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Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
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<SEC-DOCUMENT>0000891092-05-001801.txt : 20050920
<SEC-HEADER>0000891092-05-001801.hdr.sgml : 20050920
<ACCEPTANCE-DATETIME>20050919195902
ACCESSION NUMBER:		0000891092-05-001801
CONFORMED SUBMISSION TYPE:	497
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20050920
DATE AS OF CHANGE:		20050919
EFFECTIVENESS DATE:		20050920

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			MUNIYIELD QUALITY FUND II INC
		CENTRAL INDEX KEY:			0000887394
		IRS NUMBER:				223194461
		STATE OF INCORPORATION:			NJ
		FISCAL YEAR END:			1031

	FILING VALUES:
		FORM TYPE:		497
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-126791
		FILM NUMBER:		051092353

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

	MAIL ADDRESS:	
		STREET 1:		P O BOX 9011
		CITY:			PRINCETON
		STATE:			NJ
		ZIP:			08543-9011
</SEC-HEADER>
<DOCUMENT>
<TYPE>497
<SEQUENCE>1
<FILENAME>e22468_497.htm
<DESCRIPTION>FORM 497
<TEXT>
<HTML>
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<TITLE></TITLE>
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<p>
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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>PROSPECTUS</B></U> </FONT> </P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="4"><B>$10,000,000</B> </FONT>
<FONT FACE="Times New Roman, Times, Serif" SIZE="3"><B><BR></B> </FONT>
<FONT FACE="Times New Roman, Times, Serif" SIZE="5"><B>MuniYield Quality Fund II, Inc.</B> </FONT>
<FONT FACE="Times New Roman, Times, Serif" SIZE="3"><B><BR>Auction
Market Preferred Stock (&#147;AMPS&#148;) <BR>400 Shares, Series D
<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
Quality Fund II, Inc. is a non-diversified, closed-end management investment company
seeking to provide shareholders with as high a level of current income exempt from
Federal income taxes as is consistent with its investment policies and prudent investment
management. The Fund seeks to achieve its investment objective by investing, as a
fundamental policy, at least 80% of an aggregate of the Fund&#146;s net assets (including
proceeds from the issuance of preferred stock), plus the amounts 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). The Fund invests in a portfolio of
municipal obligations which are rated in the three highest quality rating categories (A
or better) or, if unrated, are considered by the Fund&#146;s Investment Adviser to be of
comparable quality. 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="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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<br>
<div align="center">
  <TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
    <TR VALIGN=Bottom>
      <TH COLSPAN=2>&nbsp;</TH>
      <TH width="50"><FONT SIZE=1>Per Share</FONT>
        <hr size="1" noshade width="50">
      </TH>
      <TH width="4">&nbsp;</TH>
      <TH width="60"><FONT SIZE=1>Total</FONT>
        <hr size="1" noshade width="50">
      </TH>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT colspan="2"><FONT SIZE=2>Public offering price</FONT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT WIDTH=50><FONT SIZE=2>$25,000</FONT></TD>
      <TD ALIGN=RIGHT WIDTH=4>&nbsp;</TD>
      <TD ALIGN=RIGHT WIDTH=60><FONT SIZE=2>$10,000,000</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT colspan="2"><FONT SIZE=2>Underwriting discount</FONT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="50"><FONT SIZE=2>$250</FONT></TD>
      <TD ALIGN=RIGHT width="4">&nbsp;</TD>
      <TD ALIGN=RIGHT width="60"><FONT SIZE=2>$100,000</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT colspan="2"><FONT SIZE=2>Proceeds, before expenses, to the
        Fund(1)</FONT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="50"><FONT SIZE=2>$24,750</FONT></TD>
      <TD ALIGN=RIGHT width="4">&nbsp;</TD>
      <TD ALIGN=RIGHT width="60"><FONT SIZE=2>$9,900,000</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT colspan="5">&nbsp;</TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT colspan="5"><font face="Times New Roman, Times, Serif" size=2>(1)&nbsp;&nbsp;
        The estimated offering expenses payable by the Fund are $145,000. </font></TD>
    </TR>
  </TABLE>

</div>
<BR>

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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 September 21, 2005. </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">The date of
  this prospectus is September 19, 2005. </FONT> </P>

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&nbsp;
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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 September
  19, 2005 contains further information about the Fund and is incorporated by
  reference (legally considered to be part of this prospectus) and the table of
  contents of the statement of additional information appears on page 49 of this
  prospectus. A copy of the statement of additional information and copies of
  the Fund&#146;s semi-annual and annual reports may be obtained without charge
  by writing to the Fund at its address at 800 Scudders Mill Road, Plainsboro,
  New Jersey 08536, or by calling the Fund at (800) 543-6217. Copies of the Fund&#146;s
  semi-annual and annual reports may also be obtained without charge at mutualfunds.ml.com.
  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 Web site (http://sec.gov) that contains the statement of additional
  information, material incorporated by reference and other information regarding
  registrants that file electronically with the Securities and Exchange Commission.
  The Fund does not maintain a website. </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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<BR>&nbsp;
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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>TABLE OF CONTENTS </B></FONT></P>





<div align="center">
  <TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
    <TR VALIGN=Bottom>
      <TH COLSPAN=2>&nbsp;</TH>
      <TH COLSPAN=2><FONT SIZE=1>Page</FONT>
        <hr width=95% size="1" noshade>
      </TH>
    </TR>
    <TR VALIGN=Bottom>
      <TD WIDTH=91% ALIGN=LEFT><FONT SIZE=2>Prospectus Summary</FONT></TD>
      <TD WIDTH=3% ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD WIDTH=4% ALIGN=RIGHT><FONT SIZE=2>5</FONT></TD>
      <TD WIDTH=2% ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="91%"><FONT SIZE=2>Risk Factors and Special Considerations</FONT></TD>
      <TD ALIGN=LEFT width="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="4%"><FONT SIZE=2>11</FONT></TD>
      <TD ALIGN=LEFT width="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="91%"><FONT SIZE=2>Financial Highlights</FONT></TD>
      <TD ALIGN=LEFT width="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="4%"><FONT SIZE=2>15</FONT></TD>
      <TD ALIGN=LEFT width="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="91%"><FONT SIZE=2>The Fund</FONT></TD>
      <TD ALIGN=LEFT width="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="4%"><FONT SIZE=2>17</FONT></TD>
      <TD ALIGN=LEFT width="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="91%"><FONT SIZE=2>Use of Proceeds</FONT></TD>
      <TD ALIGN=LEFT width="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="4%"><FONT SIZE=2>17</FONT></TD>
      <TD ALIGN=LEFT width="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="91%"><FONT SIZE=2>Capitalization</FONT></TD>
      <TD ALIGN=LEFT width="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="4%"><FONT SIZE=2>17</FONT></TD>
      <TD ALIGN=LEFT width="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="91%"><FONT SIZE=2>Portfolio Composition</FONT></TD>
      <TD ALIGN=LEFT width="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="4%"><FONT SIZE=2>17</FONT></TD>
      <TD ALIGN=LEFT width="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="91%"><FONT SIZE=2>Investment Objective and Policies</FONT></TD>
      <TD ALIGN=LEFT width="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="4%"><FONT SIZE=2>18</FONT></TD>
      <TD ALIGN=LEFT width="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="91%"><FONT SIZE=2>Other Investment Policies</FONT></TD>
      <TD ALIGN=LEFT width="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="4%"><FONT SIZE=2>25</FONT></TD>
      <TD ALIGN=LEFT width="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="91%"><FONT SIZE=2>Description of AMPS</FONT></TD>
      <TD ALIGN=LEFT width="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="4%"><FONT SIZE=2>29</FONT></TD>
      <TD ALIGN=LEFT width="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="91%"><FONT SIZE=2>The Auction</FONT></TD>
      <TD ALIGN=LEFT width="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="4%"><FONT SIZE=2>34</FONT></TD>
      <TD ALIGN=LEFT width="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="91%"><FONT SIZE=2>Rating Agency Guidelines</FONT></TD>
      <TD ALIGN=LEFT width="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="4%"><FONT SIZE=2>41</FONT></TD>
      <TD ALIGN=LEFT width="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="91%"><FONT SIZE=2>Investment Advisory and Management
        Arrangements</FONT></TD>
      <TD ALIGN=LEFT width="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="4%"><FONT SIZE=2>42</FONT></TD>
      <TD ALIGN=LEFT width="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="91%"><FONT SIZE=2>Taxes</FONT></TD>
      <TD ALIGN=LEFT width="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="4%"><FONT SIZE=2>43</FONT></TD>
      <TD ALIGN=LEFT width="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="91%"><FONT SIZE=2>Description of Capital Stock</FONT></TD>
      <TD ALIGN=LEFT width="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="4%"><FONT SIZE=2>44</FONT></TD>
      <TD ALIGN=LEFT width="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="91%"><FONT SIZE=2>Custodian</FONT></TD>
      <TD ALIGN=LEFT width="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="4%"><FONT SIZE=2>46</FONT></TD>
      <TD ALIGN=LEFT width="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="91%"><FONT SIZE=2>Underwriting</FONT></TD>
      <TD ALIGN=LEFT width="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="4%"><FONT SIZE=2>47</FONT></TD>
      <TD ALIGN=LEFT width="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="91%"><FONT SIZE=2>Transfer Agent, Dividend Disbursing
        Agent and Registrar</FONT></TD>
      <TD ALIGN=LEFT width="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="4%"><FONT SIZE=2>47</FONT></TD>
      <TD ALIGN=LEFT width="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="91%"><FONT SIZE=2>Accounting Services Provider</FONT></TD>
      <TD ALIGN=LEFT width="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="4%"><FONT SIZE=2>47</FONT></TD>
      <TD ALIGN=LEFT width="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="91%"><FONT SIZE=2>Legal Matters</FONT></TD>
      <TD ALIGN=LEFT width="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="4%"><FONT SIZE=2>47</FONT></TD>
      <TD ALIGN=LEFT width="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="91%"><FONT SIZE=2>Independent Registered Public Accounting
        Firm and Experts</FONT></TD>
      <TD ALIGN=LEFT width="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="4%"><FONT SIZE=2>48</FONT></TD>
      <TD ALIGN=LEFT width="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="91%"><FONT SIZE=2>Additional Information</FONT></TD>
      <TD ALIGN=LEFT width="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="4%"><FONT SIZE=2>48</FONT></TD>
      <TD ALIGN=LEFT width="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="91%"><FONT SIZE=2>Table of Contents of Statement of
        Additional Information</FONT></TD>
      <TD ALIGN=LEFT width="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="4%"><FONT SIZE=2>49</FONT></TD>
      <TD ALIGN=LEFT width="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="91%"><FONT SIZE=2>Glossary</FONT></TD>
      <TD ALIGN=LEFT width="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT width="4%"><FONT SIZE=2>50</FONT></TD>
      <TD ALIGN=LEFT width="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
  </TABLE>
</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;<i>&nbsp;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>
<i><!-- MARKER FORMAT-SHEET="Para Hang 25-75" FSL="Workstation" --> </i>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>The Fund </B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
                     MuniYield Quality Fund II, Inc. is a non-diversified, closed-end
management                               investment company. </FONT></TD>
</TR>
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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>The Offering</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The Fund is offering a total of 400                               shares of Auction
Market Preferred Stock, Series                               D, 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></TD>
</TR>
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    <TD WIDTH=25%>&nbsp; </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The Series D
      AMPS will be shares of preferred stock of the Fund that entitle their holders
      to receive cash dividends at an annual rate that may vary for the successive
      dividend periods. In general, except as described below, each dividend period
      following the initial dividend period will be seven days. The applicable
      dividend for a particular dividend period will be determined by an auction
      conducted on the business day next preceding the start of that dividend
      period. </FONT></TD>
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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>                               </B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Investors and
potential investors in shares of                               Series D AMPS may
participate in auctions for the                               AMPS through their
broker-dealers. </FONT></TD>
</TR>
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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>                               </B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" 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></TD>
</TR>
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    <TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Investment
      Objective <BR>
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and Policies</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" 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 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 its net assets
                              (including proceeds from the issuance of preferred
                              stock), and the proceeds of any borrowings for
                              investment purposes, in a portfolio of municipal
                              obligations issued by or on behalf of states,
                              territories and possessions of the United States
                              and their political subdivisions, agencies or
                              instrumentalities, each of which pays interest
                              that, in the opinion of bond counsel to the
                              issuer, is excludable from gross income for
                              Federal income tax purposes (&#147;Municipal Bonds&#148;).
                              In general, the Fund does not intend for its
                              investments to earn a large amount of interest
                              income that is not exempt from Federal income tax,
                              except that the interest may be includable in
                              taxable income for purposes of the Federal
                              alternative minimum tax. There can be no assurance
                              that the Fund&#146;s investment objective will be
                              realized. </FONT></TD>
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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>                               </B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Maturity. </I>The
average maturity of the Fund&#146;s portfolio securities varies
from time to time based upon an assessment of economic and
market conditions by Fund Asset Management, L.P., the
Fund&#146;s investment adviser (the &#147;Investment
Adviser&#148;). The Fund intends to invest primarily in
long term Municipal Bonds (that is, Municipal
Bonds with maturities of more than ten years).
However, the Fund also may invest in intermediate
term Municipal Bonds with remaining maturities of
between three years and ten years. The Fund also
may invest from time to time in short term
Municipal Bonds with remaining maturities of less
than three years. </FONT> </TD>
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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>                               </B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Municipal
      Bonds Ratings. </I>The Fund invests in a portfolio of Municipal Bonds that
      are rated in the three highest quality rating categories by one or more
      nationally recognized statistical rating organizations (&#147;NRSROs&#148;)
      (A or higher by Moody&#146;s Investors Service, Inc. (&#147;Moody&#146;s&#148;),
      Standard &amp; Poor&#146;s (&#147;S&amp;P&#148;) or Fitch Ratings (&#147;Fitch&#148;)),
      </FONT> </TD>
</TR>
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    <TD WIDTH=25%><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=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>or in unrated
      bonds considered by the Investment Adviser to be of comparable quality.
      In assessing the quality of Municipal Bonds, the Investment Adviser takes
      into account any letters of credit or similar credit enhancement to which
      particular Municipal Bonds are entitled and the creditworthiness of the
      financial institution that provided such credit enhancement. </FONT></TD>
</TR>
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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>                               </B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Indexed and
Inverse Floating Rate Securities. </I>The Fund may invest in
securities whose potential returns are directly related to
changes in an underlying index or interest rate, known as
indexed securities. The return on indexed
securities will rise when the underlying index or
interest rate rises and fall when the index or
interest rate falls. The Fund may also invest in
securities whose return is inversely related to
changes in an interest rate (inverse floaters). In
general, income on inverse floaters will decrease
when short term interest rates increase and
increase when short term interest rates decrease.
Investments in inverse floaters may subject the
Fund to the risks of reduced or eliminated
interest payments and loss of principal. In
addition, certain indexed securities and inverse
floaters may increase or decrease in value at a
greater rate than the underlying interest rate,
which effectively leverages the Fund&#146;s investment.
As a result, the market value of such securities
will generally be more volatile than that of fixed
rate, tax exempt securities. Both indexed
securities and inverse floaters are derivative
securities and can be considered speculative. </FONT> </TD>
</TR>
</TABLE>
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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>                               </B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Hedging Transactions.
</I>The Fund may seek to hedge its portfolio against changes in
interest rates using options and financial futures
contracts or swap transactions. The Fund&#146;s hedging
transactions are designed to reduce volatility, but come at
some cost. For example, the Fund may try to limit
its risk of loss from a decline in price of a
portfolio security by purchasing a put option.
However, the Fund must pay for the option, and the
price of the security may not in fact drop. In
large part, the success of the Fund&#146;s hedging
activities depends on its ability to forecast
movements in securities prices and interest rates.
The Fund is not required to hedge its portfolio
and may choose not to do so. The Fund cannot
guarantee that any hedging strategies it uses will
work. </FONT> </TD>
</TR>
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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>                               </B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Swap Agreements.
</I>The Fund is authorized to enter into swap agreements, which
are over-the-counter contracts in which one party agrees to
make periodic payments based on the change in the
market value of a specific bond, basket of bonds
or index in return for periodic payments based on
a fixed or variable interest rate or the change in
market value of a different bond, basket of bonds
or index. Swap agreements may be used to obtain
exposure to a bond or market without owning or
taking physical custody of securities. </FONT> </TD>
</TR>
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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>                               </B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Tax Considerations.
</I>While exempt-interest dividends are excluded from gross
income for Federal income tax purposes, they may be subject
to the Federal alternative minimum tax in certain
circumstances. Distributions of any capital gain
or other taxable income will be taxable to
stockholders. The Fund may not be a suitable
investment for investors subject to the Federal
alternative minimum tax or who would become
subject to such tax by investing in the Fund. See
&#147;Taxes.&#148; </FONT> </TD>
</TR>
</TABLE>
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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Risk Factors</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=75%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Set forth below is a summary of the main risks of investing
in the Fund&#146;s Series D 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 D
AMPS, see &#147;Risk Factors and Special Considerations.&#148;</I> </FONT> </TD>
</TR>
</TABLE>
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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%>&#149;<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=70%><FONT FACE="Times New Roman, Times, Serif" 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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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%>&#149;<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=70%><FONT FACE="Times New Roman, Times, Serif" 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>
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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%>&#149;<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=70%><FONT FACE="Times New Roman, Times, Serif" 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>
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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%>&#149;<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=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As
a result of bidding by broker-dealers in an                                 auction for
their own account, the dividend rate                                 that would apply at
the auction may be higher or                                 lower than the rate that
would have prevailed                                 had the broker-dealer not bid. </FONT></TD>
</TR>
</TABLE>
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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%>&#149;<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=70%><FONT FACE="Times New Roman, Times, Serif" 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>
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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%>&#149;<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=70%><FONT FACE="Times New Roman, Times, Serif" 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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<TD WIDTH=5%>&#149;<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=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Merrill
Lynch, Pierce, Fenner &amp; Smith                                 Incorporated (&#147;Merrill
Lynch&#148;) has advised the                                 Fund that it and various other
broker-dealers                                 and other firms that participate in the
auction                                 rate securities market received letters from the
                                staff of the Securities and Exchange Commission
                                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>
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<TD WIDTH=5%>&#149;<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=70%><FONT FACE="Times New Roman, Times, Serif" 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>
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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%>&#149;<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=70%><FONT FACE="Times New Roman, Times, Serif" 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>
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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%>&#149;<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=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Fund issues shares of AMPS, which generally                                 pay dividends
based on short term interest                                 rates. The Fund generally
will purchase                                 Municipal Bonds that pay interest at fixed
or                                 adjustable rates. If market interest rates rise,
                                this could negatively impact the value of the
                                Fund&#146;s investment portfolio, reducing the amount
                                of assets serving as asset coverage for the
                                AMPS. If the asset coverage becomes too low, the
                                Fund may be required to redeem some or all of
                                the shares of AMPS. </FONT></TD>
</TR>
</TABLE>
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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%>&#149;<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=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Fund is registered as a &#147;non-diversified&#148;                                 investment
company, the Fund may invest a                                 greater percentage of its
assets in a single                                 issuer than a diversified investment
company.                                 Since the Fund may invest a relatively high
                                percentage of its assets in a limited number of
                                issuers, the Fund may be more exposed to any
                                single economic, political or regulatory
                                occurrence than a more widely diversified fund. </FONT></TD>
</TR>
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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%>&#149;<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=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
amount of public information available about                                 Municipal
Bonds in the Fund&#146;s portfolio is                                 generally less than that
for corporate equities                                 or bonds, and the investment
performance of the                                 Fund may, therefore, be more dependent
on the                                 analytical abilities of the Investment Adviser
                                than the performance of a stock fund or taxable
                                bond fund. </FONT></TD>
</TR>
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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%>&#149;<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=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Fund&#146;s investments in Municipal Bonds are                                 subject to
interest rate and credit risk.                                 Interest rate risk is the
risk that prices of                                 Municipal Bonds generally increase
when interest                                 rates decline and decrease when interest
rates                                 increase. Prices of the longer term securities
                                in which the Fund primarily invests generally
                                change more in response to changes in interest
                                rates than prices of shorter term securities.
                                Credit risk is the risk that the issuer will be
                                unable to pay the interest or principal when
                                due. Changes in an issuer&#146;s credit rating or the
                                market&#146;s perception of an issuer&#146;s
                                creditworthiness may affect the value of the
                                Fund&#146;s investment in that issuer. </FONT></TD>
</TR>
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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Investment Adviser</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The Investment Adviser provides investment                               advisory and
administrative services to the Fund.                               For its services, the
Fund pays the Investment                               Adviser a monthly fee at the
annual rate of 0.50%                               of the Fund&#146;s average weekly net
assets (including                               any proceeds from the issuance of
preferred                               stock). </FONT></TD>
</TR>
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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Dividends and
Dividend <BR>Periods</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Dividends on the Series D AMPS will be
cumulative from the date the shares are first issued and payable at the annualized cash dividend rate for the
initial dividend period on the initial dividend payment date as follows: </FONT> </TD>
</TR>
</TABLE>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT WIDTH=25%>&nbsp;&nbsp;</TD>
    <TD ALIGN=LEFT WIDTH=10%><b><font size=1>AMPS Series </font> </b>
      <hr width=60 size="1" noshade align="left">
    </TD>
    <TD ALIGN=LEFT WIDTH=14%>&nbsp;</TD>
    <TD ALIGN=CENTER WIDTH=16%><b><font size=1>Initial <br>
      Dividend <br>
      Rate </font> </b>
      <hr width=60 size="1" noshade>
    </TD>
    <TD ALIGN=LEFT WIDTH=2%>&nbsp;</TD>
    <TD ALIGN=CENTER WIDTH=15%><b><font size=1>Initial <br>
      Dividend <br>
      Period <br>
      Ending </font></b>
      <hr width=60 size="1" noshade>
    </TD>
    <TD ALIGN=LEFT WIDTH=2%>&nbsp;</TD>
    <TD ALIGN=CENTER WIDTH=14%><b><font size=1>Initial <br>
      Dividend <br>
      Payment <br>
      Date </font> </b>
      <hr width=60 size="1" noshade>
    </TD>
    <TD ALIGN=LEFT WIDTH=2%>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT WIDTH=25%>&nbsp;</TD>
    <TD ALIGN=LEFT WIDTH=10%><FONT SIZE=2>Series D</FONT></TD>
    <TD ALIGN=LEFT WIDTH=14%><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=CENTER WIDTH=16%><FONT SIZE=2>2.55%</FONT></TD>
    <TD ALIGN=LEFT WIDTH=2%><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=CENTER WIDTH=15%><FONT SIZE=2>October 3, 2005</FONT></TD>
    <TD ALIGN=LEFT WIDTH=2%><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=CENTER WIDTH=14%><FONT SIZE=2>October 4, 2005</FONT></TD>
    <TD ALIGN=LEFT WIDTH=2%><FONT SIZE=2>&nbsp;</FONT></TD>
  </TR>
</TABLE>


<br>
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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> </B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>After the
initial                               dividend period, each dividend period for the
                              Series D AMPS will generally consist of seven
                              days; provided however, that before any auction,
                              the Fund may decide, subject to certain
                              limitations and only if it gives notice to
                              holders, to declare a special dividend period of
                              up to five years. </FONT></TD>
</TR>
</TABLE>
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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>          </B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>After the
initial dividend period, in the case of dividend periods that are not special dividend
periods, dividends generally will be payable on each succeeding Tuesday. </FONT></TD>
</TR>
</TABLE>
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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>                               </B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dividends for
the Series D AMPS will be paid                               through the securities
depository (The Depository                               Trust Company) on each dividend
payment date for                               the AMPS. </FONT></TD>
</TR>
</TABLE>
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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>                               </B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For each
subsequent dividend period, the auction                               agent (The Bank of
New York) will hold an auction                               to determine the cash
dividend rate on the shares                               of the Series D AMPS. </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">
8</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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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Determination of
<BR>Maximum Dividend <BR>Rates</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Generally, the applicable dividend rate for any dividend
period for the Series D  AMPS will not be more than the maximum applicable rate
attributable to such  shares. The maximum applicable rate for the Series D AMPS will be
the higher of (A) the applicable percentage of the reference rate on the auction date or (B) the
applicable spread plus the reference rate on the auction date. The reference
rate is (A) the higher of the applicable LIBOR Rate (as defined in the Glossary)
and the Taxable Equivalent of the Short-Term Municipal Bond Rate (as defined in
the Glossary) (for a dividend period or special dividend period of 364 or fewer
days), or (B) the applicable Treasury Index Rate (as defined in the
Glossary)(for a special dividend period of 365 days or more). The maximum
applicable rate for the AMPS will depend on the credit rating assigned to the
shares, the length of the dividend period and whether or not the Fund has given
notification prior to the auction for the dividend period that any taxable
income will be included in the dividend on the AMPS for that dividend period.
The applicable percentage and applicable spread are as follows:</FONT></TD>
</TR>
</TABLE>
<BR>
<table cellpadding=0 cellspacing=0 border=0 width=100%>
  <tr valign=Bottom>
    <td align=CENTER rowspan="2" width=25%>&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 align=center colspan="3" valign="bottom"><b><font size=1>Credit Ratings</font></b>
      <hr width=95% size="1" noshade>
    </td>
    <td align=center rowspan="2" valign="bottom" width=1%>&nbsp;</td>
    <td align=center colspan="2" rowspan="2" valign="bottom"><b><font size=1>Applicable
      <br>
      Percentage <br>
      of Reference <br>
      Rate&#151;NoNotification </font></b>
      <hr width=95% size="1" noshade>
    </td>
    <td align=center rowspan="2" valign="bottom" width=1%>&nbsp;</td>
    <td align=center colspan="2" rowspan="2" valign="bottom"><b><font size=1>Applicable
      <br>
      Percentage <br>
      of Reference <br>
      Rate&#151;Notification </font></b>
      <hr width=95% size="1" noshade>
    </td>
    <td align=center rowspan="2" valign="bottom" width=1%>&nbsp;</td>
    <td align=center colspan="2" rowspan="2" valign="bottom"><b><font size=1>Applicable
      <br>
      Spread Over <br>
      Reference <br>
      Rate&#151;NoNotification </font></b>
      <hr width=95% size="1" noshade>
    </td>
    <td align=center rowspan="2" valign="bottom" width=1%>&nbsp;</td>
    <td align=center colspan="2" rowspan="2" valign="bottom"><b><font size=1>Applicable
      <br>
      Spread Over <br>
      Reference <br>
      Rate&#151;Notification </font></b>
      <hr width=95% size="1" noshade>
    </td>
    <td align=center rowspan="2" valign="bottom">&nbsp;</td>
  </tr>
  <tr valign=Bottom>
    <td align=CENTER width=9%><b><font size=1>Moody&#146;s</font> </b>
      <hr width=95% size="1" noshade>
    </td>
    <td align=CENTER width=1%>&nbsp;&nbsp;</td>
    <td align=LEFT width=10%>
      <div align="center"><font size=1>&nbsp;&nbsp;&nbsp;<b>S&amp;P </b> </font>
      </div>
      <hr width=95% size="1" noshade align="center">
    </td>
  </tr>
  <tr valign=Bottom>
    <td align=CENTER width="0%">&nbsp;</td>
    <td align=CENTER width="9%"><font size=1>Aaa</font></td>
    <td align=LEFT width="1%">&nbsp;</td>
    <td align=CENTER width="10%"><font size=1>AAA</font></td>
    <td align=LEFT width="1%">&nbsp;&nbsp;</td>
    <td align=center colspan="2"><font size=1>110</font><font size=1>%</font></td>
    <td align=center width="1%">&nbsp;&nbsp;</td>
    <td align=center colspan="2"><font size=1>125</font><font size=1>%</font></td>
    <td align=LEFT width="1%">&nbsp;&nbsp;</td>
    <td align=center colspan="2"><font size=1>1.10</font><font size=1>%</font></td>
    <td align=center width="1%">&nbsp;&nbsp;</td>
    <td align=center colspan="2"><font size=1>1</font><font size=1>.25%</font></td>
    <td align=center>&nbsp;</td>
  </tr>
  <tr valign=Bottom>
    <td align=CENTER width="0%">&nbsp;</td>
    <td align=CENTER width="9%"><font size=1>Aa3 to Aa1</font></td>
    <td align=LEFT width="1%"><font size=1>&nbsp;</font></td>
    <td align=CENTER width="10%"><font size=1>AA- to AA+</font></td>
    <td align=LEFT width="1%"><font size=1>&nbsp;</font></td>
    <td align=center colspan="2"><font size=1>125</font><font size=1>%</font></td>
    <td align=center width="1%">&nbsp;</td>
    <td align=center colspan="2"><font size=1>150</font><font size=1>%</font></td>
    <td align=LEFT width="1%">&nbsp;</td>
    <td align=center colspan="2"><font size=1>1.25</font><font size=1>%</font></td>
    <td align=center width="1%">&nbsp;</td>
    <td align=center colspan="2"><font size=1>1</font><font size=1>.50%</font></td>
    <td align=center>&nbsp;</td>
  </tr>
  <tr valign=Bottom>
    <td align=CENTER width="0%">&nbsp;</td>
    <td align=CENTER width="9%"><font size=1>A3 to A1</font></td>
    <td align=LEFT width="1%"><font size=1>&nbsp;</font></td>
    <td align=CENTER width="10%"><font size=1>A- to A+</font></td>
    <td align=LEFT width="1%"><font size=1>&nbsp;</font></td>
    <td align=center colspan="2"><font size=1>150</font><font size=1>%</font></td>
    <td align=center width="1%">&nbsp;</td>
    <td align=center colspan="2"><font size=1>200</font><font size=1>%</font></td>
    <td align=LEFT width="1%">&nbsp;</td>
    <td align=center colspan="2"><font size=1>1.50</font><font size=1>%</font></td>
    <td align=center width="1%">&nbsp;</td>
    <td align=center colspan="2"><font size=1>2</font><font size=1>.00%</font></td>
    <td align=center>&nbsp;</td>
  </tr>
  <tr valign=Bottom>
    <td align=CENTER width="0%">&nbsp;</td>
    <td align=CENTER width="9%"><font size=1>Baa3 to Baa1</font></td>
    <td align=LEFT width="1%"><font size=1>&nbsp;</font></td>
    <td align=CENTER width="10%"><font size=1>BBB- to BBB+</font></td>
    <td align=LEFT width="1%"><font size=1>&nbsp;</font></td>
    <td align=center colspan="2"><font size=1>175</font><font size=1>%</font></td>
    <td align=center width="1%">&nbsp;</td>
    <td align=center colspan="2"><font size=1>250</font><font size=1>%</font></td>
    <td align=LEFT width="1%">&nbsp;</td>
    <td align=center colspan="2"><font size=1>1.75</font><font size=1>%</font></td>
    <td align=center width="1%">&nbsp;</td>
    <td align=center colspan="2"><font size=1>2</font><font size=1>.50%</font></td>
    <td align=center>&nbsp;</td>
  </tr>
  <tr valign=Bottom>
    <td align=CENTER width="0%">&nbsp;</td>
    <td align=CENTER width="9%"><font size=1>Below Baa3</font></td>
    <td align=LEFT width="1%"><font size=1>&nbsp;</font></td>
    <td align=CENTER width="10%"><font size=1>Below BBB-</font></td>
    <td align=LEFT width="1%"><font size=1>&nbsp;</font></td>
    <td align=center colspan="2"><font size=1>200</font><font size=1>%</font></td>
    <td align=center width="1%">&nbsp;</td>
    <td align=center colspan="2"><font size=1>300</font><font size=1>%</font></td>
    <td align=LEFT width="1%">&nbsp;</td>
    <td align=center colspan="2"><font size=1>2.00</font><font size=1>%</font></td>
    <td align=center width="1%">&nbsp;</td>
    <td align=center colspan="2"><font size=1>3</font><font size=1>.00%</font></td>
    <td align=center>&nbsp;</td>
  </tr>
  <tr>
    <td colspan=3></td>
    <td colspan=2></td>
    <td colspan=3></td>
    <td colspan=3></td>
    <td colspan=3></td>
    <td colspan=2></td>
    <td></td>
  </tr>
</table>
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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>                               </B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The applicable
percentage and the applicable spread as so determined may be subject
                              to upward but not downward adjustment in the discretion of
the Board of Directors                               of the Fund after consultation with
the broker-dealers participating in the auction                               for the
AMPS. </FONT></TD>
</TR>
</TABLE>
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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>                               </B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>There is
no minimum applicable dividend rate for any dividend period. </FONT></TD>
</TR>
</TABLE>
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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Other AMPS</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
                   The Fund has outstanding 6,000 shares of three 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 $150,000,000 (the &#147;Other AMPS&#148;). The Other AMPS are as
follows: 2,000 shares of                               Auction Market Preferred Stock,
Series A; 2,000 shares of Auction Market Preferred                               Stock,
Series B; and 2,000 shares of Auction Market Preferred Stock, Series C. The
                              Series D AMPS offered hereby rank on a parity with the
Other AMPS with respect to                               dividends and liquidation
preference. </FONT></TD>
</TR>
</TABLE>
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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Asset Maintenance</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Under the Fund&#146;s Articles                               Supplementary creating the Series
D AMPS (the                               &#147;Articles Supplementary&#148;), the Fund must
maintain: </FONT></TD>
</TR>
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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%>&#149;<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=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>asset
coverage of the AMPS and Other AMPS as                                 required by the
rating agencies rating the AMPS,                                 and </FONT></TD>
</TR>
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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%>&#149;<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=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>asset
coverage of the AMPS and Other AMPS of at                                 least 200% as
required by the Investment Company                                 Act of 1940 (the &#147;1940
Act&#148;). </FONT></TD>
</TR>
</TABLE>
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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>                               </B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Fund
estimates that, based on the composition                               of its portfolio
at April 30, 2005, asset coverage                               of the AMPS and Other
AMPS as required by the 1940                               Act would be approximately
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></TD>
</TR>
</TABLE>
<BR>
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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Mandatory Redemption</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
If the required asset coverage is not                               maintained or, when
necessary, restored, the Fund                               must redeem shares of the
Series D AMPS at the                               price of $25,000 per share plus
accumulated but                               unpaid dividends thereon (whether or not
earned or                               declared). The provisions of the 1940 Act may
                              restrict the Fund&#146;s ability to make such a
                              mandatory redemption. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Optional Redemption</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The Fund may, at its option, choose to                               redeem all or a
portion of the shares of AMPS on                               any dividend payment date
at the price of $25,000                               per share, plus accumulated but
unpaid dividends                               thereon (whether or not earned or
declared) plus                               any applicable premium. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Liquidation Preference</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The liquidation preference (that is,                               the amount the Fund
must pay to holders of AMPS if                               the Fund is liquidated) of
each share of AMPS will                               be $25,000, plus an amount equal to
accumulated                               but unpaid dividends (whether or not earned or
                              declared). </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Ratings </B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
AMPS will be issued with a rating of Aaa from Moody&#146;s and AAA from S&amp;P. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Voting Rights</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
                The 1940 Act requires that the holders of AMPS and any other preferred
stock,                               including the Other AMPS, voting as a separate
class, have the right to elect at                               least two directors at
all times and to elect a majority of the directors at any
                              time when dividends on the AMPS or any other preferred
stock, including the Other                               AMPS, are unpaid for two full
years. The Fund&#146;s Charter, the 1940 Act and the                               General
Corporation Laws of the State of Maryland require holders of AMPS and any
                              other preferred stock, including the Other AMPS, to vote as
a separate class on                               certain other matters. </FONT></TD>
</TR>
</TABLE>
<BR>

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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 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An
investment in the Fund&#146;s AMPS should not constitute a complete investment program. </I></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;Set
forth below are the main risks of investing in the Fund&#146;s AMPS. </I></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;Investment
Considerations. </I>Investors in AMPS should consider the following factors: </FONT> </P>

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

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

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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 market 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 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 that 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 Municipal Bonds, which are subject to interest
rate and credit risk. Interest rate risk is the risk that prices of Municipal Bonds
generally increase when interest rates decline and decrease when interest rates increase.
Prices of longer term securities generally change more in response to interest rate
changes than prices of shorter term securities. The Fund&#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. 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. Credit risk is the risk that
the issuer will be unable to pay the interest or principal when due. The degree of credit
risk depends on both the financial condition of the issuer and the terms of the
obligation. </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 Municipal Bond&#146;s issuer may call the bond for redemption before it
matures. If this happens to a Municipal Bond that the Fund holds, the Fund may lose
income and may have to invest the proceeds in Municipal Bonds with lower yields. </FONT> </P>

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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 Municipal Bond portfolio
will decline if and when the Fund invests the proceeds from matured, traded or called
bonds at market interest rates that are below the portfolio&#146;s current earnings rate. A
decline in income could negatively affect the Fund&#146;s yield, return or the market price of
the common stock. </FONT> </P>

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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 Municipal Bonds in which the Fund invests may lack an established
secondary trading market or are 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 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
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
  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 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 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 </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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 Municipal Bonds and other tax exempt securities in reliance
on an opinion of bond counsel to the issuer that the interest paid on those securities
will be excludable from gross income for Federal income tax purposes. Such securities,
however, may be determined for Federal income tax 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 holders of AMPS, to be taxable to those stockholders in the year of receipt.
The Fund will not pay an Additional Dividend (as defined herein) to a holder of AMPS
under these circumstances. </FONT> </P>


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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 October 31, 1995 to October
31, 2004 has been audited by Deloitte &amp; Touche </FONT> <FONT FACE="Times New Roman, Times, Serif" SIZE="1">LLP </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2">, 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 Fund&#146;s 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 align="left">
  <table border=0 cellspacing=0 cellpadding=0 width="740">
    <tr align="left" valign="bottom">
      <td width="171">&nbsp;</td>
      <td align="center" valign=top colspan="2"><b><font size="1">For the Six
        <br>
        Months Ended <br>
        April 30, 2005 </font></b></td>
      <td align="center" valign=top width="10">&nbsp;</td>
      <td align="center" valign=top colspan="19"><b><font size="1">For the Year
        Ended October 31, </font></b>
        <hr size="1" noshade>
      </td>
      <td width="20">&nbsp;</td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="171"> <font size="1">&nbsp;</font></td>
      <td align="center" valign=top colspan="2"><b><font size="1">(unaudited)
        </font></b>
        <hr size="1" noshade>
      </td>
      <td align="center" valign=top width="10">&nbsp;&nbsp;</td>
      <td align="center" valign=top width="36"><b><font size="1">2004 </font></b>
        <hr size="1" noshade>
      </td>
      <td align="center" valign=top width="9"> <b><font size="1">&nbsp;</font></b></td>
      <td align="center" valign=top width="36"><b><font size="1">2003 </font></b>
        <hr size="1" noshade>
      </td>
      <td align="center" valign=top width="9"> <b><font size="1">&nbsp;</font></b></td>
      <td align="center" valign=top width="36"><b><font size="1">2002 </font></b>
        <hr size="1" noshade>
      </td>
      <td align="center" valign=top width="9">&nbsp; </td>
      <td align="center" valign=top width="36"><b><font size="1">2001&#134; </font></b>
        <hr size="1" noshade>
      </td>
      <td align="center" valign=top width="9">&nbsp; </td>
      <td align="center" valign=top width="36"><b><font size="1">2000&#134; </font></b>
        <hr size="1" noshade>
      </td>
      <td align="center" valign=top width="9">&nbsp; </td>
      <td align="center" valign=top width="36"><b><font size="1">1999&#134; </font></b>
        <hr size="1" noshade>
      </td>
      <td align="center" valign=top width="13">&nbsp; </td>
      <td align="center" valign=top width="49"><b><font size="1">1998&#134; </font></b>
        <hr size="1" noshade>
      </td>
      <td align="center" valign=top width="9"> <b><font size="1">&nbsp;</font></b></td>
      <td align="center" valign=top width="42"><b><font size="1">1997 </font></b>
        <hr size="1" noshade>
      </td>
      <td align="center" valign=top width="9"> <b><font size="1">&nbsp;</font></b></td>
      <td align="center" valign=top width="36"><b><font size="1">1996 </font></b>
        <hr size="1" noshade>
      </td>
      <td align="center" valign=top width="9"> <b><font size="1">&nbsp;</font></b></td>
      <td align="center" valign=top width="42"> <b><font size="1">1995 </font></b>
        <hr size="1" noshade>
      </td>
      <td width="20"> <b><font size="1">&nbsp;</font></b></td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="171"> <font size="1"><b>Per Share <br>
        Operating Performance</b></font></td>
      <td width="44"> <font size="1">&nbsp;</font></td>
      <td width="25"> <font size="1">&nbsp;</font></td>
      <td width="10">&nbsp;&nbsp;</td>
      <td width="36"> <font size="1">&nbsp;</font></td>
      <td width="9"> <font size="1">&nbsp;</font></td>
      <td width="36"> <font size="1">&nbsp;</font></td>
      <td width="9"> <font size="1">&nbsp;</font></td>
      <td width="36"> <font size="1">&nbsp;</font></td>
      <td width="9"> <font size="1">&nbsp;</font></td>
      <td width="36"> <font size="1">&nbsp;</font></td>
      <td width="9"> <font size="1">&nbsp;</font></td>
      <td width="36"> <font size="1">&nbsp;</font></td>
      <td width="9"> <font size="1">&nbsp;</font></td>
      <td width="36"> <font size="1">&nbsp;</font></td>
      <td width="13"> <font size="1">&nbsp;</font></td>
      <td width="49"> <font size="1">&nbsp;</font></td>
      <td width="9"> <font size="1">&nbsp;</font></td>
      <td width="42"> <font size="1">&nbsp;</font></td>
      <td width="9"> <font size="1">&nbsp;</font></td>
      <td width="36"> <font size="1">&nbsp;</font></td>
      <td width="9"> <font size="1">&nbsp;</font></td>
      <td width="42"> <font size="1">&nbsp;</font></td>
      <td width="20"> <font size="1">&nbsp;</font></td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="171"> <font size="1">Net asset value, <br>
        &nbsp;&nbsp; beginning of period</font></td>
      <td align="right" width="44"> <font size="1">$13.72</font></td>
      <td align="left" width="25">&nbsp; </td>
      <td align="left" width="10">&nbsp;</td>
      <td align="right" width="36"> <font size="1">$13.44</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">$13.27</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">$13.21</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">$12.39</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">$12.31</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">$15.52</font></td>
      <td align="left" width="13">&nbsp; </td>
      <td align="right" width="49"> <font size="1">$15.46</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="42"> <font size="1">$14.86</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">$14.64</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="42"> <font size="1">$13.20</font></td>
      <td align="left" width="20">&nbsp; </td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="171">&nbsp;</td>
      <td align="right" width="44">
        <hr size="1" noshade>
      </td>
      <td align="left" width="25">&nbsp;</td>
      <td align="left" width="10">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td align="left" width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td align="left" width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td align="left" width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td align="left" width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td align="left" width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td align="left" width="13">&nbsp;</td>
      <td align="right" width="49">
        <hr size="1" noshade>
      </td>
      <td align="left" width="9">&nbsp;</td>
      <td align="right" width="42">
        <hr size="1" noshade>
      </td>
      <td align="left" width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td align="left" width="9">&nbsp;</td>
      <td align="right" width="42">
        <hr size="1" noshade>
      </td>
      <td align="left" width="20">&nbsp;</td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="171"> <font size="1">Investment income &#151; net</font></td>
      <td align="right" width="44"> <font size="1">.46</font></td>
      <td align="left" width="25"> <font size="1">&#135;</font></td>
      <td align="left" width="10">&nbsp;</td>
      <td align="right" width="36"> <font size="1">.94</font></td>
      <td align="left" width="9"> <font size="1">&#135;</font></td>
      <td align="right" width="36"> <font size="1">.97</font></td>
      <td align="left" width="9"><font size="1">&#135;</font> </td>
      <td align="right" width="36"> <font size="1">.94</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">.94</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">.99</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">1.04</font></td>
      <td align="left" width="13">&nbsp; </td>
      <td align="right" width="49"> <font size="1">1.10</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="42"> <font size="1">1.15</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">1.16</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="42"> <font size="1">1.16</font></td>
      <td align="left" width="20">&nbsp; </td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="171"> <font size="1">Realized and unrealized gain <br>
        &nbsp;&nbsp;&nbsp;(loss) &#151; net</font></td>
      <td align="right" width="44"> <font size="1">.02</font></td>
      <td align="left" width="25">&nbsp; </td>
      <td align="left" width="10">&nbsp;</td>
      <td align="right" width="36"> <font size="1">.27</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">.09</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">&#151;</font></td>
      <td align="left" width="9"> <font size="1">+</font></td>
      <td align="right" width="36"> <font size="1">.84</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">.17</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">(2.65</font></td>
      <td align="left" width="13"> <font size="1">)</font></td>
      <td align="right" width="49"> <font size="1">.46</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="42"> <font size="1">.64</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">.23</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="42"> <font size="1">1.53</font></td>
      <td align="left" width="20">&nbsp; </td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="171"> <font size="1">Less dividends and distributions <br>
        &nbsp;&nbsp;&nbsp;to Preferred Stock shareholders:</font></td>
      <td align="right" width="44">&nbsp; </td>
      <td align="left" width="25">&nbsp; </td>
      <td align="left" width="10">&nbsp;</td>
      <td align="right" width="36">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36">&nbsp; </td>
      <td align="left" width="13">&nbsp; </td>
      <td align="right" width="49">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="42">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="42">&nbsp; </td>
      <td align="left" width="20">&nbsp; </td>
    </tr>
    <tr align="left" valign="bottom">
      <td align="left" valign="bottom" width="171"> <font size="1">&nbsp;&nbsp;Investment
        income &#151; net</font></td>
      <td align="right" valign="bottom" width="44"> <font size="1">(.06</font></td>
      <td align="left" valign="bottom" width="25"> <font size="1">)</font></td>
      <td align="left" valign="bottom" width="10">&nbsp;</td>
      <td align="right" valign="bottom" width="36"> <font size="1">(.07</font></td>
      <td align="left" valign="bottom" width="9"> <font size="1">)</font></td>
      <td align="right" valign="bottom" width="36"> <font size="1">(.07</font></td>
      <td align="left" valign="bottom" width="9"> <font size="1">)</font></td>
      <td align="right" valign="bottom" width="36"> <font size="1">(.10</font></td>
      <td align="left" valign="bottom" width="9"> <font size="1">)</font></td>
      <td align="right" valign="bottom" width="36"> <font size="1">(.22</font></td>
      <td align="left" valign="bottom" width="9"> <font size="1">)</font></td>
      <td align="right" valign="bottom" width="36"> <font size="1">(.27</font></td>
      <td align="left" valign="bottom" width="9"> <font size="1">)</font></td>
      <td align="right" valign="bottom" width="36"> <font size="1">(.19</font></td>
      <td align="left" valign="bottom" width="13"> <font size="1">)</font></td>
      <td align="right" valign="bottom" width="49"> <font size="1">(.17</font></td>
      <td align="left" valign="bottom" width="9"> <font size="1">)</font></td>
      <td align="right" valign="bottom" width="42"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="9">&nbsp; </td>
      <td align="right" valign="bottom" width="36"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="9">&nbsp;</td>
      <td align="right" valign="bottom" width="42"> <font size="1">&#151;</font></td>
      <td align="left" width="20">&nbsp;</td>
    </tr>
    <tr align="left" valign="bottom">
      <td align="left" valign="bottom" width="171"> <font size="1">&nbsp;&nbsp;Realized
        gain &#151; net</font></td>
      <td align="right" valign="bottom" width="44"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="25">&nbsp; </td>
      <td align="left" valign="bottom" width="10">&nbsp;</td>
      <td align="right" valign="bottom" width="36"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="9">&nbsp; </td>
      <td align="right" valign="bottom" width="36"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="9">&nbsp; </td>
      <td align="right" valign="bottom" width="36"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="9">&nbsp; </td>
      <td align="right" valign="bottom" width="36"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="9">&nbsp; </td>
      <td align="right" valign="bottom" width="36"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="9">&nbsp; </td>
      <td align="right" valign="bottom" width="36"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="13">&nbsp; </td>
      <td align="right" valign="bottom" width="49"> <font size="1">(.12</font></td>
      <td align="left" valign="bottom" width="9"> <font size="1">)</font></td>
      <td align="right" valign="bottom" width="42"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="9">&nbsp; </td>
      <td align="right" valign="bottom" width="36"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="9">&nbsp;</td>
      <td align="right" valign="bottom" width="42"> <font size="1">&#151;</font></td>
      <td align="left" width="20">&nbsp;</td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="171"><font size="1"> &nbsp;&nbsp;In excess of realized <br>
        &nbsp;&nbsp;&nbsp; gain &#151; net</font></td>
      <td align="right" width="44"> <font size="1">&#151;</font></td>
      <td align="left" width="25">&nbsp; </td>
      <td align="left" width="10">&nbsp;</td>
      <td align="right" width="36"> <font size="1">&#151;</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">&#151;</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">&#151;</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">&#151;</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">&#151;</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">(.06</font></td>
      <td align="left" width="13"> <font size="1">)</font></td>
      <td align="right" width="49"> <font size="1">&#151;</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="42"> <font size="1">&#151;</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">&#151;</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="42"> <font size="1">&#151;</font></td>
      <td align="left" width="20">&nbsp; </td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="171">&nbsp;</td>
      <td align="right" width="44">
        <hr size="1" noshade>
      </td>
      <td width="25">&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="13">&nbsp;</td>
      <td align="right" width="49">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="42">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="42">
        <hr size="1" noshade>
      </td>
      <td align="left" width="20">&nbsp;</td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="171"> <font size="1">Total from investment <br>
        &nbsp;&nbsp; operations</font></td>
      <td align="right" width="44"> <font size="1">.42</font></td>
      <td align="left" width="25">&nbsp; </td>
      <td align="left" width="10">&nbsp;</td>
      <td align="right" width="36"> <font size="1">1.14</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">.99</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">.84</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">1.56</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">.89</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">(1.86</font></td>
      <td align="left" width="13"> <font size="1">)</font></td>
      <td align="right" width="49"> <font size="1">1.27</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="42"> <font size="1">1.79</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">1.39</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="42"> <font size="1">2.69</font></td>
      <td align="left" width="20">&nbsp; </td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="171">&nbsp;</td>
      <td align="right" width="44">
        <hr size="1" noshade>
      </td>
      <td width="25">&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="13">&nbsp;</td>
      <td align="right" width="49">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="42">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="42">
        <hr size="1" noshade>
      </td>
      <td align="left" width="20">&nbsp;</td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="171"> <font size="1">Less dividends and distributions <br>
        to Common Stock shareholders:</font></td>
      <td align="right" width="44">&nbsp; </td>
      <td align="left" width="25">&nbsp; </td>
      <td align="left" width="10">&nbsp;</td>
      <td align="right" width="36">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36">&nbsp; </td>
      <td align="left" width="13">&nbsp; </td>
      <td align="right" width="49">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="42">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="42">&nbsp; </td>
      <td align="left" width="20">&nbsp; </td>
    </tr>
    <tr align="left" valign="bottom">
      <td align="left" valign="bottom" width="171"> <font size="1">&nbsp;&nbsp;Investment
        income &#151; net</font></td>
      <td align="right" valign="bottom" width="44"> <font size="1">(.43</font></td>
      <td align="left" valign="bottom" width="25"> <font size="1">)</font></td>
      <td align="left" valign="bottom" width="10">&nbsp;</td>
      <td align="right" valign="bottom" width="36"> <font size="1">(.86</font></td>
      <td align="left" valign="bottom" width="9"> <font size="1">)</font></td>
      <td align="right" valign="bottom" width="36"> <font size="1">(.82</font></td>
      <td align="left" valign="bottom" width="9"> <font size="1">)</font></td>
      <td align="right" valign="bottom" width="36"> <font size="1">(.78</font></td>
      <td align="left" valign="bottom" width="9"> <font size="1">)</font></td>
      <td align="right" valign="bottom" width="36"> <font size="1">(.74</font></td>
      <td align="left" valign="bottom" width="9"> <font size="1">)</font></td>
      <td align="right" valign="bottom" width="36"> <font size="1">(.81</font></td>
      <td align="left" valign="bottom" width="9"> <font size="1">)</font></td>
      <td align="right" valign="bottom" width="36"> <font size="1">(.86</font></td>
      <td align="left" valign="bottom" width="13"> <font size="1">)</font></td>
      <td align="right" valign="bottom" width="49"> <font size="1">(.87</font></td>
      <td align="left" valign="bottom" width="9"> <font size="1">)</font></td>
      <td align="right" valign="bottom" width="42"> <font size="1">(.91</font></td>
      <td align="left" valign="bottom" width="9"> <font size="1">)</font></td>
      <td align="right" valign="bottom" width="36"> <font size="1">(.92</font></td>
      <td align="left" valign="bottom" width="9"> <font size="1">)</font></td>
      <td align="right" valign="bottom" width="42"> <font size="1">(.89</font></td>
      <td align="left" valign="bottom" width="20"> <font size="1">)</font></td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="171"><font size="1">&nbsp;&nbsp;Realized gain &#151; net</font></td>
      <td align="right" width="44"> <font size="1">&#151;</font></td>
      <td align="left" width="25">&nbsp; </td>
      <td align="left" width="10">&nbsp;</td>
      <td align="right" width="36"> <font size="1">&#151;</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">&#151;</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">&#151;</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">&#151;</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">&#151;</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">&#151;</font></td>
      <td align="left" width="13">&nbsp; </td>
      <td align="right" width="49"> <font size="1">(.34</font></td>
      <td align="left" width="9"> <font size="1">)</font></td>
      <td align="right" width="42"> <font size="1">(.03</font></td>
      <td align="left" width="9"> <font size="1">)</font></td>
      <td align="right" width="36"> <font size="1">&#151;</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="42"> <font size="1">(.10</font></td>
      <td align="left" width="20"> <font size="1">)</font></td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="171"><font size="1">&nbsp;&nbsp;In excess of realized gain &#151;
        net</font> </td>
      <td align="right" valign="bottom" width="44"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="25">&nbsp; </td>
      <td align="left" valign="bottom" width="10">&nbsp;</td>
      <td align="right" valign="bottom" width="36"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="9">&nbsp; </td>
      <td align="right" valign="bottom" width="36"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="9">&nbsp; </td>
      <td align="right" valign="bottom" width="36"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="9">&nbsp; </td>
      <td align="right" valign="bottom" width="36"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="9">&nbsp; </td>
      <td align="right" valign="bottom" width="36"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="9">&nbsp; </td>
      <td align="right" valign="bottom" width="36"> <font size="1">(.49</font></td>
      <td align="left" valign="bottom" width="13"> <font size="1">)</font></td>
      <td align="right" valign="bottom" width="49"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="9">&nbsp; </td>
      <td align="right" valign="bottom" width="42"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="9">&nbsp; </td>
      <td align="right" valign="bottom" width="36"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="9">&nbsp; </td>
      <td align="right" valign="bottom" width="42"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="20"> <font size="1">&#134;&#134;</font></td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="171">&nbsp;</td>
      <td align="right" width="44">
        <hr size="1" noshade>
      </td>
      <td width="25">&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="13">&nbsp;</td>
      <td align="right" width="49">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="42">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="42">
        <hr size="1" noshade>
      </td>
      <td align="left" width="20">&nbsp;</td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="171"> <font size="1">Total dividends and distributions <br>
        &nbsp;&nbsp; to Common Stock shareholders</font></td>
      <td align="right" width="44"> <font size="1">(.43</font></td>
      <td align="left" width="25"> <font size="1">)</font></td>
      <td align="left" width="10">&nbsp;</td>
      <td align="right" width="36"> <font size="1">(.86</font></td>
      <td align="left" width="9"> <font size="1">)</font></td>
      <td align="right" width="36"> <font size="1">(.82</font></td>
      <td align="left" width="9"> <font size="1">)</font></td>
      <td align="right" width="36"> <font size="1">(.78</font></td>
      <td align="left" width="9"> <font size="1">)</font></td>
      <td align="right" width="36"> <font size="1">(.74</font></td>
      <td align="left" width="9"> <font size="1">)</font></td>
      <td align="right" width="36"> <font size="1">(.81</font></td>
      <td align="left" width="9"> <font size="1">)</font></td>
      <td align="right" width="36"> <font size="1">(1.35</font></td>
      <td align="left" width="13"> <font size="1">)</font></td>
      <td align="right" width="49"> <font size="1">(1.21</font></td>
      <td align="left" width="9"> <font size="1">)</font></td>
      <td align="right" width="42"> <font size="1">(.94</font></td>
      <td align="left" width="9"> <font size="1">)</font></td>
      <td align="right" width="36"> <font size="1">(.92</font></td>
      <td align="left" width="9"> <font size="1">)</font></td>
      <td align="right" width="42"> <font size="1">(.99</font></td>
      <td align="left" width="20"> <font size="1">)</font></td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="171">&nbsp;</td>
      <td align="right" width="44">
        <hr size="1" noshade>
      </td>
      <td width="25">&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="13">&nbsp;</td>
      <td align="right" width="49">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="42">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="42">
        <hr size="1" noshade>
      </td>
      <td align="left" width="20">&nbsp;</td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="171"> <font size="1">Effect of Preferred Shares <br>
        activity: </font></td>
      <td align="right" width="44">&nbsp; </td>
      <td align="left" width="25">&nbsp; </td>
      <td align="left" width="10">&nbsp;</td>
      <td align="right" width="36">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36">&nbsp; </td>
      <td align="left" width="13">&nbsp; </td>
      <td align="right" width="49">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="42">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="42">&nbsp; </td>
      <td align="left" width="20">&nbsp; </td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="171"> <font size="1">Dividends and distributions to <br>
        Preferred Stock shareholders:</font></td>
      <td align="right" width="44">&nbsp; </td>
      <td align="left" width="25">&nbsp; </td>
      <td align="left" width="10">&nbsp;</td>
      <td align="right" width="36">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36">&nbsp; </td>
      <td align="left" width="13">&nbsp; </td>
      <td align="right" width="49">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="42">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="42">&nbsp; </td>
      <td align="left" width="20">&nbsp; </td>
    </tr>
    <tr align="left" valign="bottom">
      <td align="left" valign="bottom" width="171"> <font size="1">&nbsp;&nbsp;Investment
        income &#151; net</font></td>
      <td align="right" valign="bottom" width="44"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="25">&nbsp; </td>
      <td align="left" valign="bottom" width="10">&nbsp;</td>
      <td align="right" valign="bottom" width="36"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="9">&nbsp; </td>
      <td align="right" valign="bottom" width="36"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="9">&nbsp; </td>
      <td align="right" valign="bottom" width="36"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="9">&nbsp; </td>
      <td align="right" valign="bottom" width="36"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="9">&nbsp; </td>
      <td align="right" valign="bottom" width="36"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="9">&nbsp; </td>
      <td align="right" valign="bottom" width="36"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="13">&nbsp; </td>
      <td align="right" valign="bottom" width="49"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="9">&nbsp; </td>
      <td align="right" valign="bottom" width="42"> <font size="1">(.24</font></td>
      <td align="left" valign="bottom" width="9"> <font size="1">)</font></td>
      <td align="right" valign="bottom" width="36"> <font size="1">(.25</font></td>
      <td align="left" valign="bottom" width="9"> <font size="1">)</font></td>
      <td align="right" valign="bottom" width="42"> <font size="1">(.25</font></td>
      <td align="left" valign="bottom" width="20"> <font size="1">)</font></td>
    </tr>
    <tr align="left" valign="bottom">
      <td align="left" valign="bottom" width="171"> <font size="1">&nbsp;&nbsp;Realized
        gain &#151; net</font></td>
      <td align="right" valign="bottom" width="44"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="25">&nbsp; </td>
      <td align="left" valign="bottom" width="10">&nbsp;</td>
      <td align="right" valign="bottom" width="36"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="9">&nbsp; </td>
      <td align="right" valign="bottom" width="36"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="9">&nbsp; </td>
      <td align="right" valign="bottom" width="36"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="9">&nbsp; </td>
      <td align="right" valign="bottom" width="36"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="9">&nbsp; </td>
      <td align="right" valign="bottom" width="36"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="9">&nbsp; </td>
      <td align="right" valign="bottom" width="36"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="13">&nbsp; </td>
      <td align="right" valign="bottom" width="49"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="9">&nbsp; </td>
      <td align="right" valign="bottom" width="42"> <font size="1">(.01</font></td>
      <td align="left" valign="bottom" width="9"> <font size="1">)</font></td>
      <td align="right" valign="bottom" width="36"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="9">&nbsp; </td>
      <td align="right" valign="bottom" width="42"> <font size="1">(.01</font></td>
      <td align="left" valign="bottom" width="20"> <font size="1">)</font></td>
    </tr>
    <tr align="left" valign="bottom">
      <td align="left" valign="bottom" width="171"> <font size="1">&nbsp;&nbsp;In
        excess of realized gain &#151; net</font></td>
      <td align="right" valign="bottom" width="44"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="25">&nbsp; </td>
      <td align="left" valign="bottom" width="10">&nbsp;</td>
      <td align="right" valign="bottom" width="36"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="9">&nbsp; </td>
      <td align="right" valign="bottom" width="36"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="9">&nbsp; </td>
      <td align="right" valign="bottom" width="36"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="9">&nbsp; </td>
      <td align="right" valign="bottom" width="36"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="9">&nbsp; </td>
      <td align="right" valign="bottom" width="36"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="9">&nbsp; </td>
      <td align="right" valign="bottom" width="36"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="13">&nbsp; </td>
      <td align="right" valign="bottom" width="49"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="9">&nbsp; </td>
      <td align="right" valign="bottom" width="42"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="9">&nbsp; </td>
      <td align="right" valign="bottom" width="36"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="9">&nbsp; </td>
      <td align="right" valign="bottom" width="42"> <font size="1">&#151;</font></td>
      <td align="left" valign="bottom" width="20"> <font size="1">&#134;&#134;</font></td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="171">&nbsp;</td>
      <td align="right" width="44">
        <hr size="1" noshade>
      </td>
      <td width="25">&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="13">&nbsp;</td>
      <td align="right" width="49">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="42">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="42">
        <hr size="1" noshade>
      </td>
      <td align="left" width="20">&nbsp;</td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="171"> <font size="1">Total effect of Preferred <br>
        &nbsp;&nbsp; Shares activity</font></td>
      <td align="right" width="44"> <font size="1">&#151;</font></td>
      <td align="left" width="25">&nbsp; </td>
      <td align="left" width="10">&nbsp;</td>
      <td align="right" width="36"> <font size="1">&#151;</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">&#151;</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">&#151;</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">&#151;</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">&#151;</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">&#151;</font></td>
      <td align="left" width="13">&nbsp; </td>
      <td align="right" width="49"> <font size="1">&#151;</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="42"> <font size="1">(.25</font></td>
      <td align="left" width="9"> <font size="1">)</font></td>
      <td align="right" width="36"> <font size="1">(.25</font></td>
      <td align="left" width="9"> <font size="1">)</font></td>
      <td align="right" width="42"> <font size="1">(.26</font></td>
      <td align="left" width="20"> <font size="1">)</font></td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="171">&nbsp;</td>
      <td align="right" width="44">
        <hr size="1" noshade>
      </td>
      <td width="25">&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="13">&nbsp;</td>
      <td align="right" width="49">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="42">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="42">
        <hr size="1" noshade>
      </td>
      <td align="left" width="20">&nbsp;</td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="171"> <font size="1">Net asset value, end of period</font></td>
      <td align="right" width="44"> <font size="1">$13.71</font></td>
      <td align="left" width="25">&nbsp; </td>
      <td align="left" width="10">&nbsp;</td>
      <td align="right" width="36"> <font size="1">$13.72</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">$13.44</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">$13.27</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">$13.21</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">$12.39</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">$12.31</font></td>
      <td align="left" width="13">&nbsp; </td>
      <td align="right" width="49"> <font size="1">$15.52</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="42"> <font size="1">$15.46</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">$14.86</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="42"> <font size="1">$14.64</font></td>
      <td align="left" width="20">&nbsp; </td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="171">&nbsp;</td>
      <td align="right" width="44">
        <hr size="1" noshade>
      </td>
      <td width="25">&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="13">&nbsp;</td>
      <td align="right" width="49">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="42">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="42">
        <hr size="1" noshade>
      </td>
      <td align="left" width="20">&nbsp;</td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="171"> <font size="1">Market price per share, <br>
        &nbsp;&nbsp;&nbsp;end of period</font></td>
      <td align="right" width="44"> <font size="1">$12.58</font></td>
      <td align="left" width="25">&nbsp; </td>
      <td align="left" width="10">&nbsp;</td>
      <td align="right" width="36"> <font size="1">$12.69</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">$12.18</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">$11.75</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">$12.07</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">$11.50</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">$11.50</font></td>
      <td align="left" width="13">&nbsp; </td>
      <td align="right" width="49"> <font size="1">$15.1875</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="42"> <font size="1">$14.375</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36"> <font size="1">$13.50</font></td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="42"> <font size="1">$12.625</font></td>
      <td align="left" width="20">&nbsp; </td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="171">&nbsp;</td>
      <td align="right" width="44">
        <hr size="1" noshade>
      </td>
      <td width="25">&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="13">&nbsp;</td>
      <td align="right" width="49">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="42">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="42">
        <hr size="1" noshade>
      </td>
      <td align="left" width="20">&nbsp;</td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="171"> <font size="1"><b>Total Investment Return**</b></font></td>
      <td align="right" width="44">&nbsp; </td>
      <td align="left" width="25">&nbsp; </td>
      <td align="left" width="10">&nbsp;</td>
      <td align="right" width="36">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36">&nbsp; </td>
      <td align="left" width="13">&nbsp; </td>
      <td align="right" width="49">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="42">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="36">&nbsp; </td>
      <td align="left" width="9">&nbsp; </td>
      <td align="right" width="42">&nbsp; </td>
      <td align="left" width="20">&nbsp; </td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="171"> <font size="1">Based on net asset value <br>
        &nbsp;&nbsp; per share</font></td>
      <td align="right" width="44"> <font size="1">3.39</font></td>
      <td align="left" width="25"> <font size="1">%++</font></td>
      <td align="left" width="10">&nbsp;</td>
      <td align="right" width="36"> <font size="1">9.32</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="36"> <font size="1">8.28</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="36"> <font size="1">7.27</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="36"> <font size="1">13.47</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="36"> <font size="1">8.04</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="36"> <font size="1">(12.74</font></td>
      <td align="left" width="13"> <font size="1">%)</font></td>
      <td align="right" width="49"> <font size="1">8.80</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="42"> <font size="1">11.24</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="36"> <font size="1">8.68</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="42"> <font size="1">20.30</font></td>
      <td align="left" width="20"> <font size="1">%</font></td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="171">&nbsp;</td>
      <td align="right" width="44">
        <hr size="1" noshade>
      </td>
      <td width="25">&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="13">&nbsp;</td>
      <td align="right" width="49">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="42">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="42">
        <hr size="1" noshade>
      </td>
      <td align="left" width="20">&nbsp;</td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="171"> <font size="1">Based on market price per share</font></td>
      <td align="right" width="44"> <font size="1">2.57</font></td>
      <td align="left" width="25"> <font size="1">%++</font></td>
      <td align="left" width="10">&nbsp;</td>
      <td align="right" width="36"> <font size="1">11.57</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="36"> <font size="1">10.83</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="36"> <font size="1">3.95</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="36"> <font size="1">11.70</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="36"> <font size="1">7.35</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="36"> <font size="1">(16.70</font></td>
      <td align="left" width="13"> <font size="1">%)</font></td>
      <td align="right" width="49"> <font size="1">14.51</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="42"> <font size="1">13.86</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="36"> <font size="1">14.50</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="42"> <font size="1">23.09</font></td>
      <td align="left" width="20"> <font size="1">%</font></td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="171">&nbsp;</td>
      <td align="right" width="44">
        <hr size="1" noshade>
      </td>
      <td width="25">&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="13">&nbsp;</td>
      <td align="right" width="49">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="42">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="42">
        <hr size="1" noshade>
      </td>
      <td align="left" width="20">&nbsp;</td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="171"> <font size="1"><b>Ratios Based on Average Net <br>
        Assets of Common Stock</b></font></td>
      <td align="right" width="44"> <font size="1">&nbsp;</font></td>
      <td align="left" width="25"> <font size="1">&nbsp;</font></td>
      <td align="left" width="10">&nbsp;</td>
      <td align="right" width="36"> <font size="1">&nbsp;</font></td>
      <td align="left" width="9"> <font size="1">&nbsp;</font></td>
      <td align="right" width="36"> <font size="1">&nbsp;</font></td>
      <td align="left" width="9"> <font size="1">&nbsp;</font></td>
      <td align="right" width="36"> <font size="1">&nbsp;</font></td>
      <td align="left" width="9"> <font size="1">&nbsp;</font></td>
      <td align="right" width="36"> <font size="1">&nbsp;</font></td>
      <td align="left" width="9"> <font size="1">&nbsp;</font></td>
      <td align="right" width="36"> <font size="1">&nbsp;</font></td>
      <td align="left" width="9"> <font size="1">&nbsp;</font></td>
      <td align="right" width="36"> <font size="1">&nbsp;</font></td>
      <td align="left" width="13"> <font size="1">&nbsp;</font></td>
      <td align="right" width="49"> <font size="1">&nbsp;</font></td>
      <td align="left" width="9"> <font size="1">&nbsp;</font></td>
      <td align="right" width="42"> <font size="1">&nbsp;</font></td>
      <td align="left" width="9"> <font size="1">&nbsp;</font></td>
      <td align="right" width="36"> <font size="1">&nbsp;</font></td>
      <td align="left" width="9"> <font size="1">&nbsp;</font></td>
      <td align="right" width="42"> <font size="1">&nbsp;</font></td>
      <td align="left" width="20"> <font size="1">&nbsp;</font></td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="171"> <font size="1">Total expenses, net of <br>
        &nbsp;&nbsp;&nbsp;reimbursement***</font></td>
      <td align="right" width="44"> <font size="1">1.02</font></td>
      <td align="left" width="25"> <font size="1">%*</font></td>
      <td align="left" width="10">&nbsp;</td>
      <td align="right" width="36"> <font size="1">1.01</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="36"> <font size="1">1.03</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="36"> <font size="1">1.06</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="36"> <font size="1">1.07</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="36"> <font size="1">1.08</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="36"> <font size="1">.99</font></td>
      <td align="left" width="13"> <font size="1">%</font></td>
      <td align="right" width="49"> <font size="1">.95</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="42"> <font size="1">.95</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="36"> <font size="1">.98</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="42"> <font size="1">1.01</font></td>
      <td align="left" width="20"> <font size="1">%</font></td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="171">&nbsp;</td>
      <td align="right" width="44">
        <hr size="1" noshade>
      </td>
      <td width="25">&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="13">&nbsp;</td>
      <td align="right" width="49">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="42">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="42">
        <hr size="1" noshade>
      </td>
      <td align="left" width="20">&nbsp;</td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="171"> <font size="1">Total expenses***</font></td>
      <td align="right" width="44"> <font size="1">1.02</font></td>
      <td align="left" width="25"> <font size="1">%*</font></td>
      <td align="left" width="10">&nbsp;</td>
      <td align="right" width="36"> <font size="1">1.02</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="36"> <font size="1">1.03</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="36"> <font size="1">1.06</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="36"> <font size="1">1.07</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="36"> <font size="1">1.08</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="36"> <font size="1">.99</font></td>
      <td align="left" width="13"> <font size="1">%</font></td>
      <td align="right" width="49"> <font size="1">.95</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="42"> <font size="1">.95</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="36"> <font size="1">.98</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="42"> <font size="1">1.01</font></td>
      <td align="left" width="20"> <font size="1">%</font></td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="171">&nbsp;</td>
      <td align="right" width="44">
        <hr size="1" noshade>
      </td>
      <td width="25">&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="13">&nbsp;</td>
      <td align="right" width="49">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="42">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="42">
        <hr size="1" noshade>
      </td>
      <td align="left" width="20">&nbsp; </td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="171"> <font size="1">Total investment <br>
        &nbsp;&nbsp; income &#151; net***</font></td>
      <td align="right" width="44"> <font size="1">6.70</font></td>
      <td align="left" width="25"> <font size="1">%*</font></td>
      <td align="left" width="10">&nbsp;</td>
      <td align="right" width="36"> <font size="1">7.00</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="36"> <font size="1">7.17</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="36"> <font size="1">7.26</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="36"> <font size="1">7.36</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="36"> <font size="1">8.04</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="36"> <font size="1">7.31</font></td>
      <td align="left" width="13"> <font size="1">%</font></td>
      <td align="right" width="49"> <font size="1">7.21</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="42"> <font size="1">7.50</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="36"> <font size="1">7.88</font></td>
      <td align="left" width="9"> <font size="1">%</font></td>
      <td align="right" width="42"> <font size="1">8.42</font></td>
      <td align="left" width="20"> <font size="1">%</font></td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="171">&nbsp;</td>
      <td align="right" width="44">
        <hr size="1" noshade>
      </td>
      <td width="25">&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="13">&nbsp;</td>
      <td align="right" width="49">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="42">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="36">
        <hr size="1" noshade>
      </td>
      <td width="9">&nbsp;</td>
      <td align="right" width="42">
        <hr size="1" noshade>
      </td>
      <td align="left" width="20">&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: 22; page: 22" -->
<br>

<div align="left"><br>
  <table border=0 cellspacing=0 cellpadding=0 width="740">
    <tr align="left" valign="bottom">
      <td width="141">&nbsp;</td>
      <td align="center" valign=top colspan="2"><b><font size="1">For the Six
        <br>
        Months Ended <br>
        April 30, 2005 </font></b></td>
      <td align="center" valign=top width="9">&nbsp;</td>
      <td align="center" valign=top colspan="19"><b><font size="1">For the Year
        Ended October 31, </font></b>
        <hr size="1" noshade>
      </td>
      <td width="18">&nbsp;</td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="141"> <font size="1">&nbsp;</font></td>
      <td align="center" valign=top colspan="2"><b><font size="1">(unaudited)
        </font></b>
        <hr size="1" noshade>
      </td>
      <td align="center" valign=top width="9">&nbsp;&nbsp;</td>
      <td align="center" valign=top width="43"><b><font size="1">2004 </font></b>
        <hr size="1" noshade>
      </td>
      <td align="center" valign=top width="8"> <b><font size="1">&nbsp;</font></b></td>
      <td align="center" valign=top width="43"><b><font size="1">2003 </font></b>
        <hr size="1" noshade>
      </td>
      <td align="center" valign=top width="8"> <b><font size="1">&nbsp;</font></b></td>
      <td align="center" valign=top width="43"><b><font size="1">2002 </font></b>
        <hr size="1" noshade>
      </td>
      <td align="center" valign=top width="8">&nbsp; </td>
      <td align="center" valign=top width="43"><b><font size="1">2001&#134; </font></b>
        <hr size="1" noshade>
      </td>
      <td align="center" valign=top width="8">&nbsp; </td>
      <td align="center" valign=top width="43"><b><font size="1">2000&#134; </font></b>
        <hr size="1" noshade>
      </td>
      <td align="center" valign=top width="8">&nbsp; </td>
      <td align="center" valign=top width="43"><b><font size="1">1999&#134; </font></b>
        <hr size="1" noshade>
      </td>
      <td align="center" valign=top width="8">&nbsp; </td>
      <td align="center" valign=top width="43"><b><font size="1">1998&#134; </font></b>
        <hr size="1" noshade>
      </td>
      <td align="center" valign=top width="8"> <b><font size="1">&nbsp;</font></b></td>
      <td align="center" valign=top width="43"><b><font size="1">1997 </font></b>
        <hr size="1" noshade>
      </td>
      <td align="center" valign=top width="8"> <b><font size="1">&nbsp;</font></b></td>
      <td align="center" valign=top width="43"><b><font size="1">1996 </font></b>
        <hr size="1" noshade>
      </td>
      <td align="center" valign=top width="8"> <b><font size="1">&nbsp;</font></b></td>
      <td align="center" valign=top width="43"> <b><font size="1">1995 </font></b>
        <hr size="1" noshade>
      </td>
      <td width="18"> <b><font size="1">&nbsp;</font></b></td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="141"> <font size="1">Amount of dividends to <br>
        &nbsp;&nbsp;Preferred Stock Shareholders</font></td>
      <td align="right" width="56"> <font size="1">.87</font></td>
      <td align="left" width="14"> <font size="1">%*</font></td>
      <td align="left" width="9">&nbsp;</td>
      <td align="right" width="43"> <font size="1">.51</font></td>
      <td align="left" width="8"> <font size="1">%</font></td>
      <td align="right" width="43"> <font size="1">.50</font></td>
      <td align="left" width="8"> <font size="1">%</font></td>
      <td align="right" width="43"> <font size="1">.78</font></td>
      <td align="left" width="8"> <font size="1">%</font></td>
      <td align="right" width="43"> <font size="1">1.74</font></td>
      <td align="left" width="8"> <font size="1">%</font></td>
      <td align="right" width="43"> <font size="1">2.21</font></td>
      <td align="left" width="8"> <font size="1">%</font></td>
      <td align="right" width="43"> <font size="1">1.30</font></td>
      <td align="left" width="8"> <font size="1">%</font></td>
      <td align="right" width="43"> <font size="1">1.12</font></td>
      <td align="left" width="8"> <font size="1">%</font></td>
      <td align="right" width="43"> <font size="1">1.55</font></td>
      <td align="left" width="8"> <font size="1">%</font></td>
      <td align="right" width="43"> <font size="1">1.67</font></td>
      <td align="left" width="8"> <font size="1">%</font></td>
      <td align="right" width="43"> <font size="1">1.81</font></td>
      <td align="left" width="18"> <font size="1">%</font></td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="141">&nbsp;</td>
      <td align="right" width="56">
        <hr size="1" noshade align="right" width="45">
      </td>
      <td width="14">&nbsp;</td>
      <td width="9">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td align="left" width="18">&nbsp;</td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="141"> <font size="1">Investment income &#151; net, <br>
        &nbsp;&nbsp; to Common Stock Shareholders</font></td>
      <td align="right" width="56"> <font size="1">5.83</font></td>
      <td align="left" width="14"> <font size="1">%*</font></td>
      <td align="left" width="9">&nbsp;</td>
      <td align="right" width="43"> <font size="1">6.49</font></td>
      <td align="left" width="8"> <font size="1">%</font></td>
      <td align="right" width="43"> <font size="1">6.67</font></td>
      <td align="left" width="8"> <font size="1">%</font></td>
      <td align="right" width="43"> <font size="1">6.48</font></td>
      <td align="left" width="8"> <font size="1">%</font></td>
      <td align="right" width="43"> <font size="1">5.62</font></td>
      <td align="left" width="8"> <font size="1">%</font></td>
      <td align="right" width="43"> <font size="1">5.83</font></td>
      <td align="left" width="8"> <font size="1">%</font></td>
      <td align="right" width="43"> <font size="1">6.01</font></td>
      <td align="left" width="8"> <font size="1">%</font></td>
      <td align="right" width="43"> <font size="1">6.09</font></td>
      <td align="left" width="8"> <font size="1">%</font></td>
      <td align="right" width="43"> <font size="1">5.95</font></td>
      <td align="left" width="8"> <font size="1">%</font></td>
      <td align="right" width="43"> <font size="1">6.21</font></td>
      <td align="left" width="8"> <font size="1">%</font></td>
      <td align="right" width="43"> <font size="1">6.61</font></td>
      <td align="left" width="18"> <font size="1">%</font></td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="141">&nbsp;</td>
      <td align="right" width="56">
        <hr size="1" noshade align="right" width="45">
      </td>
      <td width="14">&nbsp;</td>
      <td width="9">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td align="left" width="18">&nbsp;</td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="141"> <font size="1"><b>Ratios Based on Average Net <br>
        Assets of Preferred Stock</b></font></td>
      <td align="right" width="56"> <font size="1">&nbsp;</font></td>
      <td align="left" width="14"> <font size="1">&nbsp;</font></td>
      <td align="left" width="9">&nbsp;</td>
      <td align="right" width="43"> <font size="1">&nbsp;</font></td>
      <td align="left" width="8"> <font size="1">&nbsp;</font></td>
      <td align="right" width="43"> <font size="1">&nbsp;</font></td>
      <td align="left" width="8"> <font size="1">&nbsp;</font></td>
      <td align="right" width="43"> <font size="1">&nbsp;</font></td>
      <td align="left" width="8"> <font size="1">&nbsp;</font></td>
      <td align="right" width="43"> <font size="1">&nbsp;</font></td>
      <td align="left" width="8"> <font size="1">&nbsp;</font></td>
      <td align="right" width="43"> <font size="1">&nbsp;</font></td>
      <td align="left" width="8"> <font size="1">&nbsp;</font></td>
      <td align="right" width="43"> <font size="1">&nbsp;</font></td>
      <td align="left" width="8"> <font size="1">&nbsp;</font></td>
      <td align="right" width="43"> <font size="1">&nbsp;</font></td>
      <td align="left" width="8"> <font size="1">&nbsp;</font></td>
      <td align="right" width="43"> <font size="1">&nbsp;</font></td>
      <td align="left" width="8"> <font size="1">&nbsp;</font></td>
      <td align="right" width="43"> <font size="1">&nbsp;</font></td>
      <td align="left" width="8"> <font size="1">&nbsp;</font></td>
      <td align="right" width="43"> <font size="1">&nbsp;</font></td>
      <td align="left" width="18"> <font size="1">&nbsp;</font></td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="141"> <font size="1">Dividends to Preferred <br>
        &nbsp;&nbsp; Stock Shareholders</font></td>
      <td align="right" width="56"> <font size="1">1.78</font></td>
      <td align="left" width="14"> <font size="1">%*</font></td>
      <td align="left" width="9">&nbsp;</td>
      <td align="right" width="43"> <font size="1">1.04</font></td>
      <td align="left" width="8"> <font size="1">%</font></td>
      <td align="right" width="43"> <font size="1">1.00</font></td>
      <td align="left" width="8"> <font size="1">%</font></td>
      <td align="right" width="43"> <font size="1">1.51</font></td>
      <td align="left" width="8"> <font size="1">%</font></td>
      <td align="right" width="43"> <font size="1">3.31</font></td>
      <td align="left" width="8"> <font size="1">%</font></td>
      <td align="right" width="43"> <font size="1">4.02</font></td>
      <td align="left" width="8"> <font size="1">%</font></td>
      <td align="right" width="43"> <font size="1">2.75</font></td>
      <td align="left" width="8"> <font size="1">%</font></td>
      <td align="right" width="43"> <font size="1">2.53</font></td>
      <td align="left" width="8"> <font size="1">%</font></td>
      <td align="right" width="43"> <font size="1">3.48</font></td>
      <td align="left" width="8"> <font size="1">%</font></td>
      <td align="right" width="43"> <font size="1">3.61</font></td>
      <td align="left" width="8"> <font size="1">%</font></td>
      <td align="right" width="43"> <font size="1">3.68</font></td>
      <td align="left" width="18"> <font size="1">%</font></td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="141">&nbsp;</td>
      <td align="right" width="56">
        <hr size="1" noshade align="right" width="45">
      </td>
      <td width="14">&nbsp;</td>
      <td width="9">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td align="left" width="18">&nbsp;</td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="141"> <font size="1"><b>Supplemental Data</b></font></td>
      <td align="right" width="56"> <font size="1">&nbsp;</font></td>
      <td align="left" width="14"> <font size="1">&nbsp;</font></td>
      <td align="left" width="9">&nbsp;</td>
      <td align="right" width="43"> <font size="1">&nbsp;</font></td>
      <td align="left" width="8"> <font size="1">&nbsp;</font></td>
      <td align="right" width="43"> <font size="1">&nbsp;</font></td>
      <td align="left" width="8"> <font size="1">&nbsp;</font></td>
      <td align="right" width="43"> <font size="1">&nbsp;</font></td>
      <td align="left" width="8"> <font size="1">&nbsp;</font></td>
      <td align="right" width="43"> <font size="1">&nbsp;</font></td>
      <td align="left" width="8"> <font size="1">&nbsp;</font></td>
      <td align="right" width="43"> <font size="1">&nbsp;</font></td>
      <td align="left" width="8"> <font size="1">&nbsp;</font></td>
      <td align="right" width="43"> <font size="1">&nbsp;</font></td>
      <td align="left" width="8"> <font size="1">&nbsp;</font></td>
      <td align="right" width="43"> <font size="1">&nbsp;</font></td>
      <td align="left" width="8"> <font size="1">&nbsp;</font></td>
      <td align="right" width="43"> <font size="1">&nbsp;</font></td>
      <td align="left" width="8"> <font size="1">&nbsp;</font></td>
      <td align="right" width="43"> <font size="1">&nbsp;</font></td>
      <td align="left" width="8"> <font size="1">&nbsp;</font></td>
      <td align="right" width="43"> <font size="1">&nbsp;</font></td>
      <td align="left" width="18"> <font size="1">&nbsp;</font></td>
    </tr>
    <tr align="left" valign="bottom">
      <td height="25" width="141"> <font size="1">Net assets applicable <br>
        &nbsp;&nbsp; to Common Stock, <br>
        &nbsp;&nbsp; end of period <br>
        &nbsp;&nbsp; (in thousands)</font></td>
      <td align="right" height="25" width="56"> <font size="1">$306,582</font></td>
      <td height="25" align="left" width="14">&nbsp; </td>
      <td height="25" align="left" width="9">&nbsp;</td>
      <td align="right" height="25" width="43"> <font size="1">$306,764</font></td>
      <td height="25" align="left" width="8">&nbsp; </td>
      <td align="right" height="25" width="43"> <font size="1">$300,502</font></td>
      <td height="25" align="left" width="8">&nbsp; </td>
      <td align="right" height="25" width="43"> <font size="1">$296,847</font></td>
      <td height="25" align="left" width="8">&nbsp; </td>
      <td align="right" height="25" width="43"> <font size="1">$295,457</font></td>
      <td height="25" align="left" width="8">&nbsp; </td>
      <td align="right" height="25" width="43"> <font size="1">$277,229</font></td>
      <td height="25" align="left" width="8">&nbsp; </td>
      <td align="right" height="25" width="43"> <font size="1">$275,281</font></td>
      <td height="25" align="left" width="8">&nbsp; </td>
      <td align="right" height="25" width="43"> <font size="1">$342,496</font></td>
      <td height="25" align="left" width="8">&nbsp; </td>
      <td align="right" height="25" width="43"> <font size="1">$341,230</font></td>
      <td height="25" align="left" width="8">&nbsp; </td>
      <td align="right" height="25" width="43"> <font size="1">$327,881</font></td>
      <td height="25" align="left" width="8">&nbsp; </td>
      <td align="right" height="25" width="43"> <font size="1">$323,033</font></td>
      <td height="25" align="left" width="18">&nbsp; </td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="141">&nbsp;</td>
      <td align="right" width="56">
        <hr size="1" noshade align="right" width="45">
      </td>
      <td width="14">&nbsp;</td>
      <td width="9">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td align="left" width="18">&nbsp;</td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="141"> <font size="1">Preferred Stock <br>
        &nbsp;&nbsp; outstanding, end <br>
        &nbsp;&nbsp; of period <br>
        &nbsp;&nbsp; (in thousands)</font></td>
      <td align="right" width="56"> <font size="1">$150,000</font></td>
      <td align="left" width="14">&nbsp; </td>
      <td align="left" width="9">&nbsp;</td>
      <td align="right" width="43"> <font size="1">$150,000</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$150,000</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$150,000</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$150,000</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$150,000</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$150,000</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$150,000</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$150,000</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$150,000</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$150,000</font></td>
      <td align="left" width="18">&nbsp; </td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="141">&nbsp;</td>
      <td align="right" width="56">
        <hr size="1" noshade align="right" width="45">
      </td>
      <td width="14">&nbsp;</td>
      <td width="9">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td align="left" width="18">&nbsp;</td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="141"> <font size="1">Portfolio turnover</font></td>
      <td align="right" width="56"> <font size="1">10.58</font></td>
      <td align="left" width="14"> <font size="1">%</font></td>
      <td align="left" width="9">&nbsp;</td>
      <td align="right" width="43"> <font size="1">32.30</font></td>
      <td align="left" width="8"> <font size="1">%</font></td>
      <td align="right" width="43"> <font size="1">42.06</font></td>
      <td align="left" width="8"> <font size="1">%</font></td>
      <td align="right" width="43"> <font size="1">42.89</font></td>
      <td align="left" width="8"> <font size="1">%</font></td>
      <td align="right" width="43"> <font size="1">98.99</font></td>
      <td align="left" width="8"> <font size="1">%</font></td>
      <td align="right" width="43"> <font size="1">142.46</font></td>
      <td align="left" width="8"> <font size="1">%</font></td>
      <td align="right" width="43"> <font size="1">164.45</font></td>
      <td align="left" width="8"> <font size="1">%</font></td>
      <td align="right" width="43"> <font size="1">154.08</font></td>
      <td align="left" width="8"> <font size="1">%</font></td>
      <td align="right" width="43"> <font size="1">201.87</font></td>
      <td align="left" width="8"> <font size="1">%</font></td>
      <td align="right" width="43"> <font size="1">95.49</font></td>
      <td align="left" width="8"> <font size="1">%</font></td>
      <td align="right" width="43"> <font size="1">79.27</font></td>
      <td align="left" width="18"> <font size="1">%</font></td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="141">&nbsp;</td>
      <td align="right" width="56">
        <hr size="1" noshade align="right" width="45">
      </td>
      <td width="14">&nbsp;</td>
      <td width="9">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td align="left" width="18">&nbsp;</td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="141"> <font size="1"><b>Leverage</b></font></td>
      <td align="right" width="56">&nbsp; </td>
      <td align="left" width="14">&nbsp; </td>
      <td align="left" width="9">&nbsp;</td>
      <td align="right" width="43">&nbsp; </td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43">&nbsp; </td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43">&nbsp; </td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43">&nbsp; </td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43">&nbsp; </td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43">&nbsp; </td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43">&nbsp; </td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43">&nbsp; </td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43">&nbsp; </td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43">&nbsp; </td>
      <td align="left" width="18">&nbsp; </td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="141"> <font size="1">Asset coverage per $1,000</font></td>
      <td align="right" width="56"> <font size="1">$3,044</font></td>
      <td align="left" width="14">&nbsp; </td>
      <td align="left" width="9">&nbsp;</td>
      <td align="right" width="43"> <font size="1">$3,045</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$3,003</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$2,979</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$2,970</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$2,848</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$2,835</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$3,283</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$3,275</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$3,186</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$3,154</font></td>
      <td align="left" width="18">&nbsp; </td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="141">&nbsp;</td>
      <td align="right" width="56">
        <hr size="1" noshade align="right" width="45">
      </td>
      <td width="14">&nbsp;</td>
      <td width="9">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td align="left" width="18">&nbsp;</td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="141"> <font size="1">Liquidation preference <br>
        &nbsp;&nbsp; per share</font></td>
      <td align="right" width="56"> <font size="1">$25,000</font></td>
      <td align="left" width="14">&nbsp; </td>
      <td align="left" width="9">&nbsp;</td>
      <td align="right" width="43"> <font size="1">$25,000</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$25,000</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$25,000</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$25,000</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$25,000</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$25,000</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$25,000</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$25,000</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$25,000</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$25,000</font></td>
      <td align="left" width="18">&nbsp; </td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="141">&nbsp;</td>
      <td align="right" width="56">
        <hr size="1" noshade align="right" width="45">
      </td>
      <td width="14">&nbsp;</td>
      <td width="9">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td align="left" width="18">&nbsp;</td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="141"> <font size="1">Average market value <br>
        &nbsp;&nbsp; per share#</font></td>
      <td align="right" width="56"> <font size="1">$25,000</font></td>
      <td align="left" width="14">&nbsp; </td>
      <td align="left" width="9">&nbsp;</td>
      <td align="right" width="43"> <font size="1">$25,000</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$25,000</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$25,000</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$25,000</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$25,000</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$25,000</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$25,000</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$25,000</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$25,000</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$25,000</font></td>
      <td align="left" width="18">&nbsp; </td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="141">&nbsp;</td>
      <td align="right" width="56">
        <hr size="1" noshade align="right" width="45">
      </td>
      <td width="14">&nbsp;</td>
      <td width="9">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td align="left" width="18">&nbsp;</td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="141"> <font size="1"><b>Dividends Per Share on <br>
        Preferred Shares Outstanding</b></font></td>
      <td align="right" width="56">&nbsp; </td>
      <td align="left" width="14">&nbsp; </td>
      <td align="left" width="9">&nbsp;</td>
      <td align="right" width="43">&nbsp; </td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43">&nbsp; </td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43">&nbsp; </td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43">&nbsp; </td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43">&nbsp; </td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43">&nbsp; </td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43">&nbsp; </td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43">&nbsp; </td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43">&nbsp; </td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43">&nbsp; </td>
      <td align="left" width="18">&nbsp; </td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="141"> <font size="1">Series A&#151; <br>
        &nbsp;&nbsp; Investment income &#151; net</font></td>
      <td align="right" width="56"> <font size="1">$210</font></td>
      <td align="left" width="14">&nbsp; </td>
      <td align="left" width="9">&nbsp;</td>
      <td align="right" width="43"> <font size="1">$271</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$276</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$390</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$855</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$1,017</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$706</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$629</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$869</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$897</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$885</font></td>
      <td align="left" width="18">&nbsp; </td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="141">&nbsp;</td>
      <td align="right" width="56">
        <hr size="1" noshade align="right" width="45">
      </td>
      <td width="14">&nbsp;</td>
      <td width="9">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td align="left" width="18">&nbsp;</td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="141"> <font size="1">Series B&#151; <br>
        &nbsp;&nbsp; Investment income &#151; net</font></td>
      <td align="right" width="56"> <font size="1">$231</font></td>
      <td align="left" width="14">&nbsp; </td>
      <td align="left" width="9">&nbsp;</td>
      <td align="right" width="43"> <font size="1">$253</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$240</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$388</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$853</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$1,024</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$702</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$634</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$868</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$899</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$942</font></td>
      <td align="left" width="18">&nbsp; </td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="141">&nbsp;</td>
      <td align="right" width="56">
        <hr size="1" noshade align="right" width="45">
      </td>
      <td width="14">&nbsp;</td>
      <td width="9">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td align="left" width="18">&nbsp;</td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="141"> <font size="1">Series C&#151; <br>
        &nbsp;&nbsp; Investment income &#151; net</font></td>
      <td align="right" width="56"> <font size="1">$223</font></td>
      <td align="left" width="14">&nbsp; </td>
      <td align="left" width="9">&nbsp;</td>
      <td align="right" width="43"> <font size="1">$252</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$235</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$351</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$777</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$986</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$650</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$634</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$872</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$910</font></td>
      <td align="left" width="8">&nbsp; </td>
      <td align="right" width="43"> <font size="1">$934</font></td>
      <td align="left" width="18">&nbsp; </td>
    </tr>
    <tr align="left" valign="bottom">
      <td width="141">&nbsp;</td>
      <td align="right" width="56">
        <hr size="1" noshade align="right" width="45">
      </td>
      <td width="14">&nbsp;</td>
      <td width="9">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td width="8">&nbsp;</td>
      <td align="right" width="43">
        <hr size="1" noshade>
      </td>
      <td align="left" width="18">&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" FSL="Workstation" -->
<TABLE WIDTH=100%><TR>
    <TD WIDTH=4% ALIGN=right VALIGN=top>&nbsp;</TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top>&nbsp;</TD>
  </TR></TABLE>
<!-- MARKER FORMAT-SHEET="Footnote Right" FSL="Workstation" -->
<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="1">  * </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">Annualized.</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Footnote Right" FSL="Workstation" -->
<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="1"> ** </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">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" 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">Do
not reflect the effect of dividends to Preferred Stock shareholders. </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">&#135; </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">Based
on average shares outstanding. </FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Footnote Right" 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">Based
on monthly market value per share.</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Footnote Right" FSL="Workstation" -->
<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="1">+ </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">Amount
is less than $.01 per share.</FONT></TD></TR></TABLE>

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

<!-- MARKER FORMAT-SHEET="Footnote Right" FSL="Workstation" -->
<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="1">&#134;&#134; </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">Amount
is less than ($.01) per share.</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>





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



<!-- 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
Quality Fund II, 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 July 9, 1992, and has registered
under the Investment Company Act of 1940, as amended (&#147;1940 Act&#148;). The Fund&#146;s principal
executive office is located at 800 Scudders Mill Road, Plainsboro, New Jersey 08536, and
its telephone number is (609) 282-2800. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board of Directors of the Fund may at any time consider a merger, consolidation or other
form of reorganization of the Fund with one or more other investment companies advised by
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 $9,755,000 after payment of offering
expenses (estimated to be approximately $145,000) 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 align="center">
<table border=0 cellspacing=0 cellpadding=0 width="700">
    <tr align="left" valign="bottom">
      <td> <font size="2"><b>&nbsp;</b></font></td>
      <td>&nbsp;</td>
      <td align="center" valign="bottom"> <font size="1"><b>Actual</b></font>
        <hr size="1" noshade width="40">
      </td>
      <td align="center" valign="bottom">&nbsp;</td>
      <td align="center" valign="bottom">&nbsp;</td>
      <td align="center" valign="bottom"> <font size="1"><b>As Adjusted</b></font>
        <hr size="1" noshade width="65">
      </td>
      <td align="center" valign="bottom">&nbsp;</td>
    </tr>
    <tr align="left" valign="bottom">
      <td rowspan="5"> <font size="2">Preferred Stock (6,000 shares of Other AMPS
        authorized, <br>
        &nbsp;&nbsp; issued and outstanding at $25,000 per share liquidation preference,
        plus <br>
        &nbsp;&nbsp; accumulated but unpaid dividends; 6400 shares of AMPS and
        Other AMPS <br>
        &nbsp;&nbsp; authorized, issued and outstanding, as adjusted, at $25,000
        per share liquidation <br>
        &nbsp;&nbsp; preference, plus accumulated but unpaid dividends) </font></td>
      <td rowspan="5">&nbsp; </td>
      <td rowspan="5" align="right"> <font size="2">$150,023,040</font></td>
      <td align="left" valign=bottom rowspan="5"><font size="2">&nbsp;&nbsp;</font></td>
      <td rowspan="5"><font size="2">&nbsp;&nbsp;</font></td>
      <td rowspan="5" align="right"> <font size="2">$160,023,040</font></td>
      <td align="left" rowspan="5">&nbsp;</td>
    </tr>
    <tr align="left" valign="bottom"> <td></td></tr>
    <tr align="left" valign="bottom"> <td></td></tr>
    <tr align="left" valign="bottom"> <td></td></tr>
    <tr align="left" valign="bottom"> <td></td></tr>
    <tr align="left" valign="bottom">
      <td>&nbsp;</td>
      <td>&nbsp;</td>
      <td align="right">
        <hr size="2" align="right" width="70" noshade>
      </td>
      <td align="left" valign=bottom>&nbsp;</td>
      <td align="right">&nbsp;</td>
      <td align="right">
        <hr size="2" align="right" width="70" noshade>
      </td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr align="left" valign="bottom">
      <td rowspan="3"> <font size="2">Common stock, par value $.10 per share (199,994,000
        shares authorized, 22,366,930 <br>
        &nbsp;&nbsp; shares issued and outstanding; 199,993,600 shares authorized,
        22,366,930 shares <br>
        &nbsp;&nbsp; issued and outstanding, as adjusted) </font></td>
      <td rowspan="3">&nbsp; </td>
      <td align="right" rowspan="3"> <font size="2">$&nbsp;&nbsp;&nbsp;2,236,693</font></td>
      <td align="left" valign=bottom rowspan="3">&nbsp;</td>
      <td align="right" rowspan="3">&nbsp;</td>
      <td align="right" rowspan="3"> <font size="2">$&nbsp;&nbsp;&nbsp;2,236,693</font></td>
      <td align="left" rowspan="3">&nbsp;</td>
    </tr>
    <tr align="left" valign="bottom"> <td></td></tr>
    <tr align="left" valign="bottom"> <td></td></tr>
    <tr align="left" valign="bottom">
      <td> <font size="2">Paid-in capital in excess of par value</font></td>
      <td>&nbsp; </td>
      <td align="right"> <font size="2">311,763,292</font></td>
      <td align="left" valign=bottom>&nbsp;</td>
      <td align="right">&nbsp;</td>
      <td align="right"> <font size="2">311,518,292</font></td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr align="left" valign="bottom">
      <td> <font size="2">Undistributed investment income&#151;net</font></td>
      <td>&nbsp; </td>
      <td align="right"> <font size="2">4,835,663</font></td>
      <td align="left" valign=bottom>&nbsp;</td>
      <td align="right">&nbsp;</td>
      <td align="right"> <font size="2">4,835,663</font></td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr align="left" valign="bottom">
      <td> <font size="2">Accumulated realized capital losses&#151;net</font></td>
      <td>&nbsp; </td>
      <td align="right"> <font size="2">(39,087,186</font></td>
      <td align="left" valign=bottom><font size="2">)</font></td>
      <td align="right">&nbsp;</td>
      <td align="right"> <font size="2">(39,087,186</font></td>
      <td align="left"><font size="2">)</font></td>
    </tr>
    <tr align="left" valign="bottom">
      <td> <font size="2">Unrealized appreciation&#151;net</font></td>
      <td>&nbsp; </td>
      <td align="right"> <font size="2">26,833,656</font></td>
      <td align="left" valign=bottom>&nbsp;</td>
      <td align="right">&nbsp;</td>
      <td align="right"> <font size="2">26,833,656</font></td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr align="left" valign="bottom">
      <td>&nbsp;</td>
      <td>&nbsp;</td>
      <td align="right">
        <hr size="1" align="right" width="70" noshade>
      </td>
      <td>&nbsp;</td>
      <td align="right">&nbsp;</td>
      <td align="right">
        <hr size="1" align="right" width="70" noshade>
      </td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr align="left" valign="bottom">
      <td> <font size="2">Net assets applicable to outstanding common stock</font></td>
      <td>&nbsp; </td>
      <td align="right"> <font size="2">$306,582,118</font></td>
      <td align="left" valign=bottom>&nbsp;</td>
      <td align="right">&nbsp;</td>
      <td align="right"> <font size="2">$306,337,118</font></td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr align="left" valign="bottom">
      <td>&nbsp;</td>
      <td>&nbsp;</td>
      <td align="right">
        <hr size="2" align="right" width="70" noshade>
      </td>
      <td>&nbsp;</td>
      <td align="right">&nbsp;</td>
      <td align="right">
        <hr size="2" align="right" width="70" noshade>
      </td>
      <td align="left">&nbsp;</td>
    </tr>
  </table>
</div>

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<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 99.21% of the market value of the Fund&#146;s
  portfolio was invested in long term and intermediate term municipal obligations
  and approximately 0.79% of the market value of the Fund&#146;s portfolio was
  invested in short term tax exempt securities. The following table sets forth
  certain information with respect to the composition of the Fund&#146;s long
  term and intermediate term municipal obligations investment portfolio as of
  April 30, 2005. </FONT></P>
<div align="center">
  <TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
    <TR VALIGN=Bottom align="center">
      <TD WIDTH=97><b><font size=1>Moody&#146;s* </font> </b>
        <hr width=50 size="1" noshade>
      </TD>
      <TD WIDTH=17>&nbsp;</TD>
      <TD WIDTH=97><b><font size=1>S&amp;P* </font> </b>
        <hr width=50 size="1" noshade>
      </TD>
      <TD WIDTH=17>&nbsp;</TD>
      <TD colspan="2"><b><font size=1>Number of <br>
        Issues </font> </b>
        <hr width=50 size="1" noshade>
      </TD>
      <TD WIDTH=15>&nbsp;</TD>
      <TD colspan="2"><b><font size=1>Value <br>
        (in thousands) </font> </b>
        <hr width=75 size="1" noshade>
      </TD>
      <TD WIDTH=15>&nbsp;</TD>
      <TD colspan="2"><b><font size=1>Percent </font> </b>
        <hr width=50 size="1" noshade>
      </TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT WIDTH=97><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Aaa</FONT></TD>
      <TD ALIGN=LEFT WIDTH=17><FONT SIZE=2>&nbsp;&nbsp;&nbsp;</FONT></TD>
      <TD ALIGN=center valign="bottom" WIDTH=97><FONT SIZE=2>AAA</FONT></TD>
      <TD ALIGN=center valign="bottom" WIDTH=17><FONT SIZE=2>&nbsp;&nbsp;&nbsp;</FONT></TD>
      <TD ALIGN=right valign="bottom" WIDTH=71><FONT SIZE=2>105</FONT></TD>
      <TD ALIGN=center valign="bottom" WIDTH=25><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=center valign="bottom" WIDTH=15>&nbsp;&nbsp;</TD>
      <TD ALIGN=right valign="bottom" WIDTH=106><FONT SIZE=2>$400,110</FONT></TD>
      <TD ALIGN=center valign="bottom" WIDTH=38><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=center valign="bottom" WIDTH=15>&nbsp;&nbsp;</TD>
      <TD ALIGN=right valign="bottom" WIDTH=73><FONT SIZE=2>88.38</FONT></TD>
      <TD ALIGN=left valign="bottom" WIDTH=29><FONT SIZE=2>%</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="97"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Aa</FONT></TD>
      <TD ALIGN=LEFT width="17"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=center valign="bottom" width="97"><FONT SIZE=2>AA</FONT></TD>
      <TD ALIGN=center valign="bottom" width="17"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=right valign="bottom" width="71"><FONT SIZE=2>6</FONT></TD>
      <TD ALIGN=center valign="bottom" width="25"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=center valign="bottom" width="15">&nbsp;</TD>
      <TD ALIGN=right valign="bottom" width="106"><FONT SIZE=2>14,757</FONT></TD>
      <TD ALIGN=center valign="bottom" width="38"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=center valign="bottom" width="15">&nbsp;</TD>
      <TD ALIGN=right valign="bottom" width="73"><FONT SIZE=2>3.26</FONT></TD>
      <TD ALIGN=left valign="bottom" width="29">&nbsp;</TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="97"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A</FONT></TD>
      <TD ALIGN=LEFT width="17"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=center valign="bottom" width="97"><FONT SIZE=2>A</FONT></TD>
      <TD ALIGN=center valign="bottom" width="17"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=right valign="bottom" width="71"><FONT SIZE=2>7</FONT></TD>
      <TD ALIGN=center valign="bottom" width="25"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=center valign="bottom" width="15">&nbsp;</TD>
      <TD ALIGN=right valign="bottom" width="106"><FONT SIZE=2>26,398</FONT></TD>
      <TD ALIGN=center valign="bottom" width="38"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=center valign="bottom" width="15">&nbsp;</TD>
      <TD ALIGN=right valign="bottom" width="73"><FONT SIZE=2>5.83</FONT></TD>
      <TD ALIGN=left valign="bottom" width="29">&nbsp;</TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="97"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Baa</FONT></TD>
      <TD ALIGN=LEFT width="17"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=center valign="bottom" width="97"><FONT SIZE=2>BBB</FONT></TD>
      <TD ALIGN=center valign="bottom" width="17"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=right valign="bottom" width="71"><FONT SIZE=2>2</FONT></TD>
      <TD ALIGN=center valign="bottom" width="25"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=center valign="bottom" width="15">&nbsp;</TD>
      <TD ALIGN=right valign="bottom" width="106"><FONT SIZE=2>1,669</FONT></TD>
      <TD ALIGN=center valign="bottom" width="38"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=center valign="bottom" width="15">&nbsp;</TD>
      <TD ALIGN=right valign="bottom" width="73"><FONT SIZE=2>0.37</FONT></TD>
      <TD ALIGN=left valign="bottom" width="29">&nbsp;</TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="97"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ba</FONT></TD>
      <TD ALIGN=LEFT width="17"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=center valign="bottom" width="97"><FONT SIZE=2>BBB</FONT></TD>
      <TD ALIGN=center valign="bottom" width="17"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=right valign="bottom" width="71"><FONT SIZE=2>1</FONT></TD>
      <TD ALIGN=center valign="bottom" width="25"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=center valign="bottom" width="15">&nbsp;</TD>
      <TD ALIGN=right valign="bottom" width="106"><FONT SIZE=2>8,606</FONT></TD>
      <TD ALIGN=center valign="bottom" width="38"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=center valign="bottom" width="15">&nbsp;</TD>
      <TD ALIGN=right valign="bottom" width="73"><FONT SIZE=2>1.90</FONT></TD>
      <TD ALIGN=left valign="bottom" width="29">&nbsp;</TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="97"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NR**</FONT></TD>
      <TD ALIGN=LEFT width="17"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=center valign="bottom" width="97"><FONT SIZE=2>NR**</FONT></TD>
      <TD ALIGN=center valign="bottom" width="17"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=right valign="bottom" width="71"><FONT SIZE=2>1</FONT></TD>
      <TD ALIGN=center valign="bottom" width="25"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=center valign="bottom" width="15">&nbsp;</TD>
      <TD ALIGN=right valign="bottom" width="106"><FONT SIZE=2>1,160</FONT></TD>
      <TD ALIGN=center valign="bottom" width="38"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=center valign="bottom" width="15">&nbsp;</TD>
      <TD ALIGN=right valign="bottom" width="73"><FONT SIZE=2>0.26</FONT></TD>
      <TD ALIGN=left valign="bottom" width="29">&nbsp;</TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="97">&nbsp;</TD>
      <TD ALIGN=LEFT width="17">&nbsp;</TD>
      <TD ALIGN=center valign="bottom" width="97">&nbsp;</TD>
      <TD ALIGN=center valign="bottom" width="17">&nbsp;</TD>
      <TD ALIGN=right valign="bottom" width="71">
        <hr size="1" noshade align="right" width="50">
      </TD>
      <TD ALIGN=center valign="bottom" width="25">&nbsp;</TD>
      <TD ALIGN=center valign="bottom" width="15">&nbsp;</TD>
      <TD ALIGN=right valign="bottom" width="106">
        <hr size="1" noshade align="right" width="50">
      </TD>
      <TD ALIGN=center valign="bottom" width="38">&nbsp;</TD>
      <TD ALIGN=center valign="bottom" width="15">&nbsp;</TD>
      <TD ALIGN=right valign="bottom" width="73">
        <hr size="1" noshade align="right" width="50">
      </TD>
      <TD ALIGN=left valign="bottom" width="29">&nbsp;</TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="97"><FONT SIZE=2>Total</FONT></TD>
      <TD ALIGN=LEFT width="17"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=center valign="bottom" width="97"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=center valign="bottom" width="17"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=right valign="bottom" width="71"><FONT SIZE=2>122</FONT></TD>
      <TD ALIGN=center valign="bottom" width="25"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=center valign="bottom" width="15">&nbsp;</TD>
      <TD ALIGN=right valign="bottom" width="106"><FONT SIZE=2>$452,700</FONT></TD>
      <TD ALIGN=center valign="bottom" width="38"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=center valign="bottom" width="15">&nbsp;</TD>
      <TD ALIGN=right valign="bottom" width="73"><FONT SIZE=2>100.00</FONT></TD>
      <TD ALIGN=left valign="bottom" width="29"><FONT SIZE=2>%</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="97">&nbsp;</TD>
      <TD ALIGN=LEFT width="17">&nbsp;</TD>
      <TD ALIGN=center valign="bottom" width="97">&nbsp;</TD>
      <TD ALIGN=center valign="bottom" width="17">&nbsp;</TD>
      <TD ALIGN=right valign="bottom" width="71">
        <hr size="2" noshade align="right" width="50">
      </TD>
      <TD ALIGN=center valign="bottom" width="25">&nbsp;</TD>
      <TD ALIGN=center valign="bottom" width="15">&nbsp;</TD>
      <TD ALIGN=right valign="bottom" width="106">
        <hr size="2" noshade align="right" width="50">
      </TD>
      <TD ALIGN=center valign="bottom" width="38">&nbsp;</TD>
      <TD ALIGN=center valign="bottom" width="15">&nbsp;</TD>
      <TD ALIGN=right valign="bottom" width="73">
        <hr size="2" noshade align="right" width="50">
      </TD>
      <TD ALIGN=left valign="bottom" width="29">&nbsp;</TD>
    </TR>
  </TABLE>
</div>
<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">Ratings:
Using the higher of Moody&#146;s or S&amp;P ratings on the Fund&#146;s      investments. Moody&#146;s
rating categories may be modified further by a 1, 2 or      3 in Aa, A, Baa, Ba, B and
Caa ratings. S&amp;P rating categories may be      modified further by a plus (+) or
minus (-) in AA, A, BBB, BB, B and CCC      ratings.</FONT></TD></TR></TABLE>

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


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


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


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Fund may invest in certain tax exempt securities classified as &#147;private activity bonds&#148;
(or industrial development bonds, under pre-1986 law) (&#147;PABs&#148;) (in general, bonds that
benefit non-governmental entities) that may subject certain investors in the Fund to an
alternative minimum tax. See &#147;Taxes.&#148; The percentage of the Fund&#146;s total assets invested
in PABs will vary from time to time. The Fund will not invest more than 25% of its total
assets (taken at market value) in Municipal Bonds whose issuers are located in the same
state. </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Municipal Bonds in which the Fund invests are those Municipal Bonds rated at the date of
purchase in the three highest quality ratings as determined by either Moody&#146;s Investors
Service, Inc. (&#147;Moody&#146;s&#148;) (currently Aaa, Aa and A), Standard &amp; Poor&#146;s (&#147;S&amp;P&#148;)
(currently AAA, AA and A) or Fitch Ratings (&#147;Fitch&#148;) (currently AAA, AA and A). In the
case of short term notes, these quality 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-2 for Fitch. In the case of tax exempt
commercial paper, these quality rating categories are A-1+ through A-2 for S&amp;P,
Prime-1 through Prime-2 for Moody&#146;s and F-1+ through F-2 for Fitch. There may be
sub-categories or gradations indicating relative standing within the rating categories
set forth above. In assessing the quality of Municipal Bonds with respect to the
foregoing requirements, the Investment Adviser takes into account the nature of any
letters of credit or similar credit enhancement to which particular Municipal Bonds are
entitled and the creditworthiness of the financial institution that provided such credit
enhancement. See Appendix A &#151; &#147;Description of Municipal Bond Ratings&#148; to the
statement of additional information. If unrated, such securities will possess
creditworthiness comparable, in the opinion of the Investment Adviser, to other
obligations in which the Fund may invest. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
  percentage and ratings limitations on securities in which the Fund may invest
  apply at the time of making an investment and shall not be considered violated
  if an investment rating is subsequently downgraded to a rating that would have
  precluded the Fund&#146;s initial investment in such security. In the event
  that the Fund disposes of a portfolio security subsequent to its being downgraded,
  the Fund may experience a greater risk of loss than if such security had been
  sold prior to such downgrade. </FONT></P>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
net asset value of the shares of common stock of a closed-end investment company, such as
the Fund, which invests primarily in fixed income securities, changes as the general
levels of interest rates fluctuate. When interest rates decline, the value of a fixed
income portfolio can be expected to rise. Conversely, when interest rates rise, the value
of a fixed income portfolio can be expected to decline. Prices of longer term securities
in which the Fund primarily invests generally fluctuate more in response to interest rate
changes than do shorter term securities. These changes in net asset value are likely to
be greater in the case of a fund having a leveraged capital structure, such as the Fund. </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  Fund intends to invest primarily in long term Municipal Bonds with maturities
  of more than ten years. However, the Fund also may invest in intermediate term
  Municipal Bonds with maturities of between three years and ten years. The Fund
  also may invest from time to time in short term Municipal Bonds with maturities
  of less than three years. The average maturity of the Fund&#146;s portfolio
  securities will vary based upon the Investment Adviser&#146;s assessment of
  economic and market conditions. As of April 30, 2005, the weighted average maturity
  of the Fund&#146;s portfolio was approximately 19.89 years. </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">
18</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" -->




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

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

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

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<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>

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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;&#151; 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 A &#151; &#147;Description of
Municipal Bond Ratings&#148; to the statement of additional information. Obligations are
included within the term Municipal Bonds if the interest paid thereon is excluded from
gross income for Federal income tax purposes in the opinion of bond counsel to the issuer. </FONT></P>

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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 industrial development bonds or private activity bonds, 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 <i>ad valorem</i> real property taxes and the extent to which the entity
  relies on Federal or state aid, access to capital markets or other factors beyond
  the state&#146;s or entity&#146;s control. Accordingly, the capacity of the
  issuer of a general obligation bond as to the timely payment of interest and
  the repayment of principal when due is affected by the issuer&#146;s maintenance
  of its tax base. </FONT> </P>

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

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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 </FONT> </P>








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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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  </FONT></P>






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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;variation margin,&#148; are required to
be made on a daily basis as the price of the futures contract fluctuates making the long
and short positions in the futures contract more or less valuable, a process known as
&#147;marking to the market.&#148; At any time prior to the settlement date of the futures
contract, the position may be closed out by taking an opposite position that will operate
to terminate the position in the futures contract. A final determination of variation
margin is then made, additional cash is required to be paid to or released by the broker
and the purchaser realizes a loss or gain. In addition, a nominal commission is paid on
each completed sale transaction. </FONT></P>

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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"><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 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.  </FONT></P>






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

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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  </FONT></P>






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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>agency securities, domestic bank or
savings institution certificates of deposit and bankers&#146; acceptances, short term
corporate debt securities such as commercial paper and repurchase agreements. These
Temporary Investments must have a stated maturity not in excess of one year from the date
of purchase. The Fund may not invest in any security issued by a commercial bank or a
savings institution unless the bank or institution is organized and operating in the
United States, has total assets of at least one billion dollars and is a member of the
Federal Deposit Insurance Corporation (&#147;FDIC&#148;), except that up to 10% of total assets may
be invested in certificates of deposit of smaller institutions if such certificates are
fully insured by the FDIC. </FONT></P>

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

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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 D 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 D 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 6,000 shares of three 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 $150,000,000 (the
&#147;Other AMPS&#148;). The Other AMPS are as follows: 2,000 shares of Auction Market Preferred
Stock, Series A; 2,000 shares of Auction Market Preferred Stock, Series B; and 2,000
shares of Auction Market Preferred Stock, Series C. The Series D 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 the Series D 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, including the
provisions thereof establishing the Series D AMPS. The Fund&#146;s Charter and the form of
Articles Supplementary establishing the terms of the Series D 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 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 AMPS, dividends on AMPS will be payable, at the option of the Fund,
either (i) with respect to any 7-Day Dividend Period and any Short Term Dividend Period
of 35 or fewer days, on the day next succeeding the last day thereof or (ii) with respect
to any Short Term Dividend Period of more than 35 days and with respect to any Long Term
Dividend Period, monthly on the first Business Day of each calendar month during such
Short Term Dividend Period or Long Term Dividend Period and on the day next succeeding
the last day thereof (each such date referred to in clause (i) or (ii) being referred to
herein as a &#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.  </FONT></P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Thus, following the Initial Dividend
Payment Date for AMPS, dividends generally will be payable (in the case of Dividend
Periods which are not Special Dividend Periods) on each succeeding Tuesday in the case of
the Series D 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 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 </FONT> </P>





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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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 AMPS to but excluding the Initial Dividend
Payment Date (the &#147;Initial Dividend Period&#148;) with respect to the 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 AMPS, the Applicable
Rate on the AMPS for each Subsequent Dividend Period, which Subsequent Dividend Period
shall be a period commencing on and including a Dividend Payment Date and ending on and
including the calendar day prior to the next Dividend Payment Date (or calendar day prior
to the last Dividend Payment Date in a Dividend Period if there is more than one Dividend
Payment Date), shall be equal to the rate per annum that results from the Auction with
respect to such Subsequent Dividend Period. The Initial Dividend Period and Subsequent
Dividend Period for AMPS is referred to herein as a &#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;Additional
Dividends. If the Fund retroactively allocates any net capital gain or other income
subject to regular Federal income taxes to shares of AMPS without having given advance
notice thereof to the Auction Agent as described under &#147;The Auction &#151; Auction
Procedures &#151; Auction Date; Advance Notice of Allocation of Taxable Income; Inclusion
of Taxable Income in Dividends&#148; below, which may only happen when such allocation is made
as a result of the redemption of all or a portion of the outstanding shares of AMPS or
the liquidation of the Fund (the amount of such allocation referred to herein as a
&#147;Retroactive Taxable Allocation&#148;), the Fund, within 90 days (and generally within 60
days) after the end of the Fund&#146;s fiscal year for which a Retroactive Taxable Allocation
is made, will provide notice thereof to the Auction Agent and to each holder of shares
(initially Cede as nominee of the Securities Depository) during such fiscal year at such
holder&#146;s address as the same appears or last appeared on the stock books of the Fund. The
Fund, within 30 days after such notice is given to the Auction Agent, will pay to the
Auction Agent (who then will distribute to such holders of shares of AMPS), out of funds
legally available therefor, an amount equal to the aggregate Additional Dividend (as
defined below) with respect to all Retroactive Taxable Allocations made to such holders
during the fiscal year in question. </FONT></P>



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

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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 on 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 align="center">
  <table border=0 cellspacing=0 cellpadding=0 width="600">
    <tr align="left" valign="top">
      <td rowspan="2" align="center" width=400> <font size="2">Value of Fund assets
        less liabilities <br>
        not constituting senior securities</font></td>
      <td rowspan="2" align="center" width=24 valign="bottom"> <font size="2">=</font></td>
      <td rowspan="2" align="center" width=115 valign="bottom"> <font size="2">$466,337,118</font></td>
      <td rowspan="2" align="center" width=18 valign="bottom"> <font size="2">=</font></td>
      <td rowspan="2" align="center" width=43>&nbsp; </td>
    </tr>

    <tr align="left" valign="top">
      <td align="center" width=400>
        <hr size="1" noshade width="300">
      </td>
      <td align="center" width=24>&nbsp; </td>
      <td align="center" width=115>
        <hr size="1" noshade width="90">
      </td>
      <td align="center" width=18>&nbsp; </td>
      <td align="center" width=43> <font size="2">291%</font></td>
    </tr>
    <tr align="left" valign="top">
      <td rowspan="2" align="center" width=400> <font size="2">Senior securities
        representing indebtedness plus <br>
        liquidation value of the shares of AMPS</font></td>
      <td rowspan="2" align="center" width=24>&nbsp; </td>
      <td rowspan="2" align="center" width=115> <font size="2">$160,023,040</font></td>
      <td rowspan="2" align="center" width=18>&nbsp; </td>
      <td rowspan="2" align="center" width=43>&nbsp; </td>
    </tr>

  </table>
  <br>
</div>
<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 </FONT> </P>




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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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,  </FONT></P>







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

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

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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 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 Series D AMPS. One or more registered
certificates for all of the shares of the Series D 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 C to
the statement of additional information. The Settlement Procedures to be used with
respect to Auctions are set forth in Appendix B to the statement of additional
information. </FONT></P>

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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 D
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 D AMPS for Dividend Periods after the Initial Dividend Period
normally will be held every Monday after the preceding Dividend Payment Date, and each
subsequent Dividend Period normally will begin on the following Tuesday (also a Dividend
Payment Date). The Auction Date and the first day of the related Dividend Period for the
Series D AMPS (both of which must be Business Days) need not be consecutive calendar
days. For example, in most cases, if the Monday that normally would be an Auction Date
for Series D AMPS is not a Business Day, then such Auction Date will be the preceding
Friday and the first day of the related Dividend Period will continue to be the following
Tuesday. See &#147;Description of AMPS &#151; Dividends&#148; for information concerning the
circumstances under which a Dividend Payment Date may fall on a date other than the days
specified above, which may affect the Auction Date. </FONT> </P>

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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;Orders
by Beneficial Owners, Potential Beneficial Owners, Existing Holders and Potential
Holders. 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 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 align="center">
  <TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
    <TR VALIGN=Bottom align="center">
      <TD colspan="3"><b><font size=1>Credit Ratings </font></b>
        <hr width=95% size="1" noshade>
      </TD>
      <TD>&nbsp;</TD>
      <TD><b><font size=1>Applicable <br>
        Percentage <br>
        of Reference <br>
        Rate&#151;No </font></b></TD>
      <TD>&nbsp;</TD>
      <TD><b><font size=1>Applicable <br>
        Percentage <br>
        of Reference <br>
        Rate&#151; </font></b></TD>
      <TD>&nbsp;</TD>
      <TD><b><font size=1>Applicable <br>
        Spread Over <br>
        Reference <br>
        Rate&#151;No </font></b></TD>
      <TD>&nbsp;</TD>
      <TD><b><font size=1>Applicable <br>
        Spread Over <br>
        Reference <br>
        Rate&#151; </font></b></TD>
    </TR>
    <TR VALIGN=Bottom align="center">
      <TD><b><font size=1>Moody&#146;s </font> </b>
        <hr width=95% size="1" noshade>
      </TD>
      <TD>&nbsp;</TD>
      <TD><b><font size=1>S&amp;P </font> </b>
        <hr width=95% size="1" noshade>
      </TD>
      <TD>&nbsp;</TD>
      <TD><b><font size=1>Notification </font> </b>
        <hr width=95% size="1" noshade>
      </TD>
      <TD>&nbsp;</TD>
      <TD><b><font size=1>Notification </font> </b>
        <hr width=95% size="1" noshade>
      </TD>
      <TD>&nbsp;</TD>
      <TD><b><font size=1>Notification </font> </b>
        <hr width=95% size="1" noshade>
      </TD>
      <TD>&nbsp;</TD>
      <TD><b><font size=1>Notification </font> </b>
        <hr width=95% size="1" noshade>
      </TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=CENTER><FONT SIZE=2>Aaa</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>AAA</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>110%</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>125%</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>1.10%</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>1.25%</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=CENTER><FONT SIZE=2>Aa3 to Aa1</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>AA- to AA+</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>125%</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>150%</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>1.25%</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>1.50%</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=CENTER><FONT SIZE=2>A3 to A1</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>A- to A+</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>150%</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>200%</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>1.50%</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>2.00%</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=CENTER><FONT SIZE=2>Baa3 to Baa1</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>BBB- to BBB+</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>175%</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>250%</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>1.75%</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>2.50%</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=CENTER><FONT SIZE=2>Below Baa3</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>Below BBB-</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>200%</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>300%</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>2.00%</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>3.00%</FONT></TD>
    </TR>
  </TABLE>
  <br>
</div>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>There is no minimum Applicable Rate
in respect of 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;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  </FONT></P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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 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 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>




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

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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>

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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 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 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>

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







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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. 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;  </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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 Commission
staff. At the Commission staff&#146;s request, Merrill Lynch, together with certain other
broker-dealers and other firms that participate in the auction rate securities market, is
engaging in discussions with the Commission staff concerning its inquiry. Neither Merrill
Lynch nor the Fund can predict the ultimate outcome of the inquiry or how that outcome
will affect the market for the AMPS or the auctions. </FONT> </P>

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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;<I>Certain
of the capitalized terms used herein not otherwise defined in this prospectus have the
meaning provided in the Glossary at the back of this prospectus.</I> </FONT> </P>

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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 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>

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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, 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  </FONT></P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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 Michael A. Kalinoski. Mr. Kalinoski has been a Vice President and portfolio
  manager at MLIM since 1999 and has 12 years of experience investing in Municipal
  Bonds, including six years as a portfolio manager on behalf of registered investment
  companies. He has been the portfolio manager of the Fund since 2000. 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 amount obtained from
leverage and 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;The
Investment Advisory Agreement obligates the Investment Adviser to provide investment
advisory services and to pay all compensation of and furnish office space for officers
and employees of the Fund connected with investment and economic research, trading and
investment management of the Fund, as well as the compensation of all Directors of the
Fund who are affiliated persons of the Investment Adviser or any of its affiliates. The
Fund pays all other expenses incurred in the operation of the Fund, including, among
other things, expenses for legal and auditing services, taxes, costs of preparing,
printing and mailing proxies, listing fees, stock certificates and stockholder reports,
charges of the custodian and the transfer agent, dividend disbursing agent and registrar,
Securities and Exchange Commission fees, fees and expenses of non-interested Directors,
accounting and pricing costs, insurance, interest, brokerage costs, litigation and other
extraordinary or non-recurring expenses, mailing and other expenses properly payable by
the Fund. Certain accounting services are provided to the Fund by State Street Bank and
Trust Company (&#147;State Street&#148;) pursuant to an agreement between State Street and the
Fund. The Fund will pay the costs of these services. In addition, the Fund will reimburse
the Investment Adviser for certain additional accounting services. </FONT></P>

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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 the AMPS and Other AMPS in accordance with the current
  position of the IRS described under the heading &#147;Taxes&#148; in the statement
  of additional information. The Fund may notify the Auction Agent of the amount
  of any net capital gain or other anticipated taxable income to be included in
  any dividend on the AMPS prior to the Auction establishing the Applicable Dividend
  Rate for such dividend. The Auction Agent will in turn notify holders of the
  AMPS and prospective purchasers. The Fund also may include such income in a
  dividend on shares of AMPS without giving advance notice thereof if it increases
  the dividend by an additional amount calculated as if such income were a Retroactive
  Taxable Allocation and the additional amount were an Additional Dividend. See
  &#147;The Auction &#151; Auction Procedures &#151; Auction Date; Advance Notice
  of Allocation of Taxable Income; Inclusion of Taxable Income in Dividends.&#148;
  The amount of taxable income allocable to the AMPS will depend upon the amount
  of such income realized by the Fund and cannot be determined with certainty
  prior to the end of the Fund&#146;s fiscal year, but it is not generally expected
  to be significant. </FONT></P>



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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 (<i>i.e., </I>&#147;tax
  exempt&#148;). To the extent that the dividends distributed by the Fund are
  from interest income that is excludable from gross income for Federal income
  tax purposes, they are exempt from Federal income tax. There is a possibility
  that events occurring after the date of issuance of a security, or after 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 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, par value $.10 per
share, all of which shares initially were classified as common stock. The Board of
Directors is authorized, however, to classify and reclassify any unissued shares of
capital stock into one or more additional or other classes or series as may be
established from time to time by setting or changing in any one or more respects the
designations, preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications or terms or conditions of redemption of such
shares of stock and pursuant to such classification or reclassification to increase or
decrease the number of authorized shares of any existing class or series. In this regard,
the Board of Directors previously reclassified 6,000 shares of unissued common stock as
Other AMPS and reclassified 400 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 align="center">
  <TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
    <TR VALIGN=Bottom align="center">
      <TD ALIGN=left><b><font size=1>Title of Class </font> </b>
        <hr width=65 size="1" noshade align="left">
      </TD>
      <TD>&nbsp;</TD>
      <TD><b><font size=1>Amount Authorized </font> </b>
        <hr width=95 size="1" noshade>
      </TD>
      <TD>&nbsp;</TD>
      <TD><b><font size=1>Amount Held By Fund <br>
        For Its Own Account </font> </b>
        <hr width=95 size="1" noshade>
      </TD>
      <TD>&nbsp;</TD>
      <TD><b><font size=1>Amount Outstanding <br>
        (Exclusive Of Amount <br>
        Held By Fund For <br>
        Its Own Account) </font> </b>
        <hr width=100 size="1" noshade>
      </TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>Common Stock</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>199,994,000</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>- 0 -</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>22,366,930</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>Auction Market Preferred Stock</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;&nbsp;Series A</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>2,000</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>- 0 -</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>2,000</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;&nbsp;Series B</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>2,000</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>- 0 -</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>2,000</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;&nbsp;Series C</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>2,000</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>- 0 -</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER><FONT SIZE=2>2,000</FONT></TD>
    </TR>
  </TABLE>
  <br>
</div>
<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 6,000 shares of Other AMPS. Under the Articles
Supplementary for the AMPS, the Fund is authorized to issue an aggregate of 400 shares of
Series D AMPS. The terms of the shares of the Other AMPS are substantially the same as
the terms of the shares of the 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  </FONT></P>




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<P><font face="Times New Roman, Times, serif" size="2">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 obtain control of the
  Fund. A Director may be removed from office with or without cause but only by
  vote of the holders of at least 66<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>
<FONT FACE="Times New Roman, Times, Serif" SIZE="1"><u>2</u>/3 </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2">% 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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<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 the 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<font size="1"><sup>2</sup></font>/<font size="1">3</font>% of the Fund&#146;s outstanding
shares of capital stock (including the AMPS, the Other AMPS and any other preferred
stock) entitled to be voted on the matter, voting as a single class (or a majority of
such shares if the amendment was previously approved, adopted or authorized by at least
two-thirds of the total number of Directors fixed in accordance with the By-laws), and
the affirmative vote of a majority of outstanding shares (as defined in the 1940 Act) of
preferred stock of the Fund (including the AMPS and the Other AMPS), voting as a separate
class. Such a vote also would satisfy a separate requirement in the 1940 Act that the
change be approved by the stockholders. Stockholders of an open-end investment company
may require the company to redeem their shares of common stock at any time (except in
certain circumstances as authorized by or under the 1940 Act) at their net asset value,
less such redemption charge, if any, as might be in effect at the time of a redemption.
If the Fund is converted to an open-end investment company, it could be required to
liquidate portfolio securities to meet requests for redemption, and the common stock
would no longer be listed on a stock exchange. Conversion to an open-end investment
company would also require redemption of all outstanding shares of preferred stock
(including the AMPS and the 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, 1010 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 September 21, 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 $145,000 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. 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><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
transfer agent, dividend disbursing agent and registrar for the Fund&#146;s shares of AMPS,
Other AMPS and common stock is The Bank of New York, 101 Barclay Street, New York, New
York 10286. </FONT></P>

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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. </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> <FONT FACE="Times New Roman, Times, Serif" SIZE="1">LLP
  </FONT> <FONT FACE="Times New Roman, Times, Serif" SIZE="2">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 align="center">
  <TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
    <TR VALIGN=Bottom>
      <TH COLSPAN=2>&nbsp;</TH>
      <TH COLSPAN=2><FONT SIZE=1>Page</FONT>
        <hr width=95% size="1" noshade>
      </TH>
    </TR>
    <TR VALIGN=Bottom>
      <TD WIDTH=90% ALIGN=LEFT><FONT SIZE=2>Investment Objective and Policies</FONT></TD>
      <TD WIDTH=5% ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD WIDTH=3% ALIGN=RIGHT><FONT SIZE=2>3</FONT></TD>
      <TD WIDTH=2% ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>Investment Restrictions</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT><FONT SIZE=2>3</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>Description of AMPS</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT><FONT SIZE=2>4</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>The Auction</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT><FONT SIZE=2>12</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>Rating Agency Guidelines</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT><FONT SIZE=2>13</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>Directors and Officers</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT><FONT SIZE=2>20</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>Investment Advisory and Management Arrangements</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT><FONT SIZE=2>25</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>Portfolio Transactions</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT><FONT SIZE=2>33</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>Taxes</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT><FONT SIZE=2>35</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>Conflicts of Interest</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT><FONT SIZE=2>40</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>Net Asset Value</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT><FONT SIZE=2>42</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>Financial Statements</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT><FONT SIZE=2>42</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>APPENDIX A Ratings of Municipal Bonds</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT><FONT SIZE=2>A-</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>1</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>APPENDIX B Settlement Procedures</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT><FONT SIZE=2>B-</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>1</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT><FONT SIZE=2>APPENDIX C Auction Procedures</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT><FONT SIZE=2>C-</FONT></TD>
      <TD ALIGN=LEFT><FONT SIZE=2>1</FONT></TD>
    </TR>
  </TABLE>
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  &nbsp; </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;&#147;<I>Additional
Dividend</I>&#148; 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;&#147;<I>Agent
Member</I>&#148; 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;&#147;<I>AMPS</I>&#148;
means the Auction Market Preferred Stock, Series D 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;&#147;<I>AMPS
Basic Maintenance Amount</I>&#148; has the meaning set forth on pages 32 to 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;&#147;<I>AMPS
Basic Maintenance Cure Date</I>&#148; 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;&#147;<I>AMPS
  Basic Maintenance Report</I>&#148; 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;&#147;<I>Anticipation
Notes</I>&#148; shall mean the following Municipal Bonds: revenue anticipation notes, tax
anticipation notes, tax and revenue anticipation notes, grant anticipation notes and bond
anticipation notes. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<I>Applicable
Percentage</I>&#148; has the meaning set forth on page 36 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;&#147;<I>Applicable
Rate</I>&#148; 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;&#147;<I>Applicable
Spread</I>&#148; has the meaning set forth on page 36 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;&#147;<I>Articles
Supplementary</I>&#148; 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;&#147;<I>Auction</I>&#148;
means a periodic operation of the Auction Procedures. </FONT> </P>

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

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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<I>Auction
Procedures</I>&#148; means the procedures for conducting Auctions set forth in Appendix C 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;&#147;<I>Available
AMP</I>S&#148; 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;&#147;<I>Beneficial
Owner</I>&#148; 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;&#147;<I>Bid</I>&#148;
has the meaning set forth on page 36 of this prospectus. </FONT> </P>

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

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<I>Board
of Directors</I>&#148; or &#147;Board&#148; 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;&#147;<I>Broker-Dealer</I>&#148;
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;&#147;<I>Broker-Dealer
Agreement</I>&#148; 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;&#147;<I>Business
Day</I>&#148; 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;&#147;<I>Cede</I>&#148;
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;&#147;<I>Charter</I>&#148;
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;&#147;<I>Code</I>&#148;
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;&#147;<I>Common
stock</I>&#148; 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;&#147;<I>Date
of Original Issue</I>&#148; 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;&#147;<I>Deposit
Securities</I>&#148; 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;&#147;<I>Discount
Factor</I>&#148; 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;&#147;<I>Discounted
Value</I>&#148; 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;&#147;<I>Dividend
Payment Date</I>&#148; has the meaning set forth on page 30 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;&#147;<I>Dividend
Period</I>&#148; has the meaning set forth on page 30 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;&#147;<I>DTC</I>&#148;
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;&#147;<I>Eligible
Assets</I>&#148; 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;&#147;<I>Existing
Holder</I>&#148; 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;&#147;<I>Fitch</I>&#148;
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;&#147;<I>Forward
Commitment</I>&#148; 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;&#147;<I>Fund</I>&#148;
means MuniYield Quality Fund II, 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;&#147;<I>High
Yield Municipal Bonds</I>&#148; means (a) with respect to Moody&#146;s (1) Municipal Bonds rated Ba1 to
B3 by Moody&#146;s, (2) Municipal Bonds not rated by Moody&#146;s, but rated BB+ to B- by S&amp;P
or Fitch, and (3) Municipal Bonds not explicitly rated by Moody&#146;s, S&amp;P or Fitch, but
rated at least the equivalent of B3 internally by the Investment Adviser, provided that
Moody&#146;s reviews and achieves sufficient comfort with the Investment Adviser&#146;s internal
credit rating processes, and (b) with respect to S&amp;P (1) Municipal Bonds not rated by
S&amp;P but rated equivalent to BBB+ or lower by another NRSRO and (2) Municipal Bonds
rated BB+ or lower by S&amp;P. </FONT> </P>


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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<I>Investment
Adviser</I>&#148; 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;&#147;<I>IRS</I>&#148;
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;&#147;<I>LIBOR
Dealer</I>&#148; 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;&#147;<I>LIBOR
Rate</I>,&#148; 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&#147;) (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;&#147;<I>London
Business Day</I>&#148; 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;&#147;<I>Long
Term Dividend Period</I>&#148; 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;&#147;<I>Mandatory
Redemption Price</I>&#148; 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;&#147;<I>Marginal
Tax Rate</I>&#148; 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;&#147;<I>Maximum
Applicable Rate</I>&#148; has the meaning set forth on page 36 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;&#147;<I>Moody&#146;s</I>&#148;
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;&#147;<I>Moody&#146;s
  Discount Factor</I>&#148; has the meaning set forth on pages 15 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;&#147;<I>Moody&#146;s
  Eligible Assets</I>&#148; 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;&#147;<I>Moody&#146;s
Hedging Transactions</I>&#148; has the meaning set forth on page 18 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;&#147;<I>Moody&#146;s
  Volatility Factor</I>&#148; 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 align="center">
  <TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
    <TR VALIGN=Bottom>
      <TD WIDTH=46% ALIGN=center><b><font size=1>% Change in <br>
        Marginal Tax Rate </font> </b>
        <hr width=100 size="1" noshade>
      </TD>
      <TD WIDTH=31% ALIGN=center>&nbsp;</TD>
      <TD WIDTH=19% ALIGN=center><b><font size=1>Moody&#146;s Volatility <br>
        Factor </font> </b>
        <hr width=60 size="1" noshade>
      </TD>
      <TD WIDTH=4% ALIGN=LEFT>&nbsp;</TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD WIDTH=46% ALIGN=LEFT><FONT SIZE=2> less than or equal to 5% </FONT></TD>
      <TD WIDTH=31% ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD WIDTH=19% ALIGN=CENTER><FONT SIZE=2>292</FONT></TD>
      <TD WIDTH=4% ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="46%"><FONT SIZE=2>greater than 5% but less than or
        equal to 10%</FONT></TD>
      <TD ALIGN=LEFT width="31%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER width="19%"><FONT SIZE=2>313</FONT></TD>
      <TD ALIGN=LEFT width="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="46%"><FONT SIZE=2>greater than 10% but less than or
        equal to 15%</FONT></TD>
      <TD ALIGN=LEFT width="31%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER width="19%"><FONT SIZE=2>338</FONT></TD>
      <TD ALIGN=LEFT width="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="46%"><FONT SIZE=2>greater than 15% but less than or
        equal to 20%</FONT></TD>
      <TD ALIGN=LEFT width="31%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER width="19%"><FONT SIZE=2>364</FONT></TD>
      <TD ALIGN=LEFT width="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="46%"><FONT SIZE=2>greater than 20% but less than or
        equal to 25%</FONT></TD>
      <TD ALIGN=LEFT width="31%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER width="19%"><FONT SIZE=2>396</FONT></TD>
      <TD ALIGN=LEFT width="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="46%"><FONT SIZE=2>greater than 25% but less than or
        equal to 30%</FONT></TD>
      <TD ALIGN=LEFT width="31%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER width="19%"><FONT SIZE=2>432</FONT></TD>
      <TD ALIGN=LEFT width="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="46%"><FONT SIZE=2>greater than 30% but less than or
        equal to 35%</FONT></TD>
      <TD ALIGN=LEFT width="31%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER width="19%"><FONT SIZE=2>472</FONT></TD>
      <TD ALIGN=LEFT width="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
    <TR VALIGN=Bottom>
      <TD ALIGN=LEFT width="46%"><FONT SIZE=2>greater than 35% but less than or
        equal to 40%</FONT></TD>
      <TD ALIGN=LEFT width="31%"><FONT SIZE=2>&nbsp;</FONT></TD>
      <TD ALIGN=CENTER width="19%"><FONT SIZE=2>520</FONT></TD>
      <TD ALIGN=LEFT width="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
    </TR>
  </TABLE>
  <br>
</div>
<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;&#147;<I>Municipal
Bonds</I>&#148; has the meaning set forth on page 18 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;&#147;<I>Municipal
  Index</I>&#148; has the meaning set forth on page 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;&#147;<I>1940
Act</I>&#148; 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;&#147;<I>1940
Act AMPS Asset Coverage</I>&#148; 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;&#147;<I>1940
Act Cure Date</I>&#148; 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;&#147;<I>Non-Call
Period</I>&#148; 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;&#147;<I>Non-Payment
  Period</I>&#148; has the meaning set forth on pages 6 to 7 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;&#147;<I>Non-Payment
  Period Rate</I>&#148; has the meaning set forth on page 7 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;&#147;<I>Normal
Dividend Payment Date</I>&#148; has the meaning set forth on page 29 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;&#147;<I>Notice
  of Revocation</I>&#148; 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;&#147;<I>Notice
of Special Dividend Period</I>&#148; 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;&#147;<I>NRSRO</I>&#148;
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;&#147;<I>Optional
Redemption Price</I>&#148; 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;&#147;<I>Order</I>&#148;
has the meaning set forth on page 36 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;&#147;<I>Other
AMPS</I>&#148; means the Auction Market Preferred Stock, Series A; the Auction Market Preferred
Stock, Series B; and the Auction Market Preferred Stock, Series C, each with a
liquidation preference of $25,000 per share plus an amount equal to accumulated but
unpaid dividends thereon (whether or not earned or declared) of the Fund. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<I>Other
AMPS Articles Supplementary</I>&#148; 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;&#147;<I>Potential
Beneficial Owner</I>&#148; 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;&#147;<I>Potential
Holder</I>&#148; 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;&#147;<I>Preferred
stock</I>&#148; 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;&#147;<I>Premium
Call Period</I>&#148; 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;&#147;<I>Receivables
for Municipal Bonds Sold</I>&#148; for Moody&#146;s has the meaning set forth under the definition of
Moody&#146;s Discount Factor, and for S&amp;P has the meaning set forth under the definition
of S&amp;P Discount Factor. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<I>Reference
Banks</I>&#148; 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;&#147;<I>Reference
Rate</I>&#148; 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;&#147;<I>Request
for Special Dividend Period</I>&#148; has the meaning set forth on page 30 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;&#147;<I>Response</I>&#148;
  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;&#147;<I>Retroactive
Taxable Allocation</I>&#148; 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;&#147;<I>Rule
2a-7 Money Market Funds</I>&#148; 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;&#147;<I>Series
  D AMPS</I>&#148; means the Auction Market Preferred Stock, Series D, 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;&#147;<I>S&amp;P</I>&#148;
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;&#147;<I>S&amp;P
  Discount Factor</I>&#148; has the meaning set forth on page 13 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;&#147;<I>S&amp;P
  Eligible Assets</I>&#148; 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;&#147;<I>S&amp;P
  Hedging Transactions</I>&#148; has the meaning set forth on page 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;&#147;<I>S&amp;P
Volatility Factor</I>&#148; 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;&#147;<I>Securities
Depository</I>&#148; 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;&#147;<I>Sell
Order</I>&#148; 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;&#147;<I>7-Day
Dividend Period</I>&#148; 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;&#147;<I>Short
Term Dividend Period</I>&#148; 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;&#147;<I>Special
Dividend Period</I>&#148; has the meaning set forth on page 29 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;&#147;Specific
Redemption Provisions&#148; 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;&#147;<I>Submission
Deadline</I>&#148; 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;&#147;<I>Submitted
Bid</I>&#148; 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;&#147;<I>Submitted
Hold Order</I>&#148; 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;&#147;<I>Submitted
Order</I>&#148; 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;&#147;<I>Submitted
Sell Order</I>&#148; 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;&#147;<I>Subsequent
Dividend Period</I>&#148; 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;&#147;<I>Substitute
Rating Agency</I>&#148; and &#147;Substitute Rating Agencies&#148; shall mean a 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;&#147;<I>Sufficient
Clearing Bids</I>&#148; 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;&#147;<I>Taxable
Equivalent of the Short-Term Municipal Bond Rate</I>&#148; on any date means 90% of the quotient
of (A) the per annum rate expressed on an interest equivalent basis equal to the Kenny S&amp;P
30-day High Grade Index (the &#147;Kenny Index&#148;) or any successor index, made available for
the Business Day immediately preceding such date but in any event not later than 8:30
a.m. Eastern time, on such date by Kenny Information Systems Inc. or any successor
thereto, based upon 30-day yield evaluations at par of bonds the interest on which is
excludable for regular Federal income tax purposes under the Code of &#147;high grade&#148;
component issuers selected by Kenny Information Systems Inc. or any such successor from
time to time in its discretion, which component issuers shall include, without
limitation, issuers of general obligation bonds but shall exclude any bonds the interest
on which constitutes an item of tax preference under Section 57(a)(5) of the Code, or
successor provisions, for purposes of the &#147;alternative minimum tax,&#148; divided by (B) 1.00
minus the Marginal Tax Rate (expressed as a decimal); provided, however, that if the
Kenny Index is not made so available by 8:30 a.m. Eastern time, on such date by Kenny
Information Systems Inc. or any successor, the Taxable Equivalent of the Short-Term
Municipal Bond Rate shall mean the quotient of (A) the per annum rate expressed on an
interest equivalent basis equal to the most recent Kenny Index so made available for any
preceding Business Day, divided by (B) 1.00 minus the Marginal Tax Rate (expressed as a
decimal). The Fund may not utilize a successor index to the Kenny Index unless Moody&#146;s
and S&amp;P provide the Fund with written confirmation that the use of such successor
index will not adversely affect the then-current respective Moody&#146;s and S&amp;P ratings
of the AMPS. </FONT> </P>

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






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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<I>U.S.
Treasury Securities</I>&#148; 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;&#147;<I>Valuation
Date</I>&#148; 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;&#147;<I>Variation
Margin</I>&#148; 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;&#147;<I>Winning
Bid Rate</I>&#148; has the meaning set forth on page 39 of this prospectus. </FONT> </P>



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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>$10,000,000 </B></FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4><B>MuniYield Quality
Fund II, 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;) </B></FONT></P>

<!-- MARKER FORMAT-SHEET="Center Head 3 Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>400 Shares, Series D </B></FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>Liquidation
Preference $25,000 Per Share </B></FONT></P>

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<div align="center"><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>PROSPECTUS
  </B></FONT> </div>
<HR SIZE=1 noshade ALIGN=CENTER WIDTH=150>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3><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;September
  19, 2005 </B></FONT></P>

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


<hr size=1 noshade align=left width=300>
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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4><B><font size="5">$10,000,000</font>
  </B></FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=6><B>MuniYield
  Quality Fund II, Inc. </B></FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4><B>Auction Market
  Preferred Stock (&#147;AMPS&#148;) <BR>
  400 Shares, Series D <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
Quality Fund II, Inc. (the &#147;Fund&#148;) is a non-diversified, closed-end management
investment company seeking to provide shareholders with as high a level of current income
exempt from Federal income taxes as is consistent with its investment policies and
prudent investment management. The Fund seeks to achieve its investment objective by
investing, as a fundamental policy, at least 80% of an aggregate of the Fund&#146;s net
assets (including proceeds from the issuance of preferred stock), plus the amounts 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). The Fund invests in a
portfolio of municipal obligations which are rated in the three highest quality rating
categories (A or better) or, if unrated, are considered by the Investment Adviser to be
of comparable quality. 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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<HR SIZE=1 noshade ALIGN=CENTER WIDTH=150>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=5><B>Merrill Lynch
  &amp; Co. </B></FONT></P>

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

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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&nbsp;September 19, 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 CELLPADDING=0 CELLSPACING=0 BORDER=0 align="center" WIDTH=600>
  <TR VALIGN=Bottom>
    <TH>&nbsp;</TH>
    <TH><FONT SIZE=1>Page</FONT>
      <hr noshade size="1">
    </TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Investment Objective and Policies</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>3</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Investment Restrictions</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>3</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Description of AMPS</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>4</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>The Auction</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>12</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Rating Agency Guidelines</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>13</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Directors and Officers</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>20</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Investment Advisory and Management Arrangements</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>25</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Portfolio Transactions</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>33</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Taxes</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>35</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Conflicts of Interest</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>40</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Net Asset Value</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>42</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>Financial Statements</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>42</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>APPENDIX A Ratings Of Municipal Bonds</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>A-1</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>APPENDIX B Settlement Procedures</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>B-1</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>APPENDIX C Auction Procedures</FONT></TD>
    <TD ALIGN=RIGHT><FONT SIZE=2>C-1</FONT></TD>
  </TR>
</TABLE>




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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;MuniYield
Quality Fund II, Inc. is a non-diversified, closed-end management investment company
seeking to provide shareholders with as high a level of current income exempt from
Federal income taxes as is consistent with its investment policies and prudent investment
management. The Fund seeks to achieve its investment objective by investing, as a
fundamental policy, at least 80% of an aggregate of the Fund&#146;s net assets (including
proceeds from the issuance of preferred stock), and the proceeds of any borrowings for
investment purposes, in a portfolio of municipal obligations issued by or on behalf of
states, territories and possessions of the United States and their political
subdivisions, agencies or instrumentalities, each of which pays interest that, in the
opinion of bond counsel to the issuer, is excludable from gross income for Federal income
tax purposes (except that the interest may be includable in taxable income for purposes
of the Federal alternative minimum tax) (&#147;Municipal Bonds&#148;). The Fund invests
in Municipal Bonds which are rated in the three highest quality rating categories (A or
better) or, if unrated, are considered by the Investment Adviser to be of comparable
quality. 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;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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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.
Make investments for the purpose of exercising control or       management. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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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;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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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.
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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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.
Issue senior securities other than preferred stock or borrow       amounts in excess of
5% of its total assets taken at market value;       provided, however, that the Fund is
authorized to borrow money 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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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.
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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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.
Make loans to other persons, except that the Fund may purchase       Municipal Bonds and
other debt securities in accordance with its       investment objective, policies and
limitations. </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;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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<BR>&nbsp;
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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;8.
Make short sales of securities or maintain a short position or       invest in put, call,
straddle or spread options, except that the Fund may       write, purchase and sell
options and futures on Municipal Bonds, U.S.       Government obligations and related
indices or otherwise in connection with       bona fide hedging activities. </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;9.
Invest more than 25% of its total assets (taken at market value at       the time of each
investment) in the 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. 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;An
additional investment restriction adopted by the Fund, which may be changed by the Board
of Directors without stockholder approval, provides that the Fund may not 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></P>

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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 investment policies or the investment or use of assets set
forth above is adhered to at the time a transaction is effected, later changes in
percentage resulting from changing values will not be considered a violation. </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 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; in this statement of additional
information. </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;&nbsp;<I>Certain
of the capitalized terms used herein and 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 D 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 D AMPS generally will be a 7-Day Dividend Period; provided however, that prior to
any Auction, the  </FONT></P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Fund may elect, subject to certain
limitations described herein, upon giving notice to holders thereof, a Special Dividend
Period. The Applicable Rate for a particular Dividend Period will be determined by an
Auction conducted on the Business Day before the start of such Dividend Period.
Beneficial Owners and Potential Beneficial Owners of shares of AMPS may participate in
Auctions therefor, although, except in the case of a Special Dividend Period of more than
28 days, Beneficial Owners desiring to continue to hold all of their shares of AMPS
regardless of the Applicable Rate resulting from Auctions need not participate. For an
explanation of Auctions and the method of determining the Applicable Rate, see Appendix C
&#147;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 AMPS will be represented by one or more certificates registered in the name
of the nominee of the Securities Depository (initially expected to be Cede), and no
person acquiring shares of AMPS will be entitled to receive a certificate representing
such shares. See Appendix C &#147;Auction Procedures.&#148; As a result, the nominee of
the Securities Depository is expected to be the sole holder of record of the shares of
AMPS. Accordingly, each purchaser of AMPS must rely on (i) the procedures of the
Securities Depository and, if such purchaser is not a member of the Securities
Depository, such purchaser&#146;s Agent Member, to receive dividends, distributions and
notices and to exercise voting rights (if and when applicable) and (ii) the records of
the Securities Depository and, if such purchaser is not a member of the Securities
Depository, such purchaser&#146;s Agent Member, to evidence its beneficial ownership of
shares of AMPS. </FONT></P>

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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 three series of shares of Other AMPS with terms that are
substantially the same as the terms of the shares of AMPS described herein and in the
prospectus. Cede, the nominee of the Securities Depository, 55 Water Street, New York,
New York 10041-0099, is the sole holder of record of the shares of Other AMPS. The Series
D 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 will be 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 D 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 </FONT> </P>




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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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 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;<I>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 and S&amp;P. The Fund shall not give a
Notice of Special Dividend Period, and, if such Notice of Special Dividend Period shall
have been given already, shall give telephonic and written notice of its revocation (a
&#147;Notice of Revocation&#148;) to the Auction Agent, each Broker-Dealer, and the
Securities Depository on or prior to the Business Day prior to the relevant Auction Date
if (x) either the 1940 Act AMPS Asset Coverage is not satisfied or the Fund shall fail to
maintain S&amp;P Eligible Assets and Moody&#146;s Eligible Assets each with an aggregate
Discounted Value at least equal to the AMPS Basic Maintenance Amount, in each case on the
Valuation Date immediately preceding the Business Day prior to the relevant Auction Date
on an actual basis and on a pro forma basis giving effect to the proposed Special
Dividend Period (using as a pro forma dividend rate with respect to such Special Dividend
Period the dividend rate which the Broker-Dealers shall advise the Fund is an
approximately equal rate for securities similar to the AMPS with an equal dividend
period), (y) sufficient funds for the payment of dividends payable on the immediately
succeeding Dividend Payment Date have not been segregated in an account at the Fund&#146;s
custodian bank or on the books of the Fund by the close of business on the third Business
Day preceding the related Auction Date or (z) the Broker-Dealers jointly advise the Fund
that, after consideration of the factors listed above, they have concluded that it is
advisable to give a Notice of Revocation. The Fund also shall provide a copy of such
Notice of Revocation to Moody&#146;s and S&amp;P. If the Fund is prohibited from giving a
Notice of Special Dividend Period as a result of the factors enumerated in clause (x),
(y) or (z) above or if the Fund gives a Notice of Revocation with respect to a Notice of
Special Dividend Period, the next succeeding Dividend Period will be a 7-Day Dividend
Period. In addition, in the event Sufficient Clearing Bids are not made in any Auction or
an Auction is not held for any reason, the next succeeding Dividend Period will be a
7-Day Dividend Period, and the Fund may not again give a Notice of Special Dividend
Period (and any such attempted notice shall be null and void) until Sufficient Clearing
Bids have been made in an Auction with respect to a 7-Day Dividend Period. </FONT> </P>

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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 </FONT> </P>



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




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


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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 have accumulated
for the AMPS and Other AMPS outstanding to (but not including) the end of the current
Dividend Period for the AMPS that follows such Valuation Date in the event the then
current Dividend Period will end within 49 calendar days of such Valuation Date or
through the 49th day after such Valuation Date in the event the then current Dividend
Period will not end within 49 calendar days of such Valuation Date; (C) in the event the
then current Dividend Period will end within 49 calendar days of such Valuation Date, the
aggregate amount of cash dividends that would accumulate at the Maximum Applicable Rate
applicable to a Dividend Period of 28 or fewer days on any shares of AMPS and Other AMPS
outstanding from the end of such Dividend Period through the 49th day after such
Valuation Date, multiplied by the larger of the Moody&#146;s Volatility Factor and the S&amp;P
Volatility Factor, determined from time to time by Moody&#146;s and S&amp;P, respectively
(except that if such Valuation Date occurs during a Non-Payment Period, the cash dividend
for purposes of calculation would accumulate at the then current Non-Payment Period
Rate); (D) the amount of anticipated expenses of the Fund for the 90 days subsequent to
such Valuation Date; (E) the amount of current outstanding balances of any indebtedness
that is senior to the AMPS plus interest actually accrued together with 30 days
additional interest on the current outstanding balances calculated at the current rate;
(F) the amount of the Fund&#146;s maximum potential Additional Dividend liability as of
such Valuation Date; and (G) any current liabilities as of such Valuation Date to the
extent not reflected in any of (i)(A) through (i)(F) (including, without limitation, and
immediately upon determination, any amounts due and payable by the Fund for portfolio
securities purchased as of such Valuation Date and any liabilities incurred for the
purpose of clearing securities transactions) less (ii) either (A) the Discounted Value of
any of the Fund&#146;s assets, or (B) the face value of any of the Fund&#146;s assets if
such assets mature prior to or on the date of redemption of AMPS or payment of a
liability and are either securities issued or guaranteed by the United States Government
or Deposit Securities, in both cases irrevocably deposited by the Fund for the payment of
the amount needed to redeem shares of AMPS subject to redemption or to satisfy any of
(i)(B) through (i)(G). </FONT></P>

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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  </FONT></P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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 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 which may not be redeemed at the option of the Fund
due to the designation of a Non-Call Period applicable to such shares (A) will be subject
to mandatory redemption only to the extent that other shares are not available to satisfy
the number of shares required to be redeemed and (B) will be selected for redemption in
an ascending order of outstanding number of days in the Non-Call Period (with shares with
the lowest number of days to be redeemed first) and by lot in the event of shares having
an equal number of days in such Non-Call Period. The Fund is required to effect such a
mandatory redemption on a Business Day which is not later than 30 days after such Cure
Date, except that if the Fund does not have funds legally available for the redemption of
all of the required number of shares of AMPS and shares of other preferred stock which
are subject to mandatory redemption or the Fund otherwise is </FONT> </P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>unable to effect such redemption on
a Business Day which is on or prior to 30 days after such Cure Date, the Fund will redeem
those shares of AMPS that it was unable to redeem on the earliest practicable date on
which it is able to effect such redemption out of funds legally available therefor. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Notice
of Redemption. </I>If shares of AMPS are to be redeemed, a notice of redemption will be
mailed to each record holder of such shares of AMPS (initially Cede as nominee of the
Securities Depository) and to the Auction Agent not less than 17 nor more than 60 days
prior to the date fixed for the redemption thereof. Each notice of redemption will
include a statement setting forth: (i) the redemption date, (ii) the redemption price,
(iii) the aggregate number of shares of AMPS to be redeemed, (iv) the place or places
where shares of AMPS are to be surrendered for payment of the redemption price, (v) a
statement that dividends on the shares to be redeemed will cease to accumulate on such
redemption date (except that holders may be entitled to Additional Dividends) and (vi)
the provision of the Articles Supplementary pursuant to which such shares are being
redeemed. The notice also will be published in the eastern and national editions of 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 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 the AMPS to be redeemed and for payment to the Auction
Agent, Deposit Securities (with a right of substitution) having an aggregate Discounted
Value equal to the redemption payment for the shares of AMPS as to which notice of
redemption has been given, with irrevocable instructions and authority to pay the
redemption price to the record holders thereof, then upon the date of such deposit or, if
no such deposit is made, upon such date fixed for redemption (unless the Fund shall
default in making payment of the redemption price), all rights of the holders of such
shares called for redemption will cease and terminate, except the right of such holders
to receive the redemption price in respect thereof and any Additional Dividends, but
without interest, and such shares no longer will be deemed to be outstanding. The Fund
will be entitled to receive, from time to time, the interest, if any, earned on such
Deposit Securities deposited with the Auction Agent, and the holders of any shares so
redeemed will have no claim to any such interest. Any funds so deposited which are
unclaimed at the end of one year from such redemption date will be repaid, upon demand,
to the Fund, after which the holders of the shares of AMPS so called for redemption may
look only to the Fund for payment thereof. </FONT></P>

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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 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 than
those of a holder of shares of any other series of preferred stock without the
affirmative vote of at least a majority of votes entitled to be cast by holders of the
shares of AMPS adversely affected and outstanding at such time (voting separately as a
class). The Board of Directors, however, without stockholder approval, may amend, alter
or repeal any or all of the various rating agency guidelines described herein in the
event the Fund receives confirmation from the rating agencies that any such amendment,
alteration or repeal would not impair the ratings then assigned to shares of AMPS.
Furthermore, the Board of Directors, without stockholder approval, may terminate
compliance with the Moody&#146;s or S&amp;P guidelines as discussed under &#147;Rating
Agency Guidelines&#148; in the prospectus. Unless a higher percentage is provided for
under &#147;Description of Capital Stock &#151; Certain Provisions of the Charter and
By-laws&#148; in the prospectus, the affirmative vote of the holders of a majority of the
outstanding shares of preferred stock (as defined under &#147;Investment Restrictions&#148;),
including AMPS and Other AMPS, entitled to be cast, voting as a separate class, will be
required to approve any plan of reorganization (including bankruptcy proceedings)
adversely affecting such shares or any action requiring a vote of security holders under
Section 13(a) of the 1940 Act including, among other things, changes in the Fund&#146;s
investment objective or changes in the investment policies and restrictions described as
fundamental policies in the prospectus and under &#147;Investment Restrictions.&#148; So
long as any shares of AMPS are outstanding, the affirmative vote of the holders of a
majority of the outstanding shares of preferred stock (as defined under &#147;Investment
Restrictions&#148;), including AMPS and Other AMPS, voting together as a single class,
will be required to approve any voluntary application by the Fund for relief under
Federal bankruptcy law or any similar application under state law for so long as the Fund
is solvent and does not foresee becoming insolvent. The class vote of holders of shares
of AMPS, Other AMPS and any other preferred stock described above in each case will  </FONT></P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>be in addition to a separate vote of
the requisite percentage of shares of common stock and shares of AMPS, Other AMPS and any
other preferred stock, voting together as a single class, necessary to authorize the
action in question. An increase in the number of authorized shares of preferred stock
pursuant to the Charter or the issuance of additional shares of any series of preferred
stock (including AMPS and Other AMPS) pursuant to the Charter shall not in and of itself
be considered to adversely affect the contract rights of the holders of the AMPS. </FONT></P>

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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 $103,601, $171,550,
$143,340 and $178,506, 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 C to this statement of additional
information. The Settlement Procedures to be used with respect to Auctions are set forth
in Appendix B to this statement of additional information. </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 Municipal
Bonds Sold (as defined below), Rule 2a-7 Money Market Funds and Municipal Bonds eligible
for consideration under S&amp;P&#146;s current guidelines. For purposes of calculating
the Discounted Value of the Fund&#146;s portfolio under current S&amp;P guidelines, the
fair market value of Municipal Bonds eligible for consideration under such guidelines
must be discounted by the applicable S&amp;P Discount Factor set forth in the table
below. The Discounted Value of a Municipal Bond eligible for consideration under S&amp;P
guidelines is the fair market value thereof divided by the S&amp;P Discount Factor. The S&amp;P
Discount Factor used to discount a particular Municipal Bond will be determined by
reference to the rating by S&amp;P, Moody&#146;s or Fitch on such Municipal Bond;
provided, however, for purposes of determining the S&amp;P Discount Factor applicable to
Municipal Bonds not rated by S&amp;P, the Municipal Bonds will carry an S&amp;P rating
one full rating category lower than the S&amp;P rating category that is the equivalent of
the rating category in which such Municipal Bond is placed by a NRSRO, in accordance with
the table set forth below: </FONT></P>




<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600 align="center">
  <TR VALIGN=Bottom>
    <TH COLSPAN=23><FONT SIZE=1>S&amp;P&#146;s Rating Category (1)</FONT>
      <HR WIDTH=100% SIZE=1 noshade>
    </TH>
  </TR>
  <TR VALIGN=Bottom>
    <TH COLSPAN=2><FONT SIZE=1>AAA*(2)</FONT>
      <HR WIDTH=100% SIZE=1 noshade>
    </TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT SIZE=1>AA*</FONT>
      <HR WIDTH=100% SIZE=1 noshade>
    </TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT SIZE=1>A*</FONT>
      <HR WIDTH=100% SIZE=1 noshade>
    </TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT SIZE=1>BBB*</FONT>
      <HR WIDTH=100% SIZE=1 noshade>
    </TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT SIZE=1>BB*</FONT>
      <HR WIDTH=100% SIZE=1 noshade>
    </TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT SIZE=1>B*</FONT>
      <HR WIDTH=100% SIZE=1 noshade>
    </TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT SIZE=1>CCC*</FONT>
      <HR WIDTH=100% SIZE=1 noshade>
    </TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT SIZE=1>NR**</FONT>
      <HR WIDTH=100% SIZE=1 noshade>
    </TH>
  </TR>
  <TR VALIGN=Bottom align="center">
    <TD colspan="2"><FONT SIZE=2>144.75</FONT><FONT SIZE=2>%</FONT></TD>
    <TD>&nbsp;&nbsp;&nbsp;</TD>
    <TD colspan="2"><FONT SIZE=2>147.75</FONT><FONT SIZE=2>%</FONT></TD>
    <TD>&nbsp;&nbsp;&nbsp;</TD>
    <TD colspan="2"><FONT SIZE=2>150.75</FONT><FONT SIZE=2>%</FONT></TD>
    <TD>&nbsp;&nbsp;&nbsp;</TD>
    <TD colspan="2"><FONT SIZE=2>153.75</FONT><FONT SIZE=2>%</FONT></TD>
    <TD>&nbsp;&nbsp;&nbsp;</TD>
    <TD colspan="2"><FONT SIZE=2>175.11</FONT><FONT SIZE=2>%</FONT></TD>
    <TD>&nbsp;&nbsp;&nbsp;</TD>
    <TD colspan="2"><FONT SIZE=2>195.11</FONT><FONT SIZE=2>%</FONT></TD>
    <TD>&nbsp;&nbsp;&nbsp;</TD>
    <TD colspan="2"><FONT SIZE=2>215.11</FONT><FONT SIZE=2>%</FONT></TD>
    <TD>&nbsp;&nbsp;&nbsp;</TD>
    <TD colspan="2"><FONT SIZE=2>220.00</FONT><FONT SIZE=2>%</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%>&nbsp;</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%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">Not
rated.</FONT></TD></TR></TABLE>

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

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<TABLE WIDTH=100%><TR>
    <TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="1">(2) </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">For
zero coupon Municipal Bonds, the S&amp;P Discount Factor is 441.80%.</FONT></TD></TR></TABLE>

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

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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, Municipal Bonds must: </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=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>&nbsp;be
issued by any of the 50 states of the United States, its            territories and their
subdivisions, counties, cities, towns,            villages, and school districts,
agencies, such as authorities and            special districts created by the states, and
certain federally            sponsored agencies such as local housing authorities
(payments made            on these bonds are exempt from regular Federal income taxes and
are            generally exempt from state and local taxes in the state of
           issuance);  </FONT></TD>
</TR>
</TABLE>
<BR>



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<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;except
for zero coupon Municipal Bonds rated AAA by S&amp;P that mature in            30 years
or less, be interest bearing and pay interest at least            semi-annually;  </FONT></TD>
</TR>
</TABLE>
<BR>

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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;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>(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;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>(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, not be part of a private placement; 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=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(vi)  </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)
Municipal Bonds issued by issuers in any one state or territory will be considered S&amp;P
Eligible Assets only to the extent the fair market value of such Municipal Bonds does not
exceed 25% of the aggregate fair market value of S&amp;P Eligible Assets; </FONT></P>

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

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

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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)
Municipal Bonds not rated by S&amp;P but rated by another NRSRO will be included in S&amp;P
Eligible Assets only to the extent the fair market value of such Municipal Bonds does not
exceed 50% of the aggregate fair market value of the S&amp;P Eligible Assets. </FONT></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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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
the Fund will not engage in any S&amp;P Hedging Transaction based on       the Municipal
Index (other than transactions that terminate a financial       futures contract or
option held by the Fund by the Fund&#146;s taking an       opposite position thereto (&#147;Closing
Transactions&#148;)), that would cause the       Fund at the time of such transaction to
own or have sold the least of (A)       more than 1,000 outstanding financial futures
contracts based on the       Municipal Index, (B) outstanding financial futures contracts
based on the       Municipal Index exceeding in number 25% of the quotient of the fair
market       value of the Fund&#146;s total assets divided by  </FONT>
</TD>
</TR>
</TABLE>
<BR>



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14</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>
$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 <i>The Wall Street Journal</i>;
      </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
Municipal Bonds Sold (as defined below), Rule 2a-7 Money Market Funds and Municipal Bonds
eligible for consideration under Moody&#146;s guidelines. For purposes of calculating the
Discounted Value of the Fund&#146;s portfolio under current Moody&#146;s guidelines, the
fair market value of Municipal Bonds eligible for consideration under such guidelines
must be discounted by the applicable Moody&#146;s Discount Factor set forth in the table
below. The Discounted Value of a Municipal Bond eligible for consideration under Moody&#146;s
guidelines is the lower of par and the quotient of the fair market value thereof divided
by the Moody&#146;s Discount Factor. The Moody&#146;s Discount Factor used to discount a
particular Municipal Bond will be determined by reference to the rating by Moody&#146;s, S&amp;P
or Fitch on such Municipal Bond, in accordance with the tables set forth below: </FONT></P>




<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600 align="center">
  <TR VALIGN=Bottom>
    <TH COLSPAN=14><FONT SIZE=1>Moody&#146;s Rating Category (1)</FONT>
      <HR WIDTH=100% SIZE=1 noshade>
    </TH>
  </TR>
  <TR VALIGN=Bottom>
    <TH COLSPAN=2><FONT SIZE=1>Aaa</FONT>
      <HR WIDTH=100% SIZE=1 noshade>
    </TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT SIZE=1>Aa</FONT>
      <HR WIDTH=100% SIZE=1 noshade>
    </TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT SIZE=1>A</FONT>
      <HR WIDTH=100% SIZE=1 noshade>
    </TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT SIZE=1>Baa</FONT>
      <HR WIDTH=100% SIZE=1 noshade>
    </TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT SIZE=1>Other (2)</FONT>
      <HR WIDTH=100% SIZE=1 noshade>
    </TH>
  </TR>
  <TR VALIGN=Bottom align="center">
    <TD colspan="2"><FONT SIZE=2>151</FONT><FONT SIZE=2>%</FONT></TD>
    <TD>&nbsp;&nbsp;&nbsp;</TD>
    <TD colspan="2"><FONT SIZE=2>159</FONT><FONT SIZE=2>%</FONT></TD>
    <TD>&nbsp;&nbsp;&nbsp;</TD>
    <TD colspan="2"><FONT SIZE=2>160</FONT><FONT SIZE=2>%</FONT></TD>
    <TD>&nbsp;&nbsp;&nbsp;</TD>
    <TD colspan="2"><FONT SIZE=2>173</FONT><FONT SIZE=2>%</FONT></TD>
    <TD>&nbsp;&nbsp;&nbsp;</TD>
    <TD colspan="2"><FONT SIZE=2>225</FONT><FONT SIZE=2>%</FONT></TD>
  </TR>
</TABLE>

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



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




<br>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600 align="center">
  <TR VALIGN=Bottom>
    <TH COLSPAN=5><FONT SIZE=1>Moody&#146;s Rating Category</FONT>
      <HR WIDTH=79% SIZE=1 noshade>
    </TH>
  </TR>
  <TR VALIGN=Bottom>
    <TH COLSPAN=2><FONT SIZE=1>MIG-1, VMIG-1, P-1 (1)</FONT>
      <HR WIDTH=110 SIZE=1 noshade>
    </TH>
    <TH width="105">&nbsp;</TH>
    <TH COLSPAN=2 width="249"><FONT SIZE=1>MIG-1, VMIG-1, P-1 (2)</FONT>
      <HR WIDTH=120 SIZE=1 noshade>
    </TH>
  </TR>
  <TR VALIGN=Bottom align="center">
    <TD colspan="2"><FONT SIZE=2>100</FONT><FONT SIZE=2>%</FONT></TD>
    <TD WIDTH=105>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD colspan="2" WIDTH=249><FONT SIZE=2>136</FONT><FONT SIZE=2>%</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">(1) </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">Moody&#146;s
rated Municipal Bonds that have a maturity less than or equal to 49      days and
Municipal Bonds not rated by Moody&#146;s but rated the equivalent to      MIG-1, VMIG-1,
or P-1 by S&amp;P or Fitch that have a maturity less than or      equal to 49 days.</FONT></TD></TR></TABLE>

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

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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 Municipal Bonds Sold that are due within five Business Days of such Valuation Date.
The Moody&#146;s Discount Factor for Receivables for Municipal Bonds Sold that are due
within six and 30 Business Days of such Valuation Date will be the Moody&#146;s Discount
Factor applicable to the Municipal Bonds sold. &#147;Receivables for Municipal Bonds Sold,&#148; for
purposes of calculating Moody&#146;s Eligible Assets as of any Valuation Date, means the
book value of receivables for Municipal Bonds sold as of or prior to such Valuation Date
if such receivables are due within 30 Business Days of such Valuation Date. </FONT></P>

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




<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600 align="center">
  <TR VALIGN=Bottom>
    <TH><FONT SIZE=1>Rating </FONT>
      <HR WIDTH=100% SIZE=1 noshade>
    </TH>
    <TH>&nbsp;</TH>
    <TH><FONT SIZE=1>Minimum Issue Size<BR>
      ($ Millions) </FONT>
      <HR WIDTH=100% SIZE=1 noshade>
    </TH>
    <TH>&nbsp;</TH>
    <TH><FONT SIZE=1>Maximum Underlying<BR>
      Obligor (%) (1) </FONT>
      <HR WIDTH=100% SIZE=1 noshade>
    </TH>
    <TH>&nbsp;</TH>
    <TH><FONT SIZE=1>Maximum State<BR>
      Allowed (%) (1) (3) </FONT>
      <HR WIDTH=100% SIZE=1 noshade>
    </TH>
  </TR>
  <TR VALIGN=Bottom align="center">
    <TD><FONT SIZE=2>&nbsp;&nbsp;&nbsp;Aaa</FONT></TD>
    <TD>&nbsp;&nbsp;&nbsp;</TD>
    <TD><FONT SIZE=2>*</FONT></TD>
    <TD>&nbsp;&nbsp;&nbsp;</TD>
    <TD><FONT SIZE=2>100</FONT></TD>
    <TD>&nbsp;&nbsp;&nbsp;</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>&nbsp;</TD>
    <TD><FONT SIZE=2>10</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT SIZE=2>20</FONT></TD>
    <TD>&nbsp;</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>&nbsp;</TD>
    <TD><FONT SIZE=2>10</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT SIZE=2>10</FONT></TD>
    <TD>&nbsp;</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>&nbsp;</TD>
    <TD><FONT SIZE=2>10</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT SIZE=2>6</FONT></TD>
    <TD>&nbsp;</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>&nbsp;</TD>
    <TD><FONT SIZE=2>10</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT SIZE=2>4</FONT></TD>
    <TD>&nbsp;</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>&nbsp;</TD>
    <TD><FONT SIZE=2>10</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT SIZE=2>3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT SIZE=2>12</FONT></TD>
  </TR>
  <TR VALIGN=Bottom align="center">
    <TD><FONT SIZE=2>Other (2)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT SIZE=2>10</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT SIZE=2>2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT SIZE=2>12</FONT></TD>
  </TR>
</TABLE>

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

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

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<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=left VALIGN=top><FONT SIZE="1">(3) </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">Territorial
bonds (other than those issued by Puerto Rico and counted      collectively) are each
limited to 10% of Moody&#146;s Eligible Assets. For      diversification purposes, Puerto
Rico will be treated as a state.</FONT></TD></TR></TABLE>

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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 Municipal
Bond backed by the guaranty, letter of credit or insurance issued by a third party will
be deemed to be issued by such third party if the issuance of such third party credit is
the sole determinant of the rating on such Bond. </FONT></P>

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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 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  </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>sufficient comfort with the
Investment Adviser&#146;s internal credit rating processes, not have suspended ratings by
Moody&#146;s, if an Inverse Floater, be explicitly rated by Moody&#146;s, and be part of
an issue of Municipal Bonds of at least $10,000,000 (except for issues rated Aaa by Moody&#146;s,
as provided in the chart above). </FONT></P>

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

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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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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
the Fund will not engage in any Moody&#146;s Hedging Transaction based       on the
Municipal Index (other than Closing Transactions) that would cause       the Fund at the
time of such transaction to own or have sold (A)       outstanding financial futures
contracts based on the Municipal Index       exceeding in number 10% of the average
number of daily traded financial       futures contracts based on the Municipal Index in
the 30 days preceding       the time of effecting such transaction as reported by The
Wall Street       Journal or (B) outstanding financial futures contracts based on the
      Municipal Index having a fair market value exceeding 50% of the fair       market
value of all Municipal Bonds constituting Moody&#146;s Eligible Assets       owned by the
Fund (other than Moody&#146;s Eligible Assets already subject to a       Moody&#146;s
Hedging Transaction); </FONT>
</TD>
</TR>
</TABLE>
<BR>



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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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<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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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)
the Fund will engage in Closing Transactions to close out any       outstanding financial
futures contract based on the Municipal Index if the       amount of open interest in the
Municipal Index as reported by The Wall       Street Journal is less than 5,000; </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 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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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)
the Fund will engage in Moody&#146;s Hedging Transactions only with       respect to
financial futures contracts or options thereon having the next       settlement date or
the settlement date immediately thereafter; </FONT>
</TD>
</TR>
</TABLE>
<BR>

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

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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)
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  </FONT></P>



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<BR>&nbsp;
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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 overall
supervision 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;Ms.
Ramo and Messrs. London and Salomon are the members of the Fund&#146;s Nominating
Committee (the &#147;Nominating Committee&#148;). The principal responsibilities of the
Nominating Committee are to identify individuals qualified to serve as non-interested
Directors of the Fund and to recommend its nominees for consideration by the full Board.
While the Nominating Committee is solely responsible for the selection and nomination of
the Fund&#146;s non-interested Directors, the Nominating Committee may consider
nominations for the office of the Director made by Fund stockholders 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" width="100%">
  <tr valign="bottom" align="center">
    <td width="9%"> <font size="1" face="Times New Roman, Times, serif"><b>Name,
      <br>
      Address* and <br>
      Age of Director </b></font>
      <hr noshade size="1">
    </td>
    <td width="1%">&nbsp; </td>
    <td width="7%"> <font size="1" face="Times New Roman, Times, serif"><b>Position(s)<br>
      Held with <br>
      the Fund </b></font>
      <hr noshade size="1">
    </td>
    <td width="1%">&nbsp; </td>
    <td width="14%"> <font size="1" face="Times New Roman, Times, serif"><b>Term
      of <br>
      Office** and <br>
      Length of <br>
      Time Served </b></font>
      <hr noshade size="1">
    </td>
    <td width="1%">&nbsp; </td>
    <td width="42%"> <font size="1" face="Times New Roman, Times, serif"><b> Principal
      Occupation(s) <br>
      During the Past Five Years </b></font>
      <hr noshade size="1">
    </td>
    <td width="1%">&nbsp; </td>
    <td width="16%"> <font size="1" face="Times New Roman, Times, serif"><b>Number
      of <br>
      MLIM/FAM- <br>
      Advised Funds <br>
      and Portfolios <br>
      Overseen </b></font>
      <hr noshade size="1">
    </td>
    <td width="1%">&nbsp; </td>
    <td width="7%"> <font size="1" face="Times New Roman, Times, serif"><b>Public
      <br>
      Directorships </b></font>
      <hr noshade size="1">
    </td>
  </tr>
  <tr valign="top" align="left">
    <td width="9%"><font face="Times New Roman, Times, serif" size="2">James H.
      Bodurtha (61) ***</font></td>
    <td width="1%">&nbsp;</td>
    <td width="7%"><font face="Times New Roman, Times, serif" size="2">Director</font></td>
    <td width="1%">&nbsp;</td>
    <td width="14%"><font face="Times New Roman, Times, serif" size="2">Director
      since 1995 and Co-Chairman of the Board since 2005</font></td>
    <td width="1%">&nbsp;</td>
    <td width="42%"><font face="Times New Roman, Times, serif" size="2">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 width="1%">&nbsp;</td>
    <td width="16%"><font face="Times New Roman, Times, serif" size="2">39 registered
      investment companies consisting of 59&nbsp;portfolios</font></td>
    <td width="1%">&nbsp;</td>
    <td width="7%"><font face="Times New Roman, Times, serif" size="2">None</font></td>
  </tr>
  <tr>
    <td width="9%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="7%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="14%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="42%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="16%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="7%">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="9%"><font face="Times New Roman, Times, serif" size="2">Kenneth
      A. Froot (48)</font></td>
    <td width="1%">&nbsp;</td>
    <td width="7%"><font face="Times New Roman, Times, serif" size="2">Director</font></td>
    <td width="1%">&nbsp;</td>
    <td width="14%"><font face="Times New Roman, Times, serif" size="2">Director
      since 2005 </font></td>
    <td width="1%">&nbsp;</td>
    <td width="42%"><font face="Times New Roman, Times, serif" size="2">Professor,
      Harvard University, since 1992.</font></td>
    <td width="1%">&nbsp;</td>
    <td width="16%"><font face="Times New Roman, Times, serif" size="2">39 registered
      investment companies consisting of 59&nbsp;portfolios</font></td>
    <td width="1%">&nbsp;</td>
    <td width="7%"><font face="Times New Roman, Times, serif" size="2">None</font></td>
  </tr>
</table>

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







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<br>

<table border="0" width="100%">
  <tr valign="bottom" align="center">
    <td width="9%"> <font size="1" face="Times New Roman, Times, serif"><b>Name,
      <br>
      Address* and <br>
      Age of Director </b></font>
      <hr noshade size="1">
    </td>
    <td width="1%">&nbsp; </td>
    <td width="7%"> <font size="1" face="Times New Roman, Times, serif"><b>Position(s)<br>
      Held with <br>
      the Fund </b></font>
      <hr noshade size="1">
    </td>
    <td width="1%">&nbsp; </td>
    <td width="14%"> <font size="1" face="Times New Roman, Times, serif"><b>Term
      of <br>
      Office** and <br>
      Length of <br>
      Time Served </b></font>
      <hr noshade size="1">
    </td>
    <td width="1%">&nbsp; </td>
    <td width="42%"> <font size="1" face="Times New Roman, Times, serif"><b> Principal
      Occupation(s) <br>
      During the Past Five Years </b></font>
      <hr noshade size="1">
    </td>
    <td width="1%">&nbsp; </td>
    <td width="16%"> <font size="1" face="Times New Roman, Times, serif"><b>Number
      of <br>
      MLIM/FAM- <br>
      Advised Funds <br>
      and Portfolios <br>
      Overseen </b></font>
      <hr noshade size="1">
    </td>
    <td width="1%">&nbsp; </td>
    <td width="7%"> <font size="1" face="Times New Roman, Times, serif"><b>Public
      <br>
      Directorships </b></font>
      <hr noshade size="1">
    </td>
  </tr>
  <tr valign="top" align="left">
    <td width="9%"><font face="Times New Roman, Times, serif" size="2">Joe Grills
      (70) ***</font></td>
    <td width="1%">&nbsp;</td>
    <td width="7%"><font face="Times New Roman, Times, serif" size="2"> Director</font></td>
    <td width="1%">&nbsp;</td>
    <td width="14%"><font face="Times New Roman, Times, serif" size="2">Director
      since 2002 and Co-Chairman of the Board since 2005</font></td>
    <td width="1%">&nbsp;</td>
    <td width="42%"><font face="Times New Roman, Times, serif" size="2">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 width="1%">&nbsp;</td>
    <td width="16%"><font face="Times New Roman, Times, serif" size="2">39 registered
      investment companies consisting of 59&nbsp;portfolios</font></td>
    <td width="1%">&nbsp;</td>
    <td width="7%"><font face="Times New Roman, Times, serif" size="2">Kimco Realty
      Corporation</font></td>
  </tr>
  <tr>
    <td width="9%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="7%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="14%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="42%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="16%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="7%">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="9%"><font face="Times New Roman, Times, serif" size="2">Herbert
      I. London (66)</font></td>
    <td width="1%">&nbsp;</td>
    <td width="7%"><font face="Times New Roman, Times, serif" size="2">Director</font></td>
    <td width="1%">&nbsp;</td>
    <td width="14%"><font face="Times New Roman, Times, serif" size="2">Director
      since 1992</font></td>
    <td width="1%">&nbsp;</td>
    <td width="42%"><font face="Times New Roman, Times, serif" size="2">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 width="1%">&nbsp;</td>
    <td width="16%"><font face="Times New Roman, Times, serif" size="2">39 registered
      investment companies consisting of 59&nbsp;portfolios</font></td>
    <td width="1%">&nbsp;</td>
    <td width="7%"><font face="Times New Roman, Times, serif" size="2">None</font></td>
  </tr>
  <tr valign="top">
    <td width="9%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="7%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="14%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="42%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="16%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="7%">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="9%"><font face="Times New Roman, Times, serif" size="2">Roberta
      Cooper Ramo (63)****</font></td>
    <td width="1%">&nbsp;</td>
    <td width="7%"><font face="Times New Roman, Times, serif" size="2">Director</font></td>
    <td width="1%">&nbsp;</td>
    <td width="14%"><font face="Times New Roman, Times, serif" size="2">Director
      since 1999</font></td>
    <td width="1%">&nbsp;</td>
    <td width="42%" align="left"><font face="Times New Roman, Times, serif" size="2">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 width="1%">&nbsp;</td>
    <td width="16%"><font face="Times New Roman, Times, serif" size="2"> 39 registered
      investment companies consisting of 59&nbsp;portfolios</font></td>
    <td width="1%">&nbsp;</td>
    <td width="7%"><font face="Times New Roman, Times, serif" size="2">None</font></td>
  </tr>
</table>

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







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<br>

<table border="0" width="100%">
  <tr valign="bottom">
    <td width="9%">
      <div align="center"><font size="1" face="Times New Roman, Times, serif"><b>Name,
        Address* and<br>
        Age of Director</b></font></div>
    </td>
    <td width="1%">
      <div align="center">&nbsp;</div>
    </td>
    <td width="7%">
      <div align="center"><font size="1" face="Times New Roman, Times, serif"><b>Position(s)<br>
        Held with<br>
        the Fund</b></font></div>
    </td>
    <td width="1%">
      <div align="center">&nbsp;</div>
    </td>
    <td width="14%">
      <div align="center"><font size="1" face="Times New Roman, Times, serif"><b>Term
        of<br>
        Office** and<br>
        Length of<br>
        Time Served</b></font></div>
    </td>
    <td width="1%">
      <div align="center">&nbsp;</div>
    </td>
    <td width="42%">
      <div align="center"><font size="1" face="Times New Roman, Times, serif"><b><br>
        Principal Occupation(s)<br>
        During the Past Five Years</b></font></div>
    </td>
    <td width="1%">
      <div align="center">&nbsp;</div>
    </td>
    <td width="16%">
      <div align="center"><font size="1" face="Times New Roman, Times, serif"><b>Number
        of<br>
        MLIM/FAM-<br>
        Advised Funds<br>
        and Portfolios<br>
        Overseen</b></font></div>
    </td>
    <td width="1%">
      <div align="center">&nbsp;</div>
    </td>
    <td width="7%">
      <div align="center"><font size="1" face="Times New Roman, Times, serif"><b>Public<br>
        Directorships </b></font> </div>
    </td>
  </tr>
  <tr>
    <td width="9%">
      <hr noshade size="1">
    </td>
    <td width="1%">&nbsp;</td>
    <td width="7%">
      <hr noshade size="1">
    </td>
    <td width="1%">&nbsp;</td>
    <td width="14%">
      <hr noshade size="1">
    </td>
    <td width="1%">&nbsp;</td>
    <td width="42%">
      <hr noshade size="1">
    </td>
    <td width="1%">&nbsp;</td>
    <td width="16%">
      <hr noshade size="1">
    </td>
    <td width="1%">&nbsp;</td>
    <td width="7%">
      <hr noshade size="1">
    </td>
  </tr>
  <tr valign="top" align="left">
    <td width="9%"><font face="Times New Roman, Times, serif" size="2">Robert
      S. Salomon, Jr. (68)</font></td>
    <td width="1%">&nbsp;</td>
    <td width="7%"><font face="Times New Roman, Times, serif" size="2">Director</font></td>
    <td width="1%">&nbsp;</td>
    <td width="14%"><font face="Times New Roman, Times, serif" size="2">Director
      since 2002</font></td>
    <td width="1%">&nbsp;</td>
    <td width="42%"><font face="Times New Roman, Times, serif" size="2">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 width="1%">&nbsp;</td>
    <td width="16%"><font face="Times New Roman, Times, serif" size="2">39 registered
      investment companies consisting of 59&nbsp;portfolios</font></td>
    <td width="1%">&nbsp;</td>
    <td width="7%"><font face="Times New Roman, Times, serif" size="2">None</font></td>
  </tr>
  <tr valign="top">
    <td width="9%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="7%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="14%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="42%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="16%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="7%">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="9%"><font face="Times New Roman, Times, serif" size="2">Stephen
      B. Swensrud (72)</font></td>
    <td width="1%">&nbsp;</td>
    <td width="7%"><font face="Times New Roman, Times, serif" size="2">Director</font></td>
    <td width="1%">&nbsp;</td>
    <td width="14%"><font face="Times New Roman, Times, serif" size="2">Director
      since 2002</font></td>
    <td width="1%">&nbsp;</td>
    <td width="42%"><font face="Times New Roman, Times, serif" size="2">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 width="1%">&nbsp;</td>
    <td width="16%"><font face="Times New Roman, Times, serif" size="2">40 registered
      investment companies consisting of 60&nbsp;portfolios </font></td>
    <td width="1%">&nbsp;</td>
    <td width="7%"><font face="Times New Roman, Times, serif" size="2">International
      Mobile Communications, Inc. </font></td>
  </tr>
</table>
<font face="Times New Roman, Times, serif" size="2"> <!-- MARKER FORMAT-SHEET="Cutoff rule Footnote" FSL="Workstation" --></font>
<HR SIZE=1 noshade ALIGN=left  WIDTH=75>


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

<!-- MARKER FORMAT-SHEET="Footnote Left" 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">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 Left" 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">Co-Chair
of the Audit Committee.</FONT></TD></TR></TABLE>

<!-- MARKER FORMAT-SHEET="Footnote Left" 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">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" width="100%">
  <tr valign="bottom">
    <td width="9%">
      <div align="center"><font size="1" face="Times New Roman, Times, serif"><b>Name,
        Address* and<br>
        Age of Director</b></font></div>
    </td>
    <td width="1%">
      <div align="center">&nbsp;</div>
    </td>
    <td width="7%">
      <div align="center"><font size="1" face="Times New Roman, Times, serif"><b>Position(s)<br>
        Held with<br>
        the Fund</b></font></div>
    </td>
    <td width="1%">
      <div align="center">&nbsp;</div>
    </td>
    <td width="14%">
      <div align="center"><font size="1" face="Times New Roman, Times, serif"><b>Term
        of<br>
        Office** and<br>
        Length of<br>
        Time Served</b></font></div>
    </td>
    <td width="1%">
      <div align="center">&nbsp;</div>
    </td>
    <td width="42%">
      <div align="center"><font size="1" face="Times New Roman, Times, serif"><b><br>
        Principal Occupation(s)<br>
        During the Past Five Years</b></font></div>
    </td>
    <td width="1%">
      <div align="center">&nbsp;</div>
    </td>
    <td width="16%">
      <div align="center"><font size="1" face="Times New Roman, Times, serif"><b>Number
        of<br>
        MLIM/FAM-<br>
        Advised Funds<br>
        and Portfolios<br>
        Overseen</b></font></div>
    </td>
    <td width="1%">
      <div align="center">&nbsp;</div>
    </td>
    <td width="7%">
      <div align="center"><font size="1" face="Times New Roman, Times, serif"><b>Public<br>
        Directorships </b></font> </div>
    </td>
  </tr>
  <tr>
    <td width="9%">
      <hr noshade size="1">
    </td>
    <td width="1%">&nbsp;</td>
    <td width="7%">
      <hr noshade size="1">
    </td>
    <td width="1%">&nbsp;</td>
    <td width="14%">
      <hr noshade size="1">
    </td>
    <td width="1%">&nbsp;</td>
    <td width="42%">
      <hr noshade size="1">
    </td>
    <td width="1%">&nbsp;</td>
    <td width="16%">
      <hr noshade size="1">
    </td>
    <td width="1%">&nbsp;</td>
    <td width="7%">
      <hr noshade size="1">
    </td>
  </tr>
  <tr valign="top" align="left">
    <td width="9%"><font face="Times New Roman, Times, serif" size="2">Robert
      C. Doll, Jr. (50)***</font></td>
    <td width="1%">&nbsp;</td>
    <td width="7%"><font face="Times New Roman, Times, serif" size="2">President
      and Director</font></td>
    <td width="1%">&nbsp;</td>
    <td width="14%"><font face="Times New Roman, Times, serif" size="2">President
      and Director**** since 2005</font></td>
    <td width="1%">&nbsp;</td>
    <td width="42%"><font face="Times New Roman, Times, serif" size="2">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 width="1%">&nbsp;</td>
    <td width="16%"><font face="Times New Roman, Times, serif" size="2">125 registered
      investment companies consisting of 164&nbsp;portfolios</font></td>
    <td width="1%">&nbsp;</td>
    <td width="7%"><font face="Times New Roman, Times, serif" size="2">None</font></td>
  </tr>
  <tr valign="top">
    <td width="9%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="7%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="14%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="42%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="16%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="7%">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="9%"><font face="Times New Roman, Times, serif" size="2">Kenneth
      A. Jacob (53)</font></td>
    <td width="1%">&nbsp;</td>
    <td width="7%"><font face="Times New Roman, Times, serif" size="2">Senior
      Vice President</font></td>
    <td width="1%">&nbsp;</td>
    <td width="14%"><font face="Times New Roman, Times, serif" size="2">Senior
      Vice President since 2002</font></td>
    <td width="1%">&nbsp;</td>
    <td width="42%"><font face="Times New Roman, Times, serif" size="2">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 width="1%">&nbsp;</td>
    <td width="16%"><font face="Times New Roman, Times, serif" size="2">38 registered
      investment companies consisting of 50&nbsp;portfolios</font></td>
    <td width="1%">&nbsp;</td>
    <td width="7%"><font face="Times New Roman, Times, serif" size="2">None</font></td>
  </tr>
  <tr valign="top">
    <td width="9%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="7%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="14%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="42%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="16%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="7%">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="9%"><font face="Times New Roman, Times, serif" size="2">John M.
      Loffredo (41)</font></td>
    <td width="1%">&nbsp;</td>
    <td width="7%"><font face="Times New Roman, Times, serif" size="2">Senior
      Vice President</font></td>
    <td width="1%">&nbsp;</td>
    <td width="14%"><font face="Times New Roman, Times, serif" size="2">Senior
      Vice President since 2001</font></td>
    <td width="1%">&nbsp;</td>
    <td width="42%"><font face="Times New Roman, Times, serif" size="2"> 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 width="1%">&nbsp;</td>
    <td width="16%"><font face="Times New Roman, Times, serif" size="2">39 registered
      investment companies consisting of 51&nbsp;portfolios</font></td>
    <td width="1%">&nbsp;</td>
    <td width="7%"><font face="Times New Roman, Times, serif" 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">
22</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR SIZE=5 noshade WIDTH=100% ALIGN=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 23; page: 23" -->
<table border="0" width="100%">
  <tr valign="bottom">
    <td width="9%">
      <div align="center"><font size="1" face="Times New Roman, Times, serif"><b>Name,
        Address* and<br>
        Age of Director</b></font></div>
    </td>
    <td width="1%">
      <div align="center">&nbsp;</div>
    </td>
    <td width="7%">
      <div align="center"><font size="1" face="Times New Roman, Times, serif"><b>Position(s)<br>
        Held with<br>
        the Fund</b></font></div>
    </td>
    <td width="1%">
      <div align="center">&nbsp;</div>
    </td>
    <td width="14%">
      <div align="center"><font size="1" face="Times New Roman, Times, serif"><b>Term
        of<br>
        Office** and<br>
        Length of<br>
        Time Served</b></font></div>
    </td>
    <td width="1%">
      <div align="center">&nbsp;</div>
    </td>
    <td width="42%">
      <div align="center"><font size="1" face="Times New Roman, Times, serif"><b><br>
        Principal Occupation(s)<br>
        During the Past Five Years</b></font></div>
    </td>
    <td width="1%">
      <div align="center">&nbsp;</div>
    </td>
    <td width="16%">
      <div align="center"><font size="1" face="Times New Roman, Times, serif"><b>Number
        of<br>
        MLIM/FAM-<br>
        Advised Funds<br>
        and Portfolios<br>
        Overseen</b></font></div>
    </td>
    <td width="1%">
      <div align="center">&nbsp;</div>
    </td>
    <td width="7%">
      <div align="center"><font size="1" face="Times New Roman, Times, serif"><b>Public<br>
        Directorships </b></font> </div>
    </td>
  </tr>
  <tr>
    <td width="9%">
      <hr noshade size="1">
    </td>
    <td width="1%">&nbsp;</td>
    <td width="7%">
      <hr noshade size="1">
    </td>
    <td width="1%">&nbsp;</td>
    <td width="14%">
      <hr noshade size="1">
    </td>
    <td width="1%">&nbsp;</td>
    <td width="42%">
      <hr noshade size="1">
    </td>
    <td width="1%">&nbsp;</td>
    <td width="16%">
      <hr noshade size="1">
    </td>
    <td width="1%">&nbsp;</td>
    <td width="7%">
      <hr noshade size="1">
    </td>
  </tr>
  <tr valign="top" align="left">
    <td width="9%"><font face="Times New Roman, Times, serif" size="2">Michael
      Kalinoski (34)</font></td>
    <td width="1%">&nbsp;</td>
    <td width="7%"><font face="Times New Roman, Times, serif" size="2">Vice President</font></td>
    <td width="1%">&nbsp;</td>
    <td width="14%"><font face="Times New Roman, Times, serif" size="2">Vice President
      since 2000</font></td>
    <td width="1%">&nbsp;</td>
    <td width="42%"><font face="Times New Roman, Times, serif" size="2">Vice President
      of MLIM since 1999</font></td>
    <td width="1%">&nbsp;</td>
    <td width="16%"><font face="Times New Roman, Times, serif" size="2">4 registered
      investment companies consisting of 4&nbsp;portfolios</font></td>
    <td width="1%">&nbsp;</td>
    <td width="7%"><font face="Times New Roman, Times, serif" size="2">None</font></td>
  </tr>
  <tr valign="top">
    <td width="9%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="7%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="14%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="42%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="16%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="7%">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="9%"><font face="Times New Roman, Times, serif" size="2">Donald
      C. Burke (45)</font></td>
    <td width="1%">&nbsp;</td>
    <td width="7%"><font face="Times New Roman, Times, serif" size="2">Vice President
      and Treasurer</font></td>
    <td width="1%">&nbsp;</td>
    <td width="14%"><font face="Times New Roman, Times, serif" size="2">Vice President
      since 1994 and Treasurer since 1999</font></td>
    <td width="1%">&nbsp;</td>
    <td width="42%"><font face="Times New Roman, Times, serif" size="2">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 width="1%">&nbsp;</td>
    <td width="16%"><font face="Times New Roman, Times, serif" size="2">127 registered
      investment companies consisting of 166&nbsp;portfolios</font></td>
    <td width="1%">&nbsp;</td>
    <td width="7%"><font face="Times New Roman, Times, serif" size="2">None</font></td>
  </tr>
  <tr valign="top">
    <td width="9%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="7%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="14%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="42%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="16%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="7%">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="9%"><font face="Times New Roman, Times, serif" size="2">Jeffrey
      Hiller (53)</font></td>
    <td width="1%">&nbsp;</td>
    <td width="7%"><font face="Times New Roman, Times, serif" size="2">Chief Compliance
      Officer</font></td>
    <td width="1%">&nbsp;</td>
    <td width="14%"><font face="Times New Roman, Times, serif" size="2">Chief
      Compliance Officer since 2004</font></td>
    <td width="1%">&nbsp;</td>
    <td width="42%"><font face="Times New Roman, Times, serif" size="2"> 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 width="1%">&nbsp;</td>
    <td width="16%"><font face="Times New Roman, Times, serif" size="2">128 registered
      investment companies consisting of 167&nbsp;portfolios</font></td>
    <td width="1%">&nbsp;</td>
    <td width="7%"><font face="Times New Roman, Times, serif" size="2">None</font>
    </td>
  </tr>
  <tr valign="top">
    <td width="9%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="7%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="14%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="42%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="16%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="7%">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="9%"><font face="Times New Roman, Times, serif" size="2">Alice A.
      Pellegrino (45)</font></td>
    <td width="1%">&nbsp;</td>
    <td width="7%"><font face="Times New Roman, Times, serif" size="2">Secretary</font></td>
    <td width="1%">&nbsp;</td>
    <td width="14%"><font face="Times New Roman, Times, serif" size="2">Secretary
      since 2004</font></td>
    <td width="1%">&nbsp;</td>
    <td width="42%"><font face="Times New Roman, Times, serif" size="2">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 width="1%">&nbsp;</td>
    <td width="16%"><font face="Times New Roman, Times, serif" size="2">125 registered
      investment companies consisting of 164&nbsp;portfolios</font></td>
    <td width="1%">&nbsp;</td>
    <td width="7%"><font face="Times New Roman, Times, serif" size="2">None</font></td>
  </tr>
</table>
<HR SIZE=1 noshade ALIGN=left  WIDTH=75>


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

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

<!-- MARKER FORMAT-SHEET="Footnote Left" FSL="Workstation" -->
<TABLE WIDTH=100%><TR>
    <TD WIDTH=4% ALIGN=right VALIGN=top><FONT SIZE="1"> *** </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">Mr.
Doll is an &#147;interested person,&#148; as defined in the 1940 Act, of the       Fund
based on his positions with MLIM, FAM, Princeton Services, and       Princeton
Administrators, L.P.</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%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">As
a Director, Mr. Doll serves until his successor is elected and       qualified or until
December 31 of the year in which he turns 72, or until       his death, resignation, or
removal as provided in the Fund&#146;s By-Laws or       Charter.</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;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. Bodurtha and Mr. London are the Directors
elected by holders of preferred stock. See &#147;Description of AMPS &#151; Voting Rights.&#148; </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">
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: 24; page: 24" -->








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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Share Ownership </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;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=600 align="center">
  <TR VALIGN=Bottom>
    <TH align="left"><FONT SIZE=1>Name </FONT>
      <HR WIDTH=30 SIZE=1 noshade align="left">
    </TH>
    <TH>&nbsp;</TH>
    <TH><FONT SIZE=1>Aggregate Dollar Range <BR>
      of Equity in the Fund </FONT>
      <HR WIDTH=110 SIZE=1 noshade>
    </TH>
    <TH>&nbsp;</TH>
    <TH><FONT SIZE=1>Aggregate Dollar Range<BR>
      of Securities in Supervised <BR>
      Merrill Lynch Funds </FONT>
      <HR WIDTH=120 SIZE=1 noshade>
    </TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2><i>Interested Director:</i></FONT></TD>
    <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;</TD>
    <TD ALIGN=CENTER><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=CENTER>&nbsp;&nbsp;&nbsp;</TD>
    <TD ALIGN=CENTER><FONT SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;Robert C. Doll, Jr</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=CENTER><FONT SIZE=2>None</FONT></TD>
    <TD ALIGN=CENTER>&nbsp;</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>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;James H. Bodurtha</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=CENTER><FONT SIZE=2>None</FONT></TD>
    <TD ALIGN=CENTER>&nbsp;</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>&nbsp;</TD>
    <TD ALIGN=CENTER><FONT SIZE=2>None</FONT></TD>
    <TD ALIGN=CENTER>&nbsp;</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>&nbsp;</TD>
    <TD ALIGN=CENTER><FONT SIZE=2>None</FONT></TD>
    <TD ALIGN=CENTER>&nbsp;</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>&nbsp;</TD>
    <TD ALIGN=CENTER><FONT SIZE=2>None</FONT></TD>
    <TD ALIGN=CENTER>&nbsp;</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>&nbsp;</TD>
    <TD ALIGN=CENTER><FONT SIZE=2>None</FONT></TD>
    <TD ALIGN=CENTER>&nbsp;</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>&nbsp;</TD>
    <TD ALIGN=CENTER><FONT SIZE=2>None</FONT></TD>
    <TD ALIGN=CENTER>&nbsp;</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>&nbsp;</TD>
    <TD ALIGN=CENTER><FONT SIZE=2>None</FONT></TD>
    <TD ALIGN=CENTER>&nbsp;</TD>
    <TD ALIGN=CENTER><FONT SIZE=2>$50,001-$100,000</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=right VALIGN=top><FONT SIZE="1"> * </FONT></TD>
    <TD WIDTH=2%>&nbsp;</TD>
    <TD WIDTH=94% ALIGN=left VALIGN=top><FONT SIZE="1">For
the number of MLIM/FAM-advised funds from which each Director receives      compensation,
see the table above under &#147;Directors and Officers &#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%>&nbsp;</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-Chair 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-Chair provides services based on the relative net
assets of each such fund. </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">
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: 25; page: 25" -->







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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 align="left"><FONT SIZE=1>Name of Director </FONT>
      <hr width=75 size=1 noshade align="left">
    </TH>
    <TH align="left">&nbsp;</TH>
    <TH><FONT SIZE=1>Compensation <BR>
      from Fund </FONT>
      <HR WIDTH=70 SIZE=1 noshade>
    </TH>
    <TH>&nbsp;</TH>
    <TH><FONT SIZE=1>Pension or <BR>
      Retirement <BR>
      Benefits Accrued <BR>
      as Part of <BR>
      Fund Expense </FONT>
      <HR WIDTH=80 SIZE=1 noshade>
    </TH>
    <TH>&nbsp;</TH>
    <TH><FONT SIZE=1>Aggregate <BR>
      Compensation <BR>
      From Fund and <BR>
      other MLIM/FAM- <BR>
      Advised Funds*** </FONT>
      <HR WIDTH=80 SIZE=1 noshade>
    </TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>James H. Bodurtha*</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;</TD>
    <TD ALIGN=center><FONT SIZE=2>$3,650</FONT></TD>
    <TD ALIGN=center>&nbsp;&nbsp;&nbsp;</TD>
    <TD ALIGN=center><FONT SIZE=2>None</FONT></TD>
    <TD ALIGN=center>&nbsp;&nbsp;&nbsp;</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>&nbsp;</TD>
    <TD ALIGN=center><FONT SIZE=2>-0-</FONT></TD>
    <TD ALIGN=center>&nbsp;</TD>
    <TD ALIGN=center><FONT SIZE=2>None</FONT></TD>
    <TD ALIGN=center>&nbsp;</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>&nbsp;</TD>
    <TD ALIGN=center><FONT SIZE=2>$3,650</FONT></TD>
    <TD ALIGN=center>&nbsp;</TD>
    <TD ALIGN=center><FONT SIZE=2>None</FONT></TD>
    <TD ALIGN=center>&nbsp;</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>&nbsp;</TD>
    <TD ALIGN=center><FONT SIZE=2>$3,337</FONT></TD>
    <TD ALIGN=center>&nbsp;</TD>
    <TD ALIGN=center><FONT SIZE=2>None</FONT></TD>
    <TD ALIGN=center>&nbsp;</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>&nbsp;</TD>
    <TD ALIGN=center><FONT SIZE=2>$3,337</FONT></TD>
    <TD ALIGN=center>&nbsp;</TD>
    <TD ALIGN=center><FONT SIZE=2>None</FONT></TD>
    <TD ALIGN=center>&nbsp;</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>&nbsp;</TD>
    <TD ALIGN=center><FONT SIZE=2>$3,337</FONT></TD>
    <TD ALIGN=center>&nbsp;</TD>
    <TD ALIGN=center><FONT SIZE=2>None</FONT></TD>
    <TD ALIGN=center>&nbsp;</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>&nbsp;</TD>
    <TD ALIGN=center><FONT SIZE=2>$3,337</FONT></TD>
    <TD ALIGN=center>&nbsp;</TD>
    <TD ALIGN=center><FONT SIZE=2>None</FONT></TD>
    <TD ALIGN=center>&nbsp;</TD>
    <TD ALIGN=center><FONT SIZE=2>$231,000</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%>&nbsp;</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 Left" FSL="Workstation" -->
<TABLE WIDTH=100%><TR><TD WIDTH=4% ALIGN=left VALIGN=top><FONT SIZE="1"> ** </FONT></TD>
    <TD WIDTH=2%>&nbsp;</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>

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




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

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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 Michael A. Kalinoski. Mr. Kalinoski has been a portfolio manager and Vice
  President of MLIM since 1999 and has 12 years of experience investing in Municipal
  Bonds, including six years as a portfolio manager on behalf of registered investment
  companies. He has been the portfolio manager of the Fund since 2000. 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 the amount obtained
from leverage and 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. It is
understood that the liquidation preference of any outstanding preferred stock (other than
accumulated dividends) is not considered a liability in determining the Fund&#146;s
average weekly net assets. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
the 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 $1,135,612, $2,249,920, $2,265,983 and $2,202,564, respectively. </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">
25</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR SIZE=5 noshade WIDTH=100% ALIGN=LEFT>







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



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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 $1,491, $12,710, $9,311 and $3,111,
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 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 align="center" WIDTH=100%>
  <TR VALIGN=Bottom>
    <TH align="left" width="44%"><FONT SIZE=1>Period: </FONT>
      <HR WIDTH=30 SIZE=1 noshade align="left">
    </TH>
    <TH align="left" width="2%">&nbsp;</TH>
    <TH width="24%"><FONT SIZE=1>Paid by the Fund to <BR>
      State Street </FONT>
      <HR WIDTH=100 SIZE=1 noshade>
    </TH>
    <TH width="2%">&nbsp;</TH>
    <TH width="28%"><FONT SIZE=1>Paid by the Fund to <BR>
      the Investment <BR>
      Adviser </FONT>
      <HR WIDTH=100 SIZE=1 noshade>
    </TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT width="44%"><FONT SIZE=2>Six months ended April 30, 2005</FONT></TD>
    <TD ALIGN=LEFT width="2%">&nbsp;&nbsp;&nbsp;</TD>
    <TD ALIGN=center width="24%"><FONT SIZE=2>$&nbsp;&nbsp;73,851</FONT></TD>
    <TD ALIGN=center width="2%">&nbsp;&nbsp;&nbsp;</TD>
    <TD ALIGN=center width="28%"><FONT SIZE=2>$&nbsp;&nbsp;4,794</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT width="44%"><FONT SIZE=2>Fiscal year ended October 31, 2004</FONT></TD>
    <TD ALIGN=LEFT width="2%">&nbsp;</TD>
    <TD ALIGN=center width="24%"><FONT SIZE=2>$142,467</FONT></TD>
    <TD ALIGN=center width="2%">&nbsp;</TD>
    <TD ALIGN=center width="28%"><FONT SIZE=2>$&nbsp;&nbsp;8,773</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT width="44%"><FONT SIZE=2>Fiscal year ended October 31, 2003</FONT></TD>
    <TD ALIGN=LEFT width="2%">&nbsp;</TD>
    <TD ALIGN=center width="24%"><FONT SIZE=2>$141,916</FONT></TD>
    <TD ALIGN=center width="2%">&nbsp;</TD>
    <TD ALIGN=center width="28%"><FONT SIZE=2>$&nbsp;&nbsp;9,804</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT width="44%"><FONT SIZE=2>Fiscal year ended October 31, 2002</FONT></TD>
    <TD ALIGN=LEFT width="2%">&nbsp;</TD>
    <TD ALIGN=center width="24%"><FONT SIZE=2>$139,688</FONT></TD>
    <TD ALIGN=center width="2%">&nbsp;</TD>
    <TD ALIGN=center width="28%"><FONT SIZE=2>$18,351</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 are also 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 quality of overall services provided by the Investment
Adviser to be 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 many of
the Fund&#146;s shareholders, 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 indices. While the Board reviews performance data at least quarterly,
consistent with the Investment Adviser&#146;s investment goals, the Board attaches more
importance to performance over relatively long periods of time, typically three to five
years. The Board noted that the Fund&#146;s performance after fees and expenses ranked in
the first quintile for the one year, three year and five year periods ended May 31, 2005.
The Board concluded that the Fund&#146;s performance, 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 </FONT> </P>




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<BR>&nbsp;
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<!-- MARKER PAGE="sheet: 28; page: 28" -->







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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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. Kalinoski, the
Fund&#146;s portfolio manager, has over ten 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 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;&nbsp;&nbsp;<I>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 and actual management fee rates, as well as the Fund&#146;s total expenses,
were lower than the median fees and expenses charged by its peer group. The Board has
concluded that the Fund&#146;s management fee and fee rate and overall expense ratio are
reasonable compared to those of other, comparable funds. </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 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
shareholders. </FONT></P>


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<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 Michael A. Kalinoski. </FONT></P>


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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Other Funds and
Accounts Managed by Portfolio Manager as of October 31, 2004 </I></B></FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600 align="center">
  <TR VALIGN=Bottom>
    <TH>&nbsp;</TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=5><font size=1>Number of Other Accounts Managed<br>
      and Assets by Account Type </font>
      <hr width=100% size=1 noshade>
    </TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=5><FONT SIZE=1>Number of Accounts and Assets for Which<br>
      Advisory Fee is Performance-Based </FONT>
      <hr width=100% size=1 noshade>
    </TH>
  </TR>
  <TR VALIGN=Bottom>
    <TH><FONT SIZE=1>Name of Investment <BR>
      Adviser and <BR>
      Portfolio Manager </FONT>
      <HR WIDTH=100% SIZE=1 noshade>
    </TH>
    <TH>&nbsp;</TH>
    <TH><FONT SIZE=1>Registered <BR>
      Investment <BR>
      Companies </FONT>
      <HR WIDTH=100% SIZE=1 noshade>
    </TH>
    <TH>&nbsp;</TH>
    <TH><FONT SIZE=1>Other Pooled <BR>
      Investment <BR>
      Vehicles </FONT>
      <HR WIDTH=100% SIZE=1 noshade>
    </TH>
    <TH>&nbsp;</TH>
    <TH><FONT SIZE=1>Other <BR>
      accounts </FONT>
      <HR WIDTH=100% SIZE=1 noshade>
    </TH>
    <TH>&nbsp;</TH>
    <TH><FONT SIZE=1>Registered <BR>
      Investment <BR>
      Companies </FONT>
      <HR WIDTH=100% SIZE=1 noshade>
    </TH>
    <TH>&nbsp;</TH>
    <TH><FONT SIZE=1>Other Pooled <BR>
      Investment <BR>
      Vehicles </FONT>
      <HR WIDTH=100% SIZE=1 noshade>
    </TH>
    <TH>&nbsp;</TH>
    <TH><FONT SIZE=1>Other <BR>
      accounts </FONT>
      <HR WIDTH=100% SIZE=1 noshade>
    </TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1"><u>Fund Asset Management L.P.</u></font></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=center><font size="1">&nbsp;</font></TD>
    <TD ALIGN=center>&nbsp;</TD>
    <TD ALIGN=center>&nbsp;</TD>
    <TD ALIGN=center>&nbsp;&nbsp;</TD>
    <TD ALIGN=center>&nbsp;</TD>
    <TD ALIGN=center>&nbsp;&nbsp;</TD>
    <TD ALIGN=center>&nbsp;</TD>
    <TD ALIGN=center>&nbsp;&nbsp;</TD>
    <TD ALIGN=center>&nbsp;</TD>
    <TD ALIGN=center>&nbsp;&nbsp;</TD>
    <TD ALIGN=center>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1">Michael A. Kalinoski</font></TD>
    <TD ALIGN=LEFT>&nbsp;&nbsp;</TD>
    <TD ALIGN=center><font size="1">&nbsp;4</font></TD>
    <TD ALIGN=center>&nbsp;&nbsp;</TD>
    <TD ALIGN=center><font size="1">0</font></TD>
    <TD ALIGN=center>&nbsp;</TD>
    <TD ALIGN=center><font size="1">0</font></TD>
    <TD ALIGN=center>&nbsp;</TD>
    <TD ALIGN=center><font size="1">0</font></TD>
    <TD ALIGN=center>&nbsp;</TD>
    <TD ALIGN=center><font size="1">0</font></TD>
    <TD ALIGN=center>&nbsp;</TD>
    <TD ALIGN=center><font size="1">0</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=center><font size="1">$1,758,638,428</font></TD>
    <TD ALIGN=center>&nbsp;</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>
    <TD ALIGN=CENTER><b><FONT SIZE=2>Portfolio Manager</FONT></b>
      <hr noshade size="1" width="50%">
    </TD>
    <TD ALIGN=LEFT><b><FONT SIZE=2>&nbsp;</FONT></b></TD>
    <TD ALIGN=CENTER><b><FONT SIZE=2>Dollar Range</FONT></b>
      <hr noshade size="1" width="50%">
    </TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=CENTER><FONT SIZE=2>Michael A. Kalinoski</FONT></TD>
    <TD ALIGN=LEFT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD ALIGN=CENTER><FONT SIZE=2>None</FONT></TD>
  </TR>
</TABLE>


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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>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Portfolio
Manager Compensation</I> </FONT> </P>

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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>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Compensation
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;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>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Base
Salary</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;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>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Performance-Based
Compensation</I> </FONT> </P>

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<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>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Cash
Bonus</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;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>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Stock
Bonus</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;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 </FONT></P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Other
Compensation Programs</I> </FONT> </P>


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

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Other
Benefits</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;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>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Potential Material
Conflicts of Interest </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;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>

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<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>

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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 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>

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<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 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 &#151; such as approval of mergers and other significant corporate
transactions &#151; akin to investment decisions, and are, therefore, not suitable for
general guidelines. The Proxy Committee may elect to adopt a common position for the
Investment Adviser on certain proxy votes that are akin to investment decisions, or
determine to permit the portfolio manager to make individual decisions on how best to
maximize economic value for the Fund (similar to normal buy/sell investment decisions
made by such portfolio managers). While it is expected that the Investment Adviser will
generally seek to vote proxies over which the Investment Adviser exercises voting
authority in a uniform manner for all the Investment Adviser&#146;s clients, the Proxy
Committee, in conjunction with the Fund&#146;s portfolio manager, may determine that the
Fund&#146;s specific circumstances require that its proxies be voted differently. </FONT></P>

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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 investment advisory, administrative
and/or other services (each, a &#147;Client&#148;) is involved. The Proxy Voting
Procedures and the Investment Adviser&#146;s adherence to those procedures are designed
to address such conflicts of interest. The Proxy Committee intends to strictly adhere to
the Proxy Voting Procedures in all proxy matters, including matters involving Affiliates
and Clients. If, however, an issue representing a non-routine matter that is material to
an Affiliate or a widely known Client is involved such that the Proxy Committee does not
reasonably believe it is able to follow its guidelines (or if the particular proxy matter
is not addressed by the guidelines) and vote impartially, the Proxy Committee may, in its
discretion for the purposes of ensuring that an independent determination is reached,
retain an independent fiduciary to advise the Proxy Committee on how to vote or to cast
votes on behalf of the Investment Adviser&#146;s clients. </FONT></P>

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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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  <TR>
    <TD WIDTH=5%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=3%></TD>
    <TD WIDTH=90%><FONT SIZE=2>Proposals
related to the composition of the board of directors of issuers other than investment
companies. As a            general matter, the Proxy Committee believes that a company&#146;s
board of directors (rather than stockholders) is            most likely to have access to
important, nonpublic information regarding a company&#146;s business and prospects,
           and is therefore best-positioned to set corporate policy and oversee
management. The Proxy Committee,            therefore, believes that the foundation of
good corporate governance is the election of qualified, independent            corporate
directors who are likely to diligently represent the interests of stockholders and
oversee management            of the corporation in a manner that will seek to maximize
stockholder value over time. In individual cases, the            Proxy Committee may look
at a nominee&#146;s number of other directorships, history of representing stockholder
           interests as a director of other companies or other factors, to the extent the
Proxy Committee deems relevant.</FONT></TD></TR></TABLE>


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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 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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<TABLE WIDTH=100%>
  <TR>
    <TD WIDTH=5%></TD>
    <TD WIDTH=2% VALIGN=top><FONT SIZE=3>&#149;</FONT></TD>
    <TD WIDTH=3%></TD>
    <TD WIDTH=90%><FONT SIZE=2>Proposals
related to management compensation and employee benefits.            As a general matter,
the Proxy Committee favors disclosure of an            issuer&#146;s compensation and
benefit policies and opposes excessive            compensation, but believes that
compensation matters are normally            best determined by an issuer&#146;s board of
directors, rather than            stockholders. Proposals to &#147;micro-manage&#148; an
issuer&#146;s compensation            practices or to set arbitrary restrictions on
compensation or            benefits will, therefore, generally not be supported.</FONT></TD></TR></TABLE>

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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, 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, the Fund paid no brokerage commissions. For the
fiscal years ended October 31, 2004, 2003 and 2002, the Fund paid brokerage commissions
of $2,000, $12,210 and $17,970, respectively. All of the brokerage commissions paid for
the fiscal year ended October 31, 2004 were paid to MerrillLynch. None of the brokerage
commissions paid for the fiscal years ended October 31, 2003 and 2002 were paid to
MerrillLynch or 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;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 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 10.58%, 32.30% and 42.06%, 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 <font size="1">LLP</font>, counsel
  to the Fund, the shares of AMPS will constitute stock of the Fund and distributions
  with respect to shares of AMPS (other than distributions in redemption of shares
  of AMPS subject to Section 302(b) of the Code) will constitute dividends to
  the extent of the Fund&#146;s current and accumulated earnings and profits as
  calculated for Federal income tax purposes. Nevertheless, it is possible that
  the IRS might take a contrary position, asserting, for example, that the shares
  of AMPS constitute debt of the Fund. If this position were upheld, the discussion
  of the treatment of distributions below would not apply. Instead, distributions
  by the Fund to holders of shares of AMPS would constitute taxable interest income,
  whether or not they exceeded the earnings and profits of the Fund, would be
  included in full in the income of the recipient and would be taxed as ordinary
  income. Counsel believes that such a position, if asserted by the IRS, would
  be unlikely to prevail. </FONT></P>

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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;). 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
  </FONT></P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>obligations and designated by the
Fund as exempt-interest dividends in a written notice mailed to the Fund&#146;s
stockholders within 60 days after the close of its taxable year. To the extent that the
dividends distributed to the Fund&#146;s stockholders are derived from interest income
exempt from tax under Code Section 103(a) and are properly designated as exempt-interest
dividends, they will be excludable from a stockholder&#146;s gross income for Federal tax
purposes. Exempt-interest dividends are included, however, in determining the portion, if
any, of a person&#146;s social security and railroad retirement benefits subject to
Federal income taxes. Each stockholder is advised to consult a tax adviser with respect
to whether exempt-interest dividends retain the exclusion under Code Section 103(a) if
such stockholder would be treated as a &#147;substantial user&#148; or &#147;related
person&#148; under Code Section 147(a) with respect to property financed with the
proceeds of an issue of PABs, if any, held by the Fund. </FONT></P>

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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 generally are
considered ordinary income for Federal income tax purposes. Distributions by the Fund,
whether from exempt-interest income, ordinary income or capital gains, are not eligible
for the dividends received deduction allowed to corporations under the Code or the
reduced tax rates available to non-corporate shareholders. Distributions, if any, from an
excess of net long-term capital gains over net short-term capital losses derived from the
sale of securities or from certain transactions in futures, or options and swaps (&#147;capital
gain dividends&#148;) are taxable as long-term capital gains for Federal income tax
purposes, regardless of the length of time the stockholder has owned Fund shares.
Generally not later than 60 days after the close of its taxable year, the Fund will
provide its stockholders with a written notice designating the amounts of any
exempt-interest dividends and capital gain dividends. If the Fund pays a dividend in
January which was declared in the previous October, November or December to stockholders
of record on a specified date in one of such months, then such dividend will be treated
for tax purposes as being paid by the Fund and received by its stockholders on December
31 of the year in which such dividend was declared. </FONT></P>

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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 D AMPS and Other AMPS as tax exempt interest, capital gains
or other taxable income, as applicable, in proportion to each series&#146; share of total
dividends paid during the year. The Fund may notify the Auction Agent of the amount of
any net capital gain and other taxable income to be included in any dividend on shares of
AMPS prior to the Auction establishing the Applicable Rate for such dividend. The Fund
also may include such income in a dividend on shares of AMPS without giving advance
notice thereof if it increases the dividend by an additional amount calculated as if such
income were a Retroactive Taxable Allocation and the additional amount were an Additional
Dividend, provided that the Fund will notify the  </FONT></P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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 <font size="1">LLP</font>, counsel
  to the Fund, under current law the manner in which the Fund intends to allocate
  items of tax exempt income, net capital gain and other taxable income among
  shares of common stock and shares of AMPS will be respected for Federal income
  tax purposes. However, the tax treatment of Additional Dividends may affect
  the Fund&#146;s calculation of each class&#146;s allocable share of capital
  gains and other taxable income. In addition, there is currently no direct guidance
  from the IRS or other sources specifically addressing whether the Fund&#146;s
  method for allocating tax exempt income, net capital gain and other taxable
  income, if any, among shares of common stock and shares of the AMPS will be
  respected for Federal income tax purposes, and it is possible that the IRS could
  disagree with counsel&#146;s opinion and attempt to reallocate the Fund&#146;s
  net capital gain or other taxable income. In the event of a reallocation, some
  of the dividends identified by the Fund as exempt-interest dividends to holders
  of shares of AMPS may be recharacterized as additional capital gains or other
  taxable income. In the event of such recharacterization, the Fund would not
  be required to make payments to such stockholders to offset the tax effect of
  such reallocation. In addition, a reallocation may cause the Fund to be liable
  for income tax and excise tax on any reallocated taxable income. Sidley Austin
  Brown &amp; Wood <font size="1">LLP</font> has advised the Fund that, in its
  opinion, if the IRS were to challenge in court the Fund&#146;s allocations of
  income and gain, the IRS would be unlikely to prevail. A holder should be aware,
  however, that the opinion of Sidley Austin Brown &amp; Wood <font size="1">LLP</font>
  represents only its best legal judgment and is not binding on the IRS or the
  courts. </FONT></P>

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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 (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 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 does not necessarily
result in an exemption for such dividends under the income or other tax laws of any state
or local taxing authority. Stockholders are advised to consult their own tax advisers
concerning state and local matters. </FONT></P>

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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 SEC, Merrill Lynch) serve as the counterparty, principal or issuer. In such cases,
such party&#146;s interests in the transaction will be adverse to the interests of the
Fund, and such party may have no incentive to assure that the Fund obtains the best
possible prices or terms in connection with the transactions. In addition, the purchase,
holding and sale of such investments by the Fund may enhance the profitability of Merrill
Lynch. Merrill Lynch and its affiliates may also create, write or issue derivative
instruments for customers of Merrill Lynch or its affiliates, the underlying securities
or instruments of which may be those in which the Fund invests or which may be based on
the performance of the Fund. The Fund may, subject to applicable law, purchase
investments that are the subject of an underwriting or other distribution by Merrill
Lynch or its affiliates and may also enter into transactions with other clients of
Merrill Lynch or its affiliates where such other clients have interests adverse to those
of the Fund. At times, these activities may cause departments of Merrill Lynch or its
affiliates to give advice to clients that may cause these clients to take actions adverse
to the interests of the Fund. To the extent affiliated transactions are permitted, the
Fund will deal with Merrill Lynch and its affiliates on an arms-length basis. </FONT></P>

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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 <I>Barron&#146;s</I>, the Monday edition of <I>The Wall Street Journal </I>and the
Monday and Saturday editions of <I>The New York Times</I>. </FONT> </P>

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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 <font size="1">LLP</font>
  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>RATINGS OF MUNICIPAL
BONDS </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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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Description of Moody&#146;s
Municipal Bond 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>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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<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>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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<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>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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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<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=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>MIG 1 </FONT></TD>
    <TD width="1%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=93%><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=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>MIG 2 </FONT></TD>
    <TD width="1%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=93%><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=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>MIG 3 </FONT></TD>
    <TD width="1%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=93%><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=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SG </FONT></TD>
    <TD width="1%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=93%><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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<BR>&nbsp;
<TABLE WIDTH=100%><TR><TD WIDTH=20% ALIGN=left><FONT SIZE=1>&nbsp;</FONT></TD><TD WIDTH=60% ALIGN=center><FONT SIZE="2">
A-1</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR SIZE=5 noshade WIDTH=100% ALIGN=LEFT>







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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, e.g., Aaa/NR or NR/VMIG 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;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=8%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>VMIG 1</B>
      </FONT> </TD>
    <TD width="1%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=91%><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=8%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>VMIG 2</B>
      </FONT> </TD>
    <TD width="1%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=91%><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=8%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>VMIG 3</B>
      </FONT> </TD>
    <TD width="1%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=91%><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=8%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>SG</B>
      </FONT> </TD>
    <TD width="1%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=91%><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=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>P-1 </FONT></TD>
    <TD width="1%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=91%><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=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>P-2 </FONT></TD>
    <TD width="1%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=91%><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=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>P-3 </FONT></TD>
    <TD width="1%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=91%><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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<TR VALIGN=TOP>
    <TD WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NP </FONT></TD>
    <TD width="1%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=91%><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>&nbsp;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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<BR>&nbsp;
<TABLE WIDTH=100%><TR><TD WIDTH=20% ALIGN=left><FONT SIZE=1>&nbsp;</FONT></TD><TD WIDTH=60% ALIGN=center><FONT SIZE="2">
A-2</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR SIZE=5 noshade WIDTH=100% ALIGN=LEFT>







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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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<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  </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 </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
&#145;c&#146; subscript is used to provide additional information to               investors
that the bank may terminate its obligation to purchase               tendered bonds if
the long term credit rating of the issuer is               below an investment-grade
level and/or the issuer&#146;s bonds are               deemed taxable. </FONT></TD>
</TR>
</TABLE>
<BR>

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<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 &#145;p&#146; indicates that the rating is provisional. A
              provisional rating assumes the successful completion of the
              project financed by the debt being rated and indicates that
              payment of debt service requirements is largely or entirely
              dependent upon the successful, timely completion of the project.
              This rating, however, while addressing credit quality subsequent
              to the completion of the project, makes no comment on the
              likelihood of or the risk of default upon failure of such
              completion. The investor should exercise his own judgment with
              respect to such likelihood and risk. </FONT></TD>
</TR>
</TABLE>
<BR>

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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>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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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&#148; 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&#148; is rated in the highest
              category by Standard &amp; Poor&#146;s. The obligor&#146;s capacity to meet
its               financial commitment on the obligation is strong. Within this
              category, certain obligations are designated with a plus sign (+).
              This indicates that the obligor&#146;s capacity to meet its financial
              commitment on these obligations is extremely strong. </FONT></TD>
</TR>
</TABLE>
<BR>

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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&#148; is somewhat more susceptible               to
the adverse effects of changes in circumstances and economic               conditions
than obligations in higher rating categories. However,               the obligor&#146;s
capacity to meet its financial commitment on the               obligation is satisfactory. </FONT></TD>
</TR>
</TABLE>
<BR>

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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&#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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<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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<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 &#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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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<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>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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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Plus
</I>(+) or <I>Minus </I>(-): Plus and minus signs are used with a rating symbol to indicate the
relative position of a credit within the rating category. Plus and minus signs, however,
are not used in the &#147;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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Plus
</I>(+) or <I>Minus </I>(-): Plus and minus signs are used with a rating symbol to indicate the
relative position of a credit within the rating category. Plus and minus signs, however,
are not used in the &#147;DDD,&#148; &#147;DD,&#148; or &#147;D&#148; categories. </FONT> </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+&#148; and               &#147;F-1&#148; 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">
A-6</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR SIZE=5 noshade WIDTH=100% ALIGN=LEFT>







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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
    <TD WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F-S </FONT></TD>
    <TD width="1%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=91%><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=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>D </FONT></TD>
    <TD width="1%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=91%><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=8% height="17"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>LOC
      </FONT></TD>
    <TD width="1%" height="17"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;
      </FONT></TD>
    <TD WIDTH=91% height="17"><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=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NR </FONT></TD>
    <TD width="1%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=91%><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=8%><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; </FONT></TD>
    <TD WIDTH=91%><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=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Suspended </FONT></TD>
    <TD width="1%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=91%><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=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Withdrawn </FONT></TD>
    <TD width="1%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=91%><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=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>FitchAlert
      </FONT></TD>
    <TD width="1%"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
    <TD WIDTH=91%><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">
A-7</FONT></TD><TD WIDTH=20% ALIGN=right><FONT SIZE="1">&nbsp;</FONT></TD></TR></TABLE><HR SIZE=5 noshade WIDTH=100% ALIGN=LEFT>







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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>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 B constitutes a representation by the Fund that in each
Auction each party referred to herein actually will perform the procedures described
herein to be performed by such party. Capitalized terms used herein shall have the
respective meanings specified in the Glossary in the prospectus or this Appendix B
hereto, as the case may be. </FONT></P>

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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 AMPS to be sold pursuant to such Order
against payment            therefor and advise any such Beneficial Owner that will
continue to            hold shares of AMPS of the Applicable Rate for the next succeeding
           Dividend Period; </FONT>
</TD>
</TR>
</TABLE>
<BR>


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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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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)
advise each Beneficial Owner on whose behalf such            Broker-Dealer submitted a
Hold Order of the Applicable Rate for the            next succeeding Dividend Period; </FONT>
</TD>
</TR>
</TABLE>
<BR>

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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)
advise each Beneficial Owner on whose behalf such            Broker-Dealer submitted an
Order of the Auction Date for the next            succeeding Auction; and </FONT>
</TD>
</TR>
</TABLE>
<BR>

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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)
advise each Potential Beneficial Owner on whose behalf such            Broker-Dealer
submitted a Bid that was accepted, in whole or in part,            of the Auction Date
for the next succeeding Auction. </FONT>
</TD>
</TR>
</TABLE>
<BR>

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



<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>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 C constitutes a representation by the Fund that in each Auction
  each party referred to herein actually will perform the procedures described
  herein to be performed by such party. </font></p>
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<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Paragraph
  10(a) Certain Definitions. </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>
<br>
<table cellpadding=0 cellspacing=0 border=0 align="center" width=600>
  <tr valign=Bottom>
    <td align=center colspan="3"><font size="1"><b>Credit Ratings </b></font>
      <hr noshade size="1">
    </td>
    <td align=CENTER rowspan="2" width="15">&nbsp;</td>
    <td align=center colspan="2" rowspan="2"><b><font size=1>Applicable <br>
      Percentage <br>
      of Reference <br>
      Rate&#151; <br>
      Notification </font> </b>
      <hr width=100% size=1 noshade>
    </td>
    <td align=center rowspan="2" width="13">&nbsp;</td>
    <td align=center colspan="2" rowspan="2"><b><font size=1>Applicable <br>
      Percentage <br>
      of Reference <br>
      Rate&#151;Notification </font></b>
      <hr width=100% size=1 noshade>
      <b> </b> </td>
    <td align=center rowspan="2" width="10">&nbsp;</td>
    <td align=center colspan="2" rowspan="2"><b><font size=1>Applicable <br>
      Spread Over <br>
      Reference Rate&#151; <br>
      No&#151;Notification </font> </b>
      <hr width=100% size=1 noshade>
    </td>
    <td align=center rowspan="2" width="10">&nbsp;</td>
    <td align=center colspan="2" rowspan="2" width="102"><b><font size=1>Applicable
      <br>
      Spread Over <br>
      Reference Rate&#151; <br>
      Notification </font> </b>
      <hr width=100% size=1 noshade>
    </td>
  </tr>
  <tr valign=Bottom>
    <td align=center width="89"><b><font size=1>Moody&#146;s </font> </b>
      <hr width=100% size=1 noshade>
    </td>
    <td align=LEFT width="10">&nbsp;</td>
    <td align=CENTER width="89"><b><font size=1>S&amp;P </font> </b>
      <hr width=100% size=1 noshade>
    </td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT width="89"><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Aaa</font></td>
    <td align=LEFT width="10">&nbsp;&nbsp;</td>
    <td align=CENTER width="89"><font size=2>AAA</font></td>
    <td align=CENTER width="15">&nbsp;&nbsp;</td>
    <td align=center colspan="2"><font size=2>110</font><font size=2>%</font></td>
    <td align=center width="13">&nbsp;&nbsp;</td>
    <td align=center colspan="2"><font size=2>125</font><font size=2>%</font></td>
    <td align=center width="10">&nbsp;&nbsp;</td>
    <td align=center colspan="2"><font size=2>1.10</font><font size=2>%</font></td>
    <td align=center width="10">&nbsp;&nbsp;</td>
    <td align=center colspan="2" width="102"><font size=2>1.25</font><font size=2>%</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT width="89"><font size=2>&nbsp;Aa3 to Aa1</font></td>
    <td align=LEFT width="10">&nbsp;</td>
    <td align=CENTER width="89"><font size=2>AA- to AA+</font></td>
    <td align=CENTER width="15">&nbsp;</td>
    <td align=center colspan="2"><font size=2>125</font><font size=2>%</font></td>
    <td align=center width="13">&nbsp;</td>
    <td align=center colspan="2"><font size=2>150</font><font size=2>%</font></td>
    <td align=center width="10">&nbsp;</td>
    <td align=center colspan="2"><font size=2>1.25</font><font size=2>%</font></td>
    <td align=center width="10">&nbsp;</td>
    <td align=center colspan="2" width="102"><font size=2>1.50</font><font size=2>%</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT width="89"><font size=2>&nbsp;&nbsp;A3 to A1</font></td>
    <td align=LEFT width="10">&nbsp;</td>
    <td align=CENTER width="89"><font size=2>A- to A+</font></td>
    <td align=CENTER width="15">&nbsp;</td>
    <td align=center colspan="2"><font size=2>150</font><font size=2>%</font></td>
    <td align=center width="13">&nbsp;</td>
    <td align=center colspan="2"><font size=2>200</font><font size=2>%</font></td>
    <td align=center width="10">&nbsp;</td>
    <td align=center colspan="2"><font size=2>1.50</font><font size=2>%</font></td>
    <td align=center width="10">&nbsp;</td>
    <td align=center colspan="2" width="102"><font size=2>2.00</font><font size=2>%</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT width="89"><font size=2>Baa3 to Baa1</font></td>
    <td align=LEFT width="10">&nbsp;</td>
    <td align=CENTER width="89"><font size=2>BBB- to BBB+</font></td>
    <td align=CENTER width="15">&nbsp;</td>
    <td align=center colspan="2"><font size=2>175</font><font size=2>%</font></td>
    <td align=center width="13">&nbsp;</td>
    <td align=center colspan="2"><font size=2>250</font><font size=2>%</font></td>
    <td align=center width="10">&nbsp;</td>
    <td align=center colspan="2"><font size=2>1.75</font><font size=2>%</font></td>
    <td align=center width="10">&nbsp;</td>
    <td align=center colspan="2" width="102"><font size=2>2.50</font><font size=2>%</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT width="89"><font size=2>&nbsp;Below Baa3</font></td>
    <td align=LEFT width="10">&nbsp;</td>
    <td align=CENTER width="89"><font size=2>Below BBB-</font></td>
    <td align=CENTER width="15">&nbsp;</td>
    <td align=center colspan="2"><font size=2>200</font><font size=2>%</font></td>
    <td align=center width="13">&nbsp;</td>
    <td align=center colspan="2"><font size=2>300</font><font size=2>%</font></td>
    <td align=center width="10">&nbsp;</td>
    <td align=center colspan="2"><font size=2>2.00</font><font size=2>%</font></td>
    <td align=center width="10">&nbsp;</td>
    <td align=center colspan="2" width="102"><font size=2>3.00</font><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;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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&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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<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>
<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Paragraph 10(b)
  Orders by Beneficial Owners, Potential Beneficial Owners, Existing Holders And
  Potential Holders. </b></font></p>
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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>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)
      the number of outstanding shares, if any, of AMPS held by such Beneficial
      Owner which such Beneficial Owner desires to continue to hold, provided
      that the Applicable Rate for the next succeeding Dividend Period shall not
      be less than the rate per annum specified by such Beneficial Owner; and/or
      </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)
      the number of outstanding shares, if any, of AMPS held by such Beneficial
      Owner which such Beneficial Owner offers to sell without regard to the Applicable
      Rate for the next succeeding Dividend Period; and </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)
      each Broker-Dealer, using a list of Potential Beneficial Owners that shall
      be maintained in good faith for the purpose of conducting a competitive
      Auction, shall contact Potential Beneficial Owners, including Persons that
      are not Beneficial Owners, on such list to determine the number of outstanding
      shares, if any, of AMPS which each such Potential Beneficial Owner offers
      to purchase, provided that the Applicable Rate for the next succeeding Dividend
      Period shall not be less than the rate per annum specified by such Potential
      Beneficial Owner. </font> </td>
  </tr>
</table>
<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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&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> C-2</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
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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>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)
      such number or a lesser number of outstanding shares of AMPS to be determined
      as set forth in Paragraph 10(e)(i)(D) if the Applicable Rate determined
      on such Auction Date shall be equal to the rate per annum specified therein;
      or </font> </td>
  </tr>
</table>
<br>
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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>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)
      the number of outstanding shares of AMPS specified in such Bid if the Applicable
      Rate determined on such Auction Date shall be higher than the rate per annum
      specified in such Bid; or </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)
      such number or a lesser number of outstanding shares of AMPS to be determined
      as set forth in Paragraph 10(e)(i)(E) if the Applicable Rate determined
      on such Auction Date shall be equal to the rate per annum specified therein.
      </font> </td>
  </tr>
</table>
<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>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)
      the aggregate number of outstanding shares of AMPS that are the subject
      of such Order; </font> </td>
  </tr>
</table>
<br>
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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>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)
      the number of outstanding shares, if any, of AMPS subject to any Hold Order
      placed by such Existing Holder; </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)
      the number of outstanding shares, if any, of AMPS subject to any Bid placed
      by such Existing Holder and the rate per annum specified in such Bid; and
      </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)
      the number of outstanding shares, if any, of AMPS subject to any Sell Order
      placed by such Existing Holder; and </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D)
      to the extent such Bidder is a Potential Holder, the rate per annum specified
      in such Potential Holder&#146;s Bid. </font> </td>
  </tr>
</table>
<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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&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> C-3</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 55; page: 55" --> <!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)
  If an Order or Orders covering all of the outstanding shares of AMPS held by
  an Existing Holder are not submitted to the Auction Agent prior to the Submission
  Deadline, the Auction Agent shall deem a Hold Order (in the case of an Auction
  relating to a Dividend Period which is not a Special Dividend Period of more
  than 28 days) and a Sell Order (in the case of an Auction relating to a Special
  Dividend Period of more than 28 days) to have been submitted on behalf of such
  Existing Holder covering the number of outstanding shares of AMPS held by such
  Existing Holder and not subject to Orders submitted to the Auction Agent. </font></p>
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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>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)
      any Sell Order shall be considered valid up to and including the excess
      of the number of outstanding shares of AMPS held by such Existing Holder
      over the number of shares of AMPS subject to Hold Orders referred to in
      Paragraph 10(c)(iv)(A) and Bids referred to in Paragraph 10(c)(iv)(B); provided
      that if more than one Sell Order is submitted on behalf of any Existing
      Holder and the number of shares of AMPS subject to such Sell Orders is greater
      than such excess, the number of shares of AMPS subject to each of such Sell
      Orders shall be reduced pro rata so that such Sell Orders, in the aggregate,
      cover exactly the number of shares of AMPS equal to such excess. </font>
    </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)
  If more than one Bid is submitted on behalf of any Potential Holder, each Bid
  submitted shall be a separate Bid with the rate per annum and number of shares
  of AMPS therein specified. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)
  Any Order submitted by a Beneficial Owner or a Potential Beneficial Owner to
  its Broker-Dealer, or by a Broker-Dealer to the Auction Agent, prior to the
  Submission Deadline on any Auction Date shall be irrevocable. </font></p>
<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>Paragraph 10(d)
  Determination of Sufficient Clearing Bids, Winning Bid Rate and Applicable Rate.
  </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
  Not earlier than the Submission Deadline on each Auction Date, the Auction Agent
  shall assemble all Orders submitted or deemed submitted to it by the Broker-Dealers
  (each such Order as submitted or deemed submitted by a Broker-Dealer being hereinafter
  referred to individually as a &#147;Submitted Hold Order,&#148; a &#147;Submitted
  Bid&#148; or a &#147;Submitted Sell Order,&#148; as the case may be, or as a
  &#147;Submitted Order&#148;) and shall determine: </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)
      the excess of the total number of outstanding shares of AMPS over the number
      of outstanding shares of AMPS that are the subject of Submitted Hold Orders
      (such excess being hereinafter referred to as the &#147;Available AMPS&#148;);
      </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)
      from the Submitted Orders whether the number of outstanding shares of AMPS
      that are the subject of Submitted Bids by Potential Holders specifying one
      or more rates per annum equal to or lower than the Maximum Applicable Rate
      exceeds or is equal to the sum of: </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> C-4</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 56; page: 56" --> <!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)
      the number of outstanding shares of AMPS that are the subject of Submitted
      Bids by Existing Holders specifying one or more rates per annum higher than
      the Maximum Applicable Rate, and </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)
      the number of outstanding shares of AMPS that are subject to Submitted Sell
      Orders (if such excess or such equality exists (other than because the number
      of outstanding shares of AMPS in clauses (1) and (2) above are each zero
      because all of the outstanding shares of AMPS are the subject of Submitted
      Hold Orders), such Submitted Bids by Potential Holders hereinafter being
      referred to collectively as &#147;Sufficient Clearing Bids&#148;); and </font>
    </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)
      if Sufficient Clearing Bids exist, the lowest rate per annum specified in
      the Submitted Bids (the &#147;Winning Bid Rate&#148;) that if: </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)
      each Submitted Bid from Existing Holders specifying the Winning Bid Rate
      and all other submitted Bids from Existing Holders specifying lower rates
      per annum were rejected, thus entitling such Existing Holders to continue
      to hold the shares of AMPS that are the subject of such Submitted Bids,
      and </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)
      each Submitted Bid from Potential Holders specifying the Winning Bid Rate
      and all other Submitted Bids from Potential Holders specifying lower rates
      per annum were accepted, thus entitling the Potential Holders to purchase
      the shares of AMPS that are the subject of such Submitted Bids, 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>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)
  Promptly after the Auction Agent has made the determinations pursuant to Paragraph
  10(d)(i), the Auction Agent shall advise the Fund of the Maximum Applicable
  Rate and, based on such determinations, the Applicable Rate for the next succeeding
  Dividend Period as follows: </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)
      if Sufficient Clearing Bids exist, that the Applicable Rate for the next
      succeeding Dividend Period shall be equal to the Winning Bid Rate; </font>
    </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)
      if Sufficient Clearing Bids do not exist (other than because all of the
      outstanding shares of AMPS are the subject of Submitted Hold Orders), that
      the Applicable Rate for the next succeeding Dividend Period shall be equal
      to the Maximum Applicable Rate; or </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)
      if all of the outstanding shares of AMPS are the subject of Submitted Hold
      Orders, the Dividend Period next succeeding the Auction automatically shall
      be the same length as the immediately preceding Dividend Period and the
      Applicable Rate for the next succeeding Dividend Period shall be equal to
      60% of the Reference Rate (or 90% of such rate if the Fund has provided
      notification to the Auction Agent prior to establishing the Applicable Rate
      for any dividend that net capital gain or other taxable income will be included
      in such dividend on shares of AMPS) on the date of the Auction. </font>
    </td>
  </tr>
</table>
<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>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based
  on the determinations made pursuant to Paragraph 10(d)(i), the Submitted Bids
  and Submitted Sell Orders shall be accepted or rejected and the Auction Agent
  shall take such other action as set forth below: </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
      If Sufficient Clearing Bids have been made, subject to the provisions of
      Paragraph 10(e)(iii) and Paragraph 10(e)(iv), Submitted Bids and Submitted
      Sell Orders shall be accepted or rejected in the following order of priority
      and all other Submitted Bids shall be rejected: </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)
      the Submitted Sell Orders of Existing Holders shall be accepted and the
      Submitted Bid of each of the Existing Holders specifying any rate per annum
      that is higher than the Winning Bid Rate shall be accepted, thus requiring
      each such Existing Holder to sell the outstanding shares of AMPS that are
      the subject of such Submitted Sell Order or Submitted Bid; </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)
      the Submitted Bid of each of the Existing Holders specifying any rate per
      annum that is lower than the Winning Bid Rate shall be rejected, thus entitling
      each such Existing Holder to continue to hold the outstanding shares of
      AMPS that are the subject of such Submitted Bid; </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> C-5</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 57; page: 57" --> <!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)
      the Submitted Bid of each of the Potential Holders specifying any rate per
      annum that is lower than the Winning Bid Rate shall be accepted; </font>
    </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D)
      the Submitted Bid of each of the Existing Holders specifying a rate per
      annum that is equal to the Winning Bid Rate shall be rejected, thus entitling
      each such Existing Holder to continue to hold the outstanding shares of
      AMPS that are the subject of such Submitted Bid, unless the number of outstanding
      shares of AMPS subject to all such Submitted Bids shall be greater than
      the number of outstanding shares of AMPS (&#147;Remaining Shares&#148;)
      equal to the excess of the Available AMPS over the number of outstanding
      shares of AMPS subject to Submitted Bids described in Paragraph 10(e)(i)(B)
      and Paragraph 10(e)(i)(C), in which event the Submitted Bids of each such
      Existing Holder shall be accepted, and each such Existing Holder shall be
      required to sell outstanding shares of AMPS, but only in an amount equal
      to the difference between (1) the number of outstanding shares of AMPS then
      held by such Existing Holder subject to such Submitted Bid and (2) the number
      of shares of AMPS obtained by multiplying (x) the number of Remaining Shares
      by (y) a fraction the numerator of which shall be the number of outstanding
      shares of AMPS held by such Existing Holder subject to such Submitted Bid
      and the denominator of which shall be the sum of the numbers of outstanding
      shares of AMPS subject to such Submitted Bids made by all such Existing
      Holders that specified a rate per annum equal to the Winning Bid Rate; and
      </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(E)
      the Submitted Bid of each of the Potential Holders specifying a rate per
      annum that is equal to the Winning Bid Rate shall be accepted but only in
      an amount equal to the number of outstanding shares of AMPS obtained by
      multiplying (x) the difference between the Available AMPS and the number
      of outstanding shares of AMPS subject to Submitted Bids described in Paragraph
      10(e)(i)(B), Paragraph 10(e)(i)(C) and Paragraph 10(e)(i)(D) by (y) a fraction
      the numerator of which shall be the number of outstanding shares of AMPS
      subject to such Submitted Bid and the denominator of which shall be the
      sum of the number of outstanding shares of AMPS subject to such Submitted
      Bids made by all such Potential Holders that specified rates per annum equal
      to the Winning Bid Rate. </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)
      If Sufficient Clearing Bids have not been made (other than because all of
      the outstanding shares of AMPS are subject to Submitted Hold Orders), subject
      to the provisions of Paragraph 10(e)(iii), Submitted Orders shall be accepted
      or rejected as follows in the following order of priority and all other
      Submitted Bids shall be rejected: </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)
      the Submitted Bid of each Existing Holder specifying any rate per annum
      that is equal to or lower than the Maximum Applicable Rate shall be rejected,
      thus entitling such Existing Holder to continue to hold the outstanding
      shares of AMPS that are the subject of such Submitted Bid; </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)
      the Submitted Bid of each Potential Holder specifying any rate per annum
      that is equal to or lower than the Maximum Applicable Rate shall be accepted,
      thus requiring such Potential Holder to purchase the outstanding shares
      of AMPS that are the subject of such Submitted Bid; and </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 10" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=10%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=90%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)
      the Submitted Bids of each Existing Holder specifying any rate per annum
      that is higher than the Maximum Applicable Rate shall be accepted and the
      Submitted Sell Orders of each Existing Holder shall be accepted, in both
      cases only in an amount equal to the difference between (1) the number of
      outstanding shares of AMPS then held by such Existing Holder subject to
      such Submitted Bid or Submitted Sell Order and (2) the number of shares
      of AMPS obtained by multiplying (x) the difference between the Available
      AMPS and the aggregate number of outstanding shares of AMPS subject to Submitted
      Bids described in Paragraph 10(e)(ii)(A) and Paragraph 10(e)(ii)(B) by (y)
      a fraction the numerator of which shall be the number of outstanding shares
      of AMPS held by such Existing Holder subject to such Submitted Bid or Submitted
      Sell Order and the denominator of which shall be the number of outstanding
      shares of AMPS subject to all such Submitted Bids and Submitted Sell Orders.
      </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)
      If, as a result of the procedures described in Paragraph 10(e)(i) or Paragraph
      10(e)(ii), any Existing Holder would be entitled or required to sell, or
      any Potential Holder would be entitled or required to purchase, a fraction
      of a share of AMPS on any Auction Date, the Auction Agent shall, in such
      manner as in its sole discretion it shall determine, round up or down the
      number of shares of AMPS to be purchased or sold by any Existing Holder
      or Potential Holder on such Auction Date so that each outstanding share
      of AMPS purchased or sold by each Existing Holder or Potential Holder on
      such Auction Date shall be a whole share of AMPS. </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Page Break CENTER" FSL="Workstation" --> <br>
&nbsp;
<table width=100%>
  <tr>
    <td width=20% align=left><font size=1>&nbsp;</font></td>
    <td width=60% align=center><font size="2"> C-6</font></td>
    <td width=20% align=right><font size="1">&nbsp;</font></td>
  </tr>
</table>
<hr size=5 noshade width=100% align=LEFT>
<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 58; page: 58" --> <!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)
      If, as a result of the procedures described in Paragraph 10(e)(i), any Potential
      Holder would be entitled or required to purchase less than a whole share
      of AMPS on any Auction Date, the Auction Agent, in such manner as in its
      sole discretion it shall determine, shall allocate shares of AMPS for purchase
      among Potential Holders so that only whole shares of AMPS are purchased
      on such Auction Date by any Potential Holder, even if such allocation results
      in one or more of such Potential Holders not purchasing any shares of AMPS
      on such Auction Date. </font> </td>
  </tr>
</table>
<br>
<!-- MARKER FORMAT-SHEET="Para Indent 05" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=5%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=95%><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)
      Based on the results of each Auction, the Auction Agent shall determine,
      with respect to each Broker-Dealer that submitted Bids or Sell Orders on
      behalf of Existing Holders or Potential Holders, the aggregate number of
      the outstanding shares of AMPS to be purchased and the aggregate number
      of outstanding shares of AMPS to be sold by such Potential Holders and Existing
      Holders and, to the extent that such aggregate number of outstanding shares
      to be purchased and such aggregate number of outstanding shares to be sold
      differ, the Auction Agent shall determine to which other Broker-Dealer or
      Broker-Dealers acting for one or more purchasers such Broker-Dealer shall
      deliver, or from which other Broker-Dealer or Broker-Dealers acting for
      one or more sellers such Broker-Dealer shall receive, as the case may be,
      outstanding shares of AMPS. </font> </td>
  </tr>
</table>
<br>
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<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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