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<SEC-DOCUMENT>0000905148-04-004838.txt : 20041112
<SEC-HEADER>0000905148-04-004838.hdr.sgml : 20041111
<ACCEPTANCE-DATETIME>20041112171448
ACCESSION NUMBER:		0000905148-04-004838
CONFORMED SUBMISSION TYPE:	N-2
PUBLIC DOCUMENT COUNT:		13
FILED AS OF DATE:		20041112
DATE AS OF CHANGE:		20041112

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			MUNIVEST FUND II INC
		CENTRAL INDEX KEY:			0000897269
		IRS NUMBER:				223220659
		STATE OF INCORPORATION:			MD
		FISCAL YEAR END:			1031

	FILING VALUES:
		FORM TYPE:		N-2
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-120447
		FILM NUMBER:		041140532

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

	MAIL ADDRESS:	
		STREET 1:		PO BOX 9011
		CITY:			PRINCETON
		STATE:			NJ
		ZIP:			08543-9011

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			MUNIVEST FUND II INC
		CENTRAL INDEX KEY:			0000897269
		IRS NUMBER:				223220659
		STATE OF INCORPORATION:			MD
		FISCAL YEAR END:			1031

	FILING VALUES:
		FORM TYPE:		N-2
		SEC ACT:		1940 Act
		SEC FILE NUMBER:	811-07478
		FILM NUMBER:		041140533

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

	MAIL ADDRESS:	
		STREET 1:		PO BOX 9011
		CITY:			PRINCETON
		STATE:			NJ
		ZIP:			08543-9011
</SEC-HEADER>
<DOCUMENT>
<TYPE>N-2
<SEQUENCE>1
<FILENAME>efc4-1994_5619122formn2.txt
<TEXT>
   As filed with the Securities and Exchange Commission on November 12, 2004
                                              Securities Act File No. 333-
                                     Investment Company Act File No. 811-07478

==============================================================================
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                               -----------------
                                   FORM N-2
            REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933        |X|
                          Pre-Effective Amendment No.                      |_|
                         Post-Effective Amendment No.                      |_|
                                    and/or
        REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940    |X|
                                AMENDMENT NO. 7                            |X|
                       (Check appropriate box or boxes)
                               -----------------
                            MUNIVEST FUND II, INC.
              (Exact Name of Registrant as Specified in Charter)
                               -----------------
             800 Scudders Mill Road, Plainsboro, New Jersey 08536
                   (Address of Principal Executive Offices)
                                (609) 282-2800
             (Registrant's Telephone Number, Including Area Code)
                               -----------------
                                Terry K. Glenn
                            MuniVest Fund II, Inc.
             800 Scudders Mill Road, Plainsboro, New Jersey 08536
       Mailing Address: P.O. Box 9011, Princeton, New Jersey 08543-9011
                    (Name and Address of Agent for Service)
                               -----------------
                                  Copies to:
        Andrew J. Donohue, Esq.                      Frank P. Bruno, Esq.
      FUND ASSET MANAGEMENT, L.P                SIDLEY AUSTIN BROWN & WOOD LLP
             P.O. Box 9011                            787 Seventh Avenue
   Princeton, New Jersey 08543-9011              New York, New York 10019-6018
                               -----------------
      Approximate date of proposed public offering: As soon as practicable
after the effective date of this Registration Statement.

      If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, as amended (the "Securities Act"), other than securities offered only
in connection with dividend or interest reinvestment plans, check the
following box. |_|

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

<TABLE>
<CAPTION>
                  CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
===================================================================================================
                                                           Proposed      Proposed
                                                           Proposed      Maximum
                                                           Maximum      Aggregate     Amount of
          Title of Securities             Amount being  Offering Price   Offering    Registration
            Being Registered             Registered(1)   Per Unit(1)     Price(1)       Fee(2)
- ---------------------------------------------------------------------------------------------------
<S>                                      <C>            <C>            <C>           <C>
Auction Market Preferred Stock...         1,600 shares     $25,000     $40,000,000      $5,068
===================================================================================================
</TABLE>

(1) Estimated solely for the purpose of calculating the registration fee.
(2) Transmitted prior to the filing date to the designated lockbox of the
Securities and Exchange Commission at Mellon Bank in Pittsburgh, PA.
                               -----------------
      The Registrant hereby amends this Registration Statement on such date or
dates as may become necessary to delay its effective date until the Registrant
shall file a further amendment, which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.

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

<PAGE>

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

                             Subject to Completion
                Preliminary Prospectus dated November 12, 2004

P R O S P E C T U S
- -------------------

                                  $40,000,000
                            MuniVest Fund II, Inc.
                    Auction Market Preferred Stock ("AMPS")
                            1,600 Shares, Series D
                   Liquidation Preference $25,000 per Share
                               -----------------
      MuniVest Fund II, Inc. is a non-diversified, closed-end fund. The
investment objective of the Fund is to provide shareholders with as high a
level of current income exempt from Federal income taxes 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's net assets (including proceeds from
the issuance of any preferred stock) and the proceeds of any borrowings for
investment purposes, in a portfolio of municipal obligations the interest on
which, in the opinion of bond counsel to the issuer, is excludable from gross
income for Federal income tax purposes (except that the interest may be
includable in taxable income for purposes of the Federal alternative minimum
tax). Under normal market conditions, the Fund expects to invest at least 75%
of its total assets in municipal obligations that are rated investment grade
or, if unrated, are considered by the Fund's investment adviser to be of
comparable quality. The Fund may invest up to 25% of its total assets in
municipal obligations that are rated below investment grade (commonly known as
"junk" bonds) or, if unrated, are considered by the Fund's investment adviser
to possess similar credit characteristics. The Fund invests primarily in long
term municipal obligations. The Fund may invest in certain tax exempt
securities classified as "private activity bonds," as discussed within, that
may subject certain investors in the Fund to an alternative minimum tax. There
can be no assurance that the Fund's investment objective will be realized.

      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's statement of additional information, dated
________ __, 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 [50] of this prospectus. You may request a free copy by writing or
calling the Fund at (800) 543-6217.

      Certain capitalized terms used herein not otherwise defined in this
prospectus have the meaning provided in the Glossary at the back of this
prospectus.

      Investing in the AMPS involves certain risks that are described in the
"Risk Factors and Special Considerations" section beginning on page [9] of
this prospectus. The minimum purchase amount for the AMPS is $25,000.

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

<TABLE>
<CAPTION>
                                                           Per Share           Total
                                                           ---------           -----
<S>                                                        <C>             <C>
      Public offering price.........................        $25,000        $40,000,000
      Underwriting discount.........................           $250           $400,000
      Proceeds, before expenses, to the Fund (1)....        $24,750        $39,600,000
</TABLE>

       (1) The estimated offering expenses payable by the Fund are $150,000.

      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.

      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.

      One certificate for the AMPS will be ready for delivery to the nominee
of The Depository Trust Company on or about ________ ___, 2005.
                                ---------------
                              Merrill Lynch & Co.
                                ---------------
              The date of this prospectus is ________ ___, 2005.

<PAGE>

                               TABLE OF CONTENTS
                                                                          Page
                                                                          ----

Prospectus Summary...........................................................4
Risk Factors and Special Considerations.....................................10
Financial Highlights........................................................14
The Fund....................................................................16
Use of Proceeds.............................................................16
Capitalization..............................................................16
Portfolio Composition.......................................................17
Investment Objective and Policies...........................................17
Other Investment Policies...................................................26
Description of AMPS.........................................................29
The Auction.................................................................35
Rating Agency Guidelines....................................................42
Investment Advisory and Management Arrangements.............................43
Taxes.......................................................................44
Description of Capital Stock................................................45
Custodian...................................................................48
Underwriting................................................................49
Transfer Agent, Dividend Disbursing Agent and Registrar.....................49
Accounting Services Provider................................................49
Legal Opinions..............................................................50
Independent Registered Public Accounting Firm And Experts...................50
Additional Information......................................................50
Table of Contents of Statement of Additional Information....................51
Glossary....................................................................52

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

      Information about the Fund can be reviewed and copied at the Securities
and Exchange Commission's Public Reference Room in Washington, D.C. Call
1-202-942-8090 for information on the operation of the public reference room.
This information is also available on the Securities and Exchange Commission'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.

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

      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.



                                       3
<PAGE>

- ------------------------------------------------------------------------------
                              PROSPECTUS SUMMARY

      This summary is qualified in its entirety by reference to the detailed
information included in this prospectus and the statement of additional
information.

The Fund                 MuniVest Fund II, Inc. is a non-diversified,
                         closed-end management investment company.

The Offering             The Fund is offering a total of 1,600 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 & Smith Incorporated
                         ("Merrill Lynch"), as underwriter.

                         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.

                         Investors and potential investors in shares of Series
                         D AMPS may participate in auctions for the AMPS
                         through their broker-dealers.

                         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's agent member (generally the investor's
                         broker-dealer). The investor's agent member, in turn,
                         will maintain records of such investor's beneficial
                         ownership of AMPS.

Investment               The investment objective of the Fund is to provide
Objective and            shareholders with as high a level of current income
Policies                 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's net assets
                         (including proceeds from the issuance of any
                         preferred stock) and the proceeds of any borrowings
                         for investment purposes, in a portfolio of municipal
                         obligations issued by or on behalf of states,
                         territories and possessions of the United States and
                         their political subdivisions, agencies or
                         instrumentalities, each of which pays interest that,
                         in the opinion of bond counsel to the issuer, is
                         excludable from gross income for Federal income tax
                         purposes ("Municipal Bonds"). 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's investment objective will
                         be realized.

                         Maturity. The average maturity of the Fund'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's investment
                         adviser (the "Investment Adviser"). 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 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.

                         Investment Grade Municipal Bonds. Under normal market
                         conditions, the Fund invests at least 75% of its
                         total assets in a portfolio of Municipal Bonds that
                         are rated investment grade by one or more nationally
                         recognized statistical rating organizations
                         ("NRSROs") (Baa or higher by Moody's Investors
                         Service, Inc. ("Moody's") or BBB or higher by

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


                                       4
<PAGE>


- ------------------------------------------------------------------------------
                         Standard & Poor's ("S&P") or Fitch Ratings ("Fitch"))
                         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.

                         "High Yield' or "Junk" Bonds. The Fund may invest up
                         to 25% of its total assets in high yield Municipal
                         Bonds (commonly known as "junk" bonds) that are rated
                         below investment grade by the NRSROs (Ba or lower
                         Moody's or BB or lower by S&P or Fitch) or are
                         unrated securities that are considered by the
                         Investment Adviser to possess similar credit
                         characteristics. Although junk bonds generally pay
                         higher rates of interest than investment grade bonds,
                         they are high risk investments that may cause income
                         and principal losses for the Fund. Junk bonds
                         generally are less liquid and experience more price
                         volatility than higher rated debt securities. The
                         issuers of junk bonds may have a larger amount of
                         outstanding debt relative to their assets than
                         issuers of investment grade bonds. In the event of an
                         issuer's bankruptcy, claims of other creditors may
                         have priority over the claims of junk bond holders,
                         leaving few or no assets available to repay junk bond
                         holders. Junk bonds may be subject to greater call
                         and redemption risk than higher rated debt
                         securities.

                         Indexed and Inverse Floating Rate Securities. 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'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.

                         Hedging Transactions. The Fund may seek to hedge its
                         portfolio against changes in interest rates using
                         options and financial futures contracts or swap
                         transactions. The Fund'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'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.

                         Swap Agreements. 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.

                         Tax Considerations. 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

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


                                       5
<PAGE>


- ------------------------------------------------------------------------------
                         in the Fund. See "Taxes."

Risk Factors             Main Risks. Set forth below is a summary of the main
                         risks of investing in the Fund's Series D AMPS:

                         o  The credit ratings of the AMPS could be reduced or
                            terminated while an investor holds the AMPS, which
                            could affect liquidity.

                         o  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.

                         o  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.

                         o  As a result of bidding by broker-dealers in an
                            auction, the dividend rate that would apply at the
                            auction may be higher or lower than the rate that
                            would have prevailed had the broker-dealer not
                            bid.

                         o  A broker-dealer may bid in an auction in order to
                            prevent what would otherwise be (i) a failed
                            auction, (ii) an "all-hold" 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.

                         o  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.

                         o  The Fund is registered as a "non-diversified"
                            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.

                         o  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'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.

                         o  The amount of public information available about
                            Municipal Bonds in the Fund'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.

                         o  The Fund'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.
                            Credit risk is the risk that the issuer will be
                            unable to pay the interest or principal when due.
                            Changes in an

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


                                       6
<PAGE>


- ------------------------------------------------------------------------------
                            issuer's credit rating or the market's perception
                            of an issuer's creditworthiness may affect the
                            value of the Fund's investment in that issuer.

                         o  Investments in junk bonds entail a higher level of
                            credit risk (loss of income and/or principal) and
                            a corresponding greater risk of loss than
                            investments in investment grade Municipal Bonds.
                            Municipal Bonds rated in the lower rating
                            categories are considered to be predominantly
                            speculative with respect to capacity to pay
                            interest and dividend income and repay principal.

                         For a more detailed description of the main risks as
                         well as certain other risks associated with investing
                         in the Fund's Series D AMPS, see "Risk Factors and
                         Special Considerations."

Investment Adviser       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's
                         average weekly net assets (including any proceeds
                         from the issuance of preferred stock).

Dividends and            Dividends on the Series D AMPS will be cumulative
Dividend Periods         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:

<TABLE>
<CAPTION>
                                                               Initial           Initial
                                              Initial         Dividend          Dividend
                                              Dividend         Period            Payment
                           AMPS Series          Rate           Ending             Date
                       ------------------  -------------  ---------------- ------------------
<S>                                        <C>            <C>              <C>
                       Series D.......           %         _________, 2005  __________, 2005
</TABLE>

                         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.

                         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 ________ in the case of the Series D AMPS.

                         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.

                         For each subsequent dividend period, the auction
                         agent (The Bank of New York) will hold an auction to
                         determine the cash dividend rate on the shares of
                         Series D AMPS.

Determination of         Generally, the applicable dividend rate for any
Maximum Dividend         dividend period for the Series D AMPS will not be
Rates                    more than the maximum applicable rate attributable to
                         such shares. The maximum applicable rate will be the
                         higher of (A) the applicable percentage of the
                         reference rate on the auction date or (B) the
                         applicable spread plus the reference rate on the
                         auction date. The reference rate is (A) the higher of
                         the applicable LIBOR Rate (as defined in the
                         Glossary) and the Taxable Equivalent of the Short
                         Term Municipal Bond Rate (as defined in the Glossary)
                         (for a dividend period or special dividend period of
                         364 or fewer days), or (B) the applicable Treasury
                         Index Rate (as defined in the Glossary) (for a
                         special dividend period of 365 days or more). The
                         maximum applicable rate for the Series D 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

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


                                       7
<PAGE>


- ------------------------------------------------------------------------------
                         applicable percentage and applicable spread are as
                         follows:

<TABLE>
<CAPTION>
                                                          Applicable      Applicable     Applicable      Applicable
                                                          Percentage      Percentage     Spread Over    Spread Over
                                Credit Ratings           of Reference    of Reference     Reference      Reference
                        ------------------------------      Rate--No         Rate--        Rate--No        Rate--
                           Moody's            S&P        Notification    Notification   Notification    Notification
                        --------------  --------------  --------------  -------------- --------------  --------------
<S>                     <C>             <C>             <C>             <C>            <C>            <C>
                             Aaa              AAA            110%            125%           1.10%          1.25%
                          Aa3 to Aa1      AA- to AA+         125%            150%           1.25%          1.50%
                           A3 to A1        A- to A+          150%            200%           1.50%          2.00%
                         Baa3 to Baa1    BBB- to BBB+        175%            250%           1.75%          2.50%
                          Below Baa3      Below BBB-         200%            300%           2.00%          3.00%
</TABLE>

                         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.

                         There is no minimum applicable dividend rate for any
                         dividend period.

Other AMPS               The Fund has outstanding 5,400 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 $135,000,000 (the
                         "Other AMPS"). The Other AMPS are as follows: 1,800
                         shares of Auction Market Preferred Stock, Series A;
                         1,800 shares of Auction Market Preferred Stock,
                         Series B; and 1,800 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.

Asset Maintenance        Under the Fund's Articles Supplementary creating the
                         Series D AMPS (the "Articles Supplementary"), the
                         Fund must maintain:

                         o  asset coverage of the AMPS and Other AMPS as
                            required by the rating agencies rating the AMPS,
                            and

                         o  asset coverage of the AMPS and Other AMPS of at
                            least 200% as required by the Investment Company
                            Act of 1940 (the "1940 Act").

                         The Fund estimates that, based on the composition of
                         its portfolio at October 31, 2004, asset coverage of
                         the AMPS and Other AMPS as required by the 1940 Act
                         would be approximately ___% immediately after the
                         Fund issues the shares of AMPS offered by this
                         prospectus representing approximately __% of the
                         Fund's capital, or approximately __% of the Fund's
                         common stock equity, immediately after the issuance
                         of such AMPS.

Mandatory                If the required asset coverage is not maintained or,
Redemption               when necessary, restored, the Fund must redeem shares
                         of AMPS at the price of $25,000 per share plus
                         accumulated but unpaid dividends thereon (whether or
                         not earned or declared). The provisions of the 1940
                         Act may restrict the Fund's ability to make such a
                         mandatory redemption.

Optional                 The Fund may, at its option, choose to redeem all or
Redemption               some of the shares of AMPS on any dividend payment
                         date at the price of $25,000 per share, plus
                         accumulated but unpaid dividends thereon (whether or
                         not earned or declared), plus any applicable premium.

Liquidation              The liquidation preference (that is, the amount the
Preference               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

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


                                       8
<PAGE>


                         accumulated but unpaid dividends (whether or not
                         earned or declared).

Ratings                  The AMPS will be issued with a rating of Aaa from
                         Moody's and AAA from S&P.

Voting Rights            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'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.
















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


                                       9
<PAGE>


- ------------------------------------------------------------------------------
                    RISK FACTORS AND SPECIAL CONSIDERATIONS

      An investment in the Fund's AMPS should not constitute a complete
investment program.

      Set forth below are the main risks of investing in the Fund's AMPS.

      Investment Considerations. Investors in AMPS should consider the
following factors:

      o     The credit ratings of the AMPS could be reduced or terminated
            while an investor holds the AMPS.

      o     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.

      o     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.

      o     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.

      o     A broker-dealer may bid in an auction in order to prevent what
            would otherwise be (i) a failed auction, (ii) an "all-hold"
            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 brokerdealer
            may, but is not obligated to, advise owners of AMPS that the
            dividend rate that would apply in an "all-hold" 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 "all-hold" auction.

      o     Merrill Lynch has advised the Fund that it and certain other
            broker-dealers and other participants in the auction rate
            securities markets, including both taxable and tax exempt markets,
            have received a letter from the Commission requesting that each of
            them voluntarily conduct an investigation regarding their
            respective practices and procedures in those markets. Merrill
            Lynch is cooperating and expects to continue to cooperate with the
            Commission in providing the requested information. No assurance
            can be given as to whether the results of this process will affect
            the market for AMPS or the auctions.

      Secondary Market. 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.

      Rating Agencies. The Fund will issue the AMPS only if the AMPS have
received a rating of Aaa from Moody's and AAA from S&P. As a result of such
ratings, the Fund will be subject to guidelines of Moody's, S&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's portfolio in accordance with the
Fund's investment objective and policies. Also, under certain circumstances,
the Fund may voluntarily terminate compliance with Moody's or S&P's
guidelines, or both, in which case the AMPS may no longer be rated by Moody's
or S&P, as applicable, but will be rated by at least one rating agency.

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


                                      10
<PAGE>


- ------------------------------------------------------------------------------
      Interest Rate Risk and AMPS. 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's portfolio securities. Because income from
the Fund'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's net portfolio income before the Fund'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'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.

      Non-Diversification. The Fund is registered as a "non-diversified"
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.

      Market Risk and Selection Risk. Market risk is the risk that the bond
market will go down in value, including the possibility that the market will
go down sharply and unpredictably. Selection risk is the risk that the
securities that Fund management selects will underperform the bond market, the
relevant indices, or other funds with similar investment objectives and
investment strategies.

      Tax Exempt Securities Market Risk. The amount of public information
available about Municipal Bonds in the Fund'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.

      Interest Rate and Credit Risk. 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'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's portfolio will decline in value if interest rates
increase in the future. Credit risk is the risk that the issuer will be unable
to pay the interest or principal when due. Changes in an issuer's credit
rating or the market's perception of an issuer's creditworthiness may affect
the value of the Fund's investment in that issuer. The degree of credit risk
depends on both the financial condition of the issuer and the terms of the
obligation.

      Risks Associated with Non-Investment Grade Securities. Under normal
market conditions, the Fund expects to invest at least 75% of its total assets
in Municipal Bonds that are rated investment grade by Moody's, S&P or Fitch,
or in unrated Municipal Bonds that are considered by the Investment Adviser to
possess similar credit characteristics. Obligations rated in the lowest
investment grade category may have certain speculative characteristics. The
Fund may invest up to 25% of its total assets in high yield Municipal Bonds
that are rated below investment grade or are unrated securities that are
considered by the Investment Adviser to possess similar credit
characteristics. Securities rated below investment grade, also known as junk
bonds, generally entail greater interest rate and credit risks than investment
grade securities. For example, their prices are more volatile, economic
downturns and financial setbacks may affect their prices more negatively, and
their trading market may be more limited.

      Set forth below are certain other risks associated with investing in the
Fund's AMPS.

      Call and Redemption Risk. A Municipal Bond'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.

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


                                      11
<PAGE>


- ------------------------------------------------------------------------------
      Rating Categories. The Fund intends to invest in Municipal Bonds that
are rated investment grade by S&P, Moody's or Fitch, or in unrated Municipal
Bonds that are considered by the Investment Adviser to possess similar credit
characteristics. Obligations rated in the lowest investment grade category may
have certain speculative characteristics. For example, their prices are more
volatile, economic downturns and financial setbacks may affect their prices
more negatively, and their trading market may be more limited.

      Reinvestment Risk. Reinvestment risk is the risk that income from the
Fund'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's current earnings rate. A decline in income could
negatively affect the Fund's yield, return or the market price of the common
stock.

      Private Activity Bonds. The Fund may invest in certain tax exempt
securities classified as "private activity bonds." These bonds may subject
certain investors in the Fund to the Federal alternative minimum tax.

      Liquidity of Investments. Certain Municipal Bonds in which the Fund
invests may lack an established secondary trading market or may be otherwise
considered illiquid. Liquidity of a security relates to the ability to easily
dispose of the security and the price to be obtained and does not generally
relate to the credit risk or likelihood of receipt of cash at maturity.
Illiquid securities may trade at a discount from comparable, more liquid
investments.

      Portfolio Strategies. The Fund may engage in various portfolio
strategies both to seek to increase the return of the Fund and to seek to
hedge its portfolio against adverse effects from movements in interest rates
and in the securities markets. These portfolio strategies include the use of
derivatives, such as indexed securities, inverse floating rate securities,
options, futures, options on futures, interest rate swap transactions and
credit default swaps. Such strategies subject the Fund to the risk that, if
the Investment Adviser incorrectly forecasts market values, interest rates or
other applicable factors, the Fund's performance could suffer. Certain of
these strategies, such as investments in inverse floating rate securities and
credit default swaps, may provide investment leverage to the Fund'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'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's risk of loss.

      General Risks Related to Derivatives. 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'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'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.e., 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.

      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.

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


                                      12
<PAGE>


- ------------------------------------------------------------------------------
      Swaps. Swap agreements are types of derivatives. In order to seek to
hedge the value of the Fund's portfolio, to hedge against increases in the
Fund's cost associated with the interest payments on its outstanding
borrowings or to seek to increase the Fund's return, the Fund may enter into
interest rate or credit default swap transactions. In interest rate swap
transactions, there is a risk that yields will move in the direction opposite
of the direction anticipated by the Fund, which would cause the Fund to make
payments to its counterparty in the transaction that could adversely affect
Fund performance. In addition to the risks applicable to swaps generally,
credit default swap transactions involve special risks because they are
difficult to value, are highly susceptible to liquidity and credit risk, and
generally pay a return to the party that has paid the premium only in the
event of an actual default by the issuer of the underlying obligation (as
opposed to a credit downgrade or other indication of financial difficulty).
The Fund is not required to enter into interest rate or credit default swap
transactions for hedging purposes or to enhance its return and may choose not
to do so.

      Taxability Risk. 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 to
pay, or to have paid, taxable income subsequent to the Fund'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'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. If a security
acquired based on reliance on such an opinion of counsel is subsequently
determined to pay interest that is includable in gross income for Federal
income tax purposes, the Fund will dispose of that security as soon as
reasonably practicable.

      Antitakeover Provisions. The Fund'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.

      Market Disruption. 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's portfolio securities, interest rates,
auctions, secondary trading, ratings, credit risk, inflation and other factors
relating to the Fund's AMPS. Non-investment grade securities tend to be more
volatile than investment grade fixed income securities so that these events
and other market disruptions may have a greater impact on the prices and
volatility of non-investment grade securities than on investment grade fixed
income securities. There can be no assurance that these events and other
market disruptions will not have other material and adverse implications for
the non-investment grade securities markets.







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


                                      13
<PAGE>


                             FINANCIAL HIGHLIGHTS

      The following Financial Highlights table is intended to help you
understand the Fund's financial performance for the years shown. Certain
information reflects financial results for a single share of common stock or
preferred stock of the Fund. The total returns in the table represent the rate
an investor would have earned or lost on an investment in shares of common
stock of the Fund (assuming reinvestment of all dividends). The information
with respect to the fiscal years ended October 31, 1995 to October 31, 2004
has been audited by ______________, whose report for the fiscal year ended
October 31, 2004, along with the financial statements of the Fund, is included
in the Fund's 2004 Annual Report, which is incorporated by reference herein.
You may obtain a copy of the 2004 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.

      The following per share data and ratios have been derived from
information provided in the financial statements.

<TABLE>
<CAPTION>
                                                                                   For the Year Ended October 31,
                                                                ------------------------------------------------------------------
                                                                     2004        2003          2002         2001++        2000++
                                                                -------------  --------      --------     ----------    ----------
<S>                                                             <C>            <C>          <C>           <C>           <C>
Increase (Decrease) in Net Asset Value:
 Per Share Operating Performance
 Net asset value, beginning of year .....................                       $14.16       $14.29        $13.32         $12.81
                                                                -------------  --------      --------     ----------    ----------
 Investment income--net .................................                         1.17+        1.11          1.02           1.04
 Realized and unrealized gain (loss) on
  investments--net ......................................                          .49         (.25)          .97            .54
 Dividends to Preferred Stock shareholders
  from investment income--net ...........................                         (.07)        (.09)         (.22)          (.28)
                                                                -------------  --------      --------     ----------    ----------
 Total from investment operations .......................                         1.59          .77          1.77           1.30
                                                                -------------  --------      --------     ----------    ----------
 Less dividends to Common Stock shareholders from:
   Investment income--net ...............................                         (.99)        (.90)         (.80)          (.79)
   Realized gain on investments--net ....................                          --            --             --            --
                                                                -------------  --------      --------     ----------    ----------
 Total dividends and distributions to
  Common Stock shareholders .............................                         (.99)        (.90)         (.80)          (.79)
                                                                -------------  --------      --------     ----------    ----------
 Effect of Preferred Stock activity:
  Dividends and distributions to Preferred
  Stock shareholders from:
 Investment income--net .................................                          --            --             --            --
                                                                -------------  --------      --------     ----------    ----------
 Realized gain on investments-net .......................                          --            --             --            --
                                                                -------------  --------      --------     ----------    ----------
 Total effect of Preferred Stock activity ...............                          --            --             --            --
                                                                -------------  --------      --------     ----------    ----------
 Net asset value, end of year ...........................                       $14.76       $14.16        $14.29         $13.32
                                                                =============  ========      ========     ==========    ==========
 Market price per share, end of year ....................                       $14.26       $13.36        $13.69         $11.625
                                                                =============  ========      ========     ==========    ==========
Total Investment Return*
 Based on market price per share ........................                        14.56%        4.25%        25.20%          5.93%
                                                                =============  ========      ========     ==========    ==========
 Based on net asset value per share .....................                        11.88%        5.86%        14.06%         11.33%
Ratios Based on Average Net Assets of
 Common Stock
 Total expenses, net of reimbursement** .................                         1.01%        1.05%         1.02%          1.08%
                                                                =============  ========      ========     ==========    ==========
 Total expenses** .......................................                         1.01%        1.05%         1.02%          1.08%
                                                                =============  ========      ========     ==========    ==========
 Total investment income--net** .........................                         8.01%        7.79%         7.42%          8.00%
                                                                =============  ========      ========     ==========    ==========
 Amount of dividends to Preferred Stock
  shareholders ..........................................                          .46%         .66%         1.57%          2.15%
                                                                =============  ========      ========     ==========    ==========
 Investment income--net, to Common
  Stock shareholders ....................................                         7.55%        7.13%         5.85%          5.85%
                                                                =============  ========      ========     ==========    ==========

<CAPTION>

                                                                                  For the Year Ended October 31,
                                                           ----------------------------------------------------------
                                                             1999++      1998++       1997       1996         1995
                                                           ----------  ----------   ---------  ---------    ---------
<S>                                                        <C>         <C>          <C>        <C>          <C>
Increase (Decrease) in Net Asset Value:
 Per Share Operating Performance
 Net asset value, beginning of year .....................    $14.85      $14.59       $14.12     $13.93       $12.56
                                                           ----------  ----------   ---------  ---------    ---------
 Investment income--net .................................      1.05        1.08         1.13       1.10         1.11
 Realized and unrealized gain (loss) on
  investments--net ......................................     (2.05)        .26          .46        .18         1.37
 Dividends to Preferred Stock shareholders
  from investment income--net ...........................      (.22)       (.24)       --         --           --
                                                           ----------  ----------   ---------  ---------    ---------
 Total from investment operations .......................      1.22        1.10         1.59       1.28         2.48
                                                           ----------  ----------   ---------  ---------    ---------
 Less dividends to Common Stock shareholders from:
   Investment income--net ...............................      (.82)       (.84)        (.88)      (.85)        (.85)
   Realized gain on investments--net ....................          --        --           --         --         (.12)
                                                           ----------  ----------   ---------  ---------    ---------
 Total dividends and distributions to
  Common Stock shareholders .............................      (.82)       (.84)        (.88)      (.85)        (.85)
                                                           ----------  ----------   ---------  ---------    ---------
 Effect of Preferred Stock activity:
  Dividends and distributions to Preferred
  Stock shareholders from:
 Investment income--net .................................           --        --        (.24)      (.24)        (.26)
                                                           ----------  ----------   ---------  ---------    ---------
 Realized gain on investments-net .......................          --        --           --         --           --
                                                           ----------  ----------   ---------  ---------    ---------
 Total effect of Preferred Stock activity ...............      (.22)       (.24)        (.24)      (.24)        (.26)
                                                           ----------  ----------   ---------  ---------    ---------
 Net asset value, end of year ...........................    $12.81      $14.85       $14.59     $14.12       $13.93
                                                           ==========  ==========   =========  =========    =========
 Market price per share, end of year ....................    $11.75      $14.4375     $13.875    $12.625      $12.125
                                                           ==========  ==========   =========  =========    =========
Total Investment Return*
 Based on market price per share ........................    (13.49)%     10.37%       17.32%     11.43%       25.68%
                                                           ==========  ==========   =========  =========    =========
 Based on net asset value per share .....................     (8.31)%      7.96%       10.31%      8.47%       19.27%
Ratios Based on Average Net Assets of
 Common Stock
 Total expenses, net of reimbursement** .................      1.01%        .96%        1.00%      1.01%        1.05%
                                                           ==========  ==========   =========  =========    =========
 Total expenses** .......................................      1.01%        .96%        1.00%      1.01%        1.05%
                                                           ==========  ==========   =========  =========    =========
 Total investment income--net** .........................      7.36%       7.32%        7.78%      7.93%        8.46%
                                                           ==========  ==========   =========  =========    =========
 Amount of dividends to Preferred Stock
  shareholders ..........................................      1.53%       1.61%        1.64%      1.73%        2.02%
                                                           ==========  ==========   =========  =========    =========
 Investment income--net, to Common
  Stock shareholders ....................................      5.83%       5.71%        6.14%      6.20%        6.44%
                                                           ==========  ==========   =========  =========    =========

                                                                                                (continued on following page)
</TABLE>











                                                                 14
<PAGE>


(continued from prior page)

<TABLE>
<CAPTION>
                                                                             For the Year Ended August 31,
                                                            ---------------------------------------------------------------
                                                                2004         2003      2002         2001++       2000++
                                                            ------------  ---------- -----------  ------------ ------------
<S>                                                         <C>           <C>        <C>          <C>          <C>
Ratios Based on Average Net Assets of
 Common & Preferred Stock**
 Total expenses, net of reimbursement ....................                     .69%        .71%         .69%         .71%
                                                            ============  ========== ===========  ============ ============
 Total expenses ..........................................                     .69%        .71%         .69%         .71%
                                                            ============  ========== ===========  ============ ============
 Total investment income--net ............................                    5.46%       5.26%        4.98%        5.24%
                                                            ============  ========== ===========  ============ ============
Ratios Based on Average Net Assets of
 Preferred Stock
 Dividends to Preferred Stock
  shareholders ...........................................                     .98%       1.38%        3.22%        4.08%
                                                            ============  ========== ===========  ============ ============
Supplemental Data
 Net assets applicable to Common Stock,
  end of period (in thousands) ...........................                $293,753    $281,830     $284,547     $265,169
                                                            ============  ========== ===========  ============ ============
 Preferred Stock outstanding, end of
  period (in thousands) ..................................                $135,000    $135,000     $135,000     $135,000
                                                            ============  ========== ===========  ============ ============
 Portfolio turnover ......................................                   31.50%      66.07%       87.80%      110.66%
                                                            ============  ========== ===========  ============ ============
Leverage:
 Asset coverage per $1,000 ...............................                $3,176      $3,088       $3,108       $2,964
                                                            ============  ========== ===========  ============ ============
 Liquidation preference per share+++ .....................                $25,000     $25,000      $25,000      $25,000
                                                            ============  ========== ===========  ============ ============
 Average market value per share+++# ......................                $25,000     $25,000      $25,000      $25,000
                                                            ============  ========== ===========  ============ ============
Dividends Per Share on Preferred Stock
 Outstanding+++
 Series A--Investment income--net ........................                $251        $338         $793         $1,067
                                                            ============  ========== ===========  ============ ============
 Series B--Investment income--net ........................                $248        $319         $834         $990
                                                            ============  ========== ===========  ============ ============
 Series C--Investment income--net ........................                $240        $375         $784         $1,012
                                                            ============  ========== ===========  ============ ============

<CAPTION>

                                                                                     For the Year Ended August 31,
                                                           -----------------------------------------------------------
                                                              1999++      1998        1997        1996        1995
                                                           ----------  ----------  ----------- ----------- -----------
<S>                                                        <C>         <C>         <C>         <C>         <C>
Ratios Based on Average Net Assets of
 Common & Preferred Stock**
 Total expenses, net of reimbursement ....................       .68%        .66%        .68%        .68%        .69%
                                                           ==========  ==========  =========== =========== ===========
 Total expenses ..........................................       .68%        .66%        .68%        .68%        .69%
                                                           ==========  ==========  =========== =========== ===========
 Total investment income--net ............................      4.99%       5.06%       5.30%       5.30%       5.55%
                                                           ==========  ==========  =========== =========== ===========
Ratios Based on Average Net Assets of
 Preferred Stock
 Dividends to Preferred Stock
  shareholders ...........................................      3.22%       3.52%       3.50%       3.55%       3.90%
                                                           ==========  ==========  =========== =========== ===========
Supplemental Data
 Net assets applicable to Common Stock,
  end of period (in thousands) ...........................  $254,975    $295,621    $290,345    $281,036    $277,230
                                                           ==========  ==========  =========== =========== ===========
 Preferred Stock outstanding, end of
  period (in thousands) ..................................  $135,000    $135,000    $135,000    $135,000    $135,000
                                                           ==========  ==========  =========== =========== ===========
 Portfolio turnover ......................................    114.08%     140.55%      57.80%      46.58%      95.62%
                                                           ==========  ==========  =========== =========== ===========
Leverage:
 Asset coverage per $1,000 ...............................  $2,889      $3,190      $3,151      $3,082      $3,054
                                                           ==========  ==========  =========== =========== ===========
 Liquidation preference per share+++ .....................  $25,000     $25,000     $25,000     $25,000     $25,000
                                                           ==========  ==========  =========== =========== ===========
 Average market value per share+++# ......................  $25,000     $25,000     $25,000     $25,000     $25,000
                                                           ==========  ==========  =========== =========== ===========
Dividends Per Share on Preferred Stock
 Outstanding+++
 Series A--Investment income--net ........................  $816        $897        $880        $898        $967
                                                           ==========  ==========  =========== =========== ===========
 Series B--Investment income--net ........................  $810        $875        $872        $879        $891
                                                           ==========  ==========  =========== =========== ===========
 Series C--Investment income--net ........................  $786        $869        $869        $886        $1,070
                                                           ==========  ==========  =========== =========== ===========
</TABLE>

- ----------------
*     Total investment returns based on market value, which can be
      significantly greater or lesser than the net asset value, may result in
      substantially different returns. Total investment returns exclude the
      effects of sales charges.
**    Do not reflect the effect of dividends to Preferred Stock shareholders.
+     Based on average shares outstanding.
++    Certain prior year amounts have been reclassified to conform to current
      year presentation.
+++   Adjusted to reflect a two-for-one stock split on December 1, 1994.
++    Aggregate total investment return.
#     Based on monthly market value per share.



                                      15
<PAGE>


                                   THE FUND

      MuniVest Fund II, Inc. (the "Fund") is a non-diversified, closed-end
fund. The Fund was incorporated under the laws of the State of Maryland on
February 4, 1993, and has registered under the Investment Company Act of 1940,
as amended ("1940 Act"). The Fund's principal executive office is located at
800 Scudders Mill Road, Plainsboro, New Jersey 08536, and its telephone number
is (609) 282-2800.

      The Board of Directors of the Fund may at any time consider a merger,
consolidation or other form of reorganization of the Fund with one or more
other investment companies advised by the Investment Adviser that have similar
investment objectives and policies as the Fund. Any such merger, consolidation
or other form of reorganization would require the prior approval of the Board
of Directors and, if the Fund is the acquired fund, the stockholders of the
Fund. See "Description of Capital Stock--Certain Provisions of the Charter and
Bylaws."

                                USE OF PROCEEDS

      The net proceeds of this offering will be approximately $39,450,000
after payment of offering expenses (estimated to be approximately $150,000)
and the deduction of the underwriting discount.

      The net proceeds of the offering will be invested in accordance with the
Fund'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 "Investment Objective and Policies."

                                CAPITALIZATION

      The following table sets forth the unaudited capitalization of the Fund
as of October 31, 2004 and as adjusted to give effect to the issuance of the
shares of AMPS offered hereby.

<TABLE>
<CAPTION>

                                                                                    Actual             As Adjusted
                                                                                -----------------    ------------------

<S>                                                                              <C>                   <C>

Preferred stock (5,400 shares of Other AMPS authorized, issued and outstanding
   at $25,000 per share liquidation preference, plus accumulated but unpaid
   dividends; 7,000 shares of AMPS and Other AMPS authorized, issued and
   outstanding, as adjusted, at $25,000 per share liquidation
   preference, plus accumulated but unpaid dividends) .........................  $                     $
                                                                                =================    ==================

Common Stock, par value $.10 per share (199,994,600 shares authorized,
   __________ shares issued and outstanding); 199,993,000
   shares authorized,
   __________ shares issued and outstanding, as adjusted.......................
   Paid-in capital in excess of par value......................................
   Undistributed investment income--net........................................
   Accumulated realized capital losses on investment--net......................
   Unrealized appreciation on investments--net.................................
                                                                                -----------------    ------------------
   Net assets applicable to outstanding common stock...........................  $                      $
                                                                                =================    ==================

</TABLE>



                                                          16
<PAGE>


                             PORTFOLIO COMPOSITION

      As of October 31, 2004, approximately ____% of the market value of the
Fund's portfolio was invested in long term and intermediate term municipal
obligations and approximately ____% of the market value of the Fund'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's long term municipal obligation investment portfolio as of October 31,
2004.

                                         Number of        Value
   Moody's*      Fitch*         S&P*       Issues     (in thousands)   Percent
- -------------- -----------   ---------- ----------   ---------------- ---------
      Aaa         AAA            AAA                  $                   %
      Aa           AA            AA                                       %
       A           A              A                                       %
      Baa         BBB            BBB                                      %
      Ba           BB            BB                                       %
       B           B              B                                       %
      Caa         CCC            CCC                                      %
      NR           NR            NR                                       %
                                        ----------   ---------------- ---------
Total................................                 $                  %
                                        ==========   ================ =========

- --------------
*     Ratings: Using the higher of Moody's, S&P or Fitch ratings on the Fund's
      investments. Moody's rating categories may be modified further by a 1, 2
      or 3 in Aa, A, Baa, Ba, B and Caa ratings. S&P rating categories may be
      modified further by a plus (+) or minus (-) in AA, A, BBB, BB, B and CCC
      ratings. Fitch rating categories may be modified further by a plus (+)
      or minus (-) in AA, A, BBB, BB, B and CCC.

                       INVESTMENT OBJECTIVE AND POLICIES

      The Fund'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 at least 80% of an aggregate
of the Fund's net assets (including proceeds from the issuance of any
preferred stock) and the proceeds of any borrowings for investment purposes,
in a portfolio of municipal obligations issued by or on behalf of states,
territories and possessions of the United States and their political
subdivisions, agencies or instrumentalities, each of which pays interest that,
in the opinion of bond counsel to the issuer, is excludable from gross income
for Federal income tax purposes (except that the interest may be includable in
taxable income for purposes of the Federal alternative minimum tax)
("Municipal Bonds"). The Fund's investment objective and its policy of
investing at least 80% of an aggregate of the Fund's net assets (including
proceeds from the issuance of any preferred stock) and the proceeds of any
borrowings for investment purposes, in Municipal Bonds are fundamental
policies that may not be changed without the approval of a majority of the
outstanding voting securities of the Fund (as defined in the 1940 Act). There
can be no assurance that the Fund's investment objective will be realized.

      The Fund may invest in certain tax exempt securities classified as
"private activity bonds" (or industrial development bonds, under pre-1986 law)
("PABs") (in general, bonds that benefit non-governmental entities) that may
subject certain investors in the Fund to an alternative minimum tax. See
"Taxes." The percentage of the Fund's total assets invested in PABs will vary
from time to time. The Fund also will not invest more than 25% of its total
assets (taken at market value at the time of each investment) in Municipal
Bonds whose issuers are located in the same state.

      Under normal market conditions, the Fund expects to invest at least 75%
of its total assets in a portfolio of Municipal Bonds that are commonly
referred to as "investment grade" securities, which are obligations rated at
the time of purchase within the four highest quality ratings as determined by
either Moody's Investors Service, Inc. ("Moody's") (currently Aaa, Aa, A and
Baa), Standard & Poor's ("S&P") (currently AAA, AA, A and BBB) or Fitch
Ratings ("Fitch") (currently AAA, AA, A and BBB). In the case of short term
notes, the investment grade rating categories are SP-1+ through SP-2 for S&P,
MIG-1 through MIG-3 for Moody's and F-1+ through F-3 for Fitch. In the case of
tax exempt commercial paper, the investment grade rating categories are A-1+
through A-3 for


                                      17
<PAGE>


S&P, Prime-1 through Prime-3 for Moody's and F-1+ through F-3 for Fitch.
Obligations ranked in the lowest investment grade rating category (BBB, SP-2
and A-3 for S&P; Baa, MIG-3 and Prime-3 for Moody's and BBB and F-3 for
Fitch), while considered "investment grade," may have certain speculative
characteristics. There may be sub-categories or gradations indicating relative
standing within the rating categories set forth above. In assessing the
quality of Municipal Bonds with respect to the foregoing requirements, the
Investment Adviser takes into account the nature of any letters of credit or
similar credit enhancement to which particular Municipal Bonds are entitled
and the creditworthiness of the financial institution that provided such
credit enhancement. See Appendix A--"Description of Municipal Bond Ratings" 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.

      The Fund also may invest up to 25% of its total assets in Municipal
Bonds that are rated below Baa by Moody's or below BBB by S&P or Fitch or, if
unrated, are considered by the Investment Adviser to possess similar credit
characteristics. Such securities, sometimes referred to as "high yield" or
"junk" bonds, are predominantly speculative with respect to the capacity to
pay interest and repay principal in accordance with the terms of the security
and generally involve a greater volatility of price than securities in higher
rating categories. The Fund does not intend to purchase Municipal Bonds that
are in default or which the Investment Adviser believes will soon be in
default. Below investment grade securities and comparable unrated securities
involve substantial risk of loss, are considered speculative with respect to
the issuer's ability to pay interest and any required redemption or principal
payments and are susceptible to default or decline in market value due to
adverse economic and business developments.

      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'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.

      The net asset value of the shares of common stock of a closed-end
investment company, such as the Fund, which invests primarily in fixed income
securities, changes as the general levels of interest rates fluctuate. When
interest rates decline, the value of a fixed income portfolio can be expected
to rise. Conversely, when interest rates rise, the value of a fixed income
portfolio can be expected to decline. Prices of longer term securities
generally fluctuate more in response to interest rate changes than do shorter
term securities. These changes in net asset value are likely to be greater in
the case of a fund having a leveraged capital structure, such as the Fund.

      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's portfolio securities will vary based upon the Investment Adviser's
assessment of economic and market conditions. As of October 31, 2004, the
weighted average maturity of the Fund's portfolio was approximately 19.26
years.

      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 "Temporary Investments").
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 ("VRDOs")
and VRDOs in the form of participation interests ("Participating VRDOs") in
variable rate tax exempt obligations held by a financial institution. See
"Other Investment Policies--Temporary Investments." The Fund's hedging
strategies, which are described in more detail under "Hedging
Transactions--Financial Futures Transactions and Options," are not fundamental
policies and may be modified by the Board of Directors of the Fund without the
approval of the Fund'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.


                                      18
<PAGE>


      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 ("Non-Municipal
Tax Exempt Securities"). 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'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 ("IRS") 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.

      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.

      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.

Risk Factors and Special Considerations Relating to Municipal Bonds

      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 "--Description of Municipal
Bonds" and "--Hedging Transactions--Financial Futures Transactions and
Options."

      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.

Description of Municipal Bonds

      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--"Description of Municipal Bond Ratings" 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.

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


                                      19
<PAGE>


      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's common stock. See "Taxes."

      General Obligation Bonds. General obligation bonds are secured by the
issuer'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's creditworthiness will depend on many factors, including potential
erosion of its tax base due to population declines, natural disasters,
declines in the state's industrial base or inability to attract new
industries, economic limits on the ability to tax without eroding the tax
base, state legislative proposals or voter initiatives to limit ad valorem
real property taxes and the extent to which the entity relies on Federal or
state aid, access to capital markets or other factors beyond the state's or
entity'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's maintenance of its tax base.

      Revenue Bonds. 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.

      PABs. 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's dependence on revenues for
the operation of the particular facility being financed.

      Moral Obligation Bonds. The Fund also may invest in "moral obligation"
bonds, which are normally issued by special purpose public authorities. If an
issuer of moral obligation bonds is unable to meet its obligations, the
repayment of such bonds becomes a moral commitment but not a legal obligation
of the state or municipality in question.

      Municipal Lease Obligations. Also included within the general category
of Municipal Bonds are certificates of participation ("COPs") 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 "lease obligations") relating to such
equipment, land or facilities. Although lease obligations do not constitute
general obligations of the issuer for which the issuer's unlimited taxing
power is pledged, a lease obligation is frequently backed by the issuer's
covenant to budget for, appropriate and make the payments due under the lease
obligation. However, certain lease obligations contain "non-appropriation"
clauses which provide that the issuer has no obligation to make lease or
installment purchase payments in future years unless money is appropriated for
such purpose on a yearly basis. Although "non-appropriation" lease obligations
are secured by the 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.

      Indexed and Inverse Floating Rate Securities. 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's return on such
Municipal Bonds


                                      20
<PAGE>


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 "inverse floating obligations" or "residual interest bonds" 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.

      When Issued Securities, Delayed Delivery Securities and Forward
Commitments. The Fund may purchase or sell securities that it is entitled to
receive on a when issued basis. The Fund may also purchase or sell securities
on a delayed delivery basis. The Fund may also purchase or sell securities
through a forward commitment. These transactions involve the purchase or sale
of securities by the Fund at an established price with payment and delivery
taking place in the future. The purchase will be recorded on the date the Fund
enters into the commitment and the value of the securities will thereafter be
reflected in the Fund'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.

      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'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.

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

      "High Yield" or "Junk" Bonds. The Fund may invest up to 25% of its total
assets in high yield Municipal Bonds that are rated below Baa by Moody's or
below BBB by S&P or Fitch or are unrated securities that are considered by the
Investment Adviser to possess similar credit characteristics. See Appendix A
"Description of Municipal Bond Ratings" to the statement of additional
information for additional information regarding ratings of Municipal Bonds.
Junk bonds are debt securities that are rated below investment grade by the
major rating agencies or are unrated securities that are considered by the
Investment Adviser to possess similar credit characteristics. Although junk
bonds generally pay higher rates of interest than investment grade bonds, they
are high risk investments that may cause income and principal losses for the
Fund. The major risks in junk bond investments include the following:

      o     Junk bonds may be issued by less creditworthy issuers. These
            securities are vulnerable to adverse changes in the issuer's
            industry and to general economic conditions. Issuers of junk bonds
            may be unable to meet their interest or principal payment
            obligations because of an economic downturn, specific issuer
            developments or the unavailability of additional financing.


                                      21
<PAGE>


      o     The issuers of junk bonds may have a larger amount of outstanding
            debt relative to their assets than issuers of investment grade
            bonds. If the issuer experiences financial difficulties, it may be
            unable to meet its debt obligations. The issuer's ability to pay
            its debt obligations also may be lessened by specific issuer
            developments, or the unavailability of additional financing.

      o     Junk bonds are frequently ranked junior to claims by other
            creditors. If the issuer cannot meet its obligations, the senior
            obligations are generally paid off before the junior obligations.

      o     Junk bonds frequently have call or redemption features that permit
            an issuer to repurchase the security from the Fund before it
            matures. If an issuer redeems the junk bonds, the Fund may have to
            invest the proceeds in bonds with lower yields and may lose
            income.

      o     Prices of junk bonds are subject to extreme price fluctuations.
            Negative economic developments may have a greater impact on the
            prices of junk bonds than on other higher rated fixed income
            securities.

      o     Junk bonds may be less liquid than higher rated fixed income
            securities even under normal economic conditions. There are fewer
            dealers in the junk bond market, and there may be significant
            differences in the prices quoted for junk bonds by the dealers.
            Because they are less liquid, judgment may play a greater role in
            valuing certain of the Fund's portfolio securities than in the
            case of securities trading in a more liquid market.

      The Fund may incur expenses to the extent necessary to seek recovery
upon default or to negotiate new terms with a defaulting issuer.

      Yields. 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.

Hedging Transactions

      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's use of
hedging strategies is intended to reduce the volatility of the net asset value
of the Fund's shares of common stock, the net asset value of the Fund's shares
of common stock will fluctuate. No assurance can be given that the Fund'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's and S&P, the Fund's use of
options and certain financial futures and options thereon will be subject to
the limitations described under "Rating Agency Guidelines."

      Financial Futures Transactions and Options. The Fund is authorized to
purchase and sell certain exchange traded financial futures contracts
("financial futures contracts") 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's return.
However, any transactions involving financial futures or options (including
puts and calls associated therewith) will be in accordance with the Fund'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


                                      22
<PAGE>


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.

      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 "Taxes."

      Futures Contracts. 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.e., by entering into an offsetting
transaction. Futures contracts have been designed by boards of trade which
have been designated "contracts markets" by the Commodity Futures Trading
Commission ("CFTC").

      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 "initial
margin" and represents a "good faith" deposit assuring the performance of both
the purchaser and seller under the futures contract. Subsequent payments to
and from the broker, called "variation margin," 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 "marking to the market." 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.

      The Fund deals in financial futures contracts based on a long term
municipal bond index developed by the Chicago Board of Trade ("CBT") and The
Bond Buyer (the "Municipal Bond Index"). 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's or
S&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.

      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.

      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 ("GNMA") 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.

      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.


                                      23
<PAGE>


      Futures Strategies. The Fund may sell a financial futures contract
(i.e., 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'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'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'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.

      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.

      Call Options on Futures Contracts. 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.

      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's portfolio holdings.

      Put Options on Futures Contracts. 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's portfolio against the risk of rising interest
rates.

      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.

      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.


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



                                      24
<PAGE>


      Under regulations of the CFTC, the futures trading activity described
herein will not result in the Fund being deemed a "commodity pool" and the
Fund need not be operated by a person registered with the CFTC as a "commodity
pool operator."

      When the Fund purchases a futures contract, or writes a put option or
purchases a call option thereon, an amount of cash, cash equivalents (e.g.,
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.

      Risk Factors in Futures Transactions and Options. 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.

      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'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's investments as compared to those comprising the
Municipal Bond Index and general economic or political factors. In addition,
the correlation between movements in the value of the Municipal Bond Index may
be subject to change over time as additions to and deletions from the
Municipal Bond Index alter its structure. The correlation between futures
contracts on U.S. Government securities and the Municipal Bonds held by the
Fund may be adversely affected by similar factors and the risk of imperfect
correlation between movements in the prices of such futures contracts and the
prices of Municipal Bonds held by the Fund may be greater. Municipal Bond
Index futures contracts were approved for trading in 1986. Trading in such
futures contracts may tend to be less liquid than trading in other futures
contracts. The trading of futures contracts also is subject to certain market
risks, such as inadequate trading activity, which could at times make it
difficult or impossible to liquidate existing positions.

      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'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
"daily price fluctuation limits" 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.

      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


                                      25
<PAGE>


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's total return for such period may be less than if it had not engaged in
the hedging transaction.

      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'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.

      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.

                           OTHER INVESTMENT POLICIES

The Fund has adopted certain other policies as set forth below.

Temporary Investments

      The Fund may invest in short term tax exempt and taxable securities
subject to the limitations set forth above. The tax exempt money market
securities may include municipal notes, municipal commercial paper, municipal
bonds with a remaining maturity of less than one year, variable rate demand
notes and participations therein. Municipal notes include tax anticipation
notes, bond anticipation notes, revenue anticipation notes and grant
anticipation notes. Anticipation notes are sold as interim financing in
anticipation of tax collection, bond sales, government grants or revenue
receipts. Municipal commercial paper refers to short term unsecured promissory
notes generally issued to finance short term credit needs. The taxable money
market securities in which the Fund may invest as Temporary Investments
consist of U.S. Government securities, U.S. Government agency securities,
domestic bank or savings institution certificates of deposit and bankers'
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 ("FDIC"), 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.

Interest Rate Swap Transactions

      In order to seek to hedge the value of the Fund against interest rate
fluctuations, to hedge against increases in the Fund's costs associated with
the dividend payments on any preferred stock, including the AMPS, or to seek
to increase the Fund's return, the Fund may enter into interest rate swap
transactions such as Municipal Market Data AAA Cash Curve swaps ("MMD Swaps")
or Bond Market Association Municipal Swap Index swaps ("BMA Swaps"). 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's yield, for example, during periods of steep
interest rate yield curves (i.e., wide differences between short term and long
term interest rates).


                                      26
<PAGE>


      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 (e.g., 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'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 (e.g., coupon, maturity,
call feature).

      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.

      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's performance.

      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'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.

Credit Default Swap Agreements

      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 "buyer" in a credit default
contract may be obligated to pay the protection "seller" 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 "par value" (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.

      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


                                      27
<PAGE>


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'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'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 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's portfolio.
Such segregation will not limit the Fund's exposure to loss.

VRDOs and Participating VRDOs

      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.

      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' notice, not to
exceed seven days. In addition, the Participating VRDO is backed by an
irrevocable letter of credit or guaranty of the financial institution. The
Fund would have an undivided interest in the underlying obligation and thus
participate on the same basis as the financial institution in such obligation
except that the financial institution typically retains fees out of the
interest paid on the obligation for servicing the obligation, providing the
letter of credit and issuing the repurchase commitment. The Fund has been
advised by its counsel that the Fund should be entitled to treat the income
received on Participating VRDOs as interest from tax exempt obligations as
long as the Fund does not invest more than 20% of its total assets in such
investments and certain other conditions are met. It is contemplated that the
Fund will not invest more than 20% of its assets in Participating VRDOs.

      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.

      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's), SP-1 through
SP-2 for notes and A-1 through A-3 for VRDOs and commercial paper (as
determined by S&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.

Repurchase Agreements

      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


                                      28
<PAGE>


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'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.

      In general, for Federal income tax purposes, repurchase agreements are
treated as collateralized loans secured by the securities "sold." Therefore,
amounts earned under such agreements will not be considered tax exempt
interest. The treatment of purchase and sales contracts is less certain.

Borrowings

      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? 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 "leveraging")
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.

                              DESCRIPTION OF AMPS

      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.

General

      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. 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 "The Auction" herein and in the statement of
additional information.

      The Fund has outstanding 5,400 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 $135,000,000 (the "Other AMPS"). The Other AMPS are
as follows: 1,800 shares of Auction Market Preferred Stock, Series A; 1,800
shares of Auction Market Preferred Stock, Series B; and 1,800 shares of
Auction Market Preferred Stock, Series C. The Series D AMPS offered hereby
rank on a parity with the


                                      29
<PAGE>


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.

      The following is a brief description of the terms of the shares of AMPS.
This description does not purport to be complete and is subject to and
qualified in its entirety by reference to the Fund's Charter and Articles
Supplementary of the AMPS, including the provisions thereof establishing the
AMPS. The Fund's Charter and the form of Articles Supplementary of the AMPS
establishing the terms of the AMPS have been filed as exhibits to the
Registration Statement of which this prospectus is a part.

Dividends

      General. 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 "Determination of Dividend
Rate," 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'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'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
"Taxes."

      Dividends on the shares of AMPS will accumulate from the date on which
the Fund originally issues the shares of AMPS (the "Date of Original Issue")
and will be payable on the dates described below. Dividends on shares of AMPS
with respect to the Initial Dividend Period shall be payable on the Initial
Dividend Payment Date. Following the Initial Dividend Payment Date for the
AMPS, dividends on the AMPS will be payable, at the option of the Fund, either
(i) with respect to any 7-Day Dividend Period and any Short Term Dividend
Period of 35 or fewer days, on the day next succeeding the last day thereof or
(ii) with respect to any Short Term Dividend Period of more than 35 days and
with respect to any Long Term Dividend Period, monthly on the first Business
Day of each calendar month during such Short Term Dividend Period or Long Term
Dividend Period and on the day next succeeding the last day thereof (each such
date referred to in clause (i) or (ii) being referred to herein as a "Normal
Dividend Payment Date"), except that if such Normal Dividend Payment Date is
not a Business Day, the Dividend Payment Date shall be the first Business Day
next succeeding such Normal Dividend Payment Date. Thus, following the Initial
Dividend Payment Date for AMPS, dividends generally will be payable (in the
case of Dividend Periods which are not Special Dividend Periods) on each
succeeding ________ 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
"Dividend Periods." Each dividend payment date determined as provided above is
hereinafter referred to as a "Dividend Payment Date."

      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.

      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 "The
Auction--Securities Depository." The Securities Depository will credit the
accounts of the Agent Members of the Existing Holders in accordance with the
Securities Depository'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


                                      30
<PAGE>


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.

      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 "--Additional Dividends" in this prospectus
and under "Description of AMPS--Dividends--Non-Payment Period; Late Charge" 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.

      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.

      Notification of Dividend Period. 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 "Request for
Special Dividend Period") to the Auction Agent and to each Broker-Dealer, may
request that the next succeeding Dividend Period for the AMPS will be a number
of days (other than seven), evenly divisible by seven, and not fewer than
seven nor more than 364 in the case of a Short Term Dividend Period or one
whole year or more but not greater than five years in the case of a Long Term
Dividend Period, specified in such notice, provided that the Fund may not give
a Request for Special Dividend Period (and any such request shall be null and
void) unless, for any Auction occurring after the initial Auction, Sufficient
Clearing Bids were made in the last occurring Auction and unless full
cumulative dividends and any amounts due with respect to redemptions, and any
Additional Dividends payable prior to such date have been paid in full. Such
Request for Special Dividend Period, in the case of a Short Term Dividend
Period, shall be given on or prior to the second Business Day but not more
than seven Business Days prior to an Auction Date for the AMPS and, in the
case of a Long Term Dividend Period, shall be given on or prior to the second
Business Day but not more than 28 days prior to an Auction Date for the AMPS.
Upon receiving such Request for Special Dividend Period, the Broker-Dealers
jointly shall determine whether, given the factors set forth below, it is
advisable that the Fund issue a Notice of Special Dividend Period for the AMPS
as contemplated by such Request for Special Dividend Period and the Optional
Redemption Price of the AMPS during such Special Dividend Period and the
Specific Redemption Provisions and shall give the Fund written notice (a
"Response") 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 "Notice of Special Dividend Period") to the Auction
Agent, the Securities Depository and each Broker-Dealer. See "Description of
AMPS--Dividends--Notification of Dividend Period" in the statement of
additional information for a detailed description of these procedures.

      Determination of Dividend Rate. The dividend rate on shares of the AMPS
during the period from and including the Date of Original Issue for the Series
D AMPS to but excluding the Initial Dividend Payment Date (the "Initial
Dividend Period") with respect to the Series D AMPS will be the rate per annum
set forth above under "Prospectus Summary--Dividends and Dividend Periods."
Commencing on the Initial Dividend Payment Date for the Series D AMPS, the
Applicable Rate on the Series D AMPS for each Subsequent Dividend Period,
which Subsequent Dividend Period shall be a period commencing on and including
a Dividend Payment Date and ending on and including the calendar day prior to
the next Dividend Payment Date (or calendar day prior to the last Dividend
Payment Date in a Dividend Period if there is more than one Dividend Payment
Date), shall be equal to the rate per annum that results from the Auction with
respect to such Subsequent Dividend Period. The Initial Dividend Period and
Subsequent Dividend Period for the AMPS is referred to herein as a "Dividend
Period." Cash dividends shall be calculated as set forth above under
"Dividends--General."


                                      31
<PAGE>


      Restrictions on Dividends and Other Payments. 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 October 31, 2004, asset coverage
with respect to shares of AMPS would be approximately ___% representing
approximately __% of the Fund's capital and __% of the Fund'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's ability to maintain such qualification.
See "Taxes" in the statement of additional information.

      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 "Voting Rights" 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.

      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 "The Auction--Auction Procedures--Auction Date; Advance Notice
of Allocation of Taxable Income; Inclusion of Taxable Income in Dividends"
below, which may only happen when such allocation is made as a result of the
redemption of all or some of the outstanding shares of AMPS or the liquidation
of the Fund (the amount of such allocation referred to herein as a
"Retroactive Taxable Allocation"), the Fund, within 90 days (and generally
within 60 days) after the end of the Fund'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'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.

      An "Additional Dividend" means payment to a present or former holder of
shares of AMPS of an amount which, when taken together with the aggregate
amount of Retroactive Taxable Allocations made to such holder with respect to
the fiscal year in question, would cause such holder's dividends in dollars
(after Federal income tax consequences) from the aggregate of both the
Retroactive Taxable Allocations and the Additional Dividend to be equal to the
dollar amount of the dividends which would have been received by such holder
if the amount of the aggregate Retroactive Taxable Allocations 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 "Taxes" 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.

      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 "The
Auction-- Auction


                                      32
<PAGE>


Procedures--Auction Date; Advance Notice of Allocation of Taxable Income;
Inclusion of Taxable Income in Dividends" below.

Asset Maintenance

      The Fund will be required to satisfy two separate asset maintenance
requirements under the terms of the Articles Supplementary. These requirements
are summarized below.

      1940 Act AMPS Asset Coverage. 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)
("1940 Act AMPS Asset Coverage"). 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 "1940 Act Cure Date"), the Fund will be required
under certain circumstances to redeem certain of the shares of AMPS. See
"Redemption" below.

      Based upon the composition of the Fund's portfolio at October 31, 2004,
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:

      Value of Fund assets less liabilities
       not constituting senior securities              $                    %
- -------------------------------------------------   =  ------------   =
   Senior securities representing indebtedness         $
  plus liquidation value of the shares of AMPS

      AMPS Basic Maintenance Amount. 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 "Valuation Date") Moody's
Eligible Assets and S&P Eligible Assets each having in the aggregate a
Discounted Value at least equal to the AMPS Basic Maintenance Amount. The AMPS
Basic Maintenance Amount includes the sum of (i) the aggregate liquidation
value of AMPS and Other AMPS then outstanding and (ii) certain accrued and
projected payment obligations of the Fund. See "Description of AMPS--Asset
Maintenance--AMPS Basic Maintenance Amount" 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 "AMPS Basic Maintenance Cure Date"), 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 "Redemption" herein and in
the statement of additional information.

Redemption

      Optional Redemption. 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. "Optional Redemption Price"
means $25,000 per share of AMPS plus an amount equal to accumulated but unpaid
dividends (whether or not earned or declared) to the date fixed for redemption
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 "Dividends--Additional Dividends." 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's
leveraged capital


                                      33
<PAGE>


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.

      Mandatory Redemption. 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's
Eligible Assets and S&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 "Cure Date"), as the case may be. "Mandatory
Redemption Price" means $25,000 per share of AMPS plus an amount equal to
accumulated but unpaid dividends (whether or not earned or declared) to the
date fixed for redemption. 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 "Dividends--Additional Dividends."

      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 "Description of AMPS-- Redemption" in the
statement of additional information.

Liquidation Rights

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

Voting Rights

      Except as otherwise indicated in this prospectus and the statement of
additional information and except as otherwise required by applicable law,
holders of shares of AMPS will be entitled to one vote per share on each
matter submitted to a vote of stockholders of the Fund and will vote together
with holders of shares of Other AMPS and holders of shares of common stock as
a single class.

      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's Directors at all times and
to elect a majority of the Directors at any time that two full years'
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 "Description of AMPS--Voting Rights" in the
statement of additional information.


                                      34
<PAGE>


                                  THE AUCTION

      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.

General

      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 "Description of AMPS--Dividends--General") at the
rate per annum equal to the Applicable Rate for each such Dividend Period.

      The provisions of the Articles Supplementary establishing the terms 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 "Auction Procedures") 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.

      Each periodic operation of such procedures with respect to the shares of
AMPS is referred to hereinafter as an "Auction." 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
"Description of AMPS--Dividends--Non-Payment Period; Late Charge" in the
statement of additional information.

      Auction Agent Agreement. 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 "Auction Agent")
(the "Auction Agent Agreement"), 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.

      Broker-Dealer Agreements. The Auction Agent has entered into agreements
with Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and
more than twenty other broker-dealers and may enter into similar agreements
(collectively, the "Broker-Dealer Agreements") with one or more other
broker-dealers (collectively, the "Broker-Dealers") 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 & Co., Inc.

      Securities Depository. 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.

Auction Procedures

      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.


                                      35
<PAGE>


The Settlement Procedures to be used with respect to Auctions are set forth in
Appendix B to the statement of additional information.

      Auction Date; Advance Notice of Allocation of Taxable Income; Inclusion
of Taxable Income in Dividends. 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
"Auction Date"). "Business Day" means a day on which the New York Stock
Exchange (the "NYSE") 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
_______ after the preceding Dividend Payment Date, and each subsequent
Dividend Period normally will begin on the following _____ (also a Dividend
Payment Date). The Auction Date and the first day of the related Dividend
Period (both of which must be Business Days) need not be consecutive calendar
days. For example, in most cases, if the ________ that normally would be an
Auction Date for the Series D AMPS is not a Business Day, then such Auction
Date will be the preceding Monday and the first day of the related Dividend
Period will continue to be the following ________. See "Description of
AMPS--Dividends" 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.

      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
"Description of AMPS--Dividends--Additional Dividends" above.

      Orders by Beneficial Owners, Potential Beneficial Owners, Existing
Holders and Potential Holders. On or prior to each Auction Date:

            (a)   each Beneficial Owner may submit to its Broker-Dealer by
telephone a:

                  (i)   Hold Order--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;

                  (ii)  Bid--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

                  (iii) Sell Order--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

      (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.


                                      36
<PAGE>


      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 "Order" and collectively as "Orders." 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 "Bidder" and collectively as "Bidders." 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.

      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
"Submission of Orders by Broker-Dealers to Auction Agent" below.

      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.

      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's and S&P (or
if Moody's or S&P or both shall not make such rating available, the equivalent
of either or both of such ratings by a Substitute Rating Agency or two
Substitute Rating Agencies or, in the event that only one such rating shall be
available, such rating) and (ii) whether the 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:

<TABLE>
<CAPTION>

                                       Applicable                               Applicable
                                       Percentage           Applicable          Spread Over        Applicable
                                      of Reference          Percentage           Reference         Spread Over
          Credit Ratings                 Rate--No           of Reference           Rate--No           Reference
- ---------------------------------
     Moody's             S&P          Notification      Rate--Notification      Notification     Rate--Notification
- ----------------   --------------   ----------------  --------------------      ------------     --------------------
<S>                 <C>                   <C>                  <C>                  <C>                <C>
       Aaa               AAA              110%                 125%                 1.10%              1.25%
   Aa3 to Aa1        AA- to AA+           125%                 150%                 1.25%              1.50%
    A3 to A1          A- to A+            150%                 200%                 1.50%              2.00%
  Baa3 to Baa1      BBB- to BBB+          175%                 250%                 1.75%              2.50%
   Below Baa3        Below BBB-           200%                 300%                 2.00%              3.00%

</TABLE>

      There is no minimum Applicable Rate in respect of any Dividend Period.

      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&P or Moody's, or both to
provide a rating for the AMPS, subject to the Fund's ability to terminate
compliance with the rating agency guidelines as discussed under "Rating Agency
Guidelines." If either S&P or Moody's, or both, shall not make such a rating
available, and subject to the Fund's ability to terminate compliance with the
rating agency guidelines discussed under "Rating Agency Guidelines," Merrill
Lynch or its affiliates and successors, after obtaining the Fund's approval,
will select another NRSRO (a "Substitute Rating Agency") or two other NRSROs
("Substitute Rating Agencies") to act as a Substitute Rating Agency or
Substitute Rating Agencies, as the case may be.


                                      37
<PAGE>


      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 "Determination of Sufficient
Clearing Bids, Winning Bid Rate and Applicable Rate" and "Acceptance and
Rejection of Submitted Bids and Submitted Sell Orders and Allocation of
Shares."

      Neither the Fund nor the Auction Agent will be responsible for a
Broker-Dealer's failure to comply with the foregoing.

      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'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
"Submission of Orders by Broker-Dealers to Auction Agent." 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 "Notification of
Results; Settlement" below.

      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.

      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).

      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's custodian bank for
the benefit of holders of AMPS to be redeemed and for payment to the Auction
Agent, as set forth under "Description of AMPS--Redemption" 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.e., Merrill Lynch) may submit an Order.

      Submission of Orders by Broker-Dealers to Auction Agent. 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 "Submission Deadline"),
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


                                      38
<PAGE>


Broker-Dealer, or by a Broker-Dealer to the Auction Agent, prior to the
Submission Deadline on any Auction Date, shall be irrevocable.

      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%.

      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:

            (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;

            (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

            (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.

      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.

      Determination of Sufficient Clearing Bids, Winning Bid Rate and
Applicable Rate. 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 "Hold Order," "Bid" or "Sell Order" as
submitted or deemed submitted by a Broker-Dealer hereinafter being referred to
as a "Submitted Hold Order," a "Submitted Bid" or a "Submitted Sell Order," as
the case may be, or as a "Submitted Order") 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
"Available AMPS") 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).

      If Sufficient Clearing Bids have been made, the Auction Agent will
determine the lowest rate per annum specified in the Submitted Bids (the
"Winning Bid Rate") 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


                                      39
<PAGE>


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.

      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.

      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 "Acceptance and Rejection of Submitted Bids and Submitted Sell
Orders and Allocation of Shares." Thus, under some circumstances, Beneficial
Owners may not have liquidity of investment.

      Acceptance and Rejection of Submitted Bids and Submitted Sell Orders and
Allocation of Shares. Based on the determinations described under
"Determination of Sufficient Clearing Bids, Winning Bid Rate and Applicable
Rate" 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.

      If Sufficient Clearing Bids have been made:

            (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;

            (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;

            (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;

            (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

            (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.

      If Sufficient Clearing Bids have not been made (other than because all
outstanding shares of AMPS are the subject of Submitted Hold Orders):

            (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;

            (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


                                      40
<PAGE>


            (c)   each Existing Holder that placed a Submitted Bid specifying
      a rate per annum higher than the Maximum Applicable Rate or a Submitted
      Sell Order will sell a number of outstanding shares of AMPS determined
      on a pro rata basis based on the outstanding shares of AMPS subject to
      all such Submitted Bids and Submitted Sell Orders.

      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.

      Notification of Results; Settlement. 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'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'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.

Broker-Dealers

      General. 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.


                                      41
<PAGE>


      A Broker-Dealer may also Bid in an Auction in order to prevent what
would otherwise be (i) a failed Auction, (ii) an "all-hold" 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 "all-hold" Auction (i.e., 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 "all-hold" Auction.

      Commission Inquiry. Merrill Lynch has advised the Fund that it and
certain other Broker-Dealers and other participants in the auction rate
securities markets, including both taxable and tax exempt markets, have
received a letter from the Commission requesting that each of them voluntarily
conduct an investigation regarding their respective practices and procedures
in those markets. Merrill Lynch is cooperating and expects to continue to
cooperate with the Commission in providing the requested information. No
assurance can be given as to whether the results of this process will affect
the market for the AMPS or the Auctions.

      Fees. 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.

      Secondary Trading Market. 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.e.,
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.

                           RATING AGENCY GUIDELINES

      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.

      The Fund currently intends that, so long as shares of AMPS are
outstanding and the AMPS are rated by Moody's and S&P, the composition of its
portfolio will reflect guidelines established by Moody's and S&P in connection
with the Fund's receipt of a rating for such shares on or prior to their Date
of Original Issue of at least Aaa from Moody's and AAA from S&P. Moody's and
S&P, which are 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's or S&P (described below).
If the Fund voluntarily terminates compliance with Moody's or S&P guidelines,
the Fund will no longer be required to maintain a Moody's Discounted Value or
a S&P Discounted Value, as applicable, at least equal to the AMPS Basic
Maintenance Amount. If the Fund voluntarily terminates compliance with Moody's
or S&P guidelines, or both, at the time of termination, it must continue to be
rated by at least one NRSRO.


                                      42
<PAGE>


      The guidelines described below have been developed by Moody's and S&P in
connection with issuances of asset-backed and similar securities, including
debt obligations and variable rate preferred stock, generally on a
case-by-case basis through discussions with the issuers of these securities.
The guidelines are designed to ensure that assets underlying outstanding debt
or preferred stock will be 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's and S&P to issue the
above-described ratings for shares of AMPS, which ratings generally are relied
upon by institutional investors in purchasing such securities. The guidelines
provide a set of tests for portfolio composition and asset coverage that
supplement (and in some cases are more restrictive than) the applicable
requirements under the 1940 Act. See "Description of AMPS--Asset Maintenance"
herein and in the statement of additional information.

      The Fund intends to maintain a Discounted Value for its portfolio at
least equal to the AMPS Basic Maintenance Amount. Moody's and S&P each has
established separate guidelines for determining Discounted Value. To the
extent any particular portfolio holding does not satisfy the applicable rating
agency's guidelines, all or a portion of such holding's value will not be
included in the calculation of Discounted Value (as defined by such rating
agency). The Moody's and S&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's portfolio.

      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 "Description of AMPS--Asset
Maintenance" and "Description of AMPS--Redemption" herein and in the statement
of additional information.

      The Fund may, but is not required to, adopt any modifications to these
guidelines that hereafter may be established by Moody's or S&P. Failure to
adopt any such modifications, however, may result in a change in the ratings
described above or a withdrawal of 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's and S&P that any such change would not impair the
ratings then assigned by Moody's and S&P to the AMPS.

      As described by Moody's and S&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's and S&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.

      For additional information concerning the Moody's and S&P ratings
guidelines, see "Rating Agency Guidelines" in the statement of additional
information.

                INVESTMENT ADVISORY AND MANAGEMENT ARRANGEMENTS

      The Investment Adviser, which is owned and controlled by Merrill Lynch &
Co. Inc. ("ML & 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 September 2004, the Investment
Adviser and its affiliates, including Merrill Lynch Investment Managers, L.P.
("MLIM"), had a total of approximately $473 billion in investment company and
other portfolio assets under management, including approximately $238 billion
in fixed income assets. This amount includes assets managed by


                                      43
<PAGE>


certain affiliates of the Investment Adviser. The Investment Adviser is a
limited partnership, the partners of which are ML & Co. and Princeton
Services. The principal business address of the Investment Adviser is 800
Scudders Mill Road, Plainsboro, New Jersey 08536.

      The Investment Advisory Agreement provides that, subject to the
direction of the Fund's Board of Directors, the Investment Adviser is
responsible for the actual management of the Fund's portfolio. The
responsibility for making decisions to buy, sell or hold a particular security
rests with the Investment Adviser, subject to review by the Board of
Directors.

      The portfolio manager primarily responsible for the Fund's day-to-day
management is Fred K. Steube. Fred K. Steube has been a Director (Municipal
Tax-Exempt Fund Management) of MLIM since 2000 and has twenty-four years of
experience investing in Municipal Bonds. The Fund's portfolio manager will
consider analyses from various sources, make the necessary investment
decisions, and place orders for transactions accordingly.

      For its services, the Fund pays the Investment Adviser a monthly fee at
the annual rate of 0.50% of the Fund's average weekly net assets ("average
weekly net assets" means the average weekly value of the total assets of the
Fund, including the proceeds from the issuance of preferred stock, minus the
sum of (i) accrued liabilities of the Fund, (ii) any accrued and unpaid
interest on outstanding borrowings and (iii) accumulated dividends on shares
of preferred stock). For purposes of this calculation, average weekly net
assets is determined at the end of each month on the basis of the average net
assets of the Fund for each week during the month. The assets for each weekly
period are determined by averaging the net assets at the last business day of
a week with the net assets at the last business day of the prior week. The
liquidation preference of any outstanding preferred stock (other than
accumulated dividends) is not considered a liability in determining the Fund's
average daily net assets.

      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
("State Street") 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.

                                     TAXES

      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
"Taxes" 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 "The Auction-- Auction
Procedures--Auction Date; Advance Notice of Allocation of Taxable Income;
Inclusion of Taxable Income in Dividends." 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's fiscal year, but it is not generally expected to be significant.


                                      44
<PAGE>


      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 "Description of AMPS--Dividends-- Additional
Dividends." 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.

      Generally within 60 days after the end of the Fund'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.

      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.e., "tax exempt"). 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 a Fund'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.

      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'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.

      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 "Description of AMPS--Dividends--Restrictions on Dividends and
Other Payments" 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 "Description of
AMPS--Redemption" herein and in the statement of additional information. There
can be no assurance, however, that any such action would achieve such
objectives.

      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.

      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.

                         DESCRIPTION OF CAPITAL STOCK

      The Fund is authorized to issue 200,000,000 shares of capital stock, all
of which shares initially were classified as common stock, par value $.10 per
share. The Board of Directors is authorized, however, to classify and
reclassify any unissued shares of capital stock into one or more additional or
other classes or series as may be established from time to time by setting or
changing in any one or more respects the designations, preferences, conversion
or other rights, voting powers, restrictions, limitations as to dividends,
qualifications or terms or conditions of redemption of such shares of stock
and pursuant to such classification or reclassification to increase or
decrease the number of authorized shares of any existing class or series. In
this regard, the Board of Directors previously reclassified 5,400 shares of
unissued common stock as Other AMPS and reclassified 1,600 shares of


                                      45
<PAGE>


unissued common stock as AMPS, which are being offered hereby. See
"Description of AMPS" herein and in the statement of additional information.

      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
November 1, 2004.

<TABLE>
<CAPTION>

                                                                                           Amount
                                                                                        Outstanding
                                                                                       (Exclusive Of
                                                                      Amount Held       Amount Held
                                                                      By Fund For       By Fund For
                                                         Amount         Its Own           Its Own
Title of Class                                         Authorized       Account           Account)
- ---------------------------------------------      ---------------- ---------------  -----------------
<S>                                                  <C>                  <C>           <C>
Common Stock.................................        199,994,600          - 0 -         19,944,719
Auction Market Preferred Stock
   Series A AMPS.............................              1,800          - 0 -              1,800
   Series B AMPS.............................              1,800          - 0 -              1,800
   Series C AMPS.............................              1,800          - 0 -              1,800

</TABLE>

      The Fund will send unaudited reports at least semi-annually and audited
annual financial statements to all of its stockholders.

Common Stock

      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.

      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 "Description of
AMPS--Voting Rights" herein and in the statement of additional information.

      Stockholders are entitled to one vote for each share held. The shares of
common stock, AMPS, Other AMPS and any other preferred stock do not have
cumulative voting rights, which means that the holders of more than 50% of the
shares of common stock, AMPS, Other AMPS and any other preferred stock voting
for the election of Directors can elect all of the Directors standing for
election by holders, and, in such event, the holders of the remaining shares
of common stock, AMPS, Other AMPS and any other preferred stock will not be
able to elect any of such Directors.

      So long as any shares of the Fund'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
"Description of AMPS--Dividends--Restrictions on Dividends and Other Payments"
herein and in the statement of additional information.

Preferred Stock

      The Fund has issued an aggregate of 5,400 shares of Other AMPS. Under
the Articles Supplementary for the AMPS, the Fund is authorized to issue an
aggregate of 1,600 additional shares of AMPS. The terms of the shares of Other
AMPS are substantially the same as the terms of the shares of AMPS. See
"Description of AMPS." 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.


                                      46
<PAGE>


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.

Certain Provisions of the Charter and By-laws

      The Fund's Charter includes provisions that could have the effect of
limiting the ability of other entities or persons to acquire control of the
Fund or to change the composition of its Board of Directors and could have the
effect of depriving common stockholders of an opportunity to sell their shares
at a premium over prevailing market prices by discouraging a third party from
seeking to obtain control of the Fund. A Director may be removed from office
with or without cause by vote of the holders of at least 66-2/3% 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.

      In addition, the Charter requires the favorable vote of the holders of
at least 66-2/3% of the Fund's shares to approve, adopt or authorize the
following:

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

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

      o     a liquidation or dissolution of the Fund;

unless such action has been approved, adopted or authorized by the affirmative
vote of at least two-thirds of the total number of Directors fixed in
accordance with the By-laws, in which case the affirmative vote of a majority
of the Fund'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's outstanding shares (as defined in the 1940 Act) of preferred
stock, including the AMPS and Other AMPS, then entitled to be voted, voting as
a separate class.

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

      The Charter and By-laws provide that the Board of Directors has the
power to make, alter or repeal any of the By-laws (except for any By-law
specified not to be amended or repealed by the Board), subject to the
requirements of the 1940 Act. Neither this provision of the Charter, nor any
of the foregoing provisions of the Charter requiring the affirmative vote of
66-2/3% of shares of capital stock of the Fund can be amended or repealed except
by the vote of such required number of shares.


                                      47
<PAGE>


      The Board of Directors has determined that the 66-2/3% 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 Commission
for the full text of these provisions.

                                   CUSTODIAN

      The Fund's securities and cash are held under a custodian agreement with
The Bank of New York, 101 Barclay Street, New York, New York 10286.


















                                      48
<PAGE>


                                 UNDERWRITING

      Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Underwriter")
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.

      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.

      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'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.

Commissions and Discounts

      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 ________ __, 2005.

      The expenses of the offering, excluding underwriting discount, are
estimated at $150,000 and are payable by the Fund.

Other Relationships

      Merrill Lynch acts in Auctions as a Broker-Dealer as set forth under
"The Auction--General--Broker- Dealer Agreements" and will be entitled to fees
for services as a Broker-Dealer as set forth under "The
Auction--Broker-Dealers." Merrill Lynch also may provide information to be
used in ascertaining the Reference Rate.

      The Fund also anticipates that Merrill Lynch may from time to time act
as a broker in connection with the execution of its portfolio transactions.
See "Portfolio Transactions" in the statement of additional information.
Merrill Lynch is an affiliate of the Investment Adviser. See "Investment
Restrictions" and "Portfolio Transactions" in the statement of additional
information.

      The address of the Underwriter is 4 World Financial Center, New York,
New York 10080.

            TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND REGISTRAR

      The transfer agent, dividend disbursing agent and registrar for the
Fund's shares of AMPS, Other AMPS and common stock is The Bank of New York,
101 Barclay Street, New York, New York 10286.

                         ACCOUNTING SERVICES PROVIDER

      State Street Bank and Trust Company, 500 College Road East, Princeton,
New Jersey 08540, provides certain accounting services for the Fund.


                                      49
<PAGE>


                                LEGAL OPINIONS

      Certain legal matters in connection with the AMPS offered hereby are
passed on for the Fund and the Underwriter by Sidley Austin Brown & Wood LLP,
New York, New York 10019.

           INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND EXPERTS

      The audited financial statements of the Fund appearing under the caption
"Financial Highlights" included in this prospectus have been audited by
___________, independent registered public accounting firm, for the years
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. ______________ has an office at _________________________.

                            ADDITIONAL INFORMATION

      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 Commission.
Any such reports and other information, including the Fund's Code of Ethics,
can be inspected and copied at the public reference facilities of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549. Information on the operation of such public reference facilities
may be obtained by calling the Commission at 1-202-942-8090. Copies of such
materials can be obtained from the public reference section of the Commission
by writing to 450 Fifth Street, N.W., 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.

      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'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.













                                      50
<PAGE>


           TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION

                                                                          Page
                                                                          ----
Investment Objective and Policies............................................3
Investment Restrictions......................................................3
Description of AMPS..........................................................4
The Auction.................................................................12
Rating Agency Guidelines....................................................13
Directors and Officers......................................................20
Investment Advisory and Management Arrangements.............................27
Portfolio Transactions......................................................32
Taxes.......................................................................34
Net Asset Value.............................................................38
Financial Statements........................................................39
APPENDIX A  Description of Municipal Bond Ratings..........................A-1
APPENDIX B  Settlement Procedures..........................................B-1
APPENDIX C  Auction Procedures.............................................C-1

















                                      51
<PAGE>


                                   GLOSSARY

      "Additional Dividend" has the meaning set forth on pages [29 to 30] of
this prospectus.

      "Agent Member" 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.

      "AMPS" 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.

      "AMPS Basic Maintenance Amount" has the meaning set forth on pages [30
to 31] of this prospectus.

      "AMPS Basic Maintenance Cure Date" has the meaning set forth on page
[30] of this prospectus.

      "AMPS Basic Maintenance Report" has the meaning set forth on page [9] of
the statement of additional information.

      "Anticipation Notes" shall mean the following Municipal Bonds: revenue
anticipation notes, tax anticipation notes, tax and revenue anticipation
notes, grant anticipation notes and bond anticipation notes.

      "Applicable Percentage" has the meaning set forth on pages [34 to 35] of
this prospectus.

      "Applicable Rate" means the rate per annum at which cash dividends are
payable on shares of AMPS for any Dividend Period.

      "Applicable Spread" has the meaning set forth on pages [34 to 35] of
this prospectus.

      "Articles Supplementary" means the Articles Supplementary of the Fund
specifying the powers, preferences and rights of the shares of the AMPS.

      "Auction" means a periodic operation of the Auction Procedures.

      "Auction Agent" means The Bank of New York unless and until another
commercial bank, trust company or other financial institution appointed by a
resolution of the Board of Directors of the 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.

      "Auction Agent Agreement" 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.

      "Auction Date" has the meaning set forth on page [33] of this
prospectus.

      "Auction Procedures" means the procedures for conducting Auctions set
forth in Appendix C to the statement of additional information.

      "Available AMPS" has the meaning set forth on page [37] of this
prospectus.

      "Beneficial Owner" means a customer of a Broker-Dealer who is listed on
the records of that Broker- Dealer (or if applicable, the Auction Agent) as a
holder of shares of AMPS or a Broker-Dealer that holds AMPS for its own
account.

      "Bid" has the meaning set forth on page [34] of this prospectus.


                                      52
<PAGE>


      "Bidder" has the meaning set forth on page [34] of this prospectus.

      "Board of Directors" or "Board" means the Board of Directors of the
Fund.

      "Broker-Dealer" 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.

      "Broker-Dealer Agreement" means an agreement entered into between the
Auction Agent and a Broker- Dealer, including Merrill Lynch, Pierce, Fenner &
Smith Incorporated, pursuant to which such Broker-Dealer agrees to follow the
Auction Procedures.

      "Business Day" 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.

      "Cede" means Cede & Co., the nominee of DTC, and in whose name the
shares of AMPS initially will be registered.

      "Charter" means the Articles of Incorporation, as amended and
supplemented (including the Articles Supplementary and the Other AMPS Articles
Supplementary), of the Fund.

      "Code" means the Internal Revenue Code of 1986, as amended.

      "Common stock" means the common stock, par value $.10 per share, of the
Fund.

      "Date of Original Issue" means, with respect to each share of AMPS, the
date on which such share first is issued by the Fund.

      "Deposit Securities" means cash and Municipal Bonds rated at least A2
(having a remaining maturity of 12 months or less), P-1, VMIG-1 or MIG-1 by
Moody's or A (having a remaining maturity of 12 months or less), A-1+ or SP-1+
by S&P or A (having a remaining maturity of 12 months or less) or F-1+ by
Fitch.

      "Discount Factor" means a Moody's Discount Factor or an S&P Discount
Factor, as the case may be.

      "Discounted Value" means (i) with respect to an S&P Eligible Asset, the
quotient of the fair market value thereof divided by the applicable S&P
Discount Factor and (ii) with respect to a Moody's Eligible Asset, the lower
of par and the quotient of the fair market value thereof divided by the
applicable Moody's Discount Factor.

      "Dividend Payment Date" has the meaning set forth on page [27] of this
prospectus.

      "Dividend Period" has the meaning set forth on page [27] of this
prospectus.

      "DTC" means The Depository Trust Company.

      "Eligible Assets" means Moody's Eligible Assets or S&P Eligible Assets,
as the case may be.

      "Existing Holder" 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.

      "Fitch" means Fitch Ratings or its successors.

      "Forward Commitment" has the meaning set forth on page [21] of the
statement of additional information.

      "Fund" means MuniVest Fund II, Inc., a Maryland corporation that is the
issuer of the AMPS.


                                      53
<PAGE>


      "High Yield Municipal Bonds" means (a) with respect to Moody's (1)
Municipal Bonds rated Ba1 to B3 by Moody's, (2) Municipal Bonds not rated by
Moody's, but rated BB+ to B- by S&P or Fitch, and (3) Municipal Bonds not
explicitly rated by Moody's, S&P or Fitch, but rated at least the equivalent
of B3 internally by the Investment Adviser, provided that Moody's reviews and
achieves sufficient comfort with the Investment Adviser's internal credit
rating processes, and (b) with respect to S&P (1) Municipal Bonds not rated by
S&P but rated equivalent to BBB+ or lower by another NRSRO and (2) Municipal
Bonds rated BB+ or lower by S&P.

      "Hold Order" has the meaning set forth on page [34] of this prospectus.

      "Initial Dividend Payment Date" means the first Dividend Payment Date
for the Series D AMPS.

      "Initial Dividend Period" means the period from and including the Date
of Original Issue to but excluding the Initial Dividend Payment Date for the
Series D AMPS.

      "Initial Margin" means the amount of cash or securities deposited with a
broker as a margin payment at the time of purchase or sale of a financial
futures contract.

      "Inverse Floaters" means trust certificates or other instruments
evidencing interests in one or more Municipal Bonds that qualify as (i) S&P
Eligible Assets the interest rates on which are adjusted at short term
intervals on a basis that is inverse to the simultaneous readjustment of the
interest rates on corresponding floating rate trust certificates or other
instruments issued by the same issuer, provided that the ratio of the
aggregate dollar amount of floating rate instruments to inverse floating rate
instruments issued by the same issuer does not exceed one to one at their time
of original issuance unless the floating rate instrument has only one reset
remaining until maturity or (ii) Moody'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'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.e., the ratio of underlying capital appreciation
bonds or other instruments to residual long-term derivative instruments) of
not more than 2:1.

      "Investment Adviser" means Fund Asset Management, L.P.

      "IRS" means the United States Internal Revenue Service.

      "LIBOR Dealer" means Merrill Lynch, Pierce, Fenner & 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.

      "LIBOR Rate," 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's Telerate Service ("Telerate Page 3750") (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 "LIBOR Determination Date"), 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'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'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


                                      54
<PAGE>


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.

      "London Business Day" means any day on which commercial banks are
generally open for business in London.

      "Long Term Dividend Period" means a Special Dividend Period consisting
of a specified period of one whole year or more but not greater than five
years.

      "Mandatory Redemption Price" has the meaning set forth on page [31] of
this prospectus.

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

      "Maximum Applicable Rate" has the meaning set forth on page [34] of this
prospectus.

      "Moody's" means Moody's Investors Service, Inc. or its successors.

      "Moody's Discount Factor" has the meaning set forth on pages [17 to 18]
of the statement of additional information.

      "Moody's Eligible Assets" has the meaning set forth on pages [18 to 21]
of the statement of additional information.

      "Moody's Hedging Transactions" has the meaning set forth on page [19] of
the statement of additional information.

      "Moody's Volatility Factor" means 272% as long as there has been no
increase enacted to the Marginal Tax Rate. If such an increase is enacted but
not yet implemented, the Moody's Volatility Factor shall be as follows:


      % Change in                                          Moody's Volatility
      Marginal Tax Rate                                          Factor
      -------------------------------------------------- ----------------------
      <5%............................................             292%
      -
      >5% but <10%...................................             313%
              -
      >10% but <15%..................................             338%
               -
      >15% but <20%..................................             364%
               -
      >20% but <25%..................................             396%
               -
      >25% but <30%..................................             432%
               -
      >30% but <35%..................................             472%
               -
      >35% but <40%..................................             520%
               -


                                      55
<PAGE>


      Notwithstanding the foregoing, the Moody's Volatility Factor may mean
such other potential dividend rate increase factor as Moody's advises the Fund
in writing is applicable.

      "Municipal Bonds" has the meaning set forth on page [14] of this
prospectus.

      "Municipal Index" has the meaning set forth on page [16] of the
statement of additional information.

      "1940 Act" means the Investment Company Act of 1940, as amended from
time to time.

      "1940 Act AMPS Asset Coverage" has the meaning set forth on page [30] of
this prospectus.

      "1940 Act Cure Date" has the meaning set forth on page [30] of this
prospectus.

      "Non-Call Period" has the meaning set forth under "Specific Redemption
Provisions" below.

      "Non-Payment Period" has the meaning set forth on page [7] of the
statement of additional information.

      "Non-Payment Period Rate" has the meaning set forth on page [8] of the
statement of additional information.

      "Normal Dividend Payment Date" has the meaning set forth on page [27] of
this prospectus.

      "Notice of Revocation" has the meaning set forth on page [6] of the
statement of additional information.

      "Notice of Special Dividend Period" has the meaning set forth on page
[28] of this prospectus.

      "NRSRO" 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.

      "Optional Redemption Price" has the meaning set forth on page [31] of
this prospectus.

      "Order" has the meaning set forth on page [34] of this prospectus.

      "Other AMPS" 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.

      "Other AMPS Articles Supplementary" means the Articles Supplementary, as
amended and supplemented, of the Fund specifying the powers, preferences and
rights of the shares of the Other AMPS.

      "Potential Beneficial Owner" means a customer of a Broker-Dealer or a
Broker-Dealer that is not a Beneficial Owner of shares of AMPS but that wishes
to purchase such shares, or that is a Beneficial Owner that wishes to purchase
additional shares of AMPS.

      "Potential Holder" means any Broker-Dealer or any such other person as
may be permitted by the 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).

      "Preferred stock" means preferred stock of the Fund and includes the
AMPS.

      "Premium Call Period" has the meaning set forth under "Specific
Redemption Provisions" below.

      "Receivables for Municipal Bonds Sold" for Moody's has the meaning set
forth under the definition of Moody's Discount Factor, and for S&P has the
meaning set forth under the definition of S&P Discount Factor.


                                      56
<PAGE>


      "Reference Banks" means four major banks in the London interbank market
selected by Merrill Lynch, Pierce, Fenner & Smith Incorporated or its
affiliates or successors or such other party as the Fund may from time to time
appoint.

      "Reference Rate" 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.

      "Request for Special Dividend Period" has the meaning set forth on page
[28] of this prospectus.

      "Response" has the meaning set forth on page [28] of this prospectus.

      "Retroactive Taxable Allocation" has the meaning set forth on page [29]
of this prospectus.

      "Rule 2a-7 Money Market Funds" means investment companies registered
under the 1940 Act that comply with the requirements of Rule 2a-7 thereunder.

      "Series D AMPS" 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.

      "S&P" means Standard & Poor's or its successors.

      "S&P Discount Factor" has the meaning set forth on page [14] of the
statement of additional information.

      "S&P Eligible Assets" has the meaning set forth on pages [15 to 17] of
the statement of additional information.

      "S&P Hedging Transactions" has the meaning set forth on page [16] of the
statement of additional information.

      "S&P Volatility Factor" means 277% or such other potential dividend rate
increase factor as S&P advises the Fund in writing is applicable.

      "Securities Depository" 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.

      "Sell Order" has the meaning specified in Subsection 10(b)(i) of the
Auction Procedures.

      "7-Day Dividend Period" means a Dividend Period consisting of seven
days.

      "Short Term Dividend Period" means a Special Dividend Period consisting
of a specified number of days (other than seven) evenly divisible by seven,
and not fewer than seven days nor more than 364 days.

      "Special Dividend Period" has the meaning set forth on page [26] of this
prospectus.

      "Specific Redemption Provisions" means, with respect to a Special
Dividend Period, either, or any combination of, (i) a period (a "Non-Call
Period") determined by the Board of Directors of the 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 "Premium Call Period"), 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's option at a price per share equal to $25,000 plus


                                      57
<PAGE>


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.

      "Submission Deadline" has the meaning set forth on page [36] of this
prospectus.

      "Submitted Bid" has the meaning set forth on page [37] of this
prospectus.

      "Submitted Hold Order" has the meaning set forth on page [37] of this
prospectus.

      "Submitted Order" has the meaning set forth on page [37] of this
prospectus.

      "Submitted Sell Order" has the meaning set forth on page [37] of this
prospectus.

      "Subsequent Dividend Period" means each Dividend Period after the
Initial Dividend Period.

      "Substitute Rating Agency" and "Substitute Rating Agencies" shall mean
an NRSRO or two NRSROs, respectively, selected by Merrill Lynch, Pierce,
Fenner & Smith Incorporated, or its respective affiliates and successors,
after obtaining the Fund'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.

      "Sufficient Clearing Bids" has the meaning set forth on page [37] of
this prospectus.

      "Taxable Equivalent of the Short Term Municipal Bond Rate" on any date
means 90% of the quotient of (A) the per annum rate expressed on an interest
equivalent basis equal to the Kenny S&P 30-day High Grade Index (the "Kenny
Index") or any successor index, made available for the Business Day
immediately preceding such date but in any event not later than 8:30 a.m.,
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
"high grade" component issuers selected by Kenny Information Systems Inc. or
any such successor from time to time in its discretion, which component
issuers shall include, without limitation, issuers of general obligation bonds
but shall exclude any bonds the interest on which constitutes an item of tax
preference under Section 57(a)(5) of the Code, or successor provisions, for
purposes of the "alternative minimum tax," divided by (B) 1.00 minus the
Marginal Tax Rate (expressed as a decimal); provided, however, that if the
Kenny Index is not made so available by 8:30 a.m., 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's and S&P provide
the Fund with written confirmation that the use of such successor index will
not adversely affect the then-current respective Moody's and S&P ratings of
the AMPS.

      "Treasury Bonds" means U.S. Treasury Bonds or Notes.

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

      "U.S. Treasury Securities" means direct obligations of the United States
Treasury that are entitled to the full faith and credit of the United States
government.


                                      58
<PAGE>


      "Valuation Date" has the meaning set forth on page [30] of this
prospectus.

      "Variation Margin" 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.

      "Winning Bid Rate" has the meaning set forth on page [37] of this
prospectus.

















                                      59
<PAGE>








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



                                  $40,000,000

                            MuniVest Fund II, Inc.

                    Auction Market Preferred Stock ("AMPS")

                            1,600 Shares, Series D

                   Liquidation Preference $25,000 per Share








                             --------------------
                             P R O S P E C T U S
                             --------------------








                              Merrill Lynch & Co.





                               ________ __, 2005            Code #_____-0105

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



                                      C-1
<PAGE>


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


                             Subject to Completion
         Preliminary Statement of Information dated November 12, 2004

S T A T E M E N T  OF  A D D I T I O N A L  I N F O R M A T I O N
- -----------------------------------------------------------------

                                  $40,000,000

                            MuniVest Fund II, Inc.

                    Auction Market Preferred Stock ("AMPS")

                            1,600 Shares, Series D

                   Liquidation Preference $25,000 per Share

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


      MuniVest Fund II, Inc. (the "Fund") is a non-diversified, closed-end
fund. The investment objective of the Fund is to provide shareholders with as
high a level of current income exempt from Federal income taxes 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's net assets (including
proceeds from the issuance of any preferred stock), and the proceeds of any
borrowings for investment purposes, in a portfolio of municipal obligations
the interest on which, in the opinion of bond counsel to the issuer, is
excludable from gross income for Federal income purposes (except that the
interest may be includable in taxable income for purposes of the Federal
alternative minimum tax). Under normal market conditions, the Fund expects to
invest at least 75% of its total assets in municipal obligations that are
rated investment grade or, if unrated, are considered by the Fund's investment
adviser to be of comparable quality. The Fund may invest up to 25% of its
total assets in high yield municipal obligations that are rated below
investment grade (commonly known as "junk bonds") or, if unrated, are
considered by the Fund's investment adviser to possess similar credit
characteristics. The Fund invests primarily in long term municipal
obligations. The Fund may invest in certain tax exempt securities classified
as "private activity bonds," as discussed within, that may subject certain
investors in the Fund to an alternative minimum tax. There can be no assurance
that the Fund's investment objective will be realized.

      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.

      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 "Commission") 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.

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

                              Merrill Lynch & Co.

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


  The date of this statement of additional information is _______ ___, 2005.


                                       1
<PAGE>



           TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
                                                                          Page
                                                                          ----
Investment Objective and Policies............................................3
Investment Restrictions......................................................3
Description of AMPS..........................................................4
The Auction.................................................................12
Rating Agency Guidelines....................................................13
Directors and Officers......................................................20
Investment Advisory and Management Arrangements.............................27
Portfolio Transactions......................................................32
Taxes.......................................................................34
Net Asset Value.............................................................38
Financial Statements........................................................39
APPENDIX A  Description of Municipal Bond Ratings..........................A-1
APPENDIX B  Settlement Procedures..........................................B-1
APPENDIX C  Auction Procedures.............................................C-1



















                                       2
<PAGE>


                       INVESTMENT OBJECTIVE AND POLICIES

      The Fund'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 at least 80% of an aggregate
of the Fund's net assets (including proceeds from the issuance of any
preferred stock) and the proceeds of any borrowings for investment purposes,
in a portfolio of municipal obligations issued by or on behalf of states,
territories and possessions of the United States and their political
subdivisions, agencies or instrumentalities, each of which pays interest that,
in the opinion of bond counsel to the issuer, is excludable from gross income
for Federal income tax purposes (except that the interest may be includable in
taxable income for purposes of the Federal alternative minimum tax)
("Municipal Bonds"). The Fund's investment objective and its policy of
investing at least 80% of an aggregate of the Fund's net assets (including
proceeds from the issuance of any preferred stock) and the proceeds of any
borrowings for investment purposes, in Municipal Bonds are fundamental
policies that may not be changed without the approval of a majority of the
outstanding voting securities of the Fund (as defined in the 1940 Act). There
can be no assurance that the Fund's investment objective will be realized.

      Reference is made to "Investment Objective and Policies" and "Other
Investment Policies" in the prospectus for information regarding other types
of securities that the Fund may invest in to achieve its objective.

                            INVESTMENT RESTRICTIONS

      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'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:

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

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

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

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

            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.

            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 limitation.

            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


                                       3
<PAGE>


      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).

            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.

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

      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 fundamental investment
restriction (9) above, the exception for states, municipalities and their
political subdivisions applies only to tax exempt securities issued by such
entities.

      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.

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

      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'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 "Code"). See
"Taxes." 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's total assets will
be invested in the securities of a single issuer and (ii) with respect to 50%
of the market value of its total assets, not more than 5% of the market value
of its total assets will be invested in the securities 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 "diversified" under the
1940 Act must satisfy the foregoing 5% and 10% requirements with respect to
75% of its total assets.

      The Investment Adviser of the Fund and Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch") are owned and controlled by Merrill Lynch
& Co., Inc. ("ML & Co."). 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 "Portfolio Transactions."

                              DESCRIPTION OF AMPS

      Certain of the capitalized terms used herein not otherwise defined in
this statement of additional information have the meaning provided in the
Glossary at the back of the prospectus.


                                      4
<PAGE>


      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. 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--"Auction Procedures."

      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--"Auction Procedures." 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'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's Agent Member, to
evidence its beneficial ownership of shares of AMPS.

      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 "Description of AMPS--Liquidation Rights" 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 "Description of AMPS--Redemption" in the
prospectus.

      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.

      In addition to serving as the Auction Agent in connection with the
Auction Procedures described in the prospectus, The Bank of New York also
serves as the transfer agent, registrar, dividend disbursing agent and
redemption agent for the shares of AMPS. The Auction Agent, however, will
serve merely as the agent of the Fund, acting in accordance with the Fund's
instructions, and will not be responsible for any evaluation or verification
of any matters certified to it.

      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.

      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's Charter and Articles Supplementary, including the provisions thereof
establishing the AMPS. The Fund'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.


                                      5
<PAGE>


Dividends

      General. 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 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'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 "Taxes."

      Notification of Dividend Period. In determining whether the Fund should
issue a Notice of Special Dividend for AMPS, the Broker-Dealers will consider
(i) existing short term and long term market rates and indices of such short
term and long term rates, (ii) existing market supply and demand for short
term and long term securities, (iii) existing yield curves for short term and
long term securities comparable to the AMPS, (iv) industry and financial
conditions that may affect the AMPS, (v) the investment objective of the Fund,
and (vi) the Dividend Periods and dividend rates at which current and
potential beneficial holders of the AMPS would remain or become beneficial
holders. If the Broker-Dealers shall not give the Fund a Response by such
second Business Day or if the Response states that given the factors set forth
above it is not advisable that the Fund give a Notice of Special Dividend
Period for the AMPS, the Fund may not give a Notice of Special Dividend Period
in respect of such Request for Special Dividend Period. In the event the
Response indicates that it is advisable that the Fund give a Notice of Special
Dividend Period for the AMPS, the Fund, by no later than the second Business
Day prior to such Auction Date, may give a notice (a "Notice of Special
Dividend Period") to the Auction Agent, the Securities Depository and each
Broker-Dealer, which notice will specify (i) the duration of the Special
Dividend Period, (ii) the Optional Redemption Price as specified in the
related Response, and (iii) the Specific Redemption Provisions, if any, as
specified in the related Response. The Fund also shall provide a copy of such
Notice of Special Dividend Period to Moody's and S&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 "Notice of Revocation") to the Auction Agent, each
Broker-Dealer, and the Securities Depository on or prior to the Business Day
prior to the relevant Auction Date if (x) either the 1940 Act AMPS Asset
Coverage is not satisfied or the Fund shall fail to maintain S&P Eligible
Assets and Moody's Eligible Assets each with an aggregate Discounted Value at
least equal to the AMPS Basic Maintenance Amount, in each case on 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'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's Investors Service, Inc. ("Moody's") and Standard &
Poor's ("S&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.

      Non-Payment Period; Late Charge. 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


                                      6
<PAGE>


Payment Date or (B) on any redemption date for shares of AMPS called for
redemption, the Mandatory Redemption Price per share of such AMPS or, in the
case of an optional redemption, the Optional Redemption Price per share. Such
Non-Payment Period will consist of the period commencing on and including the
aforementioned Dividend Payment Date or redemption date, as the case may be,
and ending on and including the Business Day on which, by 12:00 noon, Eastern
time, all unpaid cash dividends and unpaid redemption prices shall have been
so deposited or otherwise shall have been made available to the applicable
holders in same-day funds, provided that a Non-Payment Period for AMPS will
not end unless the Fund shall have given at least five days' but no more than
30 days' 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 "Non-Payment Period."

      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.

      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's and S&P (and any
Substitute Rating Agency or Substitute Rating Agencies, as the case may be, in
lieu of Moody's or S&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.

      Restrictions on Dividends and Other Payments. 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&P Eligible Assets and Moody's Eligible Assets each with an aggregate
Discounted Value equal to or greater than the AMPS Basic Maintenance Amount,
and the 1940 Act AMPS Asset Coverage (see "Asset Maintenance" and "Redemption"
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)


                                      7
<PAGE>


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.

Asset Maintenance

      1940 Act AMPS Asset Coverage. 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)
("1940 Act AMPS Asset Coverage"). 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 "1940 Act Cure Date"), the Fund will be required
under certain circumstances to redeem certain of the shares of AMPS. See
"Description of AMPS--Redemption" in the prospectus and "--Redemption" below.

      AMPS Basic Maintenance Amount. 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 "Valuation Date") to maintain S&P
Eligible Assets and Moody'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 "AMPS Basic Maintenance Cure Date"), the Fund will be required under
certain circumstances to redeem certain of the shares of AMPS. See
"Description of AMPS--Redemption" in the prospectus and "--Redemption" 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.

      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's Volatility Factor
and the S&P Volatility Factor, determined from time to time by Moody's and
S&P, respectively (except that if such Valuation Date occurs during a
Non-Payment Period, the cash dividend for purposes of calculation would
accumulate at the then current Non-Payment Period Rate); (D) the amount of
anticipated expenses of the 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'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's assets, or (B) the face value of any of the Fund'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).

      The Discount Factors and guidelines for determining the market value of
the Fund's portfolio holdings have been based on criteria established in
connection with rating the AMPS. These factors include, but are not


                                       8
<PAGE>


limited to, the sensitivity of the market value of the relevant asset to
changes in interest rates, the liquidity and depth of the market for the
relevant asset, the credit quality of the relevant asset (for example, the
lower the rating of a debt obligation, the higher the related discount factor)
and the frequency with which the relevant asset is marked to market. In no
event shall the Discounted Value of any asset of the Fund exceed its unpaid
principal balance or face amount as of the date of calculation. The Discount
Factor relating to any asset of the Fund and the AMPS Basic Maintenance
Amount, the assets eligible for inclusion in the calculation of the Discounted
Value of the Fund'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&P, Moody's and any Substitute Rating Agency that any such
changes would not impair the rating then assigned to the shares of AMPS by S&P
or Moody's or any Substitute Rating Agency.

      On or before the seventh Business Day in the case of Moody's and the
next Business Day in the case of S&P after a Valuation Date on which the Fund
fails to maintain S&P Eligible Assets and Moody's Eligible Assets each with an
aggregate Discounted Value equal to or greater than the AMPS Basic Maintenance
Amount, the Fund is required to (i) deliver to Moody'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's
common stock as of the date of such failure (an "AMPS Basic Maintenance
Report") and (ii) send S&P an electronic notification of such failure. The
Fund also will deliver an AMPS Basic Maintenance Report as of the 25th day of
each month (or if such day is not a Business Day, as of the next succeeding
Business Day) or as of the last Business Day of the month in which the Fund'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's fiscal year ends, the Fund will deliver a letter prepared by the
Fund'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's independent accountants shows that an error was made in the AMPS
Basic Maintenance Report, the calculation or determination made by the Fund's
independent accountants will be conclusive and binding on the Fund. The Fund
will also (i) provide Moody's with an AMPS Basic Maintenance Report and (ii)
send S&P an electronic notification, as of each Valuation Date on or before
the seventh Business Day in the case of Moody's and the next Business Day in
the case of S&P after such date when the Discounted Value of Moody's Eligible
Assets or S&P Eligible Assets, as the case may be, fails to exceed the AMPS
Basic Maintenance Amount by 10% or more in the case of S&P and 25% or more in
the case of Moody's. 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's an AMPS Basic Maintenance Report as
of the close of business on such date that common stock is repurchased.

Redemption

      Mandatory Redemption. 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&P Eligible Assets and Moody's Eligible Assets each with an aggregate
Discounted Value equal to or greater than the AMPS Basic Maintenance Amount or
satisfaction of the 1940 Act AMPS Asset Coverage, as the case may be, on such
Cure Date (provided that, if there is no such minimum number of shares 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&P Eligible Assets and Moody's Eligible Assets each with an aggregate
Discounted Value equal to or greater than the AMPS Basic Maintenance Amount or
satisfaction of the 1940 Act AMPS Asset Coverage, as the case may be, pro rata
among shares of AMPS, 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


                                       9
<PAGE>


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 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.

      Notice of Redemption. 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.

      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.

      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'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.

      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'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's failure to maintain
Moody's Eligible Assets or S&P Eligible Assets with an aggregate Discounted
Value equal to or greater than the AMPS Basic Maintenance Amount.


                                      10
<PAGE>


Voting Rights

      In connection with the election of the Fund'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'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' 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.

      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's or S&P guidelines as discussed under
"Rating Agency Guidelines" in the prospectus. Unless a higher percentage is
provided for under "Description of Capital Stock--Certain Provisions of the
Charter and By-laws" in the prospectus, the affirmative vote of the holders of
a majority of the outstanding shares of preferred stock (as defined under
"Investment Restrictions"), 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's
investment objective or changes in the investment policies and restrictions
described as fundamental policies in the prospectus and under "Investment
Restrictions." 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 "Investment Restrictions"), including AMPS and Other AMPS,
voting together as a single class, will be required to approve any voluntary
application by the Fund for relief under Federal bankruptcy law or any similar
application under state law for so long as the Fund is solvent and does not
foresee becoming insolvent. The class vote of holders of shares of AMPS, Other
AMPS and any other preferred stock described above in each case will be in
addition to a separate vote of the requisite percentage of shares of common
stock and shares of AMPS, Other AMPS and any other preferred stock, voting
together as a single class or voting as separate classes, necessary to
authorize the action in question. An increase in the number of authorized


                                      11
<PAGE>


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.

      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.

      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.

                                  THE AUCTION

Auction Agent Agreement

      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.

      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.

Broker-Dealer Agreements

      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' 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.

      For the fiscal years ended October 31, 2004, 2003 and 2002, Merrill
Lynch, an affiliate of the Investment Adviser, earned $______, $132,746 and
$151,462, respectively, pursuant to its Broker-Dealer Agreement with the Fund.

Auction Procedures

      The Auction Procedures are set forth in Appendix C. The Settlement
Procedures to be used with respect to Auctions are set forth in Appendix B.


                                      12
<PAGE>


                           RATING AGENCY GUIDELINES

      S&P AAA Rating Guidelines The Discounted Value of the Fund's S&P
Eligible Assets is calculated on each Valuation Date. See "Description of
AMPS--Asset Maintenance--AMPS Basic Maintenance Amount." S&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&P's current guidelines. For purposes of calculating the Discounted Value of
the Fund's portfolio under current S&P guidelines, the fair market value of
Municipal Bonds eligible for consideration under such guidelines must be
discounted by the applicable S&P Discount Factor set forth in the table below.
The Discounted Value of a Municipal Bond eligible for consideration under S&P
guidelines is the fair market value thereof divided by the S&P Discount
Factor. The S&P Discount Factor used to discount a particular Municipal Bond
will be determined by reference to the rating by S&P, Moody's or Fitch on such
Municipal Bond; provided, however, for purposes of determining the S&P
Discount Factor applicable to Municipal Bonds not rated by S&P, the Municipal
Bonds will carry an S&P rating one full rating category lower than the S&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:


                           S&P's Rating Category (1)
- --------------------------------------------------------------------------------
 AAA* (2)     AA*       A*       BBB*       BB*       B*       CCC*      NR**
- ---------- --------- --------- --------- --------- --------- --------- ---------
 144.75%    147.75%   150.75%   153.75%   175.11%   195.11%   215.11%   220.00%

- ---------
*     S&P rating.
**    Not rated.
(1)   For Municipal Bonds of any one issuer rated at least BBB- by S&P, or if
      not rated by S&P, rated at least A- by another NRSRO, 2% is added to the
      applicable S&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&P Eligible Assets, but in no event greater than 10%; or
      for any percentage over 5% add 10 percentage points to the applicable
      S&P Discount Factor.
(2)   For zero coupon Municipal Bonds, the S&P Discount Factor is 441.80%.

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

      The S&P guidelines require certain minimum issue size and impose other
requirements for purposes of determining S&P Eligible Assets. In order to be
considered S&P Eligible Assets, Municipal Bonds must:

            (i)   be issued by any of the 50 states of the United States, its
      territories and their subdivisions, counties, cities, towns, villages,
      and school districts, agencies, such as authorities and special
      districts created by the states, and certain federally sponsored
      agencies such as local housing authorities (payments


                                      13
<PAGE>


      made on these bonds are exempt from regular federal income taxes and are
      generally exempt from state and local taxes in the state of issuance);

            (ii)  except for zero coupon Municipal Bonds rated AAA by S&P that
      mature in 30 years or less, be interest bearing and pay interest at
      least semi-annually;

            (iii) be payable with respect to principal and interest in U.S.
      dollars; (iv) not be subject to a covered call or covered put option
      written by the Fund; (v) except for Inverse Floaters, not be part of a
      private placement; and

            (iv)  except for Inverse Floaters and legally defeased bonds that
      are secured by securities issued or guaranteed by the United States
      Government, be part of an issue with an original issue size of at least
      $10 million or, if of an issue with an original issue size below $10
      million, is rated at least AA or higher by S&P.

      Notwithstanding the foregoing:

            (i)   Municipal Bonds issued by issuers in any one state or
      territory will be considered S&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&P Eligible Assets;

            (ii)  Municipal Bonds which are escrow bonds or defeased bonds may
      compose up to 100% of the aggregate fair market value of S&P Eligible
      Assets if such Bonds initially are assigned a rating by S&P in
      accordance with S&P's legal defeasance criteria or rerated by S&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&P AAA rating, provided
      that such equivalent rated Bonds are limited to 50% of the aggregate
      fair market value of S&P Eligible Assets and are deemed to have an AA
      S&P rating for purposes of determining the S&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;

            (iii) Municipal Bonds which are not rated by any NRSRO may
      comprise no more than 10% of S&P Eligible Assets;

            (iv)  Municipal Bonds rated at least BBB- by S&P, or if not rated
      by S&P, rated at least A- by another NRSRO, of any one issuer or
      guarantor (excluding bond insurers) will be considered S&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&P
      Eligible Assets, High Yield Municipal Bonds of any issuer may comprise
      no more than 5% of S&P Eligible Assets, and Municipal Bonds of any one
      issuer which are not rated by any NRSRO will be considered S&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&P
      Eligible Assets. In the aggregate, the maximum issuer exposure is
      limited to 10% of the S&P Eligible Assets; and

            (v)   Municipal Bonds not rated by S&P but rated by another NRSRO
      will be included in S&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&P Eligible Assets.

      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&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&P that
engaging in such transactions will not impair the ratings then assigned to the
shares of AMPS by S&P, except that the Fund may purchase or sell financial
futures contracts based on the Bond Buyer Municipal Bond Index (the "Municipal
Index") or Treasury Bonds and write, purchase or sell put and call options on
such contracts (collectively, "S&P Hedging Transactions"), subject to the
following limitations:


                                      14
<PAGE>


            (i)   the Fund will not engage in any S&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's
      taking an opposite position thereto ("Closing Transactions")), 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's total assets divided by
      $1,000 or (C) outstanding financial futures contracts based on the
      Municipal Index exceeding in number 10% of the average number of daily
      traded financial futures contracts based on the Municipal Index in the
      30 days preceding the time of effecting such transaction as reported by
      The Wall Street Journal;

            (ii)  the Fund will not engage in any S&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's total assets divided by $100,000 ($200,000 in the case of
      the two-year United States Treasury Note) or (B) outstanding financial
      futures contracts based on Treasury Bonds exceeding in number 10% of the
      average number of daily traded financial futures contracts based on
      Treasury Bonds in the 30 days preceding the time of effecting such
      transaction as reported by The Wall Street Journal;

            (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&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;

            (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

            (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'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'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.

      For purposes of determining whether the Fund has S&P Eligible Assets
with a Discounted Value that equals or exceeds the AMPS Basic Maintenance
Amount, the Discounted Value of cash or securities held for the payment of
Initial Margin or Variation Margin shall be zero and the aggregate Discounted
Value of S&P Eligible Assets shall be reduced by an amount equal to (i) 30% of
the aggregate settlement value, as marked to market, of any outstanding
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.

Moody's Aaa Rating Guidelines

      The Discounted Value of the Fund's Moody's Eligible Assets is calculated
on each Valuation Date. See "Description of AMPS--Asset Maintenance--AMPS
Basic Maintenance Amount." Moody'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's guidelines. For
purposes of calculating the Discounted Value of the Fund's portfolio under
current Moody's guidelines, the fair market value of Municipal Bonds eligible
for consideration under such guidelines must be discounted by the applicable
Moody's Discount Factor set forth in the table below. The Discounted Value of
a Municipal Bond eligible for consideration under Moody's guidelines is the
lower of par and the quotient of the fair market value thereof divided by the
Moody's Discount Factor. The


                                      15
<PAGE>


Moody's Discount Factor used to discount a particular Municipal Bond will be
determined by reference to the rating by Moody's, S&P or Fitch on such
Municipal Bond, in accordance with the tables set forth below:

                          Moody's Rating Category (1)
- ------------------------------------------------------------------------------
      Aaa              Aa               A              Baa          Other (2)
- ----------------  -----------      -----------    ------------   -------------
      151%            159%            160%            173%            225%
- ---------
(1)   Ratings assigned by S&P or Fitch are generally accepted by Moody's at
      face value. However, adjustments to face value may be made to particular
      categories of credits for which the S&P and/or Fitch rating does not
      seem to approximate a Moody's rating equivalent. Split rated securities
      assigned by S&P and Fitch will be accepted at the lower of the two
      ratings.
(2)   Municipal Bonds rated Ba1 to B3 by Moody's or, if not rated by Moody's,
      rated BB+ to B- by S&P or Fitch. In addition, Municipal Bonds not
      explicitly rated by Moody's, S&P or Fitch, but rated at least the
      equivalent of B3 internally by the Investment Adviser, provided that
      Moody's reviews and achieves sufficient comfort with the Investment
      Adviser's internal credit rating processes, will be included under
      "Other" in the table. Unless conclusions regarding liquidity risk as
      well as estimates of both the probability and severity of default for
      the Fund's assets can be derived from other sources as well as combined
      with a number of sources as presented by the Fund to Moody's, unrated
      Municipal Bonds which are rated at least the equivalent of B3 by the
      Investment Adviser internally are limited to 10% of Moody's Eligible
      Assets.

                            Moody's Rating Category
   -------------------------------------------------------------
      MIG-1, VMIG-1, P-1 (1)            MIG-1, VMIG-1, P-1 (2)
   -----------------------------    ----------------------------
               100%                              136%
- ---------
(1)   Moody's rated Municipal Bonds that have a maturity less than or equal to
      49 days and Municipal Bonds not rated by Moody's but rated the
      equivalent to MIG-1, VMIG-1, or P-1 by S&P or Fitch that have a maturity
      less than or equal to 49 days.
(2)   Moody's rated Municipal Bonds that have a maturity greater than 49 days
      and Municipal Bonds not rated by Moody's but rated the equivalent to
      MIG-1, VMIG-1, or P-1 by S&P or Fitch that have a maturity greater than
      49 days.

      Notwithstanding the foregoing, no Moody'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'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's Discount Factor applicable to
the Municipal Bonds sold. "Receivables for Municipal Bonds Sold," for purposes
of calculating Moody'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.

      The Moody'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.

      The Moody's Discount Factor for Rule 2a-7 Money Market Funds shall be
110%.

      The Moody'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's Eligible Assets, as set forth in the table on the following page:





                                          Maximum Underlying    Maximum State
      Rating         Minimum Issue Size        Obligor             Allowed
   ------------


                                      16
<PAGE>


                        ($ Millions)           (%) (1)           (%) (1) (3)
                     ------------------     -------------     -----------------
        Aaa                  *                   100                 100
        Aa                   10                   20                  60
         A                   10                   10                  40
        Baa                  10                   6                   20
        Ba                   10                   4                   12
         B                   10                   3                   12
     Other (2)               10                   2                   12

- ---------
*     Not applicable.
(1)   The referenced percentages represent maximum cumulative totals for the
      related rating category and each lower rating category.
(2)   Municipal Bonds not rated by Moody's, S&P or Fitch, but rated at least
      the equivalent of B3 internally by the Investment Adviser.
(3)   Territorial bonds (other than those issued by Puerto Rico and counted
      collectively) are each limited to 10% of Moody's Eligible Assets. For
      diversification purposes, Puerto Rico will be treated as a state.

      For purposes of the maximum underlying obligor requirement described
above, any Municipal Bond backed by the guaranty, letter of credit or
insurance issued by a third party will be deemed to be issued by such third
party if the issuance of such third party credit is the sole determinant of
the rating on such Bond.

      Current Moody's guidelines also require that Municipal Bonds
constituting Moody's Eligible Assets pay interest in cash, are publicly rated
B3 or higher by Moody's or, if not rated by Moody's, but rated by S&P or
Fitch, are publicly rated at least B- by S&P or Fitch, or if not explicitly
rated by Moody's, S&P or Fitch, be rated at least the equivalent of B3
internally by the Investment Adviser, provided that Moody's reviews and
achieves sufficient comfort with the Investment Adviser's internal credit
rating processes, not have suspended ratings by Moody's, if an Inverse
Floater, be explicitly rated by Moody's, and be part of an issue of Municipal
Bonds of at least $10,000,000 (except for issues rated Aaa by Moody's, as
provided in the chart above).

      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'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's, the Fund will not enter into any such reverse repurchase agreements
unless it has received written confirmation from Moody's that such
transactions would not impair the rating then assigned the AMPS by Moody's.
When the 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's Eligible Asset if the long-term debt of such other party is rated at
least A2 by Moody's and such agreement has a term of 30 days or less;
otherwise the Discounted Value of such Bond will constitute a Moody's Eligible
Asset.

      High Yield Municipal Bonds may comprise no more than 20% of Moody's
Eligible Assets. Unless conclusions regarding liquidity risk as well as
estimates of both the probability and severity of default for the Fund's
assets can be derived from other sources as well as combined with a number of
sources as presented by the Fund to Moody'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's Eligible Assets.

      Inverse Floaters, including primary market and secondary market residual
interest bonds, may constitute no more than 10% of Moody's Eligible Assets.

      Notwithstanding the foregoing, an asset will not be considered a Moody's
Eligible Asset if it is (i) held in a margin account, (ii) subject to any
material lien, mortgage, pledge, security interest or security agreement of
any kind, (iii) held for the purchase of a security pursuant to a Forward
Commitment or (iv) irrevocably deposited by the Fund for the payment of
dividends or redemption.

      For so long as shares of AMPS are rated by Moody's, in managing the
Fund's portfolio, the Investment Adviser will not alter the composition of the
Fund's portfolio if, in the reasonable belief of the Investment Adviser,


                                      17
<PAGE>


the effect of any such alteration would be to cause the Fund to have Moody's
Eligible Assets with an aggregate Discounted Value, as of the immediately
preceding Valuation Date, less than the AMPS Basic Maintenance Amount as of
such Valuation Date; provided, however, that in the event that, as of the
immediately preceding Valuation Date, the aggregate Discounted Value of
Moody's Eligible Assets exceeded the AMPS Basic Maintenance Amount by 5% or
less, the Investment Adviser will not alter the composition of the Fund's
portfolio in a manner reasonably expected to reduce the aggregate Discounted
Value of Moody's Eligible Assets unless the Fund shall have confirmed that,
after giving effect to such alteration, the aggregate Discounted Value of
Moody's Eligible Assets would exceed the AMPS Basic Maintenance Amount.

      For so long as any shares of AMPS are rated by Moody's, the Fund will
not engage in Bond Market Association Municipal Swap Index swap transactions
("BMA swap transactions"), 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's that engaging in such transactions would not impair the ratings
then assigned to the shares of AMPS by Moody'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'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, "Moody's Hedging
Transactions"), subject to the following limitations:

            (i)   the Fund will not engage in any Moody'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's Eligible Assets
      owned by the Fund (other than Moody's Eligible Assets already subject to
      a Moody's Hedging Transaction);

            (ii)  the Fund will not engage in any Moody'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's Eligible Assets owned by the Fund and rated Aa
      by Moody's (or, if not rated by Moody's but rated by S&P, rated AAA by
      S&P) or (B) outstanding 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's
      Eligible Assets owned by the Fund (other than Moody's Eligible Assets
      already subject to a Moody's Hedging Transaction) and rated Baa or A by
      Moody's (or, if not rated by Moody's but rated by S&P, rated A or AA by
      S&P) (for purposes of the foregoing clauses (i) and (ii), the Fund shall
      be deemed to own the number of financial futures contracts that underlie
      any outstanding options written by the Fund);

            (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;

            (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;

            (v)   the Fund will engage in Moody's Hedging Transactions only
      with respect to financial futures contracts or options thereon having
      the next settlement date or the settlement date immediately thereafter;

            (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


                                      18
<PAGE>


      combination of the Fund'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'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'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;

            (vii) the Fund will not enter into an option or futures
      transaction unless, after giving effect thereto, the Fund would continue
      to have Moody's Eligible Assets with an aggregate Discounted Value equal
      to or greater than the AMPS Basic Maintenance Amount; and

            (viii) the Fund will not engage in BMA swap transactions with
      respect to more than 20% of the Fund's net assets; provided that the
      Fund's use of futures will proportionately decrease as the Fund's use of
      BMA swap transactions increases, and vice-versa.

      For purposes of determining whether the Fund has Moody's Eligible Assets
with an aggregate Discounted Value that equals or exceeds the AMPS Basic
Maintenance Amount, the Discounted Value of Moody's Eligible Assets 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 "readily reversible"
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.

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

      For so long as any shares of AMPS are rated by Moody'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's Hedging Transactions), except that the Fund may enter into
such contracts to purchase newly-issued securities on the date such securities
are issued ("Forward Commitments"), subject to the following limitations:

            (i)   the 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'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'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's obligations under any Forward Commitment to which it is from
      time to time a party, and

            (ii)  the Fund will not enter into a Forward Commitment unless,
      after giving effect thereto, the Fund would continue to have Moody's
      Eligible Assets with an aggregate Discounted Value equal to or greater
      than the AMPS Basic Maintenance Amount.


                                      19
<PAGE>


      For purposes of determining whether the Fund has Moody's Eligible Assets
with an aggregate Discounted Value that equals or exceeds the AMPS Basic
Maintenance Amount, the Discounted Value of all Forward Commitments to which
the Fund is a party and of all securities deliverable to the Fund pursuant to
such Forward Commitments shall be zero.

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

      For so long as shares of AMPS are rated by S&P or Moody's, the Fund,
unless it has received written confirmation from S&P and/or Moody's, as the
case may be, that such action would not impair the ratings then assigned to
the AMPS by S&P and/or Moody'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's
assets at the time of such borrowings and which borrowings shall be repaid
within 60 days and not be extended or renewed and shall not cause the
aggregate Discounted Value of Moody's Eligible Assets and S&P Eligible Assets
to be less than the AMPS Basic Maintenance Amount), (ii) engage in short sales
of securities, (iii) lend any securities, (iv) issue any class or series of
stock ranking prior to or on a parity with the AMPS with respect to the
payment of dividends or the distribution of assets upon dissolution,
liquidation or winding up of the Fund, (v) reissue any previously purchased or
redeemed by the Fund, (vi) merge or consolidate into or with any other
corporation or entity, (vii) change the Fund's pricing service or (viii)
engage in reverse repurchase agreements.

      For as long as the AMPS are rated by S&P, the Fund will not, unless it
has received written confirmation from S&P that such action would not impair
the rating then assigned to the shares of AMPS by S&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'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&P Eligible Assets, 90% of any
positive mark-to-market valuation of the Fund's rights will be S&P Eligible
Assets, 100% of any negative mark-to-market valuation of the Fund'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'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's obligations with
respect to such caps or floors.

                            DIRECTORS AND OFFICERS

      The Directors of the Fund consist of eight individuals, seven of whom
are not "interested persons" of the Fund as defined in the 1940 Act (the
"non-interested Directors"). 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.

      Each non-interested Director is a member of the Fund's Audit and
Oversight Committee (the "Audit Committee"). The principal responsibilities of
the Audit Committee are the appointment, compensation and oversight of the
Fund's independent accountants, including the resolution of disagreements
regarding financial reporting between Fund management and such independent
accountants. The Audit Committee's responsibilities include, without
limitation, to (i) review with the independent accountants the arrangements
for and scope of annual and special audits and any other services provided by
the independent accountants to the Fund; (ii) discuss with the independent
accountants certain matters relating to the Fund's financial statements,
including any adjustment to such financial statements recommended by such
independent accountants or any other results of any audit; (iii) ensure that
the independent accountants submit on a periodic basis a formal written
statement with respect to their independence, discuss with the independent
accountants any relationships or services disclosed in the statement that may
impact the objectivity and independence of the Fund's independent accountants
and recommend that the Board of Directors take appropriate action in response
thereto to satisfy itself of the independent accountants' independence; and
(iv) consider the comments of the independent accountants with respect to the
quality and


                                      20
<PAGE>


adequacy of the Fund's accounting and financial reporting policies and
practices and internal controls and Fund management'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 six times
during the Fund's fiscal year ended October 31, 2004.

      Each non-interested Director is also a member of the Fund's Nominating
Committee (the "Nominating Committee"). 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's non-interested
Directors, the Nominating Committee may consider nominations for the office of
the Director made by Fund stockholders as it deems appropriate. Fund
stockholders who wish to recommend a nominee should send nominations to the
Secretary of the Fund that include biographical information and set forth the
qualifications of the proposed nominee. The Nominating Committee met four
times during the Fund's fiscal year ended October 31, 2004.

Biographical Information

      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.
("MLIM") or their affiliates ("MLIM/FAM-advised funds") and other public
directorships.


<TABLE>
<CAPTION>

        Name,                                       Term of
       Address*            Position(s)           Office** and
      and Age of          Held with the         Length of Time           Principal Occupation(s)
       Director                Fund                 Served                During Past Five Years
- -----------------   --------------------- ----------------------- ----------------------------------
<S>                    <C>                  <C>                     <C>
Ronald W.              Director             Director                Professor Emeritus of Finance,
Forbes                                      since 1993              School of Business, State
(63)                                                                University of New York at
                                                                    Albany since 2000 and
                                                                    professor thereof from 1989
                                                                    to 2000; International
                                                                    Consultant, Urban
                                                                    Institute, Washington,
                                                                    D.C. from 1995 to 1999.

Cynthia A.             Director             Director                Professor, Harvard Business
Montgomery                                  since 1993              School since 1989; Associate
(51)                                                                Professor, J.L. Kellogg
                                                                    Graduate School of
                                                                    Management, Northwestern
                                                                    University from 1985 to 1989;
                                                                    Associate Professor, Graduate
                                                                    School of Business
                                                                    Administration, University
                                                                    of Michigan from 1979 to 1985.

<CAPTION>

        Name,             MLIM/FAM-
       Address*         Advised Funds
      and Age of       and Portfolios
       Director           Overseen         Public Directorships
- -----------------   ------------------- -------------------------
<S>                  <C>                 <C>
Ronald W.            48 registered       None
Forbes               investment
(63)                 companies
                     consisting of
                     48 portfolios





Cynthia A.           48 registered       NewellRubber-
Montgomery           investment          maid Inc.
(51)                 companies           (manufacturing)
                     consisting of
                     48 portfolios

</TABLE>

                                                      (continued on next page)

<TABLE>
<CAPTION>


        Name,                                       Term of
       Address*            Position(s)           Office** and
      and Age of          Held with the         Length of Time           Principal Occupation(s)
       Director                Fund                 Served                During Past Five Years
- -----------------   --------------------- ----------------------- ----------------------------------
<S>                    <C>                  <C>                     <C>

<CAPTION>

                          Number of
        Name,             MLIM/FAM-
       Address*         Advised Funds
      and Age of       and Portfolios
       Director           Overseen         Public Directorships
- -----------------   ------------------- -------------------------
<S>                  <C>                 <C>

</TABLE>

                                      21
<PAGE>


<TABLE>
<CAPTION>

        Name,                                       Term of
       Address*            Position(s)           Office** and
      and Age of          Held with the         Length of Time           Principal Occupation(s)
       Director                Fund                 Served                During Past Five Years
- -----------------   --------------------- ----------------------- ----------------------------------
<S>                    <C>                  <C>                     <C>
Jean Margo             Director             Director                Self-employed consultant
Reid (58)                                   since 2004              since 2001; Counsel of
                                                                    Alliance Capital Management
                                                                    (investment adviser) in 2000;
                                                                    General Counsel, Director and
                                                                    Secretary of Sanford C.
                                                                    Bernstein & Co., Inc.
                                                                    (investment
                                                                    adviser/brokerdealer) from
                                                                    1997 to 2000; Secretary,
                                                                    Sanford C. Bernstein Fund,
                                                                    Inc. from 1994 to 2000;
                                                                    Director and Secretary of
                                                                    SCB, Inc. since 1998; Director
                                                                    and Secretary of SCB
                                                                    Partners, Inc. since 2000; and
                                                                    Director of Covenant House
                                                                    from 2001 to 2004.

Kevin A.               Director             Director                Founder and currently
Ryan (72)                                   since 1993              Director Emeritus of the
                                                                    Boston University Center for
                                                                    the Advancement of Ethics
                                                                    and character and Director
                                                                    thereof from 1989 to 1999;
                                                                    Professor from 1982 to 1999
                                                                    and currently Professor
                                                                    Emeritus of Education of
                                                                    Boston University; formerly
                                                                    taught on the faculties of The
                                                                    University of Chicago,
                                                                    Stanford University and Ohio
                                                                    State University.

Roscoe S.              Director             Director                President, Middle East
Suddarth (68)                               since 2000              Institute, from 1995 to 2001;
                                                                    Foreign Service Officer,
                                                                    United States Foreign Service,
                                                                    from 1961 to 1995; Career
                                                                    Minister, from 1989 to 1995;
                                                                    Deputy Inspector General,
                                                                    U.S. Department of State,
                                                                    from 1991 to 1994; U.S.
                                                                    Ambassador to the Hashemite
                                                                    Kingdom of Jordan, from
                                                                    1987 to 1990.

<CAPTION>

        Name,             MLIM/FAM-
       Address*         Advised Funds
      and Age of       and Portfolios
       Director           Overseen         Public Directorships
- -----------------   ------------------- -------------------------
<S>                  <C>                 <C>
Jean Margo           48 registered       None
Reid (58)            investment
                     companies
                     consisting of
                     48 portfolios














Kevin A.             48 registered       None
Ryan (72)            investment
                     companies
                     consisting of
                     48 portfolios










Roscoe S.            48 registered       None
Suddarth (68)        investment
                     companies
                     consisting of
                     48 portfolios

</TABLE>


                                      22
<PAGE>


<TABLE>
<CAPTION>

        Name,                                       Term of
       Address*            Position(s)           Office** and
      and Age of          Held with the         Length of Time           Principal Occupation(s)
       Director                Fund                 Served                During Past Five Years
- -----------------   --------------------- ----------------------- ----------------------------------


        Name,                                       Term of
       Address*            Position(s)           Office** and
      and Age of          Held with the         Length of Time           Principal Occupation(s)
       Director                Fund                 Served                During Past Five Years
- -----------------   --------------------- ----------------------- ----------------------------------
<S>                    <C>                  <C>                     <C>

Richard R.             Director             Director                Professor of Finance since
West (66)                                   since 1993              1984, Dean from 1984 to 1993
                                                                    and currently Dean Emeritus
                                                                    of New York University
                                                                    Leonard N. Stern School of
                                                                    Business Administration.









Edward D.              Director             Director                Self-employed financial
Zinbarg (69)                                since 2000              consultant since 1994;
                                                                    Executive Vice President of
                                                                    the Prudential Insurance
                                                                    Company of America from
                                                                    1988 to 1994; Former Director
                                                                    of Prudential Reinsurance
                                                                    Company and former Trustee of
                                                                    the Prudential Foundation.

<CAPTION>

                           Number of
        Name,              MLIM/FAM-
       Address*          Advised Funds
      and Age of        and Portfolios
       Director            Overseen         Public Directorships
- -----------------    ------------------- -------------------------
<S>                   <C>                 <C>

Richard R.            48 registered       Bowne & Co.,
West (66)             investment          Inc. (financial
                      companies           printers);
                      consisting of       Vornado Realty
                      48 portfolios       Trust (real estate
                                          holding
                                          company);
                                          Vornado
                                          Operating
                                          Company (real
                                          estate company);
                                          Alexander's Inc.
                                          (real estate
                                          company)

Edward D.             48 registered       None
Zinbarg (69)          investment
                      companies
                      consisting of
                      48 portfolios

</TABLE>

- ---------

*     The address of each non-interested Director is P.O. Box 9095, Princeton,
New Jersey 08543-9095.
**    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's by-laws or
charter or by statute.
***   Mr. Ryan is expected to retire as a Director of the Fund effective
January 1, 2005.

      Certain biographical and other information relating to the Director who
is an "interested person" of the Fund as defined in the 1940 Act (the
"interested Director") 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.





                                      23
<PAGE>


<TABLE>
<CAPTION>

        Name,                                       Term of
       Address*            Position(s)           Office** and
      and Age of          Held with the         Length of Time           Principal Occupation(s)
       Director                Fund                 Served                During Past Five Years
- -----------------   --------------------- ----------------------- ----------------------------------
<S>                    <C>                  <C>                     <C>

Terry K.               President            President and           President of the MLIM/FAM
Glenn                  and                  Director****            advised funds since 1999;
(64)***                Director             since 1999              Chairman (Americas Region)
                                                                    of MLIM from 2000 to 2002;
                                                                    Executive Vice President of
                                                                    MLIM and FAM (which terms
                                                                    as used herein include their
                                                                    corporate predecessors) from
                                                                    1983 to 2002; President of
                                                                    FAM Distributors, Inc.
                                                                    ("FAMD" or the
                                                                    "Distributor") from 1986 to

                                                                    2002 and Director thereof
                                                                    from 1991 to 2002; Executive
                                                                    Vice President and Director of
                                                                    Princeton Services, Inc.
                                                                    ("Princeton Services") from
                                                                    1993 to 2002; President of
                                                                    Princeton Administrators, L.P.
                                                                    from 1988 to 2002; Director of
                                                                    Financial Data Services, Inc.
                                                                    from 1985 to 2002.

Donald C.              Vice                 Vice                    First Vice President of MLIM
Burke (44)             President            President               and FAM since 1997 and
                       and                  since 1993              Treasurer thereof since 1999;
                       Treasurer            and Treasurer           Senior Vice President,
                                            since 1999              Director and Treasurer of
                                                                    Princeton Services since 1999;
                                                                    Vice President of FAMD since
                                                                    1999; Vice President of
                                                                    MLIM and FAM from 1990 to
                                                                    1997; Director of Taxation of
                                                                    MLIM since 1990.

Kenneth A.             Senior Vice          Senior Vice             Managing Director of MLIM
Jacob (53)             President            President               since 2000; First Vice
                                            since 2002              President of MLIM from 1997
                                                                    to 2000; Vice President of
                                                                    MLIM from 1984 to 1997.

John M.                Senior Vice          Senior Vice             Managing Director of MLIM
Loffredo (40)          President            President               since 2000; First Vice
                                            since 2002              President of MLIM from 1997
                                                                    to 2000; Vice President of
                                                                    MLIM from 1991 to 1997;
                                                                    Portfolio Manager with MLIM
                                                                    and FAM since 1997.

<CAPTION>

        Name,              MLIM/FAM-
       Address*          Advised Funds
      and Age of        and Portfolios
       Director            Overseen         Public Directorships
- -----------------    ------------------- -------------------------
<S>                   <C>                 <C>

Terry K.              124 registered      None
Glenn                 investment
(64)***               companies
                      consisting of
                      157 portfolios



















Donald C.             123 registered      None
Burke (44)            investment
                      companies
                      consisting of
                      156 portfolios







Kenneth A.            38 registered       None
Jacob (53)            investment
                      companies
                      consisting of
                      50 portfolios

John M.               38 registered       None
Loffredo (40)         investment
                      companies
                      consisting of
                      50 portfolios



</TABLE>

                                                      (continued on next page)


                                      24
<PAGE>


<TABLE>
<CAPTION>

        Name,                                       Term of
       Address*            Position(s)           Office** and
      and Age of          Held with the         Length of Time           Principal Occupation(s)
       Director                Fund                 Served                During Past Five Years
- -----------------   --------------------- ----------------------- ----------------------------------
<S>                    <C>                  <C>                     <C>

Fred K.                Vice                 Vice                    Director (Municipal Tax-
Steube (53)            President            President               Exempt Fund Management)
                       and                  and                     since 2000; Vice President of
                       Portfolio            Portfolio               MLIM from 1994 to 2000.
                       Manager              Manager
                                            since 1993

Jeffrey Hiller         Chief                Chief                   Chief Compliance Officer of
(53)                   Compliance           Compliance              the MLIM/FAM-advised
                       Officer              Officer since           funds since 2004; First Vice
                                            2004                    President and Chief
                                                                    Compliance Officer of MLIM
                                                                    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's Division of
                                                                    Enforcement in Washington,
                                                                    DC from 1990 to 1995.

Alice A.               Secretary            Secretary               Director (Legal Advisory) of
Pellegrino                                  since 2004              MLIM since 2002; Vice
(44)                                                                President of MLIM from 1999
                                                                    to 2002; Attorney associated
                                                                    with MLIM since 1997.

<CAPTION>

        Name,             MLIM/FAM-
       Address*         Advised Funds
      and Age of       and Portfolios
       Director           Overseen         Public Directorships
- -----------------   ------------------- -------------------------
<S>                  <C>                 <C>

Fred K.              4 registered        None
Steube (53)          investment
                     companies
                     consisting of
                     4 portfolios


Jeffrey Hiller       124 registered      None
(53)                 investment
                     companies
                     consisting of
                     157 portfolios



















Alice A.             123 registered      None
Pellegrino           investment
(44)                 companies
                     consisting of
                     156 portfolios

</TABLE>


- ---------
*     The address of each officer listed is P.O. Box 9011, Princeton, New
      Jersey 08543-9011.
**    Elected by and serves at the pleasure of the Board of Directors of the
      Fund.
***   Mr. Glenn is an "interested person," as defined in the 1940 Act, of the
      Fund based on his current and former positions with FAM, MLIM, FAMD,
      Princeton Services, and Princeton Administrators, L.P.
****  As a Director, Mr. Glenn 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's
      by-laws or charter or by statute.

      In connection with the election of the Fund'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's Directors, and the remaining
Directors are elected by all holders of capital stock, voting as a single
class. Mr. Forbes and Mr. West are the Directors elected by holders of
preferred stock. See "Description of AMPS--Voting Rights."


                                      25
<PAGE>


Share Ownership

      Information relating to each Director'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 ("Supervised Merrill Lynch Funds") as of December
31, 2003 is set forth in the chart below.

                                                               Aggregate Dollar
                                                                   Range of
                                                 Aggregate       Securities in
                                              Dollar Range of     Supervised
                                               Equity in the     Merrill Lynch
Name                                                Fund             Funds
- ----                                         ----------------  ----------------
Interested Director:
   Terry K. Glenn..........................         None         Over $100,000
Non-interested Directors:
   Ronald W. Forbes........................   $10,001-$50,000    Over $100,000
   Cynthia A. Montgomery...................         None         Over $100,000
   Jean Margo Reid.........................         None             None
   Kevin A. Ryan...........................         None         Over $100,000
   Roscoe S. Suddarth......................         None         Over $100,000
   Richard R. West.........................         None         Over $100,000
   Edward D. Zinbarg.......................         None         Over $100,000

- ---------
*     Ms. Reid was elected a Director of the Fund and a Director of certain
      other MLIM/FAM advised funds on August 19, 2004.

      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 & Co.

Compensation of Directors

      The Fund pays each non-interested Director a combined fee of $3,800 per
year plus a fee of $150 for each in-person Board meeting attended and $150 for
each in-person Audit Committee meeting attended, together with such Director's
out-of-pocket expenses relating to attendance at such meetings. The Chairman
of the Fund's Audit Committee receives an additional annual fee of $1,000.

      The following table shows the compensation earned by the non-interested
Directors for the Fund's fiscal year ended October 31, 2003 and the aggregate
compensation paid to them from all MLIM/FAM-advised funds for the calendar
year ended December 31, 2003.

<TABLE>
<CAPTION>

                                                                                              Aggregate Compensation From
                                        Compensation         Pension Retirement Benefits       Fund and other FAM/MLIM-
Name of Director                         from Fund         Accrued as part of Fund Expense          Advised Funds**
- ------------------------------        ---------------    ----------------------------------- -----------------------------
<S>                                        <C>                          <C>                            <C>
Ronald W. Forbes*                          $6,000                       None                           $308,400
Cynthia A. Montgomery                      $5,000                       None                           $266,400
Jean Margo Reid***                          None                        None                             None
Kevin A. Ryan                              $5,000                       None                           $266,400
Roscoe S. Suddarth                         $5,000                       None                           $266,400
Richard R. West                            $5,000                       None                           $266,400
Edward D. Zinbarg                          $5,000                       None                           $275,400

</TABLE>

- ---------
*     Chairman of the Audit Committee.
**    For the number of MLIM/FAM-advised funds from which each Director
      received compensation see table above under "--Biographical
      Information."
***   Ms. Reid was elected a Director of the Fund and a Director of certain
      other MLIM/FAM-advised funds on August 19, 2004.


                                      26
<PAGE>


      Pursuant to its investment advisory agreement with the Fund (the
"Investment Advisory Agreement"), the Investment Adviser pays all compensation
to all officers of the Fund and all Directors of the Fund who are affiliated
with ML & Co. or its subsidiaries.

                INVESTMENT ADVISORY AND MANAGEMENT ARRANGEMENTS

      The Investment Adviser, which is owned and controlled by ML & 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 September 2004, the Investment Adviser and its
affiliates, including MLIM, had a total of approximately $473 billion in
investment company and other portfolio assets under management, including
approximately $248 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 & Co. and
Princeton Services. The principal business address of the Investment Adviser
is 800 Scudders Mill Road, Plainsboro, New Jersey 08536.

      The Investment Advisory Agreement provides that, subject to the
supervision of the Fund's Board of Directors, the Investment Adviser is
responsible for the actual management of the Fund's portfolio. The
responsibility for making decisions to buy, sell or hold a particular security
rests with the Investment Adviser, subject to review by the Board of
Directors.

      The portfolio manager primarily responsible for the Fund's day to day
management is Fred K. Steube. Fred K. Steube has been a Director (Municipal
Tax-Exempt Fund Management) of MLIM since 2000 and has twenty-four years of
experience investing in Municipal Bonds. The Fund's portfolio manager will
consider analyses from various sources, make the necessary investment
decisions, and place orders for transactions accordingly.

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

      For the fiscal years ended October 31, 2004, 2003 and 2002, the fees
paid by the Fund to the Investment Adviser pursuant to the Investment Advisory
Agreement were $_________, $2,129,798 and $2,075,081, respectively.

      For the fiscal years ended October 31, 2004, 2003 and 2002, the
Investment Adviser reimbursed the Fund $_____, $12,355 and $1,753,
respectively.

      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
("State Street") 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.


                                      27
<PAGE>


      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:

<TABLE>
<CAPTION>

                                                        Paid by the           Paid by the
                                                          Fund to             Fund to the
            Fiscal year ended                           State Street       Investment Adviser
- --------------------------------------------        --------------------  --------------------
<S>                                                           <C>               <C>
2004......................................                     $                 $
2003......................................                     $135,193          $ 9,210
2002......................................                     $133,487          $15,745

</TABLE>

      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' 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 May 17, 2004.

      The Board of Directors receives, reviews and evaluates information
concerning the services and personnel of the Investment Adviser and its
affiliates at each quarterly meeting of the Board of Directors and the Audit
Committee. While particular focus is given to information concerning
profitability, comparability of fees and total expenses and Fund performance
at the meeting at which the renewal of the Investment Advisory Agreement is
considered, the Investment Adviser evaluation process is an ongoing one. In
this regard, the Board's and the Audit Committee's consideration of the
nature, extent and quality of the services provided by the Investment Adviser
under the Investment Advisory Agreement included deliberations at other
quarterly meetings in addition to the May 17, 2004 meeting.

      In connection with the Board of Directors' consideration of the
Investment Advisory Agreement at its May 17, 2004 meeting, the Board
specifically requested and received from the Investment Adviser financial and
performance data of the Fund, information concerning the profitability of the
Fund to the Investment Adviser, information concerning fees charged to similar
accounts by the Investment Adviser and information as to services rendered to
the Fund and paid to affiliates of the Investment Adviser by the Fund. The
Board also received from Lipper, Inc. information concerning the performance
of the Fund compared to certain other non-MLIM/FAM-advised closed-end,
leveraged Municipal Bond funds, and comparing the Fund's fee rate for advisory
and administrative services and ratios for management expenses,
investment-related expenses and total expenses to those of other
non-MLIM/FAM-advised closed-end funds deemed comparable by Lipper, Inc. The
Board of Directors considered the compensation paid to the Investment Adviser
and the services provided to the Fund by the Investment Adviser under the
Investment Advisory Agreement, as well as other services provided by the
Investment Adviser and its affiliates under other agreements, and the
personnel who provide these services. In addition to the investment advisory
services provided to the Fund, the Investment Adviser and its affiliates
provide administrative services, stockholder services, oversight of fund
accounting, marketing services, assistance in meeting legal and regulatory
requirements, and other services necessary for the operation of the Fund. The
Board of Directors also considered the direct and indirect benefits to the
Investment Adviser from its relationship with the Fund. Based on their
experience as Directors of the Fund and as directors of other MLIM/FAM-advised
funds, the Board of Directors concluded that the Fund benefits and should
continue to benefit from those services.

      In reviewing the Investment Advisory Agreement, the Board focused on the
experience, resources and strengths of the Investment Adviser and its
affiliates in managing investment companies that invest primarily in Municipal
Bonds, including a number of other MLIM/FAM-advised leveraged closed-end funds
that have investment objectives and strategies substantially similar to those
of the Fund. The Board considered the amount of fixed income assets, including
tax-exempt fixed income assets, under the management of the Investment Adviser
and its affiliates, including MLIM, as well as the experience of the Fund's
portfolio management team. The Board noted that the Investment Adviser has one
of the largest amounts of Municipal Bond fund assets under management and has
over twenty-five years experience investing in Municipal Bonds, and that the
portfolio manager has over twenty-four years of experience investing in
Municipal Bonds. The Board also noted that, in connection with the Fund's
investments in Municipal Bonds, the Investment Adviser may need to assess the
quality of such Municipal


                                      28
<PAGE>


Bonds by performing an independent credit analysis of any letters of credit or
similar credit enhancements to which particular Municipal Bonds are entitled
and the creditworthiness of the financial institutions that provide such
credit enhancement and that the Investment Adviser has substantial expertise
and experience in such analysis. The Board also considered the Investment
Adviser's expertise and experience in managing funds that use leverage through
the issuance of preferred stock, noting that the Investment Adviser manages
over thirty such funds and has developed analytical tools to help assess risks
and performance impact of leverage. The Board noted that the Investment
Adviser has a high level of expertise in managing the types of investments
used by the Fund and in managing leverage, and concluded that the Fund
benefits, and should continue to benefit, from that expertise. The Board of
Directors based their conclusions on the Directors' experience as directors of
other leveraged, closed-end investment companies managed by the Investment
Adviser that invest in Municipal Bonds and on their experience with credit
analysis and risk management historically performed by the Investment Adviser.

      The Board of Directors also reviewed the compliance and administrative
services provided to the Fund by the Investment Adviser, including its
oversight of the Fund's day-to-day operations and its oversight of Fund
accounting. The Investment Adviser and its affiliates provide compliance and
administrative services to the Fund and all the MLIM/FAM-advised funds, as
well as to a number of third party fund groups. The Directors, based on their
experience as directors of other investment companies managed by the
Investment Adviser and its affiliates as well as of the Fund, also focused on
the quality of the Investment Adviser's compliance and administrative staff.
The Board noted that, in addition to the analysts and compliance personnel
dedicated to the tax-exempt fixed income management group, the Investment
Adviser has a separate administrative, legal and compliance staff to ensure a
high level of quality in the compliance and administrative services provided
to the Fund. The Board of Directors concluded, based on their experience as
Directors, that, historically, the compliance and administrative services
provided by the Investment Adviser were of a sufficiently high quality to
benefit the Fund.

      In reviewing the Investment Advisory Agreement, the Board of Directors
evaluated the Fund's fee rate for advisory and administrative services and the
Fund's historical performance as compared to the rate of thirteen
non-MLIM/FAM-advised comparable leveraged, closed-end funds that invest
primarily in municipal obligations as provided by Lipper, Inc. In particular,
the Board of Directors noted that the Fund had the second lowest contractual
advisory fee rate at a common asset level (below the median of the group)
among thirteen non-MLIM/FAM-advised comparable funds. The Board of Directors
also found that, both including and excluding assets attributable to leverage,
the Fund had the fifth lowest actual advisory fee rate, including advisory and
administrative services and the effects of any fee waivers, as a percentage of
total assets at a common asset level (in each case, below the median of the
group). The Board also compared the Fund's total expenses, both including and
excluding assets attributable to leverage, and concluded that, in each case
the Fund's expenses were fifth lowest in its category and in each case below
the median of the group. The Board also noted that the Fund's historical
performance was comparable (total return of 4.17%, 1.50% and .49% above the
median for the one year, three year and five year periods ended October 31,
2003, respectively) to that of other similarly managed closed-end leveraged
municipal debt funds. The Board also requested, received and considered
profitability information related to the management revenues from the Fund.
Based upon the information reviewed and their discussion, the Board of
Directors concluded that the advisory fee rate was reasonable in relation to
the services provided by the Investment Adviser to the Fund as well as the
costs incurred and benefits to be gained by the Investment Adviser and its
affiliates in providing such services, including the advisory and
administrative components and the effects of any fee waivers. The Board also
found the investment advisory fee and total expense ratio to be reasonable in
comparison to the fees charged by other comparable funds of similar size.

      The Board considered whether there should be changes in the advisory fee
rate or structure in order to enable the Fund to participate in any economies
of scale that the Investment Adviser may experience as a result of growth in
the Fund's assets. The Board determined that the current advisory fee rate was
reasonable and that no changes are currently necessary. The non-interested
Directors were represented by independent counsel who assisted them in their
deliberations.

Code of Ethics

      The Fund'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


                                      29
<PAGE>


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.

Proxy Voting Policies and Procedures

      The Fund's Board of Directors has delegated to the Investment Adviser
authority to vote all proxies relating to the Fund's portfolio securities. The
Investment Adviser has adopted policies and procedures ("Proxy Voting
Procedures") 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'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's interest and those of the Investment
Adviser's clients are properly addressed and resolved.

      In order to implement the Proxy Voting Procedures, the Investment
Adviser has formed a Proxy Voting Committee (the "Committee"). The Committee
is comprised of the Investment Adviser's Chief Investment Officer (the "CIO"),
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 Committee will also include two
non-voting representatives from the Investment Adviser's Legal department
appointed by the Investment Adviser's General Counsel. The Committee'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's affiliates may serve as a member
of the Committee or participate in its decision making (except to the extent
such person is asked by the Committee to present information to the Committee,
on the same basis as other interested knowledgeable parties not affiliated
with the Investment Adviser might be asked to do so). The 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 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's unique structure, management, strategic options and, in
certain circumstances, probable economic and other anticipated consequences of
alternate actions. In so doing, the Committee may determine to vote a
particular proxy in a manner contrary to its generally stated policies. In
addition, the Committee will be responsible for ensuring that all reporting
and recordkeeping requirements related to proxy voting are fulfilled.

      The 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 Committee may elect not to adopt a specific
voting policy applicable to that issue. The Investment Adviser believes that
certain proxy voting issues require investment analysis--such as approval of
mergers and other significant corporate transactions-- akin to investment
decisions, and are, therefore, not suitable for general guidelines. The
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's clients, the Committee, in conjunction with the Fund's
portfolio manager, may determine that the Fund's specific circumstances
require that its proxies be voted differently.

      To assist the Investment Adviser in voting proxies, the Committee has
retained Institutional Shareholder Services ("ISS"). 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.


                                      30
<PAGE>


      The Investment Adviser's Proxy Voting Procedures also address special
circumstances that can arise in connection with proxy voting. For instance,
under the Proxy Voting Procedures, the Investment Adviser generally will not
seek to vote proxies related to portfolio securities that are on loan,
although it may do so under circumstances. In addition, the Investment Adviser
will vote proxies related to securities of foreign issuers only on a best
efforts basis and may elect not to vote at all in certain countries where the
Committee determines that the costs associated with voting generally outweigh
the benefits. The Committee may at any time override these general policies if
it determines that such action is in the best interests of the Fund.

      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 "Affiliate"), or a money management or other client of the
Investment Adviser (each, a "Client") is involved. The Proxy Voting Procedures
and the Investment Adviser's adherence to those procedures are designed to
address such conflicts of interest. The 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 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 Committee may, in its discretion for
the purposes of ensuring that an independent determination is reached, retain
an independent fiduciary to advise the Committee on how to vote or to cast
votes on behalf of the Investment Adviser's clients.

      In the event that the Committee determines not to retain an independent
fiduciary, or it does not follow the advice of such an independent fiduciary,
the powers of the Committee shall pass to a subcommittee, appointed by the CIO
(with advice from the Secretary of the Committee), consisting solely of
Committee members selected by the CIO. The CIO shall appoint to the
subcommittee, where appropriate, only persons whose job responsibilities do
not include contact with the Client and whose job evaluations would not be
affected by the Investment Adviser'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'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's normal voting guidelines or, on
matters where the Investment Adviser'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's absence, the Assistant Secretary of the
Committee concurs that the subcommittee's determination is consistent with the
Investment Adviser's fiduciary duties.

      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 Committee
determines that it is in the Fund's best interest to do so. In addition, the
guidelines may be reviewed at any time upon the request of a Committee member
and may be amended or deleted upon the vote of a majority of Committee members
present at a Committee meeting at which there is a quorum.

      The Investment Adviser has adopted specific voting guidelines with
respect to the following proxy issues:

      o     Proposals related to the composition of the board of directors of
            issuers other than investment companies. As a general matter, the
            Committee believes that a company's board of directors (rather
            than stockholders) is most likely to have access to important,
            nonpublic information regarding a company's business and
            prospects, and is therefore best-positioned to set corporate
            policy and oversee management. The 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
            Committee may look at a nominee's history of representing
            stockholder interests as a director of other companies or other
            factors, to the extent the Committee deems relevant.

      o     Proposals related to the selection of an issuer's independent
            auditors. As a general matter, the Committee believes that
            corporate auditors have a responsibility to represent the
            interests of


                                      31
<PAGE>


            stockholders and provide an independent view on the propriety of
            financial reporting decisions of corporate management. While the
            Committee will generally defer to a corporation's choice of
            auditor, in individual cases, the Committee may look at an
            auditors' history of representing stockholder interests as auditor
            of other companies, to the extent the Committee deems relevant.

      o     Proposals related to management compensation and employee
            benefits. As a general matter, the Committee favors disclosure of
            an issuer's compensation and benefit policies and opposes
            excessive compensation, but believes that compensation matters are
            normally best determined by an issuer's board of directors, rather
            than stockholders. Proposals to "micro-manage" an issuer's
            compensation practices or to set arbitrary restrictions on
            compensation or benefits will, therefore, generally not be
            supported.

      o     Proposals related to requests, principally from management, for
            approval of amendments that would alter an issuer's capital
            structure. As a general matter, the Committee will support
            requests that enhance the rights of common stockholders and oppose
            requests that appear to be unreasonably dilutive.

      o     Proposals related to requests for approval of amendments to an
            issuer's charter or by-laws. As a general matter, the Committee
            opposes poison pill provisions.

      o     Routine proposals related to requests regarding the formalities of
            corporate meetings.

      o     Proposals related to proxy issues associated solely with holdings
            of investment company shares. As with other types of companies,
            the Committee believes that a fund's board of directors (rather
            than its stockholders) is best-positioned to set fund policy and
            oversee management. However, the Committee opposes granting boards
            of directors authority over certain matters, such as changes to a
            fund's investment objective, that the Investment Company Act
            envisions will be approved directly by stockholders.

      o     Proposals related to limiting corporate conduct in some manner
            that relates to the stockholder's environmental or social
            concerns. The Committee generally believes that annual stockholder
            meetings are inappropriate forums for discussion of larger social
            issues, and opposes stockholder resolutions "micro-managing"
            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 Committee is generally supportive
            of proposals to require corporate disclosure of matters that seem
            relevant and material to the economic interests of stockholders,
            the Committee is generally not supportive of proposals to require
            disclosure of corporate matters for other purposes.

                            PORTFOLIO TRANSACTIONS

      Subject to policies established by the Board of Directors, the
Investment Adviser is primarily responsible for the execution of the Fund'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's general
execution and operations facilities and the firm'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.

      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


                                      32
<PAGE>


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.

      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
"Investment Restrictions." 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 "Group
Order Exemptive Order"). 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.

      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.

      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'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's
Board of Directors will reconsider this matter from time to time.

      The Fund has received an exemptive order from the Commission permitting
it to lend portfolio securities to Merrill Lynch or its affiliates. Pursuant
to that order, the Fund also has retained an affiliated entity of the
Investment Adviser as the securities lending agent for a fee, including a fee
based on a share of the returns on investment of cash collateral. That entity
may, on behalf of the Fund, invest cash collateral received by the Fund for
such loans, among other things, in a private investment company managed by
that entity or in registered money market funds advised by the Investment
Adviser or its affiliates.

      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.

      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.


                                      33
<PAGE>


Portfolio Turnover

      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'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.

      For the fiscal years ended October 31, 2004 and 2003, the Fund's
portfolio turnover rates were     % and 31.50%, respectively.

                                     TAXES

      The Fund has elected to qualify for the special tax treatment afforded
regulated investment companies ("RICs") under the Internal Revenue Code of
1986, as amended (the "Code"). 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's distributions derived from income
on tax exempt obligations, as defined herein, would no longer qualify for
treatment as exempt interest.

      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.

      The Internal Revenue Service (the "IRS"), 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 & Wood LLP, counsel to the
Fund, the shares of AMPS will constitute stock of the Fund and distributions
with respect to shares of AMPS (other than distributions in redemption of
shares of AMPS subject to Section 302(b) of the Code) will constitute
dividends to the extent of the Fund'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.

      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.e., "tax-exempt"). The Fund intends to qualify to pay "exempt-interest
dividends" as defined in Section 852(b)(5) of the Code. Under such section if,
at the close of each quarter of its taxable year, at least 50% of the value of
its total assets consists of obligations that pay interest which is excludable
from gross income for Federal income tax purposes ("tax exempt obligations")
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-


                                      34
<PAGE>


interest dividends are dividends or any part thereof paid by the Fund that are
attributable to interest on tax exempt obligations and designated by the Fund
as exempt-interest dividends in a written notice mailed to the Fund's
stockholders within 60 days after the close of its taxable year. To the extent
that the dividends distributed to the Fund'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's gross income for Federal tax purposes. Exempt-interest dividends
are included, however, in determining the portion, if any, of a person'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 "substantial user" or
"related person" under Code Section 147(a) with respect to property financed
with the proceeds of an issue of PABs, if any, held by the Fund.

      To the extent that the Fund's distributions are derived from interest on
its taxable investments or from an excess of net short-term capital gains over
net long-term capital losses ("ordinary income dividends"), such distributions
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 ("capital gain dividends") are taxable as long-term capital gains for
Federal income tax purposes, regardless of the length of time the stockholder
has owned Fund shares. 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.

      All or a portion of the Fund'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's earnings and profits will first reduce
the adjusted tax basis of a holder's shares and, after such adjusted tax basis
is reduced to zero, will constitute capital gains to such holder (assuming the
shares are held as a capital asset). 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'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.

      If you borrow money to buy the Fund's AMPS, you may not be permitted to
deduct the interest on that loan. Under Federal income tax rules, the Fund'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.

      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's proportionate share of
particular types of income, including exempt-interest income and net long-term
capital gains. A class's proportionate share of a particular type of income is
determined according to the percentage of total dividends paid by the RIC
during such year that was paid to such class. 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' 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


                                      35
<PAGE>


Allocation and the additional amount were an Additional Dividend, provided
that the Fund will notify the Auction Agent of the additional amounts to be
included in such dividend prior to the applicable Dividend Payment Date. See
"The Auction--Auction Procedures--Auction Date; Advance Notice of Allocation
of Taxable Income; Inclusion of Taxable Income in Dividends" 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 "taxable distribution") 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.

      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 "Description of AMPS--Dividends-- Additional
Dividends" 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.

      In the opinion of Sidley Austin Brown & Wood LLP, counsel to the Fund,
under current law the manner in which the Fund intends to allocate items of
tax exempt income, net capital gain and other taxable income among shares of
common stock and shares of the series of AMPS will be respected for Federal
income tax purposes. However, the tax treatment of Additional Dividends may
affect the Fund's calculation of each class'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'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's opinion and attempt to reallocate the Fund'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 & Wood LLP has advised the Fund that, in its opinion, if the IRS were to
challenge in court the Fund'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 & Wood LLP represents only its best legal judgment and is
not binding on the IRS or the courts.

      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 (e.g., bonds used for industrial development or housing purposes).
Income received on such bonds is classified as an item of "tax preference,"
which could subject 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's "adjusted
current earnings," which more closely reflect a corporation'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.

      The Fund may invest in instruments the return on which includes
nontraditional features such as indexed principal or interest payments
("nontraditional instruments"). 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.


                                      36
<PAGE>


      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.

      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.e.,
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.

      The Fund'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 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 "tax exemption opinion").

      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.

      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'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'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.

      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 "Description of AMPS--Dividends--Restrictions on
Dividends and Other Payments" and in the prospectus. This may prevent the Fund
from distributing at least 90% of its net income, and may, therefore,
jeopardize the Fund'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


                                      37
<PAGE>


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 "Description of AMPS--Redemption" herein and in the prospectus. There can
be no assurance, however, that any such action would achieve such objectives.

      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 "preferential" 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.

      Under certain Code provisions, some stockholders may be subject to a
withholding tax on ordinary income dividends, capital gain dividends and
redemption payments ("backup withholding"). 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'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's Federal income tax liability, provided that the
required information is timely forwarded to the IRS.

      The Fund is generally not an appropriate investment for retirement
plans, other entities that are not subject to tax and foreign stockholders.

State and Local Taxes

      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.

      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's
securities and its political subdivisions and instrumentalities is exempt from
that state'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.

      The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury Regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections
and the Treasury Regulations promulgated thereunder. The Code and the Treasury
Regulations are subject to change by legislative, judicial or administrative
action either prospectively or retroactively.

      Stockholders are urged to consult their tax advisers regarding specific
questions as to Federal, state, local or foreign taxes.

                                NET ASSET VALUE

      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


                                      38
<PAGE>


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.

      The Municipal Bonds and other portfolio securities in which the Fund
invests are traded primarily in over-the-counter ("OTC") 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 "yield
equivalent" 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.

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

                             FINANCIAL STATEMENTS

      The Fund's audited financial statements for the fiscal year ended
October 31, 2004, together with the report of ___________ thereon, are
incorporated in this statement of additional information by reference to its
2004 Annual Report. You may request a copy of the 2004 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.
















                                      39
<PAGE>

                                  APPENDIX A

                     DESCRIPTION OF MUNICIPAL BOND RATINGS

Description of Moody's Municipal Long-Term Ratings

Aaa         Issuers or issues rated Aaa demonstrate the strongest
            creditworthiness relative to other US municipal or tax-exempt
            issuers or issues.

Aa          Issuers or issues rated Aa demonstrate very strong
            creditworthiness relative to other US municipal or tax-exempt
            issuers or issues.

A           Issuers or issues rated A present above-average creditworthiness
            relative to other US municipal or tax-exempt issuers or issues.

Baa         Issuers or issues rated Baa represent average creditworthiness
            relative to other US municipal or tax- exempt issuers or issues.

Ba          Issuers or issues rated Ba demonstrate below-average
            creditworthiness relative to other US municipal or tax-exempt
            issuers or issues.

B           Issuers or issues rated B demonstrate weak creditworthiness
            relative to other US municipal or tax- exempt issuers or issues.

Caa         Issuers or issues rated Caa demonstrate very weak creditworthiness
            relative to other US municipal or tax-exempt issuers or issues.

Ca          Issuers or issues rated Ca demonstrate extremely weak
            creditworthiness relative to other US municipal or tax-exempt
            issuers or issues.

C           Issuers or issues rated C demonstrate the weakest creditworthiness
            relative to other US municipal or tax-exempt issuers or issues.


Note: Moody'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.



                                      A-1
<PAGE>

Description of Moody's U.S. Short-Term Ratings

MIG 1/VMIG1  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.

MIG 2/VMIG2  This designation denotes strong credit quality. Margins of
             protection are ample, although not as large as in the preceding
             group.

MIG 3/VMIG3  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.

SG           This designation denotes speculative-grade credit quality. Debt
             instruments in this category may lack sufficient margins of
             protection.

Description of Moody's Short-Term Paper Ratings

      Moody's Short-Term 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's employs the following three designations,
all judged to be investment grade, to indicate the relative repayment capacity
of rated issuers:

P-1         Issuers (or supporting institutions) rated Prime-1 have a superior
            ability to repay short- term debt obligations.

P-2         Issuers (or supporting institutions) rated Prime-2 have a strong
            ability to repay short-term debt obligations.

P-3         Issuers (or supporting institutions) rated Prime-3 have an
            acceptable ability to repay short-term obligations.

NP          Issuers (or supporting institutions) rated Not Prime do not fall
            within any of the Prime rating categories.

Description of Standard & Poor's, a Division of The McGraw-Hill Companies,
Inc. ("Standard & Poor's"), Debt Ratings

      A Standard & Poor'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.

      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.

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


                                      A-2
<PAGE>


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

      I.    Likelihood of payment-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;

      II.   Nature of and provisions of the obligation;

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

Long Term Issue Credit Ratings

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

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

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

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

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

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

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

p            The letter `p' indicates that the rating is provisional. A
             provisional rating assumes the successful completion of the
             project financed by the debt being rated and indicates that
             payment of 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.

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


                                     A-3
<PAGE>


r            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.

N.R.         This indicates that no rating has been requested, that there is
             insufficient information on which to base a rating, or that
             Standard & Poor's does not rate a particular obligation as a
             matter of policy.

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

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

      A Standard & Poor's short-term credit issue 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 "A-1" for the highest-quality obligations to "D" for
the lowest. These categories are as follows:

A-1          A short-term obligation rated "A-1" is rated in the highest
             category by Standard & Poor's. The obligor'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's capacity to meet its
             financial commitment on these obligations is extremely strong.

A-2          A short-term obligation rated "A-2" is somewhat more susceptible
             to the adverse effects of changes in circumstances and economic
             conditions than obligations in higher rating categories. However,
             the obligor's capacity to meet its financial commitment on the
             obligation is satisfactory.

A-3          A short-term obligation rated "A-3" 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.

B            A short-term obligation rated "B" 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's inadequate capacity to meet its
             financial commitment on the obligation.

C            A short-term obligation rated "C" 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.

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

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

p            The letter "p" indicates that the rating is provisional. A
             provisional rating assumes the successful completion of the
             project financed by the debt being rated and indicates that
             payment of 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.


                                     A-4
<PAGE>


*            Continuance of the ratings is contingent upon Standard & Poor's
             receipt of an executed copy of the escrow agreement or closing.

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

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

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

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

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

      Note rating symbols are as follows:

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

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

SP-3         Speculative capacity to pay principal and interest.

Description of Fitch Ratings' ("Fitch") Investment Grade Bond Ratings

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

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

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

      Bonds 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.

      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.


                                      A-5
<PAGE>


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

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

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

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

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

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

Description of Fitch's Speculative Grade Bond Ratings

      Fitch speculative grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
("BB" to "C") represent Fitch's assessment of the likelihood of timely payment
of principal and interest in accordance with the terms of obligation for bond
issues not in default. For defaulted bonds, the rating ("DDD" to "D") is an
assessment of the ultimate recovery value through reorganization or
liquidation. The rating takes into consideration special features of the
issue, its relationship to other obligations of the issuer, the current and
prospective financial condition and operating performance of the issuer and
any guarantor, as well as the economic and political environment that might
affect the issuer's future financial strength.

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

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

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

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

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


                                     A-6
<PAGE>


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

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

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

Description of Fitch's Short Term Ratings

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

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

      Fitch short term ratings are as follows:

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

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

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

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

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

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

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

NR           Indicates that Fitch does not rate the specific issue.

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

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

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

FitchAlert   Ratings are placed on FitchAlert to notify investors of an
             occurrence that is likely to result in a rating change and the
             likely direction of such change. These are designated as
             "Positive," indicating a


                                      A-7
<PAGE>


             potential upgrade, "Negative," for potential downgrade, or
             "Evolving," where ratings may be raised or lowered. FitchAlert is
             relatively short term, and should be resolved within 12 months.

Ratings Outlook: An outlook is used to describe the most likely direction of
any rating change over the intermediate term. It is described as "Positive" or
"Negative." The absence of a designation indicates a stable outlook.
























                                     A-8
<PAGE>


                                  APPENDIX B

                             SETTLEMENT PROCEDURES

      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.

      (a)   On each Auction Date, the Auction Agent shall notify by telephone
or through the Auction Agent'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:

            (i)   the Applicable Rate fixed for the next succeeding Dividend
      Period;

            (ii)  whether Sufficient Clearing Bids existed for the
      determination of the Applicable Rate;

            (iii) if such Broker-Dealer (a "Seller's Broker-Dealer") 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;

            (iv)  if such Broker-Dealer (a "Buyer's Broker-Dealer") 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;

            (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's
      Broker-Dealers (and the name of the Agent Member, if any, of each such
      Buyer'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's Broker-Dealers acted;

            (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's Broker-Dealers (and the name of the Agent Member, if any, of
      each such Seller'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's Broker-Dealers acted; and

            (vii) the Auction Date of the next succeeding Auction with respect
      to the AMPS.

      (b)   On each Auction Date, each Broker-Dealer that submitted an Order
on behalf of any Beneficial Owner or Potential Beneficial Owner shall:

            (i)   in the case of a Broker-Dealer that is a Buyer'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'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;


                                     B-1
<PAGE>


            (ii)  in the case of a Broker-Dealer that is a Seller'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'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;

            (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;

            (iv)  advise each Beneficial Owner on whose behalf such
      Broker-Dealer submitted an Order of the Auction Date for the next
      succeeding Auction; and

            (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.

      (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.

      (d)   On each Auction Date:

            (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;

            (ii)  each Seller'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's Broker-Dealer (or its Agent Member) identified to such
      Seller's Broker-Dealer pursuant to (a)(v) above against payment
      therefor; and

            (iii) each Buyer'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'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.

      (e)   On the day after the Auction Date:

            (i)   each Bidder'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;

            (ii)  each Seller'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


                                     B-2
<PAGE>


            (iii) each Buyer'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.

      (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.




















                                     B-3
<PAGE>


                                  APPENDIX C

                              AUCTION PROCEDURES

      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.

Paragraph 10(a) Certain Definitions.

      As used in this Paragraph 10, the following terms shall have the
following meanings, unless the context otherwise requires:

            (i)   "AMPS" shall mean the shares of AMPS being auctioned
      pursuant to this Paragraph 10.

            (ii)  "Auction Date" shall mean the first Business Day preceding
      the first day of a Dividend Period.

            (iii) "Available AMPS" shall have the meaning specified in
      Paragraph 10(d)(i) below.

            (iv)  "Bid" shall have the meaning specified in Paragraph 10(b)(i)
      below.

            (v)   "Bidder" shall have the meaning specified in Paragraph
      10(b)(i) below.

            (vi)  "Hold Order" shall have the meaning specified in Paragraph
      10(b)(i) below.

            (vii) "Maximum Applicable Rate" 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 the lower of the
      credit rating or ratings assigned on such date to such shares by Moody's
      and S&P (or if Moody's or S&P or both shall not make such rating
      available, the equivalent of either or both of such ratings by a
      Substitute Rating Agency or two Substitute Rating Agencies or, in the
      event that only one such rating shall be available, such rating) as
      follows:

<TABLE>
<CAPTION>

                                       Applicable                               Applicable
                                       Percentage           Applicable          Spread Over        Applicable
                                      of Reference          Percentage           Reference         Spread Over
          Credit Ratings                 Rate--No           of Reference           Rate--No           Reference
- ---------------------------------
     Moody's             S&P          Notification      Rate--Notification      Notification     Rate--Notification
- ----------------   --------------   ----------------  --------------------      ------------     --------------------
<S>                 <C>                   <C>                  <C>                  <C>                <C>
       Aaa               AAA              110%                 125%                 1.10%              1.25%
   Aa3 to Aa1        AA- to AA+           125%                 150%                 1.25%              1.50%
    A3 to A1          A- to A+            150%                 200%                 1.50%              2.00%
  Baa3 to Baa1      BBB- to BBB+          175%                 250%                 1.75%              2.50%
   Below Baa3        Below BBB-           200%                 300%                 2.00%              3.00%

</TABLE>

      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 "Termination of Rating
Agency Provisions," the Fund shall take all reasonable action necessary to
enable S&P and Moody's to provide a rating for the AMPS. If either S&P or
Moody's shall not make such a rating available or if neither S&P nor Moody's
shall make such a rating available, subject to the provisions of paragraph 12
of the Articles Supplementary entitled "Termination of Rating Agency
Provisions," Merrill Lynch, Pierce, Fenner & Smith


                                      C-1
<PAGE>


Incorporated or its affiliates and successors, after obtaining the Fund'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.

            (viii) "Order" shall have the meaning specified in Paragraph
      10(b)(i) below.

            (ix)  "Sell Order" shall have the meaning specified in Paragraph
      10(b)(i) below.

            (x)   "Submission Deadline" 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.

            (xi)  "Submitted Bid" shall have the meaning specified in
      Paragraph 10(d)(i) below.

            (xii) "Submitted Hold Order" shall have the meaning specified in
      Paragraph 10(d)(i) below.

            (xiii) "Submitted Order" shall have the meaning specified in
      Paragraph 10(d)(i) below.

            (xiv) "Submitted Sell Order" shall have the meaning specified in
      Paragraph 10(d)(i) below.

            (xv)  "Sufficient Clearing Bids" shall have the meaning specified
      in Paragraph 10(d)(i) below.

            (xvi) "Winning Bid Rate" shall have the meaning specified in
      Paragraph 10(d)(i) below.

Paragraph 10(b) Orders by Beneficial Owners, Potential Beneficial Owners,
Existing Holders And Potential Holders.

      (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:

            (A)   each Beneficial Owner may submit to its Broker-Dealer
      information as to:

                  (1)   the number of outstanding shares, if any, of AMPS held
            by such Beneficial Owner which such Beneficial Owner desires to
            continue to hold without regard to the Applicable Rate for the
            next succeeding Dividend Period;

                  (2)   the number of outstanding shares, if any, of AMPS held
            by such Beneficial Owner which such Beneficial Owner desires to
            continue to hold, provided that the Applicable Rate for the next
            succeeding Dividend Period shall not be less than the rate per
            annum specified by such Beneficial Owner; and/or

                  (3)   the number of outstanding shares, if any, of AMPS held
            by such Beneficial Owner which such Beneficial Owner offers to
            sell without regard to the Applicable Rate for the next succeeding
            Dividend Period; and

            (B)   each Broker-Dealer, using a list of Potential Beneficial
      Owners that shall be maintained in good faith for the purpose of
      conducting a competitive Auction, shall contact Potential Beneficial
      Owners, including Persons that are not Beneficial Owners, on such list
      to determine the number of


                                      C-2
<PAGE>


      outstanding shares, if any, of AMPS which each such Potential Beneficial
      Owner offers to purchase, provided that the Applicable Rate for the next
      succeeding Dividend Period shall not be less than the rate per annum
      specified by such Potential Beneficial Owner.

      For the purposes hereof, the communication by a Beneficial Owner or
Potential Beneficial Owner to a Broker-Dealer, or the communication by a
Broker-Dealer acting for its own account to the Auction Agent, of information
referred to in clause (A) or (B) of this Paragraph 10(b)(i) is hereinafter
referred to as an "Order" and each Beneficial Owner and each Potential
Beneficial Owner placing an Order, including a Broker-Dealer acting in such
capacity for its own account, is hereinafter referred to as a "Bidder"; an
Order containing the information referred to in clause (A)(1) of this
Paragraph 10(b)(i) is hereinafter referred to as a "Hold Order"; an Order
containing the information referred to in clause (A)(2) or (B) of this
Paragraph 10(b)(i) is hereinafter referred to as a "Bid"; and an Order
containing the information referred to in clause (A)(3) of this Paragraph
10(b)(i) is hereinafter referred to as a "Sell Order." Inasmuch as a
Broker-Dealer participates in an Auction as an Existing Holder or a Potential
Holder only to represent the interests of a Beneficial Owner or Potential
Beneficial Owner, whether it be its customers or itself, all discussion herein
relating to the consequences of an Auction for Existing Holders and Potential
Holders also applies to the underlying beneficial ownership interests
represented.

      (ii)  (A) A Bid by an Existing Holder shall constitute an irrevocable
offer to sell:

            (1)   the number of outstanding shares of AMPS specified in such
      Bid if the Applicable Rate determined on such Auction Date shall be less
      than the rate per annum specified in such Bid; or

            (2)   such number or a lesser number of outstanding shares of AMPS
      to be determined as set forth in Paragraph 10(e)(i)(D) if the Applicable
      Rate determined on such Auction Date shall be equal to the rate per
      annum specified therein; or

            (3)   a lesser number of outstanding shares of AMPS to be
      determined as set forth in Paragraph 10(e)(ii)(C) if such specified rate
      per annum shall be higher than the Maximum Applicable Rate and
      Sufficient Clearing Bids do not exist.

      (B)   A Sell Order by an Existing Holder shall constitute an irrevocable
offer to sell:

            (1)   the number of outstanding shares of AMPS specified in such
      Sell Order, or

            (2)   such number or a lesser number of outstanding shares of AMPS
      to be determined as set forth in Paragraph 10(e)(ii)(C) if Sufficient
      Clearing Bids do not exist.

      (C)   A Bid by a Potential Holder shall constitute an irrevocable offer
to purchase:

            (1)   the number of outstanding shares of AMPS specified in such
      Bid if the Applicable Rate determined on such Auction Date shall be
      higher than the rate per annum specified in such Bid; or

            (2)   such number or a lesser number of outstanding shares of AMPS
      to be determined as set forth in Paragraph 10(e)(i)(E) if the Applicable
      Rate determined on such Auction Date shall be equal to the rate per
      annum specified therein.

Paragraph 10(c) Submission of Orders by Broker-Dealers to Auction Agent.

      (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:


                                      C-3
<PAGE>


            (A)   the name of the Bidder placing such Order (which shall be
      the Broker-Dealer unless otherwise permitted by the Fund);

            (B)   the aggregate number of outstanding shares of AMPS that are
      the subject of such Order;

            (C)   to the extent that such Bidder is an Existing Holder

                  (1)   the number of outstanding shares, if any, of AMPS
            subject to any Hold Order placed by such Existing Holder;

                  (2)   the number of outstanding shares, if any, of AMPS
            subject to any Bid placed by such Existing Holder and the rate per
            annum specified in such Bid; and

                  (3)   the number of outstanding shares, if any, of AMPS
            subject to any Sell Order placed by such Existing Holder; and

            (D)   to the extent such Bidder is a Potential Holder, the rate
      per annum specified in such Potential Holder's Bid.

      (ii)  If any rate per annum specified in any Bid contains more than
three figures to the right of the decimal point, the Auction Agent shall round
such rate up to the next highest one-thousandth (.001) of 1%.

      (iii) If an Order or Orders covering all of the outstanding shares of
AMPS held by an Existing Holder are not submitted to the Auction Agent prior
to the Submission Deadline, the Auction Agent shall deem a Hold Order (in the
case of an Auction relating to a Dividend Period which is not a Special
Dividend Period of 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.

      (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:

            (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;

            (B)   any Bids submitted on behalf of such Existing Holder shall
      be considered valid, in the ascending order of their respective rates
      per annum if more than one Bid is submitted on behalf of such Existing
      Holder, up to and including the excess of the number of outstanding
      shares of AMPS held by such Existing Holder over the number of shares of
      AMPS subject to any Hold Order referred to in Paragraph 10(c)(iv)(A)
      above (and if more than one Bid submitted on behalf of such Existing
      Holder specifies the same rate per annum and together they cover more
      than the remaining number of shares that can be the subject of valid
      Bids after application of Paragraph 10(c)(iv)(A) above and of the
      foregoing portion of this Paragraph 10(c)(iv)(B) to any Bid or Bids
      specifying a lower rate or rates per annum, the number of shares subject
      to each of such Bids shall be reduced pro rata so that such Bids, in the
      aggregate, cover exactly such remaining number of shares); and the
      number of shares, if any, subject to Bids not valid under this Paragraph
      10(c)(iv)(B) shall be treated as the subject of a Bid by a Potential
      Holder; and

            (C)   any Sell Order shall be considered valid up to and including
      the excess of the number of outstanding shares of AMPS held by such
      Existing Holder over the number of shares of AMPS subject to


                                     C-4
<PAGE>


      Hold Orders referred to in Paragraph 10(c)(iv)(A) and Bids referred to
      in Paragraph 10(c)(iv)(B); provided that if more than one Sell Order is
      submitted on behalf of any Existing Holder and the number of shares of
      AMPS subject to such Sell Orders is greater than such excess, the number
      of shares of AMPS subject to each of such Sell Orders shall be reduced
      pro rata so that such Sell Orders, in the aggregate, cover exactly the
      number of shares of AMPS equal to such excess.

      (v)   If more than one Bid is submitted on behalf of any Potential
Holder, each Bid submitted shall be a separate Bid with the rate per annum and
number of shares of AMPS therein specified.

      (vi)  Any Order submitted by a Beneficial Owner 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.

Paragraph 10(d) Determination of Sufficient Clearing Bids, Winning Bid Rate
and Applicable Rate.

      (i)   Not earlier than the Submission Deadline on each Auction Date, the
Auction Agent shall assemble all Orders submitted or deemed submitted to it by
the Broker-Dealers (each such Order as submitted or deemed submitted by a
Broker-Dealer being hereinafter referred to individually as a "Submitted Hold
Order," a "Submitted Bid" or a "Submitted Sell Order," as the case may be, or
as a "Submitted Order") and shall determine:

            (A)   the excess of the total number of outstanding shares of AMPS
      over the number of outstanding shares of AMPS that are the subject of
      Submitted Hold Orders (such excess being hereinafter referred to as the
      "Available AMPS");

            (B)   from the Submitted Orders whether the number of outstanding
      shares of AMPS that are the subject of Submitted Bids by Potential
      Holders specifying one or more rates per annum equal to or lower than
      the Maximum Applicable Rate exceeds or is equal to the sum of:

                  (1)   the number of outstanding shares of AMPS that are the
            subject of Submitted Bids by Existing Holders specifying one or
            more rates per annum higher than the Maximum Applicable Rate, and

                  (2)   the number of outstanding shares of AMPS that are
            subject to Submitted Sell Orders (if such excess or such equality
            exists (other than because the number of outstanding shares of
            AMPS in 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 "Sufficient Clearing Bids"); and

            (C)   if Sufficient Clearing Bids exist, the lowest rate per annum
      specified in the Submitted Bids (the "Winning Bid Rate") that if:

                  (1)   each Submitted Bid from Existing Holders specifying
            the Winning Bid Rate and all other submitted Bids from Existing
            Holders specifying lower rates per annum were rejected, thus
            entitling such Existing Holders to continue to hold the shares of
            AMPS that are the subject of such Submitted Bids, and

                  (2)   each Submitted Bid from Potential Holders specifying
            the Winning Bid Rate and all other Submitted Bids from Potential
            Holders specifying lower rates per annum were accepted, thus
            entitling the Potential Holders to purchase the shares of AMPS
            that are the subject of such Submitted Bids, would result in the
            number of shares subject to all Submitted Bids specifying the
            Winning Bid Rate or a lower rate per annum being at least equal to
            the Available AMPS.


                                      C-5
<PAGE>


      (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:

            (A)   if Sufficient Clearing Bids exist, that the Applicable Rate
      for the next succeeding Dividend Period shall be equal to the Winning
      Bid Rate;

            (B)   if Sufficient Clearing Bids do not exist (other than because
      all of the outstanding shares of AMPS are the subject of Submitted Hold
      Orders), that the Applicable Rate for the next succeeding Dividend
      Period shall be equal to the Maximum Applicable Rate; or

            (C)   if all of the outstanding shares of AMPS are the subject of
      Submitted Hold Orders, 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.

Paragraph 10(e) Acceptance and Rejection of Submitted Bids and Submitted Sell
Orders and Allocation of Shares.

      Based on the determinations made pursuant to Paragraph 10(d)(i), the
Submitted Bids and Submitted Sell Orders shall be accepted or rejected and the
Auction Agent shall take such other action as set forth below:

      (i)   If Sufficient Clearing Bids have been made, subject to the
provisions of Paragraph 10(e)(iii) and Paragraph 10(e)(iv), Submitted Bids and
Submitted Sell Orders shall be accepted or rejected in the following order of
priority and all other Submitted Bids shall be rejected:

            (A)   the Submitted Sell Orders of Existing Holders shall be
      accepted and the Submitted Bid of each of the Existing Holders
      specifying any rate per annum that is higher than the Winning Bid Rate
      shall be accepted, thus requiring each such Existing Holder to sell the
      outstanding shares of AMPS that are the subject of such Submitted Sell
      Order or Submitted Bid;

            (B)   the Submitted Bid of each of the Existing Holders specifying
      any rate per annum that is lower than the Winning Bid Rate shall be
      rejected, thus entitling each such Existing Holder to continue to hold
      the outstanding shares of AMPS that are the subject of such Submitted
      Bid;

            (C)   the Submitted Bid of each of the Potential Holders
      specifying any rate per annum that is lower than the Winning Bid Rate
      shall be accepted;

            (D)   the Submitted Bid of each of the Existing Holders specifying
      a rate per annum that is equal to the Winning Bid Rate shall be
      rejected, thus entitling each such Existing Holder to continue to hold
      the outstanding shares of AMPS that are the subject of such Submitted
      Bid, unless the number of outstanding shares of AMPS subject to all such
      Submitted Bids shall be greater than the number of outstanding shares of
      AMPS ("Remaining Shares") equal to the excess of the Available AMPS over
      the number of outstanding shares of AMPS subject to Submitted Bids
      described in Paragraph 10(e)(i)(B) and Paragraph 10(e)(i)(C), in which
      event the Submitted Bids of each such Existing Holder shall be accepted,
      and each such Existing Holder shall be required to sell outstanding
      shares of AMPS, but only in an amount equal to the difference between
      (1) the number of outstanding shares of AMPS then held by such Existing
      Holder subject to such Submitted Bid and (2) the number of shares of
      AMPS obtained by multiplying (x) the number of Remaining Shares by (y) a
      fraction the numerator of which shall be the number of outstanding
      shares of AMPS held by such Existing Holder subject to such Submitted
      Bid and the denominator of which shall be the sum of the 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


                                      C-6
<PAGE>


            (E)   the Submitted Bid of each of the Potential Holders
      specifying a rate per annum that is equal to the Winning Bid Rate shall
      be accepted but only in an amount equal to the number of outstanding
      shares of AMPS obtained by multiplying (x) the difference between the
      Available AMPS and the number of outstanding shares of AMPS subject to
      Submitted Bids described in Paragraph 10(e)(i)(B), Paragraph 10(e)(i)(C)
      and Paragraph 10(e)(i)(D) by (y) a fraction the numerator of which shall
      be the number of outstanding shares of AMPS subject to such Submitted
      Bid and the denominator of which shall be the sum of the number of
      outstanding shares of AMPS subject to such Submitted Bids made by all
      such Potential Holders that specified rates per annum equal to the
      Winning Bid Rate.

      (ii)  If Sufficient Clearing Bids have not been made (other than because
all of the outstanding shares of AMPS are subject to Submitted Hold Orders),
subject to the provisions of Paragraph 10(e)(iii), Submitted Orders shall be
accepted or rejected as follows in the following order of priority and all
other Submitted Bids shall be rejected:

            (A)   the Submitted Bid of each Existing Holder specifying any
      rate per annum that is equal to or lower than the Maximum Applicable
      Rate shall be rejected, thus entitling such Existing Holder to continue
      to hold the outstanding shares of AMPS that are the subject of such
      Submitted Bid;

            (B)   the Submitted Bid of each Potential Holder specifying any
      rate per annum that is equal to or lower than the Maximum Applicable
      Rate shall be accepted, thus requiring such Potential Holder to purchase
      the outstanding shares of AMPS that are the subject of such Submitted
      Bid; and

            (C)   the Submitted Bids of each Existing Holder specifying any
      rate per annum that is higher than the Maximum Applicable Rate shall be
      accepted and the Submitted Sell Orders of each Existing Holder shall be
      accepted, in both cases only in an amount equal to the difference
      between (1) the number of outstanding shares of AMPS then held by such
      Existing Holder subject to such Submitted Bid or Submitted Sell Order
      and (2) the number of shares of AMPS obtained by multiplying (x) the
      difference between the Available AMPS and the aggregate number of
      outstanding shares of AMPS subject to Submitted Bids described in
      Paragraph 10(e)(ii)(A) and Paragraph 10(e)(ii)(B) by (y) a fraction the
      numerator of which shall be the number of outstanding shares of AMPS
      held by such Existing Holder subject to such Submitted Bid or Submitted
      Sell Order and the denominator of which shall be the number of
      outstanding shares of AMPS subject to all such Submitted Bids and
      Submitted Sell Orders.

      (iii) If, as a result of the procedures described in Paragraph 10(e)(i)
or Paragraph 10(e)(ii), any Existing Holder would be entitled or required to
sell, or any Potential Holder would be entitled or required to purchase, a
fraction of a share of AMPS on any Auction Date, the Auction Agent shall, in
such manner as in its sole discretion it shall determine, round up or down the
number of shares of AMPS to be purchased or sold by any Existing Holder or
Potential Holder on such Auction Date so that each outstanding share of AMPS
purchased or sold by each Existing Holder or Potential Holder on such Auction
Date shall be a whole share of AMPS.

      (iv)  If, as a result of the procedures described in Paragraph 10(e)(i),
any Potential Holder would be entitled or required to purchase less than a
whole share of AMPS on any Auction Date, the Auction Agent, 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.

      (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.


                                      C-7
<PAGE>


Paragraph 10(f) Miscellaneous.

      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's beneficial ownership. Neither
the Fund nor any affiliate (other than Merrill Lynch, Pierce, Fenner & Smith
Incorporated) shall submit an Order in any Auction. Any Beneficial Owner that
is an affiliate (other than Merrill Lynch, Pierce, Fenner & 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'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.















                                     C-8
<PAGE>


                           PART C. OTHER INFORMATION

Item 24.  Financial Statements And Exhibits.

(1)       Financial Statements

Part A:
         Financial Highlights for each of the fiscal years in the ten-year
         period ended October 31, 2004.


Part B:
         Schedule of Investments of the Fund as of October 31, 2004.*
         Statement of Net Assets of the Fund as of October 31, 2004.*
         Statement of Operations of the Fund for the fiscal year ended
         October 31, 2004.*

         Statements of Changes in Net Assets of the Fund for the fiscal
         years ended October 31, 2003 and 2004.*

         Financial Highlights of the Fund for each of the fiscal years in
         the five-year period ended October 31, 2004.*

         Report of Independent Registered Public Accounting Firm.*


- ---------
*        Incorporated by reference to the Registrant's Annual Report to
         Shareholders for the fiscal year ended October 31, 2003 filed with
         the Securities and Exchange Commission ("Commission") on January 6,
         2003 pursuant to Rule 30b2-1 under the Investment Company Act of
         1940, as amended ("1940 Act").


Exhibits  Description
- --------  -----------

(a)(1)    Articles of Incorporation of the Registrant.

(a)(2)    Articles Supplementary creating three series of Auction Market
          Preferred Stock ("AMPS") of the Registrant.

(a)(3)    Articles of Amendment to the Articles Supplementary, dated November
          30, 1994.

(a)(4)    Articles of Amendment to the Articles Supplementary, dated November
          30, 1994.

(a)(5)    Articles of Amendment to the Articles Supplementary, dated October
          11, 1999.

(a)(6)    Form of Articles Supplementary creating one series of AMPS. (b)
          By-laws of the Registrant. (c) Not applicable.

(d)(1)    Portions of the Articles of Incorporation, By-laws and Articles
          Supplementary of the Registrant defining the rights of holders of
          shares of the Registrant.(a)

(d)(2)    Form of specimen certificate for the AMPS of the Registrant. (e)
          Form of Automatic Dividend Reinvestment Plan.(b) (f) Not applicable.

(g)       Form of Investment Advisory Agreement between the Registrant and
          Fund Asset Management, L.P. ("FAM" or the "Investment Adviser").

(h)(1)    Form of Purchase Agreement between the Registrant and the Investment
          Advisor and Merrill Lynch, Pierce, Fenner & Smith Incorporated
          ("Merrill Lynch") relating to the AMPS.

(h)(2)    Form of Merrill Lynch Standard Dealer Agreement.(c)


                                      C-1
<PAGE>


Exhibits  Description
- --------  -----------

(i)       Not applicable.

(j)       Form of Custodian Agreement between the Registrant and The Bank of
          New York ("BONY").(d)

(k)(l)    Form of Registrar, Transfer Agency, Dividend Disbursing Agency and
          Shareholder Servicing Agency Agreement between the Registrant and
          BONY.(e)

(k)(2)    Form of Agreement of Resignation, Appointment and Acceptance among
          the Registrant, IBJ Whitehall Bank & Trust Company and BONY.(e)

(k)(3)    Form of Administrative Services Agreement between the Registrant and
          State Street Bank and Trust Company.(f)

(k)(4)    Form of Auction Agent Agreement between the Registrant and BONY.
          (k)(5) Form of Broker-Dealer Agreement.(g) (k)(6) Form of Letter of
          Representations.

(l)       Opinion and Consent of Sidley Austin Brown & Wood LLP.*

(m)       Not applicable.

(n)       Consent of ___________, independent registered public accounting
          firm for the Registrant.*

(o)       Not applicable.

(p)       Not applicable.

(q)       Not applicable.

(r)       Code of Ethics.(h)

- ---------
* To be filed by amendment.
(a)    Reference is made to Article V, Article VI (sections 2, 3, 4, 5 and 6),
       Article VII, Article VIII, Article X, Article XI, Article XII and
       Article XIII of the Registrant's Articles of Incorporation, filed as
       Exhibit (a)(1) hereto; to Article II, Article III (sections l, 2, 3, 5
       and 17), Article VI, Article VII, Article XII, Article XIII and Article
       XIV of the Registrant's By-Laws filed as Exhibit (b) hereto; and to the
       Articles Supplementary and Articles of Amendment filed as Exhibit
       (a)(2), (a)(3), (a)(4), (a)(5) and (a)(6).
(b)    Filed as an exhibit to the Registrant's Annual Report to Shareholders
       for the fiscal year ended October 31, 2003, filed on January 6, 2004.
(c)    Incorporated by reference to Exhibit (h)(2) to Pre-Effective Amendment
       No. 3 to the Registration Statement on Form N-2 of Preferred Income
       Strategies, Inc. (File No. 333-102712), filed on March 25, 2003.
(d)    Incorporated by reference to Exhibit 7 to Post-Effective No. 13 to the
       Registration Statement on Form N-IA of The Asset Program, Inc. (File
       No. 33-53887), filed on March 21, 2002.
(e)    Incorporated by reference to Exhibit 8(d) to Post-Effective Amendment
       No. 1 to the Registration Statement on Form N-1 A of Merrill Lynch
       Focus Twenty Fund, Inc. (File No. 333-89775) filed on March 20, 2001.
(f)    Incorporated by reference to an exhibit to the Registration Statement
       on Form N-14 of MuniYield Fund, Inc. (File No. 333-65242), filed on
       September 14, 2001.
(g)    Incorporated by reference to Exhibit (k)(5) to the Registration
       Statement on Form N-2 of MuniYield Insured Fund, Inc. (File No.
       333-116604), filed on June 18, 2004.
(h)    Incorporated by reference to Exhibit 15 to Pre-Effective Amendment No.
       1 to the Registration Statement on Form N-1 A of Merrill Lynch
       Inflation Protected Fund (File No. 333-110936), filed on January 22,
       2004.

Item 25.  Marketing Arrangements.

          See Exhibits (h)(1) and (2).

Item 26.  Other Expenses of Issuance and Distribution.

          The following table sets forth the estimated expenses to be incurred
in connection with the offering described in this Registration Statement:


                                     C-2
<PAGE>


      Registration fees................................   $  5,068
      Printing (other than stock certificates).........   $ 21,250
      Legal fees and expenses..........................   $ 65,000
      Accounting fees and expenses.....................   $  6,000
      Rating Agency Fees...............................   $ 45,000
      Miscellaneous....................................   $  7,682
                                                         ----------
      Total............................................   $150,000

Item 27.  Persons Controlled by or Under Common Control with Registrant.

          The Registrant does not control nor is it under common control with,
any person.

Item 28.  Number of Holders of Securities.

                                            Number of Record Holders
Title of Class                                 At December 1, 2004
- --------------                             --------------------------
Common Stock, $.10 par value...............
Preferred Stock............................              1

Item 29.  Indemnification.

          Reference is made to Section 2-418 of the General Corporation Law of
the State of Maryland, Article VI of the Registrant's Articles of
Incorporation, Article VI of the Registrant's By-laws and Section 6 of the
Purchase Agreement, which provide for indemnification.

          Article VI of the By-laws provides that each officer and director of
the Registrant shall be indemnified by the Registrant to the full extent
permitted under the Maryland General Corporation Law, except that such
indemnity shall not protect any such person against any liability to the
Registrant or any stockholder thereof to which such person would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office.
Absent a court determination that an officer or director seeking
indemnification was not liable on the merits or guilty of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in
the conduct of his or her office, the decision by the Registrant to indemnify
such person must be based upon the reasonable determination of independent
legal counsel or the vote of a majority of a quorum of non-party independent
directors, after review of the facts, that such officer or director is not
guilty of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her office.

          Each officer and director of the Registrant claiming indemnification
within the scope of Article VI of the By-laws shall be entitled to advances
from the Registrant for payment of the reasonable expenses incurred by him or
her in connection with proceedings to which he or she is a party in the manner
and to the full extent permitted under the Maryland General Corporation Law;
provided, however, that the person seeking indemnification shall provide to
the Registrant a written affirmation of his or her good faith belief that the
standard of conduct necessary for indemnification by the Registrant has been
met and a written undertaking to repay any such advance, if it ultimately
should be determined that the standard of conduct has not been met, and
provided further that at least one of the following additional conditions is
met: (i) the person seeking indemnification shall provide a security in form
and amount acceptable to the Registrant for his or her undertaking; (ii) the
Registrant is insured against losses arising by reason of the advance; or
(iii) a majority of a quorum of non-party independent directors, or
independent legal counsel in a written opinion shall determine, based on a
review of facts readily available to the Registrant at the time the advance is
proposed to be made, that there is reason to believe that the person seeking
indemnification will ultimately be found to be entitled to indemnification.


                                     C-3
<PAGE>


          The Registrant may purchase insurance on behalf of an officer or
director protecting such person to the full extent permitted under the
Maryland General Corporation Law from liability arising from his or her
activities as officer or director of the Registrant. The Registrant, however,
may not purchase insurance on behalf of any officer or director of the
Registrant that protects or purports to protect such person from liability to
the Registrant or to its stockholders to which such officer or director would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
or her office.

          In Section 7 of the Purchase Agreement relating to the securities
being offered hereby, the Registrant agrees to indemnify Merrill Lynch and
each person, if any, who controls Merrill Lynch within the meaning of the
Securities Act of 1933 (the "1933 Act") against certain types of civil
liabilities arising in connection with the Registration Statement or
Prospectus and Statement of Additional Information.

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

Item 30.  Business and Other Connections of the Investment Adviser.

          FAM acts as the investment adviser for a number of affiliated
open-end and closed-end registered investment companies.

          Merrill Lynch Investment Managers, L.P. ("MLIM"), acts as the
investment adviser for a number of affiliated open-end and closed-end
registered investment companies, and also acts as sub-adviser to certain other
portfolios.

          The address of each of these registered investment companies is P.O.
Box 9011, Princeton, New Jersey 08543-9011, except that the address of Merrill
Lynch Funds for Institutions Series is One Financial Center, 23rd Floor,
Boston, Massachusetts 02111-2665.

          The address of the Investment Adviser, MLIM, Princeton Services,
Inc. ("Princeton Services") and Princeton Administrators, L.P. ("Princeton
Administrators") is also P.O. Box 9011, Princeton, New Jersey 08543-9011. The
address of Merrill Lynch and Merrill Lynch & Co., Inc. ("ML & Co.") is World
Financial Center, North Tower, 250 Vesey Street, New York, New York 10080. The
address of the Fund's transfer agent, The Bank of New York (the "Transfer
Agent"), is 101 Barclay Street, New York, New York 10286.

          Set forth below is a list of each executive officer and partner of
the Investment Adviser indicating each business, profession, vocation or
employment of a substantial nature in which each such person or entity has
been engaged for the past two years for his, her or its own account or in the
capacity of director, officer, employee, partner or Director. Mr. Burke is
Vice President and Treasurer of all or substantially all of the investment
companies advised by FAM or its affiliates, and Mr. Doll is an officer of one
or more of such companies.

<TABLE>
<CAPTION>

                                                                              Other Substantial Business,
                                   Position(s) with Investment                   Profession, Vocation
             Name                            Adviser                                 Or Employment
- -------------------------       -------------------------------   ----------------------------------------------------------------
<S>                             <C>                               <C>
ML & Co.                        Limited Partner                   Financial Services Holding Company; Limited
                                                                  Partner of MLIM

Princeton Services              General Partner                   General Partner of MLIM

Robert C. Doll, Jr.             President                         President of MLIM; Director of Princeton Services;
                                                                  Chief Investment Officer of OppenheimerFunds, Inc.
                                                                  in 1999 and Executive Vice President thereof from



                                                                C-4
<PAGE>


                                                                  1991 to 1999

Donald C. Burke                 First Vice President and          First Vice President, Treasurer and Director of
                                Treasurer                         Taxation of MLIM; Senior Vice President, Treasurer
                                                                  and Director of Princeton Services; Vice President
                                                                  of FAMD

Andrew J. Donohue               General Counsel                   First Vice President and General Counsel of MLIM;
                                                                  Senior Vice President, Director and General
                                                                  Counsel of Princeton Services; President and Director of FAMD

Alice A. Pellegrino             Secretary                         Secretary of MLIM, Princeton Services and FAMD

</TABLE>

Item 31.  Location of Account and Records.

          All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act, and the Rules promulgated thereunder are
maintained at the offices of the Registrant (800 Scudders Mill Road,
Plainsboro, New Jersey 08536), its Investment Adviser (800 Scudders Mill Road,
Plainsboro, New Jersey 08536), its custodian and transfer agent, The Bank of
New York (101 Barclay Street, New York, New York 10286), and its accounting
services provider, State Street (500 College Road East, Princeton, New Jersey
08540).

Item 32.  Management Services.

          Not applicable.

Item 33.  Undertakings.

          (1)    The Registrant undertakes to suspend the offering of the
shares of preferred stock covered hereby until it amends its prospectus
contained herein if (1) subsequent to the effective date of this Registration
Statement, its net asset value per share of preferred stock declines more than
10% from its net asset value per share of preferred stock as of the effective
date of this Registration Statement, or (2) its net asset value per share of
preferred stock increases to an amount greater than its net proceeds as stated
in the prospectus contained herein.

          (2)    Not applicable.

          (3)    Not applicable.

          (4)    Not applicable.

          (5)    The Registrant undertakes that:

                 (a)    For purposes of determining any liability under the
          1933 Act, the information omitted from the form of prospectus filed
          as part of this Registration Statement in reliance upon Rule 430A
          and contained in the form of prospectus filed by the registrant
          pursuant to Rule 497(h) under the 1933 Act shall be deemed to be
          part of this Registration Statement as of the time it was declared
          effective.

                 (b)    For the purpose of determining any liability under the
          1933 Act, each post-effective amendment that contains a form of
          prospectus shall be deemed to be a new registration statement
          relating to the securities offered therein, and the offering of such
          securities at that time shall be deemed to be the initial bona fide
          offering thereof.

                 (c)    The Registrant undertakes to send by first-class mail
          or other means designed to ensure equally prompt delivery, within
          two business days of receipt of a written or oral request, any
          statement of additional information.


                                     C-5
<PAGE>


                                  SIGNATURES

      Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the Township of Plainsboro, and State of New
Jersey, on the 12th day of November, 2004.

                      MUNIVEST FUND II, INC.
                            (Registrant)

                      By:      /s/ Donald C. Burke
                               -----------------------------------------------
                               (Donald C. Burke, Vice President and Treasurer)


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

      Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following person in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>

                   Signature                                        Title                                        Date
                   ---------                                        -----                                        ----

<S>                                                     <C>                                               <C>
          /s/ Terry K. Glenn                            President (Principal Executive                    November 12, 2004
        --------------------------------
                (TERRY K. GLENN)                            Officer) and Director

           /s/ Donald C. Burke                           Vice President and Treasurer                     November 12, 2004
      -----------------------------------
               (DONALD C. BURKE)                     (Principal Financial and Accounting
                                                                   Officer)

        /s/ Ronald W. Forbes                                       Director                               November 12, 2004
        -------------------------------
               (RONALD W. FORBES)

         /s/ Cynthia A. Montgomery                                 Director                               November 12, 2004
     -------------------------------------
            (CYNTHIA A. MONTGOMERY)

               /s/ Jean Margo Reid                                 Director                               November 12, 2004
  -------------------------------------------
               (JEAN MARGO REID)

               /s/ Kevin A. Ryan                                   Director                               November 12, 2004
      ------------------------------------
                (KEVIN A. RYAN)

           /s/ Roscoe S. Suddarth                                  Director                               November 12, 2004
   ------------------------------------------
              (ROSCOE S. SUDDARTH)

                 /s/ Richard R. West                               Director                               November 12, 2004
        -------------------------------
               (RICHARD R. WEST)

         /s/ Edward D. Zinbarg                                     Director                               November 12, 2004
         ------------------------------
              (EDWARD D. ZINBARG)

</TABLE>





                                      C-6
<PAGE>



                                 EXHIBIT INDEX

(a)(1)    Articles of Incorporation of the Registrant.

(a)(2)    Articles Supplementary creating three series of Auction Market
          Preferred Stock ("AMPS") of the Registrant.

(a)(3)    Articles of Amendment to the Articles Supplementary, dated November
          30, 1994.

(a)(4)    Articles of Amendment to the Articles Supplementary, dated November
          30, 1994.

(a)(5)    Articles of Amendment to the Articles Supplementary, dated October
          11, 1999.

(a)(6)    Form of Articles Supplementary creating one series of AMPS.

(b)       By-laws of the Registrant.

(d)(2)    Form of specimen certificate for the AMPS of the Registrant.

(g)       Form of Investment Advisory Agreement between the Registrant and
          Fund Asset Management, L.P. ("FAM")

(h)(1)    Form of Purchase Agreement between the Registrant and FAM and
          Merrill Lynch, Pierce, Fenner & Smith Incorporated.

(k)(4)    Form of Auction Agent Agreement between the Registrant and BONY.

(k)(6)    Form of Letter of Representation.






                                      C-7


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2A1
<SEQUENCE>2
<FILENAME>efc4-1994_5621139ex992a1.txt
<TEXT>
                                                                Exhibit (a)(1)



                           ARTICLES OF INCORPORATION

                                      OF

                            MUNIVEST FUND II, INC.


                                  ARTICLE I

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

                                  ARTICLE II

                                     NAME

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

                                 ARTICLE III

                              PURPOSES AND POWERS

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





<PAGE>

                                  ARTICLE IV

                     PRINCIPAL OFFICE AND MANAGEMENT AGENT

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

                                  ARTICLE V

                                 CAPITAL STOCK

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

      (2) The Board of Directors may classify and reclassify any unissued
shares of capital stock into one or more additional or other classes or series
as may be established from time to time by setting or changing in any one or
more respects the designation, 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.

      (3) Unless otherwise expressly provided in the charter of the
Corporation, including any Articles Supplementary creating any class or series
of capital stock, the holders of each class or series of capital stock shall
be entitled to dividends and distributions in such amounts and at



                                      2
<PAGE>


such times as may be determined by the Board of Directors, and the dividends
and distributions paid with respect to the various classes or series of capital
stock may vary among such classes and series.

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

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


                                      3
<PAGE>

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

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

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


                                      4
<PAGE>

                                  ARTICLE VI

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

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

                              Philip L. Kirstein
                               Mark B. Goldfus
                            Michael J. Hennewinkel

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

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

      (4) To the fullest extent permitted by the General Laws of the State of
Maryland, subject to the requirements of the Investment Company Act of 1940,
as amended, no director or officer of the Corporation shall be personally
liable to the Corporation or its security holders for money damages. No
amendment of these Articles of Incorporation or repeal of any provision


                                      5
<PAGE>

hereof shall limit or eliminate the benefits provided to directors and
officers under this provision in connection with any act or omission that
occurred prior to such amendment or repeal.

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

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

                                 ARTICLE VII

                          DENIAL OF PREEMPTIVE RIGHTS

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




                                      6
<PAGE>

                                 ARTICLE VIII

                             DETERMINATION BINDING

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



                                      7
<PAGE>

thereunder or (b) protect or purport to protect any director or officer
of the Corporation against any liability to the Corporation or its security
holders to which it would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.


                                  ARTICLE IX

                              PERPETUAL EXISTENCE

      The duration of the Corporation shall be perpetual.


                                  ARTICLE X

                       PRIVATE PROPERTY OF STOCKHOLDERS

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


                                  ARTICLE XI

                        CONVERSION TO OPEN-END COMPANY

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



                                      8
<PAGE>

Corporation, in which case the affirmative vote of the holders of a majority
of the outstanding shares of capital stock of the Corporation entitled to vote
thereon shall be required.


                                 ARTICLE XII

                      MERGER, SALE OF ASSETS, LIQUIDATION

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


                                 ARTICLE XIII

                                   AMENDMENT

      The Corporation reserves the right to amend, alter, change or repeal any
provision contained in these Articles of Incorporation, in the manner now or
hereafter prescribed by statute, including any amendment which alters the
contract rights, as expressly set forth in the charter, of any outstanding
stock and substantially adversely affects the stockholders' rights and all
rights conferred upon stockholders herein are granted subject to this
reservation.



                                      9
<PAGE>


Notwithstanding any other provisions of these Articles of Incorporation
or the By-Laws of the Corporation (and notwithstanding the fact that a lesser
percentage may be specified by law, these Articles of Incorporation or the
By-Laws of the Corporation) the amendment or repeal of Section (5) of Article
V, Section (1), Section (3), Section (4), Section (5) and Section (6) of
Article VI, Article IX, Article X, Article XI, Article XII, or this Article
XIII, of these Articles of Incorporation shall require the affirmative vote of
the holders of at least sixty-six and two-thirds percent (66 2/3%) of the
outstanding shares of capital stock of the Corporation entitled to be voted on
the matter.

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

Dated the 3rd day
of February 1993.


                                               /s/ Laura Sutton
                                    ------------------------------
                                    Laura Sutton

                                      10

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2A2
<SEQUENCE>3
<FILENAME>efc4-1994_5621559ex992a2.txt
<TEXT>
                                                                Exhibit (a)(2)

                            MUNIVEST FUND II, INC.

                Articles Supplementary creating three series of

                       Auction Market Preferred Stock(1)

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

      FIRST: Pursuant to authority expressly vested in the Board of Directors
of the Corporation by article fifth of its Charter, the Board of Directors has
reclassified 2,700 authorized and unissued shares of common stock of the
Corporation as preferred stock of the Corporation and has authorized the
issuance of three series of preferred stock, par value $.10 per share,
liquidation preference $50,000 per share plus an amount equal to accumulated
but unpaid dividends (whether or not earned or declared) thereon, to be
designated respectively: Auction Market Preferred Stock, Series A; Auction
Market Preferred Stock, Series B; and Auction Market Preferred Stock, Series
C.

      SECOND: The preferences, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption, of the
shares of each such series of preferred stock are as follows:

                                  DESIGNATION

      SERIES A: A series of 900 shares of preferred stock, par value $.10 per
share, liquidation preference $50,000 per share plus an amount equal to
accumulated but unpaid dividends (whether or not earned or declared) thereon,
is hereby designated "Auction Market Preferred Stock, Series A." Each share of
Auction Market Preferred Stock, Series A ( sometimes referred to herein as
"Series A AMPS") shall be issued on April 26, 1993; have an Initial


- -------------------------
(1)   Registered trademark of Merrill Lynch & Co., Inc.

<PAGE>

Dividend Rate equal to 2.50% per annum; have Initial Dividend Payment Dates as
set forth herein; and have such other preferences, voting powers, limitations
as to dividends, qualifications and terms and conditions of redemption as are
set forth in these Articles Supplementary. The Auction Market Preferred Stock,
Series A shall constitute a separate series of preferred stock of the
Corporation, and each share of Auction Market Preferred Stock, Series A shall
be identical.

      SERIES B: A series of 900 shares of preferred stock, par value $.10 per
share, liquidation preference $50,000 per share plus an amount equal to
accumulated but unpaid dividends (whether or not earned or declared) thereon,
is hereby designated "Auction Market Preferred Stock, Series B." Each share of
Auction Market Preferred Stock, Series B (sometimes referred to herein as
"Series B AMPS") shall be issued on April 26, 1993; have an Initial Dividend
Rate equal to 2.70% per annum; have Initial Dividend Payment Dates as set
forth herein; and have such other preferences, voting powers, limitations as
to dividends, qualifications and terms and conditions of redemption as are set
forth in these Articles Supplementary. The Auction Market Preferred Stock,
Series B shall constitute a separate series of preferred stock of the
Corporation, and each share of Auction Market Preferred Stock, Series B shall
be identical.

      SERIES C: A series of 900 shares of preferred stock, par value $.10 per
share, liquidation preference $50,000 per share plus an amount equal to
accumulated but unpaid dividends (whether or not earned or declared) thereon
is hereby designated "Auction Market Preferred Stock, Series C." Each share of
Auction Market Preferred Stock, Series C (sometimes referred to herein as
"Series C AMPS") shall be issued on April 26, 1993; have an Initial Dividend
Rate equal to 2.25% per annum; have an Initial Dividend Payment Date as set
forth herein; and have such other preferences, voting powers, limitations as
to dividends,



                                      2
<PAGE>

qualifications and terms and conditions of redemption as are set forth in these
Articles Supplementary. The Auction Market Preferred Stock, Series C shall
constitute a separate series of preferred stock of the Corporation, and each
share of Auction Market Preferred Stock, Series C shall be identical.

      1. Definitions. (a) Unless the context or use indicates another or
different meaning or intent, in these Articles Supplementary the following
terms have the following meanings, whether used in the singular or plural:

            "`AA' Composite Commercial Paper Rate," on any date of
determination, means (i) the Interest Equivalent of the rate on commercial
paper placed on behalf of issuers whose corporate bonds are rated "AA" by S&P
or "Aa" by Moody's or the equivalent of such rating by another nationally
recognized rating agency, as such rate is made available on a discount basis
or otherwise by the Federal Reserve Bank of New York for the Business Day
immediately preceding such date, or (ii) in the event that the Federal Reserve
Bank of New York does not make available such a rate, then the arithmetic
average of the Interest Equivalent of the rate on commercial paper placed on
behalf of such issuers, as quoted on a discount basis or otherwise by Merrill
Lynch, Pierce, Fenner & Smith Incorporated or its successors that are
Commercial Paper Dealers, to the Auction Agent for the close of business on
the Business Day immediately preceding such date. If one of the Commercial
Paper Dealers does not quote a rate required to determine the "AA" Composite
Commercial Paper Rate, the "AA" Composite Commercial Paper Rate will be
determined on the basis of the quotation or quotations furnished by any
Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers
selected by the Corporation to provide such rate or rates not being supplied
by the Commercial Paper Dealer. If the number of Dividend Period Days shall be
(i) 7 or more but fewer than 49 days, such rate shall be the Interest
Equivalent of the 30-day rate on such commercial paper; (ii) 49 or more but
fewer



                                      3
<PAGE>

than 70 days, such rate shall be the Interest Equivalent of the 60-day
rate on such commercial paper; (iii) 70 or more days but fewer than 85 days,
such rate shall be the arithmetic average of the Interest Equivalent on the
60-day and 90-day rates on such commercial paper; (iv) 85 or more days but
fewer than 99 days, such rate shall be the Interest Equivalent of the 90-day
rate on such commercial paper; (v) 99 or more days but fewer than 120 days,
such rate shall be the arithmetic average of the Interest Equivalent of the
90-day and 120-day rates on such commercial paper; (vi) 120 or more days but
fewer than 141 days, such rate shall be the Interest Equivalent of the 120-day
rate on such commercial paper; (vii) 141 or more days but fewer than 162 days,
such rate shall be the arithmetic average of the Interest Equivalent of the
120-day and 180-day rates on such commercial paper; and (viii) 162 or more
days but fewer than 183 days, such rate shall be the Interest Equivalent of
the 180-day rate on such commercial paper.

            "Accountant's Confirmation" has the meaning set forth in paragraph
7(c) of these Articles Supplementary.

            "Additional Dividend" has the meaning set forth in paragraph 2(e)
of these Articles Supplementary.

            "Adviser" means the Corporation's investment adviser which
initially shall be Fund Asset Management, Inc.

            "Affiliate" means any Person, other than Merrill Lynch, Pierce,
Fenner & Smith Incorporated or its successors, known to the Auction Agent to
be controlled by, in control of, or under common control with, the
Corporation.

            "Agent Member" means a member of the Securities Depository that
will act on behalf of a Beneficial Owner of one or more shares of AMPS or a
Potential Beneficial Owner.



                                      4
<PAGE>

            "AMPS" means, as the case may be, the Auction Market Preferred
Stock, Series A; Auction Market Preferred Stock, Series B; or Auction Market
Preferred Stock, Series C.

            "AMPS Basic Maintenance Amount," as of any Valuation Date, means
the dollar amount equal to (i) the sum of (A) the product of the number of
shares of AMPS of such series and Other AMPS Outstanding on such Valuation
Date multiplied by the sum of (a) $50,000 and (b) any applicable redemption
premium attributable to the designation of a Premium Call Period; (B) the
aggregate amount of cash dividends (whether or not earned or declared) that
will have accumulated for each share of AMPS and other AMPS Outstanding, in
each case, to (but not including) the end of the current Dividend Period for
each series of 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's Volatility Factor and the S&P
Volatility Factor, determined from time to time by Moody's and S&P,
respectively (except that if such Valuation Date occurs during a Non-Payment
Period, the cash dividend for purposes of calculation would accumulate at the
then current Non-Payment Period Rate); (D) the amount of anticipated expenses
of the Corporation for the 90 days subsequent to such Valuation Date; (E) the
amount of the Corporation's Maximum Potential Additional Dividend Liability as
of such Valuation Date; and (F) any current liabilities as of such Valuation
Date to the extent not reflected in any of






                                      5
<PAGE>

(i)(A) through (i)(E) (including, without limitation, and immediately upon
determination, any amounts due and payable by the Corporation pursuant to
repurchase agreements and any payables for Municipal Bonds purchased as of
such Valuation Date) less (ii) either (A) the Discounted Value of any of the
Corporation's assets, or (B) the face value of any of the Corporation's assets
if such assets mature prior to or on the date of redemption of AMPS or payment
of a liability and are either securities issued or guaranteed by the United
States Government or have a rating assigned by Moody's of at least Aaa, P-1,
VMIG-1 or MIG-1 and, with respect to S&P, at least AAA, SP-1+ or A-1+, in both
cases irrevocably deposited by the Corporation for the payment of the amount
needed to redeem shares of AMPS subject to redemption or any of (i)(B) through
(i)(F).

            "AMPS Basic Maintenance Cure Date," with respect to the failure by
the Corporation to satisfy the AMPS Basic Maintenance Amount (as required by
paragraph 7(a) of these Articles Supplementary) as of a given Valuation Date,
means the sixth Business Day following such Valuation Date.

            "AMPS Basic Maintenance Report" means a report signed by any of
the President, Treasurer, any Senior Vice President or any Vice President of
the Corporation which sets forth, as of the related Valuation Date, the assets
of the Corporation, the Market Value and the Discount Value thereof (seriatim
and in aggregate), and the AMPS Basic Maintenance Amount.

            "Anticipation Notes" shall mean the following Municipal Bonds:
revenue anticipation notes, tax anticipation notes, tax and revenue
anticipation notes, grant anticipation notes and bond anticipation notes.

            "Applicable Percentage" has the meaning set forth in paragraph
11(a)(vii) of these Articles Supplementary.




                                      6
<PAGE>

            "Applicable Rate" means the rate per annum at which cash dividends
are payable on the AMPS or Other AMPS, as the case may be, for any Dividend
Period.

            "Auction" means a periodic operation of the Auction Procedures.

            "Auction Agent" means IBJ Schroder Bank & Trust Company unless and
until another commercial bank, trust company or other financial institution
appointed by a resolution of the Board of Directors of the Corporation or a
duly authorized committee thereof enters into an agreement with the
Corporation to follow the Auction Procedures for the purpose of determining
the Applicable Rate and to act as transfer agent, registrar, dividend
disbursing agent and redemption agent for the AMPS and Other AMPS.

            "Auction Procedures" means the procedures for conducting Auctions
set forth in paragraph 11 of these Articles Supplementary.

            "Beneficial Owner" means a customer of a Broker-Dealer who is
listed on the records of that Broker-Dealer (or, if applicable, the Auction
Agent) as a holder of shares of AMPS or a Broker-Dealer that holds AMPS for
its own account.

            "Broker-Dealer" means any broker-dealer, or other entity permitted
by law to perform the functions required of a Broker-Dealer in paragraph 11 of
these Articles Supplementary, that has been selected by the Corporation and
has entered into a Broker-Dealer Agreement with the Auction Agent that remains
effective.

            "Broker-Dealer Agreement" means an agreement between the Auction
Agent and a Broker-Dealer pursuant to which such Broker-Dealer agrees to
follow the procedures specified in paragraph 11 of these Articles
Supplementary.

            "Business Day" means a day on which the New York Stock Exchange,
Inc. is open for trading and which is not a Saturday, Sunday or other day on
which banks in The City of New York are authorized or obligated by law to
close.



                                      7
<PAGE>

            "Charter" means the Articles of Incorporation, as amended and
supplemented (including these Articles Supplementary), of the Corporation on
file in the State Department of Assessments and Taxation of Maryland.

            "Code" means the Internal Revenue Code of 1986, as amended.

            "Commercial Paper Dealers" means Merrill Lynch, Pierce, Fenner &
Smith Incorporated and such other commercial paper dealer or dealers as the
Corporation may from time to time appoint, or, in lieu of any thereof, their
respective affiliates or successors.

            "Common Stock" means the common stock, par value $.10 per share,
of the corporation.

            "Corporation" means Munivest Fund II, Inc., a Maryland corporation.

            "Date of Original Issue" means, with respect to any share of AMPS
or Other AMPS, the date on which the Corporation originally issues such share.

            "Deposit Securities" means cash and Municipal Bonds rated at least
AAA, A-1+ or SP-1+ by S&P.

            "Discounted Value" means (i) with respect to an S&P Eligible
Asset, the quotient of the Market Value thereof divided by the applicable S&P
Discount Factor and (ii) with respect to a Moody's Eligible Asset, the lower
of par and the quotient of the Market Value thereof divided by the applicable
Moody's Discount Factor.

            "Dividend Coverage Amount," as of any Valuation Date, means (A)(i)
the aggregate amount of cash dividends that will accumulate on all shares of
Outstanding AMPS and Other AMPS, in each case to (but not including) the next
Dividend Payment Date therefor for each series of AMPS that follows such
Valuation Date plus (ii) the aggregate amount of all liabilities existing on
such Valuation Date which are payable on or prior to such next Dividend
Payment Date less (B)(i) the combined Market Value of Deposit Securities
irrevocably deposited




                                      8
<PAGE>

with the Auction Agent for the payment of cash dividends on all shares
of AMPS and Other AMPS, (ii) the book value of receivables for Municipal Bonds
sold as of or prior to such Valuation Date, if such receivables are due within
five Business Days of such Valuation Date and in any event on or prior to such
next Dividend Payment Date, and (iii) interest on Municipal Bonds which is
scheduled to be paid on or prior to the next Dividend Payment Date.

            "Dividend Coverage Assets," as of any Valuation Date, means, in
the case of shares of AMPS and Other AMPS, Deposit Securities with maturity or
tender payment dates not later in each case than the Dividend Payment Date
therefor that follows such Valuation Date.

            "Dividend Payment Date," with respect to AMPS, has the meaning set
forth in paragraph 2(b)(i) of these Articles Supplementary and, with respect
to Other AMPS, has the equivalent meaning.

            "Dividend Period" means the Initial Dividend Period, any 7-day
Dividend Period, any 28-day Dividend Period and any Special Dividend Period.

            "Existing Holder" means a Broker-Dealer or any such other Person
as may be permitted by the Corporation that is listed as the holder of record
of shares of AMPS in the Stock Books.

            "First Initial Dividend Payment Date" means May 3, 1993 in the
case of Series A AMPS and Series B AMPS.

            "Forward Commitment" has the meaning set forth in paragraph 9(c)
of these Articles Supplementary.

            "Holder" means a Person identified as a holder of record of shares
of AMPS in the Stock Register.



                                      9
<PAGE>

            "Independent Accountant" means a nationally recognized accountant,
or firm of accountants, that is, with respect to the Corporation, an
independent public accountant or firm of independent public accountants under
the Securities Act of 1933, as amended.

            "Initial Dividend Payment Date" means, with respect to Series A
AMPS and Series B AMPS, each of the First Initial Dividend Payment Date, the
Last Initial Dividend Payment Date and the first Business Day of each calendar
month during the Initial Dividend Period, and with respect to Series C AMPS,
May 6, 1993.

            "Initial Dividend Period," with respect to each series of AMPS,
has the meaning set forth in paragraph 2(c)(i) of these Articles Supplementary
and, with respect to Other AMPS, has the equivalent meaning.

            "Initial Dividend Rate," with respect to each series of AMPS,
means the rate per annum specified herein applicable to the Initial Dividend
Period for such series of AMPS and, with respect to other AMPS, has the
equivalent meaning.

            "Initial Margin" means the amount of cash or securities deposited
with a broker as a margin payment at the time of purchase or sale of a futures
contract.

            "Interest Equivalent" means a yield on a 360-day basis of a
discount basis security which is equal to the yield on an equivalent
interest-bearing security.

            "Last Initial Dividend Payment Date" means July 22, 1993 in the
case of Series A AMPS and October 21, 1993 in the case of Series B AMPS.

            "Long Term Dividend Period" means a Special Dividend Period
consisting of a specified period of one whole year or more but not greater
than five years.

            "Mandatory Redemption Price" means $50,000 per share of AMPS plus
an amount equal to accumulated but unpaid dividends (whether or not earned or
declared) to the date fixed for redemption and excluding Additional Dividends.



                                      10
<PAGE>

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

            "Market Value" of any asset of the Corporation shall be the market
value thereof determined by the Pricing Service. Market Value of any asset
shall include any interest accrued thereon. The Pricing Service shall value
portfolio securities at the quoted bid prices or the mean between the quoted
bid and asked price or the yield equivalent when quotations are not readily
available. Securities for which quotations are not readily available shall be
valued at fair value as determined by the Pricing Service using methods which
include consideration of: yields or prices of municipal bonds of comparable
quality, type of issue, coupon, maturity and rating; indications as to value
from dealers; and general market conditions. The Pricing Service may employ
electronic data processing techniques and/or a matrix system to determine
valuations. In the event the Pricing Service is unable to value a security,
the security shall be valued at the lower of two dealer bids obtained by the
Corporation from dealers who are members of the National Association of
Securities Dealers, Inc. and who make a market in the security, at least one
of which shall be in writing. Futures contracts and options are valued at
closing prices for such instruments established by the exchange or board of
trade on which they are traded, or if market quotations are not readily
available, are valued at fair value on a consistent basis using methods
determined in good faith by the Board of Directors.

            "Maximum Applicable Rate," with respect to AMPS, has the meaning
set forth in paragraph 11(a)(vii) of these Articles Supplementary and, with
respect to Other AMPS, has the equivalent meaning.

            "Maximum Potential Additional Dividend Liability," as of any
Valuation Date, means the aggregate amount of Additional Dividends that would
be due if the Corporation were



                                      11
<PAGE>

to make Retroactive Taxable Allocations, with respect to any fiscal
year, estimated based upon dividends paid and the amount of undistributed
realized net capital gains and other taxable income earned by the Corporation,
as of the end of the calendar month immediately preceding such Valuation Date
and assuming such Additional Dividends are fully taxable.

            "Minimum Liquidity Level" means, as of any Valuation Date, an
aggregate Market Value of the Corporation's Dividend Coverage Assets not less
than the Dividend Coverage Amount.

            "Moody's" means Moody's Investors Service, Inc. or its successors.

            "Moody's Discount Factor" means, for purposes of determining the
Discounted Value of any Municipal Bond which constitutes a Moody's Eligible
Asset, the percentage determined by reference to (a) the rating by Moody's or
S&P on such Bond and (b) the Moody's Exposure Period, in accordance with the
table set forth below:
<TABLE>
<CAPTION>

                                                 Rating Category
                             ---------------------------------------------------------
Moody's Exposure Period      Aaa*   Aa*    A*     Baa*  Other** VMIG-1***  SP-1+***
- ---------------------------  -----  -----  -----  ----- ------- ---------  -----------
<S>                          <C>    <C>    <C>    <C>    <C>      <C>       <C>
7 weeks or less...........   151%   159%   168%   202%   229%     136%      148%
8 weeks or less but
greater than seven weeks..   154    164    173    205    235      137       149
9 weeks or less but
greater than eight weeks..   158    169    179    209    242      138       150

</TABLE>

- -----------------------------
*   Moody's rating.
**  Municipal Bonds not rated by Moody's but rated BBB-, BBB or BBB+ by S&P.
*** Municipal Bonds rated MIG-1, VMIG-1 or P-1 or, if not rated by Moody's,
    rated SP-1+ or A-1+ by S&P which do not mature or have a demand feature at
    par exercisable within the Moody's Exposure Period and which do not have a
    long-term rating. For the purposes of the definition of Moody's Eligible
    Assets, these securities will have an assumed rating of "A" by Moody's.

            Notwithstanding the foregoing, (i) no Moody's Discount Factor will
be applied to short-term Municipal Bonds so long as such Municipal Bonds are
rated at least MIG-1, VMIG-1 or P-1 by Moody's and mature or have a demand
feature at par exercisable within the Moody's Exposure Period, and the Moody's
Discount Factor for such Bonds will be 125% if such Bonds are not rated by
Moody's but are rated A-1+ or SP-1+ or AA by S&P and mature or have a




                                      12
<PAGE>

demand feature at par exercisable within the Moody's Exposure Period, and (ii)
no Moody's Discount Factor will be applied to cash or to Receivables for
Municipal Bonds Sold. "Receivables for Municipal Bonds Sold," for purposes of
calculating Moody's Eligible Assets as of any Valuation Date, means no more
than the aggregate of the following: (i) the book value of receivables for
Municipal Bonds sold as of or prior to such Valuation Date if such receivables
are due within five Business Days of such Valuation Date, and if the trades
which generated such receivables are (x) settled through clearing house firms
with respect to which the Corporation has received prior written authorization
from Moody's or (y) with counterparties having a Moody's long-term debt rating
of at least Baa3; and (ii) the Moody's Discounted Value of Municipal Bonds
sold as of or prior to such Valuation Date which generated receivables, if
such receivables are due within five Business Days of such Valuation Date but
do not comply with either of conditions (x) or (y) of the preceding clause
(i).

            "Moody's Eligible Asset" means cash, receivables for Municipal
Bonds Sold or a Municipal Bond that (i) pays interest in cash, (ii) is
publicly rated Baa or higher by Moody's or, if not rated by Moody's but rated
by S&P, is rated at least BBB- by S&P (provided that, for purposes of
determining the Moody's Discount Factor applicable to any such S&P-rated
Municipal Bond, such Municipal Bond (excluding any short-term Municipal Bond)
will be deemed to have a Moody's rating which is one full rating category
lower than its S&P rating), (iii) does not have its Moody's rating suspended
by Moody's; and (iv) is part of an issue of Municipal Bonds of at least
$10,000,000. In addition, Municipal Bonds in the Corporation's portfolio must
be within the following diversification requirements in order to be included
within Moody's Eligible Assets:



                                      13
<PAGE>

                                                            Maximum State or
                      Minimum Issue                            Territory
                         Size          Maximum Underlying    Concentration
Rating                ($ Millions)      Obligor (%) (1)         (%)(1)(3)
                      --------------   ------------------   -----------------
Aaa...............         10                100                  100
Aa................         10                 20                   60
A.................         10                 10                   40
Baa...............         10                  6                   20
Other (2).........         10                  4                   12

- --------------
(1)   The referenced percentages represent maximum cumulative totals for the
      related rating category and each lower rating category.
(2)   Municipal Bonds not rated by Moody's but rated BBB-, BBB or BBB+ by S&P.
(3)   Territorial bonds (other than those issued by Puerto Rico and counted
      collectively) and each limited to 10% of Moody's Eligible Assets. For
      diversification purposes, Puerto Rico will be treated as a state.

            For purposes of the maximum underlying obligor requirement
described above, any Municipal Bond backed by the guaranty, letter of credit
or insurance issued by a third party will be deemed to be issued by such third
party if the issuance of such third party credit is the sole determinant of
the rating on such Bond.

            When the Corporation sells a Municipal Bond and agrees to
repurchase it at a future date, the Discounted Value of such Bond will
constitute a Moody's Eligible Asset and the amount the Corporation is required
to pay upon repurchase of such Bond will count as a liability for purposes of
calculating the AMPS Basic Maintenance Amount. When the Corporation purchases
a Municipal Bond and agrees to sell it at a future date to another party, cash
receivable by the Corporation thereby will constitute a Moody's Eligible Asset
if the long-term debt of such other party is rated as least A2 by Moody's and
such agreement has a term of 30 days or less; otherwise the Discounted Value
of such Bond will constitute a Moody's Eligible Asset.

            Notwithstanding the foregoing, an asset will not be considered a
Moody's Eligible Asset if it is (i) held in a margin account, (ii) subject to
material lien, mortgage, pledge, security interest or security agreement of
any kind, (iii) held for the purchase of a security pursuant to a Forward
Commitment or (iv) irrevocably deposited by the Corporation for the payment of
dividends or redemption.




                                      14
<PAGE>

            "Moody's Exposure Period" means a period that is the same length
or longer than the number of days used in calculating the cash dividend
component of the AMPS Basic Maintenance Amount and shall initially be the
period commencing on and including a given Valuation Date and ending 48 days
thereafter.

            "Moody's Hedging Transaction" has the meaning set forth in
paragraph 9(b) of these Articles Supplementary.

            "Moody's Volatility Factor" means 272% as long as there has been
no increase enacted to the Marginal Tax Rate. If such an increase is enacted
but not yet implemented, the Moody's Volatility Factor shall be as follows:

                       % Change in
                    Marginal Tax Rate   Moody's Volatility Factor
                ----------------------  --------------------------
                              = 5%                292%
                   >5%  but   =10%                313%
                  >10%  but   =15%                338%
                  >15%  but   =20%                364%
                  >20%  but   =25%                396%
                  >25%  but   =30%                432%
                  >30%  but   =35%                472%
                  >35%  but   =40%                520%

Notwithstanding the foregoing, the Moody's Volatility Factor may mean such
other potential dividend rate increase factor as Moody's advises the
Corporation in writing is applicable.

            "Municipal Bonds" means "Municipal Bonds" as defined in the
Corporation's Registration Statement on Form N-2 (File No. 33-60712) on file
with the Securities and Exchange Commission, as such Registration Statement
may be amended from time to time, as well as short-term municipal obligations.

            "Municipal Index" has the meaning set forth in paragraph 9(a) of
these Articles Supplementary.

            "1940 Act" means the Investment Company Act of 1940, as amended
from time to time.



                                      15
<PAGE>

            "1940 Act AMPS Asset Coverage" means asset coverage, as defined in
section 18(h) of the 1940 Act, of at least 200% with respect to all
outstanding senior securities of the Corporation which are stock, including
all outstanding shares of AMPS and Other AMPS (or such other asset coverage as
may in the future be specified in or under the 1940 Act as the minimum asset
coverage for senior securities which are stock of a closed-end investment
company as a condition of paying dividends on its common stock).

            "1940 Act Cure Date," with respect to the failure by the
Corporation to maintain the 1940 Act AMPS Asset Coverage (as required by
paragraph 6 of these Articles Supplementary) as of the last Business Day of
each month, means the last Business Day of the following month.

            "Non-Call Period" has the meaning set forth under the definition
of "Specific Redemption Provisions".

            "Non-Payment Period" means, with respect to each series of AMPS,
any period commencing on and including the day on which the Corporation shall
fail to (i) declare, prior to the close of business on the second Business Day
preceding any Dividend Payment Date, for payment on or (to the extent
permitted by paragraph 2(c)(i) of these Articles Supplementary) within three
Business Days after such Dividend Payment Date to the Holders as of 12:00
noon, New York City time, on the Business Day preceding such Dividend Payment
Date, the full amount of any dividend on shares of AMPS payable on such
Dividend Payment Date or (ii) deposit, irrevocably in trust, in same-day
funds, with the Auction Agent by 12:00 Noon, New York City time, (A) on such
Dividend Payment Date the full amount of any cash dividend on such shares
payable (if declared) on such Dividend Payment Date or (B) on any redemption
date for any shares of AMPS called for redemption, the Mandatory Redemption
Price per share of such AMPS or, in the case of an optional redemption, the
Optional Redemption Price per share,




                                      16
<PAGE>

and ending on and including the Business Day on which, by 12:00 Noon,
New York City time, all unpaid cash dividends and unpaid redemption prices
shall have been so deposited or shall have otherwise been made available to
Holders in same-day funds; provided that, a Non-Payment Period shall not end
unless the Corporation shall have given at least five days' but no more than
30 days' written notice of such deposit or availability to the Auction Agent,
all Existing Holders (at their addresses appearing in the Stock Books) and the
Securities Depository. Notwithstanding the foregoing, the failure by the
Corporation to deposit funds as provided for by clauses (ii)(A) or (ii)(B)
above within three Business Days after any Dividend Payment Date or redemption
date, as the case may be, in each case to the extent contemplated by paragraph
2(c)(i) of these Articles Supplementary, shall not constitute a "Non-Payment
Period."

            "Non-Payment Period Rate" means, initially, 200% of the applicable
Reference Rate (or 275% of such rate if the Corporation has provided
notification to the Auction Agent prior to the Auction establishing the
Applicable Rate for any dividend pursuant to paragraph 2(f) hereof that net
capital gains or other taxable income will be included in such dividend on
shares of AMPS), provided that the Board of Directors of the Corporation shall
have the authority to adjust, modify, alter or change from time to time the
initial Non-Payment Period Rate if the Board of Directors of the Corporation
determines and Moody's and S&P (and any Substitute Rating Agency in lieu of
Moody's or S&P in the event either of such parties shall not rate the AMPS)
advise the Corporation in writing that such adjustment, modification,
alteration or change will not adversely affect their then-current ratings on
the AMPS.

            "Normal Dividend Payment Date" has the meaning set forth in
paragraph 2(b)(i) of these Articles Supplementary.

            "Notice of Redemption" means any notice with respect to the
redemption of shares of AMPS pursuant to paragraph 4 of these Articles
Supplementary.



                                      17
<PAGE>

            "Notice of Revocation" has the meaning set forth in paragraph
2(c)(iii) of these Articles Supplementary.

            "Notice of Special Dividend Period" has the meaning set forth in
paragraph 2(c)(iii) of these Articles Supplementary.

            "Optional Redemption Price" means $50,000 per share plus an amount
equal to accumulated but unpaid dividends (whether or not earned or declared)
to the date fixed for redemption and excluding Additional Dividends plus any
applicable redemption premium attributable to the designation of a Premium
Call Period.

            "Other AMPS" means the auction rate preferred stock of the
Corporation, other than the AMPS.

            "Outstanding" means, as of any date (i) with respect to AMPS,
shares of AMPS theretofore issued by the Corporation except, without
duplication, (A) any shares of AMPS theretofore cancelled or delivered to the
Auction Agent for cancellation, or redeemed by the Corporation, or as to which
a Notice of Redemption shall have been given and moneys shall have been
deposited in trust by the Corporation pursuant to paragraph 4(c) and (B) any
shares of AMPS as to which the Corporation or any Affiliate thereof shall be
an Existing Holder, provided that shares of AMPS held by an Affiliate shall be
deemed outstanding for purposes of calculating the AMPS Basic Maintenance
Amount and (ii) with respect to shares of other Preferred Stock, has the
equivalent meaning.

            "Parity Stock" means the AMPS and each other outstanding series of
Preferred Stock the holders of which, together with the holders of the AMPS,
shall be entitled to the receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in proportion to
the full respective preferential amounts to which they are entitled, without
preference or priority one over the other.



                                      18
<PAGE>

            "Person" means and includes an individual, a partnership, a
corporation, a trust, an unincorporated association, a joint venture or other
entity or a government or any agency or political subdivision thereof.

            "Potential Beneficial Owner" means a customer of a Broker-Dealer
or a Broker-Dealer that is not a Beneficial Owner of shares of AMPS but that
wishes to purchase such shares, or that is a Beneficial Owner that wishes to
purchase additional shares of AMPS.

            "Potential Holder" means any Person, including any Existing
Holder, who may be interested in acquiring shares of AMPS (or, in the case of
an Existing Holder, additional shares of AMPS).

            "Preferred Stock" means the preferred stock, par value $.10 per
share, of the Corporation, and includes AMPS and Other AMPS.

            "Premium Call Period" has the meaning set forth under the
definition of "Specific Redemption Provisions".

            "Pricing Service" means J.J. Kenny or any pricing service
designated by the Board of Directors of the Corporation provided the
Corporation obtains written assurance from S&P and Moody's that such
designation will not impair the rating then assigned by S&P and Moody's to the
AMPS.

            "Quarterly Valuation Date" means the twenty-fifth day of the last
month of each fiscal quarter of the Corporation (or, if such day is not a
Business Day, the next succeeding Business Day) in each fiscal year of the
Corporation, commencing July 25, 1993.

            "Receivables for Municipal Bonds Sold" for Moody's has the meaning
set forth under the definition of Moody's Discount Factor, and for S&P has the
meaning set forth under the definition of S&P Discount Factor.



                                      19
<PAGE>

            "Reference Rate" means: (i) with respect to a Dividend Period or a
Short Term Dividend Period having 28 or fewer days, the higher of the
applicable "AA" Composite Commercial Paper Rate and the Taxable Equivalent of
the Short-Term Municipal Bond Rate, (ii) with respect to any Short Term
Dividend Period having more than 28 but fewer than 183 days, the applicable
"AA" Composite Commercial Paper Rate, (iii) with respect to any Short Term
Dividend Period having 183 or more but fewer than 364 days, the applicable
U.S. Treasury Bill Rate and (iv) with respect to any Long Term Dividend
Period, the applicable U.S. Treasury Note Rate.

            "Request for Special Dividend Period" has the meaning set forth in
paragraph 2(c)(iii) of these Articles Supplementary.

            "Response" has the meaning set forth in paragraph 2(c)(iii) of
these Articles Supplementary.

            "Retroactive Taxable Allocation" has the meaning set forth in
paragraph 2(e) of these Articles Supplementary.

            "Right," with respect to each series of AMPS, has the meaning set
forth in paragraph 2(e) of these Articles Supplementary and, with respect to
Other AMPS, has the equivalent meaning.

            "S&P" means Standard & Poor's Corporation or its successors.

            "S&P Discount Factor" means, for purposes of determining the
Discounted Value of any Municipal Bond which constitutes an S&P Eligible
Asset, the percentage determined by reference to (a) the rating by S&P or
Moody's on such Bond and (b) the S&P Exposure Period, in accordance with the
tables set forth below:



                                      20
<PAGE>

                                                   Rating Category
                                      -----------------------------------------
S&P Exposure Period                     AAA*       AA*         A*        BBB*
- ------------------------------------- ---------  --------  ----------- --------
40 Business Days                        190%       195%       210%       250%
22 Business Days                        170        175        190        230
10 Business Days                        155        160        175        215
7   Business Days                       150        155        170        210
3   Business Days                       130        135        150        190

- -------------------------------------
*   S&P rating.

            Notwithstanding the foregoing, (i) the S&P Discount Factor for
short-term Municipal Bonds will be 115%, so long as such Municipal Bonds are
rated A-1+ or SP-1+ by S&P and mature or have a demand feature exercisable in
30 days or less, or 125% if such Municipal Bonds are not rated by S&P but are
rated VMIG-1, P-1 or MIG-1 by Moody's; provided, however, such short-term
Municipal Bonds rated by Moody's but not rated by S&P having a demand feature
exercisable in 30 days or less must be backed by a letter of credit, liquidity
facility or guarantee from a bank or other financial institution having a
short-term rating of at least A-1+ from S&P; and further provided that such
short-term Municipal Bonds rated by Moody's but not rated by S&P may comprise
no more than 50% of short-term Municipal Bonds that qualify as S&P Eligible
Assets and (ii) no S&P Discount Factor will be applied to cash or to
Receivables for Municipal Bonds Sold. "Receivables for Municipal Bonds Sold,"
for purposes of calculating S&P'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 five Business Days of
such Valuation Date. For purposes of the foregoing, Anticipation Notes rated
SP-1+ or, if not rated by S&P, rated VMIG-1 by Moody's, which do not mature or
have a demand feature exercisable in 30 days and which do not have a long-term
rating, shall be considered to be short-term Municipal Bonds.

            "S&P Eligible Asset" means cash, Receivables for Municipal Bonds
Sold or a Municipal Bond that (i) is issued by any of the 50 states, the
territories and their subdivisions,




                                      21
<PAGE>

counties, cities, towns, villages, and school districts, agencies, such
as authorities and special districts created by the states, and certain
federally sponsored agencies such as local housing authorities (payments made
on these bonds are exempt from regular federal income taxes and are generally
exempt from state and local taxes in the state of issuance), (ii) is interest
bearing and pays interest at least semi-annually; (iii) is payable with
respect to principal and interest in United States Dollars; (iv) is publicly
rated BBB or higher by S&P or, except in the case of Anticipation Notes that
are grant anticipation notes or bond anticipation notes which must be rated by
S&P to be included in S&P Eligible Assets, if not rated by S&P but rated by
Moody's, is rated at least A by Moody's (provided that such Moody's-rated
Municipal Bonds will be included in S&P Eligible Assets only to the extent the
Market Value of such Municipal Bonds does not exceed 50% of the aggregate
Market Value of the S&P Eligible Assets; and further provided that, for
purposes of determining the S&P Discount Factor applicable to any such
Moody's-rated Municipal Bond, such Municipal Bond will be deemed to have an
S&P rating which is one full rating category lower than its Moody's rating);
(v) is not subject to a covered call or covered put option written by the
Corporation; (vi) is not part of a private placement of Municipal Bonds; and
(vii) is part of an issue of Municipal Bonds with an original issue size of at
least $20 million or, if of an issue with an original issue size below $20
million (but in no event below $10 million), is issued by an issuer with a
total of at least $50 million of securities outstanding. Notwithstanding the
foregoing:

            (1) Municipal Bonds of any one issuer or guarantor (excluding bond
      insurers) will be considered S&P Eligible Assets only to the extent the
      Market Value of such Municipal Bonds does not exceed 10% of the
      aggregate Market Value of the S&P Eligible Assets, provided that 2% is
      added to the applicable S&P Discount Factor for



                                      22
<PAGE>

      every 1% by which the Market Value of such Municipal Bonds exceeds 5% of
      the aggregate Market Value of the S&P Eligible Assets;

            (2) Municipal Bonds guaranteed or insured by any one bond insurer
      will be considered S&P Eligible Assets only to the extent the Market
      Value of such Municipal Bonds does not exceed 25% of the aggregate
      Market Value of the S&P Eligible Assets; and

            (3) Municipal Bonds issued by issuers in any one state or
      territory will be considered S&P Eligible Assets only to the extent the
      Market Value of such Municipal Bonds does not exceed 20% of the
      aggregate Market Value of S&P Eligible Assets.

            "S&P Exposure Period" means the maximum period of time following a
Valuation Date, including the Valuation Date and the AMPS Basic Maintenance
Cure Date, that the Corporation has under these Articles Supplementary to cure
any failure to maintain, as of such Valuation Date, the Discounted Value for
its portfolio at least equal to the AMPS Basic Maintenance Amount (as
described in paragraph 7(a) of these Articles Supplementary).

            "S&P Hedging Transactions" has the meaning set forth in paragraph
9(a) of these Articles Supplementary.

            "S&P Volatility Factor" means 277% or such other potential
dividend rate increase factor as S&P advises the Corporation in writing is
applicable.

            "Securities Depository" means The Depository Trust Company or any
successor company or other entities elected by the Corporation as securities
depository for the shares of AMPS that agrees to follow the procedures
required to be followed by such securities depository in connection with the
shares of AMPS.

            "Service" means the United States Internal Revenue Service.



                                      23
<PAGE>

            "7-Day Dividend Period means, with respect to Series C AMPS, a
Dividend Period consisting of seven days.

            "Short Term Dividend Period" means a Special Dividend Period
consisting of a specified number of days (other than 28 in the case of Series
A AMPS and Series B AMPS and other than seven in the case of Series C AMPS),
evenly divisible by seven and not fewer than seven nor more than 364.

            "Special Dividend Period" means a Dividend Period consisting of
(i) a specified number of days (other than 28 in the case of Series A AMPS and
Series B AMPS and other than seven in the case of Series C AMPS), evenly
divisible by seven, and not fewer than seven nor more than 364 or (ii) a
specified period of one whole year or more but not greater than five years (in
each case subject to adjustment as provided in paragraph 2(b)(i)).

            "Specific Redemption Provisions" means, with respect to a Special
Dividend Period either, or any combination of, (i) a period (a "Non-Call
Period") determined by the Board of Directors of the Corporation, after
consultation with the Auction Agent and the Broker-Dealers, during which the
shares of AMPS subject to such Dividend Period shall not be subject to
redemption at the option of the Corporation and (ii) a period (a "Premium Call
Period"), consisting of a number of whole years and determined by the Board of
Directors of the Corporation, after consultation with the Auction Agent and
the Broker-Dealers, during each year of which the shares of AMPS subject to
such Dividend Period shall be redeemable at the Corporation's option at a
price per share equal to $50,000 plus accumulated but unpaid dividends plus a
premium expressed as a percentage of $50,000, as determined by the Board of
Directors of the Corporation after consultation with the Auction Agent and the
Broker-Dealers.

            "Stock Books" means the books maintained by the Auction Agent
setting forth at all times a current list, as determined by the Auction Agent,
of Existing Holders of the AMPS.



                                      24
<PAGE>

            "Stock Register" means the register of Holders maintained on
behalf of the Corporation by the Auction Agent in its capacity as transfer
agent and registrar for the AMPS.

            "Subsequent Dividend Period," with respect to AMPS, has the
meaning set forth in paragraph 2(c)(i) of these Articles Supplementary and,
with respect to Other AMPS, has the equivalent meaning.

            "Substitute Commercial Paper Dealers" means such Substitute
Commercial Paper Dealer or Dealers as the Corporation may from time to time
appoint or, in lieu of any thereof, their respective affiliates or successors.

            "Substitute Rating Agency" and "Substitute Rating Agencies" mean a
nationally recognized statistical rating organization or two nationally
recognized statistical rating organizations, respectively, selected by Merrill
Lynch, Pierce, Fenner & Smith Incorporated or its affiliates and successors,
after consultation with the Corporation, to act as the substitute rating
agency or substitute rating agencies, as the case may be, to determine the
credit ratings of the shares of AMPS.

            "Taxable Equivalent of the Short-Term Municipal Bond Rate" on any
date means 90% of the quotient of (A) the per annum rate expressed on an
interest equivalent basis equal to the Kenny S&P 30 day High Grade Index (the
"Kenny Index") or any successor index, made available for the Business Day
immediately preceding such date but in any event not later than 8:30 A.M., New
York City time, on such date by Kenny Information Systems Inc. or any
successor thereto, based upon 30-day yield evaluations at par of bonds the
interest on which is excludable for regular Federal income tax purposes under
the Code of "high grade" component issuers selected by Kenny Information
Systems Inc. or any such successor from time to time in its discretion, which
component issuers shall include, without limitation, issuers of general
obligation bonds but shall exclude any bonds the interest on which constitutes
an item of tax



                                      25
<PAGE>

preference under Section 57(a)(5) of the Code, or successor provisions,
for purposes of the "alternative minimum tax," divided by (B) 1.00 minus the
Marginal Tax Rate (expressed as a decimal); provided, however, that if the
Kenny Index is not made so available by 8:30 A.M., New York City time, on such
date by Kenny Information Systems Inc. or any successor, the Taxable
Equivalent of the Short-Term Municipal Bond Rate shall mean the quotient of
(A) the per annum rate expressed on an interest equivalent basis equal to the
most recent Kenny Index so made available for any preceding Business Day,
divided by (B) 1.00 minus the Marginal Tax Rate (expressed as a decimal). The
Corporation may not utilize a successor index to the Kenny Index unless
Moody's and S&P provide the Corporation with written confirmation that the use
of such successor index will not adversely affect the then-current respective
Moody's and S&P ratings of the AMPS.

            "Treasury Bonds" has the meaning set forth in paragraph 9(a) of
these Articles Supplementary.

            "28-day Dividend Period" means, with respect to Series A AMPS and
Series B AMPS, a Dividend Period consisting of 28 days.

            "U.S. Treasury Bill Rate" on any date means (i) the Interest
Equivalent of the rate on the actively traded Treasury Bill with a maturity
most nearly comparable to the length of the related Dividend Period, as such
rate is made available on a discount basis or otherwise by the Federal Reserve
Bank of New York in its Composite 3:30 P.M. quotations for U.S. Government
Securities report for such Business Day, or (ii) if such yield as so
calculated is not available, the Alternate Treasury Bill Rate on such date.
"Alternate Treasury Bill Rate" on any date means the Interest Equivalent of
the yield as calculated by reference to the arithmetic average of the bid
price quotations of the actively traded Treasury Bill with a maturity most
nearly comparable to the length of the related Dividend Period, as determined
by bid price quotations as of any time on



                                      26
<PAGE>

the Business Day immediately preceding such date, obtained from at least
three recognized primary U.S. Government securities dealers selected by the
Auction Agent.

            "U.S. Treasury Note Rate" on any date means (i) the yield as
calculated by reference to the bid price quotation of the actively traded,
current coupon Treasury Note with a maturity most nearly comparable to the
length of the related Dividend Period, as such bid price quotation is
published on the Business Day immediately preceding such date by the Federal
Reserve Bank of New York in its Composite 3:30 P.M. Quotations for U.S.
Government Securities report for such Business Day, or (ii) if such yield as
so calculated is not available, the Alternate Treasury Note Rate on such date.
"Alternate Treasury Note Rate" on any date means the yield as calculated by
reference to the arithmetic average of the bid price quotations of the
actively traded, current coupon Treasury Note with a maturity most nearly
comparable to the length of the related Dividend Period, as determined by the
bid price quotations as of any time on the Business Day immediately preceding
such date, obtained from at least three recognized primary U.S. Government
securities dealers selected by the Auction Agent.

            "Valuation Date" means, for purposes of determining whether the
Corporation is maintaining the AMPS Basic Maintenance Amount and the Minimum
Liquidity Level, each Business Day commencing with the date of Original Issue.

            "Variation Margin" means, in connection with an outstanding
futures contract owned or sold by the Corporation, the amount of cash or
securities paid to or received from a broker (subsequent to the Initial Margin
payment) from time to time as the price of such futures contract fluctuates.

      (b) The foregoing definitions of Accountant's Confirmation, AMPS Basic
Maintenance Amount, AMPS Basic Maintenance Cure Date, AMPS Basic Maintenance
Report, Deposit Securities, Discounted Value, Dividend Coverage Amount,
Dividend Coverage Assets,





                                      27
<PAGE>

Independent Accountant, Initial Margin, Market Value, Minimum Liquidity
Level, Moody's Discount Factor, Moody's Eligible Asset, Moody's Exposure
Period, Moody's Hedging Transactions, Moody's Volatility Factor, S&P Discount
Factor, S&P Eligible Asset, S&P Exposure Period, S&P Hedging Transactions, S&P
Volatility Factor, Valuation Date and Variation Margin have been determined by
the Board of Directors of the Corporation in order to obtain a "aaa" rating
from Moody's and a AAA rating from S&P on the AMPS on their Date of Original
Issue; and the Board of Directors of the Corporation shall have the authority,
without shareholder approval, to adjust, modify, alter or change from time to
time the foregoing definitions and the restrictions and guidelines set forth
thereunder if Moody's and S&P or any Substitute Rating Agency advises the
Corporation in writing that such adjustment, modification, alteration or
change will not adversely affect their then-current ratings on the AMPS.

      2. Dividends. (a) The Holders shall be entitled to receive, when, as and
if declared by the Board of Directors of the Corporation, out of funds legally
available therefor, cumulative dividends each consisting of (i) cash at the
Applicable Rate, (ii) a Right to receive cash as set forth in paragraph 2(e)
below, and (iii) any additional amounts as set forth in paragraph 2(f) below,
and no more, payable on the respective dates set forth below. Dividends on the
shares of AMPS so declared and payable shall be paid (i) in preference to and
in priority over any dividends declared and payable on the Common Stock, and
(ii) to the extent permitted under the Code and to the extent available, out
of net tax-exempt income earned on the Corporation's investments. To the
extent permitted under the Code, dividends on shares of AMPS will be
designated as exempt-interest dividends. For the purposes of this section, the
term "net tax-exempt income" shall exclude capital gains of the Corporation.

      (b) (i) Cash dividends on shares of AMPS shall accumulate from the Date
of Original Issue and shall be payable, when, as and if declared by the Board
of Directors, out of




                                      28
<PAGE>

funds legally available therefor, commencing on the First Initial Dividend
Payment Date with respect to the Series A AMPS and Series B AMPS and
on the Initial Dividend Payment Date with respect to the Series C AMPS.
Dividends on the AMPS during the Initial Dividend Period shall be payable on
each Initial Dividend Payment Date. Following the Last Initial Dividend
Payment Date for the Series A AMPS and Series B AMPS and the Initial Dividend
Payment Date for the Series C AMPS, dividends on each series of AMPS will be
payable, at the option of the Corporation, either (i) with respect to any
7-Day Dividend Period, any 28-day Dividend Period and any Short Term Dividend
Period of 35 or fewer days on the day next succeeding the last day thereof, 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 herein referred to as a "Normal
Dividend Payment Date"), except that if such Normal Dividend Payment Date is
not a Business Day, then (i) the Dividend Payment Date shall be the first
Business Day next succeeding such Normal Dividend Payment Date if such Normal
Dividend Payment Date is a Monday, Tuesday, Wednesday or Thursday, or (ii) the
Dividend Payment Date shall be the first Business Day next preceding such
Normal Dividend Payment Date if such Normal Dividend Payment Date is a Friday.
If, however, in the case of clause (ii) in the preceding sentence, the
Securities Depository shall make available to its participants and members in
funds immediately available in New York City on Dividend Payment Dates the
amount due as dividends on such Dividend Payment Dates (and the Securities
Depository shall have so advised the Corporation), and if the Normal Dividend
Payment Date is not a Business Day, then the Dividend Payment Date shall be
the next succeeding Business Day. Although any particular Dividend Payment
Date may not occur on the originally scheduled date because of the




                                      29
<PAGE>

exceptions discussed above, the next succeeding Dividend Payment Date,
subject to such exceptions, will occur on the next following originally
scheduled date. If for any reason a Dividend Payment Date cannot be fixed as
described above, then the Board of Directors shall fix the Dividend Payment
Date. The Initial Dividend Period, 7-day Dividend Periods, 28-day Dividend
Periods and Special Dividend Periods are hereinafter sometimes referred to as
Dividend Periods. Each dividend payment date determined as provided above is
hereinafter referred to as a "Dividend Payment Date."

            (ii) Each dividend shall be paid to the Holders as they appear in
      the Stock Register as of 12:00 noon, New York City time, on the Business
      Day preceding the Dividend Payment Date. Dividends in arrears for any
      past Dividend Period may be declared and paid at any time, without
      reference to any regular Dividend Payment Date, to the Holders as they
      appear on the Stock Register on a date, not exceeding 15 days prior to
      the payment date therefor, as may be fixed by the Board of Directors of
      the Corporation.

      (c) (i) During the period from and including the Date of Original Issue
to but excluding the Last Initial Dividend Payment Date in the case of Series
A AMPS and Series B AMPS and the Initial Dividend Payment Date in the case of
Series C AMPS (the "Initial Dividend Period"), the Applicable Rate shall be
the Initial Dividend Rate. Commencing on the Last Initial Dividend Payment
Date in the case of Series A AMPS and Series B AMPS and the Initial Dividend
Payment Date in the case of Series C AMPS, the Applicable Rate for each
subsequent dividend period (hereinafter referred to as a "Subsequent Dividend
Period"), which Subsequent Dividend Period shall commence on and include a
Dividend Payment Date and shall end on and include the calendar day prior to
the next Dividend Payment Date (or last Dividend





                                      30
<PAGE>

Payment Date in a Dividend Period if there is more than one Dividend
Payment Date), shall be equal to the rate per annum that results from
implementation of the Auction Procedures.

            The Applicable Dividend Rate for each Dividend Period commencing
during a Non-Payment Period shall be equal to the Non-Payment Period Rate; and
each Dividend Period, commencing after the first day of, and during, a
Non-Payment Period shall be a 28-day Dividend Period in the case of Series A
AMPS and Series B AMPS and a 7-Day Dividend Period in the case of Series C
AMPS, provided that if the preceding Dividend Period for Series A AMPS or
Series B AMPS is a Special Dividend Period of less than 28 days, the Dividend
Period commencing during a Non-Payment Period will be the same length as such
preceding Dividend Period. Except in the case of the willful failure of the
Corporation to pay a dividend on a Dividend Payment Date or to redeem any
shares of AMPS on the date set for such redemption, any amount of any dividend
due on any Dividend Payment Date (if, prior to the close of business on the
second Business Day preceding such Dividend Payment Date, the Corporation has
declared such dividend payable on such Dividend Payment Date to the Holders of
such shares of AMPS as of 12:00 noon, New York City time, on the Business Day
preceding such Dividend Payment Date) or redemption price with respect to any
shares of AMPS not paid to such Holders when due may be paid to such Holders
in the same form of funds by 12:00 noon, New York City time, on any of the
first three Business Days after such Dividend Payment Date or due date, as the
case may be, provided that, such amount is accompanied by a late charge
calculated for such period of non-payment at the Non-Payment Period Rate
applied to the amount of such non-payment based on the actual number of days
comprising such period divided by 365. In the case of a willful failure of the
Corporation to pay a dividend on a Dividend Payment Date or to redeem any
shares of AMPS on the date set for such redemption, the preceding sentence
shall not apply and the Applicable Dividend Rate for the Dividend Period
commencing during the




                                      31
<PAGE>

Non-Payment Period resulting from such failure shall be the Non-Payment
Period Rate. For the purposes of the foregoing, payment to a person in
same-day funds on any Business Day at any time shall be considered equivalent
to payment to such person in New York Clearing House (next-day) funds at the
same time on the preceding Business Day, and any payment made after 12:00
noon, New York City time, on any Business Day shall be considered to have been
made instead in the same form of funds and to the same person before 12:00
noon, New York City time, on the next Business Day.

            (ii) The amount of cash dividends per share of AMPS payable (if
      declared) on each Dividend Payment Date of the Initial Dividend Period,
      each 7-Day Dividend Period, each 28-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 such share was outstanding
      and the denominator of which will be 365, multiplying the amount so
      obtained by $50,000, and rounding the amount so obtained to the nearest
      cent. During any Long Term Dividend Period, the amount of dividends per
      share payable on any Dividend Payment Date shall be computed by dividing
      the Applicable Rate for such Dividend Period by twelve, multiplying the
      amount so obtained by $50,000, and rounding the amount so obtained to
      the nearest cent; provided, however, that, if the number of days from
      and including the Date of Original Issue or the preceding Dividend
      Payment date, as the case may be, to and including the day preceding
      such Dividend Payment Date is less than 30 and such days do not
      constitute a full calendar month, then the amount of dividends per share
      payable on such Dividend Payment Date shall be computed by multiplying
      the Applicable Rate for such Dividend Period by a fraction, the
      numerator of which will be




                                      32
<PAGE>

      such number of days and the denominator of which will be 360, multiplying
      the amount so obtained by $50,000, and rounding the amount so obtained
      to the nearest cent.

            (iii) With respect to each Dividend Period that is a Special
      Dividend Period, the Corporation may, at its sole option and to the
      extent permitted by law, by telephonic and written notice (a "Request
      for Special Dividend Period") to the Auction Agent and to each
      Broker-Dealer, request that the next succeeding Dividend Period for a
      series of AMPS be a number of days (other than 28 in the case of Series
      A AMPS and Series B AMPS and other than seven in the case of Series C
      AMPS), evenly divisible by seven, and not fewer than seven nor more than
      364 in the case of a Short Term Dividend Period or one whole year or
      more but not greater than five years in the case of a Long Term Dividend
      Period, specified in such notice, provided that the Corporation may not
      give a Request for Special Dividend Period of greater than 28 days (and
      any such request shall be null and void) unless, for any Auction
      occurring after the initial Auction, Sufficient Clearing Bids were made
      in the last occurring Auction and unless full cumulative dividends, any
      amounts due with respect to redemptions, and any Additional Dividends
      payable prior to such date have been paid in full. Such Request for
      Special Dividend Period, in the case of a Short Term Dividend Period,
      shall be given on or prior to the second Business Day but not more than
      seven Business Days prior to an Auction Date for a series of AMPS and,
      in the case of a Long Term Dividend Period, shall be given on or prior
      to the second Business Day but not more than 28 days prior to an Auction
      Date for the AMPS. Upon receiving such Request for Special Dividend
      Period, the Broker-Dealer(s) shall jointly determine whether, given the
      factors set forth below, it is advisable that the Corporation issue a
      Notice of Special Dividend Period for the series of AMPS as contemplated
      by such Request for Special Dividend Period and the Optional



                                      33
<PAGE>

      Redemption Price of the AMPS during such Special Dividend Period
      and the Specific Redemption Provisions and shall give the Corporation
      and the Auction Agent written notice (a "Response") of such
      determination by no later than the second Business Day prior to such
      Auction Date. In making such determination the Broker-Dealer(s) will
      consider (1) existing short-term and long-term market rates and indices
      of such short-term and long-term rates, (2) existing market supply and
      demand for short-term and long-term securities, (3) existing yield
      curves for short-term and long-term securities comparable to the AMPS,
      (4) industry and financial conditions which may affect the AMPS, (5) the
      investment objective of the Corporation, and (6) the Dividend Periods
      and dividend rates at which current and potential beneficial holders of
      the AMPS would remain or become beneficial holders. If the
      Broker-Dealer(s) shall not give the Corporation and the Auction Agent a
      Response by such second Business Day or if the Response states that
      given the factors set forth above it is not advisable that the
      Corporation give a Notice of Special Dividend Period for the series of
      AMPS, the Corporation may not give a Notice of Special Dividend Period
      in respect of such Request for Special Dividend Period. In the event the
      Response indicates that it is advisable that the Corporation give a
      Notice of Special Dividend Period for the series of AMPS, the
      Corporation may by no later than the second Business Day prior to such
      Auction Date give a notice (a "Notice of Special Dividend Period") to
      the Auction Agent, the Securities Depository and each Broker-Dealer
      which notice will specify (i) the duration of the special Dividend
      Period, (ii) the Optional Redemption Price as specified in the related
      Response and (iii) the Specific Redemption Provisions, if any, as
      specified in the related Response. The Corporation shall also provide a
      copy of such Notice of Special Dividend Period to Moody's and S&P. The
      Corporation shall not give a Notice of Special




                                      34
<PAGE>

      Dividend Period and, if the Corporation has given a Notice of
      Special Dividend Period, the Corporation is required to give telephonic
      and written notice of its revocation (a "Notice of Revocation") to the
      Auction Agent, each Broker-Dealer, and the Securities Depository on or
      prior to the Business Day prior to the relevant Auction Date if (x)
      either the 1940 AMPS Asset Coverage is not satisfied or the Corporation
      shall fail to maintain S&P Eligible Assets and Moody's Eligible Assets
      each with an aggregate Discounted Value at least equal to the AMPS Basic
      Maintenance Amount, in each case on each of the two Valuation Dates
      immediately preceding the Business Day prior to the relevant Auction
      Date on an actual basis and on a pro forma basis giving effect to the
      proposed Special Dividend Period (using as a pro forma dividend rate
      with respect to such Special Dividend Period the dividend rate which the
      Broker-Dealers shall advise the Corporation is an approximately equal
      rate for securities similar to the AMPS with an equal dividend period),
      provided that, in calculating the aggregate Discounted Value of Moody's
      Eligible Assets for this purpose, the Moody's Exposure Period shall be
      deemed to be one week longer, (y) sufficient funds for the payment of
      dividends payable on the immediately succeeding Dividend Payment Date
      have not been irrevocably deposited with the Auction Agent by the close
      of business on the third Business Day preceding the related Auction Date
      or (z) the Broker-Dealer(s) jointly advises the Corporation that after
      consideration of the factors listed above they have concluded that it is
      advisable to give a Notice of Revocation. The Corporation shall also
      provide a copy of such Notice of Revocation to Moody's and S&P. If the
      Corporation is prohibited from giving a Notice of Special Dividend
      Period as a result of any of the factors enumerated in clause (x), (y)
      or (z) of the prior sentence or if the Corporation gives a Notice of
      Revocation with respect to a Notice of Special Dividend Period for any
      series of AMPS, the next



                                      35
<PAGE>

      succeeding Dividend Period for that series will be a 28-day Dividend
      Period in the case of Series A AMPS and Series B AMPS and a
      7-Day Dividend Period in the case of Series C AMPS, provided that if the
      then current Dividend Period for Series A AMPS and Series B AMPS is a
      Special Dividend Period of less than 28 days, the next succeeding
      Dividend Period for such series of AMPS will be the same length as such
      current Dividend Period. In addition, in the event Sufficient Clearing
      Bids are not made in the applicable Auction or such Auction is not held
      for any reason, such next succeeding Dividend Period will be a 28-day
      Dividend Period (in the case of Series A AMPS and Series B AMPS) or a
      7-Day Dividend Period (in the case of Series C AMPS) and the Corporation
      may not again give a Notice of Special Dividend Period for the AMPS (and
      any such attempted notice shall be null and void) until Sufficient
      Clearing Bids have been made in an Auction with respect to a 28-day
      Dividend Period (in the case of Series A AMPS and Series B AMPS) or a
      7-Day Dividend Period (in the case of Series C AMPS).

      (d) (i) Holders shall not be entitled to any dividends, whether payable
in cash, property or stock, in excess of full cumulative dividends and
applicable late charge, as herein provided, on the shares of AMPS (except for
Additional Dividends as provided in paragraph 2(a) hereof and additional
payments as provided in paragraph 2(f) hereof). Except for the late charge
payable pursuant to paragraph 2(c)(i) hereof, no interest, or sum of money in
lieu of interest, shall be payable in respect of any dividend payment on the
shares of AMPS that may be in arrears.

            (ii) For so long as any shares of AMPS is Outstanding, the
      Corporation shall not declare, pay or set apart for payment any dividend
      or other distribution (other than a dividend or distribution paid in
      shares of, or options, warrants or rights to subscribe for or



                                      36
<PAGE>

      purchase, Common Stock or other stock, if any, ranking junior to
      the shares of AMPS as to dividends or upon liquidation) in respect of
      the Common Stock or any other stock of the Corporation ranking junior to
      or on a party with the shares of AMPS as to dividends or upon
      liquidation, or call for redemption, redeemed, purchase or otherwise
      acquire for consideration any shares of the Common Stock or any other
      such junior stock (except by conversion into or exchange for stock of
      the Corporation ranking junior to the shares of AMPS as to dividends and
      upon liquidation) or any other such Parity Stock (except by conversion
      into or exchange for stock of the Corporation ranking junior to or on a
      parity with the shares of AMPS as to dividends and upon liquidation),
      unless (A) immediately after such transaction, the Corporation shall
      have S&P Eligible Assets and Moody's Eligible Assets each with an
      aggregate Discounted Value equal to or greater than the AMPS Basic
      Maintenance Amount and the Corporation shall maintain the 1940 Act AMPS
      Asset Coverage, (B) full cumulative dividends on shares of AMPS and
      shares of Other AMPS due on or prior to the date of the transaction have
      been declared and paid or shall have been declared and sufficient funds
      for the payment thereof deposited with the Auction Agent, (C) any
      Additional Dividend required to be paid under paragraph 2(e) below on or
      before the date of such declaration or payment has been paid and (D) the
      Corporation has redeemed the full number of shares of AMPS required to
      be redeemed by an provision for mandatory redemption contained herein.

      (e) Each dividend shall consist of (i) cash at the Applicable Dividend
Rate, (ii) an uncertificated right (a "Right") to receive an Additional
Dividend (as defined below), and (iii) any additional amounts as set forth in
paragraph 2(f) below. Each Right shall thereafter be independent of the share
or shares of AMPS on which the dividend was paid. The Corporation shall cause
to be maintained a record of each Right received by the respective Holders. A
Right




                                      37
<PAGE>

may not be transferred other than by operation of law. If the Corporation
retroactively allocates any net capital gains or other income subject to
regular Federal income taxes to shares of AMPS without having given
advance notice thereof to the Auction Agent as described in paragraph 2(f)
hereof solely by reason of the fact that such allocation is made as a result
of the redemption of all or a portion of the outstanding shares of AMPS or the
liquidation of the Corporation (the amount of such allocation referred to
herein as a "Retroactive Taxable Allocation"), the Corporation will, within 90
days (and generally within 60 days) after the end of the Corporation's fiscal
year for which a Retroactive Taxable Allocation is made, provide notice
thereof to the Auction Agent and to each holder of a Right applicable to such
shares of AMPS (initially Cede & Co. as nominee of the Depository Trust
Company) during such fiscal year at such holder's address as the same appears
or last appeared on the Stock Books of the Corporation. The Corporation will,
within 30 days after such notice is given to the Auction Agent, pay to the
Auction Agent (who will then distribute to such holders of Rights), out of
funds legally available therefor, an amount equal to the aggregate Additional
Dividend with respect to all Retroactive Taxable Allocations made to such
holders during the fiscal year in question.

      An "Additional Dividend" means payment to a present or former holder of
shares of AMPS of an amount which, when taken together with the aggregate
amount of Retroactive Taxable allocations made to such holder with respect to
the fiscal year in question, would cause such holder's dividends in dollars
from the aggregate of both the Retroactive Taxable Allocations and the
Additional Dividends to be equal to the dollar amount of the dividends which
would have been received by such holder if the amount of the aggregate
Retroactive Taxable Allocations would have been excludable from the gross
income of such holder. Such Additional Dividend shall be calculated (i)
without consideration being given to the time value of money; (ii) assuming
that no holder of shares of AMPS is subject to the Federal alternative




                                      38
<PAGE>

minimum tax with respect to dividends received from the Corporation; and (iii)
assuming that each Retroactive Taxable Allocation would be taxable in the
hands of each holder of shares of AMPS at the greater of: (x) the maximum
marginal regular Federal individual income tax rate applicable to ordinary
income or capital gains depending on the taxable character of the distribution
including any surtax, but without taking into account the effect of any
provision limiting deductions or personal exemptions; or (y) the maximum
marginal regular Federal corporate income tax rate applicable to ordinary
income or capital gains depending on the taxable character of the distribution
(disregarding the phase out of the benefit of lower tax brackets).

      (f) Except as provided below, whenever the Corporation intends to
include any net capital gains or other income subject to regular Federal
income taxes in any dividend on shares of AMPS, the Corporation will notify
the Auction Agent of the amount to be so included at least five Business Days
prior to the Auction Date on which the Applicable Rate for such dividend is to
be established. The Corporation may also include such income in a dividend on
shares of a series of AMPS without giving advance notice thereof if it
increases the dividend by an additional amount calculated as if such income
was a Retroactive Taxable Allocation and the additional amount was an
Additional Dividend, provided that the Corporation will notify the Auction
Agent of the additional amounts to be included in such dividend at least five
Business Days prior to the applicable Dividend Payment Date.

      (g) No fractional shares of AMPS shall be issued.

      3.  Liquidation Rights. Upon any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, the Holders shall be
entitled to receive, out of the assets of the Corporation available for
distribution to shareholders, before any distribution or payment is made upon
any Common Stock or any other capital stock ranking junior in right of




                                      39
<PAGE>

payment upon liquidation to the AMPS, the sum of $50,000 per share plus
accumulated but unpaid dividends (whether or not earned or declared) thereon
to date of distribution, and after such payment the holders of AMPS will be
entitled to no other payments other than Additional Dividends as provided in
paragraph 2(e) hereof. If upon any liquidation, dissolution or winding up of
the Corporation, the amounts payable with respect to the AMPS and any other
Outstanding class or series of Preferred Stock of the Corporation ranking on a
party with the AMPS as to payment upon liquidation are not paid in full, the
Holders and the holders of such other class or series will share ratably in
any such distributions of assets in proportion to the respective preferential
amounts to which they are entitled. After payment of the full amount of the
liquidating distribution to which they are entitled, the Holders will not be
entitled to any further participation in any distribution of assets by the
Corporation except for any Additional Dividends. A consolidation, merger or
statutory share exchange of the Corporation with or into any other corporation
or entity or a sale, whether for cash, shares of stock, securities or
properties, of all or substantially all or any part of the assets of the
Corporation shall not be deemed or construed to be a liquidation, dissolution
or winding up of the Corporation.

      4. Redemption. (a) Shares of AMPS shall be redeemable by the Corporation
as provided below:

            (i) To the extent permitted under the 1940 Act and Maryland law,
      upon giving a Notice of Redemption, the Corporation at its option may
      redeem shares of AMPS, in whole or in part, out of funds legally
      available therefor, at the Optional Redemption Price per share, on any
      Dividend Payment Date; provided that no shares of AMPS may be redeemed
      at the option of the Corporation during (A) the Initial Dividend Period
      with respect to such share or (B) a Non-Call Period to which such share
      is subject. In addition, holders of AMPS which are redeemed shall be
      entitled to receive Additional



                                      40
<PAGE>

      Dividends to the extent provided herein. The Corporation may not
      give a Notice of Redemption relating to an optional redemption as
      described in this paragraph 4(a)(i) unless, at the time of giving such
      Notice of Redemption, the Corporation has available Deposit Securities
      with maturity or tender dates not later than the day preceding the
      applicable redemption date and having a value not less than the amount
      due to holders by reason of the redemption of their shares of AMPS on
      such redemption date.

            (ii) The Corporation shall redeem, out of funds legally available
      therefor, at the Mandatory Redemption Price per share, shares of AMPS to
      the extent permitted under the 1940 Act and Maryland law, on a date
      fixed by the Board of Directors, if the Corporation fails to maintain
      S&P Eligible Assets and Moody's Eligible Assets each with an aggregate
      Discounted Value equal to or greater than the AMPS Basic Maintenance
      Amount as provided in paragraph 7(a) or to satisfy the 1940 Act AMPS
      Asset Coverage as provided in paragraph 6 and such failure is not cured
      on or before the AMPS Basic Maintenance Cure Date or the 1940 Act Cure
      Date (herein collectively referred to as a "Cure Date"), as the case may
      be. In addition, holders of AMPS so redeemed shall be entitled to
      receive Additional Dividends to the extent provided herein. The number
      of shares of AMPS to be redeemed shall be equal to the lesser of (i) the
      minimum number of shares of AMPS the redemption of which, if deemed to
      have occurred immediately prior to the opening of business on the Cure
      Date, together with all shares of other Preferred Stock subject to
      redemption or retirement, would result in the Corporation having S&P
      Eligible Assets and Moody's Eligible Assets each with an aggregate
      Discounted Value equal to or greater than the AMPS Basic Maintenance
      Amount or satisfaction of the 1940 Act AMPS Asset Coverage, as the case
      may be, on such Cure Date (provided that, if there is no such minimum
      number of shares of AMPS and shares of other Preferred Stock




                                      41
<PAGE>

      the redemption of which would have such result, all shares of AMPS and
      shares of other Preferred Stock then Outstanding shall be redeemed), and
      (ii) the maximum number of shares of AMPS, together with all shares of
      other Preferred Stock subject to redemption or retirement, that can be
      redeemed out of funds expected to be legally available therefor on such
      redemption date. In determining the number of shares of AMPS required to
      be redeemed in accordance with the foregoing, the Corporation shall
      allocate the number required to be redeemed which would result in the
      Corporation having S&P Eligible Assets and Moody's Eligible Assets each
      with an aggregate Discounted Value equal to or greater than the AMPS
      Basic Maintenance Amount or satisfaction of the 1940 Act AMPS Asset
      Coverage, as the case may be, pro rata among shares of AMPS of all
      series, Other AMPS and other Preferred Stock subject to redemption
      pursuant to provisions similar to those contained in this paragraph
      4(a)(ii); provided that, shares of AMPS which may not be redeemed at the
      option of the Corporation due to the designation of a Non-Call Period
      applicable to such shares (A) will be subject to mandatory redemption
      only to the extent that other shares are not available to satisfy the
      number of shares required to be redeemed and (B) will be selected for
      redemption in an ascending order of outstanding number of days in the
      Non-Call Period (with shares with the lowest number of days to be
      redeemed first) and by lot in the event of shares having an equal number
      of days in such Non-Call Period. The Corporation shall effect such
      redemption on a Business Day which is not later than 35 days after such
      Cure Date, except that if the Corporation does not have funds legally
      available for the redemption of all of the required number of shares of
      AMPS and shares of other Preferred Stock which are subject to mandatory
      redemption or the Corporation otherwise is unable to effect such
      redemption on or prior to 35 days after such Cure Date, the Corporation
      shall redeem those shares of AMPS which it is unable to




                                      42
<PAGE>

      redeem on the earliest practicable date on which it is able to
      effect such redemption out of funds legally available therefor.

      (b) Notwithstanding any other provisions of this paragraph 4, no shares
of AMPS may be redeemed pursuant to paragraph 4(a)(i) of these Articles
Supplementary (i) unless all dividends in arrears on all remaining outstanding
shares of Parity Stock shall have been or are being contemporaneously paid or
declared and set apart for payment and (ii) if redemption thereof would result
in the Corporation's failure to maintain Moody's Eligible Assets or S&P
Eligible Assets with an aggregate Discounted Value equal to or greater than
the AMPS Basic Maintenance Amount. In the event that less than all the
outstanding shares of a series of AMPS are to be redeemed and there is no more
than one Holder, the shares of that series of AMPS to be redeemed shall be
selected by lot or such other method as the Corporation shall deem fair and
equitable.

      (c) Whenever shares of AMPS are to be redeemed, the Corporation, not
less than 20 nor more than 30 days prior to the date fixed for redemption,
shall mail a notice ("Notice of Redemption") by first-class mail, postage
prepaid, to each Holder of shares of AMPS to be redeemed and to the Auction
Agent. The Corporation shall cause the Notice of Redemption to also be
published in the eastern and national editions of The Wall Street Journal. The
Notice of Redemption shall set forth (i) the redemption date, (ii) the amount
of the redemption price, (iii) the aggregate number of shares of AMPS of such
series to be redeemed, (iv) the place or places where shares of AMPS of such
series are to be surrendered for payment of the redemption price, (v) a
statement that dividends on the shares to be redeemed shall cease to
accumulate on such redemption date (except that holders may be entitled to
Additional Dividends) and (vi) the provision of these Articles Supplementary
pursuant to which such shares are being redeemed.




                                      43
<PAGE>

No defect in the Notice of Redemption or in the mailing or publication thereof
shall affect the validity of the redemption proceedings, except as provided by
applicable law.

      If the Notice of Redemption shall have been given as aforesaid and,
concurrently or thereafter, the Corporation shall have deposited in trust with
the Auction Agent a cash amount equal to the redemption payment for the shares
of AMPS as to which such Notice of Redemption has been given with irrevocable
instructions and authority to pay the redemption price to the Holders of such
shares, then upon the date of such deposit or, if no such deposit is made,
then upon such date fixed for redemption (unless the Corporation shall default
in making the redemption payment), all rights of the Holders of such shares as
shareholders of the Corporation by reason of the ownership of such shares will
cease and terminate (except their right to receive the redemption price in
respect thereof and any Additional Dividends, but without interest), and such
shares shall no longer be deemed outstanding. The Corporation shall be
entitled to receive, from time to time, from the Auction Agent the interest,
if any, on such moneys deposited with it and the Holders of any shares so
redeemed shall have no claim to any of such interest. In case the Holder of
any shares, so called for redemption shall not claim the redemption payment
for his shares within one year after the date of redemption, the Auction Agent
shall, upon demand, pay over the Corporation such amount remaining on deposit
and the Auction Agent shall thereupon be relieved of all responsibility to the
Holder of such shares called for redemption and such Holder thereafter shall
look only to the Corporation for the redemption payment.

      5. Voting Rights. (a) General. Except as otherwise provided in the
Charter or By-Laws, each Holder of shares of AMPS shall be entitled to one
vote for each share held on each matter submitted to a vote of shareholders of
the Corporation, and the holders of outstanding shares of Preferred Stock,
including AMPS, and of shares of Common Stock shall vote together as a single
class; provided that, at any meeting of the shareholders of the



                                      44
<PAGE>

Corporation held for the election of directors, the holders of outstanding
shares of Preferred Stock, including AMPS, shall be entitled, as a class, to the
exclusion of the holders of all other securities and classes of capital stock
of the Corporation, to elect two directors of the Corporation. Subject to
paragraph 5(b) hereof, the holders of outstanding shares of capital stock of
the Corporation, including the holders of outstanding shares of Preferred
Stock, including AMPS, voting as a single class, shall elect the balance of
the directors.

      (b) Right to Elect Majority of Board of Directors. During any period in
which any one or more of the conditions described below shall exist (such
period being referred to herein as a "Voting Period"), the number of directors
constituting the Board of Directors shall be automatically increased by the
smallest number that, when added to the two directors elected exclusively by
the holders of shares of Preferred Stock, would constitute a majority of the
Board of Directors as so increased by such smallest number; and the holders of
shares of Preferred Stock shall be entitled, voting separately as one class
(to the exclusion of the holders of all other securities and classes of
capital stock of the Corporation), to elect such smallest number of additional
directors, together with the two directors that such holders are in any event
entitled to elect. A Voting Period shall commence:

            (i) if at any time accumulated dividends (whether or not earned or
      declared, and whether or not funds are then legally available in an
      amount sufficient therefor) on the outstanding shares of AMPS equal to
      at least two full years' dividends shall be due and unpaid and
      sufficient cash or specified securities shall not have been deposited
      with the Auction Agent for the payment of such accumulated dividends; or

           (ii) if at any time holders of any other shares of Preferred Stock
      are entitled to elect a majority of the directors of the Corporation
      under the 1940 Act.



                                      45
<PAGE>

      Upon the termination of a Voting Period, the voting rights described in
this paragraph 5(b) shall cease, subject always, however, to the reverting of
such voting rights in the Holders upon the further occurrence of any of the
events described in this paragraph 5(b).

      (c) Right to Vote with Respect to Certain Other Matters. So long as any
shares of AMPS are outstanding, the Corporation shall not, without the
affirmative vote of the holders of a majority of the shares of Preferred Stock
Outstanding at the time, voting separately as one class: (i) authorize, create
or issue, or increase the authorized or issued amount of, any class or series
of stock ranking prior to or on a parity with any series of Preferred Stock
with respect to payment of dividends or the distribution of assets on
liquidation, or increase the authorized amount of AMPS or any other Preferred
Stock, 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 AMPS are outstanding, the
Corporation shall not approve any of the actions set forth in clause (i) or
(ii) which adversely affects the contract rights expressly set forth in the
Charter of a Holder of shares of a series of AMPS differently than those of a
Holder of shares of any other series of AMPS without the affirmative vote of
the holders of at least a majority of the shares of AMPS of each series
adversely affected and outstanding at such time (each such adversely affected
series voting separately as a class). The Corporation shall notify Moody's and
S&P ten Business Days prior to any such vote described in clause (i) or (ii).
Unless a higher percentage is provided for under the Charter, the affirmative
vote of the holders of a majority of the outstanding shares of Preferred
Stock, including AMPS, voting together as a single class, will be required to
approve any plan of reorganization (including bankruptcy proceedings)
adversely affecting such shares or any action requiring a vote of security
holders under Section 13(a) of the 1940 Act. The class



                                      46
<PAGE>

vote of holders of shares of Preferred Stock, including AMPS, described
above will in each case be in addition to a separate vote of the requisite
percentage of shares of Common Stock and shares of Preferred Stock, including
AMPS, voting together as a single class necessary to authorize the action in
question.

      (d) Voting Procedures.

          (i) As soon as practicable after the accrual of any right of the
      holders of shares of Preferred Stock to elect additional directors as
      described in paragraph 5(b) above, the Corporation shall call a special
      meeting of such holders and instruct the Auction Agent to mail a notice
      of such special meeting to such holders, such meeting to be held not
      less than 10 nor more than 20 days after the date of mailing of such
      notice. If the Corporation fails to send such notice to the Auction
      Agent or if the Corporation does not call such a special meeting, it may
      be called by any such holder on like notice. The record date for
      determining the holders entitled to notice of and to vote at such
      special meeting shall be the close of business on the fifth Business Day
      preceding the day on which such notice is mailed. At any such special
      meeting and at each meeting held during a Voting Period, such Holders,
      voting together as a class (to the exclusion of the holders of all other
      securities and classes of capital stock of the Corporation), shall be
      entitled to elect the number of directors prescribed in paragraph 5(b)
      above. At any such meeting or adjournment thereof in the absence of a
      quorum, a majority of such holders present in person or by proxy shall
      have the power to adjourn the meeting without notice, other than by an
      announcement at the meeting, to a date not more than 120 days after the
      original record date.

           (ii) For purposes of determining any rights of the Holders to vote
      on any matter or the number of shares required to constitute a quorum,
      whether such right is




                                      47
<PAGE>

      created by these Articles Supplementary, by the other provisions
      of the Charter, by statute or otherwise, a share of AMPS which is not
      Outstanding shall not be counted.

          (iii) The terms of office of all persons who are directors of the
      Corporation at the time of a special meeting of Holders and holders of
      other Preferred Stock to elect directors shall continue, notwithstanding
      the election at such meeting by the Holders and such other holders of
      the number of directors that they are entitled to elect, and the persons
      so elected by the Holders and such other holders, together with the two
      incumbent directors elected by the Holders and such other holders of
      Preferred Stock and the remaining incumbent directors elected by the
      holders of the Common Stock and Preferred Stock, shall constitute the
      duly elected directors of the Corporation.

           (iv) Simultaneously with the expiration of a Voting Period, the
      terms of office of the additional directors elected by the Holders and
      holders of other Preferred Stock pursuant to paragraph 5(b) above shall
      terminate, the remaining directors shall constitute the directors of the
      Corporation and the voting rights of the Holders and such other holders
      to elect additional directors pursuant to paragraph 5(b) above shall
      cease, subject to the provisions of the last sentence of paragraph
      5(b)(ii).

      (e) Exclusive Remedy. Unless otherwise required by law, the Holders of
shares of AMPS shall not have any rights or preferences other than those
specifically set forth herein. The Holders of shares of AMPS shall have no
preemptive rights or rights to cumulative voting. In the event that the
Corporation fails to pay any dividends on the shares of AMPS, the exclusive
remedy of the Holders shall be the right to vote for directors pursuant to the
provisions of this paragraph 5.

      (f) Notification to S&P and Moody's. In the event a vote of Holders of
AMPS is required pursuant to the provisions of Section 13(a) of the 1940 Act,
the Corporation shall, not



                                      48
<PAGE>

later than ten Business Days prior to the date on which such vote is to
be taken, notify S&P and Moody's that such vote is to be taken and the nature
of the action with respect to which such vote is to be taken and, not later
than ten Business Days after the date on which such vote is taken, notify S&P
and Moody's of the result of such vote.

      6. 1940 Act AMPS Asset Coverage. The Corporation shall maintain, as of
the last Business Day of each month in which any share of AMPS is outstanding,
the 1940 Act AMPS Asset Coverage.

      7. AMPS Basic Maintenance Amount. (a) The Corporation shall maintain, on
each Valuation Date, and shall verify to its satisfaction that it is
maintaining on such Valuation Date, (i) S&P Eligible Assets having an
aggregate Discounted Value equal to or greater than the AMPS Basic Maintenance
Amount and (ii) Moody's Eligible Assets having an aggregate Discounted Value
equal to or greater than the AMPS Basic Maintenance Amount. Upon any failure
to maintain the required Discounted Value, the Corporation will use its best
efforts to alter the composition of its portfolio to reattain the AMPS Basic
Maintenance Amount on or prior to the AMPS Basic Maintenance Cure Date.

      (b) On or before 5:00 p.m., New York City time, on the third Business
Day after a Valuation Date on which the Corporation fails to satisfy the AMPS
Basic Maintenance Amount, the Corporation shall complete and deliver to the
Auction Agent, and Moody's and S&P, as the case may be, a complete AMPS Basic
Maintenance Report as of the date of such failure, which will be deemed to
have been delivered to the Auction Agent if the Auction Agent receives a copy
or telecopy, telex or other electronic transcription thereof and on the same
day the Corporation mails to the Auction Agent for delivery on the next
Business Day the complete AMPS Basic Maintenance Report. The Corporation will
deliver an AMPS Basic Maintenance Report to the Auction Agent and Moody's and
S&P, as the case may be, on or before 5:00 p.m., New York



                                      49
<PAGE>

City time, on the third Business Day after a Valuation Date on which the
Corporation cures its failure to maintain Moody's Eligible Assets or S&P
Eligible Assets, as the case may be, with an aggregate Discounted Value equal
to or greater than the AMPS Basic Maintenance Amount or on which the
Corporation fails to maintain Moody's Eligible Assets or S&P Eligible Assets,
as the case may be, with an aggregate Discounted Value which exceeds the AMPS
Basic Maintenance amount by 5% or more. The Corporation will also deliver an
AMPS Basic Maintenance Report to the Auction Agent, Moody's and S&P as of each
Quarterly Valuation Date on or before the third Business day after such date.
Additionally, on or before 5:00 p.m., New York City time, on the third
Business Day after the first day of a Special Dividend Period, the Corporation
will deliver an AMPS Basic Maintenance Report to S&P and the Auction Agent.
Whenever the Corporation delivers an AMPS Basic Maintenance Report to S&P
pursuant to this paragraph 7(b), it shall also deliver a Certificate of
Minimum Liquidity to S&P and the Auction Agent. The Corporation shall also
provide Moody's and S&P with an AMPS Basic Maintenance Report when
specifically requested by either Moody's or S&P. A failure by the Corporation
to deliver an AMPS Basic Maintenance Report under this paragraph 7(b) shall be
deemed to be delivery of an AMPS Basic Maintenance Report indicating the
Discounted Value for S&P Eligible Assets and Moody's Eligible Assets of the
Corporation is less than the AMPS Basic Maintenance Amount, as of the relevant
Valuation Date.

      (c) Within ten Business Days after the date of delivery of an AMPS Basic
Maintenance Report and a Certificate of Minimum Liquidity in accordance with
paragraph 7(b) above relating to a Quarterly Valuation Date, the Independent
Accountant will confirm in writing to the Auction Agent, S&P and Moody's (i)
the mathematical accuracy of the calculations reflected in such Report (and in
any other AMPS Basic Maintenance Report, randomly selected by the Independent
Accountant, that was delivered by the Corporation during the quarter ending




                                      50
<PAGE>

on such Quarterly Valuation Date) and (with respect to S&P only while S&P is
rating the AMPS) such Certificate, (ii) that, in such Report (and in such
randomly selected Report), the Corporation correctly determined the assets of
the Corporation which constitute S&P Eligible Assets or Moody's Eligible
Assets, as the case may be, at such Quarterly Valuation Date in accordance
with these Articles Supplementary, (iii) that, in such Report (and in such
randomly selected Report), the Corporation determined whether the Corporation
had, at such Quarterly Valuation Date (and at the Valuation Date addressed in
such randomly-selected Report) in accordance with these Articles
Supplementary, S&P Eligible Assets of an aggregate Discounted Value at least
equal to the AMPS Basic Maintenance Amount and Moody's Eligible Assets of an
aggregate Discounted Value at least equal to the AMPS Basic Maintenance
amount, (iv) that (with respect to S&P only) in such Certificate, the
Corporation determined the Minimum Liquidity Level and the Corporation's
Deposit Securities in accordance with these Articles Supplementary, including
maturity or tender date, (v) with respect to the S&P rating on Municipal
Bonds, the issuer name, issue size and coupon rate listed in such Report and
(with respect to S&P only) such Certificate, that the Independent Accountant
has requested that S&P verify such information and the Independent Accountant
shall provide a listing in its letter of any differences, (vi) with respect to
the Moody's ratings on Municipal Bonds, the issuer name, issue size and coupon
rate listed in such Report and (with respect to S&P only) such Certificate,
that such information has been verified by Moody's (in the event such
information is not verified by Moody's, the Independent Accountant will
inquire of Moody's what such information is, and provide a listing in its
letter of any differences), (vii) with respect to the bid or mean price (or
such alternative permissible factor used in calculating the Market Value)
provided by the custodian of the Corporation's assets to the Corporation for
purposes of valuing securities in the Corporation's portfolio, the Independent
Accountant has traced the price used in such Report and




                                      51
<PAGE>

(with respect to S&P only) such Certificate to the bid or mean price
listed in such Report and (with respect to S&P only) such Certificate as
provided to the Corporation and verified that such information agrees (in the
event such information does not agree, the Independent Accountant will provide
a listing in its letter of such differences) and (viii) with respect to such
confirmation to Moody's, that the Corporation has satisfied the requirements
of paragraph 9(b) of these Articles Supplementary (such confirmation is herein
called the "Accountant's Confirmation").

      (d) Within ten Business Days after the date of delivery to the Auction
Agent, S&P and Moody's of an AMPS Basic Maintenance Report in accordance with
paragraph 7(b) above relating to any Valuation Date on which the Corporation
failed to maintain S&P Eligible Assets with an aggregate Discounted Value and
Moody's Eligible Assets with an aggregate Discounted Value equal to or greater
than the AMPS Basic Maintenance Amount, and relating to the AMPS Basic
Maintenance Cure Date with respect to such failure, the Independent Accountant
will provide to the Auction Agent, S&P and Moody's an Accountant's
Confirmation as to such AMPS Basic Maintenance Report.

      (e) If any Accountant's Confirmation delivered pursuant to subparagraph
(c) or (d) of this paragraph 7 shows that an error was made in the AMPS Basic
Maintenance Report for a particular Valuation Date for which such Accountant's
Confirmation as required to be delivered, or shows that a lower aggregate
Discounted Value for the aggregate of all S&P Eligible Assets or Moody's
Eligible Assets, as the case may be, of the Corporation was determined by the
Independent Accountant, the calculation or determination made by such
Independent Accountant shall be final and conclusive and shall be binding on
the Corporation, and the Corporation shall accordingly amend and deliver the
AMPS Basic Maintenance Report to the Auction Agent, S&P and Moody's promptly
following receipt by the Corporation of such Accountant's Confirmation.




                                      52
<PAGE>

      (f) On or before 5:00 p.m., New York City time, on the first Business
Day after the Date of Original Issue of the shares of AMPS, the Corporation
will complete and deliver to S&P and Moody's an AMPS Basic Maintenance Report
as of the close of business on such Date of Original Issue. Within five
Business Days of such Date of Original Issue, the Independent Accountant will
confirm in writing to S&P and Moody's (i) the mathematical accuracy of the
calculation reflected in such Report and (ii) that the aggregate Discounted
Value of S&P Eligible Assets and the aggregate Discounted Value of Moody's
Eligible Assets reflected thereon equals or exceeds the AMPS Basic Maintenance
Amount reflected thereon. Also, on or before 5:00 p.m., New York City time, on
the first Business Day after shares of Common Stock are repurchased by the
Corporation, the Corporation will complete and deliver to S&P and Moody's an
AMPS Basic Maintenance Report as of the close of business on such date that
Common Stock is repurchased.

      (g) For so long as shares of AMPS are rated by Moody's, in managing the
Corporation's portfolio, the Adviser will not alter the composition of the
Corporation's portfolio if, in the reasonable belief of the Adviser, the
effect of any such alteration would be to cause the Corporation to have
Moody's Eligible Assets with an aggregate Discounted Value, as of the
immediately preceding Valuation Date, less than the AMPS Basic Maintenance
Amount as of such Valuation Date; provided, however, that in the event that,
as of the immediately preceding Valuation Date, the aggregate Discounted Value
of Moody's Eligible Assets exceeded the AMPS Basic Maintenance Amount by five
percent or less, the Adviser will not alter the composition of the
Corporation's portfolio in a manner reasonably expected to reduce the
aggregate Discounted Value of Moody's Eligible Assets unless the Corporation
shall have confirmed that, after giving effect to such alteration, the
aggregate Discounted Value of Moody's Eligible Assets would exceed the AMPS
Basic Maintenance Amount.




                                      53
<PAGE>

      8. Minimum Liquidity Level. (a) For so long as any shares of AMPS are
rated by S&P, the Corporation shall be required to have, as of each Valuation
Date, Dividend Coverage Assets having in the aggregate a Market Value not less
than the Dividend Coverage Amount.

      (b) As of each Valuation Date as long as any shares of AMPS are rated by
S&P, the Corporation shall determine (i) the Market Value of the Dividend
Coverage Assets owned by the Corporation as of that Valuation Date, (ii) the
Dividend Coverage Amount on that Valuation Date, and (iii) whether the Minimum
Liquidity Level is met as of that Valuation Date. The calculations of the
Dividend Coverage Assets, the Dividend Coverage Amount and whether the Minimum
Liquidity Level is met shall be set forth in a certificate (a "Certificate of
Minimum Liquidity") dated as of the Valuation Date. The AMPS Basic Maintenance
Report and the Certificate of Minimum Liquidity may be combined in one
certificate. The Corporation shall cause the Certificate of Minimum Liquidity
to be delivered to S&P not later than the close of business on the third
Business Day after the Valuation Date applicable to such Certificate pursuant
to paragraph 7(b). The Minimum Liquidity Level shall be deemed to be met as of
any date of determination if the Corporation has timely delivered a
Certificate of Minimum Liquidity relating to such date which states that the
same has been met and which is not manifestly inaccurate. In the event that a
Certificate of Minimum Liquidity is not delivered to S&P when required, the
Minimum Liquidity Level shall be deemed not to have been met as of the
applicable date.

      (c) If the Minimum Liquidity Level is not met as of any Valuation Date,
then the Corporation shall purchase or otherwise acquire Dividend Coverage
Assets to the extent necessary so that the Minimum Liquidity Level is met as
of the fifth Business Day following such Valuation Date. The Corporation
shall, by such fifth Business Day, provide to S&P a Certificate of Minimum
Liquidity setting forth the calculations of the Dividend Coverage Assets




                                      54
<PAGE>

and the Dividend Coverage Amount and showing that the Minimum Liquidity Level is
met as of such fifth Business Day together with a report of the custodian of
the Corporation's assets confirming the amount of the Corporation's Dividend
Coverage Assets as of such fifth Business Day.

      9. Certain Other Restrictions.

      (a) For so long as any shares of AMPS are rated by S&P, the Corporation
will not purchase or sell futures contracts, write, purchase or sell options
on futures contracts or write put options (except covered put options) or call
options (except covered call options) on portfolio securities unless it
receives written confirmation from S&P that engaging in such transactions will
not impair the ratings then assigned to the shares of AMPS by S&P, except that
the Corporation may purchase or sell futures contracts based on the Bond Buyer
Municipal Bond Index (the "Municipal Index") or United States Treasury Bonds
with remaining maturities of ten years of more ("Treasury Bonds") and write,
purchase or sell put and call options on such contracts (collectively, "S&P
Hedging Transactions"), subject to the following limitations:

            (i) the Corporation will not engage in any S&P Hedging Transaction
      based on the Municipal Index (other than transactions which terminate a
      futures contract or option held by the Corporation by the Corporation's
      taking an opposite position thereto ("Closing Transactions")), which
      would cause the Corporation at the time of such transaction to own or
      have sold the least of (A) more than 1,000 outstanding futures contracts
      based on the Municipal Index, (B) outstanding futures contracts based on
      the Municipal Index exceeding in number 25% of the quotient of the
      Market Value of the Corporation's total assets divided by $100,000 or
      (C) outstanding futures contracts based on the Municipal Index exceeding
      in number 10% of the average number of daily traded




                                      55
<PAGE>

      futures contracts based on the Municipal Index in the 30 days
      preceding the time of effecting such transaction as reported by The Wall
      Street Journal;

            (ii) the Corporation will not engage in any S&P Hedging
      Transaction based on Treasury Bonds (other than Closing Transactions)
      which would cause the Corporation at the time of such transaction to own
      or have sold the lesser of (A) outstanding futures contracts based on
      Treasury Bonds and on the Municipal Index exceeding in number 25% of the
      quotient of the Market Value of the Corporation's total assets divided
      by $100,000 or (B) outstanding futures contracts based on Treasury Bonds
      exceeding in number 10% of the average number of daily traded futures
      contracts based on Treasury Bonds in the 30 days preceding the time of
      effecting such transaction as reported by The Wall Street Journal;

           (iii) the Corporation will engage in Closing Transactions to close
      out any outstanding futures contract which the Corporation owns or has
      sold or any outstanding option thereon owned by the Corporation in the
      event (A) the Corporation does not have S&P Eligible Assets with an
      aggregate Discounted Value equal to or greater than the AMPS Basic
      Maintenance Amount on two consecutive Valuation Dates and (B) the
      Corporation is required to pay Variation Margin on the second such
      Valuation Date;

           (iv) the Corporation will engage in a Closing Transaction to close
      out any outstanding futures contract or option thereon in the month
      prior to the delivery month under the terms of such futures contract or
      option thereon unless the Corporation holds the securities deliverable
      under such terms; and

            (v) when the Corporation writes a futures contract or option
      thereon, it will either maintain an amount of cash, cash equivalents or
      short-term, fixed-income securities in a segregated account with the
      Corporation's custodian, so that the amount so




                                      56
<PAGE>

      segregated plus the amount of Initial Margin and Variation Margin
      held in the account of or on behalf of the Corporation's broker with
      respect to such futures contract or option equals the Market Value of
      the futures contract or option, or, in the event the Corporation writes
      a future contract or option thereon which requires delivery of an
      underlying security, it shall hold such underlying security in its
      portfolio.

      For purposes of determining whether the Corporation has S&P Eligible
Assets with a Discounted Value that equals or exceeds the AMPS Basic
Maintenance Amount, the Discounted Value of cash or securities held for the
payment of Initial Margin or Variation Margin shall be zero and the aggregate
Discounted Value of S&P Eligible Assets shall be reduced by an amount equal to
(i) 30% of the aggregate settlement value, as marked to market, of any
outstanding futures contracts based on the Municipal Index which are owned by
the Corporation plus (ii) 25% of the aggregate settlement value, as marked to
market, of any outstanding futures contracts based on Treasury Bonds which
contracts are owned by the Corporation.

      (b) For so long as any shares of AMPS are rated by Moody's, the
Corporation will not buy or sell futures contracts, write, purchase or sell
call options on futures contracts or purchase put options on futures contracts
or write call options (except covered call options) on portfolio securities
unless it receives written confirmation from Moody's that engaging in such
transactions would not impair the ratings then assigned to the shares of AMPS
by Moody's, except that the Corporation may purchase or sell exchange-traded
futures contracts based on the Municipal Index or Treasury Bonds and purchase,
write or sell exchange-traded put options on such futures contracts and
purchase, write or sell exchange-traded call options on such futures contracts
(collectively, "Moody's Hedging Transactions"), subject to the following
limitations:

            (i) the Corporation will not engage in any Moody's Hedging
      Transaction based on the Municipal Index (other than Closing
      Transactions) which would cause the




                                      57
<PAGE>

      Corporation at the time of such transaction to own or have sold
      (A) outstanding futures contracts based on the Municipal Index exceeding
      in number 10% of the average number of daily traded futures contracts
      based on the Municipal Index in the 30 days preceding the time of
      effecting such transaction as reported by The Wall Street Journal or (B)
      outstanding futures contracts based on the Municipal Index having a
      Market Value exceeding the Market Value of all Moody's Eligible Assets
      owned by the Corporation (other than Moody's Eligible Assets already
      subject to a Moody's Hedging Transaction);

            (ii) the Corporation will not engage in any Moody's Hedging
      Transaction based on Treasury Bonds (other than Closing Transactions)
      which would cause the Corporation at the time of such transaction to own
      or have sold (A) outstanding futures contracts based on Treasury Bonds
      having an aggregate Market Value exceeding 40% of the aggregate Market
      Value of Moody's Eligible Assets owned by the Corporation and rated Aa
      by Moody's (or, if not rated by Moody's but rated by S&P, rated AAA by
      S&P) or (B) outstanding futures contracts based on Treasury Bonds having
      an aggregate Market Value exceeding 80% of the aggregate Market Value of
      all Moody's Eligible Assets owned by the Corporation (other than Moody's
      Eligible Assets already subject to a Moody's Hedging Transaction) and
      rated Baa or A by Moody's (or, if not rated by Moody's but rated by S&P,
      rated A or AA by S&P) (for purposes of the foregoing clauses (i) and
      (ii), the Corporation shall be deemed to own the number of futures
      contracts that underlie any outstanding options written by the
      Corporation);

            (iii) the Corporation will engage in Closing Transactions to close
      out any outstanding futures contract based on the Municipal Index if the
      amount of open interest in the Municipal Index as reported by The Wall
      Street Journal is less than 5,000;



                                      58
<PAGE>

            (iv) the Corporation will engage in a Closing Transaction to close
      out any outstanding futures contract by no later than the fifth Business
      Day of the month in which such contract expires and will engage in a
      Closing Transaction to close out any outstanding option on a futures
      contract by no later than the first Business Day of the month in which
      such option expires;

            (v) the Corporation will engage in Moody's Hedging Transactions
      only with respect to futures contracts or options thereon having the
      next settlement date or the settlement date immediately thereafter;

            (vi) in the event the Corporation writes a futures contract or
      option thereon which requires delivery of an underlying security, it
      shall hold such underlying security in its portfolio;

           (vii) the Corporation will not engage in options and futures
      transactions for leveraging or speculative purposes and will not write
      any call options or sell any futures contracts for the purpose of
      hedging the anticipated purchase of an asset prior to completion of such
      purchases; and

          (viii) the Corporation will not enter into an option or futures
      transaction unless, after giving effect thereto, the Corporation would
      continue to have Moody's Eligible Assets with an aggregate Discounted
      Value equal to or greater than the AMPS Basic Maintenance Amount.

      For purposes of determining whether the Corporation has Moody's Eligible
Assets with an aggregate Discounted Value that equals or exceeds the AMPS
Basic Maintenance Amount, the Discounted Value of Moody's Eligible Assets
which the Corporation is obligated to deliver or receive pursuant to an
outstanding futures contract or option shall be as follows: (i) assets subject
to call options written by the Corporation which are either exchange-traded
and "readily




                                      59
<PAGE>

reversible" or which expire within 49 days after the date as of which such
valuation is made shall be valued at the lesser of (a) Discounted Value
and (b) the exercise price of the call option written by the Corporation; (ii)
assets subject to call options written by the Corporation not meeting the
requirements of clause (i) of this sentence shall have no value; (iii) assets
subject to put options written by the Corporation shall be valued at the
lesser of (A) the exercise price and (B) the Discounted Value of the subject
security; (iv) futures contracts shall be valued at the lesser of (A)
settlement price and (B) the Discounted Value of the subject security,
provided that, if a contract matures within 49 days after the date as of which
such valuation is made, where the Corporation is the seller the contract may
be valued at the settlement price and where the Corporation is the buyer the
contract may be valued at the Discounted Value of the subject securities and
(v) where delivery may be made to the Corporation with any security of a class
of securities, the Corporation shall assume that it will take delivery of the
security with the lowest Discounted Value.

      For purposes of determining whether the Corporation has Moody's Eligible
Assets with an aggregate Discounted Value that equals or exceeds the AMPS
Basic Maintenance Amount, the following amounts shall be subtracted from the
aggregate Discounted Value of the Moody's Eligible Assets held by the
Corporation: (i) 10% of the exercise price of a written call option; (ii) the
exercise price of any written put option; (iii) where the Corporation is the
seller under a futures contract, 10% of the settlement price of the futures
contract; (iv) where the Corporation is the purchaser under a futures
contract, the settlement price of assets purchased under such futures
contract; (v) the settlement price of the underlying futures contract if the
Corporation writes put options on a futures contract; and (vi) 105% of the
Market Value of the underlying futures contracts if the Corporation writes
call options on a future contract and does not own the underlying contract.



                                      60
<PAGE>


      (c) For so long as any shares of AMPS are rated by Moody's, the
Corporation will not enter into any contract to purchase securities for a
fixed price at a future date beyond customary settlement time (other than such
contracts that constitute Moody's Hedging Transactions that are permitted
under paragraph 9(b) of these Articles Supplementary) except that the
Corporation may enter into such contracts to purchase newly-issued securities
on the date such securities are issued ("Forward Commitments"), subject to the
following limitations:

            (i) the Corporation will maintain in a segregated account with its
      custodian cash, cash equivalents or short-term, fixed-income securities
      rated P-1, MIG-1 or VMIG-1 by Moody's and maturing prior to the date of
      the Forward Commitment with a Market Value that equals or exceeds the
      amount of the Corporation's obligations under any Forward Commitments to
      which it is from time to time a party or long-term fixed income
      securities with a Discounted Value that equals or exceeds the amount of
      the Corporation's obligations under any Forward Commitment to which it
      is from time to time a party; and

           (ii) the Corporation will not enter into a Forward Commitment
      unless, after giving effect thereto the Corporation would continue to
      have Moody's Eligible Assets with an aggregate Discounted Value equal to
      or greater than the AMPS Basic Maintenance Amount.

      For purposes of determining whether the Corporation has Moody's Eligible
Assets with an aggregate Discounted Value that equals or exceeds the AMPS
Basic Maintenance Amount, the Discounted Value of all Forward Commitments to
which the Corporation is a party and of all securities deliverable to the
Corporation pursuant to such Forward Commitments shall be zero.

      (d) For so long as shares of AMPS are rated by S&P or Moody's, the
Corporation will not, unless it has received written confirmation from S&P
and/or Moody's, s the case may




                                      61
<PAGE>

be, that such action would not impair the ratings then assigned to shares
of AMPS by S&P and/or Moody's, as the case may be, (i) borrow money
except for the purposes of clearing transactions in portfolio securities
(which borrowings shall under any circumstances be limited to the lesser of
$10 million and an amount equal to 5% of the Market Value of the Corporation's
assets at the time of such borrowings and which borrowings shall be repaid
within 60 days and not be extended or renewed), (ii) engage in short sales of
securities, (iii) lend any securities, (iv) issue any class or series of stock
ranking prior to or on a parity with the AMPS with respect to the payment of
dividends or the distribution of assets upon dissolution, liquidation or
winding up of the Corporation, (v) reissue any AMPS previously purchased or
redeemed by the Corporation, (vi) merge or consolidate into or with any other
corporation or entity, (vii) change the Pricing Service or (viii) engage in
reverse repurchase agreements.

      10. Notice. All notices or communications, unless otherwise specified in
the By-Laws of the Corporation or these Articles Supplementary, shall be
sufficiently given if in writing and delivered in person or mailed by
first-class mail, postage prepaid. Notice shall be deemed given on the earlier
of the date received or the date seven days after which such notice is mailed.

      11. Auction Procedures. (a) Certain definitions. As used in this
paragraph 11, the following terms shall have the following meanings, unless
the context otherwise requires:

            (i) "AMPS" means the shares of AMPS being auctioned pursuant to
      this paragraph 11.

           (ii) "Auction Date" means the first Business Day preceding the
      first day of a Dividend Period.

          (iii) "Available AMPS" has the meaning specified in paragraph
      11(d)(i) below.

           (iv) "Bid" has the meaning specified in paragraph 11(b)(i) below.



                                      62
<PAGE>

            (v) "Bidder" has the meaning specified in paragraph 11(b)(i)
      below.

           (vi) "Hold Order" has the meaning specified in paragraph 11(b)(i)
      below.

          (vii) "Maximum Applicable Rate" for any Dividend Period will be
      the Applicable Percentage of the Reference Rate. The Applicable
      Percentage will be determined based on (i) the lower of the credit
      rating or ratings assigned on such date to such shares by Moody's and
      S&P (or if Moody's or S&P or both shall not make such rating available,
      the equivalent of either or both of such ratings by a Substitute Rating
      Agency or two Substitute Rating Agencies or, in the event that only one
      such rating shall be available, such rating) and (ii) whether the
      Corporation has provided notification to the Auction Agent prior to the
      Auction establishing the Applicable Rate for any dividend pursuant to
      paragraph 2(f) hereof that net capital gains or other taxable income
      will be included in such dividend on shares of AMPS as follows:

                                         Applicable          Applicable
             Credit Ratings              Percentage of       Percentage of
- ---------------------------------------- Reference Rate -    Reference Rate -
      Moody's                S&P         No Notification     Notification
- -----------------    ------------------- ------------------  -----------------
"aa3" or higher      AA- or higher              110%                150%
"a3" to "a1"         A- to A+                   125%                160%
"baa3" to "baa1"     BBB- to BBB+               150%                250%
Below "baa3"         Below BBB-                 200%                275%


      The Corporation shall take all reasonable action necessary to enable S&P
and Moody's to provide a rating for each series of AMPS. If either S&P or
Moody's shall not make such a rating available, or neither S&P nor Moody's
shall make such a rating available, Merrill Lynch, Pierce, Fenner & Smith
Incorporated or its affiliates and successors, after consultation with the
Corporation, shall select a nationally recognized statistical rating
organization or two nationally recognized statistical rating organizations to
act as a Substitute Rating Agency or Substitute Rating Agencies, as the case
may be.

            (viii) "Order" has the meaning specified in paragraph 11(b)(i)
      below.



                                      63
<PAGE>

            (ix) "Sell Order" has the meaning specified in paragraph 11(b)(i)
      below.

             (x) "Submission Deadline" means 1:00 P.M., New York City time, on
      any Auction Date or such other time on any Auction Date as may be
      specified by the Auction Agent from time to time as the time by which
      each Broker-Dealer must submit to the Auction Agent in writing all
      orders obtained by it for the Auction to be conducted on such Auction
      Date.

            (xi) "Submitted Bid" has the meaning specified in paragraph
      11(d)(i) below.

           (xii) "Submitted Hold Order" has the meaning specified in
      paragraph 11(d)(i) below.

          (xiii) "Submitted Order" has the meaning specified in paragraph
      11(d)(i) below.

           (xiv) "Submitted Sell Order" has the meaning specified in
      paragraph 11(d)(i) below.

            (xv) "Sufficient Clearing Bids" has the meaning specified in
      paragraph 11(d)(i) below.

           (xvi) "Winning Bid Rate" has the meaning specified in paragraph
      11(d)(i) below.

      (b) Orders by Beneficial Owners, Potential Beneficial Owners, Existing
Holders and Potential Holders.

            (i) Unless otherwise permitted by the Corporation, Beneficial
      Owners and Potential Beneficial Owners may only participate in Auctions
      through their Broker-Dealers. Broker-Dealers will submit the Orders of
      their respective customers who are Beneficial Owners and Potential
      Beneficial Owners to the Auction Agent, designating themselves as
      Existing Holders in respect of shares subject to Orders submitted or
      deemed submitted to them by Beneficial Owners and as Potential Holders
      in




                                      64
<PAGE>

      respect of shares subject to Orders submitted to them by Potential
      Beneficial Owners. A Broker-Dealer may also hold shares of AMPS in its
      own account as a Beneficial Owner. A Broker-Dealer may thus submit
      orders to the Auction Agent as a Beneficial Owner or a Potential
      Beneficial Owner and therefore participate in an Auction as an Existing
      Holder or Potential Holder on behalf of both itself and its customers.
      On or prior to the Submission Deadline on each Auction Date:

                  (A) each Beneficial Owner may submit to its Broker-Dealer
            information as to:

                        (1) the number of Outstanding shares, if any, of AMPS
                  held by such Beneficial Owner which such Beneficial Owner
                  desires to continue to hold without regard to the Applicable
                  Rate for the next succeeding Dividend Period;

                        (2) the number of Outstanding shares, if any, of AMPS
                  held by such Beneficial Owner which such Beneficial Owner
                  desires to continue to hold, provided that the Applicable
                  Rate for the next succeeding Dividend Period shall not be
                  less than the rate per annum specified by such Beneficial
                  Owner; and/or

                        (3) the number of Outstanding shares, if any, of AMPS
                  held by such Beneficial Owner which such Beneficial Owner
                  offers to sell without regard to the Applicable Rate for the
                  next succeeding Dividend Period; and

                  (B) each Broker-Dealer, using a list of Potential Beneficial
            Owners that shall be maintained in good faith for the purpose of
            conducting a competitive Auction, shall contact Potential
            Beneficial Owners, including Persons that are not




                                      65
<PAGE>

            Beneficial Owners, on such list to determine the number of
            Outstanding shares, if any, of AMPS which each such Potential
            Beneficial Owner offers to purchase, provided that the Applicable
            Rate for the next succeeding Dividend Period shall not be less
            than the rate per annum specified by such Potential Beneficial
            Owner.

      For the purposes hereof, the communication by a Beneficial Owner or
Potential Beneficial Owner to a Broker-Dealer, or the communication by a
Broker-Dealer acting for its own account to the Auction Agent, of information
referred to in clause (A) or (B) of this paragraph 11(b)(i) is hereinafter
referred to as an "Order" and each Beneficial Owner and each Potential
Beneficial Owner placing an Order, including a Broker-Dealer acting in such
capacity for its own account, is hereinafter referred to as a "Bidder"; an
Order containing the information referred to in clause (A)(1) of this
paragraph 11(b)(i) is hereinafter referred to as a "Hold Order"; an Order
containing the information referred to in clause (A)(2) or (B) of this
paragraph 11(b)(i) is hereinafter referred to as a "Bid"; and an Order
containing the information referred to in clause (A)(3) of this paragraph
11(b)(i) is hereinafter referred to as a "Sell Order". Inasmuch as a
Broker-Dealer participates in an Auction as an Existing Holder or a Potential
Holder only to represent the interests of a Beneficial Owner or Potential
Beneficial Owner, whether it be its customers or itself, all discussions
herein relating to the consequences of an Auction for Existing Holders and
Potential Holders also applies to the underlying beneficial ownership
interests represented.

            (ii) (A) A Bid by an Existing Holder shall constitute an
      irrevocable offer to sell:

                  (1) the number of Outstanding shares of AMPS specified in
            such Bid if the Applicable Rate determined on such Auction Date
            shall be less than the rate per annum specified in such Bid; or



                                      66
<PAGE>

                  (2) such number or a lesser number of Outstanding shares of
            AMPS to be determined as set forth in paragraph 11(e)(i)(D) if the
            Applicable Rate determined on such Auction Date shall be equal to
            the rate per annum specified therein; or

                  (3) a lesser number of Outstanding shares of AMPS to be
            determined as set forth in paragraph 11(e)(ii)(C) if such
            specified rate per annum shall be higher than the Maximum
            Applicable Rate and Sufficient Clearing Bids do not exist.

                  (B) A Sell Order by an Existing Holder shall constitute an
            irrevocable offer to sell:

                        (1) the number of Outstanding shares of AMPS specified
                  in such Sell Order; or

                        (2) such number or a lesser number of Outstanding
                  shares of AMPS to be determined as set forth in paragraph
                  11(e)(ii)(C) if Sufficient Clearing Bids do not exist.

                  (C) A Bid by a Potential Holder shall constitute an
            irrevocable offer to purchase:

                        (1) the number of Outstanding shares of AMPS specified
                  in such Bid if the Applicable Rate determined on such
                  Auction Date shall be higher than the rate per annum in such
                  Bid; or

                        (2) such number or a lesser number of Outstanding
                  shares of AMPS to be determined as set forth in paragraph
                  11(e)(i)(E) if the Applicable Rate determined on such
                  Auction Date shall be equal to the rate per annum specified
                  therein.



                                      67
<PAGE>

      (c)  Submission of Orders by Broker-Dealers to Auction Agent.

           (i) Each Broker-Dealer shall submit in writing or through the
      Auction Agent's Auction Processing System to the Auction Agent prior to
      the Submission Deadline on each Auction Date all Orders obtained by such
      Broker-Dealer, designating itself (unless otherwise permitted by the
      Corporation) as an Existing Holder in respect of shares subject to
      Orders submitted or deemed submitted to it by Beneficial Owners and as a
      Potential Holder in respect of shares subject to Orders submitted to it
      by Potential Beneficial Owners, and specifying with respect to each
      Order:

                  (A) the name of the Bidder placing such Order (which shall
            be the Broker-Dealer unless otherwise permitted by the
            Corporation);

                  (B) the aggregate number of Outstanding shares of AMPS that
            are the subject of such Order;

                  (C) to the extent that such Bidder is an Existing Holder:

                      (1) the number of Outstanding shares, if any, of AMPS
                  subject to any Hold Order placed by such Existing Holder;

                      (2) the number of Outstanding shares, if any, of AMPS
                  subject to any Bid placed by such Existing Holder and the
                  rate per annum specified in such Bid; and

                      (3) the number of Outstanding shares, if any, of AMPS
                  subject to any Sell Order placed by such Existing Holder;
                  and

                  (D) to the extent such Bidder is a Potential Holder, the
            rate per annum specified in such Potential Holder's Bid.



                                      68
<PAGE>

            (ii) If any rate per annum specified in any Bid contains more than
      three figures to the right of the decimal point, the Auction Agent shall
      round such rate up to the next highest one-thousandth (.001) of 1%.

           (iii) If an Order or Orders covering all of the Outstanding shares
      of AMPS held by an Existing Holder are not submitted to the Auction
      Agent prior to the Submission Deadline, the Auction Agent shall deem a
      Hold Order (in the case of an Auction relating to a Dividend Period
      which is not a Special Dividend Period) and a Sell Order (in the case of
      an Auction relating to a Special Dividend Period) to have been submitted
      on behalf of such Existing Holder covering the number of Outstanding
      shares of AMPS held by such Existing Holder and not subject to Orders
      submitted to the Auction Agent.

            (iv) If one or more Orders on behalf of an Existing Holder
      covering in the aggregate more than the number of Outstanding shares of
      AMPS held by such Existing Holder are submitted to the Auction Agent,
      such Order shall be considered valid as follows and in the following
      order of priority:

                  (A) any Hold Order submitted on behalf of such Existing
            Holder shall be considered valid up to and including the number of
            Outstanding shares of AMPS held by such Existing Holder; provided
            that if more than one Hold Order is submitted on behalf of such
            Existing Holder and the number of shares of AMPS subject to such
            Hold Orders exceeds the number of Outstanding shares of AMPS held
            by such Existing Holder, the number of shares of AMPS subject to
            each of such Holder Orders shall be reduced pro rata so that such
            Hold Orders, in the aggregate, will cover exactly the number of
            Outstanding shares of AMPS held by such Existing Holder;




                                      69
<PAGE>

                  (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 11(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 11(c)(iv)(A) above and of the foregoing
            portion of this paragraph 11(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 11(c)(iv)(B) shall be treated as the
            subject of a Bid by a Potential Holder; and

                  (C) any Sell Order shall be considered valid up to and
            including the excess of the number of Outstanding shares of AMPS
            held by such Existing Holder over the number of shares of AMPS
            subject to Hold Orders referred to in paragraph 11(c)(iv)(A) and
            Bids referred to in paragraph 11(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.




                                      70
<PAGE>

            (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 specified.

            (vi) Any Order submitted by a Beneficial Owner as a Potential
      Beneficial Owner to its Broker-Dealer, or by a Broker-Dealer to the
      Auction Agent, prior to the Submission Deadline on any Auction Date
      shall be irrevocable.

      (d) Determination of Sufficient Clearing Bids, Winning Bid Rate and
Applicable Rate.

            (i) Not earlier than the Submission Deadline on each Auction Date,
      the Auction Agent shall assemble all Orders submitted or deemed
      submitted to it by the Broker-Dealers (each such Order as submitted or
      deemed submitted by a Broker-Dealer being hereinafter referred to
      individually as a "Submitted Hold Order", a "Submitted Bid" or a
      "Submitted Sell Order", as the case may be, or as a "Submitted Order")
      and shall determine:

                  (A) the excess of the total number of Outstanding shares of
            AMPS over the number of Outstanding shares of AMPS that are the
            subject of Submitted Hold Orders (such excess being hereinafter
            referred to as the "Available AMPS");

                  (B) from the Submitted Orders whether the number of
            Outstanding shares of AMPS that are the subject of Submitted Bids
            by Potential Holders specifying one or more rates per annum equal
            to or lower than the Maximum Applicable Rate exceeds or is equal
            to the sum of:

                        (1) the number of Outstanding shares of AMPS that are
                  the subject of Submitted Bids by Existing Holders specifying
                  one or more rates per annum higher than the Maximum
                  Applicable Rate, and



                                      71
<PAGE>

                        (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 holder Orders), such Submitted Bids
                  by Potential Holders being hereinafter referred to
                  collectively as "Sufficient Clearing Bids"); and

                  (C) if Sufficient Clearing Bids exist, the lowest rate per
            annum specified in the Submitted Bids (the "Winning Bid Rate")
            that if:

                        (1) each Submitted Bid from Existing Holders
                  specifying the Winning Bid Rate and all other Submitted Bids
                  from Existing Holders specifying lower rates per annum were
                  rejected, thus entitling such Existing Holders to continue
                  to hold the shares of AMPS that are the subject of such
                  Submitted Bids, and

                        (2) each Submitted Bid from Potential Holders
                  specifying the Winning Bid Rate and all other Submitted Bids
                  from Potential Holders specifying lower rates per annum were
                  accepted, thus entitling the Potential Holders to purchase
                  the shares of AMPS that are the subject of such Submitted
                  Bids,

would result in the number of shares subject to all Submitted Bids specifying
the Winning Bid Rate or a lower rate per annum being at least equal to the
Available AMPS.

            (ii) Promptly after the Auction Agent has made the determinations
      pursuant to paragraph 11(d)(i), the Auction Agent shall advise the
      Corporation of the Maximum




                                      72
<PAGE>

      Applicable Rate and, based on such determination, the Applicable Rate
      for the next succeeding Dividend Period as follows:

                  (A) if Sufficient Clearing Bids exist, that the Applicable
            Rate for the next succeeding Dividend Period shall be equal to the
            Winning Bid Rate;

                  (B) if Sufficient Clearing Bids do not exist (other than
            because all of the Outstanding shares of AMPS are the subject of
            Submitted Hold Orders), that the Applicable Rate for the next
            succeeding Dividend Period shall be equal to the Maximum
            Applicable Rate; or

                  (C) if all of the Outstanding shares of AMPS are the subject
            of Submitted Hold Orders, that the Dividend Period next succeeding
            the Auction shall automatically be the same length as the
            immediately preceding Dividend Period and the Applicable Rate for
            the next succeeding Dividend Period shall be equal to 59% of the
            Reference Rate (or 90% of such rate if the Corporation has
            provided notification to the Auction Agent prior to the Auction
            establishing the Applicable Rate for any dividend pursuant to
            paragraph 2(f) hereof that net capital gains or other taxable
            income will be included in such dividend on shares of AMPS) on the
            date of the Auction.

      (e) Acceptance and Rejection of Submitted Bids and Submitted Sell Orders
and Allocation of Shares. Based on the determinations made pursuant to
paragraph 11(d)(i), the Submitted Bids and Submitted Sell Orders shall be
accepted or rejected and the Auction Agent shall take such other action as set
forth below:

            (i) If Sufficient Clearing Bids have been made, subject to the
      provisions of paragraph 11(e)(iii) and paragraph 11(e)(iv), Submitted
      Bids and Submitted Sell Orders



                                      73
<PAGE>

      shall be accepted or rejected in the following order or priority and all
      other Submitted Bids shall be rejected:

                  (A) the Submitted Sell Orders of Existing Holders shall be
            accepted and the Submitted Bid of each of the Existing Holders
            specifying any rate per annum that is higher than the Winning Bid
            Rate shall be accepted, thus requiring each such Existing Holder
            to sell the Outstanding shares of AMPS that are the subject of
            such Submitted Sell Order or Submitted Bid;

                  (B) the Submitted Bid of each of the Existing Holders
            specifying any rate per annum that is lower than the Winning Bid
            Rate shall be rejected, thus entitling each such Existing Holder
            to continue to hold the Outstanding shares of AMPS that are the
            subject of such Submitted Bid;

                  (C) the Submitted Bid of each of the Potential Holders
            specifying any rate per annum that is lower than the Winning Bid
            Rate shall be accepted;

                  (D) the Submitted Bid of each of the Existing Holders
            specifying a rate per annum that is equal to the Winning Bid Rate
            shall be rejected, thus entitling each such Existing Holder to
            continue to hold the Outstanding shares of AMPS that are the
            subject of such Submitted Bid, unless the number of Outstanding
            shares of AMPS subject to all such Submitted Bids shall be greater
            than the number of Outstanding shares of AMPS ("Remaining Shares")
            equal to the excess of the Available AMPS over the number of
            Outstanding shares of AMPS subject to Submitted Bids described in
            paragraph 11(e)(i)(B) and paragraph 11(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




                                      74
<PAGE>

            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

                  (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 11(e)(i)(B), paragraph 11(e)(i)(C) and paragraph
            11(e)(i)(D) by (y) a fraction the numerator of which shall be the
            number of Outstanding shares of AMPS subject to such Submitted Bid
            and the denominator of which shall be the sum of the number of
            Outstanding shares of AMPS subject to such Submitted Bids made by
            all such Potential Holders that specified rates per annum equal to
            the Winning Bid Rate.

            (ii) If Sufficient Clearing Bids have not been made (other than
      because all of the Outstanding shares of AMPS are subject to Submitted
      Hold Orders), subject to the provisions of paragraph 11(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:



                                      75
<PAGE>

                  (A) the Submitted Bid of each Existing Holder specifying any
            rate per annum that is equal to or lower than the Maximum
            Applicable Rate shall be rejected, thus entitling such Existing
            Holder to continue to hold the Outstanding shares of AMPS that are
            the subject of such Submitted Bid;

                  (B) the Submitted Bid of each Potential Holder specifying
            any rate per annum that is equal to or lower than the Maximum
            Applicable Rate shall be accepted, thus requiring such Potential
            Holder to purchase the Outstanding shares of AMPS that are the
            subject of such Submitted Bid; and

                  (C) the Submitted Bids of each Existing Holder specifying
            any rate per annum that is higher than the Maximum Applicable Rate
            shall be accepted and the Submitted Sell Orders of each Existing
            Holder shall be accepted, in both cases only in an amount equal to
            the difference between (1) the number of Outstanding shares of
            AMPS then held by such Existing Holder subject to such Submitted
            Bid or Submitted Sell Order and (2) the number of shares of AMPS
            obtained by multiplying (x) the difference between the Available
            AMPS and the aggregate number of Outstanding shares of AMPS
            subject to Submitted Bids described in paragraph 11(e)(ii)(A) and
            paragraph 11(e)(ii)(B) by (y) a fraction the numerator of which
            shall be the number of Outstanding shares of AMPS held by such
            Existing Holder subject to such Submitted Bid or Submitted Sell
            Order and the denominator of which shall be the number of
            Outstanding shares of AMPS subject to all such Submitted Bids and
            Submitted Sell Orders.

            (iii) If, as a result of the procedures described in paragraph
      11(e)(i) or paragraph 11(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




                                      76
<PAGE>

      on any Auction Date, the Auction Agent shall, in such manner as in
      its sole discretion it shall determine, round up or down the number of
      shares of AMPS to be purchased or sold by any Existing Holder or
      Potential Holder on such Auction Date so that each Outstanding share of
      AMPS purchased or sold by each Existing Holder or Potential Holder on
      such Auction Date shall be a whole share of AMPS.

            (iv) If, as a result of the procedures described in paragraph
      11(e)(i), any Potential Holder would be entitled or required to purchase
      less than a whole share of AMPS on any Auction Date, the Auction Agent
      shall, in such manner as in its sole discretion it shall determine,
      allocate shares of AMPS for purchase among Potential Holders so that
      only whole shares of AMPS are purchased on such Auction Date by any
      Potential Holder, even if such allocation results in one or more of such
      Potential Holders not purchasing any shares of AMPS on such Auction
      Date.

            (v) Based on the results of each Auction, the Auction Agent shall
      determine, with respect to each Broker-Dealer that submitted Bids or
      Sell Orders on behalf of Existing Holders or Potential Holders, the
      aggregate number of Outstanding shares of AMPS to be purchased and the
      aggregate number of the Outstanding shares of AMPS to be sold by such
      Potential Holders and Existing Holders and, to the extent that such
      aggregate number of Outstanding shares to be purchased and such
      aggregate number of Outstanding shares to be sold differ, the Auction
      Agent shall determine to which other Broker-Dealer or Broker-Dealers
      acting for one or more purchasers such Broker-Dealer shall deliver, or
      from which other Broker-Dealer or Broker-Dealers acting for one or more
      sellers such Broker-Dealer shall receive, as the case may be,
      Outstanding shares of AMPS.




                                      77
<PAGE>

      (f) Miscellaneous. The Corporation may interpret the provisions of this
paragraph 11 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 11 or to or through a Broker-Dealer, provided that
in the case of all transfers other than pursuant to Auctions such Beneficial
Owner or Existing Holder, its Broker-Dealer, if applicable, or its Agent
Member advises the Auction Agent of such transfer and (B) except as otherwise
required by law, shall have the ownership of the shares of AMPS held by it
maintained in book entry form by the Securities Depository in the account of
its Agent Member, which in turn will maintain records of such Beneficial
Owner's beneficial ownership. Neither the Corporation nor any Affiliate shall
submit an Order in any Auction. Any Beneficial Owner that is an Affiliate
shall not sell, transfer or otherwise dispose of shares of AMPS to any Person
other than the Corporation. All of the Outstanding shares of AMPS of a series
shall be represented by a single certificate registered in the name of the
nominee of the Securities Depository unless otherwise required by law or
unless there is no Securities Depository. If there is no Securities
Depository, at the Corporation's option and upon its receipt of such documents
as it deems appropriate, any shares of AMPS may be registered in the Stock
Register in the name of the Beneficial Owner thereof and such Beneficial Owner
thereupon will be entitled to receive certificates therefor and required to
deliver certificates therefor upon transfer or exchange thereof.

      12. Securities Depository; Stock Certificates. (a) If there is a
Securities Depository, one certificate for all of the shares of AMPS of each
series shall be issued to the Securities Depository and registered in the name
of the Securities Depository or its nominee. Additional



                                      78
<PAGE>

certificates may be issued as necessary to represent shares of AMPS. All
such certificates shall bear a legend to the effect that such certificates are
issued subject to the provisions restricting the transfer of shares of AMPS
contained in these Articles Supplementary. Unless the Corporation shall have
elected, during a Non-Payment Period, to waive this requirement, the
Corporation will also issue stop-transfer instructions to the Auction Agent
for the shares of AMPS. Except as provided in paragraph (b) below, the
Securities Depository or its nominee will be the Holder, and no Beneficial
Owner shall receive certificates representing its ownership interest in such
shares.

      (b) If the Applicable Rate applicable to all shares of AMPS of a series
shall be the Non-Payment Period Rate or there is no Securities Depository, the
Corporation may at its option issue one or more new certificates with respect
to such shares (without the legend referred to in paragraph 12(a)) registered
in the names of the Beneficial Owners or their nominees and rescind the
stop-transfer instructions referred to in paragraph 12(a) with respect to such
shares.




                                      79
<PAGE>


      IN WITNESS WHEREOF, MUNIVEST FUND II, INC. has caused these presents to
be signed in its name and on its behalf by a duly authorized officer, and its
corporate seal to be hereunto affixed and attested by its Secretary, and the
said officers of the Corporation further acknowledge said instrument to be the
corporate act of the Corporation, and state under the penalties of perjury
that to the best of their knowledge, information and belief the matters and
facts herein set forth with respect to approval are true in all material
respects, all on April 19, 1993.

                                    MUNIVEST FUND II, INC.


                                    By  /s/ Vincent Giordano
                                        ----------------------
                                        Name: Vincent Giordano
                                        Title: Vice President

Attest:


/s/ Mark Goldfus
- ----------------
    Mark Goldfus
     Secretary





                                      80

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2A3
<SEQUENCE>4
<FILENAME>efc4-1994_5621491ex992a3.txt
<TEXT>
                                                                Exhibit (a)(3)

                            MUNIVEST FUND II, INC.
                Articles Supplementary creating three series of

                      Auction Market Preferred Stock(R)

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

      FIRST: Pursuant to authority expressly vested in the Board of Directors
of the Corporation by Article FIFTH of its Charter, the Board of Directors has
reclassified 2,700 authorized and unissued shares of common stock of the
Corporation as additional preferred stock of the Corporation and has
authorized the issuance of preferred stock, par value $.10 per share,
liquidation preference $50,000 per share plus an amount equal to accumulated
but unpaid dividends (whether or not earned or declared) thereon, to be
designated Auction Market Preferred Stock.

      SECOND: The preferences, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption, of the
shares of such preferred stock shall be identical to the 2,700 shares of
Auction Market Preferred Stock previously reclassified and authorized by the
Board of Directors pursuant to Articles Supplementary dated April 19, 1993 and
filed on April 20, 1993 with the Maryland State Department of Assessments and
Taxation. Accordingly, these Articles Supplementary hereby incorporate by
reference such previously filed Articles Supplementary beginning with the
section entitled "DESIGNATION" and continuing until the end of the final
section entitled "Securities Depository; Stock Certificates," with the
following exception:
______________
(R)  Registered trademark of Merrill Lynch & Co., Inc.


<PAGE>

      At page 2, in the section entitled "DESIGNATION," strike out the date
"April 26, 1993" and insert in lieu thereof the date "December 1, 1994";

      IN WITNESS WHEREOF, MUNIVEST FUND II, INC. has caused these presents to
be signed in its name and on its behalf by a duly authorized officer, and
attested by its Secretary, and the said officers of the Corporation further
acknowledge said instrument to be the corporate act of the Corporation, and
state under the penalties of perjury that to the best of their knowledge,
information and belief the matters and facts herein set forth with respect to
approval are true in all material respects, all on November 30, 1994.

                                      MUNIVEST FUND II, INC.



                                      By /s/ Vincent R. Giordano
                                        ---------------------------------
                                         Name:  Vincent R. Giordano
                                         Title:    Senior Vice President
Attest:



   /s/ Mark B. Goldfus
- --------------------------
Name:  Mark B. Goldfus
Its:   Secretary





</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2A4
<SEQUENCE>5
<FILENAME>efc4-1994_5621503ex992a4.txt
<TEXT>
                                                                  Exhibit (a)(4)


                            MUNIVEST FUND II, INC.

           Articles of Amendment to Articles Supplementary creating

               three series of Auction Market Preferred Stock(R)

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

      FIRST: The Articles Supplementary, filed on April 20, 1993, and the
Articles Supplementary, filed on December 1, 1994, each creating 2,700 shares
of Auction Market Preferred Stock of the Corporation (collectively, the
"Articles Supplementary"), are hereby amended by these Articles of Amendment
as follows:

      In each instance in which "$.10" appears, delete "$.10" and substitute
"$.05"(R) therefor;

      In each instance in which "$50,000" appears, delete "$50,000" and
substitute "$25,000" therefor.

      SECOND: The foregoing amendment to the Articles Supplementary has been
effected in the manner and by the vote required by the Corporation's Charter
and the laws of Maryland. Pursuant to Section 2.603 of the Code, the amendment
of the Articles Supplementary as hereinabove set forth has been duly advised,
approved and adopted by a majority of the entire Board of Directors of the
corporation, there being no stock entitled to be voted on the Charter
amendment outstanding or subscribed for at the time of approval.

______________
(R) Registered trademark of Merrill Lynch & Co., Inc.


<PAGE>

      THIRD: Except as amended hereby, the Charter shall remain in full force
and effect.

      FOURTH: The authorized capital stock of the Corporation has not been
increased by these Articles of Amendment.

      FIFTH: These Articles of Amendment shall be effective contemporaneously
with the acceptance for recording or filing by the Maryland State Department
of Assessments and Taxation of the Corporation's Articles supplementary dated
November 30, 1994.

      The Senior Vice President acknowledges there Articles of Amendment to be
the copororate act of the Corporation and states that to the best of his
knowledge, information and belief the matters and facts set forth in these
Articles with respect to the authorization and approval of the amendment of
the Corporation's Articles Supplementary are true in all material respects,
and that this statement is made under the penalties of perjury.



                                      2

<PAGE>

      IN WITNESS WHEREOF, MUNIVEST FUND II, INC. has caused these Articles to
be signed in its name and on its behalf by its Senior Vice President, a duly
authorized officer of the Corporation, and attested by its Secretary as of
November 30, 1994.

                                      MUNIVEST FUND II, INC.


                                      By   /s/ Vincent R. Giordano
                                        --------------------------
                                      Name:   Vincent R. Giordano
                                      Title:  Senior Vice President

Attest:

 /s/ Mark B. Goldfus
- ---------------------
Name: Mark B. Goldfus
Its:  Secretary

                                      3

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2A5
<SEQUENCE>6
<FILENAME>efc4-1994_5621513ex992a5.txt
<TEXT>
                                                                  Exhibit (a)(5)

                            MUNIVEST FUND II, INC.

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

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

      FIRST: The Articles Supplementary, filed on April 20, 1993, and the
Articles Supplementary, filed on December 1, 1994, each creating 2,700 shares
of Auction Market Preferred Stock ("AMPS") of the Corporation (the "Articles
Supplementary"), are hereby amended by these Articles of Amendment as follows:

      In each of the Articles Supplementary, paragraph (c) of section 5
entitled "Right to Vote with Respect to Certain Other Matters" is deleted in
its entirety and replaced with the following:

            (c) Right to Vote with Respect to Certain Other Matters. So long
      as any shares of AMPS are outstanding, the Corporation shall not,
      without the affirmative vote of the holders of a majority of the shares
      of the Preferred Stock Outstanding at the time, voting separately as one
      class: (i) authorize, create or issue any class or series of stock
      ranking prior to the AMPS or any other series of Preferred Stock with
      respect to payment of dividends or the distribution of assets on
      liquidation, or (ii) amend, alter or repeal the provisions of the
      Charter, whether by merger, consolidation or otherwise, so as to
      adversely affect any of the contract rights expressly set forth in the
      Charter of holders of shares of AMPS or any other Preferred Stock. To
      the extent permitted under the 1940 Act, in the event shares of more
      than one series of AMPS are outstanding, the Corporation shall not
      approve any of the actions set forth in clause (i) or (ii) which
      adversely affects the contract rights expressly set forth in the Charter
      of a Holder of shares of a series of AMPS differently than those of a
      Holder of shares of any other series of AMPS without the affirmative
      vote of the holders of at least a majority of the shares of AMPS of each
      series adversely affected and outstanding at such time (each such
      adversely affected series voting separately as a class). The Corporation
      shall notify Moody's and S&P ten Business Days prior to any such vote
      described in clause (i) or (ii). Unless a higher percentage is provided
      for


______________
(R) Registered trademark of Merrill Lynch & Co., Inc.

<PAGE>

      under the Charter, the affirmative vote of the holders of a majority of
      the outstanding shares of Preferred Stock, including AMPS, voting
      together as a single class, will be required to approve any plan of
      reorganization (including bankruptcy proceedings) adversely affecting
      such shares or any action requiring a vote of security holders under
      Section 13(a) of the 1940 Act. The class vote of holders of shares of
      Preferred Stock, including AMPS, described above will in each case be in
      addition to a separate vote of the requisite percentage of shares of
      Common Stock and shares of Preferred Stock, including AMPS, voting
      together as a single class necessary to authorize the action in
      question.

      SECOND: The foregoing amendment to the Articles Supplementary has been
effected in the manner and by the vote required by the charter of the
Corporation (the "Charter") and the laws of Maryland. The amendment of the
Articles Supplementary, as hereinabove set forth has been duly advised,
approved, and adopted by a majority of the entire Board of Directors of the
Corporation, and by a majority of the outstanding Common Stock and AMPS voting
together as a single class and by a majority of the outstanding AMPS voting
together as a separate class.

      THIRD: Except as amended, hereby, the Charter shall remain in full force
and effect.

      FOURTH: The authorized capital stock of the Corporation has not been
increased by these Articles of Amendment.

      FIFTH: These Articles of Amendment shall be effective immediately upon
the acceptance for recording or filing by the Maryland State Department of
Assessments and Taxation.

      The undersigned Vice President and Treasurer acknowledges these Articles
of Amendment to be the corporate act of the Corporation and as to all matters
or facts required to be verified under oath, the undersigned Vice President
and Treasurer states that to the best of his knowledge, information and belief
the matters and facts set forth in these Articles of Amendment with respect to
the authorization and approval of the amendment of the Corporation's Articles
Supplementary are true in all material respects, and that this statement is
made under the penalties of perjury.


<PAGE>

      IN WITNESS WHEREOF, MUNIVEST FUND II, INC. has caused these Articles of
Amendment to be signed in its name and on its behalf by its Vice President and
Treasurer, a duly authorized officer of the Corporation, and attested by its
Secretary as of October 11, 1999.

                                      MUNIVEST FUND II, INC.



                                      By    /s/ Donald C. Burke
                                        ----------------------------------
                                        Name:  Donald C. Burke
                                        Title:    Vice President and Treasurer

Attest:



    /s/ William E. Zitelli
- --------------------------
Name:  William E. Zitelli
Its:   Secretary

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2A6
<SEQUENCE>7
<FILENAME>efc4-1994_5613928ex992a6.txt
<TEXT>
                                                                  Exhibit (a)(6)

                            MUNIVEST FUND II, INC.

                 Articles Supplementary creating one series of

                        Auction Market Preferred Stock


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

      FIRST: Pursuant to authority expressly vested in the Board of Directors
of the Corporation by article fifth of its Charter, the Board of Directors has
reclassified 1,600 authorized and unissued shares of common stock of the
Corporation as preferred stock of the Corporation and has authorized the
issuance of one series of preferred stock, par value $.10 per share,
liquidation preference $25,000 per share plus an amount equal to accumulated
but unpaid dividends (whether or not earned or declared) thereon, to be
designated Auction Market Preferred Stock, Series D.

      SECOND: The preferences, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption, of the
shares of preferred stock are as follows:

                                  DESIGNATION

      A series of 1,600 shares of preferred stock, par value $.10 per share,
liquidation preference $25,000 per share plus an amount equal to accumulated
but unpaid dividends (whether or not earned or declared) thereon, is hereby
designated "Auction Market Preferred Stock, Series D." Each share of Auction
Market Preferred Stock, Series D (sometimes referred to herein as "AMPS")
shall be issued on a date to be determined by the Board of Directors of the
Corporation or pursuant to their delegated authority; have an Initial Dividend
Rate and an Initial


<PAGE>

Dividend Payment Date as shall be determined in advance of the issuance
thereof by the Board of Directors of the Corporation or pursuant to their
delegated authority; and have such other preferences, voting powers,
limitations as to dividends, qualifications and terms and conditions of
redemption as are set forth in these Articles Supplementary. The Auction
Market Preferred Stock, Series D shall constitute a separate series of
preferred stock of the Corporation, and each share of Auction Market Preferred
Stock, Series D shall be identical.



                                      2
<PAGE>


     1.  Definitions.

     (a) Unless the context or use indicates another or different meaning or
intent, in these Articles Supplementary the following terms have the following
meanings, whether used in the singular or plural:

     "Additional Dividend" has the meaning set forth in paragraph 2(e) of
these Articles Supplementary.

     "Adviser" means the Corporation's investment adviser which initially
shall be Fund Asset Management, L.P.

     "Affiliate" means any Person, other than Merrill Lynch, Pierce, Fenner &
Smith Incorporated or its successors, known to the Auction Agent to be
controlled by, in control of, or under common control with, the Corporation.

     "Agent Member" means a member of the Securities Depository that will act
on behalf of a Beneficial Owner of one or more shares of AMPS or a Potential
Beneficial Owner.

     "AMPS" means the Auction Market Preferred Stock, Series D.

     "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 (a) $25,000 and (b) any applicable redemption premium attributable to
the designation of a Premium Call Period; (B) the aggregate amount of cash
dividends (whether or not earned or declared) that will have accumulated for
each share of AMPS and Other AMPS Outstanding, in each case, to (but not
including) the end of the current Dividend Period that follows such Valuation
Date in the event the then current Dividend Period will end within 49 calendar
days of such Valuation Date or through the 49th day after such Valuation Date
in the event the then current Dividend Period will not end within 49


                                      3
<PAGE>

calendar days of such Valuation Date; (C) in the event the then current
Dividend Period will end within 49 calendar days of such Valuation Date, the
aggregate amount of cash dividends that would accumulate at the Maximum
Applicable Rate applicable to a Dividend Period of 28 or fewer days on any
shares of AMPS and Other AMPS Outstanding from the end of such Dividend Period
through the 49th day after such Valuation Date, multiplied by the larger of
the Moody's Volatility Factor and the S&P Volatility Factor, determined from
time to time by Moody's and S&P, respectively (except that if such Valuation
Date occurs during a Non-Payment Period, the cash dividend for purposes of
calculation would accumulate at the then current Non-Payment Period Rate); (D)
the amount of anticipated expenses of the Corporation for the 90 days
subsequent to such Valuation Date; (E) the amount of current outstanding
balances of any indebtedness which 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
Corporation'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 Corporation 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
Corporation's assets, or (B) the face value of any of the Corporation's assets
if such assets mature prior to or on the date of redemption of AMPS or payment
of a liability and are either securities issued or guaranteed by the United
States Government or Deposit Securities, in both cases irrevocably deposited
by the Corporation for the payment of the amount needed to redeem shares of
AMPS subject to redemption or to satisfy any of (i)(B) through (i)(G).



                                      4
<PAGE>

      "AMPS Basic Maintenance Cure Date," with respect to the failure by the
Corporation to satisfy the AMPS Basic Maintenance Amount (as required by
paragraph 7(a) of these Articles Supplementary) as of a given Valuation Date,
means the sixth Business Day following such Valuation Date.

     "AMPS Basic Maintenance Report" means a report signed by any of the
President, Treasurer, any Senior Vice President or any Vice President of the
Corporation which sets forth, as of the related Valuation Date, the assets of
the Corporation, the Market Value and the Discounted Value thereof (seriatim
and in aggregate), the AMPS Basic Maintenance Amount and the net asset value
and market trading price per share of Common Stock.

     "Anticipation Notes" shall mean the following Municipal Bonds: revenue
anticipation notes, tax anticipation notes, tax and revenue anticipation
notes, grant anticipation notes and bond anticipation notes.

     "Applicable Percentage" has the meaning set forth in paragraph 10(a)(vii)
of these Articles Supplementary.

     "Applicable Rate" means the rate per annum at which cash dividends are
payable on the AMPS or Other AMPS, as the case may be, for any Dividend
Period.

     "Applicable Spread" has the meaning set forth in paragraph 10(a)(vii) of
these Articles Supplementary.

     "Auction" means a periodic operation of the Auction Procedures.

     "Auction Agent" means The Bank of New York unless and until another
commercial bank, trust company or other financial institution appointed by a
resolution of the Board of Directors of the Corporation or a duly authorized
committee thereof enters into an agreement with the Corporation to follow the
Auction Procedures for the purpose of determining the


                                      5
<PAGE>

Applicable Rate and to act as transfer agent, registrar, dividend disbursing
agent and redemption agent for the AMPS and Other AMPS.

     "Auction Date" has the meaning set forth in paragraph 10(a)(ii) of these
Articles Supplementary.

     "Auction Procedures" means the procedures for conducting Auctions set
forth in paragraph 10 of these Articles Supplementary.

     "Auditors' Confirmation" has the meaning set forth in paragraph 7(c) of
these Articles Supplementary.

     "Beneficial Owner" means a customer of a Broker-Dealer who is listed on
the records of that Broker-Dealer (or, if applicable, the Auction Agent) as a
holder of shares of AMPS or a Broker-Dealer that holds AMPS for its own
account.

     "Broker-Dealer" means any broker-dealer, or other entity permitted by law
to perform the functions required of a Broker-Dealer in paragraph 10 of these
Articles Supplementary, that has been selected by the Corporation and has
entered into a Broker-Dealer Agreement with the Auction Agent that remains
effective.

     "Broker-Dealer Agreement" means an agreement between the Auction Agent
and a Broker-Dealer pursuant to which such Broker-Dealer agrees to follow the
procedures specified in paragraph 10 of these Articles Supplementary.

     "Business Day" means a day on which the New York Stock Exchange, Inc. is
open for trading and which is not a Saturday, Sunday or other day on which
banks in The City of New York are authorized or obligated by law to close.



                                      6
<PAGE>

     "Charter" means the Articles of Incorporation, as amended and
supplemented (including these Articles Supplementary), of the Corporation on
file in the State Department of Assessments and Taxation of Maryland.

     "Code" means the Internal Revenue Code of 1986, as amended.

     "Common Stock" means the common stock, par value $.10 per share, of the
Corporation.

     "Corporation" means MuniVest Fund II, Inc., a Maryland corporation.

     "Date of Original Issue" means, with respect to any share of AMPS or
Other AMPS, the date on which the Corporation originally issues such share.

     "Deposit Securities" means cash and Municipal Bonds rated at least A2
(having a remaining maturity of 12 months or less), P-1, VMIG-1 or MIG-1 by
Moody's or A (having a remaining maturity of 12 months or less), A-1+ or SP-1+
by S&P or A (having a remaining maturity of 12 months or less) or F-1+ by
Fitch.

     "Discounted Value" means (i) with respect to an S&P Eligible Asset, the
quotient of the Market Value thereof divided by the applicable S&P Discount
Factor and (ii) with respect to a Moody's Eligible Asset, the lower of par and
the quotient of the Market Value thereof divided by the applicable Moody's
Discount Factor.

     "Dividend Payment Date," with respect to AMPS, has the meaning set forth
in paragraph 2(b)(i) of these Articles Supplementary and, with respect to
Other AMPS, has the equivalent meaning.

     "Dividend Period" means the Initial Dividend Period, any 7-Day Dividend
Period and any Special Dividend Period.

     "Existing Holder" means a Broker-Dealer or any such other Person as may
be permitted by the Corporation that is listed as the holder of record of
shares of AMPS in the Stock Books.



                                      7
<PAGE>

     "Fitch" means Fitch Ratings or its successors.

     "Forward Commitment" has the meaning set forth in paragraph 8(c) of these
Articles Supplementary.

     "High Yield Municipal Bonds" means (a) with respect to Moody's (1)
Municipal Bonds rated Ba1 to B3 by Moody's, (2) Municipal Bonds not rated by
Moody's, but rated BB+ to B- by S&P or Fitch, and (3) Municipal Bonds not
explicitly rated by Moody's, S&P or Fitch, but rated at least the equivalent
of B3 internally by the Adviser, provided that Moody's reviews and achieves
sufficient comfort with the Adviser's internal credit rating processes, and
(b) with respect to S&P (1) Municipal Bonds not rated by S&P but rated
equivalent to BBB+ or lower by another NRSRO and (2) Municipal Bonds rated BB+
or lower by S&P.

     "Holder" means a Person identified as a holder of record of shares of
AMPS in the Stock Register.

     "Independent Auditors" means a nationally recognized accountant, or firm
of accountants, that is, with respect to the Corporation, an independent
registered public accountant or firm of independent registered public
accountants under the Securities Act of 1933, as amended.

     "Initial Dividend Payment Date" means the Initial Dividend Payment Date
as determined by the Board of Directors of the Corporation with respect to the
AMPS or Other AMPS, as the case may be.

     "Initial Dividend Period," with respect to the AMPS, has the meaning set
forth in paragraph 2(c)(i) of these Articles Supplementary and, with respect
to Other AMPS, has the equivalent meaning.



                                      8
<PAGE>

     "Initial Dividend Rate," with respect to the AMPS, means the rate per
annum applicable to the Initial Dividend Period for the AMPS and, with respect
to Other AMPS, has the equivalent meaning.

     "Initial Margin" means the amount of cash or securities deposited with a
broker as a margin payment at the time of purchase or sale of a futures
contract.

     "Inverse Floaters" means trust certificates or other instruments
evidencing interests in one or more Municipal Bonds that qualify as (i) S&P
Eligible Assets the interest rates on which are adjusted at short term
intervals on a basis that is inverse to the simultaneous readjustment of the
interest rates on corresponding floating rate trust certificates or other
instruments issued by the same issuer, provided that the ratio of the
aggregate dollar amount of floating rate instruments to inverse floating rate
instruments issued by the same issuer does not exceed one to one at their time
of original issuance unless the floating rate instrument has only one reset
remaining until maturity or (ii) Moody'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's with the Adviser having
the capability to collapse (or relink) within seven (7) days as a liquidity
enhancement measure, and (b) the issuer of such Inverse Floaters employs a
leverage factor (i.e., the ratio of underlying capital appreciation bonds or
other instruments to residual long-term derivative instruments) of not more
than 2:1.

     "LIBOR Dealer" means Merrill Lynch, Pierce, Fenner & Smith Incorporated
and such other dealer or dealers as the Corporation from time to time may
appoint or, in lieu thereof, their respective affiliates and successors.



                                      9
<PAGE>

     "LIBOR Rate," 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's Telerate Service ("Telerate Page 3750") (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 "LIBOR Determination Date"), 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 Corporation'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 Corporation'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 Corporation to provide such rate or


                                      10
<PAGE>

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.

     "London Business Day" means any day on which commercial banks are
generally open for business in London.

     "Long Term Dividend Period" means a Special Dividend Period consisting of
a specified period of one whole year or more but not greater than five years.

     "Mandatory Redemption Price" means $25,000 per share of AMPS plus an
amount equal to accumulated but unpaid dividends (whether or not earned or
declared) to the date fixed for redemption and excluding Additional Dividends.



                                      11
<PAGE>

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

     "Market Value" of any asset of the Corporation shall be the market value
thereof determined by the Pricing Service. Market Value of any asset shall
include any interest accrued thereon. The Pricing Service shall value
portfolio securities at the quoted bid prices or the mean between the quoted
bid and asked price or the yield equivalent when quotations are not readily
available. Securities for which quotations are not readily available shall be
valued at fair value as determined by the Pricing Service using methods which
include consideration of: yields or prices of municipal bonds of comparable
quality, type of issue, coupon, maturity and rating; indications as to value
from dealers; and general market conditions. The Pricing Service may employ
electronic data processing techniques and/or a matrix system to determine
valuations. In the event the Pricing Service is unable to value a security,
the security shall be valued at the lower of two dealer bids obtained by the
Corporation from dealers who are members of the National Association of
Securities Dealers, Inc. and who make a market in the security, at least one
of which shall be in writing. Futures contracts and options are valued at
closing prices for such instruments established by the exchange or board of
trade on which they are traded, or if market quotations are not readily
available, are valued at fair value on a consistent basis using methods
determined in good faith by the Board of Directors.

     "Maximum Applicable Rate," with respect to AMPS, has the meaning set
forth in paragraph 10(a)(vii) of these Articles Supplementary and, with
respect to Other AMPS, has the equivalent meaning.



                                      12
<PAGE>

     "Maximum Potential Additional Dividend Liability," as of any Valuation
Date, means the aggregate amount of Additional Dividends that would be due if
the Corporation were to make Retroactive Taxable Allocations, with respect to
any fiscal year, estimated based upon dividends paid and the amount of
undistributed realized net capital gains and other taxable income earned by
the Corporation, as of the end of the calendar month immediately preceding
such Valuation Date and assuming such Additional Dividends are fully taxable.

     "Moody's" means Moody's Investors Service, Inc. or its successors.

     "Moody's Discount Factor" means, for purposes of determining the
Discounted Value of any Municipal Bond which constitutes a Moody's Eligible
Asset, the percentage determined by reference to the rating by Moody's, S&P or
Fitch on such Municipal Bond, in accordance with the tables (for the
applicable Moody's Exposure Period) set forth below:

                        ---------------------------------------
                             Moody's Rating Category (1)
                        ---------------------------------------
                          Aaa     Aa      A    Baa   Other (2)
                        ---------------------------------------
                         151%    159%   160%   173%    225%
                        ---------------------------------------

Footnotes:
(1)  Ratings assigned by S&P or Fitch are generally accepted by Moody's at
     face value. However, adjustments to face value may be made to particular
     categories of credits for which the S&P and/or Fitch rating does not seem
     to approximate a Moody's rating equivalent. Split rated securities
     assigned by S&P and Fitch will be accepted at the lower of the two
     ratings.
(2)  Municipal Bonds rated Ba1 to B3 by Moody's or, if not rated by Moody's,
     rated BB+ to B- by S&P or Fitch. In addition, Municipal Bonds not
     explicitly rated by Moody's, S&P or Fitch, but rated at least the
     equivalent of B3 internally by the Adviser, provided that Moody's reviews
     and achieves sufficient comfort with the Adviser's internal credit rating
     processes, will be included under "Other" in the table. Unless
     conclusions regarding liquidity risk as well as estimates of both the
     probability and severity of default for the Corporation's assets can be
     derived from other sources as well as combined with a number of sources
     as presented by the Corporation to Moody's, unrated Municipal Bonds which
     are rated at least the equivalent of B3 by the Adviser internally are
     limited to 10% of Moody's Eligible Assets.


                        ------------------------------------
                              Moody's Rating Category
                        ------------------------------------
                          MIG-1, VMIG-1,    MIG-1, VMIG-1,
                             P-1 (1)           P-1 (2)
                        ------------------------------------
                               100%              136%
                        ------------------------------------

Footnotes:
(1)  Moody's rated Municipal Bonds that have a maturity less than or equal to
     49 days and Municipal Bonds not rated by Moody's but rated the equivalent
     to MIG-1, VMIG-1, or P-1 by S&P or Fitch that have a maturity less than
     or equal to 49 days.
(2)  Moody's rated Municipal Bonds that have a maturity greater than 49 days
     and Municipal Bonds not rated by Moody's but rated the equivalent to
     MIG-1, VMIG-1, or P-1 by S&P or Fitch that have a maturity greater than
     49 days.



                                      13
<PAGE>

     Notwithstanding the foregoing, no Moody'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'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's Discount Factor applicable to
the Municipal Bonds sold. "Receivables for Municipal Bonds Sold," for purposes
of calculating Moody'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.

     The Moody'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.

     The Moody's Discount Factor for Rule 2a-7 Money Market Funds shall be
110%.

     "Moody's Eligible Asset" means cash, Receivables for Municipal Bonds
Sold, Rule 2a-7 Money Market Funds or a Municipal Bond that (i) pays interest
in cash, (ii) is publicly rated B3 or higher by Moody's or, if not rated by
Moody's, but rated by S&P or Fitch, is publicly rated at least B- by S&P or
Fitch, or if not explicitly rated by Moody's, S&P or Fitch, be rated at least
the equivalent of B3 internally by the Adviser, provided that Moody's reviews
and achieves sufficient comfort with the Adviser's internal credit rating
processes, (iii) does not have its Moody's rating suspended by Moody's, (iv)
if an Inverse Floater, is explicitly rated by Moody's, and (v) is part of an
issue of Municipal Bonds of at least $10,000,000 (except for issues rated Aaa
by Moody's, as provided in the chart below). In addition, Municipal Bonds in
the Corporation's portfolio must be within the following diversification
requirements in order to be included within Moody's Eligible Assets:



                                      14
<PAGE>

                                  Minimum         Maximum        Maximum State
                                 Issue Size     Underlying           Allowed
Rating                          ($ Millions)   Obligor (%) (1)     (%) (1)(3)
- -----------------------------   ------------  ----------------  ----------------

Aaa....................              *              100               100
Aa.....................             10              20                60
A......................             10              10                40
Baa....................             10               6                20
Ba.....................             10               4                12
B .....................             10               3                12
Other (2)..............             10               2                12

_____________________
(1)  The referenced percentages represent maximum cumulative totals for the
     related rating category and each lower rating category.
(2)  Municipal Bonds not rated by Moody's, S&P or Fitch, but rated at least
     the equivalent of B3 internally by the Adviser.
(3)  Territorial bonds (other than those issued by Puerto Rico and counted
     collectively) are each limited to 10% of Moody's Eligible Assets. For
     diversification purposes, Puerto Rico will be treated as a state.
*    Not applicable.

For purposes of the maximum underlying obligor requirement described above,
any Municipal Bond backed by the guaranty, letter of credit or insurance
issued by a third party will be deemed to be issued by such third party if the
issuance of such third party credit is the sole determinant of the rating on
such Bond.

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



                                      15
<PAGE>

     High Yield Municipal Bonds may comprise no more than 20% of Moody's
Eligible Assets. Unless conclusions regarding liquidity risk as well as
estimates of both the probability and severity of default for the
Corporation's assets can be derived from other sources as well as combined
with a number of sources as presented by the Corporation to Moody's, unrated
High Yield Municipal Bonds which are rated at least the equivalent of B3 by
the Adviser internally are limited to 10% of Moody's Eligible Assets.

     Inverse Floaters, including primary market and secondary market residual
interest bonds, may constitute no more than 10% of Moody's Eligible Assets.

     Notwithstanding the foregoing, an asset will not be considered a Moody's
Eligible Asset if it is (i) held in a margin account, (ii) subject to any
material lien, mortgage, pledge, security interest or security agreement of
any kind, (iii) held for the purchase of a security pursuant to a Forward
Commitment or (iv) irrevocably deposited by the Corporation for the payment of
dividends or redemption.

     "Moody's Exposure Period" means the period commencing on a given
Valuation Date and ending 49 days thereafter.

     "Moody's Hedging Transactions" has the meaning set forth in paragraph
8(b) of these Articles Supplementary.

     "Moody's Volatility Factor" means 272% as long as there has been no
increase enacted to the Marginal Tax Rate. If such an increase is enacted but
not yet implemented, the Moody's Volatility Factor shall be as follows:



                                      16
<PAGE>

                         % Change in            Moody's Volatility
                      Marginal Tax Rate               Factor
                      -----------------         ------------------

                             <=5%                       292%
                        >5% but <=10%                   313%
                        >10% but <=15%                  338%
                        >15% but <=20%                  364%
                        >20% but <=25%                  396%
                        >25% but <=30%                  432%
                        >30% but <=35%                  472%
                        >35% but <=40%                  520%

     Notwithstanding the foregoing, the Moody's Volatility Factor may mean
such other potential dividend rate increase factor as Moody's advises the
Corporation in writing is applicable.

     "Municipal Bonds" means "Municipal Bonds" as defined in the Corporation's
Registration Statement on Form N-2 (File No. 333-      ) relating to the AMPS on
file with the Securities and Exchange Commission, as such Registration
Statement may be amended from time to time, as well as short-term municipal
obligations, High Yield Municipal Bonds and Inverse Floaters.

     "Municipal Index" has the meaning set forth in paragraph 8(a) of these
Articles Supplementary.

     "1940 Act" means the Investment Company Act of 1940, as amended from time
to time.

     "1940 Act AMPS Asset Coverage" means asset coverage, as defined in
section 18(h) of the 1940 Act, of at least 200% with respect to all
outstanding senior securities of the Corporation which are stock, including
all outstanding shares of AMPS and Other AMPS (or such other asset coverage as
may in the future be specified in or under the 1940 Act as the minimum asset
coverage for senior securities which are stock of a closed-end investment
company as a condition of paying dividends on its common stock).



                                      17
<PAGE>

     "1940 Act Cure Date," with respect to the failure by the Corporation to
maintain the 1940 Act AMPS Asset Coverage (as required by paragraph 6 of these
Articles Supplementary) as of the last Business Day of each month, means the
last Business Day of the following month.

     "Non-Call Period" has the meaning set forth under the definition of
"Specific Redemption Provisions".

     "Non-Payment Period" means, with respect to the AMPS, any period
commencing on and including the day on which the Corporation shall fail to (i)
declare, prior to the close of business on the second Business Day preceding
any Dividend Payment Date, for payment on or (to the extent permitted by
paragraph 2(c)(i) of these Articles Supplementary) within three Business Days
after such Dividend Payment Date to the Holders as of 12:00 noon, 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 payable (if declared) on such
Dividend Payment Date or (B) on any redemption date for any shares of AMPS
called for redemption, the Mandatory Redemption Price per share of such AMPS
or, in the case of an optional redemption, the Optional Redemption Price per
share, and ending on and including the Business Day on which, by 12:00 noon,
Eastern time, all unpaid cash dividends and unpaid redemption prices shall
have been so deposited or shall have otherwise been made available to Holders
in same-day funds; provided that, a Non-Payment Period shall not end unless
the Corporation shall have given at least five days' but no more than 30 days'
written notice of such deposit or availability to the Auction Agent, all
Existing Holders (at their addresses appearing in the Stock Books) and the
Securities Depository. Notwithstanding the foregoing, the failure by


                                      18
<PAGE>

the Corporation to deposit funds as provided for by clauses (ii)(A) or (ii)(B)
above within three Business Days after any Dividend Payment Date or redemption
date, as the case may be, in each case to the extent contemplated by paragraph
2(c)(i) of these Articles Supplementary, shall not constitute a "Non-Payment
Period."

     "Non-Payment Period Rate" means, initially, 200% of the applicable
Reference Rate (or 300% of such rate if the Corporation has provided
notification to the Auction Agent prior to the Auction establishing the
Applicable Rate for any dividend pursuant to paragraph 2(f) hereof that net
capital gains or other taxable income will be included in such dividend on
shares of AMPS), provided that the Board of Directors of the Corporation shall
have the authority to adjust, modify, alter or change from time to time the
initial Non-Payment Period Rate if the Board of Directors of the Corporation
determines and Moody's and S&P (and any Substitute Rating Agency or Substitute
Rating Agencies, as the case may be, in lieu of Moody's or S&P, or both, in
the event either or both of such parties shall not rate the AMPS) advise the
Corporation in writing that such adjustment, modification, alteration or
change will not adversely affect their then current ratings on the AMPS.

     "Normal Dividend Payment Date" has the meaning set forth in paragraph
2(b)(i) of these Articles Supplementary.

     "Notice of Redemption" means any notice with respect to the redemption of
shares of AMPS pursuant to paragraph 4 of these Articles Supplementary.

     "Notice of Revocation" has the meaning set forth in paragraph 2(c)(iii)
of these Articles Supplementary.

     "Notice of Special Dividend Period" has the meaning set forth in
paragraph 2(c)(iii) of these Articles Supplementary.



                                      19
<PAGE>

     "NRSRO" means any nationally recognized statistical rating organization,
as that term is used in Rule 15a3-1 under the Securities Exchange Act of 1934,
as amended, or any successor provisions.

     "Optional Redemption Price" means $25,000 per share plus an amount equal
to accumulated but unpaid dividends (whether or not earned or declared) to the
date fixed for redemption and excluding Additional Dividends plus any
applicable redemption premium attributable to the designation of a Premium
Call Period.

     "Other AMPS" means the auction rate preferred stock of the Corporation,
other than the AMPS.

     "Outstanding" means, as of any date (i) with respect to AMPS, shares of
AMPS theretofore issued by the Corporation except, without duplication, (A)
any shares of AMPS theretofore cancelled or delivered to the Auction Agent for
cancellation, or redeemed by the Corporation, or as to which a Notice of
Redemption shall have been given and Deposit Securities shall have been
deposited in trust or segregated by the Corporation pursuant to paragraph 4(c)
and (B) any shares of AMPS as to which the Corporation or any Affiliate
thereof shall be a Beneficial Owner, provided that shares of AMPS held by an
Affiliate shall be deemed outstanding for purposes of calculating the AMPS
Basic Maintenance Amount and (ii) with respect to shares of other Preferred
Stock, has the equivalent meaning.

     "Parity Stock" means the AMPS and each other outstanding series of
Preferred Stock the holders of which, together with the holders of the AMPS,
shall be entitled to the receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in proportion to
the full respective preferential amounts to which they are entitled, without
preference or priority one over the other.



                                      20
<PAGE>

     "Person" means and includes an individual, a partnership, a corporation,
a trust, an unincorporated association, a joint venture or other entity or a
government or any agency or political subdivision thereof.

     "Potential Beneficial Owner" means a customer of a Broker-Dealer or a
Broker-Dealer that is not a Beneficial Owner of shares of AMPS but that wishes
to purchase such shares, or that is a Beneficial Owner that wishes to purchase
additional shares of AMPS.

     "Potential Holder" means any Broker-Dealer or any such other Person as
may be permitted by the Corporation, including any Existing Holder, who may be
interested in acquiring shares of AMPS (or, in the case of an Existing Holder,
additional shares of AMPS).

     "Preferred Stock" means the preferred stock of the Corporation, and
includes AMPS and Other AMPS.

     "Premium Call Period" has the meaning set forth under the definition of
"Specific Redemption Provisions."

     "Pricing Service" means J.J. Kenny or any pricing service designated by
the Board of Directors of the Corporation provided the Corporation obtains
written assurance from S&P and Moody's that such designation will not impair
the rating then assigned by S&P and Moody's to the AMPS.

     "Receivables for Municipal Bonds Sold" for Moody's has the meaning set
forth under the definition of Moody's Discount Factor, and for S&P has the
meaning set forth under the definition of S&P Discount Factor.

     "Reference Banks" means four major banks in the London interbank market
selected by Merrill Lynch, Pierce, Fenner & Smith Incorporated or its
affiliates or successors or such other party as the Corporation may from time
to time appoint.



                                      21
<PAGE>

     "Reference Rate" 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.

     "Request for Special Dividend Period" has the meaning set forth in
paragraph 2(c)(iii) of these Articles Supplementary.

     "Response" has the meaning set forth in paragraph 2(c)(iii) of these
Articles Supplementary.

     "Retroactive Taxable Allocation" has the meaning set forth in paragraph
2(e) of these Articles Supplementary.

     "Right" with respect to the AMPS, has the meaning set forth in paragraph
2(e) of these Articles Supplementary and, with respect to Other AMPS, has the
equivalent meaning.

     "Rule 2a-7 Money Market Funds" means investment companies registered
under the 1940 Act that comply with the requirements of Rule 2a-7 thereunder.

     "S&P" means Standard & Poor's or its successors.

     "S&P Discount Factor" means, for purposes of determining the Discounted
Value of any Municipal Bond which constitutes an S&P Eligible Asset, the
percentage determined by reference to the rating by S&P, Moody's or Fitch on
such Municipal Bond; provided, however, for purposes of determining the S&P
Discount Factor applicable to Municipal Bonds not rated by S&P, the Municipal
Bonds will carry an S&P rating one full rating category lower than the S&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 (for the
applicable S&P Exposure Period) set forth below:



                                      22
<PAGE>

 -------------------------------------------------------------------------------
                           S&P's Rating Category (1)
 -------------------------------------------------------------------------------
  AAA* (2)     AA*       A*       BBB*       BB*       B*      CCC*       NR
 -------------------------------------------------------------------------------
   144.75%   147.75%   150.75%   153.75%   175.11%  195.11%   215.11%  220.00%
 -------------------------------------------------------------------------------

__________________
*    S&P rating.
(1)  For Municipal Bonds of any one issuer rated at least BBB- by S&P, or if
     not rated by S&P, rated at least A- by another NRSRO, 2% is added to the
     applicable S&P Discount Factor for every 1% by which the Market Value of
     such Municipal Bonds exceeds 5% of the aggregate Market Value of the S&P
     Eligible Assets, but in no event greater than 10%; or for any percentage
     over 5% add 10 percentage points to the applicable S&P Discount Factor.
(2)  For zero coupon Municipal Bonds, the S&P Discount Factor is 441.80%.

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


                                      23
<PAGE>

Notes rated SP-1 or, if not rated by S&P, rated VMIG-1 by Moody's or F-1+ by
Fitch, which do not mature or have a demand feature exercisable in 30 days and
which do not have a long-term rating, shall be considered to be short-term
Municipal Bonds.

     "S&P Eligible Asset" means cash, Receivables for Municipal Bonds Sold,
Rule 2a-7 Money Market Funds or a Municipal Bond that (i) is 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), (ii) except for zero
coupon Municipal Bonds rated AAA by S&P that mature in 30 years or less, is
interest bearing and pays interest at least semi-annually; (iii) is payable
with respect to principal and interest in United States Dollars; (iv) is not
subject to a covered call or covered put option written by the Corporation;
(v) except for Inverse Floaters, is not part of a private placement; and (vi)
except for Inverse Floaters and legally defeased bonds that are secured by
securities issued or guaranteed by the United States Government, is part of an
issue of Municipal Bonds 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&P. Notwithstanding the foregoing:

          (1) Municipal Bonds issued by issuers in any one state or territory
     will be considered S&P Eligible Assets only to the extent the Market
     Value of such Municipal Bonds does not exceed 25% of the aggregate Market
     Value of S&P Eligible Assets;

          (2) Municipal Bonds which are escrow bonds or defeased bonds may
     compose up to 100% of the aggregate Market Value of S&P Eligible Assets
     if such


                                      24
<PAGE>

     Bonds initially are assigned a rating by S&P in accordance with S&P's
     legal defeasance criteria or rerated by S&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&P AAA rating, provided that such equivalent rated
     Bonds are limited to 50% of the aggregate Market Value of S&P Eligible
     Assets and are deemed to have an AA S&P rating for purposes of
     determining the S&P Discount Factor applicable to such Municipal Bonds.
     The limitations on Municipal Bonds in clause (1) above and clauses (3)
     and (4) below are not applicable to escrow bonds;

          (3) Municipal Bonds which are not rated by any NRSRO may comprise no
     more than 10% of S&P Eligible Assets;

          (4) Municipal Bonds rated at least BBB- by S&P, or if not rated by
     S&P, rated at least A- by another NRSRO, of any one issuer or guarantor
     (excluding bond insurers) will be considered S&P Eligible Assets only to
     the extent the Market Value of such Municipal Bonds does not exceed 10%
     of the aggregate Market Value of the S&P Eligible Assets, High Yield
     Municipal Bonds of any issuer may comprise no more than 5% of S&P
     Eligible Assets, and Municipal Bonds of any one issuer which are not
     rated by any NRSRO will be considered S&P Eligible Assets only to the
     extent the Market Value of such Municipal Bonds does not exceed 5% of the
     aggregate Market Value of the S&P Eligible Assets. In the aggregate, the
     maximum issuer exposure is limited to 10% of the S&P Eligible Assets; and



                                      25
<PAGE>

          (5) Municipal Bonds not rated by S&P but rated by another NRSRO will
     be included in S&P Eligible Assets only to the extent the Market Value of
     such Municipal Bonds does not exceed 50% of the aggregate Market Value of
     the S&P Eligible Assets.

     "S&P Exposure Period" means the sum of (i) that number of days from the
last Valuation Date on which the Corporation's Discounted Value of S&P
Eligible Assets were greater than the AMPS Basic Maintenance Amount to the
Valuation Date on which the Corporation's Discounted Value of S&P Eligible
Assets failed to exceed the AMPS Basic Maintenance Amount, (ii) the maximum
number of days following a Valuation Date that the Corporation has under these
Articles Supplementary to cure any failure to maintain a Discounted Value of
S&P Eligible Assets at least equal to the AMPS Basic Maintenance Amount, and
(iii) the maximum number of days the Corporation has to effect a mandatory
redemption under Section 4(a)(ii) of these Articles Supplementary.

     "S&P Hedging Transactions" has the meaning set forth in paragraph 8(a) of
these Articles Supplementary.

     "S&P Volatility Factor" means 277% or such other potential dividend rate
increase factor as S&P advises the Corporation in writing is applicable.

     "Securities Depository" means The Depository Trust Company or any
successor company or other entities elected by the Corporation as securities
depository for the shares of AMPS that agrees to follow the procedures
required to be followed by such securities depository in connection with the
shares of AMPS.

     "Service" means the United States Internal Revenue Service.

     "7-Day Dividend Period" means a Dividend Period consisting of seven days.



                                      26
<PAGE>

     "Short Term Dividend Period" means a Special Dividend Period consisting
of a specified number of days (other than seven), evenly divisible by seven,
and not fewer than seven nor more than 364.

     "Special Dividend Period" means a Dividend Period consisting of (i) a
specified number of days (other than seven), evenly divisible by seven and not
fewer than seven nor more than 364 or (ii) a specified period of one whole
year or more but not greater than five years (in each case subject to
adjustment as provided in paragraph 2(b)(i)).

     "Specific Redemption Provisions" means, with respect to a Special
Dividend Period either, or any combination of, (i) a period (a "Non-Call
Period") determined by the Board of Directors of the Corporation, after
consultation with the Auction Agent and the Broker-Dealers, during which the
shares of AMPS subject to such Dividend Period shall not be subject to
redemption at the option of the Corporation and (ii) a period (a "Premium Call
Period"), consisting of a number of whole years and determined by the Board of
Directors of the Corporation, after consultation with the Auction Agent and
the Broker-Dealers, during each year of which the shares of AMPS subject to
such Dividend Period shall be redeemable at the Corporation's option at a
price per share equal to $25,000 plus accumulated but unpaid dividends plus a
premium expressed as a percentage of $25,000, as determined by the Board of
Directors of the Corporation after consultation with the Auction Agent and the
Broker-Dealers.

     "Stock Books" means the books maintained by the Auction Agent setting
forth at all times a current list, as determined by the Auction Agent, of
Existing Holders of the AMPS.

     "Stock Register" means the register of Holders maintained on behalf of
the Corporation by the Auction Agent in its capacity as transfer agent and
registrar for the AMPS.



                                      27
<PAGE>

     "Subsequent Dividend Period," with respect to AMPS, has the meaning set
forth in paragraph 2(c)(i) of these Articles Supplementary and, with respect
to Other AMPS, has the equivalent meaning.

     "Substitute LIBOR Dealers" means such Substitute LIBOR Dealer or Dealers
as the Corporation may from time to time appoint or, in lieu of any thereof,
their respective affiliates or successors.

     "Substitute Rating Agency" and "Substitute Rating Agencies" mean a NRSRO
or two NRSROs, respectively, selected by Merrill Lynch, Pierce, Fenner & Smith
Incorporated or its affiliates and successors, after obtaining the
Corporation's approval, to act as the substitute rating agency or substitute
rating agencies, as the case may be, to determine the credit ratings of the
shares of AMPS.

     "Taxable Equivalent of the Short-Term Municipal Bond Rate" on any date
means 90% of the quotient of (A) the per annum rate expressed on an interest
equivalent basis equal to the Kenny S&P 30 day High Grade Index (the "Kenny
Index") or any successor index, made available for the Business Day
immediately preceding such date but in any event not later than 8:30 A.M.,
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
"high grade" component issuers selected by Kenny Information Systems Inc. or
any such successor from time to time in its discretion, which component
issuers shall include, without limitation, issuers of general obligation bonds
but shall exclude any bonds the interest on which constitutes an item of tax
preference under Section 57(a)(5) of the Code, or successor provisions, for
purposes of the "alternative minimum tax," divided by (B) 1.00 minus the
Marginal Tax Rate (expressed as a


                                      28
<PAGE>

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 Corporation may not utilize a successor index to
the Kenny Index unless Moody's and S&P provide the Corporation with written
confirmation that the use of such successor index will not adversely affect
the then-current respective Moody's and S&P ratings of the AMPS.

     "Treasury Bonds" means U.S. Treasury Bonds or Notes.

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



                                      29
<PAGE>

     "U.S. Treasury Securities" means direct obligations of the United States
Treasury that are entitled to the full faith and credit of the United States
government.

     "Valuation Date" means, for purposes of determining whether the
Corporation is maintaining the AMPS Basic Maintenance Amount, the last
Business Day of each week commencing with the Date of Original Issue;
provided, however, that the first Valuation Date may occur on any date
established by the Corporation; provided, however, that such date shall not be
more than one week from the Date of Original Issue.

     "Variation Margin" means, in connection with an outstanding futures
contract owned or sold by the Corporation, the amount of cash or securities
paid to or received from a broker (subsequent to the Initial Margin payment)
from time to time as the price of such futures contract fluctuates.

     (b) The foregoing definitions of AMPS Basic Maintenance Amount, AMPS
Basic Maintenance Cure Date, AMPS Basic Maintenance Report, Auditors'
Confirmation, Deposit Securities, Discounted Value, High Yield Municipal
Bonds, Independent Auditors, Initial Margin, Inverse Floaters, Market Value,
Maximum Potential Additional Dividend Liability, Moody's Discount Factor,
Moody's Eligible Asset, Moody's Exposure Period, Moody's Hedging Transactions,
Moody's Volatility Factor, S&P Discount Factor, S&P Eligible Asset, S&P
Exposure Period, S&P Hedging Transactions, S&P Volatility Factor, Valuation
Date and Variation Margin have been determined by the Board of Directors of
the Corporation in order to obtain a Aaa rating from Moody's and a AAA rating
from S&P on the AMPS on their Date of Original Issue; and the Board of
Directors of the Corporation shall have the authority, without shareholder
approval, to amend, alter or repeal from time to time by resolution or
otherwise the foregoing definitions and the restrictions and guidelines if
Moody's and S&P or any Substitute



                                      30
<PAGE>

Rating Agency advises the Corporation in writing that such amendment,
alteration or repeal will not materially affect the then current rating of the
AMPS. Furthermore, if the Board of Directors determines as provided in
paragraph 12 hereto not to continue to comply with the provisions of
paragraphs 7 and 8 hereof with respect to Moody's, and any other provisions
hereof with respect to obtaining and maintaining a rating on the AMPS from
Moody's, and/or paragraphs 7 and 8 hereof with respect to S&P, and any other
provisions hereof with respect to obtaining and maintaining a rating on the
AMPS from S&P, then such definitions listed in this paragraph, unless the
context requires otherwise, shall have no meaning in these Articles
Supplementary for the AMPS.

     2. Dividends.

     (a) The Holders shall be entitled to receive, when, as and if declared by
the Board of Directors of the Corporation, out of funds legally available
therefor, cumulative dividends each consisting of (i) cash at the Applicable
Rate, (ii) a Right to receive cash as set forth in paragraph 2(e) below, and
(iii) any additional amounts as set forth in paragraph 2(f) below, and no
more, payable on the Dividend Payment Date set forth below. Dividends on the
shares of AMPS so declared and payable shall be paid (i) in preference to and
in priority over any dividends declared and payable on the Common Stock, and
(ii) to the extent permitted under the Code and to the extent available, out
of net tax-exempt income earned on the Corporation's investments. To the
extent permitted under the Code, dividends on shares of AMPS will be
designated as exempt-interest dividends. For the purposes of this section, the
term "net tax-exempt income" shall exclude capital gains of the Corporation.

     (b) (i) Cash dividends on shares of AMPS shall accumulate from the Date
of Original Issue and shall be payable, when, as and if declared by the Board
of Directors, out of


                                      31
<PAGE>

funds legally available therefor, commencing on the Initial Dividend Payment
Date with respect to the AMPS. Following the Initial Dividend Payment Date for
the AMPS, dividends on the AMPS will be payable, at the option of the
Corporation, either (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
herein referred to as a "Normal Dividend Payment Date"), except that if such
Normal Dividend Payment Date is not a Business Day, then the Dividend Payment
Date shall be the first Business Day next succeeding such Normal Dividend
Payment Date. Although any particular Dividend Payment Date may not occur on
the originally scheduled date because of the exception discussed above, the
next succeeding Dividend Payment Date, subject to such exception, will occur
on the next following originally scheduled date. If for any reason a Dividend
Payment Date cannot be fixed as described above, then the Board of Directors
shall fix the Dividend Payment Date. The Board of Directors by resolution
prior to authorization of a dividend by the Board of Directors may change a
Dividend Payment Date if such change does not adversely affect the contract
rights of the Holders of shares of AMPS set forth in the Charter. The Initial
Dividend Period, 7-Day Dividend Periods and Special Dividend Periods are
hereinafter sometimes referred to as Dividend Periods. Each dividend payment
date determined as provided above is hereinafter referred to as a "Dividend
Payment Date."

          (ii) Each dividend shall be paid to the Holders as they appear in
     the Stock Register as of 12:00 noon, Eastern time, on the Business Day
     preceding the Dividend


                                      32
<PAGE>

     Payment Date. Dividends in arrears for any past Dividend Period may be
     declared and paid at any time, without reference to any regular Dividend
     Payment Date, to the Holders as they appear on the Stock Register on a
     date, not exceeding 15 days prior to the payment date therefor, as may be
     fixed by the Board of Directors of the Corporation.

     (c) (i) During the period from and including the Date of Original Issue
to but excluding the Initial Dividend Payment Date (the "Initial Dividend
Period"), the Applicable Rate shall be the Initial Dividend Rate. Commencing
on the Initial Dividend Payment Date, the Applicable Rate for each subsequent
dividend period (hereinafter referred to as a "Subsequent Dividend Period"),
which Subsequent Dividend Period shall commence on and include a Dividend
Payment Date and shall end on and include the calendar day prior to the next
Dividend Payment Date (or last Dividend Payment Date in a Dividend Period if
there is more than one Dividend Payment Date), shall be equal to the rate per
annum that results from implementation of the Auction Procedures.

      The Applicable Rate for each Dividend Period commencing during a
Non-Payment Period shall be equal to the Non-Payment Period Rate; and each
Dividend Period, commencing after the first day of, and during, a Non-Payment
Period shall be a 7-Day Dividend Period. Except in the case of the willful
failure of the Corporation to pay a dividend on a Dividend Payment Date or to
redeem any shares of AMPS on the date set for such redemption, any amount of
any dividend due on any Dividend Payment Date (if, prior to the close of
business on the second Business Day preceding such Dividend Payment Date, the
Corporation has declared such dividend payable on such Dividend Payment Date
to the Holders of such shares of AMPS as of 12:00 noon, Eastern time, on the
Business Day preceding such Dividend Payment Date) or redemption price with
respect to any shares of AMPS not paid to such Holders when due may be


                                      33
<PAGE>

paid to such Holders 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 Corporation to pay a dividend on a Dividend Payment Date or to redeem
any shares of AMPS on the date set for such redemption, the preceding sentence
shall not apply and the Applicable Rate for the Dividend Period commencing
during the Non-Payment Period resulting from such failure shall be the
Non-Payment Period Rate. For the purposes of the foregoing, payment to a
person in same-day funds on any Business Day at any time shall be considered
equivalent to payment to such person in New York Clearing House (next day)
funds at the same time on the preceding Business Day, and any payment made
after 12:00 noon, 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.

          (ii) The amount of cash dividends per share of 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 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


                                      34
<PAGE>

     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 Dates and the denominator of which will be 360,
     multiplying the amount so obtained by $25,000, and rounding the amount so
     obtained to the nearest cent.

          (iii) With respect to each Dividend Period that is a Special
     Dividend Period, the Corporation may, at its sole option and to the
     extent permitted by law, by telephonic and written notice (a "Request for
     Special Dividend Period") to the Auction Agent and to each Broker-Dealer,
     request that the next succeeding Dividend Period for the AMPS be a number
     of days (other than seven), evenly divisible by seven and not fewer than
     seven nor more than 364 in the case of a Short Term Dividend Period or
     one whole year or more but not greater than five years in the case of a
     Long Term Dividend Period, specified in such notice, provided that the
     Corporation may not give a Request for Special Dividend Period (and any
     such request shall be null and void) unless, for any Auction occurring
     after the initial Auction, Sufficient Clearing Bids were made in the last
     occurring Auction and unless full cumulative dividends, any amounts due
     with respect to redemptions, and any Additional Dividends payable prior
     to such date have been paid in full. Such Request for Special Dividend
     Period, in the case of a Short Term Dividend Period, shall be given on or
     prior to the second Business Day but not more than seven Business Days
     prior to an Auction Date for the AMPS and, in the case of a Long Term
     Dividend Period, shall be given on or prior to the second Business Day
     but not more than 28 days prior to an Auction Date for the AMPS. Upon
     receiving such Request for Special Dividend Period, the Broker-Dealer(s)
     shall jointly determine whether, given the


                                      35
<PAGE>

     factors set forth below, it is advisable that the Corporation issue a
     Notice of Special Dividend Period for the AMPS as contemplated by such
     Request for Special Dividend Period and the Optional Redemption Price of
     the AMPS during such Special Dividend Period and the Specific Redemption
     Provisions and shall give the Corporation written notice (a "Response")
     of such determination by no later than the second Business Day prior to
     such Auction Date. In making such determination the Broker-Dealer(s) will
     consider (1) existing short-term and long-term market rates and indices
     of such short-term and long-term rates, (2) existing market supply and
     demand for short-term and long-term securities, (3) existing yield curves
     for short-term and long-term securities comparable to the AMPS, (4)
     industry and financial conditions which may affect the AMPS, (5) the
     investment objective of the Corporation, and (6) the Dividend Periods and
     dividend rates at which current and potential beneficial holders of the
     AMPS would remain or become beneficial holders. If the Broker-Dealer(s)
     shall not give the Corporation a Response by such second Business Day or
     if the Response states that given the factors set forth above it is not
     advisable that the Corporation give a Notice of Special Dividend Period
     for the AMPS, the Corporation may not give a Notice of Special Dividend
     Period in respect of such Request for Special Dividend Period. In the
     event the Response indicates that it is advisable that the Corporation
     give a Notice of Special Dividend Period for the AMPS, the Corporation
     may by no later than the second Business Day prior to such Auction Date
     give a notice (a "Notice of Special Dividend Period") to the Auction
     Agent, the Securities Depository and each Broker-Dealer which notice will
     specify (i) the duration of the Special Dividend Period, (ii) the
     Optional Redemption Price as specified in the related Response and (iii)
     the Specific Redemption


                                      36
<PAGE>

     Provisions, if any, as specified in the related Response. The Corporation
     also shall provide a copy of such Notice of Special Dividend Period to
     Moody's and S&P. The Corporation shall not give a Notice of Special
     Dividend Period and, if the Corporation has given a Notice of Special
     Dividend Period, the Corporation is required to give telephonic and
     written notice of its revocation (a "Notice of Revocation") to the
     Auction Agent, each Broker-Dealer, and the Securities Depository on or
     prior to the Business Day prior to the relevant Auction Date if (x)
     either the 1940 Act AMPS Asset Coverage is not satisfied or the
     Corporation shall fail to maintain S&P Eligible Assets and Moody's
     Eligible Assets each with an aggregate Discounted Value at least equal to
     the AMPS Basic Maintenance Amount, in each case on 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 Corporation is an approximately equal
     rate for securities similar to the AMPS with an equal dividend period),
     provided that, in calculating the aggregate Discounted Value of Moody's
     Eligible Assets for this purpose, the Moody's Exposure Period shall be
     deemed to be one week longer, (y) sufficient funds for the payment of
     dividends payable on the immediately succeeding Dividend Payment Date
     have not been segregated in an account at the Corporation's custodian
     bank or on the books of the Corporation by the close of business on the
     third Business Day preceding the related Auction Date or (z) the
     Broker-Dealer(s) jointly advise the Corporation that after consideration
     of the factors listed above they have concluded that it is advisable to
     give a Notice of Revocation. The Corporation also shall provide a copy of
     such Notice of


                                      37
<PAGE>

     Revocation to Moody's and S&P. If the Corporation is prohibited from
     giving a Notice of Special Dividend Period as a result of any of the
     factors enumerated in clause (x), (y) or (z) above or if the Corporation
     gives a Notice of Revocation with respect to a Notice of Special Dividend
     Period for AMPS, the next succeeding Dividend Period will be a 7-Day
     Dividend Period. In addition, in the event Sufficient Clearing Bids are
     not made in the applicable Auction or such Auction is not held for any
     reason, such next succeeding Dividend Period will be a 7-Day Dividend
     Period and the Corporation may not again give a Notice of Special
     Dividend Period for the AMPS (and any such attempted notice shall be null
     and void) until Sufficient Clearing Bids have been made in an Auction
     with respect to a 7-Day Dividend Period.

     (d) (i) Holders shall not be entitled to any dividends, whether payable
in cash, property or stock, in excess of full cumulative dividends and
applicable late charges, as herein provided, on the shares of AMPS (except for
Additional Dividends as provided in paragraph 2(e) hereof and additional
payments as provided in paragraph 2(f) hereof). Except for the late charge
payable pursuant to paragraph 2(c)(i) hereof, no interest, or sum of money in
lieu of interest, shall be payable in respect of any dividend payment on the
shares of AMPS that may be in arrears.

          (ii) For so long as any share of AMPS is Outstanding, the
     Corporation shall not declare, pay or set apart for payment any dividend
     or other distribution (other than a dividend or distribution paid in
     shares of, or options, warrants or rights to subscribe for or purchase,
     Common Stock or other stock, if any, ranking junior to the shares of AMPS
     as to dividends or upon liquidation) in respect of the Common Stock or
     any other stock of the Corporation ranking junior to or on a parity with
     the shares of AMPS as to dividends


                                      38
<PAGE>

     or upon liquidation, or call for redemption, redeem, purchase or
     otherwise acquire for consideration any shares of the Common Stock or any
     other such junior stock (except by conversion into or exchange for stock
     of the Corporation ranking junior to the shares of AMPS as to dividends
     and upon liquidation) or any other such Parity Stock (except by
     conversion into or exchange for stock of the Corporation ranking junior
     to or on a parity with the shares of AMPS as to dividends and upon
     liquidation), unless (A) immediately after such transaction, the
     Corporation shall have S&P Eligible Assets and Moody's Eligible Assets
     each with an aggregate Discounted Value equal to or greater than the AMPS
     Basic Maintenance Amount and the Corporation shall maintain the 1940 Act
     AMPS Asset Coverage, (B) full cumulative dividends on shares of AMPS and
     shares of Other AMPS due on or prior to the date of the transaction have
     been declared and paid or shall have been declared and sufficient funds
     for the payment thereof deposited with the Auction Agent, (C) any
     Additional Dividend required to be paid under paragraph 2(e) below on or
     before the date of such declaration or payment has been paid and (D) the
     Corporation has redeemed the full number of shares of AMPS required to be
     redeemed by any provision for mandatory redemption contained in Section
     4(a)(ii).

     (e) Each dividend shall consist of (i) cash at the Applicable Rate, (ii)
an uncertificated right (a "Right") to receive an Additional Dividend (as
defined below), and (iii) any additional amounts as set forth in paragraph
2(f) below. Each Right shall thereafter be independent of the share or shares
of AMPS on which the dividend was paid. The Corporation shall cause to be
maintained a record of each Right received by the respective Holders. A Right
may not be transferred other than by operation of law. If the Corporation
retroactively allocates any net capital gains or other income subject to
regular Federal income taxes to shares of AMPS


                                      39
<PAGE>

without having given advance notice thereof to the Auction Agent as described
in paragraph 2(f) hereof solely by reason of the fact that such allocation is
made as a result of the redemption of all or some of the outstanding shares of
AMPS or the liquidation of the Corporation (the amount of such allocation
referred to herein as a "Retroactive Taxable Allocation"), the Corporation
will, within 90 days (and generally within 60 days) after the end of the
Corporation's fiscal year for which a Retroactive Taxable Allocation is made,
provide notice thereof to the Auction Agent and to each holder of a Right
applicable to such shares of AMPS (initially Cede & Co. as nominee of The
Depository Trust Company) during such fiscal year at such holder's address as
the same appears or last appeared on the Stock Books of the Corporation. The
Corporation will, within 30 days after such notice is given to the Auction
Agent, pay to the Auction Agent (who will then distribute to such holders of
Rights), out of funds legally available therefor, an amount equal to the
aggregate Additional Dividend with respect to all Retroactive Taxable
Allocations made to such holders during the fiscal year in question.

     An "Additional Dividend" means payment to a present or former holder of
shares of AMPS of an amount which, when taken together with the aggregate
amount of Retroactive Taxable Allocations made to such holder with respect to
the fiscal year in question, would cause such holder's dividends in dollars
(after Federal income tax consequences) from the aggregate of both the
Retroactive Taxable Allocations and the Additional Dividend to be equal to the
dollar amount of the dividends which would have been received by such holder
if the amount of the aggregate Retroactive Taxable Allocations 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
Corporation; and (iii)


                                      40
<PAGE>

assuming that each Retroactive Taxable Allocation would be taxable in the
hands of each holder of shares of AMPS at the greater of: (x) the maximum
marginal regular Federal individual income tax rate applicable to ordinary
income or capital gains depending on the taxable character of the distribution
(including any surtax); or (y) the maximum marginal regular Federal corporate
income tax rate applicable to ordinary income or capital gains depending on
the taxable character of the distribution (disregarding in both (x) and (y)
the effect of any state or local taxes and the phase out of, or provision
limiting, personal exemptions, itemized deductions, or the benefit of lower
tax brackets).

     (f) Except as provided below, whenever the Corporation intends to include
any net capital gains or other income subject to regular Federal income taxes
in any dividend on shares of AMPS, the Corporation will notify the Auction
Agent of the amount to be so included at least five Business Days prior to the
Auction Date on which the Applicable Rate for such dividend is to be
established. The Corporation may also include such income in a dividend on
shares of AMPS without giving advance notice thereof if it increases the
dividend by an additional amount calculated as if such income was a
Retroactive Taxable Allocation and the additional amount was an Additional
Dividend, provided that the Corporation will notify the Auction Agent of the
additional amounts to be included in such dividend at least five Business Days
prior to the applicable Dividend Payment Date.

     (g) No fractional shares of AMPS shall be issued.

     3. Liquidation Rights. Upon any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the Holders shall be
entitled to receive, out of the assets of the Corporation available for
distribution to shareholders, before any distribution or payment is made upon
any Common Stock or any other capital stock ranking junior in right of


                                      41
<PAGE>

payment upon liquidation to the AMPS, the sum of $25,000 per share plus
accumulated but unpaid dividends (whether or not earned or declared) thereon
to the date of distribution, and after such payment the Holders will be
entitled to no other payments other than Additional Dividends as provided in
paragraph 2(e) hereof. If upon any liquidation, dissolution or winding up of
the Corporation, the amounts payable with respect to the AMPS and any other
Outstanding class or series of Preferred Stock of the Corporation ranking on a
parity with the AMPS as to payment upon liquidation are not paid in full, the
Holders and the holders of such other class or series will share ratably in
any such distribution of assets in proportion to the respective preferential
amounts to which they are entitled. After payment of the full amount of the
liquidating distribution to which they are entitled, the Holders will not be
entitled to any further participation in any distribution of assets by the
Corporation except for any Additional Dividends. A consolidation, merger or
statutory share exchange of the Corporation with or into any other corporation
or entity or a sale, whether for cash, shares of stock, securities or
properties, of all or substantially all or any part of the assets of the
Corporation shall not be deemed or construed to be a liquidation, dissolution
or winding up of the Corporation.

     4. Redemption.

     (a) Shares of AMPS shall be redeemable by the Corporation as provided
below:

          (i) Optional Redemption. To the extent permitted under the 1940 Act
     and Maryland law, upon giving a Notice of Redemption, the Corporation at
     its option may redeem shares of AMPS, in whole or in part, out of funds
     legally available therefor, at the Optional Redemption Price per share,
     on any Dividend Payment Date; provided that no share of AMPS may be
     redeemed at the option of the Corporation during (A) the Initial Dividend
     Period with respect to such share or (B) a Non-Call Period to which such
     share


                                      42
<PAGE>

     is subject. In addition, holders of AMPS which are redeemed shall be
     entitled to receive Additional Dividends to the extent provided herein.
     The Corporation may not give a Notice of Redemption relating to an
     optional redemption as described in this paragraph 4(a)(i) unless, at the
     time of giving such Notice of Redemption, the Corporation has available
     Deposit Securities with maturity or tender dates not later than the day
     preceding the applicable redemption date and having a value not less than
     the amount due to Holders by reason of the redemption of their shares of
     AMPS on such redemption date.

          (ii) Mandatory Redemption. The Corporation shall redeem, out of
     funds legally available therefor, at the Mandatory Redemption Price per
     share, shares of AMPS to the extent permitted under the 1940 Act and
     Maryland law, on a date fixed by the Board of Directors, if the
     Corporation fails to maintain S&P Eligible Assets and Moody's Eligible
     Assets each with an aggregate Discounted Value equal to or greater than
     the AMPS Basic Maintenance Amount as provided in paragraph 7(a) or to
     satisfy the 1940 Act AMPS Asset Coverage as provided in paragraph 6 and
     such failure is not cured on or before the AMPS Basic Maintenance Cure
     Date or the 1940 Act Cure Date (herein collectively referred to as a
     "Cure Date"), as the case may be. In addition, holders of AMPS so
     redeemed shall be entitled to receive Additional Dividends to the extent
     provided herein. The number of shares of AMPS to be redeemed shall be
     equal to the lesser of (i) the minimum number of shares of AMPS the
     redemption of which, if deemed to have occurred immediately prior to the
     opening of business on the Cure Date, together with all shares of other
     Preferred Stock subject to redemption or retirement, would result in the
     Corporation having S&P Eligible Assets and Moody's Eligible Assets each
     with an aggregate Discounted Value equal to or greater than the AMPS
     Basic Maintenance


                                      43
<PAGE>

     Amount or satisfaction of the 1940 Act AMPS Asset Coverage, as the case
     may be, on such Cure Date (provided that, if there is no such minimum
     number of shares of AMPS and shares of other Preferred Stock the
     redemption of which would have such result, all shares of AMPS and shares
     of other Preferred Stock then Outstanding shall be redeemed), and (ii)
     the maximum number of shares of AMPS, together with all shares of other
     Preferred Stock subject to redemption or retirement, that can be redeemed
     out of funds expected to be legally available therefor on such redemption
     date. In determining the number of shares of AMPS required to be redeemed
     in accordance with the foregoing, the Corporation shall allocate the
     number required to be redeemed which would result in the Corporation
     having S&P Eligible Assets and Moody's Eligible Assets each with an
     aggregate Discounted Value equal to or greater than the AMPS Basic
     Maintenance Amount or satisfaction of the 1940 Act AMPS Asset Coverage,
     as the case may be, pro rata among shares of AMPS, Other AMPS and other
     Preferred Stock subject to redemption pursuant to provisions similar to
     those contained in this paragraph 4(a)(ii); provided that, shares of AMPS
     which may not be redeemed at the option of the Corporation due to the
     designation of a Non-Call Period applicable to such shares (A) will be
     subject to mandatory redemption only to the extent that other shares are
     not available to satisfy the number of shares required to be redeemed and
     (B) will be selected for redemption in an ascending order of outstanding
     number of days in the Non-Call Period (with shares with the lowest number
     of days to be redeemed first) and by lot in the event of shares having an
     equal number of days in such Non-Call Period. The Corporation shall
     effect such redemption on a Business Day which is not later than 30 days
     after such Cure Date, except that if the Corporation does not have funds
     legally


                                      44
<PAGE>

     available for the redemption of all of the required number of shares of
     AMPS and shares of other Preferred Stock which are subject to mandatory
     redemption or the Corporation otherwise is unable to effect such
     redemption on or prior to 30 days after such Cure Date, the Corporation
     shall redeem those shares of AMPS which it is unable to redeem on the
     earliest practicable date on which it is able to effect such redemption
     out of funds legally available therefor.

     (b) No Redemption Under Certain Circumstances. Notwithstanding any other
provision of this paragraph 4, no shares of AMPS may be redeemed pursuant to
paragraph 4(a)(i) of these Articles Supplementary (i) unless all dividends in
arrears on all remaining outstanding shares of Parity Stock shall have been or
are being contemporaneously paid or declared and set apart for payment and
(ii) if redemption thereof would result in the Corporation's failure to
maintain Moody's Eligible Assets or S&P Eligible Assets with an aggregate
Discounted Value equal to or greater than the AMPS Basic Maintenance Amount.
In the event that less than all the outstanding shares of a series of AMPS are
to be redeemed and there is more than one Holder, the shares of that series of
AMPS to be redeemed shall be selected by lot or such other method as the
Corporation shall deem fair and equitable.

     (c) Notice of Redemption. Whenever shares of AMPS are to be redeemed, the
Corporation, not less than 17 nor more than 60 days prior to the date fixed
for redemption, shall mail a notice ("Notice of Redemption") by first-class
mail, postage prepaid, to each Holder of shares of AMPS to be redeemed and to
the Auction Agent. The Corporation shall cause the Notice of Redemption to
also be published in the eastern and national editions of The Wall Street
Journal. The Notice of Redemption shall set forth (i) the redemption date,
(ii) the amount of the redemption price, (iii) the aggregate number of shares
of AMPS to be redeemed, (iv) the place or


                                      45
<PAGE>

places where shares of AMPS are to be surrendered for payment of the
redemption price, (v) a statement that dividends on the shares to be redeemed
shall cease to accumulate on such redemption date (except that holders may be
entitled to Additional Dividends) and (vi) the provision of these Articles
Supplementary pursuant to which such shares are being redeemed. No defect in
the Notice of Redemption or in the mailing or publication thereof shall affect
the validity of the redemption proceedings, except as required by applicable
law.

     If the Notice of Redemption shall have been given as aforesaid and,
concurrently or thereafter, the Corporation shall have deposited in trust with
the Auction Agent, or segregated in an account at the Corporation's custodian
bank for the benefit of the 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 such Notice of Redemption has been given with irrevocable
instructions and authority to pay the redemption price to the Holders of such
shares, then upon the date of such deposit or, if no such deposit is made,
then upon such date fixed for redemption (unless the Corporation shall default
in making the redemption payment), all rights of the Holders of such shares as
shareholders of the Corporation by reason of the ownership of such shares will
cease and terminate (except their right to receive the redemption price in
respect thereof and any Additional Dividends, but without interest), and such
shares shall no longer be deemed outstanding. The Corporation shall be
entitled to receive, from time to time, from the Auction Agent the interest,
if any, on such Deposit Securities deposited with it and the Holders of any
shares so redeemed shall have no claim to any of such interest. In case the
Holder of any shares so called for redemption shall not claim the redemption
payment for his shares within one year after the date of redemption, the
Auction Agent shall, upon demand, pay over to the Corporation


                                      46
<PAGE>

such amount remaining on deposit and the Auction Agent shall thereupon be
relieved of all responsibility to the Holder of such shares called for
redemption and such Holder thereafter shall look only to the Corporation for
the redemption payment.

     5. Voting Rights.

     (a) General. Except as otherwise provided in the Charter or By-laws, each
Holder of shares of AMPS shall be entitled to one vote for each share held on
each matter submitted to a vote of shareholders of the Corporation, and the
holders of outstanding shares of Preferred Stock, including AMPS, and of
shares of Common Stock shall vote together as a single class; provided that,
at any meeting of the shareholders of the Corporation held for the election of
directors, the holders of outstanding shares of Preferred Stock, including
AMPS, shall be entitled, as a class, to the exclusion of the holders of all
other securities and classes of capital stock of the Corporation, to elect two
directors of the Corporation. Subject to paragraph 5(b) hereof, the holders of
outstanding shares of capital stock of the Corporation, including the holders
of outstanding shares of Preferred Stock, including AMPS, voting as a single
class, shall elect the balance of the directors.

     (b) Right to Elect Majority of Board of Directors. During any period in
which any one or more of the conditions described below shall exist (such
period being referred to herein as a "Voting Period"), the number of directors
constituting the Board of Directors shall be automatically increased by the
smallest number that, when added to the two directors elected exclusively by
the holders of shares of Preferred Stock, would constitute a majority of the
Board of Directors as so increased by such smallest number; and the holders of
shares of Preferred Stock shall be entitled, voting separately as one class
(to the exclusion of the holders of all other securities and classes of
capital stock of the Corporation), to elect such smallest number of


                                      47
<PAGE>

additional directors, together with the two directors that such holders are in
any event entitled to elect. A Voting Period shall commence:

          (i) if at any time accumulated dividends (whether or not earned or
     declared, and whether or not funds are then legally available in an
     amount sufficient therefor) on the outstanding shares of AMPS equal to at
     least two full years' dividends shall be due and unpaid and sufficient
     cash or specified securities shall not have been deposited with the
     Auction Agent for the payment of such accumulated dividends; or

          (ii) if at any time holders of any other shares of Preferred Stock
     are entitled to elect a majority of the directors of the Corporation
     under the 1940 Act.

     Upon the termination of a Voting Period, the voting rights described in
this paragraph 5(b) shall cease, subject always, however, to the reverting of
such voting rights in the Holders upon the further occurrence of any of the
events described in this paragraph 5(b).

     (c) Right to Vote with Respect to Certain Other Matters. So long as any
shares of AMPS are outstanding, the Corporation shall not, without the
affirmative vote of the holders of a majority of the shares of Preferred Stock
Outstanding at the time, voting separately as one class: (i) authorize, create
or issue any class or series of stock ranking prior to the AMPS or any other
series of Preferred Stock with respect to payment of dividends or the
distribution of assets on dissolution, liquidation or winding up the affairs
of the Corporation, 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 Corporation shall not approve any of the
actions set forth in clause (i) or (ii) which adversely affects the contract
rights expressly set


                                      48
<PAGE>

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 the holders of at least a majority of the shares of AMPS
adversely affected and outstanding at such time (voting separately as a
class). The Corporation shall notify Moody's and S&P ten Business Days prior
to any such vote described in clause (i) or (ii). Unless a higher percentage
is provided for under the Charter, the affirmative vote of the holders of a
majority of the outstanding shares of Preferred Stock, including AMPS, voting
together as a single class, will be required to approve any plan of
reorganization (including bankruptcy proceedings) adversely affecting such
shares or any action requiring a vote of security holders under Section 13(a)
of the 1940 Act. So long as any shares of the AMPS are outstanding, the
affirmative vote of the holders of a majority of the outstanding shares of
Preferred Stock, including AMPS, voting together as a single class, will be
required to approve any voluntary application by the Corporation for relief
under Federal bankruptcy law or any similar application under state law for so
long as the Corporation is solvent and does not foresee becoming insolvent.
For purposes of the two preceding sentences, the phrase "vote of the holders
of a majority of the outstanding shares of Preferred Stock" shall have the
meaning set forth in the 1940 Act. The class vote of holders of shares of
Preferred Stock, including AMPS, described above will in each case be in
addition to a separate vote of the requisite percentage of shares of Common
Stock and shares of Preferred Stock, including AMPS, voting together as a
single class necessary to authorize the action in question. 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.



                                      49
<PAGE>

     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
Corporation, 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.

     (d) Voting Procedures.

          (i) As soon as practicable after the accrual of any right of the
     holders of shares of Preferred Stock to elect additional directors as
     described in paragraph 5(b) above, the Corporation shall call a special
     meeting of such holders and instruct the Auction Agent to mail a notice
     of such special meeting to such holders, such meeting to be held not less
     than 10 nor more than 20 days after the date of mailing of such notice.
     If the Corporation fails to send such notice to the Auction Agent or if
     the Corporation does not call such a special meeting, it may be called by
     any such holder on like notice. The record date for determining the
     holders entitled to notice of and to vote at such special meeting shall
     be the close of business on the fifth Business Day preceding the day on
     which such notice is mailed. At any such special meeting and at each
     meeting held during a Voting Period, such Holders, voting together as a
     class (to the exclusion of the holders of all other securities and
     classes of capital stock of the Corporation), shall be entitled to elect
     the number of directors prescribed in paragraph 5(b) above. At any such


                                      50
<PAGE>

     meeting or adjournment thereof in the absence of a quorum, a majority of
     such holders present in person or by proxy shall have the power to
     adjourn the meeting without notice, other than by an announcement at the
     meeting, to a date not more than 120 days after the original record date.

          (ii) For purposes of determining any rights of the Holders to vote
     on any matter or the number of shares required to constitute a quorum,
     whether such right is created by these Articles Supplementary, by the
     other provisions of the Charter, by statute or otherwise, a share of AMPS
     which is not Outstanding shall not be counted.

          (iii) The terms of office of all persons who are directors of the
     Corporation at the time of a special meeting of Holders and holders of
     other Preferred Stock to elect directors shall continue, notwithstanding
     the election at such meeting by the Holders and such other holders of the
     number of directors that they are entitled to elect, and the persons so
     elected by the Holders and such other holders, together with the two
     incumbent directors elected by the Holders and such other holders of
     Preferred Stock and the remaining incumbent directors elected by the
     holders of the Common Stock and Preferred Stock, shall constitute the
     duly elected directors of the Corporation.

          (iv) Simultaneously with the expiration of a Voting Period, the
     terms of office of the additional directors elected by the Holders and
     holders of other Preferred Stock pursuant to paragraph 5(b) above shall
     terminate, the remaining directors shall constitute the directors of the
     Corporation and the voting rights of the Holders and such other holders
     to elect additional directors pursuant to paragraph 5(b) above shall
     cease, subject to the provisions of the last sentence of paragraph 5(b).



                                      51
<PAGE>

     (e) Exclusive Remedy. Unless otherwise required by law, the Holders of
shares of AMPS shall not have any rights or preferences other than those
specifically set forth herein. The Holders of shares of AMPS shall have no
preemptive rights or rights to cumulative voting. In the event that the
Corporation fails to pay any dividends on the shares of AMPS, the exclusive
remedy of the Holders shall be the right to vote for directors pursuant to the
provisions of this paragraph 5.

     (f) Notification to S&P and Moody's. In the event a vote of Holders of
AMPS is required pursuant to the provisions of Section 13(a) of the 1940 Act,
the Corporation shall, not later than ten Business Days prior to the date on
which such vote is to be taken, notify S&P and Moody's that such vote is to be
taken and the nature of the action with respect to which such vote is to be
taken and, not later than ten Business Days after the date on which such vote
is taken, notify S&P and Moody's of the result of such vote.

     6. 1940 Act AMPS Asset Coverage. The Corporation shall maintain, as of
the last Business Day of each month in which any share of AMPS is outstanding,
the 1940 Act AMPS Asset Coverage.

     7. AMPS Basic Maintenance Amount.

     (a) The Corporation shall maintain, on each Valuation Date, and shall
verify to its satisfaction that it is maintaining on such Valuation Date, (i)
S&P Eligible Assets having an aggregate Discounted Value equal to or greater
than the AMPS Basic Maintenance Amount and (ii) Moody's Eligible Assets having
an aggregate Discounted Value equal to or greater than the AMPS Basic
Maintenance Amount. Upon any failure to maintain the required Discounted
Value, the Corporation will use its best efforts to alter the composition of
its portfolio to reattain


                                      52
<PAGE>

a Discounted Value at least equal to the AMPS Basic Maintenance Amount on or
prior to the AMPS Basic Maintenance Cure Date.

     (b) On or before 5:00 p.m., Eastern time, on the seventh Business Day in
the case of Moody's and on the next Business Day in the case of S&P, after a
Valuation Date on which the Corporation fails to satisfy the AMPS Basic
Maintenance Amount, the Corporation shall (i) complete and deliver to Moody's
a complete AMPS Basic Maintenance Report as of the date of such failure and
(ii) send S&P an electronic notification of such failure. The Corporation will
(i) deliver an AMPS Basic Maintenance Report to Moody's and (ii) send S&P an
electronic notification on or before 5:00 p.m., Eastern time, on the seventh
Business Day in the case of Moody's and on the next Business Day in the case
of S&P, after a Valuation Date on which the Corporation cures its failure to
maintain Moody's Eligible Assets or S&P Eligible Assets, as the case may be,
with an aggregate Discounted Value equal to or greater than the AMPS Basic
Maintenance Amount and on which the Corporation fails to maintain Moody's
Eligible Assets or S&P Eligible Assets, as the case may be, with an aggregate
Discounted Value which exceeds the AMPS Basic Maintenance Amount by 10% or
more in the case of S&P and 25% or more in the case of Moody's. The
Corporation will also deliver an AMPS Basic Maintenance Report to Moody's and
S&P as of the last Business Day of each month on or before the seventh
Business Day after such date. The Corporation shall also provide Moody's and
S&P with an AMPS Basic Maintenance Report when specifically requested by
either Moody's or S&P. A failure by the Corporation to deliver an AMPS Basic
Maintenance Report under this paragraph 7(b) shall be deemed to be delivery of
an AMPS Basic Maintenance Report indicating the Discounted Value for S&P
Eligible Assets and Moody's Eligible Assets of the Corporation is less than
the AMPS Basic Maintenance Amount, as of the relevant Valuation Date.



                                      53
<PAGE>

     (c) Within ten Business Days after the date of delivery of an AMPS Basic
Maintenance Report in accordance with paragraph 7(b) above relating to the
month in which the Corporation's fiscal year ends, the Independent Auditors
will confirm in writing to S&P and Moody's (i) the mathematical accuracy of
the calculations reflected in such Report, (ii) that, in such Report, the
Corporation correctly determined the assets of the Corporation which
constitute S&P Eligible Assets or Moody's Eligible Assets, as the case may be,
at its fiscal year end in accordance with these Articles Supplementary, and
(iii) that, in such Report, the Corporation determined whether the Corporation
had, at its fiscal year end in accordance with these Articles Supplementary,
S&P Eligible Assets of an aggregate Discounted Value at least equal to the
AMPS Basic Maintenance Amount and Moody's Eligible Assets of an aggregate
Discounted Value at least equal to the AMPS Basic Maintenance Amount (such
confirmation is herein called the "Auditors' Confirmation").

     (d) Within ten Business Days after the date of delivery to Moody's of an
AMPS Basic Maintenance Report in accordance with paragraph 7(b) above relating
to any Valuation Date on which the Corporation failed to maintain S&P Eligible
Assets with an aggregate Discounted Value and Moody's Eligible Assets with an
aggregate Discounted Value equal to or greater than the AMPS Basic Maintenance
Amount, and relating to the AMPS Basic Maintenance Cure Date with respect to
such failure, the Independent Auditors will provide to S&P and Moody's an
Auditors' Confirmation as to such AMPS Basic Maintenance Report.

     (e) If any Auditors' Confirmation delivered pursuant to subparagraph (c)
or (d) of this paragraph 7 shows that an error was made in the AMPS Basic
Maintenance Report for a particular date for which such Auditors' Confirmation
as required to be delivered, or shows that a lower aggregate Discounted Value
for the aggregate of all S&P Eligible Assets or Moody's


                                      54
<PAGE>

Eligible Assets, as the case may be, of the Corporation was determined by the
Independent Auditors, the calculation or determination made by such
Independent Auditors shall be final and conclusive and shall be binding on the
Corporation, and the Corporation shall accordingly amend and deliver the AMPS
Basic Maintenance Report to S&P and Moody's promptly following receipt by the
Corporation of such Auditors' Confirmation.

     (f) On or before 5:00 p.m., Eastern time, on the first Business Day after
the Date of Original Issue of the shares of AMPS, the Corporation will
complete and deliver to S&P and Moody's an AMPS Basic Maintenance Report as of
the close of business on such Date of Original Issue. Within five Business
Days of such Date of Original Issue, the Independent Auditors will confirm in
writing to S&P and Moody's (i) the mathematical accuracy of the calculations
reflected in such Report and (ii) that the aggregate Discounted Value of S&P
Eligible Assets and the aggregate Discounted Value of Moody's Eligible Assets
reflected thereon equals or exceeds the AMPS Basic Maintenance Amount
reflected thereon. Also, on or before 5:00 p.m., Eastern time, on the first
Business Day after shares of Common Stock are repurchased by the Corporation,
the Corporation will complete and deliver to S&P and Moody's an AMPS Basic
Maintenance Report as of the close of business on such date that Common Stock
is repurchased.

     (g) For so long as shares of AMPS are rated by Moody's, in managing the
Corporation's portfolio, the Adviser will not alter the composition of the
Corporation's portfolio if, in the reasonable belief of the Adviser, the
effect of any such alteration would be to cause the Corporation to have
Moody's Eligible Assets with an aggregate Discounted Value, as of the
immediately preceding Valuation Date, less than the AMPS Basic Maintenance
Amount as of such Valuation Date; provided, however, that in the event that,
as of the immediately preceding


                                      55
<PAGE>

Valuation Date, the aggregate Discounted Value of Moody's Eligible Assets
exceeded the AMPS Basic Maintenance Amount by five percent or less, the
Adviser will not alter the composition of the Corporation's portfolio in a
manner reasonably expected to reduce the aggregate Discounted Value of Moody's
Eligible Assets unless the Corporation shall have confirmed that, after giving
effect to such alteration, the aggregate Discounted Value of Moody's Eligible
Assets would exceed the AMPS Basic Maintenance Amount.

     8. Certain Other Restrictions and Requirements.

     (a) For so long as any shares of AMPS are rated by S&P, the Corporation
will not purchase or sell futures contracts, write, purchase or sell options
on futures contracts or write put options (except covered put options) or call
options (except covered call options) on portfolio securities unless it
receives written confirmation from S&P that engaging in such transactions will
not impair the ratings then assigned to the shares of AMPS by S&P, except that
the Corporation may purchase or sell futures contracts based on the Bond Buyer
Municipal Bond Index (the "Municipal Index") or Treasury Bonds and write,
purchase or sell put and call options on such contracts (collectively, "S&P
Hedging Transactions"), subject to the following limitations:

          (i) the Corporation will not engage in any S&P Hedging Transaction
     based on the Municipal Index (other than transactions which terminate a
     futures contract or option held by the Corporation by the Corporation's
     taking an opposite position thereto ("Closing Transactions")), which
     would cause the Corporation at the time of such transaction to own or
     have sold the least of (A) more than 1,000 outstanding futures contracts
     based on the Municipal Index, (B) outstanding futures contracts based on
     the Municipal Index exceeding in number 25% of the quotient of the Market
     Value of the


                                      56
<PAGE>

     Corporation's total assets divided by $1,000 or (C) outstanding futures
     contracts based on the Municipal Index exceeding in number 10% of the
     average number of daily traded futures contracts based on the Municipal
     Index in the 30 days preceding the time of effecting such transaction as
     reported by The Wall Street Journal;

          (ii) the Corporation will not engage in any S&P Hedging Transaction
     based on Treasury Bonds (other than Closing Transactions) which would
     cause the Corporation at the time of such transaction to own or have sold
     the lesser of (A) outstanding futures contracts based on Treasury Bonds
     exceeding in number 50% of the quotient of the Market Value of the
     Corporation's total assets divided by $100,000 ($200,000 in the case of
     the two-year United States Treasury Note) or (B) outstanding futures
     contracts based on Treasury Bonds exceeding in number 10% of the average
     number of daily traded futures contracts based on Treasury Bonds in the
     30 days preceding the time of effecting such transaction as reported by
     The Wall Street Journal;

          (iii) the Corporation will engage in Closing Transactions to close
     out any outstanding futures contract which the Corporation owns or has
     sold or any outstanding option thereon owned by the Corporation in the
     event (A) the Corporation does not have S&P Eligible Assets with an
     aggregate Discounted Value equal to or greater than the AMPS Basic
     Maintenance Amount on two consecutive Valuation Dates and (B) the
     Corporation is required to pay Variation Margin on the second such
     Valuation Date;

          (iv) the Corporation will engage in a Closing Transaction to close
     out any outstanding futures contract or option thereon in the month prior
     to the delivery month under the terms of such futures contract or option
     thereon unless the Corporation holds the securities deliverable under
     such terms; and



                                      57
<PAGE>

          (v) when the Corporation writes a futures contract or option
     thereon, it will either maintain an amount of cash, cash equivalents or
     liquid assets in a segregated account with the Corporation's custodian,
     so that the amount so segregated plus the amount of Initial Margin and
     Variation Margin held in the account of or on behalf of the Corporation's
     broker with respect to such futures contract or option equals the Market
     Value of the futures contract or option, or, in the event the Corporation
     writes a futures contract or option thereon which requires delivery of an
     underlying security, it shall hold such underlying security in its
     portfolio.

     For purposes of determining whether the Corporation has S&P Eligible
Assets with a Discounted Value that equals or exceeds the AMPS Basic
Maintenance Amount, the Discounted Value of cash or securities held for the
payment of Initial Margin or Variation Margin shall be zero and the aggregate
Discounted Value of S&P Eligible Assets shall be reduced by an amount equal to
(i) 30% of the aggregate settlement value, as marked to market, of any
outstanding futures contracts based on the Municipal Index which are owned by
the Corporation plus (ii) 25% of the aggregate settlement value, as marked to
market, of any outstanding futures contracts based on Treasury Bonds which
contracts are owned by the Corporation.

     (b) For so long as any shares of AMPS are rated by Moody's, the
Corporation will not engage in Bond Market Association Municipal Swap Index
swap transactions ("BMA swap transactions"), buy or sell futures contracts,
write, purchase or sell call options on futures contracts or purchase put
options on futures contracts or write call options (except covered call
options) on portfolio securities unless it receives written confirmation from
Moody's that engaging in such transactions would not impair the ratings then
assigned to the shares of AMPS by Moody's, except that the Corporation may
engage in BMA swap transactions, purchase or sell


                                      58
<PAGE>

exchange-traded futures contracts based on any index approved by Moody's or
Treasury Bonds and purchase, write or sell exchange-traded put options on such
futures contracts (collectively, "Moody's Hedging Transactions"), subject to
the following limitations:

          (i) the Corporation will not engage in any Moody's Hedging
     Transaction based on the Municipal Index (other than Closing
     Transactions) which would cause the Corporation at the time of such
     transaction to own or have sold (A) outstanding futures contracts based
     on the Municipal Index exceeding in number 10% of the average number of
     daily traded futures contracts based on the Municipal Index in the 30
     days preceding the time of effecting such transaction as reported by The
     Wall Street Journal or (B) outstanding futures contracts based on the
     Municipal Index having a Market Value exceeding 50% of the Market Value
     of all Municipal Bonds constituting Moody's Eligible Assets owned by the
     Corporation (other than Moody's Eligible Assets already subject to a
     Moody's Hedging Transaction);

          (ii) the Corporation will not engage in any Moody's Hedging
     Transaction based on Treasury Bonds (other than Closing Transactions)
     which would cause the Corporation at the time of such transaction to own
     or have sold (A) outstanding futures contracts based on Treasury Bonds
     having an aggregate Market Value exceeding 40% of the aggregate Market
     Value of Moody's Eligible Assets owned by the Corporation and rated Aa by
     Moody's (or, if not rated by Moody's but rated by S&P, rated AAA by S&P)
     or (B) outstanding futures contracts based on Treasury Bonds having an
     aggregate Market Value exceeding 80% of the aggregate Market Value of all
     Municipal Bonds constituting Moody's Eligible Assets owned by the
     Corporation (other than Moody's Eligible Assets already subject to a
     Moody's Hedging Transaction) and rated Baa or A by


                                      59
<PAGE>

     Moody's (or, if not rated by Moody's but rated by S&P, rated A or AA by
     S&P) (for purposes of the foregoing clauses (i) and (ii), the Corporation
     shall be deemed to own the number of futures contracts that underlie any
     outstanding options written by the Corporation);

          (iii) the Corporation will engage in Closing Transactions to close
     out any outstanding futures contract based on the Municipal Index if the
     amount of open interest in the Municipal Index as reported by The Wall
     Street Journal is less than 5,000;

          (iv) the Corporation will engage in a Closing Transaction to close
     out any outstanding futures contract by no later than the fifth Business
     Day of the month in which such contract expires and will engage in a
     Closing Transaction to close out any outstanding option on a futures
     contract by no later than the first Business Day of the month in which
     such option expires;

          (v) the Corporation will engage in Moody's Hedging Transactions only
     with respect to futures contracts or options thereon having the next
     settlement date or the settlement date immediately thereafter;

          (vi) the Corporation (A) will not engage in options and futures
     transactions for leveraging or speculative purposes, except that the
     Corporation may engage in an option or futures transaction so long as the
     combination of the Corporation'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 Corporation's investment objective
     and policies, in a security that is not an option or futures transaction,
     subject to the Adviser periodically demonstrating to Moody's that said
     economic results are achieved, and (B) will not write


                                      60
<PAGE>

     any call options or sell any futures contracts for the purpose of hedging
     the anticipated purchase of an asset prior to completion of such
     purchase;

          (vii) the Corporation will not enter into an option or futures
     transaction unless, after giving effect thereto, the Corporation would
     continue to have Moody's Eligible Assets with an aggregate Discounted
     Value equal to or greater than the AMPS Basic Maintenance Amount; and

          (viii) the Corporation will not engage in BMA swap transactions with
     respect to more than 20% of the Corporation's net assets; provided that
     the Corporation's use of futures will proportionately decrease as the
     Corporation's use of BMA swap transactions increases, and vice-versa.

     For purposes of determining whether the Corporation has Moody's Eligible
Assets with an aggregate Discounted Value that equals or exceeds the AMPS
Basic Maintenance Amount, the Discounted Value of Moody's Eligible Assets
which the Corporation is obligated to deliver or receive pursuant to an
outstanding futures contract or option shall be as follows: (i) assets subject
to call options written by the Corporation which are either exchange-traded
and "readily reversible" or which expire within 49 days after the date as of
which such valuation is made shall be valued at the lesser of (a) Discounted
Value and (b) the exercise price of the call option written by the
Corporation; (ii) assets subject to call options written by the Corporation
not meeting the requirements of clause (i) of this sentence shall have no
value; (iii) assets subject to put options written by the Corporation shall be
valued at the lesser of (A) the exercise price and (B) the Discounted Value of
the subject security; (iv) futures contracts shall be valued at the lesser of
(A) settlement price and (B) the Discounted Value of the subject security,
provided that, if a contract matures within 49 days after the date as of which
such valuation is made, where the


                                      61
<PAGE>

Corporation is the seller the contract may be valued at the settlement price
and where the Corporation is the buyer the contract may be valued at the
Discounted Value of the subject securities; and (v) where delivery may be made
to the Corporation with any security of a class of securities, the Corporation
shall assume that it will take delivery of the security with the lowest
Discounted Value.

     For purposes of determining whether the Corporation has Moody's Eligible
Assets with an aggregate Discounted Value that equals or exceeds the AMPS
Basic Maintenance Amount, the following amounts shall be subtracted from the
aggregate Discounted Value of the Moody's Eligible Assets held by the
Corporation: (i) 10% of the exercise price of a written call option; (ii) the
exercise price of any written put option; (iii) where the Corporation is the
seller under a futures contract, 10% of the settlement price of the futures
contract; (iv) where the Corporation is the purchaser under a futures
contract, the settlement price of assets purchased under such futures
contract; (v) the settlement price of the underlying futures contract if the
Corporation writes put options on a futures contract; and (vi) 105% of the
Market Value of the underlying futures contracts if the Corporation writes
call options on a futures contract and does not own the underlying contract.

     (c) For so long as any shares of AMPS are rated by Moody's, the
Corporation will not enter into any contract to purchase securities for a
fixed price at a future date beyond customary settlement time (other than such
contracts that constitute Moody's Hedging Transactions that are permitted
under paragraph 8(b) of these Articles Supplementary), except that the
Corporation may enter into such contracts to purchase newly-issued securities
on the date such securities are issued ("Forward Commitments"), subject to the
following limitations:



                                      62
<PAGE>

          (i) the Corporation will maintain in a segregated account with its
     custodian cash, cash equivalents or short-term, fixed-income securities
     rated P-1, MIG-1 or VMIG-1 by Moody's and maturing prior to the date of
     the Forward Commitment with a Market Value that equals or exceeds the
     amount of the Corporation's obligations under any Forward Commitments to
     which it is from time to time a party or long-term, fixed-income
     securities with a Discounted Value that equals or exceeds the amount of
     the Corporation's obligations under any Forward Commitment to which it is
     from time to time a party; and

          (ii) the Corporation will not enter into a Forward Commitment
     unless, after giving effect thereto, the Corporation would continue to
     have Moody's Eligible Assets with an aggregate Discounted Value equal to
     or greater than the AMPS Basic Maintenance Amount.

     (d) For purposes of determining whether the Corporation has Moody's
Eligible Assets with an aggregate Discounted Value that equals or exceeds the
AMPS Basic Maintenance Amount, the Discounted Value of all Forward Commitments
to which the Corporation is a party and of all securities deliverable to the
Corporation pursuant to such Forward Commitments shall be zero.

     (e) For so long as shares of AMPS are rated by S&P or Moody's, the
Corporation will not, unless it has received written confirmation from S&P
and/or Moody's, as the case may be, that such action would not impair the
ratings then assigned to shares of AMPS by S&P and/or Moody's, as the case may
be, (i) borrow money except for the purpose of clearing transactions in
portfolio securities (which borrowings shall under any circumstances be
limited to the lesser of $10 million and an amount equal to 5% of the Market
Value of the Corporation's assets at the


                                      63
<PAGE>

time of such borrowings and which borrowings shall be repaid within 60 days
and not be extended or renewed and shall not cause the aggregate Discounted
Value of Moody's Eligible Assets and S&P Eligible Assets to be less than the
AMPS Basic Maintenance Amount), (ii) engage in short sales of securities,
(iii) lend any securities, (iv) issue any class or series of stock ranking
prior to or on a parity with the AMPS with respect to the payment of dividends
or the distribution of assets upon dissolution, liquidation or winding up of
the Corporation, (v) reissue any AMPS previously purchased or redeemed by the
Corporation, (vi) merge or consolidate into or with any other corporation or
entity, (vii) change the Pricing Service or (viii) engage in reverse
repurchase agreements.

     (f) For as long as the AMPS are rated by S&P, the Corporation will not,
unless it has received written confirmation from S&P that such action would
not impair the rating then assigned to the shares of AMPS by S&P, engage in
interest rate swaps, caps and floors, except that the Corporation 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'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 Corporation 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&P
Eligible Assets, 90% of any positive mark-to-market valuation of the
Corporation's rights will be S&P Eligible Assets, 100% of any negative
mark-to-market valuation of the


                                      64
<PAGE>

Corporation's rights will be included in the calculation of the AMPS Basic
Maintenance Amount, and (vi) the Corporation must maintain liquid assets with
a value at least equal to the net amount of the excess, if any, of the
Corporation's obligations over its entitlement with respect to each swap. For
caps/floors, the Corporation must maintain liquid assets with a value at least
equal to the Corporation's obligations with respect to such caps or floors.

     (g) For so long as shares of AMPS are rated by S&P or Moody's, as the
case may be, the Corporation agrees to provide S&P and/or Moody's with the
following, unless the Corporation has received written confirmation from S&P
and/or Moody's, as the case may be, that the provision of such information is
no longer required and that the current rating then assigned to the shares of
AMPS by S&P and/or Moody's, as the case may be, would not be impaired: a
notification letter at least 30 days prior to any material change in the
Charter; a copy of the AMPS Basic Maintenance Report prepared by the
Corporation in accordance with these Articles Supplementary; and a notice upon
the occurrence of any of the following events: (i) any failure by the
Corporation to declare or pay any dividends on the AMPS or successfully
remarket the AMPS; (ii) any mandatory or optional redemption of the AMPS
effected by the Corporation; (iii) any assumption of control of the Board of
Directors of the Corporation by the holders of the AMPS; (iv) a general
unavailability of dealer quotes on the assets of the Corporation; (v) any
material auditor discrepancies on valuations; (vi) the occurrence of any
Special Dividend Period; (vii) any change in the Maximum Applicable Rate or
the Reference Rate; (viii) the acquisition by any person of beneficial
ownership of more than 5% of the Corporation's voting stock (inclusive of
Common Stock and Preferred Stock); (ix) the occurrence of any change in
Internal Revenue Service rules with respect to the payment of Additional
Dividends; (x) any change in the Pricing Service employed by the Corporation;
(xi) any change in the Adviser; (xii) any increase of


                                      65
<PAGE>

greater than 40% to the maximum marginal Federal income tax rate applicable to
individuals or corporations; and (xiii) the maximum marginal Federal income
tax rate applicable to individuals or corporations is increased to a rate in
excess of 50%.

     (h) For so long as shares of AMPS are rated by S&P or Moody's, the
Corporation shall provide S&P and/or Moody's with a copy of the Corporation's
annual audited financial statements as soon as practicable (not later than 60
days) after such annual audited financial statements have been made available
to the Corporation's stockholders.

     9. Notice. All notices or communications, unless otherwise specified in
the By-laws of the Corporation or these Articles Supplementary, shall be
sufficiently given if in writing and delivered in person or mailed by
first-class mail, postage prepaid. Notice shall be deemed given on the earlier
of the date received or the date seven days after which such notice is mailed.

     10. Auction Procedures.

     (a) Certain definitions. As used in this paragraph 10, the following
terms shall have the following meanings, unless the context otherwise
requires:

          (i) "AMPS" means the shares of AMPS being auctioned pursuant to this
     paragraph 10.

          (ii) "Auction Date" means the first Business Day preceding the first
     day of a Dividend Period.

          (iii) "Available AMPS" has the meaning specified in paragraph
     10(d)(i) below.

          (iv) "Bid" has the meaning specified in paragraph 10(b)(i) below.

          (v) "Bidder" has the meaning specified in paragraph 10(b)(i) below.

          (vi) "Hold Order" has the meaning specified in paragraph 10(b)(i)
     below.



                                      66
<PAGE>

          (vii) "Maximum Applicable Rate" 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
     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's and S&P
     (or if Moody's or S&P or both shall not make such rating available, the
     equivalent of either or both of such ratings by a Substitute Rating
     Agency or two Substitute Rating Agencies or, in the event that only one
     such rating shall be available, such rating) and (ii) whether the
     Corporation has provided notification to the Auction Agent prior to the
     Auction establishing the Applicable Rate for any dividend pursuant to
     paragraph 2(f) hereof that net capital gains or other taxable income will
     be included in such dividend on shares of AMPS as follows:

<TABLE>
<CAPTION>

                                     Applicable      Applicable       Applicable      Applicable
                                     Percentage of   Percentage of    Spread over     Spread over
                Credit Ratings       Reference       Reference        Reference       Reference
      -----------------------------  Rate - No       Rate -           Rate - No       Rate -
         Moody's           S&P       Notification    Notification     Notification    Notification
      -------------    ------------  -------------   -------------    ------------    ------------
<S>   <C>              <C>           <C>             <C>              <C>             <C>
          Aaa               AAA          110%            125%            1.10%           1.25%
       Aa3 to Aa1       AA- to AA+       125%            150%            1.25%           1.50%
        A3 to A1         A- to A+        150%            200%            1.50%           2.00%
      Baa3 to Baa1     BBB- to BBB+      175%            250%            1.75%           2.50%
       Below Baa3       Below BBB-       200%            300%            2.00%           3.00%

</TABLE>

     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 Corporation after consultation with the
Broker-Dealers, provided that immediately following any such increase the
Corporation would be in compliance with the AMPS Basic Maintenance Amount.
Subject to the provisions of paragraph 12, the Corporation shall take all
reasonable


                                      67
<PAGE>

action necessary to enable S&P and Moody's to provide a rating for the AMPS.
If either S&P or Moody's shall not make such a rating available, or neither
S&P nor Moody's shall make such a rating available, subject to the provisions
of paragraph 12, Merrill Lynch, Pierce, Fenner & Smith Incorporated or its
affiliates and successors, after obtaining the Corporation'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.

          (viii) "Order" has the meaning specified in paragraph 10(b)(i)
     below.

          (ix) "Sell Order" has the meaning specified in paragraph 10(b)(i)
     below.

          (x) "Submission Deadline" means 1:00 P.M., 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.

          (xi) "Submitted Bid" has the meaning specified in paragraph 10(d)(i)
     below.

          (xii) "Submitted Hold Order" has the meaning specified in paragraph
     10(d)(i) below.

          (xiii) "Submitted Order" has the meaning specified in paragraph
     10(d)(i) below.

          (xiv) "Submitted Sell Order" has the meaning specified in paragraph
     10(d)(i) below.

          (xv) "Sufficient Clearing Bids" has the meaning specified in
     paragraph 10(d)(i) below.

          (xvi) "Winning Bid Rate" has the meaning specified in paragraph
     10(d)(i) below.



                                      68
<PAGE>

     (b) Orders by Beneficial Owners, Potential Beneficial Owners, Existing
Holders and Potential Holders. (i) Unless otherwise permitted by the
Corporation, Beneficial Owners and Potential Beneficial Owners may only
participate in Auctions through their Broker-Dealers. Broker-Dealers will
submit the Orders of their respective customers who are Beneficial Owners and
Potential Beneficial Owners to the Auction Agent, designating themselves as
Existing Holders in respect of shares subject to Orders submitted or deemed
submitted to them by Beneficial Owners and as Potential Holders in respect of
shares subject to Orders submitted to them by Potential Beneficial Owners. A
Broker-Dealer may also hold shares of AMPS in its own account as a Beneficial
Owner. A Broker-Dealer may thus submit Orders to the Auction Agent as a
Beneficial Owner or a Potential Beneficial Owner and therefore participate in
an Auction as an Existing Holder or Potential Holder on behalf of both itself
and its customers. On or prior to the Submission Deadline on each Auction
Date:

               (A) each Beneficial Owner may submit to its Broker-Dealer
          information as to:

                    (1) the number of Outstanding shares, if any, of AMPS held
               by such Beneficial Owner which such Beneficial Owner desires to
               continue to hold without regard to the Applicable Rate for the
               next succeeding Dividend Period;

                    (2) the number of Outstanding shares, if any, of AMPS held
               by such Beneficial Owner which such Beneficial Owner desires to
               continue to hold, provided that the Applicable Rate for the
               next succeeding Dividend Period shall not be less than the rate
               per annum specified by such Beneficial Owner; and/or



                                      69
<PAGE>

                    (3) the number of Outstanding shares, if any, of AMPS held
               by such Beneficial Owner which such Beneficial Owner offers to
               sell without regard to the Applicable Rate for the next
               succeeding Dividend Period; and

               (B) each Broker-Dealer, using a list of Potential Beneficial
          Owners that shall be maintained in good faith for the purpose of
          conducting a competitive Auction, shall contact Potential Beneficial
          Owners, including Persons that are not Beneficial Owners, on such
          list to determine the number of Outstanding shares, if any, of AMPS
          which each such Potential Beneficial Owner offers to purchase,
          provided that the Applicable Rate for the next succeeding Dividend
          Period shall not be less than the rate per annum specified by such
          Potential Beneficial Owner.

     For the purposes hereof, the communication by a Beneficial Owner or
Potential Beneficial Owner to a Broker-Dealer, or the communication by a
Broker-Dealer acting for its own account to the Auction Agent, of information
referred to in clause (A) or (B) of this paragraph 10(b)(i) is hereinafter
referred to as an "Order" and each Beneficial Owner and each Potential
Beneficial Owner placing an Order, including a Broker-Dealer acting in such
capacity for its own account, is hereinafter referred to as a "Bidder"; an
Order containing the information referred to in clause (A)(1) of this
paragraph 10(b)(i) is hereinafter referred to as a "Hold Order"; an Order
containing the information referred to in clause (A)(2) or (B) of this
paragraph 10(b)(i) is hereinafter referred to as a "Bid"; and an Order
containing the information referred to in clause (A)(3) of this paragraph
10(b)(i) is hereinafter referred to as a "Sell Order". Inasmuch as a
Broker-Dealer participates in an Auction as an Existing Holder or a Potential
Holder only to represent the interests of a Beneficial Owner or Potential
Beneficial Owner, whether it be its


                                      70
<PAGE>

customers or itself, all discussion herein relating to the consequences of an
Auction for Existing Holders and Potential Holders also applies to the
underlying beneficial ownership interests represented.

          (ii) A Bid by an Existing Holder shall constitute an irrevocable
     offer to sell:

                    (1) the number of Outstanding shares of AMPS specified in
               such Bid if the Applicable Rate determined on such Auction Date
               shall be less than the rate per annum specified in such Bid; or

                    (2) such number or a lesser number of Outstanding shares
               of AMPS to be determined as set forth in paragraph 10(e)(i)(D)
               if the Applicable Rate determined on such Auction Date shall be
               equal to the rate per annum specified therein; or

                    (3) a lesser number of Outstanding shares of AMPS to be
               determined as set forth in paragraph 10(e)(ii)(C) if such
               specified rate per annum shall be higher than the Maximum
               Applicable Rate and Sufficient Clearing Bids do not exist.

               (B) A Sell Order by an Existing Holder shall constitute an
          irrevocable offer to sell:

                    (1) the number of Outstanding shares of AMPS specified in
               such Sell Order; or

                    (2) such number or a lesser number of Outstanding shares
               of AMPS to be determined as set forth in paragraph 10(e)(ii)(C)
               if Sufficient Clearing Bids do not exist.



                                      71
<PAGE>

               (C) A Bid by a Potential Holder shall constitute an irrevocable
          offer to purchase:

                    (1) the number of Outstanding shares of AMPS specified in
               such Bid if the Applicable Rate determined on such Auction Date
               shall be higher than the rate per annum specified in such Bid;
               or

                    (2) such number or a lesser number of Outstanding shares
               of AMPS to be determined as set forth in paragraph 10(e)(i)(E)
               if the Applicable Rate determined on such Auction Date shall be
               equal to the rate per annum specified therein.

     (c) Submission of Orders by Broker-Dealers to Auction Agent.

          (i) Each Broker-Dealer shall submit in writing or through 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 Corporation) as an
     Existing Holder in respect of shares subject to Orders submitted or
     deemed submitted to it by Beneficial Owners and as a Potential Holder in
     respect of shares subject to Orders submitted to it by Potential
     Beneficial Owners, and specifying with respect to each Order:

               (A) the name of the Bidder placing such Order (which shall be
          the Broker-Dealer unless otherwise permitted by the Corporation);

               (B) the aggregate number of Outstanding shares of AMPS that are
          the subject of such Order;

               (C) to the extent that such Bidder is an Existing Holder:



                                      72
<PAGE>

                    (1) the number of Outstanding shares, if any, of AMPS
               subject to any Hold Order placed by such Existing Holder;

                    (2) the number of Outstanding shares, if any, of AMPS
               subject to any Bid placed by such Existing Holder and the rate
               per annum specified in such Bid; and

                    (3) the number of Outstanding shares, if any, of AMPS
               subject to any Sell Order placed by such Existing Holder; and

               (D) to the extent such Bidder is a Potential Holder, the rate
          per annum specified in such Potential Holder's Bid.

          (ii) If any rate per annum specified in any Bid contains more than
     three figures to the right of the decimal point, the Auction Agent shall
     round such rate up to the next highest one-thousandth (.001) of 1%.

          (iii) If an Order or Orders covering all of the Outstanding shares
     of AMPS held by an Existing Holder are not submitted to the Auction Agent
     prior to the Submission Deadline, the Auction Agent shall deem a Hold
     Order (in the case of an Auction relating to a Dividend Period which is
     not a Special Dividend Period of 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.

          (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



                                      73
<PAGE>

     Holder are submitted to the Auction Agent, such Order shall be considered
     valid as follows and in the following order of priority:

               (A) any Hold Order submitted on behalf of such Existing Holder
          shall be considered valid up to and including the number of
          Outstanding shares of AMPS held by such Existing Holder; provided
          that if more than one Hold Order is submitted on behalf of such
          Existing Holder and the number of shares of AMPS subject to such
          Hold Orders exceeds the number of Outstanding shares of AMPS held by
          such Existing Holder, the number of shares of AMPS subject to each
          of such Hold Orders shall be reduced pro rata so that such Hold
          Orders, in the aggregate, will cover exactly the number of
          Outstanding shares of AMPS held by such Existing Holder;

               (B) any Bids submitted on behalf of such Existing Holder shall
          be considered valid, in the ascending order of their respective
          rates per annum if more than one Bid is submitted on behalf of such
          Existing Holder, up to and including the excess of the number of
          Outstanding shares of AMPS held by such Existing Holder over the
          number of shares of AMPS subject to any Hold Order referred to in
          paragraph 10(c)(iv)(A) above (and if more than one Bid submitted on
          behalf of such Existing Holder specifies the same rate per annum and
          together they cover more than the remaining number of shares that
          can be the subject of valid Bids after application of paragraph
          10(c)(iv)(A) above and of the foregoing portion of this paragraph
          10(c)(iv)(B) to any Bid or Bids specifying a lower rate or rates per
          annum, the number of shares subject to each of such Bids shall be
          reduced pro rata so that such Bids, in the aggregate, cover exactly
          such remaining


                                      74
<PAGE>

          number of shares); and the number of shares, if any, subject to Bids
          not valid under this paragraph 10(c)(iv)(B) shall be treated as the
          subject of a Bid by a Potential Holder; and

               (C) any Sell Order shall be considered valid up to and
          including the excess of the number of Outstanding shares of AMPS
          held by such Existing Holder over the number of shares of AMPS
          subject to Hold Orders referred to in paragraph 10(c)(iv)(A) and
          Bids referred to in paragraph 10(c)(iv)(B); provided that if more
          than one Sell Order is submitted on behalf of any Existing Holder
          and the number of shares of AMPS subject to such Sell Orders is
          greater than such excess, the number of shares of AMPS subject to
          each of such Sell Orders shall be reduced pro rata so that such Sell
          Orders, in the aggregate, cover exactly the number of shares of AMPS
          equal to such excess.

          (v) If more than one Bid is submitted on behalf of any Potential
     Holder, each Bid submitted shall be a separate Bid with the rate per
     annum and number of shares of AMPS therein specified.

          (vi) Any Order submitted by a Beneficial Owner as a Potential
     Beneficial Owner to its Broker-Dealer, or by a Broker-Dealer to the
     Auction Agent, prior to the Submission Deadline on any Auction Date shall
     be irrevocable.

     (d) Determination of Sufficient Clearing Bids, Winning Bid Rate and
Applicable Rate. (i) Not earlier than the Submission Deadline on each Auction
Date, the Auction Agent shall assemble all Orders submitted or deemed
submitted to it by the Broker-Dealers (each such Order as submitted or deemed
submitted by a Broker-Dealer being hereinafter referred to


                                      75
<PAGE>


individually as a "Submitted Hold Order", a "Submitted Bid" or a "Submitted
Sell Order", as the case may be, or as a "Submitted Order") and shall
determine:

               (A) the excess of the total number of Outstanding shares of
          AMPS over the number of Outstanding shares of AMPS that are the
          subject of Submitted Hold Orders (such excess being hereinafter
          referred to as the "Available AMPS");

               (B) from the Submitted Orders whether the number of Outstanding
          shares of AMPS that are the subject of Submitted Bids by Potential
          Holders specifying one or more rates per annum equal to or lower
          than the Maximum Applicable Rate exceeds or is equal to the sum of:

                    (1) the number of Outstanding shares of AMPS that are the
               subject of Submitted Bids by Existing Holders specifying one or
               more rates per annum higher than the Maximum Applicable Rate,
               and

                    (2) the number of Outstanding shares of AMPS that are
               subject to Submitted Sell Orders (if such excess or such
               equality exists (other than because the number of Outstanding
               shares of AMPS in clause (1) above and this clause (2) are each
               zero because all of the Outstanding shares of AMPS are the
               subject of Submitted Hold Orders), such Submitted Bids by
               Potential Holders being hereinafter referred to collectively as
               "Sufficient Clearing Bids"); and

               (C) if Sufficient Clearing Bids exist, the lowest rate per
          annum specified in the Submitted Bids (the "Winning Bid Rate") that
          if:

                    (1) each Submitted Bid from Existing Holders specifying
               the Winning Bid Rate and all other Submitted Bids from Existing
               Holders



                                      76
<PAGE>


               specifying lower rates per annum were rejected, thus entitling
               such Existing Holders to continue to hold the shares of AMPS
               that are the subject of such Submitted Bids, and

                    (2) each Submitted Bid from Potential Holders specifying
               the Winning Bid Rate and all other Submitted Bids from
               Potential Holders specifying lower rates per annum were
               accepted, thus entitling the Potential Holders to purchase the
               shares of AMPS that are the subject of such Submitted Bids,

     would result in the number of shares subject to all Submitted Bids
specifying the Winning Bid Rate or a lower rate per annum being at least equal
to the Available AMPS.

          (ii) Promptly after the Auction Agent has made the determinations
     pursuant to paragraph 10(d)(i), the Auction Agent shall advise the
     Corporation of the Maximum Applicable Rate and, based on such
     determinations, the Applicable Rate for the next succeeding Dividend
     Period as follows:

               (A) if Sufficient Clearing Bids exist, that the Applicable Rate
          for the next succeeding Dividend Period shall be equal to the
          Winning Bid Rate;

               (B) if Sufficient Clearing Bids do not exist (other than
          because all of the Outstanding shares of AMPS are the subject of
          Submitted Hold Orders), that the Applicable Rate for the next
          succeeding Dividend Period shall be equal to the Maximum Applicable
          Rate; or

               (C) if all of the Outstanding shares of AMPS are the subject of
          Submitted Hold Orders, the Dividend Period next succeeding the
          Auction shall automatically be the same length as the immediately
          preceding Dividend Period


                                      77
<PAGE>


          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 Corporation has provided notification to the Auction Agent prior
          to the Auction establishing the Applicable Rate for any dividend
          pursuant to paragraph 2(f) hereof that net capital gains or other
          taxable income will be included in such dividend on shares of AMPS)
          on the date of the Auction.

     (e) Acceptance and Rejection of Submitted Bids and Submitted Sell Orders
and Allocation of Shares.

     Based on the determinations made pursuant to paragraph 10(d)(i), the
Submitted Bids and Submitted Sell Orders shall be accepted or rejected and the
Auction Agent shall take such other action as set forth below:

          (i) If Sufficient Clearing Bids have been made, subject to the
     provisions of paragraph 10(e)(iii) and paragraph 10(e)(iv), Submitted
     Bids and Submitted Sell Orders shall be accepted or rejected in the
     following order of priority and all other Submitted Bids shall be
     rejected:

               (A) the Submitted Sell Orders of Existing Holders shall be
          accepted and the Submitted Bid of each of the Existing Holders
          specifying any rate per annum that is higher than the Winning Bid
          Rate shall be accepted, thus requiring each such Existing Holder to
          sell the Outstanding shares of AMPS that are the subject of such
          Submitted Sell Order or Submitted Bid;

               (B) the Submitted Bid of each of the Existing Holders
          specifying any rate per annum that is lower than the Winning Bid
          Rate shall be rejected, thus



                                      78
<PAGE>


          entitling each such Existing Holder to continue to hold the
          Outstanding shares of AMPS that are the subject of such Submitted
          Bid;

               (C) the Submitted Bid of each of the Potential Holders
          specifying any rate per annum that is lower than the Winning Bid
          Rate shall be accepted;

               (D) the Submitted Bid of each of the Existing Holders
          specifying a rate per annum that is equal to the Winning Bid Rate
          shall be rejected, thus entitling each such Existing Holder to
          continue to hold the Outstanding shares of AMPS that are the subject
          of such Submitted Bid, unless the number of Outstanding shares of
          AMPS subject to all such Submitted Bids shall be greater than the
          number of Outstanding shares of AMPS ("Remaining Shares") equal to
          the excess of the Available AMPS over the number of Outstanding
          shares of AMPS subject to Submitted Bids described in paragraph
          10(e)(i)(B) and paragraph 10(e)(i)(C), in which event the Submitted
          Bids of each such Existing Holder shall be accepted, and each such
          Existing Holder shall be required to sell Outstanding shares of
          AMPS, but only in an amount equal to the difference between (1) the
          number of Outstanding shares of AMPS then held by such Existing
          Holder subject to such Submitted Bid and (2) the number of shares of
          AMPS obtained by multiplying (x) the number of Remaining Shares by
          (y) a fraction the numerator of which shall be the number of
          Outstanding shares of AMPS held by such Existing Holder subject to
          such Submitted Bid and the denominator of which shall be the sum of
          the number of Outstanding shares of AMPS subject to such Submitted
          Bids made by all such Existing Holders that specified a rate per
          annum equal to the Winning Bid Rate; and



                                      79
<PAGE>


               (E) the Submitted Bid of each of the Potential Holders
          specifying a rate per annum that is equal to the Winning Bid Rate
          shall be accepted but only in an amount equal to the number of
          Outstanding shares of AMPS obtained by multiplying (x) the
          difference between the Available AMPS and the number of Outstanding
          shares of AMPS subject to Submitted Bids described in paragraph
          10(e)(i)(B), paragraph 10(e)(i)(C) and paragraph 10(e)(i)(D) by (y)
          a fraction the numerator of which shall be the number of Outstanding
          shares of AMPS subject to such Submitted Bid and the denominator of
          which shall be the sum of the number of Outstanding shares of AMPS
          subject to such Submitted Bids made by all such Potential Holders
          that specified rates per annum equal to the Winning Bid Rate.

          (ii) If Sufficient Clearing Bids have not been made (other than
     because all of the Outstanding shares of AMPS are subject to Submitted
     Hold Orders), subject to the provisions of paragraph 10(e)(iii),
     Submitted Orders shall be accepted or rejected as follows in the
     following order of priority and all other Submitted Bids shall be
     rejected:

               (A) the Submitted Bid of each Existing Holder specifying any
          rate per annum that is equal to or lower than the Maximum Applicable
          Rate shall be rejected, thus entitling such Existing Holder to
          continue to hold the Outstanding shares of AMPS that are the subject
          of such Submitted Bid;

               (B) the Submitted Bid of each Potential Holder specifying any
          rate per annum that is equal to or lower than the Maximum Applicable
          Rate shall be accepted, thus requiring such Potential Holder to
          purchase the Outstanding shares of AMPS that are the subject of such
          Submitted Bid; and



                                      80
<PAGE>


               (C) the Submitted Bids of each Existing Holder specifying any
          rate per annum that is higher than the Maximum Applicable Rate shall
          be accepted and the Submitted Sell Orders of each Existing Holder
          shall be accepted, in both cases only in an amount equal to the
          difference between (1) the number of Outstanding shares of AMPS then
          held by such Existing Holder subject to such Submitted Bid or
          Submitted Sell Order and (2) the number of shares of AMPS obtained
          by multiplying (x) the difference between the Available AMPS and the
          aggregate number of Outstanding shares of AMPS subject to Submitted
          Bids described in paragraph 10(e)(ii)(A) and paragraph 10(e)(ii)(B)
          by (y) a fraction the numerator of which shall be the number of
          Outstanding shares of AMPS held by such Existing Holder subject to
          such Submitted Bid or Submitted Sell Order and the denominator of
          which shall be the number of Outstanding shares of AMPS subject to
          all such Submitted Bids and Submitted Sell Orders.

          (iii) If, as a result of the procedures described in paragraph
     10(e)(i) or paragraph 10(e)(ii), any Existing Holder would be entitled or
     required to sell, or any Potential Holder would be entitled or required
     to purchase, a fraction of a share of AMPS on any Auction Date, the
     Auction Agent shall, in such manner as in its sole discretion it shall
     determine, round up or down the number of shares of AMPS to be purchased
     or sold by any Existing Holder or Potential Holder on such Auction Date
     so that each Outstanding share of AMPS purchased or sold by each Existing
     Holder or Potential Holder on such Auction Date shall be a whole share of
     AMPS.

          (iv) If, as a result of the procedures described in paragraph
     10(e)(i), any Potential Holder would be entitled or required to purchase
     less than a whole share of


                                      81
<PAGE>

     AMPS on any Auction Date, the Auction Agent shall, in such manner as in
     its sole discretion it shall determine, allocate shares of AMPS for
     purchase among Potential Holders so that only whole shares of AMPS are
     purchased on such Auction Date by any Potential Holder, even if such
     allocation results in one or more of such Potential Holders not
     purchasing any shares of AMPS on such Auction Date.

          (v) Based on the results of each Auction, the Auction Agent shall
     determine, with respect to each Broker-Dealer that submitted Bids or Sell
     Orders on behalf of Existing Holders or Potential Holders, the aggregate
     number of Outstanding shares of AMPS to be purchased and the aggregate
     number of the Outstanding shares of AMPS to be sold by such Potential
     Holders and Existing Holders and, to the extent that such aggregate
     number of Outstanding shares to be purchased and such aggregate number of
     Outstanding shares to be sold differ, the Auction Agent shall determine
     to which other Broker-Dealer or Broker-Dealers acting for one or more
     purchasers such Broker-Dealer shall deliver, or from which other
     Broker-Dealer or Broker-Dealers acting for one or more sellers such
     Broker-Dealer shall receive, as the case may be, Outstanding shares of
     AMPS.

     (f) Miscellaneous. The Corporation may interpret the provisions of this
paragraph 10 to resolve any inconsistency or ambiguity, remedy any formal
defect or make any other change or modification that does not substantially
adversely affect the rights of Beneficial Owners of AMPS. A Beneficial Owner
or an Existing Holder (A) may sell, transfer or otherwise dispose of shares of
AMPS only pursuant to a Bid or Sell Order in accordance with the procedures
described in this paragraph 10 or to or through a Broker-Dealer, provided that
in the case of all transfers other than pursuant to Auctions such Beneficial
Owner or Existing Holder, its Broker-


                                      82
<PAGE>

Dealer, if applicable, or its Agent Member advises the Auction Agent of such
transfer and (B) except as otherwise required by law, shall have the ownership
of the shares of AMPS held by it maintained in book entry form by the
Securities Depository in the account of its Agent Member, which in turn will
maintain records of such Beneficial Owner's beneficial ownership. Neither the
Corporation nor any Affiliate, other than an Affiliate that is a
Broker-Dealer, shall submit an Order in any Auction. Any Beneficial Owner that
is an Affiliate shall not sell, transfer or otherwise dispose of shares of
AMPS to any Person other than the Corporation. All of the Outstanding shares
of AMPS shall be represented by a single certificate registered in the name of
the nominee of the Securities Depository unless otherwise required by law or
unless there is no Securities Depository. If there is no Securities
Depository, at the Corporation's option and upon its receipt of such documents
as it deems appropriate, any shares of AMPS may be registered in the Stock
Register in the name of the Beneficial Owner thereof and such Beneficial Owner
thereupon will be entitled to receive certificates therefor and required to
deliver certificates therefor upon transfer or exchange thereof.

     11. Securities Depository; Stock Certificates.

     (a) If there is a Securities Depository, one certificate for all of the
shares of AMPS shall be issued to the Securities Depository and registered in
the name of the Securities Depository or its nominee. Additional certificates
may be issued as necessary to represent shares of AMPS. All such certificates
shall bear a legend to the effect that such certificates are issued subject to
the provisions restricting the transfer of shares of AMPS contained in these
Articles Supplementary. Unless the Corporation shall have elected, during a
Non-Payment Period, to waive this requirement, the Corporation will also issue
stop-transfer instructions to the Auction Agent for the shares of AMPS. Except
as provided in paragraph (b) below, the Securities


                                      83
<PAGE>

Depository or its nominee will be the Holder, and no Beneficial Owner shall
receive certificates representing its ownership interest in such shares.

     (b) If the Applicable Rate applicable to all shares of AMPS shall be the
Non-Payment Period Rate or there is no Securities Depository, the Corporation
may at its option issue one or more new certificates with respect to such
shares (without the legend referred to in paragraph 11(a)) registered in the
names of the Beneficial Owners or their nominees and rescind the stop-transfer
instructions referred to in paragraph 11(a) with respect to such shares.

     12. Termination of Rating Agency Provisions.

     (a) The Board of Directors may determine that it is not in the best
interests of the Corporation to continue to comply with the provisions of
paragraphs 7 and 8 hereof with respect to Moody's, and any other provisions
hereof with respect to obtaining and maintaining a rating on the AMPS from
Moody's (together, the "Moody's Provisions"), and paragraphs 7 and 8 hereof
with respect to S&P, and any other provisions hereof with respect to obtaining
and maintaining a rating on the AMPS from S&P (together, the "S&P
Provisions"), in which case the Corporation will no longer be required to
comply with any of the Moody's Provisions or the S&P Provisions, as the case
may be, provided that (i) the Corporation has given the Auction Agent, the
Broker-Dealers, Moody's or S&P and Holders of the AMPS at least 45 calendar
days written notice of such termination of compliance, (ii) the Corporation is
in compliance with the Moody's Provisions and the S&P Provisions, as the case
may be, at the time the notice required in clause (i) hereof is given and at
the time of the termination of compliance with the Moody's Provisions or the
S&P Provisions, and (iii) the AMPS continue to be rated by at least one NRSRO
at the time of the termination of compliance with the Moody's Provisions or
the S&P Provisions, as the case may be.



                                      84
<PAGE>

     (b) On the date that the notice is given in paragraph 12(a) above and on
the date that compliance with the Moody's Provisions and/or the S&P
Provisions, as the case may be, is terminated, the Corporation shall provide
the Auction Agent and Moody's or S&P, as applicable, with an officers'
certificate as to the compliance with the provisions of paragraph 12(a)
hereof, and the Moody's Provisions and/or the S&P Provisions, as applicable,
on such later date and thereafter shall have no force or effect.



                                      85
<PAGE>


     IN WITNESS WHEREOF, MUNIVEST FUND II, INC. has caused these Articles
Supplementary to be signed in its name and on its behalf by its Vice
President, and attested by its Secretary, on the     day of              , 2005.

                                    MUNIVEST FUND II, INC.



                                    By: ________________________________
                                       Name:
                                       Title:

Attest:



_________________________________
Name:
Title:   Secretary


     THE UNDERSIGNED, Vice President of MUNIVEST FUND II, INC. (the
"Corporation"), who executed on behalf of the Corporation the foregoing
Articles Supplementary, of which this certificate is made a part, hereby
acknowledges, in the name and on behalf of the Corporation, the foregoing
Articles Supplementary to be the corporate act of the Corporation and, as to
all matters and facts required to be verified under oath, further certifies
that, to the best of his knowledge, information and belief, these matters and
facts contained herein are true in all material respects and that this
statement is made under the penalties for perjury.





                                    By: ________________________________
                                        Name:
                                        Title:



                                      86

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2B
<SEQUENCE>8
<FILENAME>efc4-1994_5621558ex992b.txt
<TEXT>
                                                                     Exhibit (b)


                                    BY-LAWS

                                      OF

                            MUNIVEST FUND II, INC.


                                   ARTICLE I
                                    Offices
                                    -------

      Section 1. Principal Office. The principal office of the Corporation
shall be in the City of Baltimore, State of Maryland.

      Section 2. Principal Executive Office. The principal executive office of
the Corporation shall be at 800 Scudders Mill Road, Plainsboro, New Jersey
08536.

      Section 3. Other Offices. The Corporation may have such other offices in
such places as the Board of Directors may from time to time determine.

                                  ARTICLE II
                           Meetings of Stockholders
                          -------------------------

      Section 1. Annual Meeting. The annual meeting of the stockholders of the
Corporation for the election of directors and for the transaction of such
other business as may properly be brought before the meeting shall be held on
such day in May of each year as shall be designated annually by the Board of
Directors.

      Section 2. Special Meetings. Special meetings of the stockholders,
unless otherwise provided by law or by the Charter, may be called for any
purpose by a majority of the Board of Directors, the President, or on the
written request of the holders of the outstanding shares of capital stock of
the Corporation entitled to vote at such meeting to the extent permitted by
Maryland law.


<PAGE>

      Section 3. Place of Meetings. The annual meeting and any special meeting
of the stockholders shall be held at such place within the United States as
the Board of Directors may from time to time determine.

      Section 4. Notice of Meetings; Waiver of Notice. Notice of the place,
date and time of the holding of each annual and special meeting of the
stockholders and the purpose or purposes of each special meeting shall be
given personally or by mail, not less than ten nor more than ninety days
before the date of such meeting, to each stockholder entitled to vote at such
meeting and to each other stockholder entitled to notice of the meeting.
Notice by mail shall be deemed to be given when deposited in the United States
mail addressed to the stockholder at his address as it appears on the records
of the Corporation, with postage thereon prepaid.

      Notice of any meeting of stockholders shall be deemed waived by any
stockholder who shall attend such meeting in person or by proxy, or who shall,
either before or after the meeting, submit a signed waiver of notice which is
filed with the records of the meeting. When a meeting is adjourned to another
time and place, unless the Board of Directors, after the adjournment, shall
fix a new record date for an adjourned meeting, or the adjournment is for more
than one hundred and twenty days after the original record date, notice of
such adjourned meeting need not be given if the time and place to which the
meeting shall be adjourned were announced at the meeting at which the
adjournment is taken.

      Section 5. Quorum. At all meetings of the stockholders, the holders of a
majority of the shares of stock of the Corporation entitled to vote at the
meeting, present in person or by proxy, shall constitute a quorum for the
transaction of any business, except as otherwise provided by statute or by the
Charter. In the absence of a quorum no business may be transacted, except that
the holders of a majority of the shares of stock present in person or by proxy
and entitled to


                                      2
<PAGE>

vote may adjourn the meeting from time to time, without notice other than
announcement thereat except as otherwise required by these By-Laws, until the
holders of the requisite amount of shares of stock shall be so present. At any
such adjourned meeting at which a quorum may be present any business may be
transacted which might have been transacted at the meeting as originally
called. The absence from any meeting, in person or by proxy, of holders of the
number of shares of stock of the Corporation in excess of a majority thereof
which may be required by the laws of the State of Maryland, the Investment
Company Act of 1940, as amended, or other applicable statute, the Charter, or
these By-Laws, for action upon any given matter shall not prevent action at
such meeting upon any other matter or matters which may properly come before
the meeting, if there shall be present thereat, in person or by proxy, holders
of the number of shares of stock of the Corporation required for action in
respect of such other matter or matters.

      Section 6. Organization. At each meeting of the stockholders, the
Chairman of the Board (if one has been designated by the Board), or in his
absence or inability to act, the President, or in the absence or inability to
act of the Chairman of the Board and the President, a Vice President, shall
act as chairman of the meeting. The Secretary, or in his absence or inability
to act, any person appointed by the chairman of the meeting, shall act as
secretary of the meeting and keep the minutes thereof.

      Section 7. Order of Business. The order of business at all meetings of
the stockholders shall be as determined by the chairman of the meeting.

      Section 8. Voting. Except as otherwise provided by statute or the
Charter, each holder of record of shares of stock of the Corporation having
voting power shall be entitled at each meeting of the stockholders to one vote
for every share of such stock standing in his name


                                      3
<PAGE>

on the record of stockholders of the Corporation as of the record date
determined pursuant to Section 9 of this Article or if such record date shall
not have been so fixed, then at the later of (i) the close of business on the
day on which notice of the meeting is mailed or (ii) the thirtieth day before
the meeting.

      Each stockholder entitled to vote at any meeting of stockholders may
authorize another person or persons to act for him by a proxy signed by such
stockholder or his attorney-in-fact. No proxy shall be valid after the
expiration of eleven months from the date thereof, unless otherwise provided
in the proxy. Every proxy shall be revocable at the pleasure of the
stockholder executing it, except in those cases where such proxy states that
it is irrevocable and where an irrevocable proxy is permitted by law. Except
as otherwise provided by a statute, the Charter or these By-Laws, any
corporate action to be taken by vote of the stockholders shall be authorized
by a majority of the total votes cast at a meeting of stockholders by the
holders of shares present in person or represented by proxy and entitled to
vote on such action.

      If a vote shall be taken on any question other than the election of
directors, which shall be written ballot, then unless required by statute or
these By-Laws, or determined by the chairman of the meeting to be advisable,
any such vote need not be by ballot. On a vote by ballot, each ballot shall be
signed by the stockholder voting, or by his proxy, if there be such proxy, and
shall state the number of shares voted.

      Section 9. Fixing of Record Date. The Board of Directors may set a
record date for the purpose of determining stockholders entitled to vote at
any meeting of the stockholders. The record date, which may not be prior to
the close of business on the day the record date is fixed, shall be not more
than ninety nor less than ten days before the date of the meeting of the


                                      4
<PAGE>

stockholders. All persons who were holders of record of shares at such time,
and not others, shall be entitled to vote at such meeting and any adjournment
thereof.

      Section 10. Inspectors. The Board may, in advance of any meeting of
stockholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If the inspectors shall not be so appointed or if any of
them shall fail to appear or act, the chairman of the meeting may, and on the
request of any stockholder entitled to vote thereat shall, appoint inspectors.
Each inspector, before entering upon the discharge of his duties, shall take
and sign an oath to execute faithfully the duties of inspector at such meeting
with strict impartiality and according to the best of his ability. The
inspectors shall determine the number of shares outstanding and the voting
powers of each, the number of shares represented at the meeting, the existence
of a quorum, the validity and effect of proxies, and shall receive votes,
ballots or consents, hear and determine all challenges and questions arising
in connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all stockholders. On request of the chairman
of the meeting or any stockholder entitled to vote thereat, the inspectors
shall make a report in writing of any challenge, request or matter determined
by them and shall execute a certificate of any fact found by them. No director
or candidate for the office of director shall act as inspector of an election
of directors. Inspectors need not be stockholders.

      Section 11. Consent of Stockholders in Lieu of Meetings. Except as
otherwise provided by statute or the Charter, any action required to be taken
at any annual or special meeting of stockholders, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if the following
are filed with the records of stockholders meetings: (i) a unanimous written


                                      5
<PAGE>

consent which sets forth the action and is signed by each stockholder entitled
to vote on the matter and (ii) a written waiver of any right to dissent signed
by each stockholder entitled to notice of the meeting but not entitled to vote
thereat.

                                 ARTICLE III
                              Board of Directors
                              ------------------

      Section 1. General Powers. Except as otherwise provided in the Charter,
the business and affairs of the Corporation shall be managed under the
direction of the Board of Directors. All powers of the Corporation may be
exercised by or under authority of the Board of Directors except as conferred
on or reserved to the stockholders by law or by the Charter or these By-Laws.

      Section 2. Number of Directors. The number of directors shall be fixed
from time to time by resolution of the Board of Directors adopted by a
majority of the Directors then in office; provided, however, that the number
of directors shall in no event be less than three nor more than fifteen. Any
vacancy created by an increase in Directors may be filled in accordance with
Section 6 of this Article III. No reduction in the number of directors shall
have the effect of removing any director from office prior to the expiration
of his term unless such director is specifically removed pursuant to Section 5
of this Article III at the time of such decrease. Directors need not be
stockholders. As long as any preferred stock of the Corporation is
outstanding, the number of Directors shall be not less than five.

      Section 3. Election and Term of Directors. Directors shall be elected
annually, by written ballot at the annual meeting of stockholders, or a
special meeting held for that purpose. The term of office of each director
shall be from the time of his election and qualification until the annual
election of directors next succeeding his election and until his successor
shall have been elected and shall have qualified, or until his death, or until
he shall have resigned, or until


                                      6
<PAGE>

December 31 of the year in which he shall have reached seventy-two years of
age, or until he shall have been removed as hereinafter provided in these
By-Laws, or as otherwise provided by statute or the Charter.

      Section 4. Resignation. A director of the Corporation may resign at any
time by given written notice of his resignation to the Board or the Chairman
of the Board or the President or the Secretary. Any such resignation shall
take effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt; and,
unless otherwise specified therein, the acceptance of such resignation shall
not be necessary to make it effective.

      Section 5. Removal of Directors. Any director of the Corporation may be
removed (with or without cause) by the stockholders by a vote of sixty-six and
two-thirds percent (66?%) of the outstanding shares of capital stock then
entitled to vote in the election of such director.

      Section 6. Vacancies. Subject to the provisions of the Investment
Company Act of 1940, as amended, any vacancies in the Board, whether arising
from death, resignation, removal, an increase in the number of directors or
any other cause, shall be filled by a vote of the Board of Directors in
accordance with the Charter.

      Section 7. Place of Meetings. Meetings of the Board may be held at such
place as the Board may from time to time determine or as shall be specified in
the notice of such meeting.

      Section 8. Regular Meeting. Regular meetings of the Board may be held
without notice at such time and place as may be determined by the Board of
Directors.

      Section 9. Special Meetings. Special meetings of the Board may be called
by two or more directors of the Corporation or by the Chairman of the Board or
the President.



                                      7
<PAGE>

      Section 10. Telephone Meetings. Members of the Board of Directors or of
any committee thereof may participate in a meeting by means of a conference
telephone or similar communications equipment if all persons participating in
the meeting can hear each other at the same time. Subject to the provisions of
the Investment Company Act of 1940, as amended, participation in a meeting by
these means constitutes presence in person at the meeting.

      Section 11. Notice of Special Meetings. Notice of each special meeting
of the Board shall be given by the Secretary as hereinafter provided, in which
notice shall be stated the time and place of the meeting. Notice of such
meeting shall be delivered to each director, either personally or by telephone
or any standard form of telecommunication, at least twenty-four hours before
the time at which such meeting is to be held, or by first-class mail, postage
prepaid, addressed to him at his residence or usual place of business, at
least three days before the day on which such meeting is to be held.

      Section 12. Waiver of Notice of Meetings. Notice of any special meeting
need not be given to any director who shall, either before or after the
meeting, sign a written waiver of notice which is filed with the records of
the meeting or who shall attend such meeting. Except as otherwise specifically
required by these By-Laws, a notice or waiver or notice of any meeting need
not state the purposes of such meeting.

      Section 13. Quorum and Voting. One-third, but not less than two, of the
members of the entire Board shall be present in person at any meeting of the
Board in order to constitute a quorum for the transaction of business at such
meeting, and except as otherwise expressly required by statute, the Charter,
these By-Laws, the Investment Company Act of 1940, as amended, or other
applicable statute, the act of a majority of the directors present at any
meeting at which a quorum is present shall be the act of the Board. In the
absence of a quorum at any


                                      8
<PAGE>

meeting of the Board, a majority of the directors present thereat may adjourn
such meeting to another time and place until a quorum shall be present
thereat. Notice of the time and place of any such adjourned meeting shall be
given to the directors who were not present at the time of the adjournment
and, unless such time and place were announced at the meeting at which the
adjournment was taken, to the other directors. At any adjourned meeting at
which a quorum is present, any business may be transacted which might have
been transacted at the meeting as originally called.

      Section 14. Organization. The Board may, by resolution adopted by a
majority of the entire Board, designate a Chairman of the Board, who shall
preside at each meeting of the Board. In the absence or inability of the
Chairman of the Board to preside at a meeting, the President or, in his
absence or inability to act, another director chosen by a majority of the
directors present, shall act as chairman of the meeting and preside thereat.
The Secretary (or, in his absence or inability to act, any person appointed by
the Chairman) shall act as secretary of the meeting and keep the minutes
thereof.

      Section 15. Written Consent of Directors in Lieu of a Meeting. Subject
to the provisions of the Investment Company Act of 1940, as amended, any
action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a meeting if all
members of the Board or committee, as the case may be, consent thereto in
writing, and the writings or writing are filed with the minutes of the
proceedings of the Board or committee.

      Section 16. Compensation. Directors may receive compensation for
services to the Corporation in their capacities as directors or otherwise in
such manner and in such amounts as may be fixed from time to time by the
Board.



                                      9
<PAGE>

      Section 17. Investment Policies. It shall be the duty of the Board of
Directors to direct that the purchase, sale, retention and disposal of
portfolio securities and the other investment practices of the Corporation are
at all times consistent with the investment policies and restrictions with
respect to securities investments and otherwise of the Corporation, as recited
in the Prospectus of the Corporation included in the registration statement of
the Corporation relating to the initial public offering of its capital stock,
as filed with the Securities and Exchange Commission (or as such investment
policies and restrictions may be modified by the Board of Directors, or, if
required, by majority vote of the stockholders of the Corporation in
accordance with the Investment Company Act of 1940, as amended) and as
required by the Investment Company Act of 1940, as amended. The Board however,
may delegate the duty of management of the assets and the administration of
its day to day operations to an individual or corporate management company
and/or investment adviser pursuant to a written contract or contracts which
have obtained the requisite approvals, including the requisite approvals of
renewals thereof, of the Board of Directors and/or the stockholders of the
Corporation in accordance with the provisions of the Investment Company Act of
1940, as amended.

                                  ARTICLE IV
                                  Committees
                                  ----------

      Section 1. Executive Committee. The Board may, by resolution adopted by
a majority of the entire board, designate an Executive Committee consisting of
two or more of the directors of the Corporation, which committee shall have
and may exercise all the powers and authority of the Board with respect to all
matters other than:

      (a) the submission to stockholders of any action requiring authorization
of stockholders pursuant to statute or the Charter;

      (b) the filling of vacancies on the Board of Directors;



                                      10
<PAGE>

      (c) the fixing of compensation of the directors for serving on the Board
or on any committee of the Board, including the Executive Committee;

      (d) the approval or termination of any contract with an investment
adviser or principal underwriter, as such terms are defined in the Investment
Company Act of 1940, as amended, or the taking of any other action required to
be taken by the Board of Directors by the Investment Company of 1940, as
amended;

      (e) the amendment or repeal of these By-Laws or the adoption of new
By-Laws;

      (f) the amendment or repeal of any resolution of the Board which by its
terms may be amended or repealed only by the Board;

      (g) the declaration of dividends and the issuance of capital stock of
the Corporation; and

      (h) the approval of any merger or share exchange which does not require
stockholder approval.

      The Executive Committee shall keep written minutes of its proceedings
and shall report such minutes to the Board. All such proceedings shall be
subject to revision or alteration by the Board; provided, however, that third
parties shall not be prejudiced by such revision or alteration.

      Section 2. Other Committees of the Board. The Board of Directors may
from time to time, by resolution adopted by a majority of the whole Board,
designate one or more other committees of the Board, each such committee to
consist of two or more directors and to have such powers and duties as the
Board of Directors may, by resolution, prescribe.

      Section 3. General. One-third, but not less than two, of the members of
any committee shall be present in person at any meeting of such committee in
order to constitute a


                                      11
<PAGE>

quorum for the transaction of business at such meeting, and the act of a
majority present shall be the act of such committee. The Board may designate a
chairman of any committee and such chairman or any two members of any
committee may fix the time and place of its meetings unless the Board shall
otherwise provide. In the absence or disqualification of any member of any
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. The Board
shall have the power at any time to change the membership of any committee, to
fill all vacancies, to designate alternate members to replace any absent or
disqualified member, or to dissolve any such committee. Nothing herein shall
be deemed to prevent the Board from appointing one or more committees
consisting in whole or in part of persons who are not directors of the
Corporation; provided, however, that no such committee shall have or may
exercise any authority or power of the Board in the management of the business
or affairs of the Corporation.

                                  ARTICLE V
                        Officers, Agents and Employees
                        ------------------------------

      Section 1. Number of Qualifications. The officers of the Corporation
shall be a President, who shall be a director of the Corporation, a Secretary
and a Treasurer, each of whom shall be elected by the Board of Directors. The
Board of Directors may elect or appoint one or more Vice Presidents and may
also appoint such other officers, agents and employees as it may deem
necessary or proper. Any two or more offices may be held by the same person,
except the offices of President and Vice President, but no officer shall
execute, acknowledge or verify any instrument in more than one capacity. Such
officers shall be elected by the Board of Directors each year at its first
meeting held after the annual meeting of stockholders, each to hold office


                                      12
<PAGE>

until the next meeting of the stockholders and until his successor shall have
been duly elected and shall have qualified, or until his death, or until he
shall have resigned, or have been removed, as hereinafter provided in these
By-Laws. The Board may from time to time elect, or delegate to the President
the power to appoint, such officers (including one or more Assistant Vice
Presidents, one or more Assistant Treasurers and one or more Assistant
Secretaries) and such agents, as may be necessary or desirable for the
business of the Corporation. Such officers and agents shall have such duties
and shall hold their offices for such terms as may be prescribed by the Board
or by the appointing authority.

      Section 2. Resignations. Any officer of the Corporation may resign at
any time by giving written notice of resignation to the Board, the Chairman of
the Board, President or the Secretary. Any such resignation shall take effect
at the time specified therein or, if the time when it shall become effective
shall not be specified therein, immediately upon its receipt; and, unless
otherwise specified therein, the acceptance of such resignation shall be
necessary to make it effective.

      Section 3. Removal of Officer, Agent or Employee. Any officer, agent or
employee of the Corporation may be removed by the Board of Directors with or
without cause at any time, and the Board may delegate such power of removal as
to agents and employees not elected or appointed by the Board of Directors.
Such removal shall be without prejudice to such person's contract rights, if
any, but the appointment of any person as an officer, agent or employee of the
Corporation shall not of itself create contract rights.

      Section 4. Vacancies. A vacancy in any office, whether arising from
death, resignation, removal or any other cause, may be filled for the
unexpired portion of the term of


                                      13
<PAGE>

the office which shall be vacant, in the manner prescribed in these By-Laws
for the regular election or appointment to such office.

      Section 5. Compensation. The compensation of the officers of the
Corporation shall be fixed by the Board of Directors, but this power may be
delegated to any officer in respect of other officers under his control.

      Section 6. Bonds or Other Security. If required by the Board, any
officer, agent or employee of the Corporation shall give a bond or other
security for the faithful performance of his duties, in such amount and with
such surety or sureties as the Board may require.

      Section 7. President. The President shall be the chief executive officer
of the Corporation. In the absence of the Chairman of the Board (or if there
be none), he shall preside at all meetings of the stockholders and of the
Board of Directors. He shall have, subject to the control of the Board of
Directors, general charge of the business and affairs of the Corporation. He
may employ and discharge employees and agents of the Corporation, except such
as shall be appointed by the Board, and he may delegate these powers.

      Section 8. Vice President. Each Vice President shall have such powers
and perform such duties as the Board of Directors or the President may from
time to time prescribe.

      Section 9. Treasurer. The Treasurer shall:

      (a) have charge and custody of, and be responsible for, all the funds
and securities of the Corporation, except those which the Corporation has
placed in the custody of a bank or trust company or member of a national
securities exchange (as that term is defined in the Securities Exchange Act of
1934, as amended) pursuant to a written agreement designating such bank or
trust company or member of a national securities exchange as custodian of the
property of the Corporation;



                                      14
<PAGE>

      (b) keep full and accurate accounts of receipts and disbursements in
books belonging to the Corporation;

      (c) cause all moneys and other valuables to be deposited to the credit
of the Corporation;

      (d) receive, and give receipts for, moneys due and payable, to the
Corporation from any source whatsoever;

      (e) disburse the funds of the Corporation and supervise the investment
of its funds as ordered or authorized by the Board, taking proper vouchers
therefor; and

      (f) in general, perform all the duties incident to the office of the
Treasurer and such other duties as from time to time may be assigned to him by
the Board or the President.

      Section 10. Secretary. The Secretary shall:

      (a) keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of the Board, the committees of the Board
and the stockholders;

      (b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;

      (c) be custodian of the records and the seal of the Corporation and
affix and attest the seal to all stock certificates of the Corporation (unless
the seal of the Corporation on such certificates shall be a facsimile, as
hereinafter provided) and affix and attest the seal to all other documents to
be executed on behalf of the Corporation under its seal;

      (d) see that the books, reports, statements, certificates and other
documents and records required by law to be kept and filed are properly kept
and filed; and

      (e) in general, perform all the duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the Board or the President.



                                      15
<PAGE>

      Section 11. Delegation of Duties. In case of the absence of any officer
of the Corporation, or for any other reason that the Board may deem
sufficient, the Board may confer for the time being the powers or duties, or
any of them, of such officer upon any other officer or upon any director.

                                  ARTICLE VI
                                Indemnification
                                ---------------

      Each officer and director of the Corporation shall be indemnified by the
Corporation to the full extent permitted under the General Laws of the State
of Maryland, except that such indemnity shall not protect any such person
against any liability to the Corporation or any stockholder thereof to which
such person would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office. Absent a court determination that an officer or
director seeking indemnification was not liable on the merits or guilty of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office, the decision by the Corporation
to indemnify such person must be based upon the reasonable determination of
independent legal counsel or the vote of a majority of a quorum of the
directors who are neither "interested persons", as defined in Section 2(a)(19)
of the Investment Company Act of 1940, as amended, nor parties to the
proceeding ("non-party independent directors"), after review of the facts,
that such officer or director is not guilty of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct
of his office.

      Each officer and director of the Corporation claiming indemnification
within the scope of this Article VI shall be entitled to advances from the
Corporation for payment of the reasonable expenses incurred by him in
connection with proceedings to which he is a party in the manner and to the
full extend permitted under the General Laws of the State of Maryland;
provided,


                                      16
<PAGE>

however, that the person seeking indemnification shall provide to the
Corporation a written affirmation of his good faith belief that the standard
of conduct necessary for indemnification by the Corporation has been met and a
written undertaking to repay any such advance, if it should ultimately be
determined that the standard of conduct has not been met, and provided further
that at least one of the following additional conditions is met: (a) the
person seeking indemnification shall provide a security in form and amount
acceptable to the Corporation for his undertaking; (b) the Corporation is
insured against losses arising by reason of the advance; (c) a majority of a
quorum of non-party independent directors, or independent legal counsel in a
written opinion, shall determine, based on a review of facts readily available
to the Corporation at the time the advance is proposed to be made, that there
is reason to believe that the person seeking indemnification will ultimately
be found to be entitled to indemnification.

      The Corporation may purchase insurance on behalf of an officer or
directors protecting such person to the full extent permitted under the
General Laws of the State of Maryland, from liability arising from his
activities as officer or director of the Corporation. The Corporation,
however, may not purchase insurance on behalf of any officer or director of
the Corporation that protects or purports to protect such person from
liability to the Corporation or its stockholders to which such officer or
director would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in the
conduct of his office.

      The Corporation may indemnify or purchase insurance to the extent
provided in this Article V on behalf of an employee or agent who is not an
officer or director of the Corporation.

                                  ARTICLE VII
                                 Capital Stock
                                 -------------

      Section 1. Stock Certificates. Each holder of stock of the Corporation
shall be entitled upon request to have a certificate or certificates, in such
form as shall be approved by the


                                      17
<PAGE>

Board, representing the number of shares of stock of the Corporation owned by
him, provided, however, that certificates for fractional shares will not be
delivered in any case. The certificates representing shares of stock shall be
signed by or in the name of the Corporation by the President or a Vice
President and by the Secretary or an Assistant Secretary or the Treasurer or
an Assistant Treasurer and sealed with the seal of the Corporation. Any or all
of the signatures or the seal on the certificate may be a facsimile. In case
any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have cased to be such
officer, transfer agent or registrar before such certificate shall be issued,
it may be issued by the Corporation with the same effect as if such officer,
transfer agent or registrar were still in office at the date of issue.

      Section 2. Books of Account and Record of Stockholders. There shall be
kept at the principal executive office of the Corporation correct and complete
books and records of account of all the business and transactions of the
Corporation. There shall be made available upon request of any stockholder, in
accordance with Maryland law, a record containing the number of shares of
stock issued during a specified period not to exceed twelve months and the
consideration by the Corporation for each such share.

      Section 3. Transfers of Shares. Transfers of shares of stock of the
Corporation shall be made on the stock records of the Corporation only by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary or with a transfer agent
or transfer clerk, and on surrender of the certificate or certificates, if
issued, for such shares properly endorsed or accompanied by a duly executed
stock transfer power and the payment of all taxes thereon. Except as otherwise
provided by law, the Corporation shall be entitled to recognize the exclusive
right of a person in whose name any share or shares stand on


                                      18
<PAGE>

the record of stockholders as the owner of such share or shares for all
purposes, including, without limitation, the rights to receive dividends or
other distributions, and to vote as such owner, and the Corporation shall not
be bound to recognize any equitable or legal claim to or interest in any such
share or shares on the part of any other person.

      Section 4. Regulations. The Board may make such additional rules and
regulations, not inconsistent with these By-Laws, as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation. It may appoint, or authorize any officer or officers
to appoint, one or more transfer agents or one or more transfer clerks and one
or more registrars and may require all certificates for shares of stock to
bear the signature or signatures of any of them.

      Section 5. Lost, Destroyed or Mutilated Certificates. The holder of any
certificates representing shares of stock of the Corporation shall immediately
notify the Corporation of any loss, destruction or mutilation of such
certificate, and the Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it which the owner thereof
shall allege to have been lost or destroyed or which shall have been
mutilated, and the Board may, in its discretion, require such owner or his
legal representative to give to the Corporation a bond in such sum, limited or
unlimited, and in such form and with such surety or sureties, as the Board in
its absolute discretion shall determine, to indemnify the Corporation against
any claim that may be made against it on account of the alleged loss or
destruction of any such certificate, or issuance of a new certificate.
Anything herein to the contrary notwithstanding, the Board, in its absolute
discretion, may refuse to issue any such new certificate, except pursuant to
legal proceedings under the laws of the State of Maryland.



                                      19
<PAGE>

      Section 6. Fixing of a Record Date for Dividends and Distributions. The
Board may fix, in advance, a date not more than ninety days preceding the date
fixed for the payment of any dividend or the making of any distribution or the
allotment of rights to subscribe for securities of the Corporation, or for the
delivery of evidence of rights or evidences of interests arising out of any
change, conversion or exchange of common stock or other securities, as the
record date for the determination of the stockholders entitled to receive any
such dividend, distribution, allotment, rights or interests, and in such case
only the stockholders of record at the time so fixed shall be entitled to
receive such dividend, distribution, allotment, rights or interests.

      Section 7. Information to Stockholders and Others. Any stockholder of
the Corporation or his agent may inspect and copy during usual business hours
the Corporation's By-Laws, minutes of the proceedings of its stockholders,
annual statements of its affairs, and voting trust agreements on file at its
principal office.

                                 ARTICLE VIII
                                     Seal
                                     ----

      The seal of the Corporation shall be circular in form and shall bear, in
addition to any other emblem or device approved by the Board of Directors, the
name of the Corporation, the year of its incorporation and the words
"Corporate Seal" and "Maryland". Said seal may be used by causing it or a
facsimile thereof to be impressed or affixed or in any other manner
reproduced.

                                  ARTICLE IX
                                  Fiscal Year
                                  -----------

      Unless otherwise determined by the Board, the fiscal year of the
Corporation shall end on the 31st day of October.



                                      20
<PAGE>

                                  ARTICLE X
                          Depositories and Custodians
                          ---------------------------

      Section 1. Depositories. The funds of the Corporation shall be deposited
with such banks or other depositories as the Board of Directors of the
Corporation may from time to time determine.

      Section 2. Custodians. All securities and other investments shall be
deposited in the safekeeping of such banks or other companies as the Board of
Directors of the Corporation may from time to time determine. Every
arrangement entered into with any bank or other company for the safekeeping of
the securities and investments of the Corporation shall contain provisions
complying with the Investment Act of 1940, as amended, and the general rules
and regulations thereunder.

                                  ARTICLE XI
                           Execution of Instruments
                           ------------------------

      Section 1. Checks, Notes, Drafts, etc. Checks, notes, drafts,
acceptances, bills of exchange and other orders or obligations for the payment
of money shall be signed by such officer or officers or person or persons as
the Board of Directors by resolution shall from time to time designate.

      Section 2. Sale or Transfer of Securities. Stock certificates, bonds or
other securities at any time owned by the Corporation may be held on behalf of
the Corporation or sold, transferred or otherwise disposed of subject to any
limits imposed by these By-Laws and pursuant to authorization by the Board
and, when so authorized to be held on behalf of the Corporation or sold,
transferred or otherwise disposed of, may be transferred from the name of the
Corporation by the signature of the President or a Vice President or the
Treasurer or pursuant to any procedure approved by the Board of Directors,
subject to applicable law.



                                      21
<PAGE>

                                  ARTICLE XII
                          Independent Public Accounts
                          ---------------------------

      The firm of independent public accountants which shall sign or certify
the financial statements of the Corporation which are filed with the
Securities and Exchange Commission shall be selected annually by the Board of
Directors and ratified by the stockholders in accordance with the provisions
of the Investment Company Act of 1940, as amended.

                                 ARTICLE XIII
                               Annual Statement
                               ----------------

      The books of account of the Corporation shall be examined by an
independent firm of public accountants at the close of each annual period of
the Corporation and at such other times as may be directed by the Board. A
report to the stockholders based upon each such examination shall be mailed to
each stockholder of record of the Corporation on such date with respect to
each report as may be determined by the Board, at his address as the same
appears on the books of the Corporation. Such annual statement shall also be
available at the annual meeting of the stockholders and be placed on file at
the Corporation's principal office in the State of Maryland. Each such report
shall show the assets and liabilities of the Corporation as of the close of
the annual or quarterly period covered by the report and the securities in
which the funds of the Corporation were then invested. Such report shall also
show the Corporation's income and expenses for the period from the end of the
Corporation's preceding fiscal year to the close of the annual or quarterly
period covered by the report and any other information required by the
Investment Company Act of 1940, as amended, and shall set forth such other
matters as the Board or such firm of independent public accountants shall
determine.



                                      22
<PAGE>

                                 ARTICLE XIV
                                  Amendments
                                  ----------

      These By-Laws or any of them may be amended, altered or repealed at any
regular meeting of the stockholders or at any special meeting of the
stockholders by a favorable vote of the holders of at least sixty-six and
two-thirds percent (66?%) of the outstanding shares of capital stock of the
Corporation entitled to be voted on the matter, provided that notice of the
proposed amendment, alteration or repeal be contained in the notice of such
special meeting. These By-Laws may also be amended, altered or repealed by the
affirmative vote of a majority of the Board of Directors at any regular or
special meeting of the Board of Directors, except any particular By-Law which
is specified as not subject to alteration or repeal by the Board of Directors,
subject to the requirements of the Investment Company Act of 1940, as amended.











                                      23

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2(D)(2)
<SEQUENCE>9
<FILENAME>efc4-1994_5621076ex992d2.txt
<TEXT>
                                                                Exhibit (d)(2)


                   Auction Market Preferred Stock, Series D

NUMBER 1                                                           1,600 SHARES

                            MUNIVEST FUND II, INC.

INCORPORATED UNDER THE LAWS
SEE REVERSE FOR
OF THE STATE OF MARYLAND
CERTAIN DEFINITIONS

THIS CERTIFICATE IS TRANSFERABLE IN NEW YORK, NY              CUSIP # _________

THIS CERTIFIES THAT
                                  CEDE & CO.
IS THE OWNER OF ONE-THOUSAND AND SIX HUNDRED

FULLY PAID AND NON-ASSESSABLE SHARES OF AUCTION MARKET PREFERRED STOCK, PAR
VALUE $.10 PER SHARE, LIQUIDATION PREFERENCE $25,000 PER SHARE PLUS AN AMOUNT
EQUAL TO ACCUMULATED BUT UNPAID DIVIDENDS THEREON (WHETHER OR NOT EARNED OR
DECLARED) OF

                            MUNIVEST FUND II, INC.

TRANSFERABLE ON THE BOOKS OF SAID CORPORATION IN PERSON OR BY DULY AUTHORIZED
ATTORNEY UPON SURRENDER OF THIS CERTIFICATE PROPERLY ENDORSED.

THIS CERTIFICATE IS NOT VALID UNTIL COUNTERSIGNED BY THE TRANSFER AGENT AND
REGISTERED BY THE REGISTRAR.

IN WITNESS WHEREOF, MUNIVEST FUND II, INC. HAS CAUSED ITS CORPORATE SEAL TO BE
HERETO AFFIXED AND THIS CERTIFICATE TO BE EXECUTED IN ITS NAME AND BEHALF BY
ITS DULY AUTHORIZED OFFICERS.

Dated:  ___________________, 2005

Countersigned and Registered:

THE BANK OF NEW YORK                      ______________________________(seal)
(New York)    Transfer Agent              Vice President


By:_____________________________          ______________________________(seal)
      Authorized Signature                Secretary

<PAGE>

THE TRANSFER OF THE SHARES OF AUCTION MARKET PREFERRED STOCK REPRESENTED
HEREBY IS SUBJECT TO THE RESTRICTIONS CONTAINED IN THE CORPORATION'S CHARTER.
THE CORPORATION WILL FURNISH INFORMATION ABOUT SUCH RESTRICTIONS TO ANY
STOCKHOLDER, WITHOUT CHARGE, UPON REQUEST TO THE SECRETARY OF THE CORPORATION.

                            MUNIVEST FUND II, INC.

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

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

<TABLE>
<CAPTION>
<S>                                            <C>
TEN COM--as tenants in common                  UNIF GIFT MIN ACT--________Custodian
                                                                   (Cust)               (Minor)
TEN ENT--as tenants by the entireties
JT TEN-- as joint tenants with right                under Uniform Gifts to Minors Act
         of survivorship and not as tenants                                             (State)
         in common

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

For value received, _______________________ hereby sell, assign and transfer unto

_________________________________________________________________________________________________

Please insert social securities or other identifying number of assignee

___________________________________________________________________________

___________________________________________________________________________

_________________________________________________________________________________________________
(Please Print or Typewrite Name and Address, Including Zip Code, of Assignee)

_________________________________________________________________________________________________

_________________________________________________________________________________________________


___________________________________________________________________________  shares of the capital
stock represented by the within Certificate, and do hereby irrevocably constitute and appoint ________
Attorney to transfer the said stock on the books of the within named Corporation with full power of
substitution in the premises.

Dated: _________________________

                                           _______________________________________________________
                               NOTICE:     The Signature to this assignment must correspond
                                           with the name as written upon the face of the
                                           Certificate in every particular, without
                                           alteration or enlargement or any change whatsoever.
</TABLE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2G
<SEQUENCE>10
<FILENAME>efc4-1994_5621148ex992g.txt
<TEXT>
                                                                     Exhibit (g)


                         INVESTMENT ADVISORY AGREEMENT

      AGREEMENT made this 17th day of March, 1993, by and between MUNIVEST
FUND II, INC., a Maryland corporation (hereinafter referred to as the "Fund"),
and FUND ASSET MANAGEMENT, INC., a Delaware corporation (hereinafter referred
to as the "Investment Adviser").

                             W I T N E S S E T H:
                             -------------------

      WHEREAS, the Fund is engaged in business as a closed-end management
investment company registered under the Investment Company Act of 1940, as
amended (hereinafter referred to as the "Investment Company Act"); and

      WHEREAS, the Investment Adviser is engaged principally in rendering
management and investment advisory services and is registered as an investment
adviser under the Investment Advisers Act of 1940, as amended; and

      WHEREAS, the Fund desires to retain the Investment Adviser to provide
management and investment advisory services to the Fund in the manner and on
the terms hereinafter set forth; and

      WHEREAS, the Investment Adviser is willing to provide management and
investment advisory services to the Fund on the terms and conditions
hereinafter set forth;

      NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Fund and the Investment Adviser hereby agree as
follows:

                                  ARTICLE I
                       Duties of the Investment Adviser
                       --------------------------------

      The Fund hereby employs the Investment Adviser to act as a manager and
investment adviser of the Fund and to furnish, or arrange for affiliates to
furnish, the management and investment advisory services described below,
subject to the policies of, review by and overall

<PAGE>

control of the Board of Directors of the Fund, for the period and on the terms
and conditions set forth in this Agreement. The Investment Adviser hereby
accepts such employment and agrees during such period, at its own expense, to
render, or arrange for the rendering of, such services and to assume the
obligations herein set forth for the compensation provided for herein. The
Investment Adviser and its affiliates shall for all purposes herein be deemed
to be independent contractors and shall, unless otherwise expressly provided
or authorized, have no authority to act for or represent the Fund in any way
or otherwise be deemed agents of the Fund.

      (a) Management and Administrative Services. The Investment Adviser shall
perform (or arrange for the performance by affiliates of) the management and
administrative services necessary for the operation of the Fund including
administering shareholder accounts and handling shareholder relations. The
Investment Adviser shall provide the Fund with office space, facilities,
equipment and necessary personnel and such other services as the Investment
Adviser, subject to review by the Board of Directors, shall from time to time
determine to be necessary or useful to perform its obligations under this
Agreement. The Investment Adviser shall also, on behalf of the Fund, conduct
relations with custodians, depositories, transfer agents, pricing agents,
dividend disbursing agents, other shareholder servicing agents, accountants,
attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers,
banks and such other persons in any such other capacity deemed to be necessary
or desirable. The Investment Adviser shall generally monitor the Fund's
compliance with investment policies and restrictions as set forth in filings
made by the Fund under the Federal securities laws. The Investment Adviser
shall make reports to the Board of Directors of its performance of obligations
hereunder and furnish advice and recommendations with respect to such other
aspects of the business and affairs of the Fund as it shall determine to be
desirable.



                                      2
<PAGE>

      (b) Investment Advisory Services. The Investment Adviser shall provide
(or arrange for affiliates to provide) the Fund with such investment research,
advice and supervision as the latter may from time to time consider necessary
for the proper supervision of the assets of the Fund, shall furnish
continuously an investment program for the Fund and shall determine from time
to time which securities shall be purchased, sold or exchanged and what
portion of the assets of the Fund shall be held in the various securities in
which the Fund invests, options, futures, options on futures or cash, subject
always to the restrictions of the Articles of Incorporation and By-Laws of the
Fund, as amended from time to time, the provisions of the Investment Company
Act and the statements relating to the Fund's investment objective, investment
policies and investment restrictions as the same are set forth in filings made
by the Fund under the Federal securities laws. The Investment Adviser shall
make decisions for the Fund as to foreign currency matters and make
determinations as to foreign exchange contracts, foreign currency options,
foreign currency futures and related options on foreign currency futures. The
Investment Adviser shall make decisions for the Fund as to the manner in which
voting rights, rights to consent to corporate action and any other rights
pertaining to the Fund's portfolio securities shall be exercised. Should the
Directors at any time, however, make any definite determination as to
investment policy and notify the Investment Adviser thereof in writing, the
Investment Adviser shall be bound by such determination for the period, if
any, specified in such notice or until similarly notified that such
determination has been revoked. The Investment Adviser shall take, on behalf
of the Fund, all actions which it deems necessary to implement the investment
policies determined as provided above, and in particular to place all orders
for the purchase or sale of portfolio securities for the Fund's account with
brokers or dealers selected by it, and to that end, the Investment Adviser is
authorized as the agent of the


                                      3
<PAGE>

Fund to give instructions to the custodian of the Fund as to deliveries of
securities and payments of cash for the account of the Fund. In connection
with the selection of such brokers or dealers and the placing of such orders
with respect to assets of the Fund, the Investment Adviser is directed at all
times to seek to obtain execution and prices within the policy guidelines
determined by the Board of Directors and set forth in filings made by the Fund
under the Federal securities laws. Subject to this requirement and the
provisions of the Investment Company Act, the Securities Exchange Act of 1934,
as amended, and other applicable provisions of law, the Investment Adviser may
select brokers or dealers with which it or the Fund is affiliated.

                                  ARTICLE II
                      Allocation of Charges and Expenses
                      ----------------------------------

      (a) The Investment Adviser. The Investment Adviser shall provide the
staff and personnel necessary to perform its obligations under this Agreement,
shall assume and pay or cause to be paid all expenses incurred in connection
with the maintenance of such staff and personnel, and shall, at its own
expense, provide the office space, facilities, equipment and necessary
personnel which it is obligated to provide under Article I hereof, and shall
pay all compensation of officers of the Fund and all Directors of the Fund who
are affiliated persons of the Investment Adviser.

      (b) The Fund. The Fund assumes and shall pay or cause to be paid all
other expenses of the Fund including, without limitation: taxes, expenses for
legal and auditing services, costs of printing proxies, stock certificates,
shareholder reports, prospectuses, charges of the custodian, any sub-custodian
and transfer agent, expenses of portfolio transactions, Securities and
Exchange Commission fees, expenses of registering the shares under Federal,
state and foreign laws, fees and actual out-of-pocket expenses of Directors
who are not affiliated persons of the Investment Adviser, accounting and
pricing costs (including the daily calculation of the net asset value),


                                      4
<PAGE>

insurance, interest, brokerage costs, litigation and other extraordinary or
non-recurring expenses, and other expenses properly payable by the Fund. It is
also understood that the Fund will reimburse the Investment Adviser for its
costs in providing accounting services to the Fund.

                                 ARTICLE III
                    Compensation of the Investment Adviser
                    --------------------------------------

      (a) Investment Advisory Fee. For the services rendered, the facilities
furnished and expenses assumed by the Investment Adviser, the Fund shall pay
to the Investment Adviser at the end of each calendar month a fee based upon
the average weekly value of the net assets of the annual rate of 0.50 of 1.0%
(0.50%) of the average weekly net assets of the Fund (i.e., the average weekly
value of the total assets of the Fund, minus the sum of accrued liabilities of
the Fund and accumulated dividends on shares of outstanding preferred stock),
commencing on the day following effectiveness hereof. For purposes of this
calculation, average weekly net assets is determined at the end of each month
on the basis of the average net assets of the Fund for each week during the
month. The assets for each weekly period are determined by averaging the net
assets at the last business day of a week with the net assets at the last
business day of the prior week. It is understood that the liquidation
preference of any outstanding preferred stock (other than accumulated
dividends) is not considered a liability in determining the Fund's average
weekly net assets. If this Agreement becomes effective, subsequent to the
first day of a month or shall terminate before the last day of a month,
compensation for that part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculation of the fee as set forth
above. Subject to the provisions of subsection (b) hereof, payment of the
Investment Adviser's compensation for the preceding month shall be made as
promptly as possible after completion of the computations contemplated by
subsection (b) hereof. During any period when the determination of net asset
value is suspended by the Board of Directors, the average net asset


                                      5
<PAGE>

value of a share for the last week prior to such suspension shall for this
purpose be deemed to be the net asset value at the close of each succeeding
week until it is again determined.

      (b) Expense Limitation. In the event the operating expenses of the Fund,
including amounts payable to the Investment Adviser pursuant to subsection (a)
hereof, for any fiscal year ending on a date on which this Agreement is in
effect exceed the expense limitations applicable to the Fund imposed by
applicable state securities laws or regulations thereunder, as such
limitations may be raised or lowered from time to time, the Investment Adviser
shall reduce its management and investment advisory fee by the extent of such
excess and, if required pursuant to any such laws or regulations, will
reimburse the Fund in the amount of such excess; provided, however, to the
extent permitted by law, there shall be excluded from such expenses the amount
of interest, taxes, brokerage fees and commissions and extraordinary expenses
(including but not limited to legal claims and liabilities and litigation
costs and any indemnification related thereto) paid or payable by the Fund.
Whenever the expenses of the Fund exceed a pro rata portion of the applicable
annual expense limitations, the estimated amount of reimbursement under such
limitations shall be applicable as an offset against the monthly payment of
the fee due to the Investment Adviser. Should two or more such expense
limitations be applicable as at the end of the last business day of the month,
that expense limitation which results in the largest reduction in the
Investment Adviser's fee small be applicable.

                                  ARTICLE IV
               Limitation of Liability of the Investment Adviser
               -------------------------------------------------

      The Investment Adviser shall not be liable for any error of judgment or
mistake of law or for any loss arising out of any investment or for any act or
omission in the management of the Fund, except for willful misfeasance, bad
faith or gross negligence in the performance of its duties, or by reason of
reckless disregard of its obligations and duties hereunder. As used in this


                                      6
<PAGE>

Article IV, the term "Investment Adviser" shall include any affiliates of the
Investment Adviser performing services for the Fund contemplated hereby and
directors, officers and employees of the Investment Adviser and such
affiliates.

                                  ARTICLE V
                     Activities of the Investment Adviser
                     ------------------------------------

      The services of the Investment Adviser to the Fund are not to be deemed
to be exclusive: the Investment Adviser and any person controlled by or under
common control with the Investment Adviser (for purposes of this Article V
referred to as "affiliates") are free to render services to others. It is
understood that Directors, officers, employees and shareholders of the Fund
are or may become interested in the Investment Adviser and its affiliates, as
directors, officers, employees, partners and shareholders or otherwise, and
that directors, officers, employees, partners and shareholders of the
Investment Adviser and its affiliates are or may become similarly interested
in the Fund, and that the Investment Adviser and directors, officers,
employees, partners and shareholders of its affiliates may became interested
in the Fund as shareholder or otherwise.

                                  ARTICLE VI
                  Duration and Termination of this Agreement
                  ------------------------------------------

      This Agreement shall become effective as of the date first above written
and shall remain in force until ____________ __, 1995 and thereafter, but only
so long as such continuance is specifically approved at least annually by (i)
the Board of Directors of the Fund, or by the vote of a majority of the
outstanding voting securities of the Fund, and (ii) a majority of those
Directors who are not parties to this Agreement or interested persons of any
such party cast in person at a meeting called for the purpose of voting on
such approval.



                                      7
<PAGE>

      This Agreement may be terminated at any time, without the payment of any
penalty, by the Board of Directors or by vote of a majority of the outstanding
voting securities of the Fund, or by the Investment Adviser, on sixty days'
written notice to the other party. This Agreement shall automatically
terminate in the event of its assignment.

                                 ARTICLE VII
                         Amendments of this Agreement
                         ----------------------------

      This Agreement may be amended by the parties only if such amendment is
specifically approved by (i) the vote of a majority of outstanding voting
securities of the Fund, and (ii) a majority of those Directors who are not
parties to this Agreement or interested persons of any such party cast in
person at a meeting caller for the purpose of voting on such approval.

                                 ARTICLE VIII
                         Definitions of Certain Terms
                         ----------------------------

      The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act and the Rules and Regulations thereunder, subject, however, to
such exemptions as may be granted by the Securities and Exchange Commission
under said Act.

                                  ARTICLE IX
                                 Governing Law
                                 -------------

      This Agreement shall be construed in accordance with laws of the State
of New York and the applicable provisions of the Investment Company Act. To
the extent that the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.



                                      8
<PAGE>

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

                                        MUNIVEST FUND II, INC.



                                        By______________________________________
                                                (Authorized Signatory)

                                        FUND ASSET MANAGEMENT, INC.



                                        By______________________________________
                                                (Authorized Signatory)



                                      9
<PAGE>


                  SUPPLEMENT TO INVESTMENT ADVISORY AGREEMENT
                                     WITH
                             FUND ASSET MANAGEMENT

      As of January 1, 1994 Fund Asset Management was reorganized as a limited
partnership, formally known as Fund Asset Management, L.P. ("FAM"). The
general partner of FAM is Princeton services, Inc. and the limited partners
are Fund Asset Management, Inc. and Merrill Lynch & Co., Inc. Pursuant to Rule
202(a)(1)-1 under the Investment Advisors Act of 1940 and Rule 2a-6 under the
Investment Company Act of 1940, such reorganization did not constitute an
assignment of this investment advisory agreement since it did not involve a
change of control or management of the investment adviser. Pursuant to the
requirements of Section 205 of the Investment Advisers Act of 1940, however,
Fund Asset Management hereby supplements this investment advisory agreement by
undertaking to advise you of any change in the membership of the partnership
within a reasonable time after any such change occurs.



                                        By: /s/ Arthur Zeikel
                                            -----------------

Dated:  January 3, 1994

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2(H)(1)
<SEQUENCE>11
<FILENAME>efc4-1994_5621248ex992h1.txt
<TEXT>
                                                                Exhibit (h)(1)






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



                            MUNIVEST FUND II, INC.


                           (a Maryland corporation)


                                  $40,000,000
                        Auction Market Preferred Stock


                            1,600 Shares, Series D

                  (Liquidation Preference $25,000 Per Share)


                              PURCHASE AGREEMENT



                              Dated:       , 2005



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

<PAGE>

<TABLE>
<CAPTION>
                                                         TABLE OF CONTENTS

                                                                                                                               Page

<S>                                                                                                                            <C>
SECTION 1.  Representations and Warranties......................................................................................3

    (a)  Representations and Warranties by the Fund and the Investment Adviser..................................................3

    (b)  Additional Representations of the Investment Adviser...................................................................9

    (c)  Officers' Certificates................................................................................................10

SECTION 2.  Sale and Delivery to the Underwriter; Closing......................................................................11

    (a)  Purchase Price........................................................................................................11

    (b)  Payment...............................................................................................................11

    (c)  Denominations; Registration...........................................................................................11

SECTION 3.  Covenants of the Fund..............................................................................................11

    (a)  Compliance with Securities Regulations and Commission Requests........................................................11

    (b)  Filing of Amendments..................................................................................................12

    (c)  Delivery of Registration Statements...................................................................................12

    (d)  Delivery of Prospectus................................................................................................12

    (e)  Continued Compliance with Securities Laws.............................................................................12

    (f)  Blue Sky Qualifications...............................................................................................13

    (g)  Rule 158..............................................................................................................13

    (h)  Use of Proceeds.......................................................................................................13

    (i)  Subchapter M..........................................................................................................13

    (j)  Restrictions on Sale of Shares........................................................................................13

    (k)  Reporting Requirements................................................................................................14

    (l)  Rule 462(b) Registration Statement....................................................................................14

    (m)  No Manipulation of Market for the Shares..............................................................................14

SECTION 4.  Covenants of the Underwriter.......................................................................................14

SECTION 5.  Payment of Expenses................................................................................................14

    (a)  Expenses..............................................................................................................14

    (b)  Termination of Agreement..............................................................................................15

SECTION 6.  Conditions of Underwriter's Obligations............................................................................15

    (a)  Effectiveness of Registration Statement...............................................................................15

    (b)  Opinion of Counsel for the Fund and the Underwriter...................................................................15



                                                                i
<PAGE>

                                                        Table of Contents
                                                        -----------------
                                                           (continued)

                                                                                                                              Page
                                                                                                                              ----

    (c)  Opinion of Senior Attorney of the Investment Adviser..................................................................15

    (d)  Officers' Certificates................................................................................................15

    (e)  Accountant's Comfort Letter...........................................................................................16

    (f)  Bring-down Comfort Letter.............................................................................................16

    (g)  Ratings Letters.......................................................................................................16

    (h)  Asset Coverage........................................................................................................16

    (i)  Additional Documents..................................................................................................16

    (j)  Termination of Agreement..............................................................................................17

SECTION 7.  Indemnification....................................................................................................17

    (a)  Indemnification of the Underwriter....................................................................................17

    (b)  Indemnification of Fund, Investment Adviser, General Partner, and Directors and Officers..............................18

    (c)  Actions against Parties, Notification.................................................................................18

    (d)  Settlement without Consent if Failure to Reimburse....................................................................19

SECTION 8.  Contribution 19

SECTION 9.  Representations, Warranties and Agreements to Survive Delivery.....................................................20

SECTION 10.  Termination of Agreement..........................................................................................20

    (a)  Termination; General..................................................................................................20

    (b)  Liabilities...........................................................................................................21

SECTION 11.  Notices...........................................................................................................21

SECTION 12.  Parties...........................................................................................................21

SECTION 13.  Governing Law and Time............................................................................................21

SECTION 14.  Effect of Headings................................................................................................21
</TABLE>



                                                                ii
<PAGE>

XHIBITS
Exhibit A   -   Form of Opinion of Fund's Counsel
Exhibit B   -   Form of Opinion of Senior Attorney of the Investment Adviser
Exhibit C   -   Form of Accountant's Comfort Letter



                                     iii
<PAGE>

                            MUNIVEST FUND II, INC.
                           (a Maryland corporation)

                                  $40,000,000
                        Auction Market Preferred Stock


                            1,600 Shares, Series D



                  (Liquidation Preference $25,000 Per Share)

                              PURCHASE AGREEMENT

                                                                       , 2005

MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
            Incorporated
4 World Financial Center
New York, New York  10080

Ladies and Gentlemen:

     MuniVest Fund II, Inc., a Maryland corporation (the "Fund"), and Fund
Asset Management, L.P., a Delaware limited partnership (the "Investment
Adviser"), each confirms its agreement with Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated (the "Underwriter" or "Merrill
Lynch"), with respect to the issue and sale by the Fund and the purchase by
the Underwriter of 1,600 shares of 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 (the "Shares").

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

     The Fund has filed with the Securities and Exchange Commission (the
"Commission") a notification on Form N-8A of registration of the Fund as an
investment company under the Investment Company Act of 1940, as amended (the
"Investment Company Act"), and a registration statement on Form N-2 (Nos.
333-       , 811-07478), including the related preliminary prospectus and
preliminary statement of additional information, for the registration of the
Shares under the Securities Act of 1933, as amended (the "1933 Act"), the
Investment Company Act, and the rules and regulations of the Commission under
the 1933 Act and the Investment Company Act (together, the "Rules and
Regulations"), and has filed such amendments to such registration statement on
Form N-2, if any, and such amended preliminary prospectuses and preliminary
statements of additional information as may have been required to

<PAGE>

the date hereof. Promptly after execution and delivery of this Agreement, the
Fund will either (i) prepare and file a prospectus and statement of additional
information in accordance with the provisions of paragraph (c) of Rule 497
("Rule 497(c)") of the rules and regulations of the Commission under the 1933
Act (the "1933 Act Regulations") or a certificate in accordance with the
provisions of paragraph (j) of Rule 497 ("Rule 497(j)") of the 1933 Act
Regulations, (ii) prepare and file a prospectus and statement of additional
information in accordance with the provisions of Rule 430A ("Rule 430A") of
the 1933 Act Regulations and paragraph (h) of Rule 497 ("Rule 497(h)") of the
1933 Act Regulations, or (iii) if the Fund has elected to rely upon Rule 434
("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a
"Term Sheet") in accordance with the provisions of Rule 434 and Rule 497(h).
The information included in any such prospectus and statement of additional
information or in any such Term Sheet, as the case may be, that was omitted
from such registration statement at the time it became effective but that is
deemed to be part of such registration statement at the time it became
effective (a) pursuant to paragraph (b) of Rule 430A is referred to as "Rule
430A Information" or (b) pursuant to paragraph (d) of Rule 434 is referred to
as "Rule 434 Information." Each prospectus and statement of additional
information used before such registration statement became effective, and any
prospectus and statement of additional information that omitted, as
applicable, the Rule 430A Information or the Rule 434 Information, that was
used after such effectiveness and prior to the execution and delivery of this
Agreement, is herein called a "preliminary prospectus/statement." Such
registration statement, including the exhibits thereto and schedules thereto,
if any, at the time it became effective and including the Rule 430A
Information and the Rule 434 Information, as applicable, is herein called the
"Registration Statement." Any registration statement filed pursuant to Rule
462(b) of the 1933 Act Regulations is herein referred to as the "Rule 462(b)
Registration Statement," and after such filing the term "Registration
Statement" shall include the Rule 462(b) Registration Statement. The final
prospectus and final statement of additional information in the form first
furnished to the Underwriter for use in connection with the offering of the
Shares is herein called the "Prospectus." If Rule 434 is relied on, the term
"Prospectus" shall refer to the preliminary prospectus/statement dated
           , 2005, together with the applicable Term Sheet and all references
in this Agreement to the date of such Prospectus shall mean the date of the
applicable Term Sheet. For purposes of this Agreement, all references to the
Registration Statement, any preliminary prospectus/statement, the Prospectus,
or any Term Sheet or any amendment or supplement to any of the foregoing shall
be deemed to include the copy filed with the Commission pursuant to its
Electronic Data Gathering, Analysis and Retrieval system ("EDGAR").

     All references in this Agreement to financial statements and schedules
and other information which is "contained," "included" or "stated" in the
Registration Statement, any preliminary prospectus/statement, or the
Prospectus (or other references of like import) shall be deemed to mean and
include all such financial statements and schedules and other information
which is incorporated by reference in the Registration Statement, any
preliminary prospectus or the Prospectus as the case may be; and all
references in this Agreement to amendments or supplements to the Registration
Statement, any preliminary prospectus or the Prospectus shall be deemed to
mean and include the filing of any document under the Securities Exchange Act
of 1934, as amended (the "1934 Act"), which is incorporated by reference in
the Registration Statement, such preliminary prospectus/statement, or the
Prospectus, as the case may be.



                                      2
<PAGE>

     SECTION 1. Representations and Warranties.

     (a) Representations and Warranties by the Fund and the Investment
Adviser. The Fund and the Investment Adviser each severally represents and
warrants to the Underwriter as of the date hereof, as of the Closing Time
referred to in Section 2(c) hereof and as of the Date of Delivery (if any)
referred to in Section 2(b) hereof, and agrees with the Underwriter, as
follows:

          (i) Compliance with Registration Requirements. The Fund meets the
     requirements for use of Form N-2 under the 1933 Act. Each of the
     Registration Statement and any Rule 462(b) Registration Statement has
     become effective under the 1933 Act and no stop order suspending the
     effectiveness of the Registration Statement or any Rule 462(b)
     Registration Statement has been issued under the 1933 Act and no
     proceedings for that purpose have been instituted or are pending or, to
     the knowledge of the Fund or the Investment Adviser, are contemplated by
     the Commission, and any request on the part of the Commission for
     additional information has been complied with. If required, the Fund has
     received any orders exempting the Fund from any provisions of the
     Investment Company Act.

          At the respective times the Registration Statement, any Rule 462(b)
     Registration Statement and any post-effective amendments thereto became
     effective and at the Closing Time the Registration Statement, the Rule
     462(b) Registration Statement and any amendments or supplements thereto
     complied and will comply in all material respects with the requirements
     of the 1933 Act, the Investment Company Act and the Rules and Regulations
     and did not and will not contain an untrue statement of a material fact
     or omit to state a material fact required to be stated therein or
     necessary to make the statements therein not misleading. Neither the
     Prospectus, nor any amendments or supplements thereto, at the time the
     Prospectus or any amendments or supplements thereto were issued and at
     the Closing Time included or will include an untrue statement of a
     material fact or omitted or will omit to state a material fact necessary
     in order to make the statements therein, in the light of the
     circumstances under which they were made, not misleading. The
     representations and warranties in this subsection shall not apply to
     statements in or omissions from the Registration Statement or the
     Prospectus made in reliance upon and in conformity with information
     furnished to the Fund in writing by the Underwriter expressly for use in
     the Registration Statement or in the Prospectus. If Rule 434 is used, the
     Fund will comply with the requirements of Rule 434 and the Prospectus
     shall not be "materially different," as such term is used in Rule 434,
     from the prospectus included in the Registration Statement at the time it
     became effective.

          Each preliminary prospectus/statement and the prospectus and
     statement of additional information filed as part of the Registration
     Statement as originally filed or as part of any amendment thereto, or
     filed pursuant to Rule 497(c) or Rule 497(h) under the 1933 Act, complied
     when so filed in all material respects with the Rules and Regulations and
     each preliminary prospectus/statement and the Prospectus delivered to the
     Underwriter for use in connection with this offering was identical to the
     electronically transmitted copies thereof filed with the Commission
     pursuant to EDGAR, except to the extent permitted by Regulation S-T.



                                      3
<PAGE>

          If a Rule 462(b) Registration Statement is required in connection
     with the offering and sale of the Shares, the Fund has complied or will
     comply with the requirements of Rule 111, under the 1933 Act Regulations
     relating to the payment of filing fees thereof.

          (ii) Independent Accountants. The accountants who certified the
     financial statements and supporting schedules, if any, included or
     incorporated by reference in the Registration Statement are independent
     public accountants as required by the 1933 Act and the Rules and
     Regulations.

          (iii) Financial Statements. The financial statements, included or
     incorporated by reference in the Registration Statement and Prospectus,
     together with the related schedules and notes, present fairly the
     financial position of the Fund at the date indicated and said statements
     have been prepared in conformity with generally accepted accounting
     principles ("GAAP") applied on a consistent basis throughout the period
     involved. The supporting schedules, if any, included or incorporated by
     reference in the Registration Statement present fairly, in accordance
     with GAAP, the information required to be stated therein. The information
     in the Prospectus under the headings "Financial Highlights,"
     "Capitalization," "Portfolio Composition" and "Description of Capital
     Stock" has been fairly presented.

          (iv) No Material Adverse Change in Business. Since the respective
     dates as of which information is given in the Registration Statement and
     in the Prospectus, except as otherwise stated therein, (A) there has been
     no material adverse change in the condition, financial or otherwise, or
     in the earnings, business affairs or business prospects of the Fund,
     whether or not arising in the ordinary course of business (a "Material
     Adverse Effect"), (B) there have been no transactions entered into by the
     Fund, other than those in the ordinary course of business, which are
     material with respect to the Fund and (C) except for regular monthly
     dividends on the outstanding shares of common stock, par value $.10 per
     share (the "Common Stock"), of the Fund and periodic distributions on the
     outstanding shares of Auction Market Preferred Stock, with a liquidation
     preference of $25,000 per share (the "Outstanding AMPS"), of the Fund
     pursuant to the terms of the Outstanding AMPS, and special year end
     distributions on the Common Stock and Outstanding AMPS related to the
     Fund's qualification as a regulated investment company under Subchapter M
     of the Internal Revenue Code of 1986, as amended ("Subchapter M of the
     Code"), there has been no dividend or distribution of any kind declared,
     paid or made by the Fund on any class of its capital stock.

          (v) Good Standing of the Fund. The Fund has been duly organized and
     is validly existing as a corporation in good standing under the laws of
     the State of Maryland and has corporate power and authority to own, lease
     and operate its properties and to conduct its business as described in
     the Prospectus and to enter into and perform its obligations under this
     Agreement; and the Fund is duly qualified as a foreign corporation to
     transact business and is in good standing in each jurisdiction in which
     such qualification is required, whether by reason of the ownership or
     leasing of property or the conduct of business, except where the failure
     so to qualify or to be in good standing would not result in a Material
     Adverse Effect.



                                      4
<PAGE>

          (vi) Subsidiaries. The Fund has no subsidiaries.

          (vii) Officers and Directors. No person is serving or acting as an
     officer, director or investment adviser of the Fund except in accordance
     with the provisions of the Investment Company Act and the Rules and
     Regulations and the Investment Advisers Act of 1940, as amended (the
     "Advisers Act"), and the rules and regulations of the Commission
     promulgated under the Advisers Act (the "Advisers Act Rules and
     Regulations"). Except as disclosed in the Registration Statement and the
     Prospectus (or any amendment or supplement to either of them), no
     director of the Fund is an "interested person" (as defined in the
     Investment Company Act) of the Fund or an "affiliated person" (as defined
     in the Investment Company Act) of the Underwriter.

          (viii) Capitalization. The authorized, issued and outstanding
     capital stock of the Fund is as set forth in the Prospectus under the
     caption "Description of Capital Stock." All issued and outstanding shares
     of Common Stock and Outstanding AMPS have been duly authorized and
     validly issued and are fully paid and non-assessable, except as provided
     for in the Fund's charter, and have been offered and sold or exchanged by
     the Fund in compliance with all applicable laws (including without
     limitation, federal and state securities laws); none of the outstanding
     shares of Common Stock or Outstanding AMPS of the Fund was issued in
     violation of the preemptive or other similar rights of any securityholder
     of the Fund.

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

          (x) Authorization of Agreement. This Agreement has been duly
     authorized, executed and delivered by the Fund.

          (xi) Authorization and Description of Shares. The Shares to be
     purchased by the Underwriter from the Fund have been duly authorized for
     issuance and sale to the Underwriter pursuant to this Agreement, and,
     when issued and delivered by the Fund pursuant to this Agreement against
     payment of the consideration set forth in this Agreement will be validly
     issued, fully paid and non-assessable; the Shares conform to all
     statements relating thereto contained in the Prospectus and such
     description conforms to the rights set forth in the instruments defining
     the same; no holder of the Shares will be subject to personal liability
     by reason of being such a holder; and the issuance of the Shares is not
     subject to the preemptive or other similar rights of any securityholder
     of the Fund.

          (xii) Absence of Defaults and Conflicts. The Fund is not in
     violation of its charter or by-laws or in default in the performance or
     observance of any obligation, agreement, covenant or condition contained
     in any material contract, indenture, mortgage, deed of trust, loan or
     credit agreement, note, lease or other agreement or instrument to which
     the Fund is a party or by which it or its properties may be bound, or



                                      5
<PAGE>

     to which any of the property or assets of the Fund is subject
     (collectively, "Agreements and Instruments"), except for such defaults
     that would not result in a Material Adverse Effect; and the execution,
     delivery and performance of this Agreement, the Investment Advisory
     Agreement, the Custody Agreement, the Auction Agent Agreement and the
     Letter of Representations referred to in the Registration Statement (as
     used herein, the "Advisory Agreement", the "Custody Agreement," the
     "Auction Agreement" and the "Letter of Representations," respectively) and
     the consummation of the transactions contemplated in this Agreement and in
     the Registration Statement (including the issuance and sale of the Shares
     and the use of the proceeds from the sale of the Shares as described in
     the Prospectus under the caption "Use of Proceeds") and compliance by the
     Fund with its obligations under this Agreement have been duly authorized
     by all necessary corporate action and do not and will not, whether with
     or without the giving of notice or passage of time or both, conflict with
     or constitute a breach of, or a default or Repayment Event (as defined
     below) under, or result in the creation or imposition of any lien, charge
     or encumbrance upon any property or assets of the Fund pursuant to the
     Agreements and Instruments (except for such conflicts, breaches or
     defaults or liens, charges or encumbrances that would not result in a
     Material Adverse Effect), nor will such action result in any violation of
     the provisions of the charter or the by-laws of the Fund, or any
     applicable law, statute, rule, regulation, judgment, order, writ or
     decree of any government, government instrumentality or court, domestic
     or foreign, having jurisdiction over the Fund or any of its assets,
     properties or operations. As used herein, a "Repayment Event" means any
     event or condition which gives the holder of any note, debenture or other
     evidence of indebtedness (or any person acting on such holder's behalf)
     the right to require the repurchase, redemption or repayment of all or a
     portion of such indebtedness by the Fund.

          (xiii) Authorization of Agreements. Each of this Agreement, the
     Advisory Agreement and the Custody Agreement has been duly authorized,
     executed and delivered by the Fund, and each complies with all applicable
     provisions of the Investment Company Act. Each of the Auction Agreement
     and the Letter of Representations has been duly authorized for execution
     and delivery by the Fund and, when executed and delivered by the Fund,
     will constitute a valid and binding obligation of the Fund, enforceable
     in accordance with its terms, subject, as to enforcement, to bankruptcy,
     insolvency, reorganization or other laws relating to or affecting
     creditors' rights and to general equitable principles.

          (xiv) Absence of Proceedings. There is no action, suit, proceeding,
     inquiry or investigation before or brought by any court or governmental
     agency or body, domestic or foreign, now pending, or, to the knowledge of
     the Fund or the Investment Adviser, threatened against or affecting the
     Fund, which is required to be disclosed in the Registration Statement
     (other than as disclosed therein), or which might reasonably be expected
     to result in a Material Adverse Effect, or which might reasonably be
     expected to materially and adversely affect the properties or assets of
     the Fund or the consummation of the transactions contemplated in this
     Agreement or the performance by the Fund of its obligations hereunder;
     the aggregate of all pending legal or governmental proceedings to which
     the Fund is a party or of which any of its respective property or assets
     is the subject which are not described in the Registration Statement,
     including ordinary routine



                                      6
<PAGE>

     litigation incidental to the business, could not reasonably be expected
     to result in a Material Adverse Effect.

          (xv) Subchapter M Compliance. The Fund intends to, and will, direct
     the investment of the proceeds of the offering described in the
     Registration Statement in such a manner as to comply with the
     requirements of Subchapter M of the Code, and intends to qualify as a
     regulated investment company under Subchapter M of the Code.

          (xvi) Distribution of Offering Materials. The Fund has not
     distributed and, prior to the later to occur of (A) the Closing Time and
     (B) completion of the distribution of the Shares, will not distribute any
     offering material in connection with the offering and sale of the Shares
     other than the Registration Statement, a preliminary prospectus, the
     Prospectus or other materials, if any, permitted by the 1933 Act or the
     Investment Company Act or the Rules and Regulations.

          (xvii) Accounting Controls. The Fund maintains a system of internal
     accounting controls sufficient to provide reasonable assurances that (A)
     transactions are executed in accordance with management's general or
     specific authorization and with the applicable requirements of the
     Investment Company Act, the Rules and Regulations and the Code; (B)
     transactions are recorded as necessary to permit preparation of financial
     statements in conformity with generally accepted accounting principles
     and to maintain accountability for assets and to maintain compliance with
     the books and records requirements under the Investment Company Act and
     the Rules and Regulations; (C) access to assets is permitted only in
     accordance with the management's general or specific authorization; and
     (D) the recorded accountability for assets is compared with existing
     assets at reasonable intervals and appropriate action is taken with
     respect to any differences.

          (xviii) Absence of Undisclosed Payments. To the Fund's knowledge,
     neither the Fund nor any employee or agent of the Fund has made any
     payment of funds of the Fund or received or retained any funds, which
     payment, receipt or retention of funds is of a character required to be
     disclosed in the Prospectus.

          (xix) Material Agreements. This Agreement, the Advisory Agreement,
     the Custody Agreement and the Auction Agent Agreement have each been duly
     authorized by all requisite action on the part of the Fund and executed
     and delivered by the Fund, as of the dates noted therein, and each
     complies with all applicable provisions of the Investment Company Act in
     all material respects. Assuming due authorization, execution and delivery
     by the other parties thereto with respect to the Advisory Agreement, the
     Custody Agreement and the Auction Agent Agreement, each of the Advisory
     Agreement, the Custody Agreement and the Auction Agent Agreement
     constitutes a valid and binding agreement of the Fund, enforceable in
     accordance with its terms, except as affected by bankruptcy, insolvency,
     fraudulent conveyance, reorganization, moratorium and other similar laws
     relating to or affecting creditors' rights generally, general equitable
     principles (whether considered in a proceeding in equity or at law) and
     an implied covenant of good faith and fair dealing and except as rights
     to indemnification or contribution thereunder may be limited by federal
     or state laws.



                                      7
<PAGE>

          (xx) Registration Rights. There are no persons with registration
     rights or other similar rights to have any securities registered pursuant
     to the Registration Statement or otherwise registered by the Fund under
     the 1933 Act.

          (xxi) Accuracy of Exhibits. There are no contracts or documents
     which are required to be described in the Registration Statement or the
     Prospectus or to be filed as exhibits thereto by the 1933 Act, the
     Investment Company Act or the Rules and Regulations which have not been
     so described and filed as required.

          (xxii) Possession of Intellectual Property. The Fund owns or
     possesses, has the right to use or can acquire on reasonable terms,
     adequate patents, patent rights, licenses, inventions, copyrights,
     know-how (including trade secrets and other unpatented and/or
     unpatentable proprietary or confidential information, systems or
     procedures), trademarks, service marks, trade names or other intellectual
     property (collectively, "Intellectual Property") necessary to carry on
     the business now operated by the Fund, and the Fund has not received any
     notice or is not otherwise aware of any infringement of or conflict with
     asserted rights of others with respect to any Intellectual Property or of
     any facts or circumstances which would render any Intellectual Property
     invalid or inadequate to protect the interest of the Fund therein, and
     which infringement or conflict (if the subject of any unfavorable
     decision, ruling or finding) or invalidity or inadequacy, singly or in
     the aggregate, would result in a Material Adverse Effect.

          (xxiii) Absence of Further Requirements. No filing with, or
     authorization, approval, consent, license, order, registration,
     qualification or decree of, any court or governmental authority or agency
     is necessary or required for the performance by the Fund of its
     obligations hereunder, in connection with the offering, issuance or sale
     of the Shares under this Agreement or the consummation of the
     transactions contemplated by this Agreement, except such as have been
     already obtained or as may be required under the 1933 Act, the 1934 Act
     or the Investment Company Act or the Rules and Regulations and foreign or
     state securities laws or under the rules of the NASD (formerly, the
     National Association of Securities Dealers, Inc.).

          (xxiv) Possession of Licenses and Permits. The Fund possesses such
     permits, licenses, approvals, consents and other authorizations
     (collectively, "Governmental Licenses") issued by the appropriate
     federal, state, local or foreign regulatory agencies or bodies necessary
     to conduct the business now operated by it; the Fund is in compliance
     with the terms and conditions of all such Governmental Licenses, except
     where the failure so to comply would not, singly or in the aggregate,
     have a Material Adverse Effect; all of the Governmental Licenses are
     valid and in full force and effect, except when the invalidity of such
     Governmental Licenses or the failure of such Governmental Licenses to be
     in full force and effect would not have a Material Adverse Effect; and
     the Fund has not received any notice of proceedings relating to the
     revocation or modification of any such Governmental Licenses which,
     singly or in the aggregate, if the subject of an unfavorable decision,
     ruling or finding, would result in a Material Adverse Effect.



                                      8
<PAGE>

          (xxv) NYSE Listing. The Fund's shares of Common Stock are duly
     listed on the New York Stock Exchange ("NYSE").

          (xxvi) Ratings. The Shares have been, or prior to the Closing Date
     will be, assigned a rating of Aaa by Moody's Investors Service, Inc.
     ("Moody's") and AAA by Standard & Poor's ("S&P").

          (xxvii) Leverage. The Fund has no liability for borrowed money,
     including under any reverse repurchase agreement.

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

          (i) Organization and Authority of Investment Adviser. The Investment
     Adviser has been duly organized as a limited partnership under the laws
     of the State of Delaware, with power and authority to conduct its
     business as described in the Registration Statement and the Prospectus.

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

          (iii) Description of Investment Adviser. The description of the
     Investment Adviser in the Registration Statement and the Prospectus (and
     any amendment or supplement to either of them) complied and complies in
     all material respects with the provisions of the 1933 Act, the Investment
     Company Act, the Advisers Act, the Rules and Regulations and the Advisers
     Act Rules and Regulations and is true and correct and does not contain
     any untrue statement of a material fact or omit to state any material
     fact required to be stated therein or necessary in order to make the
     statements therein, in light of the circumstances under which they were
     made, not misleading.

          (iv) Capitalization. The Investment Adviser has the financial
     resources available to it necessary for the performance of its services
     and obligations as contemplated in the Registration Statement, the
     Prospectus, this Agreement and under the Advisory Agreement.

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



                                      9
<PAGE>

     conflict with, or result in a breach of any of the terms and provisions
     of, or constitute, with or without the giving of notice or the lapse of
     time or both, a default under, any agreement or instrument to which the
     Investment Adviser is a party or by which it is bound, the certificate of
     formation, the operating agreement, or other organizational documents of
     the Investment Adviser, or the Investment Adviser's knowledge by any law,
     order, decree, rule or regulation applicable to it of any jurisdiction,
     court, federal or state regulatory body, administrative agency or other
     governmental body, stock exchange or securities association having
     jurisdiction over the Investment Adviser or its respective properties or
     operations; and no consent, approval, authorization or order of any court
     or governmental authority or agency is required for the consummation by
     the Investment Adviser of the transactions contemplated by this Agreement
     and the Advisory Agreement, except as have been obtained or may be
     required under the 1933 Act, the Investment Company Act, the 1934 Act or
     state securities laws.

          (vi) No Material Adverse Change. Since the respective dates as of
     which information is given in the Registration Statement and the
     Prospectus, except as otherwise stated therein, there has not occurred
     any event which should reasonably be expected to have a material adverse
     effect on the ability of the Investment Adviser to perform its respective
     obligations under this Agreement and the Advisory Agreement.

          (vii) Absence of Proceedings. There is no action, suit, proceeding,
     inquiry or investigation before or brought by any court or governmental
     agency or body, domestic or foreign, now pending, or, to the knowledge of
     the Investment Adviser, threatened against or affecting the Investment
     Adviser or any "affiliated person" of the Investment Adviser (as such
     term is defined in the Investment Company Act) or any partners, trustees,
     officers or employees of the foregoing, whether or not arising in the
     ordinary course of business, which might reasonably be expected to result
     in any material adverse change in the condition, financial or otherwise,
     or earnings, business affairs or business prospects of the Investment
     Adviser, materially and adversely affect the properties or assets of the
     Investment Adviser or materially impair or adversely affect the ability
     of the Investment Adviser to function as an investment adviser or perform
     its obligations under the Advisory Agreement, or which is required to be
     disclosed in the Registration Statement and the Prospectus.

          (viii) Absence of Violation or Default. The Investment Adviser is
     not in violation of its certificate of formation, its operating agreement
     or other organizational documents or in default under any agreement,
     indenture or instrument, where such violation or default would reasonably
     be expected to have a Material Adverse Effect on the Investment Adviser's
     ability to function as an investment adviser or perform its obligations
     under the Advisory Agreement.

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



                                      10
<PAGE>

     SECTION 2. Sale and Delivery to the Underwriter; Closing.

     (a) Purchase Price. On the basis of the representations and warranties
herein contained, and subject to the terms and conditions herein set forth,
the Fund agrees to sell to the Underwriter and the Underwriter agrees to
purchase from the Fund the Shares at the price per share set forth in Schedule
A.

     (b) Payment. Payment of the purchase price for, and delivery of
certificates for, the Shares shall be made at the offices of Sidley Austin
Brown & Wood LLP, 787 Seventh Avenue, New York, New York 10019, or at such
other place as shall be agreed upon by the Underwriter and the Fund, at 9:00
A.M. (Eastern time) on the third (fourth, if the pricing occurs after 4:30
P.M. (Eastern time) on any given day) business day following the date hereof,
or such other time not later than ten business days after such date as shall
be agreed upon by the Underwriter and the Fund (such time and date of payment
and delivery herein being referred to as "Closing Time").

     Payment shall be made to the Fund by wire transfer of immediately
available funds to a bank account designated by the Fund, against delivery to
the Underwriter of certificates for the Shares to be purchased by it.

     (c) Denominations; Registration. The Shares shall be represented by
certificates registered in the name of Cede & Co., as nominee for The
Depository Trust Company. The certificates for the Shares will be made
available for examination by the Underwriter not later than 10:00 A.M. on the
last business day prior to Closing Time.

     SECTION 3. Covenants of the Fund. The Fund covenants with the Underwriter
as follows:

     (a) Compliance with Securities Regulations and Commission Requests. The
Fund, subject to Section 3(b), will comply with the requirements of Rule 430A
or Rule 434, as applicable, and will notify the Underwriter immediately, and
confirm the notice in writing, (i) if any post-effective amendment to the
Registration Statement shall have become effective, or any supplement to the
Prospectus or any amended Prospectus shall have been filed, (ii) of the
receipt of any comments from the Commission, (iii) of any request by the
Commission for any amendment to the Registration Statement or any amendment or
supplement to the Prospectus or for additional information, (iv) of the
issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or of any order preventing or suspending the use of
any preliminary prospectus/statement, or of the suspension of the
qualification of the Shares for offering or sale in any jurisdiction, or of
the initiation or threatening of any proceedings for any of such purposes, and
(v) of the issuance by the Commission of an order of suspension or revocation
of the notification on Form N-8A of registration of the Fund as an investment
company under the Investment Company Act or the initiation of any proceeding
for that purpose. The Fund will make every reasonable effort to prevent the
issuance of any stop order described in subsection (iv) hereunder or any order
of suspension or revocation described in subsection (v) hereunder and, if any
such stop order or order of suspension or revocation is issued, to obtain the
lifting thereof at the earliest possible moment. The Fund will promptly effect
the filings necessary pursuant to Rule 497(c), Rule 497(j) or Rule 497(h) and
will take such steps as it



                                      11
<PAGE>

deems necessary to ascertain promptly whether the certificate transmitted for
filing under Rule 497(j) or the form of prospectus and statement of additional
information transmitted for filing under Rule 497(c) or Rule 497(h) was
received for filing by the Commission and, in the event that it was not, it
will promptly file such certificate or prospectus and statement of additional
information.

     (b) Filing of Amendments. The Fund will give the Underwriter notice of
its intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment or filing under Rule 462(b)), any Term
Sheet or any amendment, supplement or revision to either the prospectus or
statement of additional information included in the Registration Statement at
the time it became effective or to the Prospectus, whether pursuant to the
Investment Company Act, the 1933 Act, or otherwise, and will furnish the
Underwriter with copies of any such documents a reasonable amount of time
prior to such proposed filing or use, as the case may be, and will not file or
use any such document to which the Underwriter or counsel to the Underwriter
and the Fund shall object.

     (c) Delivery of Registration Statements. The Fund has furnished or will
deliver to the Underwriter and counsel to the Underwriter and the Fund,
without charge, signed copies of the notification of registration on Form N-8A
and Registration Statement as originally filed and of each amendment thereto,
(including exhibits filed therewith, or incorporated by reference therein) and
signed copies of all consents and certificates of experts, and will also
deliver to the Underwriter a conformed copy, without charge, of the
Registration Statement as originally filed and of each amendment thereto
(without exhibits) for the Underwriter. The copies of the Registration
Statement and each amendment thereto furnished to the Underwriter will be
identical to the electronically transmitted copies thereof filed with the
Commission pursuant to EDGAR, except to the extent permitted by Regulation
S-T.

     (d) Delivery of Prospectus. The Fund has delivered to the Underwriter,
without charge, as many copies of each preliminary prospectus/statement as the
Underwriter reasonably requested, and the Fund hereby consents to the use of
such copies for purposes permitted by the 1933 Act. The Fund will furnish to
the Underwriter, without charge, during the period when the Prospectus is
required to be delivered under the 1933 Act, such number of copies of the
Prospectus (as amended or supplemented) as the Underwriter may reasonably
request. The Prospectus and any amendments or supplements thereto furnished to
the Underwriter will be identical to the electronically transmitted copies
thereof field with the Commission pursuant to EDGAR, except to the extent
permitted by Regulation S-T.

     (e) Continued Compliance with Securities Laws. The Fund will comply with
the 1933 Act, the Investment Company Act and the Rules and Regulations so as
to permit the completion of the distribution of the Shares as contemplated in
this Agreement and in the Prospectus. If at any time when a prospectus is
required by the 1933 Act to be delivered in connection with sales of the
Shares, any event shall occur or condition shall exist as a result of which it
is necessary, in the opinion of counsel to the Underwriter and the Fund, to
amend the Registration Statement or amend or supplement any Prospectus in
order that the Prospectus will not include any untrue statements of material
fact or omit to state a material fact necessary in order to make the
statements therein not misleading in the light of the circumstances existing
at the time it is delivered to a purchaser, or if it shall be necessary, in
the opinion of such counsel,



                                      12
<PAGE>

at any such time to amend the Registration Statement or amend or supplement
any Prospectus in order to comply with the requirements of the 1933 Act or the
1933 Act Regulations, the Fund will promptly prepare and file with the
Commission, subject to Section 3(b), such amendment or supplement as may be
necessary to correct such statement or omission or to make the Registration
Statement or the Prospectus comply with such requirements, and the Fund will
furnish to the Underwriter such number of copies of such amendment or
supplement as the Underwriter may reasonably request.

     (f) Blue Sky Qualifications. The Fund will use its best efforts, in
cooperation with the Underwriter, to qualify the Shares for offering and sale
under the applicable securities laws of such states and other jurisdictions as
the Underwriter may designate and to maintain such qualifications in effect
for a period of not less than one year from the later of the effective date of
the Registration Statement and any Rule 462(b) Registration Statement;
provided, however, that the Fund shall not be obligated to file any general
consent to service of process or to qualify as a foreign corporation or as a
dealer in securities in any jurisdiction in which it is not so qualified or to
subject itself to taxation in respect of doing business in any jurisdiction in
which it is not otherwise so subject. In each jurisdiction in which the Shares
have been so qualified, the Fund will file such statements and reports as may
be required by the laws of such jurisdiction to continue such qualification in
effect for a period of not less than one year from the effective date of the
Registration Statement and any Rule 462(b) Registration Statement.

     (g) Rule 158. The Fund will timely file such reports pursuant to the 1933
Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the purposes
of, and to provide the benefits contemplated by, the last paragraph of Section
11(a) of the 1933 Act.

     (h) Use of Proceeds. The Fund will use the net proceeds received by it
from the sale of the Shares in the manner specified in the Prospectus under
"Use of Proceeds."

     (i) Subchapter M. The Fund will use its best efforts to maintain its
qualification as a regulated investment company under Subchapter M of the
Code.

     (j) Restrictions on Sale of Shares. During a period of 180 days from the
date of the Prospectus, the Fund will not, without the prior written consent
of Merrill Lynch, (i) directly or indirectly offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase or otherwise transfer
or dispose of any senior security of the Fund, as defined in Section 18 of the
Investment Company Act, or file any registration statement under the 1933 Act
with respect to any of the foregoing or (ii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of senior securities,
whether any such swap or transaction described in clause (i) or (ii) above is
to be settled by delivery of senior securities, in cash or otherwise. The
foregoing sentence shall not apply to (A) the Shares to be sold hereunder or
(B) transactions as contemplated in the Registration Statement where the Fund
has segregated cash, cash equivalents or liquid securities at the Fund's
custodian having a market value at all times at least equal to the amount of
such senior securities.



                                      13
<PAGE>

     (k) Reporting Requirements. The Fund, during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934 Act,
will file all documents required to be filed with the Commission pursuant to
the Investment Company Act and the 1934 Act within the time periods required
by the Investment Company Act and the Rules and Regulations and the 1934 Act
and the rules and regulations of the Commission thereunder, respectively.

     (l) Rule 462(b) Registration Statement. If the Fund elects to rely upon
Rule 462(b), the Fund shall file a Rule 462(b) Registration Statement with the
Commission in compliance with Rule 462(b) by 10:00 P.M., Washington, D.C.
time, on the date of this Agreement, and the Fund shall at the time of filing
either pay to the Commission the filing fee for the Rule 462(b) Registration
Statement or give irrevocable instructions for the payment of such fee
pursuant to Rule 111(b) under the 1933 Act.

     (m) No Manipulation of Market for the Shares. The Fund will not (a) take,
directly or indirectly, any action designed to cause or to result in, or that
might reasonably be expected to constitute, the stabilization or manipulation
of the price of any security of the Fund to facilitate the sale or resale of
the Shares, and (b) until the Closing Date (i) sell, bid for or purchase the
Shares or pay any person (other than the Underwriter) any compensation for
soliciting purchases of the Shares or (ii) pay or agree to pay to any person
any compensation for soliciting another to purchase any other securities of
the Fund (other than payments to broker-dealers in connection with the auction
of the Outstanding AMPS).

     SECTION 4. Covenants of the Underwriter. The Underwriter covenants and
agrees with the Fund that no later than the second business day succeeding
Closing Time, it will provide the Fund and the Auction Agent (as defined in
the Prospectus) with a listing of Existing Holders (as defined in the
Prospectus) of Shares, the number of shares held by each such Existing Holder
and the number of Shares it is holding as Underwriter as of the date of such
notice.

     SECTION 5. Payment of Expenses.

     (a) Expenses. The Fund will pay all expenses incident to the performance
of its obligations under this Agreement, including (i) the preparation,
printing and filing of the Registration Statement (including financial
statements and exhibits) as originally filed and of each amendment thereto,
(ii) the preparation, printing and delivery to the Underwriter of this
Agreement and such other documents as may be required in connection with the
offering, purchase, sale, issuance or delivery of the Shares, (iii) the
preparation, issuance and delivery of the certificates for the Shares to the
Underwriter, including any stock or other transfer taxes and any stamp or
other duties payable upon the sale, issuance or delivery of the Shares to the
Underwriter, (iv) the fees and disbursements of the Fund's counsel,
accountants and other advisers, (v) the qualification of the Shares under the
securities laws in accordance with the provisions of Section 3(f) hereof,
including filing fees and the reasonable fees and disbursements of counsel to
the Underwriter and the Fund in connection therewith, (vi) the printing and
delivery to the Underwriter of copies of each preliminary
prospectus/statement, any Term Sheets and of the Prospectus and any amendments
or supplements thereto, (vii) the fees and expenses of any transfer agent or
registrar for the Shares, and (viii) the fees charged by rating agencies
rating the Shares.



                                      14
<PAGE>

     (b) Termination of Agreement. If this Agreement is terminated by the
Underwriter in accordance with the provisions of Section 6 or Section 10(a)(i)
hereof, the Fund or the Investment Adviser shall reimburse, or arrange for an
affiliate to reimburse, the Underwriter for all of its out-of-pocket expenses,
including the reasonable fees and disbursements of counsel to the Fund and the
Underwriter.

     SECTION 6. Conditions of Underwriter's Obligations. The obligations of
the Underwriter hereunder are subject to the accuracy of the representations
and warranties of the Fund and the Investment Adviser contained in Section 1
hereof, or in the certificates of any officer of the Fund and the Investment
Adviser delivered pursuant to the provisions hereof, to the performance by the
Fund and the Investment Adviser of their respective covenants and obligations
hereunder, and to the following further conditions:

     (a) Effectiveness of Registration Statement. The Registration Statement
including any Rule 462(b) Registration Statement has become effective and at
Closing Time no stop order suspending the effectiveness of the Registration
Statement shall have been issued under the 1933 Act or proceedings therefor
initiated or threatened by the Commission and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of counsel to the Underwriter and the Fund. Either (i)
a certificate has been filed with the Commission in accordance with Rule
497(j) or a prospectus and statement of additional information have been filed
with the Commission in accordance with Rule 497(c), or (ii) a prospectus and
statement of additional information containing the Rule 430A Information shall
have been filed with the Commission in accordance with Rule 497(h) (or a
post-effective amendment providing such information shall have been filed and
declared effective in accordance with the requirements of Rule 430A) or, if
the Fund has elected to rely upon Rule 434, a Term Sheet shall have been filed
with the Commission in accordance with Rule 497(h).

     (b) Opinion of Counsel for the Fund and the Underwriter. At Closing Time,
the Underwriter shall have received the favorable opinion, dated as of Closing
Time, of Sidley Austin Brown & Wood LLP, counsel to the Fund and the
Underwriter, to the effect set forth in Exhibit A hereto.

     (c) Opinion of Senior Attorney of the Investment Adviser. At Closing
Time, the Underwriter shall have received the favorable opinion, dated as of
Closing Time, of Andrew J. Donohue, Esq., General Counsel of the Investment
Adviser, or another senior attorney of the Investment Adviser, in form and
substance satisfactory to counsel to the Underwriter, to the effect set forth
in Exhibit B hereto and to such further effect as counsel to the Underwriter
may reasonably request.

     (d) Officers' Certificates. At Closing Time, there shall not have been,
since the date hereof or since the respective dates as of which information is
given in the Prospectus, any material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Fund, whether or not arising in the ordinary course of
business, and the Underwriter shall have received (A) a certificate of the
President or a Vice President of the Fund, dated as of Closing Time, to the
effect that (i) there has been no such material adverse change, (ii) the
representations and warranties in Section 1(a) hereof are true and correct
with the same force and effect as though expressly made at and as of Closing
Time,



                                      15
<PAGE>

(iii) the Fund has complied with all agreements and satisfied all conditions
on its part to be performed or satisfied at or prior to Closing Time, and (iv)
no stop order suspending the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose have been instituted or are
pending or, to the officer's knowledge, are contemplated by the Commission and
(B) a certificate of the President or a Vice President of the Investment
Adviser, dated as of Closing Time, to the effect that (i) there has been no
such material change, (ii) the representations and warranties in Sections 1(a)
and 1(b) hereof are true and correct with the same force and effect as though
expressly made at and as of Closing Time, (iii) the Investment Adviser has
complied with all agreements and satisfied all conditions on its part to be
performed or satisfied at or prior to Closing Time and (iv) there has been no
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Investment Adviser,
whether or not arising in the ordinary course of business.

     (e) Accountant's Comfort Letter. At the time of the execution of this
Agreement, the Underwriter shall have received from _______________ a letter,
dated such date, in form and substance satisfactory to the Underwriter
containing statements and information of the type ordinarily included in
accountants' "comfort letters" to underwriters with respect to the financial
statements and certain financial information contained in the Registration
Statement and the Prospectus, to the effect set forth in Exhibit C hereto and
to such further effect as counsel to the Underwriter may reasonably request.

     (f) Bring-down Comfort Letter. At Closing Time, the Underwriter shall
have received from __________________ a letter, dated as of Closing Time, to
the effect that they reaffirm the statements made in the letter, furnished
pursuant to subsection (e) of this Section, except that the "specified date"
referred to shall be a date not more than three business days prior to Closing
Time.

     (g) Ratings Letters. Subsequent to the execution and delivery of this
Agreement and prior to Closing Time, there shall not have occurred any
downgrading, nor shall any notice have been given of (i) any intended or
potential downgrading or (ii) any review or possible change that indicates
anything other than a stable outlook, in the rating accorded any securities of
or guaranteed by the Fund by any "nationally recognized statistical rating
organization," as such term is defined for purposes of Rule 436(g)(2) under
the 1933 Act; and prior to Closing Time, S&P and Moody's shall have confirmed
by letter that the Shares have been rated AAA and Aaa, respectively, by such
agencies.

     (h) Asset Coverage. As of the Closing Date and assuming the receipt of
the net proceeds from the sale of the Shares, the 1940 Act AMPS Asset Coverage
and the AMPS Basic Maintenance Amount (each as defined in the Fund's articles
supplementary creating the shares) each will be met.

     (i) Additional Documents. At Closing Time, counsel to the Fund and the
Underwriter shall have been furnished with such documents and opinions as it
may reasonably require for the purpose of enabling it to pass upon the
issuance and sale of the Shares as herein contemplated, or in order to
evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Fund in connection with the issuance and sale of the Shares as
herein contemplated shall be reasonably



                                      16
<PAGE>

satisfactory in form and substance to the Underwriter and counsel to the Fund
and the Underwriter.

     (j) Termination of Agreement. If any condition specified in this Section
shall not have been fulfilled when and as required to be fulfilled, this
Agreement, may be terminated by the Underwriter by notice to the Fund at any
time at or prior to Closing Time and such termination shall be without
liability of any party to any other party except as provided in Section 5 and
except that Sections 1, 7, 8 and 9 shall survive any such termination and
remain in full force and effect.

     SECTION 7. Indemnification.

     (a) Indemnification of the Underwriter. The Fund and the Investment
Adviser jointly and severally agree to indemnify and hold harmless the
Underwriter and each person, if any, who controls the Underwriter within the
meaning of Section 15 of the 1933 Act or Section 25 of the 1934 Act and any
director, officer, employee or affiliate thereof as follows:

          (i) against any and all loss, liability, claim, damage and expense
     whatsoever, as incurred, arising out of any untrue statement or alleged
     untrue statement of a material fact contained in the Registration
     Statement (or any amendment thereto), including the Rule 430A Information
     and the Rule 434 Information, if applicable, or the omission or alleged
     omission therefrom of a material fact required to be stated therein or
     necessary to make the statements therein not misleading or arising out of
     any untrue statement or alleged untrue statement of a material fact
     included in any preliminary prospectus/statement or the Prospectus (or
     any amendment or supplement thereto), or the omission or alleged omission
     therefrom of a material fact necessary in order to make the statements
     therein, in the light of the circumstances under which they were made,
     not misleading;

          (ii) against any and all loss, liability, claim, damage and expense
     whatsoever, as incurred, to the extent of the aggregate amount paid in
     settlement of any litigation, or any investigation or proceeding by any
     governmental agency or body, commenced or threatened, or of any claim
     whatsoever based upon any such untrue statement or omission, provided
     that (subject to Section 7(d) below) any such settlement is effected with
     the written consent of the indemnifying party; and

          (iii) against any and all expense whatsoever, as incurred (including
     the fees and disbursements of counsel chosen by the Underwriter)
     reasonably incurred in investigating, preparing or defending against any
     litigation, or any investigation or proceeding by any governmental agency
     or body, commenced or threatened, or any claim whatsoever based upon any
     such untrue statement or omission, or any such alleged untrue statement
     or omission, to the extent that any such expense is not paid under (i) or
     (ii) above;

provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information



                                      17
<PAGE>

furnished to the Fund by the Underwriter expressly for use in the Registration
Statement (or any amendment thereto), including the Rule 430A Information and
the Rule 434 Information, if applicable, or any preliminary
prospectus/statement or the Prospectus (or any amendment or supplement
thereto).

     (b) Indemnification of Fund, Investment Adviser, General Partner, and
Directors and Officers. The Underwriter agrees to indemnify and hold harmless
the Fund, the Investment Adviser, the directors of the Fund, the general
partner of the Investment Adviser, each of the Fund's officers who signed the
Registration Statement, and each person, if any, who controls the Fund or the
Investment Adviser within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act, against any and all loss, liability, claim, damage and
expense described in the indemnity contained in subsection (a) of this
Section, as incurred, but only with respect to untrue statements or omissions,
or alleged untrue statements or omissions, made in the Registration Statement
(or any amendment thereto) including the Rule 430A Information and the Rule
434 Information, if applicable, or in any preliminary prospectus/statement or
the Prospectus (or any amendment or supplement thereto) in reliance upon and
in conformity with written information furnished to the Fund by the
Underwriter expressly for use in the Registration Statement (or any amendment
thereto), or any preliminary prospectus/statement or the Prospectus (or any
amendment or supplement thereto).

     (c) Actions against Parties, Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party
of any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve
such indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve
it from any liability which it may have otherwise than on account of this
indemnity agreement. In the case of parties indemnified pursuant to Section
7(a) above, counsel to the indemnified parties shall be selected by the
Underwriter, and, in the case of parties indemnified pursuant to Section 7(b)
above, counsel to the indemnified parties shall be selected by the Fund and
the Investment Adviser. An indemnifying party may participate at its own
expense in the defense of any such action; provided, however, that counsel to
the indemnifying party shall not (except with the consent of the indemnified
party) also be counsel to the indemnified party. In no event shall the
indemnifying parties be liable for the fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. No indemnifying party shall, without the
prior written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever in respect of which indemnification or
contribution could be sought under this Section 7 or Section 8 hereof (whether
or not the indemnified parties are actual or potential parties thereto),
unless such settlement, compromise or consent (i) includes an unconditional
release of each indemnified party from all liability arising out of such
litigation, investigation, proceeding or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.



                                      18
<PAGE>

     (d) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated
by Section 7(a)(ii) effected without its written consent if (i) such
settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party
shall have received notice of the terms of such settlement at least 30 days
prior to such settlement being entered into and (iii) such indemnifying party
shall not have reimbursed such indemnified party in accordance with such
request prior to the date of such settlement.

     SECTION 8. Contribution. If the indemnification provided for in Section 7
hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Fund and the
Investment Adviser on the one hand and the Underwriter on the other hand from
the offering of the Shares pursuant to this Agreement or (ii) if the
allocation provided by clause (i) is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Fund and
the Investment Adviser on the one hand and of the Underwriter on the other
hand in connection with the statements or omissions which resulted in such
losses, liabilities, claims, damages or expenses, as well as any other
relevant equitable considerations.

     The relative benefits received by the Fund and the Investment Adviser on
the one hand and the Underwriter on the other hand in connection with the
offering of the Shares pursuant to this Agreement shall be deemed to be in the
same respective proportions as the total net proceeds from the offering of the
Shares pursuant to this Agreement (before deducting expenses) received by the
Fund, and the total underwriting commission received by the Underwriter, in
each case as set forth on the cover of the Prospectus, or, if Rule 434 is
used, the corresponding location on the Term Sheet, bear to the aggregate
initial public offering price of the Shares as set forth on such cover.

     The relative fault of the Fund and the Investment Adviser on the one hand
and the Underwriter on the other hand shall be determined by reference to,
among other things, whether any such untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Fund and the Investment Adviser or by the
Underwriter and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.

     The Fund, the Investment Adviser and the Underwriter agree that it would
not be just and equitable if contribution pursuant to this Section 8 were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to above in
this Section 8. The aggregate amount of losses, liabilities, claims, damages
and expenses incurred by an indemnified party and referred to above in this
Section 7 shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in investigating, preparing or defending
against any litigation, or any investigation or proceeding by



                                      19
<PAGE>

any governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue or alleged untrue statement or omission
or alleged omission.

     Notwithstanding the provisions of this Section 8, the Underwriter shall
not be required to contribute any amount in excess of the amount by which the
total price at which the Shares underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which the
Underwriter has otherwise been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission.

     No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.

     For purposes of this Section 8, each person, if any, who controls the
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as the Underwriter,
and each director of the Fund and the Investment Adviser, respectively, each
officer of the Fund who signed the Registration Statement and each person, if
any, who controls the Fund and the Investment Adviser within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act, shall have the same
rights to contribution as the Fund and the Investment Adviser.

     SECTION 9. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Fund or of the Investment
Adviser submitted pursuant hereto, shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of the
Underwriter or controlling person, or by or on behalf of the Fund or the
Investment Adviser and shall survive delivery of the Shares to the
Underwriter.

     SECTION 10. Termination of Agreement.

     (a) Termination; General. The Underwriter may terminate this Agreement by
notice to the Fund, at any time at or prior to Closing Time (i) if there has
been, since the time of execution of this Agreement or since the respective
dates as of which information is given in the Prospectus, any material adverse
change in the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Fund or the Investment Adviser, whether
or not arising in the ordinary course of business, or (ii) if there has
occurred any material adverse change in the financial markets in the United
States or the international financial markets, any outbreak of hostilities or
escalation thereof or other calamity or crisis or any change or development
involving a prospective change in national or international political,
financial or economic conditions, in each case the effect of which is such as
to make it, in the judgment of the Underwriter, impracticable or inadvisable
to market the Shares or to enforce contracts for the sale of the Shares, or
(iii) if trading in any securities of the Fund has been suspended or
materially limited by the Commission or the NYSE or such other national
securities exchange upon which the Fund's securities trade, or if trading
generally on the NYSE or the American Stock Exchange or in the Nasdaq National
Market System has been suspended or materially limited, or minimum or maximum
prices for trading have been fixed, or maximum ranges for prices for
securities have been required, by any of said exchanges or by such system or
by order



                                      20
<PAGE>

of the Commission, the NASD or any other governmental authority, or a material
disruption has occurred in commercial banking or securities settlement or
clearance services in the United States or (iv) if a banking moratorium has
been declared by either Federal or New York authorities.

     (b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 5 hereof, and provided further that
Sections 1, 7, 8 and 9 shall survive such termination and remain in full force
and effect.

     SECTION 11. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriter shall be directed to Merrill Lynch & Co. Inc., Merrill Lynch,
Pierce, Fenner & Smith Incorporated at 4 World Financial Center, New York, New
York 10080, Attention: Equity Capital Markets; notices to the Fund and the
Investment Adviser shall be directed to 800 Scudders Mill Road, Plainsboro,
New Jersey 08536, Attention: Donald C. Burke.

     SECTION 12. Parties. This Agreement shall inure to the benefit of and be
binding upon the Underwriter, the Fund, the Investment Adviser and their
respective successors. Nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any person, firm or corporation, other
than the Underwriter, the Fund, the Investment Adviser and their respective
successors and the controlling persons and officers, directors and general
partner referred to in Sections 7 and 8 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement
and all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the Underwriter, the Fund and the Investment Adviser and
their respective successors, and said controlling persons and officers and
directors and their heirs and legal representatives, and for the benefit of no
other person, firm or corporation. No purchaser of Shares from the Underwriter
shall be deemed to be a successor merely by reason of such purchase.

     SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.

     SECTION 14. Effect of Headings. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.



                                      21
<PAGE>

     If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Fund a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the Underwriter and the Fund and the Investment Adviser in accordance
with its terms.

                                    Very truly yours,

                                    MUNIVEST FUND II, INC.


                                    By:___________________________________
                                       Authorized Officer



                                    FUND ASSET MANAGEMENT, L.P.

                                    By: PRINCETON SERVICES, INC.,
                                       General Partner


                                    By:__________________________________
                                       Authorized Officer


CONFIRMED AND ACCEPTED,
  as of the date first above written:

MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
            INCORPORATED

By:__________________________________
   Authorized Signatory



                                      22
<PAGE>

                                  SCHEDULE A



                            MUNIVEST FUND II, INC.
                           (a Maryland corporation)

                                  $40,000,000


                        Auction Market Preferred Stock

                            1,600 Shares, Series D




                  (Liquidation Preference $25,000 per share)


     1. The initial public offering price per share for the Shares, determined
as provided in Section 2 hereof shall be $25,000 plus accumulated dividends,
if any, from the date of original issue.

     2. The purchase price per share for the Shares to be paid by the
Underwriter shall be $24,750 plus accumulated dividends, if any, from the date
of original issue, being an amount equal to the initial public offering price
set forth above less $250 per share.

     3. The dividend rate for the Series D AMPS for the initial dividend
period ending , 2005, shall be .



                                      23
<PAGE>

                                                                    Exhibit A



                       FORM OF OPINION OF FUND'S COUNSEL
                          TO BE DELIVERED PURSUANT TO
                                 SECTION 6(b)


1. The Fund has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Maryland.

2. The Fund has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectus and to
enter into and perform its obligations under the Purchase Agreement.

3. The Fund is duly qualified as a foreign corporation to transact business
and is in good standing in each jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or to be in good
standing would not result in a material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Fund, whether or not arising in the ordinary course of
business (a "Material Adverse Effect").

4. The authorized, issued and outstanding capital stock of the Fund is as set
forth in the Prospectus under the caption "Description of Capital Stock." The
outstanding shares of Common Stock of the Fund and the Outstanding AMPS have
been duly authorized and validly issued and are fully paid and nonassessable.

5. The Shares to be purchased by the Underwriter from the Fund have been duly
authorized for issuance and sale to the Underwriter pursuant to the Purchase
Agreement and, when issued and delivered by the Fund pursuant to the Purchase
Agreement against payment of the consideration set forth in the Purchase
Agreement, will be validly issued and fully paid and non-assessable and no
holder of the Shares is or will be subject to personal liability by reason of
being such a holder.

6. The issuance of the Shares is not subject to the preemptive or other
similar rights of any securityholder of the Fund.

7. To the best of our knowledge, the Fund does not have any subsidiaries.

8. The Purchase Agreement has been duly authorized, executed and delivered by
the Fund and complies with all applicable provisions of the Investment Company
Act.

9. The Registration Statement, including any Rule 462(b) Registration
Statement, has been declared effective under the 1933 Act; any required filing
of the certificate pursuant to Rule 497(j) or the Prospectus pursuant to Rule
497(c) or Rule



                                     A-1
<PAGE>

497(h), as the case may be, has been made in the manner and within the time
period required by Rule 497(j), Rule 497(c) or Rule 497(h), as the case may
be; and, to the best of our knowledge, no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement has been issued under the 1933 Act and no proceedings for that
purpose have been instituted or are pending or threatened by the Commission.

10. The Registration Statement, including any Rule 462(b) Registration
Statement, the Rule 430A Information and the Rule 434 Information, as
applicable, the Prospectus, and each amendment or supplement to the
Registration Statement and the Prospectus, as of their respective effective or
issue dates (other than the financial statements and supporting schedules
included or incorporated by reference therein or omitted therefrom, as to
which we need express no opinion) complied as to form in all material respects
with the requirements of the 1933 Act, the Investment Company Act and the
Rules and Regulations.

11. The form of certificate(s) used to evidence each of the Shares complies in
all material respects with all applicable statutory requirements and with any
applicable requirements of the charter and by-laws of the Fund. To the best of
our knowledge, there is not pending or threatened any action, suit,
proceeding, inquiry or investigation, to which the Fund is a party, or to
which the property of the Fund is subject, before or brought by any court or
governmental agency or body, domestic or foreign, which might reasonably be
expected to result in a Material Adverse Effect, or which might reasonably be
expected to materially and adversely affect the properties or assets thereof
or the consummation of the transactions contemplated in the Purchase Agreement
or the performance by the Fund of its obligations thereunder, other than those
disclosed in the Prospectus.

12. The information in the Prospectus under "Description of AMPS,"
"Description of Capital Stock," and "Taxes" and in the Registration Statement
under Item 29, to the extent that it constitutes matters of law, summaries of
legal matters, the Fund's charter and bylaws or legal proceedings, or legal
conclusions, has been reviewed by us and is correct in all material respects.

13. To the best of our knowledge, there are no statutes or regulations that
are required to be described in the Prospectus that are not described as
required.

14. All descriptions in the Prospectus of contracts and other documents to
which the Fund is a party are accurate in all material respects; to the best
of our knowledge, there are no franchises, contracts, indentures, mortgages,
loan agreements, notes, leases or other instruments of the Fund required to be
described or referred to in the Registration Statement or to be filed as
exhibits thereto other than those described or referred to therein or filed or
incorporated by reference as exhibits thereto, and the descriptions thereof or
references thereto are correct in all material respects.

15. To the best of our knowledge, the Fund is not in violation of its charter
or by-laws and no default by the Fund exists in the due performance or
observance of any material obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan agreement, note, lease or
other agreement or instrument that is described or referred to in the
Registration Statement or the Prospectus or filed or incorporated by reference
as an exhibit to the Registration Statement.



                                     A-2
<PAGE>

16. No filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any court or governmental authority
or agency, domestic or foreign (other than under the 1933 Act, the 1934 Act,
the Investment Company Act, the Rules and Regulations, which have been
obtained, or as may be required under the securities or blue sky laws of the
various states, as to which we need express no opinion) is necessary or
required in connection with the due authorization, execution and delivery of
the Purchase Agreement, the Advisory Agreement, the Custody Agreement, the
Auction Agreement and the Letter of Representations or for the offering,
issuance, sale or delivery of the Shares.

17. The Advisory Agreement and the Custody Agreement have each been duly
authorized and approved by the Fund and comply as to form in all material
respects with all applicable provisions of the Investment Company Act, and
each has been duly executed by the Fund.

18. Each of the Auction Agent Agreement and the Letter of Representations has
been duly authorized, executed and delivered by the Fund, and each constitutes
a valid and binding obligation of the Fund, enforceable in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization
or other laws relating to or affecting creditors' rights and to general
equitable principles.

19. The Fund is registered with the Commission under the Investment Company
Act as a closed-end, non-diversified management investment company, and all
required action has been taken by the Fund under the 1933 Act, the Investment
Company Act and the Rules and Regulations to make the public offering and
consummate the sale of the Shares pursuant to the Purchase Agreement; the
provisions of the charter and the by-laws of the Fund comply as to form in all
material respects with the requirements of the Investment Company Act; and, to
the best of our knowledge and information, no order of suspension or
revocation of such registration under the Investment Company Act, pursuant to
Section 8(e) of the Investment Company Act, has been issued or proceedings
therefor initiated or threatened by the Commission.

20. The execution, delivery and performance of the Purchase Agreement and the
consummation of the transactions contemplated in the Purchase Agreement and in
the Registration Statement (including the issuance and sale of the Shares, and
the use of the proceeds from the sale of the Shares as described in the
Prospectus under the caption "Use of Proceeds") and compliance by the Fund
with its obligations under the Purchase Agreement do not and will not, whether
with or without the giving of notice or lapse of time or both, conflict with
or constitute a breach of, or default or Repayment Event (as defined in
Section 1(a)(xi) of the Purchase Agreement) under or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of
the Fund pursuant to any contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, lease or any other agreement or instrument, known to
us, to which the Fund is a party or by which it may be bound, or to which any
of the property or assets of the Fund is subject (except for such conflicts,
breaches or defaults or liens, charges or encumbrances that would not have a
Material Adverse Effect), nor will such action result in any violation of the
provisions of the charter or by-laws of the Fund, or any applicable law,
statute, rule, regulation, judgment, order, writ or decree, known to us, of
any



                                     A-3
<PAGE>

government, government instrumentality or court, domestic or foreign, having
jurisdiction over the Fund or any of its properties, assets or operations.

     Nothing has come to our attention that has caused us to believe that the
Registration Statement or any amendment thereto, including the Rule 430A
Information and Rule 434 Information (if applicable), (except for financial
statements and schedules and other financial data included or incorporated by
reference therein or omitted therefrom, as to which we need make no
statement), at the time such Registration Statement or any such amendment
became effective, contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading or that the Prospectus or any amendment
or supplement thereto (except for financial statements and schedules and other
financial data included or incorporated by reference therein or omitted
therefrom, as to which we need make no statement), at the time the Prospectus
was issued, at the time any such amended or supplemented prospectus was issued
or at the Closing Time, included or includes an untrue statement of a material
fact or omitted or omits to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading.

     In rendering such opinion, such counsel may rely as to matters of fact
(but not as to legal conclusions), to the extent they deem proper, on
certificates and written statements of responsible officers of and accountants
for the Fund and the Investment Adviser and public officials. Such opinion
shall not state that it is to be governed or qualified by, or that it is
otherwise subject to, any treatise, written policy or other document relating
to legal opinions, including, without limitation, the Legal Opinion Accord of
the ABA Section of Business Law (1991).



                                     A-4
<PAGE>

                                                                    Exhibit B

           FORM OF OPINION OF THE GENERAL COUNSEL OR SENIOR ATTORNEY
                   OF THE INVESTMENT ADVISER TO BE DELIVERED
                           PURSUANT TO SECTION 6(c)

     (1) The Investment Adviser has been duly organized as a limited
partnership under the laws of the State of Delaware, with power and authority
to conduct its business as described in the Registration Statement and in the
Prospectus.

     (2) The Investment Adviser is duly registered as an investment adviser
under the Investment Advisers Act and is not prohibited by the Investment
Advisers Act or the Investment Company Act, or the rules and regulations under
such Acts, from acting under the Advisory Agreement for the Fund as
contemplated by the Prospectus.

     (3) This Agreement and the Advisory Agreement have been duly authorized,
executed and delivered by the Investment Adviser, and the Advisory Agreement
constitutes a valid and binding obligation of the Investment Adviser,
enforceable in accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization or other laws relating to or affecting
creditors' rights and to general equity principles; and, to the best of his
knowledge and information, neither the execution and delivery of this
Agreement or the Advisory Agreement nor the performance by the Investment
Adviser of its obligations hereunder or thereunder will conflict with, or
result in a breach of, any of the terms and provisions of, or constitute, with
or without the giving of notice or the lapse of time or both, a default under,
any agreement or instrument to which the Investment Adviser is a party or by
which the Investment Adviser is bound, or any law, order, rule or regulation
applicable to the Investment Adviser of any jurisdiction, court, Federal or
state regulatory body, administrative agency or other governmental body, stock
exchange or securities association having jurisdiction over the Investment
Adviser or its properties or operations.

     (4) To the best of his knowledge and information, the description of the
Investment Adviser in the Registration Statement and in the Prospectus does
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading.



                                     B-1
<PAGE>

                                                                     Exhibit C

                             FORM OF ACCOUNTANTS'
                    COMFORT LETTER PURSUANT TO SECTION 6(e)

     (1) We are independent public accountants with respect to the Fund within
the meaning of the 1933 Act, Investment Company Act and the applicable rules
and regulations thereunder adopted by the Commission;

     (2) In our opinion the financial statements audited by us and included or
incorporated by reference in the Registration Statement and the Prospectus
comply as to form in all material respects with the applicable accounting
requirements of the 1933 Act, the Investment Company Act and the related rules
and regulations adopted by the Commission;

     Such accountants shall also state that they have performed specified
procedures, not constituting an audit, including a reading of the latest
available interim financial statements of the Fund, a reading of the minute
books of the Fund, made inquiries of officials of the Fund responsible for
financial accounting matters and such other inquiries and procedures as may be
specified in such letter, and on the basis of such inquiries and procedures
nothing came to their attention that caused them to believe that (A) the
unaudited financial statements included or incorporated by reference in the
Registration Statement do not comply as to form in all material respects with
the applicable accounting requirements of the 1933 Act, the Investment Company
Act and of the Rules and Regulations applicable to unaudited interim financial
statements included or incorporated by reference in registration statements or
are not in conformity with generally accepted accounting principles applied on
a basis substantially consistent with that of the audited financial statements
included or incorporated by reference in the Registration Statement, and (B)
during the period from the date of the unaudited financial statements included
or incorporated by reference in the Registration Statement to a specified date
not more than three days prior to the date of the Purchase Agreement, there
was any change in the capital stock (other than by reason of the issuance of
shares of common stock in connection with the Fund's dividend reinvestment
plan, as specified in such letter) or decrease in net assets of the Fund or
any increase in the long-term debt of the Fund, as compared with amounts shown
on the unaudited financial statements included or incorporated by reference in
the Registration Statement, except for changes which the Registration
Statement discloses have occurred or may occur; and in addition, they have
performed other specified procedures, not constituting an audit, with respect
to certain amounts, percentages, numerical data, financial information and
financial statements appearing in the Registration Statement, which previously
have been specified by such accountants and which shall be specified in such
letter, and have compared certain of such items with, and have found such
items to be in agreement with, the accounting and financial records of the
Fund.



                                     C-1

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2(K)(4)
<SEQUENCE>12
<FILENAME>efc4-1994_5621251ex992k4.txt
<TEXT>
                                                                Exhibit (k)(4)



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


                            AUCTION AGENT AGREEMENT

                                    between

                            MUNIVEST FUND II, INC.

                                      and

                             THE BANK OF NEW YORK

                              Dated as of , 2005

                                  Relating to

                        AUCTION MARKET PREFERRED STOCK

                                   ("AMPS"),

                                   Series D

                                      of

                            MUNIVEST FUND II, INC.



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

<PAGE>

     THIS AUCTION AGENT AGREEMENT, dated as of              , 2005, is between
MUNIVEST FUND II, INC., a Maryland corporation (the "Company"), and THE BANK OF
NEW YORK, a New York banking corporation.

     The Company proposes to duly authorize and issue 1,600 shares of Auction
Market Preferred Stock, Series D ("Series D AMPS") 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 (whether or not earned or declared),
pursuant to the Company's Articles Supplementary (as defined below). The
Series D AMPS are sometimes referred to as the "AMPS." A separate Auction (as
defined below) will be conducted for each series of AMPS. The Company desires
that The Bank of New York perform certain duties as agent in connection with
each Auction of shares of AMPS (in such capacity, the "Auction Agent"), and as
the transfer agent, registrar, dividend disbursing agent and redemption agent
with respect to the shares of AMPS (in such capacity, the "Paying Agent"),
upon the terms and conditions of this Agreement, and the Company hereby
appoints The Bank of New York as said Auction Agent and Paying Agent in
accordance with those terms and conditions (hereinafter generally referred to
as the "Auction Agent," except in Sections 3 and 4 below).

     NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the Company and the Auction Agent agree as follows:

I.   DEFINITIONS AND RULES OF CONSTRUCTION.

     1.1. Terms Defined by Reference to Articles Supplementary.

Capitalized terms not defined herein shall have the respective meanings
specified in the Articles Supplementary.

     1.2. Terms Defined Herein.

As used herein and in the Settlement Procedures (as defined below), the
following terms shall have the following meanings, unless the context
otherwise requires:

          (a) "Affiliate" shall mean any Person, other than Merrill Lynch,
          Pierce, Fenner & Smith Incorporated, made known to the Auction Agent
          to be controlled by, in control of, or under common control with,
          the Company or its successors.

          (b) "Agent Member" of any Person shall mean such Person's agent
          member of the Securities Depository that will act on behalf of a
          Bidder.

          (c) "Articles Supplementary" shall mean the Articles Supplementary
          of the Company, establishing the powers, preferences and rights of
          the AMPS, filed on          , 2004 with the state of Maryland.

          (d) "Auction" shall have the meaning specified in Section 2.1
          hereof.

          (e) "Auction Agent Acceptance Fee" means an acceptance fee as set
          forth in a written agreement between the Auction Agent and the
          Company.



                                      2
<PAGE>

          (f) "Auction Agent Fee" means the fees, other than the Auction Agent
          Acceptance Fee, set forth in a written agreement signed by the
          Auction Agent and the Company.

          (g) "Auction Procedures" shall mean the Auction Procedures that are
          set forth in Paragraph 10 of the Articles Supplementary.

          (h) "Authorized Officer" shall mean each Vice President, Assistant
          Vice President, and Assistant Treasurer of the Auction Agent
          assigned to the Dealing and Trading Group of its Corporate Trust
          Department, and every other officer or employee of the Auction Agent
          designated as an "Authorized Officer" for purposes hereof in a
          written communication to the Company.

          (i) "Broker-Dealer Agreement" shall mean each agreement between the
          Auction Agent and a Broker-Dealer substantially in the form attached
          hereto as Exhibit A.

          (j) "Company Officer" shall mean the Chairman and Chief Executive
          Officer, the President, each Vice President (whether or not
          designated by a number or word or words added before or after the
          title "Vice President"), the Secretary, the Treasurer, each
          Assistant Secretary and each Assistant Treasurer of the Company and
          every other officer or employee of the Company designated as a
          "Company Officer" for purposes hereof in a written notice from the
          Company to the Auction Agent.

          (k) "Holder" shall be a holder of record of one or more shares of
          AMPS, listed as such in the stock register maintained by the Paying
          Agent pursuant to Section 4.6 hereof.

          (l) "Settlement Procedures" shall mean the Settlement Procedures
          attached as Exhibit A to the Broker-Dealer Agreement.

     1.3. Rules of Construction.

Unless the context or use indicates another or different meaning or intent,
the following rules shall apply to the construction of this Agreement:

          (a) Words importing the singular number shall include the plural
          number and vice versa.

          (b) The captions and headings herein are solely for convenience of
          reference and shall not constitute a part of this Agreement nor
          shall they affect its meaning, construction or effect.

          (c) The words "hereof," "herein," "hereto," and other words of
          similar import refer to this Agreement as a whole.



                                      3
<PAGE>

          (d) All references herein to a particular time of day shall be to
          Eastern Standard Time.

II.  THE AUCTION.

     2.1. Purpose; Incorporation by Reference of Auction Procedures and
          Settlement Procedures.

          (a) The Articles Supplementary provide that the Applicable Rate on
          shares of Series D AMPS for each Dividend Period therefor after the
          Initial Dividend Period shall be the rate per annum that a
          commercial bank, trust company or other financial institution
          appointed by the Company advises results from implementation of the
          Auction Procedures. The Board of Directors of the Company has
          adopted a resolution appointing The Bank of New York as Auction
          Agent for purposes of the Auction Procedures. The Auction Agent
          hereby accepts such appointment and agrees that, on each Auction
          Date, it shall follow the procedures set forth in this Section 2 and
          the Auction Procedures for the purpose of determining the Applicable
          Rate for the AMPS for the next Dividend Period therefor. Each
          periodic operation of such procedures is hereinafter referred to as
          an "Auction."

          (b) All of the provisions contained in the Auction Procedures and in
          the Settlement Procedures are incorporated herein by reference in
          their entirety and shall be deemed to be a part hereof to the same
          extent as if such provisions were set forth fully herein. In the
          case of any conflict between the terms of any document incorporated
          herein by reference and the terms hereof, the Auction Agent is,
          subject to its obligations as set forth in Section 6.1, authorized
          to perform its duties according to the terms hereof, and shall have
          no liability for so doing.

     2.2. Preparation for Each Auction; Maintenance of Registry of Existing
          Holders.

          (a) As of the date hereof, the Company shall provide the Auction
          Agent with a list of the Broker-Dealers and shall cause to be
          delivered to the Auction Agent for execution by the Auction Agent a
          Broker-Dealer Agreement signed by each such Broker-Dealer. The
          Auction Agent shall keep a list of Broker-Dealers with whom it has
          signed such Broker-Dealer Agreements, and shall endeavor to keep
          such list current and accurate and shall indicate thereon, or on a
          separate list, the identity of each Existing Holder, if any, whose
          most recent Order was submitted by a Broker-Dealer on such list and
          resulted in such Existing Holder continuing to hold or purchasing
          shares of AMPS. Not later than five Business Days prior to any
          Auction Date for which any change in such list of Broker-Dealers is
          to be effective, the Company shall notify the Auction Agent in
          writing of such change and, if any such change is the addition of a
          Broker-Dealer to such list, the Company shall cause to be delivered
          to the Auction Agent for execution by the Auction Agent a
          Broker-Dealer Agreement signed by such Broker-Dealer. The



                                      4
<PAGE>

          Auction Agent shall have entered into a Broker-Dealer Agreement with
          each Broker-Dealer prior to the participation of any such
          Broker-Dealer in any Auction.

          (b) In the event that the Auction Date for any Auction shall be
          changed after the Auction Agent shall have given the notice referred
          to in clause (vii) of Paragraph (a) of the Settlement Procedures,
          the Auction Agent, by such means as the Auction Agent deems
          practicable, shall give notice of such change to the Broker-Dealers
          not later than the earlier of 9:15 A.M. on the new Auction Date or
          9:15 A.M. on the old Auction Date.

          (c) The provisions contained in paragraph 2 of the Articles
          Supplementary concerning Special Dividend Periods and the
          notification of a Special Dividend Period will be followed by the
          Company and, to the extent applicable, the Auction Agent, and the
          provisions contained therein are incorporated herein by reference in
          their entirety and shall be deemed to be a part of this Agreement to
          the same extent as if such provisions were set forth fully herein.

          (d)  (i) On each Auction Date, the Auction Agent shall determine the
          Reference Rate and the Maximum Applicable Rate. If the rate obtained
          by the Auction Agent is not quoted on an interest or discount basis,
          the Auction Agent shall convert the quoted rate to an interest rate
          after consultation with the Company as to the method of such
          conversion. Not later than 9:30 A.M. on each Auction Date, the
          Auction Agent shall notify the Company and the Broker-Dealers of the
          Reference Rate so determined and of the Maximum Applicable Rate.

               (ii) If the Reference Rate is the applicable LIBOR Rate and
          such rate is to be based on rates supplied by LIBOR Dealers and one
          or more of the LIBOR Dealers shall not provide a quotation for the
          determination of the applicable LIBOR Rate, the Auction Agent
          promptly shall notify the Company so that the Company can determine
          whether to select a Substitute LIBOR Dealer or Substitute LIBOR
          Dealers to provide the quotation or quotations not being supplied by
          any LIBOR Dealer or LIBOR Dealers. The Company promptly shall advise
          the Auction Agent of any such selection. If the Company does not
          select any such Substitute LIBOR Dealer or Substitute LIBOR Dealers,
          then the rates shall be supplied by the remaining LIBOR Dealer or
          LIBOR Dealers.

               (iii) If, after the date of this Agreement, there is any change
          in the prevailing rating of AMPS by either of the rating agencies
          (or Substitute Rating Agency or successor rating agency) referred to
          in the definition of the Maximum Applicable Rate, subject to the
          provisions of paragraph 12 of the Articles Supplementary, thereby
          resulting in any change in the corresponding applicable percentage
          or corresponding applicable spread for the AMPS, as set forth in
          said definition (the "Percentage or Spread"), the Company shall
          notify the Auction Agent in writing of such change in the Percentage
          or Spread prior to 9:00 A.M. on the Auction Date for AMPS next
          succeeding such change. The Percentage for the



                                      5
<PAGE>

          AMPS on the date of this Agreement is as specified in paragraph
          10(a)(vii) of the Articles Supplementary. The Auction Agent shall be
          entitled to conclusively rely on the last Percentage or Spread of
          which it has received notice from the Company (or, in the absence of
          such notice, the Percentage or Spread set forth in the preceding
          sentence) in determining the Maximum Applicable Rate as set forth in
          Section 2.2(d)(i) hereof.

          (e) The Auction Agent shall maintain by series a current registry of
          the Existing Holders of the shares of each series of AMPS for
          purposes of each Auction. The Company shall use its best efforts to
          provide or cause to be provided to the Auction Agent within ten
          Business Days following the date of the Closing a list of the
          initial Existing Holders of each series of AMPS, and the
          Broker-Dealer of each such Existing Holder through which such
          Existing Holder purchased such shares. The Auction Agent may
          conclusively rely upon, as evidence of the identities of the
          Existing Holders, such list, the results of each Auction and notices
          from any Existing Holder, the Agent Member of any Existing Holder or
          the Broker-Dealer of any Existing Holder with respect to such
          Existing Holder's transfer of any shares of AMPS to another Person.

          (f) In the event of any partial redemption of any series of AMPS,
          upon notice by the Company to the Auction Agent of such partial
          redemption, the Auction Agent promptly shall request the Securities
          Depository to notify the Auction Agent of the identities of the
          Agent Members (and the respective numbers of shares) from the
          accounts of which shares have been called for redemption and the
          person or department at such Agent Member to contact regarding such
          redemption, and at least two Business Days prior to the Auction
          preceding the date of redemption with respect to shares of such
          series of AMPS being partially redeemed, the Auction Agent shall
          request each Agent Member so identified to disclose to the Auction
          Agent (upon selection by such Agent Member of the Existing Holders
          whose shares are to be redeemed) the number of shares of such series
          of AMPS of each such Existing Holder, if any, to be redeemed by the
          Company, provided that the Auction Agent has been furnished with the
          name and telephone number of a person or department at such Agent
          Member from which it is to request such information. In the absence
          of receiving any such information with respect to an Existing
          Holder, from such Existing Holder's Agent Member or otherwise, the
          Auction Agent may continue to treat such Existing Holder as having
          ownership of the number of shares of such series of AMPS shown in
          the Auction Agent's registry of Existing Holders.

               (i) The Auction Agent shall register a transfer of the ownership
          of shares of a series of AMPS from an Existing Holder to another
          Existing Holder, or to another Person if permitted by the Company,
          only if (A) such transfer is made pursuant to an Auction or (B) if
          such transfer is made other than pursuant to an Auction, the Auction
          Agent has been notified of such transfer in writing in a notice
          substantially in the form of Exhibit C to the Broker-Dealer
          Agreements, by such Existing Holder or by the Agent Member of such
          Existing Holder. The Auction Agent is not required to accept any
          notice of transfer delivered for an



                                      6
<PAGE>

          Auction unless it is received by the Auction Agent by 3:00 P.M. on
          the Business Day next preceding the applicable Auction Date. The
          Auction Agent shall rescind a transfer made on the registry of the
          Existing Holders of any shares of AMPS if the Auction Agent has been
          notified in writing, in a notice substantially in the form of
          Exhibit D to the Broker-Dealer Agreement, by the Agent Member or the
          Broker-Dealer of any Person that (i) purchased any shares of AMPS
          and the seller failed to deliver such shares or (ii) sold any shares
          of AMPS and the purchaser failed to make payment to such Person upon
          delivery to the purchaser of such shares.

          (g) The Auction Agent may, but shall not be obligated, to request
          that the Broker-Dealers, as set forth in Section 3.2(c) of the
          Broker-Dealer Agreements, provide the Auction Agent with a list of
          their respective customers that such Broker-Dealers believe are
          Beneficial Owners of shares of any series of AMPS. The Auction Agent
          shall keep confidential any such information and shall not disclose
          any such information so provided to any Person other than the
          relevant Broker-Dealer and the Company; provided, however, that the
          Auction Agent reserves the right and is authorized to disclose any
          such information if (i) it is ordered to do so by a court of
          competent jurisdiction or a regulatory body, judicial or
          quasi-judicial agency or authority having the authority to compel
          such disclosure, (ii) it is advised by its counsel that its failure
          to do so would be unlawful or (iii) failure to do so would expose
          the Auction Agent to loss, liability, claim, damage or expense for
          which it has not received indemnity or security satisfactory to it.

     2.3. Auction Schedule.

     The Auction Agent shall conduct Auctions in accordance with the schedule
set forth below. Such schedule may be changed by the Auction Agent with the
consent of the Company, which consent shall not be withheld unreasonably. The
Auction Agent shall give notice of any such change to each Broker-Dealer. Such
notice shall be received prior to the first Auction Date on which any such
change shall be effective. The Auction Agent will follow The Bond Market
Association's Market Practice U.S. Holiday Recommendations for shortened
trading days for bond markets (the "BMA Recommendation") unless the Auction
Agent is instructed otherwise by the Company. In the event of a BMA
Recommendation on an Auction Date, the Submission Deadline will be 11:30 A.M.
instead of 1:00 P.M. and as a result the notice of Auction results will occur
at an earlier time.

          Time                                      Event
          ----                                      -----
     By 9:30 A.M.                Auction Agent advises the Company and
                                 the Broker-Dealers of the Reference Rate and
                                 the Maximum Applicable Rate as set forth in
                                 Section 2.2(d)(i) hereof.

     9:30 A.M. - 1:00 P.M.       Auction Agent assembles information
                                 communicated to it by Broker-Dealers as
                                 provided in Paragraph 10(c)(I) of the



                                      7
<PAGE>

                                  Articles Supplementary. Submission deadline
                                  is 1:00 P.M.

     Not earlier than 1:00 P.M.   Auction Agent makes determinations pursuant
                                  to Paragraph 10(d)(i) of the Articles
                                  Supplementary.

     By approximately             Auction Agent advises the Company of the
     3:00 P.M.                    results of the Auction as provided in
                                  Paragraph 10(d)(ii) of the Articles
                                  Supplementary.

                                  Submitted Bids and Submitted Sell Orders are
                                  accepted and rejected in whole or in part
                                  and shares of AMPS allocated as provided in
                                  Paragraph 10(e) of the Articles Supplementary.

                                  Auction Agent gives notice of the Auction
                                  results as set forth in Section 2.4 hereof.

     2.4. Notice of Auction Results.

     On each Auction Date, the Auction Agent shall notify Broker-Dealers of
the results of the Auction held on such date by telephone or other mutually
acceptable electronic means as set forth in Paragraph (a) of the Settlement
Procedures. Unless instructed otherwise in writing by the Company, the Auction
Agent is authorized to release the Applicable Rate determined as a result of
the Auction for public dissemination.

     2.5. Broker-Dealers.

          (a) Not later than 12:00 noon on each Auction Date, the Company
          shall pay to the Auction Agent in Federal Funds or similar same-day
          funds an amount in cash equal to (i) in the case of any Auction Date
          immediately preceding a 7-Day Dividend Period, the product of (A) a
          fraction the numerator of which is the number of days in such
          Dividend Period (calculated by counting the first day of such
          Dividend Period but excluding the last day thereof) and the
          denominator of which is 360, times (B) 1/4 of 1%, times (C) $25,000
          times (D) the sum of the aggregate number of Outstanding shares of
          the series of AMPS for which the Auction is conducted and (ii) in
          the case of any Special Dividend Period, the amount determined by
          mutual consent of the Company and the Broker-Dealers pursuant to
          Section 3.5 of the Broker-Dealer Agreements. The Auction Agent shall
          apply such moneys as set forth in Section 3.5 of the Broker-Dealer
          Agreements and shall thereafter remit to the Company any remaining
          funds paid to the Auction Agent pursuant to this Section 2.5(a).

          (b) The Company may designate an Affiliate or Merrill Lynch, Pierce,
          Fenner & Smith Incorporated to act as a Broker-Dealer.

          (c) The Auction Agent shall terminate any Broker-Dealer Agreement as
          set forth therein if so directed by the Company.



                                      8
<PAGE>

          (d) Subject to Section 2.5(b) hereof, the Auction Agent from time to
          time shall enter into such Broker-Dealer Agreements as the Company
          shall request.

          (e) Subject to Section 2.2(a), the Auction Agent shall maintain a
          list of Broker-Dealers.

     2.6. Ownership of Shares of AMPS and Submission of Bids by the Company
          and its Affiliates.

     Neither the Company nor any Affiliate of the Company may submit any Sell
Order or Bid, directly or indirectly, in any Auction, except that an Affiliate
of the Company that is a Broker-Dealer may submit a Sell Order or Bid on
behalf of a Beneficial Owner or a Potential Beneficial Owner. The Company
shall notify the Auction Agent if the Company or, to the best of the Company's
knowledge, any Affiliate of the Company becomes a Beneficial Owner of any
shares of AMPS. Any shares of a series of AMPS redeemed, purchased or
otherwise acquired (i) by the Company shall not be reissued, except in
accordance with the requirements of the Securities Act of 1933, as amended, or
(ii) by its Affiliates shall not be transferred (other than to the Company).
The Auction Agent shall have no duty or liability with respect to enforcement
of this Section 2.6.

     2.7. Access to and Maintenance of Auction Records.

     The Auction Agent shall afford to the Company, its agents, independent
public accountants and counsel, access at reasonable times during normal
business hours to review and make extracts or copies (at the Company's sole
cost and expense) of all books, records, documents and other information
concerning the conduct and results of Auctions, provided that any such agent,
accountant or counsel shall furnish the Auction Agent with a letter from the
Company requesting that the Auction Agent afford such person access. The
Auction Agent shall maintain records relating to any Auction for a period of
two years after such Auction (unless requested by the Company to maintain such
records for such longer period not in excess of four years, then for such
longer period which shall not be in excess of four years), and such records,
in reasonable detail, shall accurately and fairly reflect the actions taken by
the Auction Agent hereunder. The Company agrees to keep confidential any
information regarding the customers of any Broker-Dealer received from the
Auction Agent in connection with this Agreement or any Auction, and shall not
disclose such information or permit the disclosure of such information without
the prior written consent of the applicable Broker-Dealer to anyone except
such agent, accountant or counsel engaged to audit or review the results of
Auctions as permitted by this Section 2.7, provided that the Company reserves
the right to disclose any such information if it is advised by its counsel
that its failure to do so would (i) be unlawful or (ii) expose it to
liability, unless the Broker-Dealer shall have offered indemnification
satisfactory to the Company. Any such agent, accountant or counsel, before
having access to such information, shall agree to keep such information
confidential and not to disclose such information or permit disclosure of such
information without the prior written consent of the applicable Broker-Dealer,
provided that such agent, accountant or counsel may reserve the right to
disclose any such information if it is advised by its counsel that its failure
to do so would (i) be unlawful or (ii) expose it to liability, unless the
Broker-Dealer shall have offered indemnification satisfactory to such agent,
accountant or counsel. The Auction Agent shall have no liability in connection
with allowing



                                      9
<PAGE>

access to the Company's books, records, documents and other information
pursuant to the terms of this Section 2.7 to the Company, its agents,
independent public accountants and counsel.

III. THE AUCTION AGENT AS PAYING AGENT.

     3.1. The Paying Agent.

     The Board of Directors of the Company has adopted a resolution appointing
The Bank of New York as transfer agent, registrar, dividend disbursing agent
and redemption agent for the Company in connection with any shares of AMPS (in
such capacity, the "Paying Agent"). The Paying Agent hereby accepts such
appointment and agrees to act in accordance with its standard procedures and
the provisions of the Articles Supplementary which are specified herein with
respect to the shares of AMPS and as set forth in this Section 3.

     3.2. The Company's Notices to the Paying Agent.

     Whenever any shares of AMPS are to be redeemed, the Company promptly
shall deliver to the Paying Agent a Notice of Redemption upon the terms set
forth in Section 4(c) of the Articles Supplementary, which will be mailed by
the Company to each Holder at least five Business Days prior to the date such
Notice of Redemption is required to be mailed pursuant to the Articles
Supplementary. The Paying Agent shall have no responsibility to confirm or
verify the accuracy of any such Notice.

     3.3. The Company to Provide Funds for Dividends and Redemptions.

          (a) Not later than noon on each Dividend Payment Date, the Company
          shall deposit with the Paying Agent an aggregate amount of Federal
          Funds or similar same-day funds equal to the declared dividends to
          be paid to Holders on such Dividend Payment Date, and shall give the
          Paying Agent irrevocable instructions to apply such funds to the
          payment of such dividends on such Dividend Payment Date.

          (b) If the Company shall give a Notice of Redemption, then by noon
          of the date fixed for redemption, the Company shall deposit in trust
          with the Paying Agent an aggregate amount of Federal Funds or
          similar same-day funds sufficient to redeem such shares of AMPS
          called for redemption and shall give the Paying Agent irrevocable
          instructions and authority to pay the redemption price to the
          Holders of shares of AMPS called for redemption upon surrender of
          the certificate or certificates therefor.

     3.4. Disbursing Dividends and Redemption Price.

     After receipt of the Federal Funds or similar same-day funds and
instructions from the Company described in Sections 3.3(a) and (b) above, the
Paying Agent shall pay to the Holders (or former Holders) entitled thereto (i)
on each corresponding Dividend Payment Date, dividends on the shares of AMPS
and (ii) on any date fixed for redemption, the redemption price of any shares
of AMPS called for redemption. The amount of dividends for any Dividend Period
to be paid by the Paying Agent to Holders will be determined by the Company as
set forth in



                                      10
<PAGE>

Paragraph 2 of the Articles Supplementary. The redemption price to be paid by
the Paying Agent to the Holders of any shares of AMPS called for redemption
will be determined as set forth in Paragraph 4 of the Articles Supplementary.
The Company shall notify the Paying Agent in writing of a decision to redeem
any shares of AMPS on or prior to the date specified in Section 3.2 above, and
such notice by the Company to the Paying Agent shall contain the information
required to be stated in a Notice of Redemption required to be mailed by the
Company to such Holders. The Paying Agent shall have no duty to determine the
redemption price and may rely conclusively on the amount thereof set forth in
a Notice of Redemption.

IV.  THE PAYING AGENT AS TRANSFER AGENT AND REGISTRAR.

     4.1. Original Issue of Stock Certificates.

     On the Date of Original Issue for any share of AMPS, one certificate for
each series of AMPS shall be issued by the Company and registered in the name
of Cede & Co., as nominee of the Securities Depository, and countersigned by
the Paying Agent. The Company will give the Auction Agent prior written notice
and instruction as to the issuance and redemption of AMPS.

     4.2. Registration of Transfer or Exchange of Shares.

     Except as provided in this Section 4.2, the shares of each series of AMPS
shall be registered solely in the name of the Securities Depository or its
nominee. If the Securities Depository shall give notice of its intention to
resign as such, and if the Company shall not have selected a substitute
Securities Depository acceptable to the Paying Agent prior to such
resignation, then upon such resignation, the shares of each series of AMPS, at
the Company's request, may be registered for transfer or exchange, and new
certificates thereupon shall be issued in the name of the designated
transferee or transferees, upon surrender of the old certificate in form
deemed by the Paying Agent properly endorsed for transfer with (a) all
necessary endorsers' signatures guaranteed in such manner and form as the
Paying Agent may require by a guarantor reasonably believed by the Paying
Agent to be responsible, (b) such assurances as the Paying Agent shall deem
necessary or appropriate to evidence the genuineness and effectiveness of each
necessary endorsement and (c) satisfactory evidence of compliance with all
applicable laws relating to the collection of taxes in connection with any
registration of transfer or exchange or funds necessary for the payment of
such taxes.

     4.3. Removal of Legend.

     Any request for removal of a legend indicating a restriction on transfer
from a certificate evidencing shares of a series of AMPS shall be accompanied
by an opinion of counsel stating that such legend may be removed and such
shares may be transferred free of the restriction described in such legend,
said opinion to be delivered under cover of a letter from a Company Officer
authorizing the Paying Agent to remove the legend on the basis of said
opinion.

     4.4. Lost, Stolen or Destroyed Stock Certificates.

     The Paying Agent shall issue and register replacement certificates for
certificates represented to have been lost, stolen or destroyed, upon the
fulfillment of such requirements as shall be deemed appropriate by the Company
and by the Paying Agent, subject at all times to



                                      11
<PAGE>

provisions of law, the By-Laws of the Company governing such matters and
resolutions adopted by the Company with respect to lost, stolen or destroyed
securities. The Paying Agent may issue new certificates in exchange for and
upon the cancellation of mutilated certificates. Any request by the Company to
the Paying Agent to issue a replacement or new certificate pursuant to this
Section 4.4 shall be deemed to be a representation and warranty by the Company
to the Paying Agent that such issuance will comply with provisions of
applicable law and the By-Laws and resolutions of the Company.

     4.5. Disposition of Canceled Certificates; Record Retention.

     The Paying Agent shall retain stock certificates which have been canceled
in transfer or in exchange and accompanying documentation in accordance with
applicable rules and regulations of the Securities and Exchange Commission for
two calendar years from the date of such cancellation. The Paying Agent, upon
written request by the Company, shall afford to the Company, its agents and
counsel access at reasonable times during normal business hours to review and
make extracts or copies (at the Company's sole cost and expense) of such
certificates and accompanying documentation. Upon request by the Company at
any time during this two-year period, the Paying Agent shall deliver to the
Company the canceled certificates and accompanying documentation. The Company,
at its expense, shall retain such records for a minimum additional period of
four calendar years from the date of delivery of the records to the Company
and shall make such records available during this period at any time, or from
time to time, for reasonable periodic, special, or other examinations by
representatives of the Securities and Exchange Commission. The Company also
shall undertake to furnish to the Securities and Exchange Commission, upon
demand, either at their principal office or at any regional office, complete,
correct and current hard copies of any and all such records.

     4.6. Stock Register.

     The Paying Agent shall maintain the stock register, which shall contain a
list of the Holders, the number of shares held by each Holder and the address
of each Holder. The Paying Agent shall record in the stock register any change
of address of a Holder upon notice by such Holder. In case of any written
request or demand for the inspection of the stock register or any other books
of the Company in the possession of the Paying Agent, the Paying Agent will
notify the Company and secure instructions as to permitting or refusing such
inspection; provided, however, that the Auction Agent reserves the right and
is authorized to permit such inspection if (i) it is ordered to do so by a
court of competent jurisdiction or a regulatory body, judicial or
quasi-judicial agency or authority having the authority to compel such
disclosure, (ii) it is advised by its counsel that its failure to do so would
be unlawful or (iii) failure to do so would expose the Auction Agent to loss,
liability, claim, damage or expense for which it has not received indemnity or
security satisfactory to it.

     4.7. Return of Funds.

     Any funds deposited with the Paying Agent by the Company for any reason
under this Agreement, including for the payment of dividends or the redemption
of shares of any series of AMPS, that remain with the Paying Agent after 12
months shall be repaid to the Company upon written request by the Company.



                                      12
<PAGE>

V.   REPRESENTATIONS AND WARRANTIES.

     5.1. Representations and Warranties of the Company.

     The Company represents and warrants to the Auction Agent that:

               (i) the Company is duly organized and is validly existing as a
          corporation in good standing under the laws of the State of
          Maryland, and has full power to execute and deliver this Agreement
          and to authorize, create and issue the shares of each series of
          AMPS;

               (ii) the Company is registered with the Securities and Exchange
          Commission under the Investment Company Act of 1940, as amended, as
          a closed-end, diversified, management investment company;

               (iii) this Agreement has been duly and validly authorized,
          executed and delivered by the Company and constitutes the legal,
          valid and binding obligation of the Company, enforceable against the
          Company in accordance with its terms, subject as to such
          enforceability to bankruptcy, insolvency, reorganization and other
          laws of general applicability relating to or affecting creditors'
          rights and to general equitable principles;

               (iv) the forms of the certificates evidencing the shares of
          each series of AMPS comply with all applicable laws of the State of
          Maryland;

               (v) the shares of each series of AMPS have been duly and
          validly authorized by the Company and, upon completion of the
          initial sale of the shares of such series of AMPS and receipt of
          payment therefor, will be validly issued, fully paid and
          nonassessable;

               (vi) at the time of the offering of the shares of each series
          of AMPS, the shares offered will be registered under the Securities
          Act of 1933, as amended, and no further action by or before any
          governmental body or authority of the United States or of any state
          thereof is required in connection with the execution and delivery of
          this Agreement or will be required in connection with the issuance
          of the shares of each series of AMPS, except such action as required
          by applicable state securities or insurance laws, all of which
          action will have been taken;

               (vii) the execution and delivery of this Agreement and the
          issuance and delivery of the shares of each series of AMPS do not
          and will not conflict with, violate, or result in a breach of, the
          terms, conditions or provisions of, or constitute a default under,
          the Charter or the By-Laws of the Company, any law or regulation
          applicable to the Company, any order or decree of any court or
          public authority having jurisdiction over the Company, or any
          mortgage, indenture, contract, agreement or undertaking to which the
          Company is a party or by which it is bound; and



                                      13
<PAGE>

               (viii) no taxes are payable upon or in respect of the execution
          of this Agreement or will be payable upon or in respect of the
          issuance of the shares of each series of AMPS.

     5.2. Representations and Warranties of the Auction Agent.

     The Auction Agent represents and warrants to the Company that the Auction
Agent is duly organized and is validly existing as a banking corporation in
good standing under the laws of the State of New York, and has the corporate
power to enter into and perform its obligations under this Agreement.

VI.  THE AUCTION AGENT.

     6.1. Duties and Responsibilities.

          (a) The Auction Agent is acting solely as agent for the Company
          hereunder and owes no fiduciary duties to any Person except as
          specifically provided by this Agreement. The Auction Agent owes no
          duties to any person other than the Company by reason of this
          Agreement.

          (b) The Auction Agent undertakes to perform such duties and only
          such duties as are set forth specifically in this Agreement, and no
          implied covenants or obligations shall be read into this Agreement
          against the Auction Agent.

          (c) In the absence of willful misconduct or negligence on its part,
          the Auction Agent shall not be liable for any action taken, suffered
          or omitted by it or for any error of judgment made by it in the
          performance of its duties under this Agreement. The Auction Agent
          shall not be liable for any error of judgment made in the absence of
          willful misconduct unless the Auction Agent shall have been
          negligent in ascertaining (or failing to ascertain) the pertinent
          facts.

          (d) The Auction Agent shall not be responsible or liable for any
          failure or delay in the performance of its obligations under this
          Agreement arising out of or caused, directly or indirectly, by
          circumstances beyond its reasonable control, including, without
          limitation, acts of God; earthquakes; fires, floods; wars; civil or
          military disturbances; sabotage; acts of war or terrorism;
          epidemics; riots; interruptions, loss or malfunctions of utilities;
          computer (hardware or software) or communications services;
          accidents; labor disputes (including, without limitation, strikes or
          work stoppages); acts of civil or military authority or governmental
          actions; it being understood that the Auction Agent shall use
          reasonable efforts which are consistent with accepted practices in
          the banking industry to resume performance as soon as practicable
          under the circumstances. In no event shall the Auction Agent be
          responsible or liable for special, indirect or consequential loss or
          damage of any kind whatsoever (including, but not limited to, loss
          of profit), even if the Auction Agent has been advised of the
          likelihood of such loss or damage and regardless of the form of
          action.



                                      14
<PAGE>

     6.2. Rights of the Auction Agent.

          (a) The Auction Agent may conclusively rely upon, and shall be
          protected in acting or refraining from acting upon, any
          communication authorized hereby and any written instruction, notice,
          request, direction, consent, report, certificate, share certificate
          or other instrument, paper or document reasonably believed by it to
          be genuine. The Auction Agent shall not be liable for acting upon
          any telephone communication or by other electronic means acceptable
          to the parties authorized hereby which the Auction Agent believes in
          good faith to have been given by the Company or by a Broker-Dealer.
          The Auction Agent may record telephone communications with the
          Company or with the Broker-Dealers or with both.

          (b) The Auction Agent may consult with counsel of its choice, and
          the written advice of such counsel shall be full and complete
          authorization and protection in respect of any action taken,
          suffered or omitted by it hereunder in good faith and in reliance
          thereon.

          (c) The Auction Agent shall not be required to advance, expend or
          risk its own funds or otherwise incur or become exposed to financial
          liability in the performance of its duties hereunder. The Auction
          Agent shall be under no liability for interest on any money received
          by it hereunder except as otherwise agreed in writing with the
          Company.

          (d) The Auction Agent may perform its duties and exercise its rights
          hereunder either directly or by or through agents or attorneys.

          (e) The Auction Agent shall have no obligation or liability with
          respect to the registration or exemption therefrom of the AMPS under
          the federal or state securities laws or with respect to the
          sufficiency or the conformity of any transfer of the AMPS to the
          terms of the Auction Agreement, the Broker-Dealer Agreements, the
          AMPS or any other document contemplated thereby.

     6.3. Auction Agent's Disclaimer.

     The Auction Agent makes no representation as to the validity or the
adequacy of this Agreement, the Broker-Dealer Agreements or the AMPS.

     6.4. Compensation, Expenses and Indemnification.

          (a) The Company shall pay to the Auction Agent reasonable
          compensation for all services rendered by it under this Agreement
          and under the Broker-Dealer Agreements as shall be agreed by the
          Auction Agent and the Company from time to time as shall be set
          forth in a separate writing signed by the Company and the Auction
          Agent, subject to adjustments if the AMPS no longer are held of
          record by the Securities Depository or its nominee or if there shall
          be such other change as shall increase materially the Auction
          Agent's obligations hereunder or under the Broker-Dealer Agreements.



                                      15
<PAGE>

          (b) The Company shall reimburse the Auction Agent upon its request
          for all reasonable expenses, disbursements and advances incurred or
          made by the Auction Agent in accordance with any provision of this
          Agreement and of the Broker-Dealer Agreements (including the
          reasonable compensation, expenses and disbursements of its agents
          and counsel), except any expense, disbursement or advance
          attributable to its negligence or willful misconduct.

          (c) The Company shall indemnify the Auction Agent, for, and hold it
          harmless against, any loss, liability or expense incurred without
          negligence or willful misconduct on its part arising out of or in
          connection with its agency under this Agreement and under the
          Broker-Dealer Agreements, including the costs and expenses of
          defending itself against any claim of liability in connection with
          its exercise or performance of any of its duties hereunder and
          thereunder, except such as may result from its negligence or willful
          misconduct.

VII. MISCELLANEOUS.

     7.1. Term of Agreement.

          (a) The term of this Agreement is unlimited unless it shall be
          terminated as provided in this Section 7.1. The Company may
          terminate this Agreement at any time by so notifying the Auction
          Agent, provided that if any AMPS remain outstanding the Company
          shall have entered into an agreement in substantially the form of
          this Agreement with a successor auction agent. The Auction Agent may
          terminate this Agreement upon prior notice to the Company on the
          date specified in such notice, which date shall be no earlier than
          60 days after delivery of such notice. If the Auction Agent resigns
          while any shares of AMPS remain outstanding, the Company shall use
          its best efforts to enter into an agreement with a successor auction
          agent containing substantially the same terms and conditions as this
          Agreement.

          (b) Except as otherwise provided in this Section 7.1(b), the
          respective rights and duties of the Company and the Auction Agent
          under this Agreement shall cease upon termination of this Agreement.
          The Company's representations, warranties, covenants and obligations
          to the Auction Agent under Sections 5 and 6.4 hereof shall survive
          the termination hereof. Upon termination of this Agreement, the
          Auction Agent shall (i) resign as Auction Agent under the
          Broker-Dealer Agreements, (ii) at the Company's request, deliver
          promptly to the Company copies of all books and records maintained
          by it in connection with its duties hereunder, and (iii) at the
          request of the Company, transfer promptly to the Company or to any
          successor auction agent any funds deposited by the Company with the
          Auction Agent (whether in its capacity as Auction Agent or as Paying
          Agent) pursuant to this Agreement which have not been distributed
          previously by the Auction Agent in accordance with this Agreement.



                                      16
<PAGE>

          (c) If the AMPS shall no longer settle through an electronic book
          entry system, the Auction Agent (but not necessarily the Paying
          Agent) shall cease to perform its duties hereunder, and under any
          Broker-Dealer Agreement.

     7.2. Communications.

     Except for (i) communications authorized to be made by telephone (or by
other electronic means acceptable to the parties) pursuant to this Agreement
or the Auction Procedures and (ii) communications in connection with Auctions
(other than those expressly required to be in writing), all notices, requests
and other communications to any party hereunder shall be in writing (including
telecopy or similar writing) and shall be given to such party at its address
or telecopier number set forth below:

     If to the Company,             MUNIVEST FUND II, INC.
     addressed to:                  800 Scudders Mill Road
                                    Plainsboro, New Jersey 08536

                                    Attention:  Treasurer
                                    Telephone No.: (609) 282-2800
                                    Telecopier No.: (609) 282-3472

     If to the Auction              The Bank of New York
     Agent, addressed to:           Corporate Trust-Dealing and Trading Group
                                    101 Barclay Street, 7W
                                    New York, New York 10286

                                    Attention: Auction Desk
                                    Telephone No.: (212) 815-3450
                                    Telecopier No.: (212) 815-3440

or such other address or telecopier number as such party hereafter may specify
for such purpose by notice to the other party. Each such notice, request or
communication shall be effective when delivered at the address specified
herein. Communications shall be given on behalf of the Company by a Company
Officer and on behalf of the Auction Agent by an Authorized Officer.

     7.3. Entire Agreement.

     This Agreement contains the entire agreement between the parties relating
to the subject matter hereof, and there are no other representations,
endorsements, promises, agreements or understandings, oral, written or
inferred, between the parties relating to the subject matter hereof, except
for agreements relating to the compensation of the Auction Agent.

     7.4. Benefits.

     Nothing herein, express or implied, shall give to any Person, other than
the Company, the Auction Agent and their respective successors and assigns,
any benefit of any legal or equitable right, remedy or claim hereunder.



                                      17
<PAGE>

     7.5. Amendment; Waiver.

          (a) This Agreement shall not be deemed or construed to be modified,
          amended, rescinded, canceled or waived, in whole or in part, except
          by a written instrument signed by a duly authorized representative
          of the party to be charged. The Company shall notify the Auction
          Agent of any change in the Articles Supplementary prior to the
          effective date of any such change. If any such change in the
          Articles Supplementary materially increases the Auction Agent's
          obligations hereunder, the Company shall obtain the written consent
          to the Auction Agent prior to the effective date of such change.

          (b) Failure of either party hereto to exercise any right or remedy
          hereunder in the event of a breach hereof by the other party shall
          not constitute a waiver of any such right or remedy with respect to
          any subsequent breach.

     7.6. Successors and Assigns.

     This Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the respective successors and permitted assigns of each of the
Company and the Auction Agent. This Agreement may not be assigned by either
party hereto absent the prior written consent of the other party, which
consent shall not be withheld unreasonably.

     7.7. Severability.

     If any clause, provision or section hereof shall be ruled invalid or
unenforceable by any court of competent jurisdiction, the invalidity or
unenforceability of such clause, provision or section shall not affect any of
the remaining clauses, provisions or sections hereof.

     7.8. Execution in Counterparts.

     This Agreement may be executed in several counterparts, each of which
shall be an original and all of which shall constitute but one and the same
instrument.

     7.9. Governing Law.

     This Agreement shall be governed by and construed in accordance with the
laws of the State of New York applicable to agreements made and to be
performed in said State.



                                      18
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the date first above written.

                                       MUNIVEST FUND II, INC.



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



                                       THE BANK OF NEW YORK



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



                                      19

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2(K)(6)
<SEQUENCE>13
<FILENAME>efc4-1994_5616566ex992k6.txt
<TEXT>
                                                                EXHIBIT (K)(6)

                                [LOGO OMITTED]


             Book-Entry-Only Auction-Rate/Money Market Preferred/
                     and Remarketed Preferred Securities


                          Letter of Representations
                 [To be Completed by Issuer and Trust Company]

                            MUNIVEST FUND II, INC.
             ----------------------------------------------------
                               [Name of Issuer]

                             The Bank of New York
             ----------------------------------------------------
                            [Name of Trust Company]

                                                             __________, 2005
                                                                 [Date]

Attention: General Counsel's Office
The Depository Trust Company
55 Water Street 49th Floor
New York, NY  10041-0099

        Re:    MUNIVEST FUND II, INC.
               ----------------------------------------------------------------
               Issuance of Auction Market Preferred Stock ("AMPS"),
               ----------------------------------------------------------------
               Series D (#                  )
               ----------------------------------------------------------------
               [Issue description, including CUSIP number (the "Securities")]

Ladies and Gentlemen:

     This letter sets forth our understanding with respect to certain matters
relating to the Securities. Trust Company shall act as transfer agent,
registrar, dividend disbursing agent, redemption agent or other such agent
with respect to the Securities. The Securities have been issued pursuant to a
prospectus, private placement memorandum, or other such document authorizing
the issuance of the Securities dated ___________________, 2004 (the "Document")
* ________________________________ is distributing the Securities through the
  ["Underwriter/Placement Agent"]
Depository Trust Company ("DTC").


     The Depository Trust Company is herein referred to as "DTC".

* Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated

<PAGE>

     To induce DTC to accept the Securities as eligible for deposit at DTC,
and to act in accordance with its Rules with respect to the Securities, Issuer
and Trust Company make the following representations to DTC:

     1. Prior to closing on the Securities on ________________, 2005 there
shall be deposited with DTC one or more Security certificates registered in
the name of DTC's nominee, Cede & Co., which represents 100% of the offering
value of the Securities. Said certificate(s) shall remain in DTC's custody as
provided in the Document. If, however, the aggregate principal amount of the
Securities exceeds $400 million, one certificate shall be issued with respect
to each $400 million of principal amount and an additional certificate shall
be issued with respect to any remaining principal amount. Each Security
certificate shall bear the following legend:

          Unless this certificate is presented by an authorized representative
     of The Depository Trust Company, a New York corporation ("DTC"), to
     Issuer or its agent for registration of transfer, exchange, or payment,
     and any certificate issued is registered in the name of Cede & Co. or in
     such other name as is requested by an authorized representative of DTC
     (and any payment is made to Cede & Co. or to such other entity as is
     requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE,
     OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
     WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an
     interest herein.

     2. Issuer: (a) understands that DTC has no obligation to, and will not,
communicate to its participants ("Participants") or to any person having an
interest in the Securities any information contained in the Security
certificate(s); and (b) acknowledges that neither DTC's Participants nor any
person having an interest in the Securities shall be deemed to have notice of
the provisions of the Security certificate(s) by virtue of submission of such
certificate(s) to DTC.

     3. In the event of any solicitation of consents from or voting by holders
of the Securities, Issuer shall establish a record date for such purposes
(with no provision for revocation of consents or votes by subsequent holders)
and shall send notice of such record date to DTC no fewer than 15 calendar
days in advance of such record date. Notices to DTC pursuant to this Paragraph
by telecopy shall be directed to DTC's Reorganization Department, Proxy Unit
at (212) 855-5181 or (212) 855-5182. If the party sending the notice does not
receive a telecopy receipt from DTC confirming that the notice has been
received, such party shall telephone (212) 855-5202. Notices to DTC pursuant
to this Paragraph, by mail or by any other means, shall be sent to:

                      Supervisor, Proxy Unit
                      Reorganization Department
                      The Depository Trust Company
                      55 Water Street 50th Floor
                      New York, NY  10041-0099



                                     -2-
<PAGE>

     4. In the event of a full or partial redemption of the Securities, Issuer
or Trust Company shall send a notice to DTC specifying: (a) the number of
Securities to be redeemed; and (b) the date such notice is to be distributed
to Security holders (the "Publication Date"). Such notice shall be sent to DTC
by a secure means (e.g., legible telecopy, registered or certified mail,
overnight delivery) in a timely manner designed to assure that such notice is
in DTC's possession no later than the close of business on the business day
before or, if possible, two business days before the Publication Date. Issuer
or Trust Company shall forward such notice either in a separate secure
transmission for each CUSIP number or in a secure transmission for multiple
CUSIP numbers (if applicable) which includes a manifest or list of each CUSIP
number submitted in that transmission. (The party sending such notice shall
have a method to verify subsequently the use of such means and the timeliness
of such notice.) The Publication Date shall be no fewer than 30 days nor more
than 60 days prior to the redemption date. Notices to DTC pursuant to this
Paragraph by telecopy shall be directed to DTC's Call Notification Department
at (516) 227-4164 or (516) 227-4190. If the party sending the notice does not
receive a telecopy receipt from DTC confirming that the notice has been
received, such party shall telephone (516) 227-4070. Notices to DTC pursuant
to this Paragraph, by mail or by any other means, shall be sent to:

                    Manager, Call Notification Department
                    The Depository Trust Company
                    711 Stewart Avenue
                    Garden City, NY  11530-4719

     5. In the event of an invitation to tender the Securities (including
mandatory tenders, exchanges, and capital changes), notice by Issuer or Trust
Company to Security holders specifying the terms of the tender and the
Publication Date of such notice shall be sent to DTC by a secure means in the
manner set forth in the preceding Paragraph. Notices to DTC pursuant to this
Paragraph and notices of other corporate actions by telecopy shall be directed
to DTC's Reorganization Department at (212) 855-5488. If the party sending the
notice does not receive a telecopy receipt from DTC confirming that the notice
has been received, such party shall telephone (212) 855-5290. Notices to DTC
pursuant to this Paragraph, by mail or by any other means, shall be sent to:

                    Manager, Reorganization Department
                    Reorganization Window
                    The Depository Trust Company
                    55 Water Street 50th Floor
                    New York, NY  10041-0099

     6. All notices and payment advices sent to DTC shall contain the CUSIP
number of the Securities.

     7. The Document indicates that the dividend rate for the Securities may
vary from time to time. Absent other existing arrangements with DTC, Issuer or
Trust Company shall give DTC notice of each such change in the dividend rate,
on the same day that the new rate is determined, by telephoning DTC's Dividend
Announcement Section at (212) 855-4550, or by telecopy sent to (212) 855-4555.
Such verbal or telecopy notice shall be followed by prompt written
confirmation sent by a secure means (e.g., legible telecopy, registered or
certified mail, overnight delivery) in a timely manner designed to assure that
such notice is in DTC's possession



                                     -3-
<PAGE>

no later than the close of business on the business day before or, if
possible, two business days before the Publication Date. Issuer or Agent shall
forward such notice either in a separate secure transmission for each CUSIP
number or in a secure transmission for multiple CUSIP numbers (if applicable)
which includes a manifest or list of each CUSIP number submitted in that
transmission. (The party sending such notice shall have a method to verify
subsequently the use and timeliness of such notice.) Notices to DTC pursuant
to this Paragraph, by mail or by any other means, shall be sent to:

                    Manager, Announcements
                    Dividend Department
                    The Depository Trust Company
                    55 Water Street 25th Floor
                    New York, NY  10041-0099

     8. The Document indicates that each purchaser of Securities must sign a
purchaser's letter which contains provisions restricting transfer of the
Securities purchased. Issuer and Trust Company acknowledge that as long as
Cede & Co. is the sole record owner of the Securities, Cede & Co. shall be
entitled to all voting rights applicable to the Securities and to receive the
full amount of all dividends, liquidation proceeds, and redemption proceeds
payable with respect to the Securities, even if the credits of Securities to
the DTC accounts of any DTC Participant result from transfers or failures to
transfer in violation of the provisions of the purchaser's letter. Issuer and
Trust Company acknowledge that DTC shall treat any Participant having
Securities credited to its DTC accounts as entitled to the full benefits of
ownership of such Securities. Without limiting the generality of the preceding
sentence, Issuer and Trust Company acknowledge that DTC shall treat any
Participant having Securities credited to its DTC accounts as entitled to
receive dividends, distributions, and voting rights, if any, in respect of
Securities and, subject to Paragraphs 12 and 13, to receive certificates
evidencing Securities if such certificates are to be issued in accordance with
Issuer's certificate of incorporation. (The treatment by DTC of the effects of
the crediting by it of Securities to the accounts of Participants described in
the preceding two sentences shall not affect the rights of Issuer,
participants in auctions relating to the Securities, purchasers, sellers, or
holders of Securities against any Participant.) DTC shall not have any
responsibility to ascertain whether any transfer of Securities is made in
accordance with the provisions of the purchaser's letter.

     9. Issuer or Trust Company shall provide a written notice of dividend
payment and distribution information to DTC as soon as the information is
available. Issuer or Trust Company shall provide this information to DTC
electronically, as previously arranged by Issuer or Trust Company and DTC, as
soon as the information is available. If electronic transmission has not been
arranged, absent any other arrangements between Issuer or Trust Company and
DTC, such information shall be sent by telecopy to DTC's Dividend Department
at (212) 855-4555 or (212) 855-4556, and receipt of such notices shall be
confirmed by telephoning (212) 855-4550. Notices to DTC pursuant to this
Paragraph, by mail or by any other means, shall be addressed as indicated in
Paragraph 7.

     10. Dividend payments and distributions shall be received by Cede & Co.,
as nominee of DTC, or its registered assigns, in same-day funds no later than
2:30 p.m. (Eastern Time) on the payment date. Issuer shall remit by 1:00 p.m.
(Eastern Time) on the payment date, dividend and distribution payments due
Trust Company, or at such earlier time as may be required by Trust Company to
guarantee that DTC shall receive payment in same-day funds no later than



                                     -4-
<PAGE>

2:30 p.m. (Eastern Time) on the payment date. Absent any other arrangements
between Issuer or Trust Company and DTC, such funds shall be wired to the
Dividend Deposit Account number that will be stamped on the signature page
hereof at the time DTC executes this Letter of Representations.

     11. Issuer or Trust Company shall provide DTC, no later than 12:00 noon
(Eastern Time) on each payment date, automated notification of CUSIP-level
detail. If the circumstances prevent the funds paid to DTC from equaling the
dollar amount associated with the detail payments by 12:00 noon (Eastern
Time), Issuer or Trust Company must provide CUSIP-level reconciliation to DTC
no later than 2:30 p.m. (Eastern Time). Reconciliation must be provided by
either automated means or written format. Such reconciliation notice, if sent
by telecopy, shall be directed to DTC's Dividend Department at (212) 855-4633,
and receipt of such reconciliation notice shall be confirmed by telephoning
(212) 855-4430.

     12. Redemption payments shall be received by Cede & Co., as nominee of
DTC, or its registered assigns, in same-day funds no later than 2:30 p.m.
(Eastern Time) on the payment date. Issuer shall remit by 1:00 p.m. (Eastern
Time) on the payment date all such redemption payments due Trust Company, or
at such earlier time as required by Trust Company to guarantee that DTC shall
receive payment in same-day funds no later than 2:30 p.m. (Eastern Time) on
the payment date. Absent any other arrangements between Issuer or Trust
Company and DTC, such funds shall be wired to the Redemption Deposit Account
number that will be stamped on the signature page hereof at the time DTC
executes this Letter of Representations.

     13. Reorganization payments and CUSIP-level detail resulting from
corporate actions (such as tender offers, remarketings, or mergers) shall be
received by Cede & Co., as nominee of DTC, or its registered assigns, in
same-day funds no later than 2:30 p.m. (Eastern Time) on the payment date.
Issuer shall remit by 1:00 p.m. (Eastern Time) on the payment date all such
reorganization payments due Trust Company, or at such earlier time as required
by Trust Company to guarantee that DTC shall receive payment in same-day funds
no later than 2:30 p.m. (Eastern Time) on the payment date. Absent any other
arrangements between Issuer or Trust Company and DTC, such funds shall be
wired to the Reorganization Deposit Account number that will be stamped on the
signature page hereof at the time DTC executes this Letter of Representations.

     14. DTC may direct Issuer or Trust Company to use any other number or
address as the number or address to which notices or payments may be sent.

     15. In the event of a redemption acceleration, or any similar transaction
(e.g., tender made and accepted in response to Issuer's or Trust Company's
invitation) necessitating a reduction in the number of Securities outstanding,
or an advance refunding of part of the Securities outstanding DTC, in its
discretion: (a) may request Issuer or Trust Company to issue and authenticate
a new Security certificate; or (b) may make an appropriate notation on the
Security certificate indicating the date and amount of such reduction in the
number of Securities outstanding, except in the case of final redemption, in
which case the certificate will be presented to Issuer or Trust Company prior
to payment, if required.

     16. In the event that Issuer determines that beneficial owners of
Securities shall be able to obtain certificated Securities, Issuer or Trust
Company shall notify DTC of the



                                     -5-
<PAGE>

availability of certificates. In such event, Issuer or Trust Company shall
issue, transfer, and exchange certificates in appropriate amounts, as required
by DTC and others.

     17. DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to
Issuer or Trust Company (at which time DTC will confirm with Issuer or Trust
Company the aggregate principal amount of Securities outstanding). Under such
circumstances, at DTC's request, Issuer and Trust Company shall cooperate
fully with DTC by taking appropriate action to make available one or more
separate certificates evidencing Securities to any DTC Participant having
Securities credited to its DTC accounts.

     18. Issuer hereby authorizes DTC to provide to Trust Company listings of
Participants' holdings, known as Security Position Listings ("SPLs") with
respect to the Securities from time to time at the request of Trust Company.
Issuer also authorizes DTC, in the event of a partial redemption of
Securities, to provide Trust Company, upon request, with the names of those
Participants whose positions in Securities have been selected for redemption
by DTC. DTC will use its best efforts to notify Trust Company of those
Participants whose positions in Securities have been selected for redemption
by DTC. Issuer authorizes and instructs Trust Company to provide DTC with such
signatures, examples of signatures, and authorizations to act as may be deemed
necessary or appropriate by DTC to permit DTC to discharge its obligations to
its Participants and appropriate regulatory authorities. DTC charges a
customary fee for such SPLs. This authorization, unless revoked by Issuer,
shall continue with respect to the Securities while any Securities are on
deposit at DTC, until and unless Trust Company shall no longer be acting. In
such event, Issuer shall provide DTC with similar evidence, satisfactory to
DTC, of the authorization of any successor thereto so to act. Requests for
SPLs shall be directed to the Proxy Unit of DTC's Reorganization Department at
(212) 855-5181 or (212) 855-5182. Receipt of such requests shall be confirmed
by telephoning (212) 855-5202. Delivery by mail or by any other means, with
respect to such SPL request, shall be directed to the address indicated in
Paragraph 3.

     19. Nothing herein shall be deemed to require Trust Company to advance
funds on behalf of Issuer.

     20. This Letter of Representations may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an
original, but all such counterparts together shall constitute but one and the
same instrument.

     21. This Letter of Representations shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving effect to
principles of conflicts of law.

     22. The sender of each notice delivered to DTC pursuant to this Letter of
Representations is responsible for confirming that such notice was properly
received by DTC.

     23. Issuer recognizes that DTC does not in any way undertake to, and
shall not have any responsibility to, monitor or ascertain the compliance of
any transactions in the Securities with the following, as amended from time to
time: (a) any exemptions from registration under the Securities Act of 1933;
(b) the Investment Company Act of 1940; (c) the Employee Retirement Income
Security Act of 1974; (d) the Internal Revenue Code of 1986; (e) any rules of



                                     -6-
<PAGE>

any self-regulatory organizations (as defined under the Securities Exchange
Act of 1934); or (f) any other local, state, or federal laws or regulations
thereunder.

     24. Issuer and Trust Company shall comply with the applicable
requirements stated in DTC's Operational Arrangements, as they may be amended
from time to time. DTC's Operational Arrangements are posted on DTC's website
at "www.DTC.org."

     25. The following rider(s), attached hereto, are hereby incorporated into
this Letter of Representations:

                                    Schedule A
- ------------------------------------------------------------------------------
                                    Schedule B
- ------------------------------------------------------------------------------
                                    Schedule C
- ------------------------------------------------------------------------------



                                      -7-
<PAGE>

Notes:
- -----

A. If there is a Trust Company (as
defined in this Letter of
Representations), Trust Company, as well
as Issuer, must sign this Letter. If
there is no Trust Company, in signing
this Letter Issuer itself undertakes to
perform all of the obligations set forth
herein.

B. Schedule B contains statements that
DTC believes accurately describe DTC,
the method of effecting book-entry
transfers of securities distributed
through DTC, and certain related
matters.

                                    Very truly yours,


                                    MUNIVEST FUND II, INC.
                                    ----------------------
                                                        [Issuer]

                                    By:_______________________________________
                                          [Authorized Officer's Signature]

                                    THE BANK OF NEW YORK
                                    ------------------------------------------
                                                 [Trust Company]

                                    By:______________________________________
                                          [Authorized Officer's Signature]



Received and Accepted:
THE DEPOSITORY TRUST COMPANY



By:_________________________






cc:  Underwriter
     Underwriter's Counsel



                                      -8-
<PAGE>

                                                                  SCHEDULE A
                                                                  ----------

       MUNIVEST FUND II, INC.; Auction Market Preferred Stock, Series D
       ----------------------------------------------------------------

       ----------------------------------------------------------------
                               [Describe Issue]



CUSIP Number                     Share Total                   Value ($Amount)
- ------------                     -----------                   ---------------
Series D (#             )           1,600                        40,000,000



                                     -9-
<PAGE>

                                                                    SCHEDULE B
                                                                    ----------

                       SAMPLE OFFERING DOCUMENT LANGUAGE
                      DESCRIBING BOOK-ENTRY-ONLY ISSUANCE
                      -----------------------------------
(Prepared by DTC--bracketed material may be applicable only to certain issues)

     1. The Depository Trust Company ("DTC"), New York, NY, will act as
securities depository for the securities (the "Securities"). The Securities
will be issued as fully-registered securities registered in the name of Cede &
Co. (DTC's partnership nominee) or such other name as may be requested by an
authorized representative of DTC. One fully-registered Security certificate
will be issued for each issue of the Securities, each in the aggregate
principal amount of such issue, and will be deposited with DTC. [If, however,
the aggregate principal amount of [any] issue exceeds $400 million, one
certificate will be issued with respect to each $400 million of principal
amount and an additional certificate will be issued with respect to any
remaining principal amount of such issue.]

     2. DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934. DTC holds securities that its participants ("Direct
Participants") deposit with DTC. DTC also facilitates the settlement among
Direct Participants of securities transactions, such as transfers and pledges,
in deposited securities through electronic computerized book-entry changes in
Direct Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. Direct Participants include securities
brokers and dealers, banks, trust companies, clearing corporations, and
certain other organizations. DTC is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange LLC, and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others such as securities brokers and
dealers, banks, and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly
("Indirect Participants"). The Rules applicable to DTC and its Direct and
Indirect Participants are on file with the Securities and Exchange Commission.

     3. Purchases of Securities under the DTC system must be made by or
through Direct Participants, which will receive a credit for the Securities on
DTC's records. The ownership interest of each actual purchaser of each
Security ("Beneficial Owner") is in turn to be recorded on the Direct and
Indirect Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchase, but Beneficial Owners are expected to
receive written confirmations providing details of the transaction, as well as
periodic statements of their holdings, from the Direct or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of
ownership interests in the Securities are to be accomplished by entries made
on the books of Direct and Indirect Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in Securities, except in the event that
use of the book-entry system for the Securities is discontinued.

     4. To facilitate subsequent transfers, all Securities deposited by Direct
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. or such other



                                     -10-
<PAGE>

name as may be requested by an authorized representative of DTC. The deposit
of Securities with DTC and their registration in the name of Cede & Co. or
such other nominee do not effect any change in beneficial ownership. DTC has
no knowledge of the actual Beneficial Owners of the Securities; DTC's records
reflect only the identity of the Direct Participants to whose accounts such
Securities are credited, which may or may not be the Beneficial Owners. The
Direct and Indirect Participants will remain responsible for keeping account
of their holdings on behalf of their customers.

     5. Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time. [Beneficial Owners of
Securities may wish to take certain steps to augment transmission to them of
notices of significant events with respect to the Securities, such as
redemptions, tenders, defaults, and proposed amendments to the security
documents. Beneficial Owners of Securities may wish to ascertain that the
nominee holding the Securities for their benefit has agreed to obtain and
transmit notices to Beneficial Owners, or in the alternative, Beneficial
Owners may wish to provide their names and addresses to the registrar and
request that copies of the notices be provided directly to them.]

     [6. Redemption notices shall be sent to DTC. If less than all of the
Securities within an issue are being redeemed, DTC's practice is to determine
by lot the amount of the interest of each Direct Participant in such issue to
be redeemed.]

     7. Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent
or vote with respect to the Securities. Under its usual procedures, DTC mails
an Omnibus Proxy to Issuer as soon as possible after the record date. The
Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Securities are credited on the record date
(identified in a listing attached to the Omnibus Proxy).

     8. Redemption proceeds, distributions, and dividend payments on the
Securities will be made to Cede & Co., or such other nominee as may be
requested by an authorized representative of DTC. DTC's practice is to credit
Direct Participants' accounts, upon DTC's receipt of funds and corresponding
detail information from Issuer or Agent on payable date in accordance with
their respective holdings shown on DTC's records. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers
in bearer form or registered in "street name," and will be the responsibility
of such Participant and not of DTC, Agent, or Issuer, subject to any statutory
or regulatory requirements as may be in effect from time to time. Payment of
redemption proceeds, distributions, and dividends to Cede & Co. (or such other
nominee as may be requested by an authorized representative of DTC) is the
responsibility of Issuer or Agent, disbursement of such payments to Direct
Participants shall be the responsibility of DTC, and disbursement of such
payments to the Beneficial Owners shall be the responsibility of Direct and
Indirect Participants.

     [9. A Beneficial Owner shall give notice to elect to have its Securities
purchased or tendered, through its Participant, to [Tender/Remarketing] Agent,
and shall effect delivery of such Securities by causing the Direct Participant
to transfer the Participant's interest in the Securities, on DTC's records, to
[Tender/Remarketing] Agent. The requirement for physical



                                     -11-
<PAGE>

delivery of Securities in connection with an optional tender or a mandatory
purchase will be deemed satisfied when the ownership rights in the Securities
are transferred by Direct Participants on DTC's records and followed by a
book-entry credit of tendered Securities to [Tender/Remarketing] Agent's DTC
account.]

     10. DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to
Issuer or Agent. Under such circumstances, in the event that a successor
securities depository is not obtained, Security certificates are required to
be printed and delivered.

     11. Issuer may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event,
Security certificates will be printed and delivered.

     12. The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that Issuer believes to be reliable, but
Issuer takes no responsibility for the accuracy thereof.



                                     -12-
<PAGE>

                                                                    SCHEDULE C
                                                                    ----------



                                [LOGO OMITTED]



    Representations for Securities Held with a Custodian on Behalf of DTC--
                to be included in DTC Letter of Representations
                -----------------------------------------------
     The Security certificate(s) shall remain in Agent's1 custody as a
"Balance Certificate" subject to the provisions of the Balance Certificate
Agreement between Agent and DTC currently in effect.

     On each day on which Agent is open for business and on which it receives
an instruction originated by a DTC participant ("Participant") through DTC's
Deposit/Withdrawal at Custodian ("DWAC") system to increase the Participant's
account by a specified number of shares, units, or obligations (a "Deposit
Instruction"), Agent shall, no later than 6:30 p.m. (Eastern Time) that day,
either approve or cancel the Deposit Instruction through the DWAC system.

     On each day on which Agent is open for business and on which it receives
an instruction originated by a Participant through the DWAC system to decrease
the Participant's account by a specified number of shares, units, or
obligations (a "Withdrawal Instruction"), Agent shall, no later than 6:30 p.m.
(Eastern Time) that day, either approve or cancel the Withdrawal Instruction
through the DWAC system.

     Agent agrees that its approval of a Deposit or Withdrawal Instruction
shall be deemed to be the receipt by DTC of a new reissued or reregistered
certificated security on registration of transfer to the name of Cede & Co.
for the quantity of securities evidenced by the Balance Certificate after the
Deposit or Withdrawal Instruction is effected.

     Agent shall be defined as Depositary, Trustee, Trust Company, Issuing
Agent and/or Paying Agent as such definition applies in the DTC Letter of
Representations to which this rider may be attached.




- --------------------
1    Agent shall be defined as Depositary, Trustee, Trust Company, Issuing
     Agent and/or Paying Agent as such definition applies in the DTC Letter of
     Representations to which this rider may be attached.



                                     -13-

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