by such Existing Holder subject to
           such Submitted Bid or Submitted Sell Order and the denominator of
           which shall be the number of outstanding shares of AMPS subject to
           all such Submitted Bids and Submitted Sell Orders. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)
If, as a result of the procedures described in Paragraph       10(e)(i) or Paragraph
10(e)(ii), any Existing Holder would be entitled or       required to sell, or any
Potential Holder would be entitled or required to       purchase, a fraction of a share
of AMPS on any Auction Date, the Auction       Agent shall, in such manner as in its sole
discretion it shall determine,       round up or down the number of shares of AMPS to be
purchased or sold by       any Existing Holder or Potential Holder on such Auction Date
so that each       outstanding share of  </FONT>
</TD>
</TR>
</TABLE>
<BR>


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<BR>&nbsp;
<TABLE WIDTH=100%><TR><TD WIDTH=20% ALIGN=left><FONT SIZE=1>&nbsp;</FONT></TD><TD WIDTH=60% ALIGN=center><FONT SIZE="2">
E-6</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR SIZE=5 noshade WIDTH=100% ALIGN=LEFT>





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<!-- MARKER PAGE="sheet: 77; page: 77" -->






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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>AMPS purchased
      or sold by each Existing Holder or Potential Holder on such Auction Date
      shall be a whole share of AMPS. </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)
If, as a result of the procedures described in Paragraph       10(e)(i), any Potential
Holder would be entitled or required to purchase       less than a whole share of AMPS on
any Auction Date, the Auction Agent, in       such manner as in its sole discretion it
shall determine, shall allocate       shares of AMPS for purchase among Potential Holders
so that only whole       shares of AMPS are purchased on such Auction Date by any
Potential Holder,       even if such allocation results in one or more of such Potential
Holders       not purchasing any shares of AMPS on such Auction Date. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)
Based on the results of each Auction, the Auction Agent shall       determine, with
respect to each Broker-Dealer that submitted Bids or Sell       Orders on behalf of
Existing Holders or Potential Holders, the aggregate       number of the outstanding
shares of AMPS to be purchased and the aggregate       number of outstanding shares of
AMPS to be sold by such Potential Holders       and Existing Holders and, to the extent
that such aggregate number of       outstanding shares to be purchased and such aggregate
number of       outstanding shares to be sold differ, the Auction Agent shall determine
to       which other Broker-Dealer or Broker-Dealers acting for one or more
      purchasers such Broker-Dealer shall deliver, or from which other
      Broker-Dealer or Broker-Dealers acting for one or more sellers such
      Broker-Dealer shall receive, as the case may be, outstanding shares of       AMPS. </FONT>
</TD>
</TR>
</TABLE>
<BR>


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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund may interpret the provisions of this Paragraph 10 to resolve any inconsistency or
ambiguity, remedy any formal defect or make any other change or modification that does
not substantially adversely affect the rights of Beneficial Owners of AMPS. A Beneficial
Owner or an Existing Holder (A) may sell, transfer or otherwise dispose of shares of AMPS
only pursuant to a Bid or Sell Order in accordance with the procedures described in this
Paragraph 10 or to or through a Broker-Dealer, provided that in the case of all transfers
other than pursuant to Auctions such Beneficial Owner or Existing Holder, its
Broker-Dealer, if applicable, or its Agent Member advises the Auction Agent of such
transfer and (B) except as otherwise required by law, shall have the ownership of the
shares of AMPS held by it maintained in book entry form by the Securities Depository in
the account of its Agent Member, which in turn will maintain records of such Beneficial
Owner&#146;s beneficial ownership. Neither the Fund nor any affiliate (other than Merrill
Lynch, Pierce, Fenner &amp; Smith Incorporated) shall submit an Order in any Auction. Any
Beneficial Owner that is an affiliate (other than Merrill Lynch, Pierce, Fenner &amp; Smith
Incorporated) shall not sell, transfer or otherwise dispose of shares of AMPS to any
person other than the Fund. All of the outstanding shares of AMPS of a series shall be
represented by a single certificate registered in the name of the nominee of the
Securities Depository unless otherwise required by law or unless there is no Securities
Depository. If there is no Securities Depository, at the Fund&#146;s option and upon its
receipt of such documents as it deems appropriate, any shares of AMPS may be registered
in the Stock Register in the name of the Beneficial Owner thereof and such Beneficial
Owner thereupon will be entitled to receive certificates therefor and required to deliver
certificates thereof or upon transfer or exchange thereof. </FONT></P>


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





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<!-- MARKER PAGE="sheet: 78; page: 78" -->





<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>PART C. OTHER
INFORMATION </B></FONT></P>

<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Item 25. &nbsp;<i>Financial
  Statements And Exhibits. </i></B></FONT></P>

<table border=0 cellspacing=0 cellpadding=0 width="100%">
  <tr>
    <td width=54 valign=top>
      <p><font face="Times New Roman" size="2">(1)</font></p>
    </td>
    <td width=510 valign=top>
      <p><font face="Times New Roman" size="2">Financial Statements</font></p>
    </td>
  </tr>
  <tr>
    <td width=54 valign=top>&nbsp;</td>
    <td width=510 valign=top>&nbsp;</td>
  </tr>
  <tr>
    <td width=54 valign=top>
      <p><font face="Times New Roman" size="2"><b>Part A:</b></font></p>
    </td>
    <td width=510 valign=top>
      <p><font face="Times New Roman" size="2">Financial Highlights for each of
        the fiscal years in the ten-year period ended October 31, 2004 and the
        six months ended April 30, 2005.</font></p>
    </td>
  </tr>
  <tr>
    <td width=54 valign=top>&nbsp;</td>
    <td width=510 valign=top>&nbsp;</td>
  </tr>
  <tr>
    <td width=54 valign=top>
      <p><font face="Times New Roman" size="2"><b>Part B: </b></font></p>
    </td>
    <td width=510 valign=top>
      <p><font face="Times New Roman" size="2">Schedule of Investments of the
        Fund as of October 31, 2004.*</font></p>
    </td>
  </tr>
  <tr>
    <td width=54 valign=top>&nbsp;</td>
    <td width=510 valign=top>&nbsp;</td>
  </tr>
  <tr>
    <td width=54 valign=top>
      <p>&nbsp;</p>
    </td>
    <td width=510 valign=top>
      <p><font face="Times New Roman" size="2">Statement of Net Assets of the
        Fund as of October 31, 2004.*</font></p>
    </td>
  </tr>
  <tr>
    <td width=54 valign=top>&nbsp;</td>
    <td width=510 valign=top>&nbsp;</td>
  </tr>
  <tr>
    <td width=54 valign=top>
      <p>&nbsp;</p>
    </td>
    <td width=510 valign=top>
      <p><font face="Times New Roman" size="2">Statement of Operations of the
        Fund for the fiscal year ended October 31, 2004.*</font></p>
    </td>
  </tr>
  <tr>
    <td width=54 valign=top>&nbsp;</td>
    <td width=510 valign=top>&nbsp;</td>
  </tr>
  <tr>
    <td width=54 valign=top>
      <p>&nbsp;</p>
    </td>
    <td width=510 valign=top>
      <p><font face="Times New Roman" size="2">Statements of Changes in Net Assets
        of the Fund for the fiscal years ended October 31, 2003 and October 31,
        2004.*</font></p>
    </td>
  </tr>
  <tr>
    <td width=54 valign=top>&nbsp;</td>
    <td width=510 valign=top>&nbsp;</td>
  </tr>
  <tr>
    <td width=54 valign=top>
      <p>&nbsp;</p>
    </td>
    <td width=510 valign=top>
      <p><font face="Times New Roman" size="2">Financial Highlights for each of
        the fiscal years in the five-year period ended October 31, 2004.*</font></p>
    </td>
  </tr>
  <tr>
    <td width=54 valign=top>&nbsp;</td>
    <td width=510 valign=top>&nbsp;</td>
  </tr>
  <tr>
    <td width=54 valign=top>
      <p>&nbsp;</p>
    </td>
    <td width=510 valign=top>
      <p><font face="Times New Roman" size="2">Report of Independent Registered
        Public Accounting Firm.*</font></p>
    </td>
  </tr>
  <tr>
    <td width=54 valign=top>&nbsp;</td>
    <td width=510 valign=top>&nbsp;</td>
  </tr>
  <tr>
    <td width=54 valign=top>
      <p>&nbsp;</p>
    </td>
    <td width=510 valign=top>
      <p><font face="Times New Roman" size="2">Statement of Investments of the
        Fund as of April 30, 2005**</font></p>
    </td>
  </tr>
  <tr>
    <td width=54 valign=top>&nbsp;</td>
    <td width=510 valign=top>&nbsp;</td>
  </tr>
  <tr>
    <td width=54 valign=top>
      <p>&nbsp;</p>
    </td>
    <td width=510 valign=top>
      <p><font face="Times New Roman" size="2">Statement of Net Assets of the
        Fund as of April 30, 2005**</font></p>
    </td>
  </tr>
  <tr>
    <td width=54 valign=top>&nbsp;</td>
    <td width=510 valign=top>&nbsp;</td>
  </tr>
  <tr>
    <td width=54 valign=top>
      <p>&nbsp;</p>
    </td>
    <td width=510 valign=top>
      <p><font face="Times New Roman" size="2">Statement of Operations of the
        Fund for the six months ended April 30, 2005**</font></p>
    </td>
  </tr>
  <tr>
    <td width=54 valign=top>&nbsp;</td>
    <td width=510 valign=top>&nbsp;</td>
  </tr>
  <tr>
    <td width=54 valign=top>
      <p>&nbsp;</p>
    </td>
    <td width=510 valign=top>
      <p><font face="Times New Roman" size="2">Statement of Changes in Net Assets
        of the Fund for the six months ended April 30, 2005**</font></p>
    </td>
  </tr>
  <tr>
    <td width=54 valign=top>&nbsp;</td>
    <td width=510 valign=top>&nbsp;</td>
  </tr>
  <tr>
    <td width=54 valign=top>
      <p>&nbsp;</p>
    </td>
    <td width=510 valign=top>
      <p><font face="Times New Roman" size="2">Financial Highlights of the Fund
        for the six months ended April 30, 2005 and each of the fiscal years in
        the five-year period ended October 31, 2005**</font></p>
    </td>
  </tr>
</table>
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<HR SIZE=1 noshade ALIGN=left  WIDTH=75>

<!-- MARKER FORMAT-SHEET="Footnote Right" FSL="Workstation" -->
<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=4% ALIGN=right VALIGN=top><font size="1">* </font></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><font size="1">Incorporated by reference
      to the Registrant&#146;s Annual Report to Shareholders for the fiscal year
      ended October 31, 2004 filed with the Securities and Exchange Commission
      (&#147;Commission&#148;) on December 28, 2004 pursuant to Rule 30b2-1 under
      the Investment Company Act of 1940, as amended (&#147;1940 Act&#148;). </font></TD>
  </TR>
  <TR>
    <TD WIDTH=4% ALIGN=right VALIGN=top><font size="1">**</font></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1"> Incorporated by reference
      to the Registrant&#146;s Semi-Annual Report to Stockholders for the six
      month period ended April 30, 2005 filed with the Commission on June 30,
      2005 pursuant to Rule 30b2-1 under the 1940 Act.</FONT></TD>
  </TR>
</TABLE>



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<BR>
<TABLE WIDTH=100%><TR><TD WIDTH=20% ALIGN=left><FONT SIZE=1>&nbsp;</FONT></TD><TD WIDTH=60% ALIGN=center><FONT SIZE="2">
C-1</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR ALIGN=LEFT WIDTH=100% SIZE=5 noshade><BR>
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<p>&nbsp;
<table border=0 cellspacing=0 cellpadding=0 width="100%">
  <tr>
    <td width=0%>&nbsp;</td>
    <td valign=top width=2% align="right">&nbsp;</td>
    <td valign=top width=6% align="left"> <font face="Times New Roman" size="2">Exhibits<br>
      </font>
      <hr noshade size="1" width="44" align="left">
    </td>
    <td valign=top width=2%>&nbsp;</td>
    <td valign=top width=90%><font face="Times New Roman" size="2">Description<br>
      </font>
      <hr noshade size="1" width="63" align="left">
    </td>
  </tr>
  <tr>
    <td width=0%></td>
    <td width=2% align="right"></td>
    <td width=6% align="left"></td>
    <td width=2%></td>
    <td width=90%></td>
  </tr>
</table>

<table border=0 cellspacing=0 cellpadding=0 width="100%">
  <tr>
    <td width=0%>
      <p>&nbsp;
    </td>
    <td valign=top width=2% align="right">&nbsp;</td>
    <td valign=top width=6% align="left">
      <p><font face="Times New Roman" size="2">(a)(1)</font></p>
    </td>
    <td valign=top width=2%>&nbsp;</td>
    <td valign=top width=90%>
      <p><font face="Times New Roman" size="2">Articles of Incorporation of the
        Registrant.(a) </font></p>
    </td>
  </tr>
  <tr>
    <td width=0%>
      <p>&nbsp;
    </td>
    <td valign=top width=2% align="right">&nbsp;</td>
    <td valign=top width=6% align="left">
      <p><font face="Times New Roman" size="2">(a)(2)</font></p>
    </td>
    <td valign=top width=2%>&nbsp;</td>
    <td valign=top width=90%>
      <p><font face="Times New Roman" size="2">Articles of Amendment to the Articles
        of Incorporation of the Registrant dated January 7, 1992.(a) </font></p>
    </td>
  </tr>
  <tr>
    <td width=0%>
      <p>&nbsp;
    </td>
    <td valign=top width=2% align="right">&nbsp;</td>
    <td valign=top width=6% align="left">
      <p><font face="Times New Roman" size="2">(a)(3)</font></p>
    </td>
    <td valign=top width=2%>&nbsp;</td>
    <td valign=top width=90%>
      <p><font face="Times New Roman" size="2">Articles of Transfer.(b)</font></p>
    </td>
  </tr>
  <tr>
    <td width=0%>
      <p>&nbsp;
    </td>
    <td valign=top width=2% align="right">&nbsp;</td>
    <td valign=top width=6% align="left">
      <p><font face="Times New Roman" size="2">(a)(4)</font></p>
    </td>
    <td valign=top width=2%>&nbsp;</td>
    <td valign=top width=90%>
      <p><font face="Times New Roman" size="2">Articles Supplementary creating
        Registrant&#146;s Series A and Series B Auction Market Preferred Stock
        (the &#147;Series A AMPS&#148; and &#147;Series B AMPS&#148;, respectively).(a)
        </font></p>
    </td>
  </tr>
  <tr>
    <td width=0%>
      <p>&nbsp;
    </td>
    <td valign=top width=2% align="right">&nbsp;</td>
    <td valign=top width=6% align="left">
      <p><font face="Times New Roman" size="2">(a)(5)</font></p>
    </td>
    <td valign=top width=2%>&nbsp;</td>
    <td valign=top width=90%>
      <p><font face="Times New Roman" size="2">Articles Supplementary creating
        additional Series A AMPS and Series B AMPS.(b)</font></p>
    </td>
  </tr>
  <tr>
    <td width=0%>
      <p>&nbsp;
    </td>
    <td valign=top width=2% align="right">&nbsp;</td>
    <td valign=top width=6% align="left">
      <p><font face="Times New Roman" size="2">(a)(6)</font></p>
    </td>
    <td valign=top width=2%>&nbsp;</td>
    <td valign=top width=90%>
      <p><font face="Times New Roman" size="2">Articles of Amendment to Articles
        Supplementary creating Registrant&#146;s Series A AMPS and Series B AMPS,
        dated November 30, 1994.(b) </font></p>
    </td>
  </tr>
  <tr>
    <td width=0%>
      <p>&nbsp;
    </td>
    <td valign=top width=2% align="right">&nbsp;</td>
    <td valign=top width=6% align="left">
      <p><font face="Times New Roman" size="2">(a)(7)</font></p>
    </td>
    <td valign=top width=2%>&nbsp;</td>
    <td valign=top width=90%>
      <p><font face="Times New Roman" size="2">Form of Articles Supplementary
        creating Registrant&#146;s Series C, Series D and Series E Auction Market
        Preferred Stock (the &#147;Series C AMPS&#148;, &#147;Series D AMPS&#148;
        and &#147;Series E AMPS&#148;, respectively, and collectively with the
        Series A AMPS and Series B AMPS, the &#147;Other AMPS&#148;).(c)</font></p>
    </td>
  </tr>
  <tr>
    <td width=0%>
      <p>&nbsp;
    </td>
    <td valign=top width=2% align="right">&nbsp;</td>
    <td valign=top width=6% align="left">
      <p><font face="Times New Roman" size="2">(a)(8)</font></p>
    </td>
    <td valign=top width=2%>&nbsp;</td>
    <td valign=top width=90%>
      <p><font face="Times New Roman" size="2">Articles of Amendment to Articles
        Supplementary creating Other AMPS, dated July 13, 2005.(b)</font></p>
    </td>
  </tr>
  <tr>
    <td width=0%>
      <p>&nbsp;
    </td>
    <td valign=top width=2% align="right">&nbsp;</td>
    <td valign=top width=6% align="left">
      <p><font face="Times New Roman" size="2">(a)(9)</font></p>
    </td>
    <td valign=top width=2%>&nbsp;</td>
    <td valign=top width=90%>
      <p><font face="Times New Roman" size="2">Form of Articles Supplementary
        creating Series F Auction Market Preferred Stock (the &#147;AMPS&#148;).(b)</font></p>
    </td>
  </tr>
  <tr>
    <td width=0%>
      <p>&nbsp;
    </td>
    <td valign=top width=2% align="right">&nbsp;</td>
    <td valign=top width=6% align="left">
      <p><font face="Times New Roman" size="2">(b)</font></p>
    </td>
    <td valign=top width=2%>&nbsp;</td>
    <td valign=top width=90%>
      <p><font face="Times New Roman" size="2">By-laws of the Registrant.(a)</font></p>
    </td>
  </tr>
  <tr>
    <td width=0%>
      <p>&nbsp;
    </td>
    <td valign=top width=2% align="right">&nbsp;</td>
    <td valign=top width=6% align="left">
      <p><font face="Times New Roman" size="2">(c)</font></p>
    </td>
    <td valign=top width=2%>&nbsp;</td>
    <td valign=top width=90%>
      <p><font face="Times New Roman" size="2">Not applicable.</font></p>
    </td>
  </tr>
  <tr>
    <td width=0%>
      <p>&nbsp;
    </td>
    <td valign=top width=2% align="right">&nbsp;</td>
    <td valign=top width=6% align="left">
      <p><font face="Times New Roman" size="2">(d)(1)</font></p>
    </td>
    <td valign=top width=2%>&nbsp;</td>
    <td valign=top width=90%>
      <p><font face="Times New Roman" size="2">Portions of the Articles of Incorporation,
        By-laws and Articles Supplementary of the Registrant defining the rights
        of holders of shares of the Registrant.(d)</font></p>
    </td>
  </tr>
  <tr>
    <td width=0%>
      <p>&nbsp;
    </td>
    <td valign=top width=2% align="right">&nbsp;</td>
    <td valign=top width=6% align="left">
      <p><font face="Times New Roman" size="2">(d)(2)</font></p>
    </td>
    <td valign=top width=2%>&nbsp;</td>
    <td valign=top width=90%>
      <p><font face="Times New Roman" size="2">Form of specimen certificate for
        the AMPS of the Registrant.(b)</font></p>
    </td>
  </tr>
  <tr>
    <td width=0%>
      <p>&nbsp;
    </td>
    <td valign=top width=2% align="right">&nbsp;</td>
    <td valign=top width=6% align="left">
      <p><font face="Times New Roman" size="2">(e)</font></p>
    </td>
    <td valign=top width=2%>&nbsp;</td>
    <td valign=top width=90%>
      <p><font face="Times New Roman" size="2">Form of Automatic Dividend Reinvestment
        Plan.(b)</font></p>
    </td>
  </tr>
  <tr>
    <td width=0%>
      <p>&nbsp;
    </td>
    <td valign=top width=2% align="right">&nbsp;</td>
    <td valign=top width=6% align="left">
      <p><font face="Times New Roman" size="2">(f)</font></p>
    </td>
    <td valign=top width=2%>&nbsp;</td>
    <td valign=top width=90%>
      <p><font face="Times New Roman" size="2">Not applicable.</font></p>
    </td>
  </tr>
  <tr>
    <td width=0%>
      <p>&nbsp;
    </td>
    <td valign=top width=2% align="right">&nbsp;</td>
    <td valign=top width=6% align="left">
      <p><font face="Times New Roman" size="2">(g)(1)</font></p>
    </td>
    <td valign=top width=2%>&nbsp;</td>
    <td valign=top width=90%>
      <p><font face="Times New Roman" size="2">Form of Investment Advisory Agreement
        between the Registrant and Fund Asset Management, L.P. (&#147;FAM&#148;
        or the &#147;Investment Adviser&#148;).(a)</font></p>
    </td>
  </tr>
  <tr>
    <td width=0%>
      <p>&nbsp;
    </td>
    <td valign=top width=2% align="right">&nbsp;</td>
    <td valign=top width=6% align="left">
      <p><font face="Times New Roman" size="2">(h)(1)</font></p>
    </td>
    <td valign=top width=2%>&nbsp;</td>
    <td valign=top width=90%>
      <p><font face="Times New Roman" size="2">Form of Purchase Agreement between
        the Registrant and Merrill Lynch, Pierce, Fenner &amp; Smith Incorporated
        (&#147;Merrill Lynch&#148;) relating to the AMPS.(b)</font></p>
    </td>
  </tr>
  <tr>
    <td width=0%>
      <p>&nbsp;
    </td>
    <td valign=top width=2% align="right">&nbsp;</td>
    <td valign=top width=6% align="left">
      <p><font face="Times New Roman" size="2">(h)(2)</font></p>
    </td>
    <td valign=top width=2%>&nbsp;</td>
    <td valign=top width=90%>
      <p><font face="Times New Roman" size="2">Form of Merrill Lynch Standard
        Dealer Agreement.(e)</font></p>
    </td>
  </tr>
  <tr>
    <td width=0%>
      <p>&nbsp;
    </td>
    <td valign=top width=2% align="right">&nbsp;</td>
    <td valign=top width=6% align="left">
      <p><font face="Times New Roman" size="2">(i)</font></p>
    </td>
    <td valign=top width=2%>&nbsp;</td>
    <td valign=top width=90%>
      <p><font face="Times New Roman" size="2">Not applicable.</font></p>
    </td>
  </tr>
  <tr>
    <td width=0%>
      <p>&nbsp;
    </td>
    <td valign=top width=2% align="right">&nbsp;</td>
    <td valign=top width=6% align="left">
      <p><font face="Times New Roman" size="2">(j)</font></p>
    </td>
    <td valign=top width=2%>&nbsp;</td>
    <td valign=top width=90%>
      <p><font face="Times New Roman" size="2">Form of Custodian Agreement between
        the Registrant and The Bank of New York (&#147;BONY&#148;).(f)</font></p>
    </td>
  </tr>
  <tr>
    <td width=0%>
      <p>&nbsp;
    </td>
    <td valign=top width=2% align="right">&nbsp;</td>
    <td valign=top width=6% align="left">
      <p><font face="Times New Roman" size="2">(k)(l)</font></p>
    </td>
    <td valign=top width=2%>&nbsp;</td>
    <td valign=top width=90%>
      <p><font face="Times New Roman" size="2">Form of Registrar, Transfer Agency,
        Dividend Disbursing Agency and Shareholder Servicing Agency Agreement
        between the Registrant and BONY.(b)</font></p>
    </td>
  </tr>
  <tr>
    <td width=0%>
      <p>&nbsp;
    </td>
    <td valign=top width=2% align="right">&nbsp;</td>
    <td valign=top width=6% align="left">
      <p><font face="Times New Roman" size="2">(k)(2)</font></p>
    </td>
    <td valign=top width=2%>&nbsp;</td>
    <td valign=top width=90%>
      <p><font face="Times New Roman" size="2">Form of Administrative Services
        Agreement between the Registrant and State Street Bank &amp; Trust Company.(g)</font></p>
    </td>
  </tr>
  <tr>
    <td width=0%>
      <p>&nbsp;
    </td>
    <td valign=top width=2% align="right">&nbsp;</td>
    <td valign=top width=6% align="left">
      <p><font face="Times New Roman" size="2">(k)(4)</font></p>
    </td>
    <td valign=top width=2%>&nbsp;</td>
    <td valign=top width=90%>
      <p><font face="Times New Roman" size="2">Form of Auction Agent Agreement
        between the Registrant and The Bank of New York.(b)</font></p>
    </td>
  </tr>
  <tr>
    <td width=0%>
      <p>&nbsp;
    </td>
    <td valign=top width=2% align="right">&nbsp;</td>
    <td valign=top width=6% align="left">
      <p><font face="Times New Roman" size="2">(k)(5)</font></p>
    </td>
    <td valign=top width=2%>&nbsp;</td>
    <td valign=top width=90%>
      <p><font face="Times New Roman" size="2">Form of Broker-Dealer Agreement.(b)</font></p>
    </td>
  </tr>
  <tr>
    <td width=0%>
      <p>&nbsp;
    </td>
    <td valign=top width=2% align="right">&nbsp;</td>
    <td valign=top width=6% align="left">
      <p><font face="Times New Roman" size="2">(k)(6)</font></p>
    </td>
    <td valign=top width=2%>&nbsp;</td>
    <td valign=top width=90%>
      <p><font face="Times New Roman" size="2">Form of Letter of Representations.(b)</font></p>
    </td>
  </tr>
  <tr>
    <td width=0%>
      <p>&nbsp;
    </td>
    <td valign=top width=2% align="right">&nbsp;</td>
    <td valign=top width=6% align="left">
      <p><font face="Times New Roman" size="2">(l)</font></p>
    </td>
    <td valign=top width=2%>&nbsp;</td>
    <td valign=top width=90%>
      <p><font face="Times New Roman" size="2">Opinion and Consent of Sidley Austin
        Brown &amp; Wood <font size="1">LLP</font>.</font></p>
    </td>
  </tr>
  <tr>
    <td width=0%>
      <p>&nbsp;
    </td>
    <td valign=top width=2% align="right">&nbsp;</td>
    <td valign=top width=6% align="left">
      <p><font face="Times New Roman" size="2">(m)</font></p>
    </td>
    <td valign=top width=2%>&nbsp;</td>
    <td valign=top width=90%>
      <p><font face="Times New Roman" size="2">Not applicable.</font></p>
    </td>
  </tr>
  <tr>
    <td width=0%>
      <p>&nbsp;
    </td>
    <td valign=top width=2% align="right">&nbsp;</td>
    <td valign=top width=6% align="left">
      <p><font face="Times New Roman" size="2">(n)</font></p>
    </td>
    <td valign=top width=2%>&nbsp;</td>
    <td valign=top width=90%>
      <p><font face="Times New Roman" size="2">Consent of Deloitte &amp; Touche
        <font size="1">LLP</font>, independent registered public accounting firm
        for the Registrant.</font></p>
    </td>
  </tr>
  <tr>
    <td width=0%>
      <p>&nbsp;
    </td>
    <td valign=top width=2% align="right">&nbsp;</td>
    <td valign=top width=6% align="left">
      <p><font face="Times New Roman" size="2">(o)</font></p>
    </td>
    <td valign=top width=2%>&nbsp;</td>
    <td valign=top width=90%>
      <p><font face="Times New Roman" size="2">Not applicable.</font></p>
    </td>
  </tr>
  <tr>
    <td width=0%>
      <p>&nbsp;
    </td>
    <td valign=top width=2% align="right">&nbsp;</td>
    <td valign=top width=6% align="left">
      <p><font face="Times New Roman" size="2">(p)</font></p>
    </td>
    <td valign=top width=2%>&nbsp;</td>
    <td valign=top width=90%>
      <p><font face="Times New Roman" size="2">Not applicable.</font></p>
    </td>
  </tr>
  <tr>
    <td width=0%>
      <p>&nbsp;
    </td>
    <td valign=top width=2% align="right">&nbsp;</td>
    <td valign=top width=6% align="left">
      <p><font face="Times New Roman" size="2">(q)</font></p>
    </td>
    <td valign=top width=2%>&nbsp;</td>
    <td valign=top width=90%>
      <p><font face="Times New Roman" size="2">Not applicable.</font></p>
    </td>
  </tr>
  <tr>
    <td width=0%>
      <p>&nbsp;
    </td>
    <td valign=top width=2% align="right">&nbsp;</td>
    <td valign=top width=6% align="left">
      <p><font face="Times New Roman" size="2">(r)</font></p>
    </td>
    <td valign=top width=2%>&nbsp;</td>
    <td valign=top width=90%>
      <p><font face="Times New Roman" size="2">Code of Ethics.(h)</font></p>
    </td>
  </tr>
  <tr>
    <td width=0%></td>
    <td width=2% align="right"></td>
    <td width=6% align="left"></td>
    <td width=2%></td>
    <td width=90%></td>
  </tr>
</table>

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







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

<br>


<!-- MARKER FORMAT-SHEET="Footnote Left" FSL="Workstation" -->
<TABLE WIDTH=100%><TR><TD WIDTH=2% ALIGN=left VALIGN=top><FONT SIZE="1">    (a) </FONT></TD>
    <TD WIDTH=1%>&nbsp;</TD>
    <TD WIDTH=97% ALIGN=left VALIGN=top><FONT SIZE="1">Filed
or refiled on November 9, 1999, as an Exhibit to Pre-Effective Amendment No. 1 to the
                  Registrant&#146;s Registration Statement on Form N-14 (File No. 333-88423)
(the &#147;N-14 Registration                   Statement&#148;).</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Footnote Left" FSL="Workstation" -->
<TABLE WIDTH=100%>
  <tr>
    <td width=2% align=left valign=top><font size="1"> (b) </font></td>
    <td width=1%>&nbsp;</td>
    <td width=97% align=left valign=top><font size="1">Filed with the Commission
      on July 20, 2005 as an exhibit to the Registrant&#146;s Registrantion Statement
      on Form N-2 (333-126729).</font></td>
  </tr>
  <TR>
    <TD WIDTH=2% ALIGN=left VALIGN=top><FONT SIZE="1"> (c) </FONT></TD>
    <TD WIDTH=1%>&nbsp;</TD>
    <TD WIDTH=97% ALIGN=left VALIGN=top><FONT SIZE="1">Filed on October 4, 1999
      as an Exhibit to the N-14 Registration Statement.</FONT></TD>
  </TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Footnote Left" FSL="Workstation" -->
<TABLE WIDTH=100%><TR>
    <TD WIDTH=2% ALIGN=left VALIGN=top><FONT SIZE="1"> (d) </FONT></TD>
    <TD WIDTH=1%>&nbsp;</TD>
    <TD WIDTH=97% ALIGN=left VALIGN=top><FONT SIZE="1">Reference is made to Article
      V, Article VI (sections 2, 3, 4, 5, and 6), Article VII, Article VIII, Article
      X, Article XII and Article XIII of the Registrant&#146;s Articles of Incorporation,
      previously filed as Exhibit (1)(a) to Pre-Effective Amendment No. 1 to the
      N-14 Registration Statement; 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, filed as Exhibit (b) to Pre-Effective
      Amendment No. 1 to the N-14 Registration Statement; and to the Forms of
      Articles Supplementary and the Forms of Articles of Amendment filed as Exhibits
      (a)(2), (a)(3), (a)(4), (a)(5), (a)(6), (a)(7) and (a)(8) to this Registration
      Statement.</FONT></TD>
  </TR></TABLE>

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<TABLE WIDTH=100%><TR>
    <TD WIDTH=2% ALIGN=left VALIGN=top><FONT SIZE="1"> (e) </FONT></TD>
    <TD WIDTH=1%>&nbsp;</TD>
    <TD WIDTH=97% ALIGN=left VALIGN=top><FONT SIZE="1"> Incorporated by reference
      to Exhibit (h)(2) to Pre-Effective Amendment No. 3 to the Registration Statement
      on Form N-2 of Preferred Income Strategies Fund, Inc. (File No. 333-102712),
      filed on March 25, 2003.</FONT></TD>
  </TR></TABLE>

<!-- MARKER FORMAT-SHEET="Footnote Left" FSL="Workstation" -->
<TABLE WIDTH=100%><TR>
    <TD WIDTH=2% ALIGN=left VALIGN=top><FONT SIZE="1"> (f) </FONT></TD>
    <TD WIDTH=1%>&nbsp;</TD>
    <TD WIDTH=97% ALIGN=left VALIGN=top><FONT SIZE="1">Incorporated by reference
      to Exhibit 7 to Post-Effective Amendment No. 13 to the Registration Statement
      on Form N-1A of The Asset Program, Inc. (File No. 33-53887), filed on March
      21, 2002. </FONT></TD>
  </TR></TABLE>

<!-- MARKER FORMAT-SHEET="Footnote Left" FSL="Workstation" -->
<TABLE WIDTH=100%><TR>
    <TD WIDTH=2% ALIGN=left VALIGN=top><FONT SIZE="1"> (g) </FONT></TD>
    <TD WIDTH=1%>&nbsp;</TD>
    <TD WIDTH=97% ALIGN=left VALIGN=top><FONT SIZE="1">Incorporated by reference
      to Exhibit 8(d) to Post-Effective Amendment No. 1 to the Registration Statement
      on Form N-1A of Merrill Lynch Focus Twenty Fund, Inc. (File No. 333-89775)
      filed on March 20, 2001. </FONT></TD>
  </TR></TABLE>

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<TABLE WIDTH=100%><TR>
    <TD WIDTH=2% ALIGN=left VALIGN=top><FONT SIZE="1"> (h) </FONT></TD>
    <TD WIDTH=1%>&nbsp;</TD>
    <TD WIDTH=97% ALIGN=left VALIGN=top><FONT SIZE="1">Incorporated by reference
      to Exhibit 15 to Pre-Effective Amendment No. 1 to the Registration Statement
      on Form N-1A of Merrill Lynch Inflation Protected Fund (File No. 333-110936),
      filed on January 22, 2004. </FONT></TD>
  </TR></TABLE>


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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Item 26.&nbsp;<i>
  Marketing Arrangements. </i></B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See
Exhibits (h)(1) and (2). </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Item 27. &nbsp;<i>Other
  Expenses of Issuance and Distribution. </i></B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth the estimated expenses to be incurred in connection with the
offering described in this Registration Statement: </FONT></P>


<div align="center">
  <table border=0 cellspacing=0 cellpadding=0 width="600">
    <tr>
      <td valign=top width=445>
        <p><font face="Times New Roman" size="2">Registration fees</font></p>
      </td>
      <td valign=top width=127>
        <p><font face="Times New Roman" size="2"> $&nbsp;&nbsp;&nbsp;&nbsp; 5,297</font></p>
      </td>
    </tr>
    <tr>
      <td valign=top width=445>
        <p><font face="Times New Roman" size="2">Printing (other than stock certificates)</font></p>
      </td>
      <td valign=top width=127>
        <p><font face="Times New Roman" size="2"> &nbsp;&nbsp;&nbsp;&nbsp; 17,000</font></p>
      </td>
    </tr>
    <tr>
      <td valign=top width=445>
        <p><font face="Times New Roman" size="2">Accounting Fees and Expenses</font></p>
      </td>
      <td valign=top width=127>
        <p><font face="Times New Roman" size="2"> &nbsp;&nbsp; &nbsp;&nbsp;13,390</font></p>
      </td>
    </tr>
    <tr>
      <td valign=top width=445>
        <p><font face="Times New Roman" size="2">Legal fees and expenses</font></p>
      </td>
      <td valign=top width=127>
        <p><font face="Times New Roman" size="2"> &nbsp;&nbsp;&nbsp;&nbsp; 85,000</font></p>
      </td>
    </tr>
    <tr>
      <td valign=top width=445>
        <p><font face="Times New Roman" size="2">Rating Agency Fees</font></p>
      </td>
      <td valign=top width=127>
        <p><font face="Times New Roman" size="2"> &nbsp;&nbsp;&nbsp;&nbsp; 25,000</font></p>
      </td>
    </tr>
    <tr>
      <td valign=top width=445>
        <p><font face="Times New Roman" size="2">Miscellaneous</font>
      </td>
      <td valign=top width=127>
        <p><font face="Times New Roman" size="2"> &nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;4,313</font>
        <hr noshade size="1" width="53" align="left">
      </td>
    </tr>
    <tr>
      <td valign=top width=445>
        <p><font face="Times New Roman" size="2">Total</font></p>
      </td>
      <td valign=top width=127>
        <p><font face="Times New Roman" size="2"> $ 150,000</font></p>
      </td>
    </tr>
    <tr>
      <td valign=top width=445>&nbsp;</td>
      <td valign=top width=127>
        <hr noshade size="2" width="53" align="left">
      </td>
    </tr>
  </table>
<p>&nbsp;</p>
</div>


<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Item 28. &nbsp;<i>Persons
  Controlled by or Under Common Control with Registrant. </i></B></FONT></P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Registrant is not controlled by, or under common control with, any person. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Item 29.&nbsp;<i>
  Number of Holders of Securities. </i></B></FONT></P>

<div align="center">
  <table border=0 cellspacing=0 cellpadding=0 width="600">
    <tr>
      <td width=505 valign=bottom>
        <p><font face="Times New Roman" size="2"><b>Title of Class</b></font></p>
      </td>
      <td width=133 valign=bottom>
        <p align=center><font face="Times New Roman" size="2"><b>Number of<br>
          Record Holders<br>
          At <br>
          July 31, 2005</b></font></p>
      </td>
    </tr>
    <tr>
      <td width=505 valign=bottom>
        <hr noshade size="1">
      </td>
      <td width=133 valign=bottom>
        <hr noshade size="1" width="100">
      </td>
    </tr>
    <tr>
      <td width=505 valign=bottom>
        <p><font face="Times New Roman" size="2">Common Stock, $.10 par value</font></p>
      </td>
      <td width=133 valign=bottom>
        <p align=center><font size="2">681</font></p>
      </td>
    </tr>
    <tr>
      <td width=505 valign=bottom>
        <p><font face="Times New Roman" size="2">Preferred Stock</font></p>
      </td>
      <td width=133 valign=bottom>
        <p align=center><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1</font></p>
      </td>
    </tr>
  </table>
</div>
<P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Item 30. &nbsp;<i>Indemnification.
  </i> </B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reference
  is made to Section 2-418 of the General Corporation Law of the State of Maryland,
  Article VI of the Registrant&#146;s Articles of Incorporation, Article VI of
  the Registrant&#146;s By-laws and Section 6 of the Purchase Agreement, which
  provide for indemnification. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Article
VI of the By-laws provides that each officer and director of the Registrant shall be
indemnified by the Registrant to the full extent permitted under the Maryland General
Corporation Law, except that such indemnity shall not protect any such person against any
liability to the Registrant or any stockholder thereof to which such person would
otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office. Absent a
court determination that an officer or director seeking indemnification was not liable on
the merits or guilty of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her office, the decision by the
Registrant to indemnify such person must be based upon the reasonable determination of
independent legal counsel or the vote of a majority of a quorum of non-party independent
directors, after review of the facts, that such officer or director is not guilty of
willful misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
officer and director of the Registrant claiming indemnification within the scope of
Article VI of the By-laws shall be entitled to advances from the Registrant for payment
of the reasonable expenses incurred by him or her in connection with proceedings to which
he or she is a party in the manner and to the full extent permitted under the Maryland
General Corporation Law; provided, however, that the person seeking indemnification shall
provide to the Registrant a written affirmation of his or her good faith belief that the
standard of conduct necessary for indemnification by the Registrant has been met and a
written undertaking to repay any such advance, if it ultimately should be determined that
the standard of conduct has not been met, and provided further that at least one of the
following additional conditions is met: (i) the person seeking indemnification shall
provide a security in form and amount acceptable to the Registrant for his or her
undertaking; (ii) the Registrant is insured against losses arising by reason of the
advance; or (iii) a majority of a quorum of non-party independent directors, or
independent legal counsel in a written opinion shall determine, based on a review of
facts readily available to the Registrant at the time the advance is proposed to be made,
that there is reason to believe that the person seeking indemnification will ultimately
be found to be entitled to indemnification. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Registrant may purchase insurance on behalf of an officer or director protecting such
person to the full extent permitted under the Maryland General Corporation Law from
liability arising from his or her activities as officer or director of the Registrant.
The Registrant, however, may not purchase insurance on behalf of any officer or director
of the Registrant that protects or purports to protect such person from liability to the
Registrant or to its stockholders to which such officer or director would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his or her office. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
Section 7 of the Purchase Agreement relating to the securities being offered hereby, the
Registrant agrees to indemnify Merrill Lynch and each person, if any, who controls
Merrill Lynch within the meaning of the Securities Act of 1933 (the &#147;1933 Act&#148;) against
certain types of civil liabilities arising in connection with the Registration Statement
or Prospectus and Statement of Additional Information. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insofar
as indemnification for liabilities arising under the 1933 Act may be provided to
directors, officers and controlling persons of the Registrant and Merrill Lynch, pursuant
to the foregoing provisions or otherwise, the Registrant has been advised that, in the
opinion of the Securities and Exchange Commission, such indemnification is against public
policy as expressed in the 1933 Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling person of
the Registrant in connection with any successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in connection
with the securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is against
public policy as expressed in the 1933 Act and will be governed by the final adjudication
of such issue. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Item 31.&nbsp;<i>
  Business And Other Connections Of The Investment Adviser. </i></B></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FAM
(the &#147;Investment Adviser&#148;), acts as the investment adviser for a number of affiliated
open-end and closed-end registered investment companies. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Merrill
Lynch Investment Managers, L.P. (&#147;MLIM&#148;), acts as the investment adviser for a number of
affiliated open-end and closed-end registered investment companies, and also acts as
sub-adviser to certain other portfolios. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
address of each of these registered investment companies is P.O. Box 9011, Princeton, New
Jersey 08543-9011, except that the address of Merrill Lynch Funds for Institutions Series
is One Financial Center, 23rd Floor, Boston, Massachusetts 02111-2665. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
address of the Investment Adviser, MLIM, Princeton Services, Inc. (&#147;Princeton Services&#148;)
and Princeton Administrators, L.P. (&#147;Princeton Administrators&#148;) is also P.O. Box 9011,
Princeton, New Jersey 08543-9011.  The address of FAM Distributors, Inc. (&#147;FAMD&#148;) is P.O.
Box 9081, Princeton, New Jersey 08543-9081.  The address of Merrill Lynch and Merrill
Lynch &amp; Co., Inc. (&#147;ML &amp; Co.&#148;) is World Financial Center, North Tower, 250 Vesey Street,




New York, New York 10080. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set
forth below is a list of each executive officer and partner of the Investment Adviser
indicating each business, profession, vocation or employment of a substantial nature in
which each such person or entity has been engaged for the past two years for his, her or
its own account or in the capacity of director, officer, employee, partner or Director.
Mr. Burke is Vice President and Treasurer of all or substantially all of the investment
companies advised by FAM or its affiliates, and Mr. Doll is an officer of one or more of
such companies. </FONT></P>

<table border=0 cellspacing=0 cellpadding=0 width="100%">

  <tr>
    <td width=168 valign=bottom>
      <p align=center><font face="Times New Roman" size="2"><b>Name</b></font></p>
    </td>
    <td width=175 valign=bottom>
      <p align=center><font face="Times New Roman" size="2"><b>Position(s) with<br>
        Investment Adviser</b></font></p>
    </td>
    <td width=295 valign=bottom>
      <p align=center><font face="Times New Roman" size="2"><b>Other Substantial
        Business,<br>
        Profession, Vocation Or Employment</b></font></p>
    </td>
  </tr>
  <tr>
    <td width=168 valign=top>
      <hr noshade size="1" width="100%" align="left">
    </td>
    <td width=175 valign=top>
      <hr noshade size="1" width="100%" align="left">
    </td>
    <td width=295 valign=top>
      <hr noshade size="1" width="100%" align="left">
    </td>
  </tr>

  <tr>
    <td width=168 valign=top>
      <p><font face="Times New Roman" size="2">ML &amp; Co.</font></p>
    </td>
    <td width=175 valign=top>
      <p><font face="Times New Roman" size="2">Limited Partner</font></p>
    </td>
    <td width=295 valign=top>
      <p><font face="Times New Roman" size="2">Financial Services Holding Company;
        Limited Partner of MLIM</font></p>
    </td>
  </tr>
  <tr>
    <td width=168 valign=top>&nbsp;</td>
    <td width=175 valign=top>&nbsp;</td>
    <td width=295 valign=top>&nbsp;</td>
  </tr>
  <tr>
    <td width=168 valign=top>
      <p><font face="Times New Roman" size="2">Princeton Services</font></p>
    </td>
    <td width=175 valign=top>
      <p><font face="Times New Roman" size="2">General Partner</font></p>
    </td>
    <td width=295 valign=top>
      <p><font face="Times New Roman" size="2">General Partner of MLIM</font></p>
    </td>
  </tr>
  <tr>
    <td width=168 valign=top>&nbsp;</td>
    <td width=175 valign=top>&nbsp;</td>
    <td width=295 valign=top>&nbsp;</td>
  </tr>
  <tr>
    <td width=168 valign=top>
      <p><font face="Times New Roman" size="2">Robert C. Doll, Jr.</font></p>
    </td>
    <td width=175 valign=top>
      <p><font face="Times New Roman" size="2">President</font></p>
    </td>
    <td width=295 valign=top>
      <p><font face="Times New Roman" size="2">President of MLIM; Co-Head (Americas
        Region) of MLIM from 2000 to 2004; Senior Vice President of MLIM from
        1999 to 2000; Director of Princeton Services; Chief Investment Officer
        of OppenheimerFunds, Inc. in 1999 and Executive Vice President thereof
        from 1991 to 1999</font></p>
    </td>
  </tr>
  <tr>
    <td width=168 valign=top>&nbsp;</td>
    <td width=175 valign=top>&nbsp;</td>
    <td width=295 valign=top>&nbsp;</td>
  </tr>
  <tr>
    <td width=168 valign=top>
      <p><font face="Times New Roman" size="2">Donald C. Burke</font></p>
    </td>
    <td width=175 valign=top>
      <p><font face="Times New Roman" size="2">First Vice President and Treasurer</font></p>
    </td>
    <td width=295 valign=top>
      <p><font face="Times New Roman" size="2">First Vice President and Treasurer
        of MLIM; Senior Vice President, Treasurer and Director of Princeton Services;
        Vice President of FAMD</font></p>
    </td>
  </tr>
  <tr>
    <td width=168 valign=top>&nbsp;</td>
    <td width=175 valign=top>&nbsp;</td>
    <td width=295 valign=top>&nbsp;</td>
  </tr>
  <tr>
    <td width=168 valign=top>
      <p><font face="Times New Roman" size="2">Andrew J. Donohue</font></p>
    </td>
    <td width=175 valign=top>
      <p><font face="Times New Roman" size="2">General Counsel</font></p>
    </td>
    <td width=295 valign=top>
      <p><font face="Times New Roman" size="2">First Vice President and General
        Counsel of MLIM; Senior Vice President and Director of Princeton Services;
        President and Director of FAMD</font></p>
    </td>
  </tr>
  <tr>
    <td width=168 valign=top>&nbsp;</td>
    <td width=175 valign=top>&nbsp;</td>
    <td width=295 valign=top>&nbsp;</td>
  </tr>
  <tr>
    <td width=168 valign=top>
      <p><font face="Times New Roman" size="2">Alice A. Pellegrino</font></p>
    </td>
    <td width=175 valign=top>
      <p><font face="Times New Roman" size="2">Secretary</font></p>
    </td>
    <td width=295 valign=top>
      <p><font face="Times New Roman" size="2">Secretary of MLIM, Princeton Services
        and FAMD</font></p>
    </td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Item 32.&nbsp;<i>
  Location of Account and Records. </i></B></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
accounts, books and other documents required to be maintained by Section 31(a) of the
1940 Act, and the Rules promulgated thereunder are maintained at the offices of the
Registrant (800 Scudders Mill Road, Plainsboro, New Jersey 08536), its Investment Adviser
(800 Scudders Mill Road, Plainsboro, New Jersey 08536), its custodian, The Bank of New
York (100 Church Street, New York, New York 10286), and its transfer agent, The Bank of
New York (101 Barclay Street, New York, New York 10286). </FONT></P>

<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Item 33.&nbsp;<i>
  Management Services. </i></B></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not
applicable. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Item 34. &nbsp;<i>Undertakings.
  </i> </B></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)
The Registrant undertakes to suspend the offering of the shares of preferred stock
covered hereby until it amends its prospectus contained herein if (1) subsequent to the
effective date of this Registration Statement, its net asset value per share of preferred
stock declines more than 10% from its net asset value per share of preferred stock as of
the effective date of this Registration Statement, or (2) its net asset value per share
of preferred stock increases to an amount greater than its net proceeds as stated in the
prospectus contained herein. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)
Not applicable. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)
Not applicable. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4)
Not applicable </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5)
The Registrant undertakes that: </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)
For purposes of determining any liability under the 1933          Act, the information
omitted from the form of prospectus filed as part          of this Registration Statement
in reliance upon Rule 430A and contained          in the form of prospectus filed by the
registrant pursuant to Rule          497(h) under the 1933 Act shall be deemed to be part
of this          Registration Statement as of the time it was declared effective. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
  <TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)
For the purpose of determining any liability under the          1933 Act, each
post-effective amendment that contains a form of          prospectus shall be deemed to
be a new registration statement relating          to the securities offered therein, and
the offering of such securities          at that time shall be deemed to be the initial
bona fide offering          thereof. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(6)
The Registrant undertakes to send by first-class mail or other means designed to ensure
equally prompt delivery, within two business days of receipt of a written or oral
request, any statement of additional information. </FONT></P>

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


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
  to the requirements of the Securities Act of 1933 and the Investment Company
  Act of 1940, the Registrant has duly caused this Registration Statement to be
  signed on its behalf by the undersigned, thereunto duly authorized, in the Township
  of Plainsboro, State of New Jersey, on the 14th day of September, 2005. </FONT></P>


<div align="center">
  <table width="700" border="0">
    <tr>
      <td width="398">&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;&nbsp;
      </td>
      <td colspan="2"><font size="2">MUNIYIELD NEW YORK INSURED FUND, INC.<br>
        (Registrant) </font></td>
    </tr>
    <tr>
      <td width="398">&nbsp;</td>
      <td width="23">&nbsp;</td>
      <td width="265">&nbsp;</td>
    </tr>
    <tr>
      <td width="398">&nbsp;</td>
      <td align="left" valign="top" width="23"><font size="2">By: </font></td>
      <td align="left" valign="top" width="265"><font size="2">/s/ D<font size="1">ONALD</font> C. B<font size="1">URKE</font><br>
        </font>
        <hr noshade size="1">
      </td>
    </tr>
    <tr>
      <td width="398">&nbsp;</td>
      <td width="23">&nbsp;</td>
      <td width="265"><font size="2">Donald C. Burke<br>
        Vice President and Treasurer</font><!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" --></td>
    </tr>
  </table>
  <font size="2"><br>
  <br>
  </font> </div>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement has been
signed below by the following person in the capacities and on the dates indicated. </FONT></P>

<br>
<table border=0 cellspacing=0 cellpadding=0 width="100%">
  <tr>
    <td width=213 valign=bottom>
      <p align=center><font face="Times New Roman" size="2"><b>Signatures</b></font></p>
    </td>
    <td width=268 valign=bottom>
      <p align=center><font face="Times New Roman" size="2"><b>Title</b></font></p>
    </td>
    <td width=157 valign=bottom>
      <p align=center><font face="Times New Roman" size="2"><b>Date</b></font></p>
    </td>
  </tr>
  <tr>
    <td width=213 valign=top>
      <hr noshade size="1" width="100%">
    </td>
    <td width=268 valign=top>
      <hr noshade size="1" width="100%">
    </td>
    <td width=157 valign=top>
      <hr noshade size="1" width="100%">
    </td>
  </tr>
  <tr>
    <td width=213 valign=top>
      <p><font face="Times New Roman" size="2">R<font size="1">OBERT</font> C.
        D<font size="1">OLL</font>, J<font size="1">R</font>.*</font>
      <hr noshade size="1" width="155" align="left">
      <font face="Times New Roman" size="2">(Robert C. Doll, Jr.)</font></td>
    <td width=268 valign=top>
      <p><font face="Times New Roman" size="2">President (Principal Executive
        Officer) and Director</font></p>
    </td>
    <td width=157 valign=top>
      <p><font face="Times New Roman" size="2">&nbsp;</font></p>
    </td>
  </tr>
  <tr>
    <td width=213 valign=top>
      <p><font face="Times New Roman" size="2">&nbsp;</font></p>
    </td>
    <td width=268 valign=top>
      <p><font face="Times New Roman" size="2">&nbsp;</font></p>
    </td>
    <td width=157 valign=top>
      <p align=center><font face="Times New Roman" size="2">&nbsp;</font></p>
    </td>
  </tr>
  <tr>
    <td width=213 valign=top>
      <p><font face="Times New Roman" size="2">D<font size="1">ONALD</font> C.
        B<font size="1">URKE</font>*</font>
      <hr noshade size="1" width="155" align="left">
      <font face="Times New Roman" size="2">(Donald C. Burke)</font> </td>
    <td width=268 valign=top>
      <p><font face="Times New Roman" size="2">Vice President and Treasurer (Principal
        Financial and Accounting Officer) </font></p>
    </td>
    <td width=157 valign=top>
      <p><font face="Times New Roman" size="2">&nbsp;</font></p>
    </td>
  </tr>
  <tr>
    <td width=213 valign=top>
      <p><font face="Times New Roman" size="2">&nbsp;</font></p>
    </td>
    <td width=268 valign=top>
      <p><font face="Times New Roman" size="2">&nbsp;</font></p>
    </td>
    <td width=157 valign=top>
      <p align=center><font face="Times New Roman" size="2">&nbsp;</font></p>
    </td>
  </tr>
  <tr>
    <td width=213 valign=top>
      <p><font face="Times New Roman" size="2">J<font size="1">AMES</font> H.
        B<font size="1">ODURTHA</font>* </font>
      <hr noshade size="1" width="155" align="left">
      <font face="Times New Roman" size="2">(James H. Bodurtha) </font> </td>
    <td width=268 valign=top>
      <p><font face="Times New Roman" size="2">Director</font></p>
    </td>
    <td width=157 valign=top>
      <p><font face="Times New Roman" size="2">&nbsp;</font></p>
    </td>
  </tr>
  <tr>
    <td width=213 valign=top>
      <p>&nbsp;</p>
    </td>
    <td width=268 valign=top>
      <p><font face="Times New Roman" size="2">&nbsp;</font></p>
    </td>
    <td width=157 valign=top>
      <p align=center><font face="Times New Roman" size="2">&nbsp;</font></p>
    </td>
  </tr>
  <tr>
    <td width=213 valign=top> &nbsp;
      <hr noshade size="1" width="155" align="left">
      <font face="Times New Roman" size="2">(Kenneth A. Froot)</font> </td>
    <td width=268 valign=top>
      <p><font face="Times New Roman" size="2">Director</font></p>
    </td>
    <td width=157 valign=top>
      <p align=center><font face="Times New Roman" size="2">&nbsp;</font></p>
    </td>
  </tr>
  <tr>
    <td width=213 valign=top>&nbsp;</td>
    <td width=268 valign=top>&nbsp;</td>
    <td width=157 valign=top>
      <p align=center><font face="Times New Roman" size="2">&nbsp;</font></p>
    </td>
  </tr>
  <tr>
    <td width=213 valign=top>
      <p><font face="Times New Roman" size="2">J<font size="1">OE</font> G<font size="1">RILLS</font>*</font>
      <hr noshade size="1" width="155" align="left">
      <font face="Times New Roman" size="2">(Joe Grills)</font> </td>
    <td width=268 valign=top>
      <p><font face="Times New Roman" size="2">Director</font></p>
    </td>
    <td width=157 valign=top>
      <p align=center><font face="Times New Roman" size="2">&nbsp;</font></p>
    </td>
  </tr>
  <tr>
    <td width=213 valign=top>&nbsp;</td>
    <td width=268 valign=top>&nbsp;</td>
    <td width=157 valign=top>
      <p align=center><font face="Times New Roman" size="2">&nbsp;</font></p>
    </td>
  </tr>
  <td width=213 valign=top>
    <p><font face="Times New Roman" size="2">H<font size="1">ERBERT</font> I.
      L<font size="1">ONDON</font>*</font>
    <hr noshade size="1" width="155" align="left">
    <font face="Times New Roman" size="2">(Herbert I. London)</font> </td>
  <td width=268 valign=top>
    <p><font face="Times New Roman" size="2">Director</font></p>
  </td>
  <td width=157 valign=top>

  </td>
    <tr>
    <td width=157 valign=top>
      <p align=center><font face="Times New Roman" size="2">&nbsp;</font></p>
    </td>
  </tr>
  <tr>
    <td width=213 valign=top>
      <p><font face="Times New Roman" size="2">R<font size="1">OBERTA</font> C<font size="1">OOPER</font>
        R<font size="1">AMO</font>*</font>
      <hr noshade size="1" width="155" align="left">
      <font face="Times New Roman" size="2">(Roberta Cooper Ramo)</font> </td>
    <td width=268 valign=top>
      <p><font face="Times New Roman" size="2">Director</font></p>
    </td>
    <td width=157 valign=top>
      <p align=center><font face="Times New Roman" size="2">&nbsp;</font></p>
    </td>
  </tr>
  <tr>
    <td width=157 valign=top>
      <p align=center><font face="Times New Roman" size="2">&nbsp;</font></p>
    </td>
  </tr>
  <tr>
    <td width=213 valign=top>
      <p><font face="Times New Roman" size="2">S<font size="1">TEPHEN</font> B.
        S<font size="1">WENSRUD</font>*</font>
      <hr noshade size="1" width="155" align="left">
      <font face="Times New Roman" size="2">(Stephen B. Swensrud) </font> </td>
    <td width=268 valign=top>
      <p><font face="Times New Roman" size="2">Director</font></p>
    </td>
    <td width=157 valign=top>
      <p><font face="Times New Roman" size="2">&nbsp;</font></p>
    </td>
  </tr>
  <tr>
    <td width=213 valign=top>&nbsp; </td>
    <td width=268 valign=top>
      <p><font face="Times New Roman" size="2">&nbsp;</font></p>
    </td>
    <td width=157 valign=top>
      <p align=center><font face="Times New Roman" size="2">&nbsp;</font></p>
    </td>
  </tr>
  <tr>
    <td width=213 valign=top>
      <p><font face="Times New Roman" size="2">R<font size="1">OBERT</font> S.
        S<font size="1">ALOMON</font>, J<font size="1">R</font>.*</font>
      <hr noshade size="1" width="155" align="left">
      <font face="Times New Roman" size="2">(Robert S. Salomon, Jr.)</font> </td>
    <td width=268 valign=top>
      <p><font face="Times New Roman" size="2">Director</font></p>
    </td>
    <td width=157 valign=top>
      <p><font face="Times New Roman" size="2">&nbsp;</font></p>
    </td>
  </tr>
  <tr>
    <td width=213 valign=top>
      <p>&nbsp;</p>
    </td>
    <td width=268 valign=top>
      <p><font face="Times New Roman" size="2">&nbsp;</font></p>
    </td>
    <td width=157 valign=top>
      <p align=center><font face="Times New Roman" size="2">&nbsp;</font></p>
    </td>
  </tr>
</table>

<table border=0 cellspacing=0 cellpadding=0 width="100%">
  <tr>
    <td width=213 valign=top>
      <p><font face="Times New Roman" size="2">*By /s/ D<font size="1">ONALD</font>
        C. B<font size="1">URKE</font> </font>
      <hr noshade size="1" width="200" align="left">
      <font face="Times New Roman" size="2">(Donald C. Burke, Attorney-in-Fact)</font>
    </td>
    <td width=268 valign=top>
      <p><font face="Times New Roman" size="2">&nbsp;</font></p>
    </td>
    <td width=157 valign=top>
      <p><font face="Times New Roman" size="2"> September 14, 2005</font></p>
    </td>
  </tr>
  <tr>
    <td width=213 valign=top>
      <p>&nbsp;</p>
    </td>
    <td width=268 valign=top>
      <p><font face="Times New Roman" size="2">&nbsp;</font></p>
    </td>
    <td width=157 valign=top>
      <p><font face="Times New Roman" size="2">&nbsp;</font></p>
    </td>
  </tr>
</table>




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

<table border=0 cellspacing=0 cellpadding=0 width="100%">
  <tr>
    <td width=91 colspan=2 valign=top>
      <p align="center"><font face="Times New Roman" size="2">Exhibits</font>
      <hr noshade size="1" width="44" align="center">
    </td>
    <td width=547 valign=top>
      <p><font face="Times New Roman" size="2">Description</font>
      <hr noshade size="1" width="63" align="left">
    </td>
  </tr>
  <tr>
    <td width=25></td>
    <td width=66></td>
    <td width=547></td>
  </tr>
</table>

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  <tr>
    <td width=25>&nbsp;</td>
    <td width=66 valign=top><font size="2">(l)</font></td>
    <td width=547 valign=top><font size="2">Opinion and Consent of Sidley Austin
      Brown &amp; Wood </font><font face="Times New Roman" size="1">LLP</font><font size="2">.</font></td>
  </tr>
  <tr>
    <td width=25>&nbsp; </td>
    <td width=66 valign=top><font size="2"> (n) </font></td>
    <td width=547 valign=top><font size="2"> Consent of Deloitte &amp; Touche
      </font><font face="Times New Roman" size="1">LLP</font><font size="2">,
      independent registered public accounting firm for the Registrant. </font></td>
  </tr>
  <tr>
    <td width=25></td>
    <td width=66></td>
    <td width=547></td>
  </tr>
</table>



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<DOCUMENT>
<TYPE>EX-99.(L)
<SEQUENCE>2
<FILENAME>e21107ex_l.htm
<DESCRIPTION>OPINION OF COUNSEL
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<!-- MARKER FORMAT-SHEET="Right Head 2 Bold" FSL="Workstation" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Exhibit (l) </B></FONT></P>




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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>S<font size="2">IDLEY</font>
  A<font size="2">USTIN</font> B<font size="2">ROWN</font> &amp; W<font size="2">OOD</font>
  <font size="1">LLP</font> </B></FONT></P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td align="center"><font size="1">BEIJING</font>
      <hr size="1" noshade width="25">
    </td>
    <td>&nbsp;&nbsp;&nbsp;</td>
    <td align="center" rowspan="7" valign="top"><font size="2">787 S<font size="1">EVENTH</font>
      A<font size="1">VENUE</font> <br>
      N<font size="1">EW</font> Y<font size="1">ORK</font>, N<font size="1">EW</font>
      Y<font size="1">ORK</font> 10019 <br>
      T<font size="1">ELEPHONE</font> 212 839 5300 <br>
      F<font size="1">ACSIMILE</font> 212 839 5599 <br>
      www.sidley.com <br>
      <br>
      F<font size="1">OUNDED</font> 1866 </font></td>
    <td align="center">&nbsp;&nbsp;&nbsp;</td>
    <td align="center"><font size="1">LOS ANGELES</font>
      <hr size="1" noshade width="25">
    </td>
  </tr>
  <tr>
    <td align="center"><font size="1">BRUSSELS</font>
      <hr size="1" noshade width="25">
    </td>
    <td>&nbsp;</td>
    <td align="center">&nbsp;</td>
    <td align="center"><font size="1">NEW YORK</font>
      <hr size="1" noshade width="25">
    </td>
  </tr>
  <tr>
    <td align="center"><font size="1">CHICAGO</font>
      <hr size="1" noshade width="25">
    </td>
    <td>&nbsp;</td>
    <td align="center">&nbsp;</td>
    <td align="center"><font size="1">SAN FRANCISCO</font>
      <hr size="1" noshade width="25">
    </td>
  </tr>
  <tr>
    <td align="center"><font size="1">DALLAS</font>
      <hr size="1" noshade width="25">
    </td>
    <td>&nbsp;</td>
    <td align="center">&nbsp;</td>
    <td align="center"><font size="1">SHANGHAI</font>
      <hr size="1" noshade width="25">
    </td>
  </tr>
  <tr>
    <td align="center"><font size="1">GENEVA</font>
      <hr size="1" noshade width="25">
    </td>
    <td>&nbsp;</td>
    <td align="center">&nbsp;</td>
    <td align="center"><font size="1">SINGAPORE</font>
      <hr size="1" noshade width="25">
    </td>
  </tr>
  <tr>
    <td align="center"><font size="1">HONG KONG</font>
      <hr size="1" noshade width="25">
    </td>
    <td>&nbsp;</td>
    <td align="center">&nbsp;</td>
    <td align="center"><font size="1">TOKYO</font>
      <hr size="1" noshade width="25">
    </td>
  </tr>
  <tr>
    <td align="center"><font size="1">LONDON</font>
      <hr size="1" noshade width="25">
    </td>
    <td>&nbsp;</td>
    <td align="center">&nbsp;</td>
    <td align="center"><font size="1">WASHINGTON, D.C.</font>
      <hr size="1" noshade width="25">
   </td>
  </tr>
</table>

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<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2">September 14, 2005 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>MuniYield New York Insured Fund,
Inc. <BR>800 Scudders Mill Road <BR>Plainsboro, New Jersey  08536 </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Ladies and Gentlemen: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
opinion is being furnished in connection with the registration by MuniYield New York
Insured Fund, Inc., a Maryland corporation (the &#147;Fund&#148;), of 1,800 shares of Auction
Market Preferred Stock, Series F, with a par value $0.10 per share, (the &#147;Shares&#148;), under
the Securities Act of 1933, as amended (the &#147;Securities Act&#148;), pursuant to the Fund&#146;s
registration statement on Form N-2, as amended (the &#147;Registration Statement&#148;), under the
Securities Act. The Shares will be issued pursuant to the Articles Supplementary to be
filed with the State Department of Assessments and Taxation of Maryland. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
counsel for the Fund, we are familiar with the proceedings taken by it in connection with
the authorization, issuance and sale of the Shares in the manner referred to in the
Registration Statement. In addition, we have examined and are familiar with the Charter
of the Fund, the By-Laws of the Fund, and such other documents as we have deemed relevant
to the matters referred to in this opinion. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based
upon the foregoing, we are of the opinion that the Shares, upon issuance and sale in the
manner described in the Registration Statement against payment of the consideration
described therein, will be legally issued, fully paid and non-assessable shares of
preferred stock of the Fund. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
hereby consent to the filing of this opinion as an exhibit to the Registration Statement
and to the use of our name in the Prospectus constituting a part thereof. </FONT></P>

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  <tr>
    <td width="56%">&nbsp;</td>
    <td width="44%"><font face="Times New Roman, Times, Serif" size=2>Very truly
      yours,</font></td>
  </tr>
  <tr>
    <td width="56%">&nbsp;</td>
    <td width="44%">&nbsp;</td>
  </tr>
  <tr>
    <td width="56%">&nbsp;</td>
    <td width="44%">
      <p><font face="Times New Roman, Times, Serif" size=2>/s/ Sidley Austin Brown
        &amp; Wood <font size="1">LLP</font> </font></p>
      <!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> </td>
  </tr>
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</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR SIZE=5 noshade WIDTH=100% ALIGN=LEFT>


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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(N)
<SEQUENCE>3
<FILENAME>e21107ex_n.htm
<DESCRIPTION>CONSENT OF IND. REGISTERED PUBLIC ACCOUNTING FIRM
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<!-- MARKER FORMAT-SHEET="Right Head 2 Bold" FSL="Workstation" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Exhibit (n) </B></FONT></P>

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


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We consent to the incorporation by
reference in this Pre-Effective Amendment No. 1 to Registration Statement No. 333-126729
of MuniYield New York Insured Fund, Inc. (the &#147;Fund&#148;) on Form N-2 of our report dated
December 14, 2004, appearing in the October 31, 2004 Annual Report of the Fund, which is
incorporated by reference in the Statement of Additional Information which is part of
this Registration Statement. We also consent to the reference to us under the captions
&#147;Financial Highlights&#148; and &#147;Independent Registered Public Accounting Firm and Experts&#148; in
the Prospectus, which is also part of this Registration Statement. </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">/s/ Deloitte &amp; Touche </FONT> <FONT FACE="Times New Roman, Times, Serif" SIZE="1">LLP </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Princeton, New Jersey <BR>September 13,
2005 </FONT></P>


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